Gamboa vs. Teves, 652 SCRA 690 (2011) Case Digest

Gamboa vs.
Teves, 652 SCRA 690 (2011)
FACTS:
 In 1928, the Philippine Legislature enacted Act No. 3436 granting the Philippine
Long Distance Telephone Company (PLDT) a franchise and the right to engage in
telecommunications business.
 In 1969, the Philippine Telecommunications Investment Corporation, acquired 26%
outstanding common shares of PLDT through purchase from an American company.
 Prime Holdings Incorporated (PHI) subsequently acquired 111,415 shares of stock of
PTIC by virtue of Deeds of Assignment executed by PTIC stockholders.
 In 1986, the 111,415 PTIC stocks held by PHI was sequestered by the Presidential
Commission on Good Government, the Court later declared said stocks owned by the
Philippine Government.
 In 1999, First Pacific, a Bermuda-registered, Hong Kong-based, in vestment firm
purchased the remaining 54% outstanding capital stocks of PTIC.
 In 2006, the Inter-Agency Privatization Council (IPC) announced the intention of the
Philippine Government to sell the 111,416 stocks, which is 46% of the outstanding
capital stock of the PTIC through public bidding.
 In 2007, First Pacific executed its right of first refusal and filed the winning bid for
the PTIC stocks. The sale was completed during the same year.
 The petitioner Wilson Gamboa filed the petition asking the Supreme Court to declare
the sale null and void for violating the 40% constitutional limit on foreign ownership
of public utilities since First Pacific and another foreign firm NTT DoCoMi will own
more than 51% common equity combined in PLDT should the sale remain effective.
ISSUES:
 Is the term “capital in Section 11, Article XII of the 1987 Constitution of the 1987
Constitution refer to the total common shares only or to the total outstanding capital
stock?
 Is Section 11, Article XII of the Constitution which expressly reserves to Filipinos
specific areas of investment, such as natural resources, ownership of land,
educational institutions, and advertising self-executing?
RATIO:
 The Court PARTYLY GRANTED the Petition
 The Court ruled that the term “capital” in Section 11, Article XII of the 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
comprising both common and non-voting preferred shares.
 The Court also ruled that Section 11, Article XII of the Constitution, like other
provisions of the Constitution expressly reserving to Filipinos specific areas of
investment, such as the development of natural resources and ownership of land,
educational institutions and advertising business, is self-executing. There is no need
for legislation to implement these self executing provisions of the Constitution.
 The Court said that unless the contrary is clearly intended, the provisions of the
Constitution should be considered self executing.
 A contrary rule would give the legislature discretion to determine when, or whether,
they shall be effective, the mandate of the fundamental law ratified by the sovereign
people can be easily ignored and nullified by Congress.
 The Court said that to treat Section 11, Article XII of the Constitution as not self-
executing would mean that since the 1935 Constitution, or over the last 75 years, not
one of the constitutional provisions expressly reserving specific areas of investments
to corporations, at least 60 percent of the "capital" of which is owned by Filipinos,
was enforceable. The Court could not allow such an absurd interpretation of the
Constitution.
 While the Court cannot act on matters of public policy, it suggested that it can
compel the SEC, in a petition for declaratory relief that is treated as a petition for
mandamus as in the present case, to hear and decide a possible violation of Section
11, Article XII of the Constitution in view of the ownership structure of PLDT’s
voting shares.

Gamboa vs. Teves, 652 SCRA 690 (2011) Case Digest

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