Dr. Reyrao v. United Doctors Medical Center, Inc.

[SEC-SICD * CASE NO. 08-93-4548. December 11, 1997.] DRS. ARMANDO STA ANA AVELINO L. REYRAO, EDGARDO V. AMADO, ROMEO C. SALUDO, CONRADO M. YAP, TERESITA SY AMADO, FLORDELIZA BALTAZAR, HELOISA M. BILLOTE, EVELYN R. CORTES, AMELIA LLAMAS, and GRACIELA M. ROSALES as stockholders of the United Doctors Medical Center, Inc. , petitioners , vs .UNITED DOCTORS MEDICAL CENTER, INC.,DR. DELFIN A. TAN, in his capacity as President of United Doctors Medical Center, Inc.,and LODY V. FORNOLES, in her capacity as Corporate Secretary of United Doctors Medical Center, Inc. , respondents . D E C I S I O N This is a petition for mandamus wherein petitioners prayed that the respondents be ordered to allow the petitioners personally or through their duly authorized representatives, to inspect and examine the records of all business transactions of respondent corporation, United Doctors Medical Center, Inc. (UDMC), as well as its Books of Minutes of all meetings of stockholders and of the Board of Directors, the Stock and Transfer Book, its Book of Inventories and Balances, Journals, Ledgers, Book for Copies of Letters and Telegrams, Financial Statements, Income Tax Returns, Vouchers and Receipts contracts and all papers pertaining to such contracts as well as voting trust agreements on any business day in a place to be designated by the Commission until such inspection and examination are completed. Petitioners, basically alleged that respondents are guilty of violating their rights under Section 74 of the Corporation Code for refusing to allow them to examine the records and the books of UDMC. LexLib The facts of the case are as follows: Petitioners are stockholders of UDMC, and individual respondents Delfin A. Tan and Lody V. Fornoles are President and Corporate Secretary of the respondent corporation, respectively. UDMC Hospital was established in 1975. In order to encourage medical practitioners to join the medical staff of the hospital, doctors buying shares of UDMC were given the privilege of occupying rooms on the 9th and 10th floors of the hospital building without payment of rents and utilities. Petitioners availed of the privilege and have been enjoying the same from the time they joined UDMC. The said privilege is not however, covered by any UDMC Board resolution nor by any contract pertaining to the rooms' occupancy. In 1987, the respondent corporation suffered financial reverses. In order to rehabilitate the corporation, investors were lured in, and reforms in the management of UDMC were introduced. One of the reforms sought to be implemented is UDMC Board Resolution dated May 22, 1993 which requires the doctors occupying the 9th and 10th floors of the hospital to sign a lease contract covering the rooms in their possession. The petitioners opposed the said reform claiming that the resolution is null and void for taking away a legal right without due course; and asked respondent Dr. Tan to desist from implementing the said resolution. 1 To discuss issues raised by the petitioners, a meeting with the Board of Directors was set on June 30, 1993 to tackle points of contention submitted by them. 2 No agreement was reached to settle the issues amicably. As regards the proposed lease contract, the same was revised to include certain provisions suggested by some members of the medical staff. After which some of the petitioners signed the said lease contract and withdrew their names in this case as co-petitioners. 3 Of the eleven (11) original petitioners, six (6) withdrew their names as co-petitioners pursuant to sworn letters filed before this office. 4 In a letter dated July 9, 1993, 5 respondent, Dr. Tan informed petitioner, Dr. Sta. Ana of the revisions made on the imposed lease contract, and that those who wish to retain occupancy of their present clinics are required to sign the same or make the necessary arrangements on or before July 15, 1993. Petitioners however refused to sign the lease contract, claiming that the same is contrary to an alleged original agreement with the previous management of UDMC, providing free offices spaces to the petitioners in exchange of having patients admitted in the hospital. They further claim that the said practice had been observed for eighteen (18) years and therefore should also be observed by the new management of UDMC. On July 14, 1993, or a day before the deadline given by management for petitioners to sign the lease contract, petitioners submitted a request to the respondents for the inspection and examination of the records and books of UDMC. 6 The purpose of such request was allegedly for them to know the financial condition of the Corporation. The petitioners were informed later on that their request was referred to the corporation's lawyer for proper action. 7 Earlier however, specifically on June 26, 1993, Dr. Sta. Ana, upon his request was given copies of the audited financial statements of UDMC for the years 1989 to 1992. Since he also requested for copies of other corporate papers, records and books, he was advised to examine these in the office of Ms. Fornoles, at the basement of the hospital; so, on June 29, 1993 Dr. Sta. Ana went to Ms. Fornoles' office. 8 When Dr. Sta. Ana went to see her at her office, he was told that the records are open for him to inspect. Dr. Sta. Ana, believing that it should not be him looking for the records, said he would just come back, but he never did. 9 On August 5, 1993, petitioners wrote respondents saying that since over three (3) weeks had elapsed since respondents received petitioner's letter of July 14, 1993 requesting for inspection of the records of all business transactions of UDMC, they have not replied to said request, if by August 7, 1993 no reply will be received by them, they will consider the said request denied. 10 The petitioners, subsequently, on August 19, 1993 filed this petition for mandamus. The only issue in this case is whether or not a writ of mandamus will lie against respondents to make available to the petitioners the subject book and records of the corporation. The requisites for the issuance of a writ of mandamus are the following: LexLib 1. Mandamus will lie only to compel a tribunal, corporation, board or officer to comply with a purely ministerial duty. The duty is ministerial on when the same requires neither the exercise of official nor judgment. 11 To allow the inspection of books under Section 74 of the Corporation Code is not purely ministerial, for it provides for exceptions which can be determined by the officers of the corporation. The exceptions to the general rule are when there is improper use of the information obtained from the examination, or when the demand was not made in good faith. 2. Petitioner must establish a clear legal right to the relief sought, and mandatory duty on the part of the respondents in relation thereto. 12 3. Petitioner must show that there is no plain and adequate remedy in the ordinary course of law; 13 and 4. Petitioner must show that the act to be performed is practical. 14 It is clear that petitioners are stockholders of the respondent corporation and as a general rule should be allowed to inspect the books and records of the corporation. The said right is however, not absolute. It can be denied if the demand to exercise the same is not made in good faith. From the facts of the case, it appears that there is already friction as between the parties brought about by the reforms the new management is trying to implement which the petitioners oppose. The major point in issue as between the parties appears to be signing of lease contracts which would deprive the petitioners of the privilege they are enjoying of occupying their clinics free of charge. It is true that the former management of UDMC extended the said privilege to the petitioners; but the same is not supported by any contract or board resolution, and can never bind the new Board of Directors of UDMC. The Supreme Court ruled in the case of Boyer-Roxas vs. Court of Appeals, G.R. No. 100866, July 14, 1992, that when one is allowed to stay in the property of a corporation by mere tolerance of the said corporation, in the absence of a contract covering the same, the person can be ejected by the said corporation any time it wishes. If the purpose of the petitioner in examining or inspecting the books of the corporation is really to know the financial condition of UDMC, it could have easily been done had they coordinated with the office of the corporate secretary. Dr. Sta. Ana was in fact even furnished copies of UDMC's financial statements upon his request and was never barred from entering the room where the books and the records are for him to examine them personally. It could not be merely coincidental that petitioners filed their request for inspection a day before the deadline given them to sign lease contracts. It appears to be their last ditch effort to forestall the implementation of the Board Resolution dated May 22, 1993. One of the requisites for the issuance of a writ of mandamus is that the act sought to be performed should be practical. A cursory reading of the petition will reveal that the demand for inspection is too sweeping, making it too tedious for the respondents. The prayer of the petitioners is practically to be allowed to examine and inspect everything contained in the Office of the Corporate Secretary of UDMC. Petitioners seem to be venturing in a fishing expedition to search for loopholes in order to divert the respondent's attention and efforts from implementing their reform programs. IN VIEW OF THE FOREGOING, the petition is hereby DENIED. No pronouncements as to costs. SO ORDERED. (SGD.) C.A. GERARD M. LUKBAN Hearing Officer Footnotes 1. Exhibit "1" (Letter by petitioners addressed to Dr. Delfin A Tan, dated June 23, 1993). 2. Exhibit "8". 3. Exhibits "9" and "10". 4. Letters by Edgardo V. Amado, Romeo C. Saludo, Conrado M. Yap, Teresita Sy Amado, dated August 31, 1993, by Flordeliza Baltazar, dated September 1, 1993; and by Graciela M. Rosales, dated September 1, 1993. 5. Exhibit "F". 6. Exhibit "B". 7. Exhibit "C". 8. TSN September 26, 1995 pp. 19-21. 9. TSN April 11, 1996 pp. 9-16. 8. TSN September 26, 1995 pp. 19-21. 9. TSN April 11, 1996 pp. 9-16. 10. Exhibit "D". 11. Symaco vs. Aquino, 106 Phil. 1130 12. Enriquez vs. Abdulwahid Bidin, 47 SCRA 183. 13. Tangonan vs. Pao, 137 SCRA 245. 14. Palileo vs. Ruiz Castro, 85 Phil. 272.