TOPROS, INC. VS. CHANG, JR. et al.

G. R. Nos. 200070-71
December 07, 2021
Topic: Doctrine of Corporate Opportunity

Facts:

Chang is a former employee of Pantrade owned by Spouses Ty. Sps. Ty wanted to established another corporation
called TOPROS that which is the sole distributor of Minolta plain paper copiers in the Philippines. Chang was given
the duty to manage TOPROS and a 10% shares in the corporation with the assurance from Chang that he will render
competent, exclusive, and loyal service thereto. Chang as President and General Manager and entrusted to him the
management as well as the funds of TOPROS.

Despite its success, no substantial cash dividends were distributed to the stockholders because, according to Chang,
the corporation was investing its funds in several real properties. Ty Family sensed irregularities in Chang's dealings
when their friends and relatives began questioning the manner in which products and services from TOPROS were
issued receipts and vouchers from TOPGOLD, Golden Exim, and Identic. The Ty Family requested Chang to return all
corporate records of TOPROS. Chang, however, offered to buy them out of their interest at TOPROS. This prompted
the Ty Family to conduct an investigation which revealed that while still a Corporate Director and an officer of
TOPROS, Chang, together with the individual respondents, incorporated the respondent-corporations to siphon the
assets, funds, goodwill, equipment, and resources of TOPROS.

TOPROS alleged that Chang used its properties in organizing the respondent- corporations and obtained
opportunities properly belonging to it and its stockholders to their damage and prejudice.

Issues:

1. The violation of the corporate opportunity doctrine.

Ruling:

1. Yes, there is a violation of the corporate opportunity. After a long discourse as to the factors that the courts should
be considered in determining the award of damages under Section 34 (Disloyalty of a director violating the corporate
opportunity doctrine) of the Corporation Code, the Court discussed: The doctrine of corporate opportunity governs
the legal responsibility of directors, officers and controlling shareholders in a corporation, under the duty of loyalty,
not to take such opportunities for themselves, without first disclosing the opportunity to the board of directors of the
corporation and giving the board the option to decline the opportunity on behalf of the corporation. If the procedure
is violated and a corporate fiduciary takes the corporate opportunity anyway, the fiduciary violates its duty of loyalty
and the corporation will be entitled to a constructive trust of all profits obtained from the wrongful transaction.

Thus, a claim of damages under Section 34 of the Corporation Code (now Section 33of the RCC) arises when a
corporate officer or director takes a business opportunity for his own, provided that it is sufficiently shown by the
claimant that:

(a) The corporation is financially able to exploit the opportunity;

(b) The opportunity is within the corporation's line of business;

(c) The corporation has an interest or expectancy in the opportunity;

(d) By taking the opportunity for his own, the corporate fiduciary
(i.e., corporate director, trustee or officer) will thereby be placed in a
position inimicable to his duties to the corporation.

In determining paragraph (b), whether the opportunity is within the corporation's line of business, the involved
corporations must be shown to be in competition with one another. They must be engaged in related areas of
businesses, producing the same products with overlapping markets.