G.R. No. 142420 - Philippine Bank of Communications vs. Diamond Seafoods Corporation

On August 25, 1997, the Board of Directors of Zomer Development Company, Inc. (“petitioner”) approved a resolution to apply for a credit line with International Exchange Bank (IEB) amounting to P60,000,000, including possible excess or increases approved by IEB.
The Board authorized petitioner to assign, pledge, or mortgage its properties as security for the credit line and to secure the term loan and other credit facilities of IDHI Prime Aggregates Corporation (“Prime Aggregates”) with IEB.
Prime Aggregates obtained a term loan of P60,000,000 from IEB on August 26, 1997.
On September 2, 1997, petitioner’s Treasurer Amparo Zosa and General Manager Manuel Zosa, Jr. executed a real estate mortgage covering three parcels of land in favor of IEB to secure, among others, all loans, overdrafts, credit lines, and other obligations of the mortgagor (petitioner) and/or Prime Aggregates.

Prime Aggregates secured several other loans from IEB from September 1997 to September 1998.
Prime Aggregates defaulted on its obligations, with outstanding amounts of P90,267,854.96 and US$211,547.12 as of September 15, 2000.
IEB filed a petition for extra-judicial foreclosure before the RTC of Cebu City. On October 18, 2000, respondent Sheriff Arthur R. Cabigon issued a Notice of Extra-Judicial Foreclosure and Sale, scheduled for November 28, 2000.

Petitioner filed a complaint for injunction with a motion for preliminary injunction or TRO to enjoin the foreclosure sale, alleging the real estate mortgage was null and void because its officers were authorized only to secure one loan, not multiple obligations of Prime Aggregates.
The RTC Branch 9 denied the prayer for preliminary injunction. Petitioner filed motions for reconsideration and to amend complaints, which were denied or withdrawn.
Petitioner elevated the case to the Court of Appeals (CA) via certiorari (CA-G.R. SP No. 64390), arguing that the mortgage was ultra vires and officers exceeded their authority.

Branch 15 of the RTC dismissed petitioner’s amended complaint in September 2001.
The CA denied the certiorari petition, ruling that the trial court did not commit grave abuse in denying the injunction, rejecting claims of ultra vires mortgage and limited authority of petitioner’s officers.
Respondents moved to dismiss the petition as moot and academic due to foreclosure and consolidation of title in IEB’s favor, supported by the issuance of transfer certificates of title.

The CA subsequently set aside the order dismissing the complaint and reinstated the case to the RTC docket.
The mortgage properties had already been foreclosed and ownership consolidated in IEB’s name.
The Supreme Court found the petition moot due to completed foreclosure and title consolidation.

Whether the petition for preliminary injunction to enjoin the extra-judicial foreclosure is proper and timely given subsequent foreclosure and consolidation of title in favor of IEB.
Whether the real estate mortgage executed by petitioner’s officers was ultra vires or valid despite purported limitation of authority to secure only one obligation of Prime Aggregates.
Whether petitioner’s properties could be validly mortgaged to secure the obligations of a third party (Prime Aggregates), especially considering petitioner’s By-Laws and corporate interest.
Whether petitioner’s inaction and ratification affect the validity of the mortgage and its ability to challenge the foreclosure.