18 Swadjaan v.

CA

G.R. No. 141735 (8 June 2005)

Chico-Nazario, J. / tita K

Subject Matter: Incorporation and Registration of Corporation; de facto Corporation

Summary:

 Phil. Amanah Bank granted CAMEC’s loan based on a Sawadjaan’s inspection and appraisal
report on the parcels of land offered by CAMEC as collateral. When CAMEC failed to pay, it was
found that the collaterals were spurious/non-existent which costed AIIBP (formerly PAB) a
P6million loss. AIIBP’s Board of Directors found him guilty of Dishonest in the Performance of
Official Duties and/or Conduct Prejudicial to the Best interest of the Service and dismissed the
petitioner from service. This led to a series of proceedings which ended with the SC ruling
against the Sawadjaan. Sawadjaan then filed a Motion for New Trial before the CA on the
ground that AIIBP failed to file its by-laws within 60 days as required by RA 6848 Sec. 51, the
bank and its stockholders had already forfeited its franchise or charter, including its license to
exist and operate as a corporation, and thus no longer have the legal standing and personality to
initiate an administrative case. The motion was denied, hence the petition before the SC. The SC
also dismissed the petition. The SC found that Sawadjaan had added nothing new in his
arguments. Also, it ruled that a corporation which has failed to file its by-laws within the
prescribed period does not ipso facto lose its powers as such.

Doctrines:

 By failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation whose
right to exercise corporate powers may not be inquired into collaterally in any private suit to which
such corporation may be a party.
 A corporation which has failed to file its by-laws within the prescribed period does not ipso facto
lose its powers as such.

Parties:

Petitioner Sappari K. Sawadjaan (Petitioner)

Court of Appeals
Respondent Civil Service Commission
Al-Amanah Investment Bank of the Philippines (AIIBP)

Facts:

Petitioner was then the appraiser of Philippine Amanah Bank (PAB). He was assigned to inspect two
parcels of land which were offered as collaterals by Compressed Air Machineries and Equipment Corp.
(CAMEC). On the basis of petitioner’s Inspection & Appraisal Report, PAB granted CAMEC’s loan
application.
PAB was eventually replaced by AIIBP1, and all assets, liabilities and capital accounts of PAB were
transferred to AIIBP. Petitioner, an employee of PAB, was retained by AIIBP.

When CAMEC failed to pay despite the given extension, AIIBP found that the parcel of land offered as
collateral was non-existent and the TCT presented was spurios, and that the other lot had a prior
existing mortgage.

An Investigating Committee was created to look into the CAMEC transaction which had cost the bank
P6million in losses.

The AIIBP Chairman then charged the petitioner with Dishonesty in the Performance of Official Duties
and/or Conduct Prejudicial to the Best Interest of the Service.

The investigating Committee ruled that Petitioner Sawadjaan could not be held liable for the
administrative offense charged, nonetheless, petitioner cannot escape liability for the conduct
prejudicial to the best interest of the service. Hence, the Investigating committee recommended a 6-
month suspension. This decision led to series of proceedings which eventually ended with a petition
filed by Petitioner Sawadjaan in the Supreme Court. The SC dismissed his petition.

Petitioner filed a Motion for New Trial in the CA. He claimed that he had recently discovered that at the
time his employment was terminated, AIIBP had not yet adopted its corporate by-laws, and that its
registration was held in abeyance.

Petitioner argued that since AIIBP failed to file its by-laws within 60 days fro the passage of RA 6848 as
required by Sec. 51, the bank and its stockholders had already forfeited its franchise or charyer,
including its license to exist and operate as a corporation, and thus no longer have the legal standing
and personality to initiate an administrative case.

The Motion for New Trial (w/c was treated as MR) was denied by the CA. Hence, petitioner filed the
present petition.

Issues:

1. WON the proceedings initiated by AIIBP are null and void since the AIBP failed to file its by-laws
within the designated 60 days from the effectivity of RA. 6848 – NO

Ratio:

NO – proceedings initiated by AIIBP are not null and void despite the failure to file its by-laws within the
designated 60 days.

**Petitioner already raised the question of AIIBP’s corporate existence and lack of jurisdiction in
his Motion for New Trial which was denied by the CA. He has added nothing substantial in his
arguments.

 At the very least, by its failure to submit its by-laws on time, the AIBP may be considered a de
facto corporation whose right to exercise corporate powers may not be inquired into collaterally
in any private suit to which such corporation may be a party.

1 Congress passed RA 6848 creating the AIIBP and repealing PD No. 264 which created PAB.
  Moreover, a corporation which has failed to file its by-laws within the prescribed period does
not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the Certificate
of Registration of Corporations, details the procedures and remedies that may be availed of
before an order of revocation can be issued.
o There is no showing that such a procedure has been initiated in this case.

 Petitioner’s argument is irrelevant because this is not a corporate controversy, but a labor
dispute; and it is an employer’s basic right to freely select or discharge its employees, if only as a
measure od self-protection against atcs inimical to its interest.
o As an appraiser/investigator, the petitioner is expected to conduct an ocular inspection
of the properties offered by CAMEC as collaterals, however, he failes to conduct routine
checks and he deliberately misrepresented in his appraisal report.

Wherefore, the petition is DISMISSED. The Decision of the Court of Appeals of March 30 1999 affirming
Resolutions No. 94-4483 and No. 95-2754 of the Civil Service Commission, and its Resolution of 15
December 19999 are hereby AFFIRMED.