SEC En Banc Case Nos. 12-12-278, 01-13-281 & 08-14-339(Asian Hospital, Inc. vs. EPD) Decision

Securities and Exchange Commission COMMISSION EN BANC Republic of the Phitippines Department of Finance

IN THE MATTER OF:

ASIAN HOSPITAL, INC. SEC En Banc Case No. 12-12-278 X

ASIAN HOSPITAL, INC.

Appellant,

-versus- SEC En Banc Case No. 01-13-281

INVESTIGATION DIVISION, AND ATTYS. KAPUNAN, IRENE JOY BESIDO- BEHALF SINGSON, PROSECUTION ATTY. LALAINE P. MONSERATE, in her capacity as DIVISION HEAD GARCIA AND RYAN V. ROMERO CASTILLO ENFORCEMENT OF THE KAPUNAN OF THE COMPLAINTS OF LORNA LAW DEPARTMENT, MS. OFFICES GARCIA & Appellees. PATAJO- EVELYN AND AND IN

X

ASIAN HOSPITAL, INC.

Appellant, -versus- SEC En Banc Case No. 08-14-339

DEPARTMENT, ENFORCEMENT PROSECUTION MR. JOSE P. AQUINO, IN HIS CAPACITY AS DIRECTOR OF THE DEPARTMENT, AND

Appellee.

x

Asian Hospital Inc. vs. Enforcement and Prosecution Department et al SEC En Banc Case Nos. 12-12-278: In the Matter of. Page 2 of 20 01-13-281; DECISION 08-14-339

DECISION

the Memorandum of Partial Appeal dated 6 August 2014 filed by Asian Assailed Order") of the Enforcement and Prosecution Department (now Hospital, Inc. in SEC En Banc Case No. 08-14-339 which assails the Order the Enforcement and Investor Protection Department or EIPD), and (c) dated 7 July 20142 (the "Second Assailed Order") of the EIPD. Appeal dated 18 December 2012 filed by Evelyn R. Singson in SEC En Banc Case No. 12-12-278, (b) Memorandum of Appeal dated 26 December 2012 filed by Asian Hospital, Inc. in SEC En Banc Case No. 01- 13-281, both assailing the Order dated 6 December 20121 (the "First Before the Commission En Banc are (a) the Memorandum of Partial

law being presented therein is anchored on the same factual Appeals of the parties pursuant to Section 1 Rule 313 of the Rules of Court, which applies suppletorily4, considering that the question(s) of circumstances. On a procedural matter, the Commission has consolidated the

RELEVANT FACTS

known as Bumrungrad International Philippines, Inc.), Insular Life Singson (collectively, the "Significant Shareholders"), with Filinvest number of AHI shares equivalent to its unpaid interests on AHI's executed between and among Asian Hospital, Inc. (AHI), Healthcare Assurance Co., Ltd. (Insular), Dr. George Garcia (Dr. Garcia) and Ms Alabang, Inc. (FAI), whereby the latter agreed to subscribe to such obligations.5 Properties, Inc. (HPI), Vista Medical Management, Inc. (VMMI, now On 28 August 2000, a Memorandum of Agreement (the "M0A") was

acquired by FAI pursuant to its provisions (the "Buy-Back Shares") within one (1) year from the agreed payment date at a price composed of one or several other investors to purchase/acquire all of the AHI shares Under the MOA, it was agreed that (a) AHI will repurchase, or cause

2 SEC - EIPD Case No. 2013-359 entitled In the Matter of Asian Hospitai, Inc. 1 SEC -- EPD Case No. 2011-1734 CID entitled In the Matter of Asian Hospital, Inc., 3 "SECTION 1. Consolidation. When actions involving a common question of law or fact are pending before the court. consolidated; and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs whenever practicable, be applied by analogy or in a suppletory character and effect." 5 Reply Memorandum dated 4 February 2013. Par. 6 it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions 4 SEC. 1-6, Rule I Part I of the 2016 Rules of Procedure of the Securities and Exchange Commission provides that: or delay. "The pertinent provisions of the Rules of Court may, in the interest of expeditious dispensation of justice and

Asian Hospital Inc. vs. Enf dPros utin In the Matter of fnenteta

SEC En Banc Case Nos. 12-12-278 Page 3 of 20 01-13-281: DECISION 08-14-339

in the event that AHI fails to comply with its obligation to purchase the the par value of the shares plus premium, and (b) the Significant Shareholders shall acquire the Buy-Back Shares at an agreed percentage Buy-Back Shares.7

payment of its remaining obligations under the MOA and informed it of Significant Shareholders, demanding payment of AHI's remaining obligation under the MOA, and the purchase price of the Buy-Back Shares.8 its continuing failure to repurchase the Buy-Back Shares. This was followed by a Statement of Account dated 15 January 2002 sent to thel In a letter dated 14 January 2002, FAI demanded from AHI the

to comply with its obligations to repurchase the Buy-Back Shares consisting of 114,406,150 shares.9 However, since AHI had no retained earnings which prevented it from repurchasing the Buy-Back Shares, the Significant Shareholders (excluding Ms. Singson) entered into a Letter Agreement dated 3 December 2004 (the "Letter Agreement") where they agreed as follows: In a letter dated 27 August 2004, FAI reiterated its demand for AHI

(e) FAI will waive 50% of the premium accruing on the (a)VMMI shall repurchase 13% of the Buy-Back Shares; (b) Insular will assign to FAI its advances to AHI to satisfy its (c) Dr. Garcia will assign to FAI its advances to AHI to satisfy its f} d The obligation to purchase the remaining 37% of the Buy-Back The AHI Liability and the Premium Liability shall be converted Shares, which Ms. Singson was originally liable to pay for amount of PhP28,183,421.53 (the "AHI Liability"); Shares; under the MOA, shall be booked as cash liability of AHI in the outstanding amount of AHI's obligation to FAI as of 31 August 2004, and all the premium accruing after such date, reducing AHI's liability for the premium on the outstanding amount of the obligations to PhP17,141,761,which AHI shall book as liability (the "Premium Liability"); obligation to purchase 13% of the Buy-Back Shares; obligation to purchase the remaining 37% of the Buy-Back

into 40,110,781 AHI shares.10

6 (a) VMMI - 13%; (b) Insular - 13%; and (c) Dr. Garcia and Ms. Singson -- 74% 7 Ibid. Pars. 7 and 8 8 Ibid. Pars. 9 and 10 10 Id. Par. 14 9 Ibid. Par. 13

Asiar Hospital Inc. SEC En Banc Case Nos. 12-12-278; Drc cutia In the Matter o artmertet al Page 4 of 20 01-13-281; 08-14-339 DECISION

assigned to it; and (b) the AHI Liability and the Premium Liability which FAI by AHI and the Significant Shareholders under the MOA was consideration of (i) the advances to AHI which Insular and Dr. Garcia AHI booked as "Accounts Receivables".11 Consequently, the obligation to extinguished, which included the 37% of the Buy-Back Shares which Ms Singson agreed to purchase/acquire. Pursuant to the Letter Agreement, FAI was issued shares in

June 2011 when it was removed pursuant to the legal opinion which AHI's external auditor, SyCip Gorres & Velayo ("SGV) confirmed that this Singson agreed to purchase/acquire was then booked as accounts receivable from AHI. This entry was reflected in the books of AHI until confirmed that the MOA was deemed novated by the Letter Agreement. was an acceptable way of booking the transaction.12 In February 2005, the 37% of the Buy-Back Shares which Ms.

PhP45,325,182.00 (the "Subject Amount"). The shareholders of AHI were furnished with a copy of the Required Reports. This disclosure, according to Ms. Singson, tarnished her reputation as she did not owe AHI the Subject Amount.13 (collectively, the "Required Reports") which disclosed, among others, that it made advances to a stockholder in the amount of AHI filed with the Commission its 2010 AFS and Annual Report

different dates in July and August of 2011, and subsequently sent AHI a Letter dated 17 August 2011 demanding from it (including its past and the alleged advances to her, (b) the issuance of a public apology to her, present directors), VMMI, and SGV (a) the correction of the recording of (c) the buy-out of her shares in AHI, (d) the payment of damages, and (e) the reimbursement of her expenses.14 Ms. Singson forthwith inspected the corporate records of AHI on

supplementary schedules of AHI's AFS. AHI also proposed to make a the basis for the questioned entry in the books of the corporation, and informed her that the same had already been deleted in the clarificatory statement on the said issue at the next annual shareholders In a letter dated 23 September 2011, AHI explained to Ms. Singson

13 Memorandum of Partial Appeal dated 18 December 2012. Par. 4.2 14 Reply Memorandum dated 4 February 2013. Par. 21 12 Id. Pars. 16, 18 and 19 l1l Id. Par. 15

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meeting, but denied Ms. Singson's claim for damages, reimbursement, and buy-out of her shares.15

16 November 2011 for "Fraudulent Manipulation of the Financial the appropriate penalties against AHI and the relevant Significant Statements of Asian Hospital" (the "Complaint") against AHI with the Shareholders for alleged violation of the Corporation Code, and the relevant accounting and reporting standards.16 EIPD, praying for the conduct of an investigation and the imposition of On 16 November 2011, Ms. Singson filed a Letter-Complaint dated

the entry in its 2005 to 2010 AFS (the "Relevant AFS") relating to the acceptable way of booking the transaction.17 However, such entry was false or misleading statements; neither were there material accounts receivable from Ms. Singson was justified by the extinguishment of her obligation under the MOA which, according to SGV, was an corrected pursuant to the legal opinion issued by its external counsel (the Agreement.18 Thus, AHI maintained that the Relevant AFS did not contain misrepresentations made therein. dismissal of the Complaint for utter lack of merit, essentially arguing that "Legal Opinion"] confirming that the MOA was novated by the Letter- In its Answer dated 30 April 2012 (the "Answer"), AHI sought the

make its findings on the propriety of the issuance of the stocks Manifestation dated 30 August 2012 filed by Asian Hospital, Inc.) with Motion to Involve the Office of the General Accountant of the Securities and Exchange Commission dated 18 September 2012, where she prayed that the Office of the General Account (OGA) be directed to comment and corresponding to the amount of PhP45,325,182.53. On 9 October 2012, Ms. Singson filed a Reply (To Counter-

the EPD (CID-EPD) issued the First Assailed Order dismissing the to the Office of the General Accountant the evaluation of AHI's AFS from 2005 until 2011 for possible violation of Rule 68 of the SRC-IRR.19 The dispositive portion of the First Assailed Order reads: Complaint on the grounds of mootness. The CID-EPD however endorsed On 6 December 2012, the Complaints and Investigation Division of

16 Memorandum of Partial Appeal dated 18 December 2012. Par. 4.16 (see Annex "B") 17 Answer dated 30 April 2012. Pars. 10, 14 18 Ibid. Par. 12 15 Ibid. Par. 23 19 Ibid. Par. 4.23

Asian Hospital Inc. vs. En SEC En Banc Case Nos. 12-12-278; Dre In the Matter of. Page 6 of 20 01-13-281 08-14-33 DECISION eta

Financial Statements from 2005 to 2011 for possible for being moot and academic, without prejudice to the filing of appropriate action in Court by the complainant. Furthermore, this case shall be endorsed to the Office of the General Accountant (OGA) for its review of AHI's Audited violation of SEC Rule 68 of the Implementing Rules and Regulations of the Securities Regulation Code (SRC). "WHEREFORE, premises considered, this case is DISMISSED

(A) The Singson Appeal - SEC En

Banc Case No. 12-12-278

On 26 December 2012, Ms. Singson filed the instant Memorandum of Partial Appeal which was docketed as SEC En Banc Case No. 12-12-278 (the "Singson Appeal").

praying for the dismissal of the Singson Appeal for lack of merit, and the its Answer. affirmation of the Assailed Order on the ground that Ms. Singson allegedly failed to raise new grounds that would warrant the reversal thereof. AHI essentially reiterated the allegations and arguments that it presented in On 4 February 2013, AHI filed its Reply Memorandum therein

(B} The AHI Appeal - SEC En Banc

Case No. 12-13-281

in effect fulfilled Ms. Singson's liability under the MOA. This justified the Was docketed as SEC En Banc Case No. 12-13-281 (the "AHI Appeal"). The the finding of the EPD that "AHI has no legal basis for recording Advances to a Stockholder (Ms. Evelyn Singson) for the amount of P45,325,183.00." and the Significant Shareholders under the MOA, after the Letter Agreement was implemented, AHI recognized a liability under such Letter Agreement to cover the 37% share attributable to Ms. Singson. AHI attribution of the amount that AHI settled on behalf of Ms. Singson as "advances" against the latter in the books of the corporation, applying Article 1236 of the Civil Code, which was allegedly confirmed by SGV.20 AHI maintained that with the extinguishment of the obligations of AHI AHI Appeal prayed for the reversal or deletion in the Assailed Order of On 10 January 2013, AHI filed its Memorandum of Appeal which

where she prayed for the issuance of an order (a) denying the AHI Appeal, On 19 February 2013, Ms. Singson filed her Reply Memorandum

20 Memorandum of Appeal dated 26 December 2012. Par. 49

Asian Hospital II SEC En Banc Case Nos. 12-12-278: DT I Department et al In the Matter . Page 7 of 20 01-13-281 08-14-339 DECISION

recording the advances in the amount of Php45,325,183.00 in the name contained a false or misleading statement. This, according to Ms. Singson also had the effect of watering of AHI's stocks since the non-existent advances recorded against her were allegedly used in consideration for and (b) upholding the finding of the EPD that AHI had no legal basis in of Ms. Singson. Ms. Singson argued that the booking of an "Accounts Receivable" against her name when she was not even a party to the Letter Agreement resulted in AHI's books being materially misstated as it the issuance of additional shares of stock to FAI.21

C The AHI Partial Appeal - SEC En Banc Case No. 08-14-339

2005 to 2011. The Show Cause specifically included, among others, (a) the finding of material misstatement of the 2004 AFS representing and conditions of the "Advances to a Stockholder" in its 2004 and 2005 FS, and (c) the reason/s for the write off in the 2010 AFS. of Rule 68 of the SRC-IRR to the OGA and the action by the latter on the same, the EPD issued a Show Cause Letter on 16 December 2013 (the showed violations of Rule 68 of the SRC-IRR in its AFS covering the years advances to Ms. Singson, (b) the absence of any disclosure of the terms "Show Cause") directing AHI to address the findings of the OGA which Following the endorsement of the matter on AHI's alleged violation

and earlier can no longer be cited as basis for imposing any liability against it considering that these violations, if any, have already prescribed pursuant to Sec. 62.2 of the SRC. AHI also addressed the items the advances made to Ms. Singson, AHI maintained a contrary position and essentially reiterated its arguments in its previous pleadings in support thereof. AHI also insisted that, assuming the absence of a legal basis, the questioned recording should not be considered a "material" misstatement since the advances did not comprise a significant portion and/or omissions relating to the preparation of its AFS for the year 2008 which the OGA found to be in violation of Rule 68 of the SRC-IRR. Specifically on the finding that AHI materially misstated in its 2004 AFS of its receivables i.e. only around 1%. In its letter dated 13 January 2014, AHI maintained that the acts

penalty in the amount of Pesos: Two Hundred Eighteen Thousand One AHI to have violated Rule 68 of the SRC-IRR, and imposed upon it a On 7 July 2014, the EPD issued the Second Assailed Order finding

21 Reply Memorandum dated 15 February 2013. Pars. 9, 12, 14

Asian Hospital Inc. vs. Enfo SEC En Banc Case Nos. 12-12-278; In the Matter o epartment et al Page 8 of 20 01-13-281 08-14-339 DECISION

Hundred Ninety-Seven & 32/100 (PhP218,197.32) [the "Monetary Penalty"l, the dispositive portion of which reads:

amended, ASIAN HOSPITAL INC. is hereby directed to pay in disclosure requirements provided in Rule 68 of the SRC, as cash or manager's check payable to the Securities and Exchange Commission within fifteen (15) days from receipt PES0S (P218,197.32) as penalty for said violations.' THOUSAND ONE HUNDRED NINETY-SEVEN and 32/100 "WHEREFORE, premises considered, for violating the of this Order the total amount of TWO HUNDRED EIGHTEEN

Protest and with Reservation of Rights, allegedly for the purpose of ensuring the good standing of AHI with the Commission. On 4 August 2014, AHI filed a Notice of Payment of Penalties Under

process; for being devoid of factual and legal bases; and on the ground of Memorandum of Partial Appeal (the "AHI Partial Appeal"], praying for the reversal of the Second Assailed Order for being void inasmuch as it was allegedly rendered in violation of AHI's right to administrative due prescription.22 On 6 August 2014, AHI filed its Notice of Partial Appeal and

it was afforded every opportunity to refute the initial findings of the OGA but failed to provide an acceptable explanation for its failure to comply with the rules;23 and (b) the prescriptive period under Sec. 62.2 of the SRC applies only to civil liability, citing the case of Citibank vs Tanco- maintained that the AHI Partial Appeal should be dismissed because (a) Gabaldon.24 In its Reply Memorandum filed on 20 August 2014, the EPD

ISSUES

records of the instant case voluminous disclose that these consolidated cases essentially involve an intra-corporate dispute which under Section 5.2 of the SRC is now within the exclusive province of the proper Regional Trial Court sitting as commercial courts. However, considering that the Complaint equally alleged violation by AHI of Rule 68 of the SRC-IRR, The pleadings submitted by the parties which have made the

22 Memorandum of Partial Appeal dated 6 August 2014. Par. 27 23 Reply Memorandum dated 20 August 2014. Pars. 12 and 13 24 Ibid. Pars. 15 to 17

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the primary and exclusive jurisdiction of this Commission, and which in be passed upon by the Commission are as follows: which the EPD correctly took cognizance of as a matter that falls within turn resulted in the issuance of the Assailed Orders, the issues that will

(A

WHETHER THE EPD WAS CORRECT IN HOLDING THAT THE ACTION SUBJECT OF THE INSTANT CASE HAS NOT YET PRESCRIBED.

(B)

IMPOSING UPON THE LATTER THE MONETARY PENALTY. WHETHER THE EPD COMMITTED REVERSIBLE ERROR IN FINDING THAT AHI VIOLATED RULE 68 OF THE SRC, AND

C

WHETHER THE EPD WAS CORRECT IN HOLDING THAT THE INSTANT CASE HAS BECOME MOOT AND ACAMEDIC.

RULING

that the findings therein are allegedly bereft of the requisite factual and legal bases. Assailed Order, AHI was denied of its right to due process in the sense Preliminarily, We will determine if, in relation to the Second

of due process is satisfied if the parties to a case are afforded the opportunity to explain their side, or to seek reconsideration of the ruling. We find this principle being reiterated in Articulo v. Cagayan State University25, where the Supreme Court ruled, thus: jurisprudence that in administrative cases, the fundamental requirement This Commission has consistently applied the rule enshrined in

strictly applied. In fact, the right to cross-examine is not an fully equated with due process in its strict judicial sense. In not always necessary and technical rules of procedure are not "It bears emphasis that administrative due process cannot be administrative proceedings, a formal or trial-type hearing is

25 G.R. No. 253213 [Notice), [December 2, 2020]

Asian Hospital Inc. vs. Eni SEC En Banc Case Nos. 12-12-278; d Drc cution Der In the Matter oartmeni Page 10 of 20 01-13-281: DECISION 08-14-339 Ia

basis to nullify the CSUBOR Decision for lack of due process." an opportunity to explain one's side or to seek a reconsideration of the action or ruling. Thus, there is no indispensable aspect of administrative due process. After all, due process in administrative cases, in essence, is simply

Assailed Order, and We find that the same adopted the findings of the OGA which laid down in detail (a) the relevant year of the subject AFS; AHI's responses; (d) OGA's evaluation of the company's response; and (e) the basis and amount of (b) an enumeration and brief description of AHI's non-compliance; (d) In the instant case, We have carefully scrutinized the Second the enalty. These, to the mind of the

In other words, this document sufficiently informed AHI of the findings of violation made by the Commission, through its relevant departments, VI Section 6-1 of the 2006 Rules of Procedure that the decision shall contain a statement of facts and the law on which the resolution is made. which AHI formally addressed and responded to. Commission, sufficiently satisfied the requirement provided under Rule

clearly and distinctly the facts and law on which it is based does not apply that the Second Assailed Order failed to substantially comply with the informed AHI of its infractions and the legal bases for the imposition of the Monetary Penalties. In the case of Solid Homes, Inc. vs. Laserna,26 the Supreme Court ruled that the requirement that a decision expresses rule, the same does not warrant its nullification since it sufficiently in administrative cases, thus: The foregoing notwithstanding, and granting ex gratia argumenti

manner that the parties to the proceedings can know the Tibaythat the decision must express clearly and distinctly the facts and the law on which it is based. For as long as the administrative decision is grounded on "As can be seen above, among these rights are "the decision must be rendered on the evidence presented at the hearing. or at least contained in the record and disclosed to the parties affected;" and that the decision be rendered "in such a various issues involved, and the reasons for the decisions rendered." Note that there is no requirement in Ang evidence, and expressed in a manner that sufficiently informs the parties of the factual and legal bases of the decision, the due process requirement is satisfied.

26 G.R. No. 166051, April 8, 2008.

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X X X

Office of the President that it conducted a careful study and thorough evaluation of the records of the present case and it was fully convinced as regards the findings of the HLURB Board of Commissioners. Thirdly, it was categorically stated in the Decision of the

property has not yet been fully settled and the outstanding balance is yet to be paid by them. In addition, this case is a simple action for specific performance with damages, thus, laws involved." (Emphasis supplied) And lastly, the facts of the present case were contested by the parties and it can be easily determined by the hearing officer or tribunal. Even the respondents admitted that, indeed, the total purchase price for the subject there are neither doctrinal complications involved in this case that will require an extended discussion of the not

process was not violated. On account thereof, we therefore find that the right of AHI to due

A OF THE SRC-IRR HAS NOT YET PRESCRIBED. AHI'S VIOLATION OF RULE 68

of time. Unlike acquisitive prescription or usucaption which vests the property and raised a new title in the occupant, extinctive prescription Supreme Court has ruled that courts and/or administrative agencies extinctive prescription whereby rights and actions are lost by the lapse does nothing more than bar the right of action.27 Relative thereto, the Article 1106 of the Civil Code of the Philippines provides for

27 "The differences between acquisitive and extinctive prescriptions are well-stated as fllows: Prescription was a statute of limitations. Whereas usucaption expressly 'vests the property' and other words, it is the possessor who is the actor. Under a statute of stations, however, one does not look to the act of the possessor but to the neglect of the owner. In the former the important controls." (De Morales v. Court of First Instance of Misamis Occidental, G.R. No. L-52278, [May 29, raised a new title in the occupant, prescription did nothing more than bar the right of action. The concept most fundamental to a system of titie by possession is that the relationship between the occupant and he land in terms of possession is capable of producing legal consequences. In feature is the claimant in possession, and in the iatter it is the owner out of possession which 1980]. 186 PHIL 596-600)

Asian Hospital Inc. vs. Enforcement and Prosecution Department et al. SEC En Banc Case Nos. 12-12-278; In the Matter of. Page 12 of 20 01-13-281 08-14-339 DECISION

exercising quasi-judicial powers can dismiss a case motu proprio on the basis of a finding that prescription has set in.28

Commission, at the outset, to determine if the action subject of the instant Given the foregoing, it is thus important and incumbent upon this

the validity of the action that We will have on the matter. case has already been prescribed, as alleged by AHI, as this is essential to

omissions committed by it in the preparation of its AFS for 2004 or 2005 AHI maintained in the AHI Partial Appeal that any and all acts or

considering that these violations, if any, have already prescribed pursuant to Sec. 62.2 of the SRC. Considering that the cause of action for the alleged material misstatement accrued on the date when the AFS was filed, a prescription was already set in when the Show Cause Letter was sent to AHI as it was made almost ten (10) years thereafter.29 can no longer be cited as the basis for imposing any liability against it

position provides: Section 62 of the SRC which AHI invoked in support of its

"Section 62. Limitation of Actions. 62.1. No

years after the violation upon which it is based. In no action shall be maintained to enforce any liability created under Section 56 [Civil Liabilities on Account of False Registration Statement] or 57 [Civil Liabilities Arising in Connection with Prospectus, Communications and Reports] of this Code unless brought within two (2) years after the discovery of the untrue statement or the omission, or, if the action is to enforce a liability created under Subsection 57.1 (a), unless, brought within two (2) event shall an such action be brought to enforce a liability

28 "We therefore have no other recourse but to grant the instant petition on the ground of prescription. Even if that defense was belatedly raised before the RTC for the first time on appeal from the ruling of based on the undated checks, by applying Section 1 of Rule 9 of the Rules of Court to wit: the MeTC, we nonetheless dismiss the complaint, seeking to enforce the civil liability of Evangelista jurisdiction over the subject matter, that there is another action pending between the Section 1. Defenses and objections not pleaded. -- Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings same parties for the : same cause, or that the action is barred by a prior judgment or by or the evidence on record that the court has no

for the two checks has already prescribed." (Evangelista v. Screenex, Inc., G.R. No. 211564, [November While it was on appeal before the RTC that petitioner invoked the defense of prescription, we find that the pleadings and the evidence on record indubitably establish that the action to hold petitioner liable 20.2017] statute of limitations, the court shall dismiss the claim

29 Notice of Partial Appeal dated 6 August 2014. Pars. 24 and 25

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created under Section 56 or Subsection 57.1 (a) more than the public, or under Subsection 57.1(b) more than five (5) five (5) years after the security was bona fide offered to years after the sale.

this Code unless brought within two (2) years after the liability created under any other provision of discovery of the facts constituting the cause of action and within five (5) years after such cause of action accrued." (Emphasis Ours) 62.2. No action shall be maintained to enforce any

Section 62.2 of thereof, but due to laches, thus: of limitation, the Commission holds that AHI is wrong in saying that nature. In the case of Citibank N.A. and the Citigroup Private Bank v. Tanco-Gabaldon, et al.,30 the Supreme Court explained the scope of the Sec. 62.2 of the SRC and categorically ruled that complaints for administrative liability under the SRC prescribed, not pursuant to the same is applicable to the instant case which is administrative in While AHI is correct that the afore-quoted provision is a statute

"Section 62 provides for two different prescriptive periods.

Section 62.1 specifically sets out the prescriptive period for the liabilities created under Sections 56, 57, 57.1(a) and 57.1(b). Section 56 refers to Civil Liabilities on Account of False Registration Statement while Section 57 pertains to Civil Liabilities on Arising in Connection with Prospectus, Communications and Reports. Under these provisions, enforcement of the civil liability must be brought within two (2) years or five (5) years, as the case may be.

On the other hand, Section 62.2 provides for the prescriptive period to enforce any liability created under the SRC. It is the the uncertainty. Does it include both civil and criminal liability? Or does it pertain solely to civil liability? interpretation of the phrase "any liability" that creates

reference to the context, i.e., that every part of the statute In order to put said phrase in its proper perspective reference must be made to the rule of statutory construction that every part of the statute must be interpreted with

30G.R. No. 198444, 4 September 2013.

Asian Hospital Inc. vs. Enfor d Dv +c n Department et al In the Matter of.

SEC En Banc Case Nos. 12-12-278; Page 14 of 20 01-13-281 08-14-339 DECISION

must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.

Section 62.2 should not be read in isolation of the other which provides for the prescriptive period for the enforcement of civil liability in cases of violations of Sections provision included in Section 62, particularly Section 62.1 56,57,57.1(a) and 57.1(b).

Moreover, it should be noted that the civil liabilities provided in the SRC are not limited to Sections 56 and 57. Section 58 provides for Civil Liability For Fraud in Connection With Securities Transactions: Section 59 Civil Liability For

With Respect to Co Manipulation of Security Price iodit Fut ;: Section 60 -- Civil Liability re Contracts and Pre-need Plans; and Section Givil iability on Account of Insider Trading. Thus, bearing in mind that Section 62.1 merely addressed the prescriptiv eriod for the civil liability

reasonably follows that the other sub-provision, Section covered by Section 62.1, namely Sections59, 60 and 61. This conclusion is further supported by the fact that the subsequent provision, Section 63, explicitly pertains to the amount of damages recoverable under Sections 56, 57, 58, 59, 60 and 61, the trial court having jurisdiction over such actions, the persons liable and the extent of their liability provided in Sections 56, 62.2, deals with the other civil liabilities that were not 7, 57.1(a) and 57.1(b), then it

prescriptive periods only of the civil liability in cases of Clearly, the intent is to encompass in Section 62 the violations of the SRC.

nature. The phrase could not have suddenly intended to ruled that "the phrase 'any liability' in subsection 62.2 can only refer to other liabilities that are also civil in mean criminal liability for this would go beyond the context of the other provisions among which it is found.' The CA, therefore, did not commit any error when it

X X X

Section 54 of the SRC provides for the administrative sanctions to be imposed against persons or entities

Asian Hospital Inc. Dye In the Matter TTJ T8T

SEC En Banc Case Nos.12-12-278 Page 15 of 20 01-13-281 08-14-339 DECISION

controlled by equitable considerations." (Emphasis and period until when complaints for administrative liability well-settled principle of law that laches is a recourse in law.And though laches applies even to imprescriptible actions, its elements must be proved positively. Ultimately the question of laches is addressed to the sound discretion of the court and, being an equitable doctrine, its application is violating the Code, its rules or SEC orders. Just as the SRC did not provide a prescriptive period for the filing of criminal actions, it likewise omitted to provide for the under the law should be initiated. On this score, it is a equity, which is, applied only in the absence of statutory underscoring supplied)

avoid liability has no leg to stand on. This notwithstanding, We will liability" in Section 62.2 of the SRC only refers to liabilities that are civil in nature. Verily, AHI's invocation of Section 62.2 of the SRC as a basis to determine if laches has set in. It is clear from the afore-quoted doctrine that the phrase "any

unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. Stated differently, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it Court emphasized that the neglect must be serious enough to cause prejudice to the other party, thus: or declined to assert it.31 In Victoriano v. Court of Appeals32, the Supreme Laches is the failure or neglect, for an unreasonable and

in equity. "...such neglect or omission to assert a right taken in conjunction with the lapse of time and other circumstances causing prejudice to an adverse party, as will operate as a bar

2011 which is the same year that she inspected the relevant documents unreasonable delay on the part of Ms. Singson in acting on the same that of AHI, and discovered the alleged fraudulent manipulation of the AFS of AHI. Against this factual backdrop, it cannot be said that there was an would justify a conclusion that there was an abandonment of the exercise of her rights. We thus affirm the finding of the EIPD, and so hold that the In the instant case, Ms. Singson filed the Complaint in November

31 Republic of the Philippines vs. Sundiam, G.R. No. 236381, August 27, 2020. 32 G.R. No. 87550, February 11, 1991.

Asian Hospit d Pro n In the Matter partment et al

SEC En Banc Case Nos. 12-12-278: Page 16 of 20 01-13-281 08-14-339 DECISION

instant case has not yet been prescribed; nor is it bared by laches.

B. AND CONSTITUTES MATERIAL VIOLATION OF RULE 68 OF THE THE ENTRY IN THE SUBJECT AFS ON RENDERS AHI SHAREHOLDER HAD NO BASIS MISSTATEMENT ADVANCES LIABLE FOR WHICH TO

SRC-IRR.

books of AHI which maliciously and erroneously portrayed her as owing by Ms. Singson, relates to the alleged error in the financial entries in the of this reality during the 2011 ASM.33 These were Ms. Singson's bases in out of her shares in AHI, (d) the payment of damages, and (e) the reimbursement of her expenses.34 demanding from AHI (a) the correction of the recording of the alleged advances to her, (b) the issuance of a public apology to her, (c) the buy- and refusing to pay AHI her obligation, and misleading its shareholders The main issue presented in the Complaint, as expressly admitted

AFS") considering that the Legal Opinion which it relied upon and used the finding of the OGA, found that AHI violated the disclosure P45,325,183.00 (the "Subject Entry") in its 2005-2010 AFS (the "Subject as legal basis in correcting the entries in the Subject AFS was only issued in 2011. Moreover, as a consequence of the investigation conducted by Second Assailed Order. Specifically, the EPD, finding merit and adopting requirements prescribed under Section 68 of the SRC, as amended. for recording Advances to a Stockholder (Ms. Singson) for the amount of OGA which found material misstatements in the AFS of AHI, the EPD subsequently imposed upon AHI the Monetary Penalty, through the In the First Assailed Order, the EPD found that AHI has no legal basis

amount of Php45,325,183.00 against the account of Ms. Singson, since it on Accounting. AHI further claimed that the advances could not be considered material under IAs 1 (par. 7) since they did not comprise a that there was a material misstatement in recording the advances in the was able to show that such entry was made in accordance with the Philippine Financial Reporting Standards and the Philippine Standards In the AHI Partial Appeal, AHI claimed that the EPD erred in finding

34 Reply Memorandum dated 4 February 2013. Par. 21 33 Reply (To Counter-Manifestation dated 30 August 2012 filed by Asian Hospital, Inc.) with Motion to Involve the Office of the General Accountant of the Securities and Exchange Commission dated 18 September 2012. Par. 1.9

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comprised 1% of the assets.35 In this regard, the Commission notes that from among the violations which the EPD found to have been committed by AHI in the Second Assailed Order, only the finding on the Subject Entry was questioned and elevated on appeal. AHI is thus deemed to have significant portion of the receivables and total assets i.e. it merely

accepted the other findings of the EPD.

We sustain the findings of the EPD.

used as a basis to justify its act in writing off the erroneous recognition of Advances to a Stockholder (Ms. Singson) in the Subject AFS. under the MOA to purchase 37% of the Buy-Back Shares was in the nature of a guarantee, which secured AHI's principal obligation to repurchase the Buy-Back Shares. The Legal Opinion proceeded to state that the subsequent execution of the Letter Agreement resulted in the extinguishment of AHI's obligation to repurchase, which equally including that of Ms. Singson's. This position was adopted by AHI and was extinguished the guarantee obligation of the Significant Stockholders The Legal Opinion expressly provided that Ms. Singson's obligation

liability.36 The recording of AHI's Liability was correct. However, there admission by AHI that pursuant to the Letter Agreement, the obligation Singson guaranteed to pay for under the MOA, was booked as AHI's cash should not have been a subsequent entry to recover such liability by booking a receivable - Advances to a Stockholder (Ms. Singson), in the light of the fact that the guarantee obligation of Ms. Singson was already extinguished with the execution of, and pursuant to the Letter to purchase the remaining 37% of the Buy-Back Shares which Ms. Agreement. Moreover, We equally note in the AHI Partial Appeal an express

by writing off the recognition of the Advances to a Stockholder, AHI in of the guarantee obligation of Ms. Singson under the MOA was should have already been reflected in the Subject AFS. It therefore matters not that the Legal Opinion, which embodied the legal basis for which prompted AHI to modify the succeeding AFS i.e. starting in 2011 effect, admitted that such entry in the Subject AFS was erroneous. In other words, the Disputed Entry in the Subject AFS was wrong because consummated (a fact that was confirmed in the Legal Opinion), and with the execution of the Letter Agreement in 2004, the extinguishment By admitting that the position in the Legal Opinion was correct

36 Ibid. Par. 18(f)(iv). Page 10 35 Memorandum of Partial Appeal dated 6 August 2014. Par. 20 to 22

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secured much earlier). The fact remains that prior to the Legal Opinion, the Disputed Entry in the Subject AFS was erroneously made from the by AHI, that the latter had caused the writing-off of the Disputed Entry from its 2010 AFS. This constitutes a material misstatement in the the correct entry, was only secured in 2011 (when it should have been start. Hence, it was only in 2011, or after the Legal 0pinion was received Subject AFS.

the Subject AFS contained material misstatements which violated Sec. 68 of the SRC, and warranted the imposition of the appropriate penalties. On the basis thereof, We agree with both the EPD and the OGA that

C. MOOTED BY THE FINDING OF THE INSTANT CASE HAS BEEN VIOLATION AND THE

IMPOSITION OF THE

AHI. APPLICABLE PENALTIES UPON

anymore show any receivable from Ms. Singson, consequent to the the ground of mootness after finding that the 2011 AFS of AHI did not writing-off of the same. In the First Assailed Order37, the EPD dismissed the Complaint on

EIPD allegedly failed to discharge. Ms. Singson was in effect saying that Corporation Code, required the EPD to conduct the proper investigation and to impose the appropriate penalties; duties, and functions which the the EIPD committed reversible error in holding that the Complaint has become moot by the mere writing-off of the receivable because the violation by AHI of Rule 68 of the SRC-IRR, as well as Sec. 62 of the determination on the alleged violation by AHI of the SRC and the Corporation Code which was the subject thereof remained pending. Ms. Singson did not agree with the EPD. She maintained that the

Administration, the Supreme Court discussed when a case becomes moot and academic, thus: In the case of Penafrancia Sugar Mill, Inc. v. Sugar Regulatory

supervening events, so that an adjudication of the case it ceases to present a justiciable controversy by virtue of or a declaration on the issue would be of no practical "A case or issue is considered moot and academic when

37 Dated 6 December 2012

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would be negated by the dismissal of the petition. Courts value or use. In such instance, there is no actual substantial relief which a petitioner would be entitled to, and which the ground of mootness. This is because the judgment will not serve any useful purpose or have any practical legal generally decline jurisdiction over such case or dismiss it on effect because, in the nature of things, it cannot be enforced."38 (Emphasis suppli ed)

SRC and directed AHI to pay the Monetary Penalty. already passed upon the issue on whether the Disputed Entry made in the Subject AFS of AHI constituted a violation of Sec. 68 of the SRC. The EPD has in fact made therein a finding of violation of Section 68 of the In the instant case, the EPD has, through the Second Assailed Order.

removal of the Disputed Entry in the Subject AFS after the same was Written-off by AHI, We find and so hold that Second Assailed Decision mooted the Singson Appeal inasmuch as the same finally determined and the SRC. The Second Assailed Decision was a supervening event that will presented in the Singson Appeal of no practical value because the EPD disposed of the issue relating to AHI's alleged violation of Section 68 of render any determination or action by this Commission on the issue Monetary Penalty, the imposition of which has been passed upon by this Commission in the instant Decision. has already passed upon the same. In fact, AHI has already paid the On account thereof, while We agree with Ms. Singson that the

Commission from acting on the Singson Appeal on the ground that the resulted in the execution thereof, any action/decision that this issuance of the Second Assailed Order, the relief which Ms. Singson was be available. compliance by AHI with the directive therein, albeit under protest, which Commission will make on the issue can no longer be enforced. With the claiming to be entitled to, or would have been deprived of has ceased to The foregoing factual circumstances effectively prevent the

has already been implemented with the payment by AHI of the Monetary recourse but to dismiss the Singson Appeal on the ground of mootness. Penalty, albeit under protest. The Commission is thus left with no other the issuance of a decision on the same matter will no longer serve any useful purpose because, in the nature of things, the Second Assailed Order Verily, any order directing the conduct of an investigation and/or

38 G.R. No. 208660, March 5, 2014.

Asian Hospital Inc. vs. Enforcement and Prosecution Department et al. SEC En Banc Case Nos. 12-12-278: In the Matter of Page 20 of 20 01-13-281 08-14-339 DECISION

dated 6 August 2014 both filed by Asian Hospital, Inc. are hereby Appeal dated 18 December 2012 filed by Ms. Evelyn Singson is hereby Appeal dated 26 December 2012 and Memorandum of Partial Appeal DISMISSED for lack of merit and basis. DISMISSED for having become moot and academic. The Memorandum of WHEREFORE, premises considered, the Memorandum of Partial

AFFIRMED. The Commission sees no further need to rule on the Order dated 6 December 2012 of the EPD since the same was already mooted by the Second Assailed Order. The Order dated 7 July 2014 issued by the EPD is hereby

SO ORDERED.

Makati City, Philippines.

EMILIO B. Chairperson AQUINO

JAVEY PAUL D. FRANCISCO KE LEF

Commissioner Commissioner

KARLO S. BELLO* Commissioner MCJILL BRYANT T. FERNANDEZ Commissioner

*On Official Business