Case Summary (G.R. No. 93833)
Petitioner
Antonio Pardo, asserted stockholder of the Hercules Lumber Company, Inc., sought a writ of mandamus from the Supreme Court to compel respondents to permit him, or his duly authorized agent, to examine the company’s records and business transactions.
Respondents
Hercules Lumber Company, Inc. and Ignacio Ferrer (acting secretary). The respondents admitted certain petition allegations but defended the refusal to permit inspection by invoking a by-law provision and a board resolution that purportedly limited inspection to specified days.
Key Dates
Decision date: August 1, 1924. Board resolution referenced in the pleadings was passed at a directors’ meeting on February 16, 1924, fixing March 15–25 as the period for inspection and scheduling the usual general meeting for March 30.
Applicable Law and Constitutional Basis
The action turns on the statutory right conferred by section 51 of Act No. 1459 (the statute cited in the opinion). Because the decision was rendered in 1924, it was decided under the legal framework then operative and on the statutory provisions cited; the 1987 Constitution is not applicable to this 1924 decision.
Procedural Posture
This is an original mandamus proceeding filed in the Supreme Court. The respondents filed an answer admitting some facts and asserting defenses; the petitioner demurred to the answer. The Supreme Court sua sponte (or on the record) resolved the demurrer issue and determined entitlement to relief.
Facts
It is inferentially admitted that Pardo is a stockholder and that Ferrer, as acting secretary, refused to permit Pardo or his authorized representative to inspect the corporate records at times Pardo desired. The corporation’s by-laws contain Article 10 providing that “Every shareholder may examine the books of the company and other documents pertaining to the same upon the days which the board of directors shall annually fix.” At a directors’ meeting on February 16, 1924, the board resolved that the books would be open for examination only from March 15 to March 25, with the general shareholders’ meeting on March 30. The respondents also alleged that Pardo’s motives were improper — that he sought information for competitive or litigation purposes.
Issues Presented
- Whether a stockholder (or his duly authorized agent) may exercise the statutory right of inspection granted by section 51 of Act No. 1459.
- Whether a corporate by-law or a board resolution that limits inspection to specific days may lawfully restrict that statutory right.
- Whether the alleged improper motive of the stockholder defeats the statutory right of inspection.
Legal Analysis — Right to Inspect and Agent Authority
The Court affirms that the statutory right of inspection under section 51 of Act No. 1459 may be exercised by a stockholder personally or by a duly authorized agent or representative. The opinion explicitly relies on prior precedent (Philpotts v. Philippine Manufacturing Co. and Berry, 40 Phil. 471) recognizing an agent’s authority to inspect on a stockholder’s behalf. Thus Pardo’s use of an authorized representative does not defeat the right.
Legal Analysis — Limitations by By-law or Board Resolution
The Court rejects the contention that a by-law or board resolution may lawfully abridge the statutory inspection right to a narrow, directorally fixed period. While corporate officers may deny inspection when sought at unreasonable hours or under improper conditions, neither officers nor the board may abrogate the right altogether. A by-law that unduly restricts statutory inspection is invalid. The Court cites authority to this effect (text references to 14 C.J., 7 R.C.L., Thompson on Corporations, and cases such as Harkness v. Guthrie and State v. St. Louis Railroad Co.) and holds that the statutory phrase “at reasonable hours” contemplates reasonable hours on business days throughout the year rather than confinement to an arbitrary brief window established by directors.
Legal Analysis — Sha
...continue readingCase Syllabus (G.R. No. 93833)
Citation and Procedural Posture
- Reported at 47 Phil. 964; G.R. No. 22442; decision dated August 01, 1924.
- Original proceeding in the Supreme Court in which the petitioner, Antonio Pardo, seeks a writ of mandamus.
- Relief sought: compel respondents to permit the petitioner and his duly authorized agent and representative to examine the records and business transactions of the Hercules Lumber Company, Inc.
- The respondents filed an answer admitting certain allegations and asserting defenses; the petitioner demurred to the answer. The case before the Court concerns the demurrer.
Parties and Representation
- Petitioner: Antonio Pardo, described as a stockholder in the Hercules Lumber Company, Inc.
- Respondents: The Hercules Lumber Co., Inc., and Ignacio Ferrer (acting secretary of the company).
- Decision authored by STREET, J.; Justices Johnson, Malcolm, Villamor, Ostrand, and Romualdez concur.
Facts as Alleged and Admitted
- It is inferentially, if not directly, admitted that the petitioner is a stockholder in the Hercules Lumber Company, Inc.
- Ignacio Ferrer, as acting secretary, has refused to permit the petitioner or his agent to inspect the corporate records and business transactions at times desired by the petitioner.
- The corporation’s by-laws contain Article 10, which declares: "Every shareholder may examine the books of the company and other documents pertaining to the same upon the days which the board of directors shall annually fix."
- At a directors' meeting held on February 16, 1924, the board passed a resolution stating in substance: "The board also resolved to call the usual general (meeting of shareholders) for March 30 of the present year, with notice to the shareholders that the books of the company are at their disposition from the 15th to 25th of the same month for examination, in appropriate hours."
- The respondents assert the petitioner has not availed himself of the permission to inspect during the ten-day period (15th to 25th) specified by the board.
Statutory Provision and Controlling Precedent
- The petitioner’s claimed right of inspection is asserted under section 51 of Act No. 1459.
- The Court refers to Philpotts vs. Philippine Manufacturing Co. and Berry (40 Phil., 471) as precedent holding that a stockholder’s right of examination may be exercised by the stockholder in person or by any duly authorized agent or representative.
- The statutory phrase quoted by the Court: the right of inspection can be exercised "at reasonable hours."
Respondents’ Main Contentions (Defenses)
- Primary defense: the board resolution and the by-law (Article 10) lawfully limit the times when inspection may be exercised; because the petitioner did not inspect within the 15th–25th March period fixed by the board, his right is lost, at least for that year.
- Secondary defenses: challenge the petitioner’s motives,