Gamboa v. Sec. Teves

11/27/2016
G.R.No.176579
ENBANC
WILSONP.GAMBOA,
G.R.No.176579
Petitioner,
Present:
versus
CORONA,C.J.,
FINANCESECRETARY
MARGARITOB.TEVES,
FINANCEUNDERSECRETARY
JOHNP.SEVILLA,AND
COMMISSIONERRICARDO
ABCEDEOFTHE
PRESIDENTIALCOMMISSION
ONGOODGOVERNMENT
(PCGG)INTHEIRCAPACITIES
ASCHAIRANDMEMBERS,
RESPECTIVELY,OFTHE
PRIVATIZATIONCOUNCIL,
CARPIO,
CHAIRMANANTHONISALIM
OFFIRSTPACIFICCO.,LTD.IN
HISCAPACITYASDIRECTOR
OFMETROPACIFICASSET
HOLDINGSINC.,CHAIRMAN
MANUELV.PANGILINANOF
PHILIPPINELONGDISTANCE
TELEPHONECOMPANY(PLDT)
INHISCAPACITYAS
MANAGINGDIRECTOROF
FIRSTPACIFICCO.,LTD.,
PRESIDENTNAPOLEONL.
NAZARENOOFPHILIPPINE
LONGDISTANCETELEPHONE
COMPANY,CHAIRFEBARINOF
THESECURITIESEXCHANGE
COMMISSION,andPRESIDENT
FRANCISLIMOFTHE
PHILIPPINESTOCK
EXCHANGE,
ABAD,
Respondents.
http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/176579.html
VELASCO,JR.,
LEONARDODECASTRO,
BRION,
PERALTA,
BERSAMIN,
DELCASTILLO,
VILLARAMA,JR.,
PEREZ,
MENDOZA,and
SERENO,JJ.
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PABLITOV.SANIDADand
Promulgated:
ARNOV.SANIDAD,
June28,2011
PetitionersinIntervention.
xx
DECISION
CARPIO,J.:
TheCase
Thisisanoriginalpetitionforprohibition,injunction,declaratoryreliefanddeclarationofnullity
ofthesaleofsharesofstockofPhilippineTelecommunicationsInvestmentCorporation(PTIC)by
thegovernmentoftheRepublicofthePhilippinestoMetroPacificAssetsHoldings,Inc.(MPAH),
anaffiliateofFirstPacificCompanyLimited(FirstPacific).
TheAntecedents
Thefacts,accordingtopetitionerWilsonP.Gamboa,astockholderofPhilippineLongDistance
TelephoneCompany(PLDT),areasfollows:1
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On28November1928,thePhilippineLegislatureenactedActNo.3436whichgrantedPLDTa
franchiseandtherighttoengageintelecommunicationsbusiness.In1969,GeneralTelephoneand
ElectronicsCorporation(GTE),anAmericancompanyandamajorPLDTstockholder,sold26
percentoftheoutstandingcommonsharesofPLDTtoPTIC.In1977,PrimeHoldings,Inc.(PHI)
wasincorporatedbyseveralpersons,includingRolandGapudandJoseCampos,Jr.Subsequently,
PHIbecametheownerof111,415sharesofstockofPTICbyvirtueofthreeDeedsofAssignment
executedbyPTICstockholdersRamonCojuangcoandLuisTirsoRivilla.In1986,the111,415
sharesofstockofPTICheldbyPHIweresequesteredbythePresidentialCommissiononGood
Government(PCGG).The111,415PTICshares,whichrepresentabout46.125percentofthe
outstandingcapitalstockofPTIC,werelaterdeclaredbythisCourttobeownedbytheRepublic
ofthePhilippines.2
In1999,FirstPacific,aBermudaregistered,HongKongbasedinvestmentfirm,acquiredthe
remaining54percentoftheoutstandingcapitalstockofPTIC.On20November2006,theInter
AgencyPrivatizationCouncil(IPC)ofthePhilippineGovernmentannouncedthatitwouldsellthe
111,415PTICshares,or46.125percentoftheoutstandingcapitalstockofPTIC,throughapublic
biddingtobeconductedon4December2006.Subsequently,thepublicbiddingwasresetto8
December2006,andonlytwobidders,ParallaxVentureFundXXVII(Parallax)andPanAsia
PresidioCapital,submittedtheirbids.ParallaxwonwithabidofP25.6billionorUS$510million.
Thereafter,FirstPacificannouncedthatitwouldexerciseitsrightoffirstrefusalasaPTIC
stockholderandbuythe111,415PTICsharesbymatchingthebidpriceofParallax.However,First
Pacificfailedtodosobythe1February2007deadlinesetbyIPCandinstead,yieldeditsrightto
PTICitselfwhichwasthengivenbyIPCuntil2March2007tobuythePTICshares.On14
February2007,FirstPacific,throughitssubsidiary,MPAH,enteredintoaConditionalSaleand
PurchaseAgreementofthe111,415PTICshares,or46.125percentoftheoutstandingcapitalstock
ofPTIC,withthePhilippineGovernmentforthepriceofP25,217,556,000orUS$510,580,189.
Thesalewascompletedon28February2007.
SincePTICisastockholderofPLDT,thesalebythePhilippineGovernmentof46.125percentof
PTICsharesisactuallyanindirectsaleof12millionsharesorabout6.3percentoftheoutstanding
commonsharesofPLDT.Withthesale,FirstPacificscommonshareholdingsinPLDT
increasedfrom30.7percentto37percent,therebyincreasingthecommonshareholdingsof
foreignersinPLDTtoabout81.47percent.ThisviolatesSection11,ArticleXIIofthe1987
PhilippineConstitutionwhichlimitsforeignownershipofthecapitalofapublicutilitytonotmore
than40percent.3
Ontheotherhand,publicrespondentsFinanceSecretaryMargaritoB.Teves,UndersecretaryJohn
P.Sevilla,andPCGGCommissionerRicardoAbcedeallegethefollowingrelevantfacts:
On9November1967,PTICwasincorporatedandhadsinceengagedinthebusinessofinvestment
holdings.PTICheld26,034,263PLDTcommonshares,or13.847percentofthetotalPLDT
outstandingcommonshares.PHI,ontheotherhand,wasincorporatedin1977,andbecamethe
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ownerof111,415PTICsharesor46.125percentoftheoutstandingcapitalstockofPTICbyvirtue
ofthreeDeedsofAssignmentexecutedbyRamonCojuangcoandLuisTirsoRivilla.In1986,the
111,415PTICsharesheldbyPHIweresequesteredbythePCGG,andsubsequentlydeclaredby
thisCourtaspartoftheillgottenwealthofformerPresidentFerdinandMarcos.Thesequestered
PTICshareswerereconveyedtotheRepublicofthePhilippinesinaccordancewiththisCourts
decision4whichbecamefinalandexecutoryon8August2006.
ThePhilippineGovernmentdecidedtosellthe111,415PTICshares,whichrepresent6.4percent
oftheoutstandingcommonsharesofstockofPLDT,anddesignatedtheInterAgency
PrivatizationCouncil(IPC),composedoftheDepartmentofFinanceandthePCGG,asthe
disposingentity.Aninvitationtobidwaspublishedinsevendifferentnewspapersfrom13to24
November2006.On20November2006,aprebidconferencewasheld,andtheoriginaldeadline
forbiddingscheduledon4December2006wasresetto8December2006.Theextensionwas
publishedinninedifferentnewspapers.
Duringthe8December2006bidding,ParallaxCapitalManagementLPemergedasthehighest
bidderwithabidofP25,217,556,000.ThegovernmentnotifiedFirstPacific,themajorityownerof
PTICshares,ofthebiddingresultsandgaveFirstPacificuntil1February2007toexerciseitsright
offirstrefusalinaccordancewithPTICsArticlesofIncorporation.FirstPacificannouncedits
intentiontomatchParallaxsbid.
On31January2007,theHouseofRepresentatives(HR)CommitteeonGoodGovernment
conductedapublichearingontheparticularsofthethenimpendingsaleofthe111,415PTIC
shares.RespondentsTevesandSevillawereamongthosewhoattendedthepublichearing.TheHR
CommitteeReportNo.2270concludedthat:(a)theauctionofthegovernments111,415PTIC
sharesboreduediligence,transparencyandconformitywithexistinglegalproceduresand(b)
FirstPacificsintendedacquisitionofthegovernments111,415PTICsharesresultinginFirst
Pacifics100%ownershipofPTICwillnotviolatethe40percentconstitutionallimiton
foreignownershipofapublicutilitysincePTICholdsonly13.847percentofthetotal
outstandingcommonsharesofPLDT.5On28February2007,FirstPacificcompletedthe
acquisitionofthe111,415sharesofstockofPTIC.
RespondentManuelV.Pangilinanadmitsthefollowingfacts:(a)theIPCconductedapublic
biddingforthesaleof111,415PTICsharesor46percentoftheoutstandingcapitalstockofPTIC
(theremaining54percentofPTICshareswasalreadyownedbyFirstPacificanditsaffiliates)(b)
ParallaxofferedthehighestbidamountingtoP25,217,556,000(c)pursuanttotherightoffirst
refusalinfavorofPTICanditsshareholdersgrantedinPTICsArticlesofIncorporation,MPAH,a
FirstPacificaffiliate,exerciseditsrightoffirstrefusalbymatchingthehighestbidofferedfor
PTICshareson13February2007and(d)on28February2007,thesalewasconsummatedwhen
MPAHpaidIPCP25,217,556,000andthegovernmentdeliveredthecertificatesforthe111,415
PTICshares.RespondentPangilinandeniestheotherallegationsoffactsofpetitioner.
On28February2007,petitionerfiledtheinstantpetitionforprohibition,injunction,declaratory
relief,anddeclarationofnullityofsaleofthe111,415PTICshares.Petitionerclaims,among
others,thatthesaleofthe111,415PTICshareswouldresultinanincreaseinFirstPacifics
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commonshareholdingsinPLDTfrom30.7percentto37percent,andthis,combinedwith
JapaneseNTTDoCoMoscommonshareholdingsinPLDT,wouldresulttoatotalforeigncommon
shareholdingsinPLDTof51.56percentwhichisoverthe40percentconstitutionallimit.6
Petitionerasserts:
Ifandwhenthesaleiscompleted,FirstPacificsequityinPLDTwillgoupfrom30.7percentto37.0
percentofitscommonorvotingstockholdings,xxx.Hence,theconsummationofthesalewillputthe
twolargestforeigninvestorsinPLDTFirstPacificandJapansNTTDoCoMo,whichistheworlds
largestwirelesstelecommunicationsfirm,owning51.56percentofPLDTcommonequity.xxxWith
thecompletionofthesale,dataculledfromtheofficialwebsiteoftheNewYorkStockExchange
(www.nyse.com)showedthatthoseforeignentities,whichownatleastfivepercentofcommonequity,
willcollectivelyown81.47percentofPLDTscommonequity.xxx
xxxastheannualdisclosurereports,alsoreferredtoasForm20Kreportsxxxwhich
PLDTsubmittedtotheNewYorkStockExchangefortheperiod20032005,revealed
thatFirstPacificandseveralotherforeignentitiesbreachedtheconstitutionallimitof40
percentownershipasearlyas2003.xxx7
Petitionerraisesthefollowingissues:(1)whethertheconsummationofthethenimpendingsaleof
111,415PTICsharestoFirstPacificviolatestheconstitutionallimitonforeignownershipofa
publicutility(2)whetherpublicrespondentscommittedgraveabuseofdiscretioninallowingthe
saleofthe111,415PTICsharestoFirstPacificand(3)whetherthesaleofcommonsharesto
foreignersinexcessof40percentoftheentiresubscribedcommoncapitalstockviolatesthe
constitutionallimitonforeignownershipofapublicutility.8
On13August2007,PablitoV.SanidadandArnoV.SanidadfiledaMotionforLeavetoIntervene
andAdmitAttachedPetitioninIntervention.IntheResolutionof28August2007,theCourt
grantedthemotionandnotedthePetitioninIntervention.
PetitionersininterventionjoinpetitionerWilsonGamboaxxxinseeking,amongothers,toenjoin
and/ornullifythesalebyrespondentsofthe111,415PTICsharestoFirstPacificorassignee.
Petitionersininterventionclaimthat,asPLDTsubscribers,theyhaveastakeintheoutcomeofthe
controversyxxxwherethePhilippineGovernmentiscompletingthesaleofgovernmentowned
assetsin[PLDT],unquestionablyapublicutility,inviolationofthenationalityrestrictionsofthe
PhilippineConstitution.
TheIssue
ThisCourtisnotatrieroffacts.Factualquestionssuchasthoseraisedbypetitioner,9which
indisputablydemandathoroughexaminationoftheevidenceoftheparties,aregenerallybeyond
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thisCourtsjurisdiction.Adheringtothiswellsettledprinciple,theCourtshallconfinethe
resolutionoftheinstantcontroversysolelyonthethresholdandpurelylegalissueofwhetherthe
termcapitalinSection11,ArticleXIIoftheConstitutionreferstothetotalcommonsharesonlyor
tothetotaloutstandingcapitalstock(combinedtotalofcommonandnonvotingpreferredshares)
ofPLDT,apublicutility.
TheRulingoftheCourt
Thepetitionispartlymeritorious.
Petitionfordeclaratoryrelieftreatedaspetitionformandamus
Attheoutset,petitionerisfacedwithaproceduralbarrier.Amongtheremediespetitionerseeks,
onlythepetitionforprohibitioniswithintheoriginaljurisdictionofthiscourt,whichhoweveris
notexclusivebutisconcurrentwiththeRegionalTrialCourtandtheCourtofAppeals.The
actionsfordeclaratoryrelief,10injunction,andannulmentofsalearenotembracedwithinthe
originaljurisdictionoftheSupremeCourt.Onthisgroundalone,thepetitioncouldhavebeen
dismissedoutright.
WhiledirectresorttothisCourtmaybejustifiedinapetitionforprohibition,11theCourtshall
neverthelessrefrainfromdiscussingthegroundsinsupportofthepetitionforprohibitionsinceon
28February2007,thequestionedsalewasconsummatedwhenMPAHpaidIPCP25,217,556,000
andthegovernmentdeliveredthecertificatesforthe111,415PTICshares.
However,sincethethresholdandpurelylegalissueonthedefinitionofthetermcapitalinSection
11,ArticleXIIoftheConstitutionhasfarreachingimplicationstothenationaleconomy,theCourt
treatsthepetitionfordeclaratoryreliefasoneformandamus.12
InSalvacionv.CentralBankofthePhilippines,13theCourttreatedthepetitionfordeclaratory
reliefasoneformandamusconsideringthegraveinjusticethatwouldresultintheinterpretationof
abankinglaw.Inthatcase,whichinvolvedthecrimeofrapecommittedbyaforeigntourist
againstaFilipinominorandtheexecutionofthefinaljudgmentinthecivilcasefordamageson
thetouristsdollardepositwithalocalbank,theCourtdeclaredSection113ofCentralBank
CircularNo.960,exemptingforeigncurrencydepositsfromattachment,garnishmentoranyother
orderorprocessofanycourt,inapplicableduetothepeculiarcircumstancesofthecase.TheCourt
heldthatinjusticewouldresultespeciallytoacitizenaggrievedbyaforeignguestlikeaccusedxx
xthatwouldnegateArticle10oftheCivilCodewhichprovidesthatincaseofdoubtinthe
interpretationorapplicationoflaws,itispresumedthatthelawmakingbodyintendedrightand
justicetoprevail.TheCourtthereforerequiredrespondentsCentralBankofthePhilippines,the
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localbank,andtheaccusedtocomplywiththewritofexecutionissuedinthecivilcasefor
damagesandtoreleasethedollardepositoftheaccusedtosatisfythejudgment.
InAllianceofGovernmentWorkersv.MinisterofLabor,14theCourtsimilarlybrushedasidethe
proceduralinfirmityofthepetitionfordeclaratoryreliefandtreatedthesameasonefor
mandamus.InAlliance,theissuewaswhetherthegovernmentunlawfullyexcludedpetitioners,
whoweregovernmentemployees,fromtheenjoymentofrightstowhichtheywereentitledunder
thelaw.Specifically,thequestionwas:Arethebranches,agencies,subdivisions,and
instrumentalitiesoftheGovernment,includinggovernmentownedorcontrolledcorporations
includedamongthefouremployersunderPresidentialDecreeNo.851whicharerequiredtopay
theiremployeesxxxathirteenth(13th)monthpayxxx?TheConstitutionalprincipleinvolved
thereinaffectedallgovernmentemployees,clearlyjustifyingarelaxationofthetechnicalrulesof
procedure,andcertainlyrequiringtheinterpretationoftheassailedpresidentialdecree.
Inshort,itiswellsettledthatthisCourtmaytreatapetitionfordeclaratoryreliefasonefor
mandamusiftheissueinvolvedhasfarreachingimplications.AsthisCourtheldinSalvacion:
TheCourthasnooriginalandexclusivejurisdictionoverapetitionfordeclaratoryrelief.However,
exceptionstothisrulehavebeenrecognized.Thus,wherethepetitionhasfarreaching
implicationsandraisesquestionsthatshouldberesolved,itmaybetreatedasonefor
mandamus.15(Emphasissupplied)
Inthepresentcase,petitionerseeksprimarilytheinterpretationofthetermcapitalinSection11,
ArticleXIIoftheConstitution.HepraysthatthisCourtdeclarethatthetermcapitalrefersto
commonsharesonly,andthatsuchsharesconstitutethesolebasisindeterminingforeignequityin
apublicutility.PetitionerfurtherasksthisCourttodeclareanyrulinginconsistentwithsuch
interpretationunconstitutional.
TheinterpretationofthetermcapitalinSection11,ArticleXIIoftheConstitutionhasfarreaching
implicationstothenationaleconomy.Infact,aresolutionofthisissuewilldeterminewhether
Filipinosaremasters,orsecondclasscitizens,intheirowncountry.Whatisatstakehereis
whetherFilipinosorforeignerswillhaveeffectivecontrolofthenationaleconomy.Indeed,ifever
thereisalegalissuethathasfarreachingimplicationstotheentirenation,andtofuture
generationsofFilipinos,itisthethreshholdlegalissuepresentedinthiscase.
TheCourtfirstencounteredtheissueonthedefinitionofthetermcapitalinSection11,ArticleXII
oftheConstitutioninthecaseofFernandezv.Cojuangco,docketedasG.R.No.157360.16That
caseinvolvedthesamepublicutility(PLDT)andsubstantiallythesameprivaterespondents.
Despitetheimportanceandnoveltyoftheconstitutionalissueraisedthereinanddespitethefact
thatthepetitioninvolvedapurelylegalquestion,theCourtdeclinedtoresolvethecaseonthe
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merits,andinsteaddeniedthesamefordisregardingthehierarchyofcourts.17There,petitioner
FernandezassailedonapurequestionoflawtheRegionalTrialCourtsDecisionof21February
2003viaapetitionforreviewunderRule45.TheCourtsResolution,denyingthepetition,became
finalon21December2004.
TheinstantpetitionthereforepresentstheCourtwithanotheropportunitytofinallysettlethis
purelylegalissuewhichisoftranscendentalimportancetothenationaleconomyanda
fundamentalrequirementtoafaithfuladherencetoourConstitution.TheCourtmustforthwith
seizesuchopportunity,notonlyforthebenefitofthelitigants,butmoresignificantlyforthe
benefitoftheentireFilipinopeople,toensure,inthewordsoftheConstitution,aselfreliantand
independentnationaleconomyeffectivelycontrolledbyFilipinos.18Besides,inthelightofvague
andconfusingpositionstakenbygovernmentagenciesonthispurelylegalissue,presentand
futureforeigninvestorsinthiscountrydeserve,asamatterofbasicfairness,acategoricalruling
fromthisCourtontheextentoftheirparticipationinthecapitalofpublicutilitiesandother
nationalizedbusinesses.
Despiteitsfarreachingimplicationstothenationaleconomy,thispurelylegalissuehasremained
unresolvedforover75yearssincethe1935Constitution.ThereisnoreasonforthisCourtto
evadethiseverrecurringfundamentalissueanddelayagaindefiningthetermcapital,which
appearsnotonlyinSection11,ArticleXIIoftheConstitution,butalsoinSection2,ArticleXIIon
coproductionandjointventureagreementsforthedevelopmentofournaturalresources,19in
Section7,ArticleXIIonownershipofprivatelands,20inSection10,ArticleXIIonthe
reservationofcertaininvestmentstoFilipinocitizens,21inSection4(2),ArticleXIVonthe
ownershipofeducationalinstitutions,22andinSection11(2),ArticleXVIontheownershipof
advertisingcompanies.23
Petitionerhaslocusstandi
ThereisnodisputethatpetitionerisastockholderofPLDT.Assuch,hehastherighttoquestion
thesubjectsale,whichheclaimstoviolatethenationalityrequirementprescribedinSection11,
ArticleXIIoftheConstitution.IfthesaleindeedviolatestheConstitution,thenthereisa
possibilitythatPLDTsfranchisecouldberevoked,adireconsequencedirectlyaffectingpetitioners
interestasastockholder.
Moreimportantly,thereisnoquestionthattheinstantpetitionraisesmattersoftranscendental
importancetothepublic.Thefundamentalandthresholdlegalissueinthiscase,involvingthe
nationaleconomyandtheeconomicwelfareoftheFilipinopeople,faroutweighsanyperceived
impedimentinthelegalpersonalityofthepetitionertobringthisaction.
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InChavezv.PCGG,24theCourtupheldtherightofacitizentobringasuitonmattersof
transcendentalimportancetothepublic,thus:
InTaadav.Tuvera,theCourtassertedthatwhentheissueconcernsapublicrightandthe
objectofmandamusistoobtaintheenforcementofapublicduty,thepeopleareregardedas
therealpartiesininterestandbecauseitissufficientthatpetitionerisacitizenandassuch
isinterestedintheexecutionofthelaws,heneednotshowthathehasanylegalorspecial
interestintheresultoftheaction.Intheaforesaidcase,thepetitionerssoughttoenforcetheir
righttobeinformedonmattersofpublicconcern,arightthenrecognizedinSection6,ArticleIV
ofthe1973Constitution,inconnectionwiththerulethatlawsinordertobevalidandenforceable
mustbepublishedintheOfficialGazetteorotherwiseeffectivelypromulgated.Inrulingforthe
petitionerslegalstanding,theCourtdeclaredthattherighttheysoughttobeenforcedisapublic
rightrecognizedbynolessthanthefundamentallawoftheland.
Legaspiv.CivilServiceCommission,whilereiteratingTaada,furtherdeclaredthatwhena
mandamusproceedinginvolvestheassertionofapublicright,therequirementofpersonal
interestissatisfiedbythemerefactthatpetitionerisacitizenand,therefore,partofthe
generalpublicwhichpossessestheright.
Further,inAlbanov.Reyes,wesaidthatwhileexpenditureofpublicfundsmaynothavebeen
involvedunderthequestionedcontractforthedevelopment,managementandoperationofthe
ManilaInternationalContainerTerminal,publicinterest[was]definitelyinvolvedconsidering
theimportantrole[ofthesubjectcontract]...intheeconomicdevelopmentofthecountry
andthemagnitudeofthefinancialconsiderationinvolved.Weconcludedthat,asa
consequence,thedisclosureprovisionintheConstitutionwouldconstitutesufficientauthorityfor
upholdingthepetitionersstanding.(Emphasissupplied)
Clearly,sincetheinstantpetition,broughtbyacitizen,involvesmattersoftranscendentalpublic
importance,thepetitionerhastherequisitelocusstandi.
DefinitionoftheTermCapitalin
Section11,ArticleXIIofthe1987Constitution
Section11,ArticleXII(NationalEconomyandPatrimony)ofthe1987Constitutionmandatesthe
Filipinizationofpublicutilities,towit:
Section11.Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofa
publicutilityshallbegrantedexcepttocitizensofthePhilippinesortocorporationsor
associationsorganizedunderthelawsofthePhilippines,atleastsixtypercentumofwhose
capitalisownedbysuchcitizensnorshallsuchfranchise,certificate,orauthorizationbeexclusivein
characterorforalongerperiodthanfiftyyears.Neithershallanysuchfranchiseorrightbegranted
exceptundertheconditionthatitshallbesubjecttoamendment,alteration,orrepealbytheCongress
whenthecommongoodsorequires.TheStateshallencourageequityparticipationinpublicutilitiesby
thegeneralpublic.Theparticipationofforeigninvestorsinthegoverningbodyofanypublicutility
enterpriseshallbelimitedtotheirproportionateshareinitscapital,andalltheexecutiveandmanaging
officersofsuchcorporationorassociationmustbecitizensofthePhilippines.(Emphasissupplied)
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TheaboveprovisionsubstantiallyreiteratesSection5,ArticleXIVofthe1973Constitution,thus:
publicutilityshallbegrantedexcepttocitizensofthePhilippinesortocorporationsor
associationsorganizedunderthelawsofthePhilippinesatleastsixtypercentumofthecapitalof
whichisownedbysuchcitizens,norshallsuchfranchise,certificate,orauthorizationbeexclusivein
characterorforalongerperiodthanfiftyyears.Neithershallanysuchfranchiseorrightbegranted
exceptundertheconditionthatitshallbesubjecttoamendment,alteration,orrepealbytheNational
Assemblywhenthepublicinterestsorequires.TheStateshallencourageequityparticipationinpublic
utilitiesbythegeneralpublic.Theparticipationofforeigninvestorsinthegoverningbodyofanypublic
utilityenterpriseshallbelimitedtotheirproportionateshareinthecapitalthereof.(Emphasissupplied)
Theforegoingprovisioninthe1973ConstitutionreproducedSection8,ArticleXIVofthe1935
Constitution,viz:
publicutilityshallbegrantedexcepttocitizensofthePhilippinesortocorporationsorother
entitiesorganizedunderthelawsofthePhilippinessixtypercentumofthecapitalofwhichis
ownedbycitizensofthePhilippines,norshallsuchfranchise,certificate,orauthorizationbe
exclusiveincharacterorforalongerperiodthanfiftyyears.Nofranchiseorrightshallbegrantedto
anyindividual,firm,orcorporation,exceptundertheconditionthatitshallbesubjecttoamendment,
alteration,orrepealbytheCongresswhenthepublicinterestsorequires.(Emphasissupplied)
FatherJoaquinG.Bernas,S.J.,aleadingmemberofthe1986ConstitutionalCommission,reminds
usthattheFilipinizationprovisioninthe1987Constitutionisoneoftheproductsofthespiritof
nationalismwhichgrippedthe1935ConstitutionalConvention.25The1987Constitutionprovides
fortheFilipinizationofpublicutilitiesbyrequiringthatanyformofauthorizationfortheoperation
ofpublicutilitiesshouldbegrantedonlytocitizensofthePhilippinesortocorporationsor
associationsorganizedunderthelawsofthePhilippinesatleastsixtypercentumofwhosecapital
isownedbysuchcitizens.Theprovisionis[anexpress]recognitionofthesensitiveandvital
positionofpublicutilitiesbothinthenationaleconomyandfornationalsecurity.26The
evidentpurposeofthecitizenshiprequirementistopreventaliensfromassumingcontrolofpublic
utilities,whichmaybeinimicaltothenationalinterest.27Thisspecificprovisionexplicitly
reservestoFilipinocitizenscontrolofpublicutilities,pursuanttoanoverridingeconomicgoalof
the1987Constitution:toconserveanddevelopourpatrimony28andensureaselfreliantand
independentnationaleconomyeffectivelycontrolledbyFilipinos.29
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Anycitizenorjuridicalentitydesiringtooperateapublicutilitymustthereforemeettheminimum
nationalityrequirementprescribedinSection11,ArticleXIIoftheConstitution.Hence,fora
corporationtobegrantedauthoritytooperateapublicutility,atleast60percentofitscapitalmust
beownedbyFilipinocitizens.
Thecruxofthecontroversyisthedefinitionofthetermcapital.DoesthetermcapitalinSection
11,ArticleXIIoftheConstitutionrefertocommonsharesortothetotaloutstandingcapitalstock
(combinedtotalofcommonandnonvotingpreferredshares)?
Petitionersubmitsthatthe40percentforeignequitylimitationindomesticpublicutilitiesrefers
onlytocommonsharesbecausesuchsharesareentitledtovoteanditisthroughvotingthatcontrol
overacorporationisexercised.PetitionerpositsthatthetermcapitalinSection11,ArticleXIIof
theConstitutionreferstotheownershipofcommoncapitalstocksubscribedandoutstanding,
whichclassofsharesalone,underthecorporatesetupofPLDT,canvoteandelectmembersof
theboardofdirectors.ItisundisputedthatPLDTsnonvotingpreferredsharesareheldmostlyby
Filipinocitizens.30ThisarosefromPresidentialDecreeNo.217,31issuedon16June1973bythen
PresidentFerdinandMarcos,requiringeveryapplicantofaPLDTtelephonelinetosubscribeto
nonvotingpreferredsharestopayfortheinvestmentcostofinstallingthetelephoneline.32
Petitionersininterventionbasicallyreiteratepetitionersargumentsandadoptpetitionersdefinition
ofthetermcapital.33Petitionersininterventionallegethattheapproximateforeignownershipof
commoncapitalstockofPLDTxxxalreadyamountstoatleast63.54%ofthetotaloutstanding
commonstock,whichmeansthatforeignersexercisesignificantcontroloverPLDT,patently
violatingthe40percentforeignequitylimitationinpublicutilitiesprescribedbytheConstitution.
Respondents,ontheotherhand,donotofferanydefinitionofthetermcapitalinSection11,
ArticleXIIoftheConstitution.Moreimportantly,privaterespondentsNazarenoandPangilinanof
PLDTdonotdisputethatmorethan40percentofthecommonsharesofPLDTareheldby
foreigners.
Inparticular,respondentNazarenosMemorandum,consistingof73pages,harpsmainlyonthe
proceduralinfirmitiesofthepetitionandthesupposedviolationofthedueprocessrightsofthe
affectedforeigncommonshareholders.RespondentNazarenodoesnotdenypetitionersallegation
offoreignersdominatingthecommonshareholdingsofPLDT.Nazarenostressedmainlythatthe
petitionseekstodivestforeigncommonshareholderspurportedlyexceeding40%ofthetotal
commonshareholdingsinPLDToftheirownershipovertheirshares.Thus,theforeignnatural
andjuridicalPLDTshareholdersmustbeimpleadedinthissuitsothattheycanbeheard.34
Essentially,Nazarenoinvokesdenialofdueprocessonbehalfoftheforeigncommon
shareholders.
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WhileNazarenodoesnotintroduceanydefinitionofthetermcapital,hestatesthatamongthe
factualassertionsthatneedtobeestablishedtocounterpetitionersallegationsistheuniform
interpretationbygovernmentagencies(suchastheSEC),institutionsandcorporations(such
asthePhilippineNationalOilCompanyEnergyDevelopmentCorporationorPNOCEDC)
ofincludingbothpreferredsharesandcommonsharesincontrollinginterestinviewof
testingcompliancewiththe40%constitutionallimitationonforeignownershipinpublic
utilities.35
Similarly,respondentManuelV.PangilinandoesnotdefinethetermcapitalinSection11,Article
XIIoftheConstitution.Neitherdoesherefutepetitionersclaimofforeignersholdingmorethan40
percentofPLDTscommonshares.Instead,respondentPangilinanfocusesontheproceduralflaws
ofthepetitionandtheallegedviolationofthedueprocessrightsofforeigners.Respondent
PangilinanemphasizesinhisMemorandum(1)theabsenceofthisCourtsjurisdictionoverthe
petition(2)petitionerslackofstanding(3)mootnessofthepetition(4)nonavailabilityof
declaratoryreliefand(5)thedenialofdueprocessrights.Moreover,respondentPangilinan
allegesthattheissueshouldbewhetherownersofsharesinPLDTaswellasownersofsharesin
companiesholdingsharesinPLDTmayberequiredtorelinquishtheirsharesinPLDTandin
thosecompanieswithoutanylawrequiringthemtosurrendertheirsharesandalsowithoutnotice
andtrial.
RespondentPangilinanfurtherassertsthatSection11,[ArticleXIIoftheConstitution]imposes
nonationalityrequirementontheshareholdersoftheutilitycompanyasaconditionfor
keepingtheirsharesintheutilitycompany.Accordingtohim,Section11doesnotauthorize
takingonepersonsproperty(theshareholdersstockintheutilitycompany)onthebasisofanother
partysallegedfailuretosatisfyarequirementthatisaconditiononlyforthatotherpartysretention
ofanotherpieceofproperty(theutilitycompanybeingatleast60%Filipinoownedtokeepits
franchise).36
TheOSG,representingpublicrespondentsSecretaryMargaritoTeves,UndersecretaryJohnP.
Sevilla,CommissionerRicardoAbcede,andChairmanFeBarin,islikewisesilentonthedefinition
ofthetermcapital.InitsMemorandum37dated24September2007,theOSGalsolimitsits
discussiononthesupposedproceduraldefectsofthepetition,i.e.lackofstanding,lackof
jurisdiction,noninclusionofinterestedparties,andlackofbasisforinjunction.TheOSGdoesnot
presentanydefinitionorinterpretationofthetermcapitalinSection11,ArticleXIIofthe
Constitution.TheOSGcontendsthatthepetitionactuallypartakesofacollateralattackonPLDTs
franchiseasapublicutility,whichineffectrequiresafullblowntrialwhereallthepartiesin
interestaregiventheirdayincourt.38
RespondentFranciscoEdLim,impleadedasPresidentandChiefExecutiveOfficerofthe
PhilippineStockExchange(PSE),doesnotalsodefinethetermcapitalandseeksthedismissalof
thepetitiononthefollowinggrounds:(1)failuretostateacauseofactionagainstLim(2)thePSE
allegedlyimplementeditsrulesandrequiredalllistedcompanies,includingPLDT,tomakeproper
andtimelydisclosuresand(3)thereliefsprayedforinthepetitionwouldadverselyimpactthe
stockmarket.
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IntheearliercaseofFernandezv.Cojuangco,petitionerFernandezwhoclaimedtobea
stockholderofrecordofPLDT,contendedthatthetermcapitalinthe1987Constitutionrefersto
sharesentitledtovoteorthecommonshares.Fernandezexplainedthus:
Thefortypercent(40%)foreignequitylimitationinpublicutilitiesprescribedbytheConstitutionrefers
toownershipofsharesofstockentitledtovote,i.e.,commonshares,consideringthatitisthrough
votingthatcontrolisbeingexercised.xxx
Obviously,theintentoftheframersoftheConstitutioninimposinglimitationsandrestrictionsonfully
nationalizedandpartiallynationalizedactivitiesisforFilipinonationalstobealwaysincontrolofthe
corporationundertakingsaidactivities.Otherwise,iftheTrialCourtsrulingupholdingrespondents
argumentsweretobegivencredence,itwouldbepossiblefortheownershipstructureofapublicutility
corporationtobedividedintoonepercent(1%)commonstocksandninetyninepercent(99%)
preferredstocks.FollowingtheTrialCourtsrulingadoptingrespondentsarguments,thecommonshares
canbeownedentirelybyforeignersthuscreatinganabsurdsituationwhereinforeigners,whoare
supposedtobeminorityshareholders,controlthepublicutilitycorporation.
xxxx
Thus,the40%foreignownershiplimitationshouldbeinterpretedtoapplytoboththebeneficial
ownershipandthecontrollinginterest.
xxxx
Clearly,therefore,thefortypercent(40%)foreignequitylimitationinpublicutilitiesprescribedbythe
Constitutionreferstoownershipofsharesofstockentitledtovote,i.e.,commonshares.Furthermore,
ownershipofrecordofshareswillnotsufficebutitmustbeshownthatthelegalandbeneficial
ownershiprestsinthehandsofFilipinocitizens.Consequently,inthecaseofpetitionerPLDT,sinceit
isalreadyadmittedthatthevotinginterestsofforeignerswhichwouldgainentrytopetitionerPLDTby
theacquisitionofSMARTsharesthroughtheQuestionedTransactionsisequivalentto82.99%,andthe
nomineearrangementsbetweentheforeignprincipalsandtheFilipinoownersislikewiseadmitted,
thereis,therefore,aviolationofSection11,ArticleXIIoftheConstitution.
Parenthetically,theOpinionsdatedFebruary15,1988andApril14,1987citedbytheTrialCourtto
supportthepropositionthatthemeaningofthewordcapitalasusedinSection11,ArticleXIIofthe
Constitutionallegedlyreferstothesumtotalofthesharessubscribedandpaidinbytheshareholder
anditallegedlyisimmaterialhowthestockisclassified,whetherascommonorpreferred,cannotstand
inthefaceofaclearlegislativepolicyasstatedintheFIAwhichtookeffectin1991orwayaftersaid
opinionswererendered,andasclarifiedbytheabovequotedAmendments.Inthisregard,sufficeitto
statethatasbetweenthelawandanopinionrenderedbyanadministrativeagency,thelawindubitably
prevails.Moreover,saidOpinionsaremerelyadvisoryandcannotprevailovertheclearintentofthe
framersoftheConstitution.
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Inthesamevein,theSECsconstructionofSection11,ArticleXIIoftheConstitutionisatbestmerely
advisoryforitisthecourtsthatfinallydeterminewhatalawmeans.39
Ontheotherhand,respondentstherein,AntonioO.Cojuangco,ManuelV.Pangilinan,CarlosA.
Arellano,HelenY.Dee,MagdangalB.Elma,MarilesCachoRomulo,Fr.BienvenidoF.Nebres,
RayC.Espinosa,NapoleonL.Nazareno,AlbertF.DelRosario,andOrlandoB.Vea,arguedthat
thetermcapitalinSection11,ArticleXIIoftheConstitutionincludespreferredsharessincethe
Constitutiondoesnotdistinguishamongclassesofstock,thus:
16.TheConstitutionappliesitsforeignownershiplimitationonthecorporationscapital,withoutdistinction
astoclassesofshares.xxx
Inthisconnection,theCorporationCodewhichwasalreadyinforceatthetimethepresent(1987)
Constitutionwasdrafteddefinedoutstandingcapitalstockasfollows:
Section137.Outstandingcapitalstockdefined.Thetermoutstandingcapitalstock,asusedinthis
Code,meansthetotalsharesofstockissuedunderbindingsubscriptionagreementstosubscribersor
stockholders,whetherornotfullyorpartiallypaid,excepttreasuryshares.
Section137oftheCorporationCodealsodoesnotdistinguishbetweencommonandpreferredshares,
norexcludeeitherclassofshares,indeterminingtheoutstandingcapitalstock(thecapital)ofa
corporation.Consequently,petitionerssuggestiontoreckonPLDTsforeignequityonlyonthebasisof
PLDTsoutstandingcommonsharesiswithoutlegalbasis.ThelanguageoftheConstitutionshouldbe
understoodinthesenseithasincommonuse.
xxxx
17.ButevenassumingthatresorttotheproceedingsoftheConstitutionalCommissionisnecessary,thereis
nothingintheRecordoftheConstitutionalCommission(Vol.III)whichpetitionermisleadinglycitedin
thePetitionxxxwhichsupportspetitionersviewthatonlycommonsharesshouldformthebasisfor
computingapublicutilitysforeignequity.
xxxx
18.Inaddition,theSECthegovernmentagencyprimarilyresponsibleforimplementingtheCorporation
Code,andwhichalsohastheresponsibilityofensuringcompliancewiththeConstitutionsforeign
equityrestrictionsasregardsnationalizedactivitiesxxxhascategoricallyruledthatbothcommonand
preferredsharesareproperlyconsideredindeterminingoutstandingcapitalstockandthenationality
compositionthereof.40
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Weagreewithpetitionerandpetitionersinintervention.ThetermcapitalinSection11,Article
XIIoftheConstitutionrefersonlytosharesofstockentitledtovoteintheelectionofdirectors,
andthusinthepresentcaseonlytocommonshares,41andnottothetotaloutstandingcapitalstock
comprisingbothcommonandnonvotingpreferredshares.
TheCorporationCodeofthePhilippines42classifiessharesascommonorpreferred,thus:
Sec.6.Classificationofshares.Thesharesofstockofstockcorporationsmaybedividedintoclasses
orseriesofshares,orboth,anyofwhichclassesorseriesofsharesmayhavesuchrights,privilegesor
restrictionsasmaybestatedinthearticlesofincorporation:Provided,Thatnosharemaybedeprived
ofvotingrightsexceptthoseclassifiedandissuedaspreferredorredeemableshares,unless
otherwiseprovidedinthisCode:Provided,further,Thatthereshallalwaysbeaclassorseriesof
shareswhichhavecompletevotingrights.Anyorallofthesharesorseriesofsharesmayhaveapar
valueorhavenoparvalueasmaybeprovidedforinthearticlesofincorporation:Provided,however,
Thatbanks,trustcompanies,insurancecompanies,publicutilities,andbuildingandloanassociations
shallnotbepermittedtoissuenoparvaluesharesofstock.
Preferredsharesofstockissuedbyanycorporationmaybegivenpreferenceinthedistributionofthe
assetsofthecorporationincaseofliquidationandinthedistributionofdividends,orsuchother
preferencesasmaybestatedinthearticlesofincorporationwhicharenotviolativeoftheprovisionsof
thisCode:Provided,Thatpreferredsharesofstockmaybeissuedonlywithastatedparvalue.The
BoardofDirectors,whereauthorizedinthearticlesofincorporation,mayfixthetermsandconditions
ofpreferredsharesofstockoranyseriesthereof:Provided,Thatsuchtermsandconditionsshallbe
effectiveuponthefilingofacertificatethereofwiththeSecuritiesandExchangeCommission.
Sharesofcapitalstockissuedwithoutparvalueshallbedeemedfullypaidandnonassessableandthe
holderofsuchsharesshallnotbeliabletothecorporationortoitscreditorsinrespectthereto:
ProvidedThatshareswithoutparvaluemaynotbeissuedforaconsiderationlessthanthevalueoffive
(P5.00)pesospershare:Provided,further,Thattheentireconsiderationreceivedbythecorporationfor
itsnoparvaluesharesshallbetreatedascapitalandshallnotbeavailablefordistributionasdividends.
Acorporationmay,furthermore,classifyitssharesforthepurposeofinsuringcompliancewith
constitutionalorlegalrequirements.
Exceptasotherwiseprovidedinthearticlesofincorporationandstatedinthecertificateofstock,each
shareshallbeequalinallrespectstoeveryothershare.
WherethearticlesofincorporationprovidefornonvotingsharesinthecasesallowedbythisCode,the
holdersofsuchsharesshallneverthelessbeentitledtovoteonthefollowingmatters:
1.Amendmentofthearticlesofincorporation
2.Adoptionandamendmentofbylaws
3.Sale,lease,exchange,mortgage,pledgeorotherdispositionofallorsubstantiallyallofthe
corporateproperty
4.Incurring,creatingorincreasingbondedindebtedness
5.Increaseordecreaseofcapitalstock
6.Mergerorconsolidationofthecorporationwithanothercorporationorothercorporations
7.Investmentofcorporatefundsinanothercorporationorbusinessinaccordancewiththis
Codeand
8.Dissolutionofthecorporation.
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Exceptasprovidedintheimmediatelyprecedingparagraph,thevotenecessarytoapproveaparticular
corporateactasprovidedinthisCodeshallbedeemedtoreferonlytostockswithvotingrights.
Indisputably,oneoftherightsofastockholderistherighttoparticipateinthecontrolor
managementofthecorporation.43Thisisexercisedthroughhisvoteintheelectionofdirectors
becauseitistheboardofdirectorsthatcontrolsormanagesthecorporation.44Intheabsenceof
provisionsinthearticlesofincorporationdenyingvotingrightstopreferredshares,preferred
shareshavethesamevotingrightsascommonshares.However,preferredshareholdersareoften
excludedfromanycontrol,thatis,deprivedoftherighttovoteintheelectionofdirectorsandon
othermatters,onthetheorythatthepreferredshareholdersaremerelyinvestorsinthecorporation
forincomeinthesamemannerasbondholders.45Infact,undertheCorporationCodeonly
preferredorredeemablesharescanbedeprivedoftherighttovote.46Commonsharescannotbe
deprivedoftherighttovoteinanycorporatemeeting,andanyprovisioninthearticlesof
incorporationrestrictingtherightofcommonshareholderstovoteisinvalid.47
Consideringthatcommonshareshavevotingrightswhichtranslatetocontrol,asopposedto
preferredshareswhichusuallyhavenovotingrights,thetermcapitalinSection11,ArticleXIIof
theConstitutionrefersonlytocommonshares.However,ifthepreferredsharesalsohavetheright
tovoteintheelectionofdirectors,thenthetermcapitalshallincludesuchpreferredsharesbecause
therighttoparticipateinthecontrolormanagementofthecorporationisexercisedthroughthe
righttovoteintheelectionofdirectors.Inshort,thetermcapitalinSection11,ArticleXIIof
theConstitutionrefersonlytosharesofstockthatcanvoteintheelectionofdirectors.
ThisinterpretationisconsistentwiththeintentoftheframersoftheConstitutiontoplaceinthe
handsofFilipinocitizensthecontrolandmanagementofpublicutilities.Asrevealedinthe
deliberationsoftheConstitutionalCommission,capitalreferstothevotingstockorcontrolling
interestofacorporation,towit:
MR.NOLLEDO.InSections3,9and15,theCommitteestatedlocalorFilipinoequityandforeign
equitynamely,6040inSection3,6040inSection9and2/31/3inSection15.
MR.VILLEGAS.Thatisright.
MR.NOLLEDO.Inteachinglaw,wearealwaysfacedwiththisquestion:Wheredowebasetheequity
requirement,isitontheauthorizedcapitalstock,onthesubscribedcapitalstock,oronthepaidup
capitalstockofacorporation?WilltheCommitteepleaseenlightenmeonthis?
MR.VILLEGAS.WehavejusthadalongdiscussionwiththemembersoftheteamfromtheUPLaw
Centerwhoprovidedusadraft.ThephrasethatiscontainedherewhichweadoptedfromtheUP
draftis60percentofvotingstock.
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MR.NOLLEDO.Thatmustbebasedonthesubscribedcapitalstock,becauseunlessdeclared
delinquent,unpaidcapitalstockshallbeentitledtovote.
MR.NOLLEDO.Thankyou.
Withrespecttoaninvestmentbyonecorporationinanothercorporation,say,acorporationwith6040
percentequityinvestsinanothercorporationwhichispermittedbytheCorporationCode,doesthe
Committeeadoptthegrandfatherrule?
MR.VILLEGAS.Yes,thatistheunderstandingoftheCommittee.
MR.NOLLEDO.Therefore,weneedadditionalFilipinocapital?
MR.VILLEGAS.Yes.48
xxxx
MR.AZCUNA.MayIbeclarifiedastothatportionthatwasacceptedbytheCommittee.
MR.VILLEGAS.TheportionacceptedbytheCommitteeisthedeletionofthephrasevotingstockor
controllinginterest.
MR.AZCUNA.Hence,withouttheDavideamendment,thecommitteereportwouldread:corporations
orassociationsatleastsixtypercentofwhoseCAPITALisownedbysuchcitizens.
MR.VILLEGAS.Yes.
MR.AZCUNA.SoiftheDavideamendmentislost,wearestuckwith60percentofthecapitaltobe
ownedbycitizens.
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MR.AZCUNA.Butthecontrolcanbewiththeforeignerseveniftheyaretheminority.Letus
say40percentofthecapitalisownedbythem,butitisthevotingcapital,whereas,theFilipinos
ownthenonvotingshares.Sowecanhaveasituationwherethecorporationiscontrolledby
foreignersdespitebeingtheminoritybecausetheyhavethevotingcapital.Thatistheanomaly
thatwouldresulthere.
MR.BENGZON.No,thereasonweeliminatedthewordstockasstatedinthe1973and1935
ConstitutionsisthataccordingtoCommissionerRodrigo,thereareassociationsthatdonothave
stocks.ThatiswhywesayCAPITAL.
MR.AZCUNA.Weshouldnoteliminatethephrasecontrollinginterest.
MR.BENGZON.Inthecaseofstockcorporations,itisassumed.49(Emphasissupplied)
Thus,60percentofthecapitalassumes,orshouldresultin,controllinginterestinthecorporation.
Reinforcingthisinterpretationofthetermcapital,asreferringtocontrollinginterestorshares
entitledtovote,isthedefinitionofaPhilippinenationalintheForeignInvestmentsActof1991,50
towit:
SEC.3.Definitions.AsusedinthisAct:
a.ThetermPhilippinenationalshallmeanacitizenofthePhilippinesoradomesticpartnershipor
associationwhollyownedbycitizensofthePhilippinesoracorporationorganizedunderthelaws
ofthePhilippinesofwhichatleastsixtypercent(60%)ofthecapitalstockoutstandingand
entitledtovoteisownedandheldbycitizensofthePhilippinesoracorporationorganizedabroad
andregisteredasdoingbusinessinthePhilippinesundertheCorporationCodeofwhichonehundred
percent(100%)ofthecapitalstockoutstandingandentitledtovoteiswhollyownedbyFilipinosora
trusteeoffundsforpensionorotheremployeeretirementorseparationbenefits,wherethetrusteeisa
Philippinenationalandatleastsixtypercent(60%)ofthefundwillaccruetothebenefitofPhilippine
nationals:Provided,ThatwhereacorporationanditsnonFilipinostockholdersownstocksina
SecuritiesandExchangeCommission(SEC)registeredenterprise,atleastsixtypercent(60%)ofthe
capitalstockoutstandingandentitledtovoteofeachofbothcorporationsmustbeownedandheldby
citizensofthePhilippinesandatleastsixtypercent(60%)ofthemembersoftheBoardofDirectorsof
eachofbothcorporationsmustbecitizensofthePhilippines,inorderthatthecorporation,shallbe
consideredaPhilippinenational.(Emphasissupplied)
InexplainingthedefinitionofaPhilippinenational,theImplementingRulesandRegulationsof
theForeignInvestmentsActof1991provide:
b.PhilippinenationalshallmeanacitizenofthePhilippinesoradomesticpartnershiporassociation
whollyownedbythecitizensofthePhilippinesoracorporationorganizedunderthelawsofthe
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Philippinesofwhichatleastsixtypercent[60%]ofthecapitalstockoutstandingandentitledto
voteisownedandheldbycitizensofthePhilippinesoratrusteeoffundsforpensionorother
employeeretirementorseparationbenefits,wherethetrusteeisaPhilippinenationalandatleastsixty
percent[60%]ofthefundwillaccruetothebenefitofthePhilippinenationalsProvided,thatwherea
corporationitsnonFilipinostockholdersownstocksinaSecuritiesandExchangeCommission[SEC]
registeredenterprise,atleastsixtypercent[60%]ofthecapitalstockoutstandingandentitledtovoteof
bothcorporationsmustbeownedandheldbycitizensofthePhilippinesandatleastsixtypercent
[60%]ofthemembersoftheBoardofDirectorsofeachofbothcorporationmustbecitizensofthe
Philippines,inorderthatthecorporationshallbeconsideredaPhilippinenational.Thecontroltestshall
beappliedforthispurpose.
CompliancewiththerequiredFilipinoownershipofacorporationshallbedeterminedonthe
basisofoutstandingcapitalstockwhetherfullypaidornot,butonlysuchstockswhichare
generallyentitledtovoteareconsidered.
ForstockstobedeemedownedandheldbyPhilippinecitizensorPhilippinenationals,merelegal
titleisnotenoughtomeettherequiredFilipinoequity.Fullbeneficialownershipofthestocks,
coupledwithappropriatevotingrightsisessential.Thus,stocks,thevotingrightsofwhichhave
beenassignedortransferredtoalienscannotbeconsideredheldbyPhilippinecitizensor
Philippinenationals.
Individualsorjuridicalentitiesnotmeetingtheaforementionedqualificationsareconsideredas
nonPhilippinenationals.(Emphasissupplied)
Merelegaltitleisinsufficienttomeetthe60percentFilipinoownedcapitalrequiredinthe
Constitution.Fullbeneficialownershipof60percentoftheoutstandingcapitalstock,coupledwith
60percentofthevotingrights,isrequired.Thelegalandbeneficialownershipof60percentofthe
outstandingcapitalstockmustrestinthehandsofFilipinonationalsinaccordancewiththe
constitutionalmandate.Otherwise,thecorporationisconsideredasnonPhilippinenational[s].
UnderSection10,ArticleXIIoftheConstitution,Congressmayreservetocitizensofthe
Philippinesortocorporationsorassociationsatleastsixtypercentumofwhosecapitalisowned
bysuchcitizens,orsuchhigherpercentageasCongressmayprescribe,certainareasof
investments.Thus,innumerouslawsCongresshasreservedcertainareasofinvestmentsto
Filipinocitizensortocorporationsatleastsixtypercentofthecapitalofwhichisownedby
Filipinocitizens.Someoftheselawsare:(1)RegulationofAwardofGovernmentContractsor
R.A.No.5183(2)PhilippineInventorsIncentivesActorR.A.No.3850(3)MagnaCartafor
Micro,SmallandMediumEnterprisesorR.A.No.6977(4)PhilippineOverseasShipping
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DevelopmentActorR.A.No.7471(5)DomesticShippingDevelopmentActof2004orR.A.No.
9295(6)PhilippineTechnologyTransferActof2009orR.A.No.10055and(7)ShipMortgage
DecreeorP.D.No.1521.Hence,thetermcapitalinSection11,ArticleXIIoftheConstitutionis
alsousedinthesamecontextinnumerouslawsreservingcertainareasofinvestmentstoFilipino
citizens.
Toconstruebroadlythetermcapitalasthetotaloutstandingcapitalstock,includingbothcommon
andnonvotingpreferredshares,grosslycontravenestheintentandletteroftheConstitutionthat
theStateshalldevelopaselfreliantandindependentnationaleconomyeffectivelycontrolledby
Filipinos.Abroaddefinitionunjustifiablydisregardswhoownstheallimportantvotingstock,
whichnecessarilyequatestocontrolofthepublicutility.
Weshallillustratetheglaringanomalyingivingabroaddefinitiontothetermcapital.Letus
assumethatacorporationhas100commonsharesownedbyforeignersand1,000,000nonvoting
preferredsharesownedbyFilipinos,withbothclassesofsharehavingaparvalueofonepeso
(P1.00)pershare.Underthebroaddefinitionofthetermcapital,suchcorporationwouldbe
consideredcompliantwiththe40percentconstitutionallimitonforeignequityofpublicutilities
sincetheoverwhelmingmajority,ormorethan99.999percent,ofthetotaloutstandingcapital
stockisFilipinoowned.Thisisobviouslyabsurd.
Intheexamplegiven,onlytheforeignersholdingthecommonshareshavevotingrightsinthe
electionofdirectors,eveniftheyholdonly100shares.Theforeigners,withaminusculeequityof
lessthan0.001percent,exercisecontroloverthepublicutility.Ontheotherhand,theFilipinos,
holdingmorethan99.999percentoftheequity,cannotvoteintheelectionofdirectorsandhence,
havenocontroloverthepublicutility.Thisstarklycircumventstheintentoftheframersofthe
Constitution,aswellastheclearlanguageoftheConstitution,toplacethecontrolofpublic
utilitiesinthehandsofFilipinos.ItalsorendersillusorytheStatepolicyofanindependent
nationaleconomyeffectivelycontrolledbyFilipinos.
Theexamplegivenisnottheoreticalbutcanbefoundintherealworld,andinfactexistsinthe
presentcase.
HoldersofPLDTpreferredsharesareexplicitlydeniedoftherighttovoteintheelectionof
directors.PLDTsArticlesofIncorporationexpresslystatethattheholdersofSerialPreferred
Stockshallnotbeentitledtovoteatanymeetingofthestockholdersfortheelectionof
directorsorforanyotherpurposeorotherwiseparticipateinanyactiontakenbythecorporation
oritsstockholders,ortoreceivenoticeofanymeetingofstockholders.51
Ontheotherhand,holdersofcommonsharesaregrantedtheexclusiverighttovoteintheelection
ofdirectors.PLDTsArticlesofIncorporation52statethateachholderofCommonCapitalStock
shallhaveonevoteinrespectofeachshareofsuchstockheldbyhimonallmattersvoteduponby
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thestockholders,andtheholdersofCommonCapitalStockshallhavetheexclusiverightto
votefortheelectionofdirectorsandforallotherpurposes.53
Inshort,onlyholdersofcommonsharescanvoteintheelectionofdirectors,meaningonly
commonshareholdersexercisecontroloverPLDT.Conversely,holdersofpreferredshares,who
havenovotingrightsintheelectionofdirectors,donothaveanycontroloverPLDT.Infact,under
PLDTsArticlesofIncorporation,holdersofcommonshareshavevotingrightsforallpurposes,
whileholdersofpreferredshareshavenovotingrightforanypurposewhatsoever.
Itmustbestressed,andrespondentsdonotdispute,thatforeignersholdamajorityofthe
commonsharesofPLDT.Infact,basedonPLDTs2010GeneralInformationSheet(GIS),54which
isadocumentrequiredtobesubmittedannuallytotheSecuritiesandExchangeCommission,55
foreignershold120,046,690commonsharesofPLDTwhereasFilipinosholdonly66,750,622
commonshares.56Inotherwords,foreignershold64.27%ofthetotalnumberofPLDTscommon
shares,whileFilipinosholdonly35.73%.Sinceholdingamajorityofthecommonsharesequates
tocontrol,itisclearthatforeignersexercisecontroloverPLDT.Suchamountofcontrol
unmistakablyexceedstheallowable40percentlimitonforeignownershipofpublicutilities
expresslymandatedinSection11,ArticleXIIoftheConstitution.
Moreover,theDividendDeclarationsofPLDTfor2009,57assubmittedtotheSEC,showsthatper
sharetheSIP58preferredsharesearnapittanceindividendscomparedtothecommonshares.
PLDTdeclareddividendsforthecommonsharesatP70.00pershare,whilethedeclareddividends
forthepreferredsharesamountedtoameaslyP1.00pershare.59Sothepreferredsharesnotonly
cannotvoteintheelectionofdirectors,theyalsohaveverylittleandobviouslynegligibledividend
earningcapacitycomparedtocommonshares.
AsshowninPLDTs2010GIS,60assubmittedtotheSEC,theparvalueofPLDTcommonshares
isP5.00pershare,whereastheparvalueofpreferredsharesisP10.00pershare.Inotherwords,
preferredshareshavetwicetheparvalueofcommonsharesbutcannotelectdirectorsandhave
only1/70ofthedividendsofcommonshares.Moreover,99.44%ofthepreferredsharesareowned
byFilipinoswhileforeignersownonlyaminuscule0.56%ofthepreferredshares.61Worse,
preferredsharesconstitute77.85%oftheauthorizedcapitalstockofPLDTwhilecommonshares
constituteonly22.15%.62ThisundeniablyshowsthatbeneficialinterestinPLDTisnotwiththe
nonvotingpreferredsharesbutwiththecommonshares,blatantlyviolatingtheconstitutional
requirementof60percentFilipinocontrolandFilipinobeneficialownershipinapublicutility.
Thelegalandbeneficialownershipof60percentoftheoutstandingcapitalstockmustrestinthe
handsofFilipinosinaccordancewiththeconstitutionalmandate.Fullbeneficialownershipof60
percentoftheoutstandingcapitalstock,coupledwith60percentofthevotingrights,is
constitutionallyrequiredfortheStatesgrantofauthoritytooperateapublicutility.Theundisputed
factthatthePLDTpreferredshares,99.44%ownedbyFilipinos,arenonvotingandearnonly
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1/70ofthedividendsthatPLDTcommonsharesearn,grosslyviolatestheconstitutional
requirementof60percentFilipinocontrolandFilipinobeneficialownershipofapublicutility.
Inshort,Filipinosholdlessthan60percentofthevotingstock,andearnlessthan60percent
ofthedividends,ofPLDT.ThisdirectlycontravenestheexpresscommandinSection11,Article
XIIoftheConstitutionthat[n]ofranchise,certificate,oranyotherformofauthorizationforthe
operationofapublicutilityshallbegrantedexcepttoxxxcorporationsxxxorganizedunderthe
lawsofthePhilippines,atleastsixtypercentumofwhosecapitalisownedbysuchcitizensxx
x.
Torepeat,(1)foreignersown64.27%ofthecommonsharesofPLDT,whichclassofshares
exercisesthesolerighttovoteintheelectionofdirectors,andthusexercisecontroloverPLDT
(2)Filipinosownonly35.73%ofPLDTscommonshares,constitutingaminorityofthevoting
stock,andthusdonotexercisecontroloverPLDT(3)preferredshares,99.44%ownedby
Filipinos,havenovotingrights(4)preferredsharesearnonly1/70ofthedividendsthatcommon
sharesearn63(5)preferredshareshavetwicetheparvalueofcommonsharesand(6)preferred
sharesconstitute77.85%oftheauthorizedcapitalstockofPLDTandcommonsharesonly
22.15%.ThiskindofownershipandcontrolofapublicutilityisamockeryoftheConstitution.
Incidentally,thefactthatPLDTcommonshareswithaparvalueofP5.00haveacurrentstock
marketvalueofP2,328.00pershare,64whilePLDTpreferredshareswithaparvalueofP10.00
persharehaveacurrentstockmarketvaluerangingfromonlyP10.92toP11.06pershare,65isa
glaringconfirmationbythemarketthatcontrolandbeneficialownershipofPLDTrestwiththe
commonshares,notwiththepreferredshares.
Indisputably,construingthetermcapitalinSection11,ArticleXIIoftheConstitutiontoinclude
bothvotingandnonvotingshareswillresultintheabjectsurrenderofourtelecommunications
industrytoforeigners,amountingtoaclearabdicationoftheStatesconstitutionaldutytolimit
controlofpublicutilitiestoFilipinocitizens.Suchaninterpretationcertainlyrunscountertothe
constitutionalprovisionreservingcertainareasofinvestmenttoFilipinocitizens,suchasthe
exploitationofnaturalresourcesaswellastheownershipofland,educationalinstitutionsand
advertisingbusinesses.TheCourtshouldneveropentoforeigncontrolwhattheConstitutionhas
expresslyreservedtoFilipinosforthatwouldbeabetrayaloftheConstitutionandofthenational
interest.TheCourtmustperformitssolemndutytodefendandupholdtheintentandletterofthe
Constitutiontoensure,inthewordsoftheConstitution,aselfreliantandindependentnational
economyeffectivelycontrolledbyFilipinos.
Section11,ArticleXIIoftheConstitution,likeotherprovisionsoftheConstitutionexpressly
reservingtoFilipinosspecificareasofinvestment,suchasthedevelopmentofnaturalresources
andownershipofland,educationalinstitutionsandadvertisingbusiness,isselfexecuting.Thereis
noneedforlegislationtoimplementtheseselfexecutingprovisionsoftheConstitution.The
rationalewhytheseconstitutionalprovisionsareselfexecutingwasexplainedinManilaPrince
Hotelv.GSIS,66thus:
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xxxHence,unlessitisexpresslyprovidedthatalegislativeactisnecessarytoenforceaconstitutional
mandate,thepresumptionnowisthatallprovisionsoftheconstitutionareselfexecuting.Ifthe
constitutionalprovisionsaretreatedasrequiringlegislationinsteadofselfexecuting,thelegislature
wouldhavethepowertoignoreandpracticallynullifythemandateofthefundamentallaw.Thiscanbe
cataclysmic.Thatiswhytheprevailingviewis,asithasalwaysbeen,that
...incaseofdoubt,theConstitutionshouldbeconsideredselfexecutingratherthannonself
executing....Unlessthecontraryisclearlyintended,theprovisionsoftheConstitutionshouldbe
consideredselfexecuting,asacontraryrulewouldgivethelegislaturediscretiontodetermine
when,orwhether,theyshallbeeffective.Theseprovisionswouldbesubordinatedtothewillofthe
lawmakingbody,whichcouldmakethementirelymeaninglessbysimplyrefusingtopasstheneeded
implementingstatute.(Emphasissupplied)
InManilaPrinceHotel,eventheDissentingOpinionofthenAssociateJusticeReynatoS.Puno,
laterChiefJustice,agreedthatconstitutionalprovisionsarepresumedtobeselfexecuting.Justice
Punostated:
CourtsasaruleconsidertheprovisionsoftheConstitutionasselfexecuting,ratherthanasrequiring
futurelegislationfortheirenforcement.Thereasonisnotdifficulttodiscern.Foriftheyarenot
treatedasselfexecuting,themandateofthefundamentallawratifiedbythesovereignpeoplecan
beeasilyignoredandnullifiedbyCongress.Suffusedwithwisdomoftheagesistheunyielding
rulethatlegislativeactionsmaygivebreathtoconstitutionalrightsbutcongressionalinaction
shouldnotsuffocatethem.
Thus,wehavetreatedasselfexecutingtheprovisionsintheBillofRightsonarrests,searchesand
seizures,therightsofapersonundercustodialinvestigation,therightsofanaccused,andtheprivilege
againstselfincrimination.Itisrecognizedthatlegislationisunnecessarytoenablecourtstoeffectuate
constitutionalprovisionsguaranteeingthefundamentalrightsoflife,libertyandtheprotectionof
property.Thesametreatmentisaccordedtoconstitutionalprovisionsforbiddingthetakingordamaging
ofpropertyforpublicusewithoutjustcompensation.(Emphasissupplied)
Thus,innumerouscases,67thisCourt,evenintheabsenceofimplementinglegislation,applied
directlytheprovisionsofthe1935,1973and1987Constitutionslimitinglandownershipto
Filipinos.InSorianov.OngHoo,68thisCourtruled:
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xxxAstheConstitutionissilentastotheeffectsorconsequencesofasalebyacitizenofhislandto
analien,andasboththecitizenandthealienhaveviolatedthelaw,noneofthemshouldhavea
recourseagainsttheother,anditshouldonlybetheStatethatshouldbeallowedtointerveneand
determinewhatistobedonewiththepropertysubjectoftheviolation.WehavesaidthatwhattheState
shoulddoorcoulddoinsuchmattersisamatterofpublicpolicy,entirelybeyondthescopeofjudicial
authority.(Dinglasan,etal.vs.LeeBunTing,etal.,6G.R.No.L5996,June27,1956.)Whilethe
legislaturehasnotdefinitelydecidedwhatpolicyshouldbefollowedincasesofviolationsagainst
theconstitutionalprohibition,courtsofjusticecannotgobeyondbydeclaringthedispositionto
benullandvoidasviolativeoftheConstitution.xxx(Emphasissupplied)
TotreatSection11,ArticleXIIoftheConstitutionasnotselfexecutingwouldmeanthatsincethe
1935Constitution,oroverthelast75years,notoneoftheconstitutionalprovisionsexpressly
reservingspecificareasofinvestmentstocorporations,atleast60percentofthecapitalofwhichis
ownedbyFilipinos,wasenforceable.Inshort,theframersofthe1935,1973and1987
ConstitutionsmiserablyfailedtoeffectivelyreservetoFilipinosspecificareasofinvestment,like
theoperationbycorporationsofpublicutilities,theexploitationbycorporationsofmineral
resources,theownershipbycorporationsofrealestate,andtheownershipofeducational
institutions.Allthelegislaturesthatconvenedsince1935alsomiserablyfailedtoenactlegislations
toimplementthesevitalconstitutionalprovisionsthatdeterminewhowilleffectivelycontrolthe
nationaleconomy,Filipinosorforeigners.ThisCourtcannotallowsuchanabsurdinterpretationof
theConstitution.
ThisCourthasheldthattheSEChasbothregulatoryandadjudicativefunctions.69Underits
regulatoryfunctions,theSECcanbecompelledbymandamustoperformitsstatutorydutywhenit
unlawfullyneglectstoperformthesame.Underitsadjudicativeorquasijudicialfunctions,the
SECcanbealsobecompelledbymandamustohearanddecideapossibleviolationofanylawit
administersorenforceswhenitismandatedbylawtoinvestigatesuchviolation.
UnderSection17(4)70oftheCorporationCode,theSEChastheregulatoryfunctiontorejector
disapprovetheArticlesofIncorporationofanycorporationwheretherequiredpercentageof
ownershipofthecapitalstocktobeownedbycitizensofthePhilippineshasnotbeen
compliedwithasrequiredbyexistinglawsortheConstitution.Thus,theSECisthe
governmentagencytaskedwiththestatutorydutytoenforcethenationalityrequirementprescribed
inSection11,ArticleXIIoftheConstitutionontheownershipofpublicutilities.ThisCourt,ina
petitionfordeclaratoryreliefthatistreatedasapetitionformandamusasinthepresentcase,can
directtheSECtoperformitsstatutorydutyunderthelaw,adutythattheSEChasapparently
unlawfullyneglectedtodobasedonthe2010GISthatrespondentPLDTsubmittedtotheSEC.
UnderSection5(m)oftheSecuritiesRegulationCode,71theSECisvestedwiththepowerand
functiontosuspendorrevoke,afterpropernoticeandhearing,thefranchiseorcertificateof
registrationofcorporations,partnershipsorassociations,uponanyofthegroundsprovided
bylaw.TheSECismandatedunderSection5(d)ofthesameCodewiththepowerandfunctionto
investigatexxxtheactivitiesofpersonstoensurecompliancewiththelawsandregulations
thatSECadministersorenforces.TheGISthatallcorporationsarerequiredtosubmittoSEC
annuallyshouldputtheSEConguardagainstviolationsofthenationalityrequirementprescribed
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intheConstitutionandexistinglaws.ThisCourtcancompeltheSEC,inapetitionfordeclaratory
reliefthatistreatedasapetitionformandamusasinthepresentcase,tohearanddecideapossible
violationofSection11,ArticleXIIoftheConstitutioninviewoftheownershipstructureof
PLDTsvotingshares,asadmittedbyrespondentsandasstatedinPLDTs2010GISthatPLDT
submittedtoSEC.
WHEREFORE,wePARTLYGRANTthepetitionandrulethatthetermcapitalinSection11,
ArticleXIIofthe1987Constitutionrefersonlytosharesofstockentitledtovoteintheelectionof
directors,andthusinthepresentcaseonlytocommonshares,andnottothetotaloutstanding
capitalstock(commonandnonvotingpreferredshares).RespondentChairpersonoftheSecurities
andExchangeCommissionisDIRECTEDtoapplythisdefinitionofthetermcapitalin
determiningtheextentofallowableforeignownershipinrespondentPhilippineLongDistance
TelephoneCompany,andifthereisaviolationofSection11,ArticleXIIoftheConstitution,to
imposetheappropriatesanctionsunderthelaw.
SOORDERED.
ANTONIOT.CARPIO
AssociateJustice
WECONCUR:
IjointhedissentofMr.JusticeVelasco
RENATOC.CORONA
ChiefJustice
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Idissent
(PleaseseeDissentingOpinion)
PRESBITEROJ.VELASCO,JR.
TERESITAJ.LEONARDO
DECASTRO
AssociateJustice
AssociateJustice
ARTUROD.BRION
DIOSDADOM.PERALTA
AssociateJustice
AssociateJustice
LUCASP.BERSAMIN
MARIANOC.DELCASTILLO
AssociateJustice
AssociateJustice
Seemydissentingopinion
ROBERTOA.ABAD
MARTINS.VILLARAMA,JR.
AssociateJustice
AssociateJustice
JOSEPORTUGALPEREZ
AssociateJustice
JOSEC.MENDOZA
AssociateJustice
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MARIALOURDESP.A.SERENO
AssociateJustice
CERTIFICATION
PursuanttoSection13,ArticleVIIIoftheConstitution,Icertifythattheconclusionsintheabove
Decisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriteroftheopinion
oftheCourt.
RENATOC.CORONA
ChiefJustice
1Rollo(Vol.I),pp.15103,(Vol.II),pp.762768.
2SeeCojuangcov.Sandiganbayan,G.R.No.183278,24April2009,586SCRA790.
3Section11,ArticleXIIofthe1987Constitutionprovides:
ARTICLEXII
NATIONALECONOMYANDPATRIMONY
xxxx
Section11.Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbegranted
excepttocitizensofthePhilippinesortocorporationsorassociationsorganizedunderthelawsofthePhilippines,atleast
sixtypercentumofwhosecapitalisownedbysuchcitizensnorshallsuchfranchise,certificate,orauthorizationbe
exclusiveincharacterorforalongerperiodthanfiftyyears.Neithershallanysuchfranchiseorrightbegrantedexcept
undertheconditionthatitshallbesubjecttoamendment,alteration,orrepealbytheCongresswhenthecommongoodso
requires.TheStateshallencourageequityparticipationinpublicutilitiesbythegeneralpublic.Theparticipationof
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foreigninvestorsinthegoverningbodyofanypublicutilityenterpriseshallbelimitedtotheirproportionateshareinits
capital,andalltheexecutiveandmanagingofficersofsuchcorporationorassociationmustbecitizensofthePhilippines.
4Yuchengcov.Sandiganbayan,G.R.No.149802,20January2006,479SCRA1.
5Rollo,(Vol.II),p.806.
6Rollo(Vol.I),p.23.
7Id.at2324,26.
8Id.at41.
9Id.
10GovernedbyRule63oftheRulesofCourt.Section1,Rule63oftheRulesofCourtstates:
RULE63
DeclaratoryReliefandSimilarRemedies
Section1.Whomayfilepetition.Anypersoninterestedunderadeed,will,contractorotherwritteninstrument,orwhoserightsare
affectedbyastatute,executiveorderorregulation,ordinance,oranyothergovernmentalregulationmay,beforebreachorviolation
thereofbringanactionintheappropriateRegionalTrialCourttodetermineanyquestionofconstructionorvalidityarising,andfor
adeclarationofhisrightsorduties,thereunder.(BarMatterNo.803,17February1998)
11Section2,Rule65oftheRulesofCourtprovides:
SEC.2.Petitionforprohibition.Whentheproceedingsofanytribunal,corporation,board,officer,orperson,whether
exercisingjudicial,quasijudicialorministerialfunctions,arewithoutorinexcessofitsorhisjurisdiction,orwithgrave
abuseofdiscretionamountingtolackorexcessofjurisdiction,andthereisnoappealoranyotherplain,speedyand
adequateremedyintheordinarycourseoflaw,apersonaggrievedtherebymayfileaverifiedpetitioninthepropercourt,
allegingthefactswithcertaintyandprayingthatjudgmentberenderedcommandingtherespondenttodesistfromfurther
proceedingsintheactionormatterspecifiedtherein,orotherwisegrantingsuchincidentalreliefaslawandjusticemay
require.
xxxx
12Section3,Rule65oftheRulesofCourtstates:
SEC.3.Petitionformandamus.Whenanytribunal,corporation,board,officerorpersonunlawfullyneglectsthe
performanceofanactwhichthelawspecificallyenjoinsasadutyresultingfromanoffice,trust,orstation,orunlawfully
excludesanotherfromtheuseandenjoymentofarightorofficetowhichsuchotherisentitled,andthereisnootherplain,
speedyandadequateremedyintheordinarycourseoflaw,thepersonaggrievedtherebymayfileaverifiedpetitioninthe
propercourt,allegingthefactswithcertaintyandprayingthatjudgmentberenderedcommandingtherespondent,
immediatelyoratsomeothertimetobespecifiedbythecourt,todotheactrequiredtobedonetoprotecttherightsofthe
petitionerandtopaythedamagessustainedbythepetitionerbyreasonofthewrongfulactsoftherespondent.
xxxx
13343Phil.539(1997).
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14209Phil.1(1983),citingNacionalistaPartyv.AngeloBautista,85Phil.101,andAquinov.CommissiononElections,62SCRA
275.
15Supranote13.
16AdvertedtoinrespondentNazarenosMemorandumdated27September2007.Rollo,p.929.Nazarenostated:Infact,in
Fernandezv.Cojuangco,whichraisedmarkedlysimilarissues,theHonorableCourtrefusedtoentertainthePetitiondirectlyfiled
withitanddismissedthesameforviolatingtheprincipleofhierarchyofcourts.
17InaResolutiondated9June2003.
18Section19,ArticleII,Constitution.
19Section2.Alllandsofthepublicdomain,waters,minerals,coal,petroleum,andothermineraloils,allforcesofpotential
energy,fisheries,forestsortimber,wildlife,floraandfauna,andothernaturalresourcesareownedbytheState.Withthe
exceptionofagriculturallands,allothernaturalresourcesshallnotbealienated.Theexploration,development,and
utilizationofnaturalresourcesshallbeunderthefullcontrolandsupervisionoftheState.TheStatemaydirectly
undertakesuchactivities,oritmayenterintocoproduction,jointventure,orproductionsharingagreementswith
Filipinocitizens,orcorporationsorassociationsatleastsixtypercentumofwhosecapitalisownedbysuchcitizens.
Suchagreementsmaybeforaperiodnotexceedingtwentyfiveyears,renewablefornotmorethantwentyfiveyears,and
undersuchtermsandconditionsasmaybeprovidedbylaw.Incasesofwaterrightsforirrigation,watersupplyfisheries,or
industrialusesotherthanthedevelopmentofwaterpower,beneficialusemaybethemeasureandlimitofthegrant.
TheStateshallprotectthenationsmarinewealthinitsarchipelagicwaters,territorialsea,andexclusiveeconomiczone,
andreserveitsuseandenjoymentexclusivelytoFilipinocitizens.
TheCongressmay,bylaw,allowsmallscaleutilizationofnaturalresourcesbyFilipinocitizens,aswellascooperativefish
farming,withprioritytosubsistencefishermenandfishworkersinrivers,lakes,bays,andlagoons.
ThePresidentmayenterintoagreementswithforeignownedcorporationsinvolvingeithertechnicalorfinancialassistance
forlargescaleexploration,development,andutilizationofminerals,petroleum,andothermineraloilsaccordingtothe
generaltermsandconditionsprovidedbylaw,basedonrealcontributionstotheeconomicgrowthandgeneralwelfareof
thecountry.Insuchagreements,theStateshallpromotethedevelopmentanduseoflocalscientificandtechnical
resources.
ThePresidentshallnotifytheCongressofeverycontractenteredintoinaccordancewiththisprovision,withinthirtydaysfromits
execution.
20Section7.Saveincasesofhereditarysuccession,noprivatelandsshallbetransferredorconveyedexcepttoindividuals,
corporations,orassociationsqualifiedtoacquireorholdlandsofthepublicdomain.
21Section10.TheCongressshall,uponrecommendationoftheeconomicandplanningagency,whenthenational
interestdictates,reservetocitizensofthePhilippinesortocorporationsorassociationsatleastsixtypercentumof
whosecapitalisownedbysuchcitizens,orsuchhigherpercentageasCongressmayprescribe,certainareasof
investments.TheCongressshallenactmeasuresthatwillencouragetheformationandoperationofenterpriseswhose
capitaliswhollyownedbyFilipinos.
Inthegrantofrights,privileges,andconcessionscoveringthenationaleconomyandpatrimony,theStateshallgive
preferencetoqualifiedFilipinos.
TheStateshallregulateandexerciseauthorityoverforeigninvestmentswithinitsnationaljurisdictionandinaccordance
withitsnationalgoalsandpriorities.
22Section4(2),ArticleXIVofthe1987Constitutionprovides:Educationalinstitutions,otherthanthoseestablishedby
religiousgroupsandmissionboards,shallbeownedsolelybycitizensofthePhilippinesorcorporationsor
associationsatleastsixtypercentumofthecapitalofwhichisownedbysuchcitizens.TheCongressmay,however,
requireincreasedFilipinoequityparticipationinalleducationalinstitutions.
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ThecontrolandadministrationofeducationalinstitutionsshallbevestedincitizensofthePhilippines.
xxxx
23Section11(2),ArticleXVIofthe1987Constitutionprovides:Theadvertisingindustryisimpressedwithpublicinterest,
andshallberegulatedbylawfortheprotectionofconsumersandthepromotionofthegeneralwelfare.
OnlyFilipinocitizensorcorporationsorassociationsatleastseventypercentumofthecapitalofwhichisownedbysuch
citizensshallbeallowedtoengageintheadvertisingindustry.
Theparticipationofforeigninvestorsinthegoverningbodyofentitiesinsuchindustryshallbelimitedtotheirproportionateshare
inthecapitalthereof,andalltheexecutiveandmanagingofficersofsuchentitiesmustbecitizensofthePhilippines.
24G.R.No.130716,9December1998,299SCRA744citedinChavezv.PublicEstatesAuthority,433Phil.506(2002).Seealso
Davidv.MacapagalArroyo,G.R.No.171396,3May2006,489SCRA160Santiagov.CommissiononElections,G.R.No.
127325,19March1997,270SCRA106Kilosbayan,Inc.v.Guingona,Jr.,G.R.No.113375,5May1994,232SCRA110(1994).
25Bernas,TheConstitutionoftheRepublicofthePhilippines,p.452,citingSmith,BellandCo.v.Natividad,40Phil.136,148
(1919)LuzonStevedoringCorporationv.AntiDummyBoard,46SCRA474,490(1972).
26Id.
27DeLeon,Hector,PhilippineConstitutionalLaw(PrinciplesandCases),Volume2,1999Ed.,p.848.
28Preamble,1987ConstitutionDeLeon,Hector,PhilippineConstitutionalLaw(PrinciplesandCases),Volume2,1999Ed.,p.
788.
29Section19,ArticleII,Constitution.
30http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2.10%29_final.pdf
31ESTABLISHINGBASICPOLICIESFORTHETELEPHONEINDUSTRY,AMENDINGFORTHEPURPOSETHE
PERTINENTPROVISIONSOFCOMMONWEALTHACTNO.146,ASAMENDED,OTHERWISEKNOWNASTHEPUBLIC
SERVICEACT,ASAMENDED,ANDALLINCONSISTENTLEGISLATIVEANDMUNICIPALFRANCHISEOFTHE
PHILIPPINELONGDISTANCETELEPHONECOMPANYUNDERACTNO.3436,ASAMENDED,ANDALL
INCONSISTENTLEGISLATIVEANDMUNICIPALFRANCHISESINCLUDINGOTHEREXISTINGLAWS.
32UponapprovalbytheNationalTelecommunicationsCommission,thismandatoryrequirementtosubscribetononvoting
preferredshareswasmadeoptionalstarting22April2003.SeePLDT20F2005filingwiththeUnitedStatesSecuritiesand
ExchangeCommissionathttp://www.wikinvest.com/stock/Philippine_Long_Distance_TelephoneCompany_(PHI)/Filing/20
F/25/F2923101.SeealsoPhilippineConsumersFoundation,Inc.v.NTCandPLDT,G.R.No.L63318,18April1984,ontheorigin
andrationaleoftheSIP.
33Rollo(Vol.I),pp.414451.
34Rollo(Vol.II),p.991.
35Id.at951.
36Id.at838.
37Id.at898923.
38Rollo(Vol.II),p.913.
39Rollo(G.R.No.157360),pp.5562.
40Rollo(G.R.No.157360),pp.15771583.
41InPLDTscase,thepreferredstockisnonvoting,exceptasspecificallyprovidedbylaw.
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(http://www.pldt.com.ph/investor/Documents/a2d211230ec3436eab66b41d3d107cfc4Q2004FSwithopinion.pdf)
42BatasPambansaBlg.68.
43AsstatedintheCorporationCode.
44Seehttp://www.congress.gov.ph/download/researches/rrb_0303_5.pdf
45Seehttp://www.congress.gov.ph/download/researches/rrb_0303_5.pdf
46Section6,BPBlg.68orTheCorporationCode.
47Agpalo,RubenE.,CommentsontheCorporationCodeofthePhilippines,2001SecondEdition,p.36.
48RecordoftheConstitutionalCommission,Vol.III,pp.255256.
49Id.at360.
50RepublicActNo.7042entitledANACTTOPROMOTEFOREIGNINVESTMENTS,PRESCRIBETHEPROCEDURESFOR
REGISTERINGENTERPRISESDOINGBUSINESSINTHEPHILIPPINESANDFOROTHERPURPOSES.
51Rollo(G.R.No.157360),Vol.I,p.348.
ItmustbenotedthatunderPLDTsArticlesofIncorporation,thePLDTBoardofDirectorsisexpresslyauthorizedtodetermine,
amongothers,withrespecttoeachseriesofSerialPreferredStock:
xxxx
(b)thedividendrate,ifany,onthesharesofsuchseries(which,ifandtotheextenttheBoardofDirectors,initssole
discretion,shalldeemappropriateunderthecircumstances,shallbefixedconsideringtherateofreturnonsimilarsecurities
atthetimeofissuanceofsuchshares),thetermsandconditionsuponwhichandtheperiodswithrespecttowhich
dividendsshallbepayable,whetheranduponwhatconditionssuchdividendsshallbecumulativeand,ifcumulative,the
dateordatesfromwhichdividendsshallaccumulate
c.whetherornotthesharesofsuchseriesshallberedeemable,thelimitationswithrespecttosuchredemption,thetimeor
timeswhenandthemannerinwhichsuchsharesshallberedeemable(includingthemannerofselectingsharesofsuch
seriesforredemptioniflessthanallsharesaretoberedeemed)andthepriceorpricesatwhichsuchsharesshallbe
redeemable,whichmaynotbelessthan(i)theparvaluethereofplus(ii)accruedandunpaiddividendsthereon,normore
than(i)110%oftheparvaluethereofplus(ii)accruedandunpaiddividendsthereon
d.whetherornotthesharesofsuchseriesshallbesubjecttotheoperationofapurchase,retirementor
sinkingfund,and,ifso,whetheranduponwhatconditionssuchpurchase,retirementorsinkingfund
shallbecumulativeornoncumulative,theextenttowhichandthemannerinwhichsuchfundshallbe
appliedtothepurchaseorredemptionofthesharesofsuchseriesforretirementortoothercorporate
purposesandthetermsandprovisionsrelativetotheoperationthereof
(e)therightstowhichtheholdersofsharesofsuchseriesshallbeentitleduponthevoluntaryorinvoluntaryliquidation,
dissolution,distributionofassetsorwindingupofthecorporation,whichrightsmayvarydependingonwhethersuch
liquidation,dissolution,distributionorwindingupisvoluntaryorinvoluntary,andifvoluntary,mayvaryatdifferent
dates,provided,however,thattheamountwhichtheholdersofsharesofsuchseriesshallbeentitledtoreceiveintheevent
ofanyvoluntaryorinvoluntaryliquidation,dissolution,distributionofassetsorwindingupofthecorporation
Further,theholdersofSerialPreferredStockshallbeentitledtoreceive,when,asandifdeclaredbytheBoardofDirectors
outoffundslegallyavailabletherefore,preferentialcashdividendsattherate,underthetermsandconditions,forthe
periodsandonthedatesfixedbytheresolutionorresolutionsoftheBoardofDirectors,xxxandnomore,beforeany
dividendsontheCommonCapitalStock(otherthandividendspayableinCommonCapitalStock)shallbepaidorset
apartforpaymentwithrespecttothesamedividendperiod.AllsharesofPreferredStockofallseriesshallbeofequalrank,
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preferenceandpriorityastodividendsirrespectiveofwhetherornottheratesofdividendstowhichthesameshallbe
entitledshallbethesameand,whenthestateddividendsarenotpaidinfull,thesharesofallseriesofSerialPreferredStock
shallshareratablyinthepaymentofdividendsincludingaccumulations,ifany,inaccordancewiththesumswhichwould
bepayableonsuchsharesifalldividendsweredeclaredandpaidinfull,provided,however,thatanytwoormoreseriesof
SerialPreferredStockmaydifferfromeachotherastotheexistenceandextentoftherighttocumulativedividendsas
aforesaid.
52Rollo(G.R.No.157360),Vol.I,p.339355.Adoptedon21November1995andapprovedon18February1997.
53Theotherrights,limitationsandpreferencesofcommoncapitalstockareasfollows:
1.AftertherequirementswithrespecttopreferentialdividendsontheSerialPreferredStockshallhavebeenmetandafter
thecorporationshallhavecompliedwithalltherequirements,ifany,withrespecttothesettingasideofsumsaspurchase,
retirementorsinkingfunds,thenandnototherwisetheholdersoftheCommonCapitalStockshallbeentitledtoreceive
suchdividendsasmaybedeclaredfromtimetotimebytheBoardofDirectorsoutoffundslegallyavailabletherefor.
2.AfterdistributioninfullofthepreferentialamountstobedistributedtotheholdersofSerialPreferredStockintheevent
ofthevoluntaryorinvoluntaryliquidation,dissolution,distributionofassetsorwindingupofthecorporation,theholders
oftheCommonCapitalStockshallbeentitledtoreceivealltheremainingassetsofthecorporationofwhateverkind
availablefordistributiontostockholdersratablyinproportiontothenumberofsharesoftheCommonCapitalStockheld
bythem,respectively.
xxxx
4.TheownershipofsharesofCommonCapitalStockshallnotentitletheownerthereoftoanyright(otherthansuchright,
ifany,astheBoardofDirectorsinitsdiscretionmayfromtimetotimegrant)tosubscribeforortopurchaseortohave
offeredtohimforsubscriptionorpurchaseanysharesofanyclassofpreferredstockofthecorporation.
55http://www.sec.gov.ph/index.htm?GIS_Download
57http://www.pldt.com.ph/investor/Documents/2009%20Dividend%20Declarations_Update%2012082009.pdf.Seealso
http://www.pldt.com.ph/investor/Documents/disclosures_03012011.pdf
58SubscriptionInvestmentPlan.SeePDNo.217.
59Thisistheresultofthepreferredsharesbeingdenominated10%preferred,whichmeanseachpreferredsharewillearnanannual
dividendequalto10%ofitsparvalueofP10,whichamountstoP1.Oncethisdividendispaidtoholdersofpreferredshares,the
restoftheretainedearningscanbepaidasdividendstotheholdersofcommonshares.See
http://www.pldt.com.ph/investor/Documents/2009%20Dividend%20Declarations_Update%2012082009.pdf
In2011,PLDTdeclareddividendsforthecommonsharesatP78.00pershare.
(http://www.pldt.com.ph/investor/Documents/disclosures_03012011.pdf)
60http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_(as%20of%207.2.10)_final.pdf
61Id.BasedonPLDTs2010GIS,thepaidupcapitalofPLDT(asofRecordDate12April2010)consistsofthefollowing:
Filipino(preferred):403,410,355
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G.R.No.176579
Foreigners(preferred):2,287,207
Total:405,697,562
62Basedonparvalue,asstatedinPLDTs2010GISsbumittedtotheSEC.See
http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of
%207.2.10%29_final.pdf(accessed23May2011).
AuthorizedcapitalstockofPLDTisbrokendownasfollows:
Commonshares:234,000,000
Preferredshares:822,500,000
Total:1,056,000,000
63Fortheyear2009.
64http://www.pse.com.ph/(accessed31May2011)
65http://www.pse.com.ph/html/Quotations/2011/stockQuotes_05272011.pdf(accessed27May2011)
66335Phil.82(1997).
67Krivenkov.RegisterofDeeds,79Phil.461(1947)Rellosav.GawCheeHun,93Phil.827(1953)Vasquezv.LiSeng
Giap,96Phil.447(1955)Sorianov.OngHoo,103Phil.829(1958)PhilippineBankingCorporationv.LuiShe,128
Phil.53(1967)Frenzelv.Catito,453Phil.885(2003).
68Id.
69SecuritiesandExchangeCommissionv.CourtofAppeals,etal.,316Phil.903(1995).TheCourtruledinthiscase:
TheSecuritiesandExchangeCommission(SEC)hasbothregulatoryandadjudicativefunctions.
Underitsregulatoryresponsibilities,theSECmaypassuponapplicationsfor,ormaysuspendorrevoke(afterdue
noticeandhearing),certificatesofregistrationofcorporations,partnershipsandassociations(excludingcooperatives,
homeownersassociations,andlaborunions)compellegalandregulatorycompliancesconductinspectionsandimpose
finesorotherpenaltiesforviolationsoftheRevisedSecuritiesAct,aswellasimplementingrulesanddirectivesofthe
SEC,suchasmaybewarranted.
Relativetoitsadjudicativeauthority,theSEChasoriginalandexclusivejurisdictiontohearanddecidecontroversiesand
casesinvolving
a.Intracorporateandpartnershiprelationsbetweenoramongthecorporation,officersandstockholdersandpartners,
includingtheirelectionsorappointments
b.Stateandcorporateaffairsinrelationtothelegalexistenceofcorporations,partnershipsandassociationsortotheir
franchiseand
c.Investorsandcorporateaffairsparticularlyinrespectofdevicesandschemes,suchasfraudulentpractices,employedby
directors,officers,businessassociates,and/orotherstockholders,partners,ormembersofregisteredfirmsxxx
xxxx(Emphasissupplied)
70SEC.17.Groundswhenarticlesofincorporationoramendmentmayberejectedordisapproved.TheSecuritiesand
ExchangeCommissionmayrejectthearticlesofincorporationordisapproveanyamendmenttheretoifthesameisnotin
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G.R.No.176579
compliancewiththerequirementsofthisCode:Provided,ThattheCommissionshallgivetheincorporatorsa
reasonabletimewithinwhichtocorrectormodifytheobjectionableportionsofthearticlesoramendment.The
followingaregroundsforsuchrejectionordisapproval:
xxx
(4)ThattherequiredpercentageofownershipofthecapitalstocktobeownedbycitizensofthePhilippineshasnot
beencompliedwithasrequiredbyexistinglawsortheConstitution.(Emphasissupplied)
71RepublicActNo.8799.Section5ofR.A.No.8799provides:
Section5.PowersandFunctionsoftheCommission.5.1.TheCommissionshallactwithtransparencyandshallhavethe
powersandfunctionsprovidedbythisCode,PresidentialDecreeNo.902A,theCorporationCode,theInvestmentHouses
Law,theFinancingCompanyActandotherexistinglaws.PursuanttheretotheCommissionshallhave,amongothers,the
followingpowersandfunctions:
(a)Havejurisdictionandsupervisionoverallcorporations,partnershipsorassociationswhoarethegranteesofprimaryfranchises
and/oralicenseorapermitissuedbytheGovernment
xxx
(c)Approve,reject,suspend,revokeorrequireamendmentstoregistrationstatements,andregistrationandlicensing
applications
xxx
(f)Imposesanctionsfortheviolationoflawsandtherules,regulationsandorders,issuedpursuantthereto
xxx
(i)Issueceaseanddesistorderstopreventfraudorinjurytotheinvestingpublic
xxx
(m)Suspend,orrevoke,afterpropernoticeandhearingthefranchiseorcertificateofregistrationofcorporations,partnershipor
associations,uponanyofthegroundsprovidedbylawand
(n)Exercisesuchotherpowersasmaybeprovidedbylawaswellasthosewhichmaybeimpliedfrom,orwhichare
necessaryorincidentaltothecarryingoutof,theexpresspowersgrantedtheCommissiontoachievetheobjectivesand
purposesoftheselaws.
34/34

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