Case Digest (G.R. No. L-24968)
Facts:
In July 1953, Saura Import & Export Co., Inc. (hereinafter “Saura, Inc.”) applied to the Rehabilitation Finance Corporation (RFC), later converted into the Development Bank of the Philippines (DBP), for a ₱500,000 industrial loan to construct a jute‐sack factory in Davao City. On January 7, 1954, RFC approved the loan by Resolution No. 145, specifying uses of proceeds, co‐signers for promissory notes and a first mortgage on the factory site, building and machinery. Saura, Inc. sought minor modifications, prompting Resolution No. 736 (Feb. 4, 1954) ordering a re‐examination of the project. Loan documents, including the promissory note and deed of mortgage, were executed on April 13, 1954, and registered on April 17. On June 10, 1954, RFC’s Board approved Resolution No. 3989, reducing the loan to ₱300,000. Thereafter, F.R. Halling, acting for China Engineers, Ltd. (one of the co‐signers), withdrew from the obligation, and RFC deemed the ₱300,000 loan canceled. Saura, Inc. protesteCase Digest (G.R. No. L-24968)
Facts:
- Parties and trial court decision
- Plaintiff-Appellee: Saura Import & Export Co., Inc. (Saura, Inc.)
- Defendant-Appellant: Development Bank of the Philippines (DBP), successor-in-interest to the Rehabilitation Finance Corporation (RFC)
- Civil Case No. 55908, Court of First Instance of Manila — June 28, 1965 judgment for Saura, Inc., awarding P383,343.68 actual and consequential damages, legal interest from complaint date, and P5,000 attorney’s fees
- Initial loan application and approval
- July 1953: Saura, Inc. applies to RFC for P500,000 industrial loan, to be used exclusively for:
- P250,000 for construction of jute sack factory building
- P240,900 to pay balance of machinery and equipment purchase
- P9,100 as additional working capital
- January 7, 1954: RFC Resolution No. 145 approves P500,000 loan secured by first mortgage on factory building, land, machinery, and equipment; mandates co-makers (Ramon E. Saura, others, China Engineers, Ltd.); releases discretionary, tied to construction progress
- Request for modification and re-examination
- January 8, 1954: Saura, Inc. requests substitution of bond for China Engineers’ co-maker liability and swap of one individual co-maker
- February 4, 1954: RFC Resolution No. 736 orders re-examination of loan’s advisability, appointing board member to study project
- Execution of loan documents and reduction of loan
- April 13–17, 1954: Execution and registration of promissory note (with China Engineers co-signing) and mortgage deed under Resolution No. 145
- June 10, 1954: RFC Board (with Saura, Inc.’s president present) adopts Resolution No. 3989 reducing loan amount from P500,000 to P300,000; authorizes releases up to P100,000 to operationalize the factory; retains other terms of Resolution No. 145
- Withdrawal of co-maker and cancellation of reduced loan
- June 19–July 2, 1954: F. R. Hailing, on behalf of China Engineers, Ltd., withdraws as co-maker and deems loan canceled; requests mortgage withdrawal
- RFC denies reinstatement of P500,000 loan and treats P300,000 loan as canceled
- Restoration of original loan with conditions
- December 17, 1954: RFC Resolution No. 9083 restores P500,000 loan on condition that Department of Agriculture and Natural Resources certify (a) availability of local raw materials, and (b) prospect of increased local production to meet factory requirements
- December 22, 1954: RFC communicates conditions to Saura, Inc.
- Deadlock over raw materials and deviation request
- January 21, 1955: Saura, Inc. admits insufficient local kenaf, seeks assurance to import jute, and requests revised releases totaling P500,000 (P250,000 for machinery payment, P182,413.91 for equipment, P67,586.09 for raw materials and labor)
- January 25, 1955: RFC refuses deviation, reiterates principle of financing only local raw-material-based sack manufacture
- Mutual desistance and cancellation of mortgage
- June 17, 1955: Saura, Inc. requests cancellation of RFC mortgage to allow registration of Prudential Bank mortgage; RFC executes deed of cancellation
- May 15, 1955: Prudential Bank sues Saura, Inc. for unpaid trust-receipt obligation
- Subsequent events and suit for damages
- 1962: Saura, Inc. applies to DBP for new loan, denied
- January 9, 1964: Saura, Inc. files present suit for damages, alleging DBP’s failure to release loan proceeds prevented completion of jute mill project
Issues:
- Whether a perfected loan contract existed binding DBP/RFC to disburse the P500,000 loan
- Whether Saura, Inc. waived, abandoned, or extinguished its cause of action by mutual desistance and request to cancel the mortgage
- Whether Saura, Inc. itself failed to comply with the conditions of the loan agreement, particularly the local raw-materials requirement
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)