CORPORATION LAW CASE MATRIX 9

Section 74
TITLE FACTS ISSUE/S HELD DOCTRINE
Philpotts v. PMC - W. G. Philpotts, a stockholder in the - Whether the right - There is no pretense that the - The pertinent provision of
Philippine Manufacturing Company, which the law respondent corporation or any of its our law is found in the
seeks to obtain a writ of mandamus to concedes to a officials has refused to allow the second paragraph of section
compel the Phil Manufacturing to permit stockholder to inspect petitioner himself to examine anything 51 of Act No. 1459, which
the Philpotts , in person or by some the records can be relating to the affairs of the company, reads as follows: "The record
authorized agent or attorney, to inspect exercised by a proper and prays for order commanding the of all business transactions of
and examine the records of the agent or attorney of respondents to place the records of all the corporation and the
business transacted by said company the stockholder as business transactions of the company, minutes of any meeting shall
since January 1, 1918. well as by the during a specified period, at the be open to the inspection of
- In the argument in support of the stockholder in person. disposal of the plaintiff or his duly any director, member or
demurrer it is conceded by counsel for authorized agent or attorney, it being stockholder of the
the respondents that there is a right of evident that the petitioner desires to corporation at reasonable
examination in the stockholder granted exercise said right through an agent or hours."
under section 51 of the Corporation attorney. - The right of inspection given
Law, but it is insisted that this right - It is advisable to say that there are to a stockholder in the
must be exercised in person. some things which a corporation may provision above quoted can
undoubtedly keep secret, be exercised either by
notwithstanding the right of inspection himself or by any proper
given by law to the stockholder; as for representative or attorney in
instance, where a corporation, engaged fact, and either with or
in the business of manufacture, has without the attendance of
acquired a formula or process, not the stockholder. This is in
generally known, which has proved of conformity with the general
utility to it in the manufacture of its rule that what a man may do
products. in person he may do through
- It is not our intention to declare that the another; and we find nothing
authorities of the corporation, and more in the statute that would
particularly the Board of Directors, justify us in qualifying the
might not adopt measures for the right in the manner
protection of such process form suggested by the
publicity. respondents.
- But there nothing in the petition which - The right of inspection to
would indicate that the petitioner in this stockholders of corporations
case is seeking to discover anything are to be liberally construed
which the corporation is entitled to keep and that said right may be
secret; and if anything of the sort is exercised through any other
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 involved in the case it may be brought properly authorized person.
out at a more advanced stage of the
proceedings.
Pardo v. - Pardo is a stockholder of Hercules - WON, the company - No. Such restriction made by the - Right to inspect- open to any
Hercules Lumber and Ferrer is the acting can validly restrict the company is invalid. director, trustee or
Lumber secretary of the said company. The frequency to which - Inspection at unusual hours or under stockholder or member of
latter refused to permit the former to shareholders can improper conditions may be denied, the corporation at reasonable
inspect the records and business inspect its books. otherwise it cannot be denied. hours on business days. He
transactions of the company. - Neither the executive officers nor board may demand in writing a
- There was no question regarding the of directors have the power to deny a copy of excerpts at his
right to inspect as it is guaranteed in stockholder of the right all together. expense.
the Corp. Law. - It will be noted that such right can be
- The main consideration in this case has exercised at reasonable hours,
reference to the time, or times, within meaning reasonable hours on business
which the right of inspection may be days through out the year; not merely
exercised. during some arbitrary period chosen by
- The company, through various the officers.
resolutions, had designated certain - Also, generally speaking, the motive of
times to which the stockholders can the shareholder exercising the right is
inspect the books. Allegedly, Pardo immaterial.
didnt get permission to inspect thus - Therefore, Pardo is granted the relief to
was denied such. inspect.
- Hence this petition.
Veraguth v. - Veraguth, a director and stockholder of - Is Veraguth entitled to - YES. - "All business corporations
Isabela Sugar the Isabela Sugar Company, Inc., filed a 1) receive notification - As to the first issue, the SC held: no shall keep and carefully
Co. petition with the lower court praying before meetings are damage was caused to Veraguth by the preserve a record of all
that : a final and absolute writ of held 2) inspect the action taken at the special meeting business transactions, and a
mandamus be issued to each and all of books of the which he did not attend, since his minute of all meetings of
the respondent directors to notify him corporation interests were fully protected by the directors, members, or
within the reglementary period, of all Philippine National Bank; and that as to stockholders, in which shall
regular and special meetings of the meetings in the future it is to be be set forth in detain the
board of directors of the Company, and presumed that the secretary of the time and place of holding the
to place at his disposal at reasonable company will fulfill the requirements of meeting, how authorized, the
hours the minutes, documents, and the resolutions of the company notice given, whether the
books of said corporation for his pertaining to regular and special meeting was regular or
inspection as director and stockholder meetings. It will, of course, be special, if special its object,
- It appears that Veraguth has not been incumbent upon Veraguth to give formal those present and absent,
informed of previous meetings. notice to the secretary of his post-office and every act done or
- He likewise contends that when asked address if he desires notice sent to a ordered done at the meeting.
that he be permitted to inspect the particular residence. ...
books of the Cop, he was denied access - Directors of a corporation have the - "The record of all business
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 on the ground that the board of unqualified right to inspect the books transactions of the
directors adopted a resolution providing and records of the corporation at all corporation and the minutes
for inspection of the books and the reasonable times. Pretexts may not be of any meeting shall be open
taking of copies only "by authority of put forward by officers of corporations to the inspection of any
the President of the corporation to keep a director or shareholder from director, member, or
previously obtained in each case." inspecting the books and minutes of the stockholder of the
corporation, and the right of inspection corporation at reasonable
is not to be denied on the ground that hours."
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
can 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.

Gonzalez v. PNB - Ramon A. Gonzalez bought a share of - Whether or not the - The SC held in the negative, - The right of a stockholder to
stock from the PNB, and as a officers of PNB can be - First and foremost, the new Corporation inspect the record of a
stockholder, Gonzalez sought to look compelled to allow Code amended the provision of the business transactions of a
over the books and records of PNB. Gonzalez to inspect Corporation law pertaining to the rights corporation is not absolute
- It was admitted that Gonzalezs purpose the records of the of directors and stockholders to inspect but is limited to purposes
in doing so was to verify the truth on former corporate books . The Corporatio Code reasonably related to the
certain transactions which the bank has prescribed a limitationto the same interest of the stockholder,
entered into as well as to inquire into by requiring as a condition precedent must be asked fro in
the validity of said transactions. These that the one requesting the information goodfaith for a specific and
include the undertaking of the bank to must not have used improperly any honest purpose and not to
finance Southern Negros Devt Bank in information secured through pior gratify curiosity or for
the latters purchase of a sugar mill, examination. Furthermore, the Code speculative or vicious
thefinsncing of the Cebu-Mactan Bridge also required that the request must be purposes.
and he construction of Passi Sugar Mill in good faith and and for a legitimate - (See Sec 74)
at Ilo-ilo purpose. Thus, Gonzalez contention that
- In fact, Gonzalez previously instituted he has an unqualified right to inspection
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 several cases against the bank no longer stands.
questioning the propriety of these - Second, the Court found Gonzalez to be
transactions. It was also found that in bad faith and that his purpose was
Gonzalez procured a share from the not germane to the to his interest as a
bank precisely to pry into its records stockholder. The fact that Gonzalez
and use the information against the procured a share of stock purposely to
latter. exercise the right of inspection belies
- Thus, Gonzalez was subsequently his claim of good faith.
denied by the officers of the bank in its - Finally, the inspection would run counter
attempt to be furnished once gain of its to the express mandate of PNBs
records. The bank contended that his charter. Its charter limits the inspection
request was not germane to his interest of the banks records to certain qualified
as one-stock shareholder. officials.
- Thus, Gonzalez instituted an action for - Having its own charter, PNB is not
mandamus against PNB. governed by the Corp Code and the
right of inspection could not be made to
apply given the express restriction in its
charter.

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