ANG-ABAYA v. ANG G.R. No.

 178511
Topic: Sec. 74 Corporation Code
ANG-ABAYA v. ANG G.R. No. 178511, December 4, 2008, Ynares-
Santiago, J.:
The stockholder’s right of inspection of the corporation’s book 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. 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.
FACTS: Vibelle Manufacturing Corporation (VMC) and Genato
Investments, Inc. (Genato) are family-owned corporations, where
petitioners and private respondent Eduardo Ang are shareholders,
officers and members of the board of directors.
Prior to the instant controversy, VMC, Genato, and Oriano
Manufacturing Corp. filed a Civil case 4257-MC against Eduardo,
together with Michael, and some other persons for allegedly conniving to
fraudulently wrest control/management of the corporations.

During the pendency of the above-mentioned Civil Case, particularly in

July 2004, Eduardo sought permission to inspect the corporate books of
VMC and Genato on account of petitioners alleged failure to update him
on the financial and business activities of these family corporations.

Petitioners denied the request claiming that Eduardo would use the
information obtained from said inspection for purposes inimical to the
corporations’ interests. Because of petitioners’ refusal to grant Eduardo’s
request, the latter filed an Affidavit-Complaint against petitioners,
charging them with violation of two counts of Sec. 74 (Corporation
Code), in relation to Sec. 144.

Petitioners denied violating Sec. 74 and reiterated the allegations

contained in their complaint in Civ. Case 4257-MC. They alleged that
Eduardo consistently pressured petitioner Flordeliza, his daughter, to
improperly transfer ownership of the corporations’ V.A.G building to
him. When the proposed transfer of the V.A.G. building did not
materialize, petitioners claim that Eduardo instituted an action to compel
donation of said property to him. Moreover, 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.

ISSUE: Whether the petitioners violated Sec, 74 of the Corporation

Code of the PH.
RULING: NO. The stockholders’ right to inspect corporate books is not
without limitations. 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.
In order therefore for the penal provision under Sec 144 of the
Corporation Code to apply in a case of violation of a stockholder or
members right to inspect the corporate books/records the elements
provided for under Sec 74 must be present.

The petition is GRANTED.