CASE DIGEST: SAWADJAAN vs. CA. G.R. No. 141735. June 8, 2005

FACTS:

In 1973, the Philippine Amanah Bank (PAB) was created by virtue of PD 264 and the petitioner was among the first employee of the Bank. He rose through the ranks from Security Guard to an appraiser or investigator, in 1988, Sawadjaan was assigned to inspect the properties (2 lots) offered as collateral by CAMEC. On the basis of his report, PAB granted the loan of CAMEC. Sawadjaan thereafter was promoted as Loan analyst.

Meanwhile, in 1990, Congress passed RA 6848 creating the AIIBP and repealing PD 264. All assets, liabilities and capital accounts of the PAB were transferred to the AIIBP. Sawadjaan was also retained by AIIBP.

In 1993, the Board of Directors of AIIBP created an investigating committee to look into CAMEC’s transactions because upon the latter’s failure to pay the loan, they found out that the lots subject of collateral were spurious and non-existent. Due to this and to the report of the Committee, Sawadjaan was dismissed but the latter objected to the act of the Board because he contended that the AIIBP lacks corporate personality because it failed to file its By-Laws. Hence, transactions and Resolutions issued were void.

ISSUE:

Whether the Board’s Act has no force and effect or void.

RULING:

NO. The act of the Board has force and effect as a de facto Corporation. The AIIBP was created by RA 6848. It has a main office where it conducts business, has shareholders, corporate officers, board of directors, assets, and personnel. It is, in fact, represented by the office of the Government Corporate Counsel, “the principal law office of the Government-owned corporations, one of which is the Bank. At the very least, by its 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 corporations may be a party.

Moreover, a corporation that 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. There is no showing that such a procedure has been initiated in this case.