You must find Ba'al in Broken Valley to defeat him and get the sigil stone so Damian doesn't. He is located in the mine where a shrine was found (by the Quarry Waypoint shrine on the Broken Valley map). You hear about it in the beginning of the game, but in order to get in the mine you need a key, and the place you get it is in the building surrounding where the mine is in the southeast part of Broken Valley (outside the black ring members are only level 12 or so, don't let them fool you). Inside the building, you come face to face with 2 level 27 Black Ring members. Once you defeat them, go up the stairs (and there are chests along the way, one of them requires a key which is found on the writing desk at the top) you will meet some good guys, one of them will give you the key to the mine which completes the quest A Guild Without a Master. After he does that, you go downstairs with them where a whole lot of level 27 Black Ring members spawned and you have to defeat them all.
Due to the level of the enemies in the building, you will have to do it after you take your dragon form for the first time and Broken Valley has been poison fogged. To get to the area, you have to take out a lot of other level 27 Black Ring guys as well as take out ballistas etc. and disable anti-dragon shields before finally getting in there. As it looks much different with the poison fog than it did before, you may not recognize it, but it is the only wooden building poking out of the fog where you can land safely.
Once inside the mine and after fighting your way to the shrine inside, you can fight Ba'al who is only level 28 or so, but he spawns a lot of little demon helpers (probably level 26 or 27), some of which are summoners and therefore summon even more.
The default reward is 11250 exp and 1800 gold and a choice reward of either 2812 exp or 900 gold.