Case Summary (G.R. No. 176579)
Petitioner
• Wilson P. Gamboa
Respondents
• Finance Secretary Margarito B. Teves
• Undersecretary John P. Sevilla
• PCGG Commissioner Ricardo Abcede (Privatization Council)
• Manuel V. Pangilinan (First Pacific/PLDT)
• Napoleon L. Nazareno (PLDT)
• Fe Barin (SEC Chair)
• Francis Lim (PSE President)
Petitioners-in-Intervention
• Pablito V. Sanidad
• Arno V. Sanidad
Key Dates
• 28 Nov 1928 – PLDT franchise granted under Act No. 3436
• 1969 – GTE sold 26% of PLDT to PTIC
• 1977 – PHI acquired 46.125% of PTIC (111,415 shares)
• 1986 – PCGG sequestered PHI’s PTIC shares; later declared government property
• 1999 – First Pacific acquired remaining 54% of PTIC
• 8 Dec 2006 – Public bidding for government’s PTIC shares; Parallax won at ₱25.6 B
• 1 Feb 2007 – Deadline for First Pacific to match bid; right yielded back to PTIC/IPC
• 14 Feb 2007 – MPAH (First Pacific affiliate) entered Conditional Sale Agreement at ₱25.217 B
• 28 Feb 2007 – Sale consummated; Gamboa filed petition same day
• 28 Aug 2007 – Sanidad brothers granted leave to intervene
• 28 Jun 2011 – Supreme Court decision
Antecedents
- PTIC’s 46.125% shareholding in PLDT represents an indirect 6.3% stake in PLDT.
- First Pacific’s acquisition would increase its PLDT common equity from 30.7% to 37%, raising total foreign ownership (with other foreign investors) to about 64.27%.
- Petitioner alleges this breaches the 40% limit on foreign capital of a public utility under Sec. 11, Art. XII, 1987 Constitution.
Issues
- Whether the term “capital” in Sec. 11, Art. XII refers only to voting/common shares or to total outstanding capital stock (common + non-voting preferred).
- Whether the privatization sale to First Pacific violated the constitutional foreign-ownership limit.
Ruling on Jurisdiction and Standing
• Petitioner has standing as a PLDT stockholder and citizen to challenge a public constitutional provision of national importance.
• The Court treated the petition for declaratory relief as one for mandamus because of the far-reaching economic implications.
• Original petition for prohibition lies within Supreme Court jurisdiction but injunction and annulment would ordinarily belong to lower courts; nevertheless, the Court addressed the purely legal issue presented.
Definition of “Capital” under Sec. 11, Art. XII
• “Capital” refers exclusively to shares entitled to vote in the election of directors.
• Common shares carry full voting rights; non-voting preferred shares carry no voting right unless prescribed by law.
• Control is exercised through voting stock; therefore, only voting shares form the basis for determining foreign equity limitations.
• If any preferred shares are entitled to vote, they would count toward “capital.”
Application to PLDT
• PLDT’s non-voting preferred shares (99.44% Filipino-owned) carry no voting rights and minimal dividends.
• PLDT’s voting/
Case Syllabus (G.R. No. 176579)
The Subject of the Petition
- An original petition for prohibition, injunction, declaratory relief and annulment of the sale
- Challenges the government’s sale of 111,415 shares of Philippine Telecommunications Investment Corporation (PTIC)
- Sale made to Metro Pacific Assets Holdings, Inc. (MPAH), a First Pacific affiliate, on 28 February 2007 for ₱25,217,556,000
Antecedents
- 28 November 1928: Act No. 3436 grants PLDT a 50-year telecommunications franchise
- 1969: GTE sells 26% of PLDT common shares to PTIC
- 1977: Prime Holdings, Inc. (PHI) acquires 111,415 PTIC shares (46.125% of PTIC)
- 1986: PCGG sequesters those shares; Supreme Court declares them property of the Republic
- 1999: First Pacific acquires the remaining 54% of PTIC’s capital
- 8 December 2006: Public bidding for government’s 111,415 PTIC shares; Parallax wins with ₱25.6 billion
- First Pacific exercises right of first refusal; sale completed 28 February 2007
Procedural Posture
- Petition filed 28 February 2007 after sale consummation
- Motion to intervene filed 13 August 2007 by Pablito V. Sanidad and Arno V. Sanidad; granted 28 August 2007
- Respondents raise issues of standing, jurisdiction, mootness, non-joinder and due process
Constitutional Provision at Issue
- Section 11, Article XII, 1987 Constitution:
- Public-utility franchises granted only to citizens or Philippine corporations with ≥ 60% Filipino-owned capital
- Foreign participation capped at ≤ 40% of capital
- Foreigners’ participation in governance limited to their proportionate share; all key officers must be Filipino
Issues Presented
- Does the sale of PTIC shares to First Pacific violate the 40% foreign-ownership limit?
- Does “capital” in Section 11, Article XII refer only to common (voting) shares or to total outstanding capital stock (common + non-voting preferred)?
- Did respondents commit grave abuse of discretion or violate due process?
Petitioners’ Arguments
- “Capital” means voting shares only, since control is exercised through voting
- PTIC’s sale indirectly transfers 6.3% of PLDT common shares to foreigners, raising foreign voting equity above 40%
- PLDT’s Form 20-K filings (2003–2005) show foreign common holdings had already breached 40% before the sale
- Combined foreign common equity (First Pacific + NTT DoCoMo) would reach 51.56%
Respondents’ Contentions
- Privatization Council followed due process, transparency and existing procedures
- First Pacific’s exer