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CASES REPORTED
SUPREME COURT REPORTS ANNOTATED
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* EN BANC.
suit and the relief are so bound with those of the other parties that
their legal presence as parties to the proceeding is an absolute
necessity and a complete and efficient determination of the equities
and rights of the parties is not possible if they are not joined.
Corporation Law; Public Utility Corporation; As defined in the
Implementing Rules and Regulations of the Securities Regulation
Code (SRC-IRR), beneficial owner or beneficial ownership means
any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or
shares voting power and/or investment returns or power.·As defined
in the SRC-IRR, „[b]eneficial owner or beneficial ownership
means any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or
shares voting power (which includes the power to vote or direct the
voting of such security) and/or investment returns or power (which
includes the power to dispose of, or direct the disposition of such
security).‰
Same; Same; The term „full beneficial ownership‰ found in the
Foreign Investment Act-Implementing Rules and Regulations (FIA-
(funds) from both local and foreign capital markets. This access
to capital · which a stock corporation may need for expansion, debt
relief/repayment, working capital requirement and other corporate
pursuits · will be greatly eroded with further unwarranted
limitations that are not articulated in the Constitution.
Same; Same; Constitutional Law; As mandated by Section 11,
Article XII of the Constitution, all the executive and managing
officers of a public utility company must be Filipinos. Thus, the all-
Filipino management team must first be convinced that any of the
eight (8) corporate actions in Section 6 of the Corporation Code will
be to the best interest of the company.·In this regard, it should be
noted that the 8 corporate matters enumerated in Section 6 of the
Corporation Code require, at the outset, a favorable
recommendation by the management to the board. As mandated by
Section 11, Article XII of the Constitution, all the executive and
managing officers of a public utility company must be Filipinos.
Thus, the all-Filipino management team must first be convinced
that any of the 8 corporate actions in Section 6 will be to the best
interest of the company.
Same; Same; Allowing stockholders holding preferred shares
without voting rights to vote in the eight (8) corporate matters
enumerated in Section 6 of the Corporation Code is an
acknowledgment of their right of ownership.·Allowing stockholders
holding preferred shares without voting rights to vote in the 8
corporate matters enumerated in Section 6 is an acknowledgment of
their right of ownership. If the owners of preferred shares without
right to vote/elect directors are not allowed to vote in any of those 8
corporate actions, then they will not be entitled to the appraisal
right provided under Section 81 of the Corporation Code in the
event that they dissent in the corporate act.
Same; Same; A too restrictive definition of „capital‰ will surely
have a dampening effect on the business milieu by eroding the
flexibility inherent in the issuance of preferred shares with varying
terms and conditions.·As acknowledged in the Gamboa v. Teves,
652 SCRA 690 (2011) (Gamboa Decision), preferred shareholders
are merely investors in the company for income in the same manner
as bondholders. Without a lucrative package, including an
acquired finality.
Same; Under the doctrine of finality and immutability of
judgment, a decision that has acquired finality becomes immutable
and unalterable, and may no longer be modified in any respect, even
if the modification is meant to correct erroneous conclusions of fact
and law, and even if the modification is made by the court that
rendered it or by the Highest Court of the land.·Furthermore, as
opined by Justice Bersamin during the deliberations, the doctrine of
immutability of judgment precludes the Court from re examining
the definition of „capital‰ under Section 11, Article XII of the
Constitution.
10
values of the shares with voting rights and the shares without voting
rights are equal.·SEC Memorandum Circular No. 8 is valid and
constitutional provided that the par values of the shares with voting
rights and the shares without voting rights are equal. If the par
values vary, then the 60 percent Filipino ownership requirement
must be applied to each class of shares in order that the „legal and
beneficial ownership of 60 percent of the outstanding
capital stock x x x rests in the hands of Filipino nationals in
accordance with the constitutional mandate,‰ as expressly
stated in the Gamboa v. Teves, 652 SCRA 690 (2011) (Gamboa
Decision), and as reiterated and amplified in the Heirs of Wilson P.
Gamboa v. Teves, 682 SCRA 397 (2012) (Gamboa Resolution).
Same; Same; Constitutional Law; View that Section 11, Article
XII of the Constitution does not distinguish between voting or
nonvoting, common or preferred shares of stock. Thus, the term
„capital‰ refers to all shares of stock that are subscribed, which
constitute the „capital‰ of a corporation.·Section 11, Article XII of
the Constitution is clear: „No franchise, certificate, or any other
form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least
sixty per centum of whose capital is owned by such citizens,
x x x.‰ The term „capital‰ in this constitutional provision does not
refer to a specific class of share, as the Constitution does not
distinguish between voting or nonvoting, common or preferred
shares of stock. Thus, the term „capital‰ refers to all shares of stock
that are subscribed, which constitute the „capital‰ of a corporation.
11
12
13
SCRA 397 (2012), nor hold the Commission liable for grave
abuse of discretion. As it has manifested in Gamboa, in issuing MC
No. 8, the SEC abided by the CourtÊs decision and deferred to the
CourtÊs definition of the term „capital‰ in Section 11, Article XII of
the Constitution.
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19
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considered in its entirety to get the true meaning and intent of any
particular portion thereof.·Jurisprudence is replete with the
doctrine „that a final and executory judgment may nonetheless be
ÂclarifiedÊ by reference to other portions of the decision of which it
forms a part; that a judgment must not be read separately but in
connection with the other portions of the decision of which it forms
a part. Otherwise stated, a decision should be taken as a whole and
considered in its entirety to get the true meaning and intent of any
particular portion thereof.‰ It „must be construed as a whole so as to
bring all of its parts into harmony as far as this can be done by fair
and reasonable interpretation and so as to give effect to every word
and part, if possible, and to effectuate the obvious intention and
purpose of the Court, consistent with the provisions of the organic
law.‰
Constitutional Law; Corporation Law; Public Utility
Corporation; View that until the people decide, through a new
constitution, to ease the restrictions on foreign participation in the
public utility sector, the Court should resolve all doubts in favor of
upholding the spirit and intent of the 1987 Constitution.·Until the
people decide, through a new constitution, to ease the restrictions
on foreign participation in the public utility sector, the Court should
resolve all
21
22
23
24
CAGUIOA, J.:
The Antecedents
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1 These are the Petition for Certiorari filed on June 10, 2013 (the
„Petition‰) and Petition-in-Intervention (for Certiorari) filed on July 30,
2013 (the „Petition-in-Intervention‰). They will be referred to collectively
as the „petitions.‰
2 Gamboa v. Teves, 668 Phil. 1; 652 SCRA 690 (2011).
3 Heirs of Wilson P. Gamboa v. Teves, 696 Phil. 276; 682 SCRA 397
(2012).
25
SO ORDERED.4
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26
law.14
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11 Id.
12 Id. (Vol. I), pp. 31-33.
13 Id. (Vol. II), pp. 549, 587-588.
14 Id., at p. 588.
15 Id. (Vol. I), pp. 3-206 (with annexes).
27
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30
The Issues
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and still another class of preferred shares with no rights to elect the
directors and even less dividends. In this situation, the corporation
may issue common shares to foreigners amounting to forty percent
(40%) of the outstanding capital stock and issue preferred shares
entitled to vote the directors of the corporation to Filipinos
consisting of 60%39 percent (sic) of the outstanding capital stock
entitled to vote. Although it may appear that the 60-40 rule has
been complied with, the beneficial ownership of the corporation
remains with the foreign stockholder since the Filipino owners of
the preferred shares have only a miniscule share in the dividends
and profit of the corporation. Plainly, this situation runs contrary to
the Constitution and the ruling of this x x x Court.40
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34
35
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41 Galicto v. Aquino III, 683 Phil. 141, 170-171; 667 SCRA 150, 170
(2012), citing Miñoza v. Lopez, 664 Phil. 115, 123; 648 SCRA 684, 692
(2011).
42 Id., at p. 170, citing Tolentino v. Commission on Elections, 465
Phil. 385, 402; 420 SCRA 438, 452 (2004).
43 Id., at p. 172. Citations omitted.
36
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37
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38
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50 Republic v. Roque, 718 Phil. 294, 307; 706 SCRA 273, 285-286
(2013), citing Southern Hemisphere Engagement Network, Inc. v. Anti-
Terrorism Council, 646 Phil. 452, 478; 632 SCRA 146, 174 (2010).
51 Supra note 41 at p. 170; pp. 173-174, citing Lozano v. Nograles,
607 Phil. 334, 344; 589 SCRA 354, 362 (2009).
52 693 Phil. 399; 679 SCRA 237 (2012).
39
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40
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57 See Cua, Jr. v. Tan, 622 Phil. 661, 720; 607 SCRA 645, 708 (2009).
58 De Galicia v. Mercado, 519 Phil. 122, 127; 484 SCRA 131, 136-137
(2006).
59 Rollo (Vol. II), p. 1107.
41
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42
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61 Supra note 2.
62 In its Manifestation and Omnibus Motion dated July 29, 2011, the
SEC stated: „x x x The Commission, however, would submit to whatever
would be the final decision of this Honorable Court on the meaning of the
term Âcapital.ʉ
In its Memorandum, the SEC also stated: „In the event that this
Honorable Court rules with finality on the meaning of „capital,‰ the SEC
will yield to the Court and follow its interpretation.‰ Heirs of Wilson P.
Gamboa v. Teves, supra note 3 at pp. 356-357; p. 462. (emphasis omitted)
43
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63 Heirs of Wilson P. Gamboa v. Teves, id., at pp. 356, 358; pp. 463-
464.
64 Supra note 2 at p. 35; p. 705.
65 Id., at pp. 51-53; pp. 723-726.
44
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46
standing capital stock whether fully paid or not, but only such
stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine citizens or
Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks,
coupled with appropriate voting rights is essential. Thus, stocks,
the voting rights of which have been assigned or transferred to
aliens cannot be considered held by Philippine citizens or Philippine
nationals.70
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47
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72 Department of Justice.
73 Executive Order No. 226 or the OMNIBUS INVESTMENTS CODE OF 1987;
PRESIDENTIAL DECREE NO. 1789 OR THE OMNIBUS INVESTMENTS CODE OF 1981,
and Republic Act No. 5186 or the INVESTMENT INCENTIVES ACT OF 1967.
74 Supra note 3 at p. 321; p. 424.
75 Id., at p. 331; p. 435.
76 Id., at p. 342; p. 446.
48
XII.
Final Word
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49
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50
GAMBOA
SEC-MC No. 8
DECISION/RESOLUTION
(2) 60% (required percentage of „Full beneficial ownership of
Filipino) applied to BOTH (a) the 60 percent of the
total number of outstanding shares of outstanding capital stock,
stock, entitled to vote in the election coupled with 60 percent of
of directors; AND (b) the total the voting rights‰81
number of outstanding shares of
stock, whether or not entitled to vote
in the election of directors. or „Full beneficial ownership
of the stocks, coupled with
appropriate voting rights
x x x shares with voting
rights, as well as with full
beneficial ownership‰82
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53
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XII.
Final Word
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57
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instruments
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92 Id.
60
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62
stock may be issued only with a stated par value. The Board
of Directors, where authorized in the articles of incorporation,
may fix the terms and conditions of preferred shares of stock
or any series thereof: Provided, That such terms and
conditions shall be effective upon the filing of a certificate
thereof with the Securities and Exchange Commission.
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64
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108 716 Phil. 500, 515-516; 704 SCRA 24, 38-39 (2013). Emphasis
supplied; citations omitted.
72
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73
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110 Contreras and Gingco v. Felix and China Banking Corp., 78 Phil.
570, 577-578 (1947). Citations omitted.
111 Id., at p. 575.
74
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112 See Land Bank of the Philippines v. Suntay, 678 Phil. 879, 913-
914; 662 SCRA 614, 647 (2011).
113 FGU Insurance Corporation v. Regional Trial Court of Makati
City, Branch 66, 659 Phil. 117, 123; 644 SCRA 50, 56 (2011).
114 Id.
75
Closing
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76
77
CONCURRING OPINION
SERENO, CJ.:
78
79
CARPIO, J.:
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1 Gamboa v. Teves, 668 Phil. 1; 652 SCRA 690 (2011) and Heirs of
Wilson P. Gamboa v. Teves, 696 Phil. 276, 485; 682 SCRA 397, 416 (2012).
1 668 Phil. 1; 652 SCRA 690 (2011).
80
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„capital‰ of a corporation.
Consequently, the 60 percent Filipino ownership
requirement applies uniformly to all classes of shares that
are subscribed. A simple application of the 60 percent
Filipino ownership requirement is to apply the same to the
total capital, taken together regardless of different classes
of shares, as what SEC Memorandum Circular No. 8 does.
However, if the shares of stock have different par values,
such a simple application will result in an absurdity or
anomaly as explained in the example discussed above. It is
hornbook doctrine that if a provision of the Constitution or
the law is susceptible of more than one meaning, one
resulting in an absurdity or anomaly and the other in a
sensible meaning, the meaning that results in an absurdity
or anomaly must be avoided,9 particularly an absurdity or
anomaly that frustrates the intent of the Constitution or
the law. Thus, to avoid such an absurdity or anomaly, the
60 percent Filipino ownership requirement should be
applied to each class of shares if their par values are
different.
ACCORDINGLY, I vote to GRANT the petition IN
PART. SEC Memorandum Circular No. 8, Series of 2013, is
valid and constitutional if all the shares of stock have the
same par values. However, if the shares of stock have
different par values, the 60 percent Filipino ownership
requirement must be applied to each class of shares.
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9 Belo v. Philippine National Bank, 405 Phil. 851; 353 SCRA 359
(2001); Soriano v. Offshore Shipping and Manning Corporation, 258 Phil.
309; 177 SCRA 513 (1989).
87
CONCURRING OPINION
VELASCO, JR., J.:
Factual Antecedents
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1 G.R. No. 176579, June 28, 2011, 652 SCRA 690 and Heirs of Wilson
P. Gamboa v. Teves, G.R. No. 176579, October 9, 2012, 682 SCRA 397.
2 Emphasis supplied.
88
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89
Issue
90
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6 Galicto v. Aquino III, G.R. No. 193978, February 28, 2012, 667
SCRA 150, 172-173, citing Integrated Bar of the Philippines v. Zamora,
id.
7 Automotive Industry Workers Alliance (AIWA) v. Romulo, 489 Phil.
710, 719; 449 SCRA 1, 11 (2005); Gonzales v. Narvasa, 392 Phil. 518, 525;
337 SCRA 733, 742 (2000).
92
public.8
Indeed, while this Court has previously allowed the
expansion of the boundaries of the rule on legal standing in
matters of far-reaching implications, the Court cannot
condone the trivial treatment of the element of locus standi
as a mere technical requirement. The requirement of legal
standing goes into the very essence of jurisdiction and the
competence of this Court to intrude into matters falling
within the executive realm. In Galicto v. Aquino III,9 the
Court explained the importance of the rule, viz.:
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8 Republic v. Roque, G.R. No. 204603, September 24, 2013, 706 SCRA
273, 285-286.
9 Supra note 6.
10 Emphasis supplied.
93
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94
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14 Cua, Jr. v. Tan, G.R. Nos. 181455-56, December 4, 2009, 607 SCRA
645, 695.
15 Id., citing De Galicia v. Mercado, G.R. No. 146744, March 6, 2006,
484 SCRA 131, 136-137.
95
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16 See David v. Paragas, Jr., G.R. No. 176973, February 25, 2015, 751
SCRA 648, 663 and Sy v. Court of Appeals, G.R. No. 94285, August 31,
1999, 313 SCRA 328, 353-354.
96
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17 Id.
18 OKS DesignTech, Inc. v. Caccam, G.R. No. 211263, August 5, 2015,
765 SCRA 433, 442-443.
19 Gold City Integrated Services, Inc. (INPORT) v. Intermediate
Appellate Court, G.R. Nos. 71771-73, March 31, 1989, 171 SCRA 579,
585, citing Arguelles v. Young, No. L-59880, September 11, 1987, 153
SCRA 690; Republic v. Heirs of Spouses Florentino and Pacencia
Molinyawe, G.R. No. 217120, April 18, 2016, 790 SCRA 107, 116-117;
Olaño v. Lim Eng Co, G.R. No. 195835, March 14, 2016, 787 SCRA 272,
285; City of Iloilo v. Honrado, G.R. No. 160399, December 9, 2015, 777
SCRA 23, 34; OKS DesignTech, Inc. v. Caccam, id.
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Let us, however, take this corporate scenario a little bit farther
and consider the irresistible implications of changes and
circumstances that are inevitable and common in the business
world. Consider the simple matter of a possible investment of
corporate funds in another corporation or business, or a merger of
the public utility corporation, or a possible dissolution of the public
utility corporation. Who has the „control‰ over these vital and
important corporate matters? The last paragraph of Sec. 6 of
the Corporation Code provides:
Where the articles of incorporation provide for nonvoting
shares in the cases allowed by this Code, the holders of
such (nonvoting) shares shall nevertheless be entitled
to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of bylaws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all
or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another
corporation or other corporations;
7. Investment of corporate funds in another corporation or
business in accordance with this Code; and
8. Dissolution of the corporation. (Emphasis and underscoring
supplied)
In our hypothetical case, all 1,000,100 (voting and nonvoting)
shares are entitled to vote in cases involving fundamental and
106
107
lands, or worse, exercise control over these lands behind the façade
of corporations nominally owned by Filipino shareholders. Bluntly,
while the Constitution expressly prohibits the transfer of land to
aliens, foreign stockholders may resort to schemes or arrangements
where such land will be conveyed to their dummies or nominees. Is
this not circumvention, if not an outright violation, of the
fundamental Constitutional tenet that only Filipinos can own
Philippine land?
A construction of „capital‰ as referring to the total shareholdings
of the company is an acknowledgment of the existence of numerous
corporate control-enhancing mechanisms, besides ownership of
voting rights, that limits the proportion between the separate and
distinct concepts of economic right to the cash flow of the
corporation and the right to corporate control (hence, they are also
referred to as proportionality · limiting measures). This corporate
reality is reflected in SRC Rule 3(E) of the Amended Implementing
Rules and Regulations (IRR) of the SRC and Sec. 3(g) of The Real
Estate Investment Trust Act (REIT) of 2009, 72 which both provide
that control can exist regardless of ownership of voting shares.
The SRC-IRR states:
108
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110
CONCURRING OPINION
BERSAMIN, J.:
I CONCUR.
I VOTE TO DISMISS the petition for certiorari and
prohibition of Roy and the petition in intervention. The
SEC did
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1 G.R. No 176579, June 28, 2011, 652 SCRA 690; Heirs of Wilson P.
Gamboa v. Teves, G.R. No. 176579, October 9, 2012, 682 SCRA 397
(resolution).
111
1.
Neither certiorari nor prohibition is
the proper remedy to assail MC No. 8
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112
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113
2.
The Court cannot take cognizance
of the petitions for certiorari and prohibition
in the exercise of its expanded jurisdiction
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7 Section 1. x x x x
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demand-
114
The Supreme Court, like all other courts, has one main
function: to settle actual controversies involving conflicts of
rights which are demandable and enforceable. There are
rights which are guaranteed by law but cannot be enforced by
a judicial party. In a decided case, a husband complained that
his wife was unwilling to perform her duties as a wife. The
Court said: „We can tell your wife what her duties as such are
and that she is bound to comply with them, but we cannot
force her physically to discharge her main marital duty to her
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able and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government.
8 G.R. No. 209287, July 1, 2014, 728 SCRA 1, 68-69.
115
116
117
118
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3.
The doctrine of immutability of judgment precludes
the Court from reevaluating the definition of capital
under Section 11, Article XII of the 1987 Constitution
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of those who study judicial decisions that the results are usually
sound, whether the reasoning from which the results purport to
flow is sound or not.‰ (The Theory of Judicial Decision, Pound, 36
Harv. Law Review, pp. 9, 51.) It is not infrequent that the grounds
of a
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127
decision fail to reflect the exact views of the court, especially those
of concurring justices in a collegiate court. We often encounter in
judicial decisions, lapses, findings, loose statements and
generalities which do not bear on the issues or are apparently
opposed to the otherwise sound and considered result reached by
the court as expressed in the dispositive part, so called, of the
decision.
4.
The petition is actually a disguised circumvention
of the ban against a second motion for
reconsideration
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128
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129
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130
DISSENTING OPINION
MENDOZA, J.:
The Antecedents
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131
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132
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133
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6 Id.
7 Rollo, pp. 270-272.
134
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8
<https://.sec.gov.ph/.../memorandumcircular/.../sec%20%memo%20no.%208>
(last visited, April 21, 2015).
135
Petition-in-Intervention
RespondentsÊ Position
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136
PetitionersÊ Reply
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137
Comment-in-Intervention by
Philippine Stock Exchange
Comment-in-Intervention
by Sharephil
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138
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139
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20 Rollo.
140
Issues
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141
Procedural Issues
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142
changed.
The special civil actions for certiorari and prohibition
under Rule 65 have been held by this Court as proper
remedies through which the question of grave abuse of
discretion can be heard regardless of how the assailed act
has been exercised. In Araullo v. Aquino III,25 this Court
stated that „the remedies of certiorari and prohibition are
necessarily broader in scope and reach, and the writ of
certiorari or prohibition may be issued to correct errors of
jurisdiction committed not only by a tribunal, corporation,
board or officer exercising judicial, quasi-judicial or
ministerial functions but also to set right, undo and
restrain any act of grave abuse of discretion amounting to
lack or excess of jurisdiction by any branch or
instrumentality of the Government, even if the latter
does not exercise judicial, quasi-judicial or
ministerial functions.‰ It was further stated that in
discharging the duty „to set right and undo any act of grave
abuse of discretion amounting to lack or excess of
jurisdiction by any branch or
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143
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26 Id.
27 Malana v. Tappa, 616 Phil. 177; 600 SCRA 189 (2009).
144
Hierarchy of Courts
The SEC and PLDT also contend that the Court should
not assume jurisdiction over this case because the
petitioners failed to observe the principle of hierarchy of
courts. Under that principle, direct recourse to this Court is
improper because the Court must remain the court of last
resort to satisfactorily perform its constitutional functions.
It allows the Court to devote its time and attention to
matters within its exclusive jurisdiction and to prevent the
overcrowding of its docket. Be that as it may, the invocation
of this CourtÊs original jurisdiction or plea for the
dispensation of recourse to inferior courts having
concurrent jurisdiction to issue writs of certiorari has been
allowed in certain instances for special and important
reasons clearly stated in the petition, such as, (1) when
dictated by the public welfare and the advancement of
public policy; (2) when demanded by the broader interest of
justice; (3) when the challenged orders were patent
nullities; or (4) when analogous exceptional and compelling
circumstances called for and justified the immediate and
direct handling of the case.28
Exigent and compelling circumstances demand that this
Court take cognizance of this case to put an end to the
controversy and resolve the matter that could have
pervasive effect on this nationÊs economy and security.
Surely, this case is a litmus test for a regulatory framework
that must conform to the final Gamboa ruling and, above
all, the Constitution. Not to be disregarded is the
opportunity that this case seeks to clarify the dynamics of
how to properly apply the nationality limits on public
utilities. As Roy puts it, the fact that this case relates to,
and involves, an interpretation of the final Gamboa
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146
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33 Imbong v. Ochoa, Jr., G.R. No. 204819, April 8, 2014, 721 SCRA
146, 282.
34 Id.
35 Id.
147
Legal Standing
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Substantive Issues
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150
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x x x x x x x x x
Where the articles of incorporation provide for nonvoting shares in the cases
allowed by this Code, the holders of such shares shall nevertheless be entitled
to vote on the following matters:
151
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46 Id.
47 Id.
48 To illustrate:
Suppose that X corporation seeks to engage as a public utility
company. It divided its total outstanding capital stock of 1000 into three
classes of shares · 300 common shares, 200 preferred shares with the
right to vote in the election of directors (Class A preferred), and 500
preferred without such right to elect the directors (Class B preferred).
Another Corporation, Y, an entity considered as a Philippine national
under the FIA on the assumption that 60% of its capital is owned by
Filipinos, owns all common and class B preferred shares.
Three Hundred (300) common shares in the hands of Y, a Philippine
national represents sixty percent (60%) control over all shares with the
right to vote in the election of directors (sum of 200 Class A preferred
shares and 300 common shares). Coupled with another 500 preferred
Class B shares, Y can be considered in control of eighty percent (80%) of
the total outstanding capital stock of X.
Applying the control test leads to the conclusion that a Philippine
national in the person of Y controls X both with respect to the total
outstanding capital stock and the sum of all shares with the right to elect
the directors. However, after applying beneficial ownership test, which
153
Roy points out that the SEC did not include in the
assailed circular the requirement of applying the 60-40 rule
to each and every class of shares. He fears that although
Filipinos
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Sixty percent (60%) of 300 common shares = 180 shares or 36% beneficial
equity in all shares with the rights to vote in the election of directors (sum of
300 common shares and 200 Class A Preferred shares).
Sixty percent (60%) of 500 Class B preferred shares = 300 shares with the
right to elect directors.
To compute total Filipino beneficial equity in the total outstanding capital
stock, 300 shares plus the 180 shares as calculated above must be added. Thus,
300 shares + 180 shares = 480 shares or forty eight (48%) of the total
outstanding capital stock of X.
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160
DISSENTING OPINION
LEONEN, J.:
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1 Gamboa v. Teves, 668 Phil. 1; 652 SCRA 690 (2011) [Per J. Carpio,
En Banc].
161
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2 Heirs of Wilson P. Gamboa v. Teves, 696 Phil. 276; 682 SCRA 397
(2012) [Per J. Carpio, En Banc].
3 CONST., Art. XII, Secs. 2, 10, 11, and Art. XIV, Sec. 4(2) provide:
ARTICLE XII. National Economy and Patrimony
....
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The State shall regulate and exercise authority over foreign investments
within its national jurisdiction and in accordance with its national goals
and priorities.
SECTION 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of whose
capital is owned by such citizens, nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under
the condition that it shall be subject to amendment, alteration, or repeal
by the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public.
The participation of foreign investors in the governing body of any public
utility enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such corporation
or association must be citizens of the Philippines.
....
ARTICLE XIV. Education, Science and Technology, Arts, Culture, and
Sports
....
SECTION 4. . . .
(2) Educational institutions, other than those established by religious
groups and mission boards, shall be owned solely by citizens of the
Philippines or corporations or associations at least sixty per centum of the
capital of which is owned by such citizens. The Congress may, however,
require increased Filipino equity participation in all educational
institutions[.] (Emphasis supplied)
4 Heirs of Wilson P. Gamboa v. Teves, supra note 2 at p. 341; p. 470.
163
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164
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165
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166
x x x x x x x x x
....
167
x x x x x x x x x
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168
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12 CONST., Preamble.
13 CONST., Art. II, Sec. 19.
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170
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172
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173
An illustration is apt.
Suppose that a corporation, „C,‰ is engaged in a nationalized
activity requiring that 60% of its capital be owned by Filipinos and
that this 60% is owned by another corporation, „B,‰ while the
remaining 40% is owned by stockholders, collectively referred to as
„Y.‰ Y is composed entirely of foreign nationals. As for B, 60% of its
capital is owned by stockholders collectively referred to as „A,‰
while the remaining 40% is owned by stockholders collectively
referred to as „X.‰ The collective A, is composed entirely of
Philippine nationals, while the collective X is composed entirely of
foreign nationals. (N.b., in this illustration, „capital‰ is understood
to mean „shares of stock entitled to vote in the election of directors,‰
per the definition in Gamboa). Thus:
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30 Id., at pp. 478-479; pp. 506-507, citing DOJ Opinion No. 165,
Series of 1984, p. 5.