If and when the sale is completed, First Pacific's equity in PLDT will go up from 30.7 percent to 37.0 percent of its common - or voting- stockholdings, x x x. Hence, the consummation of the sale will put the two largest foreign investors in PLDT - First Pacific and Japan's NTT DoCoMo, which is the world's largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the completion of the sale, data culled from the official website of the New York Stock Exchange (www.nyse.com) showed that those foreign entities, which own at least five percent of common equity, will collectively own 81.47 percent of PLDT's common equity. x x x
x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock Exchange for the period 2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of 40 percent ownership as early as 2003. x x x"7
The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.15 (Emphasis supplied)
In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they sought to be enforced 'is a public right recognized by no less than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that 'when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, 'public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved.' We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner's standing. (Emphasis supplied)
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. (Emphasis supplied)
Section 5. 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 the capital of which 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 National Assembly when the public interest 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 the capital thereof. (Emphasis supplied)
Section 8. 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 other entities organized under the laws of the Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires. (Emphasis supplied)
The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x
Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially nationalized activities is for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the Trial Court's ruling upholding respondents' arguments were to be given credence, it would be possible for the ownership structure of a public utility corporation to be divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the Trial Court's ruling adopting respondents' arguments, the common shares can be owned entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control the public utility corporation.
x x x x
Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest.
x x x x
Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it must be shown that the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already admitted that the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition of SMART shares through the Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution.
Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the meaning of the word "capital" as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as common or preferred, cannot stand in the face of a clear legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it to state that as between the law and an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are merely advisory and cannot prevail over the clear intent of the framers of the Constitution.
In the same vein, the SEC's construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that finally determine what a law means.39
16. The Constitution applies its foreign ownership limitation on the corporation's "capital," without distinction as to classes of shares. x x x
In this connection, the Corporation Code - which was already in force at the time the present (1987) Constitution was drafted - defined outstanding capital stock as follows:Section 137. Outstanding capital stock defined. - The term "outstanding capital stock", as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares.
Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of shares, in determining the outstanding capital stock (the "capital") of a corporation. Consequently, petitioner's suggestion to reckon PLDT's foreign equity only on the basis of PLDT's outstanding common shares is without legal basis. The language of the Constitution should be understood in the sense it has in common use.
x x x x
17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of the Constitutional Commission (Vol. III) - which petitioner misleadingly cited in the Petition x x x - which supports petitioner's view that only common shares should form the basis for computing a public utility's foreign equity.
x x x x
18. In addition, the SEC - the government agency primarily responsible for implementing the Corporation Code, and which also has the responsibility of ensuring compliance with the Constitution's foreign equity restrictions as regards nationalized activities x x x - has categorically ruled that both common and preferred shares are properly considered in determining outstanding capital stock and the nationality composition thereof.40
Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of 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.
Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share.
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters:1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
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.
Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights.
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.
MR. VILLEGAS. That is right.
MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the Committee please enlighten me on this?
MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is "60 percent of voting stock."
MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes.48
x x x x
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest."
MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens."
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens.
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the capital is owned by them, but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have a situation where the corporation is controlled by foreigners despite being the minority because they have the voting capital. That is the anomaly that would result here.
MR. BENGZON. No, the reason we eliminated the word "stock" as stated in the 1973 and 1935 Constitutions is that according to Commissioner Rodrigo, there are associations that do not have stocks. That is why we say "CAPITAL."
MR. AZCUNA. We should not eliminate the phrase "controlling interest."
MR. BENGZON. In the case of stock corporations, it is assumed.49 (Emphasis supplied)
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national." (Emphasis supplied)
b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose.
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding 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.
Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals. (Emphasis supplied)
x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has always been, that --. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. (Emphasis supplied)
Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their enforcement. The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign people can be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that legislative actions may give breath to constitutional rights but congressional inaction should not suffocate them.
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person under custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is unnecessary to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The same treatment is accorded to constitutional provisions forbidding the taking or damaging of property for public use without just compensation. (Emphasis supplied)
x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen and the alien have violated the law, none of them should have a recourse against the other, and it should only be the State that should be allowed to intervene and determine what is to be done with the property subject of the violation. We have said that what the State should do or could do in such matters is a matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy should be followed in cases of violations against the constitutional prohibition, courts of justice cannot go beyond by declaring the disposition to be null and void as violative of the Constitution. x x x (Emphasis supplied)
Endnotes:
1 Rollo (Vol. I) , pp. 15-103, (Vol. II), pp. 762-768.
2 See Cojuangco v. Sandiganbayan, G.R. No. 183278, 24 April 2009, 586 SCRA 790.
3 Section 11, Article XII of the 1987 Constitution provides:
ARTICLE XII
NATIONAL ECONOMY AND PATRIMONY
x x x x
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.
4 Yuchengco v. Sandiganbayan, G.R. No. 149802, 20 January 2006, 479 SCRA 1.
5 Rollo, (Vol. II), p. 806.
6 Rollo (Vol. I), p. 23.
7 Id. at 23-24, 26.
8 Id. at 41.
9 Id.
10 Governed by Rule 63 of the Rules of Court. Section 1, Rule 63 of the Rules of Court states:
RULE 63
Declaratory Relief and Similar Remedies
Section 1. Who may file petition. -- Any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder. (Bar Matter No. 803, 17 February 1998)
11 Section 2, Rule 65 of the Rules of Court provides:
SEC. 2. Petition for prohibition. - When the proceedings of any tribunal, corporation, board, officer, or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental relief as law and justice may require.
x x x x
12 Section 3, Rule 65 of the Rules of Court states:
SEC. 3. Petition for mandamus. - When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent, immediately or at some other time to be specified by the court, to do the act required to be done to protect the rights of the petitioner and to pay the damages sustained by the petitioner by reason of the wrongful acts of the respondent.
x x x x
13 343 Phil. 539 (1997).
14 209 Phil. 1 (1983), citing Nacionalista Party v. Angelo Bautista, 85 Phil. 101, and Aquino v. Commission on Elections, 62 SCRA 275.
15 Supra note 13.
16 Adverted to in respondent Nazareno's Memorandum dated 27 September 2007. Rollo, p. 929. Nazareno stated: "In fact, in Fernandez v. Cojuangco, which raised markedly similar issues, the Honorable Court refused to entertain the Petition directly filed with it and dismissed the same for violating the principle of hierarchy of courts."
17 In a Resolution dated 9 June 2003.
18 Section 19, Article II, Constitution.
19 Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish- workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.
20 Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
21 Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.
22 Section 4(2), Article XIV of the 1987 Constitution provides: "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.
The control and administration of educational institutions shall be vested in citizens of the Philippines.
x x x x"
23 Section 11(2), Article XVI of the 1987 Constitution provides: "The advertising industry is impressed with public interest, and shall be regulated by law for the protection of consumers and the promotion of the general welfare.
Only Filipino citizens or corporations or associations at least seventy per centum of the capital of which is owned by such citizens shall be allowed to engage in the advertising industry.
The participation of foreign investors in the governing body of entities in such industry shall be limited to their proportionate share in the capital thereof, and all the executive and managing officers of such entities must be citizens of the Philippines.
24 G.R. No. 130716, 9 December 1998, 299 SCRA 744 cited in Chavez v. Public Estates Authority, 433 Phil. 506 (2002). See also David v. Macapagal-Arroyo, G.R. No. 171396, 3 May 2006, 489 SCRA 160; Santiago v. Commission on Elections, G.R. No. 127325, 19 March 1997, 270 SCRA 106; Kilosbayan, Inc. v. Guingona, Jr., G.R. No. 113375, 5 May 1994, 232 SCRA 110 (1994).
25 Bernas, The Constitution of the Republic of the Philippines, p. 452, citing Smith, Bell and Co. v. Natividad, 40 Phil. 136, 148 (1919); Luzon Stevedoring Corporation v. Anti-Dummy Board, 46 SCRA 474, 490 (1972).
26 Id.
27 De Leon, Hector, Philippine Constitutional Law (Principles and Cases), Volume 2, 1999 Ed., p. 848.
28 Preamble, 1987 Constitution; De Leon, Hector, Philippine Constitutional Law (Principles and Cases), Volume 2, 1999 Ed., p. 788.
29 Section 19, Article II, Constitution.
30 http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of %207.2.10%29_final.pdf
31 ESTABLISHING BASIC POLICIES FOR THE TELEPHONE INDUSTRY, AMENDING FOR THE PURPOSE THE PERTINENT PROVISIONS OF COMMONWEALTH ACT NO. 146, AS AMENDED, OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, AS AMENDED, AND ALL INCONSISTENT LEGISLATIVE AND MUNICIPAL FRANCHISE OF THE PHILIPPINE LONG DISTANCE TELEPHONE COMPANY UNDER ACT NO. 3436, AS AMENDED, AND ALL INCONSISTENT LEGISLATIVE AND MUNICIPAL FRANCHISES INCLUDING OTHER EXISTING LAWS.
32 Upon approval by the National Telecommunications Commission, this mandatory requirement to subscribe to non-voting preferred shares was made optional starting 22 April 2003. See PLDT 20- F 2005 filing with the United States Securities and Exchange Commission at http://www.wikinvest.com/stock/Philippine_Long_Distance_TelephoneCompany_(PHI)/Filing/20-F/2--5/F2923101. See also Philippine Consumers Foundation, Inc. v. NTC and PLDT, G.R. No. L-63318, 18 April 1984, on the origin and rationale of the SIP.
33 Rollo (Vol. I), pp. 414-451.
34 Rollo (Vol. II), p. 991.
35 Id. at 951.
36 Id. at 838.
37 Id. at 898-923.
38 Rollo (Vol. II), p. 913.
39 Rollo (G.R. No. 157360), pp. 55-62.
40 Rollo (G.R. No. 157360), pp. 1577-1583.
41 In PLDT's case, the preferred stock is non-voting, except as specifically provided by law.
(http://www.pldt.com.ph/investor/Documents/a2d211230ec3436eab66b41d3d107cfc4Q2004FSwi thopinion.pdf)
42 Batas Pambansa Blg. 68.
43 As stated in the Corporation Code.
44 See http://www.congress.gov.ph/download/researches/rrb_0303_5.pdf
45 See http://www.congress.gov.ph/download/researches/rrb_0303_5.pdf
46 Section 6, BP Blg. 68 or The Corporation Code.
47 Agpalo, Ruben E., Comments on the Corporation Code of the Philippines, 2001 Second Edition, p. 36.
48 Record of the Constitutional Commission, Vol. III, pp. 255-256.
49 Id. at 360.
50 Republic Act No. 7042 entitled "AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES AND FOR OTHER PURPOSES."
51 Rollo (G.R. No. 157360), Vol. I, p. 348.
It must be noted that under PLDT's Articles of Incorporation, the PLDT Board of Directors is expressly authorized to determine, among others, with respect to each series of Serial Preferred Stock:
x x x x
(b) the dividend rate, if any, on the shares of such series (which, if and to the extent the Board of Directors, in its sole discretion, shall deem appropriate under the circumstances, shall be fixed considering the rate of return on similar securities at the time of issuance of such shares), the terms and conditions upon which and the periods with respect to which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate;
c. whether or not the shares of such series shall be redeemable, the limitations with respect to such redemption, the time or times when and the manner in which such shares shall be redeemable (including the manner of selecting shares of such series for redemption if less than all shares are to be redeemed) and the price or prices at which such shares shall be redeemable, which may not be less than (i) the par value thereof plus (ii) accrued and unpaid dividends thereon, nor more than (i) 110% of the par value thereof plus (ii) accrued and unpaid dividends thereon;
d. whether or not the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or non-cumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof;
(e) the rights to which the holders of shares of such series shall be entitled upon the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, which rights may vary depending on whether such liquidation, dissolution, distribution or winding up is voluntary or involuntary, and if voluntary, may vary at different dates, provided, however, that the amount which the holders of shares of such series shall be entitled to receive in the event of any voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation
Further, "the holders of Serial Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefore, preferential cash dividends at the rate, under the terms and conditions, for the periods and on the dates fixed by the resolution or resolutions of the Board of Directors, x x x and no more, before any dividends on the Common Capital Stock (other than dividends payable in Common Capital Stock) shall be paid or set apart for payment with respect to the same dividend period. All shares of Preferred Stock of all series shall be of equal rank, preference and priority as to dividends irrespective of whether or not the rates of dividends to which the same shall be entitled shall be the same and, when the stated dividends are not paid in full, the shares of all series of Serial Preferred Stock shall share ratably in the payment of dividends including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, provided, however, that any two or more series of Serial Preferred Stock may differ from each other as to the existence and extent of the right to cumulative dividends as aforesaid."
52 Rollo (G.R. No. 157360), Vol. I, p. 339-355. Adopted on 21 November 1995 and approved on 18 February 1997.
53 The other rights, limitations and preferences of common capital stock are as follows:
1. After the requirements with respect to preferential dividends on the Serial Preferred Stock shall have been met and after the corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as purchase, retirement or sinking funds, then and not otherwise the holders of the Common Capital Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available therefor.
2. After distribution in full of the preferential amounts to be distributed to the holders of Serial Preferred Stock in the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, the holders of the Common Capital Stock shall be entitled to receive all the remaining assets of the corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of the Common Capital Stock held by them, respectively.
x x x x
4. The ownership of shares of Common Capital Stock shall not entitle the owner thereof to any right (other than such right, if any, as the Board of Directors in its discretion may from time to time grant) to subscribe for or to purchase or to have offered to him for subscription or purchase any shares of any class of preferred stock of the corporation.
54 http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2.10%29_final.pdf
55 http://www.sec.gov.ph/index.htm?GIS_Download
56 http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2.10%29_final.pdf
57 http://www.pldt.com.ph/investor/Documents/2009%20Dividend%20Declarations_Update%2012082009.pdf.See also http://www.pldt.com.ph/investor/Documents/disclosures_03-01- 2011.pdf
58 Subscription Investment Plan. See PD No. 217.
59 This is the result of the preferred shares being denominated 10% preferred, which means each preferred share will earn an annual dividend equal to 10% of its par value of P10, which amounts to P1. Once this dividend is paid to holders of preferred shares, the rest of the retained earnings can be paid as dividends to the holders of common shares. See http://www.pldt.com.ph/investor/Documents/2009%20Dividend%20Declarations_Update %2012082009.pdf
In 2011, PLDT declared dividends for the common shares at P78.00 per share. (http://www.pldt.com.ph/investor/Documents/disclosures_03-01-2011.pdf)
60 http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_(as%20of%207.2.10)_final.pdf
61 Id. Based on PLDT's 2010 GIS, the paid-up capital of PLDT (as of Record Date - 12 April 2010) consists of the following:
Filipino (preferred): 403,410,355
Foreigners (preferred): 2,287,207
Total: 405,697,562
62 Based on par value, as stated in PLDT's 2010 GIS sbumitted to the SEC. See http://www.pldt.com.ph/investor/shareholder/Documents/GIS_2010_%28as%20of%207.2.10%29_final.pdf (accessed 23 May 2011).
Authorized capital stock of PLDT is broken down as follows:
Common shares: 234,000,000
Preferred shares: 822,500,000
Total: 1,056,000,000
63 For the year 2009.
64 http://www.pse.com.ph/ (accessed 31 May 2011)
65 http://www.pse.com.ph/html/Quotations/2011/stockQuotes_05272011.pdf (accessed 27 May 2011)
66 335 Phil. 82 (1997).
67 Krivenko v. Register of Deeds, 79 Phil. 461 (1947); Rellosa v. Gaw Chee Hun, 93 Phil. 827 (1953); Vasquez v. Li Seng Giap, 96 Phil. 447 (1955); Soriano v. Ong Hoo, 103 Phil. 829 (1958); Philippine Banking Corporation v. Lui She, 128 Phil. 53 (1967); Frenzel v. Catito, 453 Phil. 885 (2003).
68 Id.
69 Securities and Exchange Commission v. Court of Appeals, et al., 316 Phil. 903 (1995). The Court ruled in this case:
The Securities and Exchange Commission ("SEC") has both regulatory and adjudicative functions.
Under its regulatory responsibilities, the SEC may pass upon applications for, or may suspend or revoke (after due notice and hearing), certificates of registration of corporations, partnerships and associations (excluding cooperatives, homeowners' associations, and labor unions); compel legal and regulatory compliances; conduct inspections; and impose fines or other penalties for violations of the Revised Securities Act, as well as implementing rules and directives of the SEC, such as may be warranted.
Relative to its adjudicative authority, the SEC has original and exclusive jurisdiction to hear and decide controversies and cases involving -
a. Intra-corporate and partnership relations between or among the corporation, officers and stockholders and partners, including their elections or appointments;
b. State and corporate affairs in relation to the legal existence of corporations, partnerships and associations or to their franchise; and
c. Investors and corporate affairs particularly in respect of devices and schemes, such as fraudulent practices, employed by directors, officers, business associates, and/or other stockholders, partners, or members of registered firms; x x x
x x x x (Emphasis supplied)
70 SEC. 17. Grounds when articles of incorporation or amendment may be rejected or disapproved. - The Securities and Exchange Commission may reject the articles of incorporation or disapprove any amendment thereto if the same is not in compliance with the requirements of this Code: Provided, That the Commission shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of the articles or amendment. The following are grounds for such rejection or disapproval:
x x x
(4) That the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution. (Emphasis supplied)
71 Republic Act No. 8799. Section 5 of R.A. No. 8799 provides:
Section 5. Powers and Functions of the Commission.- 5.1. The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions:
(a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or a permit issued by the Government;
x x x
(c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications;
x x x
(f) Impose sanctions for the violation of laws and the rules, regulations and orders, issued pursuant thereto;
x x x
(i) Issue cease and desist orders to prevent fraud or injury to the investing public;
x x x
(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law; and
(n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.
VELASCO, JR., J.:
With due respect, I dissent.
A summary of the pertinent facts is as follows:
Philippine Long Distance Telephone Company (PLDT), a Philippine-registered telecommunications firm, was granted an initial 50-year charter and the right to establish a telephone network by Act No. 3436 on November 28, 1928. 1
In 1969, American-owned General Telephone and Electronics Corporation (GTE), a major shareholder of PLDT, sold 26% of PLDT's equity to Philippine Telecommunications Investment Corporation (PTIC). 2 PTIC was incorporated on November 9, 1967 and is engaged in the business of investment holdings. It held 26,034,263 of PLDT shares, or 13.847% of the total outstanding common stocks of PLDT. 3
In 1977, Prime Holdings Inc. (PHI) was incorporated and 100% owned by the Conjuangco group. Subsequently, PHI became the owner of 111,415 shares or 46.125% of PTIC by virtue of three (3) Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. 4
On May 9, 1986, the 111,415 PTIC shares held by PHI were sequestered by the Presidential Commission on Good Government (PCGG) pursuant to Executive Order No. 1. 5 Later, this Court declared the said shares to be owned by the Republic of the Philippines. 6
In 1999, First Pacific Company Limited (First Pacific), a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54% equity of PTIC. 7
Thereafter, the government decided to sell its 46.1% stake in PTIC (equivalent to 6.4% indirect stake in PLDT), designating the Privatization Council of the Philippine Government as the disposition entity. On December 8, 2006, a public bidding was held where Singapore-based Parallax Capital Management LP (Parallax) emerged as the highest bidder with an offer of PhP 25,217,556,000. 8
On January 31, 2007, the House of Representatives Committee on Good Government conducted a public hearing on the particulars of the impending sale. Finance Secretary Margarito Teves, Finance Undersecretary John Sevilla, PCGG Chairperson Camilo Sabio, Commissioners Narciso Nario and Nick Conti, Securities and Exchange Commission (SEC) General Counsel Vernette Umali-Paco, Philippine Stock Exchange (PSE) Chairperson Jose Vitug and President Francisco Ed Lim, Development Bank of the Philippines (DBP) President Reynaldo David and Director Miguel Romero all attended the hearing. 9
In Report No. 2270, the House Committee on Good Government concluded that: (1) the auction of the government's PTIC shares bore due diligence, transparency and conformity with existing legal procedures; and (2) First Pacific's intended acquisition of the government's PTIC shares resulting in its 100% ownership in PTIC will not violate the 40% constitutional limit on foreign ownership of a public utility since PTIC held only 13.847% of the total outstanding common stocks of PLDT. 10
Subsequently, the government informed First Pacific of the results of the bidding and gave it until February 1, 2007 to exercise its right of first refusal as provided under PTIC's Articles of Incorporation. Consequently, First Pacific announced that it would match Parallax's bid. 11 However, First Pacific failed to raise the money for the purchase by the February 1, 2007 deadline and, instead, yielded the right to PTIC itself. The deadline was then reset to March 2, 2007. 12
On February 14, 2007, First Pacific, through its subsidiary, Metro Pacific Assets Holdings Inc. (MPAH), entered into a Conditional Sale and Purchase Agreement with the government for the latter's 46.1% stake in PTIC at the price of PhP 25,217,556,000. 13 The acquisition was completed on February 28, 2007.
On the same date, Wilson Gamboa (Gamboa) filed the instant petition for prohibition, injunction, declaratory relief and declaration of nullity of sale of the 111,415 shares of PTIC. He argues that: (1) the consummation of the impending sale of 111,415 shares to First Pacific violates the constitutional limitation on foreign ownership of a public utility; (2) respondents committed grave abuse of discretion by allowing the sale of PTIC shares to First Pacific; (3) respondents have made a complete misrepresentation of the impending sale by saying that it does not breach the constitutional limitation on foreign ownership of a public utility; and (4) the sale of common shares to foreigners in excess of 40% of the entire subscribed common capital stock violates the 1987 Philippine Constitution. 14
After a careful examination of the facts and law applicable to the case, I submit that the petition should be dismissed.
At the outset, it is strikingly clear that the petition suffers from several jurisdictional and procedural defects.
Petitioner Has No Locus Standi
Petitioner Gamboa claims that he filed the petition in his capacity as a "nominal shareholder of PLDT and as [a] taxpayer." 15 However, these claims do not clothe him with the requisite legal standing to bring this suit.
The Rules of Court specifically requires that "[e]very action must be prosecuted or defended in the name of the real party in interest." 16 A real party in interest is defined as the "party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit."
Petitioner has failed to allege any interest in the 111,415 PTIC shares nor in any of the previous purchase contracts he now seeks to annul. He is neither a shareholder of PTIC nor of First Pacific. Also, he has not alleged that he was an interested bidder in the government's auction sale of the PTIC shares. Finally, he has not shown how, as a nominal shareholder of PLDT, he stands to benefit from the annulment of the sale of the 111,415 PTIC shares or of any of the sales of the PLDT common shares held by foreigners. In fine, petitioner has not shown any real interest substantial enough to give him the requisite locus standi to question the sale of the government's PTIC shares to First Pacific.
Likewise, petitioner's assertion that he has standing to bring the suit as a "taxpayer" must fail. In Gonzales v. Narvasa, We discussed that "a taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds have been disbursed in alleged contravention of the law or the Constitution." 17 In this case, no public funds have been disbursed. In fact, the opposite has happened--there is an inflow of funds into the government coffers.
Evidently, petitioner Gamboa has no legal standing to bring the present petition before this Court.
This Court Has No Jurisdiction
Petitioner Gamboa filed four (4) different petitions before this Court--declaratory relief, annulment, prohibition and injunction. However, all of these actions are not within the exclusive and/or original jurisdiction of the Supreme Court.
Article VII of the 1987 Constitution, particularly Section 5(1), in relation to Sec. 5(5), enumerates the instances where this Court exercises original jurisdiction:
Article VIII
Section 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
x x x x
(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the integrated bar, and legal assistance to the under-privileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court.
RULE 56
Original Cases
Section 1. Original cases cognizable. - Only petitions for certiorari, prohibition, mandamus, quo warranto, habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting ambassadors, other public ministers and consuls may be filed originally in the Supreme Court.
Any person interested under a deed, will, contract or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder. (Emphasis supplied.)
x x x We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice must be stopped, not only because of the imposition upon the precious time of this Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction.
The writ of prohibition, as its name imports, is one which commands the person to whom it is directed not to do something which, by the suggested to the relator, the court is informed he is about to do. If the thing be already done, it is manifest the writ of prohibition cannot undo it, for that would require an affirmative act; and the only effect to a writ of prohibition is to suspend all action, and to prevent any further proceeding in the prohibited direction.
x x x In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders' ownership of the shares which is adversely affected but the capacity of the corporation to own land - that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. (Emphasis supplied.)
has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest[;] a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action before it may properly go forward. 44
x x x x Their presence is necessary to vest the court with jurisdiction, which is "the authority to hear and determine a cause, the right to act in a case." Thus, without their presence to a suit or proceeding, judgment of a court cannot attain real finality. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. (Emphasis supplied.)
x x x A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon complaint or otherwise" x x x the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government.
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. (Emphasis supplied.)
MR. BENGZON. We would also like to indicate that perhaps the better term in order to avoid any conflict or misinterpretations would be the use of the phrase "capital stock."
MR. NATIVIDAD. Capital stock?
MR. SUAREZ. We will discuss that on the committee level because precisely, there were three criteria that were submitted. One of them is with reference to the authorized capital stock; the second would be with respect to the voting rights; and the third would be with respect to the management. And so, again, we would like to inform the members that the Committee is still trying to polish this particular provision. 50
x x x x
MR. FOZ. Mr. Vice-President, in Sections 3 and 9, 51 the provision on equity is both 60 percent, but I notice that this is now different from the provision in the 1973 Constitution in that the basis for the equity provision is voting stock or controlling interest instead of the usual capital percentage as provided for in the 1973 Constitution. We would like to know what the difference would be between the previous and the proposed provisions regarding equity interest.
MR. VILLEGAS. Commissioner Suarez will answer that.
MR. SUAREZ. Thank you.
As a matter of fact, this particular portion is still being reviewed by this Committee. In Section 1, Article XIII of the 1935 Constitution, the wording is that the percentage should be based on the capital which is owned by such citizens. In the proposed draft, this phrase was proposed: "voting stock or controlling interest." This was a plan submitted by the UP Law Center.
Three days ago, we had an early morning breakfast conference with the members of the UP Law Center and precisely, we were seeking clarification regarding the difference. We would have three criteria to go by: One would be based on capital, which is capital stock of the corporation, authorized, subscribed or paid up, as employed under the 1935 and the 1973 Constitution. The idea behind the introduction of the phrase "voting stock or controlling interest" was precisely to avoid the perpetration of dummies, Filipino dummies of multinationals. It is theoretically possible that a situation may develop where these multinational interests would not really be only 40 percent but will extend beyond that in the matter of voting because they could enter into what is known as a voting trust or voting agreement with the rest of the stockholders and, therefore, notwithstanding the fact that on record their capital extent is only up to 40-percent interest in the corporation, actually, they would be managing and controlling the entire company. That is why the UP Law Center members suggested that we utilize the words "voting interest" which would preclude multinational control in the matter of voting, independent of the capital structure of the corporation. And then they also added the phrase "controlling interest" which up to now they have not been able to successfully define the exact meaning of. x x x And as far as I am concerned, I am not speaking in behalf of the Committee, I would feel more comfortable if we go back to the wording of the 1935 and the 1973 Constitution, that is to say, the 60-40 percentage could be based on the capital stock of the corporation.
MR. FOZ. I understand that that was the same view of Dean Carale who does not agree with the other on this panel at the UP Law Center regarding the percentage of the ratio.
MR. Suarez. That is right. Dean Carale shares my sentiment about this matter.
MR. BENGZON. I also share the sentiment of Commissioner Suarez in that respect. So there are already two in the Committee who want to go back to the wording of the 1935 and the 1973 Constitution. 52
x x x x
MR. TREÑAS. Madam President, may I propose an amendment on line 14 of Section 3 by deleting therefrom "whose voting stock and controlling interest." And in lieu thereof, insert the CAPITAL so the line should read: "associations at least sixty percent of the CAPITAL is owned by such citizens.
MR. VILLEGAS. We accept the amendment.
MR. TREÑAS. Thank you.
THE PRESIDENT. The amendment of Commissioner Treñas on line 14 has been accepted by the Committee.
Is there any objection? (Silence) The Chair hears none; the amendment is approved.53
x x x x
MR. VILLEGAS. Yes, Commissioner Davide has accepted the word "CAPITAL" in place of "voting stock or controlling interest." This is an amendment already accepted by the Committee.54 x x x x
x x x x
MR. NOLLEDO. Thank you, Madam President.
I would like to propound some questions to the chairman and members of the committee. I have here a copy of the approved provisions on Article on the National Economy and Patrimony. On page 2, the first two lines are with respect to the Filipino and foreign equity and I said: "At least sixty percent of whose capital or controlling interest is owned by such citizen."
I notice that this provision was amended by Commissioner Davide by changing "voting stocks" to "CAPITAL," but I still notice that there appears the term "controlling interest" which seems to refer to associations other than corporations and it is merely 50 percent plus one percent which is less than 60 percent. Besides, the wordings may indicate that the 60 percent may be based not only on capital but also on controlling interest; it could mean 60 percent or 51 percent.
Before I propound the final question, I would like to make a comment in relation to Section 15 since they are related to each other. I notice that in Section 15, there still appears the phrase "voting stock or controlling interest." The term "voting stocks" as the basis of the Filipino equity means that if 60 percent of the voting stocks belong to Filipinos, foreigners may not own more than 40 percent of the capital as long as the 40 percent or the excess thereof will cover nonvoting stock. This is aside from the fact that under the Corporation Code, even nonvoting shares can vote on certain instances. Control over investments may cover aspects of management and participation in the fruits of production or exploitation.
So, I hope the committee will consider favorably my recommendation that instead of using "controlling interests," we just use "CAPITAL" uniformly in cases where foreign equity is permitted by law, because the purpose is really to help the Filipinos in the exploitation of natural resources and in the operation of public utilities. I know the committee, at its own instance, can make the amendment.
What does the committee say?
MR. VILLEGAS. We completely agree with the Commissioner's views. Actually, it was really an oversight. We did decide on the word "CAPITAL." I think it was the opinion of the majority that the phrase "controlling interest" is ambiguous.
So, we do accept the Commissioner's proposal to eliminate the phrase "or controlling interest" in all the provisions that talk about foreign participation. (Emphasis supplied.)
MR. NOLLEDO. Not only in Section 3, but also with respect to Section 15.
Thank you very much. 55
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest."
MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens."
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens?
MR. VILLEGAS. That is right.
x x x x
MR. AZCUNA. Yes, but what I mean is that the control should be with the Filipinos.
MR. BENGZON. Yes, that is understood.
MR. AZCUNA. Yes, because if we just say "sixty percent of whose capital is owned by the Filipinos," the capital may be voting or non-voting.
MR. BENGZON. That is correct. 58
x x x x
MR. GARCIA. Thank you very much, Madam President.
I would like to propose the following amendment on Section 3, line 14 on page 2. I propose to change the word "sixty" to SEVENTY-FIVE. So, this will read: "or it may enter into co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations at least SEVENTY-FIVE percent of whose CAPITAL stock or controlling interest is owned by such citizens."
MR. VILLEGAS. This is just a correction. I think Commissioner Azcuna is not insisting on the retention of the phrase "controlling interest," so we will retain "CAPITAL" to go back really to the 1935 and 1973 formulations. 59 (Emphasis supplied.)
SEC. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the Philippines; of a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national." (Emphasis supplied.)
Senator Angara. x x x x
Before I leave that point, Mr. President, as we know, the constitutional test is capital. That means, equity investment, not control. Would this control test then now become an additional requirement to the constitutional requirement?
Senator Paterno. Well, this is an amplification of the constitutional stipulation, Mr. President. It is a definition, by law, of what is contained in the Constitution.
Senator Angara. No, Mr. President, because the Constitution requires 60 percent of capital. That means, whether voting or nonvoting, 60 percent of that must belong to Filipinos. Whereas, under this proposed definition, it is only the voting shares that we require to be 60 percent owned.
Senator Paterno. Yes.
Senator Angara. So, my question is: Would this requirement of control be in addition to what the Constitution imposes?
Senator Paterno. No, this would be the definition of what the Constitution requires. We are saying that it is the capital stock outstanding and entitled to vote. It is the definition of capital as maintained by the Constitution.
Senator Angara. On the contrary, I am saying that the constitutional test is capital, which is distinguished from capital stock entitled to vote. Capital means equity which can be voting or nonvoting, common or preferred. That is the constitutional test. 63 x x x (Emphasis supplied.)
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
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.
Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60% only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. 68
CHAIRMAN TEVES. x x x On definition of terms, Ronnie, would you like anything to say here on the definition of terms of Philippine national?
HON. RONALDO B. ZAMORA. I think we've - we have already agreed that we are adopting here the control test. Wasn't that the result of the -
CHAIRMAN PATERNO. No. I thought that at the last meeting, I have made it clear that the Senate was not able to make a decision for or against the grandfather rule and the control test, because we had gone into caucus and we had voted but later on the agreement was rebutted and so we had to go back to adopting the wording in the present law which is not clearly, by its language, a control test formulation.
HON. ANGARA. Well, I don't know. Maybe I was absent, Ting, when that happened but my recollection is that we went into caucus, we debated [the] pros and cons of the control versus the grandfather rule and by actual vote the control test bloc won. I don't know when subsequent rejection took place, but anyway even if the - we are adopting the present language of the law I think by interpretation, administrative interpretation, while there may be some differences at the beginning, the current interpretation of this is the control test. It amounts to the control test.
CHAIRMAN TEVES. That's what I understood, that we could manifest our decision on the control test formula even if we adopt the wordings here by the Senate version.
x x x x
CHAIRMAN PATERNO. The most we can do is to say that we have explained - is to say that although the House Panel wanted to adopt language which would make clear that the control test is the guiding philosophy in the definition of [a] Philippine national, we explained to them the situation in the Senate and said that we would be - was asked them to adopt the present wording of the law cognizant of the fact that the present administrative interpretation is the control test interpretation. But, you know, we cannot go beyond that. 71
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest."
As to the basis of computation of the 60-40 percentage nationality requirement under existing laws (whether it should be based on the number of shares or the aggregate amount in pesos of the par value of the shares), the following definitions of corporate terms are worth mentioning.
"The term capital stock signifies the aggregate of the shares actually subscribed". (11 Fletcher, Cyc. Corps. (1971 Rev. Vol.) sec. 5082, citing Goodnow v. American Writing Paper Co., 73 NJ Eq. 692, 69 A 1014 aff'g 72 NJ Eq. 645, 66 A, 607).
"Capital stock means the capital subscribed (the share capital)". (Ibid., emphasis supplied).
"In its primary sense a share of stock is simply one of the proportionate integers or units, the sum of which constitutes the capital stock of corporation. (Fletcher, sec. 5083).
The equitable interest of the shareholder in the property of the corporation is represented by the term stock, and the extent of his interest is described by the term shares. The expression shares of stock when qualified by words indicating number and ownership expresses the extent of the owner's interest in the corporate property (Ibid, Sec. 5083, emphasis supplied).
Likewise, in all provisions of the Corporation Code the stockholders' right to vote and receive dividends is always determined and based on the "outstanding capital stock", defined as follows:
"SECTION 137. Outstanding capital stock defined. -- The term "outstanding capital stock" as used in this Code, means the total shares of stock issued to subscribers or stockholders, whether or not fully or partially paid (as long as there is a binding subscription agreement, except treasury shares."
The computation, therefore, should be based on the total outstanding capital stock, irrespective of the amount of the par value of the shares.
"Under the 'control concept', the nationality of the corporation depends on the nationality of the controlling stockholders. In determining the nationality of a corporation under the 'control test', the following ruling was adopted by the Commission:
x x x x
Hence, we confirm your view that the test for compliance with the nationality requirement is based on the total outstanding capital stock irrespective of the amount of the par value of shares. 74 (Emphasis supplied.)
In view of the foregoing, it is opined that the term "capital" denotes the sum total of the shares subscribed and paid by the shareholders, or secured to be paid, irrespective of their nomenclature to be issued by the corporation in the conduct of its operation. Hence, non-voting preferred shares are considered in the computation of the 60-40% Filipino-alien equity requirement of certain economic activities under the Constitution. 75 (Emphasis supplied.)
The pertinent provision of the Philippine Constitution under Article XII, Section 7, reads in part thus:
"No franchise, certificate, or any 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 issue raised on your letter zeroes in on the meaning of the word "capital" as used in the above constitutional provision.
Anent thereto, please be informed that the term "capital" as applied to corporations, refers to the money, property or means contributed by stockholders as the form or basis for the business or enterprise for which the corporation was formed and generally implies that such money or property or means have been contributed in payment for stock issued to the contributors. (United Grocers, Ltd. v. United States F. Supp. 834, cited in 11 Fletcher, Cyc. Corp., 1986, rev. vol., sec. 5080 at 18). As further ruled by the court, "capital of a corporation is the fund or other property, actually or potentially in its possession, derived or to be derived from the sale by it of shares of its stock or his exchange by it for property other than money. This fund includes not only money or other property received by the corporation for shares of stock but all balances of purchase money, or installments, due the corporation for shares of stock sold by it, and all unpaid subscriptions for shares." (Williams v. Brownstein, 1F. 2d 470, cited in 11 Fletcher, Cyc. Corp., 1058 rev. vol., sec. 5080, p. 21).
The term "capital" is also used synonymously with the words "capital stock", as meaning the amount subscribed and paid-in and upon which the corporation is to conduct its operation. (11 Fletcher, Cyc. Corp. 1986, rev. vol., sec. 5080 at 15). And, as held by the court in Haggard v. Lexington Utilities Co., (260 Ky 251, 84 SW 2d 84, cited in 11 Fletcher, Cyc. Corp., 1958 rev. vol., sec. 5079 at 17), "The capital stock of a corporation is the amount paid-in by its stockholders in money, property or services with which it is to conduct its business, and it is immaterial how the stock is classified, whether as common or preferred."
The Commission, in a previous opinion, ruled that the term 'capital' denotes the sum total of the shares subscribed and paid by the shareholders or served to be paid, irrespective of their nomenclature. (Letter to Supreme Technotronics Corporation, dated April 14, 1987).
Hence, your query is answered in the affirmative. 76 (Emphasis supplied.)
Relative to the second issue, "In the absence of special provisions the holders of preferred stock in a corporation are in precisely the same position, both with respect to the corporation itself and with respect to the creditors of the corporation, as the holders of common stock, except only that they are entitled to receive dividends on their shares, to the extent guaranteed or agreed upon, before any dividends can be paid to the holders of common stock. x x x. Accordingly, as a general rule, they are considered in the computation of the 60-40% Filipino-alien equity percentage requirement, unless the law covering the type of business to be undertaken provides otherwise. (Emphasis supplied.)
Please note that Article XII, Section 11 of the Philippine Constitution provides:"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..."
The legal capacity of the corporation to acquire franchise, certificate, or authority for the operation of a public utility is regulated by the aforequoted Constitutional provision, which requires that at least sixty per centum (60%) of the capital of such corporation be owned by citizens of the Philippines. However, such provision does not qualify whether the required ownership of "capital" shall be that of the voting or non-voting, common or preferred. Hence, it should be interpreted to refer to the sum total of the outstanding capital stock, irrespective of the nomenclature or classification as common, preferred, voting or non-voting. (Emphasis supplied.)
For permitted and permissible investments, the maximum percentage of control allowable to foreign investors is found in Sections 46 and 47 of the Omnibus Investments Code of 1987, copy enclosed. In relation thereto, "Outstanding capital stock" refers to the total shares issued to subscribers or stockholders, whether or not fully or partially paid, except treasury shares. (Section 137, Corporation Code of the Philippines), and it is immaterial how the stock is classified, whether as common or preferred, (SEC Opinions, dated June 13, 1988, April 14, 1987, and February 15, 1988).
Your client will lose its character of being one hundred percent (100%) Filipino-owned if said Japanese entity is allowed to subscribe to its preferred shares. The issuance of shares to an alien will reduce the ownership of Filipino citizens to less than the required percentage based on the outstanding capital stock of the corporation, regardless of the fact that said shares are non-voting and non-convertible.
Please be advised that under the Retail Trade Nationalization Law (R.A. 1180), "No association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business."
x x x As far back as In re Allen, (2 Phil. 630) a 1903 decision, Justice McDonough, as ponente, cited this excerpt from the leading American case of Pennoyer v. McConnaughy, decided in 1891: "The principle that the contemporaneous construction of a statute by the executive officers of the government, whose duty it is to execute it, is entitled to great respect, and should ordinarily control the construction of the statute by the courts, is so firmly embedded in our jurisprudence that no authorities need be cited to support it.' (Ibid, 640. Pennoyer v. McConnaughly is cited in 140 US 1. The excerpt is on p. 23 thereof. Cf. Government v. Municipality of Binalonan, 32 Phil, 634 [1915]) There was a paraphrase by Justice Malcolm of such a pronouncement in Molina v. Rafferty, (37 Phil. 545) a 1918 decision:" Courts will and should respect the contemporaneous construction placed upon a statute by the executive officers whose duty it is to enforce it, and unless such interpretation is clearly erroneous will ordinarily be controlled thereby. (Ibid, 555) Since then, such a doctrine has been reiterated in numerous decisions. 79 (Emphasis supplied.)
x x x x 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. (Emphasis supplied.)
x x x Provided, finally, that the election of aliens as members of the Board of Directors of governing body of corporations or associations engaging in partially nationalized activity shall be allowed in proportion to their allowable participation or share in the capital of such entities.
The [law] does not qualify whether the required ownership of "capital stock" are voting or non-voting. Hence, it should be interpreted to mean the sum total of the capital stock subscribed, irrespective of their nomenclature and whether or not they are voting or non-voting. The use of the phrase "capital stock belongs" connotes that in order to comply with the Filipino nationality requirement for land ownership, it is necessary that the criterion of "beneficial ownership" should be met, not merely the control of the corporation.
To construe the 60-40% equity requirement is merely based on the voting shares, disregarding the preferred non-voting shares, not on the total outstanding subscribed capital stock, would give rise to a situation where the actual foreign interest would not really be only 40% but may extend beyond that because they could also own even the entire preferred non-voting shares. In this situation, Filipinos may have the control in the operation of the corporation by way of voting rights, but have no effective ownership of the corporate assets which include lands, because the actual Filipino equity constitutes only a minority of the entire outstanding capital stock. Therefore, in essence, the company, although controlled by Filipinos, is beneficially owned by foreigners since the actual ownership of at least 60% of the entire outstanding capital stocks would be in the hands of foreigners. Allowing this situation would open the floodgates to circumvention of the intent of the law to make the Filipinos the principal beneficiaries in the ownership of Philippine alienable lands.
x x x x
Thus, for purpose of "land ownership", non-voting preferred shares should be included in the computation of the statutory 60-40% Filipino-alien equity requirement. To rule otherwise would result in the emergence of foreign beneficial ownership of land, thereby defeating the purpose of the law. On the other hand, to view the equity ratio as determined on the basis of the entire outstanding capital stock would be to uphold the unequivocal purpose of the above-cited law of ensuring Filipino rightful domination of land ownership. (Emphasis supplied.)
Endnotes:
1 Rollo, p. 16.
2 Id.
3 Id. at 899.
4 Id. at 900.
5 Id.
6 See Cojuangco v. Sandiganbayan, G.R. No. 183278, April 24, 2009, 586 SCRA 790.
7 Rollo, p. 18.
8 Id. at 900-901.
9 Id. at 902.
10 Id. at 902-903.
11 Id. at 902.
12 Id. at 17.
13 Id. at 903.
14 Id. at 41.
15 Id. at 15.
16 Rule 3, Sec. 2.
17 G.R. No. 140835, August 14, 2000, 337 SCRA 733, 741. (Emphasis supplied.)
18 Province of Camarines Sur v. Court of Appeals, G.R. No. 175064, September 18, 2009, 600 SCRA 569, 585.
19 Rule 63, Sec. 2.
20 Degala v. Reyes, No. L-2402, November 29, 1950.
21 Tambunting, Jr. v. Sumabat, G.R. No. 144101, September 16, 2005, 470 SCRA 92, 96.
22 Rollo, pp. 11-12.
23 Ponencia, p. 10.
24 G.R. No. 107921, July 1, 1993, 224 SCRA 236, 243.
25 Perez v. City Mayor of Cabanatuan, No. L-16786, October 31, 1961.
26 Ferrer, Jr. v. Roco, Jr., G.R. No. 174129, July 5, 2010.
27 Montes v. Civil Service Board of Appeals, No. L-10759, May 20, 1957.
28 Republic Act No. 8799, Sec. 5 provides:
Section 5. Powers and Functions of the Commission.- 5.1. The commission shall act with transparency and shall have the powers and functions provided by this code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions:
(a) Have jurisdiction and supervision over all corporations, partnership or associations who are the grantees of primary franchises and/or a license or a permit issued by the Government;
x x x x
(c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications;
(d) Regulate, investigate or supervise the activities of persons to ensure compliance;
x x x x
(f) Impose sanctions for the violation of laws and rules, regulations and orders, and issued pursuant thereto;
(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulation and orders;
x x x x
(i) Issue cease and desist orders to prevent fraud or injury to the investing public;
x x x x
(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law; and
(n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.
29 National Power Corporation v. Province of Quezon and Municipality of Pagbilao, G.R. No. 171586, January 25, 2010.
30 See Heirs of Juanita Padilla v. Magdua, G.R. No. 176858, September 15, 2010, 630 SCRA 573, 586.
31 Batas Pambansa Blg. 129, Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
x x x x
32 Chong v. Dela Cruz, G.R. No. 184948, July 21, 2009, 593 SCRA 311, 314; citing Talento v. Escalada, G.R. No. 180884, June 27, 2008, 556 SCRA 491.
33 See Chamber of Real Estate and Builders Associations, Inc. (CREBA) v. Secretary of Agrarian Reform, G.R. No. 183409, June 18, 2010, 621 SCRA 295.
34 G.R. Nos. 99289-90, January 27, 1993, 217 SCRA 633, 651-652.
35 G.R. No. 157360, June 9, 2003.
36 Pimentel v. Ermita, G.R. No. 164978, October 13, 2005, 472 SCRA 587, 593; Tolentino v. Commission on Elections, G.R. No. 148334, January 21, 2004, 420 SCRA 438, 451.
37 61 Phil. 523 (1935).
38 4 Wall., 158, 161; 18 Law. ed., 354.
39 Rule 2, Sec. 5. Joinder of causes of action.
A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions:
x x x x
(b) The joinder shall not include special civil actions or actions governed by special rules; (Emphasis supplied.)
40 Art. III, Sec. 1.
41 J.G. Bernas, S.J., The 1987 Philippine Constitution: A Comprehensive Reviewer 27-28 (2006).
42 G.R. No. 124293, January 31, 2005, 450 SCRA 169, 192.
43 La Bugal-B'laan Tribal Association Inc. v. DENR, G.R. No. 127882, December 1, 2004, 445 SCRA 1.
44 Metropolitan Bank & Trust Company v. Alejo, G.R. No. 141970, September 10, 2001, 364 SCRA 812, 820; citations omitted.
45 Rule 3, Sec. 7.
46 G.R. No. 153059, August 14, 2007, 530 SCRA 58.
47 G.R. No. 84404, October 18, 1990, 190 SCRA 717, 729.
48 Ponencia, p. 17.
49 Id. at 20.
50 Records of the Constitutional Commission, Volume III, p. 269.
51 Referring to Sections 2 and 10, Article XII of the 1987 Constitution.
52 Records of the Constitutional Commission, Volume III, pp. 326-327.
53 Id. at 357.
54 Id. at 360.
55 Id. at 582.
56 Section 2, Article XII, 1987 Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. x x x x (Emphasis supplied.)
57 Section 10, Article XII, 1987 Constitution:
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. (Emphasis supplied.)
58 Records of the Constitutional Commission, Volume III, p. 360.
59 Id. at 364.
60 Sarmiento v. Mison, G.R. No. 79974, December 17, 1987, 156 SCRA 549, 552 citing Gold Creek Mining Corp. v. Rodriguez, 66 Phil. 259, 264.
61 Aquino, Jr. v. Enrile, No. L-35546, September 17, 1974, 59 SCRA 183.
62 Republic Act No. 7042 entitled "AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES AND FOR OTHER PURPOSES."
63 Transcript of the January 15, 1991, 4th Regular Session, 8th CRP, Bill on Second Reading, Senate, pp. 11-12.
64 Teehankee v. Rovias, 75 Phil. 634 (1945).
65 Batas Pambansa Blg. 68 entitled "THE CORPORATION CODE OF THE PHILIPPINES."
66 Castillo v. Balinghasay, G.R. No. 150976, October 18, 2004.
67 National Waterworks and Sewerage Authority, No. L-21911, September 29, 1967.
68 Opinion No. 018, s. 1989, January 19, 1989, Department of Justice.
69 Ponencia, pp. 30-31.
70 SEC Opinion dated November 6, 1989 addressed to Attys. Barbara Anne C. Migollos and Peter Dunnely A. Barot; SEC Opinion dated December 14, 1989 addressed to Atty. Maurice C. Nubla; SEC Opinion dated January 2, 1990 addressed to Atty. Eduardo F. Hernandez; SEC Opinion dated May 30, 1990 addressed to Gold Fields Philippines Corporation; SEC Opinion dated September 21, 1990 addressed to Carag, Caballes, Jamora, Rodriguez & Somera Law Offices; SEC Opinion dated March 23, 1993 addressed to Mr. Francis F. How; SEC Opinion dated April 14, 1993 addressed to Director Angeles T. Wong of the Philippine Overseas Employment Administration; SEC Opinion dated November 23, 1993 addressed to Mssrs. Dominador Almeda and Renato S. Calma; SEC Opinion dated December 7, 1993 addressed to Roco Bunag Kapunan Migallos & Jardaleza; SEC Opinion No. 49-04 dated December 22, 2004 addressed to Atty. Priscilla B. Valer; SEC Opinion No. 17-07 dated September 27, 2007 addressed to Mr. Reynaldo G. David; SEC Opinion No. 18-07 dated November 28, 2007 addressed to Mr. Rafael C. Bueno, Jr.; SEC-OGC Opinion No. 20-07 dated November 28, 2007 addressed to Atty. Amado M. Santiago, Jr., SEC-OGC Opinion No. 21-07 dated November 28, 2007 addressed to Atty. Navato Jr.; SEC-OGC Opinion No. 03-08 dated January 15, 2008 addressed to Attys. Ruby Rose J. Yusi and Rudyard S. Arbolado; SEC-OGC Opinion No. 09-09 dated April 28, 2009 addressed to Villaraza Cruz Marcelo Angangco; SEC-OGC Opinion No. 08-10 dated February 8, 2010 addressed to Mr. Teodoro B. Quijano; SEC-OGC Opinion No. 23-10 dated August 18, 2010 addressed to Attys. Teodulo G. San Juan, Jr. and Erdelyn C. Go.
71 Deliberations of the Bicameral Conference Committee, May 21, 1991, pp. 3-5.
72 Section 1(b), Implementing Rules and Regulations of the Foreign Investments Act of 1991:
b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose. (Emphasis supplied.)
73 Roldan v. Villaroman, No. L-46825, October 18, 1939.
74 See also SEC Opinion No. 18-07 dated November 28, 2007 addressed to Mr. Rafael C. Bueno, Jr.; SEC-OGC Opinion No. 03-08 dated January 15, 2008 addressed to Attys. Ruby Rose J. Yusi and Rudyard S. Arbolado; and SEC-OGC Opinion No. 23-10 dated August 18, 2010 addressed to Attys. Teodulo G. San Juan, Jr. and Erdelyn C. Go.
75 SEC Opinion dated April 14, 1987.
76 SEC Opinion dated February 15, 1988.
77 Republic Act No. 1180, Sec. 1.
78 No. L-5955, September 19, 1952.
79 Philippine Global Communications, Inc. v. Relova, No. L-60548, November 10, 1986; citing Philippine Association of Free Labor Unions [PAFLU] v. Bureau of Labor Relations, August 21, 1976, 72 SCRA 396, 402.
80 Sec. 137.
81 Black's Law Dictionary (9th ed. 2009).
82
(last visited June 23, 2011).
83 See SEC Opinion dated December 27, 1995 addressed to Mr. George Lavidia.
ABAD, J.:
In 1928, the legislature enacted Act 3436, granting Philippine Long Distance Telephone Company (PLDT) a franchise to provide telecommunications services across the country. Forty years later in 1969, General Telephone and Electronics Corporation, an American company and major PLDT stockholder, sold 26% of PLDT's equity to the Philippine Telecommunications Investment Corporation (PTIC).
Subsequently, PTIC assigned 46% of its equity or 111,415 shares of stock to Prime Holdings, Inc. In 1986, the Presidential Commission on Good Government sequestered these shares. Eventually, the Court declared these as properties of the Republic of the Philippines.
In 1999, First Pacific, a Bermuda-registered and Hongkong-based investment firm, acquired the remaining 54% of PTIC's equity in PLDT.
In 2006, the government's Inter-agency Privatization Council offered to auction the 46% PTIC equity in PLDT that the Court adjudged to the Republic. Parallax Venture Fund XXVII won with a bid of P25.2 billion or US$510 million. First Pacific announced that it would exercise its right of first refusal and buy those shares by matching Parallax's bid. In 2007, First Pacific, through its subsidiary, Metro Pacific Assets Holdings, Inc., entered into a Conditional Sale and Purchase Agreement with the national government involving the 46% PTIC equity for P25.2 billion or US$510 million.
In this petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale, petitioner Wilson P. Gamboa, a PLDT stockholder, seeks to annul the sale of the 46% PTIC equity or 111,415 shares of stock to Metro Pacific on the ground that it violates Section 11, Article XII of the 1987 Constitution which limits foreign ownership of a public utility company to 40% of its capital. Gamboa claims that since PTIC is a PLDT stockholder, the sale of the 46% of its equity is actually an indirect sale of 6.3% PLDT equity or 12 million shares of stock. This would increase First Pacific's equity in PLDT from 30.7% to 37%, and concomitantly increase the common shareholdings of foreigners in PLDT to about 64.27%.
The action presents two primordial issues:
1. Whether or not the Court can hear and decide Gamboa's petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale; and
2. Whether or not Metro Pacific's acquisition of 46% of PTIC's equity violates the constitutional limit on foreign ownership of the capital of PLDT, a public utility company, provided under Section 11, Article XII of the 1987 Constitution.
One. The objection to the idea of the Court hearing and deciding Gamboa's action seems to have some basis in the rules. Under Section 1, Rule 56 of the Rules of Court, only the following cases may be filed originally in the Supreme Court:
Sec. 1. Original cases cognizable.--Only petitions for certiorari, prohibition, mandamus, quo warranto, habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting ambassadors, other public ministers and consuls may be filed originally in the Supreme Court.
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; x x x.
Endnotes:
1 Fortich v. Corona, G.R. No. 131457, April 24, 1998, 289 SCRA 624, 645.
2 Springfield Development Corporation, Inc. v. Presiding Judge, RTC, Misamis Oriental, Br. 40, Cagayan de Oro City, G.R. No. 142628, February 6, 2007, 514 SCRA 326, 342-343; Fortich v. Corona, id.
3 Decision, p. 10.
4 G.R. No. 143855, September 21, 2010.
5 Bernas, Joaquin G., Foreign Relations in Constitutional Law, 1995 Ed., p. 87 citing Smith, Bell and Co. v. Natividad, 40 Phil 136, 148 (1919); Luzon Stevedoring Corporation v. Anti-Dummy Board, 46 SCRA 474, 490 (1972); De Leon, Hector S., Philippine Constitutional Law (Principles and Cases), 2004 Ed., Vol. 2, p. 940.
6 De Leon, Hector S., Philippine Constitutional Law (Principles and Cases), 2004 Ed., Vol. 2, p. 946.
7 Manila Prince Hotel v. Government Service Insurance System, G.R. No. 122156, February 3, 1997, 267 SCRA 408, 430.
8 Id. at 431.
9 Agpalo, Ruben E., Comments on the Corporation Code of the Philippines, 2001 Ed., p. 50.
10 Id. at 51.
11 Section 137. The Corporation Code.
12 Sec. 3. Definitions. - As used in this Act:
a. The term "Philippine national" shall mean a citizen of the Philippines; of a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a "Philippine national." (As amended by Republic Act 8179)
13 Decision, pp. 25-26.
14 Id. at 17.
15 Section 21, Article II.
16 Section 22, Article II.
17 Section 25, Article II.
18 Section 27, Article II.
19 Section 16, Article III.
20 Section 2, Article V.
21 Section 5, Article VI.
22 Section 3, Article XIII.
23 Id.