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JOSE M. ROY III v. CHAIRPERSON TERESITA HERBOSA

FACTS:

On June 28, 2011, the Supreme Court of the Philippines issued a decision in the Gamboa case which defined the term "capital" in Section 11, Article XII of the 1987 Constitution as referring only to shares of stock entitled to vote in the election of directors, particularly common shares, and directed the Securities and Exchange Commission (SEC) to apply this definition in determining foreign ownership in public utility companies like Philippine Long Distance Telephone Company (PLDT). This Gamboa Decision attained finality on October 18, 2012. The SEC then initiated public dialogues and solicited comments on draft guidelines to comply with this decision. On May 20, 2013, the SEC issued Memorandum Circular No. 8, Series of 2013 (SEC-MC No. 8) which mandated that the constitutional or statutory ownership requirement must be applied to both the total number of outstanding shares entitled to vote and the total number of outstanding shares whether voting or not.

Petitioner Atty. Jose M. Roy III filed a petition on June 10, 2013, alleging that SEC-MC No. 8 violated the Gamboa Decision by not conforming to its requirements and that it resulted from the SEC’s grave abuse of discretion. Roy argued for the application of the 60-40 Filipino ownership requirement to each class of shares and challenged the SEC’s ruling that PLDT complied with the constitutional rule on foreign ownership. Several parties, including Wilson C. Gamboa, Jr. and others, followed with petitions supporting Roy's arguments and the Court allowed their intervention. Subsequent to these events, both PLDT and SEC submitted their Comments, seeking dismissal of the petitions on several procedural and substantive grounds, including the improper filing of the petition directly in the Supreme Court, lack of locus standi of the petitioners, and premature challenge regarding PLDT’s compliance since no definitive ruling had been issued by the SEC.

The Philippine Stock Exchange (PSE) and Shareholders' Association of the Philippines, Inc. (SHAREPHIL) also intervened, arguing that reinterpreting the ownership requirements would lead to unresolved national security issues and significant negative economic impacts. The case involves judicial reviews of procedural issues, including the right standing of petitioners and due process for corporations affected by the interpretation and guidelines under SEC-MC No. 8.

ISSUES:

  1. Whether the SEC gravely abused its discretion in issuing SEC-MC No. 8 in light of the Gamboa Decision and Gamboa Resolution.

  2. Whether the SEC gravely abused its discretion in ruling that PLDT is compliant with the constitutional limitation on foreign ownership.

RULING:

  1. On the SEC's issuance of SEC-MC No. 8 The Court found that the SEC did not commit grave abuse of discretion in issuing SEC-MC No. 8. SEC-MC No. 8 was issued in compliance with the Gamboa Decision and Gamboa Resolution.

  2. On PLDT's compliance with the constitutional limit on foreign ownership This issue was disposed of as being without merit since the SEC has not yet issued a definitive ruling on PLDT's compliance with the foreign ownership restrictions under the Constitution and relevant laws.

PRINCIPLES:

  1. Actual Case or Controversy Courts will only adjudicate based on actual cases or controversies, not hypothetical or speculative claims.

  2. Locus Standi Petitioners must show a direct and substantial interest to question the validity of a government act or issuance.

  3. Hierarchy of Courts Issues should initially be raised at the appropriate lower court unless there are compelling reasons to bypass this rule.

  4. Indispensable Parties The failure to join indispensable parties can be fatal to a petition as all affected parties must be given their day in court.

  5. Beneficial Ownership Test For stocks, full beneficial ownership coupled with appropriate voting rights is required to determine compliance with Filipino ownership under the Constitution.

  6. Immutability of Judgments Once a decision has attained finality, it becomes immutable and unalterable.

  7. Interpretation of Capital The term "capital" refers only to shares entitled to vote in the election of directors, consistent with ensuring effective control by Filipinos.