Cooperative Fees Supreme Court Limits Exemptions In Foreclosure Proceedings

The Supreme Court has clarified the limits of the legal fee exemption granted to cooperatives under the Cooperative Code of the Philippines. In Baguio Market Vendors Multi-Purpose Cooperative v. Hon. Iluminada Cabato-Cortes (G.R. No. 165922, February 26, 2010), the Court ruled that a cooperative filing a petition for extrajudicial foreclosure of mortgage cannot invoke the exemption from court fees provided under Article 62(6) of Republic Act No. 6938. The ruling also reaffirms the exclusive power of the Supreme Court to promulgate rules on pleading, practice, and procedure, a power no longer shared with Congress under the 1987 Constitution.

Facts of the Case

The Baguio Market Vendors Multi-Purpose Cooperative (BAMARVEMPCO) is a credit cooperative organized under RA 6938. In 2004, as mortgagee, it filed with the Clerk of Court of the Regional Trial Court of Baguio City a petition to extrajudicially foreclose a mortgage under Act 3135, as amended. Under Section 7(c) of Rule 141 of the Rules of Court, petitions for extrajudicial foreclosure are subject to legal fees based on the value of the mortgagee's claim. Invoking Article 62(6) of RA 6938, the cooperative sought exemption from payment of these fees.

The Executive Judge denied the request, ruling that Section 22 of Rule 141 exempts only the Republic of the Philippines, its agencies, and instrumentalities from paying legal fees. On reconsideration, the judge added that the fees collected under Rule 141 are not "fees payable to the Philippine Government" because they accrue to a special fund under the Court's control, not to the National Treasury.

The Issue

The sole question before the Supreme Court was whether the cooperative's application for extrajudicial foreclosure is exempt from legal fees under Article 62(6) of RA 6938.

The Ruling: Exemption Is Limited to Two Types of Actions

The Supreme Court denied the petition and affirmed the orders of the trial court. The Court held that Article 62(6) of RA 6938 does not apply to the cooperative's foreclosure proceeding.

The exemption granted by Article 62(6) is limited to two types of actions: (1) actions brought under RA 6938 itself; and (2) actions brought by the Cooperative Development Authority to enforce the payment of obligations contracted in favor of cooperatives. The Court reasoned that the fees imposable on the cooperative do not pertain to an action brought under RA 6938 but to a petition for extrajudicial foreclosure of mortgage under Act 3135. Moreover, the cooperative is not the Cooperative Development Authority, which can claim exemption only in actions to enforce payments of obligations on behalf of cooperatives.

The Supreme Court's Exclusive Power Over Judicial Rules

The Court took the opportunity to reiterate its earlier ruling in Re: Petition for Recognition of the Exemption of the Government Service Insurance System from Payment of Legal Fees (A.M. No. 08-2-01-0, February 11, 2010). Under the 1935 and 1973 Constitutions, Congress had the power to repeal, alter, or supplement the rules promulgated by the Supreme Court. The 1987 Constitution, however, deleted this congressional power.

Citing Echegaray v. Secretary of Justice (361 Phil. 73, 1999), the Court emphasized that the power to promulgate rules of pleading, practice, and procedure is no longer shared with Congress. The Court described this power as "one of the safeguards of this Court's institutional independence." Because the payment of legal fees is a vital component of these rules, Congress cannot validly annul, change, or modify them through legislation.

Practical Takeaways

• Cooperatives cannot claim automatic exemption from court fees in extrajudicial foreclosure proceedings. The exemption under Article 62(6) of RA 6938 applies only to actions brought under the Cooperative Code and to actions brought by the Cooperative Development Authority.
• The exemption is not based on the status of the party but on the nature of the action. A cooperative that is a mortgagee filing a foreclosure petition under Act 3135 must pay the required legal fees.
• Legislative exemptions from court fees are subject to the Supreme Court's exclusive rule-making power. Under the 1987 Constitution, Congress cannot repeal, alter, or supplement rules on pleading, practice, and procedure, including rules on legal fees.
• Parties seeking exemptions from court fees should carefully verify the basis of their claim. General exemptions in charters or codes may not cover specific proceedings governed by the Rules of Court.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.