FACTS: In 1983, LGVHAI was organized by Victorio V. Soliven, the owner of the developer, as the association of homeowners and residents of the Loyola Grand Villas. For unknown reasons, the HOA did not file its corporate by-laws. The officers of the HOA tried to register its by-laws but failed. It was then that they discovered the existence of were other organisations within the subdivision – the North Association and the South Association. When Soliven inquired about the status of their HOA, the head of the legal department of the HIGC, informed him that the HOA had been automatically dissolved for two reasons. First, it failed to submit its by-laws within the period required by the Corporation Code and, second, there was non-user of corporate charter because HIGC had not received any report on the association’s activities.
The LGVHAI to lodge a complaint with the HIGC questioning the revocation without due notice and hearing. The HIGC ruled in favor of the HOA. The South Association appealed to the Appeals Board of the HIGC which was dismissed for lack of merit. Then, the South Association appealed to the CA.
The South Association contends that, since Section 46 uses the word "must" with respect to the filing of by-laws, noncompliance therewith would result in "self-extinction" and that "non-provision for remedy or sanction is itself the tacit proclamation that non-compliance is fatal and no corporate existence had yet evolved," and therefore, there was "no need to proclaim its demise." Moreover, it contends that Section 46, Corporation Code prevails over Section 6, P.D. 902-A and that the latter is invalid because it contravenes the former.
The Court of Appeals affirmed the Resolution of the HIGC Appeals Board for which reason elevated the case to the Supreme Court.
ISSUE: May the failure of a corporation to file its by-laws within one month from the date of its incorporation, as mandated by Section 46 of the Corporation Code, result in its automatic dissolution?
HELD: No. There can be no automatic corporate dissolution simply because the incorporators failed to abide by the required filing of by-laws embodied in Section 46 of the Corporation Code. There is no outright “demise” of corporate existence. Proper notice and hearing are cardinal components of due process in any democratic institution, agency or society. In other words, the incorporators must be given the chance to explain their neglect or omission and remedy the same. Non-filing of the by-laws will not result in automatic dissolution of the corporation. In fact, under the rules and regulations of the SEC, failure to file the by-laws on time may be penalized merely with the imposition of an administrative fine without affecting the corporate existence of the erring firm.
ADDTNL NOTES:
CA DECISION
The court said that Section 46 and 22, Corporation Code, or in any other provision of the Code and other laws which provide or at least imply that failure to file the by-laws results in an automatic dissolution of the corporation thus, it must be construed with P.D. 902-A.
SEC. 6 (1) OF P.D. 902-A.
This section empowers the SEC to suspend or revoke certificates of registration on the grounds listed therein. Among the grounds stated is the failure to file by-laws \ Such suspension or revocation, the same section provides, should be made upon proper notice and hearing. Although P.D. 902-A refers to the SEC, the same principles and procedures apply to the public respondent HIGC as it exercises its power to revoke or suspend the certificates of registration or homeowners association.
SEC. 9, CORPORATION CODE
The adoption and filing of by-laws is a condition subsequent which does not affect the corporate personality of a corporation like the LGVHAI. This is so because Section 9 of the Corporation Code provides that the corporate existence and juridical personality of a corporation begins from the date the SEC issues a certificate of incorporation under its official seal. Consequently, even if the by-laws have not yet been filed, a corporation may be considered a de facto corporation.
MUST = OUGHT
The word "must" connotes an imperative act or operates to impose a duty which may be enforced. However, the is not always imperative in a statute. It may be consistent with an exercise of discretion. Thus, if the languages of a statute considered as a whole and 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.
SEC. 19, CORPORATION CODE
Under Section 19 of the Corporation Code, a Corporation commences its corporate existence and juridical personality and is deemed incorporated from the date the Securities and Exchange Commission issues certificate of incorporation under its official seal.
No comments:
Post a Comment