Republic of the Philippines

SUPREME COURT
SECOND DIVISION
G.R. No. 167631 December 16, 2005
Jenette Marie B. Crisologo, Petitioner,
vs.
GLOBE TELECOM INC. and Cesar M. Maureal, Vice President for
Human Resources, Respondents.

Court of Appeals, 26 SCRA 798 (1969), wherein it was ruled that a

defendant declared in default has the remedy set forth in Section 2,
paragraph 3 of Rule 41 of the old Rules of Court. 2 Petitioner then cited
in her motion, "Section 2, paragraph 3 or (c) of the Rules of Civil
Procedure."3
Evidently, petitioner misread the provision cited in the Matute case as
that pertaining to Section 2(c), Rule 41 of the 1997 Rules of Civil
Procedure, as amended, which states: "(c) Appeal by certiorari. - In all
cases where only questions of law are raised or involved, the appeal
shall be to the Supreme Court by petition for review oncertiorari in
accordance with Rule 45." Hence, she directly filed her petition for
review on certiorari with the Court.

RESOLUTION
AUSTRIA-MARTINEZ, J.:
Petitioner was an employee of respondent company. When she was
promoted as Director of Corporate Affairs and Regulatory Matters, she
became entitled to an executive car, and she procured a 1997 Toyota
Camry. In April 2002, she was separated from the company. Petitioner
filed a complaint for illegal dismissal and reinstatement with the
National Labor Relations Commission (NLRC), which later dismissed
the complaint. Petitioner filed, on August 12, 2004, a petition
for certiorari with the Court of Appeals, docketed as CA-G.R. SP No.
85679 assailing the NLRCs dismissal.
Pending said petition, respondent company filed with the Regional Trial
Court of Mandaluyong (Branch 213) an action for recovery of
possession of a motor vehicle with application for a writ of replevin with
damages, docketed as Civil Case No. MC04-2480. Petitioner filed a
motion to dismiss on the ground of litis pendentia and forum shopping
but this was denied by the trial court. Thus, petitioner filed a petition
for certiorari with the Court of Appeals, docketed as CA-G.R. SP No.
85927.1 Petitioner also filed with the Court of Appeals a motion for the
issuance of a writ of prohibition to enjoin proceedings in the replevin
case before the trial court.
Thereafter, respondent company filed a motion to declare defendant in
default in Civil Case No. MC04-2480, which was granted by the trial
court. Respondent company was thus allowed to present its
evidence ex-parte. Petitioner filed a motion for reconsideration of the
order of default but it was denied by the trial court. On April 5, 2005,
the trial court rendered a judgment by default, the dispositive portion of
which reads:
WHEREFORE, finding merit in all the foregoing uncontroverted facts
supported by documentary exhibits, judgment is hereby rendered
declaring plaintiff to have the right of possession over the subject
motor vehicle and ordering defendant plaintiff to pay plaintiff the
following:

Petitioner should be reminded that the Matute case is of 1969 vintage

and pertained to the old Rules of Court. As stated in the Matute case, a
defendant validly declared in default has the remedy set forth in
Section 2, paragraph 3 of Rule 41. Note that under the old Rules,
Section 2, paragraph 3 of Rule 41 governed appeals from Courts of
First Instance, the Social Security Commission and the Court of
Agrarian Relations TO THE COURT OF APPEALS, and reads:
A party who has been declared in default may likewise appeal from the
judgment rendered against him as contrary to the evidence or to the
law, even if no petition for relief to set aside the order of default has
been presented by him in accordance with Rule 38. (Emphasis
supplied)
Had petitioner been more circumspect, she would have easily
ascertained that said Section 2, paragraph 3 of Rule 41 of the old
Rules of Court, as cited in the Matute case, had already been
superseded by the 1997 Rules of Civil Procedure, as amended, and
under these new rules, the different modes of appeal are clearly laid
down.
The decision sought to be reviewed in this case is a judgment by
default rendered by the trial court in Civil Case No. MC04-2480. As
such, the applicable rule is Section 2, Rule 41 of the 1997 Rules of
Civil Procedure, as amended, which provides for the different modes
of appeal from a Regional Trial Courts judgment or final order, to wit:
Section 2. Modes of appeal.
(a) Ordinary appeal. The appeal to the Court of Appeals in
cases decided by the Regional Trial Court in the exercise of its
original jurisdiction shall be taken by filing a notice of appeal with
the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party. No
record on appeal shall be required except in special proceedings
and other cases of multiple or separate appeals where the law or
these Rules so require. In such cases, the record on appeal shall
be filed and served in like manner.

1. The amount of TWO MILLION FIVE HUNDRED FIFTY SIX

THOUSAND FOUR HUNDRED SIXTY PESOS (p2,556,460.00) as
damages in the form of unpaid daily car rental for 730 (From 15 August
2002 until 22 June 2004) days at THREE THOUSAND FIVE
HUNDRED TWO PESOS (P3,502.00) per day;

(b) Petition for review. The appeal to the Court of Appeals in cases
decided by the Regional Trial Court in the exercise of its appellate
jurisdiction shall be by petition for review in accordance with Rule 42.

2. The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00)

AS AND BY WAY OF Attorneys fee;

(c) Appeal by certiorari. In all cases where only questions of law are
raised or involved, the appeal shall be to the Supreme Court by petition
for review on certiorari in accordance with Rule 45. (Emphasis
supplied)

3. The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00)

as exemplary damages in order to deter others from doing similar act
in withholding possession of a property to another to which he/she has
no right to possess; and

In Cerezo vs. Tuazon,4 the Court reiterated the remedies available to a

party declared in default:

4. Costs of suit.
SO ORDERED.
Petitioner then filed with the Court a petition for review
on certiorari under Rule 45 of the Rules of Court, which was denied by
the Court in a Resolution dated May 16, 2005, for being the wrong
remedy under the 1997 Rules of Civil Procedure, as amended.
Petitioner thus filed the present motion for reconsideration, alleging
that the filing of said petition is the proper recourse, citing Matute vs.

a) The defendant in default may, at any time after discovery thereof

and before judgment, file a motion under oath to set aside the order
of default on the ground that his failure to answer was due to fraud,
accident, mistake or excusable negligence, and that he has a
meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant
discovered the default, but before the same has become final and
executory, he may file a motion for new trial under Section 1 (a) of
Rule 37;

c) If the defendant discovered the default after the judgment has

become final and executory, he may file apetition for relief under
Section 2 [now Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as
contrary to the evidence or to the law, even if no petition to set aside
the order of default has been presented by him (Sec. 2, Rule 41).
Moreover, a petition for certiorari to declare the nullity of a judgment by
default is also available if the trial court improperly declared a party in
default, or even if the trial court properly declared a party in default, if
grave abuse of discretion attended such declaration.5
The filing of the present petition is clearly not the proper remedy to
assail the default judgment rendered by the trial court. Petitioner still
has the available remedy of filing with the Regional Trial Court a
motion for new trial or an ordinary appeal to the Court of Appeals from
the trial courts default judgment. Note that petitioner admits that she
was "properly declared in default."6 Thus, there is no question of any
improvident or improper declaration of default by the trial court, and the
remedy of filing a special civil action for certiorari has been effectively
foreclosed on petitioner. Her only recourse then is to file an ordinary
appeal with the Court of Appeals under Section 2(a), Rule 41 of the
1997 Rules of Civil Procedure, as amended.

exclusive appellate jurisdiction of the Court of Appeals. 8 (Emphasis

supplied)
It is on this score that the Court is inclined to concur with petitioners
argument that even if the remedy resorted to was wrong, the Court
may refer the case to the Court of Appeals under Rule 56, Section 6,
paragraph 2 of the 1997 Rules of Civil Procedure, as amended, which
provides: "(A)n appeal by certiorari taken to the Supreme Court from
the Regional Trial Court submitting issues of fact may be referred to
the Court of Appeals for decision or appropriate action." This despite
the express provision in Section 5(f) of the same Rule, which provides
that an appeal may be dismissed when there is error in the choice or
mode of appeal.
Both Sections 5(f) and 6 of Rule 57 use the term "may," denoting
discretion on the part of the Court in dismissing the appeal or referring
the case to the Court of Appeals. The question of fact involved in the
appeal and substantial ends of justice warrant a referral of this case to
the Court of Appeals for further appropriate proceedings.
WHEREFORE, the motion for reconsideration is GRANTED. The
petition is reinstated and the case is REFERREDto the Court of
Appeals for appropriate action.
SO ORDERED.

Instead, she came directly to this Court via petition for review
on certiorari, without setting forth substantial reasons why the ordinary
remedies under the law should be disregarded and the petition
entertained. Petitioner cannot even find solace in the Matute case as
the old Rules of Court then applicable explicitly laid down the remedy
of anordinary appeal to the Court of Appeals, and not appeal
by certiorari to this Court, by a defendant declared in default.
Petitioner further argues that the petition involved questions of law, and
the Court should have taken cognizance of the case. The grounds set
forth in her petition prove otherwise, viz.:
GROUNDS
I
THE COMPLAINT FOR REPLEVIN FILED BY RESPONDENTS
AGAINST PETITIONER SHOULD HAVE BEEN DISMISSED ON THE
GROUND OF LITIS PENDENTIA AND FOR RESPONDENTS
VIOLATION OF THE RULES AGAINST FORUM-SHOPPING
II
THE TRIAL COURT WENT AHEAD WITH THE EX-PARTE
PRESENTATION OF RESPONDENTS EVIDENCE DESPITE THE
PETITIONERS PENDING MOTION FOR RECONSIDERATION
III
THE MONETARY AWARDS FOR DAMAGES AND ATTORNEYS
FEES ARE UNWARRANTED AND UNJUSTIFIABLE CONSIDERING
THAT SUCH ARE NOT SUPPORTED BY LAW AND
JURISPRUDENCE
IV
THE COURT A QUO ISSUED THE ASSAILED DECISION IN A WAY
THAT IT IS NOT IN ACCORD WITH LAW OR APPLICABLE
DECISIONS OF THE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR THE EXERCISE BY THE
SUPREME COURT OF ITS POWER OF SUPERVISION
The test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same;
rather, it is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case, it is a
question of law; otherwise, it is a question of fact. 7 The issues on the
award of damages call for a re-evaluation of the evidence before the
trial court, which is obviously a question of fact. Cases where an
appeal involved questions of fact, of law, or both fall within the

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

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:
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 bylaws. 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

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 noncompliance.

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. 124125). 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 bylaws. 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
ofMUST . 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

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

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

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 bylaws 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 filing of the articles of
incorporation with the Securities and Exchange Commission,
adopt a code of by-laws." Whether this provision should be
given mandatory or only directory effect remained a
controversial question until it became academic with the
adoption of PD 902-A. Under this decree, 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 of corporations.
Non-filing of the by-laws will not result in automatic
dissolution of the corporation. Under Section 6(I) of PD 902A, the SEC is empowered to "suspend or revoke, after
proper notice and hearing, the franchise or certificate of
registration of a corporation" on the ground inter alia of
"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 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 Executive Order No. 90 dated December 17, 1989. 22 With
respect to homeowners associations, the HIGC shall "exercise all the
powers, authorities and responsibilities that are vested on the
Securities and Exchange Commission . . . , the provision of Act 1459,
as amended by P.D. 902-A, to the contrary notwithstanding." 23
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED and the questioned Decision of the Court of Appeals
AFFIRMED. This Decision is immediately executory. Costs against
petitioner.
SO ORDERED.
Regalado, Puno and Mendoza, JJ., concur.
Torres, Jr., J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 98382 May 17, 1993
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS and EPIFANIO DE LA
CRUZ, respondents.
Santiago, Jr., Vidad, Corpus & Associates for petitioner.
Pedro R. Lazo for spouses-intervenors.
Rosendo G. Tansinsin, Jr. for private respondent.

MELO, J.:
The notices of sale under Section 3 of Act No. 3135, as amended by
Act No. 4118, on extra-judicial foreclosure of real estate mortgage are
required to be posted for not less than twenty days in at least three
public places of the municipality or city where the property is situated,
and if such property is worth more than four hundred pesos, such
notices shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the
municipality or city.
Respondent court, through Justice Filemon Mendoza with whom
Justices Campos, Jr. and Aldecoa, Jr. concurred, construed the
publication of the notices on March 28, April 11 and l2, 1969 as a fatal
announcement and reversed the judgment appealed from by declaring
void, inter alia, the auction sale of the foreclosed pieces of realty, the
final deed of sale, and the consolidation of ownership (p. 27, Rollo).
Hence, the petition at bar, premised on the following backdrop lifted
from the text of the challenged decision:
The facts of the case as related by the trial court
are, as follows:
This is a verified complaint
brought by the plaintiff for the
reconveyance to him (and
resultant damages) of two (2)
parcels of land mortgaged by
him
to
the
defendant
Philippine
National
Bank
(Manila), which the defendant
allegedly
unlawfully
foreclosed. The defendant
then consolidated ownership
unto itself, and subsequently
sold the parcels to third
parties. The amended Answer
of the defendant states on the
other
hand
that
the
extrajudicial
foreclosure,
consolidation of ownership,
and subsequent sale to the
third parties were all valid, the
bank therefore counterclaims
for damages and other
equitable remedies.

xxx xxx xxx

From the evidence and
exhibits presented by both
parties, the Court is of the
opinion that the following facts
have been proved: Two lots,
located at Bunlo, Bocaue,
Bulacan (the first covered by
Torrens Certificate No. 16743
and possessed of an area of
approximately 3,109 square
meters: the second covered
by Torrens Certificate No.
5787, possessed of an area of
around 610 square meters,
and upon which stood a
residential-commercial
building were mortgaged to
the
defendant
Philippine
National Bank. The lots were
under the common names of
the plaintiff (Epifanio dela
Cruz), his brother (Delfin) and
his
sister
(Maria).
The
mortgage was made possible
because of the grant by the
latter two to the former of a
special power of attorney to
mortgage the lots to the
defendant. The lots were
mortgaged to guarantee the
following promissory notes:

On September 6, 1961, Atty. Ramon de los Reyes

of the bank (PNB) presented under Act No. 3135 a
foreclosure petition of the two mortgaged lots
before the Sheriff's Office at Malolos, Bulacan;
accordingly, the two lots were sold or auctioned off
on October 20, 1961 with the defendant PNB as
the highest bidder for P28,908.46. On March 7,
1963, Sheriff Leopoldo Palad executed a Final
Deed of Sale, in response to a letter-request by
the Manager of the PNB (Malolos Branch). On
January 15, 1963 a Certificate of Sale in favor of
the defendant was executed by Sheriff Palad. The
final Deed of Sale was registered in the Bulacan
Registry of Property on March 19, 1963. Inasmuch
as the plaintiff did not volunteer to buy back from
the PNB the two lots, the PNB sold on June 4,
1970 the same to spouses Conrado de Vera and
Marina de Vera in a "Deed of Conditional Sale".
(Decision, pp.3-5; Amended Record on Appeal,
pp. 96-98).
After due consideration of the evidence, the CFI
on January 22, 1978 rendered its Decision, the
dispositive portion of which reads:
WHEREFORE,
PREMISES
CONSIDERED, the instant
complaint
against
the
defendant Philippine National
Bank is hereby ordered
DISMISSED,
with
costs
against the plaintiff. The
Counterclaim against the
plaintiff
is
likewise
DISMISSED, for the Court
does not believe that the
complaint had been made in
bad faith.

(1) a promissory note for Pl2,000.00, dated

September 2, 1958, and payable within 69 days
(date of maturity Nov. l0, 1958);
(2) a promissory note for P4,000.00, dated
September 22, 1958, and payable within 49 days
(date of maturity Nov. 10, 1958);
(3) a promissory note for P4,000.00, dated June
30, 1.958 1 and payable within 120 days (date of
maturity Nov. 10, 1958) See also Annex C of
the complaint itself).
[1 This date of June 30, 1958 is disputed by the
plaintiff who claims that the correct date is June
30, 1961, which is the date actually mentioned in
the promissory note. It is however difficult to
believe the plaintiff's contention since if it were true
and correct, this would mean that nearly three (3)
years elapsed between the second and the third
promissory note; that at the time the third note was
executed, the first two had not yet been paid by
the plaintiff despite the fact that the first two were
supposed to be payable within 69 and 49 days
respectively. This state of affairs would have
necessitated the renewal of said two promissory
notes. No such renewal was proved, nor was the
renewal ever alleged. Finally, and this is very
significant: the third mentioned promissory note
states that the maturity date is Nov. 10, 1958. Now
then, how could the loan have been contracted on
June 30, 1961? It will be observed that in the bank
records, the third mentioned promissory note was
really executed on June 30, 1958 (See Exhs. 9
and 9-A). The Court is therefore inclined to believe
that the date "June 30, 1961" was a mere clerical
error and hat the true and correct date is June
1958. However, even assuming that the true and
correct date is June 30, 1961, the fact still remains
that the first two promissory notes had been
guaranteed by the mortgage of the two lots, and
therefore, it waslegal and proper to foreclose on
the lots for failure to pay said two promissory
notes.

SO ORDERED. (Decision, p.
B.; Amended Record on
Appeal, p. 100)
Not satisfied with the judgment, plaintiff interposed
the present appeal assigning as errors the
following:
I.
THE LOWER COURT ERRED IN HOLDING IN
FOOTNOTE I OF ITS DECISION THAT IT IS
THEREFORE INCLINED TO BELIEVE THAT THE
DATE "JUNE 30, 1962" WAS A MERE CLERICAL
ERROR AND THAT THE TRUE AND CORRECT
DATE IS JUNE 30, 1958. IT ALSO ERRED IN
HOLDING IN THE SAME FOOTNOTE I THAT
"HOWEVER, EVEN ASSUMING THAT THE TRUE
AND CORRECT DATE IS JUNE 30, 1961, THE
FACT STILL REMAINS THAT THE FIRST TWO
PROMISSORY
NOTES
HAD
BEEN
GUARANTEED BY THE MORTGAGE OF THE
TWO LOTS, AND THEREFORE, IT WAS LEGAL
AND PROPER TO FORECLOSE ON THE LOTS
FOR
FAILURE
TO
PAY
SAID
TWO
PROMISSORY NOTES". (page 115, Amended
Record on Appeal)
II.
THE LOWER COURT ERRED IN NOT HOLDING
THAT THE PETITION FOR EXTRAJUDICIAL
FORECLOSURE WAS PREMATURELY FILED
AND IS A MERE SCRAP OF PAPER BECAUSE
IT MERELY FORECLOSED THE ORIGINAL AND
NOT THE AMENDED MORTGAGE.
III.

THE LOWER COURT ERRED IN HOLDING THAT

"IT IS CLEAR THAT THE AUCTION SALE WAS
NOT PREMATURE". (page 117, Amended Record
on Appeal)
IV.
THE LOWER COURT ERRED IN HOLDING THAT
"SUFFICE IT TO STATE THAT ACTUALLY THE
POWER OF ATTORNEY GIVEN TO THE PNB
WAS EMBODIED IN THE REAL ESTATE
MORTGAGE
(EXB.
10)
WHICH
WAS
REGISTERED
IN
THE
REGISTRY
OF
PROPERTY
OF
BULACAN
AND
WAS
ANNOTATED ON THE TWO TORRENS
CERTIFICATES INVOLVED" (page 118, Amended
Record on Appeal).
V.
THE LOWER COURT ERRED IN HOLDING THAT
"THE NOTICES REQUIRED UNDER SEC. 3 OF
ACT NO. 3135 WERE ALL COMPLIED WITH"
AND "THAT THE DAILY RECORD . . . IS A
NEWSPAPER OF GENERAL CIRCULATION
(pages 117-118, Amended Record on Appeal).
VI.
THE LOWER COURT ERRED IN NOT
DECLARING THE CERTIFICATE OF SALE,
FINAL DEED OF SALE AND AFFIDAVIT OF
CONSOLIDATION, NULL AND VOID.
VII.
THE LOWER COURT ERRED IN NOT
ORDERING DEFENDANT TO RECONVEY TO
PLAINTIFF THE PARCELS OF LAND COVERED
BY T.C.T. NOS. 40712 AND 40713 OF BULACAN
(page 8, Amended Record on Appeal)
VIII.
THE LOWER COURT ERRED IN NOT
ORDERING DEFENDANT TO PAY TO PLAINTIFF
REASONABLE AMOUNTS OF MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY'S
FEES (page 8. Amended Record on Appeal).
IX.
THE LOWER COURT ERRED IN DISMISSING
THE INSTANT COMPLAINT AGAINST THE
PHILIPPINE NATIONAL BANK WITH COSTS
AGAINST THE PLAINTIFF. (page 118, Amended
Record on Appeal)." (Brief for Plaintiff-Appellant,
pp. 1-4) (pp. 17-21, Rollo)
With reference to the pertinent issue at hand, respondent court opined:
The Notices of Sale of appellant's foreclosed
properties were published on March 228, April 11
and April 12, 1969 issues of the newspaper "Daily
Record" (Amended Record on Appeal, p. 108).
The date March 28, 1969 falls on a Friday while
the dates April 11 and 12, 1969 are on a Friday
and Saturday, respectively. Section 3 of Act No.
3135 requires that the notice of auction sale shall
be "published once a week for at least three
consecutive weeks". Evidently, defendant-appellee
bank failed to comly with this legal requirement.
The Supreme Court has held that:
The rule is that statutory
provisions
governing
publication of notice of

mortgage foreclosure sales

must be strictly complied with,
and that even slight deviations
therefrom will invalidate the
notice and render the sale at
least voidable (Jalandoni vs.
Ledesma, 64 Phil. l058. G.R.
No. 42589, August 1937 and
October
29,
1937).
Interpreting Sec. 457 of the
Code of Civil Procedure
(reproduced in Sec. 18(c) of
Rule 39, Rules of Court and in
Sec. 3 of Act No. 3135)
in Campomanes
vs.
Bartolome and German
&
Co. (38 Phil. 808, G.R. No.
1309, October 18, 1918), this
Court held that if a sheriff sells
without notice prescribed by
the Code of Civil Procedure
induced thereto by the
judgment creditor, and the
purchaser at the sale is the
judgment creditor, the sale is
absolutely void and no title
passes. This is regarded as
the settled doctrine in this
jurisdiction whatever the rule
may be elsewhere (Boria vs.
Addison, 14 Phil. 895, G.R.
No. 18010, June 21, 1922).
. . . It has been held that
failure
to
advertise
a
mortgage foreclosure sale in
compliance with statutory
requirements constitutes a
jurisdictional
defect
invalidating the sale and that
a substantial error or omission
in a notice of sale will render
the notice insufticient and
vitiate the sale (59 C.J.S.
1314). (Tambunting vs. Court
of
Appeals,
L-48278,
November 8, 1988; 167 SCRA
16, 23-24).
In view of the admission of defendant-appellee in
its pleading showing that there was no compliance
of the notice prescribed in Section 3 of Act No.
3135, as amended by Act 4118, with respect to the
notice of sale of the foreclosed real properties in
this case, we have no choice but to declare the
auction sale as absolutely void in view of the fact
that the highest bidder and purchaser in said
auction sale was defendant-appellee bank.
Consequently, the Certificate of Sale, the Final
Deed of Sale and Affidavit of Consolidation are
likewise of no legal efffect. (pp. 24-25, Rollo)
Before we focus our attention on the subject of whether or not there
was valid compliance in regard to the required publication, we shall
briefly discuss the other observations of respondent court vis-avis herein private respondent's ascriptions raised with the appellate
court when his suit for reconveyance was dismissed by the court of
origin even as private respondent does not impugn the remarks of
respondent court along this line.
Although respondent court acknowledged that there was an ambiguity
on the date of execution of the third promissory note (June 30, 1961)
and the date of maturity thereof (October 28, 1958), it was nonetheless
established that the bank introduced sufficient proof to show that the
discrepancy was a mere clerical error pursuant to Section 7, Rule l30
of the Rules of Court. Anent the second disputation aired by private
respondent, the appellate court observed that inasmuch as the original
as well as the subsequent mortgage were foreclosed only after private
respondent's default, the procedure pursued by herein petitioner in

foreclosing the collaterals was thus appropriate albeit the petition

therefor contained only a copy of the original mortgage.
It was only on the aspect of publication of the notices of sale under Act
No. 3135, as amended, and attorney's fees where herein private
respondent scored points which eliminated in the reversal of the trial
court's decision. Respondent court was of the impression that herein
petitioner failed to comply with the legal requirement and the sale
effected thereafter must be adjudged invalid following the ruling of this
Court in Tambunting vs. Court of Appeals (167 SCRA 16 [1988]); p. 8,
Decision, p. 24, Rollo). In view of petitioner's so-called indifference to
the rules set forth under Act No. 3135, as amended, respondent court
expressly authorized private respondent to recover attorney's fees
because he was compelled to incur expenses to protect his interest.
Immediately upon the submission of a supplemental petition, the
spouses Conrado and Marina De Vera filed a petition in intervention
claiming that the two parcels of land involved herein were sold to them
on June 4, 1970 by petitioner for which transfer certificates of title were
issued in their favor (p. 40, Rollo). On the other hand, private
respondent pressed the idea that the alleged intervenors have no more
interest in the disputed lots in view of the sale effected by them to
Teresa Castillo, Aquilino and Antonio dela Cruz in 1990 (pp. 105106, Rollo).
On March 9, 1992, the Court resolved to give due course to the petition
and required the parties to submit their respective memoranda (p.
110, Rollo).
Now, in support of the theory on adherence to the conditions spelled in
the preliminary portion of this discourse, the pronouncement of this
Court in Bonnevie vs. Court of Appeals (125 SCRA [1983]; p.
135, Rollo) is sought to be utilized to press the point that the notice
need not be published for three full weeks. According to petitioner,
there is no breach of the proviso since after the first publication on
March 28, 1969, the second notice was published on April 11, 1969
(the last day of the second week), while the third publication on April
12, 1969 was announced on the first day of the third week. Petitioner
thus concludes that there was no violation from the mere
happenstance that the third publication was made only a day after the
second publication since it is enough that the second publication be
made on any day within the second week and the third publication, on
any day within the third week. Moreover, in its bid to rectify its
admission in judicio, petitioner asseverates that said admission alluded
to refers only to the dates of publications, not that there was noncompliance with the publication requirement.

because the period for the first week should be reckoned

from March 28, 1969 until April 3, 1969 while the second
week should be counted from April 4, 1969 until April 10,
1969. It is clear that the announcement on April 11, 1969
was both theoretically and physically accomplished during
the first day of the third week and cannot thus be equated
with compliance in law. Indeed, where the word is used
simply as a measure of duration of time and without
reference to the calendar, it means a period of seven
consecutive days without regard to the day of the week on
which it begins (1 Tolentino, supra at p. 467 citing Derby).
Certainly, it would have been absurd to exclude March 28, 1969 as
reckoning point in line with the third paragraph of Article 13 of the New
Civil Code, for the purpose of counting the first week of publication as
to the last day thereof fall on April 4, 1969 because this will have the
effect of extending the first week by another day. This incongruous
repercussion could not have been the unwritten intention of the
lawmakers when Act No. 3135 was enacted. Verily, inclusion of the first
day of publication is in keeping with the computation in Bonnevie vs.
Court of Appeals (125 SCRA 122 [1983]) where this Court had
occasion to pronounce, through Justice Guerrero, that the publication
of notice on June 30, July 7 and July 14, 1968 satisfied the publication
requirement under Act No. 3135. Respondent court cannot, therefore,
be faulted for holding that there was no compliance with the strict
requirements of publication independently of the so- called
admission in judicio.
WHEREFORE, the petitions for certiorari and intervention are hereby
dismissed and the decision of the Court of Appeals dated April 17,
1991 is hereby affirmed in toto.
SO ORDERED.
Feliciano, Bidin, Davide and Romero, JJ., concur.

Private respondent, on the other hand, views the legal question from a
different perspective. He believes that the period between each
publication must never be less than seven consecutive days (p. 4,
Memorandum; p. 124,Rollo).
We are not convinced by petitioner's submissions because the
disquisition in support thereof rests on the erroneous impression that
the day on which the first publication was made, or on March 28, 1969,
should be excluded pursuant to the third paragraph of Article 17 of the
New Civil Code.
It must be conceded that Article 17 is completely silent as to the
definition of what is a "week". In Concepcion vs. Zandueta (36 O.G.
3139 [1938]; Moreno, Philippine Law Dictionary, Second Ed., 1972, p.
660), this term was interpreted to mean as a period of time consisting
of seven consecutive days a definition which dovetails with the
ruling in E.M. Derby and Co. vs. City of Modesto, et al. (38 Pac. Rep.
900 [1984]; 1 Paras, Civil Code of the Philippines Annotated, Twelfth
Ed., 1989, p. 88; 1 Tolentino, Commentaries and Jurisprudence on th
Civil Code, 1990, p. 46). Following the interpretation in Derby as to the
publication of an ordinance for "at least two weeks" in some
newspaper that:
. . . here there is no date or event suggesting the
exclusion of the first day's publication from the
computation, and the cases above cited take this
case out of the rule stated in Section 12, Code Civ.
Proc. which excludes the first day and includes the
last;
the publication effected on April 11, 1969 cannot be
construed as sufficient advertisement for the second week

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 147749

June 22, 2006

SAN PABLO MANUFACTURING CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE,* Respondent.
DECISION
CORONA, J.:
In this petition for review under Rule 45 of the Rules of Court, San
Pablo Manufacturing Corporation (SPMC) assails the July 19,

20001 and April 3, 2001 resolutions of the Court of Appeals in CA-G.R.

SP No. 59139.
SPMC is a domestic corporation engaged in the business of milling,
manufacturing and exporting of coconut oil and other allied products. It
was assessed and ordered to pay by the Commissioner of Internal
Revenue the total amount of P8,182,182.852 representing deficiency
millers tax and manufacturers sales tax, 3 among other deficiency
taxes,4 for taxable year 1987. The deficiency millers tax was imposed
on SPMCs sales of crude oil to United Coconut Chemicals, Inc.
(UNICHEM) while the deficiency sales tax was applied on its sales of
corn and edible oil as manufactured products.
SPMC opposed the assessments but the Commissioner denied its
protest. SPMC appealed the denial of its protest to the Court of Tax
Appeals (CTA) by way of a petition for review docketed as CTA Case
No. 5423.
In its March 10, 2000 decision, the CTA cancelled SPMCs liability for
deficiency manufacturers tax on the sales of corn and edible oils but
upheld the Commissioners assessment for the deficiency millers tax.
SPMC moved for the partial reconsideration of the CTA affirmation of
the millers tax assessment but it was denied.
SPMC elevated the case to the Court of Appeals via a petition for
review of the CTA decision insofar as it upheld the deficiency millers
tax assessment. In its July 19, 2000 resolution, the appellate court
dismissed the petition on the principal ground 5 that the verification
attached to it was signed merely by SPMCs chief financial officer
without the corporate secretarys certificate, board resolution or power
of attorney authorizing him to sign the verification and certification
against forum shopping. SPMC sought a reconsideration of the
resolution but the same was denied. Hence, this petition.
Did the Court of Appeals err when it dismissed SPMCs appeal?
SPMC contends that its appeal should have been given due course
since it substantially complied with the requirements on verification and
certification against forum shopping. It insists on the liberal application
of the rules because, on the merits of the petition, SPMC was not liable
for the 3% millers tax. It maintains that the crude oil which it sold to
UNICHEM was actually exported by UNICHEM as an ingredient of
fatty acid and glycerine, hence, not subject to millers tax pursuant to
Section 168 of the 1987 Tax Code.
For SPMC, Section 168 of the 1987 Tax Code contemplates two
exemptions from the millers tax: (a) the milled products in their original
state were actually exported by the miller himself or by another person,
and (b) the milled products sold by the miller were actually exported as
an ingredient or part of any manufactured article by the buyer or
manufacturer of the milled products. The exportation may be effected
by the miller himself or by the buyer or manufacturer of the milled
products. Since UNICHEM, the buyer of SPMCs milled products,
subsequently exported said products, SPMC should be exempted from
the millers tax.
The petition must fail.
Under Rule 43, Section 5 of the Rules of Court, appeals from the CTA
and quasi-judicial agencies to the Court of Appeals should be verified.
A pleading required to be verified which lacks proper verification shall
be treated as an unsigned pleading.6
Moreover, a petition for review under Rule 43 requires a sworn
certification against forum shopping.7 Failure of the petitioner to comply
with any of the requirements of a petition for review is sufficient ground
for the dismissal of the petition.8
A corporation may exercise the powers expressly conferred upon it by
the Corporation Code and those that are implied by or are incidental to
its existence through its board of directors and/or duly authorized
officers and agents.9 Hence, physical acts, like the signing of
documents, can be performed only by natural persons duly authorized
for the purpose by corporate by-laws or by specific act of the board of
directors.10 In the absence of authority from the board of directors, no
person, not even the officers of the corporation, can bind the
corporation.11

SPMCs petition in the Court of Appeals did not indicate that the person
who signed the verification/certification on non-forum shopping was
authorized to do so. SPMC merely relied on the alleged inherent power
of its chief financial officer to represent SPMC in all matters regarding
the finances of the corporation including, among others, the filing of
suits to defend or protect it from assessments and to recover
erroneously paid taxes. SPMC even admitted that no power of
attorney, secretarys certificate or board resolution to prove the affiants
authority was attached to the petition. Thus, the petition was not
properly verified. Since the petition lacked proper verification, it was to
be treated as an unsigned pleading subject to dismissal.12
In PET Plans, Inc. v. Court of Appeals,13 the Court upheld the dismissal
by the Court of Appeals of the petition on the ground that the
verification and certification against forum shopping was signed by
PET Plans, Inc.s first vice-president for legal affairs/corporate
secretary without any certification that he was authorized to sign in
behalf of the corporation.
In BPI Leasing Corporation v. Court of Appeals,14 the Court ruled that
the petition should be dismissed outright on the ground that the
verification/certification against forum shopping was signed by BPI
Leasing Corporations counsel with no specific authority to do so.
Since the counsel was purportedly acting for the corporation, he
needed a resolution issued by the board of directors that specifically
authorized him to institute the petition and execute the certification.
Only then would his actions be legally binding on the corporation.15
In this case, therefore, the appellate court did not commit an error
when it dismissed the petition on the ground that it was signed by a
person who had not been issued any authority by the board of
directors to represent the corporation.
Neither can the Court subscribe to SPMCs claim of substantial
compliance or to its plea for a liberal application of the rules. Save for
the most persuasive of reasons, strict compliance with procedural rules
is
enjoined
to
facilitate
the
orderly
administration
of
justice.16 Substantial compliance will not suffice in a matter involving
strict observance such as the requirement on non-forum shopping, 17 as
well as verification. Utter disregard of the rules cannot justly be
rationalized by harping on the policy of liberal construction.18
But even if the fatal procedural infirmity were to be disregarded, the
petition must still fail for lack of merit.
As the CTA correctly ruled, SPMCs sale of crude coconut oil to
UNICHEM was subject to the 3% millers tax. Section 168 of the 1987
Tax Code provided:
Sec. 168. Percentage tax upon proprietors or operators of rope
factories, sugar central mills, coconut oil mills, palm oil mills, cassava
mills and desiccated coconut factories. Proprietors or operators of rope
factories, sugar central and mills, coconut oil mills, palm oil mills,
cassava mills and desiccated coconut factories, shall pay a tax
equivalent to three percent (3%) of the gross value in money of all the
rope, sugar, coconut oil, palm oil, cassava flour or starch, dessicated
coconut, manufactured, processed or milled by them, including the byproduct of the raw materials from which said articles are produced,
processed or manufactured, such tax to be based on the actual selling
price or market value of these articles at the time they leave the factory
or mill warehouse:Provided, however, That this tax shall not apply
to rope, coconut oil, palm oil and the by-product of copra from
which it is produced or manufactured and dessicated coconut, if
such rope, coconut oil, palm oil, copra by-products and
dessicated coconuts, shall be removed for exportation by the
proprietor or operator of the factory or the miller himself, and are
actually exported without returning to the Philippines, whether in
their original state or as an ingredient or part of any manufactured
article or products: Provided further, That where the planter or the
owner of the raw materials is the exporter of the aforementioned milled
or manufactured products, he shall be entitled to a tax credit of the
miller's taxes withheld by the proprietor or operator of the factory or
mill, corresponding to the quantity exported, which may be used
against any internal revenue tax directly due from him: and Provided,
finally, That credit for any sales, miller's or excise taxes paid on raw
materials or supplies used in the milling process shall not be allowed
against the miller's tax due, except in the case of a proprietor or
operator of a refined sugar factory as provided hereunder. (emphasis
supplied)

The language of the exempting clause of Section 168 of the 1987 Tax
Code was clear. The tax exemption applied only to the exportation of
rope, coconut oil, palm oil, copra by-products and dessicated coconuts,
whether in their original state or as an ingredient or part of any
manufactured article or products, by the proprietor or operator of the
factory or by the miller himself.
The language of the exemption proviso did not warrant the
interpretation advanced by SPMC. Nowhere did it provide that the
exportation made by the purchaser of the materials enumerated in the
exempting clause or the manufacturer of products utilizing the said
materials was covered by the exemption. Since SPMCs situation was
not within the ambit of the exemption, it was subject to the 3% millers
tax imposed under Section 168 of the 1987 Tax Code.
SPMCs proposed interpretation unduly enlarged the scope of the
exemption clause. The rule is that the exemption must not be so
enlarged by construction since the reasonable presumption is that the
State has granted in express terms all it intended to grant and that,
unless the privilege is limited to the very terms of the statute, the favor
would be intended beyond what was meant.19
Where the law enumerates the subject or condition upon which it
applies, it is to be construed as excluding from its effects all those not
expressly mentioned. Expressio unius est exclusio alterius. Anything
that is not included in the enumeration is excluded therefrom and a
meaning that does not appear nor is intended or reflected in the very
language of the statute cannot be placed therein. 20 The rule proceeds
from the premise that the legislature would not have made specific
enumerations in a statute if it had the intention not to restrict its
meaning and confine its terms to those expressly mentioned.21
The rule of expressio unius est exclusio alterius is a canon of
restrictive interpretation.22 Its application in this case is consistent with
the construction of tax exemptions in strictissimi juris against the
taxpayer. To allow SPMCs claim for tax exemption will violate these
established principles and unduly derogate sovereign authority.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
RENATO C. CORONA
Associate Justice

W/N the CA erred in affirming the decision of the RTC based on the
Stipulation of Facts that was not signed by the Petitioner nor his
counsel.
HELD:
REP. OF THE PHILIPPINES vs. HON. MIGRINIO AND TECSON
FACTS:
Acting on information received, which indicated the acquisition of
wealth beyond his lawful income, the Philippine Anti-Graft
Board required Private Respondent to submit his explanation or
comment, together with
his supporting evidence.
Private
Respondent, a retired lt. colonel, was unable to produce his
supporting evidence, despite several postponements, because they
were allegedly in the custody of his bookkeeper who had gone abroad.
The anti-graft Board was created by the PCGG to investigate the
unexplained wealth and corrupt practices of AFP personnel, both
retired and in active service.
ISSUE:
W/N Private Respondent may be investigated and prosecuted by the
Board, an agency of the PCGG, for violation of RA 3019 and 1379.
HELD:
No. Applying the rule in statutory construction, the term subordinate
as used in EO 1 and 2 would refer to one who enjoys a close
association or relation with former President Marcos and/or his wife,
similar to the immediate family member, relative, and close associate
in EO 1 and the close relative, business associate, dummy, agent, or
nominee in EO 2.
LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH)
ASSOCIATION, INC. vs. COURT OF APPEALS
FACTS:
The Loyola Grand Villas Homeowners Association Inc. (LGVHAI) was
registered with Respondent Home Insurance and Guaranty
Corporation (HIGC) as the sole homeowners organization in the said
subdivision but it did not file its corporate by-laws.
Later, it was
discovered that there were two other organizations within the
subdivision: the North and South Associations. Respondent HIGC
then informed the president of LGVHAI that the latter has been
automatically dissolved because of non-submission of its by-laws as
required by the Corporation Code. This resulted in the registration of
Petitioner association. LGVHAI complained and got a favorable result
from Respondent HIGC declaring the registration of Petitioner
association cancelled and Respondent CA subsequently affirmed the
said decision. Hence, Petitioner association filed a petition for
certiorari.
ISSUE:
W/N the failure of a corporation to file its by-laws within one month
from the date of its incorporation results in its automatic dissolution.
HELD:
No. The legislatures intent is not to automatically dissolve a
corporation for its failure to pass its by-laws. The word must in a
statute is not always imperative but it may be consistent with an
exercise of discretion. The language of the statute should be
considered as a whole while ascertaining the intent of the legislature in
using the word must or shall.
FULE vs. COURT OF APPEALS
FACTS:
Petitioner, an agent of the Towers Assurance Corporation, issued and
made out check No. 26741 in favor of Roy Nadera. Said check was
dishonored for the reason that the said checking account was already
closed, thus in violation of BP 22, the Bouncing Checks Law. Upon the
hearing, prosecution presented its evidence and the Petitioner waived
his right. Instead, he submitted a memorandum confirming the
Stipulation of Facts. He was convicted by the trial court, and on appeal,
the Appellate Court.
ISSUE:

The CA erred. Case is re-opened to receive evidence of Petitioner.

Sec. 4 of the Rules on Criminal Procedure provides, 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.Because of the word
shall, in its language, the rule is mandatory. Negative words and
phrases are to be regarded as mandatory while those in the affirmative
are merely directory. Therefore, the signature of the Petitioner and the
counsel is mandatory. Also, penal statues are to be liberally construed
in favor of the accused.
BERSABAL vs. SALVADOR
FACTS:
Private Respondents filed an ejectment suit against the
Petitioner.
The subsequent decision was appealed by the Petitioner
and during its pendency, the court issued an order stating that
counsels for both parties are given 30 days from receipt of this order
within which to file their memoranda in order for this case to be
submitted for decision by the court. After receipt, Petitioner filed 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 which was granted by the court. But the
Respondent judge issued an order dismissing the case for failure to
prosecute Petitioners appeal. Petitioner filed a motion for
reconsideration citing the submitted ex parte motion but the court
denied it.
ISSUE:
W/N the mere failure of an Appellant to submit the mentioned
memorandum would empower the CFI to dismiss the appeal on the
ground of failure to prosecute.
HELD:
The court is not empowered by law to dismiss the appeal on the mere
failure of an Appellant to submit his memorandum. The law provides
that Courts shall decide cases on the basis of the evidence and
records transmitted from the city courts: Provided parties may
submit memoranda if so requested It cannot be interpreted
otherwise than that the submission of memoranda is optional.
COLGATE-PALMOLIVE PHIL, INC vs. GIMENEZ
FACTS:
Petitioner
Corporation
engages
in
manufacturing
toilet
preparations
and household remedies. Importation of materials
including stabilizers and flavors is among those Petitioner imports.
For every importation, Petitioner pays the Central Bank of the
Philippines 17% special excise tax on the foreign exchange used for
the payment of the cost, transportation and other charges pursuant to
RA 601, the Exchange Tax Law. Under such law, it was also provided
that:Foreign
exchanged used for
the
payment of
cost,
transportation and/or other charges incident to the importation into the
Philippines of stabilizer and flavors shall be refunded to any
importer making application therefore. The petitioner therefore seeks
a refund of the 17% special excise tax
ISSUE:
W/N the imports of dental cream stabilizers and flavors are subject to
a 17% transportation tax exemption under the Exchange Tax Law.
HELD:
No. The refusal to deny refund was based on the following argument:
All the items enumerated for the tax exemption fall under one specific
class, namely: food products, books supplies/ materials and medical
supplies. The stabilizers and flavors the petitions refer to are items
which must fall under the category of food products. Because such
items will be used for toothpaste, it is not a food product and therefore

not subject to exemptionPetitioners arguments effected the grant of

the refund:
RA 601 does not categorize the exceptions as stated above. Though
stabilizers and flavors are preceded by items that might fall under
food products, the following which were included are hardly such:
fertilizer, poultry feed, vitamin concentrate, cattle, and industrial starch.
Therefore, the law must be seen in its entire context, not
the parts and categorizations posited by the respondent.