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]

[ G.R. Nos. 200070-71. December 07, 2021 ]

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.

CONCURRING OPINION

LAZARO-JAVIER, J.:

I do agree that the doctrine of corporate opportunity applies in this case based on Section 34,1 in relation to Section 31,2 Batas Pambansa Bilang 68, otherwise known as The Corporation Code of the Philippines (Corporation Code). But while the ponencia enumerated several foreign tests to determine corporate opportunity and ultimately went with Guth v. Loft, Inc.3 as synthesized by Broz v. Cellullar Information Systems, Inc.,4  I humbly opine that Section 34 of the Corporation Code, as worded, and its legislative history on what "belongs to the corporation" would have to be the springboard for determining which of these tests or a combination of these tests, if any, would bring about the statutory language and purpose. After all, Section 34 of the Corporation Code recognizes the doctrine not only to demand undivided loyalty from those who occupy a fiduciary relationship toward a corporation but also to clarify it and clear any ambiguous interpretation.

A. The Common Law Doctrine of Corporate Opportunity

Originally, it was the common law which imposed the duty of a fiduciary upon a director or officer.5 Slowly, though, this common law duty has been codified in common law and hybrid common-civil law jurisdictions, including ours. In our Revised Corporation Code of the Philippines, the relevant provisions are found in Sections 29 to 33 thereof,6 and prior to this repealing statute, the almost identical provisions of Sections 30 to 347 of the Corporation Code of the Philippines.

In its raw and unrestrained sense, the content of the fiduciary duty of directors and officers compels undivided loyalty. In the 1928 case of Meinhard v. Salmon,8 Justice Benjamin N. Cardozo9 explained what such fiduciary duty entails:

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)

x x x x

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 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.13

x x x x

The 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.14

The corporate opportunity doctrine arises out of this fundamental obligation of a fiduciary not to allow a conflict of their duty with their own interests.15 This doctrine limits the ability of those who owe a fiduciary duty to a corporation to take advantage of business opportunities that might otherwise, be available to them in the absence of the fiduciary relationship.16 According to a branch of common law, these business opportunities are those that either already belongs to the company or even for which it has been negotiating.17

Thus, as it is now broadly understood, the corporate opportunity doctrine governs the legal responsibility of directors, officers, and controlling shareholders in a corporation, under the duty of loyalty, not to take such opportunities for themselves without first disclosing the opportunity to the board of directors of the corporation and giving the board the option to decline the opportunity on behalf of the corporation. If this procedure is violated and a corporate fiduciary takes the corporate opportunity anyway, then the fiduciary has violated its duty of loyalty, and the corporation will be entitled to a constructive trust of all profits obtained from the wrongful transaction.18

Please note that the codified versions of the corporate opportunity doctrine in the Philippines have consistently retained the key phraseology for the application of this doctrine, i.e., a business opportunity which SHOULD BELONG to the corporation.

B. Common-Law Nature of Corporate Opportunity

Key to the analysis on whether this doctrine applies is the determination of whether the opportunity "belonged" to the corporation. Common law has developed various overlapping tests for this purpose.

In the 1995 case of Northeast Harbor Golf Club, Inc. (Northeast) v. Harris, et al.,19 the Supreme Judicial Court of Maine elaborated the tests for whether the opportunity belongs or belonged to the corporation: 

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).22

Northeast also included this test which was developed in 1992: 

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.24

The foregoing common law tests were meant to define the elements of corporate or business opportunity, the acquisition or attempt to obtain it would be actionable under Sections 31 and 34 of the Revised Corporation Code of the Philippines or its earlier version. I understand why these tests have been discussed prominently in the ponencia – precisely because we would want the public to know whena particular potentially or already gainful endeavor amounts to a corporate or business opportunity that a director or officer is barred from acquiring. For example, if Total Office Products and Services (TOPROS) were procuring and marketing only high­-end typewriters, and Mr. John Charles Chang (Mr. Chang) in the course of his employment with TOPROS learned of computer-enhanced word-­processing machines and this new equipment's likelihood of driving the typewriters out-of-business, would he be barred by his fiduciary duties from himself procuring and marketing these new machines as this endeavor would fall under a corporate or business opportunity?

C. Codified Nature of Corporate Opportunity

Inferring from Section 34 of the repealed Corporation Code of the Philippines and Section 33 of the Revised Corporation Code of the Philippines, a corporate opportunity is a business opportunity that "should belong" to the affected corporation. Unfortunately, however, there is no definition in the statutes of what should belong means. In the legislative deliberations on Section 34, Minister Estelito Mendoza (Minister Mendoza) explained corporate opportunity in this manner –

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.

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

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.

D. Working Legal Definition of Corporate Opportunity

I appreciate the ponencia's effort to define what prohibited corporate opportunity entails. Quoting Broz v. Cellular Information Systems, Inc.,26 Associate Justice Henri Jean Paul Inting held that a corporate opportunity exists where:

1. the corporation is financially able to exploit the property;

2. the opportunity is within the corporation's line of business;

3. the corporation has an interest or an expectancy in the opportunity; and

4. by taking the opportunity for [their] own, the corporate fiduciary (i.e., corporate director, trustee, or officer) will thereby be placed in a position [inimical] to his or her duties to the corporation.27

I respectfully submit, however, that the elements identified in the ponencia do not accurately reflect 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. It appears that the elements are predisposed to the textual qualification of the corporate opportunity as something that should already belong to the corporation to the prejudice of the intent behind the text that an opportunity that may be available to the corporation could also be actionable as a corporate opportunity.

It is true that the views expressed during legislative debates may be resorted to clarify ambiguities in the language of the statute. This is precisely the case here – what "should belong to the corporation" means is ambiguous. The ponencia admits this fact. It was for this reason that it had an extensive reference to and discussion of the common law tests of what corporate opportunity is. Hence, to come up with a working legal definition of corporate opportunity, we must construe together 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.

For this reason, when deciding whether a corporate opportunity exists that a director or an officer has availed of and could be held liable for, all relevant factors must be taken into account, including:

  • 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 the 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 director's pursuit of the opportunity;and,
  • whether the other director's gave their fully informed consent to the director's pursuit of the opportunity.28

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 belongsthat we are able to account for the true fiduciary nature of the positions of director or officer. 

Maturity of the Opportunity and Active Pursuit by the Corporation

The maturity of the opportunity includes both a "mature" or "ripe" or "immediately available" opportunity and "potential" opportunities.The latter is required by the strict ethic imposed on fiduciaries. Thefiduciary duty does not make a director or an officer's liability solely to hinge on proof of an actual conflict of duty and self-interest" but also on a potential of such conflict.29 Thus:

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)

x x x x

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.31A "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.

Thus, due to the strict ethic that is imposed on directors or officers, a breach of fiduciary duty can occur when the diverted opportunity is a potential, rather than a mature opportunity, and even when the corporation is not actively pursuing the business opportunity. 

Nature of the alleged "insider" information and opportunity

The manner in which the information and opportunity came to the knowledge of the director or officer is notdeterminative but is a fact to be taken into account in the context of the director or officer's role as a fiduciary.32 The information and opportunity need not be presented as an "insider" event or something that was known or availed by a director or officer qua director or officer.33 The information or opportunity does not have to be acquired while acting as directors or officers and its prohibitory effect is not limited to benefits acquired by reason of or during the holding of those offices.34 

Limits on Liability of Directors and Officers

Another way to analyze the extent of the duty of a director or officer under this doctrine is to examine whether any defenses may be raised by a director or officer to limit their liability. This real limitation upon their liability is nothing short of their fully informed consent. As in our codification of the corporate opportunity doctrine, the only defense available to them is that they made the profits with the knowledge and assent of the corporation. This arises again from their fiduciary position vis-a-vis the corporation – "a breach of fiduciary duty occurred, not only because the opportunity belonged to the corporation, but because the fiduciary obtained the opportunity either secretly or without the approval of the company."35

E. Application of the Corporate Opportunity Doctrine to the Case at Bar

As exhaustively narrated in the ponencia, Mr. Chang executed crude acts that brazenly usurped business opportunities that fairly belonged to TOPROS. These opportunities had long matured as they were in fact existing and ready to be as they were in fact tapped by Mr. Chang. Had these business opportunities not been hidden by Mr. Chang from TOPROS, the latter could have actively pursued and taken advantage of them as the opportunities were all in its line of business. Mr. Chang learned of these opportunities precisely because of his multiple roles as one of TOPROS' directors and its top officer.

F. Conclusion

As a result, I vote to allow the present petition and return the matter to the trial court to determine the extent of the liability for damages of Mr. John Charles Chang.


Footnotes

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;

(b) The vote of such director or trustee was not necessary for the approval of the contract;

(c) The contract is fair and reasonable under the circumstances;

(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;

2. That the vote of such director or trustee was not necessary for the approval of the contract;

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 14.1âшphi1

35 Id
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