VERAGUTH v.
ISABELA SUGAR COMPANY In any case, according to the secretary, access to the books, records, and
G.R. No. L-37064/OCT 4, 1932 / MALCOLM, J./CORPO- THE RIGHT OF
INSPECTION/ECPPOTIAN
NATURE Mandamus
PETITIONERS EUGENIO VERAGUTH
RESPONDENTS ISABELA SUGAR COMPANY, INC., GIL MONTILLA, Acting
President, and AGUSTIN B. MONTILLA, Secretary of the corp
SUMMARY. Veraguth is a director and stockholder of Isabela Sugar Co. He sought to
compel the BoD of Isabela Sugar to provide him with prior notice and minutes of all
regular and special meetings of the corporation. Defense of the secretary: (1)
minutes sought by Veraguth have not yet been signed by the present directors; and
(2) inspection is only by authority of the president previously obtained. The SC held
that although Veraguth is entitled to the minutes of the meeting, the corporate
secretary was justified in refusing to grant him copies to the same in light of the fact
that it had not yet been approved/signed by the board of directors. However, the
board resolution providing that inspection can only be by authority of president is
void.
DOCTRINE. Directors have the unqualified right to inspect the books and records of
a corporation at all reasonable times. Pretexts may not be put forward by the
officers to keep a director or SH from inspecting the books and minutes of the
corporation, and the right to inspect cannot be denied on the grounds that the
director or SHs are on unfriendly terms with the officers.
A director or SH has no absolute right to secure certified copies of the minutes until
these minutes have been written up and approved by the directors.
FACTS
The petitioner in this case, Eugenio Veraguth, in his capacity as a director
and stockholder of the Isabela Sugar Company, Inc. (Isabela) prays that
o The respondents be required within five days from receipt of notice
of this petition to show cause why they refuse to notify the
petitioner, as director, of the regular and special meetings of the
board of directors, and to place at his disposal at reasonable
hours, the minutes, and documents, and books of the aforesaid
corporation, for his inspection as director and stockholder
o A final and absolute writ of mandamus be issued to each and all of
the respondents to notify immediately the petitioner within the
reglamentary period, of all regular and special meetings of the
board of directors of the Isabela Sugar Central Company, Inc., and
to place at his disposal at reasonable hours the minutes,
documents, and books of said corporation for his inspection as
director and stockholder, and to issue immediately, upon payment
of the fees, certified copies of any documentation in connection
with said minutes, documents, and the books of the aforesaid
corporation.
**to be specific he was asking for a copy of the minutes of the special
meeting wherein the Board of Directors of the corporation issued a
resolution concerning the payment of attorneys fees with regard to
litigations that the corporation was involved in
In response to his demand for access to the minutes of the meeting in
question, the corporate secretary alleged that such minutes could not be
released because it had not been signed by the directors present during the
meeting.
minutes of any meeting could not be granted without prior approval of the
corporations president as provided in the resolution of the board of
directors. .
This was raised to the SC agad and sabi ni Malcolm, J., On further
reflection, we now feel that this was error, and that it would have been the
correct practice to have required the petitioner to present the action in a
CFI
ISSUES & RATIO.
1. WON Veraguth was entitled to access to the books, records, and meetings of
meetings of the corporation YES, but he cannot secure copies.
First, the Court examined sec. 51 of the Corporation Code which states:
All business corporations shall keep and carefully preserve a record of all business
transactions, and a minute of all meetings of directors, members, or stockholders, in
which shall be set forth in detail the time and place of holding the meeting was
regular or special, if special its object, those present and absent, and every act done
or ordered done at the meeting. . . .
The record of all business transactions of the corporation and the minutes
of any meeting shall be open to the inspection of any director, member, or
stockholder of the corporation at reasonable hours.
According to the Court this provision of the Corporation Code puts into law the
general principle of corporation law that the directors of a corporation have
unqualified right to inspect the books and records of the corporation at all
reasonable times. Further, the fact that strained relations may exist between
directors and shareholders can never justify denial of the right to inspection.
However, a director or SH has no absolute right to secure certified copies
of the minutes until these minutes have been written up and approved by
the directors.
As applied, although Veraguth is entitled to the minutes of the meeting that he
requested, the corporate secretary was justified in refusing to grant him access to
the same in light of the fact that it had not yet been approved/signed by the board
of directors.
The Court, however, held that requiring prior approval of the president before the
right to inspect could be exercised was illegal. Finally, the Court held that Veraguth
had not sufficiently demonstrated his right to the issuance of a writ of mandamus
no damage was caused by his failure to attend the special meeting and that there
was no reason to believe that the corporate secretary would not send him notice as
regards future regular and special meetings (parang presumption of regularity).
DECISION. Petition denied with costs.
NOTES:
This is a family dispute, the petitioner and the individual respondents
belonging to the same family
There is a test case between the petitioner and the respondents has been
begun in the Court of First Instance of Occidental Negros involving
hundreds of thousands of pesos, and that the appellate court should not
intrude its views to give an advantage to either party.