EN BANC

G.R. No. 176579 -Wilson P. Gamboa, Petitioner, versus Finance Secretary Margarito B. Teves, Finance Undersecretary John P. Sevilla, and Commissioner Ricardo Abcede of the Presidential Commission on Good Government (PCGG) in their capacities as Chair and Members, respectively, of the Privatization Council, et al., Respondents. Promulgated: June 28, 2011 x ---------------------------------------------------------------------------------------- x

DISSENTING OPINION
ABAD, J.:
In 1928, the legislature enacted Act 3436, granting Philippine Long Distance Telephone Company (PLDT) a franchise to provide telecommunications services across the country. Forty years later in 1969, General Telephone and Electronics Corporation, an American company and major PLDT stockholder, sold 26% of PLDTs equity to the Philippine Telecommunications Investment Corporation (PTIC). Subsequently, PTIC assigned 46% of its equity or 111,415 shares of stock to Prime Holdings, Inc. In 1986, the Presidential Commission on Good Government sequestered these shares. Eventually, the Court declared these as properties of the Republic of the Philippines. In 1999, First Pacific, a Bermuda-registered and Hongkong-based investment firm, acquired the remaining 54% of PTICs equity in PLDT. In 2006, the governments Inter-agency Privatization Council offered to auction the 46% PTIC equity in PLDT that the Court adjudged to the Republic. Parallax Venture Fund XXVII won with a bid of P25.2 billion or US$510 million. First Pacific announced that it would exercise its right of first refusal and buy those shares by matching Parallaxs bid. In 2007, First Pacific, through its subsidiary, Metro Pacific Assets Holdings, Inc., entered into a Conditional Sale and Purchase Agreement with the national government involving the 46% PTIC equity for P25.2 billion or US$510 million. In this petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale, petitioner Wilson P. Gamboa, a PLDT stockholder, seeks to annul the sale of the 46% PTIC equity or 111,415 shares of stock to Metro Pacific on the ground that it violates Section 11, Article XII of the 1987 Constitution which limits foreign ownership of a public utility company to 40% of its capital. Gamboa claims that since PTIC is a PLDT stockholder, the sale of the 46% of its equity is actually an indirect sale of 6.3% PLDT equity or 12 million shares of stock. This would increase First Pacifics

equity in PLDT from 30.7% to 37%, and concomitantly increase the common shareholdings of foreigners in PLDT to about 64.27%. The action presents two primordial issues: 1. Whether or not the Court can hear and decide Gamboas petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale; and 2. Whether or not Metro Pacifics acquisition of 46% of PTICs equity violates the constitutional limit on foreign ownership of the capital of PLDT, a public utility company, provided under Section 11, Article XII of the 1987 Constitution. One. The objection to the idea of the Court hearing and deciding Gamboas action seems to have some basis in the rules. Under Section 1, Rule 56 of the Rules of Court, only the following cases may be filed originally in the Supreme Court:
Sec. 1. Original cases cognizable.Only petitions for certiorari, prohibition, mandamus, quo warranto, habeas corpus, disciplinary proceedings against members of the judiciary and attorneys, and cases affecting ambassadors, other public ministers and consuls may be filed originally in the Supreme Court.

Strictly speaking, Gamboa actions for injunction, declaratory relief, and declaration of nullity of sale are not among the cases that can be initiated before the Supreme Court. Those actions belong to some other tribunal. And, although the Court has original jurisdiction in prohibition cases, the Court shares this authority with the Court of Appeals and the Regional Trial Courts. But this concurrence of jurisdiction does not give the parties absolute and unrestrained freedom of choice on which court the remedy will be sought. They must observe the hierarchy [1] of courts. As a rule, the Supreme Court will not entertain direct resort to it unless the remedy desired cannot be obtained in other tribunals. Only exceptional and compelling circumstances such as cases of national interest and of serious implications justify direct resort to the Supreme Court for the extraordinary remedy of writ of certiorari, [2] prohibition, or mandamus. The majority of the Court of course suggests that although Gamboa entitles his actions as ones for injunction, declaratory relief, and declaration of nullity of sale, what controls the nature of such actions are the allegations of his petition. And a valid special civil action for mandamus can be made out of those allegations since respondent Secretary of Finance, his undersecretary, and respondent Chairman of the Securities and Exchange Commission are the officials who appear to have the duty in law to implement [3] the foreign ownership restriction that the Constitution commands. To a certain extent, I agree with the position that the majority of my colleagues takes on this procedural issue. I believe that a case can be made for giving due course to Gamboas action. Indeed, there are in his actions compelling reasons to relax the doctrine of hierarchy of courts. The need to address the important question of defining the constitutional limit on foreign ownership of public utilities under Section 11, Article

XII of the 1987 Constitution, a bedrock policy adopted by the Filipino people, is certainly a matter of serious national interest. Such policy is intended to develop a selfreliant and independent national economy effectively controlled by Filipino entrepreneurs. [4] Indeed, as the Court said in Espina v. Zamora, the provisions of Article XII of the 1987 Constitution lay down the ideals of economic nationalism. One of these is the Filipinization of public utilities under Section 11 which recognizes the very strategic [5] position of public utilities both in the national economy and for national security. The participation of foreign capital is encouraged since the establishment and operation of public utilities may require the investment of substantial capital that Filipino citizens could possibly not afford. But at the same time, the Constitution wants to limit foreign involvement to prevent them from assuming control of public utilities which may be [6] inimical to national interest. Two. Still, the question is whether it is for the Court to decide in this case the shape and substance of what the Constitution meant when it restricted the size of foreign ownership of the capital of public utility corporations provided for in Section 11, Article XII of the 1987 Constitution which reads:
Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; x x x.

Gamboa contends that the constitutional limit on foreign ownership in public utilities should be based on the ownership of common or voting shares since it is through voting that stockholders are able to have control over a corporation. Preferred or non-voting shares should be excluded from the reckoning. But this interpretation, adopted by the majority, places on the Court the authority to define and interpret the meaning of capital in section 11. I believe, however, that such authority should be for Congress to exercise since it partakes of policy making founded on a general principle laid down by the fundamental law. The capital restriction written in the constitution lacks sufficient details for orderly and meaningful implementation. Indeed, in the twenty-four years that the provision has been in the Constitution, no concrete step has been taken by any government agency to see to its actual implementation given the absence of clear legislative guidance on how to go about it. It has been said that a constitution is a system of fundamental laws for the governance and administration of a nation. It prescribes the permanent framework of a system of government, assigns to the different departments their respective powers and [7] duties, and establishes certain fixed principles on which the government is founded. But while some constitutional provisions are self-executing, others are not. A constitutional provision is self-executing if it fixes the nature and extent of the right conferred and the liability imposed such that they can be determined by an

examination and construction of its terms, and there is no language indicating that the subject is referred to the legislature for action. On the other hand, if the provision needs a supplementary or enabling legislation, it is merely a declaration of policy and principle [8] which is not self-executing. Here, the Constitution simply states that no franchise for the operation of a public utility shall be granted to a corporation organized under Philippine laws unless at least sixty per centum of its capital is owned by Filipino citizens. Evidently, the Constitution fails to provide for the meaning of the term capital, considering that the shares of stock of a corporation vary in kinds. The usual classification depends on how profits are to be distributed and which stockholders have the right to vote the members of the corporations board of directors. The Corporation Code does not offer much help, albeit it only confuses, since it uses the terms capital, capital stock, or outstanding capital stock interchangeably. Capital refers to the money, property, or means contributed by stockholders in the corporation and generally implies that the same have been contributed in payment for [9] stock issued to the stockholders. Capital stock signifies the amount subscribed and [10] paid-in in money, property or services. Outstanding capital stock means the total shares of stock issued to stockholders, whether or not fully or partially paid, except [11] treasury shares. Meanwhile, the Foreign Investments Act of 1991 defines a Philippine national as, among others, a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by [12] citizens of the Philippines. This gives the impression, as Justice Carpio noted, that [13] the term capital refers only to controlling interest or shares entitled to vote. On the other hand, government agencies such as the Securities and Exchange Commission, institutions, and corporations (such as the Philippine National Oil Company-Energy Development Corporation) interpret the term capital to include both [14] preferred and common shares. Under this confusing legislative signals, the Court should not leave the matter of compliance with the constitutional limit on foreign ownership in public utilities, a matter of transcendental importance, to judicial legislation especially since any ruling the Court makes on the matter could have deep economic repercussions. This is not a concern over which the Court has competence. The 1987 Constitution laid down the general framework for restricting foreign ownership of public utilities. It is apt for Congress to build up on this framework by defining the meaning of capital, establishing rules for the implementation of the State policy, providing sanctions for its violation, and vesting in the appropriate agency the responsibility for carrying out the purposes of such policy. Parenthetically, there have been several occasions in the past where Congress

provided supplementary or enabling legislation for constitutional provisions that are not self-executing. To name just some: the Comprehensive Agrarian Reform Law of [15] [16] 1988, the Indigenous Peoples Rights Act of 1997, the Local Government Code [17] [18] of 1991, the Anti-Graft and Corrupt Practices Act, the Speedy Trial Act of [19] [20] 1998, the Overseas Absentee Voting Act of 2003, the Party-List System [21] [22] Act, the Paternity Leave Act of 1996, and the Solo Parents' Welfare Act of [23] 2000. Based on the foregoing, I vote to DENY the petition on the ground that the constitutional limit on foreign ownership in public utilities under Section 11, Article XII of the 1987 Constitution is not a self-executing provision and requires an implementing legislation for its enforcement.

ROBERTO A. ABAD Associate Justice

[1] [2]

Fortich v. Corona , G.R. No. 131457, April 24, 1998, 289 SCRA 624, 645.

Springfield Development Corporation, Inc. v. Presiding Judge, RTC, Misamis Oriental, Br. 40, Cagayan de Oro City, G.R. No. 142628, February 6, 2007, 514 SCRA 326, 342-343; Fortich v. Corona , id. [3] Decision, p. 10. [4] G.R. No. 143855, September 21, 2010. [5] BERNAS, JOAQUIN G., FOREIGN RELATIONS IN CONSTITUTIONAL LAW, 1995 Ed., p. 87 citing Smith, Bell and Co. v. Natividad , 40 Phil 136, 148 (1919); Luzon Stevedoring Corporation v. Anti-Dummy Board , 46 SCRA 474, 490 (1972); DE LEON, HECTOR S., PHILIPPINE CONSTITUTIONAL LAW (Principles and Cases), 2004 Ed., Vol. 2, p. 940. [6] DE LEON, HECTOR S., PHILIPPINE CONSTITUTIONAL LAW (Principles and Cases), 2004 Ed., Vol. 2, p. 946. [7] Manila Prince Hotel v. Government Service Insurance System, G.R. No. 122156, February 3, 1997, 267 SCRA 408, 430. [8] Id. at 431. [9] AGPALO, RUBEN E., COMMENTS ON THE CORPORATION CODE OF THE PHILIPPINES, 2001 Ed., p. 50. [10] Id. at 51. [11] Section 137. The Corporation Code. [12] Sec. 3. Definitions. - As used in this Act: a. The term Philippine national shall mean a citizen of the Philippines; of a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a Philippine national. (As amended by Republic Act 8179) [13] Decision, pp. 25-26.

[14] [15] [16] [17] [18] [19] [20] [21] [22] [23]

Id. at 17. Section 21, Article II. Section 22, Article II. Section 25, Article II. Section 27, Article II. Section 16, Article III. Section 2, Article V. Section 5, Article VI. Section 3, Article XIII. Id.