Securities Specialists, Inc. v. R.C. Lee Securities, Inc.

[SEC-SICD * CASE NO. 3643. October 25, 1994.] SECURITIES SPECIALISTS, INC. , petitioners , vs .R.C. LEE SECURITIES, INC.,ET AL. , respondents . D E C I S I O N This is a complaint filed by Securities Specialist, Inc. (SSI) to compel the respondents to deliver to the former five (5) million shares of stock and for damages. The controversies before this Commission involve generally the transferability of subscription agreements, and the question of prescription or laches in the conversion of subscription agreements from those of a corporation absorbed in a merger, to those of the surviving corporation. More importantly, the issues to be resolved revolve around accepted commercial practices involving securities pertaining to a publicly listed corporation and the responsibilities of a registered stockbroker, and what both the Commission and the public should expect from their transactions and actuations. The following facts have been proven and admitted during the trial of the case. Complainant SSI is a corporation duly organized and existing under the laws of the Philippines, with offices at c/o Casa Blanca Apartments, 1447 M. Adriatico St.,Ermita, Manila, and is engaged in the business of buying and selling stocks and other securities. Respondents are likewise corporations, duly organized and existing under Philippine laws with offices as follows: R.C. Lee Securities (R.C. Lee) at Second Floor, ITM Building, 1541 M. H. Del Pilar Street corner Cuarteles St.,Ermita, Manila; and Interport Resources (Interport) at Room 219, Makati, Stock Exchange Building, Ayala Avenue, Makati, Metro-Manila. Respondent Interport is a publicly listed Company, the capital stock of which is being sold to the publicly in the stock exchange; while the respondent R.C. Lee is a registered stockbroker, also engaged in buying and selling of stocks and other securities. On July 28, 1978, Oceanic Oil & Mineral Resources, Inc. (Oceanic) merged with respondent Interport, with the latter as the surviving corporation. Under the terms of the merger each share of Oceanic was to be exchanged for one share of Interport. On April 16 and 18, 1979, petitioners SSI received in the ordinary course of business Oceanic subscription agreements nos. 1805, 1808-1811 covering five (5) million Oceanic shares with a par value of P0.01, outstanding in the name of respondent R.C. Lee (Exhibits "B" to "B-4" of the petitioner; and by official receipts of Oceanic showing that twenty five (25%) of the subscriptions has been paid (Exhibits "C" to "C-4") On February 8, 1989, respondent Interport made a call for full payment of subscription receivables, setting March 15, 1989, as the deadline therefor. Prior to the deadline, complainant SSI tendered payment thereon through two (2) stockbrokers of the Manila Stock Exchange. Both brokers reported that Interport had refused to honor the Oceanic subscriptions. On the date of the deadline, complainant SSI tendered payment directly to respondent Interport for the balance of seventy-five million shares covered by Oceanic subscription agreements, some of which were made in the name of respondent R.C. Lee, and indorsed in blank. Respondent Interport originally rejected the tender of payment for all twenty-one (21) million shares. An annotation on a letter by complainant SSI to respondent Interport of that date, signed by the representative of respondent Interport, explained that the rejection of tender of payment was made on the ground that the Oceanic subscription agreements should have been previously converted to Interport shares (Exhibits "D" and "D-1"). LLpr Complainant SSI then requested respondent Interport for a copy of any notice requiring owners of Oceanic shares to convert their said shares into Interport shares (TSN, August 8, 1992, pp. 38 and 39).No proof of such notice was produced by respondent Interport. Complainant SSI, through a letter dated March 30, 1989 (Exhibit "H"),then asked the Commission for a copy of the Interport board resolution requiring the conversion of Oceanic shares to Interport shares. The SEC through its Director of Brokers and Exchange Department, Atty. Fe Eloisa C. Gloria, informed complainant SSI that the SEC had no records of any such resolution (Exhibit "G"). Having confirmed the non-existence of such a resolution, Mr. Francisco Villaroman, President of Complainant SSI, met with Mr. Pablo Roman, President and Chairman of the Board of respondent Interport and Interport Corporate Secretary Atty. Pineda. At that meeting, a formal request was made by the SSI President, by way of the presentation of Exhibit "G" for a copy of the resolution. No resolution was produced by respondent Interport. As a result of that meeting, payment made by complainant SSI on Sixteen (16) million of the twenty-one (21) million Oceanic shares was accepted by respondent Interport and consequently converted to Interport shares. However, respondent Interport still rejected the tendered payment for five (5) million shares, covered by the subject Oceanic subscription agreements nos. 1805, 1808-1811, with a par value of P0.01. Complainant SSI subsequently learned that on March 31, 1989, or sixteen (16) days after complainant's tender of payment, the five (5) million shares had been issued by Interport to respondent R.C. Lee relying on the latter's registration as the owner of the subject subscription agreements in the books of the former, and an affidavit by the President of R.C. Lee alleging that no transfers or encumbrances of the securities had ever been made (Exhibit "5"). Complainant SSI, through counsel, made demands upon both respondents Interport (Exhibits "N" to "N-2") and R.C. Lee (Exhibits "M" to "M-2") for the cancellation by Interport of the shares issued to R.C. Lee, as well as, the delivery thereof to complainant SSI. On October 6, 1989, when such demands proved to be of no avail, complainant SSI filed a complaint before the Commission to compel the respondents to deliver the five (5) million shares of stock and for damages. In its complaint, complainant SSI alleged fraud and collusion between the respondents in rejecting tendered payment and the transfer of the shares covered by the aforesaid subscriptions agreements (complaint p. 8). Respondent R.C. Lee, in its answer, alleged that on the basis of respondent Interport's records which did not reflect any transfers made by R.C. Lee itself of the five (5) million shares covered by the contested subscription agreements, it had in good faith filed an affidavit through its President, Ramon C. Lee, requesting for the conversion of the Oceanic subscription agreements into Interport subscription agreements or stock certificates. Furthermore, respondent R.C. Lee alleged that complainant SSI had waived whatever rights it may have had, in failing to present and register the assignments in blank of the subscription agreements covering the five (5) million Oceanic shares, for a period of at least ten (10) years from April 16 and 18, 1979, the dates of the transfer of the subscription agreements to March 15, 1989, when complainant SSI tendered payment of the balance thereon. Furthermore, respondent R.C. Lee alleged that complainant SSI was estopped from recovering the five (5) million shares issued to the former, inasmuch as they had already disposed of the same and rights over the shares had vested to third parties in good faith and for value (Answer of R.C. Lee Securities, pp. 4-5). On the other hand, respondent Interport in its answer, alleged that the subject subscription agreements, nos. 1805, 1808-1811, presented by complainant SSI for tender of payment and conversion, were in the name of R.C. Lee and assigned in blank (Answer of Interport, p. 4).Interport further invoked the rule in contract law, that novation by way of replacement of the person of the debtor requires the consent of the creditor, namely Interport (Ibid). In the preliminary conference of the case held on May 21, 1991 by this Hearing Officer an Order was issued, which reads in part: "During the preliminary conference of this case, the parties discussed and agreed on the following: 1. that no compromise agreement can be reached by the parties; 2. stipulations and/or admissions of facts and/or documents: a) the genuineness and due execution of the Oceanic subscription agreements marked as Annexes "A","A-1" to "A-4" admitted; b) genuineness and due execution of the Oceanic official receipts not admitted; c) complainant's letters dated March 15, 1989, April 25, 1989, marked as Annexes "D","H" and "K" received by respondent's Interport admitted; d) complainant's letter dated April 27, 1989 marked as Annex "Z" received by respondent R.C. Lee Securities admitted; 3. Issues to be resolved: a) who as between complainant and respondent R.C. Lee Securities is entitled to the 5 million shares; b) whether or not respondent Interport acted in good faith in issuing 5,000,000 Interport shares in favor of respondent R.C. Lee Securities, or whether or not Interport acted in good faith in rejecting the conversion of 5 million Oceanic shares represented by the subscription agreements. c) whether or not the prevailing parties are entitled to damages." Hearings of this case proceeded with testimonies of the respective witnesses of the parties involved and with cross-examination being had thereon. After the last hearing on October 13, 1992, this Hearing Officer directed the parties to submit within forty five (45) days their respective Memoranda, after which the case would be considered submitted for decision. In its Memorandum, respondent R.C. Lee posed the issue in this wise: that complainant's cause of action is premised on respondent Interport's refusal to accept its tender of payment and request for conversion of its Oceanic subscription agreement covering five (5) million shares. Respondent R.C. Lee would seek to absolve itself of liability by saying that not only does it not have any power to influence or direct the actions of co-respondents Interport in this matter; but that respondent Interport, in acting as it did, was justified by what appeared in its books namely, that respondent R.C. Lee was the owner of the contested subscription agreements, and, therefore was entitled to the shares covered by said subscription agreements. (Memorandum of R.C. Lee, pp. 5-7). Furthermore, respondents R.C. Lee invokes Article 1293 of the New Civil Code on novation, which states that "ARTICLE 1293. Novation which consists in substituting a new debtor in the place of the original ones, may be made even without the knowledge or against the will of the latter but not without the consent of the creditor. the creditor, in this case, being Interport. The reasoning is that, inasmuch as the assignment in blank of the subscription agreements in 1979 from respondent R.C. Lee to another party, and eventually, to complainant SSI, was never recognized by respondent Interport, then respondent Interport could choose to receive payment for the balance of the subscription of respondent R.C. Lee, which continued to be the registered owner, or debtor, in its books, and then validly issued to the latter the five (5) million shares under the subscription agreements (Ibid, p. 9). prcd On the other hand, respondent Interport seeks to harmonize its argument with that of respondent R.C. Lee, and pleads the sufficiency of the basis for recognizing the latter's claim to the shares, considering that the assignments were never registered in the books of the corporation (Memorandum of Interport, p. 8).Respondent Interport also pleads the non-binding nature of the assignment, since it did not recognize the transfers in blank of the subscription agreements by respondent R.C. Lee, which eventually ended up with complainant SSI (Ibid). On the basis of the evidence adduced along with the admissions of the parties, their assertions of fact in their respective pleadings, with reference to the documentary evidence presented in the course of the hearings conducted, this Commission, upon due perusal, assiduous review, mature deliberation and judicious consideration, can only find in favor of the complainant SSI. By raising contract law doctrines and issues, both respondents clearly seek to go around the basic premise under which the resolutions of the case must hinge in that the subscription agreements are "securities",as defined by the Revised Securities Act; and that respondent R.C. Lee is long time registered stockbroker who is not fully aware of the prevailing commercial practices pertaining to securities, but importantly is bound by the same; and that respondent Interport is a publicly listed company and therefore fully aware of the commercial practices, rules and regulations pertaining to securities, especially those pertaining to its stockholdings. This Commission takes judicial notice of the prevailing practice for certificates listed in the name of registered brokers whereby it is accepted that when a broker executes blank assignments over securities, such as subscription agreements, these are converted into "street certificates" and are to be negotiated or assigned in the regular course of business to the brokers-clients; and that such "street certificates" can be claimed by any party who holds in its favor such securities. Indeed, it is a common industry practice for brokers to have registered in their names securities that belong to their clients to facilitate trading with them. It is the circulation of such street certificates and their being held by another party who receives them in good faith, that is the rationale for this Commission in requiring from registered brokers a quarterly report of proof of securities listed in their names or a verification of the clients for whom such securities are being held by broker in their names. In the case at bar, the Oceanic subscriptions agreements were duly delivered to the Complainant SSI supported by stock assignments of respondent R.C. Lee (Exhibits "B" to "B-4" of the petitioner) and by official receipts of Oceanic showing that twenty five percent of the subscription had been paid (Exhibits "C" to "C-4").To this date, respondent R.C. Lee, does not deny having subscribed and delivered such stock assignments to the Oceanic subscription agreements. Therefore, having negotiated them by allowing to be in street certificates, respondent R.C. Lee, as a broker, cannot now legally and morally claim any further interests over such subscriptions or the shares of stock they represent. On the other hand, respondent Interport, being a publicly listed company is fully aware that when it deals with securities listed in the name of a broker, it must insist on the surrender of the covering title or certificates to ensure itself that the broker still has possession of such securities and has not traded or negotiated with them in the market as is the usual business of any broker. It was highly improper for respondent Interport to have accepted as basis for issuing the subject five (5) million shares in favor of respondent R.C. Lee on the mere affidavit of the latter's president. But even if we pursue the resolution of the issues raised in this case on Contract Law, this Commission would still find in favor of complainant SSI. Oceanic Oil & Mineral Resources issued the subject subscription agreements nos. 1805, 1808-1811 covering five (5) million shares therein, bearing the date January 14, 1977, in the name of R.C. Lee. On July 28, 1978, Oceanic merged with respondent Interport with the latter as the surviving corporation. However, the subscription agreements in the name of Oceanic continued to subsist, and were assigned in blank by respondent R.C. Lee in undated assignments separate from certificate. These assignments eventually came into the hands of complainant SSI in 1979 in the course of its usual business as a stockbroker (Exhibit "L"). llcd In response to a call made by Interport for the balance of subscription receivables on February 8, 1989, counsel for respondent R.C. Lee made an inquiry concerning the status of the Ramon C. Lee groups holding in Interport. The corporate secretary for Interport responded with a letter bearing the date of January 27, 1989, which listed the holdings of respondent R.C. Lee, as well as those of individuals belonging to the R.C. Lee group (Exhibits "1" and "1-A" of respondent R.C. Lee). Such list recognized subscription agreements made both to respondents Interport as well as Oceanic, identifying both kinds of holdings by subscription agreement number, with the inexplicable exceptions to the subject 5 million shares which are not identified by number but only by the designation "unreplaced OC SA 5,000,000 (Exhibit "1-A").This is remarkable for several reasons: First, this gives lie to the ostensible reason given by respondent Interport for denying tender of payment and conversion of the subscription agreements, that Oceanic subscription agreements should have been converted prior to their being presented to Interport; for even at this late hour holdings by other persons still marked as having been issued by Oceanic were still being recognized by respondent Interport. As was already mentioned, the Commission's records fail to show that either Oceanic nor respondent Interport even made a call for the balance of subscription receivables at the time of the merger in 1978, nor at any other time up to early 1989 (Exhibit "G"). Second, other Oceanic subscription agreements presented by SSI itself were subsequently recognized by Interport, thus belying the contention that the subscription agreements were stale, barred by laches or prescription. What remained were the 5 million shares for which neither respondent Interport nor respondent R.C. Lee could properly account. Third, these 5 million shares, which not even Interport could properly identify in its report to counsel for R.C. Lee, were covered by the proper documents, which however were no longer in the hands of R.C. Lee, for the reason that the subscription agreements had already been assigned in blank by the latter in 1979, an allegation that has not been denied by either respondents to the present time. In the course of subsequent transfer, the subscription agreements were to come into the hands of complainant SSI, but respondents would now deny recognition to these not on the ground that they are spurious-indeed, neither of the respondents has ever contested the genuineness of either the subscription agreements themselves, nor the assignments separate from certificate - but on the ground of prescription or laches. This is untenable. To say that the ten years since the assignment had been made are a sufficient lapse of time in order for respondent SSI to be considered to have abandoned its rights under the subscription agreements, is to ignore the rule "The right to have the transfer registered exists from the time of the transfers and it is to the transferee's benefit that the right be exercised early. However, since the law does not prescribed any period within which the registration should be effected the action to be enforced the right does not accrue until there has been a demand and a refusal to record the transfer " (11 Campus 310, 1990 ed.,citing Won v. Wack Wack Golf, G.R. No. L-10122, August 30, 1958, 104 Phil. 466, Emphasis Supplied). Petitioner SSI was denied recognition of its subscription agreement on March 15, 1989; the complaint against the respondents was filed before the SEC on October 6 of that same year. This is the period of time that it is to be taken into account, not the period between 1979 and 1989. The Commission thus finds that petitioner acted with sufficient dispatch in seeking to enforce its rights under the subscription agreements, and sought the intervention of this Commission within a reasonable period. In the affidavit of respondent R.C. Lee's president, Ramon C. Lee, dated February 22, 1989, there are several averments that need to be examined, in the light of respondent R.C. Lee's claim of having acted in good faith. The first is the statement made in paragraph 3 thereof: "That R.C. Lee Securities, Inc. has delivered to Interport its subscription Agreements for Twenty Five Million (25,000,000) shares of Oceanic for conversion into Interport shares' however, as of date, only twenty million (20,000,000) shares have been duly covered by Interport Subscription Agreements and the Five million (5,000,000) shares still remains without Subscription Agreements ". llcd No explanation is given for the failure of respondent Interport to convert the five (5) million shares. As can be seen from the letter of Interport to counsel of R.C. Lee, dated January 27, 1989, already mentioned above, these five (5) million shares purportedly belonging to respondent R.C. Lee do not seem to be covered by any properly identified subscription agreements. Yet respondent Interport issued the shares without respondent R.C. Lee having anything to show for the same. On the other hand, respondent Interport refused to recognize complainant SSI's claim to five (5) millions shares inspite of the fact that its claim was fully supported by duly issued subscription agreements, stock assignment and receipts of payment of the initial subscription. Such actuations only show the utter bad faith on the part of the respondents and their conclusion to defraud the complainant SSI. The second statement in the affidavit worth examining is found in paragraph 4 thereof: "That to my knowledge, the R.C. Lee Securities, Inc. has never executed any agreement purporting to transfer or encumber said shareholdings to any person entity or institution " (Emphasis Supplied) This statement is to be taken in the light of a subsequent statement made by respondent R.C. Lee in its Memorandum, as well as in its other pleadings that - A verification was ... made by respondent R.C. Lee with whatever files were available with them (Interport) and having found no records showing any transfer and/or assignment of the subscription agreements in Oceanic Oil and Stock Certificates in Interport as contained in the list (submitted by Interport Corporate Secretary of the R.C. Lee Group's holdings) respondent R.C. Lee communicated with Interport for the conversion of the Oceanic Oil subscription agreement into Interport shares and/or the issuance of Interport stock certificates to cover the lost stock certificates and filed the Affidavit dated February 27, 1989 ...(Memorandum of R.C. Lee pp. 3-4). This is a circular reasoning which respondent R.C. Lee would wish to use as its basis for its alleged good faith asking for the issuance of the five (5) million shares to it, even without the proper documents. It is absurd for respondent R.C. Lee to invoke the records of respondent Interport, since if there is any privity to transactions or transfers made of the subscription agreements by respondent R.C. Lee to anyone, it would be on the part of respondent R.C. Lee itself and its transferees not respondent Interport. Respondent R.C. Lee may not validly point to respondent Interport to support its supposed ignorance of transactions which it does not even deny having made; on the other hand, Interport may not make its stand of good faith in denying recognition on the basis of its own books for, as has been shown, its bad faith was manifested in other aspects of its dealing with both SSI and respondent R.C. Lee. Also, the fact that up to the present time respondent R.C. Lee has not denied its signature on the stock assignments covering subscription Agreements Nos. 1805, 1808-1811 covering five (5) million Oceanic shares, clearly show the falsity of its assertions. Both respondents seek to be absolved of liability for their machinations by invoking both the rule on novation of the debtor without the creditor's consent; as well as the Corporation Code rule of non-registration of transfers in the corporation's stock and transfer book. Neither will avail in the case at bar. Art. 1293 of the New Civil Code states: "ARTICLE 1293. Novation which consists in substituting a new debtor in the place of the original one may be made even without the knowledge or against the will of the latter but not without the consent of the creditor" .... More importantly, the allusion by the respondents likening the subscription contracts to the situation of debtor-creditor finds no basis in law. Indeed, as held by the Supreme Court, shareholders are not creditors of the corporation with respect to the shareholdings (Garcia vs. Lim Chu Sing, G.R. No. 39427, February 24, 1934, 59 Phil. 562). The Memorandum of R.C. Lee, likewise cites the Opinion of the SEC dated November 12, 1976 ,which states "that since an assignment will involve a substitution of debtor or novation of contract, as such the consent of the creditor must be obtained" has the same effect. The opinion, however, merely restated the general rule already embodied in the Codal provision quoted above; it does not preclude previously authorized transfers. According to Tolentino "When the original contract authorizes the debtor to transfer his obligations to a third person ,the novation by substitution of debtor is effected when the creditor is notified that such transfer has been made" (IV Tolentino 392, 1991 ed, emphasis supplied). But even following the argument of the respondents, when complainant SSI tendered the balance of the unpaid subscription on the subject five (5) million shares on the basis of the existing subscription agreements covering the same, respondents Interport was bound to accept payment even as the same were being tendered in the name of the registered subscriber, respondent R.C. Lee and once the payment is fully accepted in the name of respondent R.C. Lee, respondent Interport was then bound to recognize the stock assignment also tendered duly executed by respondent R.C. Lee in favor of complainant SSI. Furthermore, placing additional restrictions, on transfers shares or of subscription agreements, is violative of the rule of free transferability of shares, one of the pillars of Corporation Law. To leave the validity of transfers to the discretion of the issuing corporation is to forget the raison d' etre of the corporate vehicle, thus "One of the important advantages of the corporation over a partnership is the easy transferability of shares .To a stockholder, this interest, represented by his stock certificate, furnishes him a convenient means of raising funds whenever the need arises .He can easily sell his stocks if there is a market for it. Or he may use it as a collateral for loans. This liquidity of shares of stock is an important factor which an investor takes into consideration ." (11 Campos 321, 1990 ed.;emphasis supplied) "...When a stockholder become dissatisfied with management, it is fair that he should be completely free, if he wishes, to get out of the business by selling his shares in the market, subject to no restraint or restriction whatsoever" (11 Campos 321, 1990 ed. Emphasis supplied) Thus, to say that recognition of any transfers made by shareholders of their shares or subscription agreements is at the mercy of the issuing corporation, especially in the absence of restriction stated in the Articles of Incorporation, the by-laws, as well as, the certificates of stock themselves as required by Section 98 of the Corporation Code, is violative of this principle. Indeed, said Section 98 provides only that " Restrictions on the right to transfer shares ... shall not be more onerous than granting the existing stockholders or the corporation option to purchase the shares of the transferring stockholder with such reasonable terms, conditions or period stated therein ,..." ( Section 98, Corporation Code, emphasis supplied ) As held in Fleischer vs. Botica Nolasco, G.R. No. 23241, March 14, 1925, 47 Phil. 583, Sec. 63 of the Corporation Code contemplates no restriction as to whom the stocks may be transferred. It does no suggest that any discrimination may be created by the corporation in favor of or against a certain purchase. The owner of shares, as owner of personal property, is at liberty, under said sections to dispose of them in favor of whomever he pleases, without limitation in this respect than the general provision of law. Only recently, in Rural Bank of Salinas vs. Court of Appeals, G.R. No. 96674, June 26, 1992, it was held that a corporation, either by its board, its by-laws, or the act of its officers, cannot create restrictions in stock transfers, because "restrictions in the traffic of stock must have their source in legislative enactment, as the corporation itself cannot create such impediment". Complainant SSI theorizes that it was the intention of respondent R.C. Lee to use these five (5) million shares which rightfully belonged to SSI, to get the latter's president elected into the Board of Directors of respondent Interport, hence, the collusion between the two to defraud SSI of the shares. Be that as it may, it is clear to the Commission that the two have colluded with each other to deprive SSI of its shares and thus, the awarding of exemplary damages as prayed for by the petitioner would be in order. Evidence to support the claims for damages have properly been adduced by the complainant SSI. It was proven that during the month of March 1989, Interport shares traded at the Makati Stock Exchange from a low price level of P0.019 (TSN, June 10, 1991; Exhibits "0-7-b") or 190% of par value to a high price level of P0.029 (TSN, June 10, 1991, pp. 9-10; and Exhibits "0-7-a") or 290% of par value; that two months later Interport shares traded at the same exchange at a still higher price level of P0.038 (TSN, June 10, 1991, pp. 21-22) or 380% of par value. Complainant SSI showed also that it sold all its Interport shares from March 1989 to September 1989 at price levels ranging from P0.023 or 230% of par value to P0.035 or 350% of par value (Exhibits "Q","Q-1" to "Q-14";TSN, August 8, 1991, pp. 53-54).On November 29, 1989, Interport shares reached their peak at the Makati Stock Exchange at a price level of P0.042 (TSN, June 10, 1991, pp. 20-21) or 420% of par value. A year later by October 1990, Interport shares already suffered a decline at the Makati Stock Exchange reaching a bottom price level of P0.008 or 20% less than the par value (TSN, June 10, 1991, pp. 22-24);in June 1991, the shares only traded at a price level of P0.018 (TSN, June 10, 1991, p. 24) or 180% of par value. LexLib In its Memorandum complainant SSI summarized the results: "From the behavior of trading in Interport shares at the MKSE from 1989 to June 1991, the following patterns may be perceived from a graph of such trading (SSI's Exhibit "0.5") thus: The neckline price level of said shares during said period was P0.022 (Idem.,p. 25) or 220% of par value, the neckline serving as a resistance level for trading below it and as a support or stabilizing level for trading above it. In March 1989, when Interport initially rejected SSI's tender of payment, the price levels of Interport were already forming the rare and hard-to-come by upsurge pattern of penetrating the neckline or resistance level trading from a low of P0.19 (SSI's Exhibit "0-7-b") or 190% of par value to a high of P0.29 (SSI's Exhibit "0-7-a") or 290% of par value, thereby actually overshooting the neckline level and forming for the first time in so many years a stable left shoulder formation in the market trend that was the time to sell original Interport shares acquired at par value considering a market price that was more than double the par value. On November 29, 1989, the market trend for Interport shares in fact reached its head formation selling at a price level of P0.042 (TSN, June 10, 1991, pp. 20-21) or 420% of par value. Thereafter the right shoulder formation developed still supported and stabilized by neckline level. That was still a good time to sell original Interport shares acquired at par value considering a market value of at least 220% of par value. However, on April 30, 1990, the right shoulder formation broke (Iclem p. 27) such that having fallen below the neckline, the trend, rapidly deteriorated into the downward channeling towards the lowest price level of P0.008 on October 8, 1990 or 20% lower than par value (Iclem pp. 22-23).By then the golden opportunity to sell original Interport shares acquired at par value had been last." It is on the basis of such evidence adduced that this Hearing Officer awards the damages prayed for by the complainant SSI as a direct result of the fraud exercised by the respondents against the complainant. WHEREFORE, judgment is hereby rendered, ordering respondent Interport to deliver the five (5) million shares covered by Oceanic Oil & Mineral Resources, Inc. subscription agreements Nos. 1805, 1808-1811 to petitioner SSI; and if the same not be possible to deliver the value thereof, at the market price as of the date of this judgment; and ordering both respondents, jointly and severally, to indemnify complainant in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) by way of temperate or moderate damages to indemnify complainant in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) by way of exemplary damages; to pay for complainant's litigation expenses, including attorney's fees, reasonably in the sum of THREE HUNDRED THOUSAND PESOS (P300,000.00) and to pay the costs of the suit. SO ORDERED. prLL (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer