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Gamboa vs. Teves (2011) G.R. No. 176579
Gamboa vs. Teves (2011) G.R. No. 176579
Gamboa vs. Teves (2011) G.R. No. 176579
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
Respondents.
Facts:
Wilson Gamboa, a stockholder of PLDT, seeks to annul the sale of 111,415 common shares (representing
46.125 percent) of PTIC by the Philippine Government to Metro Pacific.
The majority shares of PTIC (representing about 54 percent) are owned by First Pacific, a Bermuda
company. Notably, First Pacific is a stockholder of Metro Pacific, the entity that acquired the other 46%
from the Philippine Government.
PTIC owns 13.847 percent of PLDT. Hence, the sale by the Philippine Government of 46.125 percent of
PTIC shares is actually an indirect sale of about 6.3 percent of the outstanding common shares of PLDT.
(13.847 percent of 46.125 is 6.38)
Japan's NTT DoCoMo owns 51.56 percent of PLDT common equity. With the sale, First Pacific's common
shareholdings in PLDT increased from 30.7 percent to 37 percent (30.7 plus 6.3).
In effect, the total common shareholdings of foreigners in PLDT has violated 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 percent.
The question posed to the court is whether the term "capital" in Section 11, Article XII of the Constitution
refers to the total common shares only or to the total outstanding capital stock (combination of common
and non-voting preferred shares) of PLDT, a public utility.
Held:
Procedural Issues
1. An action for declaratory relief is not within the original jurisdiction of the Supreme Court. However,
since the issue has far-reaching implications for the country, the Court treats the petition for declaratory
relief as one for mandamus.
2. Petitioner has the requisite locus standi. He is a stockholder of PLDT, whose franchise is in danger of
being revoked for violation of the nationality requirements.
3. The petition also involves matters of transcendental public importance, and as a citizen, petitioner has
standing. When a mandamus proceeding involves the assertion of a public right, the requirement of
personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general
'public' which possesses the right.
4. Any citizen or juridical entity desiring to operate a public utility must meet the minimum nationality
requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted
authority to operate a public utility, at least 60 percent of its "capital" must be owned by Filipino citizens.
5. 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.
6. In the present case, ‘capital’ refers only to common shares and not to the total outstanding capital stock
comprising both common and non-voting preferred shares.
7. This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of
Filipino citizens the control and management of public utilities. As revealed in the deliberations of the
Constitutional Commission, "capital" refers to the voting stock or controlling interest of a corporation.
8. Thus, 60 percent of the "capital" assumes, or should result in, 'controlling interest' in the corporation.
Reinforcing this interpretation of the term "capital," as referring to controlling interest or shares entitled to
vote, is the definition of a "Philippine national" under Section 3(a) of the Foreign Investments Act of 1991,
which states:
The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or
association wholly owned by citizens of the Philippines; or 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.
9. Furthermore, under the Implementing Rules of the Foreign Investments Act of 1991, it is stated that:
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of
outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to
vote are considered.
For 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. Thus, stocks, the voting rights of which have been assigned or
transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
10. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands
of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is
considered as non-Philippine national.
11. 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."
12. Under PLDT's Articles of Incorporation, only holders of common shares have voting rights for all
purposes, while holders of preferred shares have no voting right for any purpose whatsoever.
13. In PLDT’s case, foreigners hold a majority of the common shares. 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.