Facts:
On May 31, 1991,
Pacific Basin Securities, Inc. (Pacific Basin), through the stock brokerage firm
First Resources Management and Securities Corporation (FRMSC), purchased
308,300,000 Class “A” shares of
Oriental Petroleum and Minerals Corporation (OPMC). Pacific Basin fully paid for the shares in the total amount of
P17,727,000.00 or
P0.05750 per share. The shares were listed and traded in the Makati Stock Exchange. The shares, however, were actually owned by
Piedras Petroleum Mining Corporation (Piedras Petroleum), a
sequestered company controlled by nominees of the
Presidential Commission on Good Government (PCGG). PCGG issued a letter dated June 10, 1991 to
Equitable Banking Corporation (EBC), OPMC’s stock and transfer agent, confirming Piedras Petroleum’s sale of the shares to Pacific Basin through FRMSC and requesting EBC to record the acquisition and issue corresponding certificates of stock. EBC refused to effect the transfer, stating that the endorser on the stock certificate was not an authorized signatory of Piedras Petroleum and that there was no board resolution authorizing the sale. After FRMSC complied with these requirements and renewed its demands, EBC again failed to transfer and issue the certificates. Consequently, on April 23, 1992, Pacific Basin filed a petition for mandamus with a prayer for a
writ of preliminary mandatory injunction and/or restraining order and writ of preliminary prohibitory injunction before the SEC, docketed as
SEC Case No. 04225, asserting that OPMC and EBC refused to perform a ministerial duty under
Section 63 of the Corporation Code, and that OPMC’s amended by-laws mandated issuance of a certificate of stock to each holder of fully paid shares. OPMC and EBC denied liability and claimed government ownership based on a cession made by
Roberto S. Benedicto, allegedly covered by a compromise agreement under PCGG processes, and argued that a
Temporary Restraining Order issued in related Supreme Court cases against enforcement of the compromise agreement removed the basis of PCGG’s title. They further argued that even assuming government ownership, the sale was void for failure to comply with
Proclamation No. 50 and related rules requiring public bidding for government-owned assets. The SEC Hearing Officer ruled for Pacific Basin, taking judicial notice of en banc resolutions in Supreme Court cases that had dismissed PCGG’s petitions and denied reconsideration, rendering the TRO issue moot. The Hearing Officer held that because the shares were fully paid, the transfer in the corporate books and issuance of certificates were ministerial duties of OPMC and EBC and that the officers acted in bad faith; hence, OPMC and EBC were ordered to pay actual damages, exemplary damages, attorney’s fees, and costs. The SEC en banc later modified the Hearing Officer’s decision by deleting the awards of actual and exemplary damages. On appeal, the Court of Appeals affirmed in toto the SEC en banc in a decision dated January 26, 2000, treating stock exchange trading as supplying fair competition equivalent to public bidding and holding that OPMC and EBC were ministerially bound to record the transfer. After that affirmance, the Supreme Court considered three consolidated petitions for review on certiorari under Rule 45, questioning (a) the deletion of actual and exemplary damages and the sufficiency of proof of damages and bad faith, and (b) whether government-owned shares could be disposed of only through public bidding and whether stock exchange transactions satisfy that requirement. The Supreme Court ultimately sustained the CA and SEC on liability for mandamus-type ministerial refusal and good faith, but awarded
temperate damages and denied exemplary damages.
Issues:
Whether OPMC, EBC, and the involved corporate officers were liable to Pacific Basin to register and transfer the fully paid shares and, if so, whether Pacific Basin proved entitlement to
actual and exemplary damages,
attorney’s fees, and the proper measure of damages.
Ruling:
Ratio:
Doctrine: