Sanchez v. Roman, Jr.

[SEC-SICD * CASE NO. 11-97-5821. July 28, 1999.] MANUEL O. SANCHEZ , petitioner , vs .PABLO B. ROMAN, JR.,ET AL. , respondents . D E C I S I O N This is a Petition for Mandamus filed by petitioner Manuel O. Sanchez to compel respondents Pablo B. Roman Jr.,Patricio N. Roman, Edgardo V. Guevarra and Geminiano R. Pineda to open up the records of Capitol Hills Golf and Country Club, Inc. for inspection and photocopying of the documents specified therein. The material and relevant antecedent facts not in dispute are as follows: prcd In-a letter dated June 5, 1998, addressed to the Board of Directors of Capitol (Exh. "B"),petitioner demanded for copies of the Memorandum of Agreement and documents relative to a Joint Venture Agreement entered into by and between Capitol and Ayala Land, Inc. (ALI).This demand was reiterated in a subsequent letter dated June 26, 1997 addressed to respondents Pablo B. Roman, Jr.,Edgardo V. Guevarra and Geminiano R. Pineda (Exh. "C").In the said letter, petitioner advised the aforementioned respondents that he will see them in their office on July 3, 1997 at 2:30 P.M. to photocopy the documents at his expense. On said date and time, respondents Edgardo V. Guevarra and Geminiano R. Pineda furnished petitioner with a copy of the Memorandum of Agreement and a Certification (Exh. "D") stating that there are no available documents and records regarding the information requested by petitioner in his letter dated June 26, 1997, to wit: 1. Book/s of accounts (Cash Receipt Book) re: the amount advanced by Ayala Land, Inc. in implementation of the Memorandum. of Agreement for the purchase of the property to be converted into two (2) golf courses); 2. Book/s of accounts (Cash Disbursement Book) showing amounts spent by Capitol Hills and Country Club in acquiring the real property in San Jose del Monte, Bulacan; 3. Book/s of accounts showing how much interest, if any, have already accrued on the advances from ALI; 4. Contracts and/or agreements entered into by and between Capitol Hills and Country Club and the landowners from whom the real properties were acquired; 5. Transfer Certificate of Titles of said lands acquired by Capitol Hills and Country Club; 6. Contract or Agreement with EDAW of San Francisco for the re-design of the back nine of the golf course of Capitol Hills. On August 11, 1997, petitioner wrote the respondents officers and members of the Board of Capitol another letter (Exh. "E") demanding for the inspection and photocopying of the following documents: 1. Official receipt covering receipt of P144,637,500.00; 2. Deposit slips covering collection of P144,637,500.00; 3. ALI vouchers covering payment of P144,637,500.00; 4. Financial statements/internal tax receipts for 1994, 1995 and 1996; 5. Accounts receivable schedule 1994, 1995 and 1996; 6. Board resolution creating the blue fund; 7. Books of accounts for 1996-1997; 8. Deeds of Sale of San Jose Del Monte parcels of land; 9. Board Resolution authorizing purchase of San Juan Del Monte parcels of land. In the same letter, respondents were informed that petitioner will see them on August 21, 1997 at 2:30 P.M. with his lawyers and accountants to photocopy the desired documents at his expense. On August 21, 1997, petitioner went to see respondent Pineda for the inspection and photocopying of the documents mentioned in his letter of August 11, 1997. Petitioner, however, was handed a letter from respondent Patricio B. Roman (Exh. "F") wherein the latter pleaded unavailability on said date and requested for the resetting of the meeting to August 28, 1997 at 4:00 P.M. On said date and time, however, respondent Patricio B. Roman gave petitioner a letter (Exh. "H") asking the latter to state in writing his purpose for availing himself of the right of inspection. Petitioner, through counsel, responded stating that respondents knew from the very beginning his reasons for availing himself of his right of inspection and photocopying of documents (Exh. "I").Petitioner then advised respondents that he is granting them until September 04, 1997 to produce the desired documents and make them available for his inspection and photocopying. On said date and time, petitioner went to Capitol with his lawyer and accountant for the purpose of inspecting and photocopying at his expense the document mentioned in his letter of August 11, 1997. It was then that petitioner was informed by the Cashier that upon instructions of the President, he should not be allowed his right of inspection and photocopying. Hence, the present recourse. The principal issue in this case is whether or not petitioner should be allowed to inspect and photocopy records and documents of Capitol relating to business transactions it has entered into. The right of inspection of corporate books is recognized by express provision of our Corporation Law. Said provision states that "the record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, trustee, or stockholder or member of the corporation at reasonable hours on business days." (Section 74, par. 2 of the Corporation Code of the Philippines). The law is based on the principle that stockholders or members have a right to be fully informed as to the condition of the corporation, in the manner its affairs are conducted and how its capital stock to which they have contributed is employed and managed. ( SEC Opinion, April 29, 1970 ,citing Stone vs. Kellog, 46 NE 22). The right of stockholders to inspect the books of the corporation rests on the fact of beneficial ownership of the corporate property and assets through ownership of shares. (18 Am Jur. 2d 710). 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 quasi ownership. (Gokongwei, Jr. vs. Securities and Exchange Commission, G.R. No. L-45911, April 11, 1979, citing Fletcher Cyc, Private Corporations, Vol. V. 1976 Rev. Ed., Section 2213, p. 693). Those in charge of the corporation are merely the stockholders' or members' agent concerning whose good faith in discharging their duties the stockholders or members have an interest and right to be informed. (5 Fletcher, p. 571). There is no question that stockholders are entitled to inspect the books and records of a corporation in order to investigate the conduct of the management, determine the financial condition of the corporation, and generally take an account of the stewardship of the officers and directors. (18 Am Jur 2d 718).The evident purpose of the law in granting stockholders the right is to protect small and minority stockholders from the power of the majority and from mismanagement by its officers as well as to ascertain, establish and maintain their rights and intelligently perform their corporate duties. ( SEC Opinion, April 29, 1970 ,citing Stone vs. Kellog, 46 NE 22). As a bonafide stockholder of the Capitol Hills Golf and Country Club, Inc., petitioner Manuel O. Sanchez is by law and jurisprudence entitled to inspect the books and records of said corporation. In reaching this conclusion, this Commission did not ignore the fact that the right of inspection is not absolute and may be denied on the ground that "the person demanding to examine or copy excerpts from the corporation's records and minutes has improperly used information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand". (Section 74, par. 3 of the Corporation Code of the Philippines). Respondents, however, failed to make a case in support of their resolve not to allow herein petitioner to inspect the records and books of Capitol. Respondents miserably failed to present proof that petitioner has improperly used information secured through a prior examination of the records of minutes of the corporation. As borne out by the evidence on record, it would appear that this is the first time that petitioner is seeking an examination of the records of Capitol. Likewise, respondents' claim that petitioner was not acting in good faith or for a legitimate purpose in making his demand for inspection is but a mere assertion devoid of any evidentiary support. It is a fundamental principle of law that he who alleges must prove the same. Respondents have not done so. Besides, it is presumed that the purpose of the stockholder or member in seeking the inspection of the record of the corporation is legitimate or proper and the burden of proving otherwise rests on the corporation. (See Republic vs. Sandigan, G.R. No. 88809, July 10, 1991). Respondents failed to overcome said presumption and petitioner, therefore, may demand an examination of the corporate books and records even without disclosing his reasons. (7 RCL 326). As shown, petitioner had made formal demands on respondents for inspection, but despite repeated demands, respondents continued to ignore such valid and legitimate demand. As a matter of fact this judicial proceedings could have been averted had respondents acted favorably, on petitioner's legitimate request for inspection and photocopying of corporate records. WHEREFORE, premises considered, judgment is hereby rendered directing the respondents to allow petitioner to examine and photocopy the books and records of Capitol Hills Golf and Country Club, as specified in the petition. No pronouncement as to costs. SO ORDERED. (SGD.) JAMES K. ABUGAN (SGD.) ROSALINA T. VIDAD-TESORIO Hearing Officer Hearing Officer (SGD.) ROSITA R. GUERRERO Hearing Officer