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Nautica Canning v Yumul

G.R. No. 164588 October 19, 2005

Ynares-Santiago, J.
A transfer of stock not recorded in the transfer book of the corporation is inexistent as far as the
corporation is concerned.
1. Nautica Canning (Nautica) was incorporated on May 11, 1994 with authorized capital stock of
P40,000,000 divided into 400,000 shares with a par value of P100 each
a. It has a subscribed capital stock of P10,000,000 with paid-in subscriptions as follows
Name No of Shares Amount Subscribed Amount Paid

Alvin Dee 89,991 P8,999,100 P4,499,100

Jonathan Dee 2 P200 P200

Joanna Laurel 2 P200 P200

Darlene Gonzales 2 P200 P200

Jennifer Dee 2 P200 P200

Roberto Yumul 1 P100 P100

Jerry Angping 10,000 P1,000,000 P500,000

Total 100,000 P1,000,000 P500,000

b. On December 19, 1994, Yumul was appointed as COO/General Manager of Nautica with
a monthly compensation of P85,000 with an additional compensation of 5% of Nautica’s
operating profit for the calendar year.
c. On the same day, First Dominion Prime Holdings Inc. (FDPH), Nautica’s parent
company, through Alvin Dee granted Yumul an Option to Purchase up to 15% of the total
stocks it subscribed from Nautica
d. A Deed of Trust and Assignment was later executed between FDPH and Yumul whereby
the former assigned 14,999 of its subscribed shares in Nautica to Yumul
i. The shares were acquired and paid for in the name of the Assignor only for
convenience, but actually executed in behalf of an in trust for the assignee
2. In March 1996 Nautica declared a P35,000,000 cash dividend, P8,250,000 of which was paid to
Yumul for his 15% share
a. Yumul later on resigned from Nautica, he then wrote a letter to Dee requesting to
formalize his offer to buy Yumul’s 15% share, demanding certificate of shares in his
name in case Dee refuses to buy the shares
b. Such request was denied by Dee on the basis that Yumul was not a stockholder
3. Yumul later on requested that the Deed of Trust and Assignment be recorded in the stock and
transfer book of Nautica and he be allowed to inspect corporate books as a stockholder
a. This was denied on the basis that he never exercised the option to purchase nor paid for
the acquisition price of the shares and that the cash dividends paid to him was only held
in trust for FDPH
b. Hence Yumul filed a petition with the SEC for Mandamus and damages to compel
Nautica to record the Deed of Trust and Assignment be recorded in the Stock and
Transfer Book of Nautica
4. The SEC found in favor of Yumul declaring
a. Yumul a stockholder of Nautica
b. He is the beneficial owner of the 14,99 shares
c. Entitled to inspect the books of nautica
d. That the Corporate Secretary of Nautica to recognize the Deed of Trust and Assignment
e. On appeal to the SEC en banc affirmed this ruling, on appeal to the CA it also affirmed
the decision, hence this appeal.
5. Of note is the fact that the 14,999 shares were paid for by Dee using a China Banking
Corporation check and a Citibank Check and a letter from Dee to the corp sec to issue a
certificate of stock in Yumul’s name but in trust for Dee, hence the Stock Certificate with the
annotation ITF DEE (In Trust For Dee)
RELEVANT: W/N Yumul is a stockholder of Nautica? YES
1. Rule: ​There is nothing illegal for one stockholder to wholly own a corporation, there is nothing
invalid when one individual gives nominal ownership to other stockholders in order to meet the
incorporator requirement under the law.
a. Incorporators given a nominal share remain to be stockholders unless after the
incorporation they transfer their shares to the real party in interest
2. Application: ​In this case there is no doubt that Yumul is a stockholder since he has 1 share of
stock registered under his name. The AOI, By-law sa GI sheet of Nautica indicated him as an
incorporator and subscriber of one share.
a. Even if the agreement between Yumul and Dee was that the former was holding such
share in trust for the latter it only binds the 2 of them, with respect to the corporation
Yumul is a stockholder.
b. As ruled in Ponce v Alsons a transfer of stock not recorded in the transfer book of the
corporation is inexistent as far as the corporation is concerned. Since between the
corporation on one hand, and its shareholders and third persons on the other, the
corporation looks only to its books in order to determine who are stockholders. It is only
when a transfer is recorded in the transfer book can a corporation recognize a transferee
as a stockholder
c. More evidence that Yumul is a stockholder is the fact that he was voted as a Director of
the Board and later president and under the Corp code a director must own at least one
share of stock
W/N Yumul is the beneficial owner of the 14,999 shares? NO
1. Contention: ​Nautica argues that Yumul was given an option to purchase but he did not exercise
such option hence the Deed of Trust and Assignment is void for lack of consideration
a. Note that the SEC made no finding on W/N Yumul exercised the option nor on the validity
of the Deed of Trust and Assignment it only noted that the objective of this allegation was
merely to deprive Yumul of his right to the shares
b. The CA also did not rule on the matter ti only stated that the deed is a simulated contract,
and went on to define a simulated contract
2. Rule:​ In intestate Estate of Ty v CA the court ruled that “The determination whether a contract is
simulated or not is an issue that could be resolved by applying pertinent provisions of the Civil
Code, particularly those relative to obligations and contracts. Disputes concerning the application
of the Civil Code are properly cognizable by courts of general jurisdiction. No special skill is
necessary that would require the technical expertise of the SEC.”
3. Application: ​Hence the determination of whether a contract is simulated or not is beyond the
limited jurisdiction of the SEC. Considering that the question with regard the matter of the status
of the Deed is civil in nature the SEC had no jurisdiction and since the CA also did not rule on the
matter it would not be proper for this court to rule on it
Ruling: PARTIALLY GRANTED, AFFIRMED in so far as Yumul is a stockholder, REVERSED in so
far as the validity of the Deed