G.R. No. 125838 - Development Bank of the Philippines vs. Court of Appeals

DBP released a loan amounting to P3,500,000.00 to ERHC in three installments (P2,000,000.00 on September 27, 1975; P1,000,000.00 on June 14, 1976; and P500,000.00 on September 14, 1976).
To secure the loan, ERHC mortgaged its personal and real properties to DBP.
A restructuring of ERHC’s loan was approved on March 18, 1981 by DBP subject to several important conditions.

On June 5, 1986, DBP filed an application for extra-judicial foreclosure of both the real estate and chattel mortgages due to ERHC’s alleged failure to pay on its loan.
The required posting of auction sale notices was executed by deputy sheriffs, albeit without the proper certificates of posting.
The auction sale for personal properties was conducted on July 10, 1986, while the sale for real properties was initially scheduled for August 12, 1986 but subsequently postponed to September 11, 1986 following an agreement with ERHC.

ERHC contested the validity of the foreclosure by asserting two primary defenses: non-compliance with statutory procedural requirements and the assertion that the foreclosure was premature because the loan had been restructured.
ERHC delivered stock certificates (Nos. 30, 31, and 32) representing 3,477,052 shares, arguing that such delivery illustrated compliance with the restructuring agreement conditions.
DBP maintained that it had cancelled the restructuring agreement upon ERHC’s failure to meet certain material conditions.

ERHC initiated a complaint for the annulment of the foreclosure sale of both personal and real properties by challenging the procedural irregularities.
The Regional Trial Court of Iriga City, after granting a temporary injunction and hearing the merits, declared:

The foreclosure and auction sale of the personal and real properties void for failure to comply with statutory requirements.
The extrajudicial foreclosure of the real estate mortgage was void due to non-compliance with the publication requisites, whereas that of the chattel mortgage was valid.
DBP was ordered to retroactively restructure the loans as though the foreclosure had not taken place and to pay moral damages to ERHC.

Both ERHC and DBP appealed the trial court decision.
The Court of Appeals consolidated the appeals, ultimately affirming the trial court’s ruling on the void nature of the real estate mortgage foreclosure and sustaining the validity of the chattel mortgage foreclosure.
DBP’s motion for reconsideration was denied, leading to the present petition for review on certiorari.

The restructuring agreement, as evidenced by DBP Resolution No. 956, involved conditions such as converting part of the debt into equity, availing an additional loan, and undertaking a quasi-reorganization.
ERHC’s compliance was partial and, according to the trial and appellate courts, the delivery of stock certificates did not satisfy the condition of converting the debt into equity.
ERHC also offered to lease the foreclosed properties after the auction sale, a point that later became an issue in whether such an act constituted a waiver of its right to contest the foreclosure.

Whether DBP complied with the statutory posting requirement for the extrajudicial foreclosure despite the non-execution of the certificate of posting.
Whether the postponement of the auction sale of the real properties necessitated republication of the notice, and if the failure to republish rendered the sale void.

Whether the restructuring agreement between DBP and ERHC was perfected and effectively implemented, considering the delivery of stock certificates and the additional conditions stipulated in DBP Resolution No. 956.
Whether ERHC’s failure to convert debt into equity, avail the additional loan, and secure a quasi-reorganization undermined the perfection of the restructuring agreement.

Whether ERHC’s subsequent offer to lease the foreclosed properties amounted to a waiver of its right to question the validity of the foreclosure proceedings.

Whether the award of moral damages to ERHC, a corporation, was proper given the procedural and evidentiary issues, and if a juridical person can substantively claim moral damages.