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EUGENIO VERAGUTH, Director and Stockholder of the the board of the board of directors at which the

Isabela Sugar Company, Inc., petitioner, vs. ISABELA compensation of the attorneys of the company was
SUGAR COMPANY, INC., GIL MONTILLA, Acting fixed, or WHETHER Director Veraguth, in a spirit of
President, and AGUSTIN B. MONTILLA, Secretary of antogonism, has made the petition merely a pretext to
the same corporation, respondents.i│MALCOLM (1932) cause trouble – UNDETERMINED.

RATIO DECIDENDI WHETHER a director has the unqualified right to


inspect the books and records of the corporation – YES.
Directors of a corporation have the unqualified right
to inspect the books and records of the corporation RATIO
at all reasonable times.
The corporation had by-laws, together with a resolution
A director or stockholder can make copies, of the board of directors, providing for the holding of
abstracts, and memoranda of documents, books, ordinary and special meetings. At the time of the petition,
and papers as an incident to the right of inspection, it cannot yet be determined whether there was a
but cannot, without an order of a court, be permitted malicious attempt to keep Director Veraguth from
to take books from the office of the corporation. attending a special meeting of the board of the board of
directors at which the compensation of the attorneys of
But a director or stockholder does not have any the company was fixed, or whether Director Veraguth, in
absolute right to secure certified copies of the a spirit of antogonism, has made this merely a pretext to
minutes of the corporation until these minutes have cause trouble.
been written up and approved by the directors.
However, what is clear and decisive is that:
FACTS
- the meeting in question is in the past and has
Eugenio Veraguth, a director and stockholder of the become a purely academic question;
Isabela Sugar Company, Inc., filed this petition for
mandamus directly with the Supreme Court against the - no damage was caused to Veraguth by the
Isabela Sugar Company, Inc., Gil Montilla, acting action taken at the special meeting which he did
president of the company, and Agustin B. Montilla, not attend, since his interests were fully
secretary of the company. protected by the Philippine National Bank; and

Veraguth prays that: - as to meetings in the future it is to be presumed


that the secretary of the company will fulfill the
- the corporation and its officers be required within requirements of the resolutions of the company
five days from receipt of notice of the petition to pertaining to regular and special meetings.
show cause why they refuse to notify Veraguth
as director, of the regular and special meetings It is, however, Veraguth’s duty to give formal notice to
of the board of directors, the secretary of his post-office address if he desires
notice sent to a particular residence.
- a final and absolute writ of mandamus be issued
to the corporations and its officers to notify The Corporation Law, section 51, provides that:
immediately the petitioner within the
reglamentary period, of all regular and special All business corporations shall keep and carefully
meetings of the board of directors of the Isabela preserve a record of all business transactions, and a
Sugar Central Company, Inc., 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,
- to place at his disposal at reasonable hours the
if special its object, those present and absent, and every
minutes, documents, and books of the
act done or ordered done at the meeting. . . .
corporation for his inspection as director and
stockholder, and
The record of all business transactions of the
corporation and the minutes of any meeting shall be
- to issue immediately, upon payment of the fees,
open to the inspection of any director, member, or
certified copies of any documentation in
stockholder of the corporation at reasonable hours.
connection with said minutes, documents, and
the books of the corporation.
Directors of a corporation have the unqualified right
to inspect the books and records of the corporation
ISSUE/HELD
at all reasonable times.
WHETHER there was a malicious attempt to keep Pretexts may not be put forward by officers of
Director Veraguth from attending a special meeting of corporations to keep a director or shareholder from
inspecting the books and minutes of the corporation, and Veraguth of any meeting of the board of directors, he
the right of inspection is not to be denied on the ground would be in no better position than he is at the
that the director or shareholder is on unfriendly terms present time. Under the theory of the majority opinion
with the officers of the corporation whose records are Veraguth would have no redress.
sought to be inspected.
The refusal of the secretary of the corporation to allow
A director or stockholder can make copies, abstracts, Veraguth to read the resolution during the meeting on
and memoranda of documents, books, and papers as an the ground that it had not been signed by the directors,
incident to the right of inspection, but cannot, without Veraguth was clearly within his rights in demanding that
an order of a court, be permitted to take books from he be given an opportunity to examine said resolution. It
the office of the corporation. does not appear that there was any necessity for the
directors to sign the resolution in question. Such a
But a director or stockholder does not have any resolution was a part of the secretary's minutes of
absolute right to secure certified copies of the the meeting, which would ordinarily be reported for
minutes of the corporation until these minutes have approval at the next meeting. In any event the
been written up and approved by the directors. directors had adopted the resolution, and whether it was
(citations omitted) to be signed or not, Veraguth as a director of the
corporation had a right to see it.
Nothing improper occurred when the secretary declined
to furnish certified copies of minutes which had not been DISPOSITIVE
approved by the board of directors. While the last
resolution of the board of directors providing for The petition is DENIED.
prior approval of the president of the corporation
before the books of the corporation can be
inspected is 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.

In addition, the case seems to be a family dispute


(Veraguth and the officers are of the same family) that
has yet to develop into one of serious litigation.

DISSENTING Opinion of VICKERS:

An extraordinary meeting of the directors of the


corporation was held at Isabela, Occidental Negros. A
notice of this meeting was sent to Veraguth by registered
letter, but the notice was not received by him until a later
date, because the letter was addressed to the plaintiff at
Isabela. The post-office address of the plaintiff at that
time was Pulupandan, Occidental Negros, and this fact
was known to the defendant officers of the corporation,
as shown by the notices, because these notices were
not mailed until the day of the respective meetings,
although the notice were dated three days prior to the
dates when they were mailed.

It is clear, therefore, that no notice of the meeting


was given to Veraguth, because the notice of said
meeting was sent to Isabela instead of Pulupandan.
Taking into consideration the relations existing between
the parties, I am satisfied that this notice was
addressed to Isabela instead of Pulupandan for the
purpose of depriving the plaintiff of an opportunity
of attending the meeting.

Veraguth seeks the protection of his right to a notice


of all meetings of the board of directors, and prays
that the officers impleaded be required to perform
their duties in accordance with the law. It is obvious
that if the officers should again fail to notify
i
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