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Gamboa v. Sec of Finance Case Digest

The petitioner opposed the acquisition of 37% of common shares of Philippine Long Distance Telephone Company (PLDT) by First Pacific, a foreign corporation, as it would cause foreign ownership to exceed the 40% threshold under the Constitution. The respondent argued the acquisition was lawful under Presidential Decree 217 as PLDT consumers owned non-voting preferred shares, making the total capital majority Filipino-owned. The Supreme Court ruled the term "capital" in the Constitution refers to common shares only, as only common shares carry voting rights. As the acquisition would result in 81.47% foreign ownership of common shares, it violated the 60% Filipino ownership requirement under the Constitution.

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635 views1 page

Gamboa v. Sec of Finance Case Digest

The petitioner opposed the acquisition of 37% of common shares of Philippine Long Distance Telephone Company (PLDT) by First Pacific, a foreign corporation, as it would cause foreign ownership to exceed the 40% threshold under the Constitution. The respondent argued the acquisition was lawful under Presidential Decree 217 as PLDT consumers owned non-voting preferred shares, making the total capital majority Filipino-owned. The Supreme Court ruled the term "capital" in the Constitution refers to common shares only, as only common shares carry voting rights. As the acquisition would result in 81.47% foreign ownership of common shares, it violated the 60% Filipino ownership requirement under the Constitution.

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loisdanielle
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© © All Rights Reserved
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DIMAANO, Lois Danielle P.

LEGAWRI K32

11313145

12 January 2015

TITLE:
GAMBOA V. SECRETARY OF FINANCE
G.R. No. 176579
Petitioner: Wilson P. Gamboa
Respondent: Margarito B. Teves
Ponente: J. Carpio
FACTS:
(a.) In 1928, Philippine Long Distance Telephone Company (PLDT is granted a franchise
to engage in telecommunications.
(b.) Pursuant to Sec. 11, Art. XII of the Constitution, telecom companies must have 60%
Filipino ownership.
(c.) Petitioner opposed the acquisition of 37% of PLDT common shares by First Pacific, a
foreign corporation, as the company will go beyond the 40% threshold prescribed by
the Constitution.
(d.) Respondent argues the acquisition is lawful in accordance with P.D. 217, stating that
PLDT consumers subscribe to non-voting preferred shares; making most of the
totality of capital Filipino-owned.
(e.) Petitioner argued that the term capital should only refer to common shares as only
they are able to exercise voting rights.
ISSUE:
Does the term capital in Section 11, Article XII of the Constitution refer to common shares or
to the total outstanding capital stock (combined total of common and non-voting preferred
shares)?
RULING:
Yes. Petitioner is correct in citing that the term capital refers to total common shares in
conformity with the Constitution. The totality of PLDT stock is Filipino owned at 77.85, but this
percentage does not exercise any form of control over the corporation since it possesses no
voting rights. The acquisition of First Pacific of the disputed 37% PLDT common shares will
total to 81.47% of foreign-owned common shares. In order to be compliant with the
Constitution, 60% of the total common shares must be Filipino-owned.

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