G.R. No.

176579

June 28, 2011

WILSON P. GAMBOA, Petitioner, vs. FINANCE SECRE AR! MARGARI O B. E"ES, FINANCE #N$ERSECRE AR! JO%N P. SE"ILLA, AN$ COMMISSIONER RICAR$O ABCE$E OF %E PRESI$EN IAL COMMISSION ON GOO$ GO"ERNMEN &PCGG' IN %EIR CAPACI IES AS C%AIR AN$ MEMBERS, RESPEC I"EL!, OF %E PRI"A I(A ION CO#NCIL, C%AIRMAN AN %ONI SALIM OF FIRS PACIFIC CO., L $. IN %IS CAPACI ! AS $IREC OR OF ME RO PACIFIC ASSE %OL$INGS INC., C%AIRMAN MAN#EL ". PANGILINAN OF P%ILIPPINE LONG $IS ANCE ELEP%ONE COMPAN! &PL$ ' IN %IS CAPACI ! AS MANAGING $IREC OR OF FIRS PACIFIC CO., L $., PRESI$EN NAPOLEON L. NA(ARENO OF P%ILIPPINE LONG $IS ANCE ELEP%ONE COMPAN!, C%AIR FE BARIN OF %E SEC#RI IES E)C%ANGE COMMISSION, *n+ PRESI$EN FRANCIS LIM OF %E P%ILIPPINE S OC, E)C%ANGE, Respondents. PABLI O ". SANI$A$ *n+ ARNO ". SANI$A$, Petitioners-in-Intervention. DECISION CARPIO, J.: The Case This is an original petition for prohibition, inj n!tion, de!larator" relief and de!laration of n llit" of the sale of shares of sto!# of Philippine Tele!o$$ ni!ations Invest$ent Corporation %PTIC& b" the govern$ent of the Rep bli! of the Philippines to 'etro Pa!ifi! (ssets )oldings, In!. %'P()&, an affiliate of *irst Pa!ifi! Co$pan" +i$ited %*irst Pa!ifi!&. -e An.e/e+en.0 The fa!ts, a!!ording to petitioner ,ilson P. -a$boa, a sto!#holder of Philippine +ong Distan!e Telephone Co$pan" %P+DT&, are as follo.s/0

On 12 Nove$ber 0312, the Philippine +egislat re ena!ted (!t No. 4546 .hi!h granted P+DT a fran!hise and the right to engage in tele!o$$ ni!ations b siness. In 0363, -eneral Telephone and Ele!troni!s Corporation %-TE&, an ($eri!an !o$pan" and a $ajor P+DT sto!#holder, sold 16 per!ent of the o tstanding !o$$on shares of P+DT to PTIC. In 0377, Pri$e )oldings, In!. %P)I& .as in!orporated b" several persons, in!l ding Roland -ap d and 8ose Ca$pos, 8r. S bse9 entl", P)I be!a$e the o.ner of 000,50: shares of sto!# of PTIC b" virt e of three Deeds of (ssign$ent e;e! ted b" PTIC sto!#holders Ra$on Coj ang!o and + is Tirso Rivilla. In 0326, the 000,50: shares of sto!# of PTIC held b" P)I .ere se9 estered b" the Presidential Co$$ission on -ood -overn$ent %PC--&. The 000,50: PTIC shares, .hi!h represent abo t 56.01: per!ent of the o tstanding !apital sto!# of PTIC, .ere later de!lared b" this Co rt to be o.ned b" the Rep bli! of the Philippines.1 In 0333, *irst Pa!ifi!, a <er$ da-registered, )ong =ong-based invest$ent fir$, a!9 ired the re$aining :5 per!ent of the o tstanding !apital sto!# of PTIC. On 1> Nove$ber 1>>6, the Inter-(gen!" Privati?ation Co n!il %IPC& of the Philippine -overn$ent anno n!ed that it .o ld sell the 000,50: PTIC shares, or 56.01: per!ent of the o tstanding !apital sto!# of PTIC, thro gh a p bli! bidding to be !ond !ted on 5 De!e$ber 1>>6. S bse9 entl", the p bli! bidding .as reset to 2 De!e$ber 1>>6, and onl" t.o bidders, Paralla; @ent re * nd AA@II %Paralla;& and Pan-(sia Presidio Capital, s b$itted their bids. Paralla; .on .ith a bid of P1:.6 billion or BSC:0> $illion. Thereafter, *irst Pa!ifi! anno n!ed that it .o ld e;er!ise its right of first ref sal as a PTIC sto!#holder and b " the 000,50: PTIC shares b" $at!hing the bid pri!e of Paralla;. )o.ever, *irst Pa!ifi! failed to do so b" the 0 *ebr ar" 1>>7 deadline set b" IPC and instead, "ielded its right to PTIC itself .hi!h .as then given b" IPC ntil 1 'ar!h 1>>7 to b " the PTIC shares. On 05 *ebr ar" 1>>7, *irst Pa!ifi!, thro gh its s bsidiar", 'P(), entered into a Conditional Sale and P r!hase (gree$ent of the 000,50: PTIC shares, or 56.01: per!ent of the o tstanding !apital sto!# of PTIC, .ith the Philippine -overn$ent for the pri!e of P1:,107,::6,>>> or BSC:0>,:2>,023. The sale .as !o$pleted on 12 *ebr ar" 1>>7. Sin!e PTIC is a sto!#holder of P+DT, the sale b" the Philippine -overn$ent of 56.01: per!ent of PTIC shares is a!t all" an indire!t sale of 01 $illion shares or abo t 6.4 per!ent of the o tstanding !o$$on shares of P+DT. W1.- .-e 0*2e, F130. P*/141/50 /o66on 0-*3e-o2+1n70 1n PL$ 1n/3e*0e+ 43o6 80.7 9e3/en. .o 87 9e3/en., .-e3e:; 1n/3e*01n7 .-e /o66on 0-*3e-o2+1n70 o4 4o3e17ne30 1n PL$ .o *:ou. 0

81.<7 9e3/en.. This violates Se!tion 00, (rti!le AII of the 0327 Philippine Constit tion .hi!h li$its foreign o.nership of the !apital of a p bli! tilit" to not $ore than 5> per!ent.4 On the other hand, p bli! respondents *inan!e Se!retar" 'argarito <. Teves, Bnderse!retar" 8ohn P. Sevilla, and PC-- Co$$issioner Ri!ardo (b!ede allege the follo.ing relevant fa!ts/ On 3 Nove$ber 0367, PTIC .as in!orporated and had sin!e engaged in the b siness of invest$ent holdings. PTIC held 16,>45,164 P+DT !o$$on shares, or 04.257 per!ent of the total P+DT o tstanding !o$$on shares. P)I, on the other hand, .as in!orporated in 0377, and be!a$e the o.ner of 000,50: PTIC shares or 56.01: per!ent of the o tstanding !apital sto!# of PTIC b" virt e of three Deeds of (ssign$ent e;e! ted b" Ra$on Coj ang!o and + is Tirso Rivilla. In 0326, the 000,50: PTIC shares held b" P)I .ere se9 estered b" the PC--, and s bse9 entl" de!lared b" this Co rt as part of the ill-gotten .ealth of for$er President *erdinand 'ar!os. The se9 estered PTIC shares .ere re!onve"ed to the Rep bli! of the Philippines in a!!ordan!e .ith this Co rtDs de!ision5 .hi!h be!a$e final and e;e! tor" on 2 ( g st 1>>6. The Philippine -overn$ent de!ided to sell the 000,50: PTIC shares, .hi!h represent 6.5 per!ent of the o tstanding !o$$on shares of sto!# of P+DT, and designated the Inter-(gen!" Privati?ation Co n!il %IPC&, !o$posed of the Depart$ent of *inan!e and the PC--, as the disposing entit". (n invitation to bid .as p blished in seven different ne.spapers fro$ 04 to 15 Nove$ber 1>>6. On 1> Nove$ber 1>>6, a pre-bid !onferen!e .as held, and the original deadline for bidding s!hed led on 5 De!e$ber 1>>6 .as reset to 2 De!e$ber 1>>6. The e;tension .as p blished in nine different ne.spapers. D ring the 2 De!e$ber 1>>6 bidding, Paralla; Capital 'anage$ent +P e$erged as the highest bidder .ith a bid of P1:,107,::6,>>>. The govern$ent notified *irst Pa!ifi!, the $ajorit" o.ner of PTIC shares, of the bidding res lts and gave *irst Pa!ifi! ntil 0 *ebr ar" 1>>7 to e;er!ise its right of first ref sal in a!!ordan!e .ith PTICDs (rti!les of In!orporation. *irst Pa!ifi! anno n!ed its intention to $at!h Paralla;Ds bid. On 40 8an ar" 1>>7, the )o se of Representatives %)R& Co$$ittee on -ood -overn$ent !ond !ted a p bli! hearing on the parti! lars of the then i$pending sale of the 000,50: PTIC shares. Respondents Teves and Sevilla .ere a$ong those .ho

attended the p bli! hearing. The )R Co$$ittee Report No. 117> !on!l ded that/ %a& the a !tion of the govern$entDs 000,50: PTIC shares bore d e diligen!e, transparen!" and !onfor$it" .ith e;isting legal pro!ed resE and %b& F130. P*/141/50 1n.en+e+ */=u101.1on o4 .-e 7o>e3n6en.50 111,<15 P IC 0-*3e0 3e0u2.1n7 1n F130. P*/141/50 100? o@ne30-19 o4 P IC @122 no. >1o2*.e .-e <0 9e3/en. /on0.1.u.1on*2 2161. on 4o3e17n o@ne30-19 o4 * 9u:21/ u.121.; 01n/e P IC -o2+0 on2; 18.8<7 9e3/en. o4 .-e .o.*2 ou.0.*n+1n7 /o66on 0-*3e0 o4 PL$ .: On 12 *ebr ar" 1>>7, *irst Pa!ifi! !o$pleted the a!9 isition of the 000,50: shares of sto!# of PTIC. Respondent 'an el @. Pangilinan ad$its the follo.ing fa!ts/ %a& the IPC !ond !ted a p bli! bidding for the sale of 000,50: PTIC shares or 56 per!ent of the o tstanding !apital sto!# of PTIC %the re$aining :5 per!ent of PTIC shares .as alread" o.ned b" *irst Pa!ifi! and its affiliates&E %b& Paralla; offered the highest bid a$o nting to P1:,107,::6,>>>E %!& p rs ant to the right of first ref sal in favor of PTIC and its shareholders granted in PTICDs (rti!les of In!orporation, 'P(), a *irst Pa!ifi! affiliate, e;er!ised its right of first ref sal b" $at!hing the highest bid offered for PTIC shares on 04 *ebr ar" 1>>7E and %d& on 12 *ebr ar" 1>>7, the sale .as !ons $$ated .hen 'P() paid IPC P1:,107,::6,>>> and the govern$ent delivered the !ertifi!ates for the 000,50: PTIC shares. Respondent Pangilinan denies the other allegations of fa!ts of petitioner. On 12 *ebr ar" 1>>7, petitioner filed the instant petition for prohibition, inj n!tion, de!larator" relief, and de!laration of n llit" of sale of the 000,50: PTIC shares. Petitioner !lai$s, a$ong others, that the sale of the 000,50: PTIC shares .o ld res lt in an in!rease in *irst Pa!ifi!Ds !o$$on shareholdings in P+DT fro$ 4>.7 per!ent to 47 per!ent, and this, !o$bined .ith 8apanese NTT DoCo'oDs !o$$on shareholdings in P+DT, .o ld res lt to a total foreign !o$$on shareholdings in P+DT of :0.:6 per!ent .hi!h is over the 5> per!ent !onstit tional li$it.6 Petitioner asserts/ If and .hen the sale is !o$pleted, *irst Pa!ifi!Ds e9 it" in P+DT .ill go p fro$ 4>.7 per!ent to 47.> per!ent of its !o$$on F or voting- sto!#holdings, ; ; ;. )en!e, the !ons $$ation of the sale .ill p t the t.o largest foreign investors in P+DT F *irst Pa!ifi! and 8apanDs NTT DoCo'o, .hi!h is the .orldDs largest .ireless tele!o$$ ni!ations fir$, o.ning :0.:6 per!ent of P+DT !o$$on e9 it". ; ; ; ,ith the !o$pletion of the sale, data ! lled fro$ the offi!ial .ebsite of the Ne. Gor# Sto!# E;!hange %....n"se.!o$& sho.ed that those foreign entities, .hi!h o.n at least five per!ent of !o$$on e9 it", .ill !olle!tivel" o.n 20.57 per!ent of P+DTDs !o$$on e9 it". ; ; ; 1

; ; ; as the ann al dis!los re reports, also referred to as *or$ 1>-= reports ; ; ; .hi!h P+DT s b$itted to the Ne. Gor# Sto!# E;!hange for the period 1>>4-1>>:, revealed that *irst Pa!ifi! and several other foreign entities brea!hed the !onstit tional li$it of 5> per!ent o.nership as earl" as 1>>4. ; ; ;H7 Petitioner raises the follo.ing iss es/ %0& .hether the !ons $$ation of the then i$pending sale of 000,50: PTIC shares to *irst Pa!ifi! violates the !onstit tional li$it on foreign o.nership of a p bli! tilit"E %1& .hether p bli! respondents !o$$itted grave ab se of dis!retion in allo.ing the sale of the 000,50: PTIC shares to *irst Pa!ifi!E and %4& .hether the sale of !o$$on shares to foreigners in e;!ess of 5> per!ent of the entire s bs!ribed !o$$on !apital sto!# violates the !onstit tional li$it on foreign o.nership of a p bli! tilit". 2 On 04 ( g st 1>>7, Pablito @. Sanidad and (rno @. Sanidad filed a 'otion for +eave to Intervene and (d$it (tta!hed Petition-in-Intervention. In the Resol tion of 12 ( g st 1>>7, the Co rt granted the $otion and noted the Petition-in-Intervention. Petitioners-in-intervention Hjoin petitioner ,ilson -a$boa ; ; ; in see#ing, a$ong others, to enjoin andIor n llif" the sale b" respondents of the 000,50: PTIC shares to *irst Pa!ifi! or assignee.H Petitioners-in-intervention !lai$ that, as P+DT s bs!ribers, the" have a Hsta#e in the o t!o$e of the !ontrovers" ; ; ; .here the Philippine -overn$ent is !o$pleting the sale of govern$ent o.ned assets in JP+DTK, n9 estionabl" a p bli! tilit", in violation of the nationalit" restri!tions of the Philippine Constit tion.H -e I00ue This Co rt is not a trier of fa!ts. *a!t al 9 estions s !h as those raised b" petitioner,3 .hi!h indisp tabl" de$and a thoro gh e;a$ination of the eviden!e of the parties, are generall" be"ond this Co rtDs j risdi!tion. (dhering to this .ell-settled prin!iple, the Co rt shall !onfine the resol tion of the instant !ontrovers" solel" on the .-3e0-o2+ *n+ 9u3e2; 2e7*2 100ue of .hether the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion refers to the total !o$$on shares onl" or to the total o tstanding !apital sto!# %!o$bined total of !o$$on and non-voting preferred shares& of P+DT, a p bli! tilit". -e Ru21n7 o4 .-e Cou3.

The petition is partl" $eritorio s. Petition for declaratory relief treated as petition for mandamus (t the o tset, petitioner is fa!ed .ith a pro!ed ral barrier. ($ong the re$edies petitioner see#s, onl" the petition for prohibition is .ithin the original j risdi!tion of this !o rt, .hi!h ho.ever is not e;!l sive b t is !on! rrent .ith the Regional Trial Co rt and the Co rt of (ppeals. The a!tions for de!larator" relief,0> inj n!tion, and ann l$ent of sale are not e$bra!ed .ithin the original j risdi!tion of the S pre$e Co rt. On this gro nd alone, the petition !o ld have been dis$issed o tright. ,hile dire!t resort to this Co rt $a" be j stified in a petition for prohibition,00 the Co rt shall nevertheless refrain fro$ dis! ssing the gro nds in s pport of the petition for prohibition sin!e on 12 *ebr ar" 1>>7, the 9 estioned sale .as !ons $$ated .hen 'P() paid IPC P1:,107,::6,>>> and the govern$ent delivered the !ertifi!ates for the 000,50: PTIC shares. )o.ever, sin!e the threshold and p rel" legal iss e on the definition of the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion has far-rea!hing i$pli!ations to the national e!ono$", the Co rt treats the petition for de!larator" relief as one for $anda$ s.01 In Salvacion v. Central Bank of the Philippines,04 the Co rt treated the petition for de!larator" relief as one for $anda$ s !onsidering the grave inj sti!e that .o ld res lt in the interpretation of a ban#ing la.. In that !ase, .hi!h involved the !ri$e of rape !o$$itted b" a foreign to rist against a *ilipino $inor and the e;e! tion of the final j dg$ent in the !ivil !ase for da$ages on the to ristDs dollar deposit .ith a lo!al ban#, the Co rt de!lared Se!tion 004 of Central <an# Cir! lar No. 36>, e;e$pting foreign ! rren!" deposits fro$ atta!h$ent, garnish$ent or an" other order or pro!ess of an" !o rt, inappli!able d e to the pe! liar !ir! $stan!es of the !ase. The Co rt held that Hinj sti!e .o ld res lt espe!iall" to a !iti?en aggrieved b" a foreign g est li#e a!! sed ; ; ;H that .o ld Hnegate (rti!le 0> of the Civil Code .hi!h provides that Lin !ase of do bt in the interpretation or appli!ation of la.s, it is pres $ed that the la.$a#ing bod" intended right and j sti!e to prevail.DH The Co rt therefore re9 ired respondents Central <an# of the Philippines, the lo!al ban#, and the a!! sed to !o$pl" .ith the .rit of e;e! tion iss ed in the !ivil !ase for da$ages and to release the dollar deposit of the a!! sed to satisf" the j dg$ent. 4

In Alliance of Government Workers v. Minister of Labor,05 the Co rt si$ilarl" br shed aside the pro!ed ral infir$it" of the petition for de!larator" relief and treated the sa$e as one for $anda$ s. In Alliance, the iss e .as .hether the govern$ent nla.f ll" e;!l ded petitioners, .ho .ere govern$ent e$plo"ees, fro$ the enjo"$ent of rights to .hi!h the" .ere entitled nder the la.. Spe!ifi!all", the 9 estion .as/ H(re the bran!hes, agen!ies, s bdivisions, and instr $entalities of the -overn$ent, in!l ding govern$ent o.ned or !ontrolled !orporations in!l ded a$ong the fo r Le$plo"ersD nder Presidential De!ree No. 2:0 .hi!h are re9 ired to pa" their e$plo"ees ; ; ; a thirteenth %04th& $onth pa" ; ; ; MH The Constit tional prin!iple involved therein affe!ted all govern$ent e$plo"ees, !learl" j stif"ing a rela;ation of the te!hni!al r les of pro!ed re, and !ertainl" re9 iring the interpretation of the assailed presidential de!ree. In short, it is .ell-settled that this Co rt $a" treat a petition for de!larator" relief as one for $anda$ s if the iss e involved has far-rea!hing i$pli!ations. (s this Co rt held in Salvacion: The Co rt has no original and e;!l sive j risdi!tion over a petition for de!larator" relief. %o@e>e3, eA/e9.1on0 .o .-10 3u2e -*>e :een 3e/o7n1Be+. -u0, @-e3e .-e 9e.1.1on -*0 4*3C3e*/-1n7 16921/*.1on0 *n+ 3*10e0 =ue0.1on0 .-*. 0-ou2+ :e 3e0o2>e+, 1. 6*; :e .3e*.e+ *0 one 4o3 6*n+*6u0.0: %E$phasis s pplied& In the present !ase, petitioner see#s pri$aril" the interpretation of the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion. )e pra"s that this Co rt de!lare that the ter$ H!apitalH refers to !o$$on shares onl", and that s !h shares !onstit te Hthe sole basis in deter$ining foreign e9 it" in a p bli! tilit".H Petitioner f rther as#s this Co rt to de!lare an" r ling in!onsistent .ith s !h interpretation n!onstit tional. The interpretation of the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion has far-rea!hing i$pli!ations to the national e!ono$". In fa!t, a resol tion of this iss e .ill deter$ine .hether *ilipinos are $asters, or se!ond !lass !iti?ens, in their o.n !o ntr". ,hat is at sta#e here is .hether *ilipinos or foreigners .ill have effective control of the national e!ono$". Indeed, if ever there is a legal iss e that has farrea!hing i$pli!ations to the entire nation, and to f t re generations of *ilipinos, it is the threshhold legal iss e presented in this !ase. The Co rt first en!o ntered the iss e on the definition of the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion in the !ase of Fernande v. Co!"an#co$ do!#eted as

-.R. No. 0:746>.06 That !ase involved the sa$e p bli! tilit" %P+DT& and s bstantiall" the sa$e private respondents. Despite the i$portan!e and novelt" of the !onstit tional iss e raised therein and despite the fa!t that the petition involved a p rel" legal 9 estion, the Co rt de!lined to resolve the !ase on the $erits, and instead denied the sa$e for disregarding the hierar!h" of !o rts.07 There, petitioner *ernande? assailed on a p re 9 estion of la. the Regional Trial Co rtDs De!ision of 10 *ebr ar" 1>>4 via a petition for revie. nder R le 5:. The Co rtDs Resol tion, den"ing the petition, be!a$e final on 10 De!e$ber 1>>5. The instant petition therefore presents the Co rt .ith another opport nit" to finall" settle this 9u3e2; 2e7*2 100ue .hi!h is of trans!endental i$portan!e to the national e!ono$" and a f nda$ental re9 ire$ent to a faithf l adheren!e to o r Constit tion. The Co rt $ st forth.ith sei?e s !h opport nit", not onl" for the benefit of the litigants, b t $ore signifi!antl" for the benefit of the entire *ilipino people, to ens re, in the .ords of the Constit tion, Ha self-reliant and independent national e!ono$" e44e/.1>e2; /on.3o22e+ b" *ilipinos.H02 <esides, in the light of vag e and !onf sing positions ta#en b" govern$ent agen!ies on this p rel" legal iss e, present and f t re foreign investors in this !o ntr" deserve, as a $atter of basi! fairness, a !ategori!al r ling fro$ this Co rt on the e;tent of their parti!ipation in the !apital of p bli! tilities and other nationali?ed b sinesses. Despite its far-rea!hing i$pli!ations to the national e!ono$", this p rel" legal iss e has re$ained nresolved for over 7: "ears sin!e the 034: Constit tion. There is no reason for this Co rt to evade this ever re! rring f nda$ental iss e and dela" again defining the ter$ H!apital,H .hi!h appears not onl" in Se!tion 00, (rti!le AII of the Constit tion, b t also in Se!tion 1, (rti!le AII on !o-prod !tion and joint vent re agree$ents for the develop$ent of o r nat ral reso r!es,03 in Se!tion 7, (rti!le AII on o.nership of private lands,1> in Se!tion 0>, (rti!le AII on the reservation of !ertain invest$ents to *ilipino !iti?ens,10 in Se!tion 5%1&, (rti!le AI@ on the o.nership of ed !ational instit tions,11 and in Se!tion 00%1&, (rti!le A@I on the o.nership of advertising !o$panies.14 Petitioner has locus standi There is no disp te that petitioner is a sto!#holder of P+DT. (s s !h, he has the right to 9 estion the s bje!t sale, .hi!h he !lai$s to violate the nationalit" re9 ire$ent pres!ribed in Se!tion 00, (rti!le AII of the Constit tion. If the sale indeed violates the 5

Constit tion, then there is a possibilit" that P+DTDs fran!hise !o ld be revo#ed, a dire !onse9 en!e dire!tl" affe!ting petitionerDs interest as a sto!#holder. 'ore i$portantl", there is no 9 estion that the instant petition raises $atters of trans!endental i$portan!e to the p bli!. The f nda$ental and threshold legal iss e in this !ase, involving the national e!ono$" and the e!ono$i! .elfare of the *ilipino people, far o t.eighs an" per!eived i$pedi$ent in the legal personalit" of the petitioner to bring this a!tion. In Chave v. PCGG,15 the Co rt pheld the right of a !iti?en to bring a s it on $atters of trans!endental i$portan!e to the p bli!, th s/ In %a&ada v. %"vera, the Co rt asserted that @-en .-e 100ue /on/e3n0 * 9u:21/ 317-. *n+ .-e o:De/. o4 6*n+*6u0 10 .o o:.*1n .-e en4o3/e6en. o4 * 9u:21/ +u.;, .-e 9eo92e *3e 3e7*3+e+ *0 .-e 3e*2 9*3.1e0 1n 1n.e3e0.E *n+ :e/*u0e 1. 10 0u441/1en. .-*. 9e.1.1one3 10 * /1.1Ben *n+ *0 0u/- 10 1n.e3e0.e+ 1n .-e eAe/u.1on o4 .-e 2*@0, -e nee+ no. 0-o@ .-*. -e -*0 *n; 2e7*2 o3 09e/1*2 1n.e3e0. 1n .-e 3e0u2. o4 .-e */.1on. In the aforesaid !ase, the petitioners so ght to enfor!e their right to be infor$ed on $atters of p bli! !on!ern, a right then re!ogni?ed in Se!tion 6, (rti!le I@ of the 0374 Constit tion, in !onne!tion .ith the r le that la.s in order to be valid and enfor!eable $ st be p blished in the Offi!ial -a?ette or other.ise effe!tivel" pro$ lgated. In r ling for the petitionersD legal standing, the Co rt de!lared that the right the" so ght to be enfor!ed Lis a p bli! right re!ogni?ed b" no less than the f nda$ental la. of the land.D Le#aspi v. Civil Service Commission, .hile reiterating TaNada, f rther de!lared that L@-en * 6*n+*6u0 93o/ee+1n7 1n>o2>e0 .-e *00e3.1on o4 * 9u:21/ 317-., .-e 3e=u13e6en. o4 9e30on*2 1n.e3e0. 10 0*.1041e+ :; .-e 6e3e 4*/. .-*. 9e.1.1one3 10 * /1.1Ben *n+, .-e3e4o3e, 9*3. o4 .-e 7ene3*2 F9u:21/5 @-1/- 9o00e00e0 .-e 317-. .D * rther, in Albano v. 'e(es, .e said that .hile e;pendit re of p bli! f nds $a" not have been involved nder the 9 estioned !ontra!t for the develop$ent, $anage$ent and operation of the 'anila International Container Ter$inal, L9u:21/ 1n.e3e0. G@*0H +e41n1.e2; 1n>o2>e+ /on01+e31n7 .-e 169o3.*n. 3o2e Go4 .-e 0u:De/. /on.3*/.H . . . 1n .-e e/ono61/ +e>e2o96en. o4 .-e /oun.3; *n+ .-e 6*7n1.u+e o4 .-e 41n*n/1*2 /on01+e3*.1on 1n>o2>e+.D ,e !on!l ded that, as a !onse9 en!e, the dis!los re provision in the Constit tion .o ld !onstit te s ffi!ient a thorit" for pholding the petitionerDs standing. %E$phasis s pplied&

Clearl", sin!e the instant petition, bro ght b" a !iti?en, involves $atters of trans!endental p bli! i$portan!e, the petitioner has the re9 isite loc"s standi. Definition of the Term "Capital" in Section 11, Article !! of the 1"#$ Constitution Se!tion 00, (rti!le AII %National E!ono$" and Patri$on"& of the 0327 Constit tion $andates the *ilipini?ation of p bli! tilities, to .it/ Se!tion 00. No 43*n/-10e, /e3.141/*.e, o3 *n; o.-e3 4o36 o4 *u.-o31B*.1on 4o3 .-e o9e3*.1on o4 * 9u:21/ u.121.; 0-*22 :e 73*n.e+ eA/e9. .o /1.1Ben0 o4 .-e P-121991ne0 o3 .o /o39o3*.1on0 o3 *00o/1*.1on0 o37*n1Be+ un+e3 .-e 2*@0 o4 .-e P-121991ne0, *. 2e*0. 01A.; 9e3 /en.u6 o4 @-o0e /*91.*2 10 o@ne+ :; 0u/- /1.1Ben0 E nor shall s !h fran!hise, !ertifi!ate, or a thori?ation be e;!l sive in !hara!ter or for a longer period than fift" "ears. Neither shall an" s !h fran!hise or right be granted e;!ept nder the !ondition that it shall be s bje!t to a$end$ent, alteration, or repeal b" the Congress .hen the !o$$on good so re9 ires. The State shall en!o rage e9 it" parti!ipation in p bli! tilities b" the general p bli!. The parti!ipation of foreign investors in the governing bod" of an" p bli! tilit" enterprise shall be li$ited to their proportionate share in its !apital, and all the e;e! tive and $anaging offi!ers of s !h !orporation or asso!iation $ st be !iti?ens of the Philippines. %E$phasis s pplied& The above provision s bstantiall" reiterates Se!tion :, (rti!le AI@ of the 0374 Constit tion, th s/ Se/.1on 5. No 43*n/-10e, /e3.141/*.e, o3 *n; o.-e3 4o36 o4 *u.-o31B*.1on 4o3 .-e o9e3*.1on o4 * 9u:21/ u.121.; 0-*22 :e 73*n.e+ eA/e9. .o /1.1Ben0 o4 .-e P-121991ne0 o3 .o /o39o3*.1on0 o3 *00o/1*.1on0 o37*n1Be+ un+e3 .-e 2*@0 o4 .-e P-121991ne0 *. 2e*0. 01A.; 9e3 /en.u6 o4 .-e /*91.*2 o4 @-1/- 10 o@ne+ :; 0u/- /1.1Ben0 , nor shall s !h fran!hise, !ertifi!ate, or a thori?ation be e;!l sive in !hara!ter or for a longer period than fift" "ears. Neither shall an" s !h fran!hise or right be granted e;!ept nder the !ondition that it shall be s bje!t to a$end$ent, alteration, or repeal b" the National (sse$bl" .hen the p bli! interest so re9 ires. The State shall en!o rage e9 it" parti!ipation in p bli! tilities b" the general p bli!. The parti!ipation of foreign investors in the governing bod" of an" p bli! tilit" enterprise shall be li$ited to their proportionate share in the !apital thereof. %E$phasis s pplied&

The foregoing provision in the 0374 Constit tion reprod !ed Se!tion 2, (rti!le AI@ of the 034: Constit tion, vi / Se/.1on 8. No 43*n/-10e, /e3.141/*.e, o3 *n; o.-e3 4o36 o4 *u.-o31B*.1on 4o3 .-e o9e3*.1on o4 * 9u:21/ u.121.; 0-*22 :e 73*n.e+ eA/e9. .o /1.1Ben0 o4 .-e P-121991ne0 o3 .o /o39o3*.1on0 o3 o.-e3 en.1.1e0 o37*n1Be+ un+e3 .-e 2*@0 o4 .-e P-121991ne0 01A.; 9e3 /en.u6 o4 .-e /*91.*2 o4 @-1/- 10 o@ne+ :; /1.1Ben0 o4 .-e P-121991ne0, nor shall s !h fran!hise, !ertifi!ate, or a thori?ation be e;!l sive in !hara!ter or for a longer period than fift" "ears. No fran!hise or right shall be granted to an" individ al, fir$, or !orporation, e;!ept nder the !ondition that it shall be s bje!t to a$end$ent, alteration, or repeal b" the Congress .hen the p bli! interest so re9 ires. %E$phasis s pplied& *ather 8oa9 in -. <ernas, S.8., a leading $e$ber of the 0326 Constit tional Co$$ission, re$inds s that the *ilipini?ation provision in the 0327 Constit tion is one of the prod !ts of the spirit of nationalis$ .hi!h gripped the 034: Constit tional Convention.1: The 0327 Constit tion Hprovides for the *ilipini?ation of p bli! tilities b" re9 iring that an" for$ of a thori?ation for the operation of p bli! tilities sho ld be granted onl" to L!iti?ens of the Philippines or to !orporations or asso!iations organi?ed nder the la.s of the Philippines at least si;t" per !ent $ of .hose !apital is o.ned b" s !h !iti?ens.D -e 93o>101on 10 G*n eA93e00H 3e/o7n1.1on o4 .-e 0en01.1>e *n+ >1.*2 9o01.1on o4 9u:21/ u.121.1e0 :o.- 1n .-e n*.1on*2 e/ono6; *n+ 4o3 n*.1on*2 0e/u31.;.I16 The evident p rpose of the !iti?enship re9 ire$ent is to prevent aliens fro$ ass $ing !ontrol of p bli! tilities, .hi!h $a" be ini$i!al to the national interest.17 This spe!ifi! provision e;pli!itl" reserves to *ilipino !iti?ens !ontrol of p bli! tilities, p rs ant to an overriding e!ono$i! goal of the 0327 Constit tion/ to H!onserve and develop o r patri$on"H12 and ens re Ha self-reliant and independent national e!ono$" effectively controlled b" *ilipinos.H13 (n" !iti?en or j ridi!al entit" desiring to operate a p bli! tilit" $ st therefore $eet the $ini$ $ nationalit" re9 ire$ent pres!ribed in Se!tion 00, (rti!le AII of the Constit tion. )en!e, for a !orporation to be granted a thorit" to operate a p bli! tilit", at least 6> per!ent of its H!apitalH $ st be o.ned b" *ilipino !iti?ens. The !r ; of the !ontrovers" is the definition of the ter$ H/*91.*2.H Does the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion refer to !o$$on shares or to the total o tstanding !apital sto!# %!o$bined total of !o$$on and non-voting preferred shares&M

Petitioner s b$its that the 5> per!ent foreign e9 it" li$itation in do$esti! p bli! tilities refers onl" to !o$$on shares be!a se s !h shares are entitled to vote and it is thro gh voting that !ontrol over a !orporation is e;er!ised. Petitioner posits that the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion refers to Hthe o.nership of !o$$on !apital sto!# s bs!ribed and o tstanding, .hi!h !lass of shares alone, nder the !orporate set- p of P+DT, !an vote and ele!t $e$bers of the board of dire!tors.H It is ndisp ted that P+DTDs non-voting preferred shares are held $ostl" b" *ilipino !iti?ens.4> This arose fro$ Presidential De!ree No. 107,40 iss ed on 06 8 ne 0374 b" then President *erdinand 'ar!os, re9 iring ever" appli!ant of a P+DT telephone line to s bs!ribe to non-voting preferred shares to pa" for the invest$ent !ost of installing the telephone line.41 Petitioners-in-intervention basi!all" reiterate petitionerDs arg $ents and adopt petitionerDs definition of the ter$ H!apital.H44 Petitioners-in-intervention allege that Hthe appro;i$ate foreign o.nership of !o$$on !apital sto!# of P+DT ; ; ; alread" a$o nts to at least 64.:5O of the total o tstanding !o$$on sto!#,H .hi!h $eans that foreigners e;er!ise signifi!ant !ontrol over P+DT, patentl" violating the 5> per!ent foreign e9 it" li$itation in p bli! tilities pres!ribed b" the Constit tion. Respondents, on the other hand, do not offer an" definition of the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion. 'ore i$portantl", private respondents Na?areno and Pangilinan of P+DT do not disp te that $ore than 5> per!ent of the !o$$on shares of P+DT are held b" foreigners. In parti! lar, respondent Na?arenoDs 'e$orand $, !onsisting of 74 pages, harps $ainl" on the pro!ed ral infir$ities of the petition and the s pposed violation of the d e pro!ess rights of the Haffe!ted foreign !o$$on shareholders.H Respondent Na?areno does not den" petitionerDs allegation of foreignersD do$inating the !o$$on shareholdings of P+DT. Na?areno stressed $ainl" that the petition H0eeJ0 .o +1>e0. 4o3e17n /o66on 0-*3e-o2+e30 9u39o3.e+2; eA/ee+1n7 <0? o4 .-e .o.*2 /o66on 0-*3e-o2+1n70 1n PL$ o4 .-e13 o@ne30-19 o>e3 .-e13 0-*3e0.H Th s, Hthe foreign nat ral and j ridi!al P+DT shareholders $ st be i$pleaded in this s it so that the" !an be heard.H45 Essentiall", Na?areno invo#es denial of d e pro!ess on behalf of the foreign !o$$on shareholders. ,hile Na?areno does not introd !e an" definition of the ter$ H!apital,H he states that H*6on7 .-e 4*/.u*2 *00e3.1on0 .-*. nee+ .o :e e0.*:210-e+ .o /oun.e3 9e.1.1one350 *22e7*.1on0 10 .-e un14o36 1n.e393e.*.1on :; 7o>e3n6en. *7en/1e0 &0u/- *0 .-e 6

SEC', 1n0.1.u.1on0 *n+ /o39o3*.1on0 &0u/- *0 .-e P-121991ne N*.1on*2 O12 Co69*n;CEne37; $e>e2o96en. Co39o3*.1on o3 PNOCCE$C' o4 1n/2u+1n7 :o.93e4e33e+ 0-*3e0 *n+ /o66on 0-*3e0 1n I/on.3o221n7 1n.e3e0.I 1n >1e@ o4 .e0.1n7 /o6921*n/e @1.- .-e <0? /on0.1.u.1on*2 2161.*.1on on 4o3e17n o@ne30-19 1n 9u:21/ u.121.1e0.H4: Si$ilarl", respondent 'an el @. Pangilinan does not define the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion. Neither does he ref te petitionerDs !lai$ of foreigners holding $ore than 5> per!ent of P+DTDs !o$$on shares. Instead, respondent Pangilinan fo! ses on the pro!ed ral fla.s of the petition and the alleged violation of the d e pro!ess rights of foreigners. Respondent Pangilinan e$phasi?es in his 'e$orand $ %0& the absen!e of this Co rtDs j risdi!tion over the petitionE %1& petitionerDs la!# of standingE %4& $ootness of the petitionE %5& non-availabilit" of de!larator" reliefE and %:& the denial of d e pro!ess rights. 'oreover, respondent Pangilinan alleges that the iss e sho ld be .hether Ho.ners of shares in P+DT as .ell as o.ners of shares in !o$panies holding shares in P+DT $a" be re9 ired to relin9 ish their shares in P+DT and in those !o$panies .itho t an" la. re9 iring the$ to s rrender their shares and also .itho t noti!e and trial.H Respondent Pangilinan f rther asserts that HSe/.1on 11, GA3.1/2e )II o4 .-e Con0.1.u.1onH 169o0e0 no n*.1on*21.; 3e=u13e6en. on .-e 0-*3e-o2+e30 o4 .-e u.121.; /o69*n; *0 * /on+1.1on 4o3 Jee91n7 .-e13 0-*3e0 1n .-e u.121.; /o69*n;.H (!!ording to hi$, HSe!tion 00 does not a thori?e ta#ing one personDs propert" %the shareholderDs sto!# in the tilit" !o$pan"& on the basis of another part"Ds alleged fail re to satisf" a re9 ire$ent that is a !ondition onl" for that other part"Ds retention of another pie!e of propert" %the tilit" !o$pan" being at least 6>O *ilipino-o.ned to #eep its fran!hise&.H46 The OS-, representing p bli! respondents Se!retar" 'argarito Teves, Bnderse!retar" 8ohn P. Sevilla, Co$$issioner Ri!ardo (b!ede, and Chair$an *e <arin, is li#e.ise silent on the definition of the ter$ H!apital.H In its 'e$orand $47 dated 15 Septe$ber 1>>7, the OS- also li$its its dis! ssion on the s pposed pro!ed ral defe!ts of the petition, i.e. la!# of standing, la!# of j risdi!tion, non-in!l sion of interested parties, and la!# of basis for inj n!tion. The OS- does not present an" definition or interpretation of the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion. The OS- !ontends that Hthe petition a!t all" parta#es of a !ollateral atta!# on P+DTDs fran!hise as a p bli! tilit",H .hi!h in effe!t re9 ires a Hf ll-blo.n trial .here all the parties in interest are given their da" in !o rt.H42

Respondent *ran!is!o Ed +i$, i$pleaded as President and Chief E;e! tive Offi!er of the Philippine Sto!# E;!hange %PSE&, does not also define the ter$ H!apitalH and see#s the dis$issal of the petition on the follo.ing gro nds/ %0& fail re to state a !a se of a!tion against +i$E %1& the PSE allegedl" i$ple$ented its r les and re9 ired all listed !o$panies, in!l ding P+DT, to $a#e proper and ti$el" dis!los resE and %4& the reliefs pra"ed for in the petition .o ld adversel" i$pa!t the sto!# $ar#et. In the earlier !ase of Fernande v. Co!"an#co, petitioner *ernande? .ho !lai$ed to be a sto!#holder of re!ord of P+DT, !ontended that the ter$ H!apitalH in the 0327 Constit tion refers to shares entitled to vote or the !o$$on shares. *ernande? e;plained th s/ The fort" per!ent %5>O& foreign e9 it" li$itation in p bli! tilities pres!ribed b" the Constit tion refers to o.nership of shares of sto!# entitled to vote, i.e., !o$$on shares, !onsidering that it is thro gh voting that !ontrol is being e;er!ised. ; ; ; Obvio sl", the intent of the fra$ers of the Constit tion in i$posing li$itations and restri!tions on f ll" nationali?ed and partiall" nationali?ed a!tivities is for *ilipino nationals to be al.a"s in !ontrol of the !orporation nderta#ing said a!tivities. Other.ise, if the Trial Co rtDs r ling pholding respondentsD arg $ents .ere to be given !reden!e, it .o ld be possible for the o.nership str !t re of a p bli! tilit" !orporation to be divided into one per!ent %0O& !o$$on sto!#s and ninet"-nine per!ent %33O& preferred sto!#s. *ollo.ing the Trial Co rtDs r ling adopting respondentsD arg $ents, the !o$$on shares !an be o.ned entirel" b" foreigners th s !reating an abs rd sit ation .herein foreigners, .ho are s pposed to be $inorit" shareholders, !ontrol the p bli! tilit" !orporation. ;;;; Th s, the 5>O foreign o.nership li$itation sho ld be interpreted to appl" to both the benefi!ial o.nership and the !ontrolling interest. ;;;; Clearl", therefore, the fort" per!ent %5>O& foreign e9 it" li$itation in p bli! tilities pres!ribed b" the Constit tion refers to o.nership of shares of sto!# entitled to vote, i.e., !o$$on shares. * rther$ore, o.nership of re!ord of shares .ill not s ffi!e b t it $ st be sho.n that the legal and benefi!ial o.nership rests in the hands of *ilipino 7

!iti?ens. Conse9 entl", in the !ase of petitioner P+DT, sin!e it is alread" ad$itted that the voting interests of foreigners .hi!h .o ld gain entr" to petitioner P+DT b" the a!9 isition of S'(RT shares thro gh the P estioned Transa!tions is e9 ivalent to 21.33O, and the no$inee arrange$ents bet.een the foreign prin!ipals and the *ilipino o.ners is li#e.ise ad$itted, there is, therefore, a violation of Se!tion 00, (rti!le AII of the Constit tion. Parentheti!all", the Opinions dated *ebr ar" 0:, 0322 and (pril 05, 0327 !ited b" the Trial Co rt to s pport the proposition that the $eaning of the .ord H!apitalH as sed in Se!tion 00, (rti!le AII of the Constit tion allegedl" refers to the s $ total of the shares s bs!ribed and paid-in b" the shareholder and it allegedl" is i$$aterial ho. the sto!# is !lassified, .hether as !o$$on or preferred, !annot stand in the fa!e of a !lear legislative poli!" as stated in the *I( .hi!h too# effe!t in 0330 or .a" after said opinions .ere rendered, and as !larified b" the above-9 oted ($end$ents. In this regard, s ffi!e it to state that as bet.een the la. and an opinion rendered b" an ad$inistrative agen!", the la. ind bitabl" prevails. 'oreover, said Opinions are $erel" advisor" and !annot prevail over the !lear intent of the fra$ers of the Constit tion. In the sa$e vein, the SECDs !onstr !tion of Se!tion 00, (rti!le AII of the Constit tion is at best $erel" advisor" for it is the !o rts that finall" deter$ine .hat a la. $eans.43 On the other hand, respondents therein, (ntonio O. Coj ang!o, 'an el @. Pangilinan, Carlos (. (rellano, )elen G. Dee, 'agdangal <. El$a, 'ariles Ca!ho-Ro$ lo, *r. <ienvenido *. Nebres, Ra" C. Espinosa, Napoleon +. Na?areno, (lbert *. Del Rosario, and Orlando <. @ea, arg ed that the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion in!l des preferred shares sin!e the Constit tion does not disting ish a$ong !lasses of sto!#, th s/ 06. The Constit tion applies its foreign o.nership li$itation on the !orporationDs H!apital,H .itho t distin!tion as to !lasses of shares. ; ; ; In this !onne!tion, the Corporation Code F .hi!h .as alread" in for!e at the ti$e the present %0327& Constit tion .as drafted F defined o tstanding !apital sto!# as follo.s/ Se!tion 047. O tstanding !apital sto!# defined. F The ter$ Ho tstanding !apital sto!#H, as sed in this Code, $eans the total shares of sto!# iss ed nder binding s bs!ription

agree$ents to s bs!ribers or sto!#holders, .hether or not f ll" or partiall" paid, e;!ept treas r" shares. Se!tion 047 of the Corporation Code also does not disting ish bet.een !o$$on and preferred shares, nor e;!l de either !lass of shares, in deter$ining the o tstanding !apital sto!# %the H!apitalH& of a !orporation. Conse9 entl", petitionerDs s ggestion to re!#on P+DTDs foreign e9 it" onl" on the basis of P+DTDs o tstanding !o$$on shares is .itho t legal basis. The lang age of the Constit tion sho ld be nderstood in the sense it has in !o$$on se. ;;;; 07. < t even ass $ing that resort to the pro!eedings of the Constit tional Co$$ission is ne!essar", there is nothing in the Re!ord of the Constit tional Co$$ission %@ol. III& F .hi!h petitioner $isleadingl" !ited in the Petition ; ; ; F .hi!h s pports petitionerDs vie. that onl" !o$$on shares sho ld for$ the basis for !o$p ting a p bli! tilit"Ds foreign e9 it". ;;;; 02. In addition, the SEC F the govern$ent agen!" pri$aril" responsible for i$ple$enting the Corporation Code, and .hi!h also has the responsibilit" of ens ring !o$plian!e .ith the Constit tionDs foreign e9 it" restri!tions as regards nationali?ed a!tivities ; ; ; F has !ategori!all" r led that both !o$$on and preferred shares are properl" !onsidered in deter$ining o tstanding !apital sto!# and the nationalit" !o$position thereof.5> ,e agree .ith petitioner and petitioners-in-intervention. The ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion refers onl" to shares of sto!# entitled to vote in the ele!tion of dire!tors, and th s in the present !ase onl" to !o$$on shares,50 and not to the total o tstanding !apital sto!# !o$prising both !o$$on and non-voting preferred shares. The Corporation Code of the Philippines51 !lassifies shares as !o$$on or preferred, th s/ Se!. 6. Classification of shares. - The shares of sto!# of sto!# !orporations $a" be divided into !lasses or series of shares, or both, an" of .hi!h !lasses or series of shares 2

$a" have s !h rights, privileges or restri!tions as $a" be stated in the arti!les of in!orporation/ Provided, -*. no 0-*3e 6*; :e +e931>e+ o4 >o.1n7 317-.0 eA/e9. .-o0e /2*00141e+ *n+ 100ue+ *0 I93e4e33e+I o3 I3e+ee6*:2eI 0-*3e0, un2e00 o.-e3@10e 93o>1+e+ 1n .-10 Co+e/ Provided, f rther, That there shall al.a"s be a !lass or series of shares .hi!h have !o$plete voting rights. (n" or all of the shares or series of shares $a" have a par val e or have no par val e as $a" be provided for in the arti!les of in!orporation/ Provided, ho.ever, That ban#s, tr st !o$panies, ins ran!e !o$panies, p bli! tilities, and b ilding and loan asso!iations shall not be per$itted to iss e no-par val e shares of sto!#. Preferred shares of sto!# iss ed b" an" !orporation $a" be given preferen!e in the distrib tion of the assets of the !orporation in !ase of li9 idation and in the distrib tion of dividends, or s !h other preferen!es as $a" be stated in the arti!les of in!orporation .hi!h are not violative of the provisions of this Code/ Provided, That preferred shares of sto!# $a" be iss ed onl" .ith a stated par val e. The <oard of Dire!tors, .here a thori?ed in the arti!les of in!orporation, $a" fi; the ter$s and !onditions of preferred shares of sto!# or an" series thereof/ Provided, That s !h ter$s and !onditions shall be effe!tive pon the filing of a !ertifi!ate thereof .ith the Se! rities and E;!hange Co$$ission. Shares of !apital sto!# iss ed .itho t par val e shall be dee$ed f ll" paid and nonassessable and the holder of s !h shares shall not be liable to the !orporation or to its !reditors in respe!t thereto/ ProvidedE That shares .itho t par val e $a" not be iss ed for a !onsideration less than the val e of five %P:.>>& pesos per share/ Provided, f rther, That the entire !onsideration re!eived b" the !orporation for its no-par val e shares shall be treated as !apital and shall not be available for distrib tion as dividends. ( !orporation $a", f rther$ore, !lassif" its shares for the p rpose of ins ring !o$plian!e .ith !onstit tional or legal re9 ire$ents. E;!ept as other.ise provided in the arti!les of in!orporation and stated in the !ertifi!ate of sto!#, ea!h share shall be e9 al in all respe!ts to ever" other share. ,here the arti!les of in!orporation provide for non-voting shares in the !ases allo.ed b" this Code, the holders of s !h shares shall nevertheless be entitled to vote on the follo.ing $atters/ 0. ($end$ent of the arti!les of in!orporationE

1. (doption and a$end$ent of b"-la.sE 4. Sale, lease, e;!hange, $ortgage, pledge or other disposition of all or s bstantiall" all of the !orporate propert"E 5. In! rring, !reating or in!reasing bonded indebtednessE :. In!rease or de!rease of !apital sto!#E 6. 'erger or !onsolidation of the !orporation .ith another !orporation or other !orporationsE 7. Invest$ent of !orporate f nds in another !orporation or b siness in a!!ordan!e .ith this CodeE and 2. Dissol tion of the !orporation. E;!ept as provided in the i$$ediatel" pre!eding paragraph, the vote ne!essar" to approve a parti! lar !orporate a!t as provided in this Code shall be dee$ed to refer onl" to sto!#s .ith voting rights. Indisp tabl", one of the rights of a sto!#holder is the right to parti!ipate in the !ontrol or $anage$ent of the !orporation.54 This is e;er!ised thro gh his vote in the ele!tion of dire!tors be!a se it is the board of dire!tors that !ontrols or $anages the !orporation.55 In the absen!e of provisions in the arti!les of in!orporation den"ing voting rights to preferred shares, preferred shares have the sa$e voting rights as !o$$on shares. )o.ever, preferred shareholders are often e;!l ded fro$ an" !ontrol, that is, deprived of the right to vote in the ele!tion of dire!tors and on other $atters, on the theor" that the preferred shareholders are $erel" investors in the !orporation for in!o$e in the sa$e $anner as bondholders.5: In fa!t, nder the Corporation Code onl" preferred or redee$able shares !an be deprived of the right to vote.56 Co$$on shares !annot be deprived of the right to vote in an" !orporate $eeting, and an" provision in the arti!les of in!orporation restri!ting the right of !o$$on shareholders to vote is invalid.57 Considering that !o$$on shares have voting rights .hi!h translate to !ontrol, as opposed to preferred shares .hi!h s all" have no voting rights, the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion refers onl" to !o$$on shares. )o.ever, if 3

the preferred shares also have the right to vote in the ele!tion of dire!tors, then the ter$ H!apitalH shall in!l de s !h preferred shares be!a se the right to parti!ipate in the !ontrol or $anage$ent of the !orporation is e;er!ised thro gh the right to vote in the ele!tion of dire!tors. In 0-o3., .-e .e36 I/*91.*2I 1n Se/.1on 11, A3.1/2e )II o4 .-e Con0.1.u.1on 3e4e30 on2; .o 0-*3e0 o4 0.o/J .-*. /*n >o.e 1n .-e e2e/.1on o4 +13e/.o30. This interpretation is !onsistent .ith the intent of the fra$ers of the Constit tion to pla!e in the hands of *ilipino !iti?ens the !ontrol and $anage$ent of p bli! tilities. (s revealed in the deliberations of the Constit tional Co$$ission, H!apitalH refers to the voting sto!# or /on.3o221n7 1n.e3e0. of a !orporation, to .it/ 'R. NO++EDO. In Se!tions 4, 3 and 0:, the Co$$ittee stated lo!al or *ilipino e9 it" and foreign e9 it"E na$el", 6>-5> in Se!tion 4, 6>-5> in Se!tion 3 and 1I4-0I4 in Se!tion 0:. 'R. @I++E-(S. That is right. 'R. NO++EDO. In tea!hing la., .e are al.a"s fa!ed .ith this 9 estion/ H,here do .e base the e9 it" re9 ire$ent, is it on the a thori?ed !apital sto!#, on the s bs!ribed !apital sto!#, or on the paid- p !apital sto!# of a !orporationHM ,ill the Co$$ittee please enlighten $e on thisM 'R. @I++E-(S. ,e have j st had a long dis! ssion .ith the $e$bers of the tea$ fro$ the BP +a. Center .ho provided s a draft. -e 9-3*0e .-*. 10 /on.*1ne+ -e3e @-1/- @e *+o9.e+ 43o6 .-e #P +3*4. 10 I60 9e3/en. o4 >o.1n7 0.o/J.I 'R. NO++EDO. That $ st be based on the s bs!ribed !apital sto!#, be!a se nless de!lared delin9 ent, npaid !apital sto!# shall be entitled to vote. 'R. @I++E-(S. That is right. 'R. NO++EDO. Than# "o . ,ith respe!t to an invest$ent b" one !orporation in another !orporation, sa", a !orporation .ith 6>-5> per!ent e9 it" invests in another !orporation .hi!h is per$itted b" the Corporation Code, does the Co$$ittee adopt the grandfather r leM

'R. @I++E-(S. Ges, that is the nderstanding of the Co$$ittee. 'R. NO++EDO. Therefore, .e need additional *ilipino !apitalM 'R. @I++E-(S. Ges.52 ;;;; 'R. (QCBN(. 'a" I be !larified as to that portion that .as a!!epted b" the Co$$ittee. 'R. @I++E-(S. The portion a!!epted b" the Co$$ittee is the deletion of the phrase Hvoting sto!# or !ontrolling interest.H 'R. (QCBN(. )en!e, .itho t the Davide a$end$ent, the !o$$ittee report .o ld read/ H!orporations or asso!iations at least si;t" per!ent of .hose C(PIT(+ is o.ned b" s !h !iti?ens.H 'R. @I++E-(S. Ges. 'R. (QCBN(. So if the Davide a$end$ent is lost, .e are st !# .ith 6> per!ent of the !apital to be o.ned b" !iti?ens. 'R. @I++E-(S. That is right. MR. A(C#NA. Bu. .-e /on.3o2 /*n :e @1.- .-e 4o3e17ne30 e>en 14 .-e; *3e .-e 61no31.;. Le. u0 0*; <0 9e3/en. o4 .-e /*91.*2 10 o@ne+ :; .-e6, :u. 1. 10 .-e >o.1n7 /*91.*2, @-e3e*0, .-e F12191no0 o@n .-e non>o.1n7 0-*3e0. So @e /*n -*>e * 01.u*.1on @-e3e .-e /o39o3*.1on 10 /on.3o22e+ :; 4o3e17ne30 +e091.e :e1n7 .-e 61no31.; :e/*u0e .-e; -*>e .-e >o.1n7 /*91.*2. -*. 10 .-e *no6*2; .-*. @ou2+ 3e0u2. -e3e. MR. BENG(ON. No, .-e 3e*0on @e e2161n*.e+ .-e @o3+ I0.o/JI *0 0.*.e+ 1n .-e 1978 *n+ 1985 Con0.1.u.1on0 10 .-*. *//o3+1n7 .o Co661001one3 Ro+317o, .-e3e *3e *00o/1*.1on0 .-*. +o no. -*>e 0.o/J0. -*. 10 @-; @e 0*; ICAPI AL.I MR. A(C#NA. We 0-ou2+ no. e2161n*.e .-e 9-3*0e I/on.3o221n7 1n.e3e0..I 0>

MR. BENG(ON. In .-e /*0e o4 0.o/J /o39o3*.1on0, 1. 10 *00u6e+.53 %E$phasis s pplied& Th s, 6> per!ent of the H!apitalH ass $es, or sho ld res lt in, H/on.3o221n7 1n.e3e0.H in the !orporation. Reinfor!ing this interpretation of the ter$ H!apital,H as referring to !ontrolling interest or shares entitled to vote, is the definition of a HPhilippine nationalH in the *oreign Invest$ents (!t of 0330,:> to .it/ SEC. 4. )efinitions. - (s sed in this (!t/ a. The ter$ HPhilippine national* shall $ean a !iti?en of the PhilippinesE or a do$esti! partnership or asso!iation .holl" o.ned b" !iti?ens of the PhilippinesE or * /o39o3*.1on o37*n1Be+ un+e3 .-e 2*@0 o4 .-e P-121991ne0 o4 @-1/- *. 2e*0. 01A.; 9e3/en. &60?' o4 .-e /*91.*2 0.o/J ou.0.*n+1n7 *n+ en.1.2e+ .o >o.e 10 o@ne+ *n+ -e2+ :; /1.1Ben0 o4 .-e P-121991ne0E or a !orporation organi?ed abroad and registered as doing b siness in the Philippines nder the Corporation Code of .hi!h one h ndred per!ent %0>>O& of the !apital sto!# o tstanding and entitled to vote is .holl" o.ned b" *ilipinos or a tr stee of f nds for pension or other e$plo"ee retire$ent or separation benefits, .here the tr stee is a Philippine national and at least si;t" per!ent %6>O& of the f nd .ill a!!r e to the benefit of Philippine nationals/ Provided, That .here a !orporation and its non-*ilipino sto!#holders o.n sto!#s in a Se! rities and E;!hange Co$$ission %SEC& registered enterprise, at least si;t" per!ent %6>O& of the !apital sto!# o tstanding and entitled to vote of ea!h of both !orporations $ st be o.ned and held b" !iti?ens of the Philippines and at least si;t" per!ent %6>O& of the $e$bers of the <oard of Dire!tors of ea!h of both !orporations $ st be !iti?ens of the Philippines, in order that the !orporation, shall be !onsidered a HPhilippine national.H %E$phasis s pplied& In e;plaining the definition of a HPhilippine national,H the I$ple$enting R les and Reg lations of the *oreign Invest$ents (!t of 0330 provide/ b. HPhilippine national* shall $ean a !iti?en of the Philippines or a do$esti! partnership or asso!iation .holl" o.ned b" the !iti?ens of the PhilippinesE or * /o39o3*.1on o37*n1Be+ un+e3 .-e 2*@0 o4 .-e P-121991ne0 o4 @-1/- *. 2e*0. 01A.; 9e3/en. G60?H o4 .-e /*91.*2 0.o/J ou.0.*n+1n7 *n+ en.1.2e+ .o >o.e 10 o@ne+ *n+ -e2+ :; /1.1Ben0 o4 .-e P-121991ne0E or a tr stee of f nds for pension or other e$plo"ee retire$ent or separation benefits, .here the tr stee is a Philippine national and at least si;t" per!ent J6>OK of the f nd .ill a!!r e to the benefit of the Philippine nationalsE

Provided$ that .here a !orporation its non-*ilipino sto!#holders o.n sto!#s in a Se! rities and E;!hange Co$$ission JSECK registered enterprise, at least si;t" per!ent J6>OK of the !apital sto!# o tstanding and entitled to vote of both !orporations $ st be o.ned and held b" !iti?ens of the Philippines and at least si;t" per!ent J6>OK of the $e$bers of the <oard of Dire!tors of ea!h of both !orporation $ st be !iti?ens of the Philippines, in order that the !orporation shall be !onsidered a Philippine national. The !ontrol test shall be applied for this p rpose. Co6921*n/e @1.- .-e 3e=u13e+ F12191no o@ne30-19 o4 * /o39o3*.1on 0-*22 :e +e.e361ne+ on .-e :*010 o4 ou.0.*n+1n7 /*91.*2 0.o/J @-e.-e3 4u22; 9*1+ o3 no., :u. on2; 0u/- 0.o/J0 @-1/- *3e 7ene3*22; en.1.2e+ .o >o.e *3e /on01+e3e+. Fo3 0.o/J0 .o :e +ee6e+ o@ne+ *n+ -e2+ :; P-121991ne /1.1Ben0 o3 P-121991ne n*.1on*20, 6e3e 2e7*2 .1.2e 10 no. enou7- .o 6ee. .-e 3e=u13e+ F12191no e=u1.;. Fu22 :ene41/1*2 o@ne30-19 o4 .-e 0.o/J0, /ou92e+ @1.- *993o931*.e >o.1n7 317-.0 10 e00en.1*2. -u0, 0.o/J0, .-e >o.1n7 317-.0 o4 @-1/- -*>e :een *0017ne+ o3 .3*n04e33e+ .o *21en0 /*nno. :e /on01+e3e+ -e2+ :; P-121991ne /1.1Ben0 o3 P-121991ne n*.1on*20. In+1>1+u*20 o3 Du31+1/*2 en.1.1e0 no. 6ee.1n7 .-e *4o3e6en.1one+ =u*2141/*.1on0 *3e /on01+e3e+ *0 nonCP-121991ne n*.1on*20. %E$phasis s pplied& 'ere legal title is ins ffi!ient to $eet the 6> per!ent *ilipino-o.ned H!apitalH re9 ired in the Constit tion. * ll benefi!ial o.nership of 6> per!ent of the o tstanding !apital sto!#, !o pled .ith 6> per!ent of the voting rights, is re9 ired. The legal and benefi!ial o.nership of 6> per!ent of the o tstanding !apital sto!# $ st rest in the hands of *ilipino nationals in a!!ordan!e .ith the !onstit tional $andate. Other.ise, the !orporation is H!onsidered as non-Philippine nationalJsK.H Bnder Se!tion 0>, (rti!le AII of the Constit tion, Congress $a" Hreserve to !iti?ens of the Philippines or to !orporations or asso!iations at least si;t" per cent"m of .hose !apital is o.ned b" s !h !iti?ens, or s !h higher per!entage as Congress $a" pres!ribe, !ertain areas of invest$ents.H Th s, in n $ero s la.s Congress has reserved !ertain areas of invest$ents to *ilipino !iti?ens or to !orporations at least si;t" per!ent of the H/*91.*2H of .hi!h is o.ned b" *ilipino !iti?ens. So$e of these la.s are/ %0& Reg lation of (.ard of -overn$ent Contra!ts or R.(. No. :024E %1& Philippine Inventors In!entives (!t or R.(. No. 42:>E %4& 'agna Carta for 'i!ro, S$all and 'edi $ Enterprises or R.(. No. 6377E %5& Philippine Overseas Shipping Develop$ent 00

(!t or R.(. No. 7570E %:& Do$esti! Shipping Develop$ent (!t of 1>>5 or R.(. No. 313:E %6& Philippine Te!hnolog" Transfer (!t of 1>>3 or R.(. No. 0>>::E and %7& Ship 'ortgage De!ree or P.D. No. 0:10. )en!e, the ter$ H/*91.*2H in Se!tion 00, (rti!le AII of the Constit tion is also sed 1n .-e 0*6e /on.eA. 1n nu6e3ou0 2*@0 reserving !ertain areas of invest$ents to *ilipino !iti?ens. To !onstr e broadl" the ter$ H!apitalH as the total o tstanding !apital sto!#, in!l ding both !o$$on and non+votin# preferred shares, grossl" !ontravenes the intent and letter of the Constit tion that the HState shall develop a self-reliant and independent national e!ono$" effectively controlled b" *ilipinos.H ( broad definition nj stifiabl" disregards .ho o.ns the all-i$portant voting sto!#, .hi!h ne!essaril" e9 ates to !ontrol of the p bli! tilit". ,e shall ill strate the glaring ano$al" in giving a broad definition to the ter$ H!apital.H +et s ass $e that a !orporation has 0>> !o$$on shares o.ned b" foreigners and 0,>>>,>>> non-voting preferred shares o.ned b" *ilipinos, .ith both !lasses of share having a par val e of one peso %P0.>>& per share. Bnder the broad definition of the ter$ H!apital,H s !h !orporation .o ld be !onsidered !o$pliant .ith the 5> per!ent !onstit tional li$it on foreign e9 it" of p bli! tilities sin!e the over.hel$ing $ajorit", or $ore than 33.333 per!ent, of the total o tstanding !apital sto!# is *ilipino o.ned. This is obvio sl" abs rd. In the e;a$ple given, onl" the foreigners holding the !o$$on shares have voting rights in the ele!tion of dire!tors, even if the" hold onl" 0>> shares. The foreigners, .ith a $in s! le e9 it" of less than >.>>0 per!ent, e;er!ise !ontrol over the p bli! tilit". On the other hand, the *ilipinos, holding $ore than 33.333 per!ent of the e9 it", !annot vote in the ele!tion of dire!tors and hen!e, have no !ontrol over the p bli! tilit". This star#l" !ir! $vents the intent of the fra$ers of the Constit tion, as .ell as the !lear lang age of the Constit tion, to pla!e the !ontrol of p bli! tilities in the hands of *ilipinos. It also renders ill sor" the State poli!" of an independent national e!ono$" effectively controlled b" *ilipinos. The e;a$ple given is not theoreti!al b t !an be fo nd in the real .orld, and in fact e%ists in the present case. )olders of P+DT preferred shares are e;pli!itl" denied of the right to vote in the ele!tion of dire!tors. P+DTDs (rti!les of In!orporation e;pressl" state that H.-e -o2+e30 o4 Se31*2 P3e4e33e+ S.o/J 0-*22 no. :e en.1.2e+ .o >o.e *. *n; 6ee.1n7 o4 .-e

0.o/J-o2+e30 4o3 .-e e2e/.1on o4 +13e/.o30 o3 4o3 *n; o.-e3 9u39o0e or other.ise parti!ipate in an" a!tion ta#en b" the !orporation or its sto!#holders, or to re!eive noti!e of an" $eeting of sto!#holders.H:0 On the other hand, holders of !o$$on shares are granted the e;!l sive right to vote in the ele!tion of dire!tors. P+DTDs (rti!les of In!orporation:1 state that Hea!h holder of Co$$on Capital Sto!# shall have one vote in respe!t of ea!h share of s !h sto!# held b" hi$ on all $atters voted pon b" the sto!#holders, and .-e -o2+e30 o4 Co66on C*91.*2 S.o/J 0-*22 -*>e .-e eA/2u01>e 317-. .o >o.e 4o3 .-e e2e/.1on o4 +13e/.o30 *n+ 4o3 *22 o.-e3 9u39o0e0.H:4 In short, onl" holders of !o$$on shares !an vote in the ele!tion of dire!tors, $eaning onl" !o$$on shareholders e;er!ise !ontrol over P+DT. Conversel", holders of preferred shares, .ho have no voting rights in the ele!tion of dire!tors, do not have an" !ontrol over P+DT. In fa!t, nder P+DTDs (rti!les of In!orporation, holders of !o$$on shares have voting rights for all p rposes, .hile holders of preferred shares have no voting right for an" p rpose .hatsoever. It $ st be stressed, and 3e09on+en.0 +o no. +109u.e, that foreigners hold a $ajorit" of the !o$$on shares of P+DT. In fa!t, based on P+DTDs 1>0> -eneral Infor$ation Sheet %-IS&,:5 .hi!h is a do! $ent re9 ired to be s b$itted ann all" to the Se! rities and E;!hange Co$$ission,:: foreigners hold 01>,>56,63> !o$$on shares of P+DT .hereas *ilipinos hold onl" 66,7:>,611 !o$$on shares.:6 In other .ords, foreigners hold 65.17O of the total n $ber of P+DTDs !o$$on shares, .hile *ilipinos hold onl" 4:.74O. Sin!e holding a $ajorit" of the !o$$on shares e9 ates to !ontrol, it is !lear that foreigners e;er!ise !ontrol over P+DT. S !h a$o nt of !ontrol n$ista#abl" e;!eeds the allo.able 5> per!ent li$it on foreign o.nership of p bli! tilities e;pressl" $andated in Se!tion 00, (rti!le AII of the Constit tion. 'oreover, the Dividend De!larations of P+DT for 1>>3,:7 as s b$itted to the SEC, sho.s that per share the SIP:2 preferred shares earn a pittan!e in dividends !o$pared to the !o$$on shares. P+DT de!lared dividends for the !o$$on shares at P7>.>> per share, .hile the de!lared dividends for the preferred shares a$o nted to a $easl" P0.>> per share.:3 So the preferred shares not onl" !annot vote in the ele!tion of dire!tors, the" also have ver" little and obvio sl" negligible dividend earning !apa!it" !o$pared to !o$$on shares.

01

(s sho.n in P+DTDs 1>0> -IS,6> as s b$itted to the SEC, the par val e of P+DT !o$$on shares is P:.>> per share, .hereas the par val e of preferred shares is P0>.>> per share. In other .ords, preferred shares have t.i!e the par val e of !o$$on shares b t !annot ele!t dire!tors and have onl" 0I7> of the dividends of !o$$on shares. 'oreover, 33.55O of the preferred shares are o.ned b" *ilipinos .hile foreigners o.n onl" a $in s! le >.:6O of the preferred shares.60 ,orse, preferred shares !onstit te 77.2:O of the a thori?ed !apital sto!# of P+DT .hile !o$$on shares !onstit te onl" 11.0:O.61 This ndeniabl" sho.s that benefi!ial interest in P+DT is not .ith the nonvoting preferred shares b t .ith the !o$$on shares, blatantl" violating the !onstit tional re9 ire$ent of 6> per!ent *ilipino !ontrol and *ilipino benefi!ial o.nership in a p bli! tilit". The legal and benefi!ial o.nership of 6> per!ent of the o tstanding !apital sto!# $ st rest in the hands of *ilipinos in a!!ordan!e .ith the !onstit tional $andate. * ll benefi!ial o.nership of 6> per!ent of the o tstanding !apital sto!#, !o pled .ith 6> per!ent of the voting rights, is !onstit tionall" re9 ired for the StateDs grant of a thorit" to operate a p bli! tilit". The ndisp ted fa!t that the P+DT preferred shares, 33.55O o.ned b" *ilipinos, are non-voting and earn onl" 0I7> of the dividends that P+DT !o$$on shares earn, grossl" violates the !onstit tional re9 ire$ent of 6> per!ent *ilipino !ontrol and *ilipino benefi!ial o.nership of a p bli! tilit". In 0-o3., F12191no0 -o2+ 2e00 .-*n 60 9e3/en. o4 .-e >o.1n7 0.o/J, *n+ e*3n 2e00 .-*n 60 9e3/en. o4 .-e +1>1+en+0, o4 PL$ . This dire!tl" !ontravenes the e;press !o$$and in Se!tion 00, (rti!le AII of the Constit tion that HJnKo fran!hise, !ertifi!ate, or an" other for$ of a thori?ation for the operation of a p bli! tilit" shall be granted e;!ept to ; ; ; !orporations ; ; ; organi?ed nder the la.s of the Philippines, *. 2e*0. 01A.; 9e3 /en.u6 o4 @-o0e /*91.*2 10 o@ne+ :; 0u/- /1.1Ben0 A A A.H To repeat, %0& foreigners o.n 65.17O of the !o$$on shares of P+DT, .hi!h !lass of shares e;er!ises the 0o2e right to vote in the ele!tion of dire!tors, and th s e;er!ise !ontrol over P+DTE %1& *ilipinos o.n onl" 4:.74O of P+DTDs !o$$on shares, !onstit ting a $inorit" of the voting sto!#, and th s do not e;er!ise !ontrol over P+DTE %4& preferred shares, 33.55O o.ned b" *ilipinos, have no voting rightsE %5& preferred shares earn onl" 0I7> of the dividends that !o$$on shares earnE64 %:& preferred shares have t.i!e the par val e of !o$$on sharesE and %6& preferred shares !onstit te 77.2:O of the a thori?ed !apital sto!# of P+DT and !o$$on shares onl" 11.0:O. This #ind of o.nership and !ontrol of a p bli! tilit" is a $o!#er" of the Constit tion.

In!identall", the fa!t that P+DT !o$$on shares .ith a par val e of P:.>> have a ! rrent sto!# $ar#et val e of P1,412.>> per share,65 .hile P+DT preferred shares .ith a par val e of P0>.>> per share have a ! rrent sto!# $ar#et val e ranging fro$ onl" P0>.31 to P00.>6 per share,6: is a glaring !onfir$ation b" the $ar#et that !ontrol and benefi!ial o.nership of P+DT rest .ith the !o$$on shares, not .ith the preferred shares. Indisp tabl", !onstr ing the ter$ H!apitalH in Se!tion 00, (rti!le AII of the Constit tion to in!l de both voting and non-voting shares .ill res lt in the abje!t s rrender of o r tele!o$$ ni!ations ind str" to foreigners, a$o nting to a !lear abdi!ation of the StateDs !onstit tional d t" to li$it !ontrol of p bli! tilities to *ilipino !iti?ens. S !h an interpretation !ertainl" r ns !o nter to the !onstit tional provision reserving !ertain areas of invest$ent to *ilipino !iti?ens, s !h as the e;ploitation of nat ral reso r!es as .ell as the o.nership of land, ed !ational instit tions and advertising b sinesses. The Co rt sho ld never open to foreign !ontrol .hat the Constit tion has e;pressl" reserved to *ilipinos for that .o ld be a betra"al of the Constit tion and of the national interest. The Co rt $ st perfor$ its sole$n d t" to defend and phold the intent and letter of the Constit tion to ens re, in the .ords of the Constit tion, Ha self-reliant and independent national e!ono$" effectivel( controlled b" *ilipinos.H Se!tion 00, (rti!le AII of the Constit tion, li#e other provisions of the Constit tion e;pressl" reserving to *ilipinos specific areas of invest$ent, s !h as the develop$ent of nat ral reso r!es and o.nership of land, ed !ational instit tions and advertising b siness, is self&e%ecutin'. There is no need for legislation to i$ple$ent these selfe;e! ting provisions of the Constit tion. The rationale .h" these !onstit tional provisions are self-e;e! ting .as e;plained in Manila Prince ,otel v. GS-S,66 th s/ ; ; ; )en!e, nless it is e;pressl" provided that a legislative a!t is ne!essar" to enfor!e a !onstit tional $andate, the pres $ption no. is that all provisions of the !onstit tion are self-e;e! ting. If the !onstit tional provisions are treated as re9 iring legislation instead of self-e;e! ting, the legislat re .o ld have the po.er to ignore and pra!ti!all" n llif" the $andate of the f nda$ental la.. This !an be !ata!l"s$i!. That is .h" the prevailing vie. is, as it has al.a"s been, that R . . . in !ase of do bt, the Constit tion sho ld be !onsidered self-e;e! ting rather than non-self-e;e! ting. . . . #n2e00 .-e /on.3*3; 10 /2e*32; 1n.en+e+, .-e 93o>101on0 o4 .-e Con0.1.u.1on 0-ou2+ :e /on01+e3e+ 0e24CeAe/u.1n7, *0 * /on.3*3; 3u2e @ou2+ 71>e 04

.-e 2e7102*.u3e +10/3e.1on .o +e.e361ne @-en, o3 @-e.-e3, .-e; 0-*22 :e e44e/.1>e. These provisions .o ld be s bordinated to the .ill of the la.$a#ing bod", .hi!h !o ld $a#e the$ entirel" $eaningless b" si$pl" ref sing to pass the needed i$ple$enting stat te. %E$phasis s pplied& In Manila Prince ,otel, even the Dissenting Opinion of then (sso!iate 8 sti!e Re"nato S. P no, later Chief 8 sti!e, agreed that !onstit tional provisions are pres $ed to be self-e;e! ting. 8 sti!e P no stated/ Co rts as a r le !onsider the provisions of the Constit tion as self-e;e! ting, rather than as re9 iring f t re legislation for their enfor!e$ent. The reason is not diffi! lt to dis!ern. Fo3 14 .-e; *3e no. .3e*.e+ *0 0e24CeAe/u.1n7, .-e 6*n+*.e o4 .-e 4un+*6en.*2 2*@ 3*.141e+ :; .-e 0o>e3e17n 9eo92e /*n :e e*012; 17no3e+ *n+ nu22141e+ :; Con73e00. Su44u0e+ @1.- @10+o6 o4 .-e *7e0 10 .-e un;1e2+1n7 3u2e .-*. 2e7102*.1>e */.1on0 6*; 71>e :3e*.- .o /on0.1.u.1on*2 317-.0 :u. /on73e001on*2 1n*/.1on 0-ou2+ no. 0u44o/*.e .-e6. Th s, .e have treated as self-e;e! ting the provisions in the <ill of Rights on arrests, sear!hes and sei? res, the rights of a person nder ! stodial investigation, the rights of an a!! sed, and the privilege against self-in!ri$ination. It is re!ogni?ed that legislation is nne!essar" to enable !o rts to effe!t ate !onstit tional provisions g aranteeing the f nda$ental rights of life, libert" and the prote!tion of propert". The sa$e treat$ent is a!!orded to !onstit tional provisions forbidding the ta#ing or da$aging of propert" for p bli! se .itho t j st !o$pensation. %E$phasis s pplied& Th s, in n $ero s !ases,67 this Co rt, even in the absen!e of i$ple$enting legislation, applied dire!tl" the provisions of the 034:, 0374 and 0327 Constit tions li$iting land o.nership to *ilipinos. In Soriano v. .n# ,oo,62 this Co rt r led/ ; ; ; (s the Constit tion is silent as to the effe!ts or !onse9 en!es of a sale b" a !iti?en of his land to an alien, and as both the !iti?en and the alien have violated the la., none of the$ sho ld have a re!o rse against the other, and it sho ld onl" be the State that sho ld be allo.ed to intervene and deter$ine .hat is to be done .ith the propert" s bje!t of the violation. ,e have said that .hat the State sho ld do or !o ld do in s !h $atters is a $atter of p bli! poli!", entirel" be"ond the s!ope of j di!ial a thorit". %Dinglasan, et al. vs. +ee < n Ting, et al., 6 -. R. No. +-:336, 8 ne 17, 03:6.& W-12e .-e 2e7102*.u3e -*0 no. +e41n1.e2; +e/1+e+ @-*. 9o21/; 0-ou2+ :e 4o22o@e+ 1n /*0e0 o4 >1o2*.1on0 *7*1n0. .-e /on0.1.u.1on*2 93o-1:1.1on, /ou3.0 o4

Du0.1/e /*nno. 7o :e;on+ :; +e/2*31n7 .-e +109o01.1on .o :e nu22 *n+ >o1+ *0 >1o2*.1>e o4 .-e Con0.1.u.1on. ; ; ; %E$phasis s pplied& To treat Se!tion 00, (rti!le AII of the Constit tion as not self-e;e! ting .o ld $ean that sin!e the 034: Constit tion, or over the last 7: "ears, not one of the !onstit tional provisions e;pressl" reserving spe!ifi! areas of invest$ents to !orporations, at least 6> per!ent of the H!apitalH of .hi!h is o.ned b" *ilipinos, .as enfor!eable. In short, the fra$ers of the 034:, 0374 and 0327 Constit tions $iserabl" failed to effe!tivel" reserve to *ilipinos spe!ifi! areas of invest$ent, li#e the operation b" !orporations of p bli! tilities, the e;ploitation b" !orporations of $ineral reso r!es, the o.nership b" !orporations of real estate, and the o.nership of ed !ational instit tions. (ll the legislat res that !onvened sin!e 034: also $iserabl" failed to ena!t legislations to i$ple$ent these vital !onstit tional provisions that deter$ine .ho .ill effe!tivel" !ontrol the national e!ono$", *ilipinos or foreigners. This Co rt !annot allo. s !h an abs rd interpretation of the Constit tion. This Co rt has held that the SEC Hhas both reg lator" and adj di!ative f n!tions.H63 Bnder its reg lator" f n!tions, the SEC !an be !o$pelled b" $anda$ s to perfor$ its stat tor" d t" .hen it nla.f ll" negle!ts to perfor$ the sa$e. Bnder its adj di!ative or 9 asi-j di!ial f n!tions, the SEC !an be also be !o$pelled b" $anda$ s to hear and de!ide a possible violation of an" la. it ad$inisters or enfor!es .hen it is $andated b" la. to investigate s !h violation./a0phi/ Bnder Se!tion 07%5&7> of the Corporation Code, the SEC has the reg lator" f n!tion to reje!t or disapprove the (rti!les of In!orporation of an" !orporation .here I.-e 3e=u13e+ 9e3/en.*7e o4 o@ne30-19 o4 .-e /*91.*2 0.o/J .o :e o@ne+ :; /1.1Ben0 o4 .-e P-121991ne0 -*0 no. :een /o6921e+ @1.- *0 3e=u13e+ :; eA10.1n7 2*@0 o3 .-e Con0.1.u.1on.I Th s, the SEC is the govern$ent agen!" tas#ed .ith the stat tor" d t" to enfor!e the nationalit" re9 ire$ent pres!ribed in Se!tion 00, (rti!le AII of the Constit tion on the o.nership of p bli! tilities. This Co rt, in a petition for de!larator" relief that is treated as a petition for $anda$ s as in the present !ase, !an dire!t the SEC to perfor$ its stat tor" d t" nder the la., a d t" that the SEC has apparentl" nla.f ll" negle!ted to do based on the 1>0> -IS that respondent P+DT s b$itted to the SEC. Bnder Se!tion :%$& of the Se! rities Reg lation Code,70 the SEC is vested .ith the Hpo.er and f n!tionH to H0u09en+ o3 3e>oJe, *4.e3 93o9e3 no.1/e *n+ -e*31n7, .-e 43*n/-10e o3 /e3.141/*.e o4 3e710.3*.1on o4 /o39o3*.1on0, 9*3.ne30-190 o3 05

*00o/1*.1on0, u9on *n; o4 .-e 73oun+0 93o>1+e+ :; 2*@.H The SEC is $andated nder Se!tion :%d& of the sa$e Code .ith the Hpo.er and f n!tionH to H1n>e0.17*.e A A A .-e */.1>1.1e0 o4 9e30on0 .o en0u3e /o6921*n/eH .ith the la.s and reg lations that SEC ad$inisters or enfor!es. The -IS that all !orporations are re9 ired to s b$it to SEC ann all" sho ld p t the SEC on g ard against violations of the nationalit" re9 ire$ent pres!ribed in the Constit tion and e;isting la.s. This Co rt !an !o$pel the SEC, in a petition for de!larator" relief that is treated as a petition for $anda$ s as in the present !ase, to hear and de!ide a possible violation of Se!tion 00, (rti!le AII of the Constit tion in vie. of the o.nership str !t re of P+DTDs voting shares, as ad$itted b" respondents and as stated in P+DTDs 1>0> -IS that P+DT s b$itted to SEC. W%EREFORE, .e PAR L! GRAN the petition and r le that the ter$ H!apitalH in Se!tion 00, (rti!le AII of the 0327 Constit tion refers onl" to shares of sto!# entitled to vote in the ele!tion of dire!tors, and th s in the present !ase onl" to !o$$on shares, and not to the total o tstanding !apital sto!# %!o$$on and non-voting preferred shares&. Respondent Chairperson of the Se! rities and E;!hange Co$$ission is $IREC E$ to appl" this definition of the ter$ H!apitalH in deter$ining the e;tent of allo.able foreign o.nership in respondent Philippine +ong Distan!e Telephone Co$pan", and if there is a violation of Se!tion 00, (rti!le AII of the Constit tion, to i$pose the appropriate san!tions nder the la.. SO OR$ERE$. AN ONIO . CARPIO (sso!iate 8 sti!e

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