Fong v. Dueñas: allegations, relief sought

A well-settled rule in procedural law is that the allegations in the body of the pleading or the complaint, and not its title, determine the nature of an action.[1]

In Fong v. Dueñas,[2] an examination of Fong’s complaint shows that although it was labeled as an action for a sum of money and damages, it was actually a complaint for rescission. The following allegations in the complaint support this finding:
9. Notwithstanding the aforesaid remittances, defendant failed for an unreasonable length of time to submit a valuation of the equipment of D.C. Danton and Bakcom x x x.

10. Worse, despite repeated reminders from plaintiff, defendant failed to accomplish the organization and incorporation of the proposed holding company, contrary to his representation to promptly do so.

x x x x

17. Considering that the incorporation of the proposed holding company failed to materialize, despite the lapse of one year and four months from the time of subscription, plaintiff has the right to revoke his pre-incorporation subscription. Such revocation entitles plaintiff to a refund of the amount of P5,000,000.00 he remitted to defendant, representing advances made in favor of defendant to be considered as payment on plaintiff’s subscription to the proposed holding company upon its incorporation, plus interest from receipt by defendant of said amount until fully paid.
Fong’s allegations primarily pertained to his cancellation of their verbal agreement because Dueñas failed to perform his obligations to provide verifiable documents on the valuation of the Danton’s and Bakcom’s shares, and to incorporate the proposed corporation. These allegations clearly show that what Fong sought was the joint venture agreement’s rescission.

As a contractual remedy, rescission is available when one of the parties substantially fails to do what he has obligated himself to perform.[3] It aims to address the breach of faith and the violation of reciprocity between two parties in a contract.[4] Under Article 1191 of the Civil Code, the right of rescission is inherent in reciprocal obligations, viz:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. [Emphasis supplied.]

Dueñas submits that Fong’s prayer for the return of his cash contribution supports his claim that Fong’s complaint is an action for collection of a sum of money. However, Dueñas failed to appreciate that the ultimate effect of rescission is to restore the parties to their original status before they entered in a contract. As the Supreme Court ruled in Unlad Resources v. Dragon:[5]

Rescission has the effect of “unmaking a contract, or its undoing from the beginning, and not merely its termination.” Hence, rescission creates the obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. To rescind is to declare a contract void at its inception and to put an end to it as though it never was. It is not merely to terminate it and release the parties from further obligations to each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made.

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.[6] [Emphasis supplied.]

In this light, the High Court ruled that Fong’s 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 agreement’s rescission.

[1] Gochan v. Gochan, 423 Phil. 491, 501 (2001).

[2] G.R. No. 185592, June 15, 2015.

[3] Spouses Tumibay v. Spouses Lopez, G.R. No.171692, June 3, 2013.

[4] Id.

[5] 582 Phil. 61 (2008).

[6] Id. at 79-80.