Case Summary (G.R. No. 194461)
Procedural history in the trial court and court of appeals
The Regional Trial Court dismissed Zomer Development’s complaint on grounds that the Solicitor General was not impleaded and thus purportedly deprived of due process. Zomer Development appealed. The Court of Appeals characterized the complaint as an action for declaratory relief and refused to decide the constitutionality issue, citing the court’s discretionary power under Rule 63, Section 5, and deferred the matter as one better resolved by the Supreme Court because any pronouncement would have far-reaching procedural effects.
Nature of the petition to the Supreme Court and issues presented
Petitioner sought a writ of mandamus compelling the Court of Appeals to adjudicate the constitutionality of Section 47 in CA-G.R. CV No. 00288, asserting that the Court of Appeals unlawfully neglected its duty and that refusal deprived Petitioner of due process by failing to terminate the controversy. Respondent argued mandamus was an inappropriate substitute for remedies such as reconsideration or appeal and that the petition was moot given intervening Supreme Court authority (Goldenway). The Supreme Court framed the issues as: (1) whether mandamus could compel the Court of Appeals to rule on constitutionality, and (2) whether the question had become moot in light of Goldenway. The Court additionally sua sponte addressed whether the trial court erred in dismissing the complaint for failure to implead the Solicitor General.
Trial court’s error regarding impleading the Solicitor General
The Supreme Court held the trial court erred. Rule 63, Section 1 allows any person whose rights are affected by a statute to file declaratory actions; Rule 63, Section 3 requires notice to the Solicitor General but does not mandate dismissal for lack of active participation by the Solicitor General. Furnishing the Solicitor General a copy of the complaint satisfied due process; the Solicitor General’s failure to participate is deemed a waiver and cannot be a ground for dismissal. The Administrative Code likewise contemplates Solicitor General intervention only when the Solicitor General deems it necessary or is requested by the court. Thus, the trial court improperly dismissed on the ground cited.
Characterization of the action as declaratory relief and the discretionary nature of relief
The Supreme Court agreed with the Court of Appeals that Petitioner’s cause was essentially an action for declaratory relief: the Complaint sought a declaration of the statute’s invalidity in order to nullify foreclosure proceedings. Under Rule 63, Section 5 (and long-standing jurisprudence such as Chan v. Galang), courts possess discretion whether to entertain declaratory relief, and they may refuse to declare rights if doing so would not terminate the controversy or if declaration is unnecessary or improper under the circumstances. The Court of Appeals’ refusal to resolve the constitutional question was therefore an exercise of discretion permissible under the Rules of Court.
Availability of mandamus and correctness of remedy invoked by Petitioner
The Court reiterated that mandamus is appropriate only to compel performance of ministerial duties—those not calling for the exercise of discretion. Mandamus cannot be used to direct how a court should exercise its discretion. Because the Court of Appeals’ decision to decline to resolve a declaratory relief matter was discretionary, it could not be compelled by mandamus. The appropriate remedy to challenge the exercise of appellate discretion would have been certiorari to review for grave abuse of discretion, but Petitioner invoked the wrong remedy. Consequently, the petition for mandamus was procedurally improper and subject to denial on that basis.
Mootness and intervening jurisprudence (Goldenway and related cases)
Even assuming mandamus were available, the Supreme Court found the constitutional issue had been rendered moot by Goldenway Merchandising Corp. v. Equitable PCI Bank (706 Phil. 427, 2013), where the Court had addressed the equal protection challenge to Section 47 and upheld the provision. Subsequent cases cited by the Solicitor General, BSP and Bankers Association (White Marketing Development Corp. v. Grandwood and Spouses Limso v. PNB) reaffirmed the same rationale. Petitioner had not cited or attempted to distinguish Goldenway in its pleadings; thus the constitutional question had been conclusively resolved by binding precedent.
Substantive equal protection analysis and rationale for classification
Applying the 1987 Constitution’s equal protection framework, the Court observed that juridical persons are not a suspect class and that the classification between natural and juridical persons implicates no fundamental rights. Therefore, the rational basis test governs: the classification must advance a legitimate government interest and be reasonably related to that interest. The Court accepted the legislative purpose underlying Section 47—shortening the redemption period for juridical (often commercial) properties to reduce ownership uncertainty, facilitate quicker dispersal of bank-acquired assets, and thereby prot
...continue readingCase Syllabus (G.R. No. 194461)
Case Caption and Citation
- Full caption: Zomer Development Company, Inc., Petitioner, vs. Special Twentieth Division of the Court of Appeals, Cebu City and Union Bank of the Philippines, Respondents.
- Supreme Court citation: 868 Phil. 93, En Banc; G.R. No. 194461, January 07, 2020.
- Decision authored by: Justice Leonen.
- Concurrences and procedural notes: Peralta, C.J., Caguioa, Gesmundo, Reyes, J., JR., Hernando, Carandang, Lazaro-Javier, Inting, and Zalameda, JJ., concur. Perlas-Bernabe, J. on official leave. Reyes, A., JR., J., on official business. Lopez, J., on wellness leave.
Nature of the Petition and Relief Sought
- The petition is a Petition for Mandamus seeking to compel the Court of Appeals to rule on the constitutionality of Section 47 of Republic Act No. 8791 (the General Banking Law of 2000) in CA-G.R. CV No. 00288.
- Petitioner contends the Court of Appeals unlawfully declined to resolve the constitutional question and asks this Court to compel the Court of Appeals to decide it.
- Petitioner also alleges denial of due process resulting from the appellate court's refusal to put an end to the controversy between the parties.
Underlying Facts
- Petitioner Zomer Development Company, Inc. is a domestic corporation that owned three parcels of land in Cebu City covered by TCT Nos. 59105, 59123, and 59214.
- The properties were mortgaged to International Exchange Bank as security for a loan.
- Upon default, International Exchange Bank foreclosed on the properties by extra-judicial foreclosure.
- A Notice of Extrajudicial Foreclosure Sale was posted and published on October 18, 2001, announcing an auction.
- At the auction the bank emerged as the highest bidder; the Sheriff issued Certificates of Sale on November 19, 2001.
- The Certificates of Sale provided for a period of redemption of twelve months from registration, qualified by the phrase "or sooner and/or later, as provided for under applicable laws."
- On December 10, 2001, International Exchange Bank registered the Certificates of Sale with the Register of Deeds and TCT Nos. 361006, 361007, and 361008 were issued in its name.
- On February 18, 2002, Zomer Development filed a Complaint captioned as a Complaint for Declaration of Nullity of Notice of Sale, Certificate of Sale & TCTs and Declaration as Unconstitutional Sec. 47, RA No. 8791, challenging the foreclosure and Section 47's constitutionality.
Petitioner's Constitutional Claim
- Petitioner argued Section 47 of R.A. No. 8791 violated the Equal Protection Clause because it provided juridical persons a shorter redemption period (three months or earlier) than natural persons (one year).
- Petitioner asserted that this discrimination gave "undue advantage to lenders who are non-banks."
Lower Court Proceedings and Orders
- Regional Trial Court (RTC):
- The RTC treated the action as one for declaratory relief and dismissed the Complaint on March 24, 2004.
- The RTC refused to rule on the constitutionality of Section 47 on the ground that the Republic, represented by the Office of the Solicitor General (OSG), was not impleaded and thus would be deprived of due process.
- The RTC furnished copies of the Complaint to the OSG; the OSG did not participate.
- Court of Appeals (CA), Special Twentieth Division, Cebu City:
- On October 18, 2010, the CA dismissed the appeal "without prejudice to appellant's filing of the appropriate case before the Supreme Court."
- The CA characterized the Complaint as one for declaratory relief and declined to make a definitive ruling on the constitutionality of Section 47.
- The CA cited Rule 63, Section 5 of the Rules of Court, emphasizing the discretionary nature of declaratory relief and holding that the case was "novel" and "can be best resolved by the Supreme Court."
- The CA observed that any pronouncement might have "far reaching effects" on existing procedural rules such as Supreme Court Circular No. 7-2002 and related guidelines.
Procedural Posture Before the Supreme Court
- Petitioner filed a Petition for Mandamus in the Supreme Court asking that the CA be compelled to resolve the constitutional issue in CA-G.R. CV No. 00288.
- Union Bank of the Philippines (having acquired International Exchange Bank) appeared as private respondent.
- The Supreme Court directed the Office of the Solicitor General, Bangko Sentral ng Pilipinas, and the Bankers Association of the Philippines to submit comments to ensure parties directly affected had an opportunity to be heard.
- The OSG, BSP, and Bankers Association filed comments asserting that the issue had been settled by Goldenway Merchandising Corporation v. Equitable PCI Bank and subsequent cases.
Issues Presented to the Supreme Court
- Primary issues articulated:
- Whether a petition for mandamus is the proper remedy to compel the Court of Appeals to rule on the constitutionality of a statute (i.e., whether the CA can be compelled by mandamus to rule).
- Whether the constitutional issue in this case had become moot in light of Goldenway Merchandising Corporation v. Equitable PCI Bank.
- Additional issue considered sua sponte by the Court:
- Whether the trial court erred in dismissing the Complaint on the ground that the Office of the Solicitor General was not impleaded.
Applicable Legal Provisions and Doctrines Cited
- Rule 63 of the Rules of Court (Declaratory Relief):
- Section 1: Who may file a petition for declaratory relief (any person interested under deed, will, contract, or whose rights are affected by a statute).
- Section 3: Notice to the Solicitor General in actions involving the validity of a statute; OSG "shall be notified" and "shall be entitled to be heard."
- Section 5: Court action on declaratory relief is discretionary; the court may refuse to declare rights if the decision would not terminate the uncertainty or controversy or if not necessary and proper under the circumstances.
- Rule 65, Section 3 of the Rules of Court on mandamus: writ of mandamus may be filed against any tribunal, corporation, board, officer, or person who unlawfully neglects the performance of an act which the law specifically enj