CORPO Flashcards
Thus, a claim of damages under Section 34 of the Corporation Code (now Section 33 of the RCC) arises when a corporate officer or director takes a business opportunity for his own, provided that it is sufficiently shown by the claimant that:
(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.
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.
As pointed out by Associate Justice Marvic M.V.F. Leonen, the test laid down in Gokongwei is very much relevant to the instant case. In Gokongwei, it was held that “the test must be whether the business does in fact compete.” It further defined “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.”88 Factors, such as “quantum and place of business, identity of products and area of competition should be taken into consideration.” The Court even pointed out that it is “therefore, necessary to show that [the director’s] business covers a substantial portion of the same markets for similar products to the extent of not less than 10% of [petitioner] corporation’s market for competing products.”89
Consequently, it is not enough to impute bare acts of transactions in which the claimant subjectively perceives the duty of loyalty to be breached. Sufficient evidence must be presented to show that the claim of damages is indeed premised on a concrete corporate opportunity falling under the parameters above-stated. Only then may actual damages relative to such lost opportunity be awarded.
Chang’s Liability
The Doctrine of Apparent Authority
its existence may be ascertained through (1) the general manner in which the corporation
holds out an officer or agent as having the power to act, with which it clothes him, or, (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, with or
beyond the scope of his ordinary powers.
Apparent Authority. In addition, based on
decisions of the Supreme Court, an officer may also bind the
corporation if he has apparent authority. “The doctrine of apparent
authority is a species of the doctrine of estoppel.” An officer may be
clothed with apparent authority for specific acts. Apparent authority
may also be derived from practice. It is a familiar doctrine that if a
corporation knowingly permits its officers or any other agent, to do
acts within the scope of an apparent authority, and holds the officer
or agent out to the public as possessing power to do those acts, the
corporation will, as against any one who has in good faith dealt with
the corporation through such agent, be estopped from denying his
authority
Corporate officers
SEC. 24. Corporate Officers. – Immediately after their election, the directors of a corporation must formally organize and elect: (a) a president, who must be a director; (b) a treasurer, who must be a resident; (c) a secretary, who must be a citizen and resident of the Philippines; and (d) such other officers as may be provided in the bylaws. If the corporation is vested with public interest, the board shall also elect a compliance officer. The same person may hold two (2) or more positions concurrently, except that no one shall act as president and secretary or as president and treasurer at the same time, unless otherwise allowed in this Code.
The doctrine of piercing the corporate veil applies only in three basic instances, namely:
Case of Gesolgon v CyberONe
(a) when the separate distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation;
(b) in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or
(c) is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
We find that the application of the doctrine of piercing the corporate veil is unwarranted in the present case. First, no evidence was presented to prove that CyberOne PH was organized for the purpose of defeating public convenience or evading an existing obligation. Second, petitioners failed to allege any fraudulent acts committed by CyberOne PH in order to justify a wrong, protect a fraud, or defend a crime. Lastly, the mere fact that CyberOne PH’s major stockholders are CyberOne AU and respondent Mikrut does not prove that CyberOne PH was organized and controlled and its affairs conducted in a manner that made it merely an instrumentality, agency, conduit or adjunct of CyberOne AU. In order to disregard the separate corporate personality of a corporation, the wrongdoing must be clearly and convincingly established.
Moreover, petitioners failed to prove that CyberOne AU and Mikrut, acting as the Managing Director of both corporations, had absolute control over CyberOne PH. Even granting that CyberOne AU and Mikrut exercised a certain degree of control over the finances, policies and practices of CyberOne PH, such control does not necessarily warrant piercing the veil of corporate fiction since there was not a single proof that CyberOne PH was formed to defraud petitioners or that CyberOne PH was guilty of bad faith or fraud.
Hence, the doctrine of piercing the corporate veil cannot be applied in the instant case. This means that CyberOne AU cannot be considered as doing business in the Philippines through its local subsidiary CyberOne PH. This means as well that CyberOne AU is to be classified as a non-resident corporation not doing business in the Philippines.
