G.R. No. 209601. January 12, 2021
UNITED COCONUT PLANTERS BANK, PETITIONER, VS. SECRETARY OF JUSTICE, OFFICE OF THE CHIEF PROSECUTOR, TIRSO ANTIPORDA, JR. AND GLORIA CARREON, RESPONDENTS.
CAGUIOA, J:
whether Section 144 of the Corporation Code, which provides penal
sanctions for violations of ‘any provision of this Code or its
amendments not otherwise specifically penalized therein,’ is applicable
to violations under Section 31 of the same Code, which provides for a
civil indemnity,”[1] as posited by petitioner, has, in fact, already been resolved by the Court in Ient v. Tullett Prebon (Philippines), Inc.[2] (Ient). In this connection, the Court also notes at the outset that Batas Pambansa Blg. 68, otherwise known as “The Corporation Code of the Philippines,” has been repealed by Republic Act No. 11232[3]otherwise known as the “Revised Corporation Code of the Philippines.”
Before the Court is a Petition for Review on Certiorari[4] (Petition) under Rule 45 of the Rules of Court filed by petitioner United Coconut Planters Bank (UCPB) assailing the Decision[5] dated May 24, 2013 and the Resolution[6] dated October 17, 2013 of the Court of Appeals[7] (CA) in CA-G.R. S.P. No. 114184.[8] The CA Decision dismissed the Rule 65 petition for certiorari
filed by UCPB and affirmed the Resolutions dated July 30, 2008 and
March 1, 2010 of the Department of Justice (DOJ) Secretary while the CA
Resolution denied the motion for partial reconsideration filed by UCPB.
The Facts and Antecedent Proceedings
The CA Decision narrates the factual antecedents as follows:
x x x [UCPB], through its Legal Services Division Head, x x x
Jose A. Barcelon, filed the Complaint-Affidavit dated 23 July 2007, for
violation of Section 31 in relation to Section 144 of the Corporation
Code against private respondents [Tirso Antiporda Jr. (Antiporda) and
Gloria Carreon (Carreon)], docketed as I.S. No. 2007-633, before the
[DOJ].The Complaint-Affidavit alleged: [Antiporda and Carreon] were [UCPB’s]
former Chairman and Chief Executive Officer (“CEO”), and former
President and Chief Operating Officer (“COO”), respectively; UCPB
Capital, Inc. (“UCAP”), a wholly owned subsidiary of [UCPB], was engaged
in trading, underwriting of securities and syndication of loans from
1996 to 1998; sometime in 1998, [Antiporda and Carreon] authorized the
payment of bonuses, to some of [UCPB’s] corporate officers and
directors, for this purpose, 50 manager’s checks amounting to Php
117,872,269.43 were released from 6 April to 31 July 1998; on 27
February 1998, due to substantial losses, [UCPB’s] Board of Directors
resolved to shorten the corporate existence of UCAP effective 31 March
1998 and approved the takeover, purchase of assets and assumption of
liabilities of UCAP by [UCPB]; when UCAP was absorbed by [UCPB], it had
liabilities in the amount of Php 4.4 Billion; notwithstanding,
[Antiporda’s and Carreon’s] knowledge of UCAP’s losses, they declared
bonuses in 1998 in bad faith, with gross negligence and in violation of
[UCPB’s] by-laws which requires a board authority prior to declaration
of bonuses; thus, [Antiporda and Carreon] are liable under Section 31 of
the Corporation Code which provides for the liability of directors or
officers who conduct the affairs of a corporation in bad faith; and,
[Antiporda and Carreon] are criminally liable under Section 144 which
provides for penalties for violations of the Corporation Code.[Antiporda] filed [a] Counter-Affidavit and alleged: his actions as
Chairman and CEO were not done in bad faith as he was merely guided by
[UCPB’s] audited Financial Statements, by-laws and policies; [UCPB’s]
by-laws provided that 10% of [UCPB’s] net profit is allot[t]ed as
bonuses to its directors and officers, and, what is subject to Board
approval is only the manner by which [UCPB’s] President distributes the
4% of the net profit to other officers; it had been the practice of
[UCPB] to pay bonuses without a board resolution; the [Bangko Sentral ng
Pilipinas (BSP)] examiners never questioned the absence of a board
resolution in [UCPB’s] previous grant of bonuses; there was factual and
legal basis in the payment of bonus since [UCPB’s] financial statements
in 1997 showed a consolidated net income of Php 2.115 billion; there was
no evidence of [UCPB’s] losses amounting to Php 4.4 billion; the Php
4.4 billion losses referred by [UCPB] was due to depreciation in the
market values of the foreclosed real properties in 1998, thus, it is
appropriate to charge these losses to years 1999 to 2003; while UCAP
suffered a loss in 1997, other subsidiaries and affiliates of [UCPB]
earned profits in excess of the Php 149 million loss incurred by UCAP,
which formed the basis to declare bonuses in 1998; UCAP’s loss of Php
149 million in 1997 is a mere fraction of the Php 2.115 billion earned
by [UCPB], as the parent bank; and, the action had prescribed since the
alleged violation was committed in April 1998 and more than 9 years
passed when the complaint was filed in 2007.Carreon filed [a] Counter-Affidavit and alleged: there was sufficient
legal and factual justification for the grant of bonuses since (a) it
was expressly authorized by [UCPB’s] by-laws, (b) it was the
long-established policy and practice of [UCPB], and (c) the financial
condition of [UCPB] allowed the grant of the bonuses; the bonuses given
in a fiscal year are based on the net profit of [UCPB] in the
immediately preceding fiscal year, since [UCPB] had a net profit of Php
2.115 billion in 1997, there was a basis of bonus in 1998; the
allegation of substantial losses was contradicted by the audited
financial statements of [UCPB] for 1997 and 1998; the financial
statements showing [UCPB’s] losses were only released subsequent to her
tenure with [UCPB]; there is no evidence that UCAP incurred losses of
Php 4.4 billion in 1997; assuming that there were losses, she could not
have known, because both the internal auditors and the independent
auditors did not attest to the losses; she was not involved in the
approval or distribution of bonuses since her participation was limited
in evaluating the officers’ performance; for the period covering her
stay from 1993 to 1998, [UCPB’s] internal and external auditors, and the
examiners of BSP never questioned the grant and distribution of the
bonuses, notwithstanding, the lack of a board resolution authorizing its
grant; the presumption of regular performance of duties (Section 3[p]
and 3[q], Rule 131 of the Revised Rules of Evidence) should operate in
her favor; and, the action had prescribed.[UCPB] filed [a] Consolidated Reply-Affidavit and alleged: the release
of the bonuses was surreptitious since there was no board approval as
certified by the Certification dated 9 January 2007; [Antiporda and
Carreon] were aware of [UCPB’s] losses since they participated in the
board meeting where UCAP’s financial problems were discussed,
particularly, the Php 4 billion worth of UCAP’s liabilities; [Antiporda]
admitted in his counter-affidavit that he had knowledge of [UCPB’s]
losses; as high-ranking officers of [UCPB, Antiporda and Can-eon] cannot
just rely on the findings of a subordinate controller; x x x Carreon’s
argument that her participation was limited, was negated by the demands
and the seniority of her position and the bonuses will not be released
without [Antiporda’s and Carreon’s] authorization; while the 10% bonus
is specifically authorized by [UCPB’s] by-laws, the manner and the
procedure of the grant of the bonus[es] require the approval of the
board of directors; the action had not prescribed since the reckoning
period is not the commission of the violation but from discovery and
institution of judicial proceedings, since, the issuance of bonuses was
concealed from [UCPB]; and, prescription should only run upon the
discovery of the unauthorized payment of bonuses through the special
audit report of KPMG [o]n 30 June 2003.[Antiporda] filed [a] Rejoinder Affidavit and alleged: [UCPB] did not
refute that the grant and release of the bonuses without a board
resolution was a long-standing practice; [UCPB] did not deny that it is
the profits of [UCPB], as the parent bank, which were considered in
granting the bonuses; thus, the Php 2.115 billion profits of [UCPB] were
sufficient basis for the bonus; [UCPB’s] financial statements showed
that its losses through its assumption of liabilities from UCAP only
amounted to Php 140.860 million not Php 4.4 billion, since the Php 4.430
billion loss did not appear in [UCPB’s] audited financial statements in
1997 and 1998, it is logical to assume that the losses did not exist at
such time; the cumulative losses acquired through several years could
not affect the granting of the bonus in 1998 since the bonus in question
was solely dependent on the net profits in 1997; prescription must be
based on the commission of the alleged offense not on the discovery,
since the grant of the bonus was publicly-known; the checks for the
bonuses were signed by the controller and were cleared by the auditor
and distributed to [UCPB’s] directors and officers, thus, as early as
1998, [UCPB] had full knowledge of the facts of the alleged offense;
and, the alleged discovery of the offense on 30 June 2003, through the
KPMG report, was unsubstantiated.Carreon filed [a] Rejoinder Affidavit and alleged that the offense had
prescribed since the grant of the bonus could have been discovered since
all the pertinent records would have been available to [UCPB] in
October 1998.[UCPB] and [Antiporda] filed their respective Memoranda.
On 8 April 2008, the DOJ Task Force On Bank Fraud Cases issued the
Resolution, finding probable cause against [Antiporda and Carreon] for
violation of Section 31 in relation to Section 144 of the Corporation
Code. It held: the action was not barred by prescription since [UCPB’s]
management discovered the unauthorized payment of bonuses only through
the special audit report of KPMG on 30 June 2003; a board resolution is
required before the grant of bonus as indicated in [UCPB’s] by-laws;
and, arguments raised by [Antiporda and Carreon] are matters of defense
which they will have to present during trial.The corresponding Information was filed, docketed as Criminal Case No.
08-1106 before the Regional Trial Court (“RTC”), Makati.[Antiporda] filed the Petition for Review before the DOJ Secretary
seeking to set aside the Resolution dated 8 April 2008, and praying the
Information in Criminal Case No. 08-1106, be withdrawn. It alleged:
[UCPB] did not submit the KPMG special audit report as evidence; the
Investigating Prosecutor erred in disregarding the long standing
practice of the bank in granting bonuses based on [UCPB’s] profits and
without a board resolution; the practice of granting bonuses without a
board resolution was never questioned through the years, and was
ratified by [UCPB’s] Board of directors; the BSP examiners did not cite
the absence of a board resolution authorizing the annual payment of
bonuses as an audit exception; he acted in good faith in relying on
[UCPB’s] practice that no board resolution is necessary; there was no
finding that his acts indicated bad faith or gross negligence, which is
not presumed; there was no finding as to the presence of any of the
elements penalized under Section 31 of the Corporation Code; it was
unfair that [Antiporda and Carreon] were the only officers charged by
[UCPB]; and [UCPB’s] business is a heavily regulated industry and whose
operations were documented, thus, the discovery rule should not be
applied.In the assailed 30 July 2008 Resolution, the DOJ Secretary ruled Section
144 was not applicable to violations of Section 31 of the Corporation
Code, and the action against [Antiporda and Carreon] had prescribed. It
held: the penalties in Section 144 of the Corporation Code apply, only
when the other provisions of the Corporation Code, do not provide
penalties; since Section 31 provides for the remedy of civil action for
damages, Section 144 does not apply anymore; the act of “gross
negligence and bad faith in directing the affairs of the corporation”
can be committed only by the directors and trustees of the corporation,
thus, consistent with the principle of strict construction of penal
laws, [Antiporda and Carreon] as [UCPB’s] officers, are not liable; the
action has prescribed since the alleged violation, which was committed
by the payment of the bonus in early 1998, occurred more than 9 years
ago; the allegation that the grant of the bonuses was only discovered
through the KPMG audit report was unsubstantiated; the granting of the
bonuses was made in public, thus, as early as 1998, [UCPB] had full
knowledge of the offense and there was no need for the KPMG audit
report; and, the findings of the DOJ Secretary were equally applicable
to Carreon although she failed to appeal.The 30 July 2008 DOJ Secretary Resolution set aside the DOJ Task Force
On Bank Fraud Cases Resolution of 8 April 2008, and directed the Office
of the Chief State Prosecutor to withdraw the Information in Criminal
Case No. 08-1106.[UCPB] filed the Motion for Reconsideration. [Antiporda and Carreon]
separately filed their Oppositions to [UCPB’s] Motion for
Reconsideration. [UCPB] filed [a] Consolidated-Reply (To
Respondents-Appellants’ Oppositions). However, the DOJ Secretary denied
the Motion for Reconsideration in the assailed Resolution of 1 March
2010.Thus, [UCPB filed a Rule 65] Petition for Certiorari [before the CA].[9]
Ruling of the CA
The CA, in its Decision[10] of May 24, 2013, dismissed the Rule 65 certiorari
petition of UCPB. With the CA holding that Section 31 of the
Corporation Code was clear and categorical, there was therefore no room
for construction or interpretation, but only for application.[11]
The CA observed that there would be no basis to subject directors,
trustees, or corporate officers liable under Section 31 to the penalties
under Section 144 of the Corporation Case because Section 31 itself
provides for the proper remedy, which is civil sanction for damages
rather than criminal sanction under Section 144.[12]
According to the CA, by providing the remedy of damages, the
legislative intent is clear that Section 31 violations are excluded from
the application of Section 144; and to apply Section 144 to acts
committed under Section 31 would unduly extend its application to
situations not intended by the legislature and would also violate the
principle of strict construction of penal laws.[13]
The CA also ruled that Antiporda and Carreon, as members of UCPB’s Board
of Directors, could be held liable for violating Section 31 of the
Corporation Code because Antiporda was sued in his capacity as UCPB’s
Chairman of the Board while Carreon was sued in her capacity as
Director, which were their designations at the time of the alleged
Section 31 violation.[14]
Further, the CA ruled that the action for violation of Section 31 of the Corporation Code had prescribed.[15] The CA disagreed with the DOJ Secretary in applying the provisions of Act No. 3326,[16] specifically Section 1[17] on the issue of prescription.[18] The CA applied Article 1146[19]
of the Civil Code because Section 31 only provides for payment of
damages as penalty to erring directors and not fine and/or imprisonment.[20]
Counting four years from the commission of the offense in 1998, and not
from the KPMG special audit report in 2003, which does not pertain to
the financial losses suffered by UCPB at the time of the approval of the
bonuses in 1998 and does not support UCPB’s allegation that it was only
in 2003 when it could have discovered the offense committed by
Antiporda and Carreon, the action had prescribed in 2002.[21] Thus, when the Complaint-Affidavit of UCPB was filed on July 23, 2007, the action had already prescribed.[22]
Also, the discovery rule was inapplicable given that the approval and
grant of the questioned bonuses were widely and publicly known and that
UCPB belongs to the heavily-regulated banking industry whose
transactions are documented and audited by the BSP on a regular basis.[23]
Finally, the CA ruled that the DOJ Secretary did not commit grave abuse
of discretion amounting to lack or excess of jurisdiction when he
dismissed UCPB’s complaint and ordered the withdrawal of the
Information.[24]
The dispositive portion of the CA Decision states:
WHEREFORE, the Petition For Certiorari is DISMISSED. The Resolution dated 30 July 2008, and the Resolution dated 1 March 2010, are AFFIRMED.
SO ORDERED.[25]
Not satisfied, UCPB filed a Motion for Partial Reconsideration,[26]which the CA denied in its Resolution[27] dated October 17, 2013.
Hence, the present UCPB’s Rule 45 certiorari Petition dated December 13, 2013. Antiporda filed his Comment[28] dated March 18, 2014. Carreon filed her Comment[29] dated March 19, 2014. UCPB filed its Consolidated Reply[30] dated June 5, 2014. Antiporda filed his Memorandum[31] dated April 13, 2015, while Carreon filed her Memorandum[32] dated April 23, 2015. UCPB filed its Memorandum[33] dated May 11, 2015.
The Issues
The Petition raises two issues:
| (1) | whether the CA erred in ruling that Section 144 of the Corporation Code does not apply to Section 31 thereof; and |
| (2) | whether the CA erred in ruling that the action based on Section 31 of the Corporation Code had prescribed. |
The Ruling of the Court
The present case calls for the application of Sections 31 and 144 of the
Corporation Code. As noted at the outset, the Corporation Code has been
repealed by the Revised Corporation Code (RCC), which became effective
on February 23, 2019. Despite the passage of the later law, the former
is to be applied in this case because the alleged violation committed by
Antiporda and Carreon happened in 1998 while the Corporation Code was
in effect.
Section 31 of the Corporation Code provides:
SECTION 31. Liability of Directors, Trustees or Officers.
– Directors or trustees who willfully and knowingly vote for or assent
to patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty
as such directors or trustees shall be liable jointly and severally for
all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.When a director, trustee or officer attempts to acquire or acquires, in
violation of his duty, any interest adverse to the corporation in
respect of any matter which has been reposed in him in confidence, as to
which equity imposes a disability upon him to deal on his own behalf,
he shall be liable as a trustee for the corporation and must account for
the profits which otherwise would have accrued to the corporation.
The counterpart provision in the RCC is Section 30, which states:
SEC. 30. Liability of Directors, Trustees or Officers.
– Directors or trustees who willfully and knowingly vote for or assent
to patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty
as such directors or trustees shall be liable jointly and severally for
all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.A director, trustee or officer shall not attempt to acquire or acquire [ ] any interest adverse to the corporation in respect of any matter which has been reposed in them in confidence, and upon which, equity imposes a disability upon themselves to deal in their own behalf; otherwise the said director, trustee or officer
shall be liable as a trustee for the corporation and must account for
the profits which otherwise would have accrued to the corporation.[34]
Section 144 of the Corporation Code, in turn, provides:
SECTION 144. Violations of the Code. – Violations of
any of the provisions of this Code or its amendments not 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 by imprisonment for not less than thirty (30) days
but not 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 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 corporation responsible
for said violation: Provided, further, That nothing in this
section shall be construed to repeal the other causes for dissolution of
a corporation provided in this Code.
The counterpart provision in the RCC is Section 170, which states:
SEC. 170. Other Violations of the Code; Separate Liability. – Violations of any of the other
provisions of this Code or its amendments not otherwise specifically
penalized therein shall be punished by a fine of not less than Ten thousand pesos (P10,000.00) but not more than One million pesos (PI,000,000.00)
[ ]. If the violation is committed by a corporation, the same may,
after notice and hearing, be dissolved in appropriate proceedings before
the [ ] Commission: Provided, That such dissolution shall not
preclude the institution of appropriate action against the director,
trustee, or officer of the corporation responsible for said violation: Provided, further,
That nothing in this section shall be construed to repeal the other
causes for dissolution of a corporation provided in this Code.Liability for any of the foregoing offenses shall be separate from
any other administrative, civil, or criminal liability under this Code
and other laws.[35]
Proceeding to the first issue, UCPB argues that the civil sanction for
damages under Section 31 of the Corporation Code is not the same as the
imposition of penalty because damages refer to the sum of money that the
law awards or imposes as pecuniary compensation, recompense or
satisfaction for an injury done or a wrong sustained as a consequence of
a breach of a contractual obligation, a tortious act or an illegal act
while a penalty is the suffering inflicted by the State for the
transgression of a law.[36]Citing Ramos v. Gonong,[37]
UCPB posits that civil liability is not part of the penalty of the
crime committed and when it is imposed for the commission of crimes, it
is neither part of, nor intended to be merged into, the punishment of
the crime.[38]
UCPB further argues that since Section 31 of the Corporation Code refers
to “all damages x x x suffered by the corporation” and considering that
civil liability is not a penalty for the commission of a crime, the
violation of Section 31 is not, by the words used in Section 144 of the
Corporation Code, “specifically penalized therein.”[39] UCPB thus concludes that Section 144 should apply.[40]
Moreover, UCPB cites the Decision of the Special Third Division of the CA in Ient v. Gonzalez and Tullett Prebon[41]
wherein the DOJ Secretary’s directive to file an Information against
corporate directors and officers for violation of Sections 31 and 34[42] in relation to Section 144 of the Corporation Code was upheld.[43]
UCPB’s arguments are not persuasive enough for the Court to overturn or abandon its ruling in Ient.[44]
As mentioned at the outset, the Court has already ruled in Ient on the issue of the applicability of Section 144 to Section 31 of the Corporation Code. The Court, applying the rule of lenity,[45] ruled in Ient
that any violation of Section 31 of the Corporation Code was not
considered as a violation of any provision of such Code not otherwise
specifically penalized therein pursuant to Section 144. In other words,
Section 144 did not apply to or include in its coverage Section 31 of
the Corporation Code. The Court justified its ruling in Ient, as follows:
After a meticulous consideration of the arguments presented
by both sides, the Court comes to the conclusion that there is a textual
ambiguity in Section 144; moreover, such ambiguity remains even after
an examination of its legislative history and the use of other aids to
statutory construction, necessitating the application of the rule of
lenity in the case at bar.x x x x
There is no provision in the Corporation Code using similarly emphatic
language[46] that evinces a
categorical legislative intent to treat as a criminal offense each and
every violation of that law. Consequently, there is no compelling reason
for the Court to construe Section 144 as similarly employing the term
“penalized” or “penalty” solely in terms of criminal liability.x x x x
x x x We agree with petitioners that the lack of specific language
imposing criminal liability in Sections 31 and 34 shows legislative
intent to limit the consequences of their violation to the civil
liabilities mentioned therein. Had it been the intention of the drafters
of the law to define Sections 31 and 34 as offenses, they could have
easily included similar language as that found in Section 74.[47]x x x x
xxx Sections 31 to 34 were introduced into the Corporation Code to
define what acts are covered, as well as the consequences of such acts
or omissions amounting to a failure to fulfill a director’s or corporate
officer’s fiduciary duties to the corporation. A closer look at the
subsequent deliberations on [Cabinet Bill (C.B.)] No. 3 [(the bill that
was enacted into the Corporation Code)], particularly in relation to
Sections 31 and 34, would show that the discussions focused on the civil
liabilities or consequences prescribed in said provisions themselves. x
x xx x x x
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 Section 74 (regarding the right to inspect the
corporate records), the discussions on said provision leave no doubt
that legislators intended both civil and penal liabilities to attach to
corporate officers who violate the same x x x.x x x x
Quite apart that no legislative intent to criminalize Sections 31 and 34
was manifested in the deliberations on the Corporation Code, it is
noteworthy from the same deliberations that legislators intended to
codify the common law concepts of corporate opportunity and fiduciary
obligations of corporate officers as found in American jurisprudence
into said provisions. In common law, the remedies available in the event
of a breach of director’s fiduciary duties to the corporation are civil
remedies. If a director or officer is found to have breached his duty
of loyalty, an injunction may be issued or damages may be awarded. A
corporate officer guilty of fraud or mismanagement may be held liable
for lost profits. A disloyal agent may also suffer forfeiture of his
compensation. There is nothing in the deliberations to indicate that
drafters of the Corporation Code intended to deviate from common law
practice and enforce the fiduciary obligations of directors and
corporate officers through penal sanction aside from civil liability. On
the contrary, there appears to be a concern among the drafters of the
Corporation Code that even the imposition of the civil sanctions under
Sections 31 and 34 might discourage competent persons from serving as
directors in corporations.x x x x
The Corporation Code was intended as a regulatory measure, not primarily
as a penal statute. Sections 31 [and] 34 in particular were intended to
impose exacting standards of fidelity on corporate officers and
directors but without unduly impeding them in the discharge of their
work with concerns of litigation. Considering the object and policy of
the Corporation Code to encourage the use of the corporate entity as a
vehicle for economic growth, we cannot espouse a strict construction of
Sections 31 and 34 as penal offenses in relation to Section 144 in the
absence of unambiguous statutory language and legislative intent to that
effect.When Congress intends to criminalize certain acts it does so in plain,
categorical language, otherwise such a 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 Corporation Code.We stress that had the Legislature intended to attach penal sanctions to
Sections 31 and 34 of the Corporation Code it could have expressly
stated such intent in the same manner that it did for Section 74 of the
same Code.[48]
In view of the foregoing, the Court finds that the CA did not err in
ruling that Section 144 of the Corporation Code did not cover or apply
to Section 31 of the same Code.
With the passage of the RCC, will the Court arrive at the same ruling on
the first issue as it did in Ient using the same legal
framework? The answer will depend upon the factual milieu of the
proceeding before the Court wherein the issue on the coverage or
applicability of Section 170 to Section 30 of the RCC will be resolved.
However, it must be noted, that under the RCC, there is now a provision
on administrative sanctions that the Securities and Exchange Commission
(Commission) can impose if, after due notice and hearing, it finds that
any provision of the RCC has been violated, viz.:
SEC. 158. Administrative Sanctions. – If, after due notice
and hearing, the Commission finds that any provision of this Code, rules
or regulations, or any of the Commission’s orders has been violated,
the Commission may impose any or all of the following sanctions, taking
into consideration the extent of participation, nature, effects,
frequency and seriousness of the violation:(a) Imposition of a fine ranging from Five thousand pesos (P5,000.00) to
Two million pesos (P2,000,000.00), and not more than One thousand pesos
(P1,000.00) for each day of continuing violation but in no case to
exceed Two million pesos (P2,000,000.00);(b) Issuance of a permanent cease and desist order;
(c) Suspension or revocation of the certificate of incorporation; and
(d) Dissolution of the corporation and forfeiture of its assets under
the conditions in Title XIV of this Code.
The Court notes that the wording of the RCC reinforces the Court’s
interpretation that a violation of Section 31 of the Corporation Code,
now Section 30 of the RCC, is not covered by Section 144 of the
Corporation Code, now Section 170 of the RCC. While Section 170 of the
RCC now clarifies that the said Section applies to “Other Violations of the Code”
or “[violations of any of the other provisions of this Code or its
amendments not otherwise specifically penalized therein” and provides
for “Separate Liability” to the effect that “[l]iability for any
of the foregoing offenses [or such violations] shall be separate from
any other administrative, civil, or criminal liability under this Code
and other laws,” such language is still consistent with the violations
contemplated under Section 144 of the Corporation Code — “[v]iolations
of any of the provisions of this Code or its amendments not otherwise
specifically penalized therein,” the operative phrase “not otherwise
specifically penalized therein” being retained. Also, the civil
liability provided under Section 31 of the Corporation Code — “liable
jointly and severally for all damages resulting therefrom suffered by
the corporation, its stockholders or members and other persons” and
“liable as a trustee for the corporation and must account for the
profits which otherwise would have accrued to the corporation” — is
phrased similarly in Section 30 of the RCC. In either Section, no
administrative or criminal liability is provided. However, as stated
earlier, under the RCC, there is now Section 158 on administrative
sanctions, above quoted, that the Commission can impose if, after due
notice and hearing, it finds that any provision of the RCC has been
violated.
Thus, under the RCC, the Commission has now the authority to impose any
or all of the foregoing sanctions in case “any provision of [the RCC,]
rules or regulations, or any of the Commission’s orders has been
violated x x x, taking into consideration the extent of participation,
nature, effects, frequency and seriousness of the violation.”
As to the second issue, UCPB’s argument is anchored on the applicability
of Section 144 of the Corporation Code to Section 31.[49]
Since Section 144 provided as penalty imprisonment for not less than 30
days but not more than 5 years, then the period of prescription,
according to UCPB, should be 8 years for violations penalized under
special laws by imprisonment for 2 years or more, but less than 6 years
pursuant to Act No. 3326.[50]
Citing Section 2 of Act No. 3326, which provides that “[prescription
shall begin to run from the day of the commission of the violation of
the law, and if the same be not known at the time, from the discovery
thereof and the institution of judicial proceedings for its
investigation and punishment,” UCPB posits that at the time of the
commission of the alleged violation in 1998, there was no way that it
could have taken action on the undue payment of bonuses because the
recipients of the bonuses comprised the management of the bank with
Antiporda and Carreon being the top two officers, and even when the bank
changed administrations, i.e., from the administration of
Antiporda and Carreon to the next administration, there was no way the
new administration could have taken action against Antiporda and Carreon
until it had evidentiary basis, which came through only with the KPMG
report of 2003.[51] To UCPB,
the prescriptive period should have started to run only in 2003 when
UCPB allegedly discovered the undue payment of bonuses from the KPMG
report.[52]
The Court having already ruled on the first issue that Section 144 of
the Corporation Code did not include violations of Section 31 as
“[violations of any provisions of [that] Code or its amendments not
otherwise specifically penalize therein,” wherein imprisonment for not
less than 30 days but not more than 5 years was the imposable penalty,
then Act No. 3326 is not the applicable law on prescription.
The liability of the erring director, trustee or officer under Section
31 of the Corporation Code being purely civil, i.e., “all damages
resulting [from its violation] suffered by the corporation, its
stockholders or members and other persons,” the Court holds that it is
the Civil Code that is the controlling law. The Court thus agrees with
the CA that it is Article 1146 of the Civil Code which determines the
prescriptive period. It provides:
ART. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict. (n)
To recall, the questioned bonuses were paid through 50 manager’s checks
amounting to P117,872,269.43, which were released to the concerned UCPB
corporate officers and directors from April 6 to July 31, 1998. The KPMG
special audit report[53] was dated June 30, 2003. The Complaint-Affidavit of UCPB is dated July 23, 2007 and filed on even date with the DOJ.[54]
Even if the Court were to uphold UCPB’s actual discovery theory, the
action upon the injury to its right under Section 31 of the Corporation
Code or the damages that it had suffered by virtue of the alleged
unauthorized payment of bonuses had prescribed on July 1, 2007 or four
years from June 30, 2003, the purported day of actual discovery by UCPB.
This is pursuant to Commissioner of Internal Revenue v. Primetown Property Group, Inc.,[55]
where the Court held that Section 31 of the Administrative Code of
1987, which provides that “year” shall be understood to be twelve
calendar months, governs the computation of periods, being the more
recent law as compared to the Article 13 of the Civil Code, which
provides that a year consists of 365 days. When UCPB thus filed its
Complaint-Affidavit on July 23, 2007, the four years or 48 calendar
months prescriptive period had already lapsed.
Under Article 1155 of the Civil Code, the prescription of actions is
interrupted when they are filed before the court, when there is a written extrajudicial demand
by the creditors, and when there is any written acknowledgment of the
debt by the debtor. The filing of the Complaint-Affidavit by UCPB with
the DOJ did not interrupt the prescription of its action not only
because this was beyond the 48 calendar months prescriptive period based
on Section 31 of the Corporation Code, but also because it was not
filed before the proper court and finally because the
Complaint-Affidavit cannot even be deemed as an extrajudicial demand for
damages given its prayer: “On the basis of the foregoing, [Antiporda
and Carreon] should be held liable under Section 31, in relation to Section 144 of the Corporation Code for being guilty of gross bad faith/and/or gross negligence in directing the affairs of the corporation.”[56] Put simply, UCPB did not make a claim for any damage in the Complaint-Affidavit it filed.
Regarding the KPMG special audit report, the Court cannot make a determination based on the “Executive Summary”[57]
thereof, which UCPB attached to its Petition, that UCPB came to know of
the payment of the questioned bonuses only on June 30, 2003. The
“Executive Summary” merely mentions that UCPB “has been incurring net
losses since 2000 x x x [and] its Audit Committee has recommended a
special audit to determine the performance and accountabilities of the
BOD and management, as appropriate, from 1986 to 2002;”[58]
and the primary objective of the special audit is: “to evaluate the
performance and establish accountabilities of the BOD and management
from 1986 to 2002.[59] The
unauthorized payment of the bonuses was not even mentioned therein.
Thus, the actual discovery theory of UCPB does not even appear to have a
factual leg to stand on.
Given that there is no factual basis from which actual discovery of the
payment of the questioned bonuses by UCPB, assuming the same to have
been concealed by Antiporda and Carreon, can be based and that,
according to the CA, said payment had been widely and publicly known
given that UCPB belongs to the heavily-regulated banking industry whose
transactions are documented and audited by the BSP on a regular basis,
the filing of the action for damages based on Section 31 of the
Corporation Code had already prescribed 48 calendar months or 4 years
from July 31, 1998, the last release date of the 50 manager’s checks, at
the latest.
Parenthetically, if the second issue is to be resolved under the aegis
of the RCC and assuming that Section 170 applies to Section 30 of the
RCC, prosecution of any violation of Section 30 prescribes in a year or
12 calendar months pursuant to Section 1, Act No. 3326, given that the
penalty of any Section 30 violation is fine only.
WHEREFORE, the Petition is hereby DENIED. The Decision
dated May 24, 2013 and the Resolution dated October 17, 2013 of the
Court of Appeals in CA-G.R. S.P. No. 114184 are AFFIRMED.
Peralta, C.J., (Chairperson), Carandang, Zalameda, and Gaerlan, JJ., concur.
[1] Rollo, Vol. I, p. 12.
189530, January 11, 2017, 814 SCRA 184. Rendered by the First Division;
penned by Associate Justice Teresita J. Leonardo-De Castro, and
concurred in by Chief Justice Maria Lourdes P. A. Sereno and Associate
Justices Mariano C. Del Castillo, Francis H. Jardeleza and Alfredo
Benjamin S. Caguioa.
REVISED CORPORATION CODE OF THE PHILIPPINES. Approved on February 20,
2019; took effect on February 23, 2019 upon completion of its
publication in Manila Bulletin and the Business Mirror on February 23,
2019, see <
http://www.sec.gov.ph/wp-content/uploads/2019/11/2019Legislation_RevisedCorporationCodeEffectivity.pdf>.
Associate Justice Nina G. Antonio-Valenzuela, with Associate Justices
Francisco P. Acosta and Socorro B. Inting concurring.
[10] Supra note 5.
[11] Id. at 65-66.
PERIODS OR PRESCRIPTION FOR VIOLATIONS PENALIZED BY SPECIAL ACTS AND
MUNICIPAL ORDINANCES AND TO PROVIDE WHEN PRESCRIPTION SHALL BEGIN TO
RUN, December 4, 1926.
penalized by special acts shall, unless otherwise provided in such acts,
prescribe in accordance with the following rules: (a) after a year for offenses punished only by a fine or by imprisonment for not more than one month, or both; (b) after four years for those punished by imprisonment for more than one month, but less than two years; (c) after eight years for those punished by imprisonment for two years or more, but less than six years; and (d)
after twelve years for any other offense punished by imprisonment for
six years or more, except the crime of treason, which shall prescribe in
twenty years. Violations penalized by municipal ordinances shall
prescribe after two months.
[18] Rollo, Vol. 1, p. 66.
[19] Article 1146 of the Civil Code provides:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict;x x x x
[20] Rollo, Vol. 1, p. 67.
[25] Id. at 69.
[28] Rollo, Vol. II, pp. 779-806.
[29] Id. at 652-682, excluding Annexes.
[30] Id. at 892-931.
[32] Id. at 1034-1077.
[33] Id. at 1090-1151.
[37] No. L-42010, August 31, 1976, 72 SCRA 559.
[38] Rollo, Vol. I, pp. 27-28.
[41] CA-G.R. SP No. 109094, August 12, 2009.
[42] SECTION 34. Disloyalty of a Director.
– Where a director, by virtue of his office, acquires for himself a
business opportunity which should belong to the corporation, thereby
obtaining profits to the prejudice of such corporation, he must account
to the latter for all such profits by refunding the same, unless his act
has been ratified by a vote of the stockholders owning or representing
at least two-thirds (2/3) of the outstanding capital stock. This
provision shall be applicable, notwithstanding the fact that the
director risked his own funds in the venture.
Section 33 of the RCC is the counterpart provision of Section 34 of the
Corporation Code.
[45] In American
jurisprudence, the following are the two schools of thought regarding
the application of the rule of lenity — a textually ambiguous penal
statute being given more lenient interpretation in favor of a criminal
defendant: (1) the rule is to be applied after resort to the
language and structure, legislative history and motivating policies of
the statute; and (2) the existence of textual ambiguity in the penal
statute is sufficient for the rule’s application, Ient v. Tullett Prebon (Philippines), Inc., supra note 2, at 211-212, citing United States v. R.L.C., 503 U.S. 291, 305-308 (1992).
on Election Offenses, which include: “j) Violation of any of the
provisions of this Act” or the Voter’s Registration Act, and Section 46
on Penalties of Republic Act No. 8189.
[47] SECTION 74. Books to be Kept; Stock Transfer Agent.
– x x x
x x x x
Any officer or agent of the corporation who shall refuse to allow any
director, trustee, stockholder or member of the corporation to examine
and copy excerpts from its records or minutes, in accordance with the
provisions of this Code, shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of
an offense which shall be punishable under Section 144 of this Code x x
x.
x x x x
Section 73 of the RCC is the counterpart provision of Section 174 of the
Corporation Code. The offense mentioned in Section 73 is now punishable
under Section 161 (Violation of Duty to Maintain Records, to Allow
their Inspection, or Reproduction) of the RCC, which imposes a fine
ranging from P10,000.00 to P200,000.00, at the discretion of the court,
taking into consideration the seriousness of the violation and its
implications, and a fine ranging from P20,000.00 to P400,000.00 when the
violation is injurious or detrimental to the public.
[50] Id.
[51] Id. at 36-38.
[53] Only the cover page of
KPMG’s UCPB Special Audit Report 30 June 2003, Final Draft for
Discussion, showing the Executive Summary was attached as Annex “B” to
UCPB’s Motion for Reconsideration dated August 15, 2008 before the DOJ. Rollo, Vol. 1, p. 166.
[55] G.R. No. 162155, August 28, 2007, 531 SCRA 436.