G.R. Nos. 200070-71 - Concurring Opinion

G.R. No. 200070-71, December 7, 2021,
♦ Decision, Inting, [J]
♦ Concurring Opinion, Perlas-Bernabe, [J]
♦ Separate Concurring Opinion, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]

TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., PETITIONER, VS. 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.

The factual backdrop of this case, in sum, involves a complaint filed by Total Office Products and Services, Inc. (TOPROS) for accounting and damages with prayer for the issuance of a writ of preliminary injunction against respondents John Charles Chang, Jr. (Chang), TOPGOLD Phils. Inc. (TOPGOLD), Golden Exim Trading and Commercial Corporation, Identic International Corporation, and Hector and Cecilia Katigbak (collectively, Chang, et al.) TOPROS mainly alleged that Chang, who was president and 20% shareholder of TOPROS, siphoned the assets, funds, goodwill and resources of TOPROS and obtained corporate opportunities that properly belonged to TOPROS, and further directed said opportunities to his own companies (i.e., TOPGOLD,et al.). TOPROS added that the violations of Chang's fiduciary duties as the president of TOPROS included establishing companies in the same line of business as TOPROS, pilfering clients of TOPROS and various misrepresentations (including use of TOPROS resources in furtherance of his own companies' clients).1

The ponencia grants the herein petition, reverses the Court of Appeals (CA) and reinstates the ruling of Branch 158, Regional Trial Court of Pasig City (RTC) which ordered Chang and his companies to account for all profits and properties which should have accrued to TOPROS and refund the same to it, including the payment of actual damages in an amount to be determined by the court-appointed committee, in addition to exemplary damages in the amount of P100,000.00 and attorney's fees also in the amount of P100,000.00.2

In ordering the reinstatement of the RTC Decision, the ponencia finds that the RTC was correct in finding several disloyal acts on the part of Chang which prejudiced TOPROS and its shareholders. To determine Chang's exact liability, however, the ponencia remands the case to the RTC for reception of additional evidence and re-evaluation of evidence already presented using the parameters suggested by Senior Associate Justice Estela Perlas-Bernabe (Senior Associate Justice Bernabe), namely: (1) the line of business test; (2) the interest or expectancy test; (3) the American Law Institute (ALI) test; and (4) the Guth test (as laid down in the case of Guth v. Loft, Inc.).3 Senior Associate Justice Bernabe finally suggests that the Guth test, having integrated4 the three foregoing tests, is the most appropriate for our jurisdiction for purposes of determining breach of corporate opportunity.5

The ponencia finally cautions that TOPROS, as the claimant, has the burden of proving the specific business opportunities that gave rise to its claim of damages.

I agree with the ponencia's finding against Chang of acts that were clearly violative of the fiduciary duties incumbent upon him pursuant to Section 316 in relation to Section 347 of the Corporation Code.8 It is beyond dispute that Chang pilfered clients and appropriated opportunities that should have redounded to the benefit of TOPROS, including the act of establishing two companies which are in the same line of business as TOPROS while he was still a sitting officer and director of the latter,9 that one of his companies, TOPGOLD, even used the same business address as TOPROS, which not only gave the former access to the latter's resources, but also led the public to believe that they were one and the same when in fact they were not.10 The ponencia also crucially notes that even Chang himself admitted that he gave an investment opportunity to his company, Golden Exim and not to TOPROS on the premise that "he had to make his own living."11

However, with the violation of Chang's fiduciary duty being clear enough, the challenge, as acknowledged by the ponencia, is in the determination of what may be considered a corporate opportunity on the part of TOPROS which gave rise to a claim of damages against Chang.12 On this score, I agree with Senior Associate Justice Bernabe that a wholesale reinstatement of the RTC Decision is insufficient as it fails to take into account the distinctions and determinations that must be made for purposes of determining damages.

On this matter of winnowing between profits and properties that have accrued to Chang or his private companies' benefits and those that should have rightly redounded to the benefit of TOPROS, and consistent with Senior Associate Justice Bernabe's suggestion of consulting U.S. jurisprudence for instructive case demonstrations, I wish to offer several other tests in addition to the "line of business" test, the "interest/expectancy" test, the ALI test and the Guth test.

The following additional considerations may, as they have been considered by the ponencia, assist in fleshing out and further refining the parameters that the RTC may operate within for purposes of determining the breadth and scope of Chang's liability. Although far from a complete canvass of the terrain of the doctrine of corporate opportunity, the following tests nevertheless shed more light on the principle that has become increasingly relevant albeit relatively unexplored in our jurisdiction. Too, I wish to offer possible considerations of defenses that, although perhaps not squarely raised by Chang in this case, nonetheless inform the ponencia's appreciation of the corporate opportunity doctrine.

First, the ponencia also correctly considers the "fairness" test, under which the test of whether an opportunity is a corporate one rests on the question of whether a fiduciary's appropriation would fail the "ethical standards of what is fair and equitable in a particular set of facts."13 Although far from hard and fast, the "fairness" test is similar to the "line of business" test in that it may disallow appropriation of not only existing but prospective opportunities of the corporation. Though it admittedly poses "line-drawing"14 problems with respect to delineating between appropriations that are fair to the corporation and those that are not, this test allows for malleability in the appreciation of what constitutes the foundational premise of fairness vis-a-vis corporations, consistent with the inclination of our legislative history, as raised during the deliberations, that sought to codify the premium placed on the fiduciary duties of a corporate officer.15

Second, and in addition to the cases of Guth v. Loft, Inc.16 and Broz v. Cellular Info. Systems,17 similarly instructive are the cases of Thorpe by Castleman v. CERBCO, Inc.18 (Thorpe) and Benerofe v. Cha19 (Benerofe).

In Thorpe, the facts involved a shareholder who sued the company CERBCO and its controlling shareholders who were also its officers and directors for breach of their duty of loyalty through the usurpation of a corporate opportunity. Specifically, the officers and directors of CERBCO objected to a third party proposal because it would erode the control premium of their stocks. Here, the Chancery Court appreciated the nuanced role of the officers and directors and as controlling shareholders in that although said officers did breach their duty of loyalty for failing to fully disclose the corporate opportunity, it also noted that as controlling shareholders, they could veto any transaction that would have constituted a sale of all or substantially all of the corporation's assets, so that here, the Court held that although there was breach of loyalty, there was effectively no injury to the corporation. Thorpe would thus be valuable in the appreciation of whether a director or officer of the corporation under fire pursuant to the corporate opportunity doctrine could not also have validly undertaken the same action in a different corporate capacity.

Third, on the matter of defense against the corporate opportunity doctrine, the case of Benerofe is similarly informative. This case involved shareholders who filed a case against their corporation Inorganic Coatings, Inc. (ICI) and its directors for allegedly entering into a stock purchase agreement that favored another corporation, designees of which also sat in the ICI's board. In this case, the court ruled that the shareholders failed to prove that the board of directors usurped a corporate opportunity of ICI since it failed to prove that ICI was in fact financially capable of exploiting the corporate opportunity that was supposedly usurped. This case, therefore, would be helpful in refining the courts' appreciation of the corporate opportunity doctrine, specifically in light of the "incapacity" defense, or the defense that submits that an opportunity is only a corporate one if the corporation itself could have, on its own, been able to exploit or seize the same had it not been appropriated by the fiduciary.20

Finally, yet another possible defense that aptly informs the ponencia as well as the courts, one that is acknowledged as a plausible defense by the ALI and the "line of business" tests, is the "source" defense, which mainly argues that the source of the opportunity that the fiduciary approriated was one who was drawn to the fiduciary's personal skills and expertise, and not the corporation's.21

As succintly pointed out by Senior Associate Justice Bernabe, the foregoing parameters are, still and all, mere guideposts, with their germaneness to our jurisdiction to be further determined as each suitable case for which arises.

Bearing the above in mind, I agree with the ponencia and vote to GRANT the instant petition and REMAND Civil Case No. 68327 to the Regional Trial Court of origin for its prompt resolution in light of the parameters and considerations outlined by the ponencia with respect to the determination of corporate opportunities.