Republic of the Philippines e) That the check was drawn in favor of the complaining witness in

SUPREME COURT remittance of collection;

Manila
f) That the said check was presented for payment on January 24, 1981 but
EN BANC the same was dishonored for the reason that the said checking account was
already closed;
G.R. No. 79094 June 22, 1988
g) That the accused Manolo Fule has been properly Identified as the accused
MANOLO P. FULE, petitioner, party in this case.
vs.
THE HONORABLE COURT OF APPEALS, respondent. At the hearing of August 23, 1985, only the prosecution presented its
evidence consisting of Exhibits "A," "B" and "C." At the subsequent hearing
Balagtas P. Ilagan for petitioner. on September 17, 1985, petitioner-appellant waived the right to present
evidence and, in lieu thereof, submitted a Memorandum confirming the
The Solicitor General for respondent. Stipulation of Facts. The Trial Court convicted petitioner-appellant.

MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the Decision of respondent
Appellate Court, which affirmed the judgment of the Regional Trial Court,
Lucena City, Branch LIV, convicting petitioner (the accused-appellant) of
Violation of Batas Pambansa Blg. 22 (The Bouncing Checks Law) on the basis
of the Stipulation of Facts entered into between the prosecution and the
defense during the pre-trial conference in the Trial Court. The facts
stipulated upon read:
a) That this Court has jurisdiction over the person and subject matter of this
case;
On appeal, respondent Appellate Court upheld the Stipulation of Facts and
affirmed the judgment of conviction. 1
Hence, this recourse, with petitioner-appellant contending that:
The Honorable Respondent Court of Appeals erred in the decision of the
Regional Trial Court convicting the petitioner of the offense charged, despite
the cold fact that the basis of the conviction was based solely on the
stipulation of facts made during the pre-trial on August 8, 1985, which was
not signed by the petitioner, nor by his counsel.
Finding the petition meritorious, we resolved to give due course.

b) That the accused was an agent of the Towers Assurance Corporation on or
before January 21, 1981;
c) That on January 21, 1981, the accused issued and made out check No.
26741, dated January 24, 1981 in the sum of P2,541.05;
d) That the said check was drawn in favor of the complaining witness, Roy
Nadera;
The 1985 Rules on Criminal Procedure, which became effective on January 1,
1985, applicable to this case since the pre-trial was held on August 8, 1985,
provides:
SEC. 4. Pre-trial agreements must be signed. — No agreement or admission
made or entered during the pre-trial conference shall be used in evidence
against the accused unless reduced to writing and signed by him and his
counsel. (Rule 118) [Emphasis supplied]
By its very language, the Rule is mandatory. Under the rule of statutory Yap, C.J., Fernan, Narvasa, Cruz, Feliciano, Gancayco, Padilla, Bidin,
construction, negative words and phrases are to be regarded as mandatory Sarmiento, Cortes, Griño-Aquino and Medialdea, JJ., concur.
while those in the affirmative are merely directory (McGee vs. Republic, 94
Phil. 820 [1954]). The use of the term "shall" further emphasizes its Paras, J., took no part.
mandatory character and means that it is imperative, operating to impose a
duty which may be enforced (Bersabal vs. Salvador, No. L-35910, July 21, Gutierrez, Jr., J., is on leave.
1978, 84 SCRA 176). And more importantly, penal statutes whether
substantive and remedial or procedural are, by consecrated rule, to be
strictly applied against the government and liberally in favor of the accused
(People vs. Terrado No. L-23625, November 25, 1983, 125 SCRA 648).

The conclusion is inevitable, therefore, that the omission of the signature of

the accused and his counsel, as mandatorily required by the Rules, renders
the Stipulation of Facts inadmissible in evidence. The fact that the lawyer of
the accused, in his memorandum, confirmed the Stipulation of Facts does
not cure the defect because Rule 118 requires both the accused and his
counsel to sign the Stipulation of Facts. What the prosecution should have
done, upon discovering that the accused did not sign the Stipulation of
Facts, as required by Rule 118, was to submit evidence to establish the
elements of the crime, instead of relying solely on the supposed admission
of the accused in the Stipulation of Facts. Without said evidence
independent of the admission, the guilt of the accused cannot be deemed
established beyond reasonable doubt.

Consequently, under the circumstances obtaining in this case, the ends of

justice require that evidence be presented to determine the culpability of
the accused. When a judgment has been entered by consent of an attorney
without special authority, it will sometimes be set aside or reopened
(Natividad vs. Natividad, 51 Phil. 613 [1928]).

WHEREFORE, the judgment of respondent Appellate Court is REVERSED and

this case is hereby ordered RE-OPENED and REMANDED to the appropriate
Branch of the Regional Trial Court of Lucena City, for further reception of
evidence.

SO ORDERED.
Fule vs. CA [G.R. No. L-79094. June 22, 1988]
Ponente: MELENCIO-HERRERA, J.
FACTS:
This is a Petition for Review on certiorari of the Decision of respondent
Appellate Court, which affirmed the judgment of the Regional Trial Court,
Lucena City, Branch LIV, convicting petitioner (the accused-appellant) of
Violation of Batas Pambansa Blg. 22 (The Bouncing Checks Law) on the basis
of the Stipulation of Facts entered into between the prosecution and the
defense during the pre-trial conference in the Trial Court. At the hearing of
August 23, 1985, only the prosecution presented its evidence. At the
subsequent hearing on September 17, 1985, petitioner-appellant waived the
right to present evidence and, in lieu thereof, submitted a Memorandum
confirming the Stipulation of Facts. The Trial Court convicted petitioner-
appellant.
On appeal, respondent Appellate Court upheld the Stipulation of Facts and
affirmed the judgment of conviction. Hence, this recourse, with petitioner-
appellant contending that the Honorable Respondent Court of Appeals erred
in the decision of the Regional Trial Court convicting the petitioner of the
offense charged, despite the cold fact that the basis of the conviction was
based solely on the stipulation of facts made during the pre-trial on August
8, 1985, which was not signed by the petitioner, nor by his counsel. In Sec.4
of the Rules on Criminal Procedures:
counsel, as mandatorily required by the Rules, renders the Stipulation of
Facts inadmissible in evidence.
HELD:
YES. Judgment of respondent Appellate Court is REVERSED and this case is
hereby ordered RE-OPENED and REMANDED to the appropriate Branch of
the Regional Trial Court of Lucena City, for further reception of evidence.
RATIO:
By its very language, the Rule is mandatory. Under the rule of statutory
construction, negative words and phrases are to be regarded as mandatory
while those in the affirmative are merely directory (McGee vs. Republic, 94
Phil. 820 [1954]). The use of the term “shall” further emphasizes its
mandatory character and means that it is imperative, operating to impose a
duty which may be enforced (Bersabal vs. Salvador, No. L-35910, July 21,
1978, 84 SCRA 176). And more importantly, penal statutes whether
substantive and remedial or procedural are, by consecrated rule, to be
strictly applied against the government and liberally in favor of the accused
(People vs. Terrado No. L-23625, November 25, 1983, 125 SCRA 648).

SEC. 4. Pre-trial agreements must be signed. — No agreement or admission

made or entered during the pre-trial conference shall be used in evidence
against the accused unless reduced to writing and signed by him and his
counsel. (Rule 118) [Emphasis supplied]

Having been effective since January 01, 1985, the above rule is applicable.

ISSUE:

Whether or not the omission of the signature of the accused and his
DATE: July 21, 1978 Courts of First Instance shall decide such appealed cases on the basis of the
evidence and records transmitted from the city or municipal courts.
PETITIONER: Purita Bersabal Provided, that the parties may submit memoranda and/or brief with oral
argument if so requested.
RESPONDENT: Honorable Judge Serafin Salvador, et. al.
In other words, the Court is not empowered by law to dismiss the appeal on
FACTS: the mere failure of the appellant to submit but the Court has duty to decide
based on the available evidence and records transmitted to it.
Tan That and Ong Pin Tee filed an ejectment suit against Bersabal in
Caloocan City. The rendered decision on November 25, 1970 was appealed
by Bersabal. During the pendency of the appeal, the respondent court (of
Hon. Salvador) issued an order. which required the Clerk of Court to transmit
within 15 days of receipt the transcripts of stenographic notes and for the
counsels of both parties to file their respective memoranda within 30 days
upon receipt. Afterwhich, the case shall be deemed submitted for decision.

Bersabal received the order on April 17, 1971. The transcript of

stenographic notes not yet been submitted, Bersabal then filed on May 5,
1971 an EX-PARTE MOTION O SUBMIT MEMORANDUM WITHIN 30 DAYS
FROM RECEIPT OF NOTICE OF SUBMISSION … which was granted on May 7,
1971. However, before Bersabal received the notice, Salvador issued an
August 4, 1971 order stating that the defendant -appellant (Bersabal) failed
to prosecute her appeal hereby is ordered DISMISSED.

Bersabal filed a motion for reconsideration. However was denied. She also
filed a motion for leave to file. Likewise, was denied.

ISSUE:

Whether or not Hon. Salvador’s order (dismissing the Motion for

Reconsideration) null and void?

HELD:

YES. Although, the Court (of First Instance) was empowered to dismiss the
appeal on the ground of failure to prosecute; however, Section 45 of R.A.
No. 296 stated that:
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-35910 July 21, 1978
PURITA BERSABAL, petitioner,
vs.
HONORABLE JUDGE SERAFIN SALVADOR, as Judge of the Court of First
Instance of Caloocan City, Branch XIV, TAN THAT and ONG PIN TEE,
respondents.
MAKASIAR, J.:
On March 23, 1972, petitioner Purita Bersabal seeks to annul the orders of
respondent Judge of August 4, 1971, October 30, 1971 and March 15, 1972
and to compel said respondent Judge to decide petitioner's perfected appeal
on the basis of the evidence and records of the case submitted by the City
Court of Caloocan City plus the memorandum already submitted by the
petitioner and respondents.
Since only questions of law were raised therein, the Court of Appeals, on
October 13, 1972, issued a resolution certifying said case to this Court
pursuant to Section 17, paragraph (4) of the Judiciary Act of 1948, as
amended.
As found by the Court of Appeals, the facts of this case are as follows:
It appears that private respondents Tan That and Ong Pin Tee filed an
ejectment suit, docketed as Civil Case No. 6926 in the City Court of Caloocan
City, against the petitioner. A decision was rendered by said Court on
November 25, 1970, which decision was appealed by the petitioner to the
respondent Court and docketed therein as Civil Case No. C-2036.
During the pendency of the appeal the respondent court issued on March
23, 1971 an order which reads:
Pursuant to the provisions of Rep. Act No. 6031, the Clerk of Court of
Caloocan City, is hereby directed to transmit to this Court within fifteen (15)
days from receipt hereof the transcripts of stenographic notes taken down
during the hearing of this case before the City Court of Caloocan City, and
likewise, counsels for both parties are given thirty (30) days from receipt of
this order within which to file their respective memoranda, and thereafter,
this case shall be deemed submitted for decision by this Court.
which order was apparently received by petitioner on April 17, 1971.
The transcript of stenographic notes not having yet been forwarded to the
respondent court, petitioner filed on May 5, 1971 a 'MOTION EX-PARTE TO
SUBMIT MEMORANDUM WITHIN 30 DAYS FROM RECEIPT OF NOTICE OF
SUBMISSION OF THE TRANSCRIPT OF STENOGRAPHIC NOTES TAKEN DURING
THE HEARING OF THE CASE BEFORE THE CITY COURT OF CALOOCAN CITY'
which was granted by respondent court on May 7, 1971. However, before
the petitioner could receive any such notice from the respondent court, the
respondent Judge issued an order on August 4, 1971 which says:
For failure of the defendant-appellant to prosecute her appeal the same is
hereby ordered DISMISSED with costs against her.
Petitioner filed a motion for reconsideration of the order on September 28,
1971, citing as a ground the granting of his ex-parte motion to submit
memorandum within 30 days from notice of the submission of the
stenographic notes taken before the City Court. Private respondents filed
their opposition to the motion on September 30,1971. In the meantime, on
October 20,1971, petitioner filed her memorandum dated October 18, 1971.
On October 30, 1971 the respondent Court denied the motion for
reconsideration. Then on January 25, 1972, petitioner filed a motion for
leave to file second motion for reconsideration which was likewise denied by
the respondent court on March 15, 1972. Hence this petition.
The sole inquiry in the case at bar can be stated thus: Whether, in the light
of the provisions of the second paragraph of Section 45 of Republic Act No.
296, as amended by R.A. No. 6031, the mere failure of an appellant to
submit on nine the memorandum mentioned in the same paragraph would
empower the Court of First Instance to dismiss the appeal on the ground of
failure to Prosecute; or, whether it is mandatory upon said Court to proceed
to decide the appealed case on the basis of the evidence and records
transmitted to it, the failure of the appellant to submit a memorandum on
time notwithstanding.
The second paragraph of Section 45 of R.A. No. 296, otherwise known as the
Philippine Judiciary Act of 1948, as amended by R.A. No. 6031 provides, in
part, as follows:
Courts of First Instance shall decide such appealed cases on the basis of the
evidence and records transmitted from the city or municipal courts:
Provided, That the parties may submit memoranda and/or brief with oral
argument if so requested ... . (Emphasis supplied).
The foregoing provision is clear and leaves no room for doubt. It cannot be
interpreted otherwise than that the submission of memoranda is optional
on the part of the parties. Being optional on the part of the parties, the
latter may so choose to waive submission of the memoranda. And as a
logical concomitant of the choice given to the Parties, the Court cannot
dismiss the appeal of the party waiving the submission of said memorandum
the appellant so chooses not to submit the memorandum, the Court of First
Instance is left with no alternative but to decide the case on the basis of the
evidence and records transmitted from the city or municipal courts. In other
words, the Court is not empowered by law to dismiss the appeal on the
mere failure of an appellant to submit his memorandum, but rather it is the
Court's mandatory duty to decide the case on the basis of the available
evidence and records transmitted to it.
As a general rule, the word "may" when used in a statute is permissive only
and operates to confer discretion; while the word "shall" is imperative,
operating to impose a duty which may be enforced (Dizon vs. Encarnacion, L-
18615, Dec. 24, 1963, 9 SCRA 714, 716-717). The implication is that the
Court is left with no choice but to decide the appealed case either on the
basis of the evidence and records transmitted to it, or on the basis of the
latter plus memoranda and/or brief with oral argument duly submitted
and/or made on request.
Moreover, memoranda, briefs and oral arguments are not essential
requirements. They may be submitted and/or made only if so requested.
Finally, a contrary interpretation would be unjust and dangerous as it may
defeat the litigant's right to appeal granted to him by law. In the case of
Republic vs. Rodriguez
(L-26056, May 29, 1969, 28 SCRA 378) this Court underscored "the need of
proceeding with caution so that a party may not be deprived of its right to
appeal except for weighty reasons." Courts should heed the rule
inMunicipality of Tiwi, Albay vs. Cirujales
(L-37520, Dec. 26, 1973, 54 SCRA 390, 395), thus:
The appellate court's summary dismissal of the appeal even before receipt
of the records of the appealed case as ordered by it in a prior mandamus
case must be set aside as having been issued precipitously and without an
opportunity to consider and appreciate unavoidable circumstances of record
not attributable to petitioners that caused the delay in the elevation of the
records of the case on appeal.
In the instant case, no notice was received by petitioner about the
submission of the transcript of the stenographic notes, so that his 30-day
period to submit his memorandum would commence to run. Only after the
expiration of such period can the respondent Judge act on the case by
deciding it on the merits, not by dismissing the appeal of petitioner.
WHEREFORE, THE CHALLENGED ORDERS OF RESPONDENT JUDGE DATED
AUGUST 4, 1971, OCTOBER 30, 1971 AND MARCH 15, 1971 ARE HEREBY SET
ASIDE AS NULL AND VOID AND THE RESPONDENT COURT IS HEREBY
DIRECTED TO DECIDE CIVIL CASE NO. C-2036 ON THE MERITS. NO COSTS.
Muñoz Palma, Fernandez and Guerrero, JJ., concur.
Separate Opinions
TEEHANKEE, J, concurring:
I concur with the setting aside of the questioned dismissal of petitioner's
appeal on the ground that the record shows quite clearly that there was no
failure on part of petitioner-appellant to prosecute her appeal in respondent
judge's court. Petitioner had been granted in respondent judge's Order of
May 7, 1971, 30 days from notice of submission of the transcripts within
which to file her memorandum on appeal, yet her appeal was dismissed per
his Order of August 4, 1971 for alleged failure to prosecute (by failure to file
the memorandum) even before she had received any such notice. Upon
receipt of the dismissal order, petitioner had promptly moved for
reconsideration and filed her memorandum on appeal.
I am not prepared at this stage to concur with the ratio decidendi of the
decision penned by Mr. Justice Makasiar that the Court is not empowered by
law to dismiss the appeal on the mere failure of an appellant to submit his
memorandum, but rather it is the Court's mandatory duty to decide the case
on the basis of the available evidence and records transmitted to it." I
entertain serious doubts about such pronouncement, once when the court
of first instance "requests" the party-appellant to submit a memorandum or
brief on appeal under the provisions of Republic Act No. 6031 amending
section 45 of Republic Act No. 296, such "request" is tantamount to a
requirement for the proper prosecution of the appeal; thus, when the
appellant willfuly fails to file such memorandum or brief, the judge should
be empowered to dismiss the appeal, applying suppletorily the analogous
provisions of Rule 50, section 1 for dismissal of appeal by the higher
appellate courts and taking into account that Rule 40, section 9 of the Rules
of Court now expressly authorizes the court of first instance to dismiss an
appeal before it "for failure to prosecute."
Separate Opinions
TEEHANKEE, J, Concurring:
I concur with the setting aside of the questioned dismissal of petitioner's
appeal on the ground that the record shows quite clearly that there was no
failure on part of petitioner-appellant to prosecute her appeal in respondent
judge's court. Petitioner had been granted in respondent judge's Order of
May 7, 1971, 30 days from notice of submission of the transcripts within
which to file her memorandum on appeal, yet her appeal was dismissed per
his Order of August 4, 1971 for alleged failure to prosecute (by failure to file
the memorandum) even before she had received any such notice. Upon
receipt of the dismissal order, petitioner had promptly moved for
reconsideration and filed her memorandum on appeal.
I am not prepared at this stage to concur with the ratio decidendi of the
decision penned by Mr. Justice Makasiar that the Court is not empowered by
law to dismiss the appeal on the mere failure of an appellant to submit his
memorandum, but rather it is the Court's mandatory duty to decide the case
on the basis of the available evidence and records transmitted to it." I
entertain serious doubts about such pronouncement, once when the court
of first instance "requests" the party-appellant to submit a memorandum or
brief on appeal under the provisions of Republic Act No. 6031 amending
section 45 of Republic Act No. 296, such "request" is tantamount to a
requirement for the proper prosecution of the appeal; thus, when the
appellant willfuly fails to file such memorandum or brief, the judge should
be empowered to dismiss the appeal, applying suppletorily the analogous
provisions of Rule 50, section 1 for dismissal of appeal by the higher
appellate courts and taking into account that Rule 40, section 9 of the Rules
of Court now expressly authorizes the court of first instance to dismiss an
appeal before it "for failure to prosecute."
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167982 August 13, 2008
OFFICE OF THE OMBUDSMAN, petitioner,
vs.
MERCEDITAS DE SAHAGUN, MANUELA T. WAQUIZ and RAIDIS J. BASSIG,
respondent.*
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision 1 dated April 28, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 78008 which set aside the Orders dated
March 10, 2003 and June 24, 2003 of the petitioner Office of the
Ombudsman in OMB-ADM-0-00-0721.
The material antecedents are as follows:
On November 13, 1992, respondent Raidis J. Bassig, Chief of the Research
and Publications Division of the Intramuros Administration, submitted a
Memorandum to then Intramuros Administrator Edda V. Henson (Henson)
recommending that Brand Asia, Ltd. be commissioned to produce a video
documentary for a television program, as well implement a media plan and
marketing support services for Intramuros.
On November 17, 1992, the Bids and Awards Committee (BAC) of the
Intramuros Administration, composed of respondent Merceditas de
Sahagun, as Chairman, with respondent Manuela T. Waquiz and Dominador
C. Ferrer, Jr. (Ferrer), as members, submitted a recommendation to Henson
for the approval of the award of said contract to Brand Asia, Ltd. On the
same day, Henson approved the recommendation and issued a Notice of
Award to Brand Asia, Ltd.
On November 23, 1992, a contract of service to produce a video
documentary on Intramuros for TV program airing was executed between
Henson and Brand Asia, Ltd. On December 1, 1992, a Notice to Proceed was
issued to Brand Asia, Ltd.
On June 2, 1993, the BAC, with Augusto P. Rustia (Rustia) as additional
member, recommended to Henson the approval of the award of contract for
print collaterals to Brand Asia, Ltd. On the same day, Henson approved the
recommendation and issued a Notice of Award/Notice to Proceed to Brand
Asia, Ltd.
On June 22, 1993, a contract of services to produce print collaterals was
entered between Henson and Brand Asia, Ltd.
On March 7, 1995, an anonymous complaint was filed with the Presidential
Commission Against Graft and Corruption (PGAC) against Henson in relation
to the contracts entered into with Brand Asia, Ltd.
On November 30, 1995, Henson was dismissed from the service by the
Office of the President upon recommendation of the PGAC which found that
the contracts were entered into without the required public bidding and in
violation of Section 3 (a) and (e) of Republic Act (R.A.) No. 3019, or the Anti-
Graft and Corrupt Practices Act.
On August 8, 1996, an anonymous complaint was filed with the Ombudsman
against the BAC in relation to the latter’s participation in the contracts with
Brand Asia, Ltd. for which Henson was dismissed from service.
On September 5, 2000, Fact-Finding Intelligence Bureau (FFIB) filed criminal
and administrative charges against respondents, along with Ferrer and
Rustia, for violation of Section 3 (a) and (c) of R.A. No. 3019 in relation to
Section 1 of Executive Order No. 302 and grave misconduct, conduct grossly
prejudicial to the best interest of the service and gross violation of Rules and
Regulations pursuant to the Administrative Code of 1987, docketed as OMB-
0-00-1411 and OMB-ADM-0-00-0721, respectively. 2OMB-0-00-1411 was
dismissed on February 27, 2002 for lack of probable cause. 3
In his proposed Decision4 dated June 19, 2002, Graft Investigation Officer II
Joselito P. Fangon recommended the dismissal of OMB-ADM-0-00-0721.
However, then Ombudsman Simeon V. Marcelo disapproved the
recommendation. In an Order 5 dated March 10, 2003, he held that there
was substantial evidence to hold respondents administratively liable since
the contracts awarded to Brand Asia, Ltd. failed to go through the required
procedure for public bidding under Executive Order No. 301 dated July 26,
1987. Respondents and Ferrer were found guilty of grave misconduct and
dismissed from service. Rustia was found guilty of simple misconduct and
suspended for six months without pay.
On March 17, 2003, respondents, along with Rustia, filed a Motion for
Reconsideration.6
On June 24, 2003, Ombudsman Marcelo issued an Order7 partially granting
the motion for reconsideration. Respondents and Ferrer were found guilty of
the lesser offense of simple misconduct and suspended for six months
without pay. Rustia's suspension was reduced to three months.
Dissatisfied, respondents filed a Petition for Review 8 with the CA assailing
the Orders dated March 10, 2003 and June 24, 2003 of the Ombudsman.
On April 28, 2005, the CA rendered a Decision 9 setting aside the Orders
dated March 10, 2003 and June 24, 2003 of the Ombudsman. The CA held
that respondents may no longer be prosecuted since the complaint was filed
more than seven years after the imputed acts were committed which was
beyond the one year period provided for by Section 20 (5) of Republic Act
(R.A.) No. 6770, otherwise known as "The Ombudsman Act of 1989"; and
that the nature of the function of the Ombudsman was purely
recommendatory and it did not have the power to penalize erring
government officials and employees. The CA relied on the following
statement made by the Court in Tapiador v. Office of the Ombudsman, 10to
wit:
x x x Besides, assuming arguendo, that petitioner [Tapiador] was
administratively liable, the Ombudsman has no authority to directly dismiss
the petitioner from the government service, more particularly from his
position in the BID. Under Section 13, subparagraph 3, of Article XI of the
1987 Constitution, the Ombudsman can only "recommend" the removal of
the public official or employee found to be at fault, to the public official
concerned.11(Emphasis supplied)
Hence, the present petition raising the following issues (1) whether Section
20 (5) of R.A. No. 6770 prohibits administrative investigations in cases filed
more than one year after commission, and (2) whether the Ombudsman
only has recommendatory, not punitive, powers against erring government
officials and employees.
The Court rules in favor of the petitioner.
The issues in the present case are settled by precedents.
On the first issue, well-entrenched is the rule that administrative offenses do
not prescribe.12Administrative offenses by their very nature pertain to the
character of public officers and employees. In disciplining public officers and
employees, the object sought is not the punishment of the officer or
employee but the improvement of the public service and the preservation of
the public’s faith and confidence in our government. 13
Respondents insist that Section 20 (5) of R.A. No. 6770, to wit:
SEC. 20. Exceptions. – The Office of the Ombudsman may not conduct the
necessary investigation of any administrative act or omission complained of
if it believes that:
xxx
(5) The complaint was filed after one year from the occurrence of the act or
omission complained of. (Emphasis supplied)
proscribes the investigation of any administrative act or omission if the
complaint was filed after one year from the occurrence of the complained
act or omission.
In Melchor v. Gironella,14 the Court held that the period stated in Section
20(5) of R.A. No. 6770 does not refer to the prescription of the offense but
to the discretion given to the Ombudsman on whether it would investigate a
particular administrative offense. The use of the word "may" in the provision
is construed as permissive and operating to confer discretion. 15 Where the
words of a statute are clear, plain and free from ambiguity, they must be
given their literal meaning and applied without attempted interpretation. 16
In Filipino v. Macabuhay,17 the Court interpreted Section 20 (5) of R.A. No.
6770 in this manner:
Petitioner argues that based on the abovementioned provision [Section
20(5) of RA 6770)], respondent's complaint is barred by prescription
considering that it was filed more than one year after the alleged
commission of the acts complained of.
Petitioner's argument is without merit.
The use of the word "may" clearly shows that it is directory in nature and
not mandatory as petitioner contends. When used in a statute, it is
permissive only and operates to confer discretion; while the word "shall" is
imperative, operating to impose a duty which may be enforced. Applying
Section 20(5), therefore, it is discretionary upon the Ombudsman whether
or not to conduct an investigation on a complaint even if it was filed after
one year from the occurrence of the act or omission complained of. In fine,
the complaint is not barred by prescription.18(Emphasis supplied)
The declaration of the CA in its assailed decision that while as a general rule
the word "may" is directory, the negative phrase "may not" is mandatory in
tenor; that a directory word, when qualified by the word "not," becomes
prohibitory and therefore becomes mandatory in character, is not plausible.
It is not supported by jurisprudence on statutory construction.
As the Court recently held in Office of the Ombudsman v. Court of Appeals,19
Section 20 of R.A. No. 6770 has been clarified by Administrative Order No.
17,20 which amended Administrative Order No. 07, otherwise known as the
Rules of Procedure of the Office of the Ombudsman. Section 4, Rule III21 of
the amended Rules of Procedure of the Office of the Ombudsman reads:
Section 4. Evaluation. - Upon receipt of the complaint, the same shall be
evaluated to determine whether the same may be:
a) dismissed outright for any grounds stated under Section 20 of Republic
Act No. 6770, provided, however, that the dismissal thereof is not
mandatory and shall be discretionary on the part of the Ombudsman or
the Deputy Ombudsman concerned;
b) treated as a grievance/request for assistance which may be referred to
the Public Assistance Bureau, this Office, for appropriate action under
Section 2, Rule IV of this Rules;
c) referred to other disciplinary authorities under paragraph 2, Section 23,
R.A. 6770 for the taking of appropriate administrative proceedings;
d) referred to the appropriate office/agency or official for the conduct of
further fact-finding investigation; or
e) docketed as an administrative case for the purpose of administrative
adjudication by the Office of the Ombudsman. (Emphasis supplied)
It is, therefore, discretionary upon the Ombudsman whether or not to
conduct an investigation of a complaint even if it was filed after one year
from the occurrence of the act or omission complained of.
Thus, while the complaint herein was filed only on September 5, 2000, or
more than seven years after the commission of the acts imputed against
respondents in November 1992 and June 1993, it was within the authority
of the Ombudsman to conduct the investigation of the subject complaint.
On the second issue, the authority of the Ombudsman to determine the
administrative liability of a public official or employee, and to direct and
compel the head of the office or agency concerned to implement the
penalty imposed is likewise settled.
In Ledesma v. Court of Appeals,22 the Court has ruled that the statement in
Tapiador that made reference to the power of the Ombudsman to impose
an administrative penalty was merely an obiter dictum and could not be
cited as a doctrinal declaration of this Court, thus:
x x x [A] cursory reading of Tapiador reveals that the main point of the case
was the failure of the complainant therein to present substantial evidence to
prove the charges of the administrative case. The statement that made
reference to the power of the Ombudsman is, at best, merely an obiter
dictum and, as it is unsupported by sufficient explanation, is susceptible to
varying interpretations, as what precisely is before us in this case. Hence, it
cannot be cited as a doctrinal declaration of this Court nor is it safe from
judicial examination.23 (Emphasis supplied)
In Estarija v. Ranada,24 the Court reiterated its pronouncements in Ledesma
and categorically stated:
x x x [T]he Constitution does not restrict the powers of the Ombudsman in
Section 13, Article XI of the 1987 Constitution, but allows the Legislature to
enact a law that would spell out the powers of the Ombudsman. Through
the enactment of Rep. Act No. 6770, specifically Section 15, par. 3, the
lawmakers gave the Ombudsman such powers to sanction erring officials
and employees, except members of Congress, and the Judiciary. To
conclude, we hold that Sections 15, 21, 22 and 25 of Republic Act No. 6770
are constitutionally sound. The powers of the Ombudsman are not merely
recommendatory. His office was given teeth to render this constitutional
body not merely functional but also effective. Thus, we hold that under
Republic Act No. 6770 and the 1987 Constitution, the Ombudsman has the
constitutional power to directly remove from government service an erring
public official other than a member of Congress and the Judiciary. 25
(Emphasis supplied)
The power of the Ombudsman to directly impose administrative sanctions
has been repeatedly reiterated in the subsequent cases of Barillo v.
Gervasio,26 Office of the Ombudsman v. Madriaga, 27Office of the
Ombudsman v. Court of Appeals, 28 Balbastro v. Junio,29 Commission on Audit,
Regional Office No. 13, Butuan City v. Hinampas,30 Office of the Ombudsman
v. Santiago,31 Office of the Ombudsman v. Lisondra,32 and most recently in
Deputy Ombudsman for the Visayas v. Abugan 33 and continues to be the
controlling doctrine.
In fine, it is already well-settled that the Ombudsman's power as regards the
administrative penalty to be imposed on an erring public officer or employee
is not merely recommendatory. The Ombudsman has the power to directly
impose the penalty of removal, suspension, demotion, fine, censure, or
prosecution of a public officer or employee, other than a member of
Congress and the Judiciary, found to be at fault, within the exercise of its
administrative disciplinary authority as provided in the Constitution, R.A. No.
6770, as well as jurisprudence. This power gives the said constitutional office
teeth to render it not merely functional, but also effective. 34
Thus, the CA committed a reversible error in holding that the case had
already prescribed and that theOmbudsman does not have the power to
penalize erring government officials and employees.
WHEREFORE, the petition is GRANTED. The Decision dated April 28, 2005 of
the Court of Appeals in CA-G.R. SP No. 78008 is REVERSED and SET ASIDE.
The Order dated June 24, 2003 of the Office of the Ombudsman is
REINSTATED.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 117188 August 7, 1997
LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC.,
petitioner,
vs.
HON. COURT OF APPEALS, HOME INSURANCE AND GUARANTY
CORPORATION, EMDEN ENCARNACION and HORATIO AYCARDO,
respondents.
ROMERO, J.:
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?
This is the issue raised in this petition for review on certiorari of the Decision
1
of the Court of Appeals affirming the decision of the Home Insurance and
Guaranty Corporation (HIGC). This quasi-judicial body recognized Loyola
Grand Villas Homeowners Association (LGVHA) as the sole homeowners'
association in Loyola Grand Villas, a duly registered subdivision in Quezon
City and Marikina City that was owned and developed by Solid Homes, Inc. It
revoked the certificates of registration issued to Loyola Grand Villas
homeowners (North) Association Incorporated (the North Association for
brevity) and Loyola Grand Villas Homeowners (South) Association
Incorporated (the South Association).
LGVHAI was organized on February 8, 1983 as the association of
homeowners and residents of the Loyola Grand Villas. It was registered with
the Home Financing Corporation, the predecessor of herein respondent
HIGC, as the sole homeowners' organization in the said subdivision under
Certificate of Registration No. 04-197. It was organized by the developer of
the subdivision and its first president was Victorio V. Soliven, himself the
owner of the developer. For unknown reasons, however, LGVHAI did not file
its corporate by-laws.
Sometime in 1988, the officers of the LGVHAI tried to register its by-laws.
They failed to do so. 2 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
non-resident and Soliven himself, respectively headed these associations.
They also discovered that these associations had five (5) registered
homeowners each who were also the incorporators, directors and officers
thereof. None of the members of the LGVHAI was listed as member of the
North Association while three (3) members of LGVHAI were listed as
members of the South Association. 3 The North Association was registered
with the HIGC on February 13, 1989 under Certificate of Registration No. 04-
1160 covering Phases West II, East III, West III and East IV. It submitted its by-
laws on December 20, 1988.
In July, 1989, when Soliven inquired about the status of LGVHAI, Atty.
Joaquin A. Bautista, the head of the legal department of the HIGC, informed
him that LGVHAI had been automatically dissolved for two reasons. First, it
did not 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. Apparently, this
information resulted in the registration of the South Association with the
HIGC on July 27, 1989 covering Phases West I, East I and East II. It filed its by-
laws on July 26, 1989.
These developments prompted the officers of the LGVHAI to lodge a
complaint with the HIGC. They questioned the revocation of LGVHAI's
certificate of registration without due notice and hearing and concomitantly
prayed for the cancellation of the certificates of registration of the North and
South Associations by reason of the earlier issuance of a certificate of
registration in favor of LGVHAI.
On January 26, 1993, after due notice and hearing, private respondents
obtained a favorable ruling from HIGC Hearing Officer Danilo C. Javier who
disposed of HIGC Case No. RRM-5-89 as follows:
WHEREFORE, judgment is hereby rendered recognizing the Loyola Grand
Villas Homeowners Association, Inc., under Certificate of Registration No.
04-197 as the duly registered and existing homeowners association for
Loyola Grand Villas homeowners, and declaring the Certificates of
Registration of Loyola Grand Villas Homeowners (North) Association, Inc.
and Loyola Grand Villas Homeowners (South) Association, Inc. as hereby
revoked or cancelled; that the receivership be terminated and the Receiver
is hereby ordered to render an accounting and turn-over to Loyola Grand
Villas Homeowners Association, Inc., all assets and records of the
Association now under his custody and possession.
The South Association appealed to the Appeals Board of the HIGC. In its
Resolution of September 8, 1993, the Board 4 dismissed the appeal for lack
of merit.
Rebuffed, the South Association in turn appealed to the Court of Appeals,
raising two issues. First, whether or not LGVHAI's failure to file its by-laws
within the period prescribed by Section 46 of the Corporation Code resulted
in the automatic dissolution of LGVHAI. Second, whether or not two
homeowners' associations may be authorized by the HIGC in one "sprawling
subdivision." However, in the Decision of August 23, 1994 being assailed
here, the Court of Appeals affirmed the Resolution of the HIGC Appeals
Board.
In resolving the first issue, the Court of Appeals held that under the
Corporation Code, a private corporation commences to have corporate
existence and juridical personality from the date the Securities and Exchange
Commission (SEC) issues a certificate of incorporation under its official seal.
The requirement for the filing of by-laws under Section 46 of the
Corporation Code within one month from official notice of the issuance of
the certificate of incorporation presupposes that it is already incorporated,
although it may file its by-laws with its articles of incorporation. Elucidating
on the effect of a delayed filing of by-laws, the Court of Appeals said:
We also find nothing in the provisions cited by the petitioner, i.e., 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. While Section 46, in prescribing
that by-laws must be adopted within the period prescribed therein, may be
interpreted as a mandatory provision, particularly because of the use of the
word "must," its meaning cannot be stretched to support the argument that
automatic dissolution results from non-compliance.
We realize that Section 46 or other provisions of the Corporation Code are
silent on the result of the failure to adopt and file the by-laws within the
required period. Thus, Section 46 and other related provisions of the
Corporation Code are to be construed with Section 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 (see also II Campos: The Corporation Code, 1990 ed., pp. 124-125).
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. (Section 2 [a], E.O. 535, series 1979, transferred
the powers and authorities of the SEC over homeowners associations to the
HIGC.)
We also do not agree with the petitioner's interpretation that Section 46,
Corporation Code prevails over Section 6, P.D. 902-A and that the latter is
invalid because it contravenes the former. There is no basis for such
interpretation considering that these two provisions are not inconsistent
with each other. They are, in fact, complementary to each other so that one
cannot be considered as invalidating the other.
The Court of Appeals added that, as there was no showing that the
registration of LGVHAI had been validly revoked, it continued to be the duly
registered homeowners' association in the Loyola Grand Villas. More
importantly, the South Association did not dispute the fact that LGVHAI had
been organized and that, thereafter, it transacted business within the period
prescribed by law.
On the second issue, the Court of Appeals reiterated its previous ruling 5 that
the HIGC has the authority to order the holding of a referendum to
determine which of two contending associations should represent the entire
community, village or subdivision.
Undaunted, the South Association filed the instant petition for review on
certiorari. It elevates as sole issue for resolution the first issue it had raised
before the Court of Appeals, i.e., whether or not the 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.
Petitioner contends that, since Section 46 uses the word "must" with respect
to the filing of by-laws, noncompliance therewith would result in "self-
extinction" either due to non-occurrence of a suspensive condition or the
occurrence of a resolutory condition "under the hypothesis that (by) the
issuance of the certificate of registration alone the corporate personality is
deemed already formed." It asserts that the Corporation Code provides for a
"gradation of violations of requirements." Hence, Section 22 mandates that
the corporation must be formally organized and should commence
transaction within two years from date of incorporation. Otherwise, the
corporation would be deemed dissolved. On the other hand, if the
corporation commences operations but becomes continuously inoperative
for five years, then it may be suspended or its corporate franchise revoked.
Petitioner concedes that Section 46 and the other provisions of the
Corporation Code do not provide for sanctions for non-filing of the by-laws.
However, it insists that no sanction need be provided "because the
mandatory nature of the provision is so clear that there can be no doubt
about its being an essential attribute of corporate birth." To petitioner, its
submission is buttressed by the facts that the period for compliance is
"spelled out distinctly;" that the certification of the SEC/HIGC must show
that the by-laws are not inconsistent with the Code, and that a copy of the
by-laws "has to be attached to the articles of incorporation." Moreover, no
sanction is provided for because "in the first place, no corporate identity has
been completed." Petitioner asserts 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." 6 In a bid to convince the Court of its arguments,
petitioner stresses that:
. . . the word MUST is used in Sec. 46 in its universal literal meaning and
corollary human implication — its compulsion is integrated in its very
essence — MUST is always enforceable by the inevitable consequence —
that is, "OR ELSE". The use of the word MUST in Sec. 46 is no exception — it
means file the by-laws within one month after notice of issuance of
certificate of registration OR ELSE. The OR ELSE, though not specified, is
inextricably a part of MUST . Do this or if you do not you are "Kaput". The
importance of the by-laws to corporate existence compels such meaning for
as decreed the by-laws is "the government" of the corporation. Indeed, how
can the corporation do any lawful act as such without by-laws. Surely, no law
is indeed to create chaos. 7
Petitioner asserts that P.D. No. 902-A cannot exceed the scope and power of
the Corporation Code which itself does not provide sanctions for non-filing
of by-laws. For the petitioner, it is "not proper to assess the true meaning of
Sec. 46 . . . on an unauthorized provision on such matter contained in the
said decree."
In their comment on the petition, private respondents counter that the
requirement of adoption of by-laws is not mandatory. They point to P.D. No.
902-A as having resolved the issue of whether said requirement is
mandatory or merely directory. Citing Chung Ka Bio v. Intermediate
Appellate Court, 8 private respondents contend that Section 6(I) of that
decree provides that non-filing of by-laws is only a ground for suspension or
revocation of the certificate of registration of corporations and, therefore, it
may not result in automatic dissolution of the corporation. Moreover, 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. To emphasize the fact the LGVHAI was registered as
the sole homeowners' association in the Loyola Grand Villas, private
respondents point out that membership in the LGVHAI was an
"unconditional restriction in the deeds of sale signed by lot buyers."
In its reply to private respondents' comment on the petition, petitioner
reiterates its argument that the word " must" in Section 46 of the
Corporation Code is mandatory. It adds that, before the ruling in Chung Ka
Bio v. Intermediate Appellate Court could be applied to this case, this Court
must first resolve the issue of whether or not the provisions of P.D. No. 902-
A prescribing the rules and regulations to implement the Corporation Code
can "rise above and change" the substantive provisions of the Code.
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.
For the adoption of by-laws by the corporation, the affirmative vote of the
stockholders representing at least a majority of the outstanding capital
stock, or of at least a majority of the members, in the case of non-stock
corporations, shall be necessary. The by-laws shall be signed by the
stockholders or members voting for them and shall be kept in the principal
office of the corporation, subject to the stockholders or members voting for
them and shall be kept in the principal office of the corporation, subject to
inspection of the stockholders or members during office hours; and a copy
thereof, shall be filed with the Securities and Exchange Commission which
shall be attached to the original articles of incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be
adopted and filed prior to incorporation; in such case, such by-laws shall be
approved and signed by all the incorporators and submitted to the Securities
and Exchange Commission, together with the articles of incorporation.
In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws are
not inconsistent with this Code.
The Securities and Exchange Commission shall not accept for filing the by-
laws or any amendment thereto of any bank, banking institution, building
and loan association, trust company, insurance company, public utility,
educational institution or other special corporations governed by special
laws, unless accompanied by a certificate of the appropriate government
agency to the effect that such by-laws or amendments are in accordance
with law.
As correctly postulated by the petitioner, interpretation of this provision of
law begins with the determination of the meaning and import of the word
"must" in this section Ordinarily, the word "must" connotes an imperative
act or operates to impose a duty which may be enforced. 9 It is synonymous
with "ought" which connotes compulsion or mandatoriness. 10 However, the
word "must" in a statute, like "shall," is not always imperative. It may be
consistent with an exercise of discretion. In this jurisdiction, the tendency
has been to interpret "shall" as the context or a reasonable construction of
the statute in which it is used demands or requires. 11 This is equally true as
regards the word "must." 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. 12
In this respect, the following portions of the deliberations of the Batasang
Pambansa No. 68 are illuminating:
MR. FUENTEBELLA. Thank you, Mr. Speaker.
On page 34, referring to the adoption of by-laws, are we made to
understand here, Mr. Speaker, that by-laws must immediately be filed within
one month after the issuance? In other words, would this be mandatory or
directory in character?
MR. MENDOZA. This is mandatory.
MR. FUENTEBELLA. It being mandatory, Mr. Speaker, what would be the
effect of the failure of the corporation to file these by-laws within one
month?
MR. MENDOZA. There is a provision in the latter part of the Code which
identifies and describes the consequences of violations of any provision of
this Code. One such consequences is the dissolution of the corporation for
its inability, or perhaps, incurring certain penalties.
MR. FUENTEBELLA. But it will not automatically amount to a dissolution of
the corporation by merely failing to file the by-laws within one month.
Supposing the corporation was late, say, five days, what would be the
mandatory penalty?
MR. MENDOZA. I do not think it will necessarily result in the automatic or
ipso facto dissolution of the corporation. Perhaps, as in the case, as you
suggested, in the case of El Hogar Filipino where a quo warranto action is
brought, one takes into account the gravity of the violation committed. If the
by-laws were late — the filing of the by-laws were late by, perhaps, a day or
two, I would suppose that might be a tolerable delay, but if they are delayed
over a period of months — as is happening now — because of the absence
of a clear requirement that by-laws must be completed within a specified
period of time, the corporation must suffer certain consequences. 13
This exchange of views demonstrates clearly that automatic corporate
dissolution for failure to file the by-laws on time was never the intention of
the legislature. Moreover, even without resorting to the records of
deliberations of the Batasang Pambansa, the law itself provides the answer
to the issue propounded by petitioner.
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),
14
Section 46 aforequoted 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 even prior to incorporation. This provision in
the same section of the Code rules out mandatory compliance with the
requirement of filing the by-laws "within one (1) month after receipt of
official notice of the issuance of its certificate of incorporation by the
Securities and Exchange Commission." It necessarily follows that failure to
file the by-laws within that period does not imply the "demise" of the
corporation. 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. 15 There are in fact cases
where by-laws are unnecessary to corporate existence or to the valid
exercise of corporate powers, thus:
In the absence of charter or statutory provisions to the contrary, by-laws are
not necessary 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 even where the
governing statute in express terms confers upon the corporation the power
to adopt by-laws, the failure to exercise the power will be ascribed to mere
nonaction which will not render void any acts of the corporation which
would otherwise be valid. 16 (Emphasis supplied.)
As Fletcher aptly puts it:
It has been said that the by-laws of a corporation are the rule of its life, and
that until by-laws have been adopted the corporation may not be able to act
for the purposes of its creation, and that the first and most important duty
of the members is to adopt them. This would seem to follow as a matter of
principle from the office and functions of by-laws. Viewed in this light, the
adoption of by-laws is a matter of practical, if not one of legal, necessity.
Moreover, the peculiar circumstances attending the formation of a
corporation may impose the obligation to adopt certain by-laws, as in the
case of a close corporation organized for specific purposes. And the statute
or general laws from which the corporation derives its corporate existence
may expressly require it to make and adopt by-laws and specify to some
extent what they shall contain and the manner of their adoption. The mere
fact, however, of the existence of power in the corporation to adopt by-laws
does not ordinarily and of necessity make the exercise of such power
essential to its corporate life, or to the validity of any of its acts. 17
Although the Corporation Code requires the filing of by-laws, it does not
expressly provide for the consequences of the non-filing of the same within
the period provided for in Section 46. However, such omission has been
rectified by Presidential Decree No. 902-A, 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:
xxx xxx xxx
(1) 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:
xxx xxx xxx
5. Failure to file by-laws within the required period;
xxx xxx xxx
In the exercise of the foregoing authority and jurisdiction of the Commission
or by a Commissioner or by such other bodies, boards, committees and/or
any officer as may be created or designated by the Commission for the
purpose. The decision, ruling or order of any such Commissioner, bodies,
boards, committees and/or officer may be appealed to the Commission
sitting en banc within thirty (30) days after receipt by the appellant of notice
of such decision, ruling or order. The Commission shall promulgate rules of
procedures to govern the proceedings, hearings and appeals of cases falling
with its jurisdiction.
The aggrieved party may appeal the order, decision or ruling of the
Commission sitting en banc to the Supreme Court by petition for review in
accordance with the pertinent provisions of the Rules of Court.
Even under the foregoing express grant of power and authority, there can be
no automatic corporate dissolutionsimply 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.
That the failure to file by-laws is not provided for by the Corporation Code
but in another law is of no moment. P.D. No. 902-A, which took effect
immediately after its promulgation on March 11, 1976, is very much
apposite to the Code. Accordingly, the provisions abovequoted supply the
law governing the situation in the case at bar, inasmuch as the Corporation
Code and P.D. No. 902-A are statutes in pari materia. Interpretare et
concordare legibus est optimus interpretandi. Every statute must be so
construed and harmonized with other statutes as to form a uniform system
of jurisprudence. 18
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," 19 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
corporation.
In this regard, private respondents are correct in relying on the
pronouncements of this Court in Chung Ka Bio v.Intermediate Appellate
Court, 20 as follows:
. . . . Moreover, failure to file the by-laws does not automatically operate to
dissolve a corporation but is now considered only a ground for such
dissolution.
Section 19 of the Corporation Law, part of which is now Section 22 of the
Corporation Code, provided that the powers of the corporation would cease
if it did not formally organize and commence the transaction of its business
or the continuation of its works within two years from date of its
incorporation. Section 20, which has been reproduced with some
modifications in Section 46 of the Corporation Code, expressly declared that
"every corporation formed under this Act, must within one month after the Executive Order No. 90 dated December 17, 1989. 22 With respect to
filing of the articles of incorporation with the Securities and Exchange homeowners associations, the HIGC shall "exercise all the powers,
Commission, adopt a code of by-laws." Whether this provision should be authorities and responsibilities that are vested on the Securities and
given mandatory or only directory effect remained a controversial question Exchange Commission . . . , the provision of Act 1459, as amended by P.D.
until it became academic with the adoption of PD 902-A. Under this decree, 902-A, to the contrary notwithstanding." 23
it is now clear that the failure to file by-laws within the required period is
only a ground for suspension or revocation of the certificate of registration WHEREFORE, the instant petition for review on certiorari is hereby DENIED
of corporations. and the questioned Decision of the Court of Appeals AFFIRMED. This
Decision is immediately executory. Costs against petitioner.
Non-filing of the by-laws will not result in automatic dissolution of the
corporation. Under Section 6(I) of PD 902-A, the SEC is empowered to SO ORDERED.
"suspend or revoke, after proper notice and hearing, the franchise or
certificate of registration of a corporation" on the ground inter alia of Regalado, Puno and Mendoza, JJ., concur.
"failure to file by-laws within the required period." It is clear from this
provision that there must first of all be a hearing to determine the existence Torres, Jr., J., is on leave.
of the ground, and secondly, assuming such finding, the penalty is not
necessarily revocation but may be only suspension of the charter. 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.

It should be stressed in this connection that substantial compliance with

conditions subsequent will suffice to perfect corporate personality.
Organization and commencement of transaction of corporate business are
but conditions subsequent and not prerequisites for acquisition of corporate
personality. The adoption and filing of by-laws is also a condition
subsequent. 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. This may be done even
before the filing of the by-laws, which under Section 46 of the Corporation
Code, must be adopted "within one month after receipt of official notice of
the issuance of its certificate of incorporation." 21

That the corporation involved herein is under the supervision of the HIGC
does not alter the result of this case. The HIGC has taken over the
specialized functions of the former Home Financing Corporation by virtue of
276 SCRA 681 – Business Organization – Corporation Law – Failure to File By-
Laws

In 1983, the Loyola Grand Villas Association, Inc. (LGVAI) was incorporated
by the homeowners of the Loyola Grand Villas (LGV), a subdivision. The
Securities and Exchange Commission (SEC) issued a certificate of
incorporation under its official seal to LGVAI in the same year. LGVAI was
likewise recognized by the Home Insurance and Guaranty Corporation
(HIGC), a government-owned-and-controlled corporation whose mandate is
to oversee associations like LGVAI.

Later, LGVAI later found out that there are two homeowners associations
within LGV, namely: Loyola Grand Villas Homeowners (South) Association,
Inc. (LGVAI-South) and Loyola Grand Villas Homeowners (North) Association,
Inc. (LGVAI-North). The two associations asserted that they have to be
formed because LGVAI is inactive. When LGVAI inquired about its status with
HIGC, HIGC advised that LGVAI was already terminated; that it was
automatically dissolved when it failed to submit it By-Laws after it was
issued a certificate of incorporation by the SEC.

ISSUE: Whether or not a corporation’s failure to submit its by-laws results to

its automatic dissolution.

HELD: No. A private corporation like LGVAI commences to have corporate

existence and juridical personality from the date the Securities and Exchange
Commission (SEC) issues a certificate of incorporation under its official seal.
The submission of its by-laws is a condition subsequent but although it is
merely such, it is a MUST that it be submitted by the corporation. Failure to
submit however does not warrant automatic dissolution because such a
consequence was never the intention of the law. The failure is merely a
ground for dissolution which may be raised in a quo warranto proceeding. It
is also worthwhile to note that failure to submit can’t result to automatic
dissolution because there are some instances when a corporation does not
require a by-laws.