DBP vs.

GUARIA CORPORATION
G.R. No. 160758
15 January 2014
Petition for review on certiorari
J. Bersamin
FACTS: Respondent Guaria Corporation applied for a loan (P3,387,000.00) from
petitioner DBP for the construction of a resort complex in Iloilo. Prior to the release
of the loan, petitioner required respondent to put up a cash equity of P1,470,951.00
for the construction of the buildings and other improvements on the resort complex.
The loan was released in several installments, which respondent used to cover the
additional improvements. In all, the amount released totaled P3,003,617.49, from
which petitioner withheld P148,102.98 as interest.
Upon inspection, petitioner found that Guaria had not completed the construction
works and demanded in a letter that respondent expedite the completion and
warned that it would initiate foreclosure proceedings should they not comply. The
non-action and objection of respondent led DBP to initiate extrajudicial foreclosure
proceedings, which gave its clients and patrons the impression that business
operation had slowed down and the that the resort had closed.
Respondent filed a complaint to the RTC to seek the nullification of the foreclosure
proceedings and cancellation of certificate of sale, which ruled in their favor
rendered the extrajudicial sale as null and void, ordered petitioner to give back the
properties foreclosed and for respondent to pay back the loan. On appeal, the CA
sustained the trial courts decision with the modification deleting the award of
attorneys fees.
ISSUE: Whether the respondent is in default when it failed to perform the terms of
the mortgage contract securing the promissory note.
HELD: No. Petition denied. CA decision is AFFIRMED.
RATIO: The Court held that the agreement between petitioner and respondent was
a loan, which requires the delivery of money or any other consumable object by one
party to another on the condition that the same amount or quality shall be paid.
Loan is a reciprocal obligation, as it arises from the same cause where one party is
the creditor, and the other the debtor which means that the creditor should
release the full loan amount and the debtor repays it when it becomes due and
demandable.
The failure of petitioner to release the proceeds of the loan in its entirety, gave
them no right to demand from respondent to comply with their obligations. Indeed,
if a party in a reciprocal contract like a loan does not perform its obligation, the
other party cannot be obliged to perform what is expected of it while the others
obligation remains unfulfilled. In other words, the latter party does not incur delay.