NEUGENE MARKETING INC.

, ET AL, PETITIONERS
V.
COURT OF APPEALS ET AL, RESPONDENTS 1

GR no. 112941 February 18, 1999

Purisima, J.
SV: 3 out of 5 shareholders of Neugene voted for the dissolution of the corporation. The
dissolution was acknowledged by the SEC. The 2 other stockholders questioned the
dissolution alleging that at the time the meeting for voting for the dissolution was held, the 3
did not own the requisite 2/3 of the outstanding capital stock to validly vote for the
dissolution since majority of their shares of stock has already been transferred to new
stockholders. SEC held that the dissolution is not valid but CA reversed the decision
SC: the dissolution is valid. The transfers were fraudulently made. The stocks after issuance
by the corporation, were endorsed in blank to the UY family (the beneficial owner of
Neugene) for safekeeping. This was agreed upon by the stockholders and the Uy Family. For
the transfer to be valid it was agreed upon that the owners of stocks intended to be
transferred must give its approval first. It was also found by the court that there was no
consideration for the transfer of stocks.
1. Neugene was duly registered with the SEC to engage in the trading business for a
term of 50 years with the ff incorporators: Johnson Lee, Lok Chun Suen, Charles O. Sy,
Eugenio Flores, Jr., Arsenio Yang Jr.
2. The authorized capital stock of Neugene is PhP3Million divided into 30,000 shares
with a par value of 100 pesos each. 600,000 has been subscribed by the ff
a. Johnson Lee:
600 shares
P60,000
b. Lok Chun Suen:
1,200 shares P120,000
c. Charles O. Sy
1,800 Shares P180,000
d. Eugenio Flores, Jr.
2,100 shares P210,000
e. Arsenio Yang Jr.
300 shares
P30,000
3. Out of the aforesaid subscription 150,000 had been paid by the ff:
a. Johnson Lee
P15,000
b. Lok Chun Suen
P30,000
c. Charles O. Sy
P450,000
d. Eugenio Flores, Jr.
P52,500
e. Arsenio Yang Jr.
P7,500
4. The shareholdings were increased by 10% by virtue of stock dividend declaration in
the amt of 60,000 pesos. Again it declared a stock dividend later amounting to
P40,000 in proportion to the shareholdings of the stockholders as of April 30, 1981.
5. Eugenio Flores Jr. transferred and conveyed hi entire shareholdings of 2450 shares to
a. Sonny Moreno
1,050 shares
b. Arsenio Yang Jr.
700 shares
c. Charles O. Sy
700 shares
6. So now, the stockholders appearing in the stock and transfer book are as follows
a. Johnson Lee
700
b. Lok Chun Suen
1,400
c. Sonny Moreno
1,050
d. Charles O. Sy
2,800
e. Arsenio Yang Jr.
1,050

NEUGENE MARKETING INC., LEONCIO TAN, NICANOR MARTIN, SONNY MORENO, JOHNSON
LEE and SECURITIES AND EXCHANGE COMMISSION, petitioners,
vs.
COURT OF APPEALS, ARSENIO YANG, JR., CHARLES O. SY, LOK CHUN SUEN, BAN HUA U.
FLORES, BAN HA U. CHUA and ROGER REYES, respondents.

7. Sy and Yang (total shares 5,250)sent notice to the directors for a board meeting.
They also sent notice for a special stockholders meeting on the same day, November
30, 1987 to consider the dissolution of Neugene
8. Sy, Yang and Suen, the directors and stockholders then present voted for and
approved a resolution dissolving NEugene
9. SEC issued a certificate of dissolution
10. The petitioners, Johnson Lee, Sonny Moreno, Leoncio Tan and Nicanor Martin brought
an action to annul or set aside the SEC certificate on the dissolution of Neugene they
alleged that:
a. They are the majority stockholders of Neugene owning 80% of its outstanding
capital stock
b. That on July 1, 1987 Yang , Sy and Suen divested themselves of their
stockholdings when they endorsed their stock certificates in blank and
delivered the same to the Uy Family, the beneficial owners of NEugene.
c. The Uy Family agreed to award Neugenes stock certificates to Johnny KH Uy
who authorized Lee to dispose of the same
d. Lee sold the said shares of stock to Leoncio Tan (2,100 out of 2,800 shares of
Charles O. Sy were assigned to him in addition to the 350 out of 1,050 shares
of Yang) and Nicanor Martin (1,400 shares of Suen were assigned to Martin)
e. That Yang and Sy who each had 700 shares, and Suen, who was no longer a
stockholder could no longer validly vote for the dissolution of Neugene, hence
the proceedings and the meetings were improperly called and are null and
void
11. The respondents , SY, YANG and SUEN theorized that the alleged assignments of
shares of stock in favor of Tan and Martin were simulated and fraudulently effected as
there were never an agreement entered into by the Uy Family to award the NEugene
shares of stock. They delivered the shares of stock to the Uy Family for safe keeping
and the said certificates were kept inside the confidential vault of the Uy Family but
were stolen by Johnny KH Uy and Magdalena Go-Uy without the knowledge and
authority of the Uy Family
a. That Sonny Moreno conspired with the fraudulent transfer of stocks when he
recorded the fraudulent assignments in the stock and transfer book
12. SEC nullified the certification on the dissolution of Neugene, ruling that the Sy and
Yang no longer hold the 2/3 of the outstanding capital stocks of NEugene at the time
they presented the petition for dissolution.
13. CA reversed and upheld the validity of the dissolution ruling that the stock
certificates were not validly transferred to Martin and Tan. That to constitute a valid
transfer a stock certificate must be delivered and its delivery must be coupled with
an intention of constituting the person to whom the stock is delivered the transferee.
And in order that there is a valid transfer, the person to whom the certificates are
endorsed to must be a bona fide transferee for value
a. No receipt or transaction showing payment for the stocks.
b. The supposed partition and division of the properties of the Uy Family was a
mere Xerox copy whose original was never produced in court. It also contained
erasures and/insertion and it is written in Chinese with no translation
submitted.
14. CA denied MR hence this petition
ISSUE: Whether or not the dissolution was valid (meaning that the stockholders
who voted for it owned at least 2/3 of the outstanding capital stock) YES

Entries in the Stock and Transfer book support the conclusion arrived at by the CA
that Suen, SY and Yang owned at least 2/3 of the outstanding capital stock on the day
of the meetings

It was shown that they owned 5,250 shares out of the 7,000 outstanding capital
stock, constituting at least 2/3
SC agreed with the conclusion that the certificates of stock were stolen and therefore
not validly transferred and the transfers of stock relied upon by the petitioners were
fraudulently recorded in the STB of NEugene under the column Certificates
Cancelled (this was relied upon by the petitioners as evidence that the 3 did not own
at least 2/3 of the outstanding capital stock)
SEC overlooked certain facts of substance and value when it declared the dissolution
as not valid
o It misappreciated the true nature of the relationship between the stockholders
and the Uy Family. They had an understanding that subject shares of stock
were, immediately upon issuance, endorsed in blank by the shareholders and
entruseed to the Uy Family for safekeeping.
o Johnson Lee and Sonny Moreno knew this and were in bad faith in assigning
the stock certificates to Martin and Tan and in recording it in the STB
o As nominees of the UY family, Sy, Suen and Yangs approval was necessary for
the effectivity of the transfer. In this case the transfer lacked the requisite
approval
o No valuable consideration for the supposed transfer of stocks. The complete
absence of a cause or consideration renders the contract absolutely void and
inexistent.

Petition Dismissed. CA decision Affirmed

Justin Benedict A. Moreto