Case Digest: Loyola Grand Villas

Homeowners (South Association Inc

vs CA, GR No. 117188
Posted on October 20, 2017by mylawsome
Facts: Loyola Grand Villas Homeowners Associatio, Inc. was organized on February 8,
1983 as the registered sole homeowner’s association for Loyola Grand Villas with the
Home Financing Corporation, which later became Home Insurance Guarantee
Corporation (HIGC). However, the association was not able to file its corporate by-laws
in the prescribed date as stated in the Corporation Code Sec. 46, Adoption of by-laws,
“Ever corporation formed under this code MUST within 1 month after receipt of official
notice of the issuance of its certificate of incorporation by SEC, adopt a code of by-laws
for its government not inconsistent with this Code.”

They then discovered that there were other homeowners’ organization within the
subdivision – the North and South Association, and 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. These paved the way for the
formation of the two other associations. LGVHAI then lodged a complaint and
questioned the revocation with the HIGC Hearing Officer Javier. Hearing Officer Javier
ruled in favor of LGVHAI and revoked the registration of the North and South
Associations.

Petitioner South Association appealed the ruling contending that LGVHAI failure to file
automatically dissolved the corporation.

Issue: Is the failure to file LGVHAI’s by-laws within the period prescribed by Sec. 46 of
the Corporation Code had the effect of automatically dissolving the said corporation.

Decision: No, ordinarily the word “must” connotes 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.

ByLaws 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.