1294. WILSON P. GAMBOA VS. FINANCE SECRETARY MALGARITO B. TEVES, GR NO.

176579, JUNE 28, 2011

TOPIC: SEC 11 PUBLIC UTILITIES
FACTS: This is a petition to nullify the sale of shares of stock of Philippine Telecommunications
Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting
through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc.
(MPAH), an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based
investment management and holding company and a shareholder of the Philippine Long
Distance Telephone Company (PLDT). The petitioner questioned the sale on the ground that it
also involved an indirect sale of 12 million shares (or about 6.3 percent of the outstanding
common shares) of PLDT owned by PTIC to First Pacific. With the this sale, First Pacifics
common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing
the total common shareholdings of foreigners in PLDT to about 81.47%. This, according to the
petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign
ownership of the capital of a public utility to not more than 40%.
ISSUE: Whether or not 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 of PLDT, a public utility?
HELD: 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. The Supreme Court ruled and partly grant 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, and thus
in the present case only to common shares, and not to the total outstanding capital stock
(common and non-voting preferred shares).