SAURA IMPORT and EXPERT CO., INC.

, vs DBP
[G.R. No. L-24968, April 27, 1972]

FACTS:

In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now

DBP, for an industrial loan of P500,000 to be used for the construction of
a factory building, to pay the balance of the jute mill machinery and
equipment and as additional working capital. In Resolution No.145, the
loan application was approved to be secured first by mortgage on the
factory buildings, the land site, and machinery and equipment to be
installed.

The mortgage was registered and documents for the promissory note
were executed. However, when one of the guarantors withdrew from
such contract of loan, RFC decided to reduce the amount to 300,000.00
pesos. Saura Inc. did not agree to it, thus exerted efforts to regain the
signature of the withdrawal guarantor which was successfully made.

RFC passed Resolution No, 9083, restoring the loan, but with the
proviso (availability of raw materials and increased production). With
foregoing letter, Saura Inc. did not pursue the matter further. Instead, it
requested RFC to cancel the mortgage, and so, RFC executed the
corresponding deed of cancellation.

It appears that the cancellation was requested to make way for the
registration of a mortgage contract over the same property in favor of
Prudential Bank and Trust Co.. As security, Saura Inc. execut a trsut
receipt in favor of the Prudential Bank. For failure of Saura Inc. to pay
said obligation, Prudential Bank sued Saura Inc.

After almost 9 years, Saura Inc, commenced an action against RFC,

alleging failure on the latter to comply with its obligations to release the
loan applied for and approved, thereby preventing the plaintiff from
completing or paying contractual commitments it had entered into, in
connection with its jute mill project.

The trial court ruled in favor of Saura, ruling that there was a perfected
contract between the parties and that the RFC was guilty of breach
thereof.

ISSUE:

Whether or not there was a perfected contract between the parties.

HELD:

Yes, there was indeed a perfected consensual contract.

Article 1934 provides “An accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but the commodatum
or simple loan itself shat not be perfected until delivery of the object of the
contract.

There was undoubtedly offer and acceptance in the case. The

application of Saura, Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the corresponding mortgage was
executed and registered. The defendant failed to fulfill its obligation and
the plaintiff is therefore entitled to recover damages.

When an application for a loan of money was approved by resolution of

the respondent corporation and the responding mortgage was executed
and registered, there arises a perfected consensual contract.

However, it should be noted that RFC imposed two conditions

(availability of raw materials and increased production) when it restored
the loan to the original amount of P500,000.00.

Saura, Inc. obviously was in no position to comply with RFC’s

conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage be
cancelled.The action thus taken by both parties was in the nature of
mutual desistance which is a mode of extinguishing obligations. It is a
concept that derives from the principle that since mutual agreement can
create a contract, mutual disagreement by the parties can cause its
extinguishment.

WHEREFORE, the judgment appealed from is reversed and the

complaint dismissed.