Loyola Grand Villas Homeowners Association, Inc. vs CA, et. al., G.R. No. 117188
Subject: Statutory Construction
FACTS
On August 7, 1997, Loyola Grand
Villas Homeowners Association, Inc. (LGVHAI) was organized on 8 February 1983
as the homeowners' association for Loyola Grand Villas. It was also registered
as the sole homeowners' association in the said village with the Home Financing
Corporation (which eventually became Home Insurance Guarantee Corporation
["HIGC"]).
However, the association was not
able file its corporate by-laws. The LGVHAI officers then tried to register its
By-Laws in 1988, but they failed to do so. They then discovered that there were
two other homeowners' organizations within the subdivision - the Loyola Grand
Villas Homeowners (North) Association, Inc. [North Association] and herein
Petitioner Loyola Grand Villas Homeowners (South) Association, Inc.
["South Association].
Upon inquiry by the LGVHAI to
HIGC, it was discovered that LGVHAI was dissolved for its failure to submit its
by-laws within the period required by the Corporation Code and for its non-user
of corporate charter because HIGC had not received any report on the
association's activities. These paved the way for the formation of the North
and South Associations. LGVHAI then lodged a complaint with HIGC Hearing
Officer Danilo Javier and questioned the revocation of its registration.
Hearing Officer Javier ruled in
favor of LGVHAI, revoking the registration of the North and South Associations.
Petitioner South Association appealed the ruling, contending that LGVHAI's
failure to file its by-laws within the period prescribed by Section 46 of the
Corporation Code effectively automatically dissolved the corporation. The
Appeals Board of the HIGC and the Court of Appeals both rejected the contention
of the Petitioner affirmed the decision of Hearing Officer Javier.
ISSUE
W/N LGVHAI's failure to file its
by-laws within the period prescribed by Section 46 of the Corporation Code had
the effect of automatically dissolving the said corporation.
RULING
No.
The pertinent provision of the
Corporation Code that is the focal point of controversy in this case states:
Sec. 46. Adoption of by-laws. - Every corporation formed under this Code, must
within one (1) month after receipt of official notice of the issuance of its
certificate of incorporation by the Securities and Exchange Commission, adopt a
code of by-laws for its government not inconsistent with this Code.
Ordinarily, the word
"must" connote an imposition of duty which must be enforced. However,
the word "must" in a statute, like "shall," is not always
imperative. It may be consistent with an exercise of discretion. If the
language of a statute, considered as a whole with due regard to its nature and
object, reveals that the legislature intended to use the words
"shall" and "must" to be directory, they should be given
that meaning. Moreover, By-Laws may be necessary to govern the corporation, but
By-Laws are still subordinate to the Articles of Incorporation and the
Corporation Code.
In fact, there are cases where
By-Laws are unnecessary to the corporate existence and to the valid exercise of
corporate powers. The Corporation Code does not expressly provide for the
effects of non-filing of By-Laws. However, these have been rectified by Section
6 of PD 902-A which provides that SEC shall possess the power to suspend or
revoke, after proper notice and hearing, the franchise or certificate of
registration of corporations upon failure to file By-Laws within the required
period. This shows that there must be notice and hearing before a corporation
is dissolved for failure to file its By-Laws. Even assuming that the existence
of a ground, the penalty is not necessarily revocation, but may only be
suspension.
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