July 31, 1953, 93 Phil. 526

FACTS:

On November 29, 1947, plaintiff Woodhouse entered into a written agreement with defendant Halili for a partnership for the bottling and distribution of Mission soft drinks, plaintiff to act as industrial partner or manager, and the defendant as a capitalist. The plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of the proposed partnership and that the plaintiff was to receive 30 per cent of the net profits of the business.

Prior to the agreement, plaintiff had informed the Mission Dry Corporation that he had interested a prominent financier who was willing to invest in the bottling and distribution of the said beverages, and requested, in order that he may close the deal with him, that the right to bottle and distribute be granted him for a limited time under the condition that it will finally be transferred to the corporation. Pursuant to this request, plaintiff was given thirty days option on exclusive bottling and distribution rights.

Plaintiff prayed for the execution of the contract of partnership; accounting of profits and share thereof of 30 percent with damages. The Defendant on the other hand claims that the defendant’s consent to the agreement, was secured by false representation of plaintiff that he was the owner, or was about to become owner of an exclusive bottling franchise. Further, he contended that plaintiff did not secure the franchise but was given to defendant himself. He also filed a counterclaim for damages.

ISSUE:

WON false representation, if it existed, annuls the agreement to form the partnership

RULING:

No. Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud, which may be ground for the annulment of a contract, and the incidental deceit, which only renders the party who employs it liable for damages only. The Supreme Court has held that in order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente) inducement to the making of the contract.

If ever the plaintiff was guilty of a false representation, this was not the causal consideration that led plaintiff to enter into the partnership agreement. The main cause that induced defendant to enter into the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant or for the partnership.

 * Case digest by Cherrie Mae Aguila-Granada, LLB-1, Andres Bonifacio Law School, SY 2017-2018