Saura Import and Export, Co., Inc., v. DBP G.R. No.

L-24968
April 27, 1972 Makalintal, J.
Topic in Syllabus: LOAN
SUMMARY: Saura, Inc. applied with RFC for a loan for Php 500K. It was approved subject to certain conditions. Saura, Inc. requested
the modification of those terms, RFC re-examined the loan application and reduced the approved amount to Php 500K. Saura, Inc.
requested that the approved loan amount be restored to Php 500K and RFC agreed if the raw materials are available within the
immediate vicinity and the prospect of increased production of said materials, as well as a certification by the Department of Agriculture
and Natural Resources to that effect. However, Saura, Inc. confirmed that the kenaf needed will not be available in sufficient quantity.
When the negotiations reached an impasse, Saura, Inc. requested for the cancellation of the mortgage, to which RFC acceded. 9 years
later, Saura, Inc. sued RFC for damages alleging that their failure to comply with their obligation to release the loan proceeds prevented
them from paying their contractual obligation in connection with its jute mill project. The trial court ruled that there was a perfected
contract and RFC was guilty of breach. The Supreme Court reversed held that while there was a perfected consensual contract as per
Article 1934 of the civil code, wherein the offer and acceptance was expressed when the loan application of Saura, Inc. was approved
by a resolution of RFC and a mortgage was executed, there had been a mutual desistance between the parties on the initiative of
Saura, Inc. to extinguish the agreement and their corresponding obligations. Therefore, RFC is not guilty of breach of contract.

FACTS: Saura, Inc. applied with RFC (before its conversion to DBP) for a loan of Php 500K.
Prudential Bank extended a letter of credit in favor of Saura, Inc. to purchase the jute mill machinery and was issued a trust
receipt in its favor for the release of the machinery.
RFC passed Resolution No. (RN) 145 approving the loan application secured by a mortgage on the factory building, the land
site and the machinery and equipment conditioned
1. that amount will be used as follows: Php 250K as construction of a factory building, Php 240,900 as payment for the jute
mill machinery and equipment, and Php 9,100 as additional working capital,
2. that Sps. Saura, Arellano, Caolboy, Estabillo, and China Engineers will co-makers of the promissory notes alongside
Saura, Inc.
3. that the release of funds will be discretionary subject to their availability and the progress of the construction of the
building.
Saura, Inc. requested a modification of the terms that instead of China Engineers being a co-maker, the company will put up a bond
and that Roca will replace Arellano. RFC approved RN 736 designation members of its Board of Governors to re-examine the approved
loan. Saura, Inc. inform RFC that China Engineers agreed to again co-sign the loan and asked that the documents be prepared in
accordance to the terms in RN 145; however, despite the formal execution of the loan agreement, the re-examination of the loan
proceeded and the approved loan amount was reduced to Php 300K.
Saura, Inc. requested that the loan of Php 500K be granted. RFC denied their request and considered the loan of Php 300K as
cancelled in view of China Engineers expressing that they consider the loan cancelled but RFC later passed a resolution restoring the
loan amount to Php 500K when China Engineers expressed their willingness to again co-sign the promissory notes.
RFC conditioned the loan to the availability of the raw materials within the immediate vicinity and the prospect of increased production
of said materials, as well as a certification by the Department of Agriculture and Natural Resources to that effect.
The negotiations came to a standstill when Saura, Inc. expressed that the kenaf needed will not be available in sufficient
quantity, requested assurance that they will still be able to bring in the needed amount of jute materials and that the loan be released as
follows in different terms from those previously agreed upon and RFC replied that the need to import sufficient jute materials is not in
line with their approval of the loan.
RFC executed a deed of cancellation of the mortgage upon Saura, Inc.’s request to make way for a mortgage contract with
Prudential Bank to pay for its obligation on the trust receipt; Prudential later sued them when they failed to pay.
Almost 9 years later, Saura, Inc. sued RFC for damages alleging that their failure to comply with their obligation to release the
loan proceeds prevented them from paying their contractual obligation in connection with its jute mill project. The trial court ruled that
there was a perfected contract and RFC was guilty of breach.
ISSUE:
1. [MAIN] W/N there was a perfected consensual contract. YES
2. W/N Saura, Inc. is entitled to damages. NO
HELD:
1. YES, As per Article 1934 of the civil code, “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 shall not be perfected until the delivery of the object of the
contract.”
The offer and acceptance was expressed when the loan application of Saura, Inc. was approved by a resolution of RFC and a
mortgage was executed.
2. NO, RFC is not guilty of breach of contract.
RFC approved the loan application of Saura, Inc. on the premise that it would utilize locally grown raw materials; however,
Saura, Inc. confirmed that the local jute available will not be of sufficient quantity and asked for a modification of how the loan
amount will be spent, implying a diversion of the proceeds for purposes other than those agreed upon. When Saura, Inc.,
being in no position to comply with RFC’s condition, asked that the mortgage be cancelled, there was mutuo disenso
(Manresa) or mutual desistance (a mode of extinguishing obligations).
The agreement was extinguished by mutual desistance and on the initiative of Saura, Inc., as confirmed by their subsequent
conduct:
 Lack of protest of any breach by RFC at that time
 Request for the cancellation of the mortgage without any reservation of their rights against RFC
 Application of another loan with DBP (previously RFC) for another project.

Trixie Mariano [Case #5]