George C. Fong v. Jose V. Dueñas

Summary

This case involves a verbal joint venture agreement between former schoolmates to incorporate a holding company for their food business. When Fong contributed P5 million but Dueñas failed to provide share valuation documents and incorporate the planned company, Fong sought rescission and return of his money. The Supreme Court found both parties substantially breached their reciprocal obligations - Dueñas by failing to perform his incorporation duties and misappropriating funds, and Fong by unilaterally reducing his contribution from P32.5 million to P5 million. Applying Article 1192 of the Civil Code on mutual breach, the Court deemed the agreement extinguished, ordered return of the P5 million with interest, but extinguished damage claims. The decision clarifies rescission principles in joint ventures and consequences of mutual contractual breach.