G.R. No. 176579. June 28, 2011.
* a citizen to bring a suit on matters of transcendental importance to the
WILSON P. GAMBOA, petitioner, vs. FINANCE SECRETARY
MARGARITO B. TEVES, FINANCE UNDERSECRETARY
JOHN P. SEVILLA, AND COMMISSIONER RICARDO
ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT (PCGG) IN THEIR CAPACITIES AS CHAIR
AND MEMBERS, RESPECTIVELY, OF THE PRIVATIZATION
COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST
PACIFIC CO., LTD. IN HIS CAPACITY AS DIRECTOR OF
METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN
MANUEL V. PANGILINAN OF PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY (PLDT) IN HIS
CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC
CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
CHAIR FE BARIN OF THE SECURITIES EXCHANGE
COMMISSION, and PRESIDENT FRANCIS LIM OF THE
PHILIPPINE STOCK EXCHANGE, respondents.
PABLITO V. SANIDAD and ARNO V. SANIDAD, petitioners-
in-intervention.
Special Civil Actions; Declaratory Relief; Mandamus; Court treats the
petition for declaratory relief as one for mandamus if the issue
involved has far-reaching implications.In short, it is well-settled that
this Court may treat a petition for declaratory relief as one for
mandamus if the issue involved has far-reaching implications. As this
Court held in Salvacion: The Court has no original and exclusive
jurisdiction over a petition for declaratory relief. However, exceptions
to this rule have been recognized. Thus, where the petition has far-
reaching implications and raises questions that should be resolved, it
may be treated as one for mandamus. (Emphasis supplied)
Gamboa vs. Teves
Actions; Locus Standi; Petitioner being a stockholder of Philippine
Long Distance Telephone (PLDT) has the right to question the subject
sale which he claims to violate the nationality requirement prescribed
in Section 11, Article XII of the Constitution; Court upheld the right of
public.There is no dispute that petitioner is a stockholder of PLDT.
As such, he has the right to question the subject sale, which he claims
to violate the nationality requirement prescribed in Section 11, Article
XII of the Constitution. If the sale indeed violates the Constitution,
then there is a possibility that PLDTs franchise could be revoked, a
dire consequence directly affecting petitioners interest as a
stockholder. More importantly, there is no question that the instant
petition raises matters of transcendental importance to the public. The
fundamental and threshold legal issue in this case, involving the
national economy and the economic welfare of the Filipino people, far
outweighs any perceived impediment in the legal personality of the
petitioner to bring this action. In Chavez v. PCGG, 299 SCRA 744
(1998), the Court upheld the right of a citizen to bring a suit on
matters of transcendental importance to the public.
Corporation Law; Words and Phrases; Capital; The term capital in
Section 11, Article XII of the Constitution refers only to shares of stock
entitled to vote in the election of directors, and thus in the present
case only to common shares, and not to the total outstanding capital
stock comprising both common and non-voting preferred shares.We
agree with petitioner and petitioners-in-intervention. The term
capital in Section 11, Article XII of the Constitution refers only to
shares of stock entitled to vote in the election of directors, and thus in
the present case only to common shares, and not to the total
outstanding capital stock comprising both common and non-voting
preferred shares.
Same; Capital; Common shares cannot be deprived of the right to vote
in any corporate meeting, and any provision in the articles of
incorporation restricting the right of common shareholders to vote is
invalid.Indisputably, one of the rights of a stockholder is the right to
participate in the control or management of the corporation. This is
exercised through his vote in the election of directors because it is the
board of directors that controls or manages the corporation. In the
absence of provisions in the articles of incorporation denying voting
rights to preferred shares, preferred shares have the same voting
rights as common shares. However, preferred shareholders are often
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excluded from any control, that is, deprived of the right to vote in the
election of directors and on other matters, on the theory that the
preferred shareholders are merely investors in the corporation for
income in the same manner as bondholders. In fact, under the
Corporation Code only preferred or redeemable shares can be
deprived of the right to vote. Common shares cannot be deprived of
the right to vote in any corporate meeting, and any provision in the
articles of incorporation restricting the right of common shareholders
to vote is invalid.
Same; Same; The term capital in Section 11, Article XII of the
Constitution refers only to shares of stock that can vote in the election
of directors.Considering that common shares have voting rights
which translate to control, as opposed to preferred shares which
usually have no voting rights, the term capital in Section 11, Article
XII of the Constitution refers only to common shares. However, if the
preferred shares also have the right to vote in the election of directors,
then the term capital shall include such preferred shares because the
right to participate in the control or management of the corporation is
exercised through the right to vote in the election of directors. In
short, the term capital in Section 11, Article XII of the Constitution
refers only to shares of stock that can vote in the election of directors.
Same; Same; The term capital in Section 11, Article XII of the
Constitution to include both voting and non-voting shares will result
in the abject surrender of our telecommunications industry to
foreigners, amounting to a clear abdication of the States
constitutional duty to limit control of public utilities to Filipino
citizens; The Court should never open to foreign control what the
Constitution has expressly reserved to Filipinos for that would be a
betrayal of the Constitution and of the national interest.
Indisputably, construing the term capital in Section 11, Article XII of
the Constitution to include both voting and non-voting shares will
result in the abject surrender of our telecommunications industry to
foreigners, amounting to a clear abdication of the States
constitutional duty to limit control of public utilities to Filipino
citizens. Such an interpretation certainly runs counter to the
constitutional provision reserving certain areas of investment to
Filipino citizens, such as the exploitation of natural resources as well
as the ownership of land, educational institutions and advertising
businesses. The Court should never open to foreign control what the
Constitution has expressly reserved to Filipinos for that would be a
betrayal of the Constitution and of the national interest. The Court
must perform its solemn duty to defend and uphold the intent and
letter of the Constitution to ensure, in the words of the Constitution,
a self-reliant and independent national economy effectively
controlled by Filipinos.
Same; Securities and Exchange Commission; The Securities and
Exchange Commission (SEC) is vested with the power and function to
suspend or revoke, after proper notice and hearing, the franchise or
certificate of registration of corporations, partnerships or associations,
upon any of the grounds provided by law.Under Section 5(m) of the
Securities Regulation Code, the SEC is vested with the power and
function to suspend or revoke, after proper notice and hearing, the
franchise or certificate of registration of corporations, partnerships or
associations, upon any of the grounds provided by law. The SEC is
mandated under Section 5(d) of the same Code with the power and
function to investigate x x x the activities of persons to ensure
compliance with the laws and regulations that SEC administers or
enforces. The GIS that all corporations are required to submit to SEC
annually should put the SEC on guard against violations of the
nationality requirement prescribed in the Constitution and existing
laws. This Court can compel the SEC, in a petition for declaratory
relief that is treated as a petition for mandamus as in the present case,
to hear and decide a possible violation of Section 11, Article XII of the
Constitution in view of the ownership structure of PLDTs voting
shares, as admitted by respondents and as stated in PLDTs 2010 GIS
that PLDT submitted to SEC.
VELASCO, JR., J., Separate Dissenting Opinion:
Actions; Locus Standi; Petitioner has not shown any real interest
substantial enough to give him the requisite locus standi to question
the sale of the governments PTIC shares to First Pacific.The Rules
of Court specifically requires that [e]very action must be prosecuted
or defended in the name of the real party in interest. A real party in
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interest is defined as the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the
suit. Petitioner has failed to allege any interest in the 111,415 PTIC
shares nor in any of the previous purchase contracts he now seeks to
annul. He is neither a shareholder of PTIC nor of First Pacific. Also, he
has not alleged that he was an interested bidder in the governments
auction sale of the PTIC shares. Finally, he has not shown how, as a
nominal shareholder of PLDT, he stands to benefit from the
annulment of the sale of the 111,415 PTIC shares or of any of the sales
of the PLDT common shares held by foreigners. In fine, petitioner has
not shown any real interest substantial enough to give him the
requisite locus standi to question the sale of the governments PTIC
shares to First Pacific.
Same; Same; A taxpayer is deemed to have the standing to raise a
constitutional issue when it is established that public funds have been
disbursed in alleged contravention of the law or the Constitution.
Likewise, petitioners assertion that he has standing to bring the suit
as a taxpayer must fail. In Gonzales v. Narvasa, We discussed that a
taxpayer is deemed to have the standing to raise a constitutional issue
when it is established that public funds have been disbursed in alleged
contravention of the law or the Constitution. In this case, no public
funds have been disbursed. In fact, the opposite has happenedthere
is an inflow of funds into the government coffers.
Same; Jurisdiction; Declaratory Relief; Petitions for declaratory relief,
annulment of sale and injunction do not fall within the exclusive
jurisdiction of this Court; The proper jurisdiction for declaratory relief
is the Regional Trial Court (RTC); Requisites for an Action for
Declaratory Relief.Based on the foregoing provisos, it is patently
clear that petitions for declaratory relief, annulment of sale and
injunction do not fall within the exclusive original jurisdiction of this
Court. First, the court with the proper jurisdiction for declaratory
relief is the Regional Trial Court (RTC). Sec. 1, Rule 63 of the Rules of
Court stresses that an action for declaratory relief is within the
exclusive original jurisdiction of the RTC, viz.: Any person interested
under a deed, will, contract or other written instrument, whose rights
are affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.
(Emphasis supplied.) An action for declaratory relief also requires the
following: (1) a justiciable controversy between persons whose
interests are adverse; (2) the party seeking the relief has a legal
interest in the controversy; and (3) the issue is ripe for judicial
determination. As previously discussed, petitioner lacks any real
interest in this action; thus, no justiciable controversy between
adverse interests exists.
Same; Same; Same; The exercise of such discretion, whether to treat a
petition for declaratory relief as one for mandamus, presupposes that
the petition is otherwise viable or meritorious.Despite this, the
ponencia decided to treat the petition for declaratory relief as one for
mandamus, citing the rule that where the petition has far-reaching
implications and raises questions that should be resolved, it may be
treated as one for mandamus. However, such rule is not absolute. In
Macasiano v. National Housing Authority, 224 SCRA 236 (1993), the
Court explicitly stated that the exercise of such discretion, whether to
treat a petition for declaratory relief as one for mandamus,
presupposes that the petition is otherwise viable or meritorious. As I
shall discuss subsequently in the substantive portion of this opinion,
the petition in this case is clearly not viable or meritorious.
Same; Mandamus; A petition for mandamus is premature if there are
administrative remedies available to petitioner.A petition for
mandamus is premature if there are administrative remedies available
to petitioner. Under the doctrine of primary administrative
jurisdiction, courts cannot or will not determine a controversy where
the issues for resolution demand the exercise of sound administrative
discretion requiring the special knowledge, experience, and services of
the administrative tribunal to determine technical and intricate
matters of fact. In other words, if a case is such that its determination
requires the expertise, specialized training and knowledge of an
administrative body, relief must first be obtained in an administrative
proceeding before resort to the courts is had even if the matter may
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well be within their proper jurisdiction. Along with this, the doctrine
of exhaustion of administrative remedies also requires that where an
administrative remedy is provided by statute relief must be sought by
exhausting this remedy before the courts will act.
Same; Hierarchy of Courts; The doctrine dictates that when
jurisdiction is shared concurrently with different courts, the proper
suit should first be filed with the lower-ranking court.Although this
Court, the CA, and the RTC have concurrent jurisdiction to issue
writs of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction, such concurrence does not give the petitioner
unrestricted freedom of choice of court forum. The doctrine of
hierarchy of courts dictates that when jurisdiction is shared
concurrently with different courts, the proper suit should first be filed
with the lower-ranking court. Failure to do so is sufficient cause for
the dismissal of a petition.
Corporation Law; Capital; The intent of the framers of the
Constitution was not to limit the application of the word capital to
voting or common shares alone.Contrary to pronouncement of the
ponencia, the intent of the framers of the Constitution was not to limit
the application of the word capital to voting or common shares
alone. In fact, the Records of the Constitutional Commission reveal
that even though the UP Law Center proposed the phrase voting
stock or controlling interest, the framers of the Constitution did not
adopt this but instead used the word capital.
Same; Same; Stockholders, whether holding voting or non-voting
stocks, have all the rights, powers and privileges of ownership over
their stocks; Control is another inherent right of ownership.
Stockholders, whether holding voting or non-voting stocks, have all
the rights, powers and privileges of ownership over their stocks. This
necessarily includes the right to vote because such is inherent in and
incidental to the ownership of corporate stocks, and as such is a
property right. Additionally, control is another inherent right of
ownership. The circumstances enumerated in Sec. 6 of the
Corporation Code clearly evince this. It gives voting rights to the
stocks deemed as non-voting as to fundamental and major corporate
changes. Thus, the issue should not only dwell on the daily
management affairs of the corporation but also on the equally
important fundamental changes that may need to be voted on. On
this, the non-voting shares also exercise control, together with the
voting shares.
Same; Same; Securities and Exchange Commission; Securities and
Exchange Commission (SEC) defined capital as to include both
voting and non-voting in the determination of the nationality of a
corporation.More importantly, the SEC defined capital as to
include both voting and non-voting in the determination of the
nationality of a corporation, to wit: In view of the foregoing, it is
opined that the term capital denotes the sum total of the shares
subscribed and paid by the shareholders, or secured to be paid,
irrespective of their nomenclature to be issued by the corporation in
the conduct of its operation. Hence, non-voting preferred shares are
considered in the computation of the 60-40% Filipino-alien equity
requirement of certain economic activities under the Constitution.
(Emphasis supplied.)
Same; Same; Outstanding Capital Stock; The Corporation Code
defines outstanding capital stock as the total shares of stock
issued; It includes all types of shares.Similarly, the Corporation
Code defines outstanding capital stock as the total shares of stock
issued. It does not distinguish between common and preferred
shares. It includes all types of shares.
ABAD, J., Dissenting Opinion:
Remedial Law; Actions; Jurisdiction; Gamboa actions for injunction,
declaratory relief, and declaration of nullity of sale are not among the
cases that can be initiated before the Supreme Court; Only exceptional
and compelling circumstances such as cases of national interest and of
serious implications justify direct resort to the Supreme Court for the
extraordinary remedy of writ of certiorari, prohibition, or
mandamus.Strictly speaking, Gamboa actions for injunction,
declaratory relief, and declaration of nullity of sale are not among the
cases that can be initiated before the Supreme Court. Those actions
belong to some other tribunal. And, although the Court has original
jurisdiction in prohibition cases, the Court shares this authority with
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the Court of Appeals and the Regional Trial Courts. But this
concurrence of jurisdiction does not give the parties absolute and
unrestrained freedom of choice on which court the remedy will be
sought. They must observe the hierarchy of courts. As a rule, the
Supreme Court will not entertain direct resort to it unless the remedy
desired cannot be obtained in other tribunals. Only exceptional and
compelling circumstances such as cases of national interest and of
serious implications justify direct resort to the Supreme Court for the
extraordinary remedy of writ of certiorari, prohibition, or mandamus.
Corporation Law; Capital; The Constitution fails to provide for the
meaning of the term capital considering that the shares of stock of a
corporation vary in kinds.The Constitution fails to provide for the
meaning of the term capital, considering that the shares of stock of a
corporation vary in kinds. The usual classification depends on how
profits are to be distributed and which stockholders have the right to
vote the members of the corporations board of directors.
Same; Same; The Court should not leave the matter of compliance
with the constitutional limit on foreign ownership in public utilities, a
matter of transcendental importance, to judicial legislation especially
since any ruling the Court makes on the matter could have deep
economic repercussions; It is apt for Congress to build up on this
framework by defining the meaning of capital.Under this
confusing legislative signals, the Court should not leave the matter of
compliance with the constitutional limit on foreign ownership in
public utilities, a matter of transcendental importance, to judicial
legislation especially since any ruling the Court makes on the matter
could have deep economic repercussions. This is not a concern over
which the Court has competence. The 1987 Constitution laid down the
general framework for restricting foreign ownership of public utilities.
It is apt for Congress to build up on this framework by defining the
meaning of capital, establishing rules for the implementation of the
State policy, providing sanctions for its violation, and vesting in the
appropriate agency the responsibility for carrying out the purposes of
such policy. Gamboa vs. Teves, 652 SCRA 690, G.R. No. 176579 June
28, 2011
THE FACTS
This is a petition to nullify the sale of shares of stock of Philippine
Telecommunications Investment Corporation (PTIC) by the
government of the Republic of the Philippines, acting through the
Inter-Agency Privatization Council (IPC), to Metro Pacific Assets
Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited
(First Pacific), a Hong Kong-based investment management and
holding company and a shareholder of the Philippine Long Distance
Telephone Company (PLDT).
The petitioner questioned the sale on the ground that it also involved
an indirect sale of 12 million shares (or about 6.3 percent of the
outstanding common shares) of PLDT owned by PTIC to First Pacific.
With the this sale, First Pacifics common shareholdings in PLDT
increased from 30.7 percent to 37 percent, thereby increasing the total
common shareholdings of foreigners in PLDT to about 81.47%. This,
according to the petitioner, violates Section 11, Article XII of the 1987
Philippine Constitution which limits foreign ownership of the capital
of a public utility to not more than 40%, thus:
Section 11. No franchise, certificate, or any other form of authorization
for the operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or associations organized under
the laws of the Philippines, at least sixty per centum of whose capital
is owned by such citizens; nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration,
or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the governing
body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of the
Philippines. (Emphasis supplied)
II. THE ISSUE
Does the term capital in Section 11, Article XII of the Constitution
refer to the total common shares only, or to the total outstanding
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capital stock (combined total of common and non-voting preferred
shares) of PLDT, a public utility?
III. THE RULING
[The Court partly granted the petition and held that the term capital
in Section 11, Article XII of the Constitution refers only to shares of
stock entitled to vote in the election of directors of a public utility, i.e.,
to the total common shares in PLDT.]
Considering that common shares have voting rights which translate to
control, as opposed to preferred shares which usually have no voting
rights, the term capital in Section 11, Article XII of the Constitution
refers only to common shares. However, if the preferred shares also
have the right to vote in the election of directors, then the term
capital shall include such preferred shares because the right to
participate in the control or management of the corporation is
exercised through the right to vote in the election of directors. In
short, the term capital in Section 11, Article XII of the Constitution
refers only to shares of stock that can vote in the election of directors.
To construe broadly the term capital as the total outstanding capital
stock, including both common and non-voting preferred shares,
grossly contravenes the intent and letter of the Constitution that the
State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos. A broad definition unjustifiably
disregards who owns the all-important voting stock, which necessarily
equates to control of the public utility.
Holders of PLDT preferred shares are explicitly denied of the right to
vote in the election of directors. PLDTs Articles of Incorporation
expressly state that the holders of Serial Preferred Stock shall not be
entitled to vote at any meeting of the stockholders for the election of
directors or for any other purpose or otherwise participate in any
action taken by the corporation or its stockholders, or to receive notice
of any meeting of stockholders. On the other hand, holders of
common shares are granted the exclusive right to vote in the election
of directors. PLDTs Articles of Incorporation state that each holder
of Common Capital Stock shall have one vote in respect of each share
of such stock held by him on all matters voted upon by the
stockholders, and the holders of Common Capital Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes.
It must be stressed, and respondents do not dispute, that foreigners
hold a majority of the common shares of PLDT. In fact, based on
PLDTs 2010 General Information Sheet (GIS), which is a document
required to be submitted annually to the Securities and Exchange
Commission, foreigners hold 120,046,690 common shares of PLDT
whereas Filipinos hold only 66,750,622 common shares. In other
words, foreigners hold 64.27% of the total number of PLDTs common
shares, while Filipinos hold only 35.73%. Since holding a majority of
the common shares equates to control, it is clear that foreigners
exercise control over PLDT. Such amount of control unmistakably
exceeds the allowable 40 percent limit on foreign ownership of public
utilities expressly mandated in Section 11, Article XII of the
Constitution.
As shown in PLDTs 2010 GIS, as submitted to the SEC, the par value
of PLDT common shares is P5.00 per share, whereas the par value of
preferred shares is P10.00 per share. In other words, preferred shares
have twice the par value of common shares but cannot elect directors
and have only 1/70 of the dividends of common shares. Moreover,
99.44% of the preferred shares are owned by Filipinos while
foreigners own only a minuscule 0.56% of the preferred shares.
Worse, preferred shares constitute 77.85% of the authorized capital
stock of PLDT while common shares constitute only 22.15%. This
undeniably shows that beneficial interest in PLDT is not with the non-
voting preferred shares but with the common shares, blatantly
violating the constitutional requirement of 60 percent Filipino control
and Filipino beneficial ownership in a public utility.
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In short, Filipinos hold less than 60 percent of the voting stock, and
earn less than 60 percent of the dividends, of PLDT. This directly
contravenes the express command in Section 11, Article XII of the
Constitution that [n]o franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted
except to x x x corporations x x x organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by
such citizens x x x.
To repeat, (1) foreigners own 64.27% of the common shares of PLDT,
which class of shares exercises the sole right to vote in the election of
directors, and thus exercise control over PLDT; (2) Filipinos own only
35.73% of PLDTs common shares, constituting a minority of the
voting stock, and thus do not exercise control over PLDT; (3)
preferred shares, 99.44% owned by Filipinos, have no voting rights;
(4) preferred shares earn only 1/70 of the dividends that common
shares earn; (5) preferred shares have twice the par value of common
shares; and (6) preferred shares constitute 77.85% of the authorized
capital stock of PLDT and common shares only 22.15%. This kind of
ownership and control of a public utility is a mockery of the
Constitution.
[Thus, the Respondent Chairperson of the Securities and Exchange
Commission was DIRECTED by the Court to apply the foregoing
definition of the term capital in determining the extent of allowable
foreign ownership in respondent Philippine Long Distance Telephone
Company, and if there is a violation of Section 11, Article XII of the
Constitution, to impose the appropriate sanctions under the law.]
HEIRS OF WILSON P. GAMBOA,** petitioners, vs.
FINANCE SECRETARY MARGARITO B. TEVES, FINANCE
UNDERSECRETARY JOHN P. SEVILLA, AND
COMMISSIONER RICARDO ABCEDE OF THE
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
(PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS,
RESPECTIVELY, OF THE PRIVATIZATION COUNCIL,
CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD.
IN HIS CAPACITY AS DIRECTOR OF METRO PACIFIC
ASSET HOLDINGS INC., CHAIRMAN MANUEL V.
PANGILINAN OF PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS
MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD.,
PRESIDENT NAPOLEON L. NAZARENO OF PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY, CHAIR FE
BARIN OF THE SECURITIES AND EXCHANGE
COMMISSION, and PRESIDENT FRANCIS LIM OF THE
PHILIPPINE STOCK EXCHANGE, respondents.
PABLITO V. SANIDAD and ARNO V. SANIDAD, petitioners-
in-intervention.
Remedial Law; Civil Procedure; In Luzon Stevedoring Corp. v. Anti-
Dummy Board, 46 SCRA 474 (1972), the Court deemed it wise and
expedient to resolve the case although the petition for declaratory
relief could be outrightly dismissed for being procedurally defective;
The Supreme Court deemed it necessary to finally dispose of the case
for the guidance of all concerned, despite the apparent procedural flaw
in the petition.In Luzon Stevedoring Corp. v. Anti-Dummy Board,
46 SCRA 474 (1972), the Court deemed it wise and expedient
** The Heirs of Wilson P. Gamboa substituted petitioner Wilson P.
Gamboa per Resolution dated 17 April 2012 which noted the
Manifestation of Lauro Gamboa dated 12 April 2012 to resolve the
case although the petition for declaratory relief could be outrightly
dismissed for being procedurally defective. There, appellant
admittedly had already committed a breach of the Public Service Act
in relation to the Anti-Dummy Law since it had been employing non-
American aliens long before the decision in a prior similar case.
However, the main issue in Luzon Stevedoring was of transcendental
importance, involving the exercise or enjoyment of rights, franchises,
privileges, properties and businesses which only Filipinos and
qualified corporations could exercise or enjoy under the Constitution
and the statutes. Moreover, the same issue could be raised by
appellant in an appropriate action. Thus, in Luzon Stevedoring the
Court deemed it necessary to finally dispose of the case for the
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guidance of all concerned, despite the apparent procedural flaw in the
petition.
Constitutional Law; Capital; Words and Phrases; Until the present
case there has never been a Court ruling categorically defining the
term capital found in the various economic provisions of the 1935,
1973 and 1987 Philippine Constitutions.For more than 75 years
since the 1935 Constitution, the Court has not interpreted or defined
the term capital found in various economic provisions of the 1935,
1973 and 1987 Constitutions. There has never been a judicial
precedent interpreting the term capital in the 1935, 1973 and 1987
Constitutions, until now. Hence, it is patently wrong and utterly
baseless to claim that the Court in defining the term capital in its 28
June 2011 Decision modified, reversed, or set aside the purported
long-standing definition of the term capital, which supposedly refers
to the total outstanding shares of stock, whether voting or non-voting.
To repeat, until the present case there has never been a Court ruling
categorically defining the term capital found in the various economic
provisions of the 1935, 1973 and 1987 Philippine Constitutions.
Securities and Exchange Commission (SEC); Securities Regulation
Code; Under Section 5.1 of the Securities Regulation Code, it is the
Securities and Exchange Commission (SEC) as a collegial body, and
not any of its legal officers, that is empowered to issue opinions and
approve rules and regulations.The opinions issued by SEC legal
officers do not have the force and effect of SEC rules and regulations
because only the SEC en banc can adopt rules and regulations. As
expressly provided in Section 4.6 of the Securities Regulation Code,
the SEC cannot delegate to any of its individual Commissioner or staff
the power to adopt any rule or regulation. Further, under Section 5.1
of the same Code, it is the SEC as a collegial body, and not any of its
legal officers, that is empowered to issue opinions and approve rules
and regulations.
Same; Grandfather Rule; The Securities and Exchange Commission
(SEC) en banc, which is the collegial body statutorily empowered to
issue rules and opinions on behalf of the SEC, has adopted even the
Grandfather Rule in determining compliance with the 60-40
ownership requirement in favor of Filipino citizens mandated by the
Constitution for certain economic activities.Significantly, the SEC
en banc, which is the collegial body statutorily empowered to issue
rules and opinions on behalf of the SEC, has adopted even the
Grandfather Rule in determining compliance with the 60-40
ownership requirement in favor of Filipino citizens mandated by the
Constitution for certain economic activities. This prevailing SEC
ruling, which the SEC correctly adopted to thwart any circumvention
of the required Filipino ownership and control, is laid down in the
25 March 2010 SEC en banc ruling in Redmont Consolidated Mines,
Corp. v. McArthur Mining, Inc., et al.
Capital; Statutory Construction; The power to make a final
interpretation of the law, in this case the term capital in Section 11,
Article XII of the 1987 Constitution, lies with this Court, not with any
other government entity.The opinions of the SEC en banc, as well as
of the DOJ, interpreting the law are neither conclusive nor controlling
and thus, do not bind the Court. It is hornbook doctrine that any
interpretation of the law that administrative or quasi-judicial agencies
make is only preliminary, never conclusive on the Court. The power to
make a final interpretation of the law, in this case the term capital in
Section 11, Article XII of the 1987 Constitution, lies with this Court,
not with any other government entity.
Same; Constitutional Law; Under Section 10, Article XII of the 1987
Constitution, Congress may reserve to citizens of the Philippines or to
corporations or associations at least sixty per centum of whose capital
is owned by such citizens, or such higher percentage as Congress may
prescribe, certain areas of investments.Under Section 10, Article
XII of the 1987 Constitution, Congress may reserve to citizens of the
Philippines or to corporations or associations at least sixty per centum
of whose capital is owned by such citizens, or such higher percentage
as Congress may prescribe, certain areas of investments. Thus, in
numerous laws Congress has reserved certain areas of investments to
Filipino citizens or to corporations at least sixty percent of the
capital of which is owned by Filipino citizens. Some of these laws
are: (1) Regulation of Award of Government Contracts or R.A. No.
5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3)
Magna Carta for Micro, Small and Medium Enterprises or R.A. No.
Page 8 of 16
6977; (4) Philippine Overseas Shipping Development Act or R.A. No.
7471; (5) Domestic Shipping Development Act of 2004 or R.A. No.
9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No.
10055; and (7) Ship Mortgage Decree or P.D. No. 1521.
Same; Same; Public Utilities; Section 11, Article XII of the 1987
Constitution mandates the Filipinization of public utilities, requires
that any form of authorization for the operation of public utilities shall
be granted only to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least sixty
per centum of whose capital is owned by such citizens.With respect
to public utilities, the 1987 Constitution specifically ordains: Section
11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the
laws of the Philippines, at least sixty per centum of whose capital is
owned by such citizens; nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration,
or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the governing
body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of the
Philippines. (Emphasis supplied) This provision, which mandates the
Filipinization of public utilities, requires that any form of
authorization for the operation of public utilities shall be granted only
to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty per centum
of whose capital is owned by such citizens. The provision is [an
express] recognition of the sensitive and vital position of public
utilities both in the national economy and for national security.
Same; Same; Same; Under Section 11, Article XII of the 1987
Constitution, to own and operate a public utility a corporations
capital must at least be 60 percent owned by Philippine
nationals.The 1987 Constitution reserves the ownership and
operation of public utilities exclusively to (1) Filipino citizens, or (2)
corporations or associations at least 60 percent of whose capital is
owned by Filipino citizens. Hence, in the case of individuals, only
Filipino citizens can validly own and operate a public utility. In the
case of corporations or associations, at least 60 percent of their
capital must be owned by Filipino citizens. In other words, under
Section 11, Article XII of the 1987 Constitution, to own and operate a
public utility a corporations capital must at least be 60 percent owned
by Philippine nationals.
Same; Same; Same; Omnibus Investments Code of 1987; Under
Article 48(3) of the Omnibus Investments Code of 1987, no
corporation which is not a Philippine national shall do business in
the Philippines without first securing from the Board of Investments a
written certificate to the effect that such business or economic activity
would not conflict with the Constitution or laws of the
Philippines.Under Article 48(3) of the Omnibus Investments Code
of 1987, no corporation x x x which is not a Philippine national x x x
shall do business x x x in the Philippines x x x without first securing
from the Board of Investments a written certificate to the effect that
such business or economic activity x x x would not conflict with the
Constitution or laws of the Philippines. Thus, a non-Philippine
national cannot own and operate a reserved economic activity like a
public utility. This means, of course, that only a Philippine national
can own and operate a public utility.
Same; Same; Same; Foreign Investments Act of 1991 (FIA); Philippine
Nationals; Domestic Corporations; Words and Phrases; The Foreign
Investments Act of 1991, like all its predecessor statutes, clearly
defines a Philippine national as a Filipino citizen, or a domestic
corporation at least sixty percent (60%) of the capital stock
outstanding and entitled to vote is owned by Filipino citizens.The
FIA, like all its predecessor statutes, clearly defines a Philippine
national as a Filipino citizen, or a domestic corporation at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is
owned by Filipino citizens. A domestic corporation is a Philippine
national only if at least 60% of its voting stock is owned by Filipino
Page 9 of 16
citizens. This definition of a Philippine national is crucial in the
present case because the FIA reiterates and clarifies Section 11, Article
XII of the 1987 Constitution, which limits the ownership and
operation of public utilities to Filipino citizens or to corporations or
associations at least 60% Filipino-owned.
Same; Same; Same; Same; Among the areas of investment covered by
the Foreign Investment Negative List A is the ownership and
operation of public utilities, which the Constitution expressly reserves
to Filipino citizens and to corporations at least 60% owned by Filipino
citizens.Among the areas of investment covered by the Foreign
Investment Negative List A is the ownership and operation of public
utilities, which the Constitution expressly reserves to Filipino citizens
and to corporations at least 60% owned by Filipino citizens. In other
words, Negative List A of the FIA reserves the ownership and
operation of public utilities only to Philippine nationals, defined in
Section 3(a) of the FIA as (1) a citizen of the Philippines; x x x or (3) a
corporation organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock outstanding and entitled
to vote is owned and held by citizens of the Philippines; or (4) a
corporation organized abroad and registered as doing business in the
Philippines under the Corporation Code of which one hundred percent
(100%) of the capital stock outstanding and entitled to vote is wholly
owned by Filipinos or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the
benefit of Philippine nationals.
Same; Same; Same; The 60-40 ownership requirement in favor of
Filipino citizens must apply separately to each class of shares, whether
common, preferred non-voting, preferred voting or any other class of
shares.If a corporation, engaged in a partially nationalized industry,
issues a mixture of common and preferred non-voting shares, at least
60 percent of the common shares and at least 60 percent of the
preferred non-voting shares must be owned by Filipinos. Of course, if
a corporation issues only a single class of shares, at least 60 percent of
such shares must necessarily be owned by Filipinos. In short, the 60-
40 ownership requirement in favor of Filipino citizens must apply
separately to each class of shares, whether common, preferred non-
voting, preferred voting or any other class of shares. This uniform
application of the 60-40 ownership requirement in favor of Filipino
citizens clearly breathes life to the constitutional command that the
ownership and operation of public utilities shall be reserved
exclusively to corporations at least 60 percent of whose capital is
Filipino-owned. Applying uniformly the 60-40 ownership
requirement in favor of Filipino citizens to each class of shares,
regardless of differences in voting rights, privileges and restrictions,
guarantees effective Filipino control of public utilities, as mandated by
the Constitution.
Same; Same; Same; The use of the term capital was intended to
replace the word stock because associations without stocks can
operate public utilities as long as they meet the 60-40 ownership
requirement in favor of Filipino citizens prescribed in Section 11,
Article XII of the Constitution.The use of the term capital was
intended to replace the word stock because associations without
stocks can operate public utilities as long as they meet the 60-40
ownership requirement in favor of Filipino citizens prescribed in
Section 11, Article XII of the Constitution. However, this did not
change the intent of the framers of the Constitution to reserve
exclusively to Philippine nationals the controlling interest in public
utilities.
Same; Same; Same; Allowing foreign shareholders to elect a
controlling majority of the board, even if all the directors are Filipinos,
grossly circumvents the letter and intent of the Constitution and
defeats the very purpose of our nationalization laws.Even if
foreigners who own more than forty percent of the voting shares elect
an all-Filipino board of directors, this situation does not guarantee
Filipino control and does not in any way cure the violation of the
Constitution. The independence of the Filipino board members so
elected by such foreign shareholders is highly doubtful. As the OSG
pointed out, quoting Justice George Sutherlands words in
Humphreys Executor v. US, x x x it is quite evident that one who
holds his office only during the pleasure of another cannot be
depended upon to maintain an attitude of independence against the
Page 10 of 16
latters will. Allowing foreign shareholders to elect a controlling
majority of the board, even if all the directors are Filipinos, grossly
circumvents the letter and intent of the Constitution and defeats the
very purpose of our nationalization laws.
Same; Same; Same; The last sentence of Section 11, Article XII of the
Constitution mandates that (1) the participation of foreign investors in
the governing body of the corporation or association shall be limited
to their proportionate share in the capital of such entity; and (2) all
officers of the corporation or association must be Filipino citizens.It
is clear that the framers of the Constitution intended public utilities to
be majority Filipino-owned and controlled. To ensure that Filipinos
control public utilities, the framers of the Constitution approved, as
additional safeguard, the inclusion of the last sentence of Section 11,
Article XII of the Constitution commanding that [t]he participation
of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital,
and all the executive and managing officers of such corporation or
association must be citizens of the Philippines. In other words, the
last sentence of Section 11, Article XII of the Constitution mandates
that (1) the participation of foreign investors in the governing body of
the corporation or association shall be limited to their proportionate
share in the capital of such entity; and (2) all officers of the
corporation or association must be Filipino citizens.
Same; Same; Same; Foreign Investments Act of 1991 (FIA); The
Constitution explicitly reserves the ownership and operation of public
utilities to Philippine nationals, who are defined in the Foreign
Investments Act of 1991 as Filipino citizens, or corporations or
associations at least 60 percent of whose capital with voting rights
belongs to Filipinos.The Constitution expressly declares as State
policy the development of an economy effectively controlled by
Filipinos. Consistent with such State policy, the Constitution explicitly
reserves the ownership and operation of public utilities to Philippine
nationals, who are defined in the Foreign Investments Act of 1991 as
Filipino citizens, or corporations or associations at least 60 percent of
whose capital with voting rights belongs to Filipinos. The FIAs
implementing rules explain that [f]or stocks to be deemed owned and
held by Philippine citizens or Philippine nationals, mere legal title is
not enough to meet the required Filipino equity. Full beneficial
ownership of the stocks, coupled with appropriate voting rights is
essential. In effect, the FIA clarifies, reiterates and confirms the
interpretation that the term capital in Section 11, Article XII of the
1987 Constitution refers to shares with voting rights, as well as with
full beneficial ownership. This is precisely because the right to vote in
the election of directors, coupled with full beneficial ownership of
stocks, translates to effective control of a corporation.
VELASCO, J., Dissenting Opinion:
Constitutional Law; Capital; Public Utilities; View that Capital in the
first sentence of Sec. 11, Art. XII must then be accorded a meaning
accepted, understood, and used by an ordinary person not versed in
the technicalities of law; It does not distinguish based on the voting
feature of the stocks but refers to all shares, be they voting or non-
voting.Capital in the first sentence of Sec. 11, Art. XII must then be
accorded a meaning accepted, understood, and used by an ordinary
person not versed in the technicalities of law. As defined in a non-legal
dictionary, capital stock or capital is ordinarily taken to mean the
outstanding shares of a joint stock company considered as an
aggregate or the ownership element of a corporation divided into
shares and represented by certificates. The term capital includes all
the outstanding shares of a company that represent the proprietary
claim in a business. It does not distinguish based on the voting
feature of the stocks but refers to all shares, be they voting or non-
voting. Neither is the term limited to the management aspect of the
corporation but clearly refers to the separate aspect of ownership of
the corporate shares thereby encompassing all shares representing the
equity of the corporation.
Same; Same; Same; View that when the seeming ambiguity on the
meaning of capital cannot be threshed out by looking at the
language of the Constitution, then resort to extraneous aids has
become imperative.When the seeming ambiguity on the meaning of
capital cannot be threshed out by looking at the language of the
Constitution, then resort to extraneous aids has become imperative.
The Court can utilize the following extraneous aids, to wit: (1)
Page 11 of 16
proceedings of the convention; (2) changes in phraseology; (3) history
or realities existing at the time of the adoption of the Constitution;
(4)prior laws and judicial decisions; (5) contemporaneous
construction; and (6) consequences of alternative interpretations. I
submit that all these aids of constitutional construction affirm that the
only acceptable construction of capital in the first sentence of Sec.
11, Art. XII of the 1987 Constitution is that it refers to all shares of a
corporation, both voting and non-voting.
Same; Same; Same; View that if the framers wanted the word capital
to mean voting capital stock, their terminology would have certainly
been unmistakably limiting as to leave no doubt about their
intention.If the framers wanted the word capital to mean voting
capital stock, their terminology would have certainly been
unmistakably limiting as to leave no doubt about their intention. But
the framers consciously and purposely excluded restrictive phrases,
such as voting stocks or controlling interest, in the approved final
draft, the proposal of the UP Law Center, Commissioner Davide and
Commissioner Azcuna notwithstanding. Instead, they retained
capital as used in the 1935 and 1973 Constitutions. There was,
therefore, a conscious design to avoid stringent words that would limit
the meaning of capital in a sense insisted upon by the majority.
Cassus omissus pro omisso habendus esta person, object, or thing
omitted must have been omitted intentionally. More importantly, by
using the word capital, the intent of the framers of the Constitution
was to include all types of shares, whether voting or nonvoting, within
the ambit of the word.
Same; Same; Same; View that where a statute has received a
contemporaneous and practical interpretation and the statute as
interpreted is re-enacted, the practical interpretation is accorded
greater weight than it ordinarily receives, and is regarded as
presumptively the correct interpretation of the law.Laxamana v.
Baltazar, restates this long-standing dictum: [w]here a statute has
received a contemporaneous and practical interpretation and the
statute as interpreted is re-enacted, the practical interpretation is
accorded greater weight than it ordinarily receives, and is regarded as
presumptively the correct interpretation of the law. The rule here is
based upon the theory that the legislature is acquainted with the
contemporaneous interpretation of a statute, especially when made by
an administrative body or executive officers charged with the duty of
administering or enforcing the law, and therefore impliedly adopts the
interpretation upon re-enactment. Hence, it can be safely assumed
that the framers, in the course of deliberating the 1987 Constitution,
knew of the adverted SEC interpretation.
Same; Same; Same; View that if the Court persists in adhering to the
rationale underlying the majoritys original interpretation of capital
found in the first sentence of Section 11, Article XII, We may perhaps
be allowing Filipinos to direct and control the daily business of our
public utilities, but would irrevocably and injudiciously deprive them
of effective control over the major and equally important corporate
decisions and the eventual beneficial ownership of the corporate
assets that could include, among others, claim over our soilour
land.If the Court persists in adhering to the rationale underlying the
majoritys original interpretation of capital found in the first
sentence of Section 11, Article XII, We may perhaps be allowing
Filipinos to direct and control the daily business of our public utilities,
but would irrevocably and injudiciously deprive them of effective
control over the major and equally important corporate decisions
and the eventual beneficial ownership of the corporate assets that
could include, among others, claim over our soilour land. This
undermines the clear textual commitment under the Constitution that
reserves ownership of disposable lands to Filipino citizens.
Same; Same; Same; Amendments; View that the Constitution may
only be amended through the procedure outlined in the basic
document itself. An amendment cannot, therefore, be made through
the expedience of a legislative action that diagonally opposes the clear
provisions of the Constitution.Justice Carpio parlays the thesis that
the FIA, and its predecessors, the Investments Incentives Act of 1967
(1967 IIA), Omnibus Investments Code of 1981 (1981 OIC), and
the Omnibus Incentives Code of 1987 (1987 OIC), (collectively,
Investment Incentives Laws) more particularly their definition of
the term Philippine National, constitutes a good guide for
ascertaining the intent behind the use of the term capital in Sec. 11,
Page 12 of 16
Art. XIIthat it refers only to voting shares of public utility
corporations. I cannot share this posture. The Constitution may only
be amended through the procedure outlined in the basic document
itself. An amendment cannot, therefore, be made through the
expedience of a legislative action that diagonally opposes the clear
provisions of the Constitution.
Statutory Construction; View that legislative enactments on
commerce, trade and national economy must be so construed, when
appropriate, to determine whether the purpose underlying them is in
accord with the policies and objectives laid out in the
Constitution.Legislative enactments on commerce, trade and
national economy must be so construed, when appropriate, to
determine whether the purpose underlying them is in accord with the
policies and objectives laid out in the Constitution. Surely, a law
cannot validly broaden or restrict the thrust of a constitutional
provision unless expressly sanctioned by the Constitution itself. And
the Court may not read into the Constitution an intent or purpose that
is not there. Any attempt to enlarge the breadth of constitutional
limitations beyond what its provision dictates should be stricken
down.
Remedial Law; Civil Procedure; Indispensable Parties; Due Process;
View that since Philippine Long Distance Telephone Company (PLDT)
and the foreign stockholders were not impleaded as indispensable
parties to the case, the majority would want to indirectly execute its
decision which it could not execute directly; The principle of due
process of law contemplates notice and opportunity to be heard before
judgment is rendered, affecting ones person or property.Since
PLDT and the foreign stockholders were not impleaded as
indispensable parties to the case, the majority would want to
indirectly execute its decision which it could not execute directly. The
Court may be criticized for violating the very rules it promulgated and
for trenching the provisions of Sec. 5, Art. VIII of the Constitution,
which defines the powers and jurisdiction of this Court. It is apropos
to stress, as a reminder, that the Rules of Court is not a mere body of
technical rules that can be disregarded at will whenever convenient. It
forms an integral part of the basic notion of fair play as expressed in
this Constitutional caveat: No person shall be deprived of life, liberty
or property without due process of law, and obliges this Court, as well
as other courts and tribunals, to hear a person first before rendering a
judgment for or against him. As Daniel Webster explained, due
process of law is more clearly intended the general law, a law which
hears before it condemns; which proceeds upon enquiry, and renders
judgment only after trial. The principle of due process of law
contemplates notice and opportunity to be heard before judgment is
rendered, affecting ones person or property.
Same; Evidence; Presumptions; View that Article 1431 of the Civil
Code provides that an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or
disproved as against a person relying thereon.The Philippine
governments act of pushing for and approving the sale of the PTIC
shares, which is equivalent to 12 million PLDT common shares, to
foreign investors precludes it from asserting that the purchase violates
the Constitutional limit on foreign ownership of public utilities so that
the foreign investors must now divest the common PLDT shares
bought. The elementary principle that a person is prevented from
going back on his own act or representation to the prejudice of
another who relied thereon finds application in the present case. Art.
1431 of the Civil Code provides that an admission or representation is
rendered conclusive upon the person making it, and cannot be denied
or disproved as against a person relying thereon. This rule is
supported by Section 2(a) of Rule 131 of the Rules of Court on the
burden of proof and presumptions.
Immunity from Suit; View that the government, by concluding the
sale, has descended to the level of an ordinary citizen and stripped
itself of the vestiges of immunity that is available in the performance
of governmental acts.The indirect sale of PLDT common shares to
foreign investors partook of a propriety business transaction of the
government which was not undertaken as an incident to any of its
governmental functions. Accordingly, the government, by concluding
the sale, has descended to the level of an ordinary citizen and stripped
itself of the vestiges of immunity that is available in the performance
of governmental acts. Ergo, the government is vulnerable to, and
Page 13 of 16
cannot hold off, the application of the principle of estoppel that the
foreign investors can very well invoke in case they are compelled to
divest the voting shares they have previously acquired through the
inducement of no less the government. In other words, the
government is precluded from penalizing these alien investors for an
act performed upon its guarantee, through its facilities, and with its
imprimatur.
Constitutional Law; Capital; Public Utilities; View that the
representation that foreigners can invest up to 40% of the entirety of
the total stockholdings, and not just the voting shares, of a public
utility corporation is an implied covenant that the Philippines cannot
renege without violating the fair and equitable treatment (FET)
guarantee.The representation that foreigners can invest up to 40%
of the entirety of the total stockholdings, and not just the voting
shares, of a public utility corporation is an implied covenant that the
Philippines cannot renege without violating the FET guarantee.
Especially in this case where the Philippines made specific
commitments to countries like Japan and China that their investing
nationals can own up to 40% of the equity of a public utility like a
telecommunications corporation. In the table contained in Schedule
1(B), Annex 6 of the JPEPA, the Philippines categorically represented
that Japanese investors entry into the Philippine telecommunications
industry, specifically corporations offering voice telephone services,
is subject to only the following requirements and conditions: A.
Franchise from Congress of the Philippines B. Certificate of Public
Convenience and Necessity (CPCN) from the National
Telecommunications Commission C. Foreign equity is permitted up to
40 percent. D. x x x
Statutes; Retroactivity of Laws; View that laws have no retroactive
effect unless the contrary is provided.Lex prospicit, non respicit
laws have no retroactive effect unless the contrary is provided. As a
necessary corollary, judicial rulings should not be accorded retroactive
effect since judicial decisions applying or interpreting the laws or the
Constitution shall form part of the legal system of the Philippines. It
has been the constant holding of the Court that a judicial decision
setting a new doctrine or principle (precedent-setting decision) shall
not retroactively apply to parties who relied in good faith on the
principles and doctrines standing prior to the promulgation thereof
(old principles/doctrines), especially when a retroactive application
of the precedent-setting decision would impair the rights and
obligations of the parties.
ABAD, J., Dissenting Opinion:
Constitutional Law; Statutory Construction; Capital; View that the
authority to define and interpret the meaning of capital in Section
11, Article XII of the 1987 Constitution belongs, not to the Court, but
to Congress, as part of its policy making powers.The authority to
define and interpret the meaning of capital in Section 11, Article XII
of the 1987 Constitution belongs, not to the Court, but to Congress, as
part of its policy making powers. This matter is addressed to the
sound discretion of the lawmaking department of government since
the power to authorize and control a public utility is admittedlya
prerogative that stems from Congress. It may very well in its wisdom
define the limit of foreign ownership in public utilities.
Same; Same; View that Section 11, Article XII of the 1987 Constitution
is one of the constitutional provisions that are not self-executing and
need sufficient details for a meaningful implementation.Section 11,
Article XII of the 1987 Constitution which reads: Section 11. No
franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the
laws of the Philippines, at least sixty per centum of whose capital is
owned by such citizens; nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration,
or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the governing
body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of the
Philippines. is one of the constitutional provisions that are not self-
Page 14 of 16
executing and need sufficient details for a meaningful
implementation. While the provision states that no franchise for the
operation of a public utility shall be granted to a corporation
organized under Philippine laws unless at least 60% of its capital is
owned by Filipino citizens, it does not provide for the meaning of the
term capital.
Same; Same; View that it is a rule that when the operation of the
statute is limited, the law should receive a restricted
construction.The majority opinion also resorted to the various
investment laws in construing the term capital. But while these laws
admittedly govern foreign investments in the country, they do not
expressly or impliedly seek to supplant the ambiguity in the definition
of the term capital nor do they seek to modify foreign ownership
limitation in public utilities. It is a rule that when the operation of the
statute is limited, the law should receive a restricted construction.
Capital; Doctrine of Equality of Shares; View that under the doctrine
of equality of sharesall stocks issued by the corporation are
presumed equal with the same privileges and liabilities, provided that
the Articles of Incorporation is silent on such differences.For sure,
both common and preferred shares have always been considered part
of the corporations capital stock. Its shareholders are no different
from ordinary investors who take on the same investment risks. They
participate in the same venture, willing to share in the profits and
losses of the enterprise. Under the doctrine of equality of sharesall
stocks issued by the corporation are presumed equal with the same
privileges and liabilities, provided that the Articles of Incorporation is
silent on such differences.
Constitutional Law; Public Utilities; View that the Filipinization of
public utilities under the 1987 Constitution is a recognition of the very
strategic position of public utilities both in the national economy and
for national security.The Filipinization of public utilities under the
1987 Constitution is a recognition of the very strategic position of
public utilities both in the national economy and the national security.
The participation of foreign capital is enjoined since the establishment
and operation of public utilities may require the investment of
substantial capital which Filipino citizens may not afford. But at the
same time, foreign involvement is limited to prevent them from
assuming control of public utilities which may be inimical to national
interest. Section 11, Article XII of the 1987 Constitution already
provides three limitations on foreign participation in public utilities.
The Court need not add more by further restricting the meaning of the
term capital when none was intended by the flamers of the 1987
Constitution. Heirs of Wilson P. Gamboa vs. Teves, 682 SCRA 397,
G.R. No. 176579 October 9, 2012
Gamboa v. Teves etal., GR No. 176579, October 9, 2012
Facts:
The issue started when petitioner Gamboa questioned the indirect sale
of shares involving almost 12 million shares of the Philippine Long
Distance Telephone Company (PLDT) owned by PTIC to First Pacific.
Thus, First Pacifics common shareholdings in PLDT increased from
30.7 percent to 37 percent, thereby increasing the total common
shareholdings of foreigners in PLDT to about 81.47%. The petitioner
contends that it violates the Constitutional provision on filipinazation
of public utility, stated in Section 11, Article XII of the 1987 Philippine
Constitution, which limits foreign ownership of the capital of a public
utility to not more than 40%. Then, in 2011, the court ruled the case in
favor of the petitioner, hence this new case, resolving the motion for
reconsideration for the 2011 decision filed by the respondents.
Issue: Whether or not the Court made an erroneous interpretation of
the term capital in its 2011 decision?
Held/Reason: The Court said that the Constitution is clear in
expressing its State policy of developing an economyeffectively
controlled by Filipinos. Asserting the ideals that our Constitutions
Preamble want to achieve, that is to conserve and develop our
patrimony , hence, the State should fortify a Filipino-controlled
economy. In the 2011 decision, the Court finds no wrong in the
construction of the term capital which refers to the shares with
voting rights, as well as with full beneficial ownership (Art. 12, sec.
10) which implies that the right to vote in the election of directors,
coupled with benefits, is tantamount to an effective control.Therefore,
Page 15 of 16
the Courts interpretation of the term capital was not erroneous.
Thus, the motion for reconsideration is denied.

Page 16 of 16