RESULTADOS

1. That the person demanding has improperly used any information secured through any prior examination of the records or minutes of such corporation or any other corporation;

2. That he was not acting in good faith or for a legitimate purpose in making his demand; or

3. The right is limited or restricted by special law or the law of its creation.

W. G. PHILPOTTS, petitioner, vs.

PHILIPPINE MANUFACTURING COMPANY and F. N. BERRY, respondents.

(G.R. No. L-15568; November 8, 1919)

FACTS: Petitioner seeks to obtain a writ of mandamus to compel the respondents to permit him, in person or by some authorized agent or attorney, to inspect and examine the records of the business by Philippine Manufacturing Company, of which he is a stockholder.

Respondents interposed a demurrer.

ISSUE: WON the right the law concedes to a stockholder may be exercised by a proper agent or attorney?

HELD: Yes. The right of inspection given to a stockholder can be exercised either by himself or by any proper representative or attorney in fact, and either with or without the attendance of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another; and we find nothing in the statute that would justify us in qualifying the right in the manner suggested by the respondents.

This conclusion is supported by the undoubted weight of authority in the United States, where it is generally held that the provisions of law conceding the right of inspection to stockholders of corporations are to be liberally construed and that said right may be exercised through any other properly authorized person. As was said in Foster vs. White (86 Ala., 467), "The right may be regarded as personal, in the sense that only a stockholder may enjoy it; but the inspection and examination may be made by another. Otherwise it would be unavailing in many instances." An observation to the same effect is contained in Martin vs. Bienville Oil Works Co. (28 La., 204), where it is said: "The possession of the right in question would be futile if the possessor of it, through lack of knowledge necessary to exercise it, were debarred the right of procuring in his behalf the services of one who could exercise it." In Deadreck vs. Wilson (8 Baxt. [Tenn.], 108), the court said: "That stockholders have the right to inspect the books of the corporation, taking minutes from the same, at all reasonable times, and may be aided in this by experts and counsel, so as to make the inspection valuable to them, is a principle too well settled to need discussion." Authorities on this point could be accumulated in great abundance, but as they may be found cited in any legal encyclopedia or treaties devoted to the subject of corporations, it is unnecessary here to refer to other cases announcing the same rule.

The demurrer is overruled; and it is ordered that the writ of mandamus shall issue as prayed, unless within 5 days from notification hereof the respondents answer to the merits.

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THE CORPORATION CODE OF THE PHILIPPINES (Batas Pambansa Bilang 68, as amended) based on the book of Atty Ruben C. Ladia ANTONIO PARDO, petitioner,

vs.

THE HERCULES LUMBER CO., INC., and IGNACIO FERRER, respondents

(G.R. No. L-22442; August 1, 1924)

FACTS: Petitioner Antonio Pardo seeks to obtain a writ of mandamus to compel respondent company to permit petitioner and his duly authorized agent and representative to examine the records and business transactions of said company.

Respondents raised the defense that under Art. 10 of the by-laws, it is declared that ―every shareholder may examine the books of the company and other documents pertaining to the same upon the days which the board of directors’ shall annually fix‖. And thus was set from 15^th to 25^th of March by virtue of a board resolution.

ISSUE: WON the BOD may choose specific performance and particular dates when the right of inspection may be exercised?

HELD: No. The general right given by the statute may not be lawfully abridged to the extent attempted in this resolution. It may be admitted that the officials in charge of a corporation may deny inspection when sought at unusual hours or under other improper conditions; but neither the executive officers nor the board of directors have the power to deprive a stockholder of the right altogether. A by-law unduly restricting the right of inspection is undoubtedly invalid. Authorities to this effect are too numerous and direct to require extended comment. (14 C.J., 859; 7 R.C.L., 325; 4 Thompson on Corporations, 2nd ed., sec. 4517;

Harkness vs. Guthrie, 27 Utah, 248; 107 Am., St. Rep., 664. 681.)

The demurrer is, therefore, sustained; and the writ of mandamus will issue as prayed, with the costs against the respondent.

EUGENIO VERAGUTH, Director and Stockholder of the Isabela Sugar Company, Inc., petitioner,

vs.

ISABELA SUGAR COMPANY, INC., GIL MONTILLA, Acting President, and AGUSTIN B. MONTILLA, Secretary of the same corporation, respondents.

(G.R. No. L-37064; October 4, 1932)

FACTS: Petitioner Eugenio Veraguth seeks to obtain a final and absolute writ of mandamus to be issued to each and all of the respondents to, among others, place at his disposal at reasonable hours the minutes, documents and books of Isabela Sugar Company, Inc. (which he is a director and stockholder) for his inspection and to issue immediately, upon payment of the fees, certified copies of any documentation in connection with said minutes, documents and the books of the aforesaid corporation.

Director Veraguth telegraphed the secretary of the company, asking the latter to forward in the shortest possible time a certified copy of the resolution of the board of directors concerning the payment of attorney's fees in the case against the Isabela Sugar Company and others. To this the secretary made answer by letter stating that, since the minutes of the meeting in question had not been signed by the directors present, a certified copy could not be furnished and that as to other proceedings of the stockholders a request should be made to the president of the Isabela Sugar Company, Inc. It further appears that the board of directors adopted a resolution providing for inspection of the books and the taking of copies "by authority of the President of the corporation previously obtained in each case."

ISSUE: WON the corporate secretary is justified in refusing to furnish copies of the minutes of the meeting of the BOD?

HELD: Yes. The Corporation Law, section 51, provides that:

―All business corporations shall keep and carefully preserve a record of all business transactions, and a minute of all meetings of directors, members, or stockholders, in which shall be set forth in detail the time and place of holding the meeting was regular or special, if special its object, those

present and absent, and every act done or ordered done at the meeting. . . .

The record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, member, or stockholder of the corporation at reasonable hours.‖

The above puts in statutory form the general principles of Corporation Law.

Directors of a corporation have the unqualified right to inspect the books and records of the corporation at all reasonable times. Pretexts may not be put forward by officers of corporations to keep a director or shareholder from inspecting the books and minutes of the corporation, and the right of inspection is not to be denied on the ground that the director or shareholder is on unfriendly terms with the officers of the corporation whose records are sought to be inspected. A director or stockholder cannot of course make copies, abstracts, and memoranda of documents, books, and papers as an incident to the right of inspection, but cannot, without an order of a court, be permitted to take books from the office of the corporation. We do not conceive, however, that a director or stockholder has any absolute right to secure certified copies of the minutes of the corporation until these minutes have been written up and approved by the directors. (See Fisher's Philippine Law of Stock Corporations, sec. 153, and Fletcher Cyclopedia Corporations, vol. 4, Chap. 45.)

Combining the facts and the law, we do not think that anything improper occurred when the secretary declined to furnish certified copies of minutes which had not been approved by the board of directors, and that while so much of the last resolution of the board of directors as provides for prior approval of the president of the corporation before the books of the corporation can be inspected puts an illegal obstacle in the way of a stockholder or director, that resolution, so far as we are aware, has not been enforced to the detriment of anyone. In addition, it should be said that this is a family dispute, the petitioner and the individual respondents belonging to the same family; that a test case between the petitioner and the respondents has not been begun in the Court of First Instance of Occidental Negros involving hundreds of thousands of pesos, and that the appellate court should not intrude its views to give an advantage to either party. We rule that the petitioner has not made out a case for relief by mandamus.

GOKONGWEI VS. SEC (supra, CHAPTER 7 and 8) – ISSUE: WON petitioner may be properly denied examination of the books and records of San Miguel International, Inc., a fully owned subsidiary of SMC?

HELD: No. Pursuant to the second paragraph of section 51 of the Corporation Law, "(t)he record of all business transactions of the corporation and minutes of any meeting shall be open to the inspection of any director, member or stockholder of the corporation at reasonable hours."

The stockholder's right of inspection of the corporation's books and records is based upon their ownership of the assets and property of the corporation. It is, therefore, an incident of ownership of the corporate property, whether this ownership or interest be termed an equitable ownership, a beneficial ownership, or a ownership. This right is predicated upon the necessity of self-protection. It is generally held by majority of the courts that where the right is granted by statute to the stockholder, it is given to him as such and must be exercised by him with respect to his interest as a stockholder and for some purpose germane thereto or in the interest of the corporation. In other words, the inspection has to be germane to the petitioner's interest as a stockholder, and has to be proper and lawful in character and not inimical to the interest of the corporation. In Grey v. Insular Lumber, this Court held that "the right to examine the books of the corporation must be exercised in good faith, for specific and honest purpose, and not to gratify curiosity, or for specific and honest purpose, and not to gratify curiosity, or for speculative or vexatious purposes. The weight of judicial opinion appears to be, that on application for mandamus to enforce the right, it is proper for the court to inquire into and consider the stockholder's good faith and his purpose and motives in seeking inspection. Thus, it was held that "the right given by statute is not absolute and may be refused when the information is not sought in good faith or is used to the detriment of the corporation." But the "impropriety of purpose such as will defeat enforcement must be set up the corporation defensively if the Court is to take

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THE CORPORATION CODE OF THE PHILIPPINES (Batas Pambansa Bilang 68, as amended) based on the book of Atty Ruben C. Ladia cognizance of it as a qualification. In other words, the specific provisions take

from the stockholder the burden of showing propriety of purpose and place upon the corporation the burden of showing impropriety of purpose or motive. It appears to be the general rule that stockholders are entitled to full information as to the management of the corporation and the manner of expenditure of its funds, and to inspection to obtain such information, especially where it appears that the company is being mismanaged or that it is being managed for the personal benefit of officers or directors or certain of the stockholders to the exclusion of others."

While the right of a stockholder to examine the books and records of a corporation for a lawful purpose is a matter of law, the right of such stockholder to examine the books and records of a wholly-owned subsidiary of the corporation in which he is a stockholder is a different thing.

Some state courts recognize the right under certain conditions, while others do not. Thus, it has been held that where a corporation owns approximately no property except the shares of stock of subsidiary corporations which are merely agents or instrumentalities of the holding company, the legal fiction of distinct corporate entities may be disregarded and the books, papers and documents of all the corporations may be required to be produced for examination, and that a writ of mandamus, may be granted, as the records of the subsidiary were, to all incontents and purposes, the records of the parent even though subsidiary was not named as a party. Mandamus was likewise held proper to inspect both the subsidiary's and the parent corporation's books upon proof of sufficient control or dominion by the parent showing the relation of principal or agent or something similar thereto.

On the other hand, mandamus at the suit of a stockholder was refused where the subsidiary corporation is a separate and distinct corporation domiciled and with its books and records in another jurisdiction, and is not legally subject to the control of the parent company, although it owned a vast majority of the stock of the subsidiary. Likewise, inspection of the books of an allied corporation by stockholder of the parent company which owns all the stock of the subsidiary has been refused on the ground that the stockholder was not within the class of "persons having an interest."

In the Nash case, The Supreme Court of New York held that the contractual right of former stockholders to inspect books and records of the corporation included the right to inspect corporation's subsidiaries' books and records which were in corporation's possession and control in its office in New York."

In the Bailey case, stockholders of a corporation were held entitled to inspect the records of a controlled subsidiary corporation which used the same offices and had identical officers and directors.

In the case at bar, considering that the foreign subsidiary is wholly owned by respondent San Miguel Corporation and, therefore, under its control, it would be more in accord with equity, good faith and fair dealing to construe the statutory right of petitioner as stockholder to inspect the books and records of the corporation as extending to books and records of such wholly-owned subsidiary which are in respondent corporation's possession and control.

The Court voted unanimously to grant the petition insofar as it prays that petitioner be allowed to examine the books and records of San Miguel International, Inc., as specified by him.

RAMON A. GONZALES, petitioner,

vs. THE PHILIPPINE NATIONAL BANK, respondent.

(G.R. No. L-33320; May 30, 1983)

FACTS: Petitioner Ramon A. Gonzales instituted in the CFI of Manila a special civil action for mandamus against the herein respondent PNB praying that the latter be ordered to allow him to look into the books and records of PNB to satisfy himself as to the truth of the published report that (1) the respondent has guaranteed the obligation of South Negros Development Corporation in the purchase of a US$ 23M sugar-mill to be financed by Japanese suppliers and financiers; that the respondent; (2) the respondent is financing the construction of the P21M Cebu-Mactan Bridge to be constructed by VC Ponce,

Inc.; and (3) the construction of Passi Sugar Mill at Iloilo by the Homion Philippines, Inc.; as well as (4) to inquire into the validity of said transactions.

The CFI dismissed the special civil action.

Assailing the conclusions of the lower court, the petitioner has assigned the single error to the lower court of having ruled that his alleged improper motive in asking for an examination of the books and records of the respondent bank disqualifies him to exercise the right of a stockholder to such inspection under Section 51 of Act No. 1459, as amended. Said provision reads in part as follows:

Sec. 51. ... The record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, member or stockholder of the corporation at reasonable hours.

Petitioner maintains that the above-quoted provision does not justify the qualification made by the lower court that the inspection of corporate records may be denied on the ground that it is intended for an improper motive or purpose, the law having granted such right to a stockholder in clear and unconditional terms. He further argues that, assuming that a proper motive or purpose for the desired examination is necessary for its exercise, there is nothing improper in his purpose for asking for the examination and inspection herein involved.

ISSUE: WON Petitioner is correct in saying that he has an unqualified right to inspect the books as provided under Sec. 51 of the Corporation Law?

HELD: No. Petitioner may no longer insist on his interpretation of Section 51 of Act No. 1459, as amended, regarding the right of a stockholder to inspect and examine the books and records of a corporation. The former Corporation Law (Act No. 1459, as amended) has been replaced by Batas Pambansa Blg.

68, otherwise known as the "Corporation Code of the Philippines."

The right of inspection granted to a stockholder under Section 51 of Act No.

1459 has been retained, but with some modifications. The second and third paragraphs of Section 74 of Batas Pambansa Blg. 68 provide the following:

―The records of all business transactions of the corporation and the minutes of any meeting shall be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, in writing, for a copy of excerpts from said records or minutes, at his expense.

Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is made pursuant to a resolution or order of the board of

Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is made pursuant to a resolution or order of the board of