Case Digest (A.C. No. 7922) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
Petitioner Wilson P. Gamboa, a minority shareholder of Philippine Long Distance Telephone Company (PLDT), assails the sale by the Republic of the Philippines of 111,415 shares (46.125% of its capital stock) of Philippine Telecommunications Investment Corporation (PTIC)—an indirect 6.3% stake in PLDT—to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited. PTIC initially acquired 26% of PLDT in 1969; in 1977, Prime Holdings, Inc. (PHI) obtained a 46.125% PTIC block, which the Presidential Commission on Good Government (PCGG) sequestered in 1986 and later confirmed as Republic property. In a public bidding reset to December 8, 2006, Parallax Venture Fund XXVII outbid to purchase the 111,415 shares for ₱25.2 billion. First Pacific failed its February 1, 2007 right‐of‐first‐refusal deadline, yielding its option to PTIC, but on February 14, 2007, MPAH executed a conditional sale agreement matching Parallax’s bid, and by February 28, 2007, the tran Case Digest (A.C. No. 7922) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Background of PLDT and PTIC
- On 28 November 1928, Act No. 3436 granted PLDT a 50-year franchise to operate telecommunications services.
- In 1969, GTE sold 26% of PLDT’s common shares to Philippine Telecommunications Investment Corporation (PTIC).
- PHI Sequestration and Government Ownership
- Prime Holdings, Inc. (PHI) acquired 111,415 PTIC shares (46.125%) in 1977 by assignment from private shareholders.
- In 1986, the PCGG sequestered those shares; by 2006, the Supreme Court declared them owned by the Republic.
- Privatization of PTIC Shares
- In 1999, First Pacific acquired the remaining 54% of PTIC’s equity.
- On 8 December 2006, a public bidding for the Republic’s 46.125% PTIC equity was held: Parallax won with a P25.217 billion bid.
- First Pacific failed to complete first refusal by the original deadline but later, through its affiliate MPAH, executed a Conditional Sale and Purchase Agreement on 14 February 2007 at the same price.
- The sale was consummated on 28 February 2007 when MPAH paid P25.217 billion and received the 111,415 PTIC share certificates.
- Effect on PLDT Ownership
- PTIC holds 13.847% of PLDT’s common shares, so the 46.125% PTIC equity sale equated to an indirect 6.3% PLDT share sale.
- First Pacific’s PLDT common shareholding rose from 30.7% to 37%, and total foreign common shareholdings in PLDT to about 64.27%.
- Petitioner alleges this breaches Section 11, Article XII of the 1987 Constitution limiting foreign ownership of public utilities to 40% of their capital.
- Procedural History
- On 28 February 2007, Wilson P. Gamboa, a PLDT stockholder, filed a petition for prohibition, injunction, declaratory relief, and nullity of sale.
- Petitioners-in-intervention Pablito V. Sanidad and Arno V. Sanidad joined Gamboa’s suit.
- Respondents include Finance Secretary Teves, Undersecretary Sevilla, PCGG Commissioner Abcede, PLDT executives, the SEC Chairperson, and the PSE President.
- The core contention involves the proper meaning of “capital” in Section 11, Article XII of the Constitution.
Issues:
- Jurisdiction and Standing
- Does the Supreme Court have original jurisdiction over petition for prohibition, injunction, declaratory relief, and annulment of sale?
- Does petitioner Gamboa have locus standi to invoke those remedies?
- Substantive Constitutional Question
- Does “capital” in Section 11, Article XII refer only to shares entitled to vote (common and any voting preferred) or to total outstanding capital stock (common + non-voting preferred)?
- Does the sale of PTIC shares resulting in foreign ownership of PLDT common equity exceeding 40% violate Section 11, Article XII?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)