Veraguth v. Isabela Sugar Company, Inc.

G.R. No. L-37064 October 4, 1932 Malcolm, J. Marin

petitioners EUGENIO VERAGUTH

respondents ISABELA SUGAR COMPANY, INC., GIL MONTILLA, Acting President, and AGUSTIN B.
MONTILLA, Secretary of the same corporation
summary Veraguth sough to compel the BoD of Isabela Sugar to provide him with prior notice and
minutes of all regular and special meetings of the corporation. The Court held that it is a
general principle of Corporation Law that that the directors of a corporation have
unqualified right to inspect the books and records of the corporation at all reasonable times.

facts of the case

The petitioner in this case, Eugenio Veraguth, in his capacity as a director and stockholder of the Isabela
Sugar Company, Inc. (Isabela), prayed for two things, namely:

1. The respondents be required within five days from receipt of notice of this petition to show cause why they refuse to notify
the petitioner, as director, of the regular and special meetings of the board of directors, and to place at his disposal at
reasonable hours, the minutes, and documents, and books of the aforesaid corporation, for his inspection as director and
stockholder, and to issue, upon payment of the fees, certified copies of any documentation in connection with said minutes,
documents, and books of the corporation

2. A final and absolute writ of mandamus be issued to each and all of the respondents to notify immediately the petitioner within
the reglamentary period, of all regular and special meetings of the board of directors of the Isabela Sugar Central Company,
Inc., and to place at his disposal at reasonable hours the minutes, documents, and books of said corporation for his inspection
as director and stockholder, and to issue immediately, upon payment of the fees, certified copies of any documentation in
connection with said minutes, documents, and the books of the aforesaid corporation.

**to be specific he was asking for a copy of the minutes of the special meeting wherein the Board of Directors
of the corporation issued a resolution concerning the payment of attorney’s fees with regard to litigations that
the corporation was involved in

In response to his demand for access to the minutes of the meeting in question, the corporate secretary
alleged that such minutes could not be released because it had not been signed by the directors present
during the meeting. In any case, according to the secretary, access to the books, records, and minutes of any
meeting could not be granted without prior approval of the corporation’s president.

issue
WON Veraguth was entitled to access to the books, records, and meetings of meetings of the corporation –
YES

ratio
First, the Court examined sec. 51 of the Corporation Code which states:

“All business corporations shall keep and carefully preserve a record of all business transactions, and a minute of all meetings of
directors, members, or stockholders, in which shall be set forth in detail the time and place of holding the meeting was regular or
special, if special its object, those present and absent, and every act done or ordered done at the meeting. . . .
The record of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any
director, member, or stockholder of the corporation at reasonable hours.”

According, to the Court this provision of the Corporation Code puts into law the general principle of
corporation law that the directors of a corporation have unqualified right to inspect the books and records

1
of the corporation at all reasonable times. Further, the fact that strained relations may exist between
directors and shareholders can never justify denial of the right to inspection.

As applied, although Veraguth is entitled to the minutes of the meeting that he requested, the corporate
secretary was justified in refusing to grant him access to the same in light of the fact that it had not yet been
approved/signed by the board of directors. The Court, however, held that requiring prior approval of the
president before the right to inspect could be exercised was illegal. Finally, the Court held that Veraguth had
not sufficiently demonstrated his right to the issuance of a writ of mandamus—no damage was caused by his
failure to attend the special meeting and that there was no reason to believe that the corporate secretary would
not send him notice as regards future regular and special meetings (parang presumption of regularity).