G.R. No. 207246 - Roy III V

11/21/2017 G.R. No. 207246 | Roy III v.
Herbosa
EN BANC
[G.R. No. 207246. November 22, 2016.]
JOSE M. ROY III, petitioner, vs. CHAIRPERSON TERESITA HERBOSA, THE

SECURITIES AND EXCHANGE COMMISSION, and PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY, respondents.
WILSON C. GAMBOA, JR., DANIEL V. CARTAGENA, JOHN WARREN P.

GABINETE, ANTONIO V. PESINA, JR., MODESTO MARTIN Y. MAMON III,
and GERARDO C. EREBAREN, petitioners-in-intervention,
PHILIPPINE STOCK EXCHANGE, INC., respondent-in-intervention,
SHAREHOLDERS' ASSOCIATION OF THE PHILIPPINES, INC., respondent-in-

intervention.
DECISION
CAGUIOA, J : p
The petitions 1 before the Court are special civil actions for certiorari under Rule 65 of the
Rules of Court seeking to annul Memorandum Circular No. 8, Series of 2013 ("SEC-MC No. 8")
issued by the Securities and Exchange Commission ("SEC") for allegedly being in violation of the
Court's Decision 2 ("Gamboa Decision") and Resolution 3 ("Gamboa Resolution") in Gamboa v.
Finance Secretary Teves, G.R. No. 176579, respectively promulgated on June 28, 2011, and October
9, 2012, which jurisprudentially established the proper interpretation of Section 11, Article XII of
the Constitution.
The Antecedents
On June 28, 2011, the Court issued the Gamboa Decision, the dispositive portion of which
reads:
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in
Section 11, Article XII of the 1987 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 (common and non-voting preferred shares). Respondent
Chairperson of the Securities and Exchange Commission is DIRECTED to apply this
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.
SO ORDERED. 4
Several motions for reconsideration were filed assailing the Gamboa Decision. They were
denied in the Gamboa Resolution issued by the Court on October 9, 2012, viz.:
https://cdasiaonline.com/jurisprudences/62370/print 1/81
11/21/2017 G.R. No. 207246 | Roy III v. Herbosa
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No

further pleadings shall be entertained.
SO ORDERED. 5
The Gamboa Decision attained finality on October 18, 2012, and Entry of Judgment was
thereafter issued on December 11, 2012. 6
On November 6, 2012, the SEC posted a Notice in its website inviting the public to attend a
public dialogue and to submit comments on the draft memorandum circular (attached thereto) on 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. 7
On November 9, 2012, the SEC held the scheduled dialogue and more than 100
representatives from various organizations, government agencies, the academe and the private sector
attended. 8
On January 8, 2013, the SEC received a copy of the Entry of Judgment 9 from the Court
certifying that on October 18, 2012, the Gamboa Decision had become final and executory. 10
On March 25, 2013, the SEC posted another Notice in its website soliciting from the public
comments and suggestions on the draft guidelines. 11
On April 22, 2013, petitioner Atty. Jose M. Roy III ("Roy") submitted his written comments
on the draft guidelines. 12 CAIHTE
On May 20, 2013, the SEC, through respondent Chairperson Teresita J. Herbosa, issued SEC-
MC No. 8 entitled "Guidelines on Compliance with the Filipino-Foreign Ownership Requirements
Prescribed in the Constitution and/or Existing Laws by Corporations Engaged in Nationalized and
Partly Nationalized Activities." It was published in the Philippine Daily Inquirer and the Business
Mirror on May 22, 2013. 13 Section 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. 14
On June 10, 2013, petitioner Roy, as a lawyer and taxpayer, filed the Petition, 15 assailing 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 non-voting, preferred voting or any other
class of shares. Petitioner Roy also questions the ruling of the SEC that respondent Philippine Long
Distance Telephone Company ("PLDT") is compliant with the constitutional rule on foreign
ownership. He prays that the Court declare SEC-MC No. 8 unconstitutional and direct the SEC to
issue new guidelines regarding the determination of compliance with Section 11, Article XII of the
Constitution in accordance with Gamboa.
Wilson C. Gamboa, Jr., 16 Daniel V. Cartagena, John Warren P. Gabinete, Antonio V. Pesina,
Jr., Modesto Martin Y. Mamon III, and Gerardo C. Erebaren ("intervenors Gamboa, et al.") filed a
Motion for Leave to File Petition-in-Intervention 17 on July 30, 2013, which the Court granted. The
Petition-in-Intervention 18 filed by intervenors Gamboa, et al. mirrored the issues, arguments and
prayer of petitioner Roy.
On September 5, 2013, respondent PLDT filed its Comment (on the Petition dated 10 June
2013). 19 PLDT posited that the Petition should be dismissed because it violates the doctrine of
hierarchy of courts as there are no compelling reasons to invoke the Court's original jurisdiction; it is
prematurely filed because petitioner Roy failed to exhaust administrative remedies before the SEC;
the principal actions/remedies of mandamus and declaratory relief are not within the exclusive
and/or original jurisdiction of the Court; the petition for certiorari is an inappropriate remedy since
the SEC issued SEC-MC No. 8 in the exercise of its quasi-legislative power; it deprives the
necessary and indispensable parties of their constitutional right to due process; and the SEC merely
implemented the dispositive portion of the Gamboa Decision.
On September 20, 2013, respondents Chairperson Teresita Herbosa and SEC filed their
Consolidated Comment. 20 They sought the dismissal of the petitions on the following grounds: (1)
the petitioners do not possess locus standi to assail the constitutionality of SEC-MC No. 8; (2) a
petition for certiorari under Rule 65 is not the appropriate and proper remedy to assail the validity
and constitutionality of the SEC-MC No. 8; (3) the direct resort to the Court violates the doctrine of
hierarchy of courts; (4) the SEC did not abuse its discretion; (5) on PLDT's compliance with the
capital requirement as stated in the Gamboa ruling, the petitioners' challenge is premature
considering that the SEC has not yet issued a definitive ruling thereon.
On October 22, 2013, PLDT filed its Comment (on the Petition-in-Intervention dated 16 July
2013). 21 PLDT adopted the position that intervenors Gamboa, et al. have no standing and are not
the proper party to question the constitutionality of SEC-MC No. 8; they are in no position to assail
SEC-MC No. 8 considering that they did not participate in the public consultations or give
comments thereon; and their Petition-in-Intervention is a disguised motion for reconsideration of the
Gamboa Decision and Resolution.
On May 7, 2014, Petitioner Roy and intervenors Gamboa, et al. 22 filed their Joint
Consolidated Reply with Motion for Issuance of Temporary Restraining Order. 23
On May 22, 2014, PLDT filed its Rejoinder [To Petitioner and Petitioners-in-Intervention's
Joint Consolidated Reply dated 7 May 2014] and Opposition [To Petitioner and Petitioners-in-
Intervention's Motion for Issuance of a Temporary Restraining Order dated 7 May 2014]. 24
On June 18, 2014, the Philippine Stock Exchange, Inc. ("PSE") filed its Motion to Intervene
with Leave of Court 25 and its Comment-in-Intervention. 26 The PSE alleged that it has standing to
intervene as the primary regulator of the stock exchange and will sustain direct injury should the
petitions be granted. The PSE argued that in the Gamboa ruling, "capital" refers only to shares
entitled to vote in the election of directors, and excludes those not so entitled; and the dispositive
portion of the decision is the controlling factor that determines and settles the questions presented in
the case. The PSE further argued that adopting a new interpretation of Section 11, Article XII of the
Constitution violates the policy of conclusiveness of judgment, stare decisis, and the State's
obligation to maintain a stable and predictable legal framework for foreign investors under
international treaties; and adopting a new definition of "capital" will prove disastrous for the
Philippine stock market. The Court granted the Motion to Intervene filed by PSE. 27
PLDT filed its Consolidated Memorandum 28 on February 10, 2015. DETACa
On June 1, 2016, Shareholders' Association of the Philippines, Inc. 29 ("SHAREPHIL") filed

an Omnibus Motion [1] For Leave to Intervene; and [2] To Admit Attached Comment-in-
Intervention. 30 The Court granted the Omnibus Motion of SHAREPHIL. 31
On June 30, 2016, petitioner Roy filed his Opposition and Reply to Interventions of
Philippine Stock Exchange and Sharephil. 32 Intervenors Gamboa, et al. then filed on September 14,
2016, their Reply (to Interventions by Philippine Stock Exchange and Sharephil). 33
The Issues
The twin issues of the Petition and the Petition-in-Intervention are: (1) whether the SEC
gravely abused its discretion in issuing SEC-MC No. 8 in light of the Gamboa Decision and
Gamboa Resolution, and (2) whether the SEC gravely abused its discretion in ruling that PLDT is
compliant with the constitutional limitation on foreign ownership.
The Court's Ruling
At the outset, the Court disposes of the second issue for being without merit. In its
Consolidated Comment dated September 13, 2013, 34 the SEC already clarified that it "has not yet
issued a definitive ruling anent PLDT's compliance with the limitation on foreign ownership
imposed under the Constitution and relevant laws [and i]n fact, a careful perusal of . . . SEC-MC No.
8 readily reveals that all existing covered corporations which are non-compliant with Section 2
thereof were given a period of one (1) year from the effectivity of the same within which to comply
with said ownership requirement. . . . ." 35 Thus, in the absence of a definitive ruling by the SEC on
PLDT's compliance with the capital requirement pursuant to the Gamboa Decision and Resolution,
any question relative to the inexistent ruling is premature.
Also, considering that the Court is not a trier of facts and is in no position to make a factual
determination of PLDT's compliance with the constitutional provision under review, the Court can
only resolve the first issue, which is a pure question of law. However, before the Court tackles the
first issue, it has to rule on certain procedural challenges that have been raised.
The Procedural Issues
The Court may exercise its power of judicial review and take cognizance of a case when the
following specific requisites are met: (1) there is an actual case or controversy calling for the
exercise of judicial power; (2) the petitioner has standing to question the validity of the subject act
or issuance, i.e., he has a personal and substantial interest in the case that he has sustained, or will
sustain, direct injury as a result of the enforcement of the act or issuance; (3) the question of
constitutionality is raised at the earliest opportunity; and (4) the constitutional question is the very lis
mota of the case. 36
The first two requisites of judicial
review are not met.
Petitioners' failure to sufficiently allege, much less establish, the existence of the first two
requisites for the exercise of judicial review warrants the perfunctory dismissal of the petitions.
a. No actual controversy.
Regarding the first requisite, the Court in Belgica v. Ochoa 37 stressed anew that an actual
case or controversy is one which involves a conflict of legal rights, an assertion of opposite legal
claims, susceptible of judicial resolution as distinguished from a hypothetical or abstract difference
or dispute since the courts will decline to pass upon constitutional issues through advisory opinions,
bereft as they are of authority to resolve hypothetical or moot questions. Related to the requirement
of an actual case or controversy is the requirement of "ripeness," and a question is ripe for
adjudication when the act being challenged has a direct adverse effect on the individual challenging
it.
Petitioners have failed to show that there is an actual case or controversy which is ripe for
adjudication.
The Petition and the Petition-in-Intervention identically allege:
3. The standing interpretation of the SEC found in MC8 practically encourages
circumvention of the 60-40 ownership rule by impliedly allowing the creation of several
classes of voting shares with different degrees of beneficial ownership over the same, but at
the same time, not imposing a 40% limit on foreign ownership of the higher yielding stocks.
38
4. For instance, a situation may arise where a corporation may issue several
classes of shares of stock, one of which are common shares with rights to elect directors,
another are preferred shares with rights to elect directors but with much lesser entitlement to
dividends, and still another class of preferred shares with no rights to elect the directors and
even less dividends. In this situation, the corporation may issue common shares to foreigners
amounting to forty percent (40%) of the outstanding capital stock and issue preferred shares
entitled to vote the directors of the corporation to Filipinos consisting of 60% 39 percent (sic)
of the outstanding capital stock entitled to vote. Although it may appear that the 60-40 rule
has been complied with, the beneficial ownership of the corporation remains with the foreign
stockholder since the Filipino owners of the preferred shares have only a miniscule share in
the dividends and profit of the corporation. Plainly, this situation runs contrary to the
Constitution and the ruling of this . . . Court. 40aDSIHc
Petitioners' hypothetical illustration as to how SEC-MC No. 8 "practically encourages

circumvention of the 60-40 ownership rule" is evidently speculative and fraught with conjectures
and assumptions. There is clearly wanting specific facts against which the veracity of the
conclusions purportedly following from the speculations and assumptions can be validated. The lack
of a specific factual milieu from which the petitions originated renders any pronouncement from the
Court as a purely advisory opinion and not a decision binding on identified and definite parties and
on a known set of facts.
Firstly, unlike in Gamboa, the identity of the public utility corporation, the capital of which is
at issue, is unknown. Its outstanding capital stock and the actual composition thereof in terms of
numbers, classes, preferences and features are all theoretical. The description "preferred shares with
rights to elect directors but with much lesser entitlement to dividends, and still another class of
preferred shares with no rights to elect the directors and even less dividends" is ambiguous. What
are the specific dividend policies or entitlements of the purported preferred shares? How are the
preferred shares' dividend policies different from those of the common shares? Why and how did the
fictional public utility corporation issue those preferred shares intended to be owned by Filipinos?
What are the actual features of the foreign-owned common shares which make them superior over
those owned by Filipinos? How did it come to be that Filipino holders of preferred shares ended up
with "only a miniscule share in the dividends and profit of the [hypothetical] corporation"? Any
answer to any of these questions will, at best, be contingent, conjectural, indefinite or anticipatory.
Secondly, preferred shares usually have preference over the common shares in the payment of
dividends. If most of the "preferred shares with rights to elect directors but with much lesser
entitlement to dividends" and the other "class of preferred shares with no rights to elect the directors
and even less dividends" are owned by Filipinos, they stand to receive their dividend entitlement
ahead of the foreigners, who are common shareholders. For the common shareholders to have
"bigger dividends" as compared to the dividends paid to the preferred shareholders, which are
supposedly predominantly owned by Filipinos, there must still be unrestricted retained earnings of
the fictional corporation left after payment of the dividends declared in favor of the preferred
shareholders. The fictional illustration does not even intimate how this situation can be possible. No
permutation of unrestricted retained earnings of the hypothetical corporation is shown that makes
the present conclusion of the petitioners achievable. Also, no concrete meaning to the petitioners'
claim of the Filipinos' "miniscule share in the dividends and profit of the [fictional] corporation" is
demonstrated.
Thirdly, petitioners fail to allege or show how their hypothetical illustration will directly and
adversely affect them. That is impossible since their relationship to the fictional corporation is a
matter of guesswork.
From the foregoing, it is evident that the Court can only surmise or speculate on the situation
or controversy that the petitioners contemplate to present for judicial determination. Petitioners are
likewise conspicuously silent on the direct adverse impact to them of the implementation of SEC-
MC No. 8. Thus, the petitions must fail because the Court is barred from rendering a decision based
on assumptions, speculations, conjectures and hypothetical or fictional illustrations, more so in the
present case which is not even ripe for decision.
b. No locus standi.
The personal and substantial interest that enables a party to have legal standing is one that is
both material, an interest in issue and to be affected by the government action, as distinguished
from mere interest in the issue involved, or a mere incidental interest, and real, which means a
present substantial interest, as distinguished from a mere expectancy or a future, contingent,
subordinate, or consequential interest. 41
As to injury, the party must show that (1) he will personally suffer some actual or threatened
injury because of the allegedly illegal conduct of the government; (2) the injury is fairly traceable to
the challenged action; and (3) the injury is likely to be redressed by a favorable action. 42 If the
asserted injury is more imagined than real, or is merely superficial and insubstantial, an excursion
into constitutional adjudication by the courts is not warranted. 43
Petitioners have no legal standing to question the constitutionality of SEC-MC No. 8.
To establish his standing, petitioner Roy merely claimed that he has standing to question
SEC-MC No. 8 "as a concerned citizen, an officer of the Court and as a taxpayer" as well as "the
senior law partner of his own law firm[, which] . . . is a subscriber of PLDT." 44 On the other hand,
intervenors Gamboa, et al. allege, as basis of their locus standi, their "[b]eing lawyers and officers of
the Court" and "citizens . . . and taxpayers." 45
The Court has previously emphasized that the locus standi requisite is not met by the
expedient invocation of one's citizenship or membership in the bar who has an interest in ensuring
that laws and orders of the Philippine government are legally and validly issued as these supposed
interests are too general, which are shared by other groups and by the whole citizenry. 46 Per their
allegations, the personal interest invoked by petitioners as citizens and members of the bar in the
validity or invalidity of SEC-MC No. 8 is at best equivocal, and totally insufficient.
Petitioners' status as taxpayers is also of no moment. As often reiterated by the Court, a
taxpayer's suit is allowed only when the petitioner has demonstrated the direct correlation of the act
complained of and the disbursement of public funds in contravention of law or the Constitution, or
has shown that the case involves the exercise of the spending or taxing power of Congress. 47 SEC-
MC No. 8 does not involve an additional expenditure of public funds and the taxing or spending
power of Congress. ETHIDa
The allegation that petitioner Roy's law firm is a "subscriber of PLDT" is ambiguous. It is
unclear whether his law firm is a "subscriber" of PLDT's shares of stock or of its various
telecommunication services. Petitioner Roy has not identified the specific direct and substantial
injury he or his law firm stands to suffer as "subscriber of PLDT" as a result of the issuance of SEC-
MC No. 8 and its enforcement.
As correctly observed by respondent PLDT, "[w]hether or not the constitutionality of SEC
MC No. 8 is upheld, the rights and privileges of all PLDT subscribers, as with all the rest of
subscribers of other corporations, are necessarily and equally preserved and protected. Nothing is
added [to] or removed from a PLDT subscriber in terms of the extent of his or her participation,
relative to what he or she had originally enjoyed from the beginning. In the most practical sense, a
PLDT subscriber loses or gains nothing in the event that SEC MC No. 8 is either sustained or struck
down by [the Court]." 48
More importantly, the issue regarding PLDT's compliance with Section 11, Article XII of the
Constitution has been earlier ruled as premature and beyond the Court's jurisdiction. Thus, petitioner
Roy's allegation that his law firm is a "subscriber of PLDT" is insufficient to clothe him with locus
standi.
Petitioners' cursory incantation of "transcendental importance . . . of the rules on foreign
ownership of corporations or entities vested with public interest" 49 does not automatically justify
the brushing aside of the strict observance of the requisites for the Court's exercise of judicial
review. An indiscriminate disregard of the requisites every time "transcendental or paramount
importance or significance" is invoked would result in an unacceptable corruption of the settled
doctrine of locus standi, as every worthy cause is an interest shared by the general public. 50
In the present case, the general and equivocal allegations of petitioners on their legal standing
do not justify the relaxation of the locus standi rule. While the Court has taken an increasingly
liberal approach to the rule of locus standi, evolving from the stringent requirements of personal
injury to the broader transcendental importance doctrine, such liberality is not to be abused. 51
The Rule on the Hierarchy of Courts
has been violated.
The Court in Bañez, Jr. v. Concepcion 52 stressed that:
The Court must enjoin the observance of the policy on the hierarchy of courts, and
now affirms that the policy is not to be ignored without serious consequences. The strictness
of the policy is designed to shield the Court from having to deal with causes that are also well
within the competence of the lower courts, and thus leave time to the Court to deal with the
more fundamental and more essential tasks that the Constitution has assigned to it. The Court
may act on petitions for the extraordinary writs of certiorari, prohibition and mandamus only
when absolutely necessary or when serious and important reasons exist to justify an exception
to the policy. . . .
. . . Where the issuance of an extraordinary writ is also within the competence
of the Court of Appeals or a Regional Trial Court, it is in either of these courts
that the specific action for the writ's procurement must be presented. This is
and should continue to be the policy in this regard, a policy that courts and
lawyers must strictly observe. . . . 53
Petitioners' invocation of "transcendental importance" is hollow and does not merit the
relaxation of the rule on hierarchy of courts. There being no special, important or compelling reason
that justified the direct filing of the petitions in the Court in violation of the policy on hierarchy of
courts, their outright dismissal on this ground is further warranted. 54
The petitioners failed to implead
indispensable parties.
The cogent submissions of the PSE in its Comment-in-Intervention dated June 16, 2014 55
and SHAREPHIL in its Omnibus Motion [1] For Leave to Intervene; and [2] To Admit Attached
Comment-in-Intervention dated May 30, 2016 56 demonstrate how petitioners should have
impleaded not only PLDT but all other corporations in nationalized and partly-nationalized
industries — because the propriety of the SEC's enforcement of the Court's interpretation of
"capital" through SEC-MC No. 8 affects them as well.
Under Section 3, Rule 7 of the Rules of Court, an indispensable party is a party-in-interest
without whom there can be no final determination of an action. Indispensable parties are those with
such a material and direct interest in the controversy that a final decree would necessarily affect their
rights, so that the court cannot proceed without their presence. 57 The interests of such indispensable
parties in the subject matter of the suit and the relief are so bound with those of the other parties that
their legal presence as parties to the proceeding is an absolute necessity and a complete and efficient
determination of the equities and rights of the parties is not possible if they are not joined. 58
Other than PLDT, the petitions failed to join or implead other public utility corporations
subject to the same restriction imposed by Section 11, Article XII of the Constitution. These
corporations are in danger of losing their franchise and property if they are found not compliant with
the restrictive interpretation of the constitutional provision under review which is being espoused by
petitioners. They should be afforded due notice and opportunity to be heard, lest they be deprived of
their property without due process.
Not only are public utility corporations other than PLDT directly and materially affected by
the outcome of the petitions, their shareholders also stand to suffer in case they will be forced to
divest their shareholdings to ensure compliance with the said restrictive interpretation of the term
"capital." As explained by SHAREPHIL, in five corporations alone, more than Php158 Billion
worth of shares must be divested by foreign shareholders and absorbed by Filipino investors if
petitioners' position is upheld. 59
Petitioners' disregard of the rights of these other corporations and numerous shareholders
constitutes another fatal procedural flaw, justifying the dismissal of their petitions. Without giving
all of them their day in court, they will definitely be deprived of their property without due
process of law.
During the deliberations, Justice Velasco stressed on the foregoing procedural objections to
the granting of the petitions; and Justice Bersamin added that the special civil action for certiorari
and prohibition is not the proper remedy to assail SEC-MC No. 8 because it was not issued under
the adjudicatory or quasi-judicial functions of the SEC.
The Substantive Issue
The only substantive issue that the petitions assert is whether the SEC's issuance of SEC-MC
No. 8 is tainted with grave abuse of discretion.
The Court holds that, even if the resolution of the procedural issues were conceded in favor
of petitioners, the petitions, being anchored on Rule 65, must nonetheless fail because the SEC did
not commit grave abuse of discretion amounting to lack or excess of jurisdiction when it issued
SEC-MC No. 8. To the contrary, the Court finds SEC-MC No. 8 to have been issued in fealty to the
The ratio in the Gamboa Decision
and Gamboa Resolution.
To determine what the Court directed the SEC to do — and therefore resolve whether what
the SEC did amounted to grave abuse of discretion — the Court resorts to the decretal portion of the
Gamboa Decision, as this is the portion of the decision that a party relies upon to determine his or
her rights and duties, 60 viz.:
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in
61
In turn, the Gamboa Resolution stated:

In any event, the SEC has expressly manifested 62 that it will abide by the Court's
decision and defer to the Court's definition of the term "capital" in Section 11, Article XII of
the Constitution. Further, the SEC entered its special appearance in this case and argued
during the Oral Arguments, indicating its submission to the Court's jurisdiction. It is clear,
therefore, that there exists no legal impediment against the proper and immediate
implementation of the Court's directive to the SEC.
xxx xxx xxx
. . . The dispositive portion of the Court's ruling is addressed not to PLDT but
solely to the SEC, which is the administrative agency tasked to enforce the 60-40
ownership requirement in favor of Filipino citizens in Section 11, Article XII of the
Constitution. 63
To recall, the sole issue in the Gamboa case was: "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 (combined total of common and non-voting preferred shares) of PLDT, a public
utility." 64 AIDSTE
The Court directly answered the issue and consistently defined the term "capital" as follows:
. . . 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.
xxx xxx xxx
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. 65
The decretal portion of the Gamboa Decision follows the definition of the term "capital" in the body
of the decision, to wit: ". . . we . . . rule that the term 'capital' in Section 11, Article XII of the 1987
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 (common and
non-voting preferred shares)." 66
The Court adopted the foregoing definition of the term "capital" in Section 11, Article XII of
the 1987 Constitution in furtherance of "the intent and letter of the Constitution that the 'State shall
develop a self-reliant and independent national economy effectively controlled by Filipinos'
[because a] broad definition unjustifiably disregards who owns the all-important voting stock, which
necessarily equates to control of the public utility." 67 The Court, recognizing that the provision is an
express recognition of the sensitive and vital position of public utilities both in the national economy
and for national security, also pronounced that the evident purpose of the citizenship requirement is
to prevent aliens from assuming control of public utilities, which may be inimical to the national
interest. 68 Further, the Court noted that the foregoing 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; and, as revealed in the deliberations of the Constitutional Commission, "capital"
refers to the voting stock or controlling interest of a corporation. 69
In this regard, it would be apropos to state that since Filipinos own at least 60% of the
outstanding shares of stock entitled to vote directors, which is what the Constitution precisely
requires, then the Filipino stockholders control the corporation, i.e., they dictate corporate actions
and decisions, and they have all the rights of ownership including, but not limited to, offering certain
preferred shares that may have greater economic interest to foreign investors — as the need for
capital for corporate pursuits (such as expansion), may be good for the corporation that they own.
Surely, these "true owners" will not allow any dilution of their ownership and control if such move
will not be beneficial to them.
As owners of the corporation, the economic benefits will necessarily accrue to them. There is
thus no logical reason why Filipino shareholders will allow foreigners to have greater economic
benefits than them. It is illogical to speculate that they will create shares which have features that
will give greater economic interests or benefits than they are holding and not benefit from such
offering, or that they will allow foreigners to profit more than them from their own corporation —
unless they are dummies. But, Commonwealth Act No. 108, the Anti-Dummy Law, is NOT in issue
in these petitions. Notably, even if the shares of a particular public utility were owned 100%
Filipino, that does not discount the possibility of a dummy situation from arising. Hence, even if the
60-40 ownership in favor of Filipinos rule is applied separately to each class of shares of a public
utility corporation, as the petitioners insist, the rule can easily be side-stepped by a dummy
relationship. In other words, even applying the 60-40 Filipino-foreign ownership rule to each class
of shares will not assure the lofty purpose enunciated by petitioners.
The Court observed further in the Gamboa Decision that reinforcing this interpretation of the
term "capital," as referring to interests or shares entitled to vote, is the definition of a Philippine
national in the Foreign Investments Act of 1991 ("FIA"), which is explained in the Implementing
Rules and Regulations of the FIA ("FIA-IRR"). The FIA-IRR provides:
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. 70
Echoing the FIA-IRR, the Court stated in the Gamboa Decision that:
Mere legal title is insufficient to meet the 60 percent Filipino-owned "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]." AaCTcI
xxx xxx xxx

The legal and beneficial ownership of 60 percent of the outstanding capital stock must
rest in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the
voting rights, is constitutionally required for the State's grant of authority to operate a public
utility. . . . 71
Was the definition of the term "capital" in Section 11, Article XII of the 1987 Constitution
declared for the first time by the Court in the Gamboa Decision modified in the Gamboa
Resolution?
The Court is convinced that it was not. The Gamboa Resolution consists of 51 pages
(excluding the dissenting opinions of Associate Justices Velasco and Abad). For the most part of the
Gamboa Resolution, the Court, after reviewing SEC and DOJ 72 Opinions as well as the provisions
of the FIA and its predecessor statutes, 73 reiterated that both the Voting Control Test and the
Beneficial Ownership Test must be applied to determine whether a corporation is a "Philippine
national" 74 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." 75 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, 76 and the framers of the
Constitution intended public utilities to be majority Filipino-owned and controlled.
The "Final Word" of the Gamboa Resolution put to rest the Court's interpretation of the term
"capital," and this is quoted verbatim, to wit:
XII.
Final Word
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
FIA's 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 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. 77
Everything told, the Court, in both the Gamboa Decision and Gamboa Resolution, finally
settled with the FIA's definition of "Philippine national" as expounded in the FIA-IRR in construing
the term "capital" in Section 11, Article XII of the 1987 Constitution.
The assailed SEC-MC No. 8.
The relevant provision in the assailed SEC-MC No. 8 is Section 2, which provides:
Section 2. All covered corporations shall, at all times, observe the constitutional
or statutory ownership requirement. For purposes of determining compliance therewith, the
directors. 78 EcTCAD
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." 79
Clearly, SEC-MC No. 8 cannot be said to have been issued with grave abuse of discretion.
A simple illustration involving Company X with three kinds of shares of stock, easily shows
how compliance with the requirements of SEC-MC No. 8 will necessarily result to full and faithful
compliance with the Gamboa Decision as well as the Gamboa Resolution.
The following is the composition of the outstanding capital stock of Company X:
100 common shares
100 Class A preferred shares (with right to elect directors)
100 Class B preferred shares (without right to elect directors)
SEC-MC No. 8 GAMBOA DECISION
(1) 60% (required percentage of shares of stock entitled to vote

Filipino) applied to the total in the election of directors 80
number of outstanding (60% of the voting rights)
shares of stock entitled to
vote in the election of
directors
If at least a total of 120 of common shares and Class A preferred shares (in any combination)
are owned and controlled by Filipinos, Company X is compliant with the 60% of the voting rights in
favor of Filipinos requirement of both SEC-MC No. 8 and the Gamboa Decision.
SEC-MC No. 8 GAMBOA DECISION/
RESOLUTION
(2) 60% (required percentage of Full beneficial ownership of 60

Filipino) applied to BOTH percent of the outstanding capital
(a) the total number of stock, coupled with 60 percent of
outstanding shares of stock, the voting rights 81 or Full
entitled to vote in the beneficial ownership of the
election of directors; AND stocks, coupled with appropriate
(b) the total number of voting rights . . . shares with
outstanding shares of stock, voting rights, as well as with full
whether or not entitled to beneficial ownership" 82
vote in the election of
directors.
If at least a total of 180 shares of all the outstanding capital stock of Company X are owned
and controlled by Filipinos, provided that among those 180 shares a total of 120 of the common
shares and Class A preferred shares (in any combination) are owned and controlled by Filipinos,
then Company X is compliant with both requirements of voting rights and beneficial ownership
under SEC-MC No. 8 and the Gamboa Decision and Resolution.
From the foregoing illustration, SEC-MC No. 8 simply implemented, and is fully in
accordance with, the Gamboa Decision and Resolution.
While SEC-MC No. 8 does not expressly mention the Beneficial Ownership Test or full
beneficial ownership of stocks requirement in the FIA, this will not, as it does not, render it invalid
— meaning, it does not follow that the SEC will not apply this test in determining whether the
shares claimed to be owned by Philippine nationals are Filipino, i.e., are held by them by mere title
or in full beneficial ownership. To be sure, the SEC takes its guiding lights also from the FIA and its
implementing rules, the Securities Regulation Code (Republic Act No. 8799; "SRC") and its
implementing rules. 83
The full beneficial ownership test.
The minority justifies the application of the 60-40 Filipino-foreign ownership rule separately
to each class of shares of a public utility corporation in this fashion:
. . . The words "own and control," used to qualify the minimum Filipino participation
in Section 11, Article XII of the Constitution, reflects the importance of Filipinos having both
the ability to influence the corporation through voting rights and economic benefits. In other
words, full ownership up to 60% of a public utility encompasses both control and
economic rights, both of which must stay in Filipino hands. Filipinos, who own 60% of the
controlling interest, must also own 60% of the economic interest in a public utility. HSAcaE
. . . In mixed class or dual structured corporations, however, there is variance in the

proportion of stockholders' controlling interest vis-à-vis their economic ownership rights.
This resulting variation is recognized by the Implementing Rules and Regulations (IRR) of the
Securities Regulation Code, which defined beneficial ownership as that may exist either
through voting power and/or through investment returns. By using and/or in defining
beneficial ownership, the IRR, in effect, recognizes a possible situation where voting power
is not commensurate to investment power.
The definition of "beneficial owner" or "beneficial ownership" in the Implementing Rules and
Regulations of the Securities Regulation Code ("SRC-IRR") is consistent with the concept of "full
beneficial ownership" in the FIA-IRR.
As defined in the SRC-IRR, "[b]eneficial owner or beneficial ownership means any person
who, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (which includes the power to vote or direct the voting of such
security) and/or investment returns or power (which includes the power to dispose of, or direct the
disposition of such security) . . . ." 84
While it is correct to state that beneficial ownership is that which may exist either through
voting power and/or investment returns, it does not follow, as espoused by the minority opinion, that
the SRC-IRR, in effect, recognizes a possible situation where voting power is not commensurate to
investment power. That is a wrong syllogism. The fallacy arises from a misunderstanding on what
the definition is for. The "beneficial ownership" referred to in the definition, while it may ultimately
and indirectly refer to the overall ownership of the corporation, more pertinently refers to the
ownership of the share subject of the question: is it Filipino-owned or not?
As noted earlier, the FIA-IRR states:

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.
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. 85
The emphasized portions in the foregoing provision is the equivalent of the so-called "beneficial
ownership test." That is all.
The term "full beneficial ownership" found in the FIA-IRR is to be understood in the context
of the entire paragraph defining the term "Philippine national." Mere legal title is not enough to meet
the required Filipino equity, which means that it is not sufficient that a share is registered in the
name of a Filipino citizen or national, i.e., he should also have full beneficial ownership of the share.
If the voting right of a share held in the name of a Filipino citizen or national is assigned or
transferred to an alien, that share is not to be counted in the determination of the required Filipino
equity. In the same vein, if the dividends and other fruits and accessions of the share do not accrue to
a Filipino citizen or national, then that share is also to be excluded or not counted.
In this regard, it is worth reiterating the Court's pronouncement in the Gamboa Decision,
which is consistent with the FIA-IRR, viz.:
Mere legal title is insufficient to meet the 60 percent Filipino-owned "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. . . .
xxx xxx xxx
The legal and beneficial ownership of 60 percent of the outstanding capital stock must
rest in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the
voting rights, is constitutionally required for the State's grant of authority to operate a
public utility. . . . . 86 HESIcT
And the "Final Word" of the Gamboa Resolution is in full accord with the foregoing
pronouncement of the Court, to wit:
XII.
Final Word
. . . The FIA's 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." 87
Given that beneficial ownership of the outstanding capital stock of the public utility
corporation has to be determined for purposes of compliance with the 60% Filipino ownership
requirement, the definition in the SRC-IRR can now be applied to resolve only the question of who
is the beneficial owner or who has beneficial ownership of each "specific stock" of the said
corporation. Thus, if a "specific stock" is owned by a Filipino in the books of the corporation, but
the stock's voting power or disposing power belongs to a foreigner, then that "specific stock" will
not be deemed as "beneficially owned" by a Filipino.
Stated inversely, if the Filipino has the "specific stock's" voting power (he can vote the stock
or direct another to vote for him), or the Filipino has the investment power over the "specific stock"
(he can dispose of the stock or direct another to dispose it for him), or he has both (he can vote and
dispose of the "specific stock" or direct another to vote or dispose it for him), then such Filipino is
the "beneficial owner" of that "specific stock" — and that "specific stock" is considered (or counted)
as part of the 60% Filipino ownership of the corporation. In the end, all those "specific stocks" that
are determined to be Filipino (per definition of "beneficial owner" or "beneficial ownership") will be
added together and their sum must be equivalent to at least 60% of the total outstanding shares of
stock entitled to vote in the election of directors and at least 60% of the total number of outstanding
shares of stock, whether or not entitled to vote in the election of directors.
To reiterate, the "beneficial owner or beneficial ownership" definition in the SRC-IRR is
understood only in determining the respective nationalities of the outstanding capital stock of a
public utility corporation in order to determine its compliance with the percentage of Filipino
ownership required by the Constitution.
The restrictive re-interpretation of
"capital" as insisted by the
petitioners is unwarranted.
Petitioners' insistence that the 60% Filipino equity requirement must be applied to each class
of shares is simply beyond the literal text and contemplation of Section 11, Article XII of the 1987
Constitution, viz.:
Sec. 11. No franchise, certificate, or any other foam 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 or 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.
As worded, effective control by Filipino citizens of a public utility is already assured in the
provision. With respect to a stock corporation engaged in the business of a public utility, the
constitutional provision mandates three safeguards: (1) 60% of its capital must be owned by Filipino
citizens; (2) participation of foreign investors in its board of directors is limited to their
proportionate share in its capital; and (3) all its executive and managing officers must be citizens of
the Philippines.
In the exhaustive review made by the Court in the Gamboa Resolution of the deliberations of
the Constitutional Commission, the opinions of the framers of the 1987 Constitution, the opinions of
the SEC and the DOJ as well as the provisions of the FIA, its implementing rules and its predecessor
statutes, the intention to apply the voting control test and the beneficial ownership test was not
mentioned in reference to "each class of shares." Even the Gamboa Decision was silent on this
point. caITAC
To be sure, the application of the 60-40 Filipino-foreign ownership requirement separately to

each class of shares, whether common, preferred non-voting, preferred voting or any other class of
shares fails to understand and appreciate the nature and features of stocks as financial instruments. 88
There are basically only two types of shares or stocks, i.e., common stock and preferred
stock. However, the classes and variety of shares that a corporation may issue are dictated by the
confluence of the corporation's financial position and needs, business opportunities, short-term and
long-term targets, risks involved, to name a few; and they can be classified and re-classified from
time to time. With respect to preferred shares, there are cumulative preferred shares, non-cumulative
preferred shares, convertible preferred shares, participating preferred shares.
Because of the different features of preferred shares, it is required that the presentation and
disclosure of these financial instruments in financial statements should be in accordance with the
substance of the contractual arrangement and the definitions of a financial liability, a financial asset
and an equity instrument. 89
Under IAS 90 32.16, a financial instrument is an equity instrument only if (a) the instrument
includes no contractual obligation to deliver cash or another financial asset to another entity, and (b)
if the instrument will or may be settled in the issuer's own equity instruments, it is either: (i) a non-
derivative that includes no contractual obligation for the issuer to deliver a variable number of its
own equity instruments; or (ii) a derivative that will be settled only by the issuer exchanging a fixed
amount of cash or another financial asset for a fixed number of its own equity instruments. 91
The following are illustrations of how preferred shares should be presented and disclosed:
Illustration — preference shares
If an entity issues preference (preferred) shares that pay a fixed rate of dividend and that have
a mandatory redemption feature at a future date, the substance is that they are a contractual
obligation to deliver cash and, therefore, should be recognized as a liability. [IAS 32.18(a)] In
contrast, preference shares that do not have a fixed maturity, and where the issuer does not
have a contractual obligation to make any payment are equity. In this example even though
both instruments are legally termed preference shares they have different contractual terms
and one is a financial liability while the other is equity.
Illustration — issuance of fixed monetary amount of equity instruments
A contractual right or obligation to receive or deliver a number of its own shares or other
equity instruments that varies so that the fair value of the entity's own equity instruments to be
received or delivered equals the fixed monetary amount of the contractual right or obligation
is a financial liability. [IAS 32.20]
Illustration — one party has a choice over how an instrument is settled
When a derivative financial instrument gives one party a choice over how it is settled (for
instance, the issuer or the holder can choose settlement net in cash or by exchanging shares
for cash), it is a financial asset or a financial liability unless all of the settlement alternatives
would result in it being an equity instrument. [IAS 32.26] 92 ICHDca
The fact that from an accounting standpoint, the substance or essence of the financial
instrument is the key determinant whether it should be categorized as a financial liability or an
equity instrument, there is no compelling reason why the same treatment may not be recognized
from a legal perspective. Thus, to require Filipino shareholders to acquire preferred shares that are
substantially debts, in order to meet the "restrictive" Filipino ownership requirement that petitioners
espouse, may not bode well for the Philippine corporation and its Filipino shareholders.
Parenthetically, given the innumerable permutations that the types and classes of stocks may
take, requiring the SEC and other government agencies to keep track of the ever-changing capital
classes of corporations will be impracticable, if not downright impossible. And the law does not
require the impossible. (Lex non cogit ad impossibilia.) 93
That stock corporations are allowed to create shares of different classes with varying features
is a flexibility that is granted, among others, for the corporation to attract and generate capital
(funds) from both local and foreign capital markets. This access to capital — which a stock
corporation may need for expansion, debt relief/repayment, working capital requirement and other
corporate pursuits — will be greatly eroded with further unwarranted limitations that are not
articulated in the Constitution. The intricacies and delicate balance between debt instruments
(liabilities) and equity (capital) that stock corporations need to calibrate to fund their business
requirements and achieve their financial targets are better left to the judgment of their boards and
officers, whose bounden duty is to steer their companies to financial stability and profitability and
who are ultimately answerable to their shareholders.
Going back to the illustration above, the restrictive meaning of the term "capital" espoused by
petitioners will definitely be complied with if 60% of each of the three classes of shares of Company
X, consisting of 100 common shares, 100 Class A preferred shares (with right to elect directors) and
100 Class B preferred shares (without right to elect directors), is owned by Filipinos. However,
what if the 60% Filipino ownership in each class of preferred shares, i.e., 60 Class A preferred
shares and 60 Class B preferred shares, is not fully subscribed or achieved because there are not
enough Filipino takers? Company X will be deprived of capital that would otherwise be accessible
to it were it not for this unwarranted "restrictive" meaning of "capital."
The fact that all shares have the right to vote in 8 specific corporate actions as provided in
Section 6 of the Corporation Code does not per se justify the favorable adoption of the restrictive re-
interpretation of "capital" as the petitioners espouse. As observed in the Gamboa Decision, viz.:
The Corporation Code of the Philippines classifies shares as common or preferred,
thus:
Sec. 6. Classification of shares. — The shares of stock of stock
corporations may be divided into classes or series of shares, or both, any of
which classes or series of shares may have such rights, privileges or
restrictions as may be stated in the articles of incorporation: Provided, That no
share may be deprived of voting rights except those classified and issued
as "preferred" or "redeemable" shares, unless otherwise provided in this
Code: Provided, further, That there shall always be a class or series of shares
which have complete voting rights. Any or all of the shares or series of shares
may have a par value or have no par value as may be provided for in the
articles of incorporation: Provided, however, That banks, trust companies,
insurance companies, public utilities, and building and loan associations shall
not be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation may be given
preference in the distribution of the assets of the corporation in case of
liquidation and in the distribution of dividends, or such other preferences as
may be stated in the articles of incorporation which are not violative of the
provisions of this Code: Provided, That preferred shares of stock may be
issued only with a stated par value. The Board of Directors, where authorized
in the articles of incorporation, may fix the terms and conditions of preferred
shares of stock or any series thereof: Provided, That such terms and conditions
shall be effective upon the filing of a certificate thereof with the Securities and
Exchange Commission. TCAScE
xxx xxx xxx

A corporation may, furthermore, classify its shares for the purpose of
insuring compliance with constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and stated

in the certificate of stock, each share shall be equal in all respects to every
other share.
Where the articles of incorporation provide for non-voting shares in the
cases allowed by this Code, the holders of such shares shall nevertheless be
entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of
all or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another
corporation or other corporations;
7. Investment of corporate funds in another corporation or
business in accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote
necessary to approve a particular corporate act as provided in this Code shall
be deemed to refer only to stocks with voting rights.
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 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.
shares also have the right to vote in the election of directors, then the term "capital" shall
term "capital" in Section 11, Article XII of the Constitution refers only to shares of
stock that can vote in the election of directors.
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 . . . . 94 cTDaEH
The Gamboa Decision held that preferred shares are to be factored in only if they are entitled
to vote in the election of directors. If preferred shares have no voting rights, then they cannot elect
members of the board of directors, which wields control of the corporation. As to the right of non-
voting preferred shares to vote in the 8 instances enumerated in Section 6 of the Corporation Code,
the Gamboa Decision considered them but, in the end, did not find them significant in resolving the
issue of the proper interpretation of the word "capital" in Section 11, Article XII of the Constitution.
Therefore, to now insist in the present case that preferred shares be regarded differently from
their unambiguous treatment in the Gamboa Decision is enough proof that the Gamboa Decision,
which had attained finality more than 4 years ago, is being drastically changed or expanded.
In this regard, it should be noted that the 8 corporate matters enumerated in Section 6 of the
Corporation Code require, at the outset, a favorable recommendation by the management to the
board. As mandated by Section 11, Article XII of the Constitution, all the executive and managing
officers of a public utility company must be Filipinos. Thus, the all-Filipino management team must
first be convinced that any of the 8 corporate actions in Section 6 will be to the best interest of the
company. Then, when the all-Filipino management team recommends this to the board, a majority of
the board has to approve the recommendation — and, as required by the Constitution, foreign
participation in the board cannot exceed 40% of the total number of board seats. Since the Filipino
directors comprise the majority, they, if united, do not even need the vote of the foreign directors to
approve the intended corporate act. After approval by the board, all the shareholders (with and
without voting rights) will vote on the corporate action. The required vote in the shareholders'
meeting is 2/3 of the outstanding capital stock. 95 Given the super majority vote requirement, foreign
shareholders cannot dictate upon their Filipino counterpart. However, foreigners (if owning at least a
third of the outstanding capital stock) must agree with Filipino shareholders for the corporate action
to be approved. The 2/3 voting requirement applies to all corporations, given the significance of the
8 corporate actions contemplated in Section 6 of the Corporation Code.
In short, if the Filipino officers, directors and shareholders will not approve of the corporate
act, the foreigners are helpless.
Allowing stockholders holding preferred shares without voting rights to vote in the 8
corporate matters enumerated in Section 6 is an acknowledgment of their right of ownership. If the
owners of preferred shares without right to vote/elect directors are not allowed to vote in any of
those 8 corporate actions, then they will not be entitled to the appraisal right provided under Section
81 96 of the Corporation Code in the event that they dissent in the corporate act. As required in
Section 82, the appraisal right can only be exercised by any stockholder who voted against the
proposed action. Thus, without recognizing the right of every stockholder to vote in the 8 instances
enumerated in Section 6, the stockholder cannot exercise his appraisal right in case he votes against
the corporate action. In simple terms, the right to vote in the 8 instances enumerated in Section 6 is
more in furtherance of the stockholder's right of ownership rather than as a mode of control.
As to financial interest, giving short-lived preferred or superior terms to certain classes or
series of shares may be a welcome option to expand capital, without the Filipino shareholders
putting up additional substantial capital and/or losing ownership and control of the company. For
shareholders who are not keen on the creation of those shares, they may opt to avail themselves of
their appraisal right. As acknowledged in the Gamboa Decision, preferred shareholders are merely
investors in the company for income in the same manner as bondholders. Without a lucrative
package, including an attractive return of investment, preferred shares will not be subscribed and the
much-needed additional capital will be elusive. A too restrictive definition of "capital," one which
was never contemplated in the Gamboa Decision, will surely have a dampening effect on the
business milieu by eroding the flexibility inherent in the issuance of preferred shares with varying
terms and conditions. Consequently, the rights and prerogatives of the owners of the corporation will
be unwarrantedly stymied. cSaATC
Moreover, the restrictive interpretation of the term "capital" would have a tremendous impact
on the country as a whole — and to all Filipinos.
The PSE's Comment-in-Intervention dated June 16, 2014 97 warns that:
80. [R]edefining "capital" as used in Section 11, Article XII of the 1987
Constitution and adopting the supposed "Effective Control Test" will lead to disastrous
consequences to the Philippine stock market.
81. Current data of the PSE show that, if the "Effective Control Test" were
applied, the total value of shares that would be deemed in excess of the foreign-ownership
limits based on stock prices as of 30 April 2014 is One Hundred Fifty Nine Billion Six
Hundred Thirty Eight Million Eight Hundred Forty Five Thousand Two Hundred Six
Pesos and Eighty Nine Cents (Php159,638,845,206.89).
82. The aforementioned value of investments would have to be discharged by
foreign holders, and consequently must be absorbed by Filipino investors. Needless to state,
the lack of investments may lead to shutdown of the affected enterprises and to immeasurable
consequences to the Philippine economy. 98
In its Omnibus Motion [1] For Leave to Intervene; and [2] To Admit Attached Comment-in-
Intervention dated May 30, 2016, 99 SHAREPHIL further warns that "[t]he restrictive re-
interpretation of the term "capital" will result in massive forced divestment of foreign stockholdings
in Philippine corporations." 100 SHAREPHIL explains:
4.51. On 16 October 2012, Deutsche Bank released a Market Research Study,
which analyzed the implications of the ruling in Gamboa. The Market Research Study stated
that:
"If this thinking is applied and becomes established precedent, it would
significantly expand on the rules for determining nationality in partially
nationalized industries. If that were to happen, not only will PLDT's move to
issue the 150m voting prefs be inadequate to address the issue, a large number
of listed companies with similar capital structures could also be affected."
4.52. In five (5) companies alone, One Hundred Fifty Eight Billion Pesos
(PhP158,000,000,000.00) worth of shares will have to be sold by foreign shareholders in a
forced divestment, if the obiter in Gamboa were to be implemented. Foreign shareholders of
PLDT will have to divest One Hundred Three Billion Eight Hundred Sixty Million Pesos
(PhP103,860,000,000.00) worth of shares.
a. Foreign shareholders of Globe Telecom will have to divest Thirty Eight Billion
Two Hundred Fifty Million Pesos (PhP38,250,000,000.00) worth of shares.
b. Foreign shareholders of Ayala Land will have to divest Seventeen Billion Five
Hundred Fifty Million Pesos (PhP17,550,000,000.00) worth of shares.
c. Foreign shareholders of ICTSI will have to divest Six Billion Four Hundred
Ninety Million Pesos (PhP6,490,000,000.00) worth of shares.
d. Foreign shareholders of MWC will have to divest Seven Billion Seven Hundred
Fourteen Million Pesos (PhP7,714,000,000.00) worth of shares.
4.53. Clearly, the local stock market which has an average value turn-over of
Seven Billion Pesos cannot adequately absorb the influx of shares caused by the forced
divestment. As a result, foreign stockholders will have to sell these shares at bargain prices
just to comply with the Obiter.
4.54. These shares being part of the Philippine index, their forced divestment vis-
à-vis the inability of the local stock market to absorb these shares will necessarily bring
immense downward pressure on the index. A domino-effect implosion of the Philippine stock
market and the Philippine economy, in general is not remote. . . . . 101
Petitioners have failed to counter or refute these submissions of the PSE and SHAREPHIL.
These unrefuted observations indicate to the Court that a restrictive interpretation — or rather, re-
interpretation, of "capital", as already defined with finality in the Gamboa Decision and Resolution
— directly affects the well-being of the country and cannot be labelled as "irrelevant and
impertinent concerns . . . add[ing] burden [to] the Court." 102 These observations by the PSE 103 and
SHAREPHIL, 104 unless refuted, must be considered by the Court to be valid and sound. cHDAIS
The Court in Abacus Securities Corp. v. Ampil 105 observed that: "[s]tock market transactions
affect the general public and the national economy. The rise and fall of stock market indices reflect
to a considerable degree the state of the economy. Trends in stock prices tend to herald changes in
business conditions. Consequently, securities transactions are impressed with public interest . . . ."
106 The importance of the stock market in the economy cannot simply be glossed over.
In view of the foregoing, the pronouncement of the Court in the Gamboa Resolution — the
constitutional requirement to "apply uniformly and across the board to all classes of shares,
regardless of nomenclature and category, comprising the capital of a corporation 107 — is clearly an
obiter dictum that cannot override the Court's unequivocal definition of the term "capital" in both the
Nowhere in the discussion of the definition of the term "capital" in Section 11, Article XII of
the 1987 Constitution in the Gamboa Decision did the Court mention the 60% Filipino equity
requirement to be applied to each class of shares. The definition of "Philippine national" in the FIA
and expounded in its IRR, which the Court adopted in its interpretation of the term "capital," does
not support such application. In fact, even the Final Word of the Gamboa Resolution does not even
intimate or suggest the need for a clarification or re-interpretation.
To revisit or even clarify the unequivocal definition of the term "capital" as referring "only to
shares of stock entitled to vote in the election of directors" and apply the 60% Filipino ownership
requirement to each class of share is effectively and unwarrantedly amending or changing the
Gamboa Decision and Resolution. The Gamboa Decision and Resolution Doctrine did NOT make
any definitive ruling that the 60% Filipino ownership requirement was intended to apply to each
class of share.
In Malayang Manggagawa ng Stayfast Phils., Inc. v. NLRC, 108 the Court stated:
Where a petition for certiorari under Rule 65 of the Rules of Court alleges grave
abuse of discretion, the petitioner should establish that the respondent court or tribunal
acted in a capricious, whimsical, arbitrary or despotic manner in the exercise of its
jurisdiction as to be equivalent to lack of jurisdiction. This is so because "grave abuse of
discretion" is well-defined and not an amorphous concept that may easily be manipulated to
suit one's purpose. In this connection, Yu v. Judge Reyes-Carpio, is instructive:
The term "grave abuse of discretion" has a specific meaning. An act of
a court or tribunal can only be considered as with grave abuse of discretion
when such act is done in a "capricious or whimsical exercise of judgment as is
equivalent to lack of jurisdiction." The abuse of discretion must be so patent
and gross as to amount to an "evasion of a positive duty or to a virtual refusal
to perform a duty enjoined by law, or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner by reason of
passion and hostility." Furthermore, the use of a petition for certiorari is
restricted only to "truly extraordinary cases wherein the act of the lower court
or quasi-judicial body is wholly void." From the foregoing definition, it is clear
that the special civil action of certiorari under Rule 65 can only strike an act
down for having been done with grave abuse of discretion if the petitioner
could manifestly show that such act was patent and gross. . . . .
The onus rests on petitioners to clearly and sufficiently establish that the SEC, in issuing
SEC-MC No. 8, acted in a capricious, whimsical, arbitrary or despotic manner in the exercise of its
jurisdiction as to be equivalent to lack of jurisdiction or that the SEC's abuse of discretion is so
patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law and the Gamboa Decision and
Resolution. Petitioners miserably failed in this respect. ISHCcT
The clear and unequivocal definition

of "capital" in Gamboa has attained
finality.
It is an elementary principle in procedure that the resolution of the court in a given issue as
embodied in the dispositive portion or fallo of a decision controls the settlement of rights of the
parties and the questions, notwithstanding statement in the body of the decision which may be
somewhat confusing, inasmuch as the dispositive part of a final decision is definite, clear and
unequivocal and can be wholly given effect without need of interpretation or construction. 109
As explained above, the fallo or decretal/dispositive portions of both the Gamboa Decision
and Resolution are definite, clear and unequivocal. While there is a passage in the body of the
Gamboa Resolution that might have appeared contrary to the fallo of the Gamboa Decision —
capitalized upon by petitioners to espouse a restrictive re-interpretation of "capital" — the
definiteness and clarity of the fallo of the Gamboa Decision must control over the obiter dictum in
the Gamboa Resolution regarding the application of the 60-40 Filipino-foreign ownership
requirement to "each class of shares, regardless of differences in voting rights, privileges and
restrictions."
The final judgment as rendered is the judgment of the court irrespective of all seemingly
contrary statements in the decision because at the root of the doctrine that the premises must yield to
the conclusion is, side by side with the need of writing finis to litigations, the recognition of the truth
that "the trained intuition of the judge continually leads him to right results for which he is puzzled
to give unimpeachable legal reasons." 110
Petitioners cannot, after Gamboa has attained finality, seek a belated correction or
reconsideration of the Court's unequivocal definition of the term "capital." At the core of the
doctrine of finality of judgments is that public policy and sound practice demand that, at the risk of
occasional errors, judgments of courts should become final at some definite date fixed by law and
the very objects for which courts were instituted was to put an end to controversies. 111 Indeed, the
definition of the term "capital" in the fallo of the Gamboa Decision has acquired finality.
Because the SEC acted pursuant to the Court's pronouncements in both the Gamboa Decision
and Gamboa Resolution, then it could not have gravely abused its discretion. That portion found in
the body of the Gamboa Resolution which the petitioners rely upon is nothing more than an obiter
dictum and the SEC could not be expected to apply it as it was not — is not — a binding
pronouncement of the Court. 112
Furthermore, as opined by Justice Bersamin during the deliberations, the doctrine of
immutability of judgment precludes the Court from re-examining the definition of "capital" under
Section 11, Article XII of the Constitution. Under the doctrine of finality and immutability of
judgment, a decision that has acquired finality becomes immutable and unalterable, and may no
longer be modified in any respect, even if the modification is meant to correct erroneous conclusions
of fact and law, and even if the modification is made by the court that rendered it or by the Highest
Court of the land. Any act that violates the principle must be immediately stricken down. 113 The
petitions have not succeeded in pointing to any exceptions to the doctrine of finality of judgments,
under which the present case falls, to wit: (1) the correction of clerical errors; (2) the so-called nunc
pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) whenever
circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable. 114
With the foregoing disquisition, the Court rules that SEC-MC No. 8 is not contrary to the
Court's definition and interpretation of the term "capital." Accordingly, the petitions must be denied
for failing to show grave abuse of discretion in the issuance of SEC-MC No. 8.
The petitions are second motions for
Reconsideration, which are
proscribed.
As Justice Bersamin further noted during the deliberations, the petitions are in reality second
motions for reconsideration prohibited by the Internal Rules of the Supreme Court. 115 The parties,
particularly intervenors Gamboa, et al., could have filed a motion for clarification in Gamboa in
order to fill in the perceived shortcoming occasioned by the non-inclusion in the dispositive portion
of the Gamboa Resolution of what was discussed in the body. 116 The statement in the fallo of the
Gamboa Resolution to the effect that "[n]o further pleadings shall be entertained" could not be a
hindrance to a motion for clarification that sought an unadulterated inquiry arising upon an
ambiguity in the decision. 117 CAacTH
Closing
Ultimately, the key to nationalism is in the individual. Particularly for a public utility
corporation or association, whether stock or non-stock, it starts with the Filipino shareholder or
member who, together with other Filipino shareholders or members wielding 60% voting power,
elects the Filipino director who, in turn, together with other Filipino directors comprising a majority
of the board of directors or trustees, appoints and employs the all Filipino management team. This is
what is envisioned by the Constitution to assure effective control by Filipinos. If the safeguards,
which are already stringent, fail, i.e., a public utility corporation whose voting stocks are
beneficially owned by Filipinos, the majority of its directors are Filipinos, and all its managing
officers are Filipinos, is pro-alien (or worse, dummies), then that is not the fault or failure of the
Constitution. It is the breakdown of nationalism in each of the Filipino shareholders, Filipino
directors and Filipino officers of that corporation. No Constitution, no decision of the Court, no
legislation, no matter how ultra-nationalistic they are, can guarantee nationalism.
WHEREFORE, premises considered, the Court DENIES the Petition and Petition-in-
Intervention.
SO ORDERED.
Del Castillo, Perez and Reyes, JJ., concur.
Sereno, C.J., see concurring opinion.
Carpio and Mendoza, JJ., see dissenting opinion.
Velasco, Jr., J., please see concurring opinion.
Leonardo-de Castro, J., I join the dissent of Justice Carpio.
Brion, J., I join J. Carpio's dissent.
Peralta, * J., is on leave but left vote.

Bersamin, J., with concurring opinion.
Perlas-Bernabe, ** J., took no part and on official leave.
Leonen, J., I dissent. See separate opinion.
Jardeleza, *** J., took no part.
Separate Opinions
SERENO, C.J., concurring:
The Petition for Certiorari before this Court assails the validity of Memorandum Circular No.
8, Series of 2013, issued by respondent Securities and Exchange Commission (SEC).
The SEC circular provides for the guidelines on compliance with the Filipino-foreign
ownership requirements prescribed in the Constitution and/or existing laws by corporations engaged
in nationalized and partly nationalized activities. The specific provision that operationalizes the
ownership requirements reads:
directors. (Emphasis supplied)
Evidently, the circular limits the application of the ownership requirement only to the number
of stocks in a corporation. It does not take into consideration the par value, which, in turn, affects
the dividends or earnings of the shares.
The par value of shares is not always equal. The par value of common shares may be lower
than that of preferred shares. The latter take any of a variety of forms — they may be cumulative,
noncumulative, participating, nonparticipating, or convertible. Their par values tend to differ
depending on their features and entitlement to dividends.
The number and the par value of the permutation of shares definitely affect the issue of the
stockholding of a corporation. As illustrated by Justice Antonio T. Carpio, preferred shares having
higher par values and higher dividend declarations result in higher earnings than those of common
shares. In his example, even if Filipinos own 120 shares (100 common, 20 preferred), which
outnumber the 80 preferred shares of foreigners, it is possible that the latter would have higher
earnings. This possibility would arise if preferred shares — although less in number — have greater
par values and dividend earnings.
Thus, compliance on the basis of the number of shares alone, does not necessarily result in
keeping the required degree of beneficial ownership in favor of Filipinos. The different
combinations of shares with respect to the number, par value, and dividend earnings must also be
taken into account.
For this reason, I reiterate our directive in Gamboa for the SEC to comply with its duty to
ascertain the factual issues surrounding the ownership of the PLDT shares. The dispositive portion
of our ruling in that case reads: IAETDc
Respondent Chairperson of the Securities and Exchange Commission is DIRECTED

to apply this 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. (Emphasis in the original)
From that determination, the SEC may be able to gather the necessary information to
correctly classify various kinds of shares in different combinations of numbers, par values, and
dividends. However, with the SEC considering only the matter of the number of shares under the
assailed circular, and absent any deeper analysis of PLDT equity structure, any disposition in this
case would be premature.
I would even venture that in the case of a company where 60% of stocks are voting and 40%
are preferred, with each stock having the same par value, and which complies with the 60% Filipino
voting share rule by requiring that all voting stocks be purely in the hands of Filipinos, the minority
formula that would impose upon such companies another layer of nationality requirement by
demanding that at least 60% of each category of shares be in Filipino hands would effectively drive
up the nationality requirement to at least 84%. That this was not the intention of the Constitution is
quite obvious.
The parties have pleaded with this Court to settle what is or is not doctrine in Gamboa v.
Teves. The discussion on the various permutations possible not only in this case but in many other
1
cases drives home my point that the present case as pleaded by petitioners has prematurely
attempted to make out a case of grave abuse of discretion by the SEC. Moreover, should we decide
to grant a petition that could have such far-reaching consequences as this case appears to have, it is a
threshold requirement that the shareholders be allowed to plead their cause.
WHEREFORE, I vote to DENY the petition.
VELASCO, JR., J., concurring:
Nature of the Case
Before the Court is a petition for Certiorari under Rule 65 of the Rules of Court assailing the
constitutionality and validity of Memorandum Circular (MC) No. 8, entitled "Guidelines on
Compliance with the Filipino-Foreign Ownership Requirements prescribed by the Constitution
and/or Existing Laws by Corporations Engaged in Nationalized Activities," issued by the Securities
and Exchange Commission (SEC). CTIEac
Factual Antecedents
On June 28, 2011, the Court issued a Decision in Gamboa v. Teves 1 on the matter of
"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 (combined total of voting and non-voting shares)
of PLDT, a public utility."
Resolving the issue, the majority of the Court 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, 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." 2 The Court then directed
the SEC to apply this definition of the term "capital" in determining the extent of allowable foreign
ownership in PLDT.
Several motions for reconsideration assailing the Decision in Gamboa were filed but,
eventually, denied by the Court in its October 9, 2012 Resolution.
Pursuant to the Court's directive in Gamboa, the SEC prepared a draft memorandum circular
on the guidelines to be followed in determining compliance with the constitutional and statutory
limitations on foreign ownership in nationalized and partly nationalized industries. The SEC then
invited the public to a dialogue and submit comments on the draft of the memorandum circular. 3
Representatives from various organizations, government agencies, the academe and the
private sector attended the public dialogue and submitted position papers and written comments on
the draft to the SEC.
On May 20, 2013, the SEC issued MC No. 8. Section 2 of the circular provides:
directors.
Corporations covered by special laws which provide specific citizenship requirements shall
comply with the provisions of said law.
Petitioner Jose Roy III takes exception to the foregoing provision alleging that it is not in
accord with the ruling of the Court in Gamboa. He contends that the SEC committed grave abuse of
discretion since Section 2 of MC No. 8 "fails to differentiate the varying classes of shares and does
not require the application of the foreign equity limits to each class of shares issued by a
corporation." Petitioner relies on a portion of the October 9, 2012 Resolution in Gamboa providing
that "the 60-40 ownership requirement must apply to each class of shares, whether common,
preferred non-voting, preferred voting or any other class of shares." He, thus, prays for this Court to
declare MC No. 8 unconstitutional and to direct the SEC to issue new guidelines regarding the
determination of compliance with Section 11, Article XII of the Constitution in accordance with
Gamboa.
Petitioner further maintains that the SEC gravely abused its discretion in ruling that PLDT is
compliant with the Constitutional rule on Foreign Ownership.
William Gamboa, Jr., Daniel Cartagena, John Wilson Gabinete, Antonio V. Pesina, Jr.,
Modesto Martin Y. Mamon III, Gerardo C. Erebaren and the Philippine Stock Exchange (PSE)
sought, and were granted, intervention.
Issue
Considering that the Court is not a trier of facts and is not in a position to make a factual
determination of PLDT's compliance with Section 11, Article XII of the Constitution, the Court can
only address the pure question of law presented by the petitioner and petitioners-in-intervention:
whether or not the SEC gravely abused its discretion in issuing MC No. 8.
I concur with the ruling in the ponencia.
The petition has not met the requisites
for the exercise of judicial review
It is elementary that the power of judicial review is subject to certain limitations, which must
be complied with by the petitioner before this Court may take cognizance of the case. 4 The Court
held, thus:
When questions of constitutional significance are raised, the Court can exercise its
power of judicial review only if the following requisites are present: (1) the existence of an
actual and appropriate case; (2) the existence of personal and substantial interest on the part of
the party raising the constitutional question; (3) recourse to judicial review is made at the
earliest opportunity; and (4) the constitutional question is the lis mota of the case. 5
The petitioner's failure to sufficiently allege, much less prove the existence of the first two
requisites, warrants the outright dismissal of the petition.
To satisfy legal standing in assailing the constitutionality of a governmental act, the petitioner
must prove the direct and personal injury that he might suffer if the act is permitted to stand.
Petitioner Roy, however, merely glossed over this requisite, simply claiming that the law firm he
represents is "a subscriber of PLDT." It is not even clear whether the law firm is a "subscriber" of
PLDT's shares or purely of its various communication services.
Clearly, the very limited information provided by the petitioner does not sufficiently
demonstrate how he is left to sustain or is in immediate danger of sustaining some direct injury as a
result of the SEC's issuance of MC No. 8. As correctly argued by the respondents, assuming that his
law firm is indeed a subscriber of PLDT shares of stocks, whether or not the constitutionality of MC
No. 8 is upheld, his law firm's rights as a shareholder in PLDT will not be affected or altered. There
is simply no rational connection between his law firm's rights as an alleged shareholder with the
legality of MC No. 8. SaCIDT
The locus standi requisite is likewise not satisfied by the mere fact that petitioner Roy is a
"concerned citizen, an officer of this Court and. . . a taxpayer." We have previously emphasized that
the locus standi requisite is not overcome by one's citizenship or membership in the bar. These
supposed interests are too general, shared as they are by other groups and by the whole citizenry. 6
The only "injury" attributable to petitioner Roy is that the position paper he submitted to the
SEC was not adopted by the Commission in issuing MC No. 8. This injury, however, is not
sufficient to clothe him with the requisite standing to invoke the Court's exercise of judicial power to
review and declare unconstitutional the issuance of a governmental body.
Neither can petitioner Roy take refuge in his status as a taxpayer. Lest it is forgotten, a
taxpayer's suit is proper only when the petitioner has established that the act complained of directly
involves the illegal disbursement of public funds derived from taxation. 7 MC No. 8 does not
involve an expenditure of public funds. It does not even concern the taxing and spending power of
the Congress. Hence, justifying the recourse as a taxpayer's suit is far-fetched and implausible, with
petitioner ignoring the basic requirements of the concept.
In like manner, the petitioners-intervenors suffer the same infirmity as petitioner Roy. None
of them alleged, let alone proved, even a remote link to the implementation of MC No. 8. Certainly,
there is nothing by which this Court can ascertain their personality to challenge the validity of the
SEC issuance.
The casual invocation of the supposed "transcendental importance" of the questions posed by
the petitioner and petitioners-in-intervention does not automatically justify the disregard of the
stringent requirements for this Court's exercise of judicial power. Otherwise, the Court would be
allowing the dilution of the settled doctrine of locus standi as every worthy cause is an interest
shared by the general public. 8
Indeed, while this Court has previously allowed the expansion of the boundaries of the rule
on legal standing in matters of far-reaching implications, the Court cannot condone the trivial
treatment of the element of locus standi as a mere technical requirement. The requirement of legal
standing goes into the very essence of jurisdiction and the competence of this Court to intrude into
matters falling within the executive realm. In Galicto v. Aquino III, 9 the Court explained the
importance of the rule, viz.:
. . . The rationale for this constitutional requirement of locus standi is by no means trifle.
Not only does it assure the vigorous adversary presentation of the case; more importantly, it
must suffice to warrant the Judiciary's overruling the determination of a coordinate,
democratically elected organ of government, such as the President, and the clear approval by
Congress, in this case. Indeed, the rationale goes to the very essence of representative
democracies. 10 (emphasis supplied)
The liberality of the Court in bypassing the locus standi rule cannot, therefore, be abused. If
the Court is to maintain the respect demanded by the concept of separation of governmental powers,
it must subject applications for exemptions from the requirements of judicial review to the highest
possible judicial inquiry. In the present case, the anemic allegations of the petitioner and petitioners-
in-intervention do not warrant the application of the exceptions rather than the rule on locus standi.
The Rule on the Hierarchy of Courts
has been violated
In like manner, a hollow invocation of "transcendental importance" does not warrant the
immediate relaxation of the rule on hierarchy of courts. That hierarchy is determinative of the venue
of appeals, and also serves as a general determinant of the appropriate forum for petitions for the
extraordinary writs. 11 Indeed, "the Supreme Court is a court of last resort and must so remain if it is
to satisfactorily perform the functions assigned to it by the fundamental charter and immemorial
tradition." 12 This Court has explained that the rationale for this strict policy is to prevent the
following: (1) inordinate demands upon its time and attention, which is better devoted to those
matters within its exclusive jurisdiction; and (2) further overcrowding of the Court's docket. 13
While direct recourse to the court has previously been allowed on exceptional grounds, the
circumstances set forth in the petition and petition-in-intervention do not justify the disregard of the
established policy. Worse, petitioner's allegation that there is little value in presenting the petition to
another court is demeaning and less than fair to the lower courts. There is no reason to doubt our
trial court's ability and competence to determine the existence of grave abuse of discretion.
Section 4, Rule 65 of the Rules of Court itself provides that the RTC and the CA have
concurrent jurisdiction to issue the writ of certiorari. For certainly, the issue of abuse of discretion is
not so complex as to disqualify every court, except this Court, from deciding it. Thus, due deference
to the competence of these courts and a becoming regard of the time-honored principle of the
hierarchy of courts bars the present direct recourse to this Court.
Indispensable Parties are Being
Denied their Rights to Due Process
Even assuming that the issue involved in the present recourse is of vital importance, it is
dismissible for its failure to implead the indispensable parties.
Under Rule 3, Section 7 of the Rules of Court, an indispensable party is a party-in-interest,
without whom there can be no final determination of an action. The interests of such indispensable
party in the subject matter of the suit and the relief are so bound with those of the other parties that
his legal presence as a party to the proceeding is an absolute necessity. 14 As a rule, an indispensable
party's interest in the subject matter is such that a complete and efficient determination of the
equities and rights of the parties is not possible if he is not joined. 15 cHECAS
In the case at bar, it is alleged that the propriety of the SEC's enforcement of this Court's
interpretation of "capital" is important as it affects corporations in nationalized and partly-
nationalized industries. And yet, besides respondent PLDT, no other corporation subject to the same
restriction imposed by Section 11, Article XII of the Constitution has been joined or impleaded by
the present recourse. These corporations are in danger of losing their franchises and property
holdings if they are found not compliant with a revised interpretation of the nationality requirement.
Nonetheless, they have not been afforded due notice, much less the opportunity to be heard, in the
present case.
Worse, petitioner and petitioners-in-intervention failed to acknowledge that their restrictive
interpretation of the Court's ruling in Gamboa affects not only the public utility corporations but,
more so, the shareholders who will likely be divested of their stocks. The sheer number of foreign
shareholders and the affected shareholdings have been illustrated by the Shareholder's Association
of the Philippines, Inc. (SHAREPHIL) when it explained that, in five companies alone, more than
One Hundred Fifty Billion Pesos (P150,000,000,000.00) worth of shares have to be forcibly taken
from foreign shareholders (and absorbed by Filipino investors).
The rights of these other corporations and numerous shareholders cannot simply be ignored
in making a final determination on the constitutionality of MC No. 8. The petitioner's failure to
implead is not just a simple procedural misstep but a patent denial of due process rights. 16
The Constitution is clear as it is categorical. The State cannot proceed with depriving persons
their property without first ensuring that compliance with due process requirements is duly
observed. 17 This Court cannot, thus, sanction a restrictive interpretation of the nationality
requirement without first affording the other public utility corporations and their shareholders an
opportunity to participate in the present proceedings.
The SEC did not abuse its discretion
in issuing MC No. 8
Even if the Court takes the lenient stance and turns a blind eye on all the numerous
procedural infirmities of the petition, the petition still fails on the merits.
The petition is anchored on the contention that the SEC committed grave abuse of discretion
in issuing MC No. 8. By grave abuse of discretion, the petitioners must prove that the Commission's
act was tainted with the quality of whim and caprice. 18 Abuse of discretion is not enough. It must be
shown that the Commission exercised its power in an arbitrary or despotic manner because of
passion or personal hostility that is so patent and gross as to amount to an evasion of positive duty or
to a virtual refusal to perform a duty enjoined or to act at all in contemplation of law. 19
With this standard in mind, the petitioner and petitioners-in-intervention failed to demonstrate
that the SEC's issuance of MC No. 8 was attended with grave abuse of discretion. On the contrary,
the assailed circular sufficiently applied the Court's definitive ruling in Gamboa.
To recall, Gamboa construed the word "capital" and the nationality requirement in Section 11,
Article XII of the Constitution, which states:
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)
The Court explained in the June 28, 2011 Decision in Gamboa that the term "capital" in
Section 11, Article XII refers "only to shares of stock entitled to vote in the election of
directors." The rationale provided by the majority was that this interpretation ensures that control
of the Board of Directors stays in the hands of Filipinos, since foreigners can only own a maximum
of 40% of said shares and, accordingly, can only elect the equivalent percentage of directors. As a
necessary corollary, Filipino stockholders can always elect 60% of the Board of Directors which, to
the majority of the Court, translates to control over the corporation. The June 28, 2011 Decision,
thus, reads:
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. AHDacC
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 . . . .
The dispositive portion of the June 28, 2011 Decision in Gamboa clearly spelled out the
doctrinal declaration of the Court on the meaning of "capital" in Section 11, Article XII of the
Constitution, viz.:
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section
11, Article XII of the 1987 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 (common and non-voting preferred shares). Respondent Chairperson
of the Securities and Exchange Commission is DIRECTED to apply this 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. (emphasis
supplied)
The motions for reconsideration of the June 28, 2011 Decision filed by the movants in
Gamboa argued against the application of the term "capital" to the voting shares alone and in favor
of applying the term to the total outstanding capital stock (combined total of voting and non-voting
shares). Notably, none of them contended or moved for the application of the capital or the 60-40
requirement to "each and every class of shares" of a public utility, as it was never an issue in the
case.
In resolving the motions for reconsideration in Gamboa, it is relevant to stress that the
majority did not modify the June 28, 2011 Decision. The fallo of the October 9, 2012 Resolution
simply stated:
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No further
pleadings shall be entertained.
Clearly, the Court had no intention, express or otherwise, to amend the construction of the
term "capital" in the June 28, 2011 Decision in Gamboa, much less in the manner proposed by
petitioner Roy. Hence, no grave abuse of discretion can be attributed to the SEC in applying the term
"capital" to the "voting shares" of a corporation.
The portion quoted by the petitioners is nothing more than an obiter dictum that has never
been discussed as an issue during the deliberations in Gamboa. As such, it is not a binding
pronouncement of the Court 20 that can be used as basis to declare the SEC's circular as
unconstitutional.
This Court explained the concept and effect of an obiter dictum thusly:
An obiter dictum has been defined as an opinion expressed by a court upon some
question of law that is not necessary in the determination of the case before the court. It is a
remark made, or opinion expressed, by a judge, in his decision upon a cause by the way, that
is, incidentally or collaterally, and not directly upon the question before him, or upon a point
not necessarily involved in the determination of the cause, or introduced by way of
illustration, or analogy or argument. It does not embody the resolution or determination of
the court, and is made without argument, or full consideration of the point. It lacks the
force of an adjudication, being a mere expression of an opinion with no binding force for
purposes of res judicata. 21 (emphasis and underscoring supplied)
What is more, requiring the SEC to impose the 60-40 requirement to "each and every class of
shares" in a public utility is not only unsupported by Section 11, Article XXI, it is also
administratively and technically infeasible to implement and enforce given the variety and number
of classes that may be issued by public utility corporations.
Common and preferred are the usual forms of stock. However, it is also possible for
companies to customize and issue different classes of stock in any way they want. Thus, while all
issued common shares may be voting, their dividends may be "deferred" or subject to certain
conditions. Corporations can also issue "cumulative preferred shares" that are issued with the
stipulation that any scheduled dividends that cannot be paid when due are carried forward and must
be paid before the company can pay out ordinary share dividends. A company can likewise issue
"hybrid stocks" or preferred shares that can be converted to a fixed number of common stocks at a
specified time. These stocks may or may not be given voting rights. Further, some stocks may be
embedded with derivative options so that a type of stock may be "called" or redeemed by the
company at a specified time at a fixed price, while some stocks may be "puttable" or offered by the
stockholder at a certain time, at a certain price.
Without a doubt, the classes and variety of shares that may be issued by a corporation are
limited only by the bounds of the corporate directors' imagination. Worse, they can be classified and
re-classified, ad nauseam, from time to time.
Thus, to require the SEC and other government agencies to keep track of the ever-changing
capital classes of corporations would be impractical, if not downright impossible. Perhaps it is best
to be reminded that the law does not require the impossible. (Lex non cogit ad impossibilia.) 22
Neither can the petitioners rely on the concept of "beneficial ownership" to sustain their
position. The phrase, "beneficial ownership," is nowhere found in Section 11, Article XII of the
Constitution. Rather "beneficial ownership" was introduced in the Implementing Rules and
Regulations of the Foreign Investment Act of 1991 (FIA), not even in the law itself. Suggesting that
the phrase can expand, qualify and amend the intent of the Constitution is, bluntly, preposterous.
In defining a "Philippine National," the FIA stated, viz.: IDSEAH
a) 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; 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 (60%) of the fund will
accrue to the benefit of the Philippine nationals: Provided, That where a corporation and its
non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stocks outstanding and entitled
to vote of both corporations must be owned and held by citizens of the Philippines and at least
sixty percent (60%) of the members of the Board of Directors of both corporations must be
citizens of the Philippines, in order that the corporations shall be considered a Philippine
national.
The definition was taken a step further in the Implementing Rules and Regulations of the law
where the phrase "beneficial ownership" was used, as follows:
b. Philippine national shall mean a citizen of the Philippines or a domestic
partnership or association wholly owned by the 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; 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 the Philippine nationals; Provided, that where a corporation its non-Filipino
stockholders own stocks in a Securities and Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of
both corporations must be owned and held by citizens of the Philippines and at least sixty
percent (60%) of the members of the Board of Directors of both corporation must be citizens
of the Philippines, in order that the corporation shall be considered a Philippine national. The
control test shall be applied for this purpose.
The term Philippine national shall not include juridical entities organized and existing
under the laws of any other country even if wholly owned by Philippine citizens.
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.
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.
Individuals or juridical entities not meeting the aforementioned qualifications are
considered as non-Philippine nationals. (emphasis and underscoring supplied)
While the foregoing provisions were cited in Gamboa in identifying the "capital stock
outstanding and entitled to vote" as equivalent to "capital" in Section 11, Article XII of the
Constitution, nothing in either provision requires the application of the 60% threshold to "each and
every class of shares" of public utilities.
At most, as pointed out by the majority, "beneficial ownership" must be understood in the
context in which it is used. Thusly, the phrase simply means that the name and full rights of
ownership over the 60% of the voting shares in public utilities must belong to Filipinos. If either the
voting rights or the right to dividends, among others, of voting shares registered in the name Filipino
citizens or nationals are assigned or transferred to an alien, these shares shall not be included in the
computation of the 60% threshold.
The Commission even went above and beyond the duty levied by the court and imposed the
60-40 requirement not only on the voting shares but also on the totality of the corporation's
shareholding, thus ensuring that the public utilities are, in fact, "effectively controlled" by Filipinos
given the added layers of protection given to ensure that Filipino stockholders have the full
beneficial ownership and control of public utility corporations in accordance with the Constitution,
thus:
1. Forty percent (40%) ceiling on foreign ownership in the capital stock that
ensures sixty percent (60%) Filipino control over the capital stock which covers both voting
and non-voting shares. As a consequence, Filipino control over the stockholders is assured.
Thus, foreigners can own only up to 40% of the capital stock. aCIHcD
2. Forty percent (40%) ceiling on the right of foreigners to own and hold voting
shares and elect board directors that guarantees sixty percent (60%) Filipino control over the
Board of Directors.
3. Reservation to Filipino citizens of the executive and managing officers,
regardless of the level of alien equity ownership to secure total Filipino control over the
management of the public utility enterprise. Thus, all executive and managing officers must
be Filipinos.
In my opinion in Heirs of Gamboa v. Teves, 23 I pointed out the dire consequences of not
imposing the 40% limit on foreign ownership on the totality of the shareholdings, viz.:
[L]et us suppose that the authorized capital stock of a public utility corporation is
divided into 100 common shares and 1,000,000 non-voting preferred shares. Since, according
to the Court's June 28, 2011 Decision, the word "capital" in Sec. 11, Art. XII refers only to the
voting shares, then the 40% cap on foreign ownership applies only to the 100 common shares.
Foreigners can, therefore, own 100% of the 1,000,000 non-voting preferred shares. But then
again, the ponencia continues, at least, the "control" rests with the Filipinos because the 60%
Filipino-owned common shares will necessarily ordain the majority in the governing body of
the public utility corporation, the board of directors/trustees. Hence, Filipinos are assured of
control over the day-to-day activities of the public utility corporation.
Let us, however, take this corporate scenario a little bit farther and consider the
irresistible implications of changes and circumstances that are inevitable and common in the
business world. Consider the simple matter of a possible investment of corporate funds in
another corporation or business, or a merger of the public utility corporation, or a possible
dissolution of the public utility corporation. Who has the "control" over these vital and
important corporate matters? The last paragraph of Sec. 6 of the Corporation Code
provides:
Where the articles of incorporation provide for non-voting shares in the
cases allowed by this Code, the holders of such (non-voting) shares shall
nevertheless be entitled to vote on the following matters:
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of
the corporate property;
6. Merger or consolidation of the corporation with another corporation or other
corporations;
7. Investment of corporate funds in another corporation or business in accordance with this

Code; and
8. Dissolution of the corporation. (Emphasis and underscoring supplied.)
In our hypothetical case, all 1,000,100 (voting and non-voting) shares are entitled to
vote in cases involving fundamental and major changes in the corporate structure, such as
those listed in Sec. 6 of the Corporation Code. Hence, with only 60 out of the 1,000,100
shares in the hands of the Filipino shareholders, control is definitely in the hands of the
foreigners. The foreigners can opt to invest in other businesses and corporations, increase its
bonded indebtedness, and even dissolve the public utility corporation against the interest of
the Filipino holders of the majority voting shares. This cannot plausibly be the constitutional
intent.
Consider further a situation where the majority holders of the total outstanding capital
stock, both voting and non-voting, decide to dissolve our hypothetical public utility
corporation. Who will eventually acquire the beneficial ownership of the corporate assets
upon dissolution and liquidation? Note that Sec. 122 of the Corporation Code states:
Section 122. Corporate liquidation. — Every corporation whose
charter expires by its own limitation or is annulled by forfeiture or otherwise,
or whose corporate existence for other purposes is terminated in any other
manner, shall nevertheless be continued as a body corporate for three (3) years
. . . to dispose of and convey its property and to distribute its assets, but not for
the purpose of continuing the business for which it was established. cHaCAS
At any time during said three (3) years, the corporation is authorized
and empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From and after
any such conveyance by the corporation of its property in trust for the benefit
of its stockholders, members, creditors and others in interest, all interest which
the corporation had in the property terminates, the legal interest vests in the
trustees, and the beneficial interest in the stockholders, members, creditors or
other persons in interest. (Emphasis and underscoring supplied.)
Clearly then, the bulk of the assets of our imaginary public utility corporation, which
may include private lands, will go to the beneficial ownership of the foreigners who can hold
up to 40 out of the 100 common shares and the entire 1,000,000 preferred non-voting shares
of the corporation. These foreign shareholders will enjoy the bulk of the proceeds of the sale
of the corporate lands, or worse, exercise control over these lands behind the façade of
corporations nominally owned by Filipino shareholders. Bluntly, while the Constitution
expressly prohibits the transfer of land to aliens, foreign stockholders may resort to schemes
or arrangements where such land will be conveyed to their dummies or nominees. Is this not
circumvention, if not an outright violation, of the fundamental Constitutional tenet that only
Filipinos can own Philippine land?
A construction of "capital" as referring to the total shareholdings of the company is an
acknowledgment of the existence of numerous corporate control-enhancing mechanisms,
besides ownership of voting rights, that limits the proportion between the separate and distinct
concepts of economic right to the cash flow of the corporation and the right to corporate
control (hence, they are also referred to as proportionality-limiting measures). This corporate
reality is reflected in SRC Rule 3 (E) of the Amended Implementing Rules and Regulations
(IRR) of the SRC and Sec. 3 (g) of The Real Estate Investment Trust Act (REIT) of 2009, 72
which both provide that control can exist regardless of ownership of voting shares. The
SRC IRR states:
Control is the power to govern the financial and operating policies
of an enterprise so as to obtain benefits from its activities. Control is presumed
to exist when the parent owns, directly or indirectly through subsidiaries, more
than one half of the voting power of an enterprise unless, in exceptional
circumstances, it can be clearly demonstrated that such ownership does not
constitute control. Control also exists even when the parent owns one half
or less of the voting power of an enterprise when there is:
i. Power over more than one half of the voting rights by virtue
of an agreement with other investors;
ii. Power to govern the financial and operating policies of the
enterprise under a statute or an agreement;
iii. Power to appoint or remove the majority of the members of
the board of directors or equivalent governing body;
iv. Power to cast the majority of votes at meetings of the board
of directors or equivalent governing body. (Emphasis and underscoring
supplied.)
As shown above, ownership of voting shares or power alone without economic
control of the company does not necessarily equate to corporate control. A shareholder's
agreement can effectively clip the voting power of a shareholder holding voting shares. In the
same way, a voting right ceiling, which is "a restriction prohibiting shareholders to vote above
a certain threshold irrespective of the number of voting shares they hold," 73 can limit the
control that may be exerted by a person who owns voting stocks but who does not have a
substantial economic interest over the company. So also does the use of financial derivatives
with attached conditions to ensure the acquisition of corporate control separately from the
ownership of voting shares, or the use of supermajority provisions in the by-laws and articles
of incorporation or association. Indeed, there are innumerable ways and means, both explicit
and implicit, by which the control of a corporation can be attained and retained even with
very limited voting shares, i.e., there are a number of ways by which control can be
disproportionately increased compared to ownership 74 so long as economic rights over the
majority of the assets and equity of the corporation are maintained.
Hence, if We follow the construction of "capital" in Sec. 11, Art. XII stated in the
ponencia of June 28, 2011 and turn a blind eye to these realities of the business world, this
Court may have veritably put a limit on the foreign ownership of common shares but
have indirectly allowed foreigners to acquire greater economic right to the cash flow of
public utility corporations, which is a leverage to bargain for far greater control through the
various enhancing mechanisms or proportionality-limiting measures available in the business
world. DACcIH
In our extremely hypothetical public utility corporation with the equity structure as
thus described, since the majority recognized only the 100 common shares as the "capital"
referred to in the Constitution, the entire economic right to the cash flow arising from the
1,000,000 non-voting preferred shares can be acquired by foreigners. With this economic
power, the foreign holders of the minority common shares will, as they easily can, bargain
with the holders of the majority common shares for more corporate control in order to protect
their economic interest and reduce their economic risk in the public utility corporation. For
instance, they can easily demand the right to cast the majority of votes during the meeting of
the board of directors. After all, money commands control.
The court cannot, and ought not, accept as correct a holding that routinely disregards
legal and practical considerations as significant as above indicated. Committing an error is
bad enough, persisting in it is worse.
Thus, the zealous watchfulness demonstrated by the SEC in imposing another tier of
protection for Filipino stockholders cannot, therefore, be penalized on a misreading of the
October 9, 2012 Resolution in Gamboa, which neither added nor subtracted anything from the June
28, 2011 Decision defining capital as "shares of stock entitled to vote in the election of directors."
Thus, I join the majority in ruling that there is no need to clarify the ruling in Gamboa nor
hold the Commission liable for grave abuse of discretion. As it has manifested in Gamboa, 24 in
issuing MC No. 8, the SEC abided by the Court's decision and deferred to the Court's definition of
the term "capital" in Section 11, Article XII of the Constitution.
In view of all the foregoing, I vote to DISMISS the petition.
BERSAMIN, J., concurring:
Petitioner Jose M. Roy III (Roy) initiated this special civil action for certiorari and
prohibition to seek the declaration of Memorandum Circular No. 8, Series of 2013 (MC No. 8),
particularly Section 2 thereof, issued by the Securities and Exchange Commission (SEC) as
unconstitutional. Allegedly, MC No. 8 was in contravention of the rule on the nationality of the
shareholdings in a public utility pronounced in Gamboa v. Teves. 1
According to Roy, MC No. 8 effectively limited the application of the 60-40 nationality rule
to voting and other shares alone; and the SEC thereby gravely abused its discretion amounting to
lack or excess of jurisdiction.
Section 2 of MC No. 8 reads:
required percentage of Filipino shall be applied to BOTH (a) the total number of
directors. (Bold underscoring supplied for emphasis)
I CONCUR.
I VOTE TO DISMISS the petition for certiorari and prohibition of Roy and the petition in
intervention. The SEC did not abuse its discretion, least of all gravely, but, on the contrary, strictly
complied with the language and tenor of the decision promulgated on June 28, 2011 in Gamboa v.
Teves and of the resolution promulgated on October 9, 2012 in the same case.
Grave abuse of discretion means either that the judicial or quasi-judicial power was exercised
in an arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent
judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or
to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or
quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to lack of
jurisdiction. Mere abuse of discretion is not enough to warrant the issuance of the writ. The abuse of
discretion must be grave. 2 The SEC's strict compliance with the interpretation in Gamboa v. Teves
of the term capital as used in Section 11, Article XII of the 1987 Constitution is an indication that it
acted without arbitrariness, whimsicality or capriciousness.
In addition, I hereby respectfully give other reasons that compel my vote to dismiss Roy's
petition for certiorari and prohibition as well as the petition in intervention.
1.
Neither certiorari nor prohibition is
the proper remedy to assail MC No. 8
The remedies of certiorari and prohibition respectively provided for in Section 1 3 and
Section 2 4 of Rule 65 of the Rules of Court are limited to the exercise of judicial or quasi-judicial
functions (except that prohibition also applies to ministerial functions) by the respondent tribunal,
board or officer that acts without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction. HSCATc
It is hardly a matter to be disputed that the issuance by the SEC of MC No. 8 was in the
exercise of its regulatory functions. 5 In such exercise, the SEC's quasi-judicial functions were not
involved. A quasi-judicial function relates to the action, discretion, etc. of public administrative
officers or bodies required to investigate facts, or to ascertain the existence of facts, to hold hearings,
and to draw conclusions from the facts as the basis for official actions and for the exercise of
discretion of a judicial nature. 6 Indeed, the quasi-judicial or adjudicatory functions of the SEC
under its original and exclusive jurisdiction related only to the hearing and determination of
controversies and cases involving: (a) intra-corporate and partnership relations between or among
the corporation, officers and stockholders and partners, including their elections or appointments; (b)
state and corporate affairs in relation to the legal existence of corporations, partnerships and
associations or to their franchises; and (c) investors and corporate affairs, particularly in respect of
devices and schemes, such as fraudulent practices, employed by directors, officers, business
associates, and/or other stockholders, partners, or members of registered firms. They did not relate to
the issuance of the regulatory measures like MC No. 8.
In the context of the limitations on the remedies of certiorari and prohibition, Roy
improperly challenged MC No. 8 by petition for certiorari and prohibition.
2.
The Court cannot take cognizance
of the petitions for certiorari and prohibition
in the exercise of its expanded jurisdiction
The Court cannot take cognizance of Roy's petition for certiorari and prohibition under its
expanded jurisdiction provided in Section 1, paragraph 2, 7 of Article VIII of the Constitution. Such
expanded jurisdiction of the Court is confined to reviewing whether or not another branch of the
Government (that is, the Executive or the Legislature), including the responsible officials of such
other branch, acted without or in excess of jurisdiction, or gravely abused its discretion amounting to
lack or excess of jurisdiction.
The expanded jurisdiction of the Court was introduced in the 1987 Constitution precisely to
impose on the Court the duty of judicial review as the means to neutralize the avoidance or non-
interference approach based on the doctrine of political question whenever a controversy came
before the Court. As explained in Araullo v. Aquino III: 8
The background and rationale of the expansion of judicial power under the 1987
Constitution were laid out during the deliberations of the 1986 Constitutional Commission by
Commissioner Roberto R. Concepcion (a former Chief Justice of the Philippines) in his
sponsorship of the proposed provisions on the Judiciary, where he said: —
The Supreme Court, like all other courts, has one main function: to
settle actual controversies involving conflicts of rights which are demandable
and enforceable. There are rights which are guaranteed by law but cannot be
enforced by a judicial party. In a decided case, a husband complained that his
wife was unwilling to perform her duties as a wife. The Court said: "We can
tell your wife what her duties as such are and that she is bound to comply with
them, but we cannot force her physically to discharge her main marital duty to
her husband. There are some rights guaranteed by law, but they are so personal
that to enforce them by actual compulsion would be highly derogatory to
human dignity."
This is why the first part of the second paragraph of Section 1 provides
that:
Judicial power includes the duty of courts to settle actual
controversies involving rights which are legally demandable or
enforceable. . .
The courts, therefore, cannot entertain, much less decide, hypothetical
questions. In a presidential system of government, the Supreme Court has,
also, another important function. The powers of government are generally
considered divided into three branches: the Legislative, the Executive and
the Judiciary. Each one is supreme within its own sphere and independent
of the others. Because of that supremacy power to determine whether a
given law is valid or not is vested in courts of justice.
Briefly stated, courts of justice determine the limits of power of the
agencies and offices of the government as well as those of its officers. In
other words, the judiciary is the final arbiter on the question whether or
not a branch of government or any of its officials has acted without
jurisdiction or in excess of jurisdiction, or so capriciously as to constitute
an abuse of discretion amounting to excess of jurisdiction or lack of
jurisdiction. This is not only a judicial power but a duty to pass judgment
on matters of this nature. IDTSEH
This is the background of paragraph 2 of Section 1, which means

that the courts cannot hereafter evade the duty to settle matters of this
nature, by claiming that such matters constitute a political question. (Bold
emphasis supplied)
Araullo did not stop there, however, and went on to discourse on the procedural aspect of
enabling the exercise of the expanded jurisdiction in this wise:
What are the remedies by which the grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government may be
determined under the Constitution?
The present Rules of Court uses two special civil actions for determining and
correcting grave abuse of discretion amounting to lack or excess of jurisdiction. These are the
special civil actions for certiorari and prohibition, and both are governed by Rule 65. A
similar remedy of certiorari exists under Rule 64, but the remedy is expressly applicable only
to the judgments and final orders or resolutions of the Commission on Elections and the
Commission on Audit.
The ordinary nature and function of the writ of certiorari in our present system are
aptly explained in Delos Santos v. Metropolitan Bank and Trust Company:
In the common law, from which the remedy of certiorari evolved, the
writ of certiorari was issued out of Chancery, or the King's Bench,
commanding agents or officers of the inferior courts to return the record of a
cause pending before them, so as to give the party more sure and speedy
justice, for the writ would enable the superior court to determine from an
inspection of the record whether the inferior court's judgment was rendered
without authority. The errors were of such a nature that, if allowed to stand,
they would result in a substantial injury to the petitioner to whom no other
remedy was available. If the inferior court acted without authority, the record
was then revised and corrected in matters of law. The writ of certiorari was
limited to cases in which the inferior court was said to be exceeding its
jurisdiction or was not proceeding according to essential requirements of law
and would lie only to review judicial or quasi-judicial acts.
The concept of the remedy of certiorari in our judicial system remains

much the same as it has been in the common law. In this jurisdiction, however,
the exercise of the power to issue the writ of certiorari is largely regulated by
laying down the instances or situations in the Rules of Court in which a
superior court may issue the writ of certiorari to an inferior court or officer.
Section 1, Rule 65 of the Rules of Court compellingly provides the
requirements for that purpose, viz.:
xxx xxx xxx
The sole office of the writ of certiorari is the correction of errors of
jurisdiction, which includes the commission of grave abuse of discretion
amounting to lack of jurisdiction. In this regard, mere abuse of discretion is not
enough to warrant the issuance of the writ. The abuse of discretion must be
grave, which means either that the judicial or quasi-judicial power was
exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, or that the respondent judge, tribunal or board evaded a positive duty,
or virtually refused to perform the duty enjoined or to act in contemplation of
law, such as when such judge, tribunal or board exercising judicial or quasi-
judicial powers acted in a capricious or whimsical manner as to be equivalent
to lack of jurisdiction.
Although similar to prohibition in that it will lie for want or excess of jurisdiction,
certiorari is to be distinguished from prohibition by the fact that it is a corrective remedy used
for the re-examination of some action of an inferior tribunal, and is directed to the cause or
proceeding in the lower court and not to the court itself, while prohibition is a preventative
remedy issuing to restrain future action, and is directed to the court itself. . . .
SICDAa
With respect to the Court, however, the remedies of certiorari and prohibition are
necessarily broader in scope and reach, and the writ of certiorari or prohibition may be
issued to correct errors of jurisdiction committed not only by a tribunal, corporation,
board or officer exercising judicial, quasi-judicial or ministerial functions but also to set
right, undo and restrain any act of grave abuse of discretion amounting to lack or excess
of jurisdiction by any branch or instrumentality of the Government, even if the latter
does not exercise judicial, quasi-judicial or ministerial functions. This application is
expressly authorized by the text of the second paragraph of Section 1, supra.
Thus, petitions for certiorari and prohibition are appropriate remedies to raise
constitutional issues and to review and/or prohibit or nullify the acts of legislative and
executive officials.
Necessarily, in discharging its duty under Section 1, supra, to set right and undo
any act of grave abuse of discretion amounting to lack or excess of jurisdiction by any
branch or instrumentality of the Government, the Court is not at all precluded from
making the inquiry provided the challenge was properly brought by interested or
affected parties. The Court has been thereby entrusted expressly or by necessary
implication with both the duty and the obligation of determining, in appropriate cases,
the validity of any assailed legislative or executive action. This entrustment is consistent
with the republican system of checks and balances. 9
The SEC, albeit under the administrative supervision of the Department of Finance, 10 did not
come under the terms any branch or instrumentality of the Government used in Section 1, Article
VIII of the 1987 Constitution. Although it is an agency vested with adjudicatory as well as
regulatory powers, its issuance of MC No. 8 cannot be categorized as an act of either an executive or
a legislative character within the context of the phrase any branch or instrumentality of the
Government used in Section 1, Article VIII of the 1987 Constitution.
Accordingly, the expanded jurisdiction of the Court under Section 1, paragraph 2, Article
VIII of the 1987 Constitution was not properly invoked to decide whether or not the SEC had acted
with grave abuse of discretion in issuing MC No. 8.
3.
The doctrine of immutability of judgment precludes the
Court from re-evaluating the definition of capital under
Section 11, Article XII of the 1987 Constitution
In focus is the term capital as used in Section 11, Article XII of the Constitution, which
provides:
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.
In the decision promulgated on June 28, 2011 in Gamboa v. Teves, the Court explicitly
defined the term capital as referring only to shares of stock entitled to vote in the election of
directors. 11 In the case of Philippine Long Distance Telephone Company (PLDT), its capital — for
purposes of complying with the constitutional requirement on nationality — should include only its
common shares, not its total outstanding capital stock comprising both common and non-voting
preferred shares. 12
The Court clarified, however, that —
shares also have the right to vote in the election of directors, then the term capital shall
term capital in Section 11, Article XII of the Constitution refers only to shares of stock
that can vote in the election of directors.
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, . . .: HDICSa
xxx xxx xxx

Thus, 60 percent of the capital assumes, or should result in, controlling interest in the
corporation. . . .
xxx xxx xxx
Mere legal title is insufficient to meet the 60 percent Filipino-owned 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]. 13
In the June 28, 2011 decision, the Court disposed as follows:
WHEREFORE we PARTLY GRANT the petition and rule that the term "capital" in
SO ORDERED. 14
Acting subsequently on the motion for reconsideration, the Court promulgated its resolution
of October 9, 2012 affirming the foregoing pronouncement of June 28, 2011, holding and disposing:
Since the constitutional requirement of at least 60 percent Filipino ownership applies
not only to voting control of the corporation but also to the beneficial ownership of the
corporation, it is therefore imperative that such requirement apply uniformly and across the
board to all classes of shares, regardless of nomenclature and category, comprising the capital
of a corporation. Under the Corporation Code, capital stock consists of all classes of shares
issued to stockholders, that is, common shares as well as preferred shares, which may have
different rights, privileges or restrictions as stated in the articles of incorporation.
xxx xxx xxx
. . . Thus, 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. IDaEHC
Moreover, such uniform application to each class of shares insures that the
"controlling interest" in public utilities always lies in the hands of Filipino citizens. . . .
xxx xxx xxx
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY.
No further pleadings shall be entertained.
SO ORDERED. 15
The SEC issued MC No. 8 to conform with the Court's pronouncement in its decision of June
28, 2011. As stated, Section 2 of MC No. 8 declared that "[f]or purposes of determining compliance
therewith, the required percentage of Filipino 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."
Roy and the intervenors submit herein, however, that MC No. 8 thereby defied the
pronouncement in Gamboa v. Teves on the determination of foreign ownership of a public utility by
failing "to make a distinction between different classes of shares, and instead offers only a general
distinction between voting and all other shares."
I disagree with the submission of Roy and the intervenors.
The objective of the Court in defining the term capital as used in Section 11, Article XII of
the Constitution was to ensure that both controlling interest and beneficial ownership were vested in
Filipinos. The decision of June 28, 2011 pronounced that capital refers only to shares of stock that
can vote in the election of directors (controlling interest) and owned by Filipinos (beneficial
ownership). Put differently, 60 percent of the outstanding capital stock (whether or not entitled to
vote in the election of directors), coupled with 60 percent of the voting rights, must rest in the hands
of Filipinos.
The language and tenor of the assailed Section 2 of MC No. 8 strictly follow the definition of
the term capital in Gamboa v. Teves. Such definition already attained finality at the time Roy filed
his petition. The resolution of October 9, 2012 did not in the least modify such definition. Hence,
the SEC did not abuse its discretion in issuing MC No. 8.
What Roy and the intervenors actually would have the Court do herein is to re-define capital
so that the 60-40 ownership requirement would apply separately to each class of shares, as discussed
in the body of the resolution promulgated on October 9, 2012. 16 Such a re-definition, because it
would contravene the June 28, 2011 decision or the resolution of October 9, 2012, would actually
reopen and relitigate Gamboa v. Teves.
Any attempt on the part of Roy and the intervenors to hereby re-define the concept of capital
will unavoidably disregard the immutability of the final judgment in Gamboa v. Teves. That is not
permissible. If the main role of the courts of justice is to assist in the enforcement of the law and in
the maintenance of peace and order by putting an end to judiciable controversies with finality,
nothing serves this role better than the long established doctrine of immutability of judgments. 17
Under the doctrine of finality and immutability of judgment, a decision that has acquired finality
becomes immutable and unalterable, and may no longer be modified in any respect, even if the
modification is meant to correct erroneous conclusions of fact and law, and even if the modification
is made by the court that rendered it or by the Highest Court of the land. Any act that violates this
principle must be immediately struck down. 18 This is because the doctrine of immutability of a final
judgment serves a two-fold purpose, namely: (1) to avoid delay in the administration of justice and
thus, procedurally, to make orderly the discharge of judicial business; and (2) to put an end to
judicial controversies, at the risk of occasional errors, which is precisely why courts exist. Verily,
controversies cannot drag on indefinitely. The doctrine is not a mere technicality to be easily
brushed aside, but a matter of public policy as well as a time-honored principle of procedural law. 19
Otherwise the rights and obligations of every litigant could hang in suspense for an indefinite period
of time. DTCSHA
The only time when the immutable and final judgment may be corrected or modified is when
the correction or modification concerns: (1) merely clerical errors; (2) the so-called nunc pro tunc
entries that cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances
transpire after the finality of the decision rendering its execution unjust and inequitable. 20
The supposed conflict between the dispositive portion or fallo of the resolution promulgated
on October 9, 2012 and the body of the resolution was not a sufficient cause to disregard the
doctrine of immutability. To begin with, the dispositive portion or fallo prevails over body of the
resolution. It is really fundamental that the dispositive part or fallo of a judgment that actually settles
and declares the rights and obligations of the parties finally, definitively, and authoritatively
controls, regardless of the presence of inconsistent statements in the body that may tend to confuse.
21 Indeed, the dispositive part or fallo is the final order, while the opinion is but a mere statement,
ordering nothing. 22 As pointed out in Contreras and Gingco v. Felix and China Banking Corp.: 23
. . . More to the point is another well-recognized doctrine, that the final judgment as
rendered is the judgment of the court irrespective of all seemingly contrary statements in the
decision. "A judgment must be distinguished from an opinion. The latter is the informal
expression of the views of the court and cannot prevail against its final order or decision.
While the two may be combined in one instrument, the opinion forms no part of the
judgment. So, . . . there is a distinction between the findings and conclusions of a court and its
judgment. While they may constitute its decision and amount to the rendition of a judgment,
they are not the judgment itself. They amount to nothing more than an order for judgment,
which must, of course, be distinguished from the judgment." (1 Freeman on Judgments, p. 6)
At the root of the doctrine that the premises must yield to the conclusion is perhaps, side by
side with the needs of writing finis to litigations, the recognition of the truth that "the trained
intuition of the judge continually leads him to right results for which he is puzzled to give
[tmu] [un]impeachable legal reasons." "It is an everyday experience of those who study
judicial decisions that the results are usually sound, whether the reasoning from which the
results purport to flow is sound or not." (The Theory of Judicial Decision, Pound, 36 Harv.
Law Review, pp. 9, 51.) It is not infrequent that the grounds of a decision fail to reflect the
exact views of the court, especially those of concurring justices in a collegiate court. We often
encounter in judicial decisions, lapses, findings, loose statements and generalities which do
not bear on the issues or are apparently opposed to the otherwise sound and considered result
reached by the court as expressed in the dispositive part, so called, of the decision. cDSAEI
There is also no need to try to harmonize the seeming conflict between the fallo of the
October 9, 2012 resolution and its body in order to favor Roy and the intervenors. The dispositive
portion of the resolution of October 9, 2012, which tersely stated that "we DENY the motions for
reconsideration WITH FINALITY," was clear and forthright enough, and should prevail. The only
time when the body of the decision or resolution should be controlling is when one can
unquestionably find a persuasive showing in the body of the decision or resolution that there was a
clear mistake in the dispositive portion. 24 Yet, no effort has been exerted herein to show that there
was such an error or mistake in the dispositive portion or fallo of the October 9, 2012 resolution.
Under the circumstances, the dispositive portions of both the decision of June 28, 2011 and of
the resolution of October 12, 2012 are controlling.
4.
The petition is actually a disguised circumvention
of the ban against a second motion for reconsideration
To me, the petition of Roy is an attempt to correct the failure of the dispositive portion of the
resolution of October 9, 2012 to echo what was stated in the body of the resolution. In that sense, the
petition is actually a second motion for reconsideration disguise as an original petition for certiorari
and prohibition designed to accomplish something that the intervenors, who were the petitioners in
Gamboa v. Teves, did not accomplish directly thereat. Hence, the dismissal of the petition and the
petition in intervention is fully warranted, for what the intervenors could not do directly should not
now be allowed to be done by them indirectly.
In this regard, we reiterate the rule that a second motion for reconsideration is prohibited
from being filed in this Court. Section 3, Rule 15 of the Internal Rules of the Supreme Court
expressly state so, to wit:
Section 3. Second motion for reconsideration. — The Court shall not entertain a
second motion for reconsideration, and any exception to this rule can only be granted in the
higher interest of justice by the Court en banc upon a vote of at least two-thirds of its actual
membership. There is reconsideration "in the higher interest of justice" when the assailed
decision is not only legally erroneous, but is likewise patently unjust and potentially capable
of causing unwarranted and irremediable injury or damage to the parties. A second motion for
reconsideration can only be entertained before the ruling sought to be reconsidered becomes
final by operation of law or by the Court's declaration.
xxx xxx xxx
Had the intervenors genuinely desired to correct the perceived omission in the resolution of
October 9, 2012 in Gamboa v. Teves, their proper recourse was not for Roy to bring the petition
herein, but to file by themselves a motion for clarification in Gamboa v. Teves itself. As the Court
observed in Mahusay v. B.E. San Diego, Inc.: 25
It is a settled rule is that a judgment which has acquired finality becomes immutable
and unalterable; hence, it may no longer be modified in any respect except only to correct
clerical errors or mistakes. Clarification after final judgment is, however, allowed when
what is involved is a clerical error, not a correction of an erroneous judgment, or
dispositive portion of the Decision. Where there is an ambiguity caused by an omission or
mistake in the dispositive portion, the court may clarify such ambiguity, mistake, or omission
by an amendment; and in so doing, it may resort to the pleadings filed by the parties, the
court's findings of facts and conclusions of law as expressed in the body of the decision.
(Bold emphasis supplied.)
The statement in the dispositive portion or fallo of the resolution of October 9, 2012 to the
effect that "[n]o further pleadings shall be entertained" would not have been a hindrance to the filing
of the motion for clarification because such statement referred only to motions that would have
sought the reversal or modification of the decision on its merits, or to motions ill-disguised as
requests for clarification. 26 Indeed, the intervenors as the petitioners in Gamboa v. Teves would not
have been precluded from filing such motion that would have presented an unadulterated inquiry
arising upon an ambiguity in the decision. 27
CARPIO, J., dissenting:
On 28 June 2011, the Court rendered a ruling in Gamboa v. Tevez 1 (Gamboa Decision) by
defining for the first time for over 75 years the term "capital" which appears not only in Section 11,
Article XII of the 1987 Constitution, prescribing the minimum nationality requirement for public
utilities, but likewise in several provisions thereof, such as Section 2, Article XII; Section 10, Article
XII; Section 11, Article XII; Section 4 (2), Article XIV, and Section 11 (2), Article XVI.
In the Gamboa Decision, the Court held that "[a]ny 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." 2 The 60 percent
Filipino ownership of the "capital" assumes, or should result in, "controlling interest" in the
corporation. EDCcaS
In the Gamboa Decision, the Court defined the term "capital" as referring to shares of stock
that can vote in the election of directors. Voting rights translate to control. Otherwise stated, "the
right to participate in the control or management of the corporation is exercised through the right to
vote in the election of directors." 3
In the same decision, the Court pointed out that "[m]ere legal title is insufficient to meet the
60 percent Filipino-owned 'capital' required in the Constitution." 4 Full beneficial ownership of 60
percent of the total outstanding capital stock, coupled with 60 percent of the voting rights, is the
minimum constitutional requirement for a corporation to operate a public utility, thus:
. . . . 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]." 5 (Emphasis supplied)
Significantly, in the 9 October 2012 Resolution in Gamboa (Gamboa Resolution) 6 denying
the motion for reconsideration, the Court reiterated the twin requirement of full beneficial ownership
of at least 60 percent of the outstanding capital stock and at least 60 percent of the voting rights.
This is consistent with the Foreign Investments Act, as well as its Implementing Rules, thus:
This is consistent with Section 3 of the FIA which provides that where 100% of the capital
stock is held by "a trustee of funds for pension or other employee retirement or separation
benefits," the trustee is a Philippine national if "at least sixty percent (60%) of the fund will
accrue to the benefit of Philippine nationals." Likewise, Section 1(b) of the Implementing
Rules of the FIA provides that "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." 7 (Emphasis in the original)
The Court further clarified, in no uncertain terms, that the 60 percent constitutional
requirement of Filipino ownership applies uniformly and across the board to all classes of shares
comprising the capital of a corporation. The 60 percent Filipino ownership requirement applies to
each class of share, not to the total outstanding capital stock as a single class of share. The Court
explained:
corporation, it is therefore imperative that such requirement apply uniformly and across the
board to all classes of shares, regardless of nomenclature and category, comprising the capital
of a corporation. Under the Corporation Code, capital stock consists of all classes of shares
issued to stockholders, that is, common shares as well as preferred shares, which may have
different rights, privileges or restrictions as stated in the articles of incorporation.
xxx xxx xxx
. . . 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.
Moreover, such uniform application to each class of shares insures that the
"controlling interest" in public utilities always lies in the hands of Filipino citizens. . . . .
As we held in our 28 June 2011 Decision, to construe broadly the term "capital" as the
total outstanding capital stock, treated as a single class regardless of the actual classification
of 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."
We illustrated the glaring anomaly which would result in defining the term "capital" as the
total outstanding capital stock of a corporation, treated as a single class of shares regardless of
the actual classification of shares, to wit:
Let us assume that a corporation has 100 common shares owned by
foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with
both classes of share having a par value of one peso (P1.00) per share. Under
the broad definition of the term "capital," such corporation would be
considered compliant with the 40 percent constitutional limit on foreign equity
of public utilities since the overwhelming majority, or more than 99.999
percent, of the total outstanding capital stock is Filipino owned. This is
obviously absurd. ISHaCD
In the example given, only the foreigners holding the common shares
have voting rights in the election of directors, even if they hold only 100
shares. The foreigners, with a minuscule equity of less than 0.001 percent,
exercise control over the public utility. On the other hand, the Filipinos,
holding more than 99.999 percent of the equity, cannot vote in the election of
directors and hence, have no control over the public utility. This starkly
circumvents the intent of the framers of the Constitution, as well as the clear
language of the Constitution, to place the control of public utilities in the hands
of Filipinos. . . . . 8 (Emphasis supplied)
Clearly, in both Gamboa Decision and Resolution, the Court categorically declared that the
60 percent minimum Filipino ownership refers not only to voting rights but likewise to full
beneficial ownership of the stocks. Likewise, the 60 percent Filipino ownership applies uniformly to
each class of shares. Such interpretation ensures effective control by Filipinos of public utilities, as
expressly mandated by the Constitution.
On 20 May 2013, the Securities and Exchange Commission (SEC), through respondent
Chairperson Teresita J. Herbosa, issued Memorandum Circular No. 8, series of 2013, to implement
the Court's directive in the Gamboa Decision and Resolution. Section 2 thereof pertinently 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
directors. (Emphasis supplied)
SEC Memorandum Circular No. 8 provides for two conditions in determining whether a
corporation intending to operate or operating a public utility complies with the mandatory 60 percent
Filipino ownership requirement. It expressly states that the 60 percent Filipino ownership
requirement "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." Section 2 of SEC Memorandum Circular No. 8
therefore mandates that the 60 percent Filipino ownership requirement shall be applied separately to
both the total number of stocks with voting rights, and to the entire outstanding stock with and
without voting rights. If the 60 percent Filipino ownership requirement is not met either by the
outstanding voting stock or by the total outstanding voting and non-voting stock, then the
Constitutional requirement is violated.
SEC Memorandum Circular No. 8 can be sustained as valid and fully compliant with the
Gamboa Decision and Resolution only if (1) the stocks with voting rights and (2) the stocks without
voting rights, which comprise the capital of a corporation operating a public utility, have equal par
values. If the shares of stock have different par values, then applying SEC Memorandum Circular
No. 8 would contravene the Gamboa Decision that the "legal and beneficial ownership of 60
percent of the outstanding capital stock . . . rests in the hands of Filipino nationals in
accordance with the constitutional mandate."
For example, assume that class "A" voting shares have a par value of P1.00, and class "B"
non-voting preferred shares have a par value of P100.00. If 100 outstanding class "A" shares are all
owned by Filipino citizens, and 80 outstanding class "B" shares are owned by foreigners and 20
class "B" shares are owned by Filipino citizens, the 60-40 percent ownership requirement in favor of
Filipino citizens for voting shares, as well as for the total voting and non-voting shares, will be
complied with. If dividends are declared equivalent to the par value per share for all classes of
shares, only 20.8 percent of the dividends will go to Filipino citizens while 79.2 percent of the
dividends will go to foreigners, an absurdity or anomaly that the framers of the Constitution
certainly did not intend. Such absurdity or anomaly will also be contrary to the Gamboa Decision
that the "legal and beneficial ownership of 60 percent of the outstanding capital stock . . . rests
in the hands of Filipino nationals in accordance with the constitutional mandate."
Thus, SEC Memorandum Circular No. 8 is valid and constitutional provided that the par
values of the shares with voting rights and the shares without voting rights are equal. If the par
values vary, then the 60 percent Filipino ownership requirement must be applied to each class of
shares in order that the "legal and beneficial ownership of 60 percent of the outstanding capital
stock . . . rests in the hands of Filipino nationals in accordance with the constitutional
mandate," as expressly stated in the Gamboa Decision and as reiterated and amplified in the
Gamboa Resolution.
Finally, Section 11, Article XII of the Constitution is clear: "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, . . . ." The term "capital" in this
constitutional provision does not refer to a specific class of share, as the Constitution does not
distinguish between voting or non-voting, common or preferred shares of stock. Thus, the term
"capital" refers to all shares of stock that are subscribed, which constitute the "capital" of a
corporation.
Consequently, the 60 percent Filipino ownership requirement applies uniformly to all classes
of shares that are subscribed. A simple application of the 60 percent Filipino ownership requirement
is to apply the same to the total capital, taken together regardless of different classes of shares, as
what SEC Memorandum Circular No. 8 does. However, if the shares of stock have different par
values, such a simple application will result in an absurdity or anomaly as explained in the example
discussed above. It is hornbook doctrine that if a provision of the Constitution or the law is
susceptible of more than one meaning, one resulting in an absurdity or anomaly and the other in a
sensible meaning, the meaning that results in an absurdity or anomaly must be avoided, 9
particularly an absurdity or anomaly that frustrates the intent of the Constitution or the law. Thus, to
avoid such an absurdity or anomaly, the 60 percent Filipino ownership requirement should be
applied to each class of shares if their par values are different.
ACCORDINGLY, I vote to GRANT the petition IN PART. SEC Memorandum Circular
No. 8, series of 2013, is valid and constitutional if all the shares of stock have the same par values.
However, if the shares of stock have different par values, the 60 percent Filipino ownership
requirement must be applied to each class of shares. cDTACE
MENDOZA, J., dissenting:
The final ruling in a case includes not only the decision but also the clarifications and
amplifications contained in subsequent resolutions before its finality. A party cannot isolate the
decision and ignore the elucidations contained in the resolutions. It is only after the decision
becomes final that it becomes immutable and unalterable. 1
Accordingly, the June 28, 2011 Decision in Gamboa v. Teves 2 (Gamboa Decision) is not the
final ruling in said case but includes the clarification and amplifications of the Court in its October
9, 2012 Resolution (Gamboa Resolution). Therefore, any regulation which ignores the Court's final
ruling is not compliant with it. Hence,
I dissent.
My position is that SEC MC No. 8 is non-compliant with the final Gamboa ruling and must
be amended to conform thereto.
The Antecedents
The case of Gamboa was filed by the late Wilson Gamboa, questioning the sale of 111,415
shares of Philippine Telecommunications Investment Corporation (PITC) to First Pacific, a foreign
corporation, as it was violative of Section 11, Article XII of the Constitution. 3 It was averred therein
that PITC owned 6.3% of the Philippine Long Distance Telephone Company (PLDT), a public
utility enterprise, and the acquisition by First Pacific of its entire shareholding would amount to the
foreign ownership of the 6.3% common shares of PLDT. This would effectively increase the foreign
ownership of common shares in PLDT to 81.47%.
On June 28, 2011, the Court rendered the Gamboa Decision, holding that for there to be
compliance with the constitutional mandate, full beneficial ownership over sixty-percent (60%) of
the total outstanding capital stock, coupled by sixty-percent (60%) control over shares with the right
to vote in the election of directors, must be held by Filipinos. Thus, the decretal portion of the
Gamboa Decision reads:
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital"
in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote
4 TEHIaD
Thereafter, motions for reconsideration were filed. In its Resolution, 5 dated October 9, 2012
(Gamboa Resolution), the Court stressed that the 60-40 ownership requirement in favor of Filipino
citizens in the Constitution to engage in certain economic activities applied not only to voting
control, but also to the beneficial ownership of the corporation. The Court wrote that the same
limits must apply uniformly and separately to each class of shares, without regard to their
restrictions or privileges. Specifically, the Court explained:
Since a specific class of shares may have rights and privileges or restrictions different
from the rest of the shares in a corporation, the 60-40 ownership requirement in favor of
Filipino citizens in Section 11, Article XII of the Constitution must apply not only to shares
with voting rights but also to shares without voting rights. Preferred shares, denied the
right to vote in the election of directors, are anyway still entitled to vote on the eight specific
corporate matters mentioned above. Thus, 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
Constitution. [Emphases supplied]
Hence, the Court finally decreed:
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No
further pleadings shall be entertained.
SO ORDERED. 6
Eventually, the definition of "capital," as finally amplified and elucidated by the Court in the
Gamboa Resolution, became final and executory.
On March 25, 2013, the SEC issued a notice to the public, soliciting comments on, and
suggestions to, the draft guidelines in compliance with the Filipino ownership requirement in public
utilities prescribed in Section 11, Article XII of the Constitution.
On April 22, 2013, petitioner Atty. Jose M. Roy III (Roy) submitted his written comments 7
pursuant to the SEC Notice of March 25, 2013. He pointed out that the said guidelines (specifically
Section 2 thereof) did not comply with the letter and spirit of the Court's final ruling in Gamboa.
Roy claimed that he never received a reply from the SEC.
On May 20, 2013, the SEC, through Chairperson Teresita J. Herbosa, issued MC No. 8.
Section 2 thereof reads:
directors. 8 [Emphasis supplied]
The Subject Petition
Contending that the issuance of the assailed circular contradicted the intent and spirit of
Gamboa, Roy, as a lawyer and taxpayer, filed the subject petition, contending that the assailed
circular contradicted the intent and spirit of the final Gamboa ruling. He feared that the assailed
circular would encourage circumvention of the constitutional limitation for it would allow the
creation of several classes of voting shares with different degrees of beneficial ownership over the
same, but at the same time, not imposing a forty percent (40%) limit on foreign ownership of the
higher yielding stocks; and that permitting foreigners to benefit from equity structures with Filipinos
being given merely voting rights, but not the full economic benefits, thwarts the constitutional
directive of guaranteeing a self-reliant and independent national economy effectively controlled by
Filipinos. The effect would be, as he wrote, that while Filipinos are given voting rights, they would
be denied of the full economic benefits produced by the public utility company.
Petition-in-Intervention
Following the filing of the said petition by Roy, the Court granted the Motion to Leave to File
Petition-in-Intervention filed by Wilson C. Gamboa, Jr., the son of the petitioner in Gamboa,
together with lawyers Daniel V. Cartagena, John Warren P. Gabinete, Antonio V. Pesina, Jr.,
Modesto Martin Y. Manon, and Gerardo C. Erebaren (Gamboa, et al.). In their Petition-in-
Intervention (For Certiorari), 9 dated July 16, 2013, Gamboa, et al. merely adopted the issues,
arguments and prayer of Roy.
Both Roy and Gamboa, et al. (petitioners) claimed that by issuing MC No. 8, the SEC defied
the final Gamboa ruling as to the determination of foreign ownership in a public utility corporation.
They argued that MC No. 8 did not conform to the letter and spirit of the final Court ruling as the
Gamboa Resolution clearly stated that the 60-40 ownership requirement must apply separately to
each class of shares. MC No. 8, they asserted, failed "to make a distinction between different claims
of shares, and instead offers only a general distinction between voting and all other shares." 10 They
further pointed out that, as an effect of this faulty interpretation by the SEC, PLDT would be in
direct violation of the Constitution as it did not comply with the 60-40 rule and, therefore, could not
be considered a Filipino corporation.
Respondents' Position
The SEC, in its Consolidated Comment, 11 dated September 13, 2013, and PLDT, in its
Comment (on the Petition dated 10 June 2013), 12 dated September 5, 2013, and Comment (on The
Petition-in-Intervention, dated July 16, 2013) 13 submitted basically the same arguments to support
their prayer for the dismissal of the petition and the petition-in-intervention. They both questioned
the jurisdiction of the Court over the petitions and invoked the doctrine of hierarchy of courts to
show that direct resort to this Court by the petitioners could not be justified, and that they failed to
exhaust administrative remedies. The SEC and PLDT also agreed that the petitioners did not possess
the locus standi to question the constitutionality of MC No. 8, and that they could not invoke
"transcendental importance" as a protective cloak. With regard to PLDT's compliance with the
foreign ownership requirement laid down in Gamboa, the SEC and PLDT both argued that this
requires the determination of facts, in effect, categorizing the petitions premature and improper.
The SEC also pointed out that the tenor of the decretal portion of the decision of the Court in
Gamboa, as well as that of its October 9, 2012 resolution, was that the term capital should pertain to
shares of stocks entitled to vote in the election of directors, and that there was nothing in there that
mentioned about the 60-40 ownership requirement for each class of shares. It also argued that the
omitted rule was a mere obiter dictum or one without any binding precedent. The SEC emphasized
that the fallos of the said decision and resolution must control. DETACa
Petitioners' Reply
On May 7, 2014, the petitioners filed their Joint Consolidated Reply with Motion for Issuance
of Temporary Restraining Order 14 wherein they insisted that the Court had already determined the
transcendental importance of the matters being raised, citing the rule that where there was already a
finding that a case possessed transcendental importance, the locus standi requirement should be
relaxed.
On May 22, 2014, PLDT filed its Rejoinder and Opposition.
Comment in Intervention by Philippine Stock Exchange
On June 18, 2014, the Philippine Stock Exchange, Inc. (PSEI) filed its Motion to Intervene
with Leave of Court 15 attaching thereto its Comment-in-Intervention. The PSEI took the same
position as the SEC as to how capital in Section 11, Article XII of the 1987 Constitution was defined
in Gamboa. It agreed with the SEC that the dispositive portion or the fallo of a decision should be
the controlling factor.
Comment in Intervention by Sharephil
On June 1, 2016, Shareholders' Association of the Philippines, Inc. (Sharephil) filed an
Omnibus Motion for Leave to Intervene and Admit attached Comment-in-Intervention. It sought
intervention under Rule 19 of the Rules of Court 16 to protect the rights of shareholders against the
effects of unlawful and unreasonable regulations.
As an association composed of shareholders of Philippine companies, Sharephil questions the
propriety of the remedy availed of by the petitioners. It asserts that the proper remedy should have
been a petition for declaratory relief, which is well within the jurisdiction of the Regional Trial
Courts. 17
On the merits, Sharephil rejects petitioners' contention that MC No. 8 deviated from the
ruling of this Court in Gamboa. It argues that the SEC, in issuing the assailed circular, merely
followed what the Court stated in the dispositive portion of the Gamboa Resolution 18 affirming the
Gamboa Decision. 19
On practical considerations, Sharephil seeks to bring to the attention of the Court the effects
of declaring MC No. 8 as unconstitutional. It cites a market research study released by Deutsche
Bank on October 16, 2012 which opined that if the Court would adopt an overly strict interpretation
of the meaning of capital, not only PLDT but also a large number of listed companies with similar
structures could also be affected. It cautions that in five (5) companies alone, 150 billion pesos
worth of shares would have to be sold by foreign shareholders in a forced divestment, if the obiter in
Gamboa were to be implemented.
Petitioners' Reply to the Comment-in-Intervention
In their Opposition and Reply to Intervention of Philippine Stock Exchange and Sharephil, 20
petitioners essentially argue that PSE and Sharephil have no legal standing to intervene. They submit
that both intervenors have failed to establish sufficient legal interest in the petition; that while it is
true that intervention is permissive, it should not be so lax as to admit of any whimsical or a mere
passing interest in the issues at hand; that in the instances where interventions were allowed by this
Court, the most cited reason was that the parties seeking intervention were indispensable in the case;
and that in this case, PSEI and Sharephil are not indispensable parties as they will not sustain direct
injury capable or deserving judicial protection.
Moreover, petitioners assert that Sharephil's claims were broad and speculative as they were
based solely on a perceived inconvenience that would be brought by this proceedings to their
members; and that there was no showing of any direct injury or damage on the part of Sharephil
considering that it is not involved in a constitutionally restricted economic activity.
As to the claim that a ruling in favor of the petitioners will result in an injury to PSE by
reason of a sudden selling of shares in the market, they point out that the depreciation and
fluctuation of the market and share prices are not an injury capable of legal protection in a
proceeding involving the interpretation of the Constitution. At any rate, such movement in prices is
normal.
Finally, in upholding the correct interpretation and implementation of the Constitution, the
Philippines commits no breach against other states or their nationals under international law
particularly in cases where no general or particular specific obligations limiting judicial
interpretation of municipal law exists.
ISSUES
1. WHETHER OR NOT SEC MEMORANDUM CIRCULAR NO. 8, SERIES OF
2013 CONFORMS TO THE LETTER AND SPIRIT OF THE DECISION AND
RESOLUTION OF THIS HONORABLE COURT DATED 28 JUNE 2011 AND 9
OCTOBER 2012 IN G.R. NO. 176579 ENTITLED HEIRS OF WILSON GAMBOA
v. FINANCE SECRETARY MARGARITO B. TEVES, ET AL.
2. WHETHER THE SEC GRAVELY ABUSED ITS DISCRETION IN RULING
THAT PLDT IS COMPLIANT WITH THE CONSTITUTIONAL RULE ON
FOREIGN OWNERSHIP.
A. THE PLDT BENEFICIAL TRUST FUND DOES NOT SATISFY THE
EFFECTIVE CONTROL TEST FOR PURPOSES OF INCORPORATING
BTF HOLDINGS WHICH ACQUIRED THE 150 MILLION PREFERRED
VOTING SHARES OF PLDT.
B. WHETHER PLDT, THROUGH ITS ALTER-EGOS MEDIAQUEST AND
BTF HOLDINGS, INC., IS CIRCUMVENTING THE FOREIGN
OWNERSHIP RESTRICTIONS PROVIDED FOR IN THE 1987
CONSTITUTION.
3. WHETHER RECOURSE TO THIS HONORABLE COURT IS JUSTIFIED BY
THE TRANSCENDENTAL IMPORTANCE OF THE ISSUE RAISED BY THE
PETITIONER. 21
A reading of the contending pleadings discloses that the issues primarily raised are (1)
whether the SEC gravely abused its discretion when it omitted in SEC MC No. 8 the uniform and
separate application of the 60:40 rule in favor of Filipinos to each and every class of shares of a
corporation; and (2) whether the constitutional prescription has been complied with in the case of
PLDT.
Considering that this Court is not a trier of facts, questions pertaining to whether there was
violation of the constitutional limits on foreign ownership by PLDT requires the reception and
examination of evidence. As this is beyond the Court's jurisdiction, it will just confine itself to the
first question.
Procedural Issues
Propriety of the Remedy
The SEC and PLDT raise two procedural issues that should bar the assumption of jurisdiction
by this Court.
According to the SEC, a Rule 65 petition is not the appropriate remedy to assail the validity
and constitutionality of MC No. 8. It posits that it may be invoked only against a tribunal, board or
officer exercising judicial or quasi-judicial functions. Considering that the assailed circular was not
issued in the exercise of quasi-judicial functions and was more of a quasi-legislative act, the SEC
opines that the filing of a Rule 65 petition is not proper. Citing Southern Hemisphere Engagement
Network, Inc. v. Anti-Terrorism Council, 22 where the Court dismissed the petition for certiorari and
prohibition assailing the constitutionality of Republic Act (R.A.) No. 9372 and Executive Order
(E.O.) No. 7 for being an improper remedy as the said issuances did not involve a quasi-judicial or
judicial act, the SEC argues that the appropriate remedy should have been a petition for declaratory
relief under Rule 63 of the Rules of Court filed before a regional trial court. 23
I cannot entirely agree. aHSTID
Ordinarily, the remedies of special civil actions for certiorari and prohibition are used in
cases where the inferior court or tribunal is said to be exceeding its jurisdiction or was not
proceeding according to essential requirements of law and would lie only to review judicial or quasi-
judicial acts. 24 Still, with the constitutionally expanded powers of judicial review, particularly the
authority and duty to determine the existence of grave abuse of discretion on the part of the
legislative and executive branches of government, it cannot be denied that the scope of the said
remedies, as traditionally known, has changed.
The special civil actions for certiorari and prohibition under Rule 65 have been held by this
Court as proper remedies through which the question of grave abuse of discretion can be heard
regardless of how the assailed act has been exercised. In Araullo v. Aquino, 25 this Court stated that
"the remedies of certiorari and prohibition are necessarily broader in scope and reach, and the writ
of certiorari or prohibition may be issued to correct errors of jurisdiction committed not only by a
tribunal, corporation, board or officer exercising judicial, quasi-judicial or ministerial functions but
also to set right, undo and restrain any act of grave abuse of discretion amounting to lack or excess
of jurisdiction by any branch or instrumentality of the Government, even if the latter does not
exercise judicial, quasi-judicial or ministerial functions." It was further stated that in discharging
the duty "to set right and undo any act of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch or instrumentality of the Government, the Court is not at all precluded
from making the inquiry provided the challenge was properly brought by interested or affected
parties." 26
Hence, petitions for certiorari, as in this case, and prohibition are undeniably appropriate
remedies to raise constitutional issues and to review and/or prohibit or nullify the acts of legislative
and executive officials.
As to PLDT's position that a petition for declaratory relief should have been the appropriate
remedy, I find it to be without basis.
An action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of the rights arising thereunder. It gives a practical remedy to end
controversies that have not reached the state where another relief is immediately available; and
supplies the need for a form of action that will set controversies at rest before they lead to a
repudiation of obligations, an invasion of rights, and a commission of wrongs. The purpose of an
action for declaratory relief is to secure an authoritative statement of the rights and obligations of the
parties under a statute, deed, or contract for their guidance in the enforcement thereof, or compliance
therewith, and not to settle issues arising from an alleged breach thereof, it may be entertained
before the breach or violation of the statute, deed or contract to which it refers. 27
In this case, declaratory relief can no longer be availed of because the mere issuance of MC
No. 8 is being viewed by the petitioners as a violation by itself of the Constitution and this Court's
final directive in Gamboa. As it appears, the purpose of this petition is not to determine rights or
obligations under the assailed circular for enforcement purposes, but to settle the very question on
whether the issuance was made within the bounds of the Constitution which, if otherwise, would
certainly amount to grave abuse of discretion. By that standard alone, a petition for declaratory relief
clearly would not lie.
Hierarchy of Courts
The SEC and PLDT also contend that the Court should not assume jurisdiction over this case
because the petitioners failed to observe the principle of hierarchy of courts. Under that principle,
direct recourse to this Court is improper because the Court must remain the court of last resort to
satisfactorily perform its constitutional functions. It allows the Court to devote its time and attention
to matters within its exclusive jurisdiction and to prevent the overcrowding of its docket. Be that as
it may, the invocation of this Court's original jurisdiction or plea for the dispensation of recourse to
inferior courts having concurrent jurisdiction to issue writs of certiorari has been allowed in certain
instances for special and important reasons clearly stated in the petition, such as, (1) when dictated
by the public welfare and the advancement of public policy; (2) when demanded by the broader
interest of justice; (3) when the challenged orders were patent nullities; or (4) when analogous
exceptional and compelling circumstances called for and justified the immediate and direct handling
of the case. 28
Exigent and compelling circumstances demand that this Court take cognizance of this case to
put an end to the controversy and resolve the matter that could have pervasive effect on this nation's
economy and security. Surely, this case is a litmus test for a regulatory framework that must conform
to the final Gamboa ruling and, above all, the Constitution. Not to be disregarded is the opportunity
that this case seeks to clarify the dynamics of how to properly apply the nationality limits on public
utilities. As Roy puts it, the fact that this case relates to, and involves, an interpretation of the final
Gamboa ruling, makes it more necessary to immediately and finally settle the issues being raised.
This provides the Court an adequate and compelling reason to justify direct recourse to this Court.
CDHaET
Justiciability of the Controversy

The Court's authority to take cognizance of the kind of questions presented in this case is not
absolute. The Constitution prescribes that before the Court accepts a challenge to a governmental
act, there must be first an actual case or controversy. In the words of the US Supreme Court, this is
an "essential limit on our power [as] [i]t ensures that we act as judges, and do not engage in
policymaking properly left to elected representatives." 29 For if the Court would rule in all cases
despite lacking the requirement of an actual case, the Court might tread on forbidden grounds or
matters on which it had no constitutional competence, these matters being reserved to a more
appropriate branch of government pursuant to the established principle of separation of powers.
As ingrained in our jurisprudence, an actual case is one that is appropriate or ripe for
determination, not conjectural or anticipatory. 30 "[C]ourts do not sit to adjudicate mere academic
questions to satisfy scholarly interest, however intellectually challenging." 31 It has been said that
any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile
conclusions unrelated to actualities. 32 For said reasons, courts have no business issuing advisory
opinions.
Traditionally, a justiciable controversy must involve countervailing interests pertaining to
enforceable and demandable rights of adverse parties. But with the constitutionally granted
expansion of the power of judicial review brought about to reflect the people's desire to have a
proactive Judiciary that is ever vigilant with its duty to maintain the supremacy of the Constitution,
33 justiciable questions took an expanded form. As held in Imbong v. Ochoa, 34 the Judiciary would
now have the constitutional authority to determine whether there had been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. 35
A cursory reading of the petition and petition-in-intervention reflects that this case falls
within that category as grave abuse of discretion is being ascribed against the SEC in issuing MC
No. 8. Section 2 of the said circular is being challenged for being in violation of the Constitution and
of the letter and spirit of the final ruling in Gamboa. Considering the fact that MC No. 8 had already
been issued by the SEC and such circular, although called merely as guidelines, carried with it a
warning that failure to comply with it shall subject the juridical entity, any person, and the corporate
officers responsible to sanctions provided in Section 14 of the Foreign Investments Act of 1991
(FIA), as amended, it is beyond doubt that the question before the Court qualifies as a justiciable
controversy.
Legal Standing
As defined, locus standi or legal standing is the personal and substantial interest in a case
such that the party has sustained or will sustain direct injury as a result of the governmental act that
is being challenged. 36 The party must also demonstrate that the injury is likely to be redressed by a
favorable action of the courts. 37 Absent this, the Court cannot consider a case. In every situation, the
Court must scrutinize first whether a petitioner is suited to challenge a particular governmental act.
The petitioners' invocation of standing is based on being a citizen, lawyer, taxpayer, and
additionally for petitioner Roy, a partner of a firm that patronizes PLDT for its telecommunication
needs.
The SEC and PLDT claim that such justification is not enough to clothe the petitioners with
legal standing because they failed to show that the implementation of the circular would cause them
any direct or substantial injury. Citing IBP v. Zamora, 38 they also argue that standing cannot be
based merely on being a lawyer, as membership in the Bar is too general an interest to satisfy the
requirement of locus standi.
I find, however, that the petitioners as properly suited in their capacities as citizens.
In many cases, the legal standing of a citizen in the context of issues concerning
constitutional questions was permitted by the Court. In Imbong v. Ochoa, 39 the Court stated that the
citizen's standing to question the constitutionality of a law could be allowed even if they had only an
indirect and general interest shared in common with the public, provided that it involved the
assertion of a public right specifically in cases where the people themselves were regarded as the
real parties-in-interest. The assertion of a public right as a predicate for challenging a supposedly
illegal or unconstitutional executive or legislative action rests on the theory that a citizen represents
the public in general. Although such citizen may not be as adversely affected by the action
complained against as are others, it is enough that there is demonstration of entitlement to protection
or relief from the Court in the vindication of a public right. 40
The collective interest of the Filipino in the compliance of the SEC, being the statutory
regulator in charge of enforcing and monitoring observance with the Court's interpretation of the
constitutional limits on foreign participation in public utilities, is a matter of public right. A manifest
error in the implementation of what the Constitution demands, specifically in the crafting of a legal
framework for corporate observance on nationality limits, lies grave abuse of discretion in its heart.
This transcendentally important question requires the Court to determine whether MC No. 8
conforms to the final ruling in Gamboa. Thus, as citizens, petitioners have the proper standing to
challenge the validity and constitutionality of the assailed circular. TaCEHA
Substantive Issues
For the reason that Filipinos must remain in effective control of a public utility company, I
am of the strong view that the Court should have partly granted the petition and declared SEC MC
No. 8 as non-compliant with the final Gamboa ruling.
The Gamboa Decision and Resolution
Mindful of the constitutional objective of ensuring that Filipinos remain in effective control
of our national economy, the Court in Gamboa seized the opportunity to define the term capital as
read in the context of the 1987 Constitution. In deciding the issue, the Court fundamentally
recognized and employed the control test 41 as a primary method of determining compliance with
the restrictions imposed by the Constitution on foreign equity participation. Under such test, one has
to first look into the nationality of each stockholder as it appears in the books of the corporation
because for a stockholder to have control over the shares, he must hold them as the duly registered
owner in the stock and transfer book of a corporation. Thus, in Gamboa, the Court declared that the
required Filipino control over the "capital" of a public utility meant 60% control over all shares with
the right to elect the members of the board coupled with 60% control over the total outstanding
capital stock. This would ensure that effective control over a public utility would remain in the
hands of Filipinos.
The Court, however, further stated that even stockholders, deprived of the right to participate
in the elections of directors, could still exert effective control through the power of their vote on
fundamental corporate transactions as outlined under Section 6 of the Corporation Code. 42 For
instance, stockholders, holding preferred shares, though not generally entitled to elect directors, can
still exercise their undeniable right to approve or disapprove an amendment in the articles of
incorporation.
Foreigners can greatly control and influence corporate decision-making processes even if
they do not have legal title to the shares. Non-stockholders or persons or entities that do not have
shares of a subject corporation registered under their names can remain in effective control, albeit
indirectly, of those with controlling interest by just having specific property rights ("use and title") in
equity given to them while the legal title of the property given to another. 43 Thus, in the Gamboa
Resolution it was clarified and stressed that: EDCTIa

corporation, it is therefore imperative that such requirement apply uniformly and across
the board to all classes of shares, regardless of nomenclature and category, comprising
the capital of a corporation. Under the Corporation Code, capital stock consists of all
classes of shares issued to stockholders, that is, common shares as well as preferred shares,
which may have different rights, privileges or restrictions as stated in the articles of
incorporation. 44 [Emphases supplied]
The Court then went on to explain that "[f]ull beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60% of the voting rights, is also required." In other words,
not only should the 60% of the total outstanding capital stock and the shares with the right to elect
the directors be registered in the names of Filipinos, but also the beneficial or equitable title to such
shares must be reasonably 45 traced to Filipinos.
Thus, in Narra Nickel Mining and Development Corp. v. Redmont Consolidated Mines Corp.,
46 the Court stated that if doubt exists as to the extent of control and beneficial ownership in a public
utility, the grandfather rule can be applied to supplement the control test. The purpose of the test is
to make further inquiry on the ownership of the corporate stockholders. 47 By satisfying beneficial
ownership test through the employment of the grandfather rule, devious yet imaginative legal
strategies used to circumvent the constitutional and statutory limits on foreign equity participation
can be determined. 48
The Assailed Circular as it
relates to Gamboa Resolution
The petitioners strongly assert that the SEC gravely abused its discretion when it issued MC
No. 8, with specific reference to Section 2, which is again quoted as follows:
directors.
Roy points out that the SEC did not include in the assailed circular the requirement of
applying the 60-40 rule to each and every class of shares. He fears that although Filipinos will have
voting rights, they may remain deprived of the full economic benefits if the rule is not applied to all
classes of shares.
I agree with the petitioners.
The Basis of the Uniform and
Separate Application of 60:40 Rule to
Each and Every Class of Shares
It has been said that economic rights give meaning to control. The general assumption is that
control rights are always coupled with proportionate economic interest in a corporation. This
proportionality gives stockholders theoretically an incentive to exercise voting power well, makes
possible the market for corporate control and legitimates managerial property the managers do not
own. 49
The same theory is adhered to by the Constitution. The words "own and control," used to
qualify the minimum Filipino participation in Section 11, Article XII of the Constitution, reflects the
importance of Filipinos having both the ability to influence the corporation through voting rights and
economic benefits. In other words, full ownership up to 60% of a public utility encompasses both
control and economic rights, both of which must stay in Filipino hands. Filipinos, who own 60% of
the controlling interest, must also own 60% of the economic interest in a public utility.
In a single class structured corporation, the proportionality required can easily be determined.
In mixed class or dual structured corporations, however, there is variance in the proportion of
stockholders' controlling interest vis-à-vis their economic ownership rights. This resulting variation
is recognized by the Implementing Rules and Regulation (IRR) of the Securities Regulation Code, 50
which defined beneficial ownership as that may exist either through voting power and/or through
investment returns. By using and/or in defining beneficial ownership, the IRR, in effect, recognizes
a possible situation where voting power is not commensurate to investment power. ADCIca
Disparity in privileges accorded to different classes of shares was best illustrated in the
Gamboa Resolution. By operation of Section 6 of the Corporation Code, 51 preferred class of shares
may be created with superior economic rights as compared to the other classes. Dissimilar shares,
although similar in terms of number, can differ in terms of benefits. In such cases, holders of
preferred shares, although constituting only a smaller portion of the total outstanding capital stock of
the corporation, can have greater economic interest over those of common stockholders.
In the event that a public utility corporation restructures and eventually concentrates all
foreign shareholdings solely to a preferred class of shares with high yielding investment power,
foreigners would, in effect, have economic interests exceeding those of the Filipinos with less
economically valuable common shares. Evidently, this was not envisioned by the framers of the
Constitution. And for the reasons that follow, the Court considers such a situation as an affront to the
Constitution.
To begin with, it dilutes the potency of Filipino control in a public utility.
Economic rights effectively encourage the controlling stockholders to exercise their control
rights in accordance with their own interest. Necessarily, if Filipino controlling stockholders have
dominance over both economic ownership and control rights, their decisions on corporate matters
will mean independence from external forces.
Conversely, if Filipino controlling stockholders do not have commensurate level of interest in
the economic gains of a public utility, the disparity would allow foreigners to intervene in the
management, operation, administration or control of the corporation through means that circumvent
the limitations imposed by the Constitution. It would foster the creation of falsely simulated
existence of the required Filipino equity participation, an act prohibited under Section 2 of
Commonwealth Act No. 108, commonly known as the Anti-Dummy Law, 52 effectively
circumventing the rationale behind the constitutional limitations on foreign equity participation.
Moreover, the variation in the classes of shares would allow foreigners to acquire preferential
interest and advantage in the remaining assets of the corporation after its dissolution or termination.
This runs counter to the intent of the present constitution — the conservation and development of
the national patrimony. Filipino stockholders should not only be entitled to the benefits generated by
a public utility, they should equally have the right to receive the greater share in whatever asset that
would be left should the corporation face its end.
Clearly the only way to minimize, if not totally prevent disparity of control and economic
rights given to Filipinos, and to obstruct consequences not envisioned by the Constitution, is to
apply the 60-40 rule separately to each class of shares of a public utility corporation. It results
in the equalization of Filipino interests, both in terms of control and economic rights, in each and
every class of shares. By making the economic rights and controlling rights of Filipinos in a public
utility paramount, directors and managers would be persuaded to act in the interest of the Filipino
stockholders. In turn, the Filipino stockholders would exercise their corporate ownership rights in
ways that would benefit the entire Filipino people cognizant of the trust and preference accorded to
them by the Constitution.
Neither an Obiter Dictum or a Treaty Violation
The respondents claim that the statement that the 60-40 rule applies to each type of shares
was a mere obiter dictum. As reference, they point to the dispositive portions of the Gamboa
Decision and Gamboa Resolution, where there is no directive that the 60-40 rule should apply to
each class of shares. They insisted that the controlling rule should be what was stated in the fallo of
the decision in Gamboa that the 60-40 rule applied only to shares with the right to vote in the
election of directors. PSEI also cautions this Court in upholding the application of the 60-40 rule to
each type of shares because it would redefine what was stated in the Gamboa Decision. It would
also affect the obligation of the State under different treaties and executive agreements, and could
disastrously affect the stock exchange market and the state of foreign investments in the country.
Again, on this point, I differ. The majority disregarded the final ruling in Gamboa.
Jurisprudence is replete with the doctrine "that a final and executory judgment may
nonetheless be "clarified" by reference to other portions of the decision of which it forms a part; that
a judgment must not be read separately but in connection with the other portions of the decision of
which it forms a part. Otherwise stated, a decision should be taken as a whole and considered in its
entirety to get the true meaning and intent of any particular portion thereof. 53 It "must be construed
as a whole so as to bring all of its parts into harmony as far as this can be done by fair and
reasonable interpretation and so as to give effect to every word and part, if possible, and to
effectuate the obvious intention and purpose of the Court, consistent with the provisions of the
organic law." 54 A final ruling in Gamboa, therefore, includes the clarification and elucidation in the
subsequent Gamboa Resolution, which was unquestioned until it lapsed into finality. ACTIHa
The claimed inconsistency in the definition of capital in the Gamboa Decision and Gamboa
Resolution and on how the Court uses them in this case is more apparent than real. A deeper
understanding of the Court's philosophical underpinning on the issue of capital is that capital must
be construed in relation to the constitutional goal of securing the controlling interest in favor of
Filipinos.
Plain from the Court's previous discussions is the conclusion that controlling interest in a
public utility cannot be achieved by applying the 60-40 rule solely to shares with the right to vote in
the election of directors; it must be applied to all classes of shares. Although applying the rule
only to such shares gives an assurance that Filipinos will have control over the choice on who will
manage the corporation, it does not mean that they also control the decisions that are fundamentally
important to the corporation. If they would own 60% of all the shares of whatever class, they cannot
be denied the right to vote on important corporate matters. To the Court, the only way by which
Filipinos can be assured of having the controlling interest is to apply the 60:40 rule to each class of
shares regardless of restrictions or privileges present, with each class, being considered as a
distinct but indispensable and integral part of the entire capital of a public utility for the
purpose of determining the nationality restrictions under the Constitution.
On the point of PSEI that a ruling in favor of the petitioners would lead to a violation of the
obligation of the Philippines to provide fair and equitable treatment to foreign investors who have
relied on the FIA and its IRR, as well as predecessor statutes, the Court believes otherwise. Basic is
the rule that the Constitution is paramount above all else. It prevails not only over domestic laws,
but also against treaties and executive agreements. It cannot be said either that due process and equal
protection were violated. These constitutional limitations on foreign equity participation have been
there all along.
Need for a Constitutional Amendment
Until the people decide, through a new constitution, to ease the restrictions on foreign
participation in the public utility sector, the Court should resolve all doubts in favor of upholding the
spirit and intent of the 1987 Constitution.
As the SEC Memorandum Circular No. 8 is non-compliant with the final Gamboa ruling, the
omission by the SEC of the 60-40 rule application in favor of Filipinos to each and every class of
shares of a public utility constituted, and should have been declared, a grave abuse of discretion.
In view of all the foregoing, the petition should have been granted and SEC Memorandum
Circular No. 8 should have been declared as non-compliant with the final Gamboa ruling.
Accordingly, the Security and Exchange Commission should n have been directed to strictly
comply with the final Gamboa ruling, by including in the assailed circular the rule on the application
of the 60-40 nationality requirement to each class of shares regardless of restrictions or privileges in
accordance with the foregoing disquisition.
LEONEN, J., dissenting:
I dissent from the Decision denying the Petition. Respondent Securities and Exchange
Commission's Memorandum Circular No. 8, series of 2013 is inadequate as it fails to encompass
each and every class of shares in a corporation engaged in nationalized economic activities. This is
in violation of the constitutional provisions limiting foreign ownership in certain economic
activities, and is in patent disregard of this Court's statements in its June 28, 2011 Decision 1 as
further illuminated in its October 9, 2012 Resolution 2 in Gamboa v. Finance Secretary Teves. Thus,
the Securities and Exchange Commission gravely abused its discretion.
A better considered reading of both the 2011 Decision and 2012 Resolution in Gamboa
demonstrates this Court's adherence to the rule on which the present Decision turns: that the 60 per
centum (or higher, in the case of Article XII, Section 10) Filipino ownership requirement in
corporations engaged in nationalized economic activities, as articulated in Article XII and Article
XIV 3 of the 1987 Constitution, must apply "to each class of shares, regardless of differences in
voting rights, privileges and restrictions[.]" 4
The 2011 Decision and 2012 Resolution in Gamboa concededly lend themselves to some
degree of confusion. The dispositive portion in the 2011 Decision explicitly stated that "the term
'capital' in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to
vote in the election of directors[.]" 5 The 2012 Resolution, for its part, fine-tuned this. Thus, it
clarified that each class of shares, not only those entitled to vote in the election of directors, is
subject to the Filipino ownership requirement. 6 However, the 2012 Resolution did not recalibrate
the 2011 Decision's dispositive portion — inclusive of its definition of "capital." Rather, it merely
stated that the motions for reconsideration were denied with finality and that no further pleadings
shall be allowed. 7
Nevertheless, a judgment must be read in its entirety; in such a manner as to bring harmony
to all of its parts and to facilitate an interpretation that gives effect to its entire text. The brief
statement in the dispositive portion of the 2012 Resolution that the motions for reconsideration were
denied was not inconsistent with the jurisprudential fine-tuning of the concept of "capital." Neither
was it inadequate; it succinctly stated the action taken by the court on the pending incidents of the
case. The dispositive portion no longer needed to pontificate on the concept of "capital," for all that
it needed to state — to dispose of the case, at that specific instance — was that the motions for
reconsideration had been denied.
The brevity of the 2012 Resolution's dispositive portion was certainly not all that there was to
that Resolution. The Court's having promulgated an extended resolution (as opposed to the more
commonplace minute resolutions issued when motions for reconsideration raise no substantial
arguments or when the Court's prior decision or resolution on the main petition had already passed
upon all the basic issues) is telling. It reveals that the Court felt it necessary to engage anew in an
extended discussion because matters not yet covered, needing greater illumination, warranting re-
calibration, or impelling fine-tuning, were then expounded on. This, even if the ultimate juridical
result would have merely been the denial of the motions for reconsideration. It would be a disservice
to the Court's own wisdom then, if attention was to be drawn solely to the disposition denying the
motions for reconsideration, while failing to consider the rationale for that denial. CaSAcH
This position does not violate the doctrine on immutability of judgments. The Gamboa ruling
is not being revisited or re-evaluated in such a manner as to alter it. Far from it, this position affirms
and reinforces it. In resolving the validity of the Securities and Exchange Commission's
Memorandum Circular No. 8, this position merely echoes the conception of capital already
articulated in Gamboa; it does not invent an unprecedented idea. This echoing builds on an
integrated understanding, rather than on a myopic or even isolationist emphasis on a matter that the
dispositive portion no longer even needed to state.
In any case, the present Petition does not purport or sets itself out as a bare continuation of
Gamboa. If at all, it accepts Gamboa as a settled matter, a fait accompli; and only sets out to ensure
that the matters settled there are satisfied. This, then, is an entirely novel proceeding precipitated by
a distinct action of an instrumentality of government that, as the present Petition alleges, deviates
from what this Court has put to rest.
Memorandum Circular No. 8, an official act of the Securities and Exchange Commission,
suffices to trigger a justiciable controversy. There is no shortage of precedents (e.g., Province of
North Cotabato, et al. v. Government of the Republic of the Philippines Peace Panel on Ancestral
Domain (GRP), et al., 8 Imbong v. Ochoa, Jr., 9 and Disini, Jr., et al. v. The Secretary of Justice, et
al.) 10 in which this Court appreciated a controversy as ripe for adjudication even when the trigger
for judicial review were official enactments which supposedly had yet to occasion an actual
violation of a party's rights. Province of North Cotabato is on point:
The Solicitor General argues that there is no justiciable controversy that is ripe for
judicial review in the present petitions, reasoning that:
The unsigned MOA-AD is simply a list of consensus points subject to
further negotiations and legislative enactments as well as constitutional
processes aimed at attaining a final peaceful agreement. Simply put, the MOA-
AD remains to be a proposal that does not automatically create legally
demandable rights and obligations until the list of operative acts required have
been duly complied with. . . .
xxx xxx xxx
In the cases at bar, it is respectfully submitted that this Honorable Court
has no authority to pass upon issues based on hypothetical or feigned
constitutional problems or interests with no concrete bases. Considering the
preliminary character of the MOA-AD, there are no concrete acts that could
possibly violate petitioners' and intervenors' rights since the acts complained of
are mere contemplated steps toward the formulation of a final peace
agreement. Plainly, petitioners and intervenors' perceived injury, if at all, is
merely imaginary and illusory apart from being unfounded and based on mere
conjectures. . . .
xxx xxx xxx
The Solicitor General's arguments fail to persuade.
Concrete acts under the MOA-AD are not necessary to render the present controversy
ripe. In Pimentel, Jr. v. Aguirre, this Court held:
. . . [B]y the mere enactment of the questioned law or the approval of
the challenged action, the dispute is said to have ripened into a judicial
controversy even without any other overt act. Indeed, even a singular violation
of the Constitution and/or the law is enough to awaken judicial duty.
xxx xxx xxx
By the same token, when an act of the President, who in our
constitutional scheme is a coequal of Congress, is seriously alleged to have
infringed the Constitution and the laws . . . settling the dispute becomes the
duty and the responsibility of the courts.
In Santa Fe Independent School District v. Doe, the United States Supreme Court held
that the challenge to the constitutionality of the school's policy allowing student-led prayers
and speeches before games was ripe for adjudication, even if no public prayer had yet been
led under the policy, because the policy was being challenged as unconstitutional on its face.
That the law or act in question is not yet effective does not negate ripeness. For
example, in New York v. United States, decided in 1992, the United States Supreme Court held
that the action by the State of New York challenging the provisions of the Low-Level
Radioactive Waste Policy Act was ripe for adjudication even if the questioned provision was
not to take effect until January 1, 1996, because the parties agreed that New York had to take
immediate action to avoid the provision's consequences. 11 (Underscoring and citations
omitted) CcSTHI
The Court, here, is called to examine an official enactment that supposedly runs afoul of the
Constitution's injunction to "conserve and develop our patrimony," 12 and to "develop a self-reliant
and independent national economy effectively controlled by Filipinos." 13 This allegation of a
serious infringement of the Constitution compels us to exercise our power of judicial review.
A consideration of the constitutional equity requirement as applying to each and every single
class of shares, not just to those entitled to vote for directors in a corporation, is more in keeping
with the "philosophical underpinning" 14 of the 1987 Constitution, i.e., "that capital must be
construed in relation to the constitutional goal of securing the controlling interest in favor of
Filipinos." 15
No class of shares is ever truly bereft of a measure of control of a corporation. It is true, as
Section 6 16 of the Corporation Code permits, that preferred and/or redeemable shares may be denied
the right to vote extended to other classes of shares. For this reason, they are also often referred to as
'non-voting shares.' However, the absolutist connotation of the description "non-voting" is
misleading. The same Section 6 provides that these "non-voting shares" are still entitled to vote on
the following matters:
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of
the corporate property;
6. Merger or consolidation of the corporation with another corporation or other
corporations;
7. Investment of corporate funds in another corporation or business in accordance with this
Code; and
In the most crucial corporate actions — those that go into the very constitution of the
corporation — even so-called non-voting shares may vote. Not only can they vote; they can be
pivotal in deciding the most basic issues confronting a corporation. Certainly, the ability to decide a
corporation's framework of governance (i.e., its articles of incorporation and by-laws), viability
(through the encumbrance or disposition of all or substantially all of its assets, engagement in
another enterprise, or subjection to indebtedness), or even its very existence (through its merger or
consolidation with another corporate entity, or even through its outright dissolution) demonstrates
not only a measure of control, but even possibly overruling control. "Non-voting" preferred and
redeemable shares are hardly irrelevant in controlling a corporation.
It is in this light that I emphasize the necessity, not only of legal title, but more so of full
beneficial ownership by Filipinos of the required percentage of capital in certain corporations
engaged in nationalized economic activities. This has been underscored in Gamboa. This too, is a
matter, which I emphasized in my Dissenting Opinion in the Narra Nickel and Development Corp. v.
Redmont Consolidated Mines Corp. 17 April 21, 2014 Decision. SDTIaE
I likewise emphasize "the [C]ontrol [T]est as a primary method of determining compliance

with the restrictions imposed by the Constitution on foreign equity participation," 18 along with a
recognition of the Grandfather Rule as a "supplement" 19 to the Control Test.
My Dissent from the April 21, 2014 Decision in Narra Nickel, noted that "there are two (2)
ways through which one may be a beneficial owner of securities, such as shares of stock: first, by
having or sharing voting power; and second, by having or sharing investment returns or power." 20
This is gleaned from the definition of "beneficial owner or beneficial ownership" provided for in the
Implementing Rules and Regulations of the Securities Regulation Code. 21
Full beneficial ownership vis-à-vis capacity to control a corporation is self-evident in
ownership of voting stocks: the investiture of the capacity to vote evinces involvement in the
running of the corporation. Through it, a stockholder participates in corporate decision-making, or
otherwise participates in the designation of directors — those individuals tasked with overseeing the
corporation's activities.
Appreciating full beneficial ownership and control in a corporation may require a more
nuanced approach when the subject of inquiry is investment returns or power. Control through the
capacity to vote can be countervailed, if not totally negated, by reducing voting shares to empty
shells that represent nominal ownership even as the corporation's economic gains actually redound
to the holders of other classes of shares. There exist practices such as corporate layering which, can
be used to undermine the Constitution's equity requirements.
It is in the spirit of ensuring that effective control is lodged in Filipinos that the dynamics of
applying the Control Test and the Grandfather Rule must be considered.
As I emphasized in my twin dissents in the Narra Nickel April 21, 2014 Decision and
January 28, 2015 Resolution, 22 with the 1987 Constitution's silence on the specific mechanism for
reckoning Filipino and foreign equity ownership in corporations, the Control Test — statutorily
established through Republic Act No. 8179, the Foreign Investments Act — "must govern in
reckoning foreign equity ownership in corporations engaged in nationalized economic activities." 23
Nevertheless, "the Grandfather Rule may be used . . . as a further check to ensure that control and
beneficial ownership of a corporation is in fact lodged in Filipinos." 24
The Control Test was established by legislative fiat. The Foreign Investments Act "is the
basic law governing foreign investments in the Philippines, irrespective of the nature of business and
area of investment." 25 Its Section 3 (a) defines a "Philippine national" as including "a corporation
organized under the laws of the Philippines of which at least sixty per cent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines[.]" In my Dissent in
the Narra Nickel April 21, 2014 Decision:
This is a definition that is consistent with the first part of paragraph 7 of the 1967 SEC Rules,
which [originally articulated] the Control Test: "[s]hares belonging to corporations or
partnerships at least 60 per cent of the capital of which is owned by Filipino citizens shall be
considered as of Philippine nationality." 26
The Control Test serves the purposes of ensuring effective control and full beneficial
ownership of corporations by Filipinos, even as several corporations may be involved in the equity
structure of another. As I explained in my Dissent from the April 21, 2014 Decision in Narra Nickel:
It is a matter of transitivity that if Filipino stockholders control a corporation which, in
turn, controls another corporation, then the Filipino stockholders control the latter
corporation, albeit indirectly or through the former corporation.
An illustration is apt.
Suppose that a corporation, "C", is engaged in a nationalized activity requiring that

60% of its capital be owned by Filipinos and that this 60% is owned by another corporation,
"B", while the remaining 40% is owned by stockholders, collectively referred to as "Y". Y is
composed entirely of foreign nationals. As for B, 60% of its capital is owned by stockholders
collectively referred to as "A", while the remaining 40% is owned by stockholders
collectively referred to as "X". The collective A, is composed entirely of Philippine nationals,
while the collective X is composed entirely of foreign nationals. (N.b., in this illustration,
capital is understood to mean "shares of stock entitled to vote in the election of directors," per
the definition in Gamboa). Thus: AacCIT
By owning 60% of B's capital, A controls B. Likewise, by owning 60% of C's capital,
B controls C. From this, it follows, as a matter of transitivity, that A controls C; albeit
indirectly, that is, through B.
This "control" holds true regardless of the aggregate foreign capital in B and C. As
explained in Gamboa, control by stockholders is a matter resting on the ability to vote in the
election of directors:
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.
B will not be outvoted by Y in matters relating to C, while A will not be outvoted by
X in matters relating to B. Since all actions taken by B must necessarily be in conformity with
the will of A, anything that B does in relation to C is, in effect, in conformity with the will of
A. No amount of aggregating the foreign capital in B and C will enable X to outvote A, nor Y
to outvote B.
In effect, A controls C, through B. Stated otherwise, the collective Filipinos in A,
effectively control C, through their control of B. 27 (Emphasis in the original)
Full beneficial ownership is addressed both with respect to voting power and investment
returns or power.
As I explained, on voting power:
Voting power, as discussed previously, ultimately rests on the controlling stockholders
of the controlling investor corporation. To go back to the previous illustration, voting power
ultimately rests on A, it having the voting power in B which, in turn, has the voting power in
C. 28
As I also explained, on investment returns or power:
As to investment returns or power, it is ultimately A which enjoys investment power.
It controls B's investment decisions — including the disposition of securities held by B —
and (again, through B) controls C's investment decisions.
Similarly, it is ultimately A which benefits from investment returns generated through
C. Any income generated by C redounds to B's benefit, that is, through income obtained from
C, B gains funds or assets which it can use either to finance itself in respect of capital and/or
operations. This is a direct benefit to B, itself a Philippine national. This is also an indirect
benefit to A, a collectivity of Philippine nationals, as then, its business — B — not only
becomes more viable as a going concern but also becomes equipped to funnel income to A.
Moreover, beneficial ownership need not be direct. A controlling shareholder is
deemed the indirect beneficial owner of securities (e.g., shares) held by a corporation of
which he or she is a controlling shareholder. Thus, in the previous illustration, A, the
controlling shareholder of B, is the indirect beneficial owner of the shares in C to the extent
that they are held by B. 29
Nevertheless, ostensible equity ownership does not preclude unscrupulous parties' resort to
devices that undermine the constitutional objective of full beneficial ownership of and effective
control by Filipinos. It is at this juncture that the Grandfather Rule finds application:
Bare ownership of 60% of a corporation's shares would not suffice. What is necessary is such
ownership as will ensure control of a corporation.
. . . [T]he Grandfather Rule may be used as a supplement to the Control Test, that is,
as a further check to ensure that control and beneficial ownership of a corporation is in
fact lodged in Filipinos.
For instance, Department of Justice Opinion No. 165, series of 1984, identified the
following "significant indicators" or badges of "dummy status":
1. That the foreign investor provides practically all the funds for the joint
investment undertaken by Filipino businessmen and their foreign partner[;]
2. That the foreign investors undertake to provide practically all the technological
support for the joint venture[; and]
3. That the foreign investors, while being minority stockholders, manage the
company and prepare all economic viability studies.
In instances where methods are employed to disable Filipinos from exercising control
and reaping the economic benefits of an enterprise, the ostensible control vested by ownership
of 60% of a corporation's capital may be pierced. Then, the Grandfather Rule allows for a
further, more exacting examination of who actually controls and benefits from holding such
capital. 30
It is opportune that the present Petition has enabled this Court to clarify both the conception
of capital, for purposes of compliance with the 1987 Constitution, and the mechanisms — primarily
the Control Test, and suppletorily, the Grandfather Rule — through which such compliance may be
assessed.
ACCORDINGLY, I vote to grant the Petition. TIEHSA
Footnotes
*On official leave.

**No Part and On official leave.
***No Part.
1.These are the Petition for Certiorari filed on June 10, 2013 (the "Petition") and Petition-in-Intervention
(for Certiorari) filed on July 30, 2013 (the "Petition-in-Intervention"). They will be referred to
collectively as the "petitions."
2.Gamboa v. Finance Secretary Teves, 668 Phil. 1 (2011).
3.Heirs of Wilson P. Gamboa v. Finance Sec. Teves, 696 Phil. 276 (2012).
4.Gamboa v. Finance Secretary Teves, supra note 2, at 69-70.
5.Heirs of Wilson P. Gamboa v. Finance Sec. Teves, supra note 3, at 363.
6.Rollo (Vo. II), pp. 605-609.
7.Id. at 547.
8.Id. at 548.
9.Id. at 605-609.
10.Id. at 548.
11.Id.
12.Rollo (Vol. I), pp. 31-33.
13.Rollo (Vol. II), pp. 549, 587-588.
14.Id. at 588.
15.Rollo (Vol. I), pp. 3-206 (with annexes).
16.Son of deceased petitioner Wilson P. Gamboa in Gamboa.
17.Rollo (Vol. I), pp. 222-230 (with annex).
18.Id. at 231-446 (with annexes).
19.Id. at 466-530.
20. Rollo (Vol. II), pp. 544-615 (with annexes).
21. Id. at 633-654.
22.Petitioner Roy and intervenors Gamboa, et al. will be collectively referred to as the "petitioners."
23.Rollo (Vol. II), pp. 723-762 (with annex).
24.Id. at 765-828.
25.Id. at 839-847.
26.Id. at 848-879.
27. Id. at 880.
28.Id. at 964-1077.
29.A non-stock and non-profit association composed of shareholders of Philippine companies, which aims to
advocate changes in the legal and regulatory framework that will help improve the rights of
minority shareholders and to promote and protect all types of shareholders' rights under existing
laws, rules and regulations. Id. at 1081.
30.Id. at 1080-1114.
31.Resolution dated June 14, 2016, id. at 1115-1116.
32.Id. at 1117-1133.
33.Id. at 1134-1138.
34.Id. at 544-615 (with annex).
35.Id. at 580.
36.Belgica v. Ochoa, 721 Phil. 416, 518-519 (2013), citing Joya v. Presidential Commission on Good
Government (PCGG), 296-A Phil. 595, 602 (1993) and Biraogo v. The Philippine Truth
Commission of 2010, 651 Phil. 374, 438 (2010); Hon. General v. Hon. Urro, 662 Phil. 132, 144
(2011), citing Integrated Bar of the Philippines v. Zamora, 392 Phil. 618, 632 (2000).
37.Id. at 519-520. Citations omitted.
38.";" instead of "." in the Petition-in-Intervention.
39."%" is omitted in the Petition-in-Intervention.
40.";" instead of "." in the Petition-in-Intervention. Petition for Certiorari, rollo (Vol. I), p. 12; Petition-in-
intervention, id. at 243.
41.Galicto v. Aquino III, 683 Phil. 141, 170-171 (2012), citing Miñoza v. Lopez, 664 Phil. 115, 123 (2011).
42.Id. at 170, citing Tolentino v. Commission on Elections, 465 Phil. 385, 402 (2004).
43.Id. at 172. Citations omitted.
44.Rollo (Vol. I), p. 7.
45.Motion for Leave to file Petition-in-Intervention, id. at 224-225.
46.Galicto v. Aquino III, supra note 41, at 172-173, citing Integrated Bar of the Philippines v. Zamora, supra
note 36, at 633.
47.Automotive Industry Workers Alliance v. Romulo, 489 Phil. 710, 719 (2005). Citations omitted.
48.PLDT's Consolidated Memorandum, rollo (Vol. II), p. 992.
49.Petition for Certiorari, rollo (Vol. 1), p. 10, and Petition-in-intervention (For Certiorari), rollo (Vol. I), p.
240.
50.Republic v. Roque, 718 Phil. 294, 307 (2013), citing Southern Hemisphere Engagement Network, Inc. v.
Anti-Terrorism Council, 646 Phil. 452, 478 (2010).
51.See Galicto v. Aquino III, supra note 41, at 170, citing Lozano v. Nograles, 607 Phil. 334, 344 (2009).
52.693 Phil. 399 (2012).
53.Id. at 412.
54. Id. at 414.
55.Rollo (Vol. II), pp. 848-879.
56.Id. at 1080-1114.
57.See Cua, Jr. v. Tan, 622 Phil. 661, 720 (2009).
58.De Galicia v. Mercado, 519 Phil. 122, 127 (2006).
59.Rollo (Vol. II), p. 1107.
60.See Suntay v. Cojuangco-Suntay, 360 Phil. 932 (1998).
61.Gamboa v. Finance Secretary Teves, supra note 2.
62.In its Manifestation and Omnibus Motion dated July 29, 2011, the SEC stated: ". . . The Commission,
however, would submit to whatever would be the final decision of this Honorable Court on the
meaning of the term "capital."
In its Memorandum, the SEC also stated: "In the event that this Honorable Court rules with finality on the
meaning of "capital," the SEC will yield to the Court and follow its interpretation." (Heirs of Wilson
P. Gamboa v. Finance Sec. Teves, supra note 3, at 356-357, footnote 54; emphasis omitted.)
63.Heirs of Wilson P. Gamboa v. Finance Sec. Teves, id. at 356, 358.
64.Gamboa v. Finance Secretary Teves, supra note 2, at 35.
65.Id. at 51-53.
66.Id. at 69-70.
67.Id. at 58.
68.Id. at 44.
69.Id. at 53-54.
70.Id. at 55-57.
71.Id. at 57, 63.
72.Department of Justice.
73.Executive Order No. 226 or the Omnibus Investments Code of 1987; Presidential Decree No. 1789 or the
Omnibus Investments Code of 1981, and Republic Act No. 5186 or the Investment Incentives Act of
1967.
74.Heirs of Wilson P. Gamboa v. Finance Secretary Teves, supra note 3, at 321.
75.Id. at 331.
76.Id. at 342.
77.Id. at 361-362.
78.Rollo (Vol. I), p. 35.
79.Gamboa v. Finance Secretary Teves, supra note 2, at 57.
80.Id. at 69-70.
81.Id. at 57.
82.Heirs of Gamboa v. Finance Secretary Teves, supra note 3, at 361.
83.For definition of "Beneficial owner or beneficial ownership" and "Control," please refer to Sections 3.1.2
and 3.1.8, respectively of the 2015 Implementing Rules and Regulations of the Securities
Regulation Code.
84.2015 Implementing Rules and Regulations of the Securities Regulations Code, Sec. 3.1.2.
85.Implementing Rules and Regulations of Republic Act No. 7042 (Foreign Investment Act of 1991) as
Amended by Republic Act No. 8179, Sec. 1, b; underscoring and emphasis supplied.
86.Gamboa v. Finance Secretary Teves, supra note 2, at 57, 63. Emphasis and underscoring supplied.
87.Heirs of Gamboa v. Finance Secretary Teves, supra note 3, at 361.
88.A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity. [IAS 32 — Financial Instruments: Presentation, Key
definitions [IAS 32.11, available at <http://www.iasplus.com/en/standards/ias/ias32>, last accessed
on November 28, 2016]. The common examples of financial instruments within the scope of
International Auditing Standards (IAS) 39 are as follows: cash; demand and time deposit;
commercial paper; accounts, notes, and loans receivable and payable; debt and equity securities
which includes investments in subsidiaries, associates, and joint ventures; asset backed securities
such as collateralised mortgage obligations, repurchase agreements, and securitised packages of
receivables; and derivatives, including options, rights, warrants, futures contracts, forward
contracts, and swaps. [IAS 39 — Financial Instruments: Recognition and Measurement, available
at <http://www.iasplus.com/en/standards/ias/ias39>, last accessed on November 28, 2016].
89.IAS 32 Financial Instruments: Presentation, <http://www.ifrs.org/Documents/IAS32.pdf>, last accessed

on November 28, 2016.
90.International Accounting Standards.
91.<http://www.iasplus.com/en/standards/ias/ias32>, last accessed on November 28, 2016.
92.Id.
93.Biraogo v. The Philippine Truth Commission of 2010, supra note 36, at 463.
94.Gamboa v. Finance Secretary Teves, supra note 2, at 51-54. Underscoring supplied.
95.Sec. 16 (Amendment of Articles of Incorporation); Sec. 37 (Power to extend or shorten corporate term);
Sec. 38 (Power to increase or decrease capital stock; create or increase bonded indebtedness); Sec.
40 (Sale or other dispositions of [all or substantially all] assets); Sec. 42 (Power to invest corporate
funds in another corporation or business or for any other purpose); Sec. 48 (Amendments to by-
laws); Sec. 77 (Stockholder's or member's approval [of plan of merger or consolidation]); Sec. 118
(Voluntary dissolution where no creditors are affected); and Sec. 119 (Voluntary dissolution where
creditors are affected).
96.Sec. 81. Instances of appraisal right. — Any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or restricting the
rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to
those of outstanding shares of any class, or of extending or shortening the term of corporate
existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation.
97.Rollo (Vol. II), pp. 848-879.
98.Id. at 870. Emphasis supplied.
99.Id. at 1080-1114.
100.Id. 1105.
101.Id. at 1106-1107.
102.Petitioner Roy's Opposition and Reply to Interventions of Philippine Stock Exchange and SHAREPHIL
dated June 30, 2016, id. at 1128.
103. The PSE is an entity mandated to provide and maintain a convenient, economical, and suitable market
for the exchange of stocks, to formulate and implement rules and regulations to ensure that the
interests of all market participants are protected, and to provide an efficient and fair market for
buyers and sellers alike. The PSE alleges that, in case the petitions are granted, it stands to be
injured and there will be damaging consequences on the market, as it will force the reduction of
foreign investment and restrict capital outflow. PSE's Comment-in-Intervention, p. 2, id. at 849.
104. SHAREPHIL, as an association forwarding the rights and welfare of shareholders, alleges that it aims to
protect shareholders who have direct and substantial interest in this case and will no doubt be
adversely affected by the restrictive re-interpretation of the Gamboa ruling forwarded by the
petitioners. SHAREPHIL's Omnibus Motion [1] For Leave to Intervene; and [2] To Admit
Attached Comment-in-Intervention, par. 5, p. 3, id. at 1082.
105. 518 Phil. 478 (2006).
106. Id. at 482.
107. Heirs of Wilson P. Gamboa v. Finance Secretary Teves, supra note 3, at 339.
108. 716 Phil. 500, 515-516 (2013). Emphasis supplied; citations omitted.
109. Suntay v. Cojuangco-Suntay, supra note 60, at 944-945 (1998).
110. Contreras and Gingco v. Felix and China Banking Corp., 78 Phil. 570, 577-578 (1947). Citations
omitted.
111. Id. at 575.

112. See Land Bank of the Philippines v. Suntay, 678 Phil. 879, 913-914 (2011).
113. FGU Insurance Corp. v. RTC of Makati City, Branch 66, 659 Phil. 117, 123 (2011).
114. Id.
115. A.M. No. 10-4-20-SC, Rule 15, Sec. 3. Second motion for reconsideration. — The Court shall not
entertain a second motion for reconsideration, and any exception to this rule can only be granted in
the higher interest of justice by the Court en banc upon a vote of at least two-thirds of its actual
membership. There is reconsideration "in the higher interest of justice" when the assailed decision
is not only legally erroneous, but is likewise patently unjust and potentially capable of causing
unwarranted and irremediable injury or damage to the parties. A second motion for reconsideration
can only be entertained before the ruling sought to be reconsidered becomes final by operation of
law or by the Court's declaration.
xxx xxx xxx
116. See Spouses Mahusay v. B.E. San Diego, Inc., 666 Phil. 528, 536 (2011).
117. See Commissioner on Higher Education v. Mercado, 519 Phil. 399, 406 (2006).
SERENO, C.J., concurring:
1. Gamboa v. Teves, 668 Phil. 1 (2011) and Heirs of Gamboa v. Teves, 696 Phil. 276-485 (2012).
VELASCO, JR., J., concurring:
1. G.R. No. 176579, June 28, 2011, 652 SCRA 690 and October 9, 2012, 682 SCRA 397.
2. Emphasis supplied.
3. PLDT's Consolidated Memorandum, pp. 2-3, citing SEC Notice dated 6 November 2012.
4. In Re Save the Supreme Court Judicial Independence and Fiscal Autonomy Movement, UDK-15143,
January 21, 2015.
5. Hon. Luis Mario M. General v. Hon. Alejandro S. Urro, G.R. No. 191560, March 29, 2011, citing
Integrated Bar of the Philippines v. Zamora, 392 Phil. 618, 632 (2000).
6. Galicto v. Aquino III, G.R. No. 193978, February 28, 2012, citing Integrated Bar of the Philippines (IBP)
v. Hon. Zamora, 392 Phil. 618 (2000).
7. Automotive Industry Workers Alliance v. Romulo, 489 Phil. 710, 719 (2005); Gonzales v. Narvasa, 392
Phil. 518, 525 (2000).
8. Republic v. Roque, G.R. No. 204603, September 24, 2013.
9. G.R. No. 193978, February 28, 2012.
10. Emphasis supplied.
11. The Liga ng mga Barangay National v. The City Mayor of Manila, G.R. No. 154599, January 21, 2004.
12. Vergara Sr. v. Suelto, 240 Phil. 719, 732 (1987); De Castro v. Santos, G.R. No. 194994, April 16, 2013.
13. De Castro v. Santos, supra note 12, citing Santiago v. Vasquez, G.R. Nos. 99289-90, January 27, 1993,
217 SCRA 633; and People v. Cuaresma, 254 Phil. 418, 427 (1989).
14. Cua, Jr. v. Tan, G.R. No. 181455-56, December 4, 2009.
15. Id.; citing Galicia v. Mercado, G.R. No. 146744, March 6, 2006, 484 SCRA 131, 136-137.
16. See David v. Paragas, G.R. No. 176973, February 25, 2015 and Sy v. Court of Appeals, G.R. No. 94285,
August 31, 1999.
17. Id.
18. OKS Designtech, Inc. v. Caccam, G.R. No. 211263, August 5, 2015.
19. Gold City Integrated Services, Inc. v. Intermediate Appellate Court, G.R. Nos. 71771-73, March 31,
1989, citing Arguelles v. Young, G.R. No. L-59880, September 11, 1987, 153 SCRA 690; Republic
v. Heirs of Spouses Molinyawe, G.R. No. 217120, April 18, 2016; Olaño v. Lim Eng Co, G.R. No.
195835, March 14, 2016; City of Iloilo v. Honrado, G.R. No. 160399, December 9, 2015; OKS
Designtech, Inc. v. Caccam, G.R. No. 211263, August 5, 2015.
20. Ocean East Agency, Corp. v. Lopez, G.R. No. 194410, October 14, 2015.
21. Landbank of the Philippines v. Suntay, G.R. No. 188376, December 14, 2011.
22. Biraogo v. The Philippine Truth Commission, G.R. Nos. 192935 and 193036, December 7, 2010.
23. G.R. No. 176579, October 9, 2012, 682 SCRA 397.
24. Id. at 414.
BERSAMIN, J., concurring:
1. G.R. No. 176579, June 28, 2011, 652 SCRA 690; October 9, 2012 (resolution), 682 SCRA 397.
2. De los Santos v. Metropolitan Bank and Trust Corporation, G.R. No. 153852, October 24, 2012, 684
SCRA 410, 422-423.
3. Section 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject
thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46. (1a)
4. Section 2. Petition for prohibition. — When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or
in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging
the facts with certainty and praying that judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.
The petition shall likewise be accompanied by a certified true copy of the judgment, order or resolution
subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46. (2a)
5. See Securities and Exchange Commission v. Court of Appeals, G.R. No. 106425 & 106431-32, July 21,
1995, 246 SCRA 738, 740-741.
6. Securities and Exchange Commission v. Universal Rightfield Property Holdings, Inc., G.R. No. 181381,
July 20, 2015.
7. Section 1. . . .
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
8. G.R. No. 209287, July 1, 2014, 728 SCRA 1, 68-69.
9. Id. at 71-75.
10. Section 1. Executive Order No. 37 dated April 19, 2011.
11. 652 SCRA, at 723.
12. Id.
13. Id. at 726-730.
14. Id. at 744.
15. 682 SCRA at 443-470.
16. Id. at 445, where the Court said:
. . . [T]he 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.
17.Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, December 4, 2009, 607 SCRA 200, 212-
213.
18.FGU Insurance Corporation v. Regional Trial Court of Makati City, Branch 66, G.R. No. 161282,
February 23, 2011, 644 SCRA 50, 56.
19.Apo Fruits Corporation v. Court of Appeals, supra, at 213-214.
20.FGU Insurance Corporation v. Regional Trial Court of Makati City, Br. 66, supra, at 56.
21.Light Rail Transit Authority v. Court of Appeals, G.R. Nos. 139275-76 and 140949, November 25, 2004,
444 SCRA 125, 136.
22.PH Credit Corporation v. Court of Appeals, G.R. No. 109648, November 22, 2001, 370 SCRA 155, 166.
23.78 Phil. 570, 577-578 (1947).
24.Cobarrubias v. People, G.R. No. 160610, August 14, 2009, 596 SCRA 77, 89-90.
25.G.R. No. 179675, June 8, 2011, 651 SCRA 533, 539-540.
26.See Republic v. Unimex Micro Electronics GmBH, G.R. Nos. 166309-10, November 25, 2008, 571 SCRA
537, 540.
27.See Commissioner on Higher Education v. Mercado, G.R. No. 157877, March 10, 2006, 484 SCRA 424,
430-431.
CARPIO, J., dissenting:
1.668 Phil. 1 (2011).
2.Id. at 45.
3.Id. at 53.
4. Id. at 57.
5.Id.
6.696 Phil. 276 (2012).
7.Id. at 338-339.
8.Id. at 339, 341, 345.
9.Spouses Belo v. Philippine National Bank, 405 Phil. 851 (2001); Soriano v. Offshore Shipping and
Manning Corp., 258 Phil. 309 (1989).
MENDOZA, J., dissenting:
1.Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired
finality becomes immutable and unalterable, and may no longer be modified in any respect, even if
the modification is meant to correct erroneous conclusions of fact and law, and whether it be made
by the court that rendered it or by the Highest Court of the land. (Gomeco Metal Corp. v. Court of
Appeals, G.R. No. 202531, August 17, 2016.
2.668 Phil. 1 (2011) (Decision).
3.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.
4. Decision, supra note 2.
5. Resolution, G.R. No. 176579, October 9, 2012.

(http://sc.judiciary.gov.ph/jurisprudence/2012/october2012/176579.pdf) (Last visited, April 21,
2015).
6. Resolution, G.R. No. 176579, October 9, 2012.

(http://sc.judiciary.gov.ph/jurisprudence/2012/october2012/176579.pdf) (Last visited, April 21,
2015).
7. Rollo, pp. 270-272.
8. <https://.sec.gov.ph/.../memorandumcircular/.../sec%20memo%20no.%208> (Last visited, April 21,

2015).
9. Rollo, pp. 231-263.
10. Id. at 11.
11. Id. at 544-584.
12. Id. at 466-524.
13. Id. at 633-653.
14. Id. at 723-756.
15. Id. at 839-847.
16. Section 1. Who may intervene. — A person who has a legal interest in the matter in litigation, or in
the success of either of the parties, or an interest against both, or is so situated as to be adversely
affected by a distribution or other disposition of property in the custody of the court or of an officer
thereof may, with leave of court, be allowed to intervene in the action. The court shall consider
whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may be fully protected in a separate
proceeding. (2[a], [b]a, R12)
Section 2. Time to intervene. — The motion to intervene may be filed at any time before rendition of
judgment by the trial court. A copy of the pleading-in-intervention shall be attached to the motion
and served on the original parties. (n)
Section 3. Pleadings-in-intervention. — The intervenor shall file a complaint-in-intervention if he
asserts a claim against either or all of the original parties, or an answer-in-intervention if he unites
with the defending party in resisting a claim against the latter. (2[c]a, R12)
Section 4. Answer to complaint-in-intervention. — The answer to the complaint-in-intervention shall
be filed within fifteen (15) days from notice of the order admitting the same, unless a different
period is fixed by the court.
17. Galicto v. Aquino, 683 Phil. 141 (2012).
18. Resolution, 696 Phil. 276 (2012).
19. Decision, 668 Phil. 1 (2011).
20. Rollo.
21. Rollo, Volume I, pp. 10-11.
22.646 Phil. 452 (2010).
23.Rollo, Volume II, pp. 564-566.
24.People v. Sandiganbayan, G.R. No. 188165, December 11, 2013, 712 SCRA 359.
25.G.R. No. 209287, July 1, 2014, 728 SCRA 1.
26.Id.
27.Malana v. Tappa, 616 Phil. 177 (2009).
28.Dy v. Judge Bibat-Palamos, G.R. No. 196200, September 11, 2013, 705 SCRA 613.
29.Hollingsworth v. Perry, 133 S. Ct. 2652 (U.S. 2013).
30.Southern Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council, 646 Phil. 452, 479 (2010)
[Per J. Carpio-Morales, En Banc], citing Republic Telecommunications Holding, Inc. v. Santiago,
556 Phil. 83, 91-92 (2007).
31.Abdul v. Sandiganbayan, G.R. No. 184496, December 2, 2013, 711 SCRA 246 citing Mattel, Inc. v.
Francisco, 582 Phil. 492, 501 (2008).
32.Lozano v. Nograles, 607 Phil. 334 (2009), citing Angara v. Electoral Commission, 63 Phil. 139 (1936).
33.Imbong v. Ochoa, G.R. No. 204819, April 8, 2014, 721 SCRA 146.
34.G.R. No. 204819, April 8, 2014, 721 SCRA 146.
35.G.R. No. 204819, April 8, 2014, 721 SCRA 146.
36.Galicto v. Aquino III, G.R. No. 193978, February 28, 2012, 667 SCRA 150, citing Lozano v. Nograles,
607 Phil. 334 (2009).
37.Anak Mindanao Party-List Group v. Exec. Sec. Ermita, 558 Phil. 338, 351 (2007).
38.392 Phil. 618 (2000).
39.G.R. No. 204819, April 8, 2014, 721 SCRA 146.
40.Araullo v. Aquino III, G.R. No. 209287, July 1, 2014, 728 SCRA 1.
41.As embodied in Sec. 3 of R.A. No. 7042 or the Foreign Investments Act of 1991.
42.The Corporation Code, Section 6. "Classification of shares. — The shares of stock of stock
corporations may be divided into classes or series of shares, or both, any of which classes or series
of shares may have such rights, privileges or restrictions as may be stated in the articles of
incorporation: Provided, That no share may be deprived of voting rights except those classified and
issued as "preferred" or "redeemable" shares, unless otherwise provided in this Code: Provided,
further, that there shall always be a class or series of shares which have complete voting rights.
xxx xxx xxx

"Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the
holders of such shares shall nevertheless be entitled to vote on the following matters:

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the
corporation property;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
"Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular
corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights."
43.Black's Law Dictionary (2nd Pocket ed. 2001 p. 508).
44.Resolution, Gamboa v. Teves, G.R. No. 176579, October 9, 2012.

<http://sc.judiciary.gov.ph/jurisprudence/2012/october2012/176579.pdf> (Last visited, April 21,
2015).
45.Resolution, Narra Nickel Mining and Development Corp. v. Tesoro Mining and Development Inc., et al.,
G.R. No. 195580, January 28, 2015,
<http://sc.judiciary.gov.ph/jurisprudence/2012october2012/176579.pdf> (Last visited, April 21,
2015). Parenthetically, it is advanced that the application of the Grandfather Rule is impractical as
tracing the shareholdings to the point when natural persons hold rights to the stocks may very well
lead to an investigation ad infinitum. Suffice it to say in this regard that, while the Grandfather Rule
was originally intended to trace the shareholdings to the point where natural persons hold the
shares, the SEC had already set up a limit as to the number of corporate layers the attribution of the
nationality of the corporate shareholders may be applied.
46.Resolution, G.R. No. 195580, January 28, 2015.

2015).
47.Resolution, Narra Nickel Mining and Development Corp. v. Tesoro Mining and Development, Inc., et al.,
G.R. No. 195580, January 28, 2015,
2015).
48.To illustrate:
Suppose that X corporation seeks to engage as a public utility company. It divided its total outstanding
capital stock of 1000 into three classes of shares — 300 common shares, 200 preferred shares with
the right to vote in the election of directors (Class A preferred), and 500 preferred without such
right to elect the directors (Class B preferred). Another Corporation, Y, an entity considered as a
Philippine national under the FIA on the assumption that 60% of its capital is owned by Filipinos,
owns all common and class B preferred shares.
Three Hundred (300) common shares in the hands of Y, a Philippine national represents sixty percent
(60%) control over all shares with the right to vote in the election of directors (sum of 200 Cass A
preferred shares and 300 common shares). Coupled with another 500 preferred Class B shares, Y
can be considered in control of eighty-percent (80%) of the total outstanding capital stock of X.
Applying the control test leads to the conclusion that a Philippine national in the person of Y controls X
both with respect to the total outstanding capital stock and the sum of all shares with the right to
elect the directors. However, after applying beneficial ownership test, which means looking into
each stockholders of Y through the grandfather rule, it would show insufficient Filipino equity of at
least sixty-percent (60%) in X as required under the Constitution, Foreign Investments Act and the
Court's ruling in Gamboa.
Since Y is only sixty-percent (60%) controlled by Filipinos, the Filipino Equity in X through Y would be
as follows:
Sixty-percent (60%) of 300 common shares = 180 shares or 36% beneficial equity in all shares with the
rights to vote in the election of directors (sum of 300 common shares and 200 Class A Preferred
shares).
Sixty percent (60%) of 500 Class B preferred shares = 300 shares with the right to elect directors.
To compute total Filipino beneficial equity in the total outstanding capital stock, 300 shares plus the 180
shares as calculated above must be added. Thus, 300 shares +180 shares = 480 shares or forty eight
(48%) of the total outstanding capital stock of X.
In effect, the equity of Filipinos in X, after applying the grandfather rule, has been diluted to forty-eight
percent (48%) of the total outstanding capital stock and thirty-six percent (36%) of all shares with
the rights to vote in the election of directors. Clearly, it violates the constitutional limitation on
foreign equity participation.
49.Empty Voting and Hidden Ownership: Taxonomy, Implications, and Reforms, Henry T.C. Hu,
<www.law.yale.edu/documents/pdf/cbl/PM-6-Bus-Law-Hu-Black.pdf> (Last visited, April 23,
2015).
50.Implementing Rules and Regulations of the Securities and Regulation Code, Rule III, Sec. 1.d. Beneficial
owner or beneficial ownership means any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares: voting power, which includes
the power to vote, or to direct the voting of, such security; and/or investment returns or power,
which includes the power to dispose of, or to direct, the disposition of such security; . . . .
51.The Corporation Code, Section 6. Classification of shares. — The shares of stock of stock corporations
may be divided into classes or series of shares, or both, any of which classes or series of shares may
have such rights, privileges or restrictions as may be stated in the articles of incorporation:
Provided, That no share may be deprived of voting rights except those classified and issued as
"preferred" or "redeemable" shares, unless otherwise provided in this Code: . . . ."
52.The Anti-Dummy Law, Section 2. "In all cases in which a constitutional or legal provision requires that,
in order that a corporation or association may exercise or enjoy a right, franchise or privilege, not
less than a certain per centum of its capital must be owned by citizens of the Philippines or of any
other specific country, it shall be unlawful to falsely simulate the existence of such minimum stock
or capital as owned by such citizens, for the purpose of evading said provision. The president or
managers and directors or trustees of corporations or associations convicted of a violation of this
section shall be punished by imprisonment of not less than five nor more than fifteen years, and by
a fine not less than the value of the right, franchise or privilege, enjoyed or acquired in violation of
the provisions hereof but in no case less than five thousand pesos."
53.La Campana Development Corp. v. Development Bank of the Phils., 598 Phil. 612-634 (2009).
54. 49 C.J.S. 436, cited in Republic v. De los Angeles, 150-A Phil. 25-85 (1972).
LEONEN, J., dissenting:
1. Gamboa v. Finance Secretary Teves, et al., 668 Phil. 1 (2011) [Per J. Carpio, En Banc].
2. Heirs of Wilson P. Gamboa v. Finance Secretary Teves, et al., 696 Phil. 276 (2012) [Per J. Carpio, En
Banc].
3. CONST., art. XII, secs. 2, 10, 11, and art. XIV, sec. 4 (2) provide:
ARTICLE XII. National Economy and Patrimony

xxx xxx xxx
SECTION 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral
oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per centum of whose capital is
owned by such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as may be
provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses
other than the development of water power, beneficial use may be the measure and limit of the
grant.
xxx xxx xxx
SECTION 10. The Congress shall, upon recommendation of the economic and planning agency,
when the national interest dictates, 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. The Congress shall enact
measures that will encourage the formation and operation of enterprises whose capital is wholly
owned by Filipinos. In the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its national jurisdiction and
in accordance with its national goals and priorities.
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.
xxx xxx xxx
ARTICLE XIV. Education, Science and Technology, Arts, Culture, and Sports
xxx xxx xxx
SECTION 4 . . . .
(2) Educational institutions, other than those established by religious groups and mission boards, shall be
owned solely by citizens of the Philippines or corporations or associations at least sixty per
centum of the capital of which is owned by such citizens. The Congress may, however, require
increased Filipino equity participation in all educational institutions[.] (Emphasis supplied)
4. Heirs of Wilson P. Gamboa v. Finance Secretary Teves, et al., 696 Phil. 276, 341 (2012) [Per J. Carpio, En
Banc].
5. Gamboa v. Finance Secretary Teves, et al., 668 Phil. 1, 69-70 (2011) [Per J. Carpio, En Banc]. This
definition, stated in a fallo, was noted in my April 21, 2014 Dissent in Narra Nickel Mining and
Development Corp., et al. v. Redmont Consolidated Mines Corp., 733 Phil. 365, 420 (2014) [Per J.
Velasco, Jr., Third Division]. This, however, was not the pivotal point in that Opinion.
6. Heirs of Wilson P. Gamboa v. Finance Secretary Teves, et al., 696 Phil. 276, 341 (2012) [Per J. Carpio, En
Banc]. The Court stated, "[s]ince a specific class of shares may have rights and privileges or
restrictions different from the rest of the shares in a corporation, the 60-40 ownership requirement
in favor of Filipino citizens in Section 11, Article XII of the Constitution must apply not only to
shares with voting rights but also to shares without voting rights. Preferred shares, denied the right
to vote in the election of directors, are anyway still entitled to vote on the eight specific corporate
matters mentioned above. Thus, 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
Constitution."
7. Id. at 363.
8. 589 Phil. 387 (2008) [Per J. Carpio-Morales, En Banc].
9. G.R. No. 204819, April 8, 2014, 721 SCRA 146 [Per J. Mendoza, En Banc].
10. 727 Phil. 28 (2014) [Per J. Abad, En Banc].
11. Province of North Cotabato, et al. v. Government of the Republic of the Philippines Peace Panel on
Ancestral Domain (GRP), et al., 589 Phil. 387 (2008) [Per J. Carpio-Morales, En Banc].
12. CONST., preamble.
13. CONST., art. II, sec. 19.
14. J. Mendoza, Dissenting Opinion, p. 21.
15. Id.
16. CORP. CODE, sec. 6, par. 1 provides:
Section 6. Classification of shares. — The shares of stock of stock corporations may be divided into
classes or series of shares, or both, any of which classes or series of shares may have such rights,
privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share
may be deprived of voting rights except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class
or series of shares which have complete voting rights. Any or all of the shares or series of shares
may have a par value or have no par value as may be provided for in the articles of incorporation:
Provided, however, That banks, trust companies, insurance companies, public utilities, and building
and loan associations shall not be permitted to issue no-par value shares of stock. (Emphasis
supplied)
17. J. Leonen, Dissenting Opinion in Narra Nickel Mining and Development Corp., et al. v. Redmont
Consolidated Mines Corp., 733 Phil. 365, 420 (2014) [Per J. Velasco, Jr., Third Division].
18. J. Mendoza, Dissenting Opinion, p. 14.
19.Id. at 16.
20.J. Leonen, Dissenting Opinion in Narra Nickel Mining and Development Corp., et al. v. Redmont
21.SECURITIES CODE, Revised Implementing Rules and Regulations (2011), Rule 3 (1) (A) provides:
Rules 3 — Definition of Terms

1....
A. Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which
includes the power to vote or direct the voting of such security) and/or investment returns or power
(which includes the power to dispose of, or direct the disposition of such security)[.]
22.J. Leonen, Dissenting Opinion in Narra Nickel Mining and Development Corp. v. Redmont Consolidated
Mines Corp., G.R. No. 195580, January 28, 2015, 748 SCRA 455, 492 [Per J. Velasco, Jr., Special
Third Division].
24.Id. at 478.
25.Heirs of Wilson P. Gamboa v. Finance Secretary Teves, et al., 696 Phil. 276, 332 (2012) [Per J. Carpio, En
Banc].
27.Id. at 469-471, citing Gamboa v. Finance Secretary Teves, et al., 668 Phil. 1, 51, 53, and 69-71 (2011)
[Per J. Carpio, En Banc].
28.Id. at 475.
29.Id. at 475-476.
30.Id. at 478-479, citing DOJ Opinion No. 165, series of 1984, p. 5.
n Note from the Publisher: Written as "Security" in the original document.

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11/21/2017 G.R. No. 207246 | Roy III v.

[G.R. No. 207246. November 22, 2016.]

JOSE M. ROY III, petitioner, vs. CHAIRPERSON TERESITA HERBOSA, THE

WILSON C. GAMBOA, JR., DANIEL V. CARTAGENA, JOHN WARREN P.

PHILIPPINE STOCK EXCHANGE, INC., respondent-in-intervention,

SHAREHOLDERS' ASSOCIATION OF THE PHILIPPINES, INC., respondent-in-

WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No

On June 1, 2016, Shareholders' Association of the Philippines, Inc. 29 ("SHAREPHIL") filed

Petitioners' hypothetical illustration as to how SEC-MC No. 8 "practically encourages

In turn, the Gamboa Resolution stated:

xxx xxx xxx

(1) 60% (required percentage of shares of stock entitled to vote

(2) 60% (required percentage of Full beneficial ownership of 60

. . . In mixed class or dual structured corporations, however, there is variance in the

As noted earlier, the FIA-IRR states:

To be sure, the application of the 60-40 Filipino-foreign ownership requirement separately to

xxx xxx xxx

Except as otherwise provided in the articles of incorporation and stated

The clear and unequivocal definition

Peralta, * J., is on leave but left vote.

Respondent Chairperson of the Securities and Exchange Commission is DIRECTED

a) The term "Philippine national" shall mean a citizen of the Philippines or a

7. Investment of corporate funds in another corporation or business in accordance with this

This is the background of paragraph 2 of Section 1, which means

The concept of the remedy of certiorari in our judicial system remains

xxx xxx xxx

nationals in accordance with the constitutional mandate. Otherwise, the corporation is

MENDOZA, J., dissenting:

Justiciability of the Controversy

Since the constitutional requirement of at least 60 percent Filipino ownership applies

I likewise emphasize "the [C]ontrol [T]est as a primary method of determining compliance

Suppose that a corporation, "C", is engaged in a nationalized activity requiring that

*On official leave.

**No Part and On official leave.

2.Gamboa v. Finance Secretary Teves, 668 Phil. 1 (2011).

4.Gamboa v. Finance Secretary Teves, supra note 2, at 69-70.

5.Heirs of Wilson P. Gamboa v. Finance Sec. Teves, supra note 3, at 363.

6.Rollo (Vo. II), pp. 605-609.

12.Rollo (Vol. I), pp. 31-33.

13.Rollo (Vol. II), pp. 549, 587-588.

15.Rollo (Vol. I), pp. 3-206 (with annexes).

16.Son of deceased petitioner Wilson P. Gamboa in Gamboa.

17.Rollo (Vol. I), pp. 222-230 (with annex).

18.Id. at 231-446 (with annexes).

20. Rollo (Vol. II), pp. 544-615 (with annexes).

21. Id. at 633-654.

23.Rollo (Vol. II), pp. 723-762 (with annex).

27. Id. at 880.

31.Resolution dated June 14, 2016, id. at 1115-1116.

34.Id. at 544-615 (with annex).

37.Id. at 519-520. Citations omitted.

38.";" instead of "." in the Petition-in-Intervention.

39."%" is omitted in the Petition-in-Intervention.

43.Id. at 172. Citations omitted.

44.Rollo (Vol. I), p. 7.

45.Motion for Leave to file Petition-in-Intervention, id. at 224-225.

48.PLDT's Consolidated Memorandum, rollo (Vol. II), p. 992.

52.693 Phil. 399 (2012).