Pardo v. HERCULES LUMBER CO. et al.

(1924)
1) Pardo (a stockholder in HERCULES LUMBER CO.) filed a Original
Action for Mandamus before the SC to compel HERCULES LUMBER CO.
et al. to permit him and his duly authorized agent and representative
to examine the records and business transactions of said company.

2) acting secretary of the said company, has refused to permit the

petitioner or his agent to inspect the records and business transactions
of the said Hercules Lumber Company, Inc., at times desired by the
petitioner.

3) C answer:

a) Art. 10 of By-laws declared that

"Every shareholder may examine the books of the company and
other documents pertaining to the same upon the days which
the BOD shall annually fix."

b) at the directors' meeting of the respondent corporation

held on February 16, 1924, the board passed a resolution to the
following effect:

"The board also resolved to call the usual general (meeting of

shareholders) for March 30 of the present year, with notice to
the shareholders that the books of the company are at their
disposition from the 15th to 25th of the same month for
examination, in appropriate hours."

4) C contention:

this resolution of the board constitutes a lawful restriction on the

right conferred by statute; and it is insisted that as the petitioner
has not availed himself of the permission to inspect the books
and transactions of the company within the ten days thus
defined, his right to inspection and examination is lost, at least
for this year.

HELD: We are entirely unable to concur in this contention. The

general right given by the statute may not be lawfully abridged to the
extent attempted in this resolution. It may be admitted that the
officials in charge of a corporation may deny inspection when sought at
unusual hours or under other improper conditions; but neither the
executive officers nor the board of directors have the power to deprive
a stockholder of the right altogether. A by-law unduly restricting the
right of inspection is undoubtedly invalid.

RATIO: It will be noted that our statute declares that the right of
inspection can be exercised "at reasonable hours." This means at
reasonable hours on business days throughout the year, and
not merely during some arbitrary period of a few days chosen
by the directors.

Gonzales v. PNB (1983)

1) Gonzales (has 1 share in PNB) filed a Mandamus before RTC to
compel the PNB to allow him to inspect the latter’s records so that he
could determine whether certain bank transactions entered into before
he became a SH, whether the ff transactions were valid and:

a) to satisfy himself as to the truth of the published reports that

PNB has guaranteed the obligation of' Southern Negros Development
Corporation in the purchase of a US$23 million sugar-mill to be
financed by Japanese suppliers and financiers

b) that PNB is financing the construction of the P21M

Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc., and

c) the construction of Passi Sugar Mill at Iloilo by the Honiron

Philippines. Inc.,

2) His written request for such examination was denied by PNB.

3) PNB AVP and Legal Counsel: denied his request for being not
germane to his interest as a 1-share stockholder and for the cloud of
doubt as to his real intention and purpose in acquiring said share.

4) Gonzales previously admitted that he acquired 1 share in the

PNB precisely to exercise the right of inspection.

HELD: Petition Denied. Although the petitioner has claimed that

he has justifiable motives in seeking the inspection of the books of the
respondent bank, he has not set forth the reasons and the purposes
for which he desires such inspection, except to satisfy himself as to the
truth of published reports regarding certain transactions entered into
by the respondent bank and to inquire into their validity.
 'The circumstances under which he acquired one share of stock
in the respondent bank purposely to exercise the right of inspection do
not argue in favor of his good faith and proper motivation. Admittedly
he sought to be a stockholder in order to pry into transactions entered
into by the respondent bank even before he became a stockholder. His
obvious purpose was to arm himself with materials which he can use
against the respondent bank for acts done by the latter when the
petitioner was a total stranger to the same. He could have been
impelled by a laudable sense of civic consciousness, but it could not
be said that his purpose is germane to his interest as a
stockholder.

RATIO: However, while seemingly enlarging the right of inspection,

the new Code has prescribed limitations to the same. It is now
expressly required as a condition for such examination that the
one requesting it must not have been guilty of using improperly
any information secured through a prior examination, and that
the person asking for such examination must be acting in good
faith and for a legitimate purpose in making his demand.

Campos Note: these are not requirements but defenses.

Veraguth v. ISABEL SUGAR CO., (and Pres and Sec.) (1932)

1) Veraguth is a SH and D of ISABEL SUGAR CO.

2) Director Veraguth telegraphed the secretary of the company,

asking the latter to forward in the shortest possible time a certified
copy of the Board resolution concerning the payment of attorney's fees
in the case against the Isabela Sugar Company and others.

3) The secretary answered:

a) since the minutes of the meeting in question had not been
signed by the directors present, a certified copy could not
be furnished,

b) as to other proceedings of the stockholders a request

should be made to the president of the Isabela Sugar
Company, Inc.

4) It further appears that the BOD adopted a resolution providing

for inspection of the books and the taking of copies "by authority of
the President of the corporation previously obtained in each case."
HELD 1: We do not think that anything improper occurred when the
secretary declined to furnish certified copies of minutes which had not
been approved by the board of directors,

A director or stockholder has no absolute right to secure certified

copies of the minutes of the corporation until these minutes have been
written up and approved by the directors.

HELD 2: While so much of the last resolution of the board of

directors as provides for the prior approval of the president of the
corporation before the books of the corporation can be inspected puts
an illegal obstacle in the way of a stockholder or director, that
resolution, so far as we are aware, has not been enforced to the
detriment of anyone.

HELD OVER-ALL: Petition Denied.

Gokongwei v. SEC (1979)

1) Gokongwei’s asked the SEC to issue an order to SMC granting his
request to examine the records of San Miguel International, Inc., a
fully owned subsidiary of San Miguel Corporation.

2) The books of SMI were in the possession of the parent, SMC.

3) SEC: denied request

4) Gokongwei contention before SC:

ISSUE: WON respondent SEC gravely abused its discretion in

denying Petitioner Gokongwei’s request for an examination of the
records of San Miguel International, Inc., a fully owned subsidiary of
San Miguel Corporation?

HELD: Court voted unanimously to grant the petition insofar as it

prays that petitioner be allowed to examine the books and records of
(SMI), as specified by him.

In the case at bar, considering that the foreign subsidiary is

wholly owned by respondent San Miguel Corporation and, therefore,
under its control, it would be more in accord with equity, good faith
and fair dealing to construe the statutory right of petitioner as
stockholder to inspect the books and records of the corporation as
extending to books and records of such wholly owned subsidiary which
are in respondent corporation's possession and control.
Evangelista et al. v. Santos (1950)
1) This is an action by the minority stockholders of a
corporation against its principal officer for damages resulting from his
mismanagement of its affairs and misuse of its assets.

2) Plaintiffs Evangelista et al. are minority SHs of

VITALI LUMBER COMPANY, INC. (a Philippine corporation organized for
the exploitation of a lumber concession in Zamboanga).

3) Defendant Santos holds more than 50 % of the stocks of

said corporation and also is and always has been the president,
manager, and treasurer thereof.

4) CoA: Defendant Santos (in such triple capacity)

through fault, neglect, and abandonment allowed its lumber
concession to lapse and its properties and assets (among them
machineries, buildings, warehouses, trucks, etc.) to disappear, thus
causing the complete ruin of the corporation and total depreciation of
its stocks.

5) Prayer: require defendant

(a) to render an account of his administration of the corporate

affairs and assets

(b) to pay plaintiffs the value of their respective participation in

said assets on the basis of the value of the stocks held by each of
them; and

(c) to pay the costs of suit.

HELD 1: The injury complained of is primarily to the corporation, so

that the suit for the damages claimed should be by the corporation
rather than by the stockholders

The complaint shows that the action is for damages resulting

from mismanagement of the affairs and assets of the corporation by
its principal officer, it being alleged that defendant's maladministration
has brought about the ruin of the corporation and the consequent loss
of value of its stocks.

RATIO 1: The stockholders may not directly claim those damages for
themselves for that would result in the appropriation by, and the
distribution among them of part of the corporate assets before the
dissolution of the corporation and the liquidation of its debts and
liabilities, something which cannot be legally done.

HELD 2: NOT A DERIVATIVE SUIT!

In the present case, the plaintiff stockholders have brought

the action not for the benefit of the corporation but for their
own benefit, since they ask that the defendant make good the losses
occasioned by his mismanagement and pay to them the value of their
respective participation in the corporate assets on the basis of their
respective holdings. Clearly, this cannot be done until all corporate
debts, if there be any, are paid and the existence of the corporation
terminated by the limitation of its charter or by lawful dissolution in
view of the provisions of section 16 of the Corporation Law.

It results that Plaintiffs' complaint shows no cause of action in

their favor so that the lower court did not err in dismissing the
complaint on that ground.

REPUBLIC BANK v. Cuaderno et al. (1967)

1) In the Court below, Damaso Perez, a stockholder of the Republic
Bank, a Philippine banking corporation domiciled in Manila, instituted a
derivative suit for and in behalf of said Bank, against Miguel Cuaderno,
Bienvenido Dizon, the Board of Directors of the Republic Bank, and the
Monetary Board of the Central Bank of the Philippines.

2) Plaintiff CoA: that Damaso Perez had complained to the

Monetary Board of the Central Bank against certain frauds allegedly
committed by defendant Pablo Roman, in that being chairman of the
Board of Directors of the Republic Bank, and of its Executive Loan
Committee, in 1957 to 1959, "in grave abuse of his fiduciary duty and
taking advantage of his said positions and in connivance with other
officials of the Republic Bank", Roman had fraudulently granted or
caused to be granted loans to fictitious and non-existing persons and
to their close friends, relative and/or employees, who were in reality
their dummies, on the basis of fictitious and inflated appraised values
of real estate properties; that said loans amounted to almost 4 million
pesos.