G. R. No. 37064. October 04, 1932
EUGENIO VERAGUTH, DIRECTOR AND STOCKHOLDER OF THE ISABELA SUGAR COMPANY, INC., PETITIONER, VS. ISABELA SUGAR COMPANY INC., GIL MONTILLA, ACTING PRESIDENT, AND AGUSTIN B. MONTILL…
MALCOLM, J.:
of the Isabela Sugar Company, Inc., who is the petitioner, and the Isabela Sugar
Company, Inc., Gil Montilla, acting president of the company, and Agustin B.
Montilla, secretary of the company, who are
the respondents. The petitioner
prays: (a) That 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, documents, and books
of the aforesaid corporation, for his inspection as director and stockholder,
and to issue, upon payment of the fees, certified copies of any documentation in
connection with said minutes, documents, and books of the corporation; and (b)
that, in view of the memoranda and hearing of the parties, 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 books of the
aforesaid corporation. To the petition an answer has been interposed by the
respondents, too long to be here summarized, which raised questions of fact and
law. Following the taking of considerable testimony before the clerk as
commissioner, the case has been submitted on memoranda.
It should first be observed that when the case was filed here, it was, in
accordance with settled practice, dismissed without prejudice to the right of
the petitioner to present the action before the Court of First Instance of
Occidental Negros. Thereafter, on a motion of reconsideration being presented,
this order was set aside and the case was permitted to continue in this court.
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 Court of First Instance which is better equipped for the taking of
testimony and the resolution of questions of fact than is the appellate court.
Only with considerable difficulty, therefore, can we decide S the issues of
fact, since none of the members of the court saw or heard the witnesses testify.
Speaking to the first point with which the petition is concerned, relating to
the alleged failure of the secretary of the company to notify the petitioner in
due time of a special meeting of the company, we find the by-laws, together with
a resolution of the board of directors, providing for the holding of ordinary
and special meetings. Whether there was a malicious attempt to keep Director
Veraguth from attending a special meeting of the board of directors at which the
compensation of the attorneys of the company was fixed, or whether Director
Veraguth, in a spirit of antagonism, has made this merely a pretext to cause
trouble, we are unable definitely to say. This much, however, can appropriately
be stated and is decisive, and this is that the meeting in question is in the
past and, therefore, now merely presents an academic question; that no damage
was caused to Veraguth by the action taken at the special meeting which he did
not attend, since his interests were fully protected by the Philippine National
Bank; and that as to meetings in the future it is to be presumed that the
secretary of the company will fulfill the requirements of the resolutions of the
company pertaining to regular and special meetings. It will, of course, be
incumbent upon Veraguth to give formal notice to the secretary of his
post-office address if he desires notice sent to a particular residence.
On the second question pertaining to the right of inspection of the books of
the company, we find Director Veraguth telegraphing the secretary of the
company, asking the latter to forward in the shortest possible time a certified
copy of the resolution of the board of directors concerning the payment of
attorney’s fees in the case against the Isabela Sugar Company and others. To
this the secretary made answer by letter stating that, since the minutes of the
meeting in question had not been signed by the directors present, a certified
copy could not be furnished, and that as to other proceedings of the
stockholders a request should be made to the president of the Isabela Sugar
Company, Inc. It further appears that the board of directors 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.”
The Corporation Law, section 51, provides that:
“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, how authorized, the notice given, whether 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.”
The above puts in statutory form the general principles of Corporation Law.
Directors of a corporation have the unqualified right to inspect the books and
records of the corporation at all reasonable times. Pretexts may not be put
forward by officers of corporations to keep a director or shareholder from
inspecting the books and minutes of the corporation, and the right of inspection
is not to be denied on the ground that 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. (See Fisher’s Philippine Law of Stock Corporations, sec. 153, and
Fletcher Cyclopedia Corporations, vol. 4, Chap. 45.)
Combining the facts and the law, 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, and that 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. In addition, it should be said that this is a family dispute, the
petitioner and the individual respondents belonging- to the same family; that 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. We rule that the petitioner has not made out a case for relief
by mandamus.
Petition denied, with costs.
Avanceña, C. J., Villamor, Villa-Reed, Hull, and Imperial, JJ.,
concur.
DISSENTING
VICKERS, J.,
I dissent.
An extraordinary meeting of the directors of the defendant corporation was
held at Isabela, Occidental Negros, on April 21, 1932. A notice of this meeting
was sent to the plaintiff by registered letter, but the notice was not received
by him until May 4th, 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 is evidenced by the notices of extraordinary meetings dated
February 23 and March 11, 1932, which were sent to the plaintiff at Pulupandan.
The plaintiff complains that he was not given timely notice of the extraordinary
meetings to which these notices refer, because these notices were not mailed
until the day of the. respective meetings, although the notices were dated three
days prior to the dates when they were mailed. These notices of February 23 and
March 11, 1932 were not admissible over the objection of the attorney for the
defendants for the purpose of proving that the plaintiff was not notified of
those two meetings, because there is no allegation to that effect in the
complaint. They were, however, admissible for the purpose of showing that the
defendant officers of the corporation knew the plaintiff’s post-office address
to be Pulupandan. It is clear, therefore, that no notice of the meeting of April
21, 1932 was given the plaintiff, 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.
In the majority opinion it is stated that the meeting in question having
already been held; the failure of the defendants to notify the plaintiff of said
meeting is now merely an academic question. I cannot agree with that conclusion.
The plaintiff seeks the protection of his right to a notice of all meetings of
the board of directors, and prays that the defendant officers be required to
perform their duties in accordance with the law. It is obvious that if the
defendant officers should again fail to notify the plaintiff of any meeting of
the board of directors, he would be in no better position than he is at the
present time. Under the theory of the majority opinion the plaintiff would have
no redress.
As to the second ground of plaintiff’s complaint, or the refusal of the
secretary of the corporation to allow the plaintiff to read the resolution
adopted on April 21, 1932, on the ground that it had not been signed by the
directors, the plaintiff was clearly within his rights in demanding that he be
given an opportunity to examine said resolution. It does not appear that there
was any necessity for the directors to sign the resolution in question. Such a
resolution was a part of the secretary’s minutes of the meeting, which would
ordinarily be reported for approval at the next meeting. In any event the
directors had adopted the resolution, and whether it was to be signed or not,
the plaintiff as a director of the corporation had a right to see it. As to the
fact that ill-feeling exists between the parties and another suit between them
is now pending, that seems to me only an additional reason why the plaintiff
should be protected in the lawful rights which he now seeks to enforce. For the
foregoing reasons, the writ prayed for should be granted.
STREET, J.:
I concur in the dissenting opinion of Justice Vickers.
OSTRAND and ABAD SANTOS, JJ.:
We concur in the dissenting opinion of Justice Vickers.
DISSENTING
BUTTE, J.,
I concur in the foregoing dissent insofar as it relates to the aetions of the
respondent corporation and its officers in denying to the petitioner, as
stockholder and as director, the rights which the statutes confer upon him to
examine and make or receive copies of any and all of the books and papers of the
corporation pertaining to the conduct of its business. The record shows clearly
that the officers and remaining directors have adopted a policy of obstruction
toward the petitioner in this respect and imposed for the future, by resolution,
illegal conditions upon the petitioner’s exercise of the said right.