G.R. No. L-45144; April 3, 1939
M. E. GREY, plaintiff-appellant, vs. INSULAR LUMBER COMPANY, defendant-appellee.

FACTS

Plaintiff-appellant M.E. Grey, a stockholder (owning 57 shares but less than 3% of the total capital stock) of defendant-appellee Insular Lumber Company, sought to inspect and examine the corporation’s books and records. The Insular Lumber Company is a corporation organized under the laws of the State of New York but licensed to do business in the Philippines. Grey’s requests to examine the books at the company’s Manila and Fabrica offices in 1932 and 1933 were denied. The parties submitted a stipulation of facts, which included that under New York law (specifically Section 77 of the Stock Corporation Law), the right of a stockholder to examine books and records is limited to stockholders owning at least 3% of the shares, who may request a sworn financial statement. Grey did not make such a request. The lower court denied Grey’s petition for mandamus.

ISSUE

Whether the plaintiff-appellant, as a stockholder owning less than 3% of the shares, is entitled under applicable law to inspect and examine the books and records of the defendant corporation.

RULING

No. The Supreme Court affirmed the lower court’s judgment. The right of a stockholder to examine the books and records of a foreign corporation (organized under New York law) is governed by the law of the state of incorporation. The stipulated facts established that New York’s Section 77 of the Stock Corporation Law applies, which grants the inspection right only to stockholders owning at least 3% of the shares. Since Grey owned less than 3%, he had no statutory right to inspection. The Court rejected Grey’s alternative argument based on Philippine Corporation Law or common law rights, as he was bound by the stipulation of facts and failed to allege or prove that his purpose for inspection was proper, specific, honest, and for the protection of his interests as a stockholder, as required under common law principles.

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