For 9 October Quiz:

1}. PUNO vs PUNO September 11, 2009, G.R. No. 177066

THIRD DIVISION

JOSELITO MUSNI PUNO G.R. No. 177066

(as heir of the late Carlos Puno),
Petitioner, Present:

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
- versus - VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

PUNO ENTERPRISES, INC., represented by JESUSA Promulgated:

PUNO,
Respondent. September 11, 2009

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Upon the death of a stockholder, the heirs do not automatically become stockholders of the corporation; neither are they
mandatorily entitled to the rights and privileges of a stockholder. This, we declare in this petition for review on certiorari of the
Court of Appeals (CA) Decision[1] dated October 11, 2006 and Resolution dated March 6, 2007 in CA-G.R. CV No. 86137.

The facts of the case follow:

Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno Enterprises, Inc. On March 14, 2003,
petitioner Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated a complaint for specific performance against
respondent. Petitioner averred that he is the son of the deceased with the latters common-law wife, Amelia Puno. As surviving heir,
he claimed entitlement to the rights and privileges of his late father as stockholder of respondent. The complaint thus prayed that
respondent allow petitioner to inspect its corporate book, render an accounting of all the transactions it entered into from 1962, and
give petitioner all the profits, earnings, dividends, or income pertaining to the shares of Carlos L. Puno.[2]

Respondent filed a motion to dismiss on the ground that petitioner did not have the legal personality to sue because his
birth certificate names him as Joselito Musni Muno. Apropos, there was yet a need for a judicial declaration that Joselito Musni
Puno and Joselito Musni Muno were one and the same.

The court ordered that the proceedings be held in abeyance, ratiocinating that petitioners certificate of live birth was no
proof of his paternity and relation to Carlos L. Puno.

Petitioner submitted the corrected birth certificate with the name Joselito M. Puno, certified by the Civil Registrar of the
City of Manila, and the Certificate of Finality thereof. To hasten the disposition of the case, the court conditionally admitted the
corrected birth certificate as genuine and authentic and ordered respondent to file its answer within fifteen days from the order and
set the case for pre-trial.[3]

On October 11, 2005, the court rendered a Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering Jesusa Puno and/or Felicidad Fermin to allow the
plaintiff to inspect the corporate books and records of the company from 1962 up to the present including the
financial statements of the corporation.

The costs of copying shall be shouldered by the plaintiff. Any expenses to be incurred by the defendant
to be able to comply with this order shall be the subject of a bill of costs.

SO ORDERED.[4]

On appeal, the CA ordered the dismissal of the complaint in its Decision dated October 11, 2006. According to the CA, petitioner
was not able to establish the paternity of and his filiation to Carlos L. Puno since his birth certificate was prepared without the
intervention of and the participatory acknowledgment of paternity by Carlos L. Puno. Accordingly, the CA said that petitioner had
no right to demand that he be allowed to examine respondents books. Moreover, petitioner was not a stockholder of the corporation
but was merely claiming rights as an heir of Carlos L. Puno, an incorporator of the corporation. His action for specific performance
therefore appeared to be premature; the proper action to be taken was to prove the paternity of and his filiation to Carlos L. Puno in
a petition for the settlement of the estate of the latter.[5]

Petitioners motion for reconsideration was denied by the CA in its Resolution[6] dated March 6, 2007.

In this petition, petitioner raises the following issues:

I. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT THE JOSELITO
PUNO IS ENTITLED TO THE RELIEFS DEMANDED HE BEING THE HEIR OF THE LATE
CARLOS PUNO, ONE OF THE INCORPORATORS [OF] RESPONDENT CORPORATION.

II. HONORABLE COURT OF APPEALS ERRED IN RULING THAT FILIATION OF JOSELITO

PUNO, THE PETITIONER[,] IS NOT DULY PROVEN OR ESTABLISHED.

III. THE HONORABLE COURT ERRED IN NOT RULING THAT JOSELITO MUNO AND
JOSELITO PUNO REFERS TO THE ONE AND THE SAME PERSON.

IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT WHAT
RESPONDENT MERELY DISPUTES IS THE SURNAME OF THE PETITIONER WHICH WAS
MISSPELLED AND THE FACTUAL ALLEGATION E.G. RIGHTS OF PETITIONER AS HEIR OF
CARLOS PUNO ARE DEEMED ADMITTED HYPOTHETICALLY IN THE RESPONDENT[S]
MOTION TO DISMISS.

V. THE HONORABLE COURT OF APPEALS THEREFORE ERRED I[N] DECREEING THAT

PETITIONER IS NOT ENTITLED TO INSPECT THE CORPORATE BOOKS OF DEFENDANT
CORPORATION.[7]

The petition is without merit. Petitioner failed to establish the right to inspect respondent corporations books and receive
dividends on the stocks owned by Carlos L. Puno.

Petitioner anchors his claim on his being an heir of the deceased stockholder. However, we agree with the appellate court
that petitioner was not able to prove satisfactorily his filiation to the deceased stockholder; thus, the former cannot claim to be an
heir of the latter.

Incessantly, we have declared that factual findings of the CA supported by substantial evidence, are conclusive and
binding.[8] In an appeal via certiorari, the Court may not review the factual findings of the CA. It is not the Courts function under
Rule 45 of the Rules of Court to review, examine, and evaluate or weigh the probative value of the evidence presented. [9]

A certificate of live birth purportedly identifying the putative father is not competent evidence of paternity when there is
no showing that the putative father had a hand in the preparation of the certificate. The local civil registrar has no authority to record
the paternity of an illegitimate child on the information of a third person. [10]As correctly observed by the CA, only petitioners mother
supplied the data in the birth certificate and signed the same. There was no evidence that Carlos L. Puno acknowledged petitioner
as his son.

As for the baptismal certificate, we have already decreed that it can only serve as evidence of the administration of the
sacrament on the date specified but not of the veracity of the entries with respect to the childs paternity. [11]

In any case, Sections 74 and 75 of the Corporation Code enumerate the persons who are entitled to the inspection of
corporate books, thus

Sec. 74. Books to be kept; stock transfer agent. x x x.

The records of all business transactions of the corporation and the minutes of any meeting shall be open
to the inspection of any director, trustee, stockholder or member of the corporation at reasonable hours on
business days and he may demand, in writing, for a copy of excerpts from said records or minutes, at his expense.

xxxx

Sec. 75. Right to financial statements. Within ten (10) days from receipt of a written request of any
stockholder or member, the corporation shall furnish to him its most recent financial statement, which shall include
a balance sheet as of the end of the last taxable year and a profit or loss of statement for said taxable year, showing
in reasonable detail its assets and liabilities and the result of its operations.
 The stockholders right of inspection of the corporations books and records is based upon his ownership of shares in the
corporation and the necessity for self-protection. After all, a shareholder has the right to be intelligently informed about corporate
affairs.[13] Such right rests upon the stockholders underlying ownership of the corporations assets and property. [14]

Similarly, only stockholders of record are entitled to receive dividends declared by the corporation, a right inherent in the
ownership of the shares.[15]

Upon the death of a shareholder, the heirs do not automatically become stockholders of the corporation and acquire the
rights and privileges of the deceased as shareholder of the corporation. The stocks must be distributed first to the heirs in estate
proceedings, and the transfer of the stocks must be recorded in the books of the corporation. Section 63 of the Corporation Code
provides that no transfer shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation.[16] During such interim period, the heirs stand as the equitable owners of the stocks, the executor or administrator duly
appointed by the court being vested with the legal title to the stock. [17] Until a settlement and division of the estate is effected, the
stocks of the decedent are held by the administrator or executor.[18] Consequently, during such time, it is the administrator or executor
who is entitled to exercise the rights of the deceased as stockholder.

Thus, even if petitioner presents sufficient evidence in this case to establish that he is the son of Carlos L. Puno, he would
still not be allowed to inspect respondents books and be entitled to receive dividends from respondent, absent any showing in its
transfer book that some of the shares owned by Carlos L. Puno were transferred to him. This would only be possible if petitioner
has been recognized as an heir and has participated in the settlement of the estate of the deceased.

Corollary to this is the doctrine that a determination of whether a person, claiming proprietary rights over the estate of a
deceased person, is an heir of the deceased must be ventilated in a special proceeding instituted precisely for the purpose of settling
the estate of the latter. The status of an illegitimate child who claims to be an heir to a decedents estate cannot be adjudicated in an
ordinary civil action, as in a case for the recovery of property. [19] The doctrine applies to the instant case, which is one for specific
performance to direct respondent corporation to allow petitioner to exercise rights that pertain only to the deceased and his
representatives.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated October 11, 2006
and Resolution dated March 6, 2007 are AFFIRMED.

SO ORDERED.

2}. PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION v. PABLITO O. LIM, MANUEL A.
AGCAOILI, AND CONSUELO M. PADILLA, G.R. No. 172948, October 05, 2016

SECOND DIVISION
G.R. No. 172948, October 05, 2016
PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION, Petitioner, v. PABLITO O. LIM,
MANUEL A. AGCAOILI, AND CONSUELO M. PADILLA, Respondents.
DECISION
LEONEN, J.:
An action for injunction filed by a corporation generally does not lie to prevent the enforcement by a stockholder of his or her
right to inspection.1

Philippine Associated Smelting and Refining Corporation filed a Petition for Review on Certiorari 2 to assail the Court of Appeals
Decision3 dated January 243 2006 and Resolution4 dated May 18, 2006, The Court of Appeals lifted and cancelled the writ of
preliminary injunction issued by the Regional Trial Court, 5 which enjoined respondents Pablito O. Lim (Lim), Manuel A. Agcaoili
(Agcaoili), and Consuelo M. Padilla (Padilla), or their representatives, from gaining access to the records of Philippine Associated
Smelting and Refining Corporation.: The records were then classified as either confidential or inexistent until further orders from
the court.6

Philippine Associated Smelting and Refining Corporation (hereafter PASAR) is a corporation duly organized and existing under
the laws of the Philippines and is engaged in copper smelting and refining.

On the other hand, Pablito Lim, Manuel Agcaoili and Consuelo Padilla (collectively referred to as petitioners) were former senior
officers and presently shareholders of PASAR holding 500 shares each.

An Amended Petition for Injunction and Damages with prayer for Preliminary Injunction and/or Temporary Restraining Order,
dated February 4, 2004 was filed by PASAR seeking to restrain petitioners from demanding inspection of its confidential and
inexistent records.

On February 23, 2004, petitioners moved for the dismissal of the petition on the following grounds: 1) the petition states no cause
of action; 2) the petition should be dismissed on account of litis pendentia; 3) the petition is a nuisance or harassment suit; and 4)
the petition should be dismissed on account of improper venue.

On April 14, 2004, the RTC issued an Order granting PASAR's prayer for a writ of preliminary injunction. The RTC held that the
right to inspect book should not be denied to the stockholders, however, the same may be restricted. The right to inspect should be
limited to the ordinary records as identified and classified by PASAR. Thus, pending the determination of which records are
confidential or inexistent, the petitioners should be enjoined from inspecting the books. The dispositive portion of said Order
states:

"WHEREFORE, let a writ of preliminary injunction be issued enjoining respondents Pablito Lim, Manuel A. Agcaoili and
Consuelo N. Padilla or their representatives from gaining access to records of Philippine Associated Smelting and Refining
Corporation which are presently classified as either confidential or inexistent, until further orders from this Court.

Petitioner is required to execute a bond in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00) in favor of herein
respondents to answer for all damages which the latter may sustain by reason of the injunction should this Court, finally decide
that petitioner is not entitled thereto.

SO ORDERED."

On May 26, 2004, petitioners filed a Motion for Dissolution of the Writ of Preliminary Injunction on the ground that the petition is
insufficient. Petitioners claim that the enforcement of the right to inspect book should be on the stockholders and not on PASAR.
Petitioners further claim that no irreparable injury is caused to PASAR which justifies the issuance of the writ of preliminary
injunction.

On January 10, 2005, the RTC issued the assailed Order, denying the Motion to Dismiss filed by petitioners on the ground that it
is a prohibited pleading under Section 8, Rule 1 of the Interim Rules on Intra-Corporate Controversies under the Securities
Regulation Code (RA 8799). The Motion for Dissolution of the Writ of Preliminary Injunction was likewise denied on the ground
that the writ does not completely result in unjust denial of petitioners' right to inspect the books of the corporation. The RTC
further stated that if no preliminary injunction is issued, petitioners may, before final judgment, do the act which PASAR is
seeking the Court to restrain which will make ineffectual the final judgment that it may afterward render. 7 (Emphasis in the
original)

Aggrieved, Lim, Agcaoili, and Padilla filed before the Court of Appeals a Petition for Certiorari8questioning the propriety of the
writ of preliminary injunction. The Court of Appeals held that there was no basis to issue an injunctive writ, thus

We agree. The act of PASAR in filing a petition for injunction with prayer for writ of preliminary injunction is uncalled for. The
petition is a pre-emptive action unjustly intended to impede and restrain the stockholders' rights. If a stockholder demands the
inspection of corporate books, the corporation could refuse to heed to such demand. When the corporation, through its officers,
denies the stockholders of such right, the latter could then go to court and enforce their rights. It is then that the corporation could
set up its defenses and the reasons for the denial of such right. Thus, the proper remedy available for the enforcement of the right
of inspection is undoubtedly the writ of mandamus to be filed by the stockholders and not a petition for injunction filed by the
corporation.

The Order of the RTC shows that indeed there is no basis for the issuance not only of the temporary but also of the permanent
injunctive writ. The Order dated April 14, 2004 states:
"In the present case, PASAR failed to present sufficient evidence to show that respondents' (petitioners') demand to inspect the
corporate records was not made in good faith nor for a lawful purpose. . . . PASAR is reminded that it is its burden to prove that
respondents' action in seeking examination of the corporate records was moved by unlawful or ill-motivated designs which could
appropriately call for a judicial protection against the exercise of such right[.]" 9

Hence, Philippine Associated Smelting and Refining Corporation filed this Petition praying that this Court render judgment:
(a) reversing and setting aside the Decision dated 24 January 2006 and Resolution dated 18 May 2006 rendered by the Court of
Appeals:

(b) reinstating the writ of preliminary injunction granted by the RTC in its Order dated 14 April 2004, and consequently ordering
respondents to desist from further harassing, vexing, or annoying petitioner with threats of filing criminal complaints against its
President, Bruce Anderson, and other appropriate parties, as embodied in the letters dated 25 and 27 February 2006 and 31 March
2006;

(c) reinstating the main action for injunction and ordering the RTC to continue hearing SEC Case No. 04-33;

(d) meanwhile, it is respectfully prayed that a temporary restraining order or status quo order be issued by this Honorable Court to
urgently restrain respondents from further committing acts which are bases for the application of the writ of preliminary
injunction.10

In the Resolution11 dated July 19, 2006, this Court denied petitioner's prayer for the issuance of a temporary restraining order and
required respondents Lim, Agcaoili, and Padilla to comment on the Petition.
Respondents filed their Comment12 on October 16, 2006 through counsel Cayetano Sebastian Ata Dado & Cruz. On October 20,
2006, they filed a second Comment13 through counsel Siguion Reyna Montecillo & Ongsiako. Petitioner filed a Motion for Leave
to Admit Attached Reply,14 together with its Reply,15 on December 12, 2006.

In the Resolution16 dated January 24, 2007, this Court noted respondents' separate Comments and petitioner's Reply. The parties
were also directed to submit their respective memoranda within 30 days from notice. 17 Respondents filed their Memorandum18 on
March 26, 2007, and petitioner filed its Memorandum19 on April 2, 2007.

Petitioner argues that the right of a stockholder to inspect corporate books and records is limited in that any demand must be made
in good faith or for a legitimate purpose. 20 Respondents, however, have no legitimate purpose in this case. 21 If respondents gain
access to petitioner's confidential records, petitioner's trade secrets and other confidential information will be used by its former
officers to give undue commercial advantage to third parties. 22 Petitioner insists that to hold that objections to the right of
inspection can only be raised in an action for mandamus brought by the stockholder, would leave a corporation helpless and
without an adequate legal remedy.23 To leave the corporation helpless negates the doctrine that where there is a right, there is a
remedy for its violation.24

Petitioner argues that it has the right to protect itself against all forms of embarrassment or harassment against its officers,
including the filing of criminal cases against them.25 Moreover, respondents' request for inspection of confidential corporate
records and documents violates and breaches petitioner's right to peaceful and continuous possession of its confidential records
and documents.26

Petitioner further argues that respondents' Motion for Dissolution before the Court of Appeals did not comply with Rule 58,
Section 6 of the Rules of Court. Therefore, the Motion should not have been granted. 27 Likewise, respondents' Motion to Dismiss
is a prohibited pleading under Rule 1, Section 8 of the Interim Rules of Procedure Governing Intra-Corporate Controversies28 and
should not have been granted.29 In any case, the Court of Appeals should have remanded the case to the trial court for further
disposition.30

We are asked to resolve whether injunction properly lies to prevent respondents from invoking their right to inspect.

We deny the Petition.

I

The Petition asks this Court to enjoin acts beyond what was enjoined by the Regional Trial Court in its April 14, 2004
Order.31 The Regional Trial Court Order did not specify the particular acts it enjoined respondents from doing:
The question as to what records should be deemed confidential and inexistent, however, cannot be passed upon at this time, since
neither were admissions made nor sufficient evidence presented to categorically determine which corporate records are to be
considered confidential and inexistent. In the meantime, then, and in order to prevent grave and irreparable injury on the part of
PASAR should otherwise be allowed [sic], respondents' right to inspect is limited to the ordinary records as identified and
classified by PASAR. Subsequent hearings shall be set to determine which among the corporate records demanded to be inspected
by the respondents are indeed confidential or inexistent, and to further determine whether or not the issuance of a writ of final
injunction is in order.

WHEREFORE, let a writ of preliminary injunction be issued enjoining respondents Pablito Lim, Manuel A. Agcaoili and
Consuelo N. Padilla or their representatives from gaining access to records of Philippine Associated Smelting & Refining
Corporation which are presently classified as either confidential or inexistent, until further orders from this Court. 32 (Emphasis
supplied)

What precisely is contemplated by the phrase "gaming access to records" is not clear.

Taking advantage of this ambiguity, petitioner prays that the injunction be reinstated and that this Court enjoin respondents from
"harassing, vexing, or annoying petitioner with threats of filing criminal complaints" and from "further committing acts which are
bases for the application of the writ of preliminary injunction":
(b) reinstating the writ of preliminary injunction granted by the RTC in its Order dated 14 April 2004, and consequently ordering
respondents to desist from further harassing, vexing, or annoying petitioner with threats of filing criminal complaints against its
President, Bruce Anderson, and other appropriate parties, as embodied in the letters dated 25 and 27 February 2006 and 31 March
2006;

.....

(d) meanwhile, it is respectfully prayed that a temporary restraining order or status quo order be issued by this Honorable Court to
urgently restrain respondents from further committing acts which are bases for the application of the writ of preliminary
injunction.33

Petitioner claims that respondents are materially and substantially invading its right to protect itself by demanding to inspect
petitioner's purportedly confidential records. Respondents wrote petitioner and demanded to inspect its corporate books and
records.34 They reiterated this demand in a subsequent letter.35

On at least two (2) occasions, respondents went to petitioner's office to again demand that they be allowed to inspect. 36 On one of
these occasions, respondents brought members of the press, caused work disruption, and harassed petitioner's representatives who
met with them.37 When asked the purpose of the inspection of certain records not ordinarily inspected by stockholders,
respondents answered they wished to ensure that petitioner's business transactions were "above board" and "entered into for the
best interest of the company."38

During negotiations on the terms of confidentiality agreements to be executed before respondents are allowed to inspect certain
confidential records, respondents wrote petitioner stating that they would proceed to inspect the corporate books and records.
They warned petitioner that should petitioner fail to allow inspection, they would initiate legal proceedings against it. 39 They
refused to accept the final terms and conditions of the confidentiality agreement and wrote another letter, reiterating their demand
to inspect confidential records.40

After petitioner filed before the Regional Trial Court of Pasig City a Petition for Declaratory Relief 41seeking a declaration of the
rights and duties of the parties in relation to the inspection of the records, respondent Lim filed a criminal Complaint 42 against
some of petitioner's officers for infringing on their right to inspect petitioner's corporate books and records. 43 As a result, a
criminal case was filed against Javier Herrero, petitioner's Former President, and Jocelyn Sanchez-Salazar, its Former Corporate
Secretary.44 Respondents caused news reports to be published on the arrest warrants issued in relation to these Informations.45

Respondents wrote another letter dated January 30, 2004 demanding again that they be allowed to inspect, among others, the
confidential records.46 On March 31, 2006, respondents wrote another letter threatening to file criminal charges if they were not
allowed to inspect the confidential records. They stated that they wanted to ensure that petitioner complied with environmental
laws in the operations of its plant in Leyte.47

On April 7, 2006, petitioner advised respondents that it would furnish them with records kept by the Department of Environment
and Natural Resources. These records supposedly showed that all environmental laws were complied with. 48 On June 28, 2006
and July 4, 2006, respondents Lim and Padilla wrote to demand that they be allowed to inspect the audited financial statements for
2004 and 2005; the interim statements for the end of May 2006; and more detailed records on finance, production, marketing, and
purchasing.49

In September 2006, after a stockholders' meeting, respondents again demanded access to certain information and documents. 50 In
a letter dated September 8, 2006, respondents again asked about balance sheet accounts, advances to suppliers, trade and other
receivables, inventory, investments, current assets, trade and other payables, related party transactions, cost of goods
manufactured and sold, selling and administrative expenses, other operating expenses, metal hedging, and staff costs, among
others.51

For an action for injunction to prosper, the applicant must show the existence of a right, as well as the actual or threatened
violation of this right.52

Specifically, for a writ of preliminary injunction to be issued, Rule 58 of the Rules of Court provides:
RULE 58
PRELIMINARY INJUNCTION

....

SEC. 3. Grounds for issuance of preliminary injunction. — A preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission
or continuance of the act or acts complained of, or in requiring the performance of an act or acts either for a limited period or
perpetually;

(b) That the commission, continuance or non- performance of the act or acts complained of during the litigation would probably
work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done
some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending
to render the judgment ineffectual.

In Duvaz Corp. v. Export and Industry Bank:

Anent the first issue, the requisites for preliminary injunctive relief are: (a) the invasion of the right sought to be protected is
material and substantial; (b) the right of the plaintiff is clear and unmistakable; and (c) there is an urgent and paramount necessity
for the writ to prevent serious damage. As such, a writ of preliminary injunction may be issued only upon clear showing of an
actual existing right to be protected during the pendency of the principal action. The twin requirements of a valid injunction are
the existence of a right and its actual or threatened violation. Thus, to be entitled to an injunctive writ, the right to be protected and
the violation against that right must be shown.
In Almeida v. Court of Appeals, the Court stressed how important it is for the applicant for an injunctive writ to establish his right
thereto by competent evidence:chanRoblesvirtualLawlibrary
Thus, the petitioner, as plaintiff, was burdened to adduce testimonial and/or documentary evidence to establish her right to the
injunctive writs. It must be stressed that injunction is not designed to protect contingent or future rights, and, as such, the
possibility of irreparable damage without proof of actual existing right is no ground for an injunction. A clear and positive right
especially calling for judicial protection must be established. Injunction is not a remedy to protect or enforce contingent, abstract,
or future rights; it will not issue to protect a right not in esse and which may never arise, or to restrain an action which did not give
rise to a cause of action. There must be an existence of an actual right. Hence, where the plaintiffs right or title is doubtful or
disputed, injunction is not proper.

....

An injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be
remedied under any standard compensation. The possibility of irreparable damage without proof of an. actual existing right would
not justify injunctive relief in his favor.

....

In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. As the Court had the
occasion to state in Olalia v. Hizon . . . :chanRoblesvirtualLawlibrary
It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution,
deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of
equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages.

Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be
granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency
demands it.54 (Emphasis supplied, citations omitted)
chanrobleslaw
Thus, an injunction must fail where there is no clear showing of both an actual right to be protected and its threatened violation,
which calls for the issuance of an injunction.

The Corporation Code provides that a stockholder has the right to inspect the records of all business transactions of the
corporation and the minutes of any meeting at reasonable hours on business days. The stockholder may demand in writing for a
copy of excerpts from these records or minutes, at his or her expense:chanRoblesvirtualLawlibrary
Title VIII
Corporate Books and Records

SECTION 74. Books to be Kept; Stock Transfer Agent. — Every corporation shall, at its principal office, keep and carefully
preserve a record of all business transactions, and minutes of all meetings of stockholders or members, or of the board of directors
or trustees, 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. Upon the demand of any director, trustee, stockholder or member, the time when any director, trustee, stockholder or
member entered or left the meeting must be noted in the minutes; and on a similar demand, the yeas and nays must be taken on
any motion or proposition, and a record thereof carefully made. The protest of any director, trustee, stockholder or member on any
action or proposed action must be recorded in full on his demand.

The records of all business transactions of the corporation and the minutes of any meetings shall be open to the inspection of any
director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, in writing,
for a copy of excerpts from said records or minutes, at his expense.

Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to
examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such
director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable
under Section 144 of this Code: Provided, That if such refusal is pursuant to a resolution or order of the Board of Directors or
Trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal:
and Provided, further, That it shall be a defense to any action under this section that the person demanding to examine and copy
excerpts from the corporation's records and minutes has improperly used any information secured through any prior examination
of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate
purpose in making his demand. (Emphasis supplied)
chanrobleslaw
The right to inspect under Section 74 of the Corporation Code is subject to certain limitations. However, these limitations are
expressly provided as defenses in actions filed under Section 74. Thus, this Court has held that a corporation's objections to the
right to inspect must be raised as a defense:
2) the person demanding to examine and copy excerpts from the corporation's records and minutes has not improperly used any
information secured through any previous examination of the records of such corporation; and 3) the demand is made in good
faith or for a legitimate purpose. The latter two limitations, however, must be set up as a defense by the corporation if it is to merit
judicial cognizance. As such, and in the absence of evidence, the PCGG cannot unilaterally deny a stockholder from exercising his
statutory right of inspection based on an unsupported and naked assertion that private respondent's motive is improper or merely
for curiosity or on the ground that the stockholder is not in friendly terms with the corporation's officers. 55
chanrobleslaw
Gokongwei, Jr. v. Securities and Exchange Commission 56 stresses that "impropriety of purpose . . . must be set up the [sic]
corporation defensively":chanRoblesvirtualLawlibrary
The stockholder's right of inspection of the corporation's books and records is based upon their ownership of the assets and
property of the corporation. It is, therefore, an incident of ownership of the corporate property, whether this ownership or interest
be termed an equitable ownership, a beneficial ownership, or a quasi-ownership. This right is predicated upon the necessity of
self-protection. It is generally held by majority of the courts that where the right is granted by statute to the stockholder, it is given
to him as such and must be exercised by him with respect to his interest as a stockholder and for some purpose germane thereto or
in the interest of the corporation. In other words, the inspection has to be germane to the petitioner's interest as a stockholder, and
has to be proper and lawful in character and not inimical to the interest of the corporation. In Grey v. Insular Lumber, this Court
held that "the right to examine the books of the corporation must be exercised in good faith, for specific and honest purpose, and
not to gratify curiosity, or for speculative or vexatious purposes." The weight of judicial opinion appears to be, that on application
for mandamus to enforce the right, it is proper for the court to inquire into and consider the stockholder's good faith and his
purpose and motives hi seeking inspection. Thus, it was held that "the right given by statute is not absolute and may be refused
when the information is not sought in good faith or is used to the detriment of the corporation." But the "impropriety of purpose
such as will defeat enforcement must be set up the corporation defensively if the Court is to take cognizance of it as a
qualification. In other words, the specific provisions take from the stockholder the burden of showing propriety of purpose and
place upon the corporation the burden of showing impropriety of purpose or motive." It appears to be the "general rule that
stockholders are entitled to full information as to the management of the corporation and the manner of expenditure of its funds,
and to inspection to obtain such information, especially where it appears that the company is being mismanaged or that it is being
managed for the personal benefit of officers or directors or certain of the stockholders to the exclusion of others." 57 (Emphasis
supplied, citations omitted)
chanrobleslaw
Terelay Investment and Development Corp. v. Yulo58 has held that although the corporation may deny a stockholder's request to
inspect corporate records, the corporation must show that the purpose of the shareholder is improper by way of
defense:chanRoblesvirtualLawlibrary
The right of the shareholder to inspect the books and records of the petitioner should not be made subject to the condition of a
showing of any particular dispute or of proving any mismanagement or other occasion rendering an examination proper, but if the
right is to be denied, the burden of proof is upon the corporation to show that the purpose of the shareholder is improper, by way
of defense. According to a recognized commentator:chanRoblesvirtualLawlibrary
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.

In Guthrie v. Harkness, there was involved the right of a shareholder hi 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.59 (Citations omitted)
chanrobleslaw
Among the actions that may be filed is an action for specific performance, damages, petition for mandamus, or for violation of
Section 74, in relation to Section 144 of the Corporation Code, which provides:chanRoblesvirtualLawlibrary
SECTION 144. Violations of the Code. — Violations of any of the provisions of this Code or its amendments not otherwise
specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00) pesos but not more than ten
thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more than five (5) years, or both, in the
discretion of the court. If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in
appropriate proceedings before the Securities and Exchange Commission: Provided, That such dissolution shall not preclude the
institution of appropriate action against the director, trustee or officer of the corporation responsible for said violation: Provided,
further, That nothing in this section shall be construed to repeal the other causes for dissolution of a corporation provided in this
Code.
chanrobleslaw
In this case, petitioner invokes its right to raise the limitations provided under Section 74 of the Corporation Code. However,
petitioner provides scant legal basis to claim this right because it does not raise the limitations as a matter of defense. As properly
appreciated by the Court of Appeals:chanRoblesvirtualLawlibrary
We agree. The act of PASAR in filing a petition for injunction with prayer for writ of preliminary injunction is uncalled for. The
petition is a pre-emptive action unjustly intended to impede and restrain the stockholders' rights. If a stockholder demands the
inspection of corporate books, the corporation could refuse to heed to such demand. When the corporation, through its officers,
denies the stockholders of such right, the latter could then go to court and enforce their rights. It is then that the corporation could
set up its defenses and the reasons for the denial of such right. Thus, the proper remedy available for the enforcement of the right
of inspection is undoubtedly the writ of mandamus to be filed by the stockholders and not a petition for injunction filed by the
corporation.60
chanrobleslaw
Petitioner insists that the Court of Appeals erred in relying on Section 74 of the Corporation Code. It claims that jurisprudence
allows the corporation to prevent a stockholder from inspecting records containing confidential information.61 Petitioner cites W.G
Philpotts v. Philippine Manufacturing Company:62chanroblesvirtuallawlibrary
In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable to say that there are some things
which a corporation may undoubtedly keep secret, notwithstanding the right of inspection given by law to the stockholder; as, for
instance, where a corporation engaged in the business of manufacture, has acquired a formula or process, not generally known,
which has proved of utility to it in the manufacture of its products. It is not our intention to declare that the authorities of the
corporation, and more particularly the Board of Directors, might not adopt measures for the protection of such process from
publicity.63
chanrobleslaw
However, W.G Philpotts cannot support petitioner's contention since it involved a petition for mandamus where the stockholder
prayed to be allowed to exercise its right to inspect, and the respondent's objections were raised as a defense. Nothing in W.G.
Philpotts grants a corporation a cause of action to enjoin the exercise of the right of inspection by a stockholder.

The clear provision in Section 74 of the Corporation Code is sufficient authority to conclude that an action for injunction and,
consequently, a writ of preliminary injunction filed by a corporation is generally unavailable to prevent stockholders from
exercising their right to inspection. Specifically, stockholders cannot be prevented from gaining access to the (a) records of all
business transactions of the corporation; and (b) minutes of any meeting of stockholders or the board of directors, including their
various committees and subcommittees.

The grant of legal personality to a corporation is conditioned on its compliance with certain obligations. Among these are its
fiduciary responsibilities to its stockholders. Providing stockholders with access to information is a fundamental basis for their
intelligent participation in the governance of the corporation as a business organization that they partially own. The law is agnostic
with respect to the amount of shares required. Generally, each individual stockholder should be given reasonable access so that he
or she can assess or share his or her assessment of the management of the corporation with other stockholders. The separate legal
personality of a corporation is not so absolutely separate that it divorces itself from its responsibility to its constituent owners.

The law takes into consideration the potential disparity in the financial legal resources between the corporation and an ordinary
stockholder. The phraseology of the text of the law provides that access to the information mentioned in Section 74 of the
Corporation Code is mandatory. The presumption is that the corporation should provide access. If it has basis for denial, then the
corporation shoulders the risks of being sued and of successfully raising the proper defenses. The corporation cannot immediately
deploy its resources—part of which is owned by the requesting stockholder—to put the owner on the defensive.

Specifically, corporations may raise their objections to the right of inspection through affirmative defense in an ordinary civil
action for specific performance or damages, or through a comment (if one is required) in a petition for mandamus. 64 The
corporation or defendant or respondent still carries the burden of proving (a) that the stockholder has improperly used information
before; (b) lack of good faith; or (c) lack of legitimate purpose.65

Good faith and a legitimate purpose are presumed. It is the duty of the corporation to allege and prove with sufficient evidence the
facts that give rise to a claim of bad faith as to the existence of an illegitimate purpose.

The confidentiality of business transactions is not a magical incantation that will defeat the request of a stockholder to inspect the
records. Although it is true that the business is entitled to the protection of its trade secrets and other intellectual property rights,
facts must be pleaded to convince the court that a specific stockholder's request for inspection, under certain conditions, would
violate the corporation's own legal right.

Furthermore, the discomfort caused to the management of a corporation when a request for inspection is claimed is part of the
regular matters that a business wanting to ensure good governance must endure. The range between discomfort and vexation is a
broad one, which may tend to be located in the personalities of those involved.

Certainly, by themselves, these are not sufficient factual basis to conclude bad faith on the part of the requesting stockholder.
Courts must be convinced that the scope or manner of the request and the conditions under which it was made are so frivolous that
the huge cost to the business will, in equity, be unfair to the other stockholders. There is no iota of evidence that this happened
here.chanroblesvirtuallawlibrary
II

The Court of Appeals did not commit an error of law in disregarding the procedure on dissolution of injunctive writs. It lifted and
cancelled the injunction via a petition for certiorari under Rule 65 of the Rules of Court based on the grave abuse of discretion on
the part of the Regional Trial Court in issuing the writ of preliminary injunction.

Petitioner invokes Rule 58, Section 6 of the Rules of Court, which provides:chanRoblesvirtualLawlibrary
SEC. 6. Grounds for Objection to, or for Motion of Dissolution of, Injunction or Restraining Order. — The application for
injunction or restraining order may be denied, upon a showing of its insufficiency. The injunction or restraining order may also be
denied, or, if granted, may be dissolved, on other grounds upon affidavits of the party or person enjoined, which may be opposed
by the applicant also by affidavits. It may further be denied, or, if granted, may be dissolved, if it appears after hearing that
although the applicant is entitled to the injunction or restraining order, the issuance or continuance thereof, as the case may be,
would cause irreparable damage to the party or person enjoined while the applicant can be fully compensated for such damages as
he may suffer, and the former files a bond in an amount fixed by the court conditioned that he will pay all damages which the
applicant may suffer by the denial or the dissolution of the injunction or restraining order. If it appears that the extent of the
preliminary injunction or restraining order granted is too great, it may be modified.
chanrobleslaw
Petitioner assails respondents' failure to submit any affidavit or counter-bond pertaining to irreparable damage and compensation
of damages that may be suffered if the injunction is dissolved. 66

However, the injunction was lifted and cancelled via a petition for certiorari under Rule 65 of the Rules of Court,67 not based on a
motion for dissolution of the injunction. Thus, the Court of Appeals evaluated the basis for the injunction granted by the Regional
Trial Court rather than whether the injunction would cause irreparable damage to respondents.

WHEREFORE, the Petition is DENIED.

SO ORDERED.ChanRoblesVirtualawlibrary

Carpio, (Chairperson), Peralta,*and Mendoza, JJ., concur.

Jardeleza,** J., concur in the result.

3}. ANG-ABAYA vs. ANG, December 4, 2008, G.R. No. 178511

THIRD DIVISION

MA. BELEN FLORDELIZA C. G.R. No. 178511

ANG-ABAYA, FRANCIS JASON
A. ANG, HANNAH ZORAYDA A.
ANG, and VICENTE G. GENATO,
Petitioners, Present:
Ynares-Santiago, J. (Chairperson),
- versus - Austria-Martinez,
Carpio Morales,*
Chico-Nazario, and
Reyes, JJ.
EDUARDO G. ANG,
Respondent. Promulgated:

December 4, 2008
x ---------------------------------------------------------------------------------------- x

DECISION
YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the March 6, 2007 Decision [2] of the
Court of Appeals in CA-G.R. SP No. 94708, which nullified and set aside the July 26, 2005 and March 29, 2006 Resolutions[3] of
the Secretary of Justice in I.S. No. MAL-2004-1167 directing the withdrawal of the information filed against petitioners for violation
of Section 74 of the Corporation Code. Also assailed is the June 19, 2007 Resolution[4] denying the Motion for Reconsideration.

Vibelle Manufacturing Corporation (VMC) and Genato Investments, Inc. (Genato) (collectively referred to as the
corporations) are family-owned corporations, where petitioners Ma. Belen Flordeliza C. Ang-Abaya (Flordeliza), Francis Jason A.
Ang (Jason), Vincent G. Genato (Vincent), Hanna Zorayda A. Ang (Hanna) and private respondent Eduardo G. Ang (Eduardo) are
shareholders, officers and members of the board of directors.

Prior to the instant controversy, VMC, Genato, and Oriana Manufacturing Corporation (Oriana) filed Civil Case No. 4257-
MC, which is a case for damages with prayer for issuance of a temporary restraining order (TRO) and/or writ of preliminary
injunction against herein respondent Eduardo, together with Michael Edward Chi Ang (Michael), and some other persons for
allegedly conniving to fraudulently wrest control/management of the corporations.[5] Eduardo allegedly borrowed substantial
amounts of money from the said corporations without any intention to repay; that he repeatedly demanded for increases in his
monthly allowance and for more cash advances contrary to existing corporate policies; that he harassed petitioner Flordeliza to
transfer and/or sell certain corporate and personal properties in order to pay off his personal obligations; that he attempted to forcibly
evict petitioner Jason from his office and claim it as his own; that he interfered with and disrupted the daily business operations of
the corporations; that Michael was placed on preventive suspension due to prolonged absence without leave and commission of acts
of disloyalty such as carrying out orders of Eduardo which were detrimental to their business, using privileged information and
confidential documents/data obtained in his capacity as Vice President of the corporations, and admitting to have sabotaged their
distribution system and operations.

During the pendency of Civil Case No. 4257-MC, particularly in July, 2004, Eduardo sought permission to inspect the
corporate books of VMC and Genato on account of petitioners alleged failure and/or refusal to update him on the financial and
business activities of these family corporations. [6] Petitioners denied the request claiming that Eduardo would use the information
obtained from said inspection for purposes inimical to the corporations interests, considering that: a) he is harassing and/or bullying
the Corporation[s] into writing off P165,071,586.55 worth of personal advances which he had unlawfully obtained in the past; b)
he is unjustly demanding that he be given the office currently occupied by Mr. Francis Jason Ang, the Vice-President for Finance
and Corporate Secretary; c) he is usurping the rights belonging exclusively to the Corporation; and d) he is coercing and/or trying
to inveigle the Directors and/or Officers of the Corporation to give in to his baseless demands involving specific corporate assets.[7]

Because of petitioners refusal to grant his request to inspect the corporate books of VMC and Genato, Eduardo filed an
Affidavit-Complaint[8] against petitioners Flordeliza and Jason, charging them with violation (two counts) of Section 74, in relation
to Section 144, of the Corporation Code of the Philippines. [9] Ma. Belinda G. Sandejas (Belinda), Vincent, and Hanna were
subsequently impleaded for likewise denying respondents request to inspect the corporate books.

Petitioners filed a Joint Counter-Affidavit praying for the dismissal of the complaint for lack of factual and legal basis, or
for the suspension of the same while Civil Case No. 4257-MC is still pending resolution.[10] They denied violating Section 74 of the
Corporation Code and reiterated the allegations contained in their complaint in Civil Case No. 4257-MC. Petitioners blamed
Eduardos lavish lifestyle, which is funded by personal loans and cash advances from the family corporations.They alleged that
Eduardo consistently pressured petitioner Flordeliza, his daughter, to improperly transfer ownership of the corporations V.A.G.
Building to him;[11]to disregard the company policy prohibiting advances by shareholders; to unduly increase his corporate monthly
allowance; and to sell her Wack-Wack Golf proprietary share and use the proceeds thereof to pay his personal financial
obligations. When the proposed transfer of the V.A.G. Building did not materialize, petitioners claim that Eduardo instituted an
action to compel the donation of said property to him.[12] Furthermore, they claim that Eduardo attempted to forcibly evict petitioner
Jason from his office at VMC so he can occupy the same; that Eduardo and his cohorts constantly created trouble by intervening in
the daily operations of the corporations without the knowledge or consent of the board of directors.

Meanwhile, in Civil Case No. 4257-MC, the trial court rendered a Decision granting the permanent injunction applied for
by the corporations.[13] However, the Court of Appeals subsequently rendered a Decision[14] declaring that Eduardo, his son Michael,
and the other persons impleaded in Civil Case No. 4257-MC, were imprudently declared in default by the trial court. The appellate
court thus annulled the permanent injunction issued by the trial court and remanded the case for further proceedings. VMC, Genato,
and Oriana corporations filed a Petition for Review on Certiorari before this Court, but the same was denied for failure to
sufficiently show any reversible error in the Decision of the Court of Appeals. [15] The three corporations filed a Motion for
Reconsideration, but the same was denied with finality on June 25, 2008.

Meanwhile, on February 3, 2005, the City Prosecutors Office of Malabon City issued a Resolution[16] recommending that
petitioners be charged with two counts of violation of Section 74 of the Corporation Code, but dismissed the complaint against
Belinda for lack of evidence.[17] Petitioners filed a Petition for Review[18] before the Department of Justice (DOJ), which reversed
the recommendation of the City Prosecutor of Malabon City. [19] The dispositive portion of the DOJ Resolution dated July 26, 2005,
reads:
 Wherefore, premises considered, the assailed resolution is REVERSED and SET ASIDE. The City
Prosecutor of Malabon City is hereby directed to cause the withdrawal of the corresponding information filed
against respondents [herein petitioners] for violation of Section 74 of the Corporation Code of the Philippines and
to report the action taken thereon within ten (10) days from the receipt hereof.

SO ORDERED.[20]

The DOJ denied Eduardos Motion for Reconsideration[21] in a Resolution[22] dated March 29, 2006. On appeal, the Court of Appeals
rendered the assailed Decision, the dispositive portion of which states:

WHEREFORE, the instant petition is partially GRANTED. The assailed Resolutions of public
respondent dated July 26, 2005 and March 29, 2006 are hereby NULLIFIED and SET ASIDE. However, due to
the present existence of a prejudicial question, the criminal case docketed I.S. No. MAL-2004-1167 is hereby
SUSPENDED until Civil Case No. 4257-MC is decided on the merits with finality. [23]

The appellate court ruled that the Secretary of Justice committed grave abuse of discretion amounting to lack or excess of jurisdiction
in reversing the Resolutions of the Malabon City Prosecutor and in finding that Eduardo did not act in good faith when he demanded
for the examination of VMC and Genatos corporate books. It further held that Eduardo can demand said examination as a
stockholder of both corporations; that Eduardo raised legitimate questions that necessitated inspection of the corporate books and
records; and that petitioners refusal to allow inspection created probable cause to believe that they have committed a violation of
Section 74 of the Corporation Code.
On June 19, 2007, the Court of Appeals denied the Motions for Reconsideration filed by petitioners and the Secretary of
Justice.[24] Hence, this petition raising the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS WAS CORRECT IN ITS FINDING THAT
THE HONORABLE JUSTICE SECRETARYS REVERSAL OF THE MALABON CITY
PROSECUTORS RESOLUTION FINDING PROBABLE CAUSE AGAINST HEREIN PETITIONERS WAS
DONE CONTRARY TO THE APPLICABLE LAW AND JURISPRUDENCE TANTAMOUNT TO GRAVE
ABUSE OF DISCRETION.

WHETHER OR NOT THE HONORABLE JUSTICE SECRETARY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN REVERSING THE
RESOLUTION OF THE MALABON CITY PROSECUTOR FINDING PROBABLE CAUSE AGAINST
PETITIONERS AFTER PRELIMINARY INVESTIGATION FOR VIOLATION OF SECTION 74 OF THE
CORPORATION CODE OF THE PHILIPPINES.

WHETHER OR NOT THE HONORABLE JUSTICE SECRETARY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT
PETITIONERS ACTED IN GOOD FAITH WHEN THEY DENIED PRIVATE RESPONDENTS DEMAND
FOR INSPECTION OF CORPORATE BOOKS.[25]

We grant the petition.

Probable cause, for purposes of filing a criminal information, has been defined as such facts as are sufficient to engender
a well-founded belief that a crime has been committed and that respondent is probably guilty thereof. It is such a state of facts in
the mind of the prosecutor as would lead a person of ordinary caution and prudence to believe or entertain an honest or strong
suspicion that a thing is so. The term does not mean actual or positive cause; nor does it import absolute certainty. It is merely
based on opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether there is sufficient
evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense
charged. Precisely, there is a trial for the reception of prosecutions evidence in support of the charge. [26]

The determination of the existence of probable cause lies within the discretion of the prosecuting officers after conducting
a preliminary investigation upon complaint of an offended party. Their decisions are reviewable by the Secretary of Justice who
may direct the filing of the corresponding information or to move for the dismissal of the case. [27]

In reversing the Resolutions of the Secretary of Justice directing the withdrawal of the information filed against petitioners
for lack of probable cause, the Court of Appeals held that it was beyond the Secretary of Justices authority to determine the motives
of Eduardo in seeking an inspection of the corporations books and papers.

In order that probable cause to file a criminal case may be arrived at, or in order to engender the well-founded belief that a
crime has been committed, the elements of the crime charged should be present. [28] This is based on the principle that every crime
is defined by its elements, without which there should be at the most no criminal offense.

In Gokongwei, Jr. v. Securities and Exchange Commission,[29] this Court explained the rationale behind a stockholder's
right to inspect corporate books, to wit:
 The stockholder's right of inspection of the corporation's books and records is based upon their ownership
of the assets and property of the corporation. It is, therefore, an incident of ownership of the corporate property,
whether this ownership or interest be termed an equitable ownership, a beneficial ownership, or a quasi-ownership.
This right is predicated upon the necessity of self-protection. It is generally held by majority of the courts that
where the right is granted by statute to the stockholder, it is given to him as such and must be exercised by him
with respect to his interest as a stockholder and for some purpose germane thereto or in the interest of the
corporation. In other words, the inspection has to be germane to the petitioner's interest as a stockholder,
and has to be proper and lawful in character and not inimical to the interest of the corporation.[30]

In Republic v. Sandiganbayan,[31] the Court declared that the right to inspect and/or examine the records of a corporation
under Section 74 of the Corporation Code is circumscribed by the express limitation contained in the succeeding proviso, which
states that:

[I]t shall be a defense to any action under this section that the person demanding to examine and copy excerpts
from the corporation's records and minutes has improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any other corporation, or was not acting in good
faith or for a legitimate purpose in making his demand. (Emphasis supplied)

Thus, contrary to Eduardos insistence, the stockholders right to inspect corporate books is not without limitations. While
the right of inspection was enlarged under the Corporation Code as opposed to the old Corporation Law (Act No. 1459, as amended),

It is now expressly required as a condition for such examination that the one requesting it must not have been
guilty of using improperly any information secured through a prior examination, or that the person asking for such
examination must be acting in good faith and for a legitimate purpose in making his demand.[32] (Emphasis
supplied)

In order therefore for the penal provision under Section 144 of the Corporation Code to apply in a case of violation of a
stockholder or members right to inspect the corporate books/records as provided for under Section 74 of the Corporation Code, the
following elements must be present:

First. A director, trustee, stockholder or member has made a prior demand in writing for a copy of
excerpts from the corporations records or minutes;

Second. Any officer or agent of the concerned corporation shall refuse to allow the said director, trustee,
stockholder or member of the corporation to examine and copy said excerpts;

Third. If such refusal is made pursuant to a resolution or order of the board of directors or trustees, the
liability under this section for such action shall be imposed upon the directors or trustees who voted for such
refusal; and,

Fourth. Where the officer or agent of the corporation sets up the defense that the person demanding to
examine and copy excerpts from the corporations records and minutes has improperly used any information
secured through any prior examination of the records or minutes of such corporation or of any other corporation,
or was not acting in good faith or for a legitimate purpose in making his demand, the contrary must be shown or
proved.

Thus, in a criminal complaint for violation of Section 74 of the Corporation Code, the defense of improper use or motive
is in the nature of a justifying circumstance that would exonerate those who raise and are able to prove the same. Accordingly, where
the corporation denies inspection on the ground of improper motive or purpose, the burden of proof is taken from the shareholder
and placed on the corporation.[33] This being the case, it would be improper for the prosecutor, during preliminary investigation, to
refuse or fail to address the defense of improper use or motive, given its express statutory recognition. In the past we have declared
that if justifying circumstances are claimed as a defense, they should have at least been raised during preliminary
investigation;[34] which settles the view that the consideration and determination of justifying circumstances as a defense is a relevant
subject of preliminary investigation.

A preliminary investigation is in effect a realistic judicial appraisal of the merits of the case; sufficient proof of the guilt of
the criminal respondent must be adduced so that when the case is tried, the trial court may not be bound, as a matter of law, to order
an acquittal.[35] Although a preliminary investigation is not a trial and is not intended to usurp the function of the trial court, it is not
a casual affair; the officer conducting the same investigates or inquires into the facts concerning the commission of the crime with
the end in view of determining whether or not an information may be prepared against the accused. [36] After all, the purpose of
preliminary investigation is not only to determine whether there is sufficient ground to engender a well-founded belief that a crime
has been committed and the respondent therein is probably guilty thereof and should be held for trial; it is just as well for the purpose
of securing the innocent against hasty, malicious and oppressive prosecution, and to protect him from an open and public accusation
of a crime, from the trouble, expense and anxiety of a public trial. [37] More importantly, in the appraisal of the case presented to him
for resolution, the duty of a prosecutor is more to do justice and less to prosecute. [38]
 If the prosecutor is convinced during preliminary investigation of the validity of the respondents claim of a justifying
circumstance, then he must dismiss the complaint; if not, then he must file the requisite information. This is his discretion, the
exercise of which we grant sufficient latitude.[39]

In the instant case, the Court finds that the Court of Appeals erred in declaring that the Secretary of Justice exceeded his
authority when he conducted an inquiry on the petitioners defense of improper use and motive on Eduardos part. As a necessary
element in the offense of refusal to honor a stockholder/members right to inspect the corporate books/records, it was incumbent
upon the Secretary of Justice to determine that all the elements which constitute said offense are present, in line with our ruling
in Duterte v. Sandiganbayan.

A preliminary investigation is the crucial sieve in the criminal justice system which spells for an individual the difference
between months if not years of agonizing trial and possibly jail term, on the one hand, and peace of mind and liberty, on the
other. Thus, we have characterized the right to a preliminary investigation as not a mere formal or technical right but a substantive
one, forming part of due process in criminal justice. [40] Due process, in the instant case, requires that an inquiry into the motive
behind Eduardos attempt at inspection should have been made even during the preliminary investigation stage, just as soon as
petitioners set up the defense of improper use and motive.

Petitioners argue that Eduardos demand for an inspection of the corporations books is based on the latters attempt in bad
faith at having his more than P165 million advances from the corporations written off; that Eduardo is unjustly demanding that he
be given the office of Jason, or the Vice Presidency for Finance and Corporate Secretary; that Eduardo is usurping rights belonging
exclusively to the corporations; and Eduardos attempts at coercing the corporations, their directors and officers into giving in to his
baseless demands involving specific corporate assets. Specifically, petitioners accuse Eduardo of the following:

1. He is a spendthrift, using the family corporations resources to sustain his extravagant lifestyle. During
his incumbency as officer of VMC and Genato (from 1984 to 2000), he was able to obtain massive amounts by
way of cash advances from these corporations, amounting to more than P165 million;

2. He is exercising undue pressure upon petitioners in order to acquire ownership, through the forced
execution of a deed of donation, over the VAG Building in San Juan, which building belongs to Genato;

3. He is putting pressure on the corporations, through their directors and officers, for the latter to
disregard their respective policies which prohibit the grant of cash advances to stockholders.

4. At one time, he coerced Flordeliza for the latter to sell her Wack-Wack Golf Proprietary Share;

5. In May 2003, without the requisite authority, he called a stockholders meeting to demand an increase
in his P140,000.00 monthly allowance from the corporation to P250,000.00; demand a cash advance of
US$10,000; and to demand that the corporations shoulder the medical and educational expenses of his family as
well as those of the other stockholders;

6. In November 2003, he demanded that he be given an office within the corporations premises. In
December 2003, he stormed the corporations common office, ordered the employees to vacate the premises,
summoned the directors to a meeting, and there he berated them for not acting on his requests. In January 2004,
he returned to the office, demanding the transfer of the Accounting Department and for Jason to vacate his office
by the end of the month. He likewise left a letter which contained his demands. At the end of January 2004, he
returned, ordered the employees to leave the premises and demanded that Jason surrender his office and vacate
his desk. He did this no less than four (4) times. As a result, the respective boards of directors of the corporations
resolved to ban him from the corporate premises;

7. He has been interfering in the everyday operations of VMC and Genato, usurping the duties, rights
and authority of the directors and officers thereof. He attempted to lease out a warehouse within the VMC premises
without the knowledge and consent of its directors and officers; during the wake of the former President of VMC
and Genato, he issued instructions for the employees to close down operations for the whole duration of the wake,
against the corporate officers instructions to attend the wake by batch, so as not to hamper business operations;
he has caused chaos and confusion in VMC and Genato as a result;[41]

8. He is out to sabotage the family corporations.[42]

These serious allegations are supported by official and other documents, such as board resolutions, treasurers affidavits
and written communication from the respondent Eduardo himself, who appears to have withheld his objections to these charges. His
silence virtually amounts to an acquiescence.[43] Taken together, all these serve to justify petitioners allegation that Eduardo was not
acting in good faith and for a legitimate purpose in making his demand for inspection of the corporate books. Otherwise stated, there
is lack of probable cause to support the allegation that petitioners violated Section 74 of the Corporation Code in refusing
respondents request for examination of the corporation books.
 WHEREFORE, the Petition for Review on Certiorari is GRANTED. The March 6, 2007 Decision and June 19, 2007
Resolution of the Court of Appeals in CA-G.R. SP No. 94708 are REVERSED and SET ASIDE. The July 26, 2005 and March
29, 2006 Resolutions of the Secretary of Justice directing the withdrawal of the information filed against petitioners for violation of
Section 74 of the Corporation Code are accordingly REINSTATED and AFFIRMED.

SO ORDERED.

3.1}. Explain the concept of stockholder’s right to inspect and/or examine records of the corporation.

The stockholder's right of inspection of the corporation's books and records is based upon their
ownership of the assets and property of the corporation. It is, therefore, an incident of
ownership of the corporate property, whether this ownership or interest be termed an equitable
ownership, a beneficial ownership, or a quasi-ownership. This right is predicated upon the
necessity of self-protection. It is generally held by majority of the courts that where the right is
granted by statute to the stockholder, it is given to him as such and must be exercised by him
with respect to his interest as a stockholder and for some purpose germane thereto or in the
interest of the corporation. In other words, the inspection has to be germane to the
petitioner's interest as a stockholder, and has to be proper and lawful in character and not
inimical to the interest of the corporation.

3.2}. Can a corporation deny the right to inspect and/or examine records of the corporation? Explain.

3.3}. What are the limitations of the right to inspect and/or examine records of the corporation?

the right to inspect and/or examine the records of a corporation under Section 74 of the
Corporation Code is circumscribed by the express limitation contained in the succeeding
proviso, which states that:

[I]t shall be a defense to any action under this section that the person demanding to examine
and copy excerpts from the corporation's records and minutes has improperly used any
information secured through any prior examination of the records or minutes of such
corporation or of any other corporation, or was not acting in good faith or for a legitimate
purpose in making his demand.

3.4}. What are the elements in order for the penal provision provided in Sec. 144 to apply.

In order therefore for the penal provision under Section 144 of the Corporation Code to
apply in a case of violation of a stockholder or members right to inspect the corporate
books/records as provided for under Section 74 of the Corporation Code, the following
elements must be present:

First. A director, trustee, stockholder or member has made a prior demand

in writing for a copy of excerpts from the corporations records or minutes;

Second. Any officer or agent of the concerned corporation shall refuse to

allow the said director, trustee, stockholder or member of the corporation to
examine and copy said excerpts;
 Third. If such refusal is made pursuant to a resolution or order of the board
of directors or trustees, the liability under this section for such action shall be
imposed upon the directors or trustees who voted for such refusal; and,

Fourth. Where the officer or agent of the corporation sets up the defense
that the person demanding to examine and copy excerpts from the corporations
records and minutes has improperly used any information secured through any
prior examination of the records or minutes of such corporation or of any other
corporation, or was not acting in good faith or for a legitimate purpose in making
his demand, the contrary must be shown or proved.

4}. State Section 81 of the Corp/ Code

Sec. 81. Instances of appraisal right.- Any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of his shares in the following instances:

1. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in any
respect superior to those of outstanding shares of any class, or of extending or shortening the
term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code; and

3. In case of merger or consolidation.

4.1. Explain the concept of stockholder’s appraisal right