Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

115906 September 26, 1994 REPUBLIC OF THE PHILIPPINES represented by the PRESIDENTIAL ON GOOD GOVERNMENT (PCGG,)petitioner, vs. SANDIGANBAYAN, MARIA REMEDIOS ARGANA, ET AL., respondent. Nicanor N. Lonzame & Associates Law Offices for private respondents. MENDOZA, J.: This is a petition for review on certiorari of the resolutions dated April 6, 1994 and June 16, 1994 of the Third Division of the Sandiganbayan 1 in Civil Case No. 0026, dismissing the amended petition for forfeiture of property which petitioner, through the Solicitor General, had filed in behalf of the Republic of the Philippines against the private respondents. The facts show that on March 17, 1986 a certain Atty. Victor Aguinaldo wrote the President of the Philippines, requesting investigation of the alleged "unexplained wealth of former Muntinlupa Mayor Maximo Argana, Donata A. Argana, and the Dummies." The latter was referred by the then Minister of Justice of the president Commission on Good Government, or PCGG, which filed, through the Solicitor General, forfeiture proceedings in the Sandiganbayan. Noting, however, that forfeiture proceedings partake, in some respect, of the nature of a criminal prosecution, the Sandiganbayan on October 28, 1987 directed the PCGG to conduct a "previous inquiry to preliminary investigation in criminal cases," as required by sec. 2 of Republic Act No. 1379. Meantime it suspended the proceedings before it. On February 7, 1990, the PCGG informed the Sandiganbayan that it had conducted "the preliminary investigation . . . and . . . found that there [was] sufficient evidence to support and sustain the allegations in the Petition for forfeiture filed in this case by the Solicitor General." The petition for forfeiture was subsequently amended to include Milagro Argana Rogelio as additional respondent. On July 5, 1991, private respondents moved to dismiss the case, contending that (1) former Mayor Maximino Argana had died on June 30, 1985 and that his death was a bar to the filing of the petition for forfeiture, and (2) the PCGG had acted beyond its competence in conducting the preliminary investigation.

With respect to the first contention, the Sandiganbayan ruled that the death of former mayor Argana was not a bar to the forfeiture proceedings because such proceedings are actions in rem, resigned to reach properties and, therefore, are not affected by the death of the defendant. However, the Sandiganbayan found the second ground to be meritorious for the reason that under Executive Order No. 1, which created the PCGG, only cases for recovery of ill-gotten wealth acquired because of close association with former President Ferdinand E. Marcos can be investigated by the PCGG. Since there was no allegation that former Mayor Maximino Argana had acquired the properties allegedly ill-gotten by him because of close association with former President Marcos, the PCGG had no authority to investigate him. Accordingly, the Sandiganbayan ordered: WHEREFORE, the Motion To Dismiss together with its Supplement, filed by the respondents, through counsel, is here by granted. As prayed for, the Amended Petition For Forfeiture in the above-entitled case is hereby dismissed but without prejudice to refilling of the same by the Office of the Solicitor General, if so warranted, after the necessary preliminary investigation shall have first been conducted by the Ombudsman. Petitioner moved for reconsideration, but its motion was denied by the Sandiganbayan in its resolution dated June 16, 1994. Hence this petition, in which the only issue is whether the PCGG had the power to conduct an investigation as required by sec 2 of Republic Act No. 1379. We hold that it did. For this reason, the resolutions appealed from, holding that the PCGG had no power to investigate the charges against private respondents and dismissing the forfeiture proceedings against the, are reversed. In dismissing the proceedings against private respondents, the Sandiganbayan held: Clearly, from both the letter of Atty. Victor D. Aguinaldo, dated March 17, 1986, and the Amended Petition for forfeiture, dated October 29, 1990, in the case at bar, it is alleged that the late Mayor Maximino Argana unlawfully accumulated wealth by taking advantage of his position as the then incumbent mayor of Muntinlupa, Metro Manila. No attempt was made whatsoever to link the late Mayor Maximino Argana or his accumulation of unexplained wealth to the late President Marcos and/or his family. It is settled that the jurisdiction of the PCGG to investigate and initiate cases for violation of Republic Act Nos. 3019 (Anti Graft and Corrupt Practices Act) and 1379 (An Act Declaring forfeited in Favor of the State Any Property Found to Have Been Unlawfully Acquired By Any Public Officer or Employee and Providing for the Procedure Therefor), in relation to Executive Order Nos. 1, 2, 14 and 14-A, is limited to the recovery of illgotten wealth accumulated by former President Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad including the takeover or sequestration of all business enterprises and entries served or controlled by them during his

administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationships (O.E. No. 1, Sec. 2). In other words, as held by the Supreme Court in the case of Republic vs. Migrino, 189 SCRA 289, promulgated August 30, 1990, for the PCGG to acquire jurisdiction over cases for violations of Republic Act Nos. 3019 and 11379, "(i)t does not suffice that the respondent is or was a government official or employee during the administration of former President Ferdinand E. Marcos. There must be a prima facie showing that the respondent unlawfully accumulated wealth by virtue of his close association or relation with former President Marcos and/or his wife. This is so because the respondent's case will fall under general laws and procedures on the matter. Contrary to the ruling of the Sandiganbayan, the power of the PCGG to conduct preliminary investigation of cases of this nature does not extend only to cases brought to recover ill-gotten wealth accumulated by former President Marcos or his close associates but includes as well cases of graft and corruption assigned by the President to the PCGG for investigation. Thus sec. 2 of Executive Order No. 1, creating the PCGG, provides: Sec. 2. The Commission shall be charged with the task of assisting the President in regard to the following matters: (a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether, located in the Philippines or abroad, including the takeover or sequestration of all business enterprises and entries owned or controlled by them, during his administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationships. (b) The investigation of such cases of graft and corruption as the President may assign to the Commission from time to time. As already stated, this case originated in a letter sent to then President Corazon C. Aquino which the Minister of Justice referred to the PCGG on March 19, 1986. The Jurisdiction of the PCGG, therefore, derived from par. (b) of sec. 2 which, unlike par. (a), does not require as an element that the accused took advantage of his close association with President Marcos in committing graft and corruption. The case at bar is distinguishable fromRepublic v. Migrino, 2 which the Sandiganbayan cited in support of its ruling, in that unlike the Migrino case the complaint in this case was assigned by the President to the PCGG for investigation. In the Migrino case we held that the PCGG did not have the power to investigate and prosecute charges of unexplained wealth brought

against the private respondent where there was no prima facie showing that the had unlawfully accumulated wealth by virtue of close association or relation with former President Marcos and/or his wife required by sec. 2(a) of Executive Order No. 1. But although there is neither allegation nor showing in the case at bar that former Mayor Argana had unlawfully acquired his wealth by reason of close association with former President Marcos, the PCGG had jurisdiction to conduct the investigation because this is a case of graft and corruption assigned to it by the President of the Philippines pursuant to sec. 2(b) of Executive Order No. 1. It is noteworthy that, it its earlier resolution of October 28, 1987 returning this case to the PCGG for a "previous inquiry similar to preliminary investigation," the Sandiganbayan had upheld the power of the PCGG to conduct a preliminary investigation on precisely the basis of sec. 2(b) of Executive Order No. 1. Thus it ruled: Subsequent status, however, have eroded the exclusivity of the Tanodbayan's authority to investigate and prosecute cases under the jurisdiction of the Sandiganbayan. By Executive Order No. 1 dated February 28, 1986, the President Commission on Good Government (PCGG for short) was created and charged with the task of assisting the President, among others, in: (a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, . . . by taking undue advantage of their powers, authority, influence, connections or relationships. (b) The investigation of such cases of graft and corruption as the President may assign to Commission (PCGG) from time to time. (Sec. 2.) Apparently, the Sandiganbayan was persuaded to reverse itself because of a misapprehension of the true import of our decision in Republic v. Migrino. For what has not been sufficiently noticed is that complaints for graft and corruption, although not committed because of close association with former president Marcos, can be investigated by the PCGG if directed by the President of the Philippines. In accordance with sec. 1 of Executive Order No. 14, dated May 7, 1986, the PCGG, with the assistance of the Solicitor General, is the agency of the government empowered to bring these proceedings for forfeiture of property allegedly acquired unlawfully before February 25, 1986, the date of the EDSA Revolution. The power to investigate cases of ill-gotten or unexplained wealth acquired after that date is now vested in the Ombudsman. 3 WHEREFORE, the resolutions appealed from are REVERSED and the case is REMANDED to the Sandiganbayan for further proceedings. SO ORDERED.

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 by-product 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.

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: (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. 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 letterrequest 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. 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-a-vis 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. 105-106, 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 non-compliance with the publication requirement. 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 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.

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 nonoccurrence 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 bylaws 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 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 bylaws 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 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 902-A, 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.

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. 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: 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; 2. The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) AS AND BY WAY OF Attorneys fee; 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 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. 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. 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. (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. (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) In Cerezo vs. Tuazon,4 the Court reiterated the remedies available to a party declared in default:

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. 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 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.

36. Optima statute interpretatrix est ipsum statutum. The best interpreter of the statute is the statute itself.