SE M. ROY III, Petitioner, v.

CHAIRPERSON TERESITA HERBOSA

Facts:
The SEC issued SEC-MC No. 8 pertaining to the guidelines to be followed in determining compliance
with the Filipino ownership requirement in public utilities under Section 11, Article XII of the
Constitution pursuant to the Court's directive in the Gamboa Decision.
Sectio 2 of SEC-MC No. 8 provides:
Section 2. All covered corporations shall, at all times, observe the constitutional or statutory
ownership requirement. For purposes of determining compliance therewith, the required
percentage of Filipino ownership shall be applied to BOTH (a) the total number of outstanding
shares of stock entitled to vote in the election of directors; AND (b) the total number of
outstanding shares of stock, whether or not entitled to vote in the election of directors.

Corporations covered by special laws which provide specific citizenship requirements shall
comply with the provisions of said law.
Petitioner Roy, assailed the validity of SEC-MC No. 8 for not conforming to the letter and spirit of the
Gamboa Decision and Resolution and for having been issued by the SEC with grave abuse of discretion.
Petitioner Roy seeks to apply the 60-40 Filipino ownership requirement separately to each class of shares
of a public utility corporation, whether common, preferred nonvoting, preferred voting or any other class
of shares.

Issue:
Whether the SEC gravely abused its discretion in issuing SEC-MC No. 8 in light of the Gamboa Decision
and Gamboa Resolution.

Held:
NO.
To determine W/N there was grave abuse, the Court first observed what was held in the Gamboa decision
and resolution.
The Court observed in the Gamboa Decision that:
Mere legal title is insufficient to meet the 60 percent Filipinoowned "capital" required in the Constitution.
Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the
voting rights, is required. 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[s]."
The Court also said that the same was not modified in the Gamboa Resolution.
The Court reiterated in the Gamboa resolution that both the Voting Control Test and the Beneficial
Ownership Test must be applied to determine whether a corporation is a "Philippine national" and that a
"Philippine national," as defined in the FIA and all its predecessor statutes, is "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 citizens." The Court also reiterated that, from the deliberations of the
Constitutional Commission, it is evident that the term "capital" refers to controlling interest of a
corporation, and the framers of the Constitution intended public utilities to be majority Filipino-owned
and controlled.
The Court held in this case that Section 2 of SEC-MC No. 8 clearly incorporates the Voting Control Test
or the controlling interest requirement. In fact, Section 2 goes beyond requiring a 60-40 ratio in favor
of Filipino nationals in the voting stocks; it moreover requires the 60-40 percentage ownership in
the total number of outstanding shares of stock, whether voting or not. The SEC formulated SEC-
MC No. 8 to adhere to the Court's unambiguous pronouncement that "[f]ull beneficial ownership of 60
percent of the outstanding capital stock, coupled with 60 percent of the voting rights is required." Clearly,
SEC-MC No. 8 cannot be said to have been issued with grave abuse of discretion.