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Understanding the powers of the courts for declaratory exemption

“Judges are like judges,” said U.S. Supreme Court Justice John Roberts. “Judges do not work out the rules. They use them. โ€

โ€œ[Judges and umpires] make sure everyone is playing by the rules. But that is a limited role. No one ever went to a ball game to see the referee. โ€

Among the powers conferred on courts under the current procedural rules is to entertain a case of declaratory exemption. This act may be filed only by a person who is interested in an act, will, contract or other written instrument, promulgation or decision requesting the court to: (a) interpret its meaning or intent by its authors; and based thereon, (b) declares its rights and obligations.

According to the Philippine Supreme Court, a declaration of exemption is brought to secure an authoritative declaration of the rights and obligations of the parties under a law, act or contract for their guidance in complying with or enforcing its provisions and thus presupposes that no been any actual violation of any of these instruments. If, before the final termination of this act, an infringement or infringement of the disputed instrument takes place, it may be converted into an ordinary act; thus giving the parties the opportunity to submit submissions as may be necessary and correct.

A case of declaratory relief lies, even when it has been described as a declaration of invalidity of the notice of sale, certificate of sale and transfer certificate for titles (TCTs), as in the case of Zomer Development Company Inc. against the right of appeal.

In this case, Zomer mortgaged his three land packages to the International Exchange Bank (IEB) to secure a loan. When Zomer did not pay, the IEB excluded the properties and issued the corresponding notice of extraordinary foreclosure sale and informed the public of the sale of these properties at an auction.

IEB emerged as the highest bidder at the auction. The sheriff thus issued a sales certificate containing a period of redemption of 12 months from the registration, “or sooner and / or later, as provided by applicable law.” In addition, the corresponding TCTs, when this certificate was registered, were issued in the name of the IEB.

This development led Zomer to lodge a complaint with the Regional Trial Court (RTC) for a declaration of invalidity of a notice of sale, a certificate of sale and TCTs and a declaration as unconstitutional ยง 47 of the General Banking Act. In his complaint, Zomer claimed that, inter alia, this section violates its right to equal protection, as it provides a shorter redemption period of three months or earlier for legal entities compared to a one-year redemption period granted to natural persons.

While copies of Zomer’s complaint were provided to the Law Office (OSG), the latter did not participate in the case, prompting RTC to dismiss immediately. According to the RTC, a decision on the issue raised by Zomer would deprive the Republic through the OSG of its right to a proper trial, as it was neither heard on the issue nor alleged as a defendant therein.

Zomer appealed against that decision to the Court of Appeal. However, the latter court rejected Zomer’s appeal and refused to give a final ruling on the issue of constitutionality.

Therefore, Zomer filed a petition for mandamus before the Supreme Court, requesting that the Court of Appeal be compelled to resolve the Constitution in section 47 of the General Banking Act.

By denying Zomer’s petition, the Supreme Court first upheld the finding that its complaint to the RTC was in fact a declaratory relief. In this regard, the Court of Appeal and other courts may refuse to declare rights or interpret instruments sought in this act if it will not end the controversy or if it is unnecessary and inappropriate in the circumstances.

Nevertheless, although the Court of Appeal may be compelled to rule on the Constitution of section 47 of the General Banking Act, the Supreme Court reiterated its earlier decision that it did not infringe the equal protection clause.

The difference in the treatment of legal persons such as Zomer rests on the nature of the foreclosed properties – whether these were used as residence where the more liberal redemption period of one year was preserved or used for industrial or commercial purposes, in which case a shorter period was considered necessary to reduce the period of uncertainty about the ownership of the property and enable mortgage banks to dispose of them.

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