Ang-Abaya Vs Ang

8/26/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 573
G.R. No. 178511. December 4, 2008.*
MA. BELEN FLORDELIZA C. ANG-ABAYA, FRANCIS

JASON A. ANG, HANNAH ZORAYDA A. ANG, and
VICENTE G. GENATO, petitioners, vs. EDUARDO G.
ANG, respondent.
Criminal Procedure; Probable Cause; Words and Phrases; 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.—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 prosecution’s evidence in support of the charge.”
Criminal Law; Every crime is defined by its elements, without
which there should be—at the most—no criminal offense.—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. 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.
Corporation Law; Stockholder’s Right of Inspection; 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, but the inspection has to be germane to his interest
as a stock-
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www.central.com.ph/sfsreader/session/0000017428a3be1205824e6c003600fb002c009e/t/?o=False 1/20
* THIRD DIVISION.
130
holder, and has to be proper and lawful in character and not

inimical to the interest of the corporation.—In Gokongwei, Jr. v.
Securities and Exchange Commission, 89 SCRA 336 (1979), 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. In Republic v.
Sandiganbayan, 199 SCRA 39 (1991), 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.
Same; Same; Criminal Law; Violation of Section 74 of the
Corporation Code; Elements.—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 member’s 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 corporation’s
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
131
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 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, the contrary must be
shown or proved.
Same; Same; Same; Justifying Circumstances; Criminal
Procedure; Preliminary Investigations; 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; If justifying circumstances are claimed as a
defense, they should at least be raised during preliminary
investigation—the consideration and determination of justifying
circumstances as a defense is a relevant subject of preliminary
investigation.—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. 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; which settles the view that the consideration and
determination of justifying circumstances as a defense is a
relevant subject of preliminary investigation.
Same; Same; Same; Same; Same; Same; 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.—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.
Although a preliminary investigation is
132
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. 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. 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.
Same; Same; Same; Same; Same; Same; Due Process; 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; Due process
requires that an inquiry into the motive behind a stockholder’s
attempt at inspection should be made even during the preliminary
investigation stage, just as soon as petitioners set up the defense of
improper use and motive.—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. Due process, in the instant case, requires that an
inquiry into the motive behind Eduardo’s 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.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
133
Angara, Abello, Concepcion, Regala & Cruz for

petitioners.
Gonzales, Batiller, David, Leabres, Reyes for
respondent.
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari1 under Rule 45 of

the Rules of Court assails the March 6, 2007 Decision2of
the Court of Appeals in CA-G.R. SP No. 94708, which
nullified and set aside the July 26, 2005 and March 29,
2006 Resolutions3 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 Resolution4 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
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1 Rollo, pp. 3-46.

2 Id., at pp. 51-63; penned by Associate Justice Ramon M. Bato, Jr. and
concurred in by Associate Justices Remedios A. Salazar-Fernando and
Jose C. Mendoza.
3 Id., at pp. 249-252 and 253.
4 Id., at pp. 65-66.
134
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
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5 Id., at pp. 134-162, entitled “Vibelle Manufacturing Corporation,

Genato Investments, Incorporated, and Oriana Manufacturing
Corporation v. Eduardo Genato Ang, Michael Edward Chi Ang, and John
Does and Jane Does.” The case was raffled to Branch 74 of the Regional
Trial Court of Malabon City.
6 Id., at pp. 124 and 125.
135
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-Complaint8 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
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7 Id., at pp. 221 and 223.

8 Id., at pp. 117-121: I.S. No. Mal. 2004-1167.
9 Batas Pambansa Blg. 68 (1980),
Sec. 74. Books to be kept; stock transfer agent.—Every
corporation shall keep and carefully preserve at its principal office
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 inspection by 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, trustees, stockholder or member of the cor-
136
Hanna were subsequently impleaded for likewise denying

respondent’s request to inspect the corporate books.
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poration 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
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 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
or was not acting in good faith or for a legitimate purpose in

making his demand.
Stock corporations must also keep a book to be known as the

“stock and transfer book,” in which must be kept a record of all
stocks in the names of the stockholders alphabetically arranged;
the installments paid and unpaid on all stock for which
subscription has been made, and the date of payment of any
installment; a statement of every alienation, sale or transfer of
stock made, the date thereof, and by and to whom made; and such
other entries as the by-laws may prescribe. The stock and transfer
book shall be kept in the principal office of the corporation or in the
office of its stock transfer agent and shall be open for inspection by
any director or stockholder of the corporation at reasonable hours
on business days.
No stock transfer agent or one engaged principally in the
business of registering transfers of stocks in behalf of a stock
corporation shall be allowed to operate in the Philippines unless he
secures a license from the Securities and Exchange Commission
and pays a fee as may be fixed by the Commission, which shall be
renewable annually: Provided, That a stock corporation is not
precluded from performing or making transfer of its own stocks, in
which case all the rules and regu-
137
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 Eduardo’s 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,
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lations imposed on stock transfer agents, except the payment of a

license fee herein provided, shall be applicable.
Sec. 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.
10 Rollo, pp. 67-74.
11 The VAG Building was initially intended to be transferred or
donated to Eduardo, subject to certain conditions pursuant to the request
or suggestion of the late Belen K. Genato (Rollo, pp. 903-907); however,
said transfer did not materialize (Rollo, pp. 190-191).
138
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 sub-
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12 Civil Case No. Q-0453241 filed with the Regional Trial Court of
Quezon City, Branch 100. The case was dismissed in an Order of the RTC-
QC dated January 6, 2006.
13 Rollo, pp. 505-512, the dispostive portion of which, reads:
WHEREFORE, premises considered, judgment is hereby
rendered:
1. Permanently enjoining defendants Eduardo Genato Ang and
Michael Edward Chi Ang, and/or any of their agents,
representatives, lawyers, assignees, heirs, or any other persons
acting under their authority or instructions, from:
a. Occupying, demanding, claiming or otherwise attempting to

occupy any position or office in Plaintiff corporations, (except those
concomitant to their rights as stockholders, as the case may be),
without the consent of the boards of directors of plaintiff
corporations;
b. Entering the offices of plaintiff corporations located at 18
J.P. Bautista Ave., Malabon City, Metro Manila, or any of plaintiff
corporations’ satellite offices, business centers, distribution offices,
warehouses, or any other property belonging to plaintiff
corporations or otherwise used by them, without consent of the
boards of directors of plaintiff corporations;
c. Communicating with the officers and employees, clients,
distributors, business associates of plaintiff corporations, as well as
pertinent government agencies, for the purpose of sowing enmity
between said persons and plaintiff corporations, or to otherwise
disrupt the smooth operation and management of plaintiff
corporations;
139
sequently rendered a Decision14 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 Prosecutor’s
Office of Malabon City issued a Resolution16 recommending
that petitioners be charged with two counts of violation of
Section 74 of the Corporation Code, but dismissed the
complaint
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d. Usurping or exercising rights, privileges or property

belonging to plaintiff corporations, or representing plaintiff
corporations or acting for and in behalf of plaintiff corporations in
any transactions or dealing with clients, distributors and banks of
plaintiff corporations, or government agencies, or any other persons
with business with plaintiff corporations;
e. Seizing, interfering with or otherwise disrupting the
management, operations and/or business of plaintiff corporations,
and other similar acts of harassment and extortion that would tend
to cause damage to plaintiff corporations.
Further, defendants are hereby ordered to pay plaintiffs the
amount of P500,000.00 for and as attorney’s fees and costs of the
suit.
SO ORDERED.
14 CA-G.R. CV No. 84736, penned by Associate Justice Enrico A.
Lanzanas and concurred in by Associate Justices Edgardo P. Cruz, and
Jose C. Reyes, Jr.; Rollo, pp. 911-927.
15 In G.R. No. 178586.
16 Rollo, pp. 114-116; penned by 1st Assistant City Prosecutor Magno
T. Pablo, Jr., as approved by Malabon City-Navotas Prosecutor Jorge G.
Catalan, Jr.
140
against Belinda for lack of evidence.17 Petitioners filed a

Petition for Review18 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 Eduardo’s Motion for Reconsideration21 in

a Resolution22 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
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17 Id., at pp. 116 and 220: The City Prosecutor of Malabon found that
Ma. Belinda G. Sandejas was not present during the board meeting on
September 4, 2004 and did not vote on the Resolution denying Eduardo’s
request to inspect the corporate books of VMC and GII;.
18 Id., at pp. 423-438.
19 Id., at pp. 249-252; penned by Undersecretary Ernesto L. Pineda.
20 Id., at p. 252.
21 Id., at pp. 395-406.
22 Id., at p. 253.
23 Id., at pp. 62-63.
141
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 Genato’s 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 SECRETARY’S REVERSAL OF THE MALABON CITY
PROSECUTOR’S 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 PRI-
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24 CA Rollo, pp. 513-532 and Rollo, pp. 672-683.
142
VATE RESPONDENT’S 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 prosecution’s 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 Justice’s authority
to determine the motives of Eduardo in seeking an
inspection of the corporations’ books and papers.
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25 Rollo, pp. 24-25.

26 Villanueva v. Secretary of Justice, G.R. No. 162187, November 18,
2005, 475 SCRA 495, 511.
27 Advincula v. Court of Appeals, 397 Phil. 641, 650-651; 343 SCRA

583, 589-590 (2000).
143
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 (Emphasis supplied)
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:
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28 Duterte v. Sandiganbayan, G.R. No. 130191, April 27, 1998, 289

SCRA 721.
29 178 Phil. 266; 89 SCRA 336 (1979).
30 Id., at pp. 314-315; pp. 383-384, citing Fletcher Cyc, Private
Corporations, Vol. 5, 1976 Rev. Ed., §§. 2213, 2218 & 2222, pp. 693, 709,
725.
31 G.R. Nos. 88809 and 88858, July 10, 1991, 199 SCRA 39.
144
“[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
or was not acting in good faith or for a legitimate purpose
in making his demand.” (Emphasis supplied)
Thus, contrary to Eduardo’s insistence, the stockholder’s

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 member’s 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
corporation’s 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
_______________
32 Gonzales v. Philippine National Bank, 207 Phil. 425, 430; 122 SCRA 489,
494-495 (1983).
145
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 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, 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
_______________
33 5A Fletcher Cyc. Corporation. §§. 2220, 2008.

34 People v. Caratao, G.R. No. 126281, June 10, 2003, 403 SCRA 482;
People v. Dorado, G.R. No. 122248, February 11, 1999, 303 SCRA 61;
People v. Ronquillo, G.R. No. 96125, August 31, 1995, 247 SCRA 793;
People v. Salazar, G.R. No. 84391, April 7, 1993, 221 SCRA 170; People v.
Vicente, G.R. No. L-31725, February 18, 1986, 141 SCRA 347.
146
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 respondent’s 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
Eduardo’s part. As
_______________
35 Perez v. Ombudsman, G.R. No. 131445, May 27, 2004, 429 SCRA
357.
36 Sales v. Sandiganbayan, G.R. No. 143802, November 16, 2001, 369
SCRA 293.
37 Okabe v. Judge Gutierrez, G.R. No. 150185, May 27, 2004, 429 SCRA
685, citing People v. Poculan, 167 SCRA 176 (1988).
38 Estrada v. Desierto, G.R. Nos. 146710-15, March 2, 2001, 356 SCRA
108.
39 Camanag v. Guerrero, G.R. No. 121017, February 17, 1997, 268
SCRA 473.
147
a necessary element in the offense of refusal to honor a

stockholder/member’s 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
Eduardo’s 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 Eduardo’s demand for an
inspection of the corporations’ books is based on the latter’s
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 Eduardo’s 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;
_______________
40 Maza v. Gonzalez, G.R. Nos. 172074-76, June 1, 2007, 523 SCRA 318.
148
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
149
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, treasurer’s
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 respondent’s 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.
Austria-Martinez, Carpio-Morales,** Chico-Nazario and

Reyes, JJ., concur.
_______________
41 Court of Appeals Rollo, pages omitted, Joint Counter-Affidavit of

Flordeliza Ang-Abaya and Jason Ang.
42 Id., Joint Counter-Affidavit of Hannah Ang and Vincent Genato.
43 Lagon v. Hooven Comalco Industries, Inc., G.R. No. 135657, January
17, 2001, 349 SCRA 363.
** In lieu of Associate Justice Antonio Eduardo B. Nachura.
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8/26/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 573

G.R. No. 178511. December 4, 2008.*

MA. BELEN FLORDELIZA C. ANG-ABAYA, FRANCIS

Criminal Procedure; Probable Cause; Words and Phrases; A

holder, and has to be proper and lawful in character and not

PETITION for review on certiorari of the decision and

Angara, Abello, Concepcion, Regala & Cruz for

This Petition for Review on Certiorari1 under Rule 45 of

1 Rollo, pp. 3-46.

control/management of the corporations.5 Eduardo

that Michael was placed on preventive suspension due to

5 Id., at pp. 134-162, entitled “Vibelle Manufacturing Corporation,

Jason Ang, the Vice-President for Finance and Corporate

7 Id., at pp. 221 and 223.

Hanna were subsequently impleaded for likewise denying

poration to examine and copy excerpts from its records or minutes,

or was not acting in good faith or for a legitimate purpose in

Stock corporations must also keep a book to be known as the

Petitioners filed a Joint Counter-Affidavit praying for the

lations imposed on stock transfer agents, except the payment of a

Sec. 144. Violations of the Code.—Violations of any of the

petitioners claim that Eduardo instituted an action to

a. Occupying, demanding, claiming or otherwise attempting to

sequently rendered a Decision14 declaring that Eduardo,

d. Usurping or exercising rights, privileges or property

against Belinda for lack of evidence.17 Petitioners filed a

“Wherefore, premises considered, the assailed resolution is

The DOJ denied Eduardo’s Motion for Reconsideration21 in

“WHEREFORE, the instant petition is partially GRANTED.

The appellate court ruled that the Secretary of Justice

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

FINDING THAT PETITIONERS ACTED IN GOOD FAITH

24 CA Rollo, pp. 513-532 and Rollo, pp. 672-683.

VATE RESPONDENT’S DEMAND FOR INSPECTION OF

We grant the petition.

25 Rollo, pp. 24-25.

27 Advincula v. Court of Appeals, 397 Phil. 641, 650-651; 343 SCRA

In order that probable cause to file a criminal case may

“The stockholder’s right of inspection of the corporation’s books

In Republic v. Sandiganbayan,31 the Court declared that

28 Duterte v. Sandiganbayan, G.R. No. 130191, April 27, 1998, 289

Thus, contrary to Eduardo’s insistence, the stockholder’s

“It is now expressly required as a condition for such

In order therefore for the penal provision under Section

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

section for such action shall be imposed upon the directors or

any other corporation, or was not acting in good faith or for a

Thus, in a criminal complaint for violation of Section 74

33 5A Fletcher Cyc. Corporation. §§. 2220, 2008.

law, to order an acquittal.35 Although a preliminary

the respondent therein is probably guilty thereof and

a necessary element in the offense of refusal to honor a

technical right but a substantive one, forming part of due

“1. He is a spendthrift, using the family corporations’

2. He is exercising undue pressure upon petitioners in order

the premises, summoned the directors to a meeting, and there he

to hamper business operations; he has caused chaos and confusion

These serious allegations are supported by official and

Austria-Martinez, Carpio-Morales,** Chico-Nazario and