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

INC.,

G.R. Nos. 189158 and 189530, January 11, 2017

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 respondent’s 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.