Law in order and piece

S«c 31. Liability of directors, trustees or officers. —Directors or trustees who willfully
and knowingly vote foe or assent to patently unlawful act» of the corporation or who are
guilty of gross negligenc* 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 »n his
own behalf, he shall be Hable as a trustee for the corporation and must account for the
profits which otherwise would have accrued to the corporation, (n)

Nature of directors’/trustees* position.

I’he directors of a corporation are its agents. They - (xcupy a fiduciary relation to the
corporation, Ry
a>>riliw they have been called “trustees" (McFlA,
Kell
79S.E. 777.), with certain powers and subject V'
tlx- «-anagenwnt ๙ its property, and each stockholder:”

“and shaR,s aacksw v Lud:S

(1) I"thv performance of their official duties, they are under _tions of trust and
confidence to the corporation and lts stockholders and must act in good faith and for the
interest of the corporation or its stockholders with due care and diligence and within the
scope of their authority. (Ibid.)

(2) They are personally liable for any wrongful disposition ๙ corporate assets and for
any loss or injury to the corporation arising from their gross negligence or unauthorized
acts or violation of their duties, (see Steinberg vs. Velasco, 52 Phil. 953 H9291.)
0) Directors are not liable, however for business losses incurred because of honest bad
judgment not amounting to bad i or gross negligence, (see Ballantine, 160; see also Board ot
’ ‘9UDators vs. Heirs of Maximo Kalaw, 20 SCRA 987 [1967].)

Liability of dlrectora/trustoos for damagos.

Section 31 enumerates the occaHions when a director or trustee may be held liable for
damagcw, as (oUows:
He willfully and knowingly votes or assents to patently unlawful acts of the corporation;
He is guiltygross negligence (not mere "want of ordinary prudence" as held in Steinberg
vs. Vtlosco, supra.) or bad faith in directing the affairs of the corporation; and
He acquires any personal or pecuniary interest in conflict with his duty as such director
or trustee.
In the above instances, the erring board members shall be Eheld jointly and severally
(orsolidarily) liable for all the damages [resulting therefrom suffered by the corporation, its
stockholders or members, or other persons such as corporate creditors.