J. Velasco Dissenting Opinion

G.R. No.
207246 - Dissenting & Concurring Opinion 27/02/2018, 7)53 PM
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G.R. No. 207246, April 18, 2017,

♦ Decision, Caguioa, [J]
♦ Dissenting Opinion, Carpio, [J], Leonen, [J],
♦ Concurring Opinion, Velasco, Jr., [J],
DISSENTING OPINION
CARPIO, J.:
I dissent.
Section 11, Article XII of the 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, x xx."
In the Gamboa Decision, 1 the threshold issue before the Court was "whether the term 'capital' in Section 11, Article
XII of the Constitution refers to the total common shares only or to the total outstanding capital stock (combined total
of common and non-voting preferred shares) of PLDT, a public utility."
In resolving this issue, the Court looked into PLDT's capital structure at the time and found the glaring anomaly in
treating the total outstanding capital stock as a single class of shares. The Court showed how control and beneficial
ownership of PLDT rest solely with the common shares, thus:
x x x (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to
vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT's
common shares, constituting a minority of the voting stock, and thus do not exercise control over PLDT: (3)
preferred shares, 99 .44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the
dividends that common shares earn; (5) preferred shares have twice the par value of common shares; and (6)
preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This
kind of ownership and control of a public utility is a mockery of the Constitution.
Incidentally, the fact that PLDT common shares with a par value of ₱5.00 have a current stock market value of
₱2,328.00 per share, while PLDT preferred shares with a par value of ₱10.00 per share have a current stock market
value ranging from only ₱10.92 to ₱11.06 per share, is a glaring confirmation by the market that control and
beneficial ownership of PLDT rest with the common shares, not with the preferred shares. 2
Clearly, PLDT's capital structure then, where 64.27% of the common shares were in the hands of foreigners,
warranted the Court's ruling that the term "capital" refers to shares of stock that can vote in the election of directors.
The Court further stated that "in the present case (in the case of PLDT), [the term 'capital' refers] only to common
shares, and not to the total outstanding capital stock." The dispositive portion of the Gamboa Decision reads:
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section 11, Article XII of the 1987
Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case
only to common shares, and not to the total outstanding capital stock (common and non-voting preferred shares).
Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition of the
tem1 "capital" in determining the extent of allowable foreign ownership in respondent Philippine Long Distance
Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the
appropriate sanctions under the law.
SO ORDERED. 3
Moreover, in the Gamboa Decision, the Court stated that "[m]ere legal title is insufficient to meet the 60 percent
Filipino-owned 'capital' required in the Constitution."4 Full beneficial ownership of 60 percent of the total outstanding
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G.R. No. 207246 - Dissenting & Concurring Opinion 27/02/2018, 7)53 PM
capital stock, coupled with 60 percent of the voting rights, is the minimum constitutional requirement for a
corporation to operate a public utility, thus:
x x x. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting
rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest
in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is
"considered as non-Philippine national[s]. " 5 (Emphasis supplied)
Significantly, in the 9 October 2012 Gamboa Resolution6 denying the motion for reconsideration, the Court reiterated
the requirement of full beneficial ownership by Filipinos of at least 60 percent of the outstanding capital stock and at
least 60 percent Filipino ownership of the voting rights. This is consistent with the Foreign Investments Act, as well
as its Implementing Rules, thus:
This is consistent with Section 3 of the FIA which provides that where 100% of the capital stock is held by "a trustee
of funds for pension or other employee retirement or separation benefits," the trustee is a Philippine national if "at
least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals." Likewise, Section 1 (b) of the
Implementing Rules of the FIA provides that "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."7 (Emphasis in the original)
The Court clarified, in no uncertain terms, that the 60 percent constitutional requirement of Filipino ownership
applies uniformly and across the board to all classes of shares comprising the capital of a corporation. The 60
percent Filipino ownership requirement applies to each class of share, not to the total outstanding capital stock as a
single class of share.
Since the constitutional requirement of at least 60 percent Filipino ownership applies not only to voting control of the
corporation but also to the beneficial ownership of the corporation, it is therefore imperative that such requirement
apply uniformly and across the board to all classes of shares, regardless of nomenclature and category, comprising
the capital of a corporation. Under the Corporation Code, capital stock consists of all classes of shares issued to
stockholders, that is, common shares as well as preferred shares, which may have different rights, privileges or
restrictions as stated in the articles of incorporation.
xxxx
x x x. Thus, if a corporation, engaged in a partially nationalized industry, issues a mixture of common and preferred
non-voting shares, at least 60 percent of the common shares and at least 60 percent of the preferred non-voting
shares must be owned by Filipinos. Of course, if a corporation issues only a single class of shares, at least 60
percent of such shares must necessarily be owned by Filipinos. In short, the 60-40 ownership requirement in
favor of Filipino citizens must apply separately to each class of shares, whether common, preferred
nonvoting, preferred voting or any other class of shares. This uniform application of the 60-40 ownership
requirement in favor of Filipino citizens clearly breathes life to the constitutional command that the ownership and
operation of public utilities shall be reserved exclusively to corporations at least 60 percent of whose capital is
Filipino-owned. Applying uniformly the 60-40 ownership requirement in favor of Filipino citizens to each class of
shares, regardless of differences in voting rights, privileges and restrictions, guarantees effective Filipino control of
public utilities, as mandated by the Constitution.
Moreover, such uniform application to each class of shares insures that the "controlling interest" in public
utilities always lies in the hands of Filipino citizens. x x x.
As we held in our 28 June 2011 Decision, to construe broadly the term "capital" as the total outstanding capital
stock, treated as a single class regardless of the actual classification of shares, grossly contravenes the intent and
letter of the Constitution that the "State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos." We illustrated the glaring anomaly which would result in defining the term "capital" as the
total outstanding capital stock of a corporation, treated as a single class of shares regardless of the actual
classification of shares, to wit:
Let us assume that a corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred
shares owned by Filipinos, with both classes of share having a par value of one peso (₱1.00) per share.
Under the broad definition of the term "capital," such corporation would be considered compliant with the 40 percent
constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than
99.999 percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd.
In the example given, only the foreigners holding the common shares have voting rights in the election of directors,
even if they hold only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise
control over the public utility. On the other hand, the Filipinos, holding more than 99.999 percent of the equity,
cannot vote in the election of directors and hence, have no control over the public utility. This starkly circumvents the
intent of the framers of the Constitution, as well as the clear language of the Constitution, to place the control of
public utilities in the hands of Filipinos. x x x. 8 (Emphasis supplied)
Clearly, in both Gamboa Decision and Resolution, the Court categorically declared that the 60 percent minimum
Filipino ownership refers not only to voting rights but likewise to full beneficial ownership of the stocks. Moreover, in
the Gamboa Resolution, the Court explicitly stated that the 60 percent Filipino ownership applies uniformly to each
class of shares. Such interpretation ensures effective control by Filipinos of public utilities, as expressly mandated
by the Constitution.
Capital Structure of PLDT
Let us examine PLDT's capital structure to determine whether it complies with the Gamboa Decision and Resolution
where the Court expressly held that the 60 percent minimum Filipino ownership refers not only to voting rights but
also to full beneficial ownership of the stocks. Further, the 60 percent Filipino ownership applies uniformly to each
class of shares.
In the 2011 General Information Sheet of PLDT, before the finality of the Gamboa Decision and Resolution, its
shares were divided into common and preferred. Filipinos owned 35.77°/o while foreigners owned 64.23°/o of the
common shares. Filipinos owned 99.67% while foreigners owned 0.33% of the preferred shares. Filipinos owned
86.30% while foreigners owned 13.70% of the total outstanding capital stock. There was no dispute that in 2011,
before the Gamboa Decision and Resolution were promulgated, the common shares of PLDT had the right to vote in
the election of the board of directors, whereas the preferred shares had no such right.
In the 2012 General Information Sheet of PLDT, after the promulgation of the Gamboa Decision and Resolution, the
preferred shares were sub-classified into (a) voting preferred shares and (b) non-voting serial preferred shares. The
newly-created voting preferred shares, which have voting rights in the election of directors, are fully owned by BTF
Holdings, Inc. These voting preferred shares are not listed in the Philippine Stock Exchange. With the newly-created
preferred shares, it appears that Filipinos owned 65.53% while foreigners owned 34.47% of the total voting shares.
However, based on common shares only, Filipinos owned 41.60% while foreigners owned 58.40%. Based on
PLDT's 2012 General Information Sheet, Filipinos owned 100% of the non-voting preferred shares.
In the 2013 General Information Sheet of PLDT, it appears that Filipinos owned 67.32% while foreigners owned
32.68% of the total voting shares. However, based on common shares only, Filipinos owned 44.63% while 55.37%
were owned by foreigners. Based on PLDT's 2013 General Information Sheet, Filipinos owned 100% of the non-
voting preferred shares.
31.66% of the total voting shares. However, based on common shares only, Filipinos owned 46.35% while
foreigners owned 53.65%. Based on PLDT's 2014 General Information Sheet, Filipinos owned 100% of the non-
To summarize, the table below shows that from 2011 to 2016, the majority of the common shares remained in the
hands of foreigners and less than 60% of the common shares were owned by Filipinos.
Number of PLDT 2011 2012 2013 2014 2015 2016

shares in % in % in % in % in % in %
COMMON
A. Filipino 35.77 41.60 44.63 46.35 45.70 48.87
B. Foreigners 64.23 58.40 55.37 53.65 54.30 51.13
PREFERRED
(NONVOTING)
A. Filipino 99.67 100 100 100 100 100
B. Foreigners 0.33 0 0 0 0 0
PREFERRED
(VOTING)
A. Filipino - 100 100 100 100 100
B. Foreigners - 0 0 0 0 0
TOTAL
(VOTING)
A. Filipino 35.77 65.53 67.32 68.34 67.95 69.82
B. Foreigners 64.23 34.47 32.68 31.66 32.05 30.18
To repeat, the issue in the Gamboa Decision was "whether the term 'capital' in Section 11, Article XII of the
Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of
common and non-voting preferred shares) of PLDT, a public utility."
Considering PLDT's capital structure at the time, indicating that control and ownership rest with the common shares,
the Court stated in the dispositive portion of the Gamboa Decision that "the term 'capital' in Section 11, Article XII of
the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the
present case only to common shares, and not to the total outstanding capital stock (common and non-voting
preferred shares)."
If we apply the term "capital" as referring only to common shares and not to the total outstanding capital stock of
PLDT, as stated in the Gamboa Decision, then since 2011, before the promulgation of the Gamboa Decision and
Resolution, until 2016, after the promulgation of the Gamboa Decision and Resolution, PLDT's capital structure has
failed to comply with the constitutional requirement that at least 60 percent of its common shares, which control
PLDT, are Filipino-owned.
Voting Preferred Shares
In October 2012, PLDT created a new class of shares - the voting preferred shares - to comply allegedly with the
Gamboa Decision. All the 150,000,000 newly-issued voting preferred shares were acquired by BTF Holdings, Inc., a
wholly-owned company of the PLDT Beneficial Trust Fund (BTF). The voting preferred shares have a par value of
₱1.00 per share, while the common shares have a par value of ₱5.00 per share.
The BTF was established by the Board of Directors of PLDT as a retirement plan for PLDT's employees. As stated
in PLDT's By-Laws, among the express powers of the Board of Directors of PLDT is to establish pension or
retirement plans for the employees, and to determine the persons to participate in such plans and the amount of
their participation. 9 The Board of Directors appoints the BTF's Board of Trustees, which manages the BTF and
consists of two members of PLDT's Board of Directors, a senior member of the executive staff of PLDT, and two
persons who are neither executives nor employees of PLDT. 10 Since the PLDT Board of Directors appoints the
Board of Trustees of the BTF, in effect, it is PLDT's management which controls the BTF.
In 2011, when the Gamboa Decision was promulgated, PLDT's Board of Directors was elected by foreigners
comprising more than 60 percent of the common shares who had the right to elect the Board of Directors. After the
creation of the voting preferred shares in 2012, PLDT's Board of Directors continued to be manned by the same set
of persons, and the management of PLDT remained in the hands of the same persons.
The table 11 below shows that the total voting preferred shares of 150,000,000 comprised 40.98% of the total voting
capital of PLDT from 2012 until 2016. However, for the same period, the number of voting preferred shares
comprised only 22.5% of the total paid-up capital of PLDT. The number of common shares, which was owned by a
majority of foreigners, comprised 77.5% of the total paid-up capital of PLDT.
2012 2013 2014 2015 2016

Number of
(as of 16 Oct. (as of 3 Oct. (as of 11 April (as of 10April (as of 15 April
PLDT shares
2012) 2013) 2014) 2015) 2016)
FILIPINO
Common
Voting 89,882,436 96,429,568 100, 150, 726 98,743,500 105,577,491
Preferred 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000
FOREIGNERS
Common
Voting 126,173,339 119,626,207 115,905,049 117,312,275 110,4 78,284
Preferred 0 0 0 0 0
TOTAL
VOTING 366,055,775 366,055,775 366,055,775 366,055,775 366,055,775
% OF
VOTING
PREFERRED
vs. TOTAL
VOTING
(PAID-UP
CAPITAL) 40.98% 40.98% 40.98% 40.98% 40.98%
% OF
VOTING
PREFERRED
vs. TOTAL
PAID-UP
CAPITAL12 22.52% 22.52% 22.52% 22.73% 22.52%
There is no question that the 150,000,000 voting preferred shares have the right to vote in the election of the Board
of Directors. However, the Board of Trustees of the BTF is appointed by the Board of Directors of PLDT. The BTF
controls how the voting preferred shares of BTF Holdings, Inc. are voted. In short, BTF Holdings, Inc. is controlled
by the Board of Directors of PLDT, including how the voting preferred shares of BTF
Holdings, Inc. will be voted. In essence, whoever controls PLDT also controls BTF and BTF Holdings, Inc. When the
voting preferred shares were created and issued to BTF Holdings, Inc., PLDT, BTF, and BTF Holdings, Inc. were all
controlled by the same PLDT Board of Directors, who was elected by the owners of the PLDT common shares.
The majority of these PLDT common shares were then, and even up to now, foreign-owned and controlled.
In 2012, when the voting preferred shares were created and issued, the common shares with a par value of ₱5.00
were traded in the stock market for a price which reached ₱2,650. 13 Meanwhile, the voting preferred shares with a
par value of ₱1.00 were not traded or listed in the stock exchange. While voting rights had been extended to the
newly-created voting preferred shares, the beneficial ownership of PLDT remained indisputably with the common
shares.
Clearly, the issuance of the voting preferred shares is a farce. PLDT created and issued the voting preferred shares
to "comply" allegedly with the Gamboa Decision and Gamboa Resolution. With its "modified" capital structure, PLDT
ostensibly qualifies as a "Philippine national" with at least 60 percent of its voting stock in the hands of Filipinos.
However, in truth and in fact, it is nothing but a "sweetheart deal," a disingenuous device, which not only
circumvents the ruling in Gamboa; but worse, illegally evades the constitutional mandate of 60-40 Filipino ownership
of capital. This ploy is a plain and simple travesty of the Constitution.
Beneficial Ownership
14
The table below shows the disparity in the amounts of dividends declared from 2013 to 2016 between PLDT's
common shares and voting preferred shares.
PLDT Shares 2013 2014 2015 2016

₱52 ₱54 ₱26 ₱49
COMMON15 ₱60 ₱62 ₱61 ₱57
(per share) ₱63 ₱69 ₱65
VOTING ₱0.016/share
PREFERRED (₱2,437,500/ ₱0.016/share ₱0.016/share ₱0.016/share
STOCK16 150,000,000) (₱2,437,500/ (₱2,437,500/ (₱2,437,500/
(per share) 150,000,000) 150,000,000) 150,000,000)
% DIVIDENDS
OF VOTING
PREFERRED
VS. COMMOM
SHARES 0.04% 0.04% 0.03% 0.06%
Clearly, such disparity highlights the anomaly in the treatment of the total outstanding voting stock as a
single class of shares. From 2013 to 2016, the declared dividends on the common shares ranged from ₱26
to ₱69 per share per annum with a par value of ₱5.00 per share, whereas the dividend on the 150,000,000
voting preferred shares amounted to ₱0.065 17 per annum with a par value of ₱1.00 per share.
In short, the voting preferred shares comprised 40.98% of all voting shares but received only 0.04% 18 of the
dividends for 2013, 0.04% 19 for 2014, 0.03% 20 for 2015, and 0.06% 21 for 2016, compared with the dividends
received by the common shares for the same period.
Clearly, the voting preferred shares are mere "mickey mouse" voting shares, created just to ostensibly comply with
the 60 percent Filipino ownership requirement of the voting stock. In reality, the voting preferred shares have
insignificant beneficial returns to whoever owns it.
Significantly, in the Gamboa Decision, the Court cited the disparity in the beneficial ownership between common
shares and prefeffed shares of PLDT, to wit:
Incidentally, the fact that PLOT common shares with a par value of ₱5.00 have a current stock market value of
₱2,328.00 per share, while PLOT preferred shares with a par value of ₱10.00 per share have a current stock market
value ranging from only ₱10.92 to ₱11.06 per share, is a glaring confirmation by the market that control and
beneficial ownership of PLOT rest with the common shares, not with the preferred shares. 22
It must be noted that as of 10 March 2017, the last traded price of PLDT's common shares with a par value of ₱5.00
is ₱1,544.00,23 whereas the voting preferred shares with a par value of ₱1.00 are not listed or traded. This further
confirms that control and beneficial ownership of PLDT rest with the common shares, not with the preferred shares,
either voting or non-voting.
Moreover, as I have previously stated, SEC Memorandum Circular No. 8 can be considered valid only if (1) the
stocks with voting rights and (2) the stocks without voting rights, which comprise the capital of a corporation
operating a public utility, have equal par values. If the shares of stock have different par values, then applying SEC
Memorandum Circular No. 8 would contravene the Gamboa Decision that the "legal and beneficial ownership of
60 percent of the outstanding capital stock x x x rests in the hands of Filipino nationals in accordance with
the constitutional mandate." I illustrated the resulting anomaly in this wise:
For example, assume that class "A" voting shares have a par value of ₱1.00, and class "B" non-voting preferred
shares have a par value of ₱100.00. If 100 outstanding class "A" shares are all owned by Filipino citizens, and 80
outstanding class "B" shares are owned by foreigners and 20 class "B" shares are owned by Filipino citizens, the
60-40 percent ownership requirement in favor of Filipino citizens for voting shares, as well as for the total voting and
non-voting shares, will be complied with. If dividends are declared equivalent to the par value per share for all
classes of shares, only 20.8 percent of the dividends will go to Filipino citizens while 79.2 percent of the dividends
will go to foreigners, an absurdity or anomaly that the framers of the Constitution certainly did not intend. Such
absurdity or anomaly will also be contrary to the Gamboa Decision that the "legal and beneficial ownership of 60
percent of the outstanding capital stock x x x rests in the hands of Filipino nationals in accordance with the
constitutional mandate." (Emphasis in the original)
PLDT's capital structure, as well as the disparity in the declared dividends between common and voting preferred
shares, illustrates clearly the anomaly which will result in the interpretation by the SEC of the Gamboa Decision and
Resolution. Applying the 60 percent Filipino ownership to the total voting stock and to the total outstanding stock,
whether voting or non-voting, and not to each class of shares of PLDT clearly amounts to a blatant mockery of the
Constitution.
Clarification of the
Gamboa Decision and Resolution
While the Court did not explicitly state in the dispositive portion of the Gamboa Decision and Resolution that the
minimum 60 percent Filipino ownership must be uniformly applied to each class of shares, the body of the Gamboa
Resolution categorically declared that "the 60-40 ownership requirement in favor of Filipino citizens must apply
separately to each class of shares, whether common, preferred non-voting, preferred voting or any other class of
shares."
Is the Court perpetually precluded from refining the dispositive portion of the Gamboa Decision and Resolution to
harmonize with the Court's pronouncements in the body of the decision? Is the Court absolutely barred from
clarifying the dispositive portion of the Gamboa Decision and Resolution and stating that the 60-40 Filipino
ownership applies to each class of shares, as declared in the body of the Gamboa Resolution?
Definitely, no.
To avoid absurdity, and more importantly, to uphold the spirit and language of the Constitution, the Court is not only
allowed, but is bound, to clarify, even rectify, any apparent conflict in its decisions. To grasp and delve into the true
intent and meaning of a decision, no specific portion thereof should be resorted to - the decision must be considered
in its entirety. 24 In Reinsurance Company of the Orient, Inc. v. Court of Appeals, 25 the Court stated:
It is true that even a judgment which has become final and executory may be clarified under certain circumstances.
The dispositive portion of the judgment may, for instance, contain an error clearly clerical in nature (perhaps best
illustrated by an error in arithmetical computation) or an ambiguity arising from inadvertent omission, which error
may be rectified or ambiguity clarified and the omission supplied by reference primarily to the body of the decision
itself. Supplementary reference to the pleadings previously filed in the case may also be resorted to by way of
corroboration of the existence of the error or of the ambiguity in the dispositive part of the judgment.xxx.
To refuse to clarify the dispositive portion of the Gamboa Decision, invoking conclusiveness of judgment and obiter
dictum, among other things, is to shirk from this Court's sworn duty to uphold the Constitution. Consequently, the
Court must reject the SEC's flimsy argument that the SEC's task is merely to implement the Court's directive as
contained in the dispositive portion of the Gamboa Decision. Following such contention, the SEC deliberately
ignores the crucial pronouncements of the Court in the body of the Gamboa Decision and Resolution.
Possible Economic Consequences
Agreeing with the Philippine Stock Exchange, the majority voiced fears of an economic disaster if the term "capital"
would be "re-interpreted." The PSE claims that "[a]dopting a new definition of 'capital' will prove disastrous [to] the
Philippine stock market." The majority opined that "a restrictive interpretation - or rather, re-interpretation, of 'capital'
x x x directly affects the well-being of the country."
Suffice it to state that the possible economic repercussions resulting from the definition of the term "capital" in
Section 11, Article XII of the Constitution can never justify a blatant violation of the Constitution. It is utterly
dangerous to hold that possible economic repercussions justify junking the Constitution. The solution is to properly
amend the Constitution, not to start violating it every time it becomes inconvenient to comply with the Constitution.
To repeat, the Constitution expressly mandates an economy effectively controlled by Filipinos. To sustain the
glaringly anomalous and absurd situation which will result from the SEC's interpretation of the term "capital"
contravenes the Gamboa Decision and Resolution, and worse, contradicts the Constitution.
The majority's decision now allows foreigners to control all nationalized industries, whether nationalized
under the Constitution or existing statutes. Under these existing laws, foreign ownership is limited to less
than a controlling interest. With the majority's decision, the mere expedient of creating "mickey mouse"
voting preferred shares will turn over control of nationalized industries, particularly strategic industries like
telecommunications and energy distribution, to foreigners. This is what the majority's decision is all about.
This has, of course, far-reaching ramifications to the country's national economy, national security, and
even the future of our country as a sovereign state.
ACCORDINGLY, I vote to GRANT the motion for reconsideration. The minimum 60 percent Filipino ownership
requirement under Section 11, Article XII of the Constitution must be applied to each class of shares, which
comprises "capital," as used in the Constitution, in determining whether a corporation can validly operate a public
utility.
ANTONIO T. CARPIO
Associate Justice
Footnotes
1
Gamboa v. Teves. 668 Phil. I (2011).
2
Id. at 63-64.
3
Id. at 69-70.
4
Id. at 57.
5
Id.
6
696 Phil. 276 (2012).
7
Id. at 338-339.
8
Id. at 339, 341, 345.
9
Article V, Section 9(i) of the Amended By-Laws of PLDT dated 20 February 2015.
10
Page F-119 of SEC Form 17-A (Annual Report) for the fiscal year 2015 <http://www.pds.com.ph/wpcontent/
uploads/20 I 6/03/Disclosure-No.-490-20 I 6-Annual-Report-for-Fiscal-Year-Ended-December- 31-20 I 5-SEC-
FORM-17-A.pdf> (accessed on 12 March 2017).
11
Based on PLDT's General Information Sheets from 2011 to 2016.
2011: http://www.pldt.com/docs/default-source/general-information/pldt-2011-gis.pdt'?sfvrsn=0
(accessed on 7 March 2017).
2012: http://www.pldt.com/ docs/ default-source/ general-information/amended-general-inforrnation-

sheet final-2012.pdf?sfvrsn=0 (accessed on 7 March 2017).
2013: http://www.pldt.corn/ docs/ default-source/ general-information/amended-gis_decrease-in-capital-

stock 10-03-13.pdf?sfvrsn=0 (accessed on 7 March 2017).
2014: http://www.pldt.com/ docs/default-source/general-information/2014-gis-with-certification.pdf?

sfvrsn=0 (accessed on 7 March 2017).
2015: http://www.pldt.com/docs/default-source/general-information/2015-pldt-gis-withcertification. pdf?

sfvrsn=2 (accessed on 7 March 2017).
2016: http://www.pldt.com/docs/default-source/general-information/pldt-2016-amended-
generalinforrnation-sheet-(gis).pdf?sfvrsn=0 (accessed on 7 March 2017).

12
The number of shares comprising the total paid-up capital for 2012 was 666,058,745; for 2013 it was
666,056,345; for 2014 it was 666,056,345; for 2015 it was 666,056,145; and for 2016 it was 666,057,015.
Based on PLDT's General Information Sheets.
13
On 23 October 2012. <http://edge.pse.com.ph/companyPage/stockData.do?cmpy id=6> (accessed on 10
March 2017).
14
Based on PLDT's dividend declaration from 2013 to 2016
<http://www.pldt.com/investorrelations/shareholder-information/dividend-info> (accessed on 12 March 2017).
15
Declared on various dates.
16
Quarterly.
17
For2013,2014,and 2016.
18
₱0.065 (sum of the dividends of each voting preferred share) divided by Pl 75.065 (sum of the dividends of
each common share and voting preferred share).
19
₱0.065 (sum of the dividends of each voting preferred share) divided by P 185.065 (sum of the dividends of
20
₱0.049 (sum of the dividends of each voting preferred share) divided by Pl52.049 (sum of the dividends of
21
₱0.065 (sum of the dividends of each voting preferred share) divided by Pl 06.065 (sum of the dividends of
22
Gamboa v. Teves, supra note I, at 64.
23
As of 1:27 p.m. of 10 March 2017 <http://edge.pse.com.ph/companyPage/stockData.do?cmpy_id=6>.
24
Gulang v. Court of Appeals, 360 Phil. 435. 450 (1998), citing Valderrama v. NLRC, 326 Phil. 477, 484
(1996).
25
275 Phil. 20, 34 (1991). Cited in Gulang v. Court of Appeals, id.
The Lawphil Project - Arellano Law Foundation
DISSENTING OPINION
LEONEN, J.:
I maintain my dissent.
The primordial interest served by the limitation of foreign participation and ownership in certain economic activities is
the "conserv[ation] and develop[ment of] our patrimony." 1 By definition, this limitation is a matter of maintaining and
rendering to the Filipino what belongs to the Filipino. This means that there is an effective control by Filipinos. It also
means, as an act of preservation and development, that the Philippine economy stands to benefit from the fruits of
capital. It is thus a question of national integrity:
It should be emphatically stated that the provisions of our Constitution which limit to Filipinos the rights to develop
the natural resources and to operate the public utilities of the Philippines is one of the bulwarks of our national
integrity. The Filipino people decided to include it in our Constitution in order that it may have the stability and
permanency that its importance requires. It is written in our Constitution so that it may neither be the subject of
barter nor be impaired in the give and take of politics. With our natural resources, our sources of power and energy,
our public lands, and our public utilities, the material basis of the nation’s existence, J in the hands of aliens over
whom the Philippine Government does not have complete control, the Filipinos may soon find themselves deprived
of their patrimony and living as it were, in a house that no longer belongs to them.2 (Emphasis supplied)
The 1987 Constitution leaves room for the legislature to identify "certain areas of investment" where foreign equity
participation may be limited to 40% or even lower.3This is in addition to the areas of natural resources4 and public
utilities5where foreign equity participation was already limited to a maximum of 40% by the 19356 and the 1973 7
Constitutions. This is also in addition to other activities explicitly mentioned outside of Article XIV of the 1987
Constitution.8
The Constitution recognizes private enterprise and investments as indispensable to national progress and therefore
encourages and provides incentives for them. 9 Yet the Constitution's propitious stance towards private enterprise
and investment is tempered by the primacy of a "selfreliant and independent national economy." 10
The imperative of conserving and developing our inheritance and integrity is not an empty exhortation. The specific
mandate is established by Article II, Section 19 of the 1987 Constitution: "The State shall develop a self-reliant and
independent national economy effectively controlled by Filipinos."
There is thus a positive duty imposed upon state organs. They are charged with the definite prestation of going
about and ensuring· such conservation and development. This is done through the conscious adoption of legal
mechanisms that adequately effect such conservation and development.
The mechanisms we adopt. in jurisprudence must work not only at a barefaced identification of Filipino and foreign
stock ownership. They must go beyond surveying nominal compliance but discerningly - even astutely - account for
and foreclose avenues for circumvention.
This begins with a conceptual understanding of capital and a functional comprehension of what it means to own
capital. These must be thorough, with keen awareness that formal designations are not always representative of
attendant rights, benefits, prerogatives, and other incidents. More than titular descriptions therefore, the
mechanisms we adopt must scrutinize the many features of stock ownership, such as, its ultimate end of deriving
.commercial gains, the mutable as against the inviolable rights it entails, and its implications for participating in
corporate affairs, the avenues for withholding participation, as well as the extent and quality of such participation
depending on the nature of the affair. Our jurisprudential mechanisms must focus on beneficial, not merely titular,
ownership. It cannot be true that a share of stock is held by a Filipino when it is only the title that he holds while the
entire usufruct belongs to a foreigner.
Accordingly, the apparatus for reckoning foreign ownership must be willing go beyond what (i.e., the class of shares)
corporate participants are holding but also at how they are holding it. When appropriate, there must be an
unravelling of who ultimately derives the gains, as well as who benefits from and influences the manner of
exercising the rights and prerogatives attendant to holding shares. Our mechanisms must rise beyond the naivety of
assmning that nominal ownership translates to consummate and beneficial ownership.
he majority's position limiting the conception of "capital" vis-a-vis foreign equity participation in public utilities under
Article XII, Section 11 of the 1987 Constitution only to shares of stock entitled to vote for directors in a corporation
fails to adequately effect the Constitution's dictum. Rather than guarding our patrimony, it has opened the door for
foreign control of corporations engaged in nationalized economic activities. 11
In keeping with the primacy of our patrimony and the charge of a "self-·reliant and independent national economy,"
capital must be construed in such a manner as to secure "the controlling interest in favor of Filipinos." 12
To limit capital to so-called voting shares is to be shortsighted. It fails to account for the reality that every class of
shares exercises a measure of control over a corporation. Even so-called non-voting shares vote and may be pivotal
in the most crucial corporate actions. A cursory reading of the Corporation Code reveals this:
No class of shares is ever truly bereft of a measure of control of a corporation. It is true, as Section 6 of the
Corporation Code permits, that preferred and/or redeemable shares may be denied the right to vote extended to
other classes of shares. For this reason, they are also often referred to as ["]non-voting shares.["] However, the
absolutist connotation of the description "non-voting" is misleading. The same Section 6 provides that these "non-
voting shares" are still "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.
In the most crucial corporate actions - those that go into the very constitution of the corporation - even so-called
non-voting shares may vote. Not only can they vote; they can be pivotal in deciding the most basic issues
confronting a corporation. Certainly, the ability to decide a corporation's framework of governance (i.e., its articles of
incorporation and by-laws), viability (through the encumbrance or disposition of all or substantially all of its assets,
engagement in another enterprise, or subjection to indebtedness), or even its very existence (through its merger or.
consolidation with another corporate entity, or even through its outright dissolution) demonstrates net only a
measure of control, but even possibly overruling control. "Non-voting" preferred and redeemable shares are· hardly
irrelevant in controlling a corporation. 13 (Emphasis in the original, citation omitted)
The constitutional imperative demands a consideration not just of nominal power and control or the identification of
which shares are denominated as "voting" and "non-voting", but . equally of beneficial ownership.
The implementing rules and regulations (amended 2004) of Republic Act No. 8799, the Securities Regulation Code
(SRC), define "beneficial owner or beneficial ownership." It identifies the two (2) facets of beneficial ownership: first,
having or sharing voting power; second, having or sharing investment returns or power:
Rule 3 - Definition of Terms Used in the Rules and Regulations
1. As used in the rules and regulations adopted by the Commission under the Code, unless the context otherwise
requires:
A. Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or sharesvoting power, which includes the power to
vote, or to direct the voting of such security; and/or investment returns or power, which includes the power to
dispose of, or to direct the disposition of such security; provided, however, that a person shall be deemed to have an
indirect beneficial ownership interest in any security which is:
i. held by members of his immediate family sharing the same household;
ii. held by a partnership in which he is a general partner;
iii. held by a corporation of which he is a controlling shareholder; or
iv. subject to any contract arrangement or understanding which gives him voting power or investment power
with respect to such securities: provided however, that the following persons or institutions shall not be
deemed to be beneficial owners of securities held by them for the benefit of third parties or in customer or
fiduciary accounts in the ordinary course of business, so long as such shares were acquired by such persons
or institutions without the purpose or effect of changing or influencing control of the issuer:
a. a broker dealer;
b. an investment house registered under · the Investment Houses Law;
c. a bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
d. an insurance company subject to the supervision of the Office of the Insurance Commission;
e. an investment company registered under the Investment Company Act;
f. a pension plan subject to regulation and supervision by the Bureau of Internal Revenue and/or the
Office of the Insurance Commission or relevant authority; and ,
g. a group in which all of the members are persons specified above.
All securities of the same class beneficially owned by a person, regardless of the form such beneficial ownership
takes, shall be aggregated in calculating the number of shares beneficially owned by such person.
A person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial
ownership, within thirty (30) days, including, but not limited to, any right to acquire, through the exercise of any
option, warrant or right; through the conversion of any security; pursuant to the power to revoke a trust, discretionary
account or similar arrangement; or pursuant to automatic termination of a trust, discretionary account or similar
arrangement. (Emphasis supplied)
The concept of beneficial ownership uncovers that control is not entirely ·the end of participating in a stock
corporation. As stock corporations are fundamentally business organizations, participati.ng in their affairs by
partaking in ownership is ultimately a matter of reaping gains from investments.
Consistent with the composite character of stock ownership and impelled by the need to equip state organs with the
most efficacious means for conserving our heritage are the correlative mechanisms of the Control Test and. the
Grandfather Rule. These are the guideposts through which j foreign participation in nationalized economic activities
is reckoned. Together, the Control Test and the Grandfather Rule enable an adequate mechanism for state organs
to examine whether a stock corporation is effectively controlled and beneficially owned by Filipinos.
My dissent to the majority's November 22, 2016 Decision, 14 as well as to the April 21, 2014 Decision15 and January
28, 2015 Resolution16 in Narra Nickel and Development Corp. v. Redmont Consolidated Mines Corp., emphasized
that the Control Test finds initial application and "must govern in reckoning foreign equity ownership in corporations
engaged in nationalized economic activities." 17 Further, "the Grandfather Rule may be used as a supplement to the
Control Test, that is, as a· further check to ensure that control and beneficial ownership of a corporation is in fact
lodged in Filipinos." 18
The correlation between the Control Test and the Grandfather Rule - where the former finds initial application, and
the latter supplements - is settled in jurisprudence, having been affirmed in the January 28, 2015 Resolution in
Narra Nickel. The Court explained:
[T]he Control Test can be, as it has been, applied jointly with the· Grandfather Rule to determine the observance of
foreign ownership restriction in nationalized economic activities. The Control Test and the Grandfather Rule are not,
as it were, incompatible ownership-determinant methods that can only be applied alternative to each other. Rather,
these methods can, if appropriate, he used cumulatively in the determination of the ownership and control of
corporations engaged in fully or partly nationalized activities, as the mining operation involved in this case or the
operation of public utilities as in Gamboa or Bayantel.
The Grandfather Rule, standing alone, should not be used to determine the Filipino ownership and control in a
corporation, as it could result in an otherwise foreign corporation rendered qualified to perform nationalized or partly
nationalized activities. Hence, it is only when the Control Test is first complied with that the Grandfather Rule may be
applied. Put in another manner, if the subject corporation's Filipino equity falls below the threshold 60%, the
corporation is immediately considered foreign-owned, in which case, the need to resort to the Grandfather Rule
disappears.
On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity requirement can be
considered a Filipino corporation if there is no doubt as to who has the "beneficial ownership" and "control" of the
corporation. In that instance, there is no need for a · dissection or further inquiry on the ownership of the corporate
shareholders in both the investing and investee corporation or the application of the Grandfather Rule. As a corollary
rule, even if the 60-40 Filipino to foreign equity ratio is apparently met by the subject or investee corporation, a
resort to the Grandfather Rule is necessary if doubt exists as to the locus of the "beneficial ownership" and "control."
19
(Emphasis supplied)
Characterizing the Grandfather Rule as a "supplement" or as a "further check" is not understating its importance.
Precisely, the Grandfather Rule is intended to frustrate the use of ostensible equity ownership as an artifice for
circumventing the constitutional imperatives of "conserv[ing] and develop[ing] our patrimony"20 and "develop[ing] a
self-reliant and independent national economy."21
We should be mindful of schemes used to frustrate the Constitution's ends. These include the use of dummies and
corporate layering and cloaking devices. As early as 1936, we have adopted the Anti-Dummy Law. 22 It not only
1âwphi1
proscribes, but even penalizes concession to use one's· name or citizenship to evade constitutional or legal
requirements of citizenship for the exercise of a right, franchise or privilege,23 the simulation of minimum capital
stock, 24 and other acts deemed tantamount to the unlawful use, exploitation or enjoyment of a right, franchise,
privilege, property or business, reserved to citizens.25; In 1984, the Department of Justice, through its Opinion No.
165, referenced the Anti-Dummy Law and identified the following "significant indicators" or badges of "dummy
status":
1. That the foreign investor provides practically all the funds for the joint investment undertaken by Filipino
businessmen and their foreign partner.
2. That the foreign investors undertake to provide practically all the technological support for the joint venture.
3. That the foreign investors, while being minority stockholders, manage the company and prepare all
economic viability studies. 26
The Grandfather Rule enables the piercing of ostensible control vested by ownership of 60% of a corporation's
capital when methods are employed to disable Filipinos from exercising control and reaping the economic benefits·
of an enterprise.27 This - more assiduous - examination of who actually controls and benefits from holding such
capital may very well be a jealous means of protecting our patrimony, but fending off the challenges to our national
integrity demands it.
The application of the Grandfather Rule hinges on circumstances. It is an extraordinary mechanism the operation of
which is impelled by a reasonable sense of doubt that even as 60% of a corporation's capital is ostensibly owned by
Filipinos,' a more scrupulous arrangement may underlie that compliance and that nominal Filipino owners have
become parties to the besmirching of their own national integrity. As the 2015 Resolution in Narra Nickel explained,
"' [D]doubt' refers to various indicia that the 'beneficial ownership' and 'control' of the corporation do not in .fact
reside in Filipino shareholders but in foreign stakeholders."28 It is necessary then, that proper evidentiary bases
sustain resort to the Grandfather Rule.
Adopting mechanisms that may be well-meaning, but ultimately inadequate, reduces state organs to unwitting
collaborators in the despoiling and pillaging of the Filipino's patrimony. Rather than work for and in the national
interest, they fall prey to regulatory capture; facilitating private over public, or worse, foreign over national, gain.
The majority's limitation of capital to so-called voting stocks entrenches an operational definition that can be a
gateway to violating the Constitution's righteous protection of our heritage. It licentiously empowers foreign interests
to overrun public utilities, which are enterprises whose primary objectives should be the common good and not
commercial gain, to wrest control of rights to our natural resources, and to takeover other crucial areas of
investment.
The majority's November 22, 2016 Decision may have set us along this course. We have the opportunity to reverse
that position and truly do justice to the Filipino. 1awp++i1
ACCORDINGLY, I vote to grant the Motion for Reconsideration.
MARVIC M.V.F. LEONEN

Associate Justice
Footnotes
1
CONST., Preamble.
2
Former President of the University of the Philippines, Hon. Vicente G. Sinco (Congressional Record, House
of Representatives, Vol. I, No. 26, 561 ), quoted in Republic v. Quasha, 150-B Phil. 140, 170 (1972) [Per J.
Reyes, J.B.L., En Banc].
3
CONST., art. XII, sec. 10 provides:
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.
4
CONST., art. XII, sec. 2, par. (1) provides:
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.
5
CONST.,art. XII, sec. 11 provides: 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 cof!1mon 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.
6
CONST.(1935), art. XII, sec. 1 provides:
Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces or potential energy, and other natural resources of
the Philippines belong to the State, and their disposition, exploitation, development, or utilization
shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens subject to any existing right, grant,
lease, or concession at the time ·of the inauguration of the Government established under this
Constitution. Natural resources, with the exception of public agricultural land, shall not be
alienated, and no license, concession, or lease for the exploitation, development or utilization ion
of any of the natural resources shall be granted for a period exceeding twenty-five years, except
as to water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases beneficial use may be the measure and the limit of
the grant.
CONST.(1935), art. XIII, sec. 8 provides:
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 National Assembly when the public interest so requires.
7
CONST. (1973), art. XIV, sec. 5 provides: 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 in 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.
CONST. (1973), art. XIV, sec. 9 provides:
Section 9. The disposition, exploration, development, exploitation, or utilization of any of the

natural resources of the Philippines shall be limited to citizens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of which is owned by such
citizens. The National Assembly, in the national interest, may allow such citizens, corporations,
or associations to enter into service contracts for financial, technical, management, or other
forms of assistance with any foreign person or entity for the exploration, development,
exploitation, or utilization of any of the natural resources. Existing valid and binding service
contracts for financial, technical, management, or other forms of assistance are hereby
recognized as such.
8
CONST., art. XIV, sec. 4 (2) provides:
Section 4. (2) Educational institutions, other than those established by religious groups and
mission boards, shall be owned solely by citizens of the Philippines 01; 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.
CONST., art. XVI, sec. 11 provides:
SECTION 11. (1) The ownership and management of mass media shall be limited to citizens of
the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by
such citizens.
The Congress shall regulate or prohibit monopolies in commercial mass media when the public
interest so requires. No combinations in restraint of trade or unfair competition therein shall be
allowed. (2) 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.
9
CONST., art. II, sec. 20 provides:
Section 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.
10
CONST., art. II, sec. 19: Section 19. The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.
11
RIGOBERTO D. TIGLAO, COLLOSAL DECTPTION: How FOREIGNERS CONTROL OUR TELECOMS
SECTOR (2016).
12
Dissenting Opinion of J. Leonen in Roy v Herbosa, G.R. No. 207246, November 22, 2016 < j
http://sc.judiciary.gov.ph/pdf/web/viewer. html?file=/jurisprudence/20l6/november2016/207246 _ leone n.pdt>

6 [Per J. Caguioa, En Banc], citing Dissenting Opinion of .J. Mendoza in Royv. Herbosa, G.R. No. 207246,
November 22, 2016
< http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2016/november2016/207246
_mend oza.pdf> 21 [Per J. Caguioa, En Banc].
13
Dissenting Opinion of J. Leonen in Roy v. Herhosa, GR. No. 207246, November 22, 2016 <
http://sc.judiciary.gov.ph/pdf/web/viewer.html?file/jurisprudence/20l6/november2016/707246 _leone n.pdf> 6-
7 [Per J. Caguioa, En Banc].
14
Dissenting Opinion of J. Leonen in Roy i: llcrhosa, G.R. No). 207246, November 22, 2016, <
http://sc.judiciary.gov.ph/pdf/web/viewer.html?file/jurisprudence/2016/november2016/207246 _leone n.pdf>
[Per J. Caguioa, En Banc]
15
Dissenting Opinion of J. Leonen ip Narra Nickel Mining & Development Corp. v. Redmont Consolidated
Mines Corp., 733 Phil. 365. 420-490(2014) [Per J. Velasco, Third Division].
16
Dissenting Opinion of J. Leonen in Narra Nickel Mining and Development Corp. v. Redmont Consolidated
Mines Corp., G.R. No. 195580, January 28, 2015, 748 SCRA 455, 492-510 [Per J. Velasco, Special Third
Division Resolution].
17
Dissenting Opinion of J. Leonen in Narra Nickel Mining & Development Corp. v. Redmont Consolidated
Mines Corp., 733 Phil. 365, 468(2014) [Per J. Velasco, Third Division].
18
Id. at 4 78.
19
Narra Nickel Mining andDevelopment Corp. v. Redmont Consolidated Mines Corp., G.R. No. 195580,
January 28, 2015, 748 SCRA 455, 477-4 78 [Per J. Velasco, Special Third Division Resolution].
20
CONST., preamble.
21
CONST., art. II, sec. 19.
22
Com. Act No. 108, as amended.
23
Com. Act No. 108, sec. I provides:
Section I. In all cases in which any constitutional or legal provision requires Philippine or United
States citizenship as a requisite for the exercise or enjoyment of a right, franchise or privilege,
any citizen of the Philippines or the United States who allows his name or citizenship to be used
for the purpose of evading such provision, and any alien or foreigner profiting thereby, shall be
punished by imprisonment for not less than two nor more than ten years, and by a fine of not
less than two thousand nor more than ten thousand pesos.
The fact that the citizen of the Philippines or of the United States charged with a violation of this
Act had, at the time of the acquisition of his holdings in the corporations or associations referred
to in section two of this Act, no real or personal property, credit or other assets the value of which
shall at least be equivalent to said holdings, shall be admissible as circumstantial evidence of a
violation of this Act.
24
Com. Act No. 108, sec .. 2 provides:
Section 2. In all cases in which a constitutional or legal provision requires that, in order that a
corporation or association may exercise or enjoy a right, franchise or privilege, not less than a
certain per centum of its capital must be own1!d by citizens of the Philippines or the United
States, or both, it shall be unlawful to falsely simulate the existence of such minimum of stock or
capital as owned by such citizens of the Philippines or the United States or both, for the purpose
of evading said provision. The president or managers and directors or trustees of corporations or
associations convicted of a violation of this section shall be punished by imprisonment for not
less than two nor more than ten years, and by a fine of not less than two thousand nor more than
ten thousand pesos.

25
Com. Act No. 108, sec. 2-A provides:
Section 2-A. Any person, corporation, or association[,] which, having in its name or under its
control, a right, franchise, privilege, property or business, the exercise or enjoyment of which is
expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other
specific country, or to corporations or associations at least sixty per centum of the capital of
which is owned by such citizens, permits or allows the use, exploitation or enjoyment thereof by
a person, corporation or association not possessing the requisites prescribed by the Constitution
or the laws of the Philippines; or leases, or in any other way, transfers or conveys said right,
franchise, privilege, property or business to a person, corporation or association not otherwise
qualified under the Constitution, or the provisions of the existing laws; or in any manner permits
or allows any person, not possessing the qualifications required by the Constitution, or existing
laws to acquire, use, exploit or enjoy a right, franchise, privilege, property or business, the
exercise and enjoyment of which are expressly reserved by the Constitution or existing Jaws to
citizens of the Philippines or of any other specific country, to intervene in the management,
operation, administration or control thereof, whether as an officer, employee or laborer therein
with or without remuneration except technical personnel whose employment may be specifically
authorized by the Secretary of Justice. and any person who knowingly aids, assists or abets in
the planning, consummation or perpetration or any of the acts herein above enumerated shall be
punished by imprisonment for not less than five nor more than fifteen years and by a fine of not
less than the value of the right, franchise or privilege enjoyed or acquired in violation of the
provisions hereof but in no case less than five thousand pesos: Provided, however, that the
president, managers or pe1:sons in charge of corporations, associations or partnerships
violati.ng the provisions of this section shall be criminally liable in lieu theredf: Provided. fu1iher,
That any person, corporation or association shall, in addition to the penalty imposed herein.
forfeit such right, franchise, privilege, and the property or business enjoyed or acquired in
violation of the provisions of this Act: and Provided, finally, That the election of aliens as
members of the board of directors or governing body of corporations or associations engaging in
partially nationalized activities shall be allowed in proportion to their allowable participation or
share in the capital of such entities.
26
Sec. of Justice Op. No. 165, s. 1984.
27
Dissenting Opinion of J. Leonen in Narra Nickel Mining & Development Corp. v. Redmont Consolidated
Mines Corp., 733 Phil. 365, 478-479 (2014) [Per J. Velasco, Third Division].
CONCURRING OPINION
VELASCO, JR., J.:
I concur with the denial of the motion for reconsideration, which still fails to demonstrate any grave abuse of
discretion committed by respondent Securities and Exchange Commission (SEC) when it issued Memorandum
Circular (MC) No. 8.
For purposes of emphasis, I restate part of my Concurring Opinion to the main Decision:
The petition is anchored on the contention that the SEC committed grave abuse of discretion in issuing MC No. 8.
By grave abuse of discretion, the petitioners must prove that the Commission's act was tainted with the quality of
whim and caprice. 1 Abuse of discretion is not enough. It must be shown that the Commission exercised its power in
an arbitrary or despotic manner because of passion or personal hostility that is so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform a duty enjoined or to act at all in contemplation of law.2
With this standard in mind, the petitioner and petitioners-intervention failed to demonstrate that the SEC's issuance
of MC No. 8 was attended with grave abuse of discretion. On the contrary, the assailed circular sufficiently applied
1âwphi1
the Court's definitive ruling in Gamboa.
To recall, Gamboa construed the word "capital" and the nationality requirement in Section 11, Article XII of the
Constitution, which states:
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.3
The Court explained in the June 28, 2011 Decision in Gamboa that the term "capital" in Section 11, Article XII
refers "only to shares of stock entitled to vote in the election of directors." The rationale provided by the
majority was that this interpretation ensures that control of the Board of Directors stays in the hands of Filipinos,
since foreigners can only own a maximum of 40% of said shares and, accordingly, can only elect the equivalent
percentage of directors. As a necessary corollary, Filipino stockholders can always elect 60% of the Board of
Directors which, to the majority of the Court, translates to control over the corporation. The June 28, 2011 Decision,
thus, read:
Considering that common shares have voting rights which translate to control, as opposed to preferred shares which
usually have no voting rights, the term 'capital' in Section 11, Article XII of the Constitution refers only to common
shares. However, if the preferred shares also have the right to vote in the election of directors, then the term
"capital"
shall include such preferred shares because the right to participate in the control or management of the
corporation is exercised through the right to vote in the election of directors. In short, the term "capital" in
Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of
directors.
This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino
citizens the control and management of public utilities. As revealed in the deliberations of the Constitutional
Commission, "capital" refers to the voting stock or controlling interest of a corporation xxx
The dispositive portion of the June 28, 2011 Decision in Gamboa clearly spelled out the doctrinal declaration of the
Court on the meaning of "capital" in Section 11, Article XII of the Constitution, viz.:
WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in Section 11, Article XII of the 1987
Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present
case only to common shares, and not to the total outstanding capital stock (common and non-voting preferred
shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition
of the term "capital" in determining the extent of allowable foreign ownership in respondent Philippine Long Distance
Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the
appropriate sanctions under the law. 4
The motions for reconsideration of the June 28, 2011 Decision filed by the movants in Gamboa argued against the
application of the term "capital" to the voting shares alone and in favor of applying the term to the total outstanding
capital stock (combined total of voting and non-voting shares). Notably, none of them contended or moved for the
application of the capital or the 60-40 requirement to "each and every class of shares" of a public utility, as it was
never an issue in the case.
In resolving the motions for reconsideration in Gamboa, it is relevant to stress that the majority did not modify the
June 28, 2011 Decision. The fallo of the October 9, 2012 Resolution simply stated—
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No further pleadings shall be
entertained.
Clearly, the Court had no intention, express or otherwise, to amend the construction of the term "capital" in the June
28, 2011 Decision in Gamboa, much less in the manner proposed by petitioner Roy. Hence, no grave abuse of
discretion can be attributed to the SEC in applying the term "capital" to the "voting shares" of a corporation.
The portion quoted by the petitioners is nothing more than an obiter dictum that has never been discussed as an
issue during the deliberations in Gamboa. As such, it is not a binding pronouncement of the Court5 that can be used
as basis to declare the SEC' s circular as unconstitutional.
xxx xxx xxx
Thus, the zealous watchfulness demonstrated by the SEC in imposing another tier of protection for Filipino
stockholders cannot, therefore, be penalized on a misreading of the October 9, 2012 Resolution in Gamboa, which
neither added nor subtracted anything from the June 28, 2011 Decision defining capital as "shares of stock entitled
to vote in the election of directors."
It must also be stressed that the Decision in Gamboa was issued pursuant to this Court's symbolic function. It was
meant as a definitive ruling for the education of the bench, bar, and the public in general on the meaning of the word
"capital" in Section 11, Article XII of the Constitution, and not as a resolution exclusively applicable to a particular
public utility. Accordingly, instead of resolving the charges against PLDT, the Court directed the SEC to "apply this
definition of the term 'capital' in determining the extent of allowable foreign ownership in respondent [PLDT]."
Presently, the SEC clarified that it "has not yet issued a definitive ruling anent PLDT's compliance with the limitation
on foreign ownership imposed under the Constitution and relevant laws." It is, therefore, premature and
presumptuous for this Court to adjudge as erroneous a ruling that is still to be rendered by the SEC.
Least of all, not being a trier of facts nor specially equipped to investigate the intricacies of corporate structures and
the identities of capital market participants, this Court cannot declare a corporation as noncompliant with the
nationality requirement by, without more, a mere cursory review of its General Information Sheets. With the drastic
consequences of such a ruling, which includes the possible revocation of its franchise, all parties affected---the
corporate public utility, its investors both in equity and debt, and all its other stakeholders--- deserve more than a
passing treatment by this Court. The SEC, the government agency specifically tasked to review corporate matters,
is better-suited to fairly rule, after a full-blown investigation, on the compliance by corporate public utilities with the
nationality requirement.
Furthermore, in Gamboa, this Court construed "capital" as equivalent to the "shares of stock entitled to vote in
the election of, directors" and so, sustaining the petitioner's contention that it is through voting that control over a
corporation is exercised, it ruled that 60% of the voting shares or the "shares of stock entitled to vote in the
election of directors" in corporate public utilities are reserved for Filipinos. Thus, the June 28, 2011 Gamboa
Decision emphatically stated, viz.:
Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the
corporation. This is exercised through his vote in the election of directors because it is the board of
1âwphi1
directors that controls or manages the corporation. In the absence of provisions in the articles of
incorporation denying voting rights to preferred shares, preferred shares have the same voting rights as
common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the right
to vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely
investors in the corporation for income in the same manner as bondholders. In fact, under the Corporation Code
only preferred or redeemable shares can be deprived of the right to vote. Common shares cannot be deprived of the
right to vote in any corporate meeting, and any provision in the articles of incorporation restricting the right of
common shareholders to vote is invalid.
Considering that common shares have voting rights which translate to control, as opposed to preferred shares which
usually have no voting rights, the term capital in Section 11, Article XII of the Constitution refers only to common
shares. However, if the preferred shares also have the right to vote in the election of directors, then the term
capital shall include such preferred shares because the right to participate in the control or management of
the corporation is exercised through the right to vote in the election of directors. In short, the term capital in
Section 11. Article XII of the Constitution refers only to shares of stock that can vote in the election of
directors.
Thus, the Court cannot now feign that the construction in Gamboa of the term "capital" is confined and limited only
to "common shares," to the exclusion of voting preferred shares. Adopting this regrettably myopic view will certainly
revise and alter the final decision and resolution in Gamboa.
For the foregoing, I vote to deny with finality the present Motion for Reconsideration.
PRESBITERO J. VELASCO, JR
Associate Justice
Footnotes
1
OKS Designtech, Inc. v. Caccam, G.R. No. 211263 August 5, 2015.
2
Gold City Integrated Services, Inc. v. Intermediate Appellate Court, G.R. Nos. 71771-73, March 31, 1989;
citing Arguelles v. Young, No. L-59880, September 11, 1987, 153 SCRA 690; Republic v. Heirs of Spouses
Molinyawe, G.R. No. 217120, April 18, 2016; Olano v. Lim Eng Co, G.R. No. 195835, March 14, 2016; City of
Iloilo v. Honrado, G.R. No. 160399, December 9, 2015; OKS Designtech, Inc. v. Caccam, G.R. No. 211263,
August 5, 2015.
3
Emphasis supplied.
4
Emphasis supplied.
5
Ocean East Agency, Corp. v. Lopez, G.R. No. 194410, October 14, 2015.

J. Velasco Dissenting Opinion

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G.R. No.

207246 - Dissenting & Concurring Opinion 27/02/2018, 7)53 PM

Today is Tuesday, February 27, 2018

G.R. No. 207246, April 18, 2017,

Capital Structure of PLDT

Number of PLDT 2011 2012 2013 2014 2015 2016

Voting Preferred Shares

2012 2013 2014 2015 2016

PLDT Shares 2013 2014 2015 2016

Gamboa Decision and Resolution

Possible Economic Consequences

2012: http://www.pldt.com/ docs/ default-source/ general-information/amended-general-inforrnation-

2013: http://www.pldt.corn/ docs/ default-source/ general-information/amended-gis_decrease-in-capital-

2014: http://www.pldt.com/ docs/default-source/general-information/2014-gis-with-certification.pdf?

2015: http://www.pldt.com/docs/default-source/general-information/2015-pldt-gis-withcertification. pdf?

generalinforrnation-sheet-(gis).pdf?sfvrsn=0 (accessed on 7 March 2017).

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

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;

8. Dissolution of the corporation.

Rule 3 - Definition of Terms Used in the Rules and Regulations

i. held by members of his immediate family sharing the same household;

ii. held by a partnership in which he is a general partner;

iii. held by a corporation of which he is a controlling shareholder; or

b. an investment house registered under · the Investment Houses Law;

c. a bank authorized to operate as such by the Bangko Sentral ng Pilipinas;

e. an investment company registered under the Investment Company Act;

g. a group in which all of the members are persons specified above.

self-reliant and independent national economy."21

ACCORDINGLY, I vote to grant the Motion for Reconsideration.

MARVIC M.V.F. LEONEN

CONST.(1935), art. XIII, sec. 8 provides:

CONST. (1973), art. XIV, sec. 9 provides:

Section 9. The disposition, exploration, development, exploitation, or utilization of any of the

CONST., art. XVI, sec. 11 provides:

http://sc.judiciary.gov.ph/pdf/web/viewer. html?file=/jurisprudence/20l6/november2016/207246 _ leone n.pdt>

ten thousand pesos.

The Lawphil Project - Arellano Law Foundation

VELASCO, JR., J.:

the Court's definitive ruling in Gamboa.

xxx xxx xxx

The Lawphil Project - Arellano Law Foundation

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