Loyola Grand Villas Homeowners (South) Association Inc. vs. CA [G.R. No. 117188.

August 07, 1997] Ponente: ROMERO, J. FACTS: This is a petition for review on certiorari of the Decision 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. For unknown reasons, however, LGVHAI did not file its corporate by-laws. LGVHAI was informed by HIGC that they had been automatically dissolved. LGVHAI lodged a complaint with the HIGC. They questioned the revocation of LGVHAIs 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. After due notice and hearing, private respondents obtained a favorable ruling from HIGC recognizing them 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. The South Association appealed to the Appeals Board of the HIGC but was dismissed for lack of merit. Rebuffed, the South Association in turn appealed to the Court of Appeals, but it simply reiterated HIGCs ruling. ISSUE: Whether or not 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. HELD: NO. Petition DENIED. Decision of the Court of Appeals AFFIRMED. RATIO: Under the principle that the best interpreter of a statute is the statute itself (optima statuli

interpretatix est ipsum statutum), Section 46 of the Corporation Code 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. [I]f 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. China Banking Corporation v CA Facts: China Banking Corporation made a 53% equity investment (P16,227,851.80) in the First CBC Capital a Hongkong subsidiary engaged in financing and investment with deposit-taking function. It was shown that CBC has become insolvent so China Banking wrote-off its investment as worthless and treated it as a bad debt or as an ordinary loss deductible from its gross income. CIR disallowed the deduction on the ground that the investment should not be classified as being worthless. It also held that assuming that the securities were worthless, then they should be classified as a capital loss and not as a bad debt since there was no indebtedness between China Banking and CBC. Issue: Whether or not the investment should be classified as a capital loss. Held: Yes. Section 29.d.4.B of the NIRC contains provisions on securities becoming worthless. It 1

conveys that capital loss normally requires the concurrence of 2 conditions: a. b. there is a sale or exchange the thing sold or exchanges is a capital asset.

terminus with the Board of Directors which appointed him. In 1992, the tenure of said Board of Directors expired and so Salafranca was terminated. ISSUE: Whether or not Salafranca was illegally dismissed. HELD: Yes. At that time, Salafranca already enjoys security of tenure because he is already a regular employee. It is true that PVHAI has the right to amend its by-laws but such amendment must not impair existing contracts or rights. In this case, the provision that Salafrancas position shall be coterminus with the appointing Board impairs his right to security of tenure which has already vested even prior to the amendment of the by-laws in 1987.

When securities become worthless, there is strictly no sale or exchange but the law deems it to be a loss. These are allowed to be deducted only to the extent of capital gains and not from any other income of the taxpayer. A similar kind of treatment is given by the NIRC on the retirement of certificates of indebtedness with interest coupons or in registered form, short sales and options to buy or sell property where no sale or exchange strictly exists. In these cases, The NIRC dispenses with the standard requirements. There is ordinary loss when the property sold is not a capital asset. In the case, CBC as an investee corporation, is a subsidiary corporation of China Banking whose shares in CBC are not intended for purchase or sale but as an investment. An equity investment is a capital asset of the investor. Unquestionably, any loss is a capital loss to the investor. -Additional notes: *The loss cannot be deductible as bad debt since the shares of stock do not constitute a loan extended by it to its subsidiary or a debt subject to obligatory repayment by the latter. Enrique Salafranca vs Philamlife (Pamplona) Village Homeowners Association, Inc. FACTS: In 1981, Enrique Salafranca was hired as an administrative officer by the Philamlife Village Homeowners Associaiton, Inc. (PVHAI). Salafranca was tasked to manage the villages day to day activities. His employment was originally for 6 months only but his contract was renewed multiple times until 1983. But even after 1983, he was still allowed to continue work even without a renewed contract. In 1987, PVHAI amended its by-laws. Among the amendment was a provision that the administrative officer (Salafranca) shall have a tenure which is co-