ROY III vs.

SEC
G.R No. 207246, November 22, 2016

Facts:

On June 28, 2011, the Court issued the Gamboa Decision, the dispositive portion
of which reads:... 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.

Several motions for reconsideration were filed assailing the Gamboa Decision.
They were denied in the Gamboa Resolution issued by the Court on October 9, 2012.
The Gamboa Decision attained finality on October 18, 2012, and Entry of Judgment was
thereafter issued on December 11, 2012.

On November 6, 2012, the SEC posted a Notice in its website inviting the public
to attend a public dialogue and to submit comments on the draft memorandum circular
on the guidelines to be followed in determining compliance with the Filipino ownership
requirement in public utilities under Section 11, Article XII of the Constitution pursuant to
the Court's directive in the Gamboa Decision.

On January 8, 2013, the SEC received a copy of the Entry of Judgment from the
Court certifying that on October 18, 2012, the Gamboa Decision had become final and
executory.

On June 10, 2013, petitioner Roy, as a lawyer and taxpayer, filed the Petition,
assailing the validity of SEC-MC No. 8 for not conforming to the letter and spirit of the
Gamboa Decision and Resolution and for having been issued by the SEC with grave
abuse of discretion.

Petitioner Roy seeks to apply the 60-40 Filipino ownership requirement

separately to each class of shares of a public utility corporation, whether common,
preferred nonvoting, preferred voting or any other class of shares. Petitioner Roy also
questions the ruling of the SEC that respondent Philippine Long Distance Telephone
Company ("PLDT") is compliant with the constitutional rule on foreign ownership. He
prays that the Court declare SEC-MC No. 8 unconstitutional and direct the SEC to issue
new guidelines regarding the determination of compliance with Section 11, Article XII of
the Constitution in accordance with Gamboa.

Issue:

Whether the SEC gravely abused its discretion when it issued SEC MC No. 8.

Ruling:

SEC did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction when it issued SEC-MC No. 8. To the contrary, the Court finds SEC-MC No.
8 to have been issued in fealty to the Gamboa Decision and Resolution. In Gamboa
Decision, "capital" in Section II, Article XII of the I987 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).

Gamboa Resolution put to rest the Court's interpretation of the term "capital". Full
beneficial ownership of stocks, coupled with appropriate voting rights is
essential...reiterates and confirms the interpretation that the term "capital" in Section 11,
Article XII of the1987 Constitution refers to shares with voting rights, as well as with full
beneficial ownership. Section 2 of SEC-MC No. 8 clearly incorporates the Voting
Control Test or the controlling interest requirement. In fact, Section 2 goes beyond
requiring a 60-40 ratio in favor of Filipino nationals in the voting stocks; it moreover
requires the 60-40 percentage ownership in the total number of outstanding shares of
stock, whether voting or not. The SEC formulated SEC-MC No. 8 to adhere to the
Court's unambiguous pronouncement that "full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights is required."
Clearly, SEC-MC No. 8 cannot be said to have been issued with grave abuse of
discretion. While SEC-MC No. 8 does not expressly mention the Beneficial Ownership
Test or full beneficial ownership of stocks requirement in the FIA, this will not, as it does
not, render it invalid meaning, it does not follow that the SEC will not apply this test in
determining whether the shares claimed to be owned by Philippine nationals are
Filipino, i.e., are held by them by mere title or in full beneficial ownership. To be sure,
the SEC takes its guiding lights also from the FIA and its implementing rules, the
Securities Regulation Code.