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LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION

V.

CA, HOME INSURANCE & GUARANTY CORP. (HIGC), EMDEM ENCARNACION & HORATIO AYCARDO

Facts:

CA affirmed the decision of HIGC. HIGC (quasi-judicial body) recognized Loyola Grand VillasHome Association (LGVH) as the sole homeowners association in Loyola Grand Villas (QC). It

revoked the certificates of registration issued to LGVH North, and LGVH South.

LGVH was organized on Feb 8 1983, as the association of homeowners and residents of LGV. Itwas registered with Home Financing Corp (predecessor of HIGC). LGVH was organized by the

developer but it did not file its corporate by-laws.

In 1988, the officers tried to register its by-laws but failed. They discovered that there were twoother organizations within the subdivision North & South. North was registered with HIGC on

Feb 13, 1989, and submitted its by-laws on Dec 20, 1988.

In July 1989, LGVH President Soliven was informed that LGVH was automatically dissolved forfailure to submit its by-laws within the prescribed period, and for non-user of corporate charter.

The South Association was then registered on July 27 1989.

LGVH filed a complaint with HIGC questioning the revocation of the certificate of registrationwithout due notice and hearing. HIGC rendered a favorable decision, recognizing LGVH and

cancelling the certificates of registration of North and South. South appealed to the HIGC

Appeals Board but was denied. It then raised its appeal to the CA, but CA affirmed HIGCs

decision.

o CA held that a corporation commences to have corporate existence from the date ofissuance of the certificate of incorporation by SEC. Though mandated by Sec 46 Corp

Code to file the by-laws within a month from notice of issuance of certificate, this does

not result in automatic dissolution. Under PD 902-A Sec 6(1), suspension or revocation

of the certificate should be made upon proper notice and hearing.

South filed petition for review with SC. South contends that the use of the word must in Sec46, suggests the mandatory nature of the requirement, which would result in self-extinction

upon failure to comply. It further contends that PD 902-A cannot exceed the scope of the Corp

Code.

Issue: WON the failure of a corporation to file its by-laws within 1 month from date of incorporation

(Sec 46 Corp Code) result in its automatic dissolution?

Held: NO

The Court held that the words must and shall should not be immediately taken asmandatory, but should be interpreted in the context of the statute as a whole. The deliberations

of the Batasang Pambansa clearly show that they did not intend the automatic dissolution in

case of non-compliance with the 1month period. The Court stated that the by-laws are

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subordinate to the articles of incorporation and the Code. By laws, though considered the rule

of life of the corporation, are not necessary for the existence of corporate life or to the validity

of its acts.

The Court upheld the CA, stating that the silence of the Corp Code on the consequences of non-filing of by-laws is rectified by PD 902-A Sec 6(1), which confers upon SEC 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.

CA affirmed.