Title
Ient vs. Tullett Prebon , Inc.
Case
G.R. No. 189158
Decision Date
Jan 11, 2017
British and Filipino-German executives accused of conspiring with former Tullett officers to poach staff for Tradition Philippines; Supreme Court ruled no criminal liability under Corporation Code.
tullett prebon
tradition asia
directors

Case Summary (G.R. No. 189158)

Factual Background

Tradition Asia and Tradition London, subsidiaries of Compagnie Financiere Tradition and members of the Tradition Group, sought to establish a Philippine subsidiary, Tradition Financial Services Philippines, Inc. Petitioners Ient and Schulze were among those tasked with organizing Tradition Philippines and were named as incorporators and directors in its Articles of Incorporation. Respondent Tullett had operated an inter‑dealer broking business in the Philippines since 1995 and competed with the Tradition Group for bank and financial institution clientele. In August 2008 various meetings allegedly occurred between certain Tullett directors and brokers, culminating in the mass resignation of Tullett’s broking staff and their engagement with Tradition Philippines; indemnity agreements and employment contracts were distributed, and communications to Tullett’s clients were alleged.

Complaint and Charges

On October 15, 2008 Tullett filed a Complaint‑Affidavit with the Makati City Prosecutor charging Villalon, Chuidian, petitioners Ient and Schulze, and other John and Jane Does with violations of Sections 31 and 34 in relation to Section 144 of the Corporation Code. Tullett alleged that respondents Villalon and Chuidian, while still officers or directors of Tullett, abused their positions to induce the entire broking staff to resign and to transfer clients and business to Tradition Philippines, thereby acquiring pecuniary interests adverse to Tullett. Tullett further alleged that petitioners Ient and Schulze conspired with those directors by participating in meetings, presenting employment contracts and indemnity agreements, and otherwise facilitating the mass transfer.

Defenses and Counter‑Affidavits

Respondents Villalon and Chuidian filed counter‑affidavits asserting that their resignations and communications with brokers were motivated by dissatisfaction with management and the free exercise of profession and did not constitute disloyal conduct proscribed by Sections 31 and 34. Villalon emphasized voluntary resignation and absence of coercion; both argued that the remedies in Sections 31 and 34 are civil and that Section 144 applies only to provisions not otherwise specifically penalized. Petitioner Schulze denied participation in illicit acts and contended that the Revised Penal Code could not be made suppletorily applicable to the Corporation Code under Article 10, Revised Penal Code. Petitioner Ient denied coercion, averred legitimate business purpose in creating Tradition Philippines, and characterized the complaints as harassment intended to impede market entry.

Prosecutor’s Dismissal

Acting City Prosecutor Cresencio F. Delos Trinos, Jr. dismissed the criminal complaints in a resolution dated February 17, 2009. He found no showing that Villalon and Chuidian committed the prohibited acts under Section 31 or Section 34, observed an absence of proof that brokers were coerced or clients actually transferred, and concluded that inducement, if any, could give rise to civil liability but not criminal liability. The prosecutor relied on the Department of Justice resolution in UCPB v. Antiporda to construe Section 144 as limited to provisions lacking other penalties.

Secretary of Justice Reversal

The Secretary of Justice reversed the prosecutor’s dismissal in a Resolution dated April 23, 2009 and directed the filing of information for violations of Sections 31 and 34 in relation to Section 144. The Secretary found prima facie evidence of bad faith and disloyalty by Villalon and Chuidian, citing secret meetings, the inducement of the entire broking staff, the distribution of indemnity agreements, and the alleged transfer of clients and business opportunities to Tradition. The Secretary also concluded that petitioners Ient and Schulze conspired with the directors by actively participating in the acts complained of and by presenting employment and indemnity contracts.

Subsequent Proceedings and Court of Appeals

Prosecutor Delos Trinos filed Informations for violation of Section 31 and Section 34 on May 14, 2009. The Secretary of Justice denied petitioners’ motion for reconsideration on May 15, 2009. Petitioners sought relief by certiorari before the Court of Appeals. In a decision dated August 12, 2009 the Court of Appeals affirmed the Secretary’s Resolutions, reasoning that directors and officers occupy positions of great trust and that the alleged recruitment, inducements, and provision of indemnity contracts established a prima facie case of breach of fiduciary duty under Section 31 and disloyalty under Section 34, and that Section 144 applied to impose criminal sanctions where the Code did not otherwise provide penal consequences.

Issues Presented to the Supreme Court

The principal issue before the Supreme Court was whether Section 144 of the Corporation Code criminalizes violations of Sections 31 and 34, thereby permitting prosecution and penal sanctions for breaches of fiduciary duty and corporate opportunity. Ancillary issues included procedural objections on mootness and forum shopping, and whether certiorari was the proper vehicle to review the Secretary of Justice’s reversal of a prosecutor’s dismissal after the filing of Informations.

Supreme Court’s Procedural Rulings

The Court held that certiorari remained an available remedy under exceptional circumstances despite the filing of informations, citing precedents that allow review where necessary to protect constitutional rights, ensure orderly administration of justice, or correct action taken without or in excess of authority. The Court rejected respondent’s mootness and forum‑shopping arguments and declined to dismiss the petitions on those grounds, observing that the issues raised were of controlling legal importance and susceptible of repetition yet evading review.

Statutory Construction and Penal Law Principles

The Court applied the cardinal rules governing penal statutes: penal provisions are construed strictly against the State and liberally in favor of the accused, and the rule of lenity applies where textual ambiguity persists after recourse to legislative history and other aids to interpretation. The Court found textual ambiguity in Section 144 regarding whether the term “penalized” denotes only criminal penalties or also civil and administrative sanctions. The presence in Section 144 of an administrative remedy — involuntary dissolution of a corporation by the Securities and Exchange Commission — reinforced the view that Section 144 was not purely penal in nature.

Legislative History and Purpose of the Corporation Code

The Court examined the sponsorship speech and floor deliberations on Cabinet Bill No. 3, the legislative precursor of the Corporation Code, and found that the discussions on Sections 31 and 34 focused on civil liabilities: damages, accounting, and restitution. The legislative record reflected an intention to codify fiduciary duties and the corporate opportunity doctrine into civil remedies and to avoid unduly deterring competent persons from serving as directors by imposing penal sanctions without clear legislative mandate. By contrast, deliberations on Section 74 demonstrated express legislative intent to attach penal liability to certain breaches, showing that drafters knew how to impose criminal consequences when intended.

Comparative Provisions and Administrative Practice

The Court noted that some Securities and Exchange Commission opinions assess administrative fines for violations of the Corporation Code and that Section 74 expressly links its violation to Section 144. The Court reasoned that if Section 144 automatically imposed criminal liability for all non‑specifically penal provisions, the express language in Section 74 w

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