WILSON GAMBOA V.

MARGARITO TEVES, ET AL
28 June 2011

Facts:
 Gamboa, a stockholder of PLDT, filed a petition for prohibition, injunction,
declaratory relief and declaration of nullity of the sale of shares of stock of
the Philippine Telecommunications Investment Corporation (PTIC) by the
government to Metro Pacific Assets Holdings, Inc (MPAH), an affiliate of
First Pacific Limited (First Pacific).
 Gamboa argues that since PTIC is a stockholder of PLDT, the
government’s sale of over 46% of PTIC shares, as an indirect sale of 12
million shares or 6.3% of the outstanding common shares of PLDT, to a
foreign corporation is violative of Sec 11, Article XII of the Constitution
which limits foreign ownership of the capital of a PU to not more than 40%.
After the sale, foreign-owned PLDT stocks allegedly amounted to 81.47%.

Issue: Whether the term “capital” in Sec 11, Article XII of the 1987 Constitution
refers to the total common shares

Held: Yes. Petition partly granted. (SEC was directed to apply the interpretation
to ascertain WON PLDT violated the constitution)

Ruling:
 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.