HEIRS OF WILSON P. GAMBOA,* Petitioners, vs. FINANCE SECRETARY MARGARITO B. TEVES, FINANCE UNDERSECRETARYJOHN P. SEVILLA, AND COMMISSIONER RICARDO ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT(PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS, RE

​Doctrine: The 60-40 ownership requirement in favor of Filipino citizens in the Constitution to engage in certain economic activities applies not only to voting control of the corporation, but also to the beneficial ownership of the corporation.

FACTS:
Petitioner Gamboa questioned the indirect sale of shares involving almost 12 million shares of the Philippine Long Distance Telephone Company (PLDT) owned by PTIC to First Pacific. Thus, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the total common shareholdings of foreigners in PLDT to about 81.47%. The petitioner contends that it violates the Constitutional provision on filipinazation of public utility, stated in Section 11, Article XII of the 1987 Philippine Constitution, which limits foreign ownership of the capital of a public utility to not more than 40%. Then, in 2011, the court ruled the case in favor of the petitioner, hence this new case, resolving the motion for reconsideration for the 2011 decision filed by the respondents.

Issue:
Whether or not the Court made an erroneous interpretation of the term ‘capital’ in its 2011 decision?

Held:
​ No. In the 2011 decision, the Court finds no wrong in the construction of the term ‘capital’ which refers to the ‘shares with voting rights, as well as with full beneficial ownership’ (Art. 12, sec. 10) which implies that the right to vote in the election of directors, coupled with benefits, is tantamount to an effective control. The 60-40 ownership requirement in favor of Filipino citizens in the Constitution to engage in certain economic activities applies not only to voting control of the corporation, but also to the beneficial ownership of the corporation. Thus, in our 28 June 2011 Decision we stated: Mere legal title is insufficient to meet the 60 percent Filipino owned "capital" required in the Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is "considered as non-Philippine national[s]." (Emphasis supplied) Both the Voting Control Test and the Beneficial Ownership Test must be applied to determine whether a corporation is a "Philippine national." Therefore, the Court’s interpretation of the term ‘capital’ was not erroneous. Thus, the motion for reconsideration is denied.