saura import and export co., inc., plaintiff-appellee,

7/25/2019 Saura Import and Export Co., Inc., Plaintiff-Appellee,

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EN BANC

G.R. No. L-24968 April 27, 1972

SAURA IMPORT and !PORT "O., IN" ., plaintiff-appellee,

vs.

#$LOPMNT %AN& O' T( P(ILIPPINS, defendant-appellant.

Mabanag, Eliger and Associates and Saura, Magno and Associates for plaintiff-appellee.

Jesus A. Avancea and Hilario G. Orsolino for defendant-appellant.

MA&ALINTAL, J.:p

In Civil Case No. 55908 of the Court of First Instance of anila, !ud"#ent $as rendered on %une &8, '9(5 sentencin" defendant )evelop#ent

Ban* of the +hilippines )B+ to pa actual and conse/uential da#a"es to plaintiff aura I#port and E1port Co., Inc. in the a#ount of

+282,232.(8, plus interest at the le"al rate fro# the date the co#plaint $as filed and attorne4s fees in the a#ount of +5,000.00. he present

appeal is fro# that !ud"#ent.

In %ul '952 the plaintiff hereinafter referred to as aura, Inc. applied to the 6eha7ilitation Finance Corporation 6FC, 7efore its conversion

into )B+, for an industrial loan of +500,000.00, to 7e used as follo$s +&50,000.00 for the construction of a factor 7uildin" for the

#anufacture of !ute sac*s +&30,900.00 to pa the 7alance of the purchase price of the !ute #ill #achiner and e/uip#ent and +9,'00.00 as

additional $or*in" capital.

+arentheticall, it #a 7e #entioned that the !ute #ill #achiner had alread 7een purchased 7 aura on the stren"th of a letter of credit

e1tended 7 the +rudential Ban* and rust Co., and arrived in )avao Cit in %ul '952 and that to secure its release $ithout first pain" thedraft, aura, Inc. e1ecuted a trust receipt in favor of the said 7an*.

:n %anuar ;, '953 6FC passed 6esolution No. '35 approvin" the loan application for +500,000.00, to 7e secured 7 a first #ort"a"e on the

factor 7uildin" to 7e constructed, the land site thereof, and the #achiner and e/uip#ent to 7e installed. A#on" the other ter#s spelled out in

the resolution $ere the follo$in"

'. hat the proceeds of the loan shall 7e utili


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5. hat release shall 7e #ade at the discretion of the 6eha7ilitation Finance Corporation, su7!ect to availa7ilit of funds, and as the

construction of the factor 7uildin"s pro"resses, to 7e certified to 7 an appraiser of this Corporation@

aura, Inc. $as officiall notified of the resolution on %anuar 9, '953. he da 7efore, ho$ever, evidentl havin" other$ise 7een infor#ed of its

approval, aura, Inc. $rote a letter to 6FC, re/uestin" a #odification of the ter#s laid do$n 7 it, na#el that in lieu of havin" China

En"ineers, =td. $hich $as $illin" to assu#e lia7ilit onl to the e1tent of its stoc* su7scription $ith aura, Inc. si"n as co-#a*er on the

correspondin" pro#issor notes, aura, Inc. $ould put up a 7ond for +'&2,500.00, an a#ount e/uivalent to such su7scription and that aria. 6oca $ould 7e su7stituted for Inocencia Arellano as one of the other co-#a*ers, havin" ac/uired the latter4s shares in aura, Inc.

In vie$ of such re/uest 6FC approved 6esolution No. ;2( on Fe7ruar 3, '953, desi"natin" of the #e#7ers of its Board of ?overnors, for

certain reasons stated in the resolution, @to ree1a#ine all the aspects of this approved loan ... $ith special reference as to the advisa7ilit of

financin" this particular pro!ect 7ased on present conditions o7tainin" in the operations of !ute #ills, and to su7#it his findin"s thereon at the

ne1t #eetin" of the Board.@

:n arch &3, '953 aura, Inc. $rote 6FC that China En"ineers, =td. had a"ain a"reed to act as co-si"ner for the loan, and as*ed that the

necessar docu#ents 7e prepared in accordance $ith the ter#s and conditions specified in 6esolution No. '35. In connection $ith the

ree1a#ination of the pro!ect to 7e financed $ith the loan applied for, as stated in 6esolution No. ;2(, the parties na#ed their respective

co##ittees of en"ineers and technical #en to #eet $ith each other and underta*e the necessar studies, althou"h in appointin" its o$n

co##ittee aura, Inc. #ade the o7servation that the sa#e @should not 7e ta*en as an ac/uiescence on its part to novate, or accept ne$

conditions to, the a"ree#ent alread entered into,@ referrin" to its acceptance of the ter#s and conditions #entioned in 6esolution No. '35.

:n April '2, '953 the loan docu#ents $ere e1ecuted the pro#issor note, $ith F.6. allin", representin" China En"ineers, =td., as one of the

co-si"ners and the correspondin" deed of #ort"a"e, $hich $as dul re"istered on the follo$in" April ';.

It appears, ho$ever, that despite the for#al e1ecution of the loan a"ree#ent the ree1a#ination conte#plated in 6esolution No. ;2( proceeded.

In a #eetin" of the 6FC Board of ?overnors on %une '0, '953, at $hich 6a#on aura, +resident of aura, Inc., $as present, it $as decided to

reduce the loan fro# +500,000.00 to +200,000.00. 6esolution No. 2989 $as approved as follo$s

6E:=I:N No. 2989. 6educin" the =oan ?ranted aura I#port > E1port Co., Inc. under 6esolution No. '35, C.., fro# +500,000.00 to

+200,000.00. +ursuant to Bd. 6es. No. ;2(, c.s., authori E1port Co. under 6esolution No. '35, c.s., for the purpose of financin" the #anufacture of !ute sac*s in )avao, $ith special reference as to

the advisa7ilit of financin" this particular pro!ect 7ased on present conditions o7tainin" in the operation of !ute #ills, and after havin" heard6a#on E. aura and after e1tensive discussion on the su7!ect the Board, upon reco##endation of the Chair#an, 6E:=E) that the loan

"ranted the aura I#port > E1port Co. 7e 6E)CE) fro# +500,000 to +200,000 and that releases up to +'00,000 #a 7e authori


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hat in vie$ of o7servations #ade of the shorta"e and hi"h cost of i#ported ra$ #aterials, the )epart#ent of A"riculture and

Natural 6esources shall certif to the follo$in"

'. hat the ra$ #aterials needed 7 the 7orro$er-corporation to carr out its operation are availa7le in the i##ediate vicinit and

&. hat there is prospect of increased production thereof to provide ade/uatel for the re/uire#ents of the factor.@

he action thus ta*en $as co##unicated to aura, Inc. in a letter of 6FC dated )ece#7er &&, '953, $herein it $as e1plained that the

certification 7 the )epart#ent of A"riculture and Natural 6esources $as re/uired @as the intention of the ori"inal approval of the loan is to

develop the #anufacture of sac*s on the 7asis of locall availa7le ra$ #aterials.@ his point is i#portant, and sheds li"ht on the su7se/uent

actuations of the parties. aura, Inc. does not den that the factor he $as 7uildin" in )avao $as for the #anufacture of 7a"s fro# local ra$

#aterials. he cover pa"e of its 7rochure E1h. descri7es the pro!ect as a @%oint venture 7 and 7et$een the indanao Industr Corporation

and the aura I#port and E1port Co., Inc. to finance, #ana"e and operate aKenaf#ill plant, to #anufacture copra and corn 7a"s, runners,

floor #attin"s, carpets, draperies out of '00D local ra$ #aterials, principal enaf.@ he e1planator note on pa"e ' of the sa#e 7rochure

states that, the venture @is the first serious atte#pt in this countr to use '00D locall "ro$n ra$ #aterials nota7l enaf$hich is presentl

"ro$n co##erciall in theIsland of indanao $here the proposed !ute#ill is located ...@

his fact, accordin" to defendant )B+, is $hat #oved 6FC to approve the loan application in the first place, and to re/uire, in its 6esolution No.

9082, a certification fro# the )epart#ent of A"riculture and Natural 6esources as to the availa7ilit of local ra$ #aterials to provide ade/uatel

for the re/uire#ents of the factor. aura, Inc. itself confir#ed the defendant4s stand i#pliedl in its letter of %anuar &', '955 ' statin" that

accordin" to a special stud #ade 7 the Bureau of Forestr @enaf$ill not 7e availa7le in sufficient /uantit this ear or pro7a7l even ne1t

ear@ & re/uestin" @assurances fro# 6FC that # co#pan and associates $ill 7e a7le to 7rin" in sufficient !ute #aterials as #a 7e

necessar for the full operation of the !ute #ill@ and 2 as*in" that releases of the loan 7e #ade as follo$s

a For the pa#ent of the receipt for !ute #ill

#achineries $ith the +rudential Ban* >

rust Co#pan +&50,000.00

For i##ediate release

7 For the purchase of #aterials and e/uip-

#ent per attached list to ena7le the !ute

#ill to operate '8&,3'2.9'

c For ra$ #aterials and la7or (;,58(.09

' +&5,000.00 to 7e released on the open-

in" of the letter of credit for ra$ !ute

for &5,000.00.

& +&5,000.00 to 7e released upon arrival

of ra$ !ute.

2 +';,58(.09 to 7e released as soon as the

#ill is read to operate.

:n %anuar &5, '955 6FC sent to aura, Inc. the follo$in" repl

)ear irs


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his is $ith reference to our letter of %anuar &', '955, re"ardin" the release of our loan under consideration of +500,000. As

stated in our letter of )ece#7er &&, '953, the releases of the loan, if revived, are proposed to 7e #ade fro# ti#e to ti#e, su7!ect to

availa7ilit of funds to$ards the end that the sac* factor shall 7e placed in actual operatin" status. e shall 7e a7le to act on our

re/uest for revised purpose and #anner of releases upon re-appraisal of the securities offered for the loan.

ith respect to our re/uire#ent that the )epart#ent of A"riculture and Natural 6esources certif that the ra$ #aterials needed are

availa7le in the i##ediate vicinit and that there is prospect of increased production thereof to provide ade/uatel the re/uire#entsof the factor, $e $ish to reiterate that the 7asis of the ori"inal approval is to develop the #anufacture of sac*s on the 7asis of the

locall availa7le ra$ #aterials. Gour state#ent that ou $ill have to rel on the i#portation of !ute and our re/uest that $e "ive ou

assurance that our co#pan $ill 7e a7le to 7rin" in sufficient !ute #aterials as #a 7e necessar for the operation of our factor,

$ould not 7e in line $ith our principle in approvin" the loan.

ith the fore"oin" letter the ne"otiations ca#e to a standstill. aura, Inc. did not pursue the #atter further. Instead, it re/uested 6FC to cancel

the #ort"a"e, and so, on %une ';, '955 6FC e1ecuted the correspondin" deed of cancellation and delivered it to 6a#on F. aura hi#self as

president of aura, Inc.

It appears that the cancellation $as re/uested to #a*e $a for the re"istration of a #ort"a"e contract, e1ecuted on Au"ust (, '953, over the

sa#e propert in favor of the +rudential Ban* and rust Co., under $hich contract aura, Inc. had up to )ece#7er 2' of the sa#e ear $ithin

$hich to pa its o7li"ation on the trust receipt heretofore #entioned. It appears further that for failure to pa the said o7li"ation the +rudential

Ban* and rust Co. sued aura, Inc. on a '5, '955.

:n %anuar 9, '9(3, ahnost 9 ears after the #ort"a"e in favor of 6FC $as cancelled at the re/uest of aura, Inc., the latter co##enced the

present suit for da#a"es, alle"in" failure of 6FC as predecessor of the defendant )B+ to co#pl $ith its o7li"ation to release the proceeds of

the loan applied for and approved, there7 preventin" the plaintiff fro# co#pletin" or pain" contractual co##it#ents it had entered into, in

connection $ith its !ute #ill pro!ect.

he trial court rendered !ud"#ent for the plaintiff, rulin" that there $as a perfected contract 7et$een the parties and that the defendant $as

"uilt of 7reach thereof. he defendant pleaded 7elo$, and reiterates in this appeal ' that the plaintiff4s cause of action had prescri7ed, or

that its clai# had 7een $aived or a7andoned & that there $as no perfected contract and 2 that assu#in" there $as, the plaintiff itself did

not co#pl $ith the ter#s thereof.

e hold that there $as indeed a perfected consensual contract, as reco"ni


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deviation fro# the ter#s laid do$n in 6esolution No. '35 and e#7odied in the #ort"a"e contract, i#plin" as it did a diversion of part of the

proceeds of the loan to purposes other than those a"reed upon.

hen 6FC turned do$n the re/uest in its letter of %anuar &5, '955 the ne"otiations $hich had 7een "oin" on for the i#ple#entation of the

a"ree#ent reached an i#passe. aura, Inc. o7viousl $as in no position to co#pl $ith 6FC4s conditions. o instead of doin" so and insistin"

that the loan 7e released as a"reed upon, aura, Inc. as*ed that the #ort"a"e 7e cancelled, $hich $as done on %une '5, '955. he action

thus ta*en 7 7oth parties $as in the nature cf #utual desistance H $hat anresa ter#s @#utuo disenso@1

H $hich is a #ode of e1tin"uishin"o7li"ations. It is a concept that derives fro# the principle that since #utual a"ree#ent can create a contract, #utual disa"ree#ent 7 the

parties can cause its e1tin"uish#ent. 2

he su7se/uent conduct of aura, Inc. confir#s this desistance. It did not protest a"ainst an alle"ed 7reach of contract 7 6FC, or even point

out that the latter4s stand $as le"all un!ustified. Its re/uest for cancellation of the #ort"a"e carried no reservation of $hatever ri"hts it 7elieved

it #i"ht have a"ainst 6FC for the latter4s non-co#pliance. In '9(& it even applied $ith )B+ for another loan to finance a rice and corn pro!ect,

$hich application $as disapproved. It $as onl in '9(3, nine ears after the loan a"ree#ent had 7een cancelled at its o$n re/uest, that aura,

Inc. 7rou"ht this action for da#a"es.All these circu#stances de#onstrate 7eond dou7t that the said a"ree#ent had 7een e1tin"uished 7

#utual desistance H and that on the initiative of the plaintiff-appellee itself.

ith this vie$ $e ta*e of the case, $e find it unnecessar to consider and resolve the other issues raised in the respective 7riefs of the parties.

E6EF:6E, the !ud"#ent appealed fro# is reversed and the co#plaint dis#issed, $ith costs a"ainst the plaintiff-appellee.

saura import and export co., inc., plaintiff-appellee,

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