Capitol Hills Golf & Country Club, Inc. v. Enforcement and Prosecution Department

July 27, 2015 SEC EN BANC CASE NO. 05-11-235 (SEC-EPD Case No. 10-2908) CAPITOL HILLS GOLF & COUNTRY CLUB, INC., PABLO B. ROMAN, JR., AND ANTONIO V. MERIS , appellants , vs. ENFORCEMENT AND PROSECUTION DEPARTMENT, now known as the Enforcement and Investor Protection Department , appellee. FOR : Violation of Section 68 of the SRC in Relation to SRC Rule 68, as Amended DECISIO.N For the consideration of the Commission En Banc is the Memorandum on Appeal 1 filed by appellants Capitol Hills Golf & Country Club, Inc. (Capitol Hills), Pablo B. Roman, Jr., and Antonio V. Meris on 6 May 2011 assailing the Order dated 18 March 2011 (Assailed Order) issued by the then Enforcement and Prosecution Department (EPD), now known as the Enforcement and Investor Protection Department (EIPD), of the Commission. The pertinent portion of the Assailed Order of the EPD reads as follows: "WHEREFORE, for failure to disclose and recognize the real estate taxes and penalties and the result of non-payment thereof, due on its properties in the Audited Financial Statements for the years 2004-2008, in violation of Section 68 of the S R C in relation to the Rule 68, as amended, of the ImplementingRulesand Regulations of the S R C, Capitol Hills Golf & Country Club, Inc. is hereby ordered to pay the penalty of Twenty-Five Thousand Pesos (25,000.00) plus P500.00 daily penalty from 20 October 2010 until payment is made." Statement of Facts Capitol Hills was incorporated on 17 March 1960 under SEC Registration No. 16388. The primary purpose of Capitol Hills is to engage in promoting golf as a sport and maintain a golf and country club. 2 Appellant Pablo B. Roman was the President, 3 and appellant Antonio V. Meris was the Corporate Secretary, of Capitol Hills. 4 On 27 August 2009, the minority members of Capitol Hills 5 lodged a letter-complaint dated 24 August 2009 before the EPD against the officers of Capitol Hills. 6 The minority members of Capitol Hills claim that the officers of Capitol Hills failed and refused to pay taxes on Capitol Hills' real properties. The minority members of Capitol Hills claim that such failure to pay taxes resulted in the transfer of ownership to all or some of the said officers. Moreover, the minority members of Capitol Hills claim that the officers represented in the Audited Financial Statements (AFS) submitted to the Commission that all taxes due on real properties were paid and updated. However, the minority members of Capitol Hills claim that the representations contained in the AFS are belied by the fact that the Quezon City Treasurer's Office issued to Capitol Hills two (2) "Statements of Deficiency" which were attached to the letter-complaint. 7 The first "Statement of Deficiency" dated 30 July 2007 8 provides that Capitol Hills has unpaid real estate taxes amounting to Php2,346,719.10, inclusive of penalty for the period covered 2004 up to 2nd quarter of 2007 pertaining to 15,598 square meters of commercial lot with TCT #253850 registered in its name. The details are as follows: Tax Assessed Tax Year Tax Penalty Total Declaration Value No. D-078-05824 P15,598,000 2004-2005 P935,880.00 P336,916.80 P1,272,796.80 E-078-00989 P17,547,750 2006 P526,432.50 P189,515.70 P715,948.20 2007 (1-2 Qrt) P263,216.25 P94,757.85 P357,974.10 Total P2,346,719.10 ============= The second "Statement of Deficiency" dated 3 September 2007 9 indicates that Capitol Hills has also unpaid real estate taxes amounting to Php29,409,724.06, inclusive of penalties, on a commercial lot registered in its name with TCT# N-150438 (209,695 square meters) for the period covered from 2nd quarter of 2004 up to 2nd quarter of 2007. The details are as follows: Tax Assessed Tax Year Tax Penalty Total Declaration Value No. D-078-05693 P209,695,00 n 2004 (2-4 Qrt) P4,718,137.50 P1,698,529.50 P6,416,667.00 2005 P6,290,850.00 P2,264,706.00 P8,555,556.00 E-078-00946 P235,906,880 2006 P7,077,206.40 P2,547,794.30 P9,625,000.70 2007 (1-2 Qrt) P3,538,693.20 P1,273,897.15 P4,812,500.35 Total P29,409,724.06 ============= Next, the minority members of Capitol Hills stated that they sent a letter dated 12 December 2007 informing appellant Pablo B. Roman, Jr. that there was a publication in the Manila Standard Today dated 3 December 2007 which provides that three (3) of the properties of Capitol Hills will be sold at a public auction due to their failure to pay delinquent taxes. 10 However, appellant Pablo B. Roman, Jr. ignored the letter and the properties were sold in the public auction which was subject to a redemption period. 11 Lastly, the minority members of Capitol Hills claim that Capitol Hills failed to redeem the properties and the properties were transferred to the Quezon City Government. The minority members of Capitol Hills believe that the transfer of property and the non-payment of taxes are intended to defraud the minority stockholders. Thus, they requested the Commission to examine the matter. 12 Thereafter, the Office of the General Accountant (OGA) submitted its Memorandum dated 2 December 2009 addressed to the EPD in response to the request of the latter for comments on Capitol Hills' violation of SRC Rule 68 due to its alleged failure to declare its real estate tax liabilities in the AFS. The EPD submitted the following documents for the review of the OGA: (i) Statement of Deficiency dated 30 July 2007 issued by the Quezon City Treasurer's Office; (ii) Letter-complaint dated 24 August 2009 of the minority members of Capitol Hills; (iii) Certification dated 7 October 2008 issued by the Quezon City Treasurer's Office; and (iv) AFS from 2004 to 2008 of Capitol Hills. 13 After a review of the documents, the OGA stated the following: ". . . the Audited Financial Statements of subject company from 2007-2008 are materially incomplete and misstated with respect to the disclosures and recognition of the real estate taxes and the result of non-payment thereof. We have no documentary basis to conclude that the AFS from 2004-2006 have the same deficiency/misstatement because the only available Statement of Delinquency provided to [them] is dated July 30, 2007." 14 On 8 January 2010, appellant Antonio V. Meris, who is the Corporate Secretary of Capitol Hills, received the Notice of Conference which informed him of the company's alleged non-compliance with the reporting requirements of Section 68 of the SRC and directed him to appear at a conference on 18 January 2010 before the EPD to clarify issues thereon. During the conference held on 18 January 2010, appellant Antonio V. Meris, among others, appeared and undertook to submit a position paper. 15 In the meantime, the corporate term of Capitol Hills expired on 26 January 2010 and no application amending its articles of incorporation was filed with the Commission. 16 In their Position Paper filed on 22 April 2010, appellants Pablo B. Roman and Antonio V. Meris stated, among others, that Capitol Hills had been cleared of its tax liabilities and a release of warrant of levy had been issued by the Quezon City Treasurer's Office in its favor. 17 On 12 October 2010, Capitol Hills received a Letter of the EPD 18 informing it that its 2007 and 2008 AFS failed to disclose and recognize the real estate taxes due on its properties and that it is ordered to pay a penalty in the amount Twenty-Five Thousand Pesos (Php25,000.00) for violation of Section 68 of the SRC in relation to SRC Rule 68. CAIHTE The OGA submitted another Memorandum to the EPD in response to the latter's request for a re-evaluation of Capitol Hill's alleged violation of SRC Rule 68. The EPD again submitted the documents reviewed by the OGA in the latter's Memorandum dated 2 December 2009. 19 However, this time the EPD included the "Statement of Deficiency" dated 3 September 2007 which was not included in the previous evaluation of the OGA. After an evaluation of the documents, the OGA stated the following in its 18 October 2010 Memorandum: 20 " EVALUATION AND FINDINGS 1) Statement of Delinquency xxx xxx xxx Based on the two aforementioned Statement[s] of Delinquency, the subject company has a TOTAL UNPAID REAL ESTATE TAXES inclusive of penalty amounting to P31,756,443.16 as of the given periods. 2) Certification of the Office of the Treasurer Quezon City . . . On October 7, 2008, the Quezon City Treasurer issued a certification that based on its office records, the properties of subject company were sold in public auction conducted by the City on December 13, 2007 . . . . As indicated in the said certification, the redemption period for the above-mentioned real properties expired on December 13, 2008. 3) Audited Financial Statement 2004-2008 A review of the said AFS disclosed the following findings covering the real estate tax delinquencies: . . . a) There are NO DISCLOSURES in the 2004-2007 AFS of the obligation to pay the real estate tax due based on the Statement of Statement of Delinquency n (PAS 1). b) The real estate tax due and penalty for the two (2) properties totaling P23,350,325.85 and P8,406,117.30, respectively were NOT RECOGNIZED in the AFS from 2004-2008 , as shown by the significant discrepancy in the amount of Taxes and Licenses expense of P150,268.00 per AFS as against the computed total real estate tax due of P23,350,325.85 per Statement of Delinquency. Details: Tax Year Taxes and Real Estate Taxes Penalties per Total Real Cost and Test of Licenses per per Statement of Statement of Estate Taxes Expenses Materiality AFS Delinquency Delinquency and Penalties (1% to SD SD SD SD per Statement Total Costs 7/30/2007 9/30/2007 7/30/2007 9/30/2007 of Delinquency and TCT TCT TCT TCT Expenses) #253850 #N- #253850 #N- 150438 150438 2004 P77,549 P935,880 P4,718,137.50 P336,916.80 P1,698,529.50 P16,145,019.80 P101,648,650 16% 2005 P2,562 P6,290,850.00 P189,515.70 P2,264,706.30 2006 P70,157 P526,432.50 P7,077,206.40 P189,515.70 P2,547,794.30 P10,340,948.90 P34,902,923 76.20% Subtotal P26,585,968.70 2007 P263,216.25 P3,538,603.20 P94,757.85 P1,273,897.15 P5,170,474.45 P29,941,937 106.10% Total P150,268 P1,725,528.75 P21,624,797.10 P621,190.35 P7,784,926.95 P31,756,443.16 ========= =========== ============ ========== =========== ============ c) There is NO INDICATION that unpaid real estate tax was recognized in the "Other Current Liabilities Other" or in the "Miscellaneous Expenses" accounts because the amount in lower than the real estate taxes due. Further, there are no disclosures on the components and nature of the "Other Current Liabilities Other" and "Miscellaneous Expenses" accounts (PAS 1, par. 103). d) Incomplete disclosures (Note 15 2004 AFS, Note 16 2005 AFS, Note 15 2006 AFS, Note 15 2007 AFS per SD) on significant commitment and contingencies, i.e. , real estate tax due. There is no disclosure if a legal action has been filed (PAS 37). e) Per certification issued by the Office of the City Treasurer dated October 7, 2008, the redemption period for the properties with a total area of 293,571 square meters which were sold in public auction on December 13, 2007 had already expired on December 13, 2008. It was noted that there are no changes in the carrying value of land per 2008 AFS (with 2007 comparative figure) despite the sale of certain properties thru public auction. Moreover, there is no indication or disclosure in the 2008 AFS, that subject company exercised its right to redeem the properties. There is no disclosure in the 2008 AFS regarding the public auction that took place and the expiration of the redemption period. DETACa CONCLUSION In view of the foregoing findings on the documents made available to this Office, the Audited Financial Statements of the subject company from 2004 to 2008 are MATERIALLY INCOMPLETE and MISSTATED with respect to the disclosures and recognition of the real estate taxes and penalties , and the result of non-payment thereof." (Emphasis ours) On 18 March 2011, the EPD issued the Assailed Order holding Capitol Hills liable for violation of Section 68 of the SRC, in relation to SRC Rule 68, for failure to disclose and recognize the real estate taxes and penalties and the result of non-payment thereof, due on its properties in the AFS for the year 2004-2008. On 6 May 2011, the appellants filed their Memorandum on Appeal contesting the Assailed Order. In response, the EPD filed its Reply Memorandum on 1 June 2011 praying that the appeal of the appellants be dismissed for lack of merit. Recently, in a Show Cause Order dated 19 May 2015, the EIPD, formerly the EPD, directed Capitol Hills to explain why GG&A Shares 21 published the offer of its shares to the public. It appears that despite the expiration of its term, Capitol Hills is continuing its regular business operations. In response, the counsel for Capitol Hills stated that the latter and its Board of Liquidators or Trustees has nothing to do with the offer of its shares. Moreover, the said counsel stated that the Board of Liquidators or Trustees of Capitol Hills has already been constituted and Capitol Hills is undergoing liquidation proceedings. 22 The matter is now the subject of further inquiry by the Commission. On 15 July 2015, the counsel for Capitol Hills appeared in a conference 23 before the EIPD to clarify matters regarding the alleged offering of its shares to the public. During the conference, the said counsel stated that Capitol Hills is under liquidation proceedings and submitted, among other, Minutes of the Special Meeting of the Board of Liquidators of the company (Minutes). The Minutes indicate that the following are the members of the Board of Liquidators: Joseph A. Bengzon, Alexander P. Aguirre, Solomon M. Hermosura, Enrique B. Manuel, Jr., Jose P. Dagdagan, Seve Raquel A. Roman, and Filibon F. Tacardon. The Board of Liquidators Secretary is Melamy A. Salvadora-Asperin. 24 Arguments In their Memorandum on Appeal, the appellants argue that Capitol Hills is not liable for violation of Section 68 of the SRC, in relation to SRC Rule 68, due to the following reasons: (i) they were not served the Statements of Delinquency by the Quezon City Treasurer's Office; (ii) the real estate tax liabilities were corrected and the Quezon City Treasurer's Office issued a "Release of Warrant of Levy"; (iii) the appellants acted in good faith and there was no willful failure to disclose the required information in the AFS; and (iv) the Assailed Order did not state any basis for materiality of the defect in the AFS. 25 In its Reply Memorandum, the appellants refuted the arguments of the appellants. 26 Issue The main issue to be resolved is whether Capitol Hills violated Section 68 of the SRC and SRC Rule 68 for the failure to declare in its AFS the real estate taxes and penalties assessed upon it. Ruling One of the underlying policies of the Commission under Section 2 of the SRC is to promote transparency in corporate finances by requiring corporations to make full disclosure of their financial performance to their stockholders, members, employees, and the government. To implement this policy, S R C Rule 5.1 (a) (2) mandates companies to submit annual audited financial statements before the SEC. Financial statements are a structured representation of the financial position and financial performance of an entity. The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. Financial statements also show the results of the management's stewardship of the resources entrusted to it. 27 Moreover, the aim in the submission of the AFS with the Commission is to secure information that will assist the latter in the monitoring, supervising and controlling of the corporation and activities. The statutory objective is likewise geared in protecting the shareholders or members by informing them of the true financial condition and prospects of the corporation. HEITAD These AFS, along with other relevant documents, are examined, analyzed and audited to determine if the company is complying with the generally accepted accounting principles or if the company is engaging in fraudulent financial reporting. Thus, all financial statements must strictly adhere to SRC Rule 68 otherwise penalties shall be imposed on the erring company in the following cases: "6. PENALTIES, REPEALING CLAUSE AND EFFECTIVITY a. Penalties i. All Financial Statements submitted to this Commission shall adhere strictly to the provisions of these Rules. ii. Penalties shall be imposed on the erring company in the following cases: 1. Material misrepresentation in the financial statements; 2. Any material deviation from the generally accepted accounting principles in the Philippines, such as : a. Failure to adopt an accounting standard required by this Rule resulting in a material misstatement; b. Failure to disclose required information and other relevant or material information ; c. Failure to submit any basic component of the financial statements; and d. Failure to present the required comparative figures. . . . iii. The penalties imposable on an erring company for the violation of this Rule or Rule 68.1 shall be in addition to the fine imposable due to late or incomplete filing of other parts of any report to which the financial statements are required to be attached. iv. Suspension or revocation of the primary franchise and/or secondary license may likewise be imposed by the Commission in addition to the imposition of fines. v. The above-mentioned penalties shall be without prejudice to the filing of criminal charges against the persons responsible for the violation, as provided for in Section 54.2 of the SecuritiesRegulationCode." (Emphasis ours) In the case at bar, based on two Statements of Delinquency issued by the Quezon City Treasurer's Office to Capitol Hills, the former has a total unpaid real estate taxes inclusive of penalty amounting to Php31,756,443.16. Capitol Hills failed to disclose such unpaid amounts and this amount was not recognized in the AFS from 2004 to 2008. Clearly, as pointed out by the OGA in its Memorandum dated 18 October 2010, the AFS of Capitol Hills from 2004 to 2008 are materially incomplete and misstated with respect to the disclosures and recognition of the real estate taxes and penalties, and the result of non-payment thereof. It must be pointed out that Capitol Hills was adequately notified of its real estate tax liabilities despite its argument that they were not served with the Statements of Delinquency from the Quezon City Treasurer's Office. First, for failure to settle payment, the public auction of the properties subject to the delinquent real estate taxes and penalties were published in the Manila Standard Today dated 3 December 2007. Second, the minority members of Capitol Hills notified appellant Pablo B. Roman of the said public auction of the properties. Clearly, Capitol Hills cannot feign ignorance of the real estate tax liabilities since it was adequately informed thereof. Next, Capitol Hills claims that the matter of its real estate tax liabilities was corrected and that the Quezon City Treasurer's Office issued a Release of Warrant of Levy. However, as correctly pointed out by the EPD, no documentary evidence was presented during the investigation nor attached to the Memorandum on Appeal. Clearly, these mere allegations that the real estate tax liabilities were corrected and that Quezon City Treasurer's Office issued a Release of Warrant of Levy are unsubstantiated with any evidence. It should be stressed that mere allegations do not suffice; they must be substantiated by clear and convincing proof. 28 Further, Capitol Hills argues that it acted in good faith and there was "no willful failure" to disclose the information in its AFS. However, good faith or bad faith hardly comes into the picture in the enforcement of simple regulatory rules mandating submission of reportorial requirements. To allow legal notions to intrude at every level in the implementation of these rules would defeat their very purpose, as every penalty could be subject to question and every violation based on a clear-cut rule would be qualified by the presence or absence of good faith or bad faith, or the question of motive or intent. 29 Lastly, Capitol Hills argues that the Assailed Order did not state the basis for the "materiality" of the defect in its AFS. Capitol Hills cites the Supreme Court case of Securities and Exchange Commission v. Interport Resources Corporation by stating that it is necessary that the conclusion be supported by a finding that there is a material fact " which would affect the market price of the security to a significant extent and/or a fact which a reasonable person would consider in determining his or her cause of action with regard to its stock ". 30 However, Capitol Hills reliance of the above-mentioned case is misplaced because the "material fact" referred therein is with respect to the concept of a "fact of special significance" mentioned in Section 30 of the Revised Securities Act (RSA) 31 which is a statutory provision prohibiting insider trading. 32 Clearly, the finding of materiality or material fact is not applicable in this case since the subject matter of the case deals with failure to disclose information in the AFS and not insider trading. Proper Computation of the Imposable Penalty In the Assailed Order, the EPD imposed on Capitol Hills a penalty of Php25,000.00 plus a Php500.00 penalty per day from 20 October 2010 until payment is made for the latter's material misstatement and incomplete disclosure in its 2004, 2005, 2006, 2007 and 2008 AFS. However, penalty imposed on Capitol Hills must be MODIFIED. The Revised Scale of Fines under SEC Memorandum Circular No. 02, Series of 2003 (SEC MC 02-03) provides the following: S R C VIOLATION PENALTY FOR FIRST PROVISION OFFENSE Section 54 Misrepresentation, Misleading Php100,000.00 or 1/10 of 1% of Statements, Omission of a Material Consolidated Net Income/Revenue, Fact 33 in any Filings Required to be whichever is higher. Submitted (This is in addition to the penalty on the principal report, if any) SEC MC 02-03 has been revised by the Consolidate Scale of Fines under SEC Memorandum Circular No. 06, Series of 2005 (SEC MC 06-05), to wit: S R C/IRR DESCRIPTION PENALTY FOR FIRST PROVISION OFFENSE Section 68 FAILURE TO COMPLY WITH ANY Php25,000.00 plus Php500.00 per OF THE REQUIREMENTS OF S R C day of violation RULE 68 OR INCOMPLETE DISCLOSUREIN THE FINANCIAL STATEMENTS 34 (This is in addition to the penalty on the late or incomplete filing of the annual report) MATERIAL MISSTATEMENTS IN Php50,000.00 or 1/10 of 1% of the THE FINANCIAL REPORT 35 amount of misstatement, whichever is higher, plus Php500.00 per day of continuing violation. As to the computation of the daily penalty, SEC Memorandum Circular No. 01, Series of 2011 (SEC MC 01-11) provides the following: " The DAILY PENALTY shall be computed from the date of receipt of the letter informing the company of its non-compliance with the reporting requirements of . . . Section 68 of the Securities Regulation Code . . . up to the time that the company has submitted the following documents: (a) a sufficient explanation for the non-compliance . . . " (Emphasis Ours) In the case at bar, despite receipt of the two (2) Statements of Deficiency dated 30 July 2007 and 3 September 2007, respectively, by Capitol Hills, it should already have previous knowledge of its obligations to pay real estate taxes on its properties covered by TCT #253850 and TCT #N-150438. However, considering that Capitol Hills failed to pay real estate taxes, it should again have knowledge that it will incur a liability and deficiency as a result thereof. Thus, Capitol Hills has the obligation to reflect such liability and deficiency in its AFS that is required to be filed with the Commission. ATICcS As a consequence, for the material misstatement and incomplete disclosure of the 2004 AFS, SEC MC 02-03 applies considering that the circular took effect in 2002. It must be noted that SEC MC 02-03 does not impose a penalty for violation of Section 68 of the SRC unlike SEC MC 06-05 which imposes a penalty therefor. In which case, Section 54 of the SRC referred to in SEC MC 02-03 will apply since the said provision provides for the administrative sanctions to be imposed on any person who has "omitted to state any material fact" in any documents or records to be filed with the Commission which includes an AFS. In this case, the penalty of Php100,000.00 shall be imposed on Capitol Hills 36 considering that the "incomplete disclosure" in its 2004 AFS is tantamount to "omission of a material fact" referred to in SEC MC 02-03. As to the 2005, 2006, 2007 and 2008 AFS, SEC MC 06-05 applies considering that the circular took effect in 2005. In which case, for the "incomplete disclosure" in the 2005, 2006, 2007 and 2008 AFS, a penalty of Php25,000.00 shall be imposed on Capitol Hills for each AFS filed with the Commission. On the other hand, for the "material misstatement" in the 2005, 2006, 2007 and 2008 AFS, another penalty in the amount of Php50,000.00 shall be imposed on Capitol Hills 37 for each AFS filed with the Commission. As to the computation of the daily penalty of Php500.00 pursuant to SEC MC 06-05, in relation to SEC MC 01-11, it shall be computed from the time appellant Antonio V. Meris, who is the Corporate Secretary of Capitol Hills, received the Notice of Conference from the Commission on 8 January 2010 informing the company of its non-compliance with the reporting requirements of Section 68 of the SRC and directing him to appear before the EPD to clarify issues thereon. On the other hand, the daily penalty shall be computed up to the time appellant Antonio V. Meris, on behalf of Capitol Hills, filed the Position Paper on 22 April 2011 considering that it provides an explanation for the non-compliance of the reportorial requirements. In sum, the penalty to be imposed on Capitol Hills pursuant to SEC MC 02-03 and SEC MC 06-05, in relation to SEC MC 01-11, is computed as follows: AFS Violation Daily Penalty Base Penalty Total 2004 Material misstatement n/a Php100,000.00 Php100,000.00 AFS 2005 Incomplete Disclosure Php52,000.00 Php25,000.00 Php77,000.00 AFS From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php52,000.00) Material Misstatement Php52,000.00 Php50,000.00 Php102,000.00 From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) 2006 Incomplete Disclosure Php52,000.00 Php25,000.00 Php77,000.00 AFS From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) Material Misstatement Php52,000.00 Php50,000.00 Php102,000.00 From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) 2007 Incomplete Disclosure Php52,000.00 Php25,000.00 Php77,000.00 AFS From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) Material Misstatement Php52,000.00 Php50,000.00 Php102,000.00 From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) 2008 Incomplete Disclosure Php52,000.00 Php25,000.00 Php77,000.00 AFS From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) Material Misstatement Php52,000.00 Php50,000.00 Php102,000.00 From 8 January 2010 to 22 April 2010 = 104 days (104 days x Php500.00 = Php22,000.00) Total Php416,000.00 Php400,000.00 Php816,000.00 ============ ============ ============ Hence, Capitol Hills is now imposed a penalty of Eight Hundred Sixteen Thousand Pesos (Php816,000.00) for violation of Section 68 of the SRC, in relation to SRC Rule 68, in accordance with SEC MC 03-02 and SEC MC 05-06, in relation to SEC MC 01-11, based on the foregoing. Moreover, considering that Capitol Hills' corporate term expired on 26 January 2010, the imposition of the penalty shall now be included by the Board of Liquidators or Trustees of Capitol Hills in its liquidation proceedings. 38 WHEREFORE, premises considered, the Order of the Enforcement and Prosecution Department is hereby MODIFIED. Appellant Capitol Hills Golf & Country Club, Inc. is hereby ordered to settle the penalty of Eight Hundred Sixteen Thousand Pesos (Php816,000.00) pursuant to SEC Memorandum Circular No. 03, Series of 2002 and SEC Memorandum Circular No. 05, Series of 2006, in relation to SEC Memorandum Circular No. 01, Series of 2011, for violation of Section 68 of the SRC, in relation to SRC Rule 68, to be paid in cash or by Manager's or Cashier's check to this Commission within fifteen (15) days from receipt of this Decision. Let a copy of this Order be served upon Capitol Hills at its last business address on record. Let copies be served as well to Melamy A. Salvadora-Asperin, who is the Board of Liquidators Secretary, and to Joseph A. Bengzon, Alexander P. Aguirre, Solomon M. Hermosura, Enrique B. Manuel, Jr., Jose P. Dagdagan, Seve Raquel A. Roman, and Filibon F. Tacardon, who are the members of the Board of Liquidators. SO ORDERED. Mandaluyong City, July 27, 2015. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ANTONIETA F. IBE Commissioner (On Official Business) EPHYRO LUIS B. AMATONG Commissioner (SGD.) BLAS JAMES G. VITERBO Commissioner Footnotes 1. Memorandum on Appeal dated 2 May 2011. 2. General Information Sheet for the year 2011, p. 1; Records, p. 121. 3. Reply Memorandum , Annex "2" (Letter-complaint of the minority members of Capitol Hills dated 24 August 2009). 4. Secretary's Certificate executed by Atty. Antonio V. Meris attached to the Memorandum on Appeal of the appellants. 5. Namely retired Justice Narciso T. Atienza, Retired Justice Conrado Molina, Retired Ambassador Eusebio A. Abaquin, Atty. Irineo T. Aguirre, Jr. Atty. Zosimo Padro, Jr., Mr. Porfirio M. Flores, Atty. Clodualdo A. R. De Jesus, Jr., and Atty. Clodualdo C. De Jesus, Sr. 6. Namely Messngrs. Pablo B. Roman, Jr., Claro T. Abello, Bibiano C. Elegir, Matias V. Defensor, Jr., John Matias T. Defensor III, Edmundo E. Maqnabijon, Antonio V. Meris, Horacio R. Morales, Jr., and Angel Rodriguez. 7. See Note 3. 8. Reply Memorandum , 9. Id. , 10. Id. , par. 7 and Annex "2" (Annex "C" [Letter dated 12 December 2007] of Letter-complaint of the minority members of Capitol Hills dated 24 August 2009). 11. Id. , Annex "2" (Annex "D" [Certification dated 7 October 2008 of the Quezon City Treasurer's Office] of Letter-complaint of the minority members of Capitol Hills dated 24 August 2009). 12. See Note 3. 13. Reply Memorandum , 14. Id. 15. Id. , 16. Certificate of Corporate Filing/Information; Records, p. 125. 17. Reply Memorandum , 18. Id. , 19. To recall, the OGA reviewed the following in its Memorandum dated 2 December 2009: (i) "Statement of Deficiency" dated 30 July 2007 issued by the Quezon City Treasurer's Office; (ii) Letter-complaint dated 24 August 2009 of the minority members of Capitol Hills; (iii) Certification dated 7 October 2008 issued by the Quezon City Treasurer's Office; and (iv) AFS from 2004 to 2008 of Capitol Hills. 20. Reply Memorandum , 21. GG&A Shares claims that it is the Philippines' leading and largest SEC-registered firm involved in trading and leasing of proprietary and non-proprietary club shares since 1995. (http://www.ggaclubshares.com.ph/index.shtml , 22. Records, pp. 127-130. 23. Id. , 24. Id. , pp. 133-138. 25. Memorandum on Appeal , 26. Reply Memorandum dated 26 May 2011. 27. International Accounting Standard 1 "Presentation of Financial Statements" issued by the International Accounting Standards Board. 28. Tio, et al. v. Abayata, et al. , G.R. No. 160898, 27 June 2008. 29. Lim v. CFD , SEC En Banc Case No. 02-10-196, 16 September 2010. 30. G.R. No. 135808, 6 October 2008. 31. Section 30 of the RSA reads: "Sec. 30. Insider's duty to disclose when trading . (a) It shall be unlawful for an insider to sell or buy a security of the issuer, if he knows a fact of special significance (c) A fact is "of special significance" if (a) in addition to being material it would be likely, on being made generally available, to affect the market price of a security to a significant extent , or (b) a reasonable person would consider it especially important under the circumstances in determining his course of action in the light of such factors as the degree of its specificity, the extent of its difference from information generally available previously, and its nature and reliability." (Emphasis ours) 32. Section 30 of the RSA has been amended by Section 27 of the SRC which now provides: " Section 27 . Insider's Duty to Disclose When Trading. 27.1. It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public . . . 27.2. For purposes of this Section, information is "material nonpublic" if: (a) It has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information; or (b) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security." (Emphasis ours) 33. Emphasis Ours. 34. Emphasis Ours. 35. Emphasis Ours. 36. The penalty of Php100,000.00 shall be imposed on Capitol Hills pursuant to SEC MC 03-02 considering that it is higher than 1/10 of 1% net income in the amount of Php208.65 (The net income of Capitol Hills in 2010 is Php207,649.00 per its latest AFS filed with the Commission). 37. The penalty of Php50,000.00 shall be imposed on Capitol Hills pursuant to SEC MC 06-05 considering that it is higher than the 1/10 of 1% of the misstatement in the amount of Php31,756.44 (The amount of the misstatement in the 2005-2008 AFS of Capitol Hills is Php31,756,443.16). 38. Section 122 of the Corporation Code. n Note from the Publisher: Copied verbatim from the official document. n Note from the Publisher: Copied verbatim from the official document.