VERAGUTH v. ISABELA SUGAR CO., INC.
RATIO:
Malcolm, J. | Oct. 4, 1932 | Original Action in the SC – Mandamus | Inspection
PETITIONERS: Eugenio Veraguth (Director and Shareholder)
RESPONDENTS: Isabela Sugar Co., Inc., Gil Montanilla (Acting President) and
Agustin Montilla (Secretary)
SUMMARY: Veraguth, a director and stockholder of Isabela Sugar Co., was not
given a notice of the company’s special meeting wherein the company attorneys’
compensation was fixed (notice was addressed to him at Isabela, but his post-office
address was in Pulupandan). He telegraphed the secretary requesting for a certified
copy of the resolution of said meeting, but the latter refused, stating that the directors
present have not yet signed the minutes and that the prior approval of the President
was not obtained. Veraguth filed a mandamus against respondents to compel them to
notify him immediately of any regular or special meetings, to place at his disposal
the minutes, documents and books of the corporation for his inspection, and to be
issued a certified copy thereof. SC held that, while Veraguth, as a director and
stockholder, has an unqualified right to inspect the books and records of the
corporation, he does not have an absolute right to secure certified copies of the
minutes of the corporation until these have been written up and approved by the
directors.
DOCTRINE: Directors of a corporation have the unqualified right to inspect the
books and records of the corporation at all reasonable times.
FACTS:
1. Veraguth alleges that the Secretary failed to notify him in due time of a special
meeting of the company, at which the compensation of the company attorneys
was fixed. He also alleges that he sent a telegraph to the Secretary, asking the
latter to forward in the shortest possible time, a certified copy of the resolution of
the BoD concerning the payment of attorney’s fees in a case filed against Isabela
Sugar Co. The Secretary responded through a letter, stating that a certified copy
could not be furnished, since the minutes in question had not been signed by the
directors present; and that as to the other proceedings of the stockholders, a
request should first be made to the President. It also appears that the BoD adopted
a resolution, at which the authority of the President must be previously obtained
before an inspection of the books and the taking of copies thereof may be done.
2. Hence, Veraguth, in the instant case, prayed that: (a) respondents be required to
show cause why they refused to notify petitioner of the regular and special
meetings of the BoD, to place at his disposal the minutes, documents and books
of the corporation for his inspection, and to issue certified copies of such
documentation; and (b) that a writ of mandamus be issued to respondents to
notify him immediately within the reglementary period, of all regular and special
meetings of the BoD and to place at his disposal the minutes, documents and
books of the corporation for inspection, and to issue immediately, upon payment
of fees, certified copies of said documentation.
ISSUE/S: WoN Veraguth, as a director of the corporation, has a right to inspect the
books and records of the corporation at all reasonable times – YES.
HELD/RULING: Petition DENIED.
1. Sec. 51 of the Corpo Law provides that: "All business corporations shall keep and
carefully preserve a record ofall 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."
2. Directors of a corporation have the unqualified right to inspect the books and
records of the corporation at all reasonable times. Officers of corporations may
not 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
he 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. HOWEVER, the Court does not
conceive 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.
3. The Court did not think that anything improper occurred when the secretary
declined to furnish certified copies of minutes which had not been approved by
the BoD; and that while the last resolution of the BoD 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 has not been enforced to the detriment of anyone.
4. Re: lack of notice of the meeting: The Court held that the issue is moot and
academic since the meeting in question is in the past, and no damage was caused
to Veraguth since his interests were fully protected by PNB. As to future
meetings, the Court presumed that the secretary will fulfill the requirements of
the resolutions of the company pertaining to said meetings, and that it is
incumbent upon Veraguth to give formal notice to the secretary of his post-office
address if he desires notice be sent to a particular place.
J. Vickers, Dissent: (a) Officers of the corporation knew the fact that Veraguth’s
post-office address was in Pulupandan, as evidenced by previous notices, yet they
still sent it to Isabela. Taking into consideration the relations existing between the
parties, the officers purposely sent the notice to Isabela to deprive Veraguth of the
opportunity to attend the meeting. Issue was not moot since it is capable of
repetition. (b) It is within Veraguth’s rights to be given the opportunity to examine
the resolution. It does not appear that there was any necessity for the directors to sign
the resolution in question.
Note: Veraguth and respondents had another suit pending against each other.