Case Summary (G.R. No. 172948)
Petitioner
PASAR invoked the Regional Trial Court’s equitable powers to obtain a writ of preliminary injunction forbidding respondents from accessing records it deemed confidential or nonexistent, arguing that the exercise of the inspection right would cause irreparable harm to its business and trade secrets.
Respondents
Lim, Agcaoili, and Padilla, each holding 500 shares, insisted on their statutory right under the Corporation Code to inspect all business transaction records and meeting minutes, maintaining that no legitimate basis existed for PASAR’s blanket refusal and that their demands were made in good faith.
Key Dates
• February 4, 2004: PASAR filed its petition for injunction and damages with prayer for preliminary injunction.
• April 14, 2004: RTC granted the writ, enjoining respondents pending classification of protected records.
• May 26, 2004: Respondents moved to dissolve the injunction.
• January 10, 2005: RTC denied both the motion to dismiss and the motion for dissolution.
• January 24, 2006 & May 18, 2006: Court of Appeals lifted and cancelled the injunction by certiorari.
• October 5, 2016: Supreme Court rendered its decision under the 1987 Constitution.
Applicable Law
• 1987 Constitution (freedom of commerce, due process)
• Corporation Code, particularly Section 74 (stockholder inspection rights) and Section 144 (penalties)
• Rules of Court, Rule 58 on preliminary injunctions and Rule 65 on certiorari
• Interim Rules on Intra-Corporate Controversies under the Securities Regulation Code
Procedural History
PASAR first secured a preliminary injunction from the RTC, which held that respondents’ inspection right could be temporarily limited until the court determined which records were truly confidential or nonexistent. The respondents’ motions to dismiss and dissolve the writ were denied. On certiorari, the Court of Appeals found no basis for injunctive relief and lifted the injunction. PASAR then elevated the matter to the Supreme Court, seeking reinstatement of the injunction and additional protective orders.
Issue
Whether a corporation may pursue injunctive relief to restrain a stockholder from exercising the statutory right to inspect corporate books and records, and whether the RTC committed grave abuse of discretion by issuing the preliminary injunction.
Supreme Court Ruling
- A writ of preliminary injunction is an extraordinary remedy requiring proof of (a) a clear right, and (b) threatened or actual violation of that right. PASAR failed to present evidence of an existing right to enjoin respondents, or of irreparable injury beyond mere apprehension.
- Under Section 74 of the Corporation Code, stockholders enjoy a presumptive right to inspect all business transaction records and meeting minutes at reasonable times and locations, subject to defenses that must be affirmatively pleaded and proved by the corporation (improper motive, prior misuse, or lack of legitimate purpose).
- Jurisprudence establishes that objections to inspection must be raised defensively—typically in an action for mandamus or damages—and cannot serve as the basis for a corporation’s pre-emptive injunction. The proper remedy for a stockho
Case Syllabus (G.R. No. 172948)
Facts
- Philippine Associated Smelting and Refining Corporation (PASAR) is a Philippine corporation engaged in copper smelting and refining.
- Respondents Pablito O. Lim, Manuel A. Agcaoili, and Consuelo M. Padilla are former senior officers of PASAR and each holds 500 shares as stockholders.
- Respondents repeatedly demanded to inspect PASAR’s corporate books, including records classified by PASAR as “confidential or inexistent.”
- PASAR asserted that inspection of certain sensitive documents would expose trade secrets and confidential information, and that respondents threatened to file criminal complaints and involve the media when denied access.
Procedural History
- February 4, 2004: PASAR filed an Amended Petition for Injunction and Damages, praying for a preliminary injunction to restrain respondents from inspecting confidential or inexistent records.
- February 23, 2004: Respondents moved to dismiss the petition for lack of cause, litis pendentia, venue defect, and nuisance/harassment suit.
- April 14, 2004: Regional Trial Court (RTC), Branch 158, Pasig City, granted the writ of preliminary injunction; respondents were enjoined from inspecting records classified as confidential or inexistent pending further court orders, and PASAR posted a bond of ₱500,000.
- May 26, 2004: Respondents filed a Motion for Dissolution of the writ, arguing absence of irreparable injury to PASAR and improper petition by the corporation.
- January 10, 2005: RTC denied the Motion to Dismiss (deeming it a prohibited pleading under the Interim Rules on Intra-Corporate Controversies) and the Motion for Dissolution (finding no unjust denial of inspection rights and risk of rendering final judgment ineffectual).
- Respondents elevated the matter to the Court of Appeals via Petition for Certiorari under Rule 65, questioning the propriety of the preliminary injunction.
- January 24, 2006 (Decision) and May 18, 2006 (Resolution): Court of Appeals lifted and cancelled the writ of preliminary injunction on the ground that PASAR had no basis to restrain respondents’ stockholder right of inspection and that the proper remedy lay in mandamus by the stockho