United Coconut Planters Bank vs. Secretary of Justice

Section 144 of the Corporation Code does not apply to violations of Section 31 thereof, because Section 31 provides its own civil sanction—joint and several liability for damages—which constitutes a specific penalty excluding the application of Section 144's general penal clause; consequently, the prescriptive period for actions arising under Section 31 is governed by Article 1146 of the Civil Code (four years), not by Act No. 3326.

United Coconut Planters Bank (UCPB) is a banking institution whose former Chairman and Chief Executive Officer, Tirso Antiporda Jr., and former President and Chief Operating Officer, Gloria Carreon, are the private respondents in this case. UCPB Capital, Inc. (UCAP) was a wholly owned subsidiary of UCPB engaged in trading, underwriting of securities, and syndication of loans. The alleged violations occurred in 1998, when Batas Pambansa Blg. 68, the Corporation Code of the Philippines, was the governing statute; that Code has since been repealed by Republic Act No. 11232, the Revised Corporation Code, which took effect on February 23, 2019. The Court applied the old Corporation Code because the acts in question were committed while it was still in force.

UCPB, through its Legal Services Division Head Jose A. Barcelon, filed a Complaint-Affidavit dated July 23, 2007 before the Department of Justice, charging its former Chairman and CEO Tirso Antiporda Jr. and former President and COO Gloria Carreon with violation of Section 31 in relation to Section 144 of the Corporation Code. The complaint alleged that Antiporda and Carreon authorized the payment of bonuses to certain UCPB corporate officers and directors in 1998, for which purpose 50 manager's checks amounting to ₱117,872,269.43 were released from April 6 to July 31, 1998. According to UCPB, the bonuses were declared in bad faith and with gross negligence because, on February 27, 1998, UCPB's Board of Directors had already resolved to shorten the corporate existence of UCAP effective March 31, 1998 and had approved the takeover, purchase of assets, and assumption of liabilities of UCAP by UCPB. When UCAP was absorbed, it had liabilities of approximately ₱4.4 billion. UCPB further alleged that the by-laws required board authority prior to the declaration of bonuses, which authority was not obtained.

Antiporda countered that his actions were guided by UCPB's audited financial statements, by-laws, and policies. He asserted that UCPB's by-laws allotted 10% of net profit as bonuses to directors and officers, and that only the manner of distributing 4% of net profit to other officers required board approval. He maintained it had been UCPB's practice to pay bonuses without a board resolution, a practice never questioned by BSP examiners. He pointed to UCPB's 1997 consolidated net income of ₱2.115 billion as the basis for the 1998 bonuses and disputed the ₱4.4 billion loss figure, attributing it to depreciation in market values of foreclosed properties that should be charged to later years. He also raised the defense of prescription, arguing that more than nine years had elapsed since the alleged violation in April 1998. Carreon similarly argued that the bonuses were justified by the by-laws, long-established practice, and UCPB's financial condition; that she was not involved in the approval or distribution of bonuses; and that the action had prescribed.

UCPB replied that the release of bonuses was surreptitious because there was no board approval, as certified by a Certification dated January 9, 2007. It asserted that Antiporda and Carreon were aware of UCAP's financial problems, having participated in board meetings where these were discussed. UCPB argued that prescription should run from discovery of the unauthorized payment, which it claimed occurred only through the KPMG special audit report dated June 30, 2003. The DOJ Task Force on Bank Fraud Cases found probable cause on April 8, 2008, and the corresponding Information was filed before the RTC of Makati as Criminal Case No. 08-1106. Antiporda filed a Petition for Review before the DOJ Secretary, who reversed the Task Force on July 30, 2008, holding that Section 144 did not apply to Section 31 and that the action had prescribed. The DOJ Secretary denied reconsideration on March 1, 2010. UCPB then filed a Rule 65 petition for certiorari before the Court of Appeals, which dismissed the petition on May 24, 2013 and denied partial reconsideration on October 17, 2013. UCPB elevated the matter to the Supreme Court via the present Rule 45 petition.

• Civil Damages Distinguished from Penal Sanctions: UCPB argued that the civil sanction for damages under Section 31 is not the same as the imposition of penalty, since damages refer to pecuniary compensation for injury while a penalty is suffering inflicted by the State for transgression of law. Citing Ramos vs. Gonong, UCPB maintained that civil liability is not part of the penalty of a crime and, when imposed for commission of crimes, is neither part of nor intended to be merged into the punishment. Because Section 31 refers to "all damages suffered by the corporation," its violation is not "specifically penalized" within the meaning of Section 144, and thus Section 144 should apply.
• Prescription Under Act No. 3326: UCPB argued that since Section 144 provided for imprisonment of not less than 30 days but not more than 5 years, the prescriptive period should be 8 years pursuant to Act No. 3326 for violations penalized by special laws with imprisonment of 2 years or more but less than 6 years. It further invoked the discovery rule under Section 2 of Act No. 3326, positing that prescription should begin to run only in 2003 when UCPB allegedly discovered the unauthorized payment through the KPMG report, since the recipients of the bonuses comprised the bank's management.
• Reliance on CA Precedent: UCPB cited the CA Special Third Division decision in Ient vs. Gonzalez and Tullett Prebon, where the DOJ Secretary's directive to file an Information against corporate directors and officers for violation of Sections 31 and 34 in relation to Section 144 was upheld.

• Applicability of Section 144 to Section 31: Whether the Court of Appeals erred in ruling that Section 144 of the Corporation Code does not apply to Section 31 thereof.
• Prescription: Whether the Court of Appeals erred in ruling that the action based on Section 31 of the Corporation Code had prescribed.

• Applicability of Section 144 to Section 31: No. Section 144 does not apply to Section 31, the latter provision providing its own specific civil sanction—joint and several liability for damages—which excludes the application of the general penal clause in Section 144, pursuant to the rule of lenity as established in Ient vs. Tullett Prebon (Philippines), Inc.
• Prescription: Yes, the action had prescribed. Because the liability under Section 31 is purely civil, the prescriptive period is governed by Article 1146 of the Civil Code—four years from the injury—and not by Act No. 3326. The complaint filed on July 23, 2007 had prescribed whether counted from the last release of bonus checks on July 31, 1998, or from the purported discovery date of June 30, 2003.

• Applicability of Section 144 to Section 31: The Court reaffirmed its ruling in Ient vs. Tullett Prebon (Philippines), Inc., which had already resolved the question whether Section 144 applies to Section 31. Applying the rule of lenity, the Court in Ient found textual ambiguity in Section 144 that persisted even after examination of legislative history and other aids to statutory construction. The Court determined that the Corporation Code contained no provision using emphatic language evincing a categorical legislative intent to treat every violation as a criminal offense. Sections 31 and 34 were introduced to define acts covered and the civil consequences of such acts or omissions amounting to a failure to fulfill fiduciary duties. Legislative deliberations on these sections focused exclusively on civil liabilities, contrasting with discussions on Section 74 (right to inspect corporate records), where legislators clearly intended both civil and penal liabilities to attach. The drafters codified common law concepts of corporate opportunity and fiduciary obligations, under which the remedies for breach are civil—injunction, damages, forfeiture of compensation. There was no indication that the drafters intended to deviate from common law practice by enforcing fiduciary obligations through penal sanction. The Corporation Code was intended as a regulatory measure, not primarily a penal statute. Had the legislature intended to attach penal sanctions to Sections 31 and 34, it could have expressly stated such intent, as it did for Section 74. UCPB's argument that civil damages are not a "penalty" and therefore Section 31 violations are not "specifically penalized" was found unpersuasive. The Court also noted that the Revised Corporation Code reinforced this interpretation: Section 170 (the counterpart of Section 144) retains the operative phrase "not otherwise specifically penalized therein," and Section 30 (the counterpart of Section 31) similarly provides only civil liability without any administrative or criminal liability, though the RCC now separately provides administrative sanctions under Section 158.

• Prescription: Having ruled that Section 144 does not apply to Section 31, the Court held that Act No. 3326—which governs prescription for violations penalized by special laws—is inapplicable. Because the liability of an erring director, trustee, or officer under Section 31 is purely civil (i.e., "all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons"), the Civil Code is the controlling law. The Court agreed with the CA that Article 1146 of the Civil Code governs, requiring that actions upon an injury to the rights of the plaintiff be instituted within four years. The questioned bonuses were paid through 50 manager's checks released from April 6 to July 31, 1998. Even under UCPB's own actual discovery theory—using June 30, 2003, the date of the KPMG special audit report—the action would have prescribed on July 1, 2007, computed as 48 calendar months pursuant to Commissioner of Internal Revenue vs. Primetown Property Group, Inc., which held that Section 31 of the Administrative Code of 1987 (12 calendar months per year) governs computation of periods as the more recent law. UCPB's complaint-affidavit, filed on July 23, 2007, was thus filed beyond the prescriptive period. Moreover, the filing of the complaint-affidavit with the DOJ did not interrupt prescription because it was filed beyond the prescriptive period, was not filed before the proper court, and could not be deemed an extrajudicial demand for damages given its prayer sought criminal liability under Section 31 in relation to Section 144, not a claim for damages. The Court further found that UCPB's actual discovery theory lacked factual basis: the Executive Summary of the KPMG report attached to the petition did not even mention the unauthorized payment of bonuses; it merely recommended a special audit to evaluate the performance and accountabilities of the Board and management from 1986 to 2002. Given that the payment of bonuses was widely and publicly known—UCPB belonging to a heavily regulated banking industry whose transactions are documented and audited by the BSP—the action had prescribed four years from July 31, 1998 at the latest.

• Rule of Lenity — When a penal statute is textually ambiguous, and such ambiguity persists even after resort to language and structure, legislative history, and motivating policies, the statute must be given the more lenient interpretation in favor of the accused. The Court applied this doctrine in Ient vs. Tullett Prebon (Philippines), Inc. to hold that Section 144 of the Corporation Code does not apply to Section 31, because the ambiguity in Section 144's phrase "not otherwise specifically penalized therein" could not be resolved by textual analysis or legislative history, necessitating lenient construction against criminal liability.
• Strict Construction of Penal Laws — Penal statutes must be construed strictly against the State and in favor of the accused; any ambiguity must be resolved in favor of the accused. This principle supported the conclusion that the Corporation Code, as a regulatory measure rather than primarily a penal statute, should not be construed to impose criminal liability absent unambiguous statutory language and legislative intent.
• Civil Liability as Specific Penalty — When a provision of law itself prescribes a specific remedy or sanction—such as civil liability for damages—that provision is "specifically penalized" for purposes of excluding the application of a general penal clause. Section 31's provision of joint and several liability for damages constitutes a specific penalty, thereby excluding Section 144's general penal sanctions.
• Prescription of Civil Actions Under Article 1146 — Actions upon an injury to the rights of the plaintiff must be instituted within four years. Where the liability arising from a statutory provision is purely civil (damages), the prescriptive period is governed by the Civil Code, not by Act No. 3326 (which governs prescription for offenses penalized by special laws). The prescriptive period is computed in calendar months pursuant to Section 31 of the Administrative Code of 1987, as held in Commissioner of Internal Revenue vs. Primetown Property Group, Inc.

• "There is no provision in the Corporation Code using similarly emphatic language 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." — This passage, quoted from Ient vs. Tullett Prebon, articulates the textual basis for the rule of lenity's application to Section 144, establishing that the Corporation Code lacks categorical language criminalizing all violations.

• "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." — This passage defines the legislative purpose behind Sections 31 and 34, explaining why penal sanctions were not intended to attach to their violation.

• "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." — This is the ratio decidendi on the prescription issue, establishing that the purely civil nature of Section 31 liability shifts the governing prescriptive regime from Act No. 3326 to Article 1146 of the Civil Code.

• Ient vs. Tullett Prebon (Philippines), Inc., G.R. Nos. 189158 and 189530, January 11, 2017, 814 SCRA 184 — Controlling precedent. The Court applied the rule of lenity to hold that Section 144 of the Corporation Code does not apply to violations of Section 31, because Section 31 provides its own civil sanction. The present case followed and reaffirmed Ient.
• Ramos vs. Gonong, No. L-42010, August 31, 1976, 72 SCRA 559 — Cited by UCPB for the proposition that civil liability is not part of the penalty of a crime. The Court found this argument unpersuasive in overturning Ient.
• Commissioner of Internal Revenue vs. Primetown Property Group, Inc., G.R. No. 162155, August 28, 2007, 531 SCRA 436 — Followed on the computation of prescriptive periods. The Court applied its holding that Section 31 of the Administrative Code of 1987 (12 calendar months per year) governs the computation of periods as the more recent law, superseding Article 13 of the Civil Code (365 days).

• Section 31, Corporation Code (Batas Pambansa Blg. 68) — Provides that directors, trustees, or officers who are guilty of gross negligence or bad faith in directing the affairs of the corporation shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members, and other persons. The Court held that this provision establishes purely civil liability, which constitutes a specific penalty excluding the application of Section 144.
• Section 144, Corporation Code (Batas Pambansa Blg. 68) — Provides penal sanctions (fine and/or imprisonment) for violations of any provision of the Code "not otherwise specifically penalized therein." The Court held this provision does not apply to Section 31 violations because Section 31 provides its own civil sanction.
• Article 1146, Civil Code — Requires that actions upon an injury to the rights of the plaintiff and upon a quasi-delict be instituted within four years. The Court held this provision governs the prescriptive period for actions under Section 31, because the liability is purely civil.
• Act No. 3326 — Establishes periods of prescription for violations penalized by special acts. The Court held this law inapplicable because Section 31 does not impose penal sanctions; it provides only civil liability.
• Section 30, Revised Corporation Code (Republic Act No. 11232) — Counterpart of Section 31 of the old Corporation Code. The Court noted it similarly provides only civil liability without administrative or criminal sanction.
• Section 170, Revised Corporation Code (Republic Act No. 11232) — Counterpart of Section 144, retaining the operative phrase "not otherwise specifically penalized therein" and adding a "Separate Liability" clause. The Court found this language consistent with the interpretation that Section 144 did not cover Section 31 violations.
• Section 158, Revised Corporation Code (Republic Act No. 11232) — New provision authorizing the SEC to impose administrative sanctions for violations of any provision of the RCC. The Court noted this as a new mechanism under the RCC, absent under the old Code.

Peralta, C.J. (Chairperson), Carandang, Zalameda, and Gaerlan, JJ., concurred.