Loyola Grand vs. CA, G.R. No. 117188. August 7, 1997

 LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC. vs. HON. COURT OF APPEALS, HOME INSURANCE AND GUARANTY CORPORATION, EMDEN ENCARNACION and HORATIO AYCARDO

G.R. No. 117188. August 7, 1997

FACTS:

1. LGVHAI was organized on February 8, 1983 as the association of homeowners and residents of the Loyola Grand Villas.
2. It was organized by the developer of the subdivision and its first president was Victorio V. Soliven, himself the owner of the developer.
3. For unknown reasons, however, LGVHAI did not file its corporate bylaws.
4. In 1988, the officers of the LGVHAI tried to register its bylaws. They failed to do so.
5. To the officers’ consternation, they discovered that there were two other organizations within the subdivision the North Association and the South Association. According to private respondents, a nonresident and Soliven himself, respectively headed these associations.
6. They also discovered that these associations had five registered homeowners each who were also the incorporators, directors and officers thereof.
7. In July, 1989, when Soliven inquired about the status of LGVHAI, HIGC informed him that LGVHAI had been automatically dissolved for two reasons. First, it did not submit its bylaws within the period required by the Corporation Code and, second, there was nonuser of corporate charter because HIGC had not received any report on the association’s activities.

ISSUE:

            May the failure of a corporation to file its bylaws within one month from the date of its incorporation result in its automatic dissolution?

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RULING:

            Although the Corporation Code requires the filing of bylaws, it does not expressly provide for the consequences of the no filing of the same within the period provided for in Section 46. However, such omission has been rectified by Presidential Decree No. 902A, the pertinent provisions on the jurisdiction of the SEC of which state:

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

 (l) 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, including the following:

5. Failure to file bylaws within the required period

Even under the foregoing express grant of power and authority, there can be no automatic corporate dissolution simply because the incorporators failed to abide by the required filing of bylaws 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.

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