Case Summary (G.R. No. 248033)
Gamboa Decision and Resolution
The June 28, 2011 Decision held that “capital” refers only to voting shares—namely, common shares or any preferred shares entitled to vote—and that public utilities must ensure (1) full beneficial ownership of at least 60% of total outstanding capital stock and (2) 60% voting control by Filipinos. The October 9, 2012 Resolution affirmed that the 60–40 ownership requirement applies uniformly and separately to each class of shares, whether voting or non-voting, to guarantee effective Filipino control.
SEC Memorandum Circular No. 8
Issued May 20, 2013 by Chairperson Herbosa, MC No. 8 promulgated “Guidelines on Compliance with the Filipino-Foreign Ownership Requirements” for nationalized activities. Section 2 provides that the Filipino-ownership percentage shall be applied to both (a) the total number of voting shares and (b) the total number of all shares, voting or not.
Litigation History
Roy filed a Rule 65 petition on June 10, 2013 seeking to annul MC No. 8 for failing to require the 60–40 rule to each share class. Gamboa et al. intervened, mirroring Roy’s arguments. PLDT and the SEC filed comments opposing the petitions, arguing lack of standing, improper remedy, and that MC No. 8 faithfully implemented Gamboa. PSEI and SharePhil were later allowed to intervene and submitted comments on market impact and procedural propriety.
Procedural Challenges
The Court examined four requisites for judicial review: (1) actual case or controversy; (2) standing; (3) earliest opportunity to raise the constitutional question; and (4) lis mota. It found no actual controversy—Roy’s hypothetical examples lacked concrete facts—and held that Roy and Gamboa, et al. failed to allege personal, direct injury. Their asserted roles as citizens, lawyers, taxpayers, or PLDT subscribers did not satisfy locus standi. The petitions also violated the hierarchy of courts, as Rule 65 relief was available from lower tribunals. Finally, indispensable parties—other nationalized-industry corporations and their shareholders—were not impleaded.
Substantive Issue
The sole substantive issue was whether the SEC gravely abused its discretion in issuing MC No. 8. The Court concluded that MC No. 8 was fully consistent with the dispositive portions of Gamboa. Section 2 of MC No. 8 incorporated both the voting-rights test and the total-shares test required by Gamboa. Illustrative permutations showed that compliance with MC No. 8 necessarily ensured the 60–40 Filipino ownership rule over voting shares and full beneficial ownership of at least 60% of total capital stock.
Supreme Court Ruling
The Court held:
– The
Case Syllabus (G.R. No. 248033)
Case Information
- G.R. No. 207246, Supreme Court En Banc
- Date of Decision: November 22, 2016
- Bench: Chief Justice Sereno; Justices Carpio, Velasco Jr., Bersamin, Mendoza, Peralta (on leave but left vote), Brion, Del Castillo, Perez, Reyes, Carpio (dissent), Abad (concurring), Bersamin (concurring), Mendoza (dissent), Leonen (dissent), and others
- Petitioner: Jose M. Roy III
- Respondents: Chairperson Teresita Herbosa; Securities and Exchange Commission (SEC); Philippine Long Distance Telephone Company (PLDT)
- Petition-in-Intervention: Wilson C. Gamboa Jr., Daniel V. Cartagena, John Warren P. Gabinete, Antonio V. Pesina Jr., Modesto Martin Y. Mamon III, Gerardo C. Erebaren
- Intervenors: Philippine Stock Exchange, Inc. (PSE); Shareholders’ Association of the Philippines, Inc. (Sharephil)
Antecedent Proceedings in Gamboa v. Teves
- June 28, 2011 Decision (“Gamboa Decision”): Defined “capital” in Section 11, Article XII of the Constitution as referring only to shares entitled to vote in the election of directors; directed SEC to apply that definition to PLDT’s foreign‐ownership limit
- October 9, 2012 Resolution (“Gamboa Resolution”): Denied motions for reconsideration with finality; clarified that the 60-40 Filipino‐foreign ownership requirement must apply uniformly and separately to each class of shares—voting and non-voting, common and preferred
- Finality: Gamboa Decision became final on October 18, 2012; Entry of Judgment issued December 11, 2012
SEC’s Rule-Making Process
- November 6, 2012: SEC website notice inviting comments on draft memorandum circular implementing the Gamboa directive
- November 9, 2012: Public dialogue attended by 100+ stakeholders
- January 8, 2013: SEC received copy of Entry of Judgment certifying finality of Gamboa Decision
- March 25, 2013: SEC posted another notice for public comments on draft guidelines
- April 22, 2013: Petitioner Roy submitted written comments on draft guidelines
Memorandum Circular No. 8, Series of 2013
- Title: “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”
- Publication: Philippine Daily Inquirer and Business Mirror, May 22, 2013
- Key Provision (Section 2):
- Required percentage of Filipino ownership to be applied to BOTH
- (a) total number of outstanding shares entitled to vote in director elections, AND
- (b) total number of outstanding shares, whether voting or not
- Required percentage of Filipino ownership to be applied to BOTH
Petition for Certiorari (June 10, 2013)
- Filed by Roy under Rule 65, special civil action for certiorari and prohibition
- Main Allegations:
- MC No. 8 violates the letter and spirit of the Gamboa Decision and Gamboa Resolution
- SEC acted with