SAURA IMPORT and EXPORT CO., INC.

, plaintiff-appellee,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant.
G.R. No. L-24968 April 27, 1972
FACTS:
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion
into DBP, for an industrial loan to be used for construction of factory building, for
payment of the balance of the purchase price of the jute machinery and equipment
and as additional working capital. RFC accepted and approved the loan application
secured by mortgage subject to some conditions which Saura admitted it could not
comply with. Without having received the amount being loaned, and sensing that it
could not at anyway obtain the full amount of loan, Saura Inc. then asked for
cancellation of the mortgage which RFC also approved. After 9 years after the
mortgage was cancelled, Saura sued RFC alleging failure to comply with tits
obligations to release the loan proceeds, thereby prevented it from paying the
obligation to Prudential Bank.
The trial court ruled in favor of Saura, ruling that there was a perfected contract
between the parties ad that the RFC was guilty of breach thereof. The present
appeal is from that judgment.
ISSUE: Whether or not there was a perfected contract between Saura and RFC.
HELD:
YES, under Article 1954 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 perferted until the delivery of the
object of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura,
Inc. for a loan was approved by the defendant, and the corresponding mortgage
was executed and registered. But this fact alone falls short of resolving the basic
claim that the defendant failed to fulfill its obligation and the plaintiff is therefore
entitled to recover damages.
When RFC turned down the request, the negotiations which had been going on for
the implementation of the agreement reached an impasse. Saura 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 asked that the mortgage be cancelled,
which was done. 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.
The Court reversed the judgment appealed from and dismissed the complaint, with
costs against the plaintiff-appellee.