Loyola Grand Villas Homeowners (South) Association, Inc. Vs. CA, G.R.

No
117188, August 7, 1997
Facts:

● LGVHAI was organized in February 8, 1983 as the association of home owners in Loyola Grand
Villas. The organization was formed by Victorio Soliven, developer and first president of the
subdivision
● For some reason, LGVHAI failed to file their corporate by-laws. The corporation code provides
that this must be done within 1 month after issuance of receipt of incorporation.
● In 1988, the officers of LGVHAI tried to file their by-laws but failed.
● It was discovered that there were two other associations within Loyola Grand Villas, the North
Association and petitioner South Association. Respondents allege that these organizations were
headed by a relative of Victorio Soliven
● In 1989, when Soliven inquired about the status of LGVHAI, he was informed by the legal head of
the Home Insurance and Guaranty Corporation that the association was dissolved for (1) not
filing its corporate by-laws within the period provided by law and (2) non-use of charter since the
HIGC were not informed of any activities done by LGVHAI.
● This statement by the H C led to petitioner South Association to successfully registering as the
valid homeowners association over various areas in the subdivision.
● Officers of LGVHAI corporation filed complaint with the HIGC questioning the revocation of their
certificate of registration without due notice or hearing as well as praying for the cancellation of
the registrations of the North and South associations by reason of the earlier registration of
LGVHAI
● HGIC ruled in LGVHAI’s favor and cancelled the certificate of registrations of North and petitioner
South Associations
● Petitioner South brought the matter to the Court of Appeals questioning whether failure by
LGVHAI to file its by-laws resulted in its automatic dissolution
● The CA held that Sec. 46 of the corporation code is silent on the effects of failure by a
corporation to file its by-laws. There is no provision that a corporation is automatically dissolved
upon such failure.
● Petitioner further appealed to the SC. They concede that the Corporation Code provides no
sanctions for failing to file by-laws, however, they insist on sanctions being provided due to the
mandatory nature of the provision and how essential by-laws are in the corporate birth.

Issue:

Whether the failure of a corporation to file its by-laws results in automatic dissolution

Ruling:
No. The Court held that, upon review of the legislative deliberations, there was never any intent by the
legislature to provide automatic dissolution upon failure to file by-laws.

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Taken as a whole and under the principle that the best interpreter of a statute is the statute itself
(optima statuli interpretatix est ipsum statutum), Section 46 reveals the legislative intent to attach a
directory, and not mandatory, meaning for the word "must" in regard to the filing of by-laws. Note
should be taken of the second paragraph of the law which allows the filing of the by-laws even prior to
incorporation.

By-laws may be necessary for the "government" of the corporation but these are subordinate to the
articles of incorporation as well as to the Corporation Code and related statutes. There are in fact cases
where by-laws are unnecessary to corporate existence or to the valid exercise of corporate powers,

PD 902-A, however, rectified such lack of consequences providing the Commission with powers to
suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of
corporations, partnerships or associations, upon any of the grounds provided by law. However, such is
not tantamount to an automatic dissolution upon failure to file by-laws.

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