Title
Supreme Court
Total Office Products and Services , Inc. vs. Chang, Jr.
Case
G.R. No. 200070-71
Decision Date
Dec 7, 2021
Chang, TOPROS’ president, diverted corporate assets to his own firms, breaching fiduciary duties; the Supreme Court reinstated liability under the doctrine of corporate opportunity.

Case Summary (G.R. No. 200070-71)

Petition and Procedural History

TOPROS filed an amended petition in 2000 for injunction, accounting, and damages against Chang and his corporate vehicles for alleged misappropriation of corporate opportunities. The SEC issued a writ of preliminary attachment. The case was transferred to the RTC, which rendered judgment in favor of TOPROS on March 18, 2008. The CA reversed and dismissed the petition by decision of June 17, 2011 and denied reconsideration on January 2, 2012. TOPROS now seeks certiorari review before the Supreme Court.

Antecedent Events

In 1983, TOPROS was incorporated with authorized capital of ₱4 million, later increased to ₱10 million. Chang was elected President and General Manager with a 20% share. Under his management, TOPROS expanded its line of office products. In 1998, the Ty Family discovered that Chang, while still an officer of TOPROS, incorporated TOPGOLD, Golden Exim, and Identic to divert clients, receipts, and real-estate investments away from TOPROS.

RTC Findings and Judgment

The RTC held that Chang breached his fiduciary duties under Sections 31 and 34 of the Corporation Code by usurping business opportunities and siphoning TOPROS assets through his private corporations. It ordered Chang and the respondent-corporations, jointly and solidarily, to:

  1. Account for all profits and properties belonging to TOPROS and refund the same;
  2. Pay actual damages to be determined by a court-appointed accounting committee;
  3. Pay ₱100,000 in exemplary damages and ₱100,000 in attorney’s fees;
  4. Cover all costs of suit.

CA Reversal

The Court of Appeals found TOPROS failed to present clear and convincing evidence of complete control or fraudulent intent. It declined to pierce the corporate veil, held that mere similarity of names and overlapping directorships did not prove disloyalty, and noted hearsay deficiencies in witness testimony. The CA reversed the RTC and dissolved the attachment.

Issue Presented

Whether Chang is liable for violation of his fiduciary duties as director and officer of TOPROS, specifically under the doctrine of corporate opportunity codified in Sections 31 and 34 of the Corporation Code.

Applicable Law and Constitutional Basis

• Corporation Code, Sections 31 (liability of directors and officers) and 34 (disloyalty and corporate opportunity)
• 1987 Philippine Constitution (decision date post-1990)

Supreme Court Ruling

The Supreme Court granted the petition, set aside the CA decision and its denial of reconsideration, and reinstated the finding that Chang violated his fiduciary duties. Recognizing the divergence in factual findings between the RTC and CA, the Court remanded the case to the RTC for further proceedings under clarified guidelines.

Doctrine of Corporate Opportunity

The doctrine rests on the director’s and officer’s duty of loyalty: they must not usurp for personal gain any business opportunity that the corporation is financially able to exploit, that falls within its line of business, or in which it has an interest or expectancy. Equity imposes a constructive trust on profits acquired in violation of this duty unless the transaction is fully disclosed and ratified by a two-thirds vote of disinterested shareholders.

Guidelines for Determining Corporate Opportunity

A business opportunity is actionable under Section 34 if:

  1. The corporation is financially able to undertake it;
  2. The opportunity is within or related to its line of business;
  3. The corporation has an existing interest or reasonable expectancy in the opportunity;
  4. By appropriating it, the fiduciary places personal interest in conflict with corporate duties.
    All factors are considered t

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