FACTS:

This case involves a Petition filed by the Philippine Associated Smelting and Refining Corporation (PASAR) seeking to restrain its former senior officers and shareholders from gaining access to its confidential and inexistent records. PASAR argues that allowing the respondents to inspect its confidential records would violate its right to peaceful and continuous possession of such documents. PASAR also claims that the respondents have no legitimate purpose in demanding access to its corporate books and records, as they would use the confidential information for their own advantage.

The respondents had written multiple letters demanding to inspect PASAR's corporate books and records, even going to its office on multiple occasions to demand access. They brought members of the press, causing disruption and harassment. The respondents stated that they wanted to ensure that PASAR's business transactions were above board. The petitioner sought negotiations for confidentiality agreements before allowing the inspection, but the respondents refused to accept the final terms and conditions.

As a result, PASAR filed a Petition for Declaratory Relief before the Regional Trial Court (RTC) of Pasig City to clarify the rights and duties of the parties regarding the inspection of records. Respondent Lim also filed a criminal complaint against some of PASAR's officers. The respondents continued to demand inspection of confidential records through letters. Finally, PASAR advised the respondents that it would furnish them with records from the Department of Environment and Natural Resources to show compliance with environmental laws. However, the respondents continued to demand more information and documents, even after a stockholders' meeting. PASAR argues that the respondents' actions violate its right and seeks injunctive relief.

The RTC granted PASAR's prayer for a writ of preliminary injunction, enjoining the respondents from inspecting the records until further orders from the court. The respondents filed a motion for dissolution of the writ, claiming that the right to inspect the records should be granted to the stockholders and not to PASAR. The RTC denied the motion, stating that the writ does not result in an unjust denial of the respondents' right to inspect the books.

The respondents filed a petition for certiorari before the Court of Appeals, arguing that the writ of preliminary injunction was unjustly intended to impede and restrain their rights as stockholders. The Court of Appeals agreed and held that the proper remedy for the enforcement of the right of inspection is a writ of mandamus to be filed by the stockholders, not a petition for injunction filed by the corporation.

The petitioner now seeks the reversal and setting aside of the Court of Appeals' Decision and Resolution, as well as the reinstatement of the writ of preliminary injunction granted by the RTC. The petitioner also prays for the respondents to be restrained from harassing or threatening the petitioner with criminal complaints. The RTC had issued a limited writ of preliminary injunction, and the petitioner seeks to expand the scope of the injunction to include the acts that were not specified in the RTC order.

ISSUES:

1. Whether the petitioner has the right to be protected by a writ of preliminary injunction.

2. Whether the respondent violated the petitioner's right that warrants the issuance of a preliminary injunction.

3. Whether a corporation can unilaterally deny a stockholder's right to inspect corporate records based on unsupported assertions of improper motive or curiosity.

4. Whether the burden of proof lies on the corporation to show that the purpose of the stockholder is improper.

5. Whether the stockholder has the right to inspect the corporate books, records, and documents of a corporation.

6. Whether the corporation can file a petition for injunction to prevent the stockholder from exercising their right to inspect.

7. Whether a corporation has the right to file an action for injunction to prevent stockholders from exercising their right to inspect corporate records.

8. Whether a petition for certiorari is the proper remedy to lift and cancel a writ of preliminary injunction.

9. Whether the Court of Appeals erred in evaluating the basis for the injunction granted by the Regional Trial Court instead of considering whether the injunction would cause irreparable damage to the respondents.

RULING:

1. 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. A clear showing of an actual existing right to be protected during the pendency of the principal action is required for the issuance of a writ of preliminary injunction.

2. 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 must be established, and injunction 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. In the absence of a clear legal right, the issuance of the injunctive writ constitutes a grave abuse of discretion.

3. No, a corporation cannot unilaterally deny a stockholder's right to inspect corporate records based on unsupported assertions of improper motive or curiosity. The limitations to the right to inspect under Section 74 of the Corporation Code must be raised as a defense by the corporation. The stockholder has the statutory right to inspect the corporation's books and records, and the burden is on the corporation to show impropriety of purpose or motive.

4. Yes, the burden of proof lies on the corporation to show that the purpose of the stockholder is improper. The corporation must prove, by way of defense, that the stockholder's purpose is improper or wrongful. The stockholder's right to inspect should not be made conditional upon showing a particular dispute or proving mismanagement or any other occasion rendering an examination proper.

5. Yes, the stockholder has the right to inspect the corporate books, records, and documents of a corporation. The right of inspection is recognized as one of the fundamental rights of a stockholder and is crucial in protecting the interest of the shareholders. The purpose of inspection may include ascertaining the financial condition of the company, determining the propriety of dividends, evaluating the value of shares for sale or investment, investigating mismanagement, and obtaining information for litigation purposes. The burden is on the corporation to establish a probability that the stockholder is attempting to gain inspection for an improper purpose.

6. No, the corporation cannot file a petition for injunction to prevent the stockholder from exercising their right to inspect. The proper remedy for stockholders to enforce their right of inspection is through a petition for mandamus. If the corporation denies the stockholders of their right, they can go to court to enforce their rights, and it is at that point that the corporation can raise their defenses. Filing a petition for injunction preemptively is an unjust action that impedes and restrains the stockholders' rights.

7. No, a corporation does not have the right to file an action for injunction to prevent stockholders from exercising their right to inspect corporate records. Section 74 of the Corporation Code provides that stockholders have the right to access the records of all business transactions of the corporation and the minutes of any meeting of stockholders or the board of directors. The law considers providing stockholders with access to information as a fundamental basis for their intelligent participation in the governance of the corporation. If the corporation wishes to deny access, it must raise its objections in an ordinary civil action for specific performance or damages, or in a petition for mandamus. The burden is on the corporation to prove that the stockholder has improperly used information before, lacks good faith, or lacks a legitimate purpose.

8. Yes, a petition for certiorari is the proper remedy to lift and cancel a writ of preliminary injunction. 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 through 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.

9. The petition is denied.

PRINCIPLES:

• A writ of preliminary injunction may be issued upon a clear showing of an actual existing right to be protected and its threatened violation.

• Injunction is not a remedy to protect or enforce contingent, abstract, or future rights.

• An injunction must fail where there is no clear showing of both an actual right to be protected and its threatened violation.

• 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.

• Injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should only be granted when the court is fully satisfied that the law permits it and the emergency demands it.

• The right to inspect corporate records is based upon the ownership of the stockholder in the corporation and is an incident of ownership.

• The right to inspect must be exercised by the stockholder with respect to their interest as a stockholder and for a purpose germane thereto or in the interest of the corporation.

• The burden of proving impropriety of purpose lies on the corporation, and the stockholder is not required to show propriety of purpose.

• The stockholder's right to inspect 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.

• The specific provisions of the Corporation Code place the burden of showing impropriety of purpose or motive on the corporation, not the stockholder.

• The right of a stockholder to inspect the books, records, and documents of a corporation is a fundamental right and is crucial in protecting the interests of the shareholders.

• The burden is on the corporation to establish a probability that the stockholder is attempting to gain inspection for an improper purpose.

• The proper remedy for a stockholder to enforce their right of inspection is a petition for mandamus, and not a petition for injunction filed by the corporation preemptively.

• Stockholders have the right to access the records of all business transactions of the corporation and the minutes of any meeting of stockholders or the board of directors.

• A corporation cannot file an action for injunction to prevent stockholders from exercising their right to inspect corporate records.

• The burden is on the corporation to prove that a stockholder has improperly used information before, lacks good faith, or lacks a legitimate purpose to deny access to corporate records.

• A petitioner may file a petition for certiorari under Rule 65 of the Rules of Court to lift and cancel a writ of preliminary injunction.

• Courts should focus on determining whether an injunction would cause irreparable damage to the party seeking the injunction, rather than evaluating the basis for the injunction.

• In deciding the grant or denial of an injunction, the determination of irreparable damage or injury is a key consideration.