TL;DR

The Supreme Court affirmed that courts have the discretion to decide whether to entertain actions for declaratory relief and cannot be compelled by mandamus to rule on such cases. In this case, Zomer Development sought to compel the Court of Appeals to declare a law unconstitutional, but the Supreme Court sided with the appellate court’s decision to defer. The ruling underscores that mandamus is only for ministerial duties, not discretionary acts. Furthermore, the Supreme Court reiterated the constitutionality of the shorter redemption period for corporate properties under the General Banking Law, finding it a reasonable classification to protect the banking system’s stability. This means businesses facing foreclosure have a shorter timeframe to redeem their assets compared to individuals, a distinction legally justified by the differing nature and use of properties.

Mandamus Denied: When Courts Can Say ‘No’ to Declaratory Relief

Zomer Development Company, Inc. found itself in a legal bind after its properties were foreclosed by International Exchange Bank (later Union Bank). Seeking to reclaim its assets, Zomer challenged the constitutionality of Section 47 of the General Banking Law, arguing it unfairly shortened the redemption period for corporations like itself compared to individual property owners. When the Court of Appeals declined to rule on this constitutional question, Zomer sought a writ of mandamus from the Supreme Court, hoping to compel the CA to make a decision. The central legal question became: can a court be forced, through mandamus, to issue a declaratory relief judgment, especially on a matter of constitutional validity?

The Supreme Court decisively answered no. Justice Leonen, writing for the Court, emphasized the discretionary nature of declaratory relief actions. Quoting Rule 63, Section 5 of the Rules of Court, the decision highlighted that courts may refuse to exercise their power to declare rights if such a declaration would not resolve the underlying controversy or is deemed unnecessary. The Court of Appeals, in deferring the constitutional issue to the Supreme Court, was exercising this very discretion. The Supreme Court clarified that mandamus, a legal remedy to compel performance of a duty, is only applicable to ministerial duties—acts that require no discretion or judgment. Declaratory relief, by its nature, involves judicial discretion, making it an unsuitable subject for mandamus. Zomer’s petition, therefore, fundamentally misunderstood the scope of mandamus and the discretionary power inherent in declaratory relief actions.

Building on this procedural point, the Supreme Court also addressed the substantive issue of the constitutionality of Section 47. Zomer argued that the law violated the equal protection clause by providing a shorter redemption period for juridical persons. However, the Court firmly rejected this argument, citing its precedent in Goldenway Merchandising Corporation v. Equitable PCI Bank. The decision reiterated that the equal protection clause does not mandate absolute equality but permits reasonable classification. The classification between juridical and natural persons, in the context of redemption periods, was deemed reasonable and based on substantial distinctions.

The rationale for this classification, as elucidated in Goldenway Merchandising and reaffirmed in Zomer, lies in the differing nature and typical use of properties owned by corporations versus individuals. Corporate properties are often commercial or industrial, while individual properties are more likely residential. The shorter redemption period for corporate properties aims to reduce uncertainty in commercial property ownership, facilitate quicker disposal of assets by mortgagee-banks, and ultimately contribute to the stability of the banking system. This rationale, the Court held, is germane to the purpose of the General Banking Law, enacted in response to financial crises to ensure a sound banking system. The Court applied the rational basis test, finding a legitimate government interest in protecting the banking industry and a reasonable connection between this interest and the means employed—the shorter redemption period for juridical entities.

Furthermore, the Supreme Court clarified a procedural point regarding notice to the Solicitor General in cases challenging the validity of statutes. While Rule 63, Section 3 requires notice to the Solicitor General, the Court stated that failure of the Solicitor General to participate does not warrant dismissal of the case. Due process is satisfied by providing notice, and the Solicitor General’s non-participation is considered a waiver of their right to intervene. This clarification ensures that private litigants are not unduly prejudiced by the non-action of government agencies, streamlining the process for declaratory relief actions.

In conclusion, Zomer Development Company, Inc. v. Court of Appeals reinforces the judiciary’s discretionary power in declaratory relief cases and solidifies the constitutionality of Section 47 of the General Banking Law. It serves as a reminder that mandamus is not a tool to compel discretionary acts, and that legislative classifications, when rationally based, are permissible under the equal protection clause. The decision has significant implications for corporations facing foreclosure, highlighting the shorter redemption periods they must adhere to, while also clarifying procedural aspects of challenging statutes in court.

FAQs

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: Zomer Development Company, Inc. v. Special Twentieth Division of the Court of Appeals, G.R. No. 194461, January 07, 2020