Culala v. Bauer Products Philippine

[SEC-SICD * CASE NO. 3874. March 9, 1994.] RODRIGO M. CULALA , petitioner , vs .BAUER PRODUCTS PHILS.,ET AL. , respondents . D E C I S I O N This is an action for mandamus to compel the respondents to allow the petitioner to examine, inspect and copy certain corporate records and documents of respondent corporation pursuant to petitioner's rights as stockholder thereof under Sections 74 and 75 of the Corporation Code of the Philippines. dctai In support thereof, petitioner alleges, inter alia, that since the time of the incorporation of respondent Bauer Products, Inc. and up to the present time, he has been and is a stockholder of record of said corporation; that he sent a letter dated 05 April 1990 to the respondent corporation requesting that pursuant to the rights granted to him under Section 74 of the Corporation Code, he be allowed to examine on 19 April 1990, the following corporate records of the respondent corporation covering the period from May 20, 1982 to the present time: a.) Stock and Transfer Book b.) Stock Certificate Book c.) Minutes of Stockholders' Meeting d.) Minutes of the Board of Directors Meeting e.) Income Tax Return f.) Audited Financial Statement g.) General Journal h.) General Ledger together with the subsidiary ledgers i.) Cash Receipt Journal j.) Cash Disbursement Journal k.) Schedule of Receivable l.) List of Clients and Customers m.) Other books; documents papers or contracts that may be required in the course of the examination. It appears that at the designated date of the examination, none of the records requested to be examined were made available to the petitioner and his representative for the reason that the President of the respondent corporation was "out of town at that time and the members of the board of directors were not given due notice";that on April 18, 1990, petitioner sent another letter reiterating his request to examine the required corporate records; that on May 3, 1990, petitioner and his accountant proceeded to the office of the respondent corporation to examine the corporate records but they were informed that the records were unavailable since the records were with the respondent's accountant; that petitioner sent another letter dated 03 May 1990, containing a final demand that the corporate records of the respondent corporation be made available for examination on May 29, 1990 and requesting that the petitioner be furnished within ten (10) days copies of the most recent financial statements of the respondent corporation pursuant to J and advising the respondent corporation that should the records not be made available on such date, the petitioner will have no choice but to file the necessary action with this Commission; that the respondent corporation through the chairman of the board of directors sent the petitioner a letter inviting the former to personally attend a special board meeting of the respondent corporation on May 26, 1990 and no proxy nor representative will be entertained; that petitioner, through counsel, responded to the said letter dated 18 May 1990 advising the respondent corporation that the petitioner and his counsel will be attending the special board meeting and reiterating the request that he be furnished copies of the latest financial statements of the respondent corporation at the said meeting; that none of the requested documents were made available to the petitioner on July 23, 1990. Respondents filed their answer with counterclaim and alleged as affirmative and special defenses the following: 1. the petition does not state facts sufficient to constitute a cause of action against respondents; 2. the petitioner had not made known his purpose to examine the books and his right to examine is not absolute; 3. the inspection of the books is not intended for an honest purpose but speculative and vexatious which is prejudicial to the interest of the corporation; 4. when the financial statements were demanded in May 1990 they were not prepared for the fiscal year of the company which ends on June 30; and 5. the respondents are only willing to show the books for inspection if it is for proper purpose and at proper time. During the preliminary conference of this case, the respondents indicated their willingness to have the respondent corporation's corporate books inspected. Likewise, it was agreed that petitioner will not demand for the inspection of the list of the respondents' clients and customers. As agreed upon during the inspection on November 27, 1990, only the following documents were exhibited by the respondents to petitioner, to wit: a.) Stock and Transfer Book dated 21 May 1982 without a single entry; b.) Stock Certificate Book containing all stock certificate was issued from the time of its incorporation until inspection on November 27, 1990. Petitioner again requested for another inspection on November 6, 1990. On said date however, only the following documents were shown to petitioners: a.) Minutes of the Special Meeting of the Board of Directors held on October 26, 1988; b.) Minutes of the Special Board Meeting held on July 1, 1989; c.) Minutes of the annual meeting of stockholders held on July 3, 1989; and d.) Minutes of the annual Meeting of the Board of Directors held on July 3, 1989. Petitioners manifested that the documents exhibited to him were lacking and after the denial of his motion for summary judgment, the hearing on the merits proceeded and both parties presented their respective evidence. Petitioner claims that being a stockholder of the corporation he is entitled to inspect the records of the corporation to be able to determine the true value of his shares of stock therein, which is a valid and lawful cause. On the other hand, respondents assert that the rights of petitioner to inspect corporate records is not absolute because petitioner is not in good faith in exercising the same. The issue in this case is whether or not petitioner can, in the exercise of his right as a stockholder of respondent corporation and to determine the value of his shares therein, demand an examination of all corporate records. The right of a stockholder to inspect the corporate records is provided in Section 74 of the Corporation Code which states that: "SECTION 74. ... the records of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, on writing, for a copy of excerpts from said records or minutes, at his expense" Furthermore, Section 75 of the Corporation Code provides: "SECTION 75. Right to financial statements . within ten (10) days from receipt of a written request of any stockholder or member of the corporation shall furnish him its most recent financial statements, which shall include a balance sheet as of the end of the last taxable year and profit and loss statement for said taxable year showing in reasonable detail its assets and liabilities and the result of its operations". LLjur The term "records of all business transactions is very broad and would include those which the Code of Commerce requires all merchants (which include stock corporations) to keep, namely: a book of inventories and balances a journal ledger, and a book for copies of letter and telegrams. Such records would also include financial statements, income tax returns, vouchers and receipts, contracts and papers pertaining to such contracts, as well as voting trust agreements" (Campos, The Corporation Code, Comments Notes and Selected Cases; Vol. I, 1990 id. p. 787). Conformably, the right of petitioner therefore, to inspect the corporation records of respondent corporation is very broad in scope, limited only by the time and place of inspection and the purpose thereof. From the evidence adduced, it was established that petitioner has on several occasions notified respondents of his intention to inspect the corporate records of respondent corporation at designated dates and time and at the principal office of the respondent corporation at reasonable hours during business days. Despite this notifications, respondents for reasons only known to them refused to allow petitioner to inspect the required records, limiting petitioner's inspection to only a few corporate records. In the case of Gokongwei vs. SEC, G.R. No. L-45911, April 11, 1979, the Supreme Court ruled, that a stockholder's purpose in examining the corporate records, to be legitimate must be one which is germane to his interest as a stockholder and not contrary to the interest of the corporation. In the case at bar and contrary to the contention of the respondents, the insistence of the petitioner to inspect the corporate records is for purposes which are far removed from his interest as a stockholder or at odds with the interest of the corporation. In this regard, the records do not, at all show that petitioners purpose in demanding an inspection of the corporate records is not legitimate. The fact that petitioner was formerly a director and corporate secretary who had access to corporate records do not show any bad faith on petitioner's part complimented by the fact that petitioner is not an accountant capable of determining value of his shares of stocks. WHEREFORE, in view of the foregoing, judgment is hereby rendered commanding the respondents to allow the petitioner and/or his duly authorized representative to inspect, examine and copy the corporate records requested in the petition at a reasonable hour during business days at the principal office of the corporation. Respondents are likewise ordered to pay petitioner moral damages in the sum of P25,000.00, exemplary damages of P20,000.00 and attorney's fees of P25,000.00. LexLib SO ORDERED. No costs. (SGD.) ENRIQUE L. FLORES, JR. Hearing Officer