Case Digest (G.R. No. 176579)
Facts:
Wilson P. Gamboa, a PLDT stockholder, filed an original petition (prohibition, injunction, declaratory relief, and annulment) challenging the sale on 28 February 2007 of 111,415 shares of Philippine Telecommunications Investment Corporation (PTIC) by the Republic to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific, alleging the transaction would breach the foreign-ownership limits of Section 11, Article XII of the Constitution by increasing foreign control of Philippine Long Distance Telephone Company (PLDT). Petitioners-in-intervention joined; respondents included Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, PCGG Commissioner Ricardo Abcede, and others; the petition was docketed in this Court after the sale was consummated and intervention was allowed.
Issues:
- Did the consummation of the sale of 111,415 PTIC shares to First Pacific/MPAH violate the foreign-ownership limit in Section 11, Article XII?
- Did public respondents commit grave abuse of discretion in allowing the sale?
- Does the term "capital" in Section 11, Article XII mean only shares entitled to vote (common shares) or the total outstanding capital stock (common plus non-voting preferred)?
Ruling:
The petition was partly granted. The Court treated the petition for declaratory relief as one for mandamus because the constitutional question had far‑reaching implications, and it did not decide the writ of prohibition as the sale was already consummated. The Court ruled that the term "capital" in Section 11, Article XII refers only to shares of stock entitled to vote (and thus, in PLDT’s case, to common shares), and directed the Chairperson of the Securities and Exchange Commission to apply that definition in assessing compliance and to impose appropriate sanctions if a violation of Section 11 is found.
Ratio:
The Court reasoned that control of a corporation is exercised through voting rights and the election of directors; the Corporation Code recognizes classes of shares and permits nonvoting preferred shares to be deprived of voting rights, so a definition that counts only voting shares best advances the constitutional aim of reserving effective control of public utilities to Filipinos. The Court nonetheless clarified that preferred shares possessing voting rights are included in "capital", and that the SEC, charged with enforcing nationality requirements, may be compelled to act by mandamus where the constitutional mandate has national implications.
Doctrine:
- "Capital" in Section 11, Article XII refers to shares of stock entitled to vote; non‑voting preferred shares are excluded unless they possess voting rights.
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