G.R. No. 112941 February 18, 1999
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.

FACTS

Neugene Marketing, Inc. (NEUGENE) was registered with the SEC on January 27, 1978, with an authorized capital stock of P3,000,000. Its incorporators/directors were Johnson Lee, Lok Chun Suen, Charles O. Sy, Eugenio Flores, Jr., and Arsenio Yang, Jr. The outstanding capital stock was P700,000 represented by 7,000 shares. After assignments, the stockholders of record as per the Stock and Transfer Book were Johnson Lee (700 shares), Lok Chun Suen (1,400 shares), Sonny Moreno (1,050 shares), Charles O. Sy (2,800 shares), and Arsenio Yang, Jr. (1,050 shares).
On October 24, 1987, private respondents Charles O. Sy, Arsenio Yang, Jr., and Lok Chun Suen, holding 5,250 shares, sent notices for a board meeting and a special stockholders’ meeting on November 30, 1987, to consider NEUGENE’s dissolution. At these meetings, they voted for and approved a resolution dissolving NEUGENE. The SEC issued a Certificate of Dissolution on March 1, 1988.
Petitioners filed an action to annul the dissolution. They claimed that prior to November 30, 1987, specifically on July 1, 1987, the private respondents had divested themselves of their stockholdings by endorsing their stock certificates in blank and delivering them to the Uy family, the beneficial owners. To settle family squabbles, the Uy family agreed to award the stock certificates to Johnny K.H. Uy, who authorized Johnson Lee to dispose of them. Johnson Lee then sold the shares to petitioners Leoncio Tan and Nicanor Martin. Consequently, in the Stock and Transfer Book, Lok Chun Suen assigned all his 1,400 shares to Nicanor Martin, Charles O. Sy assigned 2,100 of his 2,800 shares to Leoncio Tan, and Arsenio Yang, Jr. assigned 350 of his 1,050 shares to Leoncio Tan. Petitioners argued that after these transfers, private respondents (holding only 700 shares each for Sy and Yang, and Suen having ceased to be a stockholder) no longer held the required two-thirds of outstanding capital stock to validly vote for dissolution under Section 118 of the Corporation Code, and the meetings lacked a quorum.
Private respondents countered that the alleged assignments were simulated and fraudulent. They asserted that they endorsed their stock certificates in blank and delivered them to the Uy family for safekeeping, but the certificates were stolen by spouses Johnny K.H. Uy and Magdalena Go-Uy without the Uy family’s authority. Petitioner Sonny Moreno, a co-conspirator, then recorded the fraudulent assignments in the Stock and Transfer Book, which he obtained from the spouses along with other corporate records. They denied selling their shares and maintained they still held at least two-thirds of the outstanding capital stock when they voted for dissolution.
The SEC Hearing Panel nullified the Certificate of Dissolution, ruling private respondents no longer held the required stock. The SEC En Banc affirmed this decision. The Court of Appeals reversed the SEC, finding the stock transfers invalid due to lack of consideration and being simulated. The Supreme Court petition followed.

ISSUE

Whether the private respondents validly held at least two-thirds of the outstanding capital stock of NEUGENE, thereby having the authority to vote for its dissolution under Section 118 of the Corporation Code at the meetings held on November 30, 1987.

RULING

The Supreme Court ruled that the private respondents were the legitimate holders and owners of at least two-thirds of the outstanding capital stock of NEUGENE and had the right to vote for its dissolution. The Court affirmed the decision of the Court of Appeals.
The Court found the alleged stock transfers to petitioners to be simulated and fraudulent. It noted the absence of any board approval for the transfers as required by the corporation’s by-laws. More critically, the Court emphasized the complete lack of any valuable consideration for the supposed transfers. Citing the Civil Code, the Court held that a contract without cause or consideration is void and inexistent. Since the private respondents categorically denied selling their shares and declared under oath that their stock certificates were stolen, the purported transfers produced no legal effect. Therefore, the private respondents remained the legitimate stockholders. As holders of 5,250 shares (constituting the required two-thirds of the 7,000 outstanding shares), they validly voted for the corporation’s dissolution. The petition was dismissed for lack of merit.