LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC., petitioner, vs. HON.

COURT OF
APPEALS, HOME INSURANCE AND GUARANTY CORPORATION, EMDEN ENCARNACION and HORATIO
AYCARDO, respondent.
G.R. No. 117188 August 7, 1997
 The legislative deliberations demonstrate that automatic even prior to incorporation. Ordinarily, the word "must"
corporate dissolution for failure to file the bylaws on time was connotes an imposition of duty which must be enforced.
never the intention of the legislature However, the word
 By-laws may be necessary for the “government” of the "must" in a statute, like "shall," is not always imperative. It may
corporation but these are subordinate to the articles of be consistent with an ecercise of discretion. If the language of a
incorporation as well as to the Corporation Code and related statute, considered as a whole with due regard to its nature and
statutes object, reveals that the legislature intended to use the words
 Due Process; There can be no automatic corporate dissolution "shall" and "must" to be directory, they should be given that
simply because the incorporators failed to abide by the required meaning.
filing of by-laws—the incorporators must be given the chance to
explain their neglect or omission and to remedy the same
The legislative deliberations of the Corporation Code reveals that
 Failure to file the by-laws within the period required by law by
it was not the intention of Congress to automatically dissolve a
no means tolls the automatic dissolution of a corporation.—
corporation for failure to file the By-Laws on time.
FACTS:
Loyola Grand Villas Homeowners Association, Inc. (LGVHAI) was Moreover, By-Laws may be necessary to govern the corporation,
but By-Laws are still subordinate to the Articles of Incorporation
organized on 8 February 1983 as the home owners' association for
and the Corporation Code. In fact, there are cases where By-Laws
Loyola Grand Villas. It was also registered as the sole
are unnecessary to the corporate existence and to the valid
homeowners' association in the said village with the Home
Financing Corporation (which eventually became Home Insurance exercise of corporate powers, thus: “In the absence of charter or
Guarantee Corporation ["HIGC"]). However, the association was statutory provisions to the contrary, by-laws are not necessary
not able file its corporate by-laws. either to the existence of a corporation or to the valid exercise of
the powers conferred upon it, certainly in all cases where the
charter sufficiently provides for the government of the body; and
The LGVHAI officers then tried to registered its By-Laws in 1988,
even where the governing statute in express terms confers upon
but they failed to do so. They then discovered that there were two
the corporation the power to adopt by-laws, the failure to
other homeowners' organizations within the subdivision - the
exercise the power will be ascribed to mere non action which will
Loyola Grand Villas Homeowners (North) Association, Inc. [North
not render void any acts of the corporation which would
Association] and herein Petitioner Loyola Grand Villas
otherwise be valid.”
Homeowners (South) Association, Inc. ["South Association].
The Corporation Code does not expressly provide for the effects
Upon inquiry by the LGVHAI to HIGC, it was discovered that
of non-filing of By-Laws. However, these have been rectified by
LGVHAI was dissolved for its failure to submit its by-laws within
Section 6 of PD 902-A which provides that SEC shall possess the
the period required by the Corporation Code and for its non-user
power to suspend or revoke, after proper notice and hearing, the
of corporate charter because HIGC had not received any report on
franchise or certificate of registration of corporations upon failure
the association's activities. These paved the way for the formation
to file By-Laws within the required period. There is no outright
of the North and South Associations.
“demise” of corporate existence. Proper notice and hearing are
cardinal components of due process in any democratic institution,
LGVHAI then lodged a complaint with HIGC Hearing Officer Danilo
agency or society. In other words, the incorporators must be given
Javier, and questioned the revocation of its registration. Hearing
the chance to explain their neglect or omission and remedy the
Officer Javier ruled in favor of LGVHAI, revoking the registration
same.
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.
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.
By-Laws are indispensable to corporations, since they are
required by law for an orderly management of corporations.
However, failure to file them within the period prescribed does
not equate to the automatic dissolution of a corporation.
As the “rules and regulations or private laws enacted by the
corporation to regulate, govern and control its own actions, affairs
and concerns and its stockholders or members and directors and
officers with relation thereto and among themselves in their
relation to it,” by-laws are indispensable to corporations in this
jurisdiction. These may not be essential to corporate birth but
certainly, these are required by law for an orderly governance
and management of corporations. Nonetheless, failure to file
them within the period required by law by no means tolls the
automatic dissolution of a corporatio

Under the principle that the best interpreter of a statute is the

statute itself (optima statuli interpretatix est ipsum statutum),
Section 46 of the Corporation Code reveals the legislative intent
to attach a directory, and not mandatory, meaning for the word
“must” in the first sentence thereof. Note should be taken of the
second paragraph of the law which allows the filing of the by-laws