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That there is prospect of increased production thereof to

OF THE PHILIPPINES provide adequately for the requirements of the factory.
G.R. No. L-24968
April 27, 1972 In response, Saura wrote: (1) that kenaf will not be available in
Cabatu, Via sufficient quantity in 1955 and the next; (2) that assurance be made
by RFC to bring sufficient jute materials for the project; and (3) that
DOCTRINE: The principle of perfected consensual contract is the loan be released for payment of receipt for the jute mill
embodied in Article 1934 of the New Civil Code which states that [a]n machineries with Prudential Bank, for the purchase of material and
accepted promise to deliver something, by way of commodatum or equipment, and for raw material and labor.
simple loan is binding upon the parties, but the commodatum or Negotiations came to a standstill until both parties ultimately agreed to
simple loan itself shall not be perfected until the delivery of the object cancel the mortgage. Subsequently, Saura filed this suit for
of the contract. damages alleging failure of RFC to comply with its obligation to
release the proceeds of the loan applied for and approved to the
Upon mutual desistance, however, such obligation arising from the detriment of Saura. The RTC ruled in favour of Saura, finding that
contract is extinguished and cannot result to liability for damages. there was a perfected contract and RFC thereby is guilty of breach
Saura applied to the Rehabilitation Finance Corporation (RFC), before ISSUE: WON RFC is liable for damages to Saura? (NO)
its conversion into DBP, for an industrial loan of P500,000 to be used
accordingly: (1) P250,000 for the construction of a factory building; HELD:
(2) P240,900 to pay the balance of the purchase price of the jute mill SC held that there was a perfected consensual contract as
machinery and equipment; and (3) P9,100 as additional working recognized under Art. 1934. There was an application of loan by
capital. RFC passed Resolution No. 145 approving the loan. Saura, and such was approved by RFC by virtue of a resolution; the
corresponding mortgage was duly executed and registered. However,
In a letter, Saura requested RFC that in lieu of having China it cannot be said that RFC failed to fulfil its obligation so that Saura is
Engineers sign as co-maker on the promissory notes, Saura would entitled to recover damages.
put up a bond. RFC then approved Resolution No. 736 calling for the
re-examination of the aspects of the said loan. The two conditions imposed in the proviso were a step in the
implementation of the loan. On the other hand, it was Saura who
After China Engineers agreed again to act as co-signer, Saura asked deviated from the original terms of the loan by appropriation of the
RFC for the preparation of documents in accordance to the RN 145. loan to some other things not included in the original application of
Despite the later execution of the loan documents, the re-examination loan as evidenced by its letter-response. The subsequent cancellation
proceeded prompting the approval of Resolution No 3989 reducing of the loan by the parties constituted a mutual desistance (on the
the loan to P300,000. Moreover, China Engineers had withdrawn. initiative of Saura itself) which by principle is a mode of extinguishing
Sauras request to grant the P500,000 loan was denied by RFC. It obligations. RFC is therefore not liable for damages.
was only through Resolution No. 9083 that the original loan was
reinstated upon manifestation of willingness of China Engineers to WHEREFORE, the judgment appealed from is REVERSED and the
sign the promissory notes, with the proviso that the DANR certify the complaint is DISMISSED.
1. That the raw material needed by Saura to carry out its
operation are available in the immediate vicinity; and