765 Phil. 562
BERSAMIN, J.:
Asserting her right as a stockholder, Cecilia Teresita Yulo wrote a letter, dated September 14, 1999, addressed to Terelay Investment and Development Corporation (TERELAY) requesting that she be allowed to examine its books and records on September 17, 1999 at 1:30 o'clock in the afternoon at the latter's office on the 25th floor, Citibank Tower, Makati City. In its reply-letter, dated September 15, 1999, TERELAY denied the request for inspection and instead demanded that she show proof that she was a bona fide stockholder.Following the enactment of Republic Act No. 8799 (The Securities Regulation Code), the case was transferred from the Securities and Exchange Commission to the RTC.
On September 16, 1999, Cecilia Yulo again sent another letter clarifying that her request for examination of the corporate records was for the purpose of inquiring into the financial condition of TERELAY and the conduct of its affairs by the principal officers. The following day, Cecilia Yulo received a faxed letter from TERELAY's counsel advising her not to continue with the inspection in order to avoid trouble.
On October 11, 1999, Cecilia Yulo filed with the Securities and Exchange Commission (SEC), a Petition for Issuance of a Writ of Mandamus with prayer for Damages against TERELAY, docketed as SEC Case No. 10-99-6433. In her petition, she prayed that judgment be rendered ordering TERELAY to allow her to inspect its corporate records, books of account and other financial records; to pay her actual damages representing attorney's fees and litigation expenses of not less than One Hundred Thousand Pesos (P100,000.00); to pay her exemplary damages; and to pay the costs of the suit On May 16, 2000, in the preliminary conference held before the SEC Hearing Officer, the parties agreed on the following:1. Petitioner Cecilia Teresita Yulo is registered as a stockholder in the corporation's stock and transfer book subject to the qualification in the Answer, andThereafter, the parties stipulated that the ISSUES to be resolved are the following:
2. Petitioner had informed the respondent, through demand letter, of her desire to inspect the records of the corporation, but the same was denied by the respondent.1. Whether or not petitioner has the right to inspect and examine TERELAY's corporate records, books of account and other financial records pursuant to Section 74 of the Corporation Code of the Philippines;
2. Whether or not petitioner as stockholder and director of TERELAY has been unduly deprived of her right to inspect and examine TERELAY's corporate records, books of accounts and other financial records in clear contravention of law, which warrants her claim for damages;
3. Whether or not Atty. Reynaldo G. Geronimo and/or the principal officers, Ma. Antonia Yulo Loyzaga and Teresa J. Yulo of respondent corporation are indispensable parties and hence, should be impleaded as respondents;
4. As a prejudicial question, whether or not petitioner is a stockholder of respondent corporation and such being the issue, whether this issue should be threshed out in the probate of the will of the late Luis A. Yulo and settlement of estate now pending with the Regional Trial Court of Manila;
5. Assuming petitioner is a stockholder, whether or not petitioner's mere desire to inquire into the financial condition of respondent corporation and conduct of the affairs of the corporation is a just and sufficient ground for inspection of the corporate records.[4]
Accordingly, petitioner's application for inspection of corporate records is granted pursuant to Rule 7 of the Interim Rules in relation to Section 74 and 75 of the Corporation Code. Defendant, through its officers, is ordered to allow inspection of corporate books and records at reasonable hours on business days and/or furnish petitioner copies thereof all at her expense. In this connection, plaintiff is ordered to deposit to the Court the amount of P1,000.00 to cover the estimated cost of the manpower necessary to produce the books and records and the cost of copying.On September 12, 2003, the CA affirmed the RTC.[7]
Respondent is further ordered to pay petitioner attorney's fees in the amount of P50,000.00
SO ORDERED.[6]
Regarding the issue of jurisdiction, TERELAY avers that it is not within the jurisdiction of the trial court to determine whether or not petitioner-appellee is its stockholder. It contends that a petition for the probate of the will of Cecilia's father, the late Luis A. Yulo, and the settlement of his estate was filed with the Regional Trial Court of Manila. The inventory of the estate includes the five (5) shares which Cecilia is claiming. Being a court of limited jurisdiction, the court a quo could not decide whether or not Luis A. Yulo donated five (5) shares to Cecilia during his lifetime. The position of TERELAY is untenable. As correctly pointed out by Cecilia Yulo, the main issue in this case is the question of whether or not she is a stockholder and therefore, has the right to inspect the corporate books and records. We agree with the ruling of the trial court that the determination of this issue is within the competence of the Regional Trial Court, acting as a special court for intra-corporate controversies, and not in the proceeding for the settlement of the estate of the late Luis Yulo.Secondly, the petitioner's submission that the respondent's "insignificant holding" of only .001% of the petitioner's stockholding did not justify the granting of her application for inspection of the corporate books and records is unwarranted.
On the matter of exhaustion of administrative remedies, TERELAY asserts that the petition for mandamus filed by Cecilia Yulo was premature because she failed to exhaust all available remedies before filing the instant petition. The Court disagrees. A writ of mandamus is a remedy provided by law where despite the stockholder's request for record inspection, the corporation still refuses to allow the stockholder the right to inspect. In the instant case, Cecilia Yulo, through counsel, sent a letter request, dated September 14, 1999, for inspection of corporate records, books of accounts and other financial records, but the same was denied by TERELAY through counsel, in its reply-letter, dated September 15, 1999. Appellee Yulo sent another letter, dated September 16, 1999, reiterating the same request but the same was again denied by TERELAY in a reply-letter dated September 17, 1999. Clearly then, appellee Yulo's right is not pre-mature and may be enforced by a writ of mandamus.
On the contention that there was no stipulation that Cecilia Yulo was registered as a stockholder, TERELAY asserts that the trial court was misled into believing that there was a stipulation or admission that Cecilia Yulo is a registered stockholder in its stock and transfer book. According to TERELAY, the admission or stipulation was that she was registered in the Articles of Incorporation is separate and distinct from being so in the stock and transfer book. TERELAY's argument cannot be sustained. A careful review of the records would show that in the Preliminary Conference Order, dated May 16, 2000, of the SEC Hearing Officer, both parties represented by their respective counsels, agreed on the fact that petitioner-appellee was "registered as a stockholder in respondent-appellant's stock and transfer book subject to the qualifications in the Answer." The records failed to disclose any objection by TERELAY. Neither did TERELAY raise this matter in the SEC hearing held on August 7, 2000 as one of the issues to be determined and resolved.
TERELAY further points out that her name as incorporator, stockholder and director in the Articles of Incorporation and Amendments were unsigned; that she did not pay for the five (5) shares appearing in the Amended Articles of Incorporation and General Information Sheet of TERELAY; that she did not subscribe to the shares; that she has neither been in possession of nor seen the certificate of stock covering the five (5) shares of stock; that the donation of the five (5) shares claimed by her was null and void for failure to comply with the requisites of a donation under Art. 748 of the Civil Code; and that there was no acceptance of the donation by her as donee. TERELAY further contends that Cecilia Yulo's purpose in inspecting the books was to inquire into its financial condition and the conduct of its affairs by the principal officers which are not sufficient and valid reasons. Therefore, the presumption of good faith cannot be accorded her.
TERELAY's position has no merit. The records disclose that the corporate documents submitted, which include the Articles of Incorporation and the Amended Articles of Incorporation, as well as the General Information Sheets and the Quarterly Reports all bear the signatures of the proper parties and their authorized custodians. The signature of appellee under the name Cecilia J. Yulo appears in the Articles of Incorporation of TERELAY. Likewise, her signatures under the name Cecilia Y. Blancaflor appear in the Amended Articles of Incorporation where she signed as Director and Corporate Secretary of TERELAY. The General Information Sheets from December 31, 1977 up to February 20, 2002 all exhibited that she was recognized as director and corporate secretary, and that she had subscribed to five (5) shares of stock. The quarterly reports do not show otherwise.
Verily, petitioner-appellee has presented enough evidence that she is a stockholder of TERELAY. The corporate documents presented support her claim that she is a registered stockholder in TERELAY's stock and transfer book thus giving her the right, under Section 74 par. 2 and Section 75 of the Philippine Corporation Law, to inspect TERELAY's books, records, and financial statements. Section 74, par. 2 and Section 75 of our Corporation Code reads as follows: x x x
Accordingly, Cecilia Yulo as the right to be fully informed of TERELAY's corporate condition and the manner its affairs are being managed. It is well-settled that the ownership of shares of stock gives stockholders the right under the law to be protected from possible mismanagement by its officers. This right is predicated upon self-preservation. In any case, TERELAY did not adduce sufficient proof that Cecilia Yulo was in bad faith or had an ulterior motive in demanding her right under the law.
In view of the foregoing, the Court finds it unnecessary to discuss the other issues raised by TERELAY as they are incapable of defeating the established fact that Cecilia Yulo is a registered stockholder of respondent-applicant.
Finally, the Court agrees with the ruling of the court a quo that the petitioner is entitled to the reasonable amount of P50,000.00 representing attorney's fees for having been compelled to litigate in order to exercise her right of inspection.[14]
By early English decisions it was formerly held that there must be something more than bare suspicion of mismanagement or fraud. There must be some particular controversy or question in which the party applying was interested, and inspection would be granted only so far as necessary for that particular occasion. By the general rule in the United States, however, shareholders have a right to inspect the books and papers of the corporation without first showing any particular dispute or proving any mismanagement or other occasion rendering an examination proper. The privilege, however, is not absolute and the corporation may show in defense that the applicant is acting from wrongful motives.WHEREFORE, the Court AFFIRMS the judgment promulgated on September 12, 2003; and ORDERS the petitioner to pay the costs of suit.
In Guthrie v. Harkness, there was involved the right of a shareholder in a national bank to inspect its books for the purpose of ascertaining whether the business affairs of the bank had been conducted according to law, and whether, as suspected, the bank was guilty of irregularities. The court said: "The decisive weight of American authority recognizes the right of the shareholder, for proper purposes and under reasonable regulations as to place and time, to inspect the books of the corporation of which he is a member . . . In issuing the writ of mandamus the court will exercise a sound discretion and grant the right under proper safeguards to protect the interest of all concerned. The writ should not be granted for speculative purposes or to gratify idle curiosity or to aid a blackmailer, but it may not be denied to the stockholder who seeks the information for legitimate purposes."
Among the purposes held to justify a demand for inspection are the following: (1) To ascertain the financial condition of the company or the propriety of dividends; (2) the value of the shares of stock for sale or investment; (3) whether there has been mismanagement; (4) in anticipation of shareholders' meetings to obtain a mailing list of shareholders to solicit proxies or influence voting; (5) to obtain information in aid of litigation with the corporation or its officers as to corporate transactions. Among the improper purposes which may justify denial of the right of inspection are: (1) Obtaining of information as to business secrets or to aid a competitor; (2) to secure business "prospects" or investment or advertising lists; (3) to find technical defects in corporate transactions in order to bring "strike suits" for purposes of blackmail or extortion.
In general, however, officers and directors have no legal authority to close the office doors against shareholders for whom they are only agents, and withhold from them the right to inspect the books which furnishes the most effective method of gaining information which the law has provided, on mere doubt or suspicion as to the motives of the shareholder. While there is some conflict of authority, when an inspection by a shareholder is contested, the burden is usually held to be upon the corporation to establish a probability that the applicant is attempting to gain inspection for a purpose not connected with his interests as a shareholder, or that his purpose is otherwise improper. The burden is not upon the petitioner to show the propriety of his examination or that the refusal by the officers or directors was wrongful, except under statutory provisions.