G.R. No. 143972 , G.R. No. 144056 & G.R. No. 144631; August 31, 2007
PACIFIC BASIN SECURITIES CO., INC. vs. ORIENTAL PETROLEUM and MINERALS CORP., et al.

FACTS

Pacific Basin Securities Co., Inc. (Pacific Basin) purchased 308.3 million Class “A” shares of Oriental Petroleum and Minerals Corporation (OPMC) through the stock exchange, paying the full purchase price. The shares were owned by Piedras Petroleum, a sequestered company. The Presidential Commission on Good Government (PCGG) confirmed the sale and requested OPMC’s stock transfer agent, Equitable Banking Corporation (EBC), to record the transfer and issue new certificates to Pacific Basin. EBC refused, citing irregularities in the endorsement and lack of a board resolution from Piedras Petroleum authorizing the sale. After Pacific Basin complied with these requirements, EBC and OPMC still refused, arguing the shares were part of ill-gotten wealth subject to a compromised agreement under litigation, and that the sale violated rules on disposing government assets by not undergoing public bidding.
Pacific Basin filed a petition for mandamus with the Securities and Exchange Commission (SEC). The SEC Hearing Officer ruled in its favor, ordering the transfer of shares and awarding damages. The SEC en banc modified the decision by deleting the awards for actual and exemplary damages. Both parties appealed to the Court of Appeals, which affirmed the SEC en banc’s decision. The case was elevated to the Supreme Court via consolidated petitions.

ISSUE

The primary issue is whether OPMC and EBC have a ministerial duty to transfer the shares and issue stock certificates to Pacific Basin, and whether the sale through the stock exchange complies with the requirement for public bidding on government assets.

RULING

Yes. The Supreme Court affirmed the Court of Appeals with modification, reinstating temperate damages. The legal logic is twofold. First, under Section 63 of the Corporation Code, a corporation’s duty to record a transfer of fully-paid shares in its books and issue a corresponding certificate is ministerial. Pacific Basin, as a purchaser in good faith through the organized stock market, presented a duly endorsed certificate and proof of full payment. OPMC and EBC’s refusal, based on alleged defects in the seller’s authority, was unjustified as they are not required to look beyond the certificate’s endorsement for regular transactions on the exchange.
Second, the sale through the stock exchange satisfied the requirement for public bidding under Proclamation No. 50 governing the disposition of government assets. The stock market operates as a public auction with transparent pricing and equal access, ensuring the best price for the shares. The PCGG’s confirmation validated the transaction. Therefore, OPMC and EBC’s refusal constituted a breach of their statutory duty. However, the Court found the award of actual damages unsubstantiated by evidence. It instead awarded temperate damages, recognizing that Pacific Basin suffered a pecuniary loss from being deprived of the shares’ use, though the exact amount could not be precisely proven. The corporate officers were held solidarily liable for this award due to their unjustified and bad faith refusal to perform a clear ministerial duty.