G.R. No. 154069. June 06, 2016
INTERPORT RESOURCES CORPORATION, PETITIONER, VS. SECURITIES SPECIALIST, INC., AND R.C. LEE SECURITIES INC., RESPONDENTS.

FACTS

In 1977, Oceanic Oil & Mineral Resources, Inc. entered into subscription agreements with R.C. Lee Securities, Inc. for 5 million shares, with 25% paid. In 1978, Oceanic merged with Interport Resources Corporation, with Interport as the surviving entity. In 1979, Securities Specialist, Inc. (SSI) acquired these subscription agreements, which were indorsed in blank by R.C. Lee. In 1989, Interport issued a call for full payment of subscription receivables. SSI tendered payment for the unpaid balance on the deadline, but Interport refused, claiming the Oceanic subscriptions needed prior conversion to Interport shares. SSI requested proof of a board resolution mandating such conversion, but Interport could not produce any, and the SEC confirmed no such resolution existed.
Despite SSI’s valid tender, Interport, sixteen days later, issued the 5 million shares to R.C. Lee, relying on R.C. Lee’s registration in its books and an affidavit from R.C. Lee’s president denying any transfer. R.C. Lee then sold the shares. SSI demanded delivery of the shares from both parties. Upon refusal, SSI filed a case with the Securities and Exchange Commission (SEC) to compel delivery and claim damages, alleging bad faith and collusion.

ISSUE

The primary issue was whether Interport acted in bad faith and was thus solidarily liable with R.C. Lee for damages when it wrongfully refused SSI’s tender of payment and subsequently issued the shares to R.C. Lee.

RULING

The Supreme Court affirmed the CA and SEC rulings, holding Interport liable. The legal logic centered on Interport’s contractual obligations and its evident bad faith. Upon the merger, Interport assumed all rights and obligations under the original subscription agreements with Oceanic. SSI, as a holder of the agreements indorsed in blank, acquired a right to the shares and validly tendered payment. Interport’s refusal, based on a non-existent conversion requirement, was unjustified. The Court found Interport’s subsequent act of issuing the shares to R.C. Lee, despite SSI’s prior tender and the lack of any resolution supporting the conversion claim, constituted clear evidence of bad faith.
This bad faith was further demonstrated by Interport’s reliance on a self-serving affidavit from R.C. Lee and its failure to honor SSI’s superior claim as a holder in due course of the negotiable instruments. Consequently, Interport’s actions were not merely a breach of contract but a willful and deliberate disregard of SSI’s rights, making it jointly and severally liable with R.C. Lee for damages. The Court reinstated the SEC En Banc decision, ordering Interport to deliver the shares or their value to SSI and to pay exemplary damages and litigation expenses, solidarily with R.C. Lee, due to the presence of fraud and evident bad faith in the transaction.