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G.R. No. L-4811 July 31, 1953

FACTS: On November 29, 1947, the Woodhouse entered in a written agreement with\, the most
important that they shall organize a partnership for the bottling and distribution of Mision soft drinks
and that Woodhouse was to secure the Mission Soft Drinks franchise for and in behalf of the proposed
partnership and receive 30 per cent of the net profits of the business.
On that day Woodhouse and Halili went to the United States, a franchise agreement was entered into
the Mission Dry Corporation and granted Halili the exclusive right, license, and authority to produce,
bottle, distribute, and sell Mision beverages in the Philippines.
When the bottling plant was already on operation, Woodhouse demanded of Halili that the partnership
papers be executed. In his complaint Woodhouse asks for the execution of the contract of partnership,
an accounting of the profits, and a share thereof of 30 per cent, as well as damages.
Halili's contends that his consent to the agreement was secured by the representation of Woodhouse
that he was about to become owner of an exclusive bottling franchise, which representation was false.
The Court of First Instance rendered judgment ordering Halili to render an accounting of the profits of
the bottling and distribution business, subject of the action, and to pay Woodhouse 15 percent thereof.
ISSUE: Whether or not Woodhouse had falsely represented that he had an exclusive franchise to bottle
Mission beverages, and whether this false representation or fraud, if it existed, annuls the agreement to
form the partnership?
HELD: The first draft that Woodhouses lawyer, prepared expressly states that Woodhouse had the
exclusive franchise. Woodhouse did actually represent to Halili that he was the holder of the exclusive
franchise and Halili was made to believe, and he actually believed, that Woodhouse had the exclusive
franchise. The main cause that induced Halili to enter into the partnership agreement with Woodhouse,
was the ability of Woodhouse to get the exclusive franchise to bottle and distribute for the Halili or for
the partnership.
While the representation that Woodhouse had the exclusive franchise did not vitiate Halili's consent to
the contract, it was used by Woodhouse to get from Halili a share of 30 per cent of the net profits. In
other words, by pretending that he had the exclusive franchise and promising to transfer it to Halili, he
obtained the consent of the latter to give him a big slice in the net profits. But when Woodhouse
learned about such, he reduced Halilis share to 15 per cent.
As to the agreement being executed, Halili may not be compelled against his will to carry out the
agreement nor execute the partnership papers. The law recognizes the individual's freedom or liberty to
do an act he has promised to do, or not to do it, as he pleases.
The Supreme Court ruled that Woodhouse's share of 15 per cent of the net profits shall continue to be
paid while Halili uses the franchise from the Mission Dry Corporation.