Friday, May 30, 2014

Case Digest: Soliman v. Sandiganbayan


G.R. No. 71305, November 24, 1986.


Petitioner Manuel Soliman was convicted of qualified theft by Sandiganbayan for having allegedly conspired with his co-workers in the Malacañang garage to steal 1,000 liters of gasoline. All his co-accused were acquitted with the exception of Bernardo Cube, the driver of the truck where the stolen fuel was carried, who had escaped and could not be tried.

A requisition was made by the Malacañang garage for 9,000 liters of gasoline which was filled in Pandacan. 1,000 liters was retained in the delivery truck which the accused were allegedly intending to sell. It was foiled as a surveillance team prevented the sale. The driver was arrested and implicated his other co-accused.

In finding the petitioner guilty, the Sandiganbayan relied heavily on the supposed confession of Cube, who was at large and never tried. However, the confession had not been formally and specifically offered in evidence by the prosecution.

The Court also relied on the alleged confession of Soliman, although he alleged the confession was elicited by interrogators who manhandled him.

The Court also made the conjecture that since Soliman had gone to the Pandacan depot and later rode with Cube in the delivery truck that brought the gasoline to Malacañang, he really conspired with Cube.

Although Soliman explained that he was ordered by a superior to follow up on the requisition, Sandiganbayan held that the said person should have been presented as a defense witness.

ISSUE: W/N Soliman could be held guilty of qualified theft.


1. The confession of Cube was not offered in evidence, in contravention of the Section 35 Rule 132 of the Rules of Court (on offer of evidence).

2. Cube's confession should have been barred altogether as pure hearsay since the petitioner did not have the chance to confront and cross-examine his accuser.

3. Soliman's alleged confession is inadmissible for being violative of his Bill of Rights while under custodial investigation.

4. The conclusion of conspiracy is far-fetched. In effect, the petitioner is held guilty because of his presence in the Pandacan depot and later in the delivery truck, as if such presence were a crime.

5. The non-presentation of Soliman's supervisor does not point to his guilt, since there is still constitutional presumption of innocence. If at all, it was the prosecution that had to introduce evidence to disprove the Soliman's testimony and not the other way around.

"We repeat our counsel against ill-considered convictions based only, as in this case, on unfounded surmises or, in other cases, prejudgments and prejudices. Although these errors may at times be corrected and undone on appeal, the stigma of a criminal conviction, even if ultimately reversed, is never quite washed away and remains to soil the innocent man’s name to his dying day."

Wednesday, April 9, 2014

Case Digest: Dolefil v. NLRC


G.R. No. L-55413, 25 July 1983.


Alfredo Tarroza, Rogelio de la Peña and Loreto Tejero ("Respondents") were light-wheel tractor operators in the pineapple field of Dole Philippines, Inc ("Dolefil"). 

On April 29, 1977, landguards of Dolefil spotted two drums containing crude oil in the farmlot of Inocencio Asibal which adjoins Dolefil's pineapple field. 

Asibal and companion Rogelio Odarve were investigated by the police and stated in their sworn statements that they bought the crude oil from Respondents and two other Dolefil employees.

Respondents and their two co-employees were charged with qualified theft in the municipal court. 

While those cases were pending, Dolefil filed with the Department of Labor an application for clearance to terminate the employment of Respondents for "stealing or dishonesty," which was granted.

Eight months later, the municipal court of acquitted Respondents of qualified theft while the two other Dolefil employees were convicted of qualified theft.

After that decision, Respondents filed a complaint for illegal dismissal and for reinstatement with backwages against Dolefil.

The Labor Arbiter dismissed the complaint and declared as valid, lawful and for a just cause the termination from employment of Respondents. The NLRC set aside the decision of the Labor Arbiter. 

ISSUE: W/N Dolefil is justified in dismissing Respondents.


An employer may terminate an employment for "serious misconduct" or for "fraud or willful breach by the employee of the trust reposed in him by his employer or representative".

Loss of confidence as a ground for dismissal does not entail proof beyond reasonable doubt of the employee's misconduct. It is enough that there be some basis for such loss of confidence or that the employer has reasonable grounds to believe that the employee is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position. 

The eventual conviction of an employee who is prosecuted for his misconduct is not indispensable to warrant his dismissal by his employer.

On the other hand, the acquittal of an employee in the criminal case filed against him by his employer does not also guarantee his reinstatement if the employer has lost confidence in him. 

A company has the right to dismiss its erring employees if only as a measure of self-protection against acts inimical to its interest.

Thursday, April 3, 2014

Case Digest: McDonald's Corporation v. L.C. Big Mak Burger, Inc.


G.R. No. 143993, August 18, 2004.


Petitioner McDonald's Corporation ("McDonald's") is a US corporation that operates a global chain of fast-food restaurants, with Petitioner McGeorge Food Industries ("McGeorge"), as the Philippine franchisee.

McDonald's owns the "Big Mac" mark for its "double-decker hamburger sandwich." with the US Trademark Registry on 16 October 1979.

Based on this Home Registration, McDonald's applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology ("PBPTT") (now IPO). On 18 July 1985, the PBPTT allowed registration of the "Big Mac."

Respondent L.C. Big Mak Burger, Inc. is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila and nearby provinces. Respondent corporation's menu includes hamburger sandwiches and other food items.

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big Mak" mark for its hamburger sandwiches, which was opposed by McDonald's. McDonald's also informed LC Big Mak chairman of its exclusive right to the "Big Mac" mark and requested him to desist from using the "Big Mac" mark or any similar mark.

Having received no reply, petitioners sued L.C. Big Mak Burger, Inc. and its directors before Makati RTC Branch 137 ("RTC"), for trademark infringement and unfair competition.

RTC rendered a Decision finding respondent corporation liable for trademark infringement and unfair competition. CA reversed RTC's decision on appeal.

1ST ISSUE:W/N respondent corporation is liable for trademark infringement and unfair competition.

Ruling: Yes
Section 22 of Republic Act No. 166, as amended, defines trademark infringement as follows:
Infringement, what constitutes. - Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.
To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion." Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement.

1st element:

A mark is valid if it is distinctive and not merely generic and descriptive.

The "Big Mac" mark, which should be treated in its entirety and not dissected word for word, is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods, such as "Lite" for beer. Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists, such as "Arthriticare" for arthritis medication. On the contrary, "Big Mac" falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents. As such, it is highly distinctive and thus valid.

2nd element:

Petitioners have duly established McDonald's exclusive ownership of the "Big Mac" mark. Prior valid registrants of the said mark had already assigned his rights to McDonald's.

3rd element:

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (confusion in which the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other) and confusion of business (though the goods of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist).

There is confusion of goods in this case since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that petitioners' "Big Mac" mark is used.

There is also confusion of business due to Respondents' use of the "Big Mak" mark in the sale of hamburgers, the same business that petitioners are engaged in, also results in confusion of business. The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business.

Furthermore, In determining likelihood of confusion, the SC has relied on the dominancy test (similarity of the prevalent features of the competing trademarks that might cause confusion) over the holistic test (consideration of the entirety of the marks as applied to the products, including the labels and packaging).

Applying the dominancy test, Respondents' use of the "Big Mak" mark results in likelihood of confusion. Aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters.

Lastly, since Section 22 only requires the less stringent standard of "likelihood of confusion," Petitioners' failure to present proof of actual confusion does not negate their claim of trademark infringement.

2ND ISSUE: W/N Respondents committed Unfair Competition

Ruling: Yes.
Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus:
Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.

In the case at bar, Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. Further, Respondents' goods are hamburgers which are also the goods of petitioners. Moreover, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." This clearly shows respondents' intent to deceive the public.

Wednesday, April 2, 2014

Case Digest: Roxas v. CA


G.R. No. 92245, 26 June 1991.


Petitioner Melania Roxas ("Melania") is married to Antonio Roxas ("Antonio"), although they are already estranged and living separately.

Melania discovered that Antonio leased to Respondent Antonio Cayetano ("Mr. Cayetano") their conjugal lot in Novaliches without her knowledge and consent. 

Thus, Melanie filed a case before the RTC praying for the annulment of the contract of lease between Antonio and Mr. Cayetano.

Mr. Cayetano moved to dismiss the complaint on the sole ground that the complaint states no cause of action.

The RTC Judge resolved said Motion by dismissing Melania's complaint.

ISSUE: W/N a husband, may legally enter into a long-term contract of lease involving conjugal real property without the consent of the wife.

Ruling: No. (Case remanded to the RTC by the SC)

Even if the husband is administrator of the conjugal partnership, administration does not include acts of ownership. For while the husband can administer the conjugal assets unhampered, he cannot alienate or encumber the conjugal realty.

As stated in Black's Law Dictionary, the word "alienation" means "the transfer of the property and possession of lands, tenements, or other things from one person to another ... The act by which the title to real estate is voluntarily assigned by one person to another and accepted by the latter, in the form prescribed by law." While encumbrance "has been defined to be every right to, or interest in, the land which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance; any (act) that impairs the use or transfer of property or real estate..."

The pivotal issue in this case is whether or not a lease is an encumbrance and/or alienation.

Under Art. 1643 of the New Civil Code "In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite...." Thus, lease is a grant of use and possession: it is not only a grant of possession.

In the contract of lease, the lessor transfers his right of use in favor of the lessee. The lessor's right of use is impaired, therein. He may even be ejected by the lessee if the lessor uses the leased realty.

Therefore, lease is a burden on the land, it is an encumbrance on the land. The concept of encumbrance includes lease, thus "an encumbrance is sometimes construed broadly to include not only liens such as mortgages and taxes, but also attachment, LEASES, inchoate dower rights, water rights, easements, and other RESTRICTIONS on USE."

Moreover, lease is not only an encumbrance but also a qualified alienation, with the lessee becoming, for all legal intents and purposes, and subject to its terms, the owner of the thing affected by the lease.

Thus, in case the wife's consent is not secured by the husband as required by law, the wife has the remedy of filing an action for the annulment of the contract.

Thursday, March 27, 2014

Case Digest: Islamic Directorate of the Philippines v. CA

G.R. No. 117897, 14 May 1997.


1971, the ISLAMIC DIRECTORATE OF THE PHILIPPINES ("IDP") was incorporated  with the primary purpose of establishing a mosque, school, and other religious infrastructures in Quezon City.

IDP purchased a 49,652-square meter lot in Tandang Sora, QC, which was covered by TCT Nos. RT-26520 (176616) and RT-26521 (170567).

When President Marcos declared martial law in 1972, most of the members of the 1971 Board of Trustees ("Tamano Group")flew to the Middle East to escape political persecution.

Thereafter, two contending groups claiming to be the IDP Board of Trustees sprung: the Carpizo group and Abbas group.

In a suit between the two groups, SEC rendered a decision in 1986 declaring both groups to be null and void. SEC recommeded that the a new by-laws be approved and a new election be conducted upon the approval of the by-laws. However, the SEC recommendation was not heeded.

In 1989, the Carpizo group passed a Board Resolution authorizing the sale of the land to Iglesia Ni Cristo ("INC"), and a Deed of Sale was eventually executed.

In 1991, the Tamano Group filed a petition before the SEC questioning the sale.

Meanwhile, INC filed a suit for specific performance before RTC Branch 81 against the Carpizo group. INC also moved to compel  a certain Leticia Ligon (who is apparently the mortgagee of the lot) to surrender the title.

The Tamano group sought to intervene, but the intervention was denied despite being informed of the pending SEC case. In 1992, the Court subsequently ruled that the INC as the rightful owner of the land, and ordered Ligon to surrender the titles for annotation. Ligon appealed to CA and SC, but her appeals were denied.

In 1993, the SEC ruled that the sale was null and void . On appeal CA reversed the SEC ruling.

MAIN ISSUE: W/N the sale between the Carpizo group and INC is null and void.


Since the SEC has declared the Carpizo group as a void Board of Trustees, the sale it entered into with INC is likewise void. Without a valid consent of a contracting party, there can be no valid contract.

In this case, the IDP, never gave its consent, through a legitimate Board of Trustees, to the disputed Deed of Absolute Sale executed in favor of INC. Therefore, this is a case not only of vitiated consent, but one where consent on the part of one of the supposed contracting parties is totally wanting. Ineluctably, the subject sale is void and produces no effect whatsoever.

Further, the Carpizo group failed to comply with Section 40 of the Corporation Code, which provides that: " ... a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets... when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly called for the purpose...."

The subject lot constitutes the only property of IDP. Hence, its sale to a third-party is a sale or disposition of all the corporate property and assets of IDP. For the sale to be valid, the majority vote of the legitimate Board of Trustees, concurred in by the vote of at least 2/3 of the bona fide members of the corporation should have been obtained. These twin requirements were not met in the case at bar.

ANCILLARY ISSUE: W/N The Ligon ruling constitutes res judicata.


Section 49(b), Rule 39 enunciates the first concept of res judicata known as "bar by prior judgment," whereas, Section 49(c), Rule 39 is referred to as "conclusiveness of judgment."

There is "bar by former judgment" when, between the first case where the judgment was rendered, and the second case where such judgment is invoked, there is identity of parties, subject matter and cause of action. When the three identities are present, the judgment on the merits rendered in the first constitutes an absolute bar to the subsequent action. But where between the first case wherein judgment is rendered and the second case wherein such judgment is invoked, there is only identity of parties but there is no identity of cause of action, the judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. This is what is termed "conclusiveness of judgment."

Neither applies to the case at bar. There is no "bar by former judgment" since while there may be identity of subject matter (IDP property) in both cases, there is no identity of parties.  The principal parties in the first case were Ligon and the Iglesia Ni Cristo. The IDP can not be considered essentially a formal party thereto for the simple reason that it was not duly represented by a legitimate Board of Trustees.

Res Judicata in the form of "conclusiveness of judgment" cannot likewise apply for the reason that the primary issue in the first case is the possession of the titles, and not the sale of the land, as in this case.

Thursday, March 6, 2014

Case Digest: Pagsibigan v. CA

G.R. No. 90169, April 7, 1993.


On November 3, 1976, Petitioner Pilar Pagsigiban obtained a loan from Respondent Planters Development Bank ("Bank") for P4,500.00, secured by a mortgage over a parcel of land.

The Promissory Note for the said loan stipulated for the first payment to be made on May 3, 1977 and payments every six months thereafter at P1,018.14 with 19% interest for unpaid amortizations. It also contained an acceleration clause.

Initial payment was made in July 6, 1977, followed by several payments in the total amount of P11,900.00. However, only four of these payments were applied to the loan, while the rest were "temporarily lodged to accounts payable since the account was already past due".

In 1984, the property was foreclosed extrajudicially upon Petition by the bank for failure to pay an outstanding balance of P29,554.81. This resulted in the property being sold to the bank for P8,163.00, and later claimed a deficiency of P21,391.81.

Petitioner filed an action for annulment of sale by Petitioner, which the lower court granted. However, it was overturned by CA.

1st Issue: W/N the auction sale is valid.

Ruling: No.
The respondent bank had the right to foreclose the mortgage upon the first default of petitioner on May 3, 1977, but it did not. When it received payment of petitioner on July 6, 1977, the respondent bank had clearly waived its right under the acceleration clause since instead of claiming penalty charges on the entire amount of P4,500.00, it only computed the penalty based on the defaulted amortization payment which is P1,018.14.

Further, for more than four years, the bank made petitioner believe that it was applying her payment on the loan and interest. It is now bound by estoppel to apply the payments to petitioner's debt and from foreclosing the property.

Accordingly, the legality of the foreclosure cannot be sustained because of substantial performance on the part of petitioner (Article 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee.) and acceptance of payment by the bank (Article 1235: when the creditor accepts performance, knowing its incompleteness and irregularity without protest or objection, the obligation is deemed complied with.).

2nd Issue: W/N Petitioner is entitled to recover damages.

Ruling: Yes.
Moral damages are warranted for the mental anguish, sleepless nights and serious anxiety that the bank's acts have caused petitioner. The bank succeeded in taking advantage of the ignorance of petitioner by lodging the bulk of petitioner's payment to account payable based on the flimsy reason that she had been in default, and then considering the entire debt pursuant to an acceleration clause as earning interest and penalty charges at an exorbitant rate of 19% each from the date of first default up to the date of foreclosure, thus bringing the obligation to an astronomical amount of P29,554.81 instead of just P11,000.00.

Exemplary damages are also proper, to serve as a deterrent for the bank from repeating similar acts and to set an example and correction for the public good.

Wednesday, March 5, 2014

Case Digest: Spouses Ruiz v. Sheriff of Manila


G.R. No. L-24016. July 31, 1970.

Spouses Ruiz ("Appellants") executed in favor of Appellee Bank of the Philippine Islands ("BPI") a real estate mortgage covering a parcel of land in Sta. Ana, Manila, as security for a loan of P15,000.00.

At the heart of the controversy is the following stipulation in the contract:
WHEREAS, the [Appellants]... have applied for and ... obtained from [BPI] ... a loan in the sum of P 15,000.00 ... to be amortized at the rate of not less than P300.00... to be effected at the end of each month. Failure to pay two successive monthly amortizations will cause this loan to be automatically due and payable in its entirety. Notwithstanding the foregoing, this loan shall not run for more than 5 years.
Upon failure of Appellants to pay 12 successive monthly amortizations despite several demands, BPI asked the Sheriff of Manila to foreclose the mortgage extrajudicially. The Sheriff caused the notice of auction to be published in the "Daily Record."

The Sheriff proceeded to sell the mortgaged property, with the BPI as the highest bidder. Since the mortgagee's bid of P15,173.74 represented the total mortgage debt, the Sheriff did not collect cash but merely applied the same to the amount of the bid.

Appellants then filed with the lower court praying for the annulment of the foreclosure sale, but the same was denied.

1st Issue: W/N the foreclosure sale was premature and therefore illegal

Ruling: No.

The acceleration clause is valid. All that the stipulation in issue meant is that while monthly amortizations could be as little as P300.00 the loan should anyway be paid within 5 years; and that failure to pay two successive amortizations would render the entire loan due and payable. Consequently, default leaving been committed for twelve months, the foreclosure of the mortgage was not premature.

2nd Issue: W/N the foreclosure sale was null and void for failure to comply with the requirements prescribed by Act 3135.

Ruling: No.

Re "Daily Record" as a newspaper of general circulation: The party alleging non-compliance with the requisite publication has the burden of proving the same. The appellants did not present evidence to show that the "Daily Record" was not a newspaper of general circulation.

Re Non-payment of cash by BPI as highest bidder: It was not necessary for BPI to pay cash to the sheriff, since the amount of its bid represented the total mortgage debt. It would serve no purpose for the sheriff to go through the ceremony of receiving the money and paying it back to the creditor.

Tuesday, March 4, 2014

Case Digest: DBP v. Licuanan


G.R. No. 150097, February 26, 2007. 


In 1974, Respondent spouses Alejandro and Adelaida Licuanan ("Respondents") were granted a P4,700 loan by petitioner Development Bank of the Philippines ("DBP") to mature in 1979, and secured by a real estate mortgage over a 980-square meter property.

In 1975, DBP granted respondents a second loan of P12,000 payable on or before the year 1980, which was secured by a real estate mortgage over four parcels of land.

In 1975, DBP granted Respondents a third loan of P22,000 maturing in 1985, and was secured by a real estate mortgage over three parcels of land.

In 1979, petitioner and respondents restructured the second loan, extending the maturity date to 1982.

In 1981, DBP sent a letter to Respondents informing them that they would institute extrajudicial foreclosure proceedings for breach of the conditions of the mortgage (of the first loan).

After an application for extrajudicial foreclosure, the properties were sold in a public auction, in which DBP was the highest bidder for bidding a total of P16,340.

In 1984, DBP informed Respondents that the properties could be reacquired by negotiated sale. Three days later, however, the properties were sold to one Emelita Peralta for P104,000.

After being informed of the sale, Respondents offered to repurchase the properties, but it was rejected by DBP.

Respondents then filed a complaint for recovery of real properties and damages in RTC of Lingayen against DBP and Peralta.

In its counterclaim, DBP asserts its right to claim for deficiency since the proceeds of the sale (P104,000) did not cover the debt of Petitioners of P131,642.33. Thus, it is entitled to claim the difference (P27,642.33) with interest.

DBP also argues that demand is not necessary as the maturity dates are already known to Respondents, and that Respondents are estopped from questioning the foreclosure sale since they offered to repurchase the property.

The RTC ruled in favor of respondents. It held that there was no demand for payment prior to the extrajudicial foreclosure and ordered Peralta to reconvey the properties to respondents, subject to Peralta’s right to be paid. It also held that petitioner did not deal fairly with respondents making it liable for nominal and moral damages, as well as attorney’s fees and litigation expenses.

CA affirmed RTC's findings.

1st Issue: W/N a demand for payment of the loans was made before the mortgage was foreclosed.  

Ruling: No.
Whether or not demand was made is a question of fact. Both the CA and RTC found that demand was never made, and no compelling reason has been shown by DBP to rule otherwise.

2nd Issue: W/N demand is necessary to make respondents guilty of default.

Ruling: Yes.
It is only when demand to pay is made and subsequently refused that respondents can be considered in default and DBP obtains the right to file an action to collect the debt or foreclose the mortgage.

The maturity dates only indicate when payment can be demanded. It is the refusal to pay after demand that gives the creditor a cause of action against the debtor.

Since demand was never made by DBP, the foreclosure was premature and therefore null and void.

Further, DBP's argument that respondents are estopped from questioning the validity of the foreclosure sale since they offered to repurchase the foreclosed properties is incorrect.

An offer to repurchase should not be construed as a waiver of the right to question the sale. Instead, it must be taken as an intention to avoid further litigation and thus is in the nature of an offer to compromise. By offering to redeem the properties, respondents can attain their ultimate objective: to pay off their debt and regain ownership of their lands.

3rd Issue: W/N respondents are liable for the deficiency claim of petitioner.

Ruling: No.
While it is true that in extrajudicial foreclosure of mortgage, the mortgagee has the right to recover the deficiency from the debtor, this presupposes that the foreclosure must first be valid.

4th Issue: W/N petitioner is liable for damages.

Ruling: Yes
DBP is liable for moral damages. Apart from the rushed foreclosure proceedings, certain acts of DBP were most certainly ruthless and in bad faith, which caused serious anxiety and wounded feelings to Respondents, to wit -

1st: DBP granted the three loans for a total of P45,740.61 because the market value of the collaterals exceeds P100,000.00. But 6 years later, when the value must have appreciated, DBP bidded for a measly P16,000.00 and claimed a deficiency. That it was measly and shocking to the conscience was conclusively proven by the fact that Peralta  bought the properties for P104,000.00 barely three 3 years later.

2nd: It is odd that DBP restructured the second loan, but not the first. This lulled Respondents into a false sense of security and a feeling of relief that the entire loan accommodation will mature in 1985. Thus, they were blindsided by the foreclosure proceedings, causing them to suffer sleepless nights.

3rd: Respondents also made pleas to repurchase the properties, which fell on deaf ears. It also had the temerity to unconscionably making deficiency claims plus interest.

Further, Respondents’ property rights were invaded or violated, hence the grant of nominal damages was also proper.

Respondents are likewise entitled to the award of attorney’s fees and expenses of litigation since the premature foreclosure by petitioner compelled them to incur expenses to protect their interest.

Saturday, February 22, 2014

Case Digest: Matrido v. People


G.R. No. 179061, July 13, 2009.


Petitioner Sheala Matrido is a credit and collection assistant of Empire East Land Holdings, Inc. (private complainant), petitioner was tasked to collect payments from buyers of its real estate properties

Petitioner received payment from Amante dela Torre in the amount of P22,470.66 as evidenced by the owner’s copy of Official Receipt No. 36547, but petitioner remitted only P4,470.66 to private complainant as reflected in the treasury department’s copy of Official Receipt No. 36547 submitted to private complainant, both copies of which bear the signature of petitioner and reflect a difference of P18,000.

Private complainant then filed an estafa complaint against Petitioner before the Makati Prosecutor's Office. The Makati PO dismissed the case for estafa for insufficiency of evidence but found probable cause to indict petitioner for qualified theft under an Information which reads:

That on or about the 10th day of June 1999, in the City of Makati, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, being then a Credit and Collection Assistant employed by complainant, EMPIRE EAST LAND HOLDINGS, INC., herein represented by Leilani N. Cabuloy, and as such had access to the payments made by complainant’s clients, with grave abuse of confidence, intent of gain and without the knowledge and consent of the said complainant company, did then and there willfully, unlawfully and feloniously take, steal and carry away the amount of P18,000.00 received from Amante Dela Torre, a buyer of a house and lot being marketed by complainant company, to the damage and prejudice of the said complainant in the aforementioned amount of P18,000.00.

The Makati RTC subsequently found the petiitoner guilty for qualified theft.

Issue: W/N the conviction for qualified theft is valid despite the fact that the prosecution tried to prove during the trial the crime of estafa thus denying the petitioner the right to be informed of the nature and cause of accusation against petitioner.

Ruling: Yes

It is the allegations in the Information that determine the nature of the offense, not the technical name given by the public prosecutor in the preamble of the Information.

As alleged in the Information, petitioner took, intending to gain therefrom and without the use of force upon things or violence against or intimidation of persons, a personal property consisting of money in the amount P18,000 belonging to private complainant, without its knowledge and consent, thereby gravely abusing the confidence reposed on her as credit and collection assistant who had access to payments from private complainant’s clients.

Theft is committed by any person who, with intent to gain, but without violence against, or intimidation of persons nor force upon things, shall take the personal property of another without the latter’s consent.  If committed with grave abuse of confidence, the crime of theft becomes qualified.

The elements of qualified theft are as follows:
  1. There was a taking of personal property.
  2. The said property belongs to another.
  3. The taking was done without the consent of the owner.
  4. The taking was done with intent to gain.
  5. The taking was accomplished without violence or intimidation against person, or force upon things.
  6. The taking was done under any of the circumstances enumerated in Article 310 of the RPC, i.e., with grave abuse of confidence.
In the present case, there is testimonial admission by petitioner of unlawfully taking the fund belonging to private complainant and of paying a certain sum to exculpate herself from liability.  That the money, taken by petitioner without authority and consent, belongs to private complainant, and that the taking was accomplished without the use of violence or intimidation against persons, nor force upon things, there is no issue. 

Intent to gain or animus lucrandi is an internal act that is presumed from the unlawful taking by the offender of the thing subject of asportation.  Actual gain is irrelevant as the important consideration is the intent to gain.

The taking was also clearly done with grave abuse of confidence.  As a credit and collection assistant of private complainant, petitioner made use of her position to obtain the amount due to private complainant.  Her position entailed a high degree of confidence reposed by private complainant as she had been granted access to funds collectible from clients, which trust was abused when she failed to remit the entrusted amount.

The Court finds no rhyme or reason in petitioner’s contention that what the prosecution tried to prove during trial was  estafa through misappropriation under Article 315(1)(b) of the RPC.

The principal distinction between the two crimes is that in theft the thing is taken while in estafa the accused receives the property and converts it to his own use or benefit.  If he was entrusted only with the material or physical (natural) or de facto possession of the thing, his misappropriation of the same constitutes theft, but if he has the juridical possession of the thing, his conversion of the same constitutes embezzlement or estafa.

Conversion of personal property in the case of an employee having material possession of the said property constitutes theft, whereas in the case of an agent to whom both material and juridical possession have been transferred, misappropriation of the same property constitutes estafa.

That petitioner did not have juridical possession over the amount or, in other words, she did not have a right over the thing which she may set up even against private complainant is clear.

Petitioner’s view that there could be no element of taking since private complainant had no actual possession of the money fails.  The argument proceeds from the flawed premise that there could be no theft if the accused has possession of the property.

A sum of money received by an employee in behalf of an employer is considered to be only in the material possession of the employee. The material possession of an employee is adjunct, by reason of his employment, to a recognition of the juridical possession of the employer.  So long as the juridical possession of the thing appropriated did not pass to the employee-perpetrator, the offense committed remains to be theft.

Case Digest: Roehr v. Rodriguez

WOLFGANG O. ROEHR, petitioner, vs. MARIA CARMEN D. RODRIGUEZ, HON. JUDGE JOSEFINA GUEVARA-SALONGA, Presiding Judge of Makati RTC, Branch 149, respondents.
G.R. No. 142820, June 20, 2003


Petitioner Wolfgang O. Roehr, a German citizen, married private respondent Carmen Rodriguez, a Filipina, on December 11, 1980 in Germany. Their marriage was subsequently ratified on February 14, 1981 in Tayasan, Negros Oriental. Out of their union were born Carolynne and Alexandra Kristine.

Carmen filed a petition for declaration of nullity of marriage before the Makati Regional Trial Court (RTC). Wolfgang filed a motion to dismiss, but it was denied.

Meanwhile, Wolfgang obtained a decree of divorce from the Court of First Instance of Hamburg-Blankenese. Said decree also provides that the parental custody of the children should be vested to Wolfgang.

Wolfgang filed another motion to dismiss for lack of jurisdiction as a divorce decree had already been promulgated, and said motion was granted by Public Respondent RTC Judge Salonga.

Carmen filed a Motion for Partial Reconsideration, with a prayer that the case proceed for the purpose of determining the issues of custody of children and the distribution of the properties between her and Wolfgang. Judge Salonga  partially set aside her previous order for the purpose of tackling the issues of support and custody of their children.

1st Issue: W/N Judge Salonga was correct in granting a partial motion for reconsideration.

Ruling: Yes.

A judge can order a partial reconsideration of a case that has not yet attained finality, as in the case at bar.

The Supreme Court goes further to say that the court can modify or alter a judgment even after the same has become executory whenever circumstances transpire rendering its decision unjust and inequitable, as where certain facts and circumstances justifying or requiring such modification or alteration transpired after the judgment has become final and executory and when it becomes imperative in the higher interest of justice or when supervening events warrant it.

2nd issue: W/N Judge Salonga's act was valid when she assumed and retained jurisdiction as regards child custody and support.

Ruling: Yes.

As a general rule, divorce decrees obtained by foreigners in other countries are recognizable in our jurisdiction. But the legal effects thereof, e.g. on custody, care and support of the children, must still be determined by our courts.

Before our courts can give the effect of res judicata to a foreign judgment, such as the award of custody to Wolfgang by the German court, it must be shown that the parties opposed to the judgment had been given ample opportunity to do so on grounds allowed under Rule 39, Section 50 of the Rules of Court (now Rule 39, Section 48, 1997 Rules of Civil Procedure).

In the present case, it cannot be said that private respondent was given the opportunity to challenge the judgment of the German court so that there is basis for declaring that judgment as res judicata with regard to the rights of Wolfgang to have parental custody of their two children. The proceedings in the German court were summary. As to what was the extent of Carmen’s participation in the proceedings in the German court, the records remain unclear.

Absent any finding that private respondent is unfit to obtain custody of the children, the trial court was correct in setting the issue for hearing to determine the issue of parental custody, care, support and education mindful of the best interests of the children.

Friday, February 21, 2014

Case Digest: Peña v. CA


G.R. No. 91478 February 7, 1991

Antecedents facts:

PAMPANGA BUS CO., INC. (PAMBUSCO) is the owner of the three lots in dispute. PAMBUSCO mortgaged the lots to the Development Bank of the Philippines (DBP), which were later on foreclosed.

Rosita Peña was awarded the lots in a foreclosure sale for being the highest bidder. The certificate of sale was later issued to her and registered in her name.

Subsequently, the Board of Directors of PAMBUSCO, through three out of its five directors, issued a resolution to assign its right of redemption over the lots in favor of any interested party. The right of redemption was later on assigned to Marcelino Enriquez, who redeemed the property.

Enriquez then sold the lots to spouses Rising T. Yap and Catalina Lugue-Yap.

Meanwhile, a case involving the validity of the sale to the spouses Yap was pending, and despite the protestations of Peña as to validity of the PAMBUSCO's assignment of the right of redemption, the lots were somehow registered in the name of spouses Yap. Despite the registration of the lots to spouses Yap, Peña retained possession of the property.

Main Case:

Spouses Yap sought to recover the possession of the lots from Peña. The latter countered that she is now the legitimate owner of the subject lands for having purchased the same in a foreclosure proceeding instituted by the DBP against PAMBUSCO and no valid redemption having been effected within the period provided by law.

The defense was that since the deed of assignment executed by PAMBUSCO in favor of Enriquez was void ab initio for being an ultra vires act of its board of directors and for being without any valuable consideration, it could not have had any legal effect.

(It should be noted that the by-laws of PAMBUSCO provide that four out of five directors must be present in a special meeting of the board to constitute a quorum, and that the corporation has already ceased to operate.)

CFI ruled in favor of Petitioner Peña, but the same was overturned by the CA.

Issue: W/N there Peña is entitled to the lots.

Ruling: Yes.

The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the corporation. They are in effect, written, into the charter. In this sense they become part of the fundamental law of the corporation with which the corporation and its directors and officers must comply.

Apparently, only three (3) out of five (5) members of the board of directors of respondent PAMBUSCO convened by virtue of a prior notice of a special meeting. There was no quorum to validly transact business since it is required under its by-laws that at least four (4) members must be present to constitute a quorum in a special meeting of the board of directors.

Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation or by-laws of the corporation may fix a greater number than the majority of the number of board members to constitute the quorum necessary for the valid transaction of business. Any number less than the number provided in the articles or by-laws therein cannot constitute a quorum and any act therein would not bind the corporation; all that the attending directors could do is to adjourn.

Moreover, the records show that respondent PAMBUSCO ceased to operate for about 25 years prior to the board meeting. Being a dormant corporation for several years, it was highly irregular, for a group of three (3) individuals representing themselves to be the directors of respondent PAMBUSCO to pass a resolution disposing of the only remaining asset of the corporation in favor of a former corporate officer.

As a matter of fact, the three (3) alleged directors who attended the special meeting on November 19, 1974 were not listed as directors of respondent PAMBUSCO in the latest general information sheet. Similarly, the latest list of stockholders of respondent PAMBUSCO on file with the SEC does not show that the said alleged directors were among the stockholders of respondent PAMBUSCO, in contravention of the rule requiring a director to own one (1) share in their to qualify as director of a corporation.

Further, under the Corporation Law, the sale or disposition of any and/or substantially all properties of the corporation requires, in addition to a proper board resolution, the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the corporation in a meeting duly called for that purpose. This was not complied with in the case at bar.

At the time of the passage of the questioned resolution, respondent PAMBUSCO was insolvent and its only remaining asset was its right of redemption over the subject properties. Since the disposition of said redemption right of respondent PAMBUSCO by virtue of the questioned resolution was not approved by the required number of stockholders, the said resolution, as well as the subsequent assignment and sale, were null and void.

Lastly, for lack of consideration, the assignment should be construed as a donation. Under Article 725 of the Civil Code, in order to be valid, such a donation must be made in a public document and the acceptance must be made in the same or in a separate instrument. In the latter case, the donor shall be notified of the acceptance in an authentic form and such step must be noted in both instruments. Since assignment to Enriquez shows that there was no acceptance of the donation in the same and in a separate document, the said deed of assignment is thus void ab initio.

Case Digest: Matugas v. COMELEC


G.R. No. 151944.  January 20, 2004


On 28 February 28 2001, Private Respondent Robert Lyndon Barbers filed his certificate of candidacy as governor of Surigao del Norte for 2001 elections. Petitioner Ernesto T. Matugas, who is also a candidate for governor, filed with COMELEC a Petition to Disqualify Barbers as candidate.

His main contention is that Barbers is not a Filipino citizen. To support his claim, Matugas presented the following documents:
  1. Photocopy of a letter-request of a certain Jesus Agana, a “confidential agent” of the Bureau of Immigration and Deportation (BID), addressed to one George Clarke, purportedly of the United States Embassy regarding the US citizenship of Barbers;
  2. A notation on the letter request allegedly made by George Clarke, stating that Barbers was naturalized on 11 October 1991;
  3. Photocopy of a Certification from the BID containing Barbers' travel records and indicating in some documents that he is American;
  4. Certification from the Office of the Solicitor General's Special Committee on Naturalization stating that there is no pending petition by, or grant of repatriation to, Barbers.
Meanwhile, Barbers won the gubernatorial race on 17 May 2001. Matugas then filed a Motion for Suspension/Annulment of Proclamation of Barbers. However, Barbers was proclaimed the duly elected governor of Surigao del Norte on 28 May 2001.

COMELEC then dismissed the Petition to Disqualify. It found “little or no probative value” in the notation of George Clarke to Agana’s letter-request.While noting that the BID certification involving the travel records of Barbers stated that he was an American, it held that there is no other independent evidence to justify Matugas's claim that Barbers has renounced his allegiance to the Philippines.

Matugas filed a Motion for reconsideration, which was denied. He then filed a Petition for Certiorari with the Supreme Court, and presented the following additional documents:
  1. Photocopy of a document purportedly coming from the US Dirstrict Court of California showing the Naturalization of Barbers signed by its Deputy Clerk;
  2. Photocopy of a purported Authentication attached to the previous document coming from the Philippine Consul in Los Angeles, California stating the following: "The annexed document is an Information of Naturalization Re: Robert Lyndon Barbers executed by United States District Court, Central District of California."
Subsequently, petitioner filed a Manifestation with Motion for Leave to Admit Original Documents, appending the originals of the above documents.

Issue: W/N Barbers should have been disqualified.

Ruling: No.

One who alleges a fact has the burden of proving it. Matugas did not overcome his burden of presenting substantial evidence with the documents he presented.

For the purpose of their presentation in evidence, documents are either public or private. Public documents include the written official acts or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the Philippines, or of a foreign country. The record of such public documents may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record.

If the record is not kept in the Philippines, the attested copy should be accompanied by a certificate that such officer has custody thereof. Said certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept and authenticated by the seal of his office.

The grant of United States citizenship by naturalization is an official act of the United States. The document containing the record of this act is a public document, so this document can only be evidenced by its official publication or a copy duly attested by the officer having legal custody thereof.

The George Clarke's notation in the letter-request of Jesus Agana is neither an official publication of the document that contains the record of private respondent’s naturalization, nor a copy attested by the officer who has legal custody of the record. Matugas also did not show if Clarke is the officer charged with the custody of such record.

Furthermore, Matugas only presented photocopies of the letter-request and notation, as well as the BID certification, in contravention of the above-cited rule.

In any case, the BID certification contains inconsistent entries regarding the “nationality” of Barbers. While some entries indicate that he is “American,” other entries state that he is “Filipino.”

The new documents presented in the Petition for Certiorari cannot also be admitted in evidence.  In this case, the Authentication executed the Philippine Consul in Los Angeles does not state that the Deputy Clerk who signed the document has the custody of the document being authenticated.

Lastly, the Petitioner's calls to consider alleged new evidence not presented before the COMELEC is clearly beyond the the Supreme Courts’ certiorari powers. Doing so would be tantamount to holding a new investigation.

The Supreme Court is not a trier of facts, and it cannot be asked to substitute its own judgment and discretion for that of the COMELEC.

The rule in appellate procedure is that a factual question may not be raised for the first time on appeal,and documents forming no part of the proofs before the appellate court will not be considered in disposing of the issues of an action. Piecemeal presentation of evidence is simply not in accord with orderly justice.

The same rules apply with greater force in certiorari proceedings. It would be absurd to hold COMELEC guilty of grave abuse of discretion for not considering evidence not presented before it. The patent unfairness of Matugas’s plea militates against the admission and consideration of the subject documents.

Thursday, February 20, 2014

Case Digest: Grace Christian High School v. CA


G.R. No. 108905 October 23, 1997


Petitioner Grace Christian High School is an educational institution located at the Grace Village in Quezon City, while Private respondent Grace Village Association, Inc. ["Association'] is an organization of lot and/or building owners, lessees and residents at Grace Village.

The original 1968 by-laws provide that the Board of Directors, composed of eleven (11) members, shall serve for one (1) year until their successors are duly elected and have qualified.

On 20 December 1975, a committee of the board of directors prepared a draft of an amendment to the
by-laws which provides that "GRACE CHRISTIAN HIGH SCHOOL representative is a permanent
Director of the ASSOCIATION."

However, this draft was never presented to the general membership for approval. Nevertheless, from 1975 to 1990, petitioner was given a permanent seat in the board of directors of the association.

On 13 February 1990, the association's committee on election sought to change the by-laws and informed the Petitioner's school principal "the proposal to make the Grace Christian High School representative as a permanent director of the association, although previously tolerated in the past elections should be reexamined."

Following this advice, notices were sent to the members of the association that the provision on election of directors of the 1968 by-laws of the association would be observed.  Petitioner requested the chairman of the election committee to change the notice to honor the 1975 by-laws provision, but was denied.

The school then brought suit for mandamus in the Home Insurance and Guaranty Corporation (HIGC) to compel the board of directors to recognize its right to a permanent seat in the board.

Meanwhile, the opinion of the SEC was sought by the association, and SEC rendered an opinion to the effect that the practice of allowing unelected members in the board was contrary to the existing by-laws of the association and to §92 of the Corporation Code (B.P. Blg. 68). This was adopted by the association in its Answer in the mandamus filed with the HIGC.

The HIGC hearing officer ruled in favor of the association, which decision was affirmed by the HIGC Appeals Board and the Court of Appeals.

Issue: W/N the 1975 provision giving the petitioner a permanent board seat was valid.

Ruling: No.

Section 23 of the Corporation Code (and its predecessor Section 28 and 29 of the Corporation Law) leaves no room for doubt that the Board of Directors of a Corporation must be elected from among the stockholders or members.

There may be corporations in which there are unelected members in the board but it is clear that in these instances, the unelected members sit as ex officio members, i.e., by virtue of and for as long as they hold a particular office (e.g. whoever is the Archbishop of Manila is considered a member of the board of Cardinal Santos Memorial Hospital, Inc.)

But in the case of petitioner, there is no reason at all for its representative to be given a seat in the board. Nor does petitioner claim a right to such seat by virtue of an office held. In fact it was not given such seat in the beginning. It was only in 1975 that a proposed amendment to the by-laws sought to give it one.

Since the provision in question is contrary to law, the fact that it has gone unchallenged for fifteen years cannot forestall a later challenge to its validity. Neither can it attain validity through acquiescence because, if it is contrary to law, it is beyond the power of the members of the association to waive its invalidity.

It is more accurate to say that the members merely tolerated petitioner's representative and tolerance cannot be considered ratification.

Nor can petitioner claim a vested right to sit in the board on the basis of "practice." Practice, no matter how long continued, cannot give rise to any vested right if it is contrary to law.

Wednesday, February 19, 2014

Case Digest: Loyola Grand Villas Homeowners (South) Association v. CA


G.R. No. 117188 August 7, 1997


Loyola Grand Villas Homeowners Association, Inc. (LGVHAI) was organized on 8 February 1983 as the homeoenwers' association for Loyola Grand Villas. It was also registered as the sole homeowners' association in the said village with the Home Financing Corporation (which eventually became Home Insurance Guarantee Corporation ["HIGC"]). However, the association was not able file its corporate by-laws.

The LGVHAI officers then tried to registered its By-Laws in 1988, but they failed to do so. They then discovered that there were two other homeowners' organizations within the subdivision - the Loyola Grand Villas Homeowners (North) Association, Inc. [North Association] and herein Petitioner Loyola Grand Villas Homeowners (South) Association, Inc.["South Association].

Upon inquiry by the LGVHAI to HIGC, it was discovered that LGVHAI was dissolved for its failure to submit its by-laws within the period required by the Corporation Code and for its non-user of corporate charter because HIGC had not received any report on the association's activities. These paved the way for the formation of the North and South Associations.

LGVHAI then lodged a complaint with HIGC Hearing Officer Danilo Javier, and questioned the revocation of its registration.  Hearing Officer Javier ruled in favor of LGVHAI, revoking the registration of the North and South Associations.

Petitioner South Association appealed the ruling, contending that LGVHAI's failure to file its by-laws within the period prescribed by Section 46 of the Corporation Code effectively automatically dissolved the corporation. The Appeals Board of the HIGC and the Court of Appeals both rejected the contention of the Petitioner affirmed the decision of Hearing Officer Javier.

Issue: W/N 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.

Ruling: No.

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.
Ordinarily, the word "must" connotes an imposition of duty which must be enforced. However, the word "must" in a statute, like "shall," is not always imperative. It may be consistent with an ecercise of discretion. If the language of a statute, considered as a whole 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.

The legislative deliberations of the Corporation Code reveals that it was not the intention of Congress to automatically dissolve a corporation for failure to file the By-Laws on time.

Moreover, By-Laws may be necessary to govern the corporation, but By-Laws are still subordinate to the Articles of Incorporation and the Corporation Code. In fact, there are cases where By-Laws are unnecessary to the corporate existence and to the valid exercise of corporate powers.

The Corporation Code does not expressly provide for the effects of non-filing of By-Laws. However, these have been rectified by Section 6 of PD 902-A which provides that SEC shall possess the power to suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations upon failure to file By-Laws within the required period.

This shows that there must be notice and hearing before a corporation is dissolved for failure to file its By-Laws. Even assuming that the existence of a ground, the penalty is not necessarily revocation, but may only be suspension.

By-Laws are indispensable to corporations, since they are required by law for an orderly management of corporations. However, failure to file them within the period prescribed does not equate to the automatic dissolution of a corporation.
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