Title Saura Import & Export Co., Inc vs Development Bank of the Phil.

, GR
No. L-24968
Ponente MAKALINTAL, J.
Doctrine Where an application for a loan of money was approved by resolution of
the defendant corporation and the corresponding mortgage was
executed and registered, there arises a perfected-consensual contract of
sale.

Mutual Desistance: is a mode of extinguishment of obligations holding

into a principle that since mutual agreement can create a contract,
mutual disagreement by the parties can cause its extinguishment.
Facts  Saura Inc applied to Rehabilitation Finance Corp (now DBP) for
an industrial loan of P500K use for the construction of the factory
bldg. and to pay the balance of the purchase price of the jute mill
machinery
 RFC passed RESOLUTION NO. 145 which approved the loan
application for P500K to be secured by a 1st mortgage for the
construction of the factory bldg. Saura Inc was notified of the
resolution
 RFC passed RESOLUTION NO. 736 after Saura Inc requested for
the modification of the terms laid down in the 1st resolution. With
this, Saura Inc asked RFC to prepare the necessary documents in
accordance to the terms and conditions laid down in the 1 st
resolution in lieu of China Engineers Ltd agreement to become a
co-signer for the loan which was followed by RFC
 Yet, China Engineers Ltd wrote to RFC that it no longer wished to
avail the P500K loan and thus be cancelled but Saura Inc
rebutted the former’s statement
 RFC passed RESOLUTION NO. 9083 restoring the loan from
P300K to P500K (since it was reduced earlier)
 RFC communicated its action to Saura Inc thru a letter explaining
that the certification by the Department of Agriculture and
Natural Resources was required as the intention of the original
approval of the loan is to develop the manufacture of sacks
(construction of the factory) on the basis of locally available raw
materials.
 Yet, Saura Inc requested RFC later on to cancel the mortgage.
With this, RFC delivered the deed of cancellation to the president
of Saura Inc.
 The cancellation of mortgage with RFC by Saura Inc is to give
way for the registration of a mortgage contract over the sack
factory in favor of Prudential Bank.
Contentions Petitioner [Saura Inc] Respondent [RFC (now DBP)]
9 years after the mortgage in favor There was no perfected contract
of RFC was cancelled at the between Saura Inc and RFC and
request of Saura Inc, the latter assuming there was, Saura Inc
filed suit for damages against RFC failed to comply with the conditions
for its failure to comply with its
 obligation to release the proceeds
of the loan applied for and
approved thereby preventing
Saura Inc from paying contractual
commitments it had entered into
Lower Courts Favored Saura Inc ruling that there was a perfected contract between
the parties and that RFC was guilty of the breach of contract.
Appellate Court N/A
Issue W/N there was a perfected consensual contract between Saura Inc and
RFC?
SC Ruling Yes. SC reiterated the provision Art. 1954 of the Civil Code. In the
present case, there was offer and acceptance: the application of Saura
Inc for a loan of P500K which was approved by RFC’s resolution and the
mortgage was executed and registered. However, SC ruled that Saura
Inc is not entitled to damages. ACCEPTED THE MONEY

It should be noted that RFC entertained the loan application of Saura Inc
on the assumption that the factory to be constructed would utilize locally
grown raw materials.

However, Saura Inc requested that a certain sum of money be released

for raw materials and labor for the construction of the factory but RFC
disagreed.

With Saura Inc failure to comply with RFC’s conditions, Saura Inc asked
that the mortgage be cancelled which was granted by RFC

…delivering the deed of cancellation to the president of Saura Inc, thus

taking the action of mutual desistance, a form of mode of
extinguishing an obligation. It should be noted that the cancellation of
mortgage carried no reservation.

Thus, CFI’s decision is reversed and the complaint of Saura Inc is

dismissed.