CREDIT TRANSACTION CASE DIGEST/ SAURA IMPORT-EXPORT CO., INC. VS. DEVELOPMENT BANK OF THE PHILIPPINES/ 44 SCRA 445 (1972)

CREDIT TRANSACTION CASE DIGEST

SAURA IMPORT-EXPORT CO., INC. VS. DEVELOPMENT BANK OF THE PHILIPPINES

44 SCRA 445 (1972)


TOPIC/DOCTRINE
‘Mutual Desistance’ (mutuo disenso)
Since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment.

FACTS
            The application of Saura, Inc. for a loan of P500,000 was approved by resolution of the defendant, and the corresponding mortgage was executed namely –that the proceeds of the loan shall be utilized exclusively for the following purposes: for construction of factory building -P250,000; for payment of balance of purchase price of machinery and equipment -P240,900; for working capital -P9,100.”
 
        Evidently, Saura, Inc. realized that it could not meet the conditions required by RFC. It requested RFC to cancel the mortgage and so, on June 17, 1955, RFC executed the corresponding deed of cancellation and delivered it to Ramon F Saura itself as president of Saura, Inc. Petitioner executed an action for damages.
           
ISSUE
Whether there is a perfected contract and RFC is entitled to recover damages for breach of contract.
 
RULING
            The court ruled in the negative.

          The court held that since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment. This is known as ‘mutual desistance’ (mutuo disenso).
 
            Here, the court held that where after approval of his loan, Saura Inc., instead of insisting for its release, asked that the mortgage given as security be cancelled and the creditor acceded thereto, the action taken by both parties was in the nature of ‘mutual desistance.’

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