Metropolitan Club, Inc. vs. Enforcement and Prosecution Department

December 10, 2013 SEC EN BANC CASE NO. 03-12-253 METROPOLITAN CLUB, INC. , appellant , vs. ENFORCEMENT AND PROSECUTION DEPARTMENT , appellee. FOR : Appeal DECISION This resolves the Appeal filed by Metropolitan Club, Inc. (hereinafter referred to as "Appellant") seeking for the issuance of an Order allowing Appellant to pay its compromise offer of twenty-four thousand six hundred seventy-five pesos (P24,675.00) as settlement for the late filing of its Quarterly Reports (SEC Form 17-Q) for the period ended July 31, 2010, October 31, 2010 and January 31, 2011, and for the setting aside of the Letter-Order dated 16 November 2011 of the Enforcement and Prosecution Department (hereinafter referred to as "Appellee") directing Appellant to settle the penalty of one hundred fifty-eight thousand nine hundred pesos (P158,900.00) for said violation. The facts of the case are as follows: On 10 January 2011, the Corporation Finance Department ("CFD") assessed Appellant with the penalty of P164,500.00 for the late filing of its Annual Report (SEC Form 17-A) for fiscal year ended April 30, 2010. Appellant submitted a compromise settlement of 15% of the total penalty or P24,675.00, which was referred to the Appellee for evaluation. On 13 June 2011, the Appellee granted the settlement offer of P24,675.00, which was paid by Appellant on 17 June 2011. On 9 June 2011, the CFD assessed Appellant with the total penalty of P158,900.00 for the late filing of its Quarterly Reports (SEC Form 17-Q) for the period ended July 31, 2010, October 31, 2010 and January 31, 2011, computed as follows: ISDCHA Nature Offense Penalty No. of Days Amount Late SEC Form 17-Q 1st Violation Reprimand 160 days (from - for the period Sept. 16, 2010 ended July 31, 2010 to Feb. 21, 2011) SEC Form 17-Q 2nd Violation P50,000.00 plus 85 days (from P75,500.00 for the period P300 per day of Dec. 16, 2010 ended Oct. 31, 2010 delay to March 10, 2011) SEC Form 17-Q 3rd Violation P60,000.00 plus 39 days (from P83,400.00 for the period P600 per day of March 18 to ended Jan. 31, 2011 delay April 25, 2011) Total P158,900.00 ========== In a Letter dated 24 June 2011, Appellant asked for a reconsideration of CFD's assessment on the ground that the cause of the delay is the delay in the completion and submission of Financial Audit Report of Appellant by its auditors, and requested for a compromise offer of 15% of the total penalty assessment of P158,900.00 or P23,835.00. On 04 July 2011, CFD referred the request to Appellee for evaluation. In a Letter dated 1 September 2011, the Appellee denied the compromise settlement. In a Letter dated 06 October 2011, Appellant requested for reconsideration of Appellee's denial on its offer for compromise settlement reiterating its earlier argument. On 20 October 2011, the Appellee denied said request for reconsideration on the settlement offer. In a Letter-Order dated 16 November 2011, Appellee directed Appellant to settle the total penalty of one hundred fifty-eight thousand nine hundred pesos (P158,900.00). Hence, the instant appeal. The ultimate issue to be resolved in this Appeal is whether the delay in the completion and submission by Appellant's External Auditor of its Annual Financial Report for the Fiscal Year Ended 30 April 2010 and the suspension of its operations due to losses warrant the granting of the settlement offer and the reversal of Appellee's Letter-Order to pay the total penalty of P158,900.00. The Appeal is without merit. aCTcDH In its Memorandum on Appeal, Appellant assigns as ground for appeal the commission by Appellant of grave abuse of discretion and serious error in ordering it to pay the total penalty of P158,900.00 and Appellant's failure to consider the following reasons for its late filing: (a) the suspension of its operations due to losses, and (b) the delay in the completion and submission by Appellant's External Auditor of its Annual Financial Report for the Fiscal Year Ended 30 April 2010. At the outset, an appeal to the Commission En Banc may be taken only if there are questions of fact, of law, or mixed questions of fact and law 1 while review on certiorari by the Commission En Banc may be taken when any Hearing Officer/Panel of the Commission has acted with grave abuse of discretion and there is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. 2 In the instant case, the errors assigned by Appellant do not involve a question of fact, of law or mixed questions of fact and law that would warrant the appeal. Appellant does not question CFD's finding of a violation of the pertinent rules of the Commission, i.e. , late filing of its Quarterly Reports (SEC Form 17-Q) for the period ended July 31, 2010, October 31, 2010 and January 31, 2011. It does not dispute the imposition of a penalty for such violation. Instead, it merely seeks to have the penalty reduced from P158,900.00 to P24,675.00 on the basis that the reason for its late filing is the suspension of its operations due to losses and the delay in the completion and submission by Appellant's External Auditor of its Annual Financial Report for the Fiscal Year Ended 30 April 2010. Accordingly, the appeal should fail. Even assuming that the appeal will be given due course, we find no cogent reason to grant the same. Appellant failed to establish the existence of grave abuse of discretion on the part of Appellant in issuing the assailed Order. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as to be equivalent to lack or excess of jurisdiction; in other words, power is exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive duty or to a virtual refusal either to perform the duty enjoined or to act at all in contemplation of law. 3 The Commission's approval of the compromise penalty for Appellant's late filing of the Annual Report for the period ended on 30 April 2010 is not sufficient to warrant the grant of a similar compromise penalty for the late filing of its Quarterly Reports (SEC Form 17-Q) for the period ended July 31, 2010, October 31, 2010 and January 31, 2011. It must be emphasized that Appellant's failure to submit aforementioned Quarterly Reports violates its undertaking in said compromise settlement not to commit a similar deficiency in the future. SECAHa It is true that the availability of the audited figures of the most recently completed year is necessary in the preparation and submission of a complete set of interim reports of the succeeding year. However, Appellant already filed its SEC Form 17-A on December 21, 2010 for the fiscal year ending 30 April 2010 and could have filed its SEC Form 17-Q for the first and second quarter of 2010 in the last week of December 2010 to prevent from being penalized had the problem been only the delay in the preparation and submission by Appellant's External Auditor of its Annual Financial Report for the Fiscal Year Ended 30 April 2010. More importantly, reporting companies, especially those imbued with public interest like Appellant, are strictly mandated to timely comply with their reportorial obligations under the Securities Regulation Code and its IRR. Also, the Commission may only agree to a settlement offer based on its findings that such settlement is in the public interest. 4 In the instant case, Appellant failed to establish that the acceptance of Appellant's offer for a compromise will be in the public's interest. It bears stressing that Appellant, a proprietary club, has a duty to its members and the investing public in general to provide timely and accurate reports and disclosures such as its Quarterly Reports. Accordingly, financial constraints do not excuse Appellant from timely preparing and submitting the reports required by law and from paying the penalties arising from its failure to timely file said reports. To rule otherwise will defeat the purpose of requiring the timely filing of such reports. WHEREFORE, premises considered, the appeal is DENIED for lack of merit. Appellant METROPOLITAN CLUB, INC. is hereby ORDERED to pay the total penalty of One Hundred Fifty-Eight Thousand Nine Hundred Pesos (P158,900.00) for the late filing of its Quarterly Reports for the period ended 31 July 2010, 31 October 2010 and 31 January 2011 computed as follows: Nature Offense Penalty No. of Days Amount Late SEC Form 17-Q 1st Violation Reprimand 160 days (from - for the period Sept. 16, 2010 ended July 31, 2010 to Feb. 21, 2011) SEC Form 17-Q 2nd Violation P50,000.00 plus 85 days (from P75,500.00 for the period P300 per day of Dec. 16, 2010 ended Oct. 31, 2010 delay to March 10, 2011) SEC Form 17-Q 3rd Violation P60,000.00 plus 39 days (from P83,400.00 for the period P600 per day of March 18 to ended Jan. 31, 2011 delay April 25, 2011) Total P158,900.00 ========= Let a copy of this Decision be furnished to the Corporation Finance Department, the Enforcement & Prosecution Department and the Economic Research & Information Department of the Commission for their information and appropriate action. SO ORDERED. December 10, 2013, Mandaluyong City, Philippines. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner (SGD.) ANTONIETA F. IBE Commissioner Footnotes 1. Section 11-1, Rule XI of the 2006 SEC Rules of Procedure. 2. Section 12-1, Rule XII of the 2006 Rules of Procedure. 3. Spouses Leynes v. Court of Appeals , G.R. No. 154462, 19 January 2011. 4. Section 55.3 of the SRC.