G.R. Nos.

189158 and 189530 January 11, 2017

JAMES IENT and MAHARLIKA SCHULZE v TULLETT PREBON (PHILIPPINES),

INC.,

Commercial Law; Corporation Code; Liability on Sections 31 and 34; SC held that through a thorough scrutinizing
of the different provisions in the Corporation Code including Sections 31 and 34, they only impose civil liability aside
from Section 74. SC concludes that had it been the intention of the drafters of the la to define Sections 31 and 34 as
offenses, they could have easily included similar language as that found in Section 74. The intention can also be gleaned
from the floor deliberations of its proponents.

SERENO,C J.:

FACTS: Tradition Group, where petitoners herein are employed, and Tullett are competitors in the
inter-dealer broking business. On the Tradition Group's motive of expansion and diversification in
Asia, petitioners lent and Schulze were tasked with the establishment Tradition Financial Services
Philippines, Inc.

However, Tullett, filed a Complaint-Affidavit with the City Prosecution Office of Makati City
against the officers/employees of the Tradition Group for violation of Sections 31 and 34 of the
Corporation Code which made them criminally liable under Section 144. Impleaded as respondents
in the Complaint-Affidavit were petitioners lent and Schulze, Jaime Villalon ,who was formerly
President and Managing Director of Tullett, Mercedes Chuidian who was formerly a member of
Tullett's Board of Directors. Villalon and Chuidian were charged with using their former positions in
Tullett to sabotage said company by orchestrating the mass resignation of its entire brokering staff in
order for them to join Tradition Philippines which was evident on their conduct of several meetings
with the employees. According to Tullett, petitioners lent and Schulze have conspired with Villalon
and Chuidian in the latter's acts of disloyalty against the company. Petitioners argued that there
could be no violation of Sections 31 and 34 of the Corporation as these sections refer to corporate
acts or corporate opportunity, that Section 144 of the same Code cannot be applied to Sections 31
and 34 which already contains the penalties or remedies for their violation; and conspiracy under the
Revised Penal Code cannot be applied to the Sections 31 and 34 of the Corporation Code. The city
prosecutor dismissed the criminal complaint however, on respondents appeal to the Department of
Justice, the dismissal was reversed finding the arguments of the respondent proper. CA affirmed the
decision of the DOJ secretary.

ISSUE/S: WoN Section 144 of the Corporation Code appliesto Sections 31 and 34 of the same
code, thus, making it a penal offense so that conspiracy can be appreciated and the petitioners can
be impleaded?

RULING:

NEGATIVE. The Supreme Court applied rule of lenity as a principle related to liberal
interpretation in favor of the accused in criminal cases. The rule applies when the court is faced with
two possible interpretations of a penal statute, one that is prejudicial to the accused and another that
is favorable to him. The rule calls for the adoption of an interpretation which is more lenient to the
accused.

According to SC, a close reading Section 144 shows that it is not purely a penal provision because it
provides that when the violator is a corporation, an administrative penalty is imposed in form of
dissolution, which is not a criminal sanction. The Court also added that there is no provision in the
Corporation Code using an emphatic language to compel the SC to construe the provision as a penal
offense. SC held that through a thorough scrutinizing of the different provisions in the Corporation
Code including Sections 31 and 34, they only impose civil liability aside from Section 74. SC
concludes that had it been the intention of the drafters of the la to define Sections 31 and 34 as
offenses, they could have easily included similar language as that found in Section 74. The intention
can also be gleaned from the floor deliberations of its proponents. Quite apart that no legislative
intent to criminalize Sections 31 and 34 was manifested in the deliberations on the Corporation
Code, it is noteworthy from the same deliberations that legislators intended to codify the common
law concepts of corporate opportunity and fiduciary obligations of corporate officers as found in
American jurisprudence into said provisions. In common law, the remedies available in the event of
a breach of director's fiduciary duties to the corporation are civil remedies. If a director or officer is
found to have breached his duty of loyalty, an injunction may be issued or damages may be awarded.
A corporate officer guilty of fraud or mismanagement may be held liable for lost profits. A disloyal
agent may also suffer forfeiture of his compensation. There is nothing in the deliberations to
indicate that drafters of the Corporation Code intended to deviate from common law practice and
enforce the fiduciary obligations of directors and corporate officers through penal sanction aside
from civil liability. GRANTED. Court of Appeals Resolutions are REVERSED and SETASIDE.