Mere pendency of cases not a defense to denying right to inspect

Posted on April 18, 2009 by Hector M. de Leon Jr When there is a dispute a on! stoc"holders o# a corporation, there appears to be a natural inclination on the part o# those $ho possess corporate records to li it access to certain records by stoc"holders belon!in! to another #action. %he stoc"holders $ho are re#used access $ill then cite &iolation o# 'ection () o# the *orporation *ode, $hich pro&ides that +the records o# all business transaction o# the corporation and the inutes o# any eetin! shall be open to the inspection o# any director, trustee, stoc"holder or e ber o# the corporation at reasonable hours on business days,- it #urther pro&ides that the the shareholder + ay de and, in $ritin!, #or a copy o# e.cerpts #ro said records or inutes, at his e.pense., A corporate o##ice or director $ho &iolates 'ection () co its a penal o##ense, and i# #ound !uilty, can be punished by/ 0a1 a #ine not less than PhP1,000 but not ore than PhP10,000- 0b1 i prison ent #or not less than 20 days but not ore than 3 years- 0c1 or both #ine and i prison ent, at the discretion o# the court. Accordin! to the 'upre e *ourt/ %he ele ents o# the o##ense . . . are/ 4irst. A director, trustee, stoc"holder or e ber has ade a prior de and in $ritin! #or a copy o# e.cerpts #ro the corporation5s records or inutes'econd. Any o##icer or a!ent o# the concerned corporation shall re#use to allo$ the said director, trustee, stoc"holder or e ber o# the corporation to e.a ine and copy said e.cerpts%hird. 6# such re#usal is ade pursuant to a resolution or order o# the board o# directors or trustees, the liability under this section #or such action shall be i posed upon the directors or trustees $ho &oted #or such re#usal- and, 4ourth. Where the o##icer or a!ent o# the corporation sets up the de#ense that the person de andin! to e.a ine and copy e.cerpts #ro the corporation5s records and inutes has i properly used any in#or ation secured throu!h any prior e.a ination o# the records or inutes o# such corporation or o# any other corporation, or $as not actin! in !ood #aith or #or a le!iti ate purpose in a"in! his de and, the contrary ust be sho$n or pro&ed. %hus, in a cri inal co plaint #or &iolation o# 'ection () o# the *orporation *ode, the de#ense o# i proper use or oti&e is in the nature o# a 7usti#yin! circu stance that $ould e.onerate those $ho raise and are able to pro&e the sa e. Accordin!ly, $here the corporation denies inspection on the !round o# i proper oti&e or purpose, the burden o# proo# is ta"en #ro the shareholder and placed on the corporation. Ho$e&er, $here no such i proper oti&e or purpose is alle!ed,

and e&en thou!h so alle!ed, it is not pro&ed by the corporation, then there is no &alid reason to deny the re8uested inspection. 6n 'y %ion! 'hiou, et al. &s. 'y *hi , et al.9'y *hi , et al. &s. 'y %ion! 'hiou, et al., :.;. <o. 1()1=89:.;. <o. 1(9)28, March 20, 2009, the o##icers o# the corporation 0'y %ion! 'hiou, et al.1 denied the 'pouses 'y access to corporate records because o# pendin! ci&il and intra> corporate cases. %his pro pted the 'pouses 'y to #ile se&eral cases a!ainst %ion! 'hiou, et al. %$o o# the co plaints, 6.'. <os. 02?>13283 and 02?>1328=, $ere #or alle!ed &iolation o# 'ection () in relation to 'ection 1)) o# the *orporation *ode. 6n these co plaints, the 'pouses 'y a&erred that they are stoc"holders and directors o# 'y 'iy Ho @ 'ons, 6nc. 0the corporation1 $ho as"ed 'y %ion! 'hiou, et al., o##icers o# the corporation, to allo$ the to inspect the boo"s and records o# the business on three occasions to no a&ail. 6n a letter dated 21 May 2002, 'y %ion! 'hiou, et al. denied the re8uest, citin! ci&il and intra>corporate cases pendin! in court. 6n the t$o other co plaints, 6.'. <o. 02?>1328( and 02?>13288, 'y %ion! 'hiou $as char!ed $ith #alsi#ication under Article 1(2, in relation to Article 1(1 o# the ;e&ised Penal *ode 0;P*1, and per7ury under Article 182 o# the ;P*. Accordin! to the 'pouses 'y, 'y %ion! 'hiou e.ecuted under oath the 2002 :eneral 6n#or ation 'heet 0:6'1 $herein he #alsely stated that the shareholdin!s o# the 'pouses 'y had decreased despite the #act that they had not e.ecuted any con&eyance o# their shares. 'y %ion! 'hiou, et al. ar!ued be#ore the prosecutor that the issues in&ol&ed in the ci&il case #or accountin! and da a!es pendin! be#ore the ;%* o# Manila $ere inti ately related to the t$o cri inal co plaints #iled by the 'pouses 'y a!ainst the , and thus constituted a pre7udicial 8uestion that should re8uire the suspension o# the cri inal co plaints. %hey also ar!ued that the 'pouses 'y5s re8uest #or inspection $as pre ature as the latter5s concern ay be properly addressed once an ans$er is #iled in the ci&il case. 'y %ion! 'hiou, on the other hand, denied the accusations a!ainst hi , alle!in! that be#ore the 2002 :6' $as sub itted to the 'ecurities and ?.chan!e *o ission 0'?*1, the sa e $as sho$n to respondents, $ho at that ti e $ere the President9*hair an o# the Aoard and Assistant %reasurer o# the corporation, and that they did not ob7ect to the entries in the :6'. 'y %ion! 'hiou also ar!ued that the issues raised in the pendin! ci&il case #or accountin! presented a pre7udicial 8uestion that necessitated the suspension o# cri inal proceedin!s. Bn 29 Cece ber 2002, the in&esti!atin! prosecutor issued a resolution reco endin! the suspension o# the cri inal co plaints #or &iolation o# the *orporation *ode and the dis issal o# the cri inal co plaints #or #alsi#ication and per7ury a!ainst 'y %ion! 'hiou. %he re&ie$in! prosecutor appro&ed the resolution. %he 'pouses 'y o&ed #or the reconsideration o# the resolution, but their otion $as denied on 1) June 200). %he 'pouses 'y thereupon #iled a petition #or re&ie$ $ith the Cepart ent o# Justice 0CBJ1, $hich the latter denied in a resolution issued on 02 'epte ber 200). %heir subse8uent otion #or reconsideration $as li"e$ise denied in the resolution o# 20 July 2003. %he 'pouses 'y ele&ated the CBJ5s resolutions to the *ourt o# Appeals throu!h a petition #or certiorari, i putin! !ra&e abuse o# discretion on the part o# the CBJ. %he appellate court !ranted

the petition and directed the *ity Prosecutor5s B##ice to #ile the appropriate in#or ations a!ainst 'y %ion! 'hiou, et al. #or &iolation o# 'ection (), in relation to 'ection 1)) o# the *orporation *ode and o# Articles 1(2 and 182 o# the ;P*. %he appellate court ruled that the ci&il case #or accountin! and da a!es cannot be dee ed pre7udicial to the aintenance or prosecution o# a cri inal action #or &iolation o# 'ection () in relation to 'ection 1)) o# the *orporation *ode since a #indin! in the ci&il case that respondents ishandled or isappropriated the #unds $ould not be deter inati&e o# their !uilt or innocence in the cri inal co plaint. 6n the sa e anner, the cri inal co plaints #or #alsi#ication and9or per7ury should not ha&e been dis issed on the !round o# pre7udicial 8uestion because the accountin! case is unrelated and not necessarily deter inati&e o# the success or #ailure o# the #alsi#ication or per7ury char!es. 4urther ore, the *ourt o# Appeals held that there $as probable cause that 'y %ion! 'hiou had co itted #alsi#ication and that the *ity o# Manila $here the 2002 :6' $as e.ecuted is the proper &enue #or the institution o# the per7ury char!es. 'y %ion! 'hiou, et al. sou!ht reconsideration o# the *ourt o# Appeals decision but their otion $as denied. 'y %ion! ar!ue be#ore the 'upre e *ourt that/ . . . in a##ir in!, odi#yin! or re&ersin! the reco endations o# the public prosecutor cannot be the sub7ect o# certiorari or re&ie$ o# the *ourt o# Appeals because the CBJ is not a 8uasi>7udicial body $ithin the pur&ie$ o# 'ection 1, ;ule =3 o# the ;ules o# *ourt. 6n any e&ent, they ar!ue, assu in! $ithout ad ittin! that the #indin!s o# the CBJ ay be sub7ect to 7udicial re&ie$ under 'ection 1, ;ule =3 o# the ;ules o# *ourt, the CBJ has not co itted any !ra&e abuse o# discretion in a##ir in! the #indin!s o# the *ity Prosecutor o# Manila. %he 'upre e *ort ruled that the CBJ !ra&ely abused its discretion $hen it suspended the hearin! o# the char!es #or &iolation o# the *orporation *ode on the !round o# pre7udicial 8uestion and $hen it dis issed the cri inal co plaints. Accordin! to the 'upre e *ourt/ 6ndeed, a preli inary proceedin! is not a 8uasi>7udicial #unction and that the CBJ is not a 8uasi> 7udicial a!ency e.ercisin! a 8uasi>7udicial #unction $hen it re&ie$s the #indin!s o# a public prosecutor re!ardin! the presence o# probable cause. Moreo&er, it is settled that the preli inary in&esti!ation proper, i.e., the deter ination o# $hether there is reasonable !round to belie&e that the accused is !uilty o# the o##ense char!ed and should be sub7ected to the e.pense, ri!ors and e barrass ent o# trial, is the #unction o# the prosecution. %his *ourt has adopted a policy o# non>inter#erence in the conduct o# preli inary in&esti!ations and lea&es to the in&esti!atin! prosecutor su##icient latitude o# discretion in the deter ination o# $hat constitutes su##icient e&idence as $ill establish probable cause #or the #ilin! o# in#or ation a!ainst the supposed o##ender. As in e&ery rule, ho$e&er, there are settled e.ceptions. Hence, the principle o# non>inter#erence does not apply $hen there is !ra&e abuse o# discretion $hich $ould authoriDe the a!!rie&ed person to #ile a petition #or certiorari and prohibition under ;ule =3, 199( ;ules o# *i&il Procedure.

As correctly #ound by the *ourt o# Appeals, the CBJ !ra&ely abused its discretion $hen it suspended the hearin! o# the char!es #or &iolation o# the *orporation *ode on the !round o# pre7udicial 8uestion and $hen it dis issed the cri inal co plaints. A pre7udicial 8uestion co es into play !enerally in a situation $here a ci&il action and a cri inal action are both pendin! and there e.ists in the #or er an issue $hich ust be pree pti&ely resol&ed be#ore the cri inal action ay proceed since ho$soe&er the issue raised in the ci&il action is resol&ed $ould be deter inati&e 7uris et de 7ure o# the !uilt or innocence o# the accused in the cri inal case. %he reason behind the principle o# pre7udicial 8uestion is to a&oid t$o con#lictin! decisions. 6t has t$o essential ele ents/ 0a1 the ci&il action in&ol&es an issue si ilar or inti ately related to the issue raised in the cri inal action- and 0b1 the resolution o# such issue deter ines $hether or not the cri inal action ay proceed. %he ci&il action and the cri inal cases do not in&ol&e any pre7udicial 8uestion. %he ci&il action #or accountin! and da a!es, *i&il *ase <o. 02>10=)3= pendin! be#ore the ;%* Manila, Aranch )=, see"s the issuance o# an order co pellin! the 'pouses 'y to render a #ull, co plete and true accountin! o# all the a ounts, proceeds and #und paid to, recei&ed and earned by the corporation since 1992 and to restitute it such a ounts, proceeds and #unds $hich the 'pouses 'y ha&e isappropriated. %he cri inal cases, on the other hand, char!e that the 'pouses 'y $ere ille!ally pre&ented #ro !ettin! inside co pany pre ises and #ro inspectin! co pany records, and that 'y %ion! 'hiou #alsi#ied the entries in the :6', speci#ically the 'pouses 'y5s shares in the corporation. 'urely, the ci&il case presents no pre7udicial 8uestion to the cri inal cases since a #indin! that the 'pouses 'y ishandled the #unds $ill ha&e no e##ect on the deter ination o# !uilt in the co plaint #or &iolation o# 'ection () in relation to 'ection 1)) o# the *orporation *ode- the ci&il case concerns the &alidity o# 'y %ion! 'hiou5s re#usal to allo$ inspection o# the records, $hile in the #alsi#ication and per7ury cases, $hat is aterial is the &eracity o# the entries ade by 'y %ion! 'hiou in the s$orn :6'. Bn the issue o# probable cause, the 'upre e *ourt ruled/ Anent the issue o# probable cause, the *ourt also #inds that there is enou!h probable cause to $arrant the institution o# the cri inal cases. %he ter probable cause does not ean Eactual and positi&e cause5 nor does it i port absolute certainty. 6t is erely based on opinion and reasonable belie#. %hus a #indin! o# probable cause does not re8uire an in8uiry into $hether there is su##icient e&idence to procure a con&iction. 6t is enou!h that it is belie&ed that the act or o ission co plained o# constitutes the o##ense char!ed. Precisely, there is a trial #or the reception o# e&idence o# the prosecution in support o# the char!e. 6n order that probable cause to #ile a cri inal case ay be arri&ed at, or in order to en!ender the $ell>#ounded belie# that a cri e has been co itted, the ele ents o# the cri e char!ed should be present. %his is based on the principle that e&ery cri e is de#ined by its ele ents, $ithout $hich there should be>at the ost>no cri inal o##ense. . .

6n the instant case, ho$e&er, the *ourt #inds that the denial o# inspection $as predicated on the pendin! ci&il case a!ainst the 'pouses 'y. %his is e&ident #ro the 21 May 2002 letter o# 'y %ion! 'hiou, et al.5s counsel to the 'pouses 'y . . . ?&en in their Joint *ounter>A##ida&it dated 22 'epte ber 2002, 'y %ion! 'hiou, et al. did not a"e any alle!ation that +the person de andin! to e.a ine and copy e.cerpts #ro the corporation5s records and inutes has i properly used any in#or ation secured throu!h any prior e.a ination o# the records or inutes o# such corporation or o# any other corporation, or $as not actin! in !ood #aith or #or a le!iti ate purpose in a"in! his de and., 6nstead, they erely reiterated the pendency o# the ci&il case. %here bein! no alle!ation o# i proper oti&e, and it bein! undisputed that 'y %ion! 'hiou, et al. denied 'y *hi and 4elicidad *han 'y5s re8uest #or inspection, the *ourt rules and so holds that the CBJ erred in dis issin! the cri inal char!e #or &iolation o# 'ection () in relation to 'ection 1)) o# the *orporation *ode. With respect to probable cause #or #alsi#ication, the 'upre e *ourt ruled/ %he 'pouses 'y char!e 'y %ion! 'hiou $ith the o##ense o# #alsi#ication o# public docu ents under Article 1(1, para!raph )- and9or per7ury under Article 182 o# the ;e&ised Penal *ode 0;P*1. %he ele ents o# #alsi#ication o# public docu ents throu!h an untruth#ul narration o# #acts are/ 0a1 the o##ender a"es in a docu ent untruth#ul state ents in a narration o# #acts- 0b1 the o##ender has a le!al obli!ation to disclose the truth o# the #acts narrated-0c1 the #acts narrated by the o##ender are absolutely #alse- and 0d1 the per&ersion o# truth in the narration o# #acts $as ade $ith the $ron!#ul intent to in7ure a third person. Bn the other hand, the ele ents o# per7ury are/ 0a1 that the accused ade a state ent under oath or e.ecuted an a##ida&it upon a aterial atter- 0b1 that the state ent or a##ida&it $as ade be#ore a co petent o##icer, authoriDed to recei&e and ad inister oath- 0c1 that in that state ent or a##ida&it, the accused ade a $ill#ul and deliberate assertion o# a #alsehood- and, 0d1 that the s$orn state ent or a##ida&it containin! the #alsity is re8uired by la$ or ade #or a le!al purpose. A :eneral 6n#or ation 'heet 0:6'1 is re8uired to be #iled $ithin thirty 0201 days #ollo$in! the date o# the annual or a special eetin!, and ust be certi#ied and s$orn to by the corporate secretary, or by the president, or any duly authoriDed o##icer o# the corporation. 4ro the records, the 2002 :6' sub itted to the '?* on 8 April 2002 $as e.ecuted under oath by 'y %ion! 'hiou in Manila, in his capacity as Fice President and :eneral Mana!er. Ay e.ecutin! the docu ent under oath, he, in e##ect, attested to the &eracity o# its contents. %he 'pouses 'y clai that the entries in the :6' pertainin! to the do not re#lect the true nu ber o# shares that they o$n in the co pany. %hey attached to their co plaint the 2002 :6' o# the co pany, also e.ecuted by 'y %ion! 'hiou, and co pared the entries therein &is>a>&is the ones in the 2002 :6'. %he 'pouses 'y noted the ar"ed decrease in their shareholdin!s, a&errin! that at no ti e a#ter the e.ecution o# the 2002 :6', up to the ti e o# the #ilin! o# their cri inal co plaints did they e.ecute or authoriDe the e.ecution o# any docu ent or deed trans#errin!, con&eyin! or disposin! their shares or any portion thereo#- and thus there is absolutely no basis #or the #i!ures re#lected in the 2002 :6'. %he 'pouses 'y clai that the #alse state ents $ere ade by 'y %ion! 'hiou $ith the $ron!#ul intent o# in7urin! the . All the ele ents o# both o##enses are su##iciently a&erred in the co plaint>a##ida&its.

%he *ourt a!rees $ith the *ourt o# Appeals5 holdin!, citin! the case o# 4abia &. *ourt o# Appeals, that the doctrine o# pri ary 7urisdiction no lon!er precludes the si ultaneous #ilin! o# the cri inal case $ith the corporate9ci&il case. Moreo&er, the *ourt #inds that the *ity o# Manila is the proper &enue #or the per7ury char!es, the :6' ha&in! been subscribed and s$orn to in the said place. Gnder 'ection 100a1, ;ule 110 o# the ;e&ised ;ules o# *ourt, the cri inal action shall be instituted and tried in the court o# the unicipality or territory $here the o##ense $as co itted or $here any o# its essential in!redients occurred. 6n Fillanue&a &. 'ecretary o# Justice, the *ourt held that the #elony is consu ated $hen the #alse state ent is ade. %hus in this case, it $as alle!ed that the per7ury $as co itted $hen 'y %ion! 'hiou subscribed and s$orn to the :6' in the *ity o# Manila, thus, #ollo$in! 'ection 100a1, ;ule 110 o# the ;e&ised ;ules o# *ourt, the *ity o# Manila is the proper &enue #or the o##ense.