Gamboa v.

Teves

FACTS: The issue started when 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: The Court said that the Constitution is clear in expressing its State policy of developing an
economy ‘effectively controlled’ by Filipinos. Asserting the ideals that our Constitution’s
Preamble want to achieve, that is – to conserve and develop our patrimony , hence, the State should
fortify a Filipino-controlled economy. 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. Therefore, the Court’s
interpretation of the term ‘capital’ was not erroneous. Thus, the motion for reconsideration is
denied.

Not known to many, the Supreme Court rendered a sequel to Gamboa vs Teves, a 2011 decision
affirmed in 2012, that defined the term “capital” for purposes of determining whether a public
utility complies with the foreign ownership limit under the Constitution.

Express Investment v. Bayantel – 687 SCRA 50 [2012]

FACTS: This is the case of “In the Matter of the Corporate Rehabilitation of Bayan
Telecommunications Inc.” (G.R. Nos. 175418-20, December 5, 2012), which was consolidated
with other cases relating to the rehabilitation of Bayan Telecommunications Inc. (Bayantel). In
this case, The Bank of New York filed a creditor-initiated petition to rehabilitate Bayantel. In due
course, the receiver recommended the rehabilitation of Bayantel by, among others, converting part
of the company’s debt into equity. However, the rehabilitation receiver imposed, as a condition,
that the resulting equity ownership of foreign creditors should not exceed the 40-percent foreign
ownership limit under the 1987 Constitution.

HELD: The Court should never open to foreign control what the Constitution has expressly
reserved to Filipinos for that would be a betrayal of the Constitution and of the national interest.
Indisputably, construing the term “capital” in Section 11, Article XII of the Constitution to include
both voting and non-voting shares will result in the abject surrender of our telecommunications
industry to foreigners, amounting to a clear abdication of the State’s constitutional duty to limit
control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the
constitutional provision reserving certain areas of investment to Filipino citizens, such as the
exploitation of natural resources as well as the ownership of land, educational institutions and
advertising businesses. The Court should never open to foreign control what the Constitution has
expressly reserved to Filipinos for that would be a betrayal of the Constitution and of the national
interest.

TANADA VS ANGARA

FACTS: Petitioners Senators Tañada, et al. questioned the constitutionality of the concurrence by
the Philippine Senate of the President’s ratification of the international Agreement establishing the
World Trade Organization (WTO). They argued that the WTO Agreement violates the mandate
of the 1987 Constitution to “develop a self-reliant and independent national economy effectively
controlled by Filipinos . . . (to) give preference to qualified Filipinos (and to) promote the
preferential use of Filipino labor, domestic materials and locally produced goods.” Further, they
contended that the “national treatment” and “parity provisions” of the WTO Agreement “place
nationals and products of member countries on the same footing as Filipinos and local products,”
in contravention of the “Filipino First” policy of our Constitution, and render meaningless the
phrase “effectively controlled by Filipinos.”

HELD: While the Constitution indeed mandates a bias in favor of Filipino goods, services, labor
and enterprises, at the same time, it recognizes the need for business exchange with the rest of the
world on the bases of equality and reciprocity and limits protection of Filipino enterprises only
against foreign competition and trade practices that are unfair. In other words, the Constitution did
not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and
services in the development of the Philippine economy. While the Constitution does not encourage
the unlimited entry of foreign goods, services and investments into the country, it does not prohibit
them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only
on foreign competition that is unfair.

ESPINA VS ZAMORA
FACTS: Republic Act No. 8762, otherwise known as the Retail Trade Liberalization Act of 2000
was signed into law by then President Joseph E. Estrada on 07 March 2000. It repealed R.A.
No.1180, which prohibits foreign nationals from engaging in retail trade business. It also allowed
foreign equity participation in retail trade and the same rights as Filipino citizens to former
Filipinos.

HELD: Constitutional provisions in question: Article XII, Section 12. The State shall promote the
preferential use of Filipino labor, domestic materials and locally produced goods, and adopt
measures that help make them competitive. Article XII, Section 13. The State shall pursue a trade
policy that serves the general welfare and utilizes all forms and arrangements of exchange on the
basis of equality and reciprocity.

FACTS: The particular enactment in question is Pres. Decree No. 1717, which ordered the
rehabilitation of the Agrix Group of Companies to be administered mainly by the National
Development Company. The law outlined the procedure for filing claims against the Agrix
companies and created a Claims Committee to process these claims. Especially relevant to this
case, and noted at the outset, is Sec. 4(1) thereof providing that "all mortgages and other liens
presently attaching to any of the assets of the dissolved corporations are hereby extinguished."

ADDITIONAL FACTS
Agrix Marketing executed in favor of respondent a real estate mortgage over three parcels of land.
Agrix later on went bankrupt. In order to rehabilitate the company, then President Marcos issued
Presidential Decree 1717 which mandated, among others, the extinguishing of all the mortgages
and liens attaching to the property of Agrix, and creating a Claims Committee to process claims
against the company to be administered mainly by NDC. Respondent thereon filed a claim against
the company before the Committee. Petitioners however filed a petition with the RTC of Calamba,
Laguna invoking the provision of the law which cancels all mortgage liens against it. Respondent
took measures to extrajudicially foreclose which the petitioners opposed by filing another case in
the same court. These cases were consolidated. The RTC held in favor of the respondent on the
ground of unconstitutionality of the decree; mainly violation of the separation of powers,
impairment of obligation of contracts, and violation of the equal protection clause. Hence this
petition.

ISSUES:
1. Is the respondent estopped from questioning the constitutionality of the law since they first
abided by it by filing a claim with the Committee?
2. Is PD 1717 unconstitutional?

RULING: On the issue of estoppel, the Court held that it could not apply in the present case since
when the respondent filed his claim, President Marcos was the supreme ruler of the country and
they could not question his acts even before the courts because of his absolute power over all
government institutions when he was the President.
The creation of New Agrix as mandated by the decree was also ruled as unconstitutional
since it violated the prohibition that the Batasang Pambansa (Congress) shall not provide for the
formation, organization, or regulation of private corporations unless such corporations are owned
or controlled by the government.
PD 1717 was held as unconstitutional on the other grounds that it was an invalid exercise
of police power, It had no lawful subject and no lawful method. It violated due process by
extinguishing all mortgages and liens and interests which are property rights unjustly taken. It also
violated the equal protection clause by lumping together all secured and unsecured creditors. It
also impaired the obligation of contracts, even though it only involved purely private interests.

BSP vs COA
DOCTRINE: Assuming for the sake of argument that the BSP ceases to be owned or controlled
by the government because of reduction of the number of representatives of the government in the
BSP Board, it does not follow that it also ceases to be a government instrumentality as it still
retains all the characteristics of the latter as an attached agency of the DECS under the
Administrative Code.
SUMMARY: The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the
Philippines (BSP) is the subject matter of this controversy that reached us via petition for
prohibition.filed by the BSP under Rule 65 of the 1997 Rules of Court. In this petition, the BSP
seeks that the COA be prohibited from implementing its June 18, 2002 Decision,its February 21,
2007 Resolution, as well as all other issuances arising therefrom, and that all of the foregoing be
rendered null and void.

FACTS: The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the
Philippines (BSP) is the subject matter of this controversy that reached us via petition for
prohibition[1] filed by the BSP under Rule 65 of the 1997 Rules of Court. In this petition, the BSP
seeks that the COA be prohibited from implementing its June 18, 2002 Decision,[2] its February
21, 2007 Resolution,[3] as well as all other issuances arising therefrom, and that all of the
foregoing be rendered null and void. It is the position of the BSP, with all due respect, that it is not
subject to the Commissions jurisdiction on the following grounds: We reckon that the ruling in the
case of Boy Scouts of the Philippines vs. National Labor Relations Commission, et al. (G.R. No.
80767) classifying the BSP as a government-controlled corporation is anchored on the substantial
Government participation in the National Executive Board of the BSP. It is to be noted that the
case was decided when the BSP Charter is defined by Commonwealth Act No. 111 as amended
by Presidential Decree 460. However, may we humbly refer you to Republic Act No. 7278 which
amended the BSPs charter after the cited case was decided. The most salient of all amendments in
RA No. 7278 is the alteration of the composition of the National Executive Board of the BSP. The
said RA virtually eliminated the substantial government participation in the National Executive
Board by removing: (i) the President of the Philippines and executive secretaries, with the
exception of the Secretary of Education, as members thereof; and (ii) the appointment and
confirmation power of the President of the Philippines, as Chief Scout, over the members of the
said Board.The BSP believes that the cited case has been superseded by RA 7278. Thereby
weakening the cases conclusion that the BSP is a government-controlled corporation (sic). The
1987 Administrative Code itself, of which the BSP vs. NLRC relied on for some terms, defines
government-owned and controlled corporations as agencies organized as stock or non-stock
corporations which the BSP, under its present charter, is not.
ISSUE: whether the BSP falls under the COAs audit jurisdiction, and is considered as a public
copropration?

RULING: YES. Section 16, Article XII should not be construed so as to prohibit Congress from
creating public corporations. In fact, Congress has enacted numerous laws creating public
corporations or government agencies or instrumentalities vested with corporate powers. Moreover,
Section 16, Article XII, which relates to National Economy and Patrimony, could not have tied the
hands of Congress in creating public corporations to serve any of the constitutional policies or
objectives.

While the BSP may be seen to be a mixed type of entity, combining aspects of both public and
private entities, we believe that considering the character of its purposes and its functions, the
statutory designation of the BSP as "a public corporation" and the substantial participation of the
Government in the selection of members of the National Executive Board of the BSP, the BSP, as
presently constituted under its charter, is a government-controlled corporation within the meaning
of Article IX (B) (2) (1) of the Constitution.
We are fortified in this conclusion when we note that the Administrative Code of 1987 designates
the BSP as one of the attached agencies of the Department of Education, Culture and Sports
("DECS").

We believe that the BSP is appropriately regarded as "a government instrumentality" under the
1987 Administrative Code.

It thus appears that the BSP may be regarded as both a "government controlled corporation with
an original charter" and as an "instrumentality" of the Government within the meaning of Article
IX (B) (2) (1) of the Constitution.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the
government because of reduction of the number of representatives of the government in the BSP
Board, it does not follow that it also ceases to be a government instrumentality as it still retains all
the characteristics of the latter as an attached agency of the DECS under the Administrative Code.
Vesting corporate powers to an attached agency or instrumentality of the government is not
constitutionally prohibited and is allowed by the above-mentioned provisions of the Civil Code
and the 1987 Administrative Code.

AGAN VS PIATCO

Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65
of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority
(MIAA) and the Department of Transportation and Communications (DOTC) and its Secretary
from implementing the following agreements executed by the Philippine Government through the
DOTC and the MIAA and the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the
Concession Agreement signed on July 12, 1997, (2) the Amended and Restated Concession
Agreement dated November 26, 1999, (3) the First Supplement to the Amended and Restated
Concession Agreement dated August 27, 1999, (4) the Second Supplement to the Amended and
Restated Concession Agreement dated September 4, 2000, and (5) the Third Supplement to the
Amended and Restated Concession Agreement dated June 22, 2001 (collectively, the PIATCO
Contracts).

On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO,
through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-and-
Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997
Concession Agreement). The Government granted PIATCO the franchise to operate and maintain
the said terminal during the concession period and to collect the fees, rentals and other charges in
accordance with the rates or schedules stipulated in the 1997 Concession Agreement. The
Agreement provided that the concession period shall be for twenty-five (25) years commencing
from the in-service date, and may be renewed at the option of the Government for a period not
exceeding twenty-five (25) years. At the end of the concession period, PIATCO shall transfer the
development facility to MIAA.
On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that
were amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of
completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with
the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the assignment
by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c) dealing with the
proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-over of
operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may be levied
on the Concessionaire; Sec. 6.03 as regards the periodic adjustment of public utility fees and
charges; the entire Article VIII concerning the provisions on the termination of the contract; and
Sec. 10.02 providing for the venue of the arbitration proceedings in case a dispute or controversy
arises between the parties to the agreement.

Issue: Whether or not the agreement between GRP and PIATCO which grants the latter just
compensation brought about by the temporary takeover of the facilities by the latter is valid?

Held: Temporary takeover of business affected with public interest. Article XII, Section 17 of
the 1987 Constitution provides:

Section 17. In times of national emergency, when the public interest so requires, the State
may, during the emergency and under reasonable terms prescribed by it, temporarily take
over or direct the operation of any privately owned public utility or business affected with
public interest.

The above provision pertains to the right of the State in times of national emergency, and in the
exercise of its police power, to temporarily take over the operation of any business affected with
public interest. In the 1986 Constitutional Commission, the term "national emergency" was
defined to include threat from external aggression, calamities or national disasters, but not strikes
"unless it is of such proportion that would paralyze government service."60 The duration of the
emergency itself is the determining factor as to how long the temporary takeover by the
government would last.61 The temporary takeover by the government extends only to the operation
of the business and not to the ownership thereof. As such the government is not required to
compensate the private entity-owner of the said business as there is no transfer of ownership,
whether permanent or temporary. The private entity-owner affected by the temporary takeover
cannot, likewise, claim just compensation for the use of the said business and its properties as the
temporary takeover by the government is in exercise of its police power and not of its power of
eminent domain.

David v. Macapagal-Arroyo

FACTS: President Arroyo issued Presidential Proclamation No. 1017 and General Order No. 5
declaring a state of national emergency basing such issuances on the conspiracy among some
military officers, leftist insurgents of the New People’s Army (NPA), and some members of the
political opposition in a plot to unseat or assassinate President Arroyo. The proclamation of
PP1017 and GO No. 5 allowed the revocation of rally permits issued earlier and ‘warrantless
arrests and take-over of facilities, including media and the cancellation of all events relating to the
EDSA anniversary. Rallies conducted were violently dispersed, some of the petitioners were
arrested, and media outlets were raided.

HELD: Section 17 states that the “the State may, during the emergency and under reasonable
terms prescribed by it, temporarily take over or direct the operation of any privately owned public
utility or business affected with public interest,” it refers to Congress, not the President. Now,
whether or not the President may exercise such power is dependent on whether Congress may
delegate it to him pursuant to a law prescribing the reasonable terms thereof.

Following our interpretation of Section 17, Article XII, invoked by President Arroyo in issuing PP
1017, this Court rules that such Proclamation does not authorize her during the emergency to
temporarily take over or direct the operation of any privately owned public utility or business
affected with public interest without authority from Congress.

Let it be emphasized that while the President alone can declare a state of national emergency,
however, without legislation, he has no power to take over privately-owned public utility or
business affected with public interest. Nor can he determine when such exceptional circumstances
have ceased. Likewise, without legislation, the President has no power to point out the types of
businesses affected with public interest that should be taken over. In short, the President has no
absolute authority to exercise all the powers of the State under Section 17, Article VII in the
absence of an emergency powers act passed by Congress.