SAURA IMPORT & EXPORT CO., INC. V.

DEVELOPMENT BANK OF THE PHILIPPINES

Apr 27 1972| Makalintal, J. | Petition for Review on Certiorari | Mutuum
PETITIONER: Saura Import and Export Co, Inc.
RESPONDENT: Devt Bank of the Philippines
SUMMARY: The RFC approved Saura Inc’s application for a P500k subject to certain conditions;
however, Saura requested changes in the terms of the agreement. While negotiations took place, the
loan documents were executed, including a deed of mortgage. Negotiations eventually came to a
standstill and Saura requested that the mortgage be cancelled, which request the RFC complied with. In
the meantime, Saura failed to pay other obligations. Almost 9 years later, Saura filed suit against the
RFC, alleging that RFC’s non-compliance with its obligation to release the loan proceeds had prevented
Saura from complying with its other commitments. The SC ruled against Saura and dismissed the
complaint.
DOCTRINE: Mutuum contracts are only perfected upon the actual delivery of the object of the contract.
Notwithstanding the fact that all the documentary requirements have been signed, mutual desistance
prior to delivery of the object, as signified by the acts of the parties, may terminate the contract

FACTS:
1. Plaintiff Saura Import and Export Co., Inc. applied to the
Rehabilitation Finance Corp, before its conversion into
DBP, for a P500k industrial loan. The application was
approved subject to specific terms and to be secured by a
mortgage on the factory building to be constructed, land
site, machinery and equipment to be installed. Saura was
officially notified of the resolution of approval on 9 Jan
1954, but had asked the day before for modification of the
terms.
2. In the meantime, the loan documents were executed,
including the promissory note and corresponding deed of
mortgage. However, after continuous communications,
negotiations between Saura and the RFC eventually came
to a standstill. Saura did not pursue the matter further but
instead rested RFC to cancel the mortgage, which RFC did.
3. It appeared that the cancellation was requested to make
way for the registration of a mortgage contract over the
same property in favour of Prudential Bank and Trust Co.
Under which Saura had up to 31 Dec 1954 to pay its
obligation on a trust receipt. Saura failed to pay Prudential,
prompting the latter to sue Saura.
4. Almost 9 years after the mortgage in favour of RFC was
cancelled at Saura’s request, Saura commenced the present
suit for damages, alleging RFC’s failure to comply with its
obligation to release the proceeds of 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.
5. DBP argued, among others, that there was no perfected
contract, and that assuming that there was, the plaintiff
itself did not comply with the terms thereof.
ISSUE: WoN there was a perfected contract – YES
WoN the contract was validly terminated - YES
RULING: Judgment appealed from reversed. Complaint
dismissed.
RATIO:
1. There was perfected consensual contract as recognized
in Art 1934, CC: 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.
2. There was undoubtedly offer and acceptance in this
case. Saura’s application for a P500k loan was approved by
defendant’s resolution, and the corresponding mortgage
was executed and registered.
3. When the loan was approved, it was with the imposition
with conditions, none of which deviated from the terms of
the agreement; rather, they were a step in its
implementation. Nor did the conditions contradict the
terms laid down in the original RFC Resolution approving
the loan.
4. When the RFC turned down Saura’s request asking for a
change in the conditions, negotiations which had been
going on for the implementation of the agreement reached
an impasse. Saura 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 asked that the
mortgage be cancelled, which the RFC did on 15 June 1955.
5. The action thus taken by both parties was in the nature
of mutual desistance (“mutuo disenso”), 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.
6. Saura’s subsequent conduct confirms this desistance. It
did not protest against any alleged breach of contract by
RFC or even point out that the latter’s stand was legally
unjustified. Its request for cancellation of the mortgage
carried no reservation of whatever rights it believed it
might have against RFC for the latter’s non-compliance,
and it even later applied with DBP for another loan, which
was disapproved. It was only 8 years after the loan
agreement had been cancelled that Saura brought this
action for damages.