1 Ient vs. Tullett Prebon (Philippines), Inc., 814 SCRA 184, January 11, 2017

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* FIRST DIVISION.
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VOL. 814, JANUARY 11, 2017 185

G.R. No. 189158. January 11, 2017.* Ient vs. Tullett Prebon (Philippines), Inc.
JAMES IENT and MAHARLIKA SCHULZE, petitioners,

vs. TULLETT PREBON (PHILIPPINES), INC., party may seek judicial review via certiorari on the ground of
respondent. grave abuse of discretion.
Moot and Academic; The „moot and academic‰ principle is not a
G.R. No. 189530. January 11, 2017.* magical formula that can automatically dissuade the courts in
resolving a case.·We likewise cannot give credit to respondentÊs
JAMES IENT and MAHARLIKA SCHULZE, petitioners, claim of mootness. The „moot and academic‰ principle is not a
vs. TULLETT PREBON (PHILIPPINES), INC., magical formula that can automatically dissuade the courts in
respondent. resolving a case. The Court will not hesitate to resolve the legal and
constitutional issues raised to formulate controlling principles to
Remedial Law; Criminal Procedure; Certiorari; The Supreme guide the bench, the bar, and the public, particularly on a question
Court (SC) had held that where the action of the Secretary of Justice capable of repetition, yet evading review.
is tainted with arbitrariness, an aggrieved party may seek judicial
Remedial Law; Civil Procedure; Forum Shopping; Words and
review via certiorari on the ground of grave abuse of discretion.·In
Phrases; Forum shopping is an act of a party, against whom an
Yambot v. Tuquero, 646 SCRA 249 (2011), we observed that under
adverse judgment or order has been rendered in one forum, of
exceptional circumstances, a petition for certiorari assailing the
seeking and possibly getting a favorable opinion in another forum,
resolution of the Secretary of Justice (involving an appeal of the
other than by appeal or special civil action for certiorari.·As for the
prosecutorÊs ruling on probable cause) may be allowed,
assertion that the present petitions are dismissible due to forum
notwithstanding the filing of an information with the trial court. We
shopping since they were filed during the pendency of petitionersÊ
reiterated the doctrine in Ching v. Secretary of Justice, 481 SCRA
motion to quash and their co-accusedÊs motion for judicial
609 (2006), that the acts of a quasi-judicial officer may be assailed
determination of probable cause with the trial court, we hold that
by the aggrieved party through a petition for certiorari and enjoined
there is no cause to dismiss these petitions on such ground. Forum
(a) when necessary to afford adequate protection to the
shopping is an act of a party, against whom an adverse judgment or
constitutional rights of the accused; (b) when necessary for the
order has been rendered in one forum, of seeking and possibly
orderly administration of justice; (c) when the acts of the officer are
getting a favorable opinion in another forum, other than by
without or in excess of authority; (d) where the charges are
appeal or special civil action for certiorari. It may also involve
manifestly false and motivated by the lust for vengeance; and (e)
the institution of two or more actions or proceedings grounded on
when there is clearly no prima facie case against the accused. In the
the same cause on the supposition that one or the other court would
case at bar, it is unsettling to perceive a seeming lack of uniformity
make a favorable disposition. There is no forum shopping where the
in the rulings of the Secretary of Justice on the issue of whether a
suits involve different causes of action or different reliefs.
violation of Section 31 entails criminal or only civil liability and
Jurisprudence explains that: A motion to quash is the mode by
such divergent actions are explained with a terse declaration of an
which an accused assails, before entering his plea, the validity of
alleged difference in factual milieu and nothing further. Such a
the criminal complaint or the criminal information filed against him
state of affairs is not only offensive to principles of fair play but also
for insufficiency on its face in point of law, or for defect apparent on
anathema to the orderly administration of justice. Indeed, we have
the face of the Information. The motion, as a rule, hypothetically
held that where the action of the Secretary of Justice is tainted with
admits the truth of the facts spelled out in the complaint or
arbitrariness, an aggrieved
information. The rules governing a motion to quash are found under all must be resolved in favor of the accused. Since penal laws should
Rule 117 of the Revised Rules of Court. Section 3 of this Rule not be applied mechanically, the Court must determine whether
enumerates the grounds for the quashal of a complaint or their application is consistent with the purpose and reason of the
information. law.‰ Intimately related to the in dubio pro reo principle is the rule
of lenity. The rule applies when the court is faced with two
possible interpretations of a penal statute, one that is prejudicial to
the ac-
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Ient vs. Tullett Prebon (Philippines), Inc.
VOL. 814, JANUARY 11, 2017 187

Same; Same; Same; Even assuming separate actions have been
filed by different parties involving essentially the same subject
matter, no forum shopping is committed where the parties did not
resort to multiple judicial remedies.·The action at bar is a review cused and another that is favorable to him. The rule calls for
on certiorari of the assailed Court of Appeals (CA) decision wherein the adoption of an interpretation which is more lenient to the
the main issue is whether or not the Secretary of Justice committed accused.
grave abuse of discretion in reversing the City ProsecutorÊs
Same; Same; There is no compelling reason for the Supreme
dismissal of the criminal complaint. These consolidated petitions
Court (SC) to construe Section 144 as similarly employing the term
may proceed regardless of whether or not there are grounds to
„penalized‰ or „penalty‰ solely in terms of criminal liability.·The
quash the criminal information pending in the court a quo. Neither
crux of the CourtÊs ruling in Romualdez v. Commission on Elections,
do we find relevant the pendency of petitionersÊ co-accusedÊs motion
553 SCRA 370 (2008), is that, from the wording of Section 450(j),
for judicial determination of probable cause before the trial court.
there is a clear legislative intent to treat as an election offense any
The several accused in these consolidated cases had a number of
violation of the provisions of Republic Act No. 8189. For this reason,
remedies available to them and they are each free to pursue the
we do not doubt that Section 46 contemplates the term „penalty‰
remedy which they deem is their best option. Certainly, there is no
primarily in the criminal law or punitive concept of the term. There
requirement that the different parties in a case must all choose the
is no provision in the Corporation Code using similarly emphatic
same remedy. We have held that even assuming separate actions
language that evinces a categorical legislative intent to treat as a
have been filed by different parties involving essentially the same
criminal offense each and every violation of that law. Consequently,
subject matter, no forum shopping is committed where the parties
there is no compelling reason for the Court to construe Section 144
did not resort to multiple judicial remedies. In any event, we have
as similarly employing the term „penalized‰ or „penalty‰ solely in
stated in the past that the rules on forum shopping are not always
terms of criminal liability. In People v. Temporada, 574 SCRA 258
applied with inflexibility.
(2008), we held that in interpreting penal laws, „words are given
Mercantile Law; Corporations; Rule of Lenity; The rule of lenity their ordinary meaning and that any reasonable doubt about the
applies when the court is faced with two (2) possible interpretations meaning is decided in favor of anyone subjected to a criminal
of a penal statute, one that is prejudicial to the accused and another statute.‰ BlackÊs Law Dictionary recognizes the numerous
that is favorable to him. The rule calls for the adoption of an conceptions of the term penalty and discusses in part that it is „[a]n
interpretation which is more lenient to the accused.·As Section 144 elastic term with many different shades of meaning; it involves
speaks, among others, of the imposition of criminal penalties, the idea of punishment, corporeal or pecuniary, or civil or
Court is guided by the elementary rules of statutory construction of criminal, although its meaning is generally confined to pecuniary
penal provisions. First, in all criminal prosecutions, the existence of punishment.‰
criminal liability for which the accused is made answerable must be
Same; Same; The Corporation Code was intended as a
clear and certain. We have consistently held that „penal statutes
regulatory measure, not primarily as a penal statute.·The
are construed strictly against the State and liberally in favor of the
Corporation Code was intended as a regulatory measure, not
accused. When there is doubt on the interpretation of criminal laws,
primarily as a penal statute. Sections 31 to 34 in particular were
intended to impose exacting standards of fidelity on corporate The facts are stated in the opinion of the Court.
officers and directors but without unduly impeding them in the Kapunan, Garcia & Castillo Law Offices for petitioner
discharge of their work with concerns of litigation. Considering the James A. Ient and Maharlika Esperanza Schulze.
object and policy of the Corporation Code to encourage the use of Villaraza & Angangco for respondent.
the corporate entity as a vehicle for economic growth, we cannot
espouse a strict construction of Sections 31 and 34 as penal offenses LEONARDO-DE CASTRO, J.:
in relation to Section 144 in the absence of unambiguous statutory
language and legislative intent to that effect. When Congress In these consolidated Petitions for Review under Rule 45
intends to criminalize certain acts it does so in plain, categorical of the Rules of Court, petitioners James A. Ient (Ient) and
language, otherwise such a statute would be susceptible to Maharlika C. Schulze (Schulze) assail the Court of AppealsÊ
constitutional attack. As earlier discussed, this can be De-
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VOL. 814, JANUARY 11, 2017 189

cision1 dated August 12, 2009 in C.A.-G.R. S.P. No. 109094,
readily seen from the text of Section 45(j) of Republic Act No. which affirmed the Resolutions dated April 23, 20092 and
8189 and Section 74 of the Corporation Code. We stress that had May 15, 20093 of the Secretary of Justice in I.S. No. 08-J-
the Legislature intended to attach penal sanctions to Sections 31 8651. The Secretary of Justice, through the Resolutions
and 34 of the Corporation Code it could have expressly stated such dated April 23, 2009 and May 15, 2009, essentially ruled
intent in the same manner that it did for Section 74 of the same that there was probable cause to hold petitioners, in
Code. conspiracy with certain former directors and officers of
respondent Tullett Prebon (Philippines), Inc. (Tullett),
Constitutional Law; Courts; It is a long standing principle in
criminally liable for violation of Sections 31 and 34 in
jurisprudence that „courts will not resolve the constitutionality of a
relation to Section 144 of the Corporation Code.
law, if the controversy can be settled on other grounds. The policy of
From an assiduous review of the records, we find that
the courts is to avoid ruling on constitutional questions and to
the relevant factual and procedural antecedents for these
presume that the acts of the political departments are valid, absent a
petitions can be summarized as follows:
clear and unmistakable showing to the contrary.‰·With respect to
Petitioner Ient is a British national and the Chief
the minutiae of other arguments cited in the partiesÊ pleadings, it is
Financial Officer of Tradition Asia Pacific Pte. Ltd.
no longer necessary for the Court to pass upon the same in light of
(Tradition Asia) in Singapore.4 Petitioner Schulze is a
our determination that there is no clear, categorical legislative
Filipino/German who does Application Support for
intent to define Sections 31 and 34 as offenses under Section 144 of
Tradition Financial Services Ltd. in London (Tradition
the Corporation Code. We likewise refrain from resolving the
London).5 Tradition Asia and Tradition London are
question on the constitutionality of Section 144 of the Corporation
subsidiaries of Compagnie Financiere Tradition and are
Code. It is a long standing principle in jurisprudence that „courts
part of the „Tradition Group.‰ The Tradition Group is
will not resolve the constitutionality of a law, if the controversy can
allegedly the third largest group of Inter-dealer Brokers
be settled on other grounds. The policy of the courts is to avoid
(IDB) in the world while the corporate organization, of
ruling on constitutional questions and to presume that the acts of
which respondent Tullett is a part, is supposedly the second
the political departments are valid, absent a clear and
largest. In other words, the Tradition Group and Tullett are
unmistakable showing to the contrary.‰
competitors in the interdealer broking business. IDBs
purportedly „utilize the secondary fixed income and foreign
PETITIONS for review on certiorari of a decision of the
exchange markets to execute their banks and their bank
Court of Appeals.
customersÊ orders, trade for a profit and manage their
exposure to risk, including Managing Director of Tullett, Mercedes Chuidian
(Chuidian), who was
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_______________
1 Rollo (G.R. No. 189158), Vol. I, pp. 64-84; penned by then Court of
Appeals Associate Justice Martin S. Villarama, Jr. (a retired member of 6 Rollo (G.R. No. 189158), Vol. I, pp. 19-22.
this Court), with Associate Justices Vicente S.E. Veloso and Normandie 7 See TullettÊs 2007 General Information Sheet, id., at p. 112.
B. Pizarro, concurring. 8 Id., at pp. 21-22.
2 Id., at pp. 85-95. 9 Rollo (G.R. No. 189530), Vol. I, p. 10.
3 Id., at pp. 96-97. 10 See 2008 General Information Sheet of Tradition Philippines, id.,
4 Id., at p. 19. at p. 240.
5 Rollo (G.R. No. 189530), Vol. I, p. 7. 11 Rollo (G.R. No. 189158), Vol. I, pp. 118-124.
12 Id., at pp. 98-111.
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Ient vs. Tullett Prebon (Philippines), Inc. VOL. 814, JANUARY 11, 2017 191
credit, interest rate and exchange rate risks.‰ In the
Philippines, the clientele for IDBs is mainly comprised of formerly a member of TullettÊs Board of Directors, and
banks and financial institutions.6 other John and Jane Does. Villalon and Chuidian were
Tullett was the first to establish a business presence in charged with using their former positions in Tullett to
the Philippines and had been engaged in the interdealer sabotage said company by orchestrating the mass
broking business or voice brokerage here since 1995.7 resignation of its entire brokering staff in order for them to
Meanwhile, on the part of the Tradition Group, the needs of join Tradition Philippines. With respect to Villalon, Tullett
its Philippine clients were previously being serviced by claimed that the former held several meetings between
Tradition Asia in Singapore. The other IDBs in the August 22 to 25, 2008 with members of TullettÊs Spot Desk
Philippines are Amstel and Icap.8 and brokering staff in order to convince them to leave the
Sometime in August 2008, in line with Tradition GroupÊs company. Villalon likewise supposedly intentionally failed
motive of expansion and diversification in Asia, petitioners to renew the contracts of some of the brokers. On August
Ient and Schulze were tasked with the establishment of a 25, 2008, a meeting was also allegedly held in Howzat Bar
Philippine subsidiary of Tradition Asia to be known as in Makati City where petitioners and a lawyer of Tradition
Tradition Financial Services Philippines, Inc. (Tradition Philippines were present. At said meeting, the brokers of
Philippines).9 Tradition Philippines was registered with the complainant Tullett were purportedly induced, en masse, to
Securities and Exchange Commission (SEC) on September sign employment contracts with Tradition Philippines and
19, 200810 with petitioners Ient and Schulze, among others, were allegedly instructed by Tradition PhilippinesÊ lawyer
named as incorporators and directors in its Articles of as to how they should file their resignation letters.
Incorporation.11 Complainant also claimed that Villalon asked the
On October 15, 2008, Tullett, through one of its brokers present at the meeting to call up TullettÊs clients to
directors, Gordon Buchan, filed a Complaint-Affidavit12 inform them that they had already resigned from the
with the City Prosecution Office of Makati City against the company and were moving to Tradition Philippines. On
officers/employees of the Tradition Group for violation of August 26, 2008, Villalon allegedly informed Mr. Barry
the Corporation Code. Impleaded as respondents in the Dennahy, Chief Operating Officer of Tullett Prebon in the
Complaint-Affidavit were petitioners Ient and Schulze, Asia-Pacific, through electronic mail that all of TullettÊs
Jaime Villalon (Villalon), who was formerly President and brokers had resigned. Subsequently, on September 1, 2008,
in another meeting with Ient and Tradition PhilippinesÊ 2008 in UCPB v. Antiporda, Villalon claimed that the DOJ
counsel, indemnity contracts in favor of the resigning had previously proclaimed that Section 31 is not a penal
employees were purportedly distributed by Tradition provision of law but only the basis of a cause of action for
Philippines. According to Tullett, respondents Villalon and civil liability. Thus, he
Chuidian (who were still its directors or officers at the
times material to the Complaint-Affidavit) violated _______________
Sections 31 and 34 of the Corporation Code which made
them criminally liable under Section 144. As for petitioners 13 Id., at pp. 102-107.
Ient and Schulze, Tullett asserted that they conspired 14 Id., at pp. 200-254 and 255-295.
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VOL. 814, JANUARY 11, 2017 193
with Villalon and Chuidian in the latterÊs acts of disloyalty

concluded that there was no probable cause that he
against the company.13
violated the Corporation Code nor was the charge of
Villalon and Chuidian filed their respective Counter-
conspiracy properly substantiated.15
Affivadits.14
Chuidian claimed that she left Tullett simply to seek
Villalon alleged that frustration with management
greener pastures. She also insisted the complaint did not
changes in Tullett Prebon motivated his personal decision
allege any act on her part that is illegal or shows her
to move from Tullett and accept the invitation of a Leonard
participation in any conspiracy. She merely exercised her
Harvey (also formerly an executive of Tullett) to enlist with
right to exercise her chosen profession and pursue a better
the Tradition Group. As a courtesy to the brokers and staff,
life. Like Villalon, she stressed that her resignation from
he informed them of his move contemporaneously with the
Tullett and subsequent transfer to Tradition Philippines
tender of his resignation letter and claimed that his
did not fall under any of the prohibited acts under Sections
meetings with the brokers was not done in bad faith as it
31 and 34. Section 144 of the Corporation Code purportedly
was but natural, in light of their long working relationship,
only applies to provisions of said Code that do not provide
that he share with them his plans. The affidavit of
for any penalty while Sections 31 and 34 already provide
Engelbert Wee should allegedly be viewed with great
for the penalties for their violation · damages, accounting
caution since Wee was one of those who accepted
and restitution. In her view, that Section 34 provided for
employment with Tradition Philippines but changed his
the ratification of the acts of the erring corporate director,
mind and was subsequently appointed Managing Director
trustee or office evinced legislative intent to exclude
(VillalonÊs former position) as a prize for his return. Villalon
violation of Section 34 from criminal prosecution. She
further argued that his resignation from Tullett was done
argued that Section 144 as a penal provision should be
in the exercise of his fundamental rights to the pursuit of
strictly construed against the State and liberally in favor of
life and the exercise of his profession; he can freely choose
the accused and Tullett has failed to substantiate its charge
to avail of a better life by seeking greener pastures; and his
of bad faith on her part.16
actions did not fall under any of the prohibited acts under
In her Counter-Affidavit,17 petitioner Schulze denied the
Sections 31 and 34 of the Corporation Code. It is likewise
charges leveled against her. She pointed out that the
his contention that Section 144 of the Corporation Code
Corporation Code is not a „special law‰ within the
applies only to violations of the Corporation Code which do
contemplation of Article 1018 of the Revised Penal Code on
not provide for a penalty while Sections 31 and 34 already
the supplementary application of the Revised Penal Code to
provide for the applicable penalties for violations of said
special laws since
provisions · damages, accounting and restitution. Citing
the Department of Justice (DOJ) Resolution dated July 30,
_______________ Adopting a similar line of reasoning as Schulze, Ient
believed that the Revised Penal Code could not be made
15 Id., at pp. 203-223.
suppletorily applicable to the Corporation Code so as to
16 Id., at pp. 256-273.
charge him as a conspirator. According to Ient, he merely
17 Id., at pp. 308-313.
acted within his rights when he offered job opportunities to
18 Article 10 of the REVISED PENAL CODE STATES:
any interested person as it was within the employeesÊ
Art. 10. Offenses not subject to the provisions of this Code.·Offenses
rights to
which are or in the future may be punishable under special laws are not
subject to the provisions of this Code. This Code shall be supplementary
_______________
to such laws, unless the latter should specially provide the contrary.
19 Rollo (G.R. No. 189158), Vol. I, p. 312.
20 Id.
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VOL. 814, JANUARY 11, 2017 195
said provision purportedly applies only to „special penal Ient vs. Tullett Prebon (Philippines), Inc.
laws.‰ She further argued that „[s]ince the Corporation
Code does not expressly provide that the provisions of the change their employment, especially since Article 23 of the
Revised Penal Code shall be made to apply suppletorily, nor Universal Declaration of Human Rights (of which the
does it adopt the nomenclature of penalties of the Revised Philippines is a signatory) provides that „everyone has the
Penal Code, the provisions of the latter cannot be made to right to work, to free choice of employment, to just and
apply suppletorily to the former as provided for in the first favorable conditions of work and to protection against
sentence of Article 10 of the Revised Penal Code.‰19 Thus, unemployment.‰21 He also denounced the Complaint-
she concluded that a charge of conspiracy which has for its Affidavit and the affidavits of Tullett employees attached
basis Article 8 of the Revised Penal Code cannot be made thereto as self-serving or as an exaggeration/twisting of the
applicable to the provisions of the Corporation Code. true events.22
Schulze also claimed that the resignations of TullettÊs In a Consolidated Reply-Affidavit23 notarized on
employees were done out of their own free will without January 22, 2009, Tullett argued that Villalon, Chuidian,
force, intimidation or pressure on her and IentÊs part and Schulze, and Ient have mostly admitted the acts attributed
were well within said employeesÊ right to „free choice of to them in the Complaint-Affidavit and only attempted to
employment.‰20 characterize said acts as „normal,‰ „innocent‰ or
For his part, petitioner Ient alleged in his Counter- „customary.‰ It was allegedly evident from the Counter-
Affidavit that the charges against him were merely filed to Affidavits that the resignation of TullettÊs employees was
harass Tradition Philippines and prevent it from an orchestrated plan and not simply motivated by their
penetrating the Philippine market. He further asserted seeking „greener pastures.‰ Purported employee
that due to the highly specialized nature of the industry, movements in the industry between the major companies
there has always been a regular flow of brokers between are irrevelant since such movements are subject to
the major players. He claimed that Tradition came to the contractual obligations. Tullett likewise denied that its
Philippines in good faith and with a sincere desire to foster working environment was stringent and „weird.‰ Even
healthy competition with the other brokers. He averred assuming that Villalon and Chuidian were dissatisfied with
that he never forced anyone to join Tradition Philippines their employment in Tullett, this would supposedly not
and the Tullett employeesÊ signing on with Tradition justify nor exempt them from violating their duties as
Philippines was their voluntary act since they were TullettÊs officers/directors. There was purportedly no
discontented with the working environment in Tullett. violation of their constitutional rights to liberty or to
exercise their profession as such rights are not unbridled did was confirm the rumors that the Tradition Group was
and subject to the laws of the State. In the case of Villalon planning to set up a Philippine office. Echoing the
and Chuidian, they had to comply with their duties found arguments of Villalon and Chuidian, Ient claimed that (a)
in Sections 31 and 34 of the Corporation Code. Tullett there could be no violation of Sections 31 and 34 of the
asserts that Section 144 applies to the case at bar since the Corporation as these sections refer to corporate acts or
DOJ Resolution in UCPB is not binding as it applies only to corporate opportunity; (b) Section 144 of the same Code
the parties therein and it likewise involved facts different cannot be applied to Sections 31 and 34 which already
from the present case. Relying on Home contains the penalties or remedies for their violation;
_______________ _______________
21 Id., at p. 323. 24 208 Phil. 359; 123 SCRA 424 (1983).

22 Id., at pp. 314-323. 25 Rollo (G.R. No. 189158), Vol. I, pp. 395-397.
23 Id., at pp. 370-401. 26 Id., at pp. 402-411.
27 Id., at p. 429.
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Ient vs. Tullett Prebon (Philippines), Inc. VOL. 814, JANUARY 11, 2017 197
Insurance Company v. Eastern Shipping Lines,24 Tullett
argued that Section 144 applies to all other violations of and (c) conspiracy under the Revised Penal Code cannot be
the Corporation Code without exception. Article 8 of the applied to the Sections 31 and 34 of the Corporation Code.
Revised Penal Code on conspiracy was allegedly applicable In a Resolution28 dated February 17, 2009, State
to the Corporation Code as a special law with a penal Prosecutor Cresencio F. Delos Trinos, Jr. (Prosecutor Delos
provision.25 Trinos), Acting City Prosecutor of Makati City, dismissed
In a Supplemental Complaint-Affidavit26 likewise the criminal complaints. He reasoned that:
notarized on January 22, 2009, Tullett included Leonard
James Harvey (Harvey) in the case and alleged that it It is our considered view that the acts ascribed [to] respondents
learned of HarveyÊs complicity through the Counter- Villalon and Chuidian did not constitute any of the prohibited acts
Affidavit of Villalon. Tullett claimed that Harvey, who was of directors or trustees enunciated under Section 31. Their cited
Chairman of its Board of Directors at the time material to actuations certainly did not involve voting for or assenting to
the Complaint, also conspired to instigate the resignations patently unlawful acts of [Tullett] nor could the same be construed
of its employees and was an indispensable part of the as gross negligence or bad faith in directing the affairs of [Tullett].
sabotage committed against it. There is also no showing that they acquired any personal or
In his Rejoiner-Affidavit,27 Ient vehemently denied that pecuniary interest in conflict with their duty as directors of
there was a prearranged plan to sabotage Tullett. [Tullett]. Neither was there a showing that they attempted to
According to Ient, Gordon Buchan of Tullett thought too acquire or acquired, in violation of their duty as directors, any
highly of his employer to believe that the Tradition GroupÊs interest adverse to [Tullett] in respect [to] any matter which has
purpose in setting up Tradition Philippines was specifically been reposed in them in confidence.
to sabotage Tullett. He stressed that Tradition Philippines xxxx
was set up for legitimate business purposes and Tullett The issue that respondent Villalon informed the brokers of his
employees who signed with Tradition did so out of their plan to resign from [Tullett] and to subsequently transfer to
own free will and without any force, intimidation, pressure Tradition is not in dispute. However, we are unable to agree that
or inducement on his and SchulzeÊs part. All he allegedly the brokers were induced or coerced into resigning from [Tullett]
and transferring to Tradition themselves. x x x As the record shows, found that since Villalon and Chuidian did not commit any
Mr. Englebert Wee and the six (6) members of the broking staff who acts in violation of Sections 31 and 34 of the Corporation
stand as [Tullett]Ês witnesses, also initially resigned from [Tullett] Code, the charge of conspiracy against Schulze and Ient
and transferred to Tradition but backed out from their contract of had no basis. As for Harvey, said Resolution noted that he
employment with Tradition and opted to remain with [Tullett]. was similarly situated as Villalon and Chuidian; thus, the
Even assuming ex gratia argumenti that the brokers were considerations in the latterÊs favor were applicable to the
induced by the respondents or anyone of them to leave their former.30 Lastly, on
employment with [Tullett], such induce-
_______________
_______________
29 Id., at pp. 467-469.
28 Id., at pp. 455-472. 30 Id., at p. 469.
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198 SUPREME COURT REPORTS ANNOTATED VOL. 814, JANUARY 11, 2017 199
Ient vs. Tullett Prebon (Philippines), Inc. Ient vs. Tullett Prebon (Philippines), Inc.
ment may only give rise to civil liability for damages the applicability of Section 144 to Sections 31 and 34,
against the respondents but no criminal liability would Prosecutor Delos Trinos relied on the reasoning in the DOJ
attach on them. x x x. Resolution dated July 30, 2008 in UCPB v. Antiporda
On the alleged inducements of clients of [Tullett] to issued by then Secretary of Justice Raul M. Gonzalez, to
transfer to Tradition, there is no showing that clients of wit:
[Tullett] actually transferred to Tradition. Also, the
allegation that respondents orchestrated the mass We maintain and reiterate the ratiocination of the Secretary of
resignation of employees of [Tullett] to destroy or shut Justice in United Coconut Planters Bank v. Tirso Antiporda, et al.,
down its business and to eliminate it from the market in I.S. No. 2007-633 promulgated on July 30, 2008, thus · „It must be
order that Tradition could take its place is baseless and noted that Section 144 covers only those provisions Ânot otherwise
speculative. Significantly, it is noted that despite the specifically penalized therein.Ê In plain language, this means that
resignations of respondents Villalon and Chuidian and the the penalties under Section 144 apply only when the other provisions
majority of the broking staff and their subsequent transfer of the Corporation Code do not yet provide penalties for
to Tradition, the business of [Tullet] was not destroyed or noncompliance therewith.‰
shut down. [Tullett] was neither eliminated from the A reading of Sections 31 and 34 shows that penalties for
market nor its place in the market taken by Tradition. x x x violations thereof are already provided therein. Under Section 31,
In the same vein, the „corporate opportunity doctrine‰ directors or trustees are made liable for damages that may result
enunciated under Section 34 does not apply herein and from their fraudulent or illegal acts. Also, directors, trustees or
cannot be rightfully raised against respondents Villalon officers who attempt to acquire or acquire any interest adverse to
and Chuidian. Under Section 34, a director of a corporation the corporation will have to account for the profits which otherwise
is prohibited from competing with the business in which would have accrued to the corporation. Section 34, on the other
his corporation is engaged in as otherwise he would be hand, penalizes directors who would be guilty of disloyalty to the
guilty of disloyalty where profits that he may realize will corporation by accounting to the corporation all profits that they
have to go to the corporate funds except if the disloyal act may realize by refunding the same.31
is ratified. Suffice it to say that their cited acts did not
involve any competition with the business of [Tullett].29
Consequently, Tullett filed a petition for review with the
On the issue of conspiracy, Prosecutor Delos Trinos
Secretary of Justice to assail the foregoing resolution of the
Acting City Prosecutor of Makati City. In a Resolution32 acts complained of in order to transfer to Tradition, to have a higher
dated April 23, 2009, then Secretary of Justice Raul M. salary and position and bring the clients and business of
Gonzalez reversed and set aside Prosecutor Delos TrinosÊs complainant with them. The fact that Tradition is not yet
resolution and directed the latter to file the information for incorporated at that time is of no consequence.
violation of Sections 31 and 34 in relation to Section 144 of Moreover, respondents Villalon and Chuidian violated Section 34
the Corporation Code against Villalon, Chuidian, Harvey, of the Corporation Code when they acquired business opportunity
Schulze, and adverse to that of complainant. When respondents Villalon and
Chuidian told the brokers of complainant to convince their clients to
_______________ trans-
31 Id., at p. 470.
32 Id., at pp. 85-95.
201
VOL. 814, JANUARY 11, 2017 201

200
fer their business to Tradition, the profits of complainant which
Ient vs. Tullett Prebon (Philippines), Inc. rightly belonging to it will be transferred to a competitor company
to be headed by respondents.
Ient before the proper court. As can be gleaned from the The provision of Section 144 of the Corporation Code is also
April 23, 2009 Resolution, the Secretary of Justice ruled applicable in the case at bar as the penal provision provided therein
that: is made applicable to all violations of the Corporation Code, not
otherwise specifically penalized. Moreover, the factual milieu of the
It is evident from the case at bar that there is probable cause to
case entitled „Antiporda, et al., IS No. 2007-633‰ is inapplicable as
indict respondents Villalon, Chuidian and Harvey for violating
the facts of the above entitled case is different.
Section 31 of the Corporation Code. Indeed, there is prima facie
xxxx
evidence to show that the said respondents acted in bad faith in
As for respondent HarveyÊs probable indictment, aside from not
directing the affairs of complainant. Undeniably, respondents
submitting his counter-affidavit, the counter-affidavit of respondent
Villalon, Chuidian and Harvey occupied positions of high
Villalon showed that he is also liable as such since the idea to
responsibility and great trust as they were members of the board of
transfer the employment of complainantÊs brokers was broached by
directors and corporate officers of complainant. x x x As such, they
him.
are required to administer the corporate affairs of complainant for
Anent respondents Ient and Schulze, record revealed that they
the welfare and benefit of the stockholders and to exercise the best
conspired with respondents Villalon and Chuidian when they
care, skill and judgment in the management of the corporate
actively participated in the acts complained of. They presented the
business and act solely for the interest of the corporation.
employment contracts and indemnity agreements with the brokers
xxxx
of complainant in a series of meetings held with respondents
Respondents Villalon and Chuidian acted with dishonesty and in
Villalon and Chuidian. Respondent Ient signed the contracts as
fraud. They went to the extent of having their several meetings
CFO of Tradition Asia and even confirmed the transfer of
away from complainantÊs office so as to secretly entice and induce
respondent Villalon to Tradition. Respondent Schulze admitted that
all its brokers to transfer to Tradition. Respondents Villalon and
the purpose of her sojourn in the Philippines was to assist in the
Chuidian did not entice merely one or two employees of
formation of Tradition. Thus, it is clear that their role in the acts
complainant but admittedly, the entire broking staff of the latter.
complained of were instrumental for respondents Villalon and
This act would lead to the sure collapse of complainant. x x x.
Chuidian to violate their duties and responsibilities as directors and
Further, respondents Villalon and Chuidian acquired personal
officers of complainant.33
and pecuniary interest in conflict with their duties as directors of
complainant. Respondents Villalon and Chuidian committed the
Ient and Schulze moved for reconsideration of the „A director, holding as he does a position of trust, is a
foregoing Resolution by the Secretary of Justice. fiduciary of the corporation. As such, in case of conflict of his
Meanwhile, on May 14, 2009, two Informations, one for interest with those of the corporation, he cannot sacrifice the
violation of Section 31 and another for violation of Section latter without incurring liability for his disloyal act. The
34, were filed by Prosecutor fiduciary duty has many
_______________
33 Id., at pp. 91-93.

203
VOL. 814, JANUARY 11, 2017 203

202 Ient vs. Tullett Prebon (Philippines), Inc.
202 SUPREME COURT REPORTS ANNOTATED ramifications, and the possible conflict-of-interest
situations are almost limitless, each possibility posing
Ient vs. Tullett Prebon (Philippines), Inc. different problems. There will be cases where a breach of
trust is clear. Thus, where a director converts for his own use
Delos Trinos with the Metropolitan Trial Court of Makati funds or property belonging to the corporation, or accepts
City. In a Resolution dated May 15, 2009, the Secretary of material benefits for exercising his powers in favor of
Justice denied the motion for reconsideration filed by someone seeking to do business with the corporation, no court
petitioners. Unsatisfied with this turn of events, petitioners will allow him to keep the profit he derives from his
Ient and Schulze brought the matter to the Court of wrongdoing. In many other cases, however, the line of
Appeals via a petition for certiorari under Rule 65 which demarcation between the fiduciary relationship and a
was docketed as C.A.-G.R. S.P. No. 109094. directorÊs personal right is not easy to define. The Code has
In a Decision dated August 12, 2009, the Court of attempted at least to lay down general rules of conduct
Appeals affirmed the Secretary of JusticeÊs Resolutions and although these serve as guidelines for directors to
dated April 23, 2009 and May 15, 2009, after holding that: follow, the determination as to whether in a given case
the duty of loyalty has been violated has ultimately to
Respondent Secretary correctly stressed that Sections 31 and 34
be decided by the court on the caseÊs own merits.‰ x x x.
must be read in the light of the nature of the position of a director
Prescinding from the above, We agree with the Secretary of
and officer of the corporation as highly imbued with trust and
Justice that the acts complained of in this case establish a prima
confidence. PetitionersÊ rigid interpretation of clear-cut instances of
facie case for violation of Sec. 31 such that the accused directors and
liability serves only to undermine the values of loyalty, honesty and
officers of private respondent corporation are probably guilty of
fairness in managing the affairs of the corporation, which the law
breach of bad faith in directing the affairs of the corporation. The
vested on their position. Besides, this Court can hardly deduce
breach of fiduciary duty as such director and corporate office (sic)
abuse of discretion on the part of respondent Secretary in
are evident from their participation in recruiting the brokers
considering a conflict of interest scenario from petitionersÊ act of
employed in the corporation, inducing them to accept employment
advancing the interest of an emerging competitor in the field rather
contracts with the newly formed firm engaged in competing
than fiercely protecting the business of their own company. As aptly
business, and securing these new hires against possible breach of
pointed out by the private respondent, the issue is not the right of
contract complaint by the corporation through indemnity contracts
the employee brokers to seek greener pastures or better
provided by Tradition Philippines. Clearly, no grave abuse of
employment opportunities but the breach of fiduciary duty owed by
discretion was committed by the respondent Secretary in reversing
its directors and officers.
the city prosecutorÊs dismissal of the criminal complaint and
In the commentary on the subject of duties of directors and
ordering the filingof the cor-
controlling stockholders under the Corporation Code, Campos
explained:
Fiduciary Duties; Conflict of Interest
204 hearing, be dissolved in appropriate proceedings before the
Securities and Exchange Commission; Provided, That such
dissolution shall not preclude the institution of appropriate
action against the director, trustee or officer of the
Ient vs. Tullett Prebon (Philippines), Inc. corporation responsible for the said violation; Provided,
further, That nothing in this section shall be construed to
responding information against the accused, including herein repeal the other causes for dissolution of a corporation
petitioners. provided in this Code.‰ x x x.
As to petitionersÊ contention that conspiracy had not been „Damages‰ as the term is used in Sec. 31 cannot be deemed as
established by the evidence, suffice it to state that such stance is punishment or penalty as this appears in the above cited criminal
belied by their own admission of the very acts complained of in the provision of the Corporation Code. Such „damage‰ implies civil,
Complaint-Affidavit, the defense put up by them consists merely in rather than, criminal liability and hence does not fall under those
their common argument that no crime was committed because provisions of the Code which are not „specifically penalized‰ with
private respondentÊs brokers had the right to resign and transfer fine or imprisonment.34
employment if they so decide.
It bears to reiterate that probable cause is such set of facts and
circumstances which would lead a reasonably discreet and prudent In light of the adverse ruling of the Court of Appeals,
man to believe that the offense charged in the Information or any petitioners Ient and Schulze filed separate petitions for
offense included therein has been committed by the person sought review with this Court. After requiring further pleadings
to be arrested. In determining probable cause, the average man from the parties, the Court directed the parties to submit
weighs the facts and circumstances without resorting to the their memoranda to consolidate their positions on the
calibrations of the rules of evidence of which he has no technical issues.
knowledge. He relies on common sense. Thus, a finding of probable At the outset, it should be noted that respondent Tullett
cause does not require an inquiry into whether there is sufficient interposed several procedural objections which we shall
evidence to procure a conviction. It is enough that it is believed that dispose of first.
the act or omission complained of constitutes the offense charged. Anent respondentÊs contentions that the present
Precisely, there is a trial for the reception of evidence of the petitions (assailing the issuances of the Secretary of Justice
prosecution in support of the charge. on the question of probable cause) had become moot and
Finally, the Court finds no merit in the argument of petitioners academic with the filing of the Informations in the trial
that Sec. 144 is not applicable since Sec. 31 already provides for court and that under our ruling in Advincula v. Court of
liability for damages against the guilty director or corporate officer. Appeals35 the filing of a petition for certiorari with the
„SEC. 144. Violations of the Code.·Violations of any of appellate court was the improper remedy as findings of the
the provisions of this Code or its amendments not Secretary of Justice on
otherwise specifically penalized therein shall be
punished by a fine of not less than one thousand (P1,000.00) _______________
pesos but not more than ten thousand (P10,000.00) pesos or
34 Id., at pp. 81-83.
by imprisonment for not less than thirty (30) days but not
35 397 Phil. 641; 343 SCRA 583 (2000).
more than five (5) years, or both, in the discretion of the
court. If the violation is committed by a corporation, the same
may, after notice and
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205 206 SUPREME COURT REPORTS ANNOTATED

VOL. 814, JANUARY 11, 2017 205
Ient vs. Tullett Prebon (Philippines), Inc. probable cause must be respected, we hold that these cited
rules are not inflexible. ing a case.39 The Court will not hesitate to resolve the legal
In Yambot v. Tuquero,36 we observed that under and constitutional issues raised to formulate controlling
exceptional circumstances, a petition for certiorari principles to guide the bench, the bar, and the public,
assailing the resolution of the Secretary of Justice particularly on a question capable of repetition, yet evading
(involving an appeal of the prosecutorÊs ruling on probable review.40
cause) may be allowed, notwithstanding the filing of an As for the assertion that the present petitions are
information with the trial court. We reiterated the doctrine dismissible due to forum shopping since they were filed
in Ching v. Secretary of Justice37 that the acts of a quasi- during the pendency of petitionersÊ motion to quash and
judicial officer may be assailed by the aggrieved party their co-accusedÊs motion for judicial determination of
through a petition for certiorari and enjoined (a) when probable cause with the trial court, we hold that there is no
necessary to afford adequate protection to the cause to dismiss these petitions on such ground.
constitutional rights of the accused; (b) when necessary for Forum shopping is an act of a party, against whom an
the orderly administration of justice; (c) when the acts of adverse judgment or order has been rendered in one forum,
the officer are without or in excess of authority; (d) where of seeking and possibly getting a favorable opinion in
the charges are manifestly false and motivated by the lust another forum, other than by appeal or special civil
for vengeance; and (e) when there is clearly no prima facie action for certiorari. It may also involve the institution
case against the accused. of two or more actions or proceedings grounded on the same
In the case at bar, it is unsettling to perceive a seeming cause on the supposition that one or the other court would
lack of uniformity in the rulings of the Secretary of Justice make a favorable disposition.41 There is no forum shopping
on the issue of whether a violation of Section 31 entails where the suits involve different causes of action or
criminal or only civil liability and such divergent actions different reliefs.42
are explained with a terse declaration of an alleged Jurisprudence explains that:
difference in factual milieu and nothing further. Such a
state of affairs is not only offensive to principles of fair play A motion to quash is the mode by which an accused assails,
but also anathema to the orderly administration of justice. before entering his plea, the validity of the criminal complaint or
Indeed, we have held that where the action of the Secretary the criminal information filed against him for insufficiency on its
of Justice is tainted with arbitrariness, an aggrieved party face in point of law, or for defect apparent on the face of the
may seek judicial review via certiorari on the ground of Information. The motion, as a rule, hypothetically admits the truth
grave abuse of discretion.38 of the facts spelled out in the complaint or information. The rules
We likewise cannot give credit to respondentÊs claim of governing a motion to quash are found under Rule 117 of the
mootness. The „moot and academic‰ principle is not a Revised Rules of Court. Section 3 of this Rule enu-
magical formula that can automatically dissuade the courts
in resolv- _______________
39 Funa v. Villar, 686 Phil. 571, 583; 670 SCRA 579, 592 (2012).
_______________
40 Deutsche Bank AG v. Court of Appeals, 683 Phil. 80, 88; 667 SCRA
36 661 Phil. 599, 606; 646 SCRA 249, 256 (2011). 82, 91 (2012).
37 517 Phil. 151, 170; 481 SCRA 609, 628 (2006). 41 People v. Grey, 639 Phil. 535, 545; 625 SCRA 523, 532 (2010).
38 Ty v. De Jemil, 653 Phil. 356, 369; 638 SCRA 671, 685 (2010). 42 Chavez v. Court of Appeals, 624 Phil. 396, 400; 610 SCRA 399, 403
(2010).
207
208
VOL. 814, JANUARY 11, 2017 207

merates the grounds for the quashal of a complaint or a petition, the strict application of the rules of procedure
information. x x x.43 (Citation omitted) may be relaxed.47 This is particularly true in these
On the other hand, the action at bar is a review on consolidated cases where legal issues of first impression
certiorari of the assailed Court of Appeals decision wherein have been raised.
the main issue is whether or not the Secretary of Justice We now proceed to rule upon the partiesÊ substantive
committed grave abuse of discretion in reversing the City arguments.
ProsecutorÊs dismissal of the criminal complaint. These The main bone of disagreement among the parties in
consolidated petitions may proceed regardless of whether this case is the applicability of Section 144 of the
or not there are grounds to quash the criminal information Corporation Code to Sections 31 and 34 of the same statute
pending in the court a quo. such that criminal liability attaches to violations of
Neither do we find relevant the pendency of petitionersÊ Sections 31 and 34. For convenient reference, we quote the
co-accusedÊs motion for judicial determination of probable contentious provisions here:
cause before the trial court. The several accused in these
consolidated cases had a number of remedies available to SECTION 31. Liability of Directors, Trustees or Officers.·
them and they are each free to pursue the remedy which Directors or trustees who willfully and knowingly vote for or assent
they deem is their best option. Certainly, there is no to patently unlawful acts of the corporation or who are guilty of
requirement that the different parties in a case must all gross negligence or bad faith in directing the affairs of the
choose the same remedy. We have held that even assuming corporation or acquire any personal or pecuniary interest in conflict
separate actions have been filed by different parties with their duty as such directors or trustees shall be liable jointly
involving essentially the same subject matter, no forum and severally for all damages resulting therefrom suffered by the
shopping is committed where the parties did not resort to corporation, its stockholders or members and other persons.
multiple judicial remedies.44 In any event, we have stated When a director, trustee or officer attempts to acquire or
in the past that the rules on forum shopping are not always acquires, in violation of his duty, any interest adverse to the
applied with inflexibility.45 corporation in respect of any matter which has been reposed in him
As a final point on the technical aspects of this case, we in confidence, as to which equity imposes a disability upon him to
reiterate here the principle that in the exercise of the deal in his own behalf, he shall be liable as a trustee for the
Courts equity jurisdiction, procedural lapses may be corporation and must account for the profits which otherwise would
disregarded so have accrued to the corporation.
_______________ _______________
43 Los Baños v. Pedro, 604 Phil. 215, 227-228; 586 SCRA 303, 314 46 Superlines Transportation Company, Inc. v. Philippine National
(2009). Construction Company, 548 Phil. 354, 362; 519 SCRA 432, 442 (2007).
44 Development Bank of the Philippines v. Court of Appeals, 526 Phil. 47 Victorio-Aquino v. Pacific Plans, Inc., G.R. No. 193108, December
525, 548-549; 494 SCRA 25, 51 (2006). 10, 2014, 744 SCRA 480, 499.
45 London v. Baguio Country Club Corporation, 439 Phil. 487, 492;
390 SCRA 618, 622 (2002).
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209 210 SUPREME COURT REPORTS ANNOTATED

VOL. 814, JANUARY 11, 2017 209
Ient vs. Tullett Prebon (Philippines), Inc. SECTION 34. Disloyalty of a Director.·Where a director, by
virtue of his office, acquires for himself a business opportunity
that a case may be resolved on its merits.46 Indeed where which should belong to the corporation, thereby obtaining profits to
strong considerations of substantive justice are manifest in the prejudice of such corporation, he must account to the latter for
all such profits by refunding the same, unless his act has been interpretation of criminal laws, all must be resolved in
ratified by a vote of the stockholders owning or representing at least favor of the accused. Since penal laws should not be applied
two-thirds (2/3) of the outstanding capital stock. This provision mechanically, the Court must determine whether their
shall be applicable, notwithstanding the fact that the director application is consistent with the purpose and reason of the
risked his own funds in the venture. law.‰48
SECTION 144. Violations of the Code.·Violations of any of the Intimately related to the in dubio pro reo49 principle is
provisions of this Code or its amendments not otherwise specifically the rule of lenity. The rule applies when the court is faced
penalized therein shall be punished by a fine of not less than one with two possible interpretations of a penal statute, one
thousand (P1,000.00) pesos but not more than ten thousand that is prejudicial to the accused and another that is
(P10,000.00) pesos or by imprisonment for not less than thirty (30) favorable to him. The rule calls for the adoption of an
days but not more than five (5) years, or both, in the discretion of interpretation which is more lenient to the accused.50
the court. If the violation is committed by a corporation, the same In American jurisprudence, there are two schools of
may, after notice and hearing, be dissolved in appropriate thought regarding the application of the rule of lenity.
proceedings before the Securities and Exchange Commission: Justice David Souter, writing for the majority in United
Provided, That such dissolution shall not preclude the institution of States v. R.L.C.,51 refused to resort to the rule and held
appropriate action against the director, trustee or officer of the that lenity is reserved „for those situations in which a
corporation responsible for said violation: Provided, further, That reasonable doubt persists about a statuteÊs intended scope
nothing in this section shall be construed to repeal the other causes even after resort to Âthe language and structure, legislative
for dissolution of a corporation provided in this Code. history, and motivating policiesÊ of the statute.‰ Justice
Antonin Scalia, although concurring in part and concurring
in the judgment, argued that „it is not consistent with the
Petitioners posit that Section 144 only applies to the rule of lenity to construe a textually ambiguous penal
provisions of the Corporation Code or its amendments „not statute against a criminal defen-
otherwise specifically penalized‰ by said statute and should
not cover Sections 31 and 34 which both prescribe the
_______________
„penalties‰ for their violation; namely, damages, accounting
and restitution of profits. On the other hand, respondent 48 People v. Valdez, G.R. Nos. 216007-09, December 8, 2015, 776
and the appellate court have taken the position that the SCRA 672, 694.
term „penalized‰ under Section 144 should be interpreted 49 This Latin legal maxim translates into „when in doubt, [rule] for
as referring to criminal penalty, such as fine or the accused.‰
imprisonment, and that it could not possibly contemplate 50 Intestate Estate of Manolita Gonzales Vda. de Carungcong v.
„civil‰ penalties such as damages, accounting or restitution. People, 626 Phil. 177, 200; 612 SCRA 272, 289 (2010).
51 503 U.S. 291, 305-308 (1992).
211
212
VOL. 814, JANUARY 11, 2017 211
As Section 144 speaks, among others, of the imposition
of criminal penalties, the Court is guided by the elementary
rules of statutory construction of penal provisions. First, in dant on the basis of legislative history. . . The rule of lenity,
all criminal prosecutions, the existence of criminal liability in my view, prescribes the result when a criminal statute is
for which the accused is made answerable must be clear ambiguous: The more lenient interpretation must
and certain. We have consistently held that „penal statutes prevail.‰52 In other words, for Justice Scalia, textual
are construed strictly against the State and liberally in ambiguity in a penal statute suffices for the rule of lenity to
favor of the accused. When there is doubt on the be applied. Although foreign case law is merely persuasive
authority and this Court is not bound by either legal It is respondentÊs opinion that the penal clause in Section
perspective expounded in United States v. R.L.C., said case 144 should receive similar treatment and be deemed
provides a useful framework in our own examination of the applicable to any violation of the Corporation Code. The
scope and application of Section 144. Court cannot accept this proposition for there are weighty
After a meticulous consideration of the arguments reasons to distinguish this case from Romualdez.
presented by both sides, the Court comes to the conclusion We find it apropos to quote Sections 45 and 46 of
that there is textual ambiguity in Section 144; moreover, Republic Act No. 8189 here:
such ambiguity remains even after an examination of its
legislative history and the use of other aids to statutory SECTION 45. Election Offense.·The following shall be
construction, necessitating the application of the rule of considered election offenses under this Act:
lenity in the case at bar. a) to deliver, hand over, entrust or give, directly or indirectly, his
Respondent urges this Court to strictly construe Section voterÊs identification card to another in consideration of money or
144 as contemplating only penal penalties. However, a other benefit or promise; or take or accept such voterÊs identification
perusal of Section 144 shows that it is not a purely penal card, directly or indirectly, by giving or causing the giving of money
provision. When it is a corporation that commits a violation or other benefit or making or causing the making of a promise
of the Corporation Code, it may be dissolved in appropriate therefor;
proceedings before the Securities and Exchange b) to fail, without cause, to post or give any of the notices or to
Commission. The involuntary dissolution of an erring make any of the reports required under this Act;
corporation is not imposed as a criminal sanction,53 but c) to issue or cause the issuance of a voterÊs identification
rather it is an administrative penalty. number to cancel or cause the cancellation thereof in violation of
The ambivalence in the language of Section 144 becomes the provisions of this Act; or to refuse the issuance of registered
more readily apparent in comparison to the penal voters their voterÊs identification card;
provision54
_______________
_______________
ciples have not been specifically dealt with in jurisprudence, it is neither
52 Id., at pp. 307-308. necessary nor practical to analyze and discuss here the variances in
53 Criminal penalties are generally understood to be limited to wording or syntax of every penal/penalty provision in our jurisdiction.
imprisonment or a fine. In Article 25 of the Revised Penal Code, The validity, scope and application of each penal/
penalties for lighter crimes may include suspension, destierro, public penalty provision should be raised and decided in the proper case.
censure and a bond to keep the peace. 55 576 Phil. 357; 553 SCRA 370 (2008).
54 We are aware of the existence of other penal/penalty provisions in
various civil statutes. However, as the constitutionality and proper
interpretation of these provisions vis-à-vis criminal law prin-
214

213
VOL. 814, JANUARY 11, 2017 213 d) to accept an appointment, to assume office and to actually
Ient vs. Tullett Prebon (Philippines), Inc. serve as a member of the Election Registration Board although
ineligible thereto; to appoint such ineligible person knowing him to
in Republic Act No. 8189 (The VoterÊs Registration Act of be ineligible;
1996), which was the subject of our decision in Romualdez e) to interfere with, impede, abscond for purposes of gain or to
v. Commission on Elections.55 In that case, we upheld the prevent the installation or use of computers and devices and the
constitutionality of Section 45(j) of Republic Act No. 8189 processing, storage, generation and transmission of registration
which made any violation of said statute a criminal offense. data or information;
f) to gain, cause access to, use, alter, destroy, or disclose any not doubt that Section 46 contemplates the term „penalty‰
computer data, program, system software, network, or any primarily in the criminal law or punitive concept of the
computer related devices, facilities, hardware or equipment, term.
whether classified or declassified; There is no provision in the Corporation Code using
g) failure to provide certified voters and deactivated voters list to similarly emphatic language that evinces a categorical
candidates and heads or representatives of political parties upon legislative intent to treat as a criminal offense each and
written request as provided in Section 30 hereof; every violation of that law. Consequently, there is no
h) failure to include the approved application form for compelling reason for the Court to construe Section 144 as
registration of a qualified voter in the book of voters of a particular similarly employing the term „penalized‰ or „penalty‰
precinct or the omission of the name of a duly registered voter in solely in terms of criminal liability.
the certified list of voters of the precinct where he is duly registered In People v. Temporada,56 we held that in interpreting
resulting in his failure to cast his vote during an election, plebiscite, penal laws, „words are given their ordinary meaning and
referendum, initiative and/or recall. The presence of the form or that any reasonable doubt about the meaning is decided in
name in the book of voters or certified list of voters in precincts favor of anyone subjected to a criminal statute.‰ BlackÊs
other than where he is duly registered shall not be an excuse Law Dictionary recognizes the numerous conceptions of the
hereof; term penalty and discusses in part that it is „[a]n elastic
i) The posting of a list of voters outside or at the door of a term with many different shades of meaning; it involves
precinct on the day of an election, plebiscite, referendum, initiative idea of punishment, corporeal or pecuniary, or civil or
and/or recall and which list is different in contents from the criminal, although its meaning is generally confined to
certified list of voters being used by the Board of Election pecuniary punishment.‰57 Persuasively, in Smith v. Doe,58
Inspectors; and the U.S. Supreme Court,
j) Violation of any of the provisions of this Act.
SECTION 46. Penalties.·Any person found guilty of any _______________
Election offense under this Act shall be punished with
imprisonment of not less than one (1) year but not more than six (6) 56 594 Phil. 680, 739; 574 SCRA 258, 307 (2008).
years and shall not be subject to probation. In addition, the guilty 57 BlackÊs Law Dictionary, 6th edition, p. 1133 (1990).
party shall be sentenced to suffer disqualification to hold public 58 Smith v. Doe, 538 U.S. 84, 94-95 (2003), citing U.S. v. One
office and depriva- Assortment of 89 Firearms, 465 U.S. 354, 364-365, 104 S.Ct. 1099 (1984).
215 216
VOL. 814, JANUARY 11, 2017 215 216 SUPREME COURT REPORTS ANNOTATED
Ient vs. Tullett Prebon (Philippines), Inc. Ient vs. Tullett Prebon (Philippines), Inc.
tion of the right of suffrage. If he is a foreigner, he shall be deported interpreting a statutory provision that covers both punitive
after the prison term has been served. Any political party found and nonpunitive provisions, held that:
guilty shall be sentenced to pay a fine of not less than One hundred
The location and labels of a statutory provision do not by
thousand pesos (P100,000) but not more than Five hundred
themselves transform a civil remedy into a criminal one. In 89
thousand pesos (P500,000).
Firearms, the Court held a forfeiture provision to be a civil sanction
even though the authorizing statute was in the criminal code. The
The crux of the CourtÊs ruling in Romualdez is that, from Court rejected the argument that the placement demonstrated
the wording of Section 450(j), there is a clear legislative CongressÊ „intention to create an additional criminal sanction,‰
intent to treat as an election offense any violation of the observing that „both criminal and civil sanctions may be
provisions of Republic Act No. 8189. For this reason, we do labeled Âpenalties.Ê‰ (Emphasis supplied)
director or officer of a corporation consenting to the
Giving a broad and flexible interpretation to the term issuance of stocks for a consideration less than its par or
„penalized‰ in Section 144 only has utility if there are issued value or for a consideration in any form other than
provisions in the Corporation Code that specify cash, valued in excess of its fair value, or who, having
consequences other than „penal‰ or „criminal‰ for violation knowledge thereof, does not forthwith express his objection in
of, or noncompliance with, the tenets of the Code. writing and file the same with the corporate secretary, shall be
Petitioners point to the civil liability prescribed in Sections solidarily liable with the stockholder concerned to the
31 and 34. Aside from Sections 31 and 34, we consider corporation and its creditors for the difference between the
these provisions of interest: fair value received at the time of issuance of the stock and
the par or issued value of the same.
SECTION 21. Corporation by Estoppel.·All persons who SECTION 66. Interest on unpaid subscriptions.·Subscribers
assume to act as a corporation knowing it to be without for stock shall pay to the corporation interest on all unpaid
authority to do so shall be liable as general partners for all subscriptions from the date of subscription, if so required by, and
debts, liabilities and damages incurred or arising as a result at the rate of interest fixed in, the bylaws. If no rate of interest is
thereof: Provided, however, That when any such ostensible fixed in the bylaws, such rate shall be deemed to be the legal rate.
corporation is sued on any transaction entered by it as a corporation SECTION 67. Payment of balance of subscription.·Subject to
or on any tort committed by it as such, it shall not be allowed to use the provisions of the contract of subscription, the board of directors
as a defense its lack of corporate personality. of any stock corporation may at any time declare due and payable to
One who assumes an obligation to an ostensible corporation as the corporation unpaid subscriptions to the capital stock and may
such, cannot resist performance thereof on the ground that there collect the same or such percentage of said unpaid sub-
was in fact no corporation.
SECTION 22. Effects of nonuse of corporate charter and
continuous in operation of a corporation.·If a corporation does
not formally organize and commence the transaction of its
business or the construction of its works within two (2) 218
years from the

scriptions, in either case with interest accrued, if any, as it may

217 deem necessary.
Payment of any unpaid subscription or any percentage thereof,
VOL. 814, JANUARY 11, 2017 217 together with the interest accrued, if any, shall be made on the date
specified in the contract of subscription or on the date stated in the
call made by the board. Failure to pay on such date shall
render the entire balance due and payable and shall make
date of its incorporation, its corporate powers cease and the the stockholder liable for interest at the legal rate on such
corporation shall be deemed dissolved. However, if a balance, unless a different rate of interest is provided in the
corporation has commenced the transaction of its business but bylaws, computed from such date until full payment. If
subsequently becomes continuously inoperative for a period of at within thirty (30) days from the said date no payment is made, all
least five (5) years, the same shall be a ground for the suspension or stocks covered by said subscription shall thereupon become
revocation of its corporate franchise or certificate of incorporation. delinquent and shall be subject to sale as hereinafter provided,
This provision shall not apply if the failure to organize, unless the board of directors orders otherwise.
commence the transaction of its business or the construction of its SECTION 74. Books to be kept; stock transfer agent.·Every
works, or to continuously operate is due to causes beyond the corporation shall, at its principal office, keep and carefully preserve
control of the corporation as may be determined by the Securities a record of all business transactions, and minutes of all meetings of
and Exchange Commission. stockholders or members, or of the board of directors or trustees, in
SECTION 65. Liability of directors for watered stocks.·Any which shall be set forth in detail the time and place of holding the
meeting, how authorized, the notice given, whether the meeting the bylaws may prescribe. The stock and transfer book shall be kept
was regular or special, if special its object, those present and in the principal office of the corporation or in the office of its stock
absent, and every act done or ordered done at the meeting. Upon transfer agent and shall be open for inspection of any director or
the demand of any director, trustee, stockholder or member, the stockholder of the corporation at reasonable hours on business days.
time when any director, trustee, stockholder or member entered or No stock transfer agent or one engaged principally in the
left the meeting must be noted in the minutes; and on a similar business of registering transfer of stocks in behalf of a stock
demand, the yeas and nays must be taken on any motion or corporation shall be allowed to operate in the Philippines unless he
proposition, and a record thereof carefully made. The protest of any secures a license from the Securities and Exchange Commission
director, trustee, stockholder or member on any action or proposed and pays a fee as may be fixed by the Commission, which shall be
action must be recorded in full on his demand. renewed annu-
The records of all business transactions of the corporation and
the minutes of any meeting shall be open to the inspection of any
director, trustee, stockholder or member of the corporation at
reasonable hours on business days and he may demand, in writing,
220
for a copy of excerpts from said records or minutes, at his expense.

219
ally: Provided, That a stock corporation is not precluded from
performing or making transfer of its own stocks, in which case all
VOL. 814, JANUARY 11, 2017 219
the rules and regulations imposed on stock transfer agents, except
Ient vs. Tullett Prebon (Philippines), Inc. the payment of a license fee herein provided, shall be applicable.
Any officer or agent of the corporation who shall refuse to

allow any director, trustee, stockholder or member of the Section 22 imposes the penalty of involuntary
corporation to examine and copy excerpts from its records dissolution for nonuse of corporate charter. The rest of the
or minutes, in accordance with the provisions of this Code, above quoted provisions, like Sections 31 and 34, provide
shall be liable to such director, trustee, stockholder or for civil or pecuniary liabilities for the acts covered therein
member for damages, and in addition, shall be guilty of an but what is significant is the fact that, of all these
offense which shall be punishable under Section 144 of this provisions that provide for consequences other than penal,
Code: Provided, That if such refusal is pursuant to a resolution or only Section 74 expressly states that a violation thereof is
order of the board of directors or trustees, the liability under this likewise considered an offense under Section 144. If
section for such action shall be imposed upon the directors or respondent and the Court of Appeals are correct, that
trustees who voted for such refusal: and Provided, further, That it Section 144 automatically imposes penal sanctions on
shall be a defense to any action under this section that the person violations of provisions for which no criminal penalty was
demanding to examine and copy excerpts from the corporationÊs imposed, then such language in Section 74 defining a
records and minutes has improperly used any information secured violation thereof as an offense would have been
through any prior examination of the records or minutes of such superfluous. There would be no need for legislators to
corporation or of any other corporation, or was not acting in good clarify that, aside from civil liability, violators of Section 74
faith or for a legitimate purpose in making his demand. are exposed to criminal liability as well. We agree with
Stock corporations must also keep a book to be known as the petitioners that the lack of specific language imposing
„stock and transfer book,‰ in which must be kept a record of all criminal liability in Sections 31 and 34 shows legislative
stocks in the names of the stockholders alphabetically arranged; the intent to limit the consequences of their violation to the
installments paid and unpaid on all stock for which subscription civil liabilities mentioned therein. Had it been the intention
has been made, and the date of payment of any installment; a of the drafters of the law to define Sections 31 and 34 as
statement of every alienation, sale or transfer of stock made, the offenses, they could have easily included similar language
date thereof, and by and to whom made; and such other entries as as that found in Section 74.
If we were to employ the same line of reasoning as the directors or the trustees who willfully and knowingly vote
majority in United States v. R.L.C., would the apparent for or assent to patently unlawful act or guilty of gross
ambiguities in the text of the Corporation Code disappear negligence or bad faith in directing the affairs of the
with an analysis of said statuteÊs legislative history as to corporation would be solidarily liable with the officers
warrant a strict interpretation of its provisions? The concerned.
answer is a negative.
In his sponsorship speech of Cabinet Bill (C.B.) No. 3 _______________
(the bill that was enacted into the Corporation Code), then
Minister Estelito Mendoza highlighted Sections 31 to 34 as 59 Rollo (G.R. No. 189158), Vol. I, p. 1454. Records of Batasan (R.B.),
among November 5, 1979, p. 1214.
221
222
VOL. 814, JANUARY 11, 2017 221

the significant innovations made to the previous statute

Now, would this, Your Honor, not discourage the serving of
(Act 1459 or the Corporation Law), thusly:
competent people as members of the Board of Directors,
There is a lot of jurisprudence on the liability of directors, considering that they might feel that in the event things
trustees or officers for breach of trust or acts of disloyalty to the would do badly against the corporation, they might be held
corporation. Such jurisprudence is not, of course, without any liable personally for acts which should be attributed only to the
ambiguity of dissent. Sections 31, 32, 33 and 34 of the code indicate corporation?
in detail prohibited acts in this area as well as consequences of the MR. MENDOZA. Your Honor will note that the directors or
performance of such acts or failure to perform or discharge the trustees who are held liable must be proven to have acted willfully
responsibility to direct the affairs of the corporation with utmost and knowingly, or if not willfully and knowingly, it must be proven
fidelity.59 that they acted with gross negligence or bad faith. It must also be
demonstrated that the acts done were patently unlawful. So, the
requirement for liability is somewhat serious to the point of, in my
Alternatively stated, Sections 31 to 34 were introduced opinion, being extreme. It will be noted that this provision does not
into the Corporation Code to define what acts are covered, merely require assenting to patently unlawful acts. It does not
as well as the consequences of such acts or omissions merely require being negligent. The provision requires that they
amounting to a failure to fulfill a directorÊs or corporate assent to patently unlawful acts willfully and with knowledge of the
officerÊs fiduciary duties to the corporation. A closer look at illegality of the act.
the subsequent deliberations on C.B. No. 3, particularly in Now, it might be true, as Your Honor suggested, that some
relation to Sections 31 and 34, would show that the persons will be discouraged or disinclined to agree to serve the
discussions focused on the civil liabilities or consequences Board of Directors because of this liability. But at the same time
prescribed in said provisions themselves. We quote the this provision · Section 31 · is really no more than a
pertinent portions of the legislative records: consequence of the requirement that the position of
membership in the Board of Directors is a position of high
On Section 31 responsibility and great trust. Unless a provision such as this is
included, then that requirement of responsibility and trust will not
(Period of Sponsorship, December 4, 1979 Session)
be as meaningful as it should be. For after all, directors may take
the attitude that unless they themselves commit the act, they would
MR. LEGASPI. x x x.
not be liable. But the responsibility of a director is not merely to act
properly. The responsibility of a director is to assure that the Board
In Section 31 page 22, it seems that the proviso is to make the
of Directors, which means his colleagues acting together, does not May I go now to page 24, Section 34.
act in a manner that is unlawful or to the prejudice of the
corporation because of personal or pecuniary interest of the _______________
directors.60 (Emphases supplied)
61 Id., at pp. 1563-1564; R.B., March 11, 1980, pp. 2349-2350.
_______________
60 Id., at p. 1480; R.B., December 4, 1979, p. 1614.
224

223
VOL. 814, JANUARY 11, 2017 223

„Disloyalty of a Director · Where a director by virtue of his
Ient vs. Tullett Prebon (Philippines), Inc. office acquires for himself a business opportunity which should
belong to the corporation thereby obtaining profits to the prejudice
(Period of Amendments, March 11, 1980 Session) of the corporation, he must account to the latter for all such profits,
unless his act has been ratified by a vote of the stockholders owning
MR. MILLORA. On line 16, Section 31, referring to the phrase or representing at least two-thirds (2/3) of the outstanding capital
„patently unlawful acts.‰ Before I introduce my proposed stock. This provision shall be applicable notwithstanding the fact
amendment to delete the word „patentlyÊÊ is there a reason for that the director risked his own funds in the venture.‰
placing this adjective before the word „unlawful,‰ Your Honor? My question, Your Honor, is: is this not the so-called
MR. ABELLO. Probably the one who prepared this original draft corporate opportunity doctrine found in the American
of Cabinet Bill No. 3 wanted to make sure that a director or trustee jurisprudence?
is not [made] liable for an act that is not clearly unlawful, so he MR. MENDOZA. Yes, Mr. Speaker, as I stated many of the
used a better word than „clearly,‰ he used the word „patently.‰ changes that have been incorporated in the Code were drawn from
MR. MILLORA. So, in that case, Your Honor, a director may jurisprudence on the matter, but even jurisprudence on several
not be liable for certain unlawful acts. Is that right, Your matters or several issues relating to the Corporation Code are
Honor? sometimes ambiguous, sometimes controversial. In order, therefore,
MR. ABELLO. Yes, if it is not patently unlawful. Precisely, to clarify those issues, what was done was to spell out in
the use of the word „patently‰ is also to give some kind of statutory language the rule that should be applied on those
protection to the directors or trustees. Because if you will matters and one of such examples is Section 34.
hold the directors or trustees responsible for everything, MR. NUÑEZ. Does not His Honor believe that to codify this
then no one will serve as director or trustee of any particular document into law may lead to absurdity or confusion as
corporation. But, he is made liable so long as he willfully and the cited doctrine is subject to many qualifications depending on the
knowingly votes for or assent to patently unlawful acts of the peculiar nature of the case?
corporation. So it is also to protect the director [or] trustees from Let us suppose that there is a business opportunity that the
liability for acts that was not patently unlawful. corporation did not take advantage of or was not interested in.
MR. MILLORA. With that explanation, Your Honor, I will not Would you hold the director responsible for acquiring the interest
proceed with my proposed amendment.61 despite the fact that the corporation did not take advantage of or
was not interested in that particular business venture? Does not
On Section 34 His Honor believe that this should be subject to qualifications and
should be dealt with on a case-to-case basis depending on the
(Period of Sponsorship, November 5, 1979 Session) circumstances of the case?
MR. MENDOZA. If a director is prudent or wise enough, then he
MR. NUÑEZ. x x x can protect himself in such contingency.
225
this business opportunity and despite this fact, Your Honor, and the
failure of the director to communicate the venture to the
VOL. 814, JANUARY 11, 2017 225
corporation, the director entered into the business venture. Is the
Ient vs. Tullett Prebon (Philippines), Inc. director liable, Your Honor, despite the fact that the corporation has
knowledge, Your Honor, from all indications, from all facts, from all
If he is aware of a business opportunity, he can make it circumstances of the case, the corporation is aware?
known to the corporation, propose it to the corporation, and MR. MENDOZA. First of all, to say that a corporation has
allow the corporation to reject it, after which he, certainly, knowledge is itself a point that can be subject of an argument.
may avail of it without risk of the consequences provided When does a corporation have knowledge · when its president
for in Section 34. comes to know of the fact, when its general manager knows of the
MR. NUÑEZ. I see. So that the position of Your Honor is that the fact, when one or two of the directors know of that fact, when a
matter should be communicated to the corporation, the matter of majority of the directors come to know of that fact? So that in itself
the director acquiring the business opportunity should be is a matter of great ambiguity, when one says it has knowledge.
communicated to the corporation and that if it is not communicated That is why when I said that a prudent director, who would
to the corporation, the director will be responsible. Is that the assure that he does not become liable under Section 34,
position of His Honor? should not only be sure that the corporation has official knowledge,
MR. MENDOZA. In my opinion it must not only be made known that is, the Board of Directors, but must take steps, positive steps,
to the corporation; the corporation must be formally advised and if which will demonstrate that the matter or opportunity was brought
he really would like to be assured that he is protected before the corporation for its decision whether to avail of it or not,
against the consequences provided for in Section 34, he and the corporation rejected it.
should take such steps whereby the opportunity is clearly presented So, under those circumstances narrated by Your Honor, it is my
to the corporation and the corporation has the opportunity to decide view that the director will be liable, unless his acts are ratified later
on whether to avail of it or not and then let the corporation reject it, by the vote of stockholders holding at least 2/3 of the outstanding
after which then he may avail of it. Under such circumstances I do capital stock.
not believe he would expose himself to the consequences MR. NUÑEZ. Your Honor has already raised the possible
provided for under Section 34. complications that may arise out of this particular provision. My
Precisely, the reason we have laid down this ruling in statutory question is: how can we remedy the situation? Is there a necessity,
language is that for as long as the rule is not clarified there will be Your Honor, of a formal notice to the corporation that it should be
ambiguity in the matter. And directors of corporations who may placed in the agenda, in a meeting or a special or regular meeting of
acquire knowledge of such opportunities would always be risking the corporation that such a business venture exists, that the
consequences not knowing how the courts will later on decide such corporation should take advantage of this business venture before a
issues. But now with the statutory rule, any director who director can be held not responsible for acquiring this business
comes to know of an opportunity that may be available to venture?
the corporation would be aware of the consequences in case
he avails of that opportunity without giving the corporation the
privilege of deciding beforehand on whether to take advantage of it
or not. 227
MR. NUÑEZ. Let us take the case of a corporation where, from
all indications, the corporation was aware of
VOL. 814, JANUARY 11, 2017 227
226 MR. MENDOZA. Well, I believe, as I have stated, Mr. Speaker,

that is what a prudent director should do. If he does not wish to be
in any way handicapped in availing of business opportunities, he Further, under the same provision, it is not clear as to
should, to the same degree, be circumspect in accepting what „account to the corporation‰ means or what it
directorships in corporations. If he wants to be completely free to includes. Is the offender liable for the profits in favor of the
avail of any opportunity which may come his way, he should not corporation?
accept the position of director in any corporation which he may MR. ABELLO. Yes, that is what it means.
anticipate may be dealing in a business in connection with which he MR. CAMARA. Or he be merely made to account?
may acquire a certain interest. MR. ABELLO. Well, Your Honor, when the law says „He
The purpose of all these provisions is to assure that must account to the latter for all such profits,‰ that means
directors or corporations constantly · not only constantly that he is liable to the corporation for such profits.
remember but actually are imposed with certain positive MR. CAMARA. Who gets the profits then, Your Honor?
obligations that at least would assure that they will discharge MR. ABELLO. The corporation itself.
their responsibilities with utmost fidelity.62 MR. CAMARA. The corporation?
(December 5, 1979 Session) MR. ABELLO. Correct.
MR. CAMARA. Thank you, Your Honor. May we go to page 24, MR. CAMARA. Thank you, Your Honor.
lines 1 to 20, Section 34 · Disloyalty of a director. Supposing under the same section, Your Honor, the director took
Your Honor, it is provided that a director, who by virtue of his the opportunity after resigning as director or officer? It is
office acquires for himself a business opportunity which should suggested, Your Honor, that this should be clarified because the
belong to the corporation thereby obtaining profits to the prejudice resigning director can take the opportunity of this transaction
of such corporation, must account to the corporation for all such before he resigns.
profits unless his act has been ratified by a vote of the stockholders MR. ABELLO. If Your Honor refers to the fact that he took that
owning or representing at least two-thirds (2/3) of the outstanding opportunity while he was a director, Section 34, would apply. But if
capital stock. the action was made after his resignation as a director of the
However, Your Honor, the right to ratification would serve to corporation, then Section 34 would not apply.63
defeat the intention of this provision. This is possible if the director
or officer is the controlling stockholder. _______________
It is, therefore, suggested, Your Honor, that the twenty percent
(20%) stockholding limit be applied here in which case, over twenty 63 Id., at p. 1498; R.B., December 5, 1979, p. 1633.
percent limit, said director or
_______________
229
62 Id., at pp. 1457-1459; R.B., November 5, 1979, pp. 1217-1219.
VOL. 814, JANUARY 11, 2017 229

228
(Period of Amendments, March 11, 1980 Session)
MR. CAMARA. This is on Section 34, page 24, line 15, I propose
to insert between the word „profits‰ and the comma (,) the words BY
Ient vs. Tullett Prebon (Philippines), Inc. REFUNDING THE SAME. So that the first sentence, lines 11 to 18
of said section, as modified, shall read as follows:
officer is disallowed to participate in the ratification. And this is „SEC. 34. Disloyalty of a director.·Where a director by
precisely the point I was driving at in the previous section, Your virtue of his office acquires for himself a business opportunity
Honor. which should belong to the corporation thereby obtaining
MR. ABELLO. Your Honor, I see the point that Your Honor has profits to the prejudice of such corporation, he must account
raised and that will be considered by the committee at an to the latter for all such profits BY REFUNDING THE
appropriate time. SAME, unless his act has been ratified by a vote of the
MR. CAMARA. Thank you, Your Honor. stockholders owning or representing at least two-thirds (2/3)
of the outstanding capital stock.‰ MR. TUPAZ. That is correct, Your Honor.
The purpose of this amendment, Mr. Speaker, is to clarify MR. MENDOZA. So that when corporate officers deny access to a
as to what to account to the corporation. shareholder, they do so under very serious consequences. If they
MR. ABELLO. Mr. Speaker, the committee accepts the should err in making that decision and it is demonstrated that they
amendment.64 (Emphases and underscoring supplied) have erred deliberately, they expose themselves to damages and
even to certain penal sanctions.
xxxx
Verily, in the instances that Sections 31 and 34 were
taken up on the floor, legislators did not veer away from
_______________
the civil consequences as stated within the four corners of
these provisions. Contrasted with the interpellations on 65 Mr. TupazÊs interpellation centered on the proviso in Section 74
Section 74 (regarding the right to inspect the corporate that it is a defense under said section that the person demanding to see
records), the discussions on said provision leave no doubt the corporationÊs records has improperly used any information secured
that legislators intended both civil and penal liabilities to through any prior examination or was not acting in good faith or for a
attach to corporate officers who violate the same, as was legitimate purpose.
repeatedly stressed in the excerpts from the legislative 66 This was renumbered as Section 144 when the Corporation Code
record quoted below: was enacted.
_______________
64 Id., at p. 1565; R.B., March 11, 1980, p. 2351.

231
VOL. 814, JANUARY 11, 2017 231

230 Ient vs. Tullett Prebon (Philippines), Inc.
230 SUPREME COURT REPORTS ANNOTATED As I said, Your Honor, I think it is fair enough to assume that
persons do not act deliberately in bad faith, that they do not act
deliberately to expose themselves to damages, or to penal
sanctions. In the ultimate, I would agree that certain decisions
On Section 74: may be unnecessarily harsh and prejudicial. But by and large, I
(Period of Sponsorship, December 10, 1979 Session) think, the probabilities are in favor of a decision being reasonable
MR. TUPAZ. x x x I guess, Mr. Speaker, that the distinguished and in accord with the interest of the corporation.67 (Emphases and
sponsor has in mind a particular situation where a minority underscoring supplied)
shareholder is one of the thousands of shareholders. But I present a
situation, Your Honor, where the minority is 49% owner of a
corporation and here comes this minority shareholder wanting, but Quite apart that no legislative intent to criminalize
a substantial minority, and yet he cannot even have access to the Sections 31 and 34 was manifested in the deliberations on
records of this corporation over which he owns almost one-half the Corporation Code, it is noteworthy from the same
because, precisely, of this particular provision of law.65 deliberations that legislators intended to codify the
MR. MENDOZA. He will not have access if the grounds common law concepts of corporate opportunity and
expressed in the proviso are present. It must also be noted, Mr. fiduciary obligations of corporate officers as found in
Speaker, that the provision before us would, let us say, make it very American jurisprudence into said provisions. In common
difficult for corporate officers to act unreasonably because they law, the remedies available in the event of a breach of
are not only subject to a suit which would compel them to directorÊs fiduciary duties to the corporation are civil
allow the access to corporate records, they are also liable for remedies. If a director or officer is found to have breached
damages and are in fact guilty of a penal act under Section his duty of loyalty, an injunction may be issued or damages
143.66 may be awarded.68 A corporate officer guilty of fraud or
mismanagement may be held liable for lost profits.69 A the Corporation Code as outlined in the Sponsorship
disloyal agent may also suffer forfeiture of his Speech of Minister Mendoza:
compensation.70 There is nothing in the deliberations to
indicate that drafters of the Corporation Code intended to Cabinet Bill No. 3 is entitled „The Corporation Code of the
deviate from common law practice and enforce the fiduciary Philippines.‰ Its consideration at this time in the history of our
obligations of directors and corporate officers through penal nation provides a fitting occasion to remind that under our
sanction aside from civil liability. On the contrary, there Constitution the economic system known as „free
appears to be a concern among the drafters of the enterprise‰ is recognized and protected. We acknowledge as a
Corporation Code that even the imposition of the civil democratic republic that the individual must be free and that as a
sanctions under Sections 31 and 34 might discourage free man · „free to choose his work and to retain the fruits of his
competent persons from serving as directors in labor‰ · he may best develop his capabilities and will produce
corporations. and supply the economic needs of the nation.
xxxx
The formation and organization of private corporations,
_______________
and I underscore private corporations as distinguished from
67 Rollo (G.R. No. 189158), Vol. I, pp. 1515-1516; R.B., December 10, corporations owned or controlled by the government or any
1979, pp. 1695-1696. subdivision or instrumentality thereof, gives wider dimensions
68 See Fletcher Cyclopedia of the Law of Corporations, 3 Fletcher to free enterprise
Cyc. Corp. § 837.60, September 2016 update.
69 See 3A Fletcher Cyc. Corp. § 1343. _______________
70 See 5A Fletcher Cyc. Corp. § 2185.
71 494 U.S. 152, 110 S.Ct. 997, 1001-1002 (1990).
232
233

VOL. 814, JANUARY 11, 2017 233
In Crandon v. United States,71 the U.S. Supreme Court
had the occasion to state that: or free trade. For not only is the right of individuals to organize
collectively recognized; the collective organization is vested with a
In determining the meaning of the statute, we look not only to juridical personality distinct from their own. Thus „the skill,
the particular statutory language, but to the design of the dexterity, and judgment‰ of a nationÊs labor force need not be
statute as a whole and to its object and policy. Moreover, constricted in their application to those of an individual or that
because the governing standard is set forth in a criminal statute, it which he alone may assemble but to those of a collective
is appropriate to apply the rule of lenity in resolving any ambiguity organization.
in the ambit of the statuteÊs coverage. To the extent that the While a code, such as the proposed code now before us, may
language or history of [the statute] is uncertain, this „time-honored appear essentially regulatory in nature, it does not, and is
interpretive guideline‰ serves to ensure both that there is fair not intended, to curb or stifle the use of the corporate entity
warning of the boundaries of criminal conduct and that as a business organization. Rather, the proposed code recognizes
legislatures, not courts, define criminal liability. (Citations the value, and seeks to inspire confidence in the value of the
omitted; emphases supplied) corporate vehicle in the economic life of society.72 (Emphases
supplied)
Under the circumstances of this case, we are convinced

to adopt a similar view. For this reason, we take into The Corporation Code was intended as a regulatory
account the avowed legislative policy in the enactment of measure, not primarily as a penal statute. Sections 31 to 34
in particular were intended to impose exacting standards of determination of the case before the court. It is a remark made, or
fidelity on corporate officers and directors but without opinion expressed, by a judge, in his decision upon a cause by the
unduly impeding them in the discharge of their work with way, that is, incidentally or collaterally, and not directly upon the
concerns of litigation. Considering the object and policy of question before him, or upon a point not necessarily involved in the
the Corporation Code to encourage the use of the corporate determination of the cause, or introduced by way of illustration, or
entity as a vehicle for economic growth, we cannot espouse analogy or argument. It does not embody the resolution or
a strict construction of Sections 31 and 34 as penal offenses determination of the court, and is made without argument,
in relation to Section 144 in the absence of unambiguous or full consideration of the point. It lacks the force of an
statutory language and legislative intent to that effect. adjudication, being a mere expression of an opinion with no
When Congress intends to criminalize certain acts it binding force for purposes of res judicata.74 (Emphasis
does so in plain, categorical language, otherwise such a supplied)
statute would be susceptible to constitutional attack. As
earlier discussed, this can be readily seen from the text of
Section 45(j) of Republic Act No. 8189 and Section 74 of the The issue in the Home Insurance Company case was
Corporation Code. whether or not a foreign corporation previously doing
We stress that had the Legislature intended to attach business here without a license has the capacity to sue in
penal sanctions to Sections 31 and 34 of the Corporation our courts when it had already acquired the necessary
Code it could have expressly stated such intent in the same license at the time of the filing of the complaints. The Court
manner that it did for Section 74 of the same Code. ruled in the affirmative. The statement regarding the
supposed penal
_______________
_______________
72 Rollo (G.R. No. 189158) Vol. I, p. 1452; R.B., November 5, 1979, p.
1212. 73 Home Insurance Company v. Eastern Shipping Lines, supra note
24.
74 Ocean East Agency Corporation v. Lopez, G.R. No. 194410, October
14, 2015, 772 SCRA 414, 428-429.
234
234 SUPREME COURT REPORTS ANNOTATED 235

VOL. 814, JANUARY 11, 2017 235
At this point, we dispose of some related arguments
raised in the pleadings.
We do not agree with respondent Tullett that previous
decisions of this Court have already settled the matter in sanction for violation of Section 133 of the Corporation
controversy in the consolidated cases at bar. The Code was not essential to the resolution of the case as none
declaration of the Court in Home Insurance Company v. of the parties was being made criminally liable under
Eastern Shipping Lines73 that „[t]he prohibition against Section 133.
doing business without first securing a license [under As for respondentÊs allusion to Genuino v. National
Section 133] is now given penal sanction which is also Labor Relations Commission,75 we find the same
applicable to other violations of the Corporation Code unavailing. Genuino involved the appeal of an illegal
under the general provisions of Section 144 of the Code‰ is dismissal case wherein it was merely mentioned in the
unmistakably obiter dictum. We explained in another case: narration of facts that the employer-bank also filed
criminal complaints against its dismissed corporate officers
An obiter dictum has been defined as an opinion expressed by a for alleged violation of Section 31 in relation to Section 144
court upon some question of law that is not necessary in the of the Corporation Code. The interpretation of said
provisions of the Corporation Code in the context of a valid, absent a clear and unmistakable showing to the
criminal proceeding was not at issue in that case. contrary.‰76
As additional support for its contentions, respondent WHEREFORE, the consolidated petitions are
cites several opinions of the SEC, applying Section 144 to GRANTED. The Decision dated August 12, 2009 of the
various violations of the Corporation Code in the Court of Appeals in C.A.-G.R. S.P No. 109094 and the
imposition of graduated fines. In respondentÊs view, these Resolutions dated April 23, 2009 and May 15, 2009 of the
opinions show a consistent administrative interpretation Secretary of Justice in I.S. No. 08-J-8651 are REVERSED
on the applicability of Section 144 to the other provisions of and SET ASIDE.
the Corporation Code and allegedly render absurd SO ORDERED.
petitionersÊ concern regarding the „over criminalization‰ of
the Corporation Code. We find respondentÊs reliance on Sereno (CJ., Chairperson), Del Castillo, Jardeleza**
these SEC opinions to be misplaced. As petitioners and Caguioa, JJ., concur.
correctly point out, the fines imposed by the SEC in these
instances of violations of the Corporation Code are in the Petitions granted, judgment reversed and set aside.
nature of administrative fines and are not penal in nature.
Notes.·A petition for certiorari shall be verified and
Without ruling upon the soundness of the legal reasoning of accompanied by a sworn certification of non-forum
the SEC in these opinions, we note that these opinions in shopping. (Colmenares vs. Heirs of Rosario Vda. de
fact support the view that even the SEC construes
Gonzales, 573 SCRA 402 [2008])
„penalty‰ as used in Section 144 as encompassing Although the submission of a certificate against forum
administrative penalties, not only criminal sanctions. In shopping is deemed obligatory, it is not jurisdictional. (Cua,
all, these SEC issuances weaken rather than strengthen Jr. vs. Tan, 607 SCRA 645 [2009])
respondentÊs case.
With respect to the minutiae of other arguments cited in
··o0o··
the partiesÊ pleadings, it is no longer necessary for the
Court to pass upon the same in light of our determination
_______________
that there is no clear, categorical legislative intent to define
Sections 31 76 Mirasol v. Court of Appeals, 403 Phil. 760, 774; 351 SCRA 44, 54
(2001).
_______________ ** Designated acting member per Raffle dated December 7, 2016.
75 564 Phil. 315; 539 SCRA 342 (2007).
236
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and 34 as offenses under Section 144 of the Corporation

Code. We likewise refrain from resolving the question on
the constitutionality of Section 144 of the Corporation
Code. It is a long standing principle in jurisprudence that
„courts will not resolve the constitutionality of a law, if the
controversy can be settled on other grounds. The policy of
the courts is to avoid ruling on constitutional questions and
to presume that the acts of the political departments are

1 Ient vs. Tullett Prebon (Philippines), Inc., 814 SCRA 184, January 11, 2017

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1 Ient vs. Tullett Prebon (Philippines), Inc., 814 SCRA 184, January 11, 2017

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_______________

VOL. 814, JANUARY 11, 2017 185

JAMES IENT and MAHARLIKA SCHULZE, petitioners,

186 SUPREME COURT REPORTS ANNOTATED

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with Villalon and Chuidian in the latterÊs acts of disloyalty

194 SUPREME COURT REPORTS ANNOTATED 195

Ient vs. Tullett Prebon (Philippines), Inc.

21 Id., at p. 323. 24 208 Phil. 359; 123 SCRA 424 (1983).

196 SUPREME COURT REPORTS ANNOTATED

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33 Id., at pp. 91-93.

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205 206 SUPREME COURT REPORTS ANNOTATED

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209 210 SUPREME COURT REPORTS ANNOTATED

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years from the

scriptions, in either case with interest accrued, if any, as it may

220 SUPREME COURT REPORTS ANNOTATED

Any officer or agent of the corporation who shall refuse to

VOL. 814, JANUARY 11, 2017 221

the significant innovations made to the previous statute

60 Id., at p. 1480; R.B., December 4, 1979, p. 1614.

224 SUPREME COURT REPORTS ANNOTATED

VOL. 814, JANUARY 11, 2017 223

226 MR. MENDOZA. Well, I believe, as I have stated, Mr. Speaker,

VOL. 814, JANUARY 11, 2017 229

64 Id., at p. 1565; R.B., March 11, 1980, p. 2351.

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232 SUPREME COURT REPORTS ANNOTATED

Under the circumstances of this case, we are convinced

234 SUPREME COURT REPORTS ANNOTATED 235

75 564 Phil. 315; 539 SCRA 342 (2007).

236 SUPREME COURT REPORTS ANNOTATED

and 34 as offenses under Section 144 of the Corporation

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