G.R. No. 185592 - GEORGE C. FONG, VS. JOSE V. DUEÑAS.

Ruling

Accordingly, when a decree for rescission is handed down, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation . [35] [Emphasis supplied.] In this light, we rule that Fongs prayer for the return of his contribution did not automatically convert the action to a complaint for a sum of money. The mutual restitution of the parties original contributions is only a necessary consequence of their agreements rescission. Rescission under Art. 1191 is applicable in the present case Reciprocal obligations are those which arise from the same cause, in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent on the obligation of the other. [36] Fong and Dueñas execution of a joint venture agreement created between them reciprocal obligations that must be performed in order to fully consummate the contract and achieve the purpose for which it was entered into. Both parties verbally agreed to incorporate a company that would hold the shares of Danton and Bakcom and which, in turn, would be the platform for their food business. Fong obligated himself to contribute half of the capital or P32.5 Million in cash. On the other hand, Dueñas bound himself to shoulder the other half by contributing his Danton and Bakcom shares, which were allegedly also valued at P32.5 Million. Aside from this, Dueñas undertook to process Alliances incorporation and registration with the SEC. When the proposed company remained unincorporated by October 30, 1997, Fong cancelled the joint venture agreement and demanded the return of his P5 Million contribution. For his part, Dueñas explained that he could not immediately return the P5 Million since he had invested it in his two companies. He found nothing irregular in this as eventually, the Danton and Bakcom shares would form part of Alliances capital. Dueñas assertion is erroneous. The parties never agreed that Fong would invest his money in Danton and Bakcom. Contrary to Dueñas submission, Fongs understanding was that his money would be applied to his shareholdings in Alliance. As shown in Fongs June 13, 1997 letter, this fact remained to be true even after he limited his contribution to P5 Million, viz : Dear Jojit, Enclosed is our check for P919,534.80 representing our additional advances to subject company in process of incorporation . This will make our total advances to date amounting to P5 million. [37] [Emphasis supplied.] Moreover, under the Corporation Code, before a stock corporation may be incorporated and registered, it is required that at least twenty five percent (25%) of its authorized capital stock as stated in the articles of incorporation, be first subscribed at the time of incorporation, and at least twenty five percent (25%) of the total subscription, be paid upon subscription. [38] To prove compliance with this requirement, the SEC req