TL;DR

The Supreme Court ruled that cooperatives are not automatically exempt from paying legal fees for extrajudicial foreclosure proceedings under Act 3135. The exemption granted to cooperatives under Republic Act No. 6938 (RA 6938) applies only to actions brought under the Cooperative Code itself or actions initiated by the Cooperative Development Authority. This decision clarifies that cooperatives must pay legal fees for foreclosure petitions, as these actions fall outside the scope of the exemption. The ruling also reinforces the Supreme Court’s exclusive power to promulgate rules on pleading, practice, and procedure, safeguarding the Court’s institutional independence.

Mortgaged Dreams: When Cooperative Fee Exemptions Meet Foreclosure Realities

The case of Baguio Market Vendors Multi-Purpose Cooperative (BAMARVEMPCO) v. Hon. Iluminada Cabato-Cortes revolves around the question of whether a cooperative is exempt from paying legal fees when it initiates extrajudicial foreclosure proceedings. BAMARVEMPCO, a credit cooperative, sought to foreclose a mortgage under Act 3135, as amended, and claimed exemption from legal fees based on Article 62(6) of Republic Act No. 6938 (RA 6938), the Cooperative Code of the Philippines. This provision exempts cooperatives from paying certain court and sheriff’s fees. However, the Executive Judge of the Regional Trial Court of Baguio City denied the request, leading to the Supreme Court case.

The core legal issue is whether the fee exemption under RA 6938 extends to extrajudicial foreclosure petitions. Article 62(6) of RA 6938 states that cooperatives are exempt “from the payment of all court and sheriff’s fees payable to the Philippine Government for and in connection with all actions brought under this Code, or where such action is brought by the Cooperative Development Authority before the court, to enforce the payment of obligations contracted in favor of the cooperative.” A plain reading of this provision suggests a limited scope of exemption.

The Supreme Court clarified that the exemption applies only to two specific types of actions. First, actions brought directly under RA 6938 itself. Second, actions brought by the Cooperative Development Authority (CDA) to enforce obligations in favor of cooperatives. This means that the exemption does not automatically extend to all legal proceedings involving cooperatives. The Court emphasized that BAMARVEMPCO’s foreclosure petition was filed under Act 3135, not RA 6938, thereby placing it outside the scope of the exemption.

Furthermore, the Court addressed the broader issue of legislative versus judicial rule-making powers. Historically, both the 1935 and 1973 Constitutions allowed Congress to “repeal, alter or supplement” rules promulgated by the Supreme Court. However, the 1987 Constitution removed this congressional power, solidifying the Supreme Court’s exclusive authority to create rules of pleading, practice, and procedure.

The Supreme Court reiterated its stance on the separation of powers, emphasizing its exclusive domain over judicial rules. This position was strongly supported by the Court’s earlier ruling in Re: Petition for Recognition of the Exemption of the Government Service Insurance System from Payment of Legal Fees, which affirmed that legislative exemptions from court fees cannot override the Court’s rule-making authority. In that case, the Court stated that because “the payment of legal fees is a vital component of the rules promulgated by this Court concerning pleading, practice and procedure, it cannot be validly annulled, changed or modified by Congress.”

The Court’s decision has significant implications for cooperatives engaging in foreclosure proceedings. Cooperatives must now budget for and pay the required legal fees for extrajudicial foreclosures, as the exemption under RA 6938 does not apply. This ruling ensures that the Judiciary Development Fund, which is funded by these fees, remains intact and available for its intended purposes. The ruling reinforces the independence of the judiciary.

FAQs

This case provides important clarity on the scope of cooperative fee exemptions and reinforces the Supreme Court’s authority over judicial rules. Cooperatives should be aware of their obligations to pay legal fees in foreclosure proceedings. Moreover, understanding the separation of powers between the legislative and judicial branches is crucial for interpreting legal provisions correctly.

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: BAGUIO MARKET VENDORS MULTI-PURPOSE COOPERATIVE (BAMARVEMPCO) vs. HON. ILUMINADA CABATO-CORTES, G.R. No. 165922, February 26, 2010