EN BANC
G.R. Nos. 200070-71. December 07, 2021
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., Petitioner, v. JOHN CHARLES CHANG, JR., TOPGOLD PHILIPPINES, INC., GOLDEN EXIM TRADING AND COMMERCIAL CORPORATION, AND IDENTIC INTERNATIONAL CORP., REPRESENTED BY JOHN CHARLES CHANG, JR., HECTOR AND CECILIA KATIGBAK, Respondents.
D E C I S I O N
INTING, J.:
A person cannot serve two masters without detriment to one of them.1 It is from this basic human frailty that the "doctrine of corporate opportunity" was recognized and laws were put in place to deter corporate officers from using their position of trust and confidence to further private interests.
Before the Court is a Petition for Review on Certiorari2 praying for the reversal of the Decision3 dated June 17, 2011 and the Resolution4 dated January 2, 2012 of the Court of Appeals (CA) in CA-G.R. SP Nos. 103047 and 103119. The CA reversed and set aside the Decision5 dated March 18, 2008 of Branch 158, Regional Trial Court (RTC), Pasig City in Civil Case No. 68327, and denied the Motion for Reconsideration6 filed by Total Office Products and Services, Inc. (TOPROS), respectively.
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff Total Office Products and Services (Topros), Inc. and against defendants John Charles Chang, Jr., Topgold Phils., Inc., Golden Exim Trading & [Commercial Corporation] and Identic International Corporation who are hereby ordered, jointly and solidarily, to:The RTC held that the case filed by TOPROS is an intra-corporate controversy between TOPROS and Chang. However, because of allegations of fraudulent utilization and siphoning of resources, opportunities, and contracts belonging to TOPROS by Chang, together with the individual respondents and the respondent-corporations, respondents are indispensable parties to the case who must be joined as party defendants.26chanRoblesvirtualLawlibraryTo carry this judgment into effect, a three-man Accounting Committee is hereby ordered formed with the Branch of [sic] Clerk of Court, Atty. Romeo Bautista IV, as Chairman, and two other certified public accountants respectively nominated by the parties, as members.
- Account for all the profits and properties which otherwise should have accrued to Topros and refund the same to Topros;cralawlawlibrary
- Pay actual damages suffered by Topros in an amount to be determined by the Court upon submission by the Court-appointed Accounting Committee of its Final Report;cralawlawlibrary
- Pay One Hundred Thousand Pesos (P100,000.00) in exemplary damages to Topros;cralawlawlibrary
- Pay One Hundred Thousand Pesos (P100,000.00) as and by way of attorney's fees to Topros; [and]
- Pay the costs of suit.
This Accounting Committee shall undertake the accounting necessary to determine the amount of actual damages suffered by Topros, the extent of loss of its business opportunities, the extent of gain profited by Chang and the three defendant corporations to the detriment of Topros, the refund of properties registered in the name of the three corporations which property pertains to Topros, and such other matters relevant to the judgment for accounting of all profits and properties properly accruing to Topros. It shall also include in its review the effects of the previously enforced Writ of Preliminary Attachment.
Accordingly, the parties are hereby directed to submit to the Court, within fifteen (15) days from receipt hereof, at least two (2) nominees each of certified public accountants from which the Court shall appoint the other two (2) members of the Accounting Committee.
Meanwhile, let the Petition be dismissed insofar as defendants Saul Mari Chang, Hector Katigbak, Cecilia Katigbak, Rosario Sarah Fernando and Elizabeth Jay are concerned.
SO ORDERED.25chanRoblesvirtualLawlibrary
WHEREFORE, the Petitions for Review in CA-G.R. SP No. 103047 and in CA-G.R. SP No. 103119 are GRANTED. The assailed RTC Decision dated 18 March 2011 in Civil Case No. 68327 is REVERSED and SET ASIDE, and accordingly, the Amended Petition is DISMISSED.According to the CA, records do not show that TOPROS even attempted to adduce evidence that Chang and individual respondents have complete control over TOPGOLD, Golden Exim, and Identic as all TOPROS did was to show that Chang and the other individual respondents were incorporators and/or officers of the respondent-corporations and that Chang substantially owned them. It ruled that given that Yaona, Jennifer, and Warren were the Corporate Treasurer, Secretary, and Chairman, respectively, of the Board of Directors of TOPROS, it could not see how Chang could have complete dominion over TOPROS' funds. It further held that TOPROS' mere allegation that Chang and the other individual respondents fraudulently siphoned off its funds and assets based mainly, if not solely, on the latter's establishment of the respondent-corporations does not amount to clear and convincing evidence sufficient to support allegations of fraud. Thus, the RTC had no justifiable reason to pierce the veil of corporate fiction.32chanRoblesvirtualLawlibrary
Consequently, the writ of attachment and all notices of garnishment issued relative thereto are hereby dissolved.
SO ORDERED.31chanRoblesvirtualLawlibrary
Petitioner asserts that: (1) Chang is guilty of violating the Corporation Code particularly Section 31, as he brazenly disregarded the director's duty of loyalty; (2) he established the respondent-corporations to acquire and utilize the assets, funds, properties, and resources of TOPROS; and (3) he also violated Section 74 of the Corporation Code in failing to provide the other directors access to the financial records of TOPROS.36chanRoblesvirtualLawlibrary
- The [CA] committed grave abuse of discretion amounting to lack or excess of jurisdiction when: it found petitioner TOPROS['] allegation of disloyalty against respondent Chang lacking; and it did not hold respondent Chang liable for disloyalty as a director to petitioner TOPROS; and
- The [CA] committed grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that any similarity in the names of petitioner TOPROS and respondent Topgold cannot be considered as indicia of fraud or of disloyalty in this case.35chanRoblesvirtualLawlibrary
Sec. 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.Section 34 of the Corporation Code (now Section 33 of the RCC) also states:
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. (Italics supplied.)
Sec. 34. Disloyalty of a director. — Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. (Italics supplied.)Legislative History
MR. MENDOZA. x x x xEvidently, the intent of the framers of Section 31 of the Corporation Code was to codify the duty of loyalty of directors and corporate officers that is to inform and offer to the corporation business opportunities which, by reason of their office, they acquire or become aware of. Only when the corporation, after having been offered the business opportunities, and rejects them, that a director can take advantage thereof.
x x x [T]his provision — Section 31 — is really no more than a consequence of the requirement that the position of membership in the Board of Directors is a position of high responsibility and great trust. Unless a provision such as this is included, then that requirement of responsibility and trust will not be as meaningful as it should be. For after all, directors may take the attitude that unless they themselves commit the act, they would not be liable. But the responsibility of a director is not merely to act properly. The responsibility of a director is to assure that the Board of Directors, which means his colleagues acting together, does not act in a manner that is unlawful or to the prejudice of the corporation because of personal or pecuniary interest of the directors.45 (Emphasis omitted.)
MR. NUÑEZ. x x x
May I go now to x x x Section 34.
x x x x
My question, Your Honor, is: is this not the so-called corporate opportunity doctrine found in the American jurisprudence?
MR. MENDOZA. Yes, Mr. Speaker, as I stated many of the changes that have been incorporated in the Code were drawn from jurisprudence on the matter, but even jurisprudence on several matters or several issues relating to the Corporation Code are sometimes ambiguous, sometimes controversial. In order, therefore, to clarify those issues, what was done was to spell out in statutory language the rule that should be applied on those matters and one of such examples is Section 34.
x x x x
MR. MENDOZA. In my opinion it must not only be made known to the corporation; the corporation must e formally advised and if he really would like to be assured that he is protected against the consequences provided for in Section 34, he should take steps whereby the opportunity is clearly presented to the corporation and the corporation has the opportunity to decide on whether to avail of it or not and then let the corporation reject it, after which then he may avail of it. x x x.
x x x [N]ow with the statutory rule, any director who comes to know of an opportunity that may be available to the corporation would be aware of the consequences in case he avails of that opportunity without giving the corporation the privilege of deciding beforehand on whether to take advantage of it or not.
x x x x
x x x [A] prudent director, who would assure that he does not become liable under Section 34, should not only be sure that the corporation has official knowledge, that is, the Board of Directors, but must take steps, positive steps, which will demonstrate that the matter or opportunity was brought before the corporation for its decision whether to avail of it or not, and the corporation rejected it.
So, under those circumstances narrated by Your Honor, it is my view that the director will be liable, unless his acts are ratified later by the vote of stockholders holding at least 2/3 of the outstanding capital stock.
x x x x
The purpose of all these provisions is to assure that directors or corporations constantly — not only constantly remember but actually are imposed with certain positive obligations that at least would assure that they will discharge their responsibilities with utmost fidelity.46 (Emphasis and underscoring omitted.)
Philippine Cases on the Doctrine of Corporate Opportunity |
A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship "is not a matter of statutory or technical law. It springs from the fact that directors have the control and guidance of corporate affairs and property and hence of the property interests of the stockholders." In the case of Gokongwei v. Securities and Exchange Commission, this Court quoted with favor from Pepper v. Litton, thus:In 2009, the Court summarized, through Strategic Alliance Development Corp. v. Radstock Securities Limited,54 the three-fold duty of members of the board of directors: duty of obedience, duty of diligence, and duty of loyalty. This means that directors: (1) shall direct the affairs of the corporation only in accordance with the purposes for which it was organized; (2) shall not willfully and knowingly vote for or assent to patently unlawful acts of the corporation or act in bad faith or with gross negligence in directing the affairs of the corporation; and (3) shall not acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees.55chanRoblesvirtualLawlibrary
chanroblesvirtuallawlibrary"x x x He cannot by the intervention of a corporate entity violate the ancient precept against serving two masters x x x He cannot utilize his inside information and his strategic position for his own preferment. He cannot violate rules of fair play by doing indirectly through the corporation what he could not do directly. He cannot use his power for his personal advantage and to the detriment of the stockholders and creditors no matter how absolute in terms that power may be and no matter how meticulous he is to satisfy technical requirements. For that power is at all times subject to the equitable limitation that it may not be exercised for the aggrandizement, preference, or advantage of the fiduciary to the exclusion or detriment of the cestuis. x x x"53chanRoblesvirtualLawlibrary
Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders. A public policy, existing through the years, and derived from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. The rule that requires an undivided and unselfish loyalty to the corporation demands that there shall be no conflict between duty and self-interest. The occasions for the determination of honesty, good faith and loyal conduct are many and varied, and no hard and fast rule can be formulated. The standards of loyalty is measured by no fixed scale.In the latter case of Broz v. Cellular Information Systems, Inc.65 (Broz), the Guth test on corporate opportunity was synthesized into four aspects, viz.:
If an officer or director of a corporation, in violation of his duty as such, acquires gain or advantage for himself, the law charges the interest so acquired with a trust for the benefit of the corporation, as its election, while it denies to the betrayer all benefit and profit. The rule, inveterate and uncompromising in its rigidity, does not rest upon the narrow ground of injury or damage to the corporation resulting from a betrayal of confidence, but upon a broader foundation of a wise public policy that, for the purpose of removing all temptation, extinguishes all possibility of profit flowing from a breach of the confidence imposed by the fiduciary relation. Given the relation between the parties, a certain result follows; and a constructive trust is the remedial device through which precedence of self is compelled to give way to the stern demands of loyalty.
The rule, referred to briefly as the rule of corporate opportunity, is merely one of the manifestations of the general rule that demands of an officer or director the utmost good faith in his relation to the corporation which he represents.
x x x x
x x x if there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation's business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself. And, if in such circumstances, the interests of the corporation are betrayed, the corporation may elect to claim all the benefits of the transaction for itself, and the law will impress a trust in favor of the corporation upon the property, interests and profits so acquired.64chanRoblesvirtualLawlibrary
The corporate opportunity doctrine, as delineated by Guth and its progeny, holds that a corporate officer or director may not take a business opportunity for his own if: (1) the corporation is financially able to exploit the opportunity; (2) the opportunity is within the corporation's line of business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimicable to his duties to the corporation. x x x66chanRoblesvirtualLawlibraryAs clarified by Broz, however, the Guth test only sets guidelines, and that ultimately, "[n]o one factor is dispositive and all factors must be taken into account insofar as they are applicable."67 Thus, the determination of whether or not a corporate director/officer has violated the doctrine "is a factual question to be decided by reasonable inference from objective facts."68chanRoblesvirtualLawlibrary
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.
(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; 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.
For his defense, Chang argued that he did most of the work of TOPROS from its incorporation in 1983 until his ouster as President and General Manager in 1998 and that he also paid for the loans of TOPROS with Chinabank in view of his having signed as guarantor or surety for the loans.101chanRoblesvirtualLawlibrary
COURT Why did you not buy the E. Rodriguez property for Topros? WITNESS
A Because this is Golden Exim Investment, sir. ATTY. RIVERA
Q- Why did you not give the opportunity to Topros? That's the question. A- Well, that's my decision. Q- So, instead of giving that opportunity to Topros, you decided to [sic] Golden Exim because that is your decision? A- Of course, I have to have my own living. I have to have my own earning and I have to have my own identity. And Golden Exim and Identic are all my identity.100chanRoblesvirtualLawlibrary
In view of the circumstances, TOPROS was correct in pointing out that the doctrine of "corporate opportunity" applies in the case.
ATTY. RIVERA Q Then, of course, you have no document showing that Topros authorized your three (3) corporations to do that line of a particular business? A- I have. x x xx x x x
These are advertisements in which Golden Exim, Identic, Pantrade, Topgold, Topros. You [c]ould see that we are authorized dealer with the knowledge of Mr. Ramon Ty. You will see everything is here.x x x x
Q- I'[m] not asking for an advertisement. I'm asking for a specific authority from Topros for you and your [companies] to engaged [sic] in that line of business which you admitted to be in direct competition with the business of Topros? A- These are all with the approval of Mr. Ramon Ty in which, you could [see] that this is part of your exhibits. Q- So, in other words, aside from those documents you have no other documents to show? A- I have no other documents but these documents was back in 1991, 1992, 1993, 1994 which we are already authorized dealer.109
Endnotes:
1 Gokongwei, Jr. v. Securities and Exchange Commission, 178 Phil. 266, 304 (1979).
2 Rollo, pp. 3-55.
3 Id. at 78-96; penned by Associate Justice Rodil V. Zalameda (now a Member of the Court) with Associate Justices Amelita G. Tolentino and Normandie B. Pizarro, concurring.
4 Id. at 76-77.
5 Id. at 58-75; penned by Presiding Judge Maria Rowena Modesto-San Pedro.
6 CA rollo, pp. 376-401.
7 Records, Vol. I, pp. 1-21.
8 Id. at 110-129.
9 Rollo, pp. 58-59; see also records, Vol. I, p. 110.
10 Rollo, p. 84.
11 Id. at 59-60.
12 Id. at 60.
13 Id.
14 Id.
15 Id. at 60-61.
16 Id. at 61.
17 Id.
18 Id. at 61-62.
19 Id. at 62.
20 Id.
21 Records, Vol. II, pp. 409-416.
22 Id. at 410-411.
23 Rollo, p. 63.
24 Id. at 58-75.
25 Id. at 74-75.
26 Id. at 64-65.
27 Batas Pambansa Blg. (BP) 68, approved on May 1, 1980.
28 Rollo, pp. 68-69.
29 Id. at 78-79.
30 Id. at 78-96.
31 Id. at 95.
32 Id. at 88-90.
33 Id. at 93-94.
34 See Resolution dated January 2, 2012 of the Court of Appeals, id. at 76-77.
35 Id. at 21-22.
36 Id. at 28-29.
37 Id. at 30.
38 Id. at 136-161.
39 Id. at 136-138.
40 See Comment/Opposition to the Petition for Review of TOPROS dated April 24, 2012, id. at 163-177.
41 Id. at 165-169.
42 See Section 187 of Republic Act No. 11232.
43 Palafox v. Wangdali, G.R. No. 235914, July 29, 2020; General Milling Corp. v. Casio, 629 Phil. 12, 27 (2010).
44 See I/AME v. Litton and Co., Inc., 822 Phil. 610, 618-619 (2017); Heirs of Fe Tan Uy v. International Exchange Bank, 703 Phil. 477, 484-485 (2013).
45 Ient v. Tullett Prebon (Phils.), Inc., 803 Phil. 163, 195 (2017), citing Record of Batasan (RB), December 4, 1979, p. 1614.
46 Id. at 196-199, citing RB, November 5, 1979, pp. 1217-1219.
47 Gokongwei, Jr. v. Securities and Exchange Commission, supra note 1.
48 Id. at 302.
49 Id., citing Paulman v. Kritzer, 74 Ill. App. 2d 284, 291 NE 2d 541 (1966); Tower Recreation, Inc. v. Beard, 141 Ind. App. 649, 231 NE 2d 154 (1967).
50 284 Phil. 517 (1992).
51 Id. at 533.
52 292-A Phil. 198 (1993).
53 Id. at 205, citing Gokongwei, Jr. v. Securities and Exchange Commission, supra note 1 at 299-300, further citing Pepper v. Litton, 308 U.S. 295-313, 84 L. Ed. 281, 291-292 (1939). Citations omitted.
54 622 Phil. 431 (2009).
55 Id. at 476-477.
56 Id.
57 Ient v. Tullett Prebon (Phils.), Inc., supra note 45.
58 Id. at 202-203.
59 Michael Begert, The Corporate Opportunity Doctrine and Outside Business Interests, The University of Chicago Law Review, Vol. 56, No. 2, The Federal Court System (Spring, 1989).
60 Id.
61 Id.
62 Id., citing Fletcher's Cyclopedia of the Law of Corporations.
63 23 Del. Ch. 255 (1939).
64 Id. at 270-274.
65 673 A.2d 148 (Del. 1996).
66 Id. at 154-155.
67 Id. at 155.
68 Id. at 154.
69 Talley, Eric and Mira Hashmall, The Corporate Opportunity Doctrine, February 2001, p. 8, available at <https://weblaw.usc.edu/why/academics/cle/icc/assets/docs/articles/iccfinal.pdf> (last accessed on December 1, 2021), citing Durfee v. Durfee & Canning, Inc., 80 N.E. 2d 522, 529 (Mass. 1948), further citing Henry Withrop Ballantine, Ballantine on Corporation, 204-05 (rev. ed. 1946).
70 Id.
71 Concurring Opinion of Associate Justice Alfredo Benjamin S. Caguioa, p. 3.
72 676 A. 2d 436 (Del. 1996).
73 Concurring Opinion of Associate Justice Alfredo Benjamin S. Caguioa, pp. 3-4.
74 C.A. No. 14614 1998 Del. Ch. LEXIS 28 (1998).
75 Concurring Opinion of Associate Justice Alfredo Benjamin S. Caguioa, p. 4.
76 Id., citing Benerofe v. Cha, supra note 74.
77 Concurring Opinion of Associate Justice Amy C. Lazaro-Javier, p. 1.
78 Id. at 3, citing Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928).
79 Id., citing Matic v. Waldner, 2016 MBCA 60 (CanLII) (Manitoba Court of Appeals, Canada); Canadian Aero Service Ltd. v. O'Malley, [1974] SCR 592 (Supreme Court of Canada).
80 Id., citing Cornell Law School, Legal Information Institute, available at <https://www.law.cornell.edu/wex/Corporate_opportunity> (last accessed: September 30, 2021).
81 661 A. 2d 1146 (1995).
82 2016 MBCA 60 (CanLII) (Manitoba Court of Appeals, Canada).
83 Concurring Opinion of Associate Justice Amy C. Lazaro-Javier, p. 9.
84 See Section 34 of BP 68 or The Corporation Code of the Philippines.
85 In the deliberations of Sec. 34, Minister Mendoza explained corporate opportunity and mentioned that "with the statutory rule, any director who comes to know of an opportunity that may be available to the corporation would be aware of the consequences in case he avails of the opportunity without giving the corporation the privilege of deciding beforehand on whether to take advantage of it or not. (Italics supplied.)
86 Concurring Opinion of Associate Justice Amy C. Lazaro-Javier, p. 9.
87 Gokongwei, Jr. v. Securities and Exchange Commission, supra note 1 at 311.
88 Id.
89 Id. at 312.
90 Rollo, pp. 142-143; See also TOPGOLD Philippines, Inc. Articles of Incorporation, records, Vol. III, pp. 74-78.
91 Exhibits "V" and "X," records, Vol. III, pp. 67, 75, 244.
92 Exhibits "O," "P" and "Q," id. at 51-55.
93 Exhibits "AA" and "AA-1" id. at 84-85.
94 See Deed of Assignment, rollo, pp. 104-106.
A portion of the deed of assignment reads:
chanroblesvirtuallawlibrary"That for and in consideration of the assumption by the ASSIGNEE of the ASSIGNOR'S obligation under the aforesaid rental agreements, the ASSIGNOR by these presents do hereby cede, convey and transfer unto this ASSIGNEE, its rights under the above described rental agreements.95 Records, Vol. III, pp. 74 and 82.
"That by virtue of these presents, the ASSIGNOR hereby relinquishes its right to demand and sue for the rental payments from the above-described lessee-entities in favor of the ASSIGNOR and in furtherance thereof, authorize all the aforesaid lessor-entities to make rental payments under their respective rental agreements payable to the ASSIGNEE;" id. at 104-105.
96 Exhibit "I," id. at 44.
97 Exhibits "W" Transfer Certificate Title No. 85410, id. at 73.
98 Id. at 67.
99 TSN, January 17, 2003, pp. 110-111.
100 Id.
101 See Formal Offer of Evidence of Defendant Chang, records, Vol. III, p. 284.
102 Rollo, pp. 141-143.
103 Id. at 70.
104 Records, Vol. III, pp. 272-279.
105 Id. at 280-281.
106 Id. at 282.
107 Id. at 283-291.
108 Id. at 292-294.
109 TSN, January 7, 2003, pp. 106-107.
110 Gokongwei, Jr. v. Securities and Exchange Commission, supra note 1 at 303.
Section 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.Generally speaking, case law instructs that Section 31 of the Corporation Code reflects the three-fold duties of obedience, diligence, and loyalty.4 The duty of loyalty is of particular significance to this case.
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. (Emphases and underscoring supplied)
A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship "is not a matter of statutory or technical law. It springs from the fact that directors have the control and guidance of corporate affairs and property and hence of the property interests of the stockholders." x x x.7 ( emphasis and underscoring supplied)The Corporation Code provides for more specific instances where the duty of loyalty may be breached. These instances are expressed in the ensuing provisions of Sections 31, namely: (a) Section 32 (Section 31 of the RCC) on self-dealing conduct; (b) Section 33 (Section 32 of the RCC) on interlocking directors; and (c) Section 34 (Section 33 of the RCC) on the acquisition of business opportunities.
Section 34. Disloyalty of a Director. — Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders, owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. (emphasis and underscoring supplied)As background, the doctrine of corporate opportunity is of common law origin. In our jurisdiction, the doctrine was first applied in the 1979 case of Gokongwei, Jr. v. Securities and Exchange Commission (Gokongwei).9 In Gokongwei, the Court explained that the doctrine "is precisely a recognition by the courts that the fiduciary standards could not be upheld where the fiduciary was acting for two entities with competing interests";10 and "rests fundamentally on the unfairness, in particular circumstances, of an officer or director taking advantage of an opportunity for his own personal profit when the interest of the corporation justly calls for protection."11chanRoblesvirtualLawlibrary
Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders. A public policy, existing through the years, and derived from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. The rule that requires an undivided and unselfish loyalty to the corporation demands that there shall be no conflict between duty and self-interest. The occasions for the determination of honesty, good faith and loyal conduct are many and varied, and no hard and fast rule can be formulated. The standard of loyalty is measured by no fixed scale.In the subsequent case of Broz v. Cellular Information Systems, Inc.24 (Broz), the Guth test on corporate opportunity was synthesized into four (4) aspects:
If an officer or director of a corporation, in violation of his duty as such, acquires gain or advantage for himself, the law charges the interest so acquired with a trust for the benefit of the corporation, at its election, while it denies to the betrayer all benefit and profit. The rule, inveterate and uncompromising in its rigidity, does not rest upon the narrow ground of injury or damage to the corporation resulting from a betrayal of confidence, but upon a broader foundation of a wise public policy that, for the purpose of removing all temptation, extinguishes all possibility of profit flowing from a breach of the confidence imposed by the fiduciary relation. Given the relation between the parties, a certain result follows; and a constructive trust is the remedial device through which precedence of self is compelled to give way to the stern demands of loyalty. x x x.
The rule, referred to briefly as the rule of corporate opportunity, is merely one of the manifestations of the general rule that demands of an officer or director the utmost good faith in his relation to the corporation which he represents.
x x x x
x x x if there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation's business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself. And, if, in such circumstances, the interests of the corporation are betrayed, the corporation may elect to claim all of the benefits of the transaction for itself, and the law will impress a trust in favor of the corporation upon the property, interests and profits so acquired. x x x.23 (Emphases and underscoring supplied)
The corporate opportunity doctrine, as delineated in Guth x x x, holds that a corporate officer or director may not take a business opportunity for his own if: (1) the corporation is financially able to exploit the opportunity; (2) the opportunity is within the corporation's line of business; (3) the corporation has an interest or expectancy in the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimicable to his duties to the corporation. x x x.25 (emphasis and underscoring supplied)Broz, however, clarifies that the Guth test only sets guidelines, and that ultimately, "[n]o one factor is dispositive and all factors must be taken into account insofar as they are applicable."26 As such, the determination of whether or not a corporate director/officer has violated this doctrine is "a factual question to be decided by reasonable inference from objective facts."27chanRoblesvirtualLawlibrary
(a) the corporation is financially able to exploit the opportunity;cralawlawlibraryNecessarily then, it is not enough to impute bare acts/transactions in which the claimant subjectively perceives the duty of loyalty to be breached; rather, sufficient evidence must be submitted to show that the claim for damages is indeed premised on a concrete corporate opportunity falling under the parameters above-stated. Only then should actual damages relative to such lost opportunity be awarded. Of course, it should be made clear that these parameters are general jurisprudential guidelines to be applied on a case-to-case basis.
(b) the opportunity is within the corporation's line of business;cralawlawlibrary
(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.
(a) when respondent Golden Exim Trading and Commercial Corp. (Golden Exim), a corporation where Chang is a majority owner of, entered into a service contract with one of TOPROS's clients, Linde Refrigeration Phils., Inc., while the latter had a subsisting contract with TOPROS;cralawlawlibraryAccordingly, the RTC ordered Chang "[t]o account for all the profits and properties which otherwise should have accrued to [TOPROS] and refund the same."31 To carry the judgment into effect, the RTC ordered the formation of an Accounting Committee to conduct the following:
(b) when Chang, as President and General Manager of respondent TOPGOLD Philippines, Inc. (TOPGOLD), signed a deed of assignment with respondent Hector Katigbak, the Service and Operations Manager of TOPROS, which contract made it appear that TOPROS assigned its rights to TOPGOLD under several rental agreements with different entities for the lease of various kinds of office equipment;cralawlawlibrary
(c) when TOPGOLD used the same address as TOPROS, which thus not only gave the former the opportunity to use the latter's resources, but also mislead the public to believe that they are one and the same entity, if not intimately related to one another; and
(d) when the land where TOPROS's building stood was registered in the name of Golden Exim, instead of TOPROS for the reason that Chang "had to make his own living."30chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in favor of [TOPROS] and against [respondents] who are hereby ordered, jointly and solidarily, to:On appeal, the Court of Appeals reversed33 the RTC's ruling due to TOPROS's alleged failure to prove its claim.
1) Account for all the profits and properties which otherwise should have accrued to [TOPROS] and refund the same to [the latter];cralawlawlibrary
x x x x
To carry this judgment into effect, a three-man Accounting Committee is hereby ordered formed with the Branch of [sic] Clerk of Court, Atty. Romeo Bautista IV, as Chairman, and two other certified public accountants respectively nominated by the parties, as members.
This Accounting Committee shall undertake the accounting necessary to determine the amount of actual damages suffered by [TOPROS), the extent of loss of its business opportunities, the extent of gain profited by Chang and the three defendant corporations to the detriment of [TOPROS), the refund of properties registered in the name of the three corporations which property pertains to [TOPROS), and such other matters relevant to the judgment for accounting of all profits and properties accruing to [TOPROS]. It shall also include in its review the effects of the previously enforced Writ of Preliminary Attachment.
x x x x32 (emphasis and underscoring supplied)
Endnotes:
1 See Guth v. Loft, Inc., 23 Del. Ch. 255, 270 (1939).
2 See ponencia, pp. 23-24 and 29-30.
3 See Heirs of Uy v. International Exchange Bank, 703 Phil. 477, 484-485 (2013); citations omitted. See also International Academy of Management and Economics v. Litton and Company, Inc., G.R. No. 191525, December 13, 2017.
4 See Strategic Alliance Development Corp. v. Radstock Securities Ltd., 622 Phil. 431, 476 (2009).
5 See id.
6 292-A Phil. 198 (1993).
7 Id. at 205; citations omitted.
8 See Ient v. Tullett Prebon (Philippines), Inc., 803 Phil. 163 (2017). See also Record of Batasan (R.B.), November 5, 1979, pp. 1217-1219, pertinent portions of which read:
chanroblesvirtuallawlibraryMR. NUÑEZ. x x x9 178 Phil. 266 (1979).
May I go now to page 24, Section 34. x x x
My question, Your Honor, is: is this not the so-called corporate opportunity doctrine found in the American jurisprudence?
MR. MENDOZA.
Yes, Mr. Speaker, as I stated many of the changes that have been incorporated in the Code were drawn from jurisprudence on the matter, but even jurisprudence on several matters or several issues relating to the Corporation Code are sometimes ambiguous, sometimes controversial. In order, therefore, to clarify those issues, what was done was to spell out in statutory language the rule that should be applied on those matters and one of such examples is Section 34. (emphasis and underscoring supplied)
10 Id. at 302.
11 Id.
12 In Gokongwei: "It is also well established that corporate officers 'are not permitted to use their position of trust and confidence to further their private interests.' In a case where directors of a corporation cancelled a contract of the corporation for exclusive sale of a foreign firm's products, and after establishing a rival business, the directors entered into a new contract themselves with the foreign firm for exclusive sale of its products, the court held that equity would regard the new contract as an offshoot of the old contract and, therefore, for the benefit of the corporation, as a faultless fiduciary may not reap the fruits of his misconduct to the exclusion of his principal.
The doctrine of 'corporate opportunity' is precisely a recognition by the courts that the fiduciary standards could not be upheld where the fiduciary was acting for two entities with competing interests. This doctrine rests fundamentally on the unfairness, in particular circumstances, of an officer or director taking advantage of an opportunity for his own personal profit when the interest of the corporation justly calls for protection." (Id. at 301-302; citations omitted.)
13 In Ponce: "True, at that time, the Corporation Law did not prohibit a director or any other person occupying a fiduciary position in the corporate hierarchy from engaging in a venture which competed with that of the corporation. But as a lawyer, Atty. Legaspi should have known that while some acts may appear to be permitted through sheer lack of statutory prohibition, these acts are nevertheless circumscribed upon ethical and moral considerations. And had Atty. Legaspi turned to American jurisprudence which then, as now, wielded a persuasive influence on our law on corporations, he would have known that it was unfair for him or for Porter, acting as fiduciary, to take advantage of an opportunity when the interest of the corporation justly calls for protection. (See Ballantine, Corporations, 204, Callaghan & Co., N. Y. [1946]).
Parenthetically, this lapse in the old Corporation Law is now cured by sections 31 and 34 of the Corporation Code x x x x[.]" (284 Phil. 517, 533 [1992]).
14 In Prime White Cement: "A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship 'is not a matter of statutory or technical law. It springs from the fact that directors have the control and guidance of corporate affairs and property and hence of the property interests of the stockholders.' x x x." (Supra note 6.)
15 In Ient: "We agree with petitioners that the lack of specific language imposing criminal liability in Sections 31 and 34 shows legislative intent to limit the consequences of their violation to the civil liabilities mentioned therein. Had it been the intention of the drafters of the law to define Sections 31 and 34 as offenses, they could have easily included similar language as that found in Section 74.
If we were to employ the same line of reasoning as the majority in United States v. R.L.C., would the apparent ambiguities in the text of the Corporation Code disappear with an analysis of said statute's legislative history as to warrant a strict interpretation of its provisions? The answer is a negative.
In his sponsorship speech of Cabinet Bill (C.B.) No. 3 (the bill that was enacted into the Corporation Code), then Minister Estelito Mendoza highlighted Sections 31 to 34 as among the significant innovations made to the previous statute (Act 1459 or the Corporation Law), thusly:
chanroblesvirtuallawlibraryThere is a lot of jurisprudence on the liability of directors, trustees or officers for breach of trust or acts of disloyalty to the corporation. Such jurisprudence is not, of course, without any ambiguity of dissent. Sections 31, 32, 33 and 34 of the code indicate in detail prohibited acts in this area as well as consequences of the performance of such acts or failure to perform or discharge the responsibility to direct the affairs of the corporation with utmost fidelity.Alternatively stated, Sections 31 to 34 were introduced into the Corporation Code to define what acts are covered, as well as the consequences of such acts or omissions amounting to a failure to fulfil a director's or corporate officer's fiduciary duties to the corporation. A closer look at the subsequent deliberations on C.B. No. 3, particularly in relation to Sections 31 and 34, would show that the discussions focused on the civil liabilities or consequences prescribed in said provisions themselves. x x x.
x x x x
Verily, in the instances that Sections 31 and 34 were taken up on the floor, legislators did not veer away from the civil consequences as stated within the four corners of these provisions. Contrasted with the interpellations on Section 74 (regarding the right to inspect the corporate records), the discussions on said provision leave no doubt that legislators intended both civil and penal liabilities to attach to corporate officers who violate the same, as was repeatedly stressed in the excerpts from the legislative record quoted below:
x x x x
Quite apart that no legislative intent to criminalize Sections 31 and 34 was manifested in the deliberations on the Corporation Code, it is noteworthy from the same deliberations that legislators intended to codify the common law concepts of corporate opportunity and fiduciary obligations of corporate officers as found in American jurisprudence into said provisions. In common law, the remedies available in the event of a breach of director's fiduciary duties to the corporation are civil remedies. If a director or officer is found to have breached his duty of loyalty, an injunction may be issued or damages may be awarded. A corporate officer guilty of fraud or mismanagement may be held liable for lost profits. A disloyal agent may also suffer forfeiture of his compensation. There is nothing in the deliberations to indicate that drafters of the Corporation Code intended to deviate from common law practice and enforce the fiduciary obligations of directors and corporate officers through penal sanction aside from civil liability. On the contrary, there appears to be a concern among the drafters of the Corporation Code that even the imposition of the civil sanctions under Sections 31 and 34 might discourage competent persons from serving as directors in corporations.
x x x x
The Corporation Code was intended as a regulatory measure, not primarily as a penal statute. Sections 31 to 34 in particular were intended to impose exacting standards of fidelity on corporate officers and directors but without unduly impeding them in the discharge of their work with concerns of litigation. Considering the object and policy of the Corporation Code to encourage the use of the corporate entity as a vehicle for economic growth, we cannot espouse a strict construction of Sections 31 and 34 as penal offenses in relation to Section 144 in the absence of unambiguous statutory language and legislative intent to that effect. (Supra note 8, at 193-204.)
16 See Gokongwei, Jr. v. Securities and Exchange Commission, supra note 9.
17 "Corporate opportunity doctrine," Fletcher Cyclopedia of the Law of Corporations, 3 Fletcher Cyc. Corp. § 861.10 (2020).
18 Michael Begert, "The Corporate Opportunity Doctrine and Outside Business Interests," The University of Chicago Law Review, Vol. 56, No. 2, The Federal Court System (Spring, 1989), p. 838.
19 Id.
20 See id.
21 "Corporate opportunity doctrine," Fletcher Cyclopedia of the Law of Corporations, 3 Fletcher Cyc. Corp. § 861.10 (2020).
22 23 Del. Ch. 255 (1939).
23 Id. at 270-273.
24 673 A.2d 148 (Del. 1996).
25 Id.
26 Id.
27 Id.
28 Guth v. Loft, Inc., supra at 270.
29 Id. at 273.
30 See ponencia, pp. 25-29.
31 Rollo, pp. 74-75.
32 Id.
33 See id. at 95.
34 See ponencia, p. 29.
SECTION 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.These provisions express what is now called the "doctrine of corporate opportunity," a term directly lifted from American jurisprudence. It was first introduced in Gokongwei, Jr. v. Securities and Exchange Commission,10 citing the American case of Schildberg Rock Products Co. Inc. v. Brooks.11 The doctrine of corporate opportunity "holds personally liable corporate directors found guilty of gross negligence or bad faith in directing the affairs of the corporation, which results in damage or injury to the corporation, its stockholders or members, and other persons."12 Gokongwei, Jr. described the doctrine of corporate opportunity as:
When a director, trustee or officer attempts to acquire or acquire, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
SECTION 34. Disloyalty of a director. — Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture.
. . . a recognition by the courts that the fiduciary standards could not be upheld where the fiduciary was acting for two entities with competing interests. This doctrine rests fundamentally on the unfairness, in particular circumstances, of an officer or director taking advantage of an opportunity for his own personal profit when the interest of the corporation justly calls for protection.13 (Citation omitted)In Gokongwei, Jr., the petitioner was barred from running as director of San Miguel Corporation. This was in line with the corporation's amended by-laws granting its Board the power by three-fourths votes to bar a stockholder from being elected as director when found to be engaged in a competitive or antagonistic business. The respondents alleged that the petitioner was engaged in businesses competitive and antagonistic to San Miguel Corporation since he owned and controlled a greater portion of his stock through Universal Robina Corporation and Consolidated Foods Corporation, which were allegedly engaged in business directly and substantially competing with allied businesses of San Miguel Corporation.14chanRoblesvirtualLawlibrary
Private respondents contend that the disputed amended by-laws were adopted by the Board of Directors of San Miguel Corporation as a measure of self-defense to protect the corporation from the clear and present danger that the election of a business competitor to the Board may cause upon the corporation and the other stockholders "irreparable prejudice." Submitted for resolution, therefore, is the issue — whether or not respondent San Miguel Corporation could, as a measure of self-protection, disqualify a competitor from nomination and election to its Board of Directors.This Court agreed with the respondents that allowing the petitioner to be elected as director would be detrimental to the corporation because a competitor could easily access its confidential information, such as marketing strategies and pricing policies through the common director.17 It explained:
It is recognized by all authorities that ["]every corporation has the inherent power to adopt by-laws 'for its internal government, and to regulate the conduct and prescribe the rights and duties of its members towards itself and among themselves in reference to the management of its affairs.'" At common law, the rule was "that the power to make and adopt by-laws was inherent in every corporation as one of its necessary and inseparable legal incidents. And it is settled throughout the United States that in the absence of positive legislative provisions limiting it, every private corporation has this inherent power as one of its necessary and inseparable legal incidents, independent of any specific enabling provision in its charter or in general law, such power of self-government being essential to enable the corporation to accomplish the purposes of its creation."16 (Citations omitted)
Sound principles of corporate management counsel against sharing sensitive information with a director whose fiduciary duty of loyalty may well require that he disclose this information to a competitive rival. These dangers are enhanced considerably where the common director such as the petitioner is a controlling stockholder of two of the competing corporations. It would seem manifest that in such situations, the director has an economic incentive to appropriate for the benefit of his own corporation the corporate plans and policies of the corporation where he sits as director.Gokongwei, Jr. held that the test must be whether the businesses involved compete with each other. It described competition as "a struggle for advantage between two or more forces, each possessing, in substantially similar if not identical degree, certain characteristics essential to the business sought."19 To determine whether another corporation is a competitor, factors such as "quantum and place of business, identity of products[,] and area of competition should be taken into consideration."20 There must be a showing that the other corporation covers a "substantial portion of the same markets for similar products to the extent of not less than 10% of respondent corporation's market for competing products."21chanRoblesvirtualLawlibrary
Indeed, access by a competitor to confidential information regarding marketing strategies and pricing policies of San Miguel Corporation would subject the latter to a competitive disadvantage and unjustly enrich the competitor, for advance knowledge by the competitor of the strategies for the development of existing or new markets of existing or new products could enable said competitor to utilize such knowledge to his advantage.18 (Citation omitted)
It is obviously to prevent the creation of an opportunity for an officer or director of San Miguel Corporation, who is also the officer or owner of a competing corporation, from taking advantage of the information which he acquires as director to promote his individual or corporate interests to the prejudice of San Miguel Corporation and its stockholders, that the questioned amendment of the by-laws was made. Certainly, 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.27chanRoblesvirtualLawlibraryHere, respondent John Charles Chang, Jr., who was elected president and general manager of petitioner Total Office Products and Services, Inc., allegedly organized corporations in the same line of business as petitioner and entered into business opportunities which should be for petitioner, in violation of the doctrine of corporate opportunity.28chanRoblesvirtualLawlibrary
To find a violation of Sections 31 and 34 of the Corporation Code, petitioner must establish that it is in the same market and produces the same products as respondents Identic International Corporation, Golden Exim Trading and Commercial Corporation (Golden Exim), and TOPGOLD Philippines. Moreover, it must show its financial ability to exploit the opportunity and that it has an interest or expectancy in the opportunity. All these factors must be established and considered.
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; and d) By taking the opportunity for [their] own, the corporate fiduciary (i.e., corporate director, trustee or officer) will thereby be placed in a position inimicable to [their] duties to the corporation.30
Endnotes:
1 Strategic Alliance Development Corporation v. Radstock Securities Ltd., 622 Phil. 431, 476 (2009) [Per J. Carpio, En Banc].
2 Id. at 476-477.
3 Gokongwei, Jr. v. Securities and Exchange Commission, 178 Phil. 266, 299 (1979) [Per J. Antonio, En Banc].
4 Id. at 299-300.
5 52 Phil. 953 (1929) [Per J. Johns, En Banc].
6 Id. at 960.
7 125 Phil. 5 (1966) [Per J. Barrera, En Banc].
8 Id. at 25.
9 Id.
10 178 Phil. 266 (1979) [Per J. Antonio, En Banc].
11 140 N.W.2d 132 (1966).
12 Sanchez v. Republic, 618 Phil. 228, 239 (2009) [Per J. Abad, Second Division].
13 Gokongwei, Jr. v. Securities and Exchange Commission, 178 Phil. 266, 302 (1979) [Per J. Antonio, En Banc].
14 Gokongwei, Jr. v. Securities and Exchange Commission, 178 Phil. 266 (1979) [Per J. Antonio, En Banc].
15 Id. at 296.
16 Id. at 296-297.
17 Id. at 303.
18 Id. at 305.
19 Id. at 311.
20 Id. at 312.
21 Id.
22 Id. at 295.
23 N. GREGORY MANKIW, PRINCIPLES OF ECONOMICS 66 (9th ed., 2019).
24 Id. at 66.
25 Id. at 88.
26 Id. at 96.
27 Gokongwei, Jr. v. Securities and Exchange Commission, 178 Phil. 266, 303 (1979) [Per J. Antonio, En Banc].
28 Ponencia, p. 9.
29 Id. at 9-10.
30 Id. at 23-24.
Endnotes:
1 Ponencia, pp. 2-4.
2 Id. at 6-7.
3 Concurring Opinion of Senior Associate Justice Estela Perlas-Bernabe dated September 28, 2021, pp. 7-9.
4 Id. at 9.
5 Id. at 10-11.
6 Section 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquire, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
7 Section 34. Disloyalty of a director. — Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. (n)
8 As has been carried over as Section 33 of the Revised Corporation Code.
9 Supra note 1, at 24-25.
10 Id. at 25.
11 Id. at 25-26
12 See id. at 16.
13 Talley, Eric and Mira Hashmall, THE CORPORATE OPPORTUNITY DOCTRINE, accessed at <https://weblaw.usc.edu/why/academics/cle/icc/assets/docs/articles/iccfinal.pdf>, citing Durfee v. Durfee & Canning, Inc., 80 N.E.2d 522, 529 (Mass. 1948).
14 Id. at 8.
15 Supra note 1, at 12.
16 23 Del. Ch. 255, 270 (1939).
17 673 A. 2d 148 (Del. 1996).
18 676 A.2d 436 (Del. 1996).
19 1998 Del. Ch. LEXIS 28.
20 Supra note 13, at 13.
21 Id. at 12.
Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this[,] there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the "disintegrating erosion" of particular exceptions (Wendt v. Fischer, 243 N.Y. 439, 444). Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.10 (Emphases supplied)The undivided loyalty required of a fiduciary has been described as being both relentless and supreme.11 It demands the highest standard of behavior that cannot be lowered even by courts. In Peoples Department Stores Inc. (Trustee of) v. Wise,12 it was said that this fiduciary duty requires directors and officers to act -
x x x x
x x x honestly and in good faith vis-a-vis the corporation. They must respect the trust and confidence that have been reposed in them to manage the assets of the corporation in pursuit of the realization of the objects of the corporation. They must avoid conflicts of interest with the corporation. They must avoid abusing their position to gain personal benefit. They must maintain the confidentiality of information they acquire by virtue of their position. Directors and officers must serve the corporation selflessly, honestly[,] and loyalty.13chanRoblesvirtualLawlibraryThe duty to avoid conflicts of interest with the corporation includes not only the director or the officer's personal interests but those of any other corporation in which the director or the officer is interested.14chanRoblesvirtualLawlibrary
x x x x
1) | "Line of business" test. If there is presented to a corporate officer or director a business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation's business and is of practical advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and, by embracing the opportunity, the self-interest of the officer or director will be brought into conflict with that of his corporation, the law will not permit him to seize the opportunity for himself. This test was applied by the Delaware Supreme Court in Guth v. Loft, Inc., 5 A.2d 503 (Del.1939).20 |
2) | "Fairness test." The true basis of governing doctrine rests on the unfairness in the particular circumstances of a director, whose relation to the corporation is fiduciary, taking advantage of an opportunity for personal profit when the interest of the corporation justly calls for protection. This calls for the application of ethical standards of what is fair and equitable in particular sets of facts. This test was applied by the Massachusetts Supreme Judicial Court adopted a different test in Durfee v. Durfee & Canning, Inc., 323 Mass. 187, 80 N.E.2d 522 (1948).21 |
3) | Combined Approach. It combines the 'line of business' test with the 'fairness' test. It engaged in a two-step analysis, first determining whether a particular opportunity was within the corporation's line of business, then scrutinizing "the equitable considerations existing prior to, at the time of, and following the officer's acquisition." The Minnesota Supreme Court applied this ir, Miller v. Miller, 301 Minn. 207, 222 N.W.2d 71, 81 (1974).22chanRoblesvirtualLawlibrary |
4) | "ALI Test." The American Law Institute (ALI)23 test is centered on a strict requirement of full disclosure prior to taking advantage of any corporate opportunity, viz.: A director or senior executive may not take advantage of a corporate opportunity unless: (a) He first offers the opportunity to the corporation and discloses the conflict of interest. It is rejected and the same is fair to the corporation; or (b) The opportunity is rejected in advance, following disclosure by disinterested directors or superior, in a manner that satisfies the standards of the business judgment rule; or (c) The rejection is authorized in advance or ratified, following such disclosure, by disinterested shareholders, and the rejection is not equivalent to a waste of corporate assets. For this purpose, a corporate opportunity means: (1) Any opportunity to engage in business activity of which a director or senior executive becomes aware, either: (a) In connection with the performance of functions as a director or senior executive, or under circumstances that should reasonably lead the director or senior executive to believe that the person offering the opportunity expects it to be offered to the corporation; or (b) Through the use of corporate information or property, if the resulting opportunity is one that the director or senior executive should reasonably be expected to believe would be of interest to the corporation; or (2) Any opportunity to engage in business activity of which a senior executive becomes aware and knows is closely related to a business in which the corporation is engaged or expects to engage.24chanRoblesvirtualLawlibrary |
MR. MENDOZA. In my opinion, it must not only be made known to the corporation; the corporation must be formally advised and if he really would like to be assured that he is protected against the consequences provided for in Section 34, he should take such steps whereby the opportunity is clearly presented to the corporation and the corporation has the opportunity to decide on whether to avail of it or not and then let the corporation reject it, after which then he may avail of it. Under such circumstances, I do not believe he would expose himself to the consequences provided for under Section 34.One would immediately notice the shift from Minister Mendoza's opportunity that may be available to the corporation to the statutory versions of which should belong to the corporation. The former "may" connotes inclusiveness and potentiality. The latter "should" connotes restrictiveness and precision or certitude. It is, thus, now up to this Court to define the key element of corporate opportunity in light of the identically worded statutory provisions and the history of the Corporation Code of the Philippines with the guidance of the common law tests on what constitutes a corporate opportunity.
Precisely, the reason we have laid down this ruling in statutory language is that for as long as the rule is not clarified there will be ambiguity in the matter. And directors of corporations who may acquire knowledge of such opportunities would always be risking consequences not knowing how the courts will later on decide such issues. But now with the statutory rule, any director who comes to know of an OPPORTUNITY THAT MAY BE AVAILABLE TO THE CORPORATION would be aware of the consequences in case he avails of that opportunity without giving the corporation the privilege of deciding beforehand on whether to take advantage of it or not.25 (Emphases and underscoring supplied)
x x x x
The overall goal of the analysis is to determine whether the opportunity fairly belonged to the corporation in the circumstances. The keystone fairly belonged brings together the essence of both the statutory provision that the opportunity SHOULD BELONG to the corporation and the legislative history of this provision that an opportunity that MAY BE AVAILABLE to the corporation would also be a corporate opportunity. More, prohibiting a director or an officer from taking advantage of an opportunity that fairly belongs to the corporation is consistent with their strict fiduciary ethic. It is only by interpreting the statutory provision in light of the legislative history in this manner of fairly belongs that we are able to account for the true fiduciary nature of the positions of director or officer.
- the maturity of the opportunity;
- whether it was actively pursued by the corporation;
- whether the corporation was capable of taking advantage of the opportunity;
- whether the opportunity was in the corporation's line of business or a related business;
- how the opportunity arose or came to the attention of the director or officer;
- whether the other directors of the corporation had knowledge of the director's pursuit of the opportunity; and,
- whether the other directors gave their fully informed consent to the director's pursuit of the opportunity.28chanRoblesvirtualLawlibrary
Maturity of the Opportunity and Active Pursuit by the Corporation |
To recapitulate, the corporate fiduciary duty exacts from directors a strict ethic to act honestly and in good faith in the corporation's best interests. In the general terms employed by Canadian Aero, this holds directors to the obligations of acting towards companies on whose boards they sit with "loyalty, good faith[,] and avoidance of conflict of duty and self-interest." This involves a duty not just to avoid actual conflict of duty and interest, but also potential conflict.30 (Emphases supplied)A conflict is a qualifying "potential" conflict only if to an objective or a reasonable person looking at the relevant facts and circumstances of a particular case there is a real sensible possibility and more than a theoretical conflict.31 A "potential" conflict excludes something one "could [only] imagine [as] some situation arising which might, in some conceivable possibility not objectively or reasonably contemplated, result in a conflict.
x x x x
Nature of the alleged "insider" information and opportunity |
Limits on Liability of Directors and Officers |
Endnotes:
1 Section 34. Disloyalty of a director.
Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. (n) (The Corporation Code of the Philippines, Batas Pambansa Bilang 68, Approved, May 1, 1980). (As amended)
2 Section 31. Liability of directors, trustees[,] or officers.
Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. (The Corporation Code of the Philippines, Batas Pambansa Bilang 68, Approved, May 1, 1980). (As amended)
3 23 Del. Ch. 255, 270 (1939).
4 673 A. 2d 148, 154-55 (Del. 1996).
5 Matic, et al. v. Waldner, et al., 2016 MBCA 60 (CanLII), (Manitoba Court of Appeal, Canada).
6 Section 29. Compensation of Directors or Trustees.
In the absence of any provision in the bylaws fixing their compensation, the directors or trustees shall not receive any compensation in their capacity as such, except for reasonable per diems: Provided, however, That the stockholders representing at least a majority of the outstanding capital stock or majority of the members may grant directors or trustees with compensation and approve the amount thereof at a regular or special meeting.
In no case shall the total yearly compensation of directors exceed ten percent (10%) of the net income before income tax of the corporation during the preceding year.
Directors or trustees shall not participate in the determination of their own per diems or compensation.
Corporations vested with public interest shall submit to their shareholders and the Commission, an annual report of the total compensation of each of their directors or trustees.
Section 30. Liability of Directors, Trustees[,] or Officers.
Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
A director, trustee[,] or officer shall not attempt to acquire, or acquire any interest adverse to the corporation in respect of any matter which has been reposed in them in confidence, and upon which, equity imposes a disability upon themselves to deal in their own behalf; otherwise, the said director, trustee[,] or officer shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
Section 31. Dealings of Directors, Trustees[,] or Officers with the Corporation.
A contract of the corporation with one (1) or more of its directors, trustees, officers[,] or their spouses and relatives within the fourth civil degree of consanguinity or affinity is voidable, at the option of such corporation, unless all the following conditions are present:
(a) The presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;cralawlawlibrary
(b) The vote of such director or trustee was not necessary for the approval of the contract;cralawlawlibrary
(c) The contract is fair and reasonable under the circumstances;cralawlawlibrary
(d) In case of corporations vested with public interest, material contracts are approved by at least two-thirds (2/3) of the entire membership of the board, with at least a majority of the independent directors voting to approve the material contract; and
(e) In case of an officer, the contract has been previously authorized by the board of directors.
Where any of the first three (3) conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting and the contract is fair and reasonable under the circumstances.
Section 32. Contracts Between Corporations with Interlocking Directors.
Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract between two (2) or more corporations having interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one (1) corporation is substantial and the interest in the other corporation or corporations is merely nominal, the contract shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned.
Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be considered substantial for purposes of interlocking directors.
Section 33. Disloyalty of a Director.
Where a director, by virtue of such office, acquires a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, the director must account for and refund to the latter all such profits, unless the act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked one's own funds in the venture. (An Act Providing for the Revised Corporation Code of the Philippines, Republic Act No. 11232, Approved on February 20, 2019).
7 Section 30. Compensation of Directors.
In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable per diems. Provided, however, That any such compensation other than per diems may be granted to directors by the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders, meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year. (n)
Section 31. Liability of Directors, Trustees[,] or Officers.
Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
When a director, trustee[,] or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. (n)
Section 32. Dealings of Directors, Trustees[,] or Officers with the Corporation.
A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;cralawlawlibrary
2. That the vote of such director or trustee was not necessary for the approval of the contract;cralawlawlibrary
3. That the contract is fair and reasonable under the circumstances; and
4. That in the case of an officer, the contract with the officer has been previously authorized by the board of directors.
Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances. (n)
Section 33. Contracts Between Corporations with Interlocking Directors.
Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone. Provided, That if the interest of the interlocking director in one corporation is substantial and his interest in the other corporation or corporations is merely nominal, he shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned.
Stockholdings exceeding twenty (20'%) percent of the outstanding capital stock shall be considered substantial for purposes of interlocking directors. (n)
Section 34. Disloyalty of a Director.
Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders, owning[,] or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. (n) (The Corporation Code of the Philippines, Batas Pambansa Bilang 68, Approved, May 1, 1980).
8 249 N.Y. 458, 464 (N.Y. 1928), 164 N.E. 545, Decided Dec. 31, 1928.
9 Then Chief Judge of the New York Court of Appeals, later Associate Justice of the U.S. Supreme Court.
10 Supra note 8.
11 Id. citing Wendt v. Fischer, 243 N.Y. 439 [1926]; Munson et al. v. Syracuse, Geneva & Corning Railroad Company et al., 103 N.Y. 58, 74 [1886].
12 2004 SCC 68, [2004] 3 SCR 461 (Supreme Court of Canada).
13 Id. citing K. P. McGuinness, The Law and Practice of Canadian Business Corporations (1999), p. 715.
14 See Canadian Aero Service Ltd v. O'Malley, [1974] SCR 592 (Supreme Court of Canada); and Jordan Inc., et al. v. Jordan Engineering Inc. et al., [2004] OTC 687 (Ontario Superior Court of Justice, Canada).
15 Supra note 5.
16 Supra note 14.
17 Id.
18 https://www.law.cornell.edu/wex/Corporate_opportunity. (Accessed: September 30, 2021, 7:37am).
19 661 A.2d 1146 (1995). https://law.justia.com/cases/maine/supreme-court/1995/661-a-2d-1146-0.html. (Accessed: September 30, 2021, 7:50am).
20 Id. The line of business test suffers from some significant weaknesses. First, the question whether a particular activity is within a corporation's line of business is conceptually difficult to answer. The facts of the instant case demonstrate that difficulty. The Club is in the business of running a golf course. It is not in the business of developing real estate. In the traditional sense, therefore, the trial court correctly observed that the opportunity in this case was not a corporate opportunity within the meaning of the Guth test. Nevertheless, the record would support a finding that the Club had made the policy judgment that development of surrounding real estate was detrimental to the best interests of the Club. The acquisition of land adjacent to the golf course for the purpose of preventing future development would have enhanced the ability of the Club to implement that policy. The record also shows that the Club had occasionally considered reversing that policy and expanding its operations to include the development of surrounding real estate. Harris's activities effectively foreclosed the Club from pursuing that option with respect to prime locations adjacent to the golf course. Second, the Guth test includes as an element the financial ability of the corporation to take advantage of the opportunity. The court in this case relied on the Club's supposed financial incapacity as a basis for excusing Harris's conduct. Often, the injection of financial ability into the equation will unduly favor the inside director or executive who has command of the facts relating to the finances of the corporation. Reliance on financial ability will also act as a disincentive to corporate executives to solve corporate financing and other problems. In addition, the Club could have prevented development without spending $275,000 to acquire the property Harris needed to obtain access to the road.
21 Id. As with the Guth test, the Durfee test calls for a broad ranging, intensely factual inquiry. The Durfee test suffers even more than the Guth test from a lack of principled content. It provides little or no practical guidance to the corporate officer or director seeking to measure her obligations.
22 Id. The Miller court hoped by adopting this approach "to ameliorate the often-expressed criticism that the [corporate opportunity] doctrine is vague and subjects today's corporate management to the danger of unpredictable liability." In fact, the test adopted in Miller merely piles the uncertainty and vagueness of the fairness test on top of the weaknesses in the line of business test.
23 The American Law Institute is a private, independent, nonprofit organization that publishes Restatements of the Law, Principles of the Law, and Model Codes to further its mission to clarify, modernize, or otherwise improve the law to promote the better administration of justice. https://www.ali.org/about-ali/faq/. (Accessed: October 2, 2021, 5:04pm).
24 Supra note 19.
Taking of Corporate Opportunities by Directors or Senior Executives (a) General Rule. A director [§ 1.13] or senior executive [§ 1.33] may not take advantage of a corporate opportunity unless: (1) The director or senior executive first offers the corporate opportunity to the corporation and makes disclosure concerning the conflict of interest [§ 1.14(a)] and the corporate opportunity [§ 1.14(b)]; (2) The corporate opportunity is rejected by the corporation; and (3) Either: (A) The rejection of the opportunity is fair to the corporation; (B) The opportunity is rejected in advance, following such disclosure, by disinterested directors [§ 1.15], or, in the case of a senior executive who is not a director, by a disinterested superior in a manner that satisfies the standards of the business judgment rule [§ 4.01(c)]; or (C) The rejection is authorized in advance or ratified, following such disclosure, by disinterested shareholders [§ 1.16], and the rejection is not equivalent to a waste of corporate assets [§ 1.42]. (b) Definition of a Corporate Opportunity. For purposes of this Section, a corporate opportunity means: (1) Any opportunity to engage in a business activity of which a director or senior executive becomes aware, either: (A) In connection with the performance of functions as a director or senior executive, or under circumstances *1151 that should reasonably lead the director or senior executive to believe that the person offering the opportunity expects it to be offered to the corporation; or (B) Through the use of corporate information or property, if the resulting opportunity is one that the director or senior executive should reasonably be expected to believe would be of interest to the corporation; or (2) Any opportunity to engage in a business activity of which a senior executive becomes aware and knows is closely related to a business in which the corporation is engaged or expects to engage. (c) Burden of Proof. A party who challenges the taking of a corporate opportunity has the burden of proof, except that if such party establishes that the requirements of Subsection (a)(3)(B) or (C) are not met, the director or the senior executive has the burden of proving that the rejection and the taking of the opportunity were fair to the corporation. (d) Ratification of Defective Disclosure. A good faith but defective disclosure of the facts concerning the corporate opportunity may be cured if at any time (but no later than a reasonable time after suit is filed challenging the taking of the corporate opportunity) the original rejection of the corporate opportunity is ratified, following the required disclosure, by the board, the shareholders, or the corporate decisionmaker who initially approved the rejection of the corporate opportunity, or such decisionmaker's successor. (e) Special Rule Concerning Delayed Offering of Corporate Opportunities. Relief based solely on failure to first offer an opportunity to the corporation under Subsection (a)(1) is not available if: (1) such failure resulted from a good faith belief that the business activity did not constitute a corporate opportunity, and (2) not later than a reasonable time after suit is filed challenging the taking of the corporate opportunity, the corporate opportunity is to the extent possible offered to the corporation and rejected in a manner that satisfies the standards of Subsection (a).
25 James Ient and Maharlika Schulze, v. Tullett Prebon Philippines, Inc., 803 Phil. 163, 198 (2017).
26 Supra note 4.
27 Id.
28 Supra note 5.
29 See Sports Villas Resort Inc., Re, 2000, 185 Nfld. & P.E.I.R. 281 (Newfoundland Court of Appeals Canada).
30 Id.
31 Supra note 5.
32 Id.
33 Id.
34 Supra note 14.
35 Id.cralawredlibrary