TOPROS vs. John Charles Chang Jr. DIGEST

Corporation Law Case
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.

2. The determination of the exact liability of Chang.
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 33
of 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;
1
(b) The opportunity is within the corporation's line of business;
(c) The corporation has an interest or expectancy in the opportunity;

and
(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.
2. Now, as to Chang’s liability. Undisputed, Chang committed several acts showing

personal and pecuniary that were in conflict with his duties as director and officer of
TOPROS, hence there is violation of the corporate opportunity doctrine.
To determine his liability, this case should be remanded to the trial court for the
reception of additional evidence and the reevaluation of evidence already submitted,
guided by the parameters aforementioned.
Finally, an officer of a corporation cannot engage in a business in direct competition

with that of the corporation where he is a director by utilizing information he has
received as such officer, under the established law that a director or officer of a
corporation may not enter into a competing enterprise which cripples or injures the
business of the corporation of which he is an officer or director. It is also established
that corporate officers are not permitted to use their position of trust and confidence
to further their private interests. Where two corporations are competitive in a
substantial sense, it would seem improbable, if not impossible, for the director, if he
were to discharge effectively his duty, to satisfy his loyalty to both corporations and
place the performance of his corporation duties above his personal concerns.

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Corporation Law Case

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

Chang is a former employee of Pantrade owned by Spouses Ty. Sps. Ty wanted to

1. The violation of the corporate opportunity doctrine.

1. Yes, there is a violation of the corporate opportunity. After a long discourse as to

The doctrine of corporate opportunity governs the legal responsibility of directors,

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

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

In determining paragraph (b), whether the opportunity is within the corporation's

2. Now, as to Chang’s liability. Undisputed, Chang committed several acts showing

Finally, an officer of a corporation cannot engage in a business in direct competition

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