Irac Case Analysis Topros vs. Chang

IRAC CASE ANALYSIS FORMAT
Issue-Rules-Analysis-Conclusion
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.
ISSUE Statement
Whether or not Chang is liable for violation of his fiduciary duties under the Corporation Code.
RULES, LAWS, REGULATIONS, POLICIES
Republic Act No. (RA) 8799 or the Securities Regulation Code
Section 31 of the Corporation Code (now Section 30 of the RCC) specifies the liabilities of directors,
trustees, or officers. It reads:
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.
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.)
Section 34 of the Corporation Code (now Section 33 of the RCC) also states.
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.)
Batas Pambansa Blg. (BP) 68 or the Corporation Code was enacted in 1980. In 2019, RA 11232,
otherwise known as the "Revised Corporation Code of the Philippines" (RCC).
ANALYSIS OF FACTS
WHO: The parties are Ramon and Yaona Ty, the owner of Total Office Products and
Services (TOPROS) , Inc., the petitioner, Topgold Philippines, Inc., Golden Exim
Trading and Commercial Corporation (Golden Exim), Identic International Corp
(Identic) [respondent corporations], and John Charles chang, Jr. (Chang), Saul
Mari Chang, Hector Katigbak (Hector), Cecilia Katigbak (Cecilia), Rosario Sarah
Fernando, and Elizabeth Jay (Elizabeth) [individual respondents].
WHAT: RTC ruled that Chang violated his fiduciary duties and was guilty of disloyalty to
TOPROS. The Decision and Resolution of RTC was reversed and set aside by the
Court of Appeals. TOPROS filed a Petition for Review for Certiorari praying for
the reversal of the Decision and Resolution of the Court of Appeals (CA).
TOPROS filed a Motion for Reconsideration, but the CA denied it on January 2,
2012. TOPROS filed a Petition.
WHERE: The Decision and Resolution of the Court of Appeals were set aside. The Civil
Case filed No. 68327 is Remended to Branch 158, Regional Trial Court, Pasig
City for Resolution of the case, with dispatch, following the guidelines set forth.
WHEN: The CA reversed and set aside the Decision dated 18 March 2008.
HOW:
The Ty Family elected TOPROS grew into a multi-
On January 31, 1983, Chang as President and million enterprise; thus,
TOPROS was incorporated General Manager and Spouses Ty increased its
with an authorized capital entrusted to him the authorized capital stock to
stock of P4,000,000.00 management as well as the P10,000,000.00 and Chang's
funds of TOPROS share to 20%.
Ty Family conducted an
investigation which
revealed that while still a Chang refused to return all
Corporate Director and an corporates records of
officer of TOPROS, Chang, TOPROS instead he offered
together with the individual to buy them out of their
respondents, incorporated interest.
the respondent-
corporations to siphon the
assets, funds, goodwill,
It was refiled as an
On November 17, 1998, Amended Petition for TOPROS sought an ex parte
TOPROS filed before the Accounting and Damages issuance of a writ of
Securities and Exchange with Prayer for the Issuance preliminary attachment
Commission (SEC) a of a Writ of Preliminary against the respondent-
Petition for Injunction, Attachment8 (Amended corporations and individual
Mandatory Injunction and Petition) against respondents
Damages (With Urgent respondent-corporation and
Motion for Issuance of Writ individual respondents.
of Preliminary Attachment)
Chang denied the charges The SEC issued a Writ of

and asserted that from Preliminary Attachment in
On March 18, 2008, the TOPROS’ inception until his favor of TOPROS wherein
Regional Trial Court (RTC) ouster as President and the latter posted a bond in
rendered a Decision in favor General Manager therein. He the amount of
of TOPROS alone ran TOPROS and P90,000,000.00
shouldered its liabilities. representing its alleged
damage..
On June 17, 2011, the Court
of Appeals reversed and set TOPROS filed a Motion for
aside the decision of the RTC. Reconsideration, but it was TOPROS filed a Petition.
The denied on January 2, 2012.
In 1998, the Ty Family

sensed irregularities in
Chang's dealings in which
products and services from
TOPROS were issued
receipts and vouchers from
ANALYSIS OF ARGUMENTS AND COUNTER-ARGUMENTS TOPGOLD, Golden Exim, and
Identic.
TOPROS CHANG ET AL
No substantial cash dividends were The Corporation was investing its funds in
distributed to the stockholders several real properties in Metro Manila,
Visayas and Mindanao.
Chang used TOPROS properties in Chang denied the charges and asserted that
organizing the respondent-corporations and TOPROS’ inception until his ouster as
obtained opportunities properly belonging to President and General Manager, he alone ran
it and its stockholders to damage and TOPROS and shouldered its liabilities.
prejudice.
Ty Family knew that Chang organized the
three corporations during his incumbency as
president and General Manager of TOPROS.
The incorporation of the respondents were

with the knowledge, approval, and
participation of the Ty Family.
Chang is guilty of violating the Corporation The doctrine of corporate opportunity does
Code not apply in the case because he was advised
to allow the corporation to go under due to its
indebtedness
Chang established the respondent- The doctrine of corporate opportunity applies
corporations to acquire and utilize the assets, only if the corporation is financially able to
funds, properties and resources of TOPROS. undertake its business
Chang violated Section 74 of the Corporation TOPROS failed to prove the claim of fraud
Code in failing to provide the other directors by preponderance of evidence of fraud
access to the financial records of TOPROS.
CONCLUSION:
Chang engaged in several acts that were inconsistent with his responsibilities as a director and
officer of TOPROS and showed a personal or financial interest.

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IRAC CASE ANALYSIS FORMAT

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

RULES, LAWS, REGULATIONS, POLICIES

Republic Act No. (RA) 8799 or the Securities Regulation Code

Chang denied the charges The SEC issued a Writ of

In 1998, the Ty Family

The incorporation of the respondents were

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