Re: Clarification of Exemption from Payment of Court and Sheriff's Fees of Cooperatives

Cooperatives are not exempt from the payment of legal fees under Rule 141 of the Rules of Court, because a legislative grant of exemption from such fees violates the Supreme Court's exclusive constitutional power to promulgate rules of pleading, practice, and procedure, and impairs the Judiciary's guaranteed fiscal autonomy.

Perpetual Help Community Cooperative (PHCCI) is a cooperative duly registered under Republic Act No. 9520, the Philippine Cooperative Code of 2008. Section 6, Article 61 of that law, reiterating Section 62, paragraph 6 of Republic Act No. 6938 (the earlier Cooperative Code), purports to exempt cooperatives from payment of all court and sheriff's fees payable to the Philippine Government for actions brought under the Code. The Supreme Court had previously issued a resolution in A.M. No. 03-4-01-0 (July 15, 2003) exempting cooperatives from such fees, and the Office of the Court Administrator issued Circular No. 44-2007 in implementation thereof. Despite these issuances, PHCCI had been continuously assessed and required to pay legal and other fees whenever it filed cases in court, prompting it to seek a definitive ruling from the Supreme Court.

Perpetual Help Community Cooperative (PHCCI) is a cooperative registered under Republic Act No. 9520, the Philippine Cooperative Code of 2008. Section 6, Article 61 of that law provides that cooperatives shall be 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 the Code, or where such actions are brought by the Cooperative Development Authority before the court to enforce the payment of obligations contracted in favor of the cooperative. This provision was a reiteration of Section 62, paragraph 6 of Republic Act No. 6938, the earlier Cooperative Code, and had been made the basis for the Supreme Court's resolution in A.M. No. 03-4-01-0, as well as OCA Circular No. 44-2007, both of which recognized the exemption.

Despite these laws and issuances, PHCCI reported that it had been continuously assessed and required to pay legal and other fees whenever it filed cases in court. It filed a motion with the Office of the Executive Judge of the Municipal Trial Court in Cities (MTCC), Dumaguete City, Negros Oriental, seeking implementation of the exemption in cases filed before the courts in his jurisdiction. Executive Judge Antonio Estoconing, by Order dated September 21, 2011, treated the motion as a mere consulta, noting that no main action had been filed in his court. He expressed hesitation in recognizing the exemption in view of existing guidelines under the Rules, particularly Section 8 of the Rule on Small Claims, which requires the plaintiff to pay docket fees and other related costs unless allowed to litigate as an indigent. He observed that many cases filed by PHCCI were small claims cases. He ruled that the matter was of national concern and should be brought to the Supreme Court for a uniform policy.

PHCCI thereafter filed a petition dated October 24, 2011 with the Supreme Court, requesting the issuance of an order to clarify and implement the exemption of cooperatives from payment of court and sheriff's fees pursuant to Republic Act No. 6938, as amended by Republic Act No. 9520. The petition was docketed as A.M. No. 12-2-03-0 and was taken up by the Court En Banc.

• Statutory Exemption: PHCCI argued that as a cooperative, it enjoys the exemption from payment of all court and sheriff's fees provided under Section 6, Article 61 of Republic Act No. 9520, which was a reiteration of Section 62, paragraph 6 of Republic Act No. 6938.
• Prior Court Issuances: PHCCI maintained that the exemption had already been recognized by the Supreme Court in its Resolution in A.M. No. 03-4-01-0 and by OCA Circular No. 44-2007, and should therefore be implemented uniformly.
• Continuous Assessment Despite Exemption: PHCCI contended that despite the exemptions granted by the aforesaid laws and issuances, it had been continuously assessed and required to pay legal and other fees whenever it filed cases in court, warranting clarification from the Supreme Court.

• Validity of Statutory Exemption: Whether cooperatives are exempt from the payment of court and sheriff's fees under Section 6, Article 61 of Republic Act No. 9520, in light of the Court's ruling in the GSIS case on judicial independence and fiscal autonomy.

• Validity of Statutory Exemption: No. The exemption of cooperatives from payment of court and sheriff's fees no longer stands, as the power to promulgate rules concerning pleading, practice, and procedure — including the imposition of legal fees — is the exclusive domain of the Supreme Court under the 1987 Constitution, and any legislative grant of exemption therefrom is constitutionally infirm.

• Validity of Statutory Exemption: The Court traced the evolution of its jurisprudence on this matter. An earlier extended minute resolution dated September 1, 2009 in A.M. No. 03-4-01-0 had exempted cooperatives from court fees but not from sheriff's fees and expenses, drawing a distinction between legal fees under Rule 141 and actual travel expenses of sheriffs under Section 10 of Rule 141, which are neither court and sheriff's fees nor amounts payable to the Philippine Government. However, the Court's En Banc resolution of February 11, 2010 in the GSIS case (A.M. No. 08-2-01-0) established a controlling principle: citing Echegaray vs. Secretary of Justice, the Court stressed that the 1987 Constitution took away the power of Congress to repeal, alter, or supplement rules concerning pleading, practice, and procedure, vesting that power exclusively in the Supreme Court. Because the payment of legal fees is a vital component of those rules, it cannot be validly annulled, changed, or modified by Congress. Furthermore, fiscal autonomy — guaranteed under Section 3, Article VIII of the Constitution — recognizes the power and authority of the Court to levy, assess, and collect fees, including legal fees. Legal fees under Rule 141 fund the Judiciary Development Fund (JDF) and the Special Allowance for the Judiciary Fund (SAJF), both established to guarantee the independence of the Judiciary. Any congressional exemption from payment of legal fees would necessarily reduce the JDF and SAJF, impairing the Court's fiscal autonomy and eroding its independence. The Court applied this ruling to cooperatives in Baguio Market Vendors Multi-Purpose Cooperative (BAMARVEMPCO) vs. Cabato-Cortes (February 26, 2010), denying a cooperative's petition for exemption from legal fees in petitions for extra-judicial foreclosure, and again in its March 10, 2010 resolution regarding the National Power Corporation. In light of these categorical pronouncements, the Court concluded that the exemption of cooperatives from payment of court and sheriff's fees can no longer stand, and cooperatives can no longer invoke Republic Act No. 6938, as amended by Republic Act No. 9520, as basis for exemption from payment of legal fees.

• Exclusive Power to Promulgate Rules of Pleading, Practice, and Procedure — Under the 1987 Constitution, the power to promulgate rules concerning pleading, practice, and procedure is the exclusive domain of the Supreme Court and is no longer shared with Congress or the Executive. Any legislative enactment that effectively repeals, alters, or modifies procedural rules promulgated by the Court constitutes an unconstitutional trespass upon this prerogative. The Court applied this doctrine to invalidate the statutory exemption of cooperatives from payment of legal fees, holding that such exemption is a matter of procedural rule-making that Congress cannot validly grant.

• Fiscal Autonomy of the Judiciary — Fiscal autonomy, guaranteed under Section 3, Article VIII of the Constitution, recognizes the power and authority of the Judiciary to levy, assess, and collect fees, including legal fees under Rule 141. Legal fees fund the Judiciary Development Fund (JDF) and the Special Allowance for the Judiciary Fund (SAJF), both established to guarantee the independence of the Judiciary. Any legislative exemption from payment of legal fees necessarily reduces these funds, impairing fiscal autonomy and eroding judicial independence. The Court held that Congress could not carve out an exemption for cooperatives without transgressing this institutional safeguard.

• "Since 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. As one of the safeguards of this Court's institutional independence, the power to promulgate rules of pleading, practice and procedure is now the Court's exclusive domain." — This passage, quoted from the GSIS case, articulates the ratio decidendi: the constitutional basis for invalidating legislative exemptions from legal fees, grounding the ruling in the separation of powers and the Court's exclusive rule-making authority.

• "The separation of powers among the three co-equal branches of our government has erected an impregnable wall that keeps the power to promulgate rules of pleading, practice and procedure within the sole province of this Court. The other branches trespass upon this prerogative if they enact laws or issue orders that effectively repeal, alter or modify any of the procedural rules promulgated by this Court." — This passage defines the doctrinal boundary between legislative and judicial power over procedural rules, frequently cited in subsequent jurisprudence on judicial independence.

• "Congress could not have carved out an exemption for the GSIS from the payment of legal fees without transgressing another equally important institutional safeguard of the Court's independence — fiscal autonomy." — This passage links the rule-making power to fiscal autonomy, establishing that legal fees are not merely procedural but also fiscal in character, and that legislative exemptions impair both safeguards simultaneously.

• Echegaray vs. Secretary of Justice, 361 Phil. 73 (1999) — Cited as foundational authority for the proposition that the 1987 Constitution vested exclusive power to promulgate rules of pleading, practice, and procedure in the Supreme Court, taking away Congress's power to repeal, alter, or supplement such rules. The GSIS case relied on this ruling, and the present decision adopted that reliance.

• Re: Petition for Recognition of the Exemption of the Government Service Insurance System (GSIS) for Payment of Legal Fees, A.M. No. 08-2-01-0, February 11, 2010, 612 SCRA 193 — Controlling precedent. The Court denied GSIS's petition for exemption from legal fees, holding that the power to promulgate rules on pleading, practice, and procedure — including the levy of legal fees — is the Court's exclusive domain, and that legislative exemptions impair fiscal autonomy. This ruling was applied directly to invalidate the cooperative exemption.

• Baguio Market Vendors Multi-Purpose Cooperative (BAMARVEMPCO) vs. Cabato-Cortes, G.R. No. 165922, February 26, 2010, 613 SCRA 733 — Followed. The Court reiterated the GSIS ruling in denying a cooperative's petition for exemption from legal fees under Section 7(c) of Rule 141 in petitions for extra-judicial foreclosure, extending the doctrine specifically to cooperatives.

• In Re: Exemption of the National Power Corporation from Payment of Filing/Docket Fees, A.M. No. 05-10-20-SC, March 10, 2010, 615 SCRA 1 — Followed. The Court, relying on the GSIS ruling, clarified that the National Power Corporation is not exempt from payment of legal fees, further reinforcing the doctrine.

• Bengzon vs. Drilon, G.R. No. 103524, April 15, 1992, 208 SCRA 133 — Cited in the GSIS case for the proposition that fiscal autonomy recognizes the power and authority of the Court to levy, assess, and collect fees.

• Section 6, Article 61, Republic Act No. 9520 (Philippine Cooperative Code of 2008) — Purports to exempt cooperatives from payment of all court and sheriff's fees payable to the Philippine Government for actions brought under the Code. The Court held that this provision can no longer serve as basis for exemption, as it trenches upon the Court's exclusive rule-making power and fiscal autonomy.

• Section 62, paragraph 6, Republic Act No. 6938 (Cooperative Code of the Philippines) — The earlier version of the cooperative exemption provision, reiterated in RA 9520. Likewise held to no longer support an exemption.

• Rule 141 (Legal Fees), Rules of Court — Defines the legal fees imposed as an incident of instituting an action in court, including filing or docket fees, appeal fees, fees for provisional remedies, mediation fees, sheriff's fees, stenographer's fees, and commissioner's fees. The Court held that the exemption from these fees cannot be granted by Congress.

• Section 3, Article VIII, 1987 Constitution — Provides that the Judiciary shall enjoy fiscal autonomy. Cited as the constitutional basis for the Court's power to levy, assess, and collect legal fees, and for invalidating legislative exemptions that would reduce the JDF and SAJF.

• Section 8, Rule on Small Claims — Requires the plaintiff to pay docket fees and other related costs unless allowed to litigate as an indigent. Executive Judge Estoconing cited this provision as a source of hesitation in recognizing the cooperative exemption, noting that many PHCCI cases were small claims cases.

• Presidential Decree No. 1949 — Established the Judiciary Development Fund (JDF) to guarantee the independence of the Judiciary. Legal fees under Rule 141 fund the JDF.

• Republic Act No. 9227 — Established the Special Allowance for the Judiciary Fund (SAJF), likewise declaring the policy to guarantee the independence of the Judiciary. Legal fees under Rule 141 fund the SAJF.

Corona, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Abad, Villarama, Jr., Mendoza, Sereno, Reyes, and Perlas-Bernabe, JJ., concurred. Del Castillo, J., was on leave.