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Strong v. Repide - 213 U.S. 419, 29 S. Ct. 521 (1909)

Rule:

Phil. I. Civ. Code art. 1261 defines the requisites of a contract, among which is the consent of the contracting parties. Phil. I. Civ. Code art. 1265 states that consent given by error, under violence, by intimidation, or deceit, shall be void. Phil. I. Civ. Code art. 1269 provides that there is deceit when by words or insidious machinations on the part of one of the contracting parties the other is induced to execute a contract which without them he would not have made. Deceit exists where the party who obtains the consent conceals or omits to state material facts, with intent to deceive, by which reason the other party is induced to give a consent he would not otherwise have given. It is the duty of the party obtaining the consent, acting in good faith, to disclose the facts. In such cases concealment is equivalent to misrepresentation.

Facts:

Defendant bought land in the Philippine Islands from plaintiffs' agent without disclosing information about an impending purchase of land by the government. Plaintiffs sued to invalidate the sale. The trial court ruled for plaintiffs, holding that the agent of plaintiff, by whom the sale was concluded, had no authority to make it; and hence, the delivery of the stock by him to defendant’s agent was illegal. The trial court further ruled that defendant was guilty of fraud in concealing certain facts from the seller, affecting the value of the stock at the time when its sale was concluded. The Supreme Court of the Islands, however, reversed the judgment, concluding that the power of attorney executed by plaintiff was sufficient to make the sale he did on behalf of the plaintiff and that there was no fraud that accompanied the sale. Plaintiff sought further review by the United States Supreme Court.

Issue:

Was the sale to defendant by plaintiff’s agent valid?

Answer:

No.

Conclusion:

The Court first noted that if the purchase in question was obtained by reason of the defendant’s fraud or deceit, it would be immaterial to inquire whether the agent of the plaintiff had power to sell the subject property. Thus, the Court deemed it necessary to determine whether or not there was evidence of such fraud or deceit as would invalidate the sale. According to the Court, there was enough evidence to sustain the judgment of the trial court, considered with reference to the law applicable to the Philippine Islands. According to Article 1265 of the Civil Code of the Philippines, consent given by error, under violence, by intimidation, or deceit shall be void. It was then provided by Article 1269 of the same code that there was deceit when by words or insidious machinations on the part of one of the contracting parties, the other was induced to execute a contract which without them he would not have made. In the case at bar, a perusal of evidence suggested that the subject property was procured by fraud; and hence, void. 

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