G.R. No.

L-12719             May 31, 1962

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
THE CLUB FILIPINO, INC. DE CEBU, respondent.

Office of the Solicitor General for petitioner.

V. Jaime and L. E. Petilla for respondent.

PAREDES, J.:

This is a petition to review the decision of the Court of Tax Appeals, reversing the decision of the Collector of Internal Revenue,
assessing against and demanding from the "Club Filipino, Inc. de Cebu", the sum of P12,068.84 as fixed and percentage taxes,
surcharge and compromise penalty, allegedly due from it as a keeper of bar and restaurant.

As found by the Court of Tax Appeals, the "Club Filipino, Inc. de Cebu," (Club, for short), is a civic corporation organized under the
laws of the Philippines with an original authorized capital stock of P22,000.00, which was subsequently increased to P200,000.00,
among others, to it "proporcionar, operar, y mantener un campo de golf, tenis, gimnesio (gymnasiums), juego de bolos (bowling
alleys), mesas de billar y pool, y toda clase de juegos no prohibidos por leyes generales y ordenanzas generales; y desarollar y
cultivar deportes de toda clase y denominacion cualquiera para el recreo y entrenamiento saludable de sus miembros y accionistas"
(sec. 2, Escritura de Incorporacion del Club Filipino, Inc. Exh. A). Neither in the articles or by-laws is there a provision relative to
dividends and their distribution, although it is covenanted that upon its dissolution, the Club's remaining assets, after paying debts,
shall be donated to a charitable Philippine Institution in Cebu (Art. 27, Estatutos del Club, Exh. A-a.).

The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased from the government), and a bar-restaurant
where it sells wines and liquors, soft drinks, meals and short orders to its members and their guests. The bar-restaurant was a
necessary incident to the operation of the club and its golf-course. The club is operated mainly with funds derived from membership
fees and dues. Whatever profits it had, were used to defray its overhead expenses and to improve its golf-course. In 1951. as a result
of a capital surplus, arising from the re-valuation of its real properties, the value or price of which increased, the Club declared stock
dividends; but no actual cash dividends were distributed to the stockholders. In 1952, a BIR agent discovered that the Club has never
paid percentage tax on the gross receipts of its bar and restaurant, although it secured B-4, B-9(a) and B-7 licenses. In a letter dated
December 22, 1852, the Collector of Internal Revenue assessed against and demanded from the Club, the following sums: —

As percentage tax on its gross receipts

during the tax years 1946 to 1951 P9,599.07
Surcharge therein 2,399.77
As fixed tax for the years 1946 to 1952 70.00
Compromise penalty 500.00

The Club wrote the Collector, requesting for the cancellation of the assessment. The request having been denied, the Club filed the
instant petition for review.

The dominant issues involved in this case are twofold:

1. Whether the respondent Club is liable for the payment of the sum of 12,068.84, as fixed and percentage taxes and surcharges
prescribed in sections 182, 183 and 191 of the Tax Code, under which the assessment was made, in connection with the operation of
its bar and restaurant, during the periods mentioned above; and

2. Whether it is liable for the payment of the sum of P500.00 as compromise penalty.

Section 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a business on which the percentage tax is
imposed shall pay in full a fixed annual tax of ten pesos for each calendar year or fraction thereof in which such person shall engage
in said business." Section 183 provides in general that "the percentage taxes on business shall be payable at the end of each
calendar quarter in the amount lawfully due on the business transacted during each quarter; etc." And section 191, same Tax Code,
provides "Percentage tax . . . Keepers of restaurants, refreshment parlors and other eating places shall pay a tax three per centum,
and keepers of bar and cafes where wines or liquors are served five per centum of their gross receipts . . .". It has been held that the
liability for fixed and percentage taxes, as provided by these sections, does not ipso facto attach by mere reason of the operation of
a bar and restaurant. For the liability to attach, the operator thereof must be engaged in the business as a barkeeper and
restaurateur. The plain and ordinary meaning of business is restricted to activities or affairs where profit is the purpose or livelihood
is the motive, and the term business when used without qualification, should be construed in its plain and ordinary meaning,
restricted to activities for profit or livelihood (The Coll. of Int. Rev. v. Manila Lodge No. 761 of the BPOE [Manila Elks Club] & Court of
Tax Appeals, G.R. No. L-11176, June 29, 1959, giving full definitions of the word "business"; Coll. of Int. Rev. v. Sweeney, et al.
[International Club of Iloilo, Inc.], G.R. No. L-12178, Aug. 21, 1959, the facts of which are similar to the ones at bar; Manila Polo Club
v. B. L. Meer, etc., No. L-10854, Jan. 27, 1960).

Having found as a fact that the Club was organized to develop and cultivate sports of all class and denomination, for the healthful
recreation and entertainment of its stockholders and members; that upon its dissolution, its remaining assets, after paying debts,
shall be donated to a charitable Philippine Institution in Cebu; that it is operated mainly with funds derived from membership fees
and dues; that the Club's bar and restaurant catered only to its members and their guests; that there was in fact no cash dividend
distribution to its stockholders and that whatever was derived on retail from its bar and restaurant was used to defray its overall
overhead expenses and to improve its golf-course (cost-plus-expenses-basis), it stands to reason that the Club is not engaged in the
business of an operator of bar and restaurant (same authorities, cited above).

It is conceded that the Club derived profit from the operation of its bar and restaurant, but such fact does not necessarily convert it
into a profit-making enterprise. The bar and restaurant are necessary adjuncts of the Club to foster its purposes and the profits
derived therefrom are necessarily incidental to the primary object of developing and cultivating sports for the healthful recreation
and entertainment of the stockholders and members. That a Club makes some profit, does not make it a profit-making Club. As has
been remarked a club should always strive, whenever possible, to have surplus (Jesus Sacred Heart College v. Collector of Int. Rev.,
G.R. No. L-6807, May 24, 1954; Collector of Int. Rev. v. Sinco Educational Corp., G.R. No. L-9276, Oct. 23, 1956).1äwphï1.ñët

It is claimed that unlike the two cases just cited (supra), which are non-stock, the appellee Club is a stock corporation. This is
unmeritorious. The facts that the capital stock of the respondent Club is divided into shares, does not detract from the finding of the
trial court that it is not engaged in the business of operator of bar and restaurant. What is determinative of whether or not the Club
is engaged in such business is its object or purpose, as stated in its articles and by-laws. It is a familiar rule that the actual purpose is
not controlled by the corporate form or by the commercial aspect of the business prosecuted, but may be shown by extrinsic
evidence, including the by-laws and the method of operation. From the extrinsic evidence adduced, the Tax Court concluded that
the Club is not engaged in the business as a barkeeper and restaurateur.

Moreover, for a stock corporation to exist, two requisites must be complied with, to wit: (1) a capital stock divided into shares and
(2) an authority to distribute to the holders of such shares, dividends or allotments of the surplus profits on the basis of the shares
held (sec. 3, Act No. 1459). In the case at bar, nowhere in its articles of incorporation or by-laws could be found an authority for the
distribution of its dividends or surplus profits. Strictly speaking, it cannot, therefore, be considered a stock corporation, within the
contemplation of the corporation law.

A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-profit, nonstock organizations, unless the
intent to the contrary is manifest and patent" (Collector v. BPOE Elks Club, et al., supra), which is not the case in the present appeal.

Having arrived at the conclusion that respondent Club is not engaged in the business as an operator of a bar and restaurant, and
therefore, not liable for fixed and percentage taxes, it follows that it is not liable for any penalty, much less of a compromise penalty.

WHEREFORE, the decision appealed from is affirmed without costs.

Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Dizon, JJ., concur.
Bengzon, C.J., is on leave.
G.R. No. L-43350 December 23, 1937

CAGAYAN FISHING DEVELOPMENT CO., INC., plaintiff-appellant,

vs.
TEODORO SANDIKO, defendant-appellee.

Arsenio P. Dizon for appellant.

Sumulong, Lavides and Sumulong for appellee.

LAUREL, J.:

This is an appeal from a judgment of the Court of First Instance of Manila absolving the defendant from the plaintiff's complaint.

Manuel Tabora is the registered owner of four parcels of land situated in the barrio of Linao, town of Aparri, Province of Cagayan, as
evidenced by transfer certificate of title No. 217 of the land records of Cagayan, a copy of which is in evidence as Exhibit 1. To
guarantee the payment of a loan in the sum of P8,000, Manuel Tabora, on August 14, 1929, executed in favor of the Philippine
National Bank a first mortgage on the four parcels of land above-mentioned. A second mortgage in favor of the same bank was in
April of 1930 executed by Tabora over the same lands to guarantee the payment of another loan amounting to P7,000. A third
mortgage on the same lands was executed on April 16, 1930 in favor of Severina Buzon to whom Tabora was indebted in the sum of
P2,9000. These mortgages were registered and annotations thereof appear at the back of transfer certificate of title No. 217.

On May 31, 1930, Tabora executed a public document entitled "Escritura de Transpaso de Propiedad Inmueble" (Exhibit A) by virtue
of which the four parcels of land owned by him was sold to the plaintiff company, said to under process of incorporation, in
consideration of one peso (P1) subject to the mortgages in favor of the Philippine National Bank and Severina Buzon and, to the
condition that the certificate of title to said lands shall not be transferred to the name of the plaintiff company until the latter has
fully and completely paid Tabora's indebtedness to the Philippine National Bank.

The plaintiff company filed its article incorporation with the Bureau of Commerce and Industry on October 22, 1930 (Exhibit 2). A
year later, on October 28, 1931, the board of directors of said company adopted a resolution (Exhibit G) authorizing its president,
Jose Ventura, to sell the four parcels of lands in question to Teodoro Sandiko for P42,000. Exhibits B, C and D were thereafter made
and executed. Exhibit B is a deed of sale executed before a notary public by the terms of which the plaintiff sold ceded and
transferred to the defendant all its right, titles, and interest in and to the four parcels of land described in transfer certificate in turn
obligated himself to shoulder the three mortgages hereinbefore referred to. Exhibit C is a promisory note for P25,300. drawn by the
defendant in favor of the plaintiff, payable after one year from the date thereof. Exhibit D is a deed of mortgage executed before a
notary public in accordance with which the four parcels of land were given a security for the payment of the promissory note, Exhibit
C. All these three instrument were dated February 15, 1932.

The defendant having failed to pay the sum stated in the promissory note, plaintiff, on January 25, 1934, brought this action in the
Court of First Instance of Manila praying that judgment be rendered against the defendant for the sum of P25,300, with interest at
legal rate from the date of the filing of the complaint, and the costs of the suits. After trial, the court below, on December 18, 1934,
rendered judgment absolving the defendant, with costs against the plaintiff. Plaintiff presented a motion for new trial on January 14,
1935, which motion was denied by the trial court on January 19 of the same year. After due exception and notice, plaintiff has
appealed to this court and makes an assignment of various errors.

In dismissing the complaint against the defendant, the court below, reached the conclusion that Exhibit B is invalid because of vice in
consent and repugnancy to law. While we do not agree with this conclusion, we have however voted to affirm the judgment
appealed from the reasons which we shall presently state.

The transfer made by Tabora to the Cagayan fishing Development Co., Inc., plaintiff herein, was affected on May 31, 1930 (Exhibit A)
and the actual incorporation of said company was affected later on October 22, 1930 (Exhibit 2). In other words, the transfer was
made almost five months before the incorporation of the company. Unquestionably, a duly organized corporation has the power to
purchase and hold such real property as the purposes for which such corporation was formed may permit and for this purpose may
enter into such contracts as may be necessary (sec. 13, pars. 5 and 9, and sec. 14, Act No. 1459). But before a corporation may be
said to be lawfully organized, many things have to be done. Among other things, the law requires the filing of articles of
incorporation (secs. 6 et seq., Act. No. 1459). Although there is a presumption that all the requirements of law have been complied
with (sec. 334, par. 31 Code of Civil Procedure), in the case before us it can not be denied that the plaintiff was not yet incorporated
when it entered into a contract of sale, Exhibit A. The contract itself referred to the plaintiff as "una sociedad en vias de
incorporacion." It was not even a de facto corporation at the time. Not being in legal existence then, it did not possess juridical
capacity to enter into the contract.

Corporations are creatures of the law, and can only come into existence in the manner prescribed by law. As has already
been stated, general law authorizing the formation of corporations are general offers to any persons who may bring
themselves within their provisions; and if conditions precedent are prescribed in the statute, or certain acts are required to
be done, they are terms of the offer, and must be complied with substantially before legal corporate existence can be
acquired. (14 C. J., sec. 111, p. 118.)

That a corporation should have a full and complete organization and existence as an entity before it can enter into any kind
of a contract or transact any business, would seem to be self evident. . . . A corporation, until organized, has no being,
franchises or faculties. Nor do those engaged in bringing it into being have any power to bind it by contract, unless so
authorized by the charter there is not a corporation nor does it possess franchise or faculties for it or others to exercise,
until it acquires a complete existence. (Gent vs. Manufacturers and Merchant's Mutual Insurance Company, 107 Ill., 652,
658.)

Boiled down to its naked reality, the contract here (Exhibit A) was entered into not between Manuel Tabora and a non-existent
corporation but between the Manuel Tabora as owner of the four parcels of lands on the one hand and the same Manuel Tabora, his
wife and others, as mere promoters of a corporations on the other hand. For reasons that are self-evident, these promoters could
not have acted as agent for a projected corporation since that which no legal existence could have no agent. A corporation, until
organized, has no life and therefore no faculties. It is, as it were, a child in ventre sa mere. This is not saying that under no
circumstances may the acts of promoters of a corporation be ratified by the corporation if and when subsequently organized. There
are, of course, exceptions (Fletcher Cyc. of Corps., permanent edition, 1931, vol. I, secs. 207 et seq.), but under the peculiar facts and
circumstances of the present case we decline to extend the doctrine of ratification which would result in the commission of injustice
or fraud to the candid and unwary.(Massachusetts rule, Abbott vs. Hapgood, 150 Mass., 248; 22 N. E. 907, 908; 5 L. R. A., 586; 15
Am. St. Rep., 193; citing English cases; Koppel vs. Massachusetts Brick Co., 192 Mass., 223; 78 N. E., 128; Holyoke Envelope Co., vs. U.
S. Envelope Co., 182 Mass., 171; 65 N. E., 54.) It should be observed that Manuel Tabora was the registered owner of the four
parcels of land, which he succeeded in mortgaging to the Philippine National Bank so that he might have the necessary funds with
which to convert and develop them into fishery. He appeared to have met with financial reverses. He formed a corporation
composed of himself, his wife, and a few others. From the articles of incorporation, Exhibit 2, it appears that out of the P48,700,
amount of capital stock subscribed, P45,000 was subscribed by Manuel Tabora himself and P500 by his wife, Rufina Q. de Tabora;
and out of the P43,300, amount paid on subscription, P42,100 is made to appear as paid by Tabora and P200 by his wife. Both
Tabora and His wife were directors and the latter was treasurer as well. In fact, to this day, the lands remain inscribed in Tabora's
name. The defendant always regarded Tabora as the owner of the lands. He dealt with Tabora directly. Jose Ventura, president of
the plaintiff corporation, intervened only to sign the contract, Exhibit B, in behalf of the plaintiff. Even the Philippine National Bank,
mortgagee of the four parcels of land, always treated Tabora as the owner of the same. (See Exhibits E and F.) Two civil suits (Nos.
1931 and 38641) were brought against Tabora in the Court of First Instance of Manila and in both cases a writ of attachment against
the four parcels of land was issued. The Philippine National Bank threatened to foreclose its mortgages. Tabora approached the
defendant Sandiko and succeeded in the making him sign Exhibits B, C, and D and in making him, among other things, assume the
payment of Tabora's indebtedness to the Philippine National Bank. The promisory note, Exhibit C, was made payable to the plaintiff
company so that it may not attached by Tabora's creditors, two of whom had obtained writs of attachment against the four parcels
of land.

If the plaintiff corporation could not and did not acquire the four parcels of land here involved, it follows that it did not possess any
resultant right to dispose of them by sale to the defendant, Teodoro Sandiko.

Some of the members of this court are also of the opinion that the transfer from Manuel Tabora to the Cagayan Fishing
Development Company, Inc., which transfer is evidenced by Exhibit A, was subject to a condition precedent (condicion suspensiva),
namely, the payment of the mortgage debt of said Tabora to the Philippine National Bank, and that this condition not having been
complied with by the Cagayan Fishing Development Company, Inc., the transfer was ineffective. (Art. 1114, Civil Code; Wise & Co. vs.
Kelly and Lim, 37 Phil., 696; Manresa, vol. 8, p. 141.) However, having arrived at the conclusion that the transfer by Manuel Tabora
to the Cagayan Fishing Development Company, Inc. was null because at the time it was affected the corporation was non-existent,
we deem it unnecessary to discuss this point.lawphil.net

The decision of the lower court is accordingly affirmed, with costs against the appellant. So Ordered.

Villa-Real, Abad Santos, Imperial, Diaz and Concepcion, JJ., concur.

G.R. No. L-48627

FERMIN Z. CARAM, JR. and ROSA O. DE CARAM, petitioners

vs.
THE HONORABLE COURT OF APPEALS and ALBERTO V. ARELLANO, respondents.

CRUZ, J.:

We gave limited due course to this petition on the question of the solidary liability of the petitioners with their co-defendants in the
lower court 1 because of the challenge to the following paragraph in the dispositive portion of the decision of the respondent court: *

1. Defendants are hereby ordered to jointly and severally pay the plaintiff the amount of P50,000.00 for the preparation of
the project study and his technical services that led to the organization of the defendant corporation, plus P10,000.00
attorney's fees; 2

The petitioners claim that this order has no support in fact and law because they had no contract whatsoever with the private
respondent regarding the above-mentioned services. Their position is that as mere subsequent investors in the corporation that was
later created, they should not be held solidarily liable with the Filipinas Orient Airways, a separate juridical entity, and with Barretto
and Garcia, their co-defendants in the lower court, ** who were the ones who requested the said services from the private
respondent. 3

We are not concerned here with the petitioners' co-defendants, who have not appealed the decision of the respondent court and
may, for this reason, be presumed to have accepted the same. For purposes of resolving this case before us, it is not necessary to
determine whether it is the promoters of the proposed corporation, or the corporation itself after its organization, that shall be
responsible for the expenses incurred in connection with such organization.

The only question we have to decide now is whether or not the petitioners themselves are also and personally liable for such
expenses and, if so, to what extent.

The reasons for the said order are given by the respondent court in its decision in this wise:

As to the 4th assigned error we hold that as to the remuneration due the plaintiff for the preparation of the project study
and the pre-organizational services in the amount of P50,000.00, not only the defendant corporation but the other
defendants including defendants Caram should be jointly and severally liable for this amount. As we above related it was
upon the request of defendants Barretto and Garcia that plaintiff handled the preparation of the project study which
project study was presented to defendant Caram so the latter was convinced to invest in the proposed airlines. The project
study was revised for purposes of presentation to financiers and the banks. It was on the basis of this study that defendant
corporation was actually organized and rendered operational. Defendants Garcia and Caram, and Barretto became
members of the Board and/or officers of defendant corporation. Thus, not only the defendant corporation but all the other
defendants who were involved in the preparatory stages of the incorporation, who caused the preparation and/or
benefited from the project study and the technical services of plaintiff must be liable. 4

It would appear from the above justification that the petitioners were not really involved in the initial steps that finally led to the
incorporation of the Filipinas Orient Airways. Elsewhere in the decision, Barretto was described as "the moving spirit." The finding of
the respondent court is that the project study was undertaken by the private respondent at the request of Barretto and Garcia who,
upon its completion, presented it to the petitioners to induce them to invest in the proposed airline. The study could have been
presented to other prospective investors. At any rate, the airline was eventually organized on the basis of the project study with the
petitioners as major stockholders and, together with Barretto and Garcia, as principal officers.

The following portion of the decision in question is also worth considering:

... Since defendant Barretto was the moving spirit in the pre-organization work of defendant corporation based on his
experience and expertise, hence he was logically compensated in the amount of P200,000.00 shares of stock not as
industrial partner but more for his technical services that brought to fruition the defendant corporation. By the same token,
We find no reason why the plaintiff should not be similarly compensated not only for having actively participated in the
preparation of the project study for several months and its subsequent revision but also in his having been involved in the
pre-organization of the defendant corporation, in the preparation of the franchise, in inviting the interest of the financiers
 and in the training and screening of personnel. We agree that for these special services of the plaintiff the amount of
P50,000.00 as compensation is reasonable. 5

The above finding bolsters the conclusion that the petitioners were not involved in the initial stages of the organization of the airline,
which were being directed by Barretto as the main promoter. It was he who was putting all the pieces together, so to speak. The
petitioners were merely among the financiers whose interest was to be invited and who were in fact persuaded, on the strength of
the project study, to invest in the proposed airline.

Significantly, there was no showing that the Filipinas Orient Airways was a fictitious corporation and did not have a separate juridical
personality, to justify making the petitioners, as principal stockholders thereof, responsible for its obligations. As a bona fide
corporation, the Filipinas Orient Airways should alone be liable for its corporate acts as duly authorized by its officers and directors.

In the light of these circumstances, we hold that the petitioners cannot be held personally liable for the compensation claimed by
the private respondent for the services performed by him in the organization of the corporation. To repeat, the petitioners did not
contract such services. It was only the results of such services that Barretto and Garcia presented to them and which persuaded
them to invest in the proposed airline. The most that can be said is that they benefited from such services, but that surely is no
justification to hold them personally liable therefor. Otherwise, all the other stockholders of the corporation, including those who
came in later, and regardless of the amount of their share holdings, would be equally and personally liable also with the petitioners
for the claims of the private respondent.

The petition is rather hazy and seems to be flawed by an ambiguous ambivalence. Our impression is that it is opposed to the
imposition of solidary responsibility upon the Carams but seems to be willing, in a vague, unexpressed offer of compromise, to
accept joint liability. While it is true that it does here and there disclaim total liability, the thrust of the petition seems to be against
the imposition of solidary liability only rather than against any liability at all, which is what it should have categorically argued.

Categorically, the Court holds that the petitioners are not liable at all, jointly or jointly and severally, under the first paragraph of the
dispositive portion of the challenged decision. So holding, we find it unnecessary to examine at this time the rules on solidary
obligations, which the parties-needlessly, as it turns out have belabored unto death.

WHEREFORE, the petition is granted. The petitioners are declared not liable under the challenged decision, which is hereby modified
accordingly. It is so ordered.

Yap (Chairman), Narvasa, Melencio-Herrera, Feliciano and Sarmiento, JJ., concur.

Gancayco, J., took no par
G.R. No. 93073 December 21, 1992

REPUBLIC PLANTERS BANK, petitioner,

vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court of Appeals in CA G.R. CV No. 07302,
entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and Fermin Canlas,
Defendant-Appellant", which affirmed the decision ** in Civil Case No. 82-5448 except that it completely absolved Fermin Canlas
from liability under the promissory notes and reduced the award for damages and attorney's fees. The RTC decision, rendered on
June 20, 1985, is quoted hereunder:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Republic Planters Bank,
ordering defendant Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and
defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally, the plaintiff bank the following sums
with interest thereon at 16% per annum from the dates indicated, to wit:

Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from January 29, 1981 until fully
paid; under promissory note (Exhibit "B"), the sum of P40,000.00 with interest from November 27, 1980; under the
promissory note (Exhibit "C"), the sum of P166,466.00 which interest from January 29, 1981; under the promissory
note (Exhibit "E"), the sum of P86,130.31 with interest from January 29, 1981; under the promissory note (Exhibit
"G"), the sum of P12,703.70 with interest from November 27, 1980; under the promissory note (Exhibit "H"), the
sum of P281,875.91 with interest from January 29, 1981; and under the promissory note (Exhibit "I"), the sum of
P200,000.00 with interest from January 29, 1981.

Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corporation (formerly named Worldwide
Garment Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay jointly and severally, the plaintiff bank the
sum of P367,000.00 with interest of 16% per annum from January 29, 1980 until fully paid

Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly Worldwide) is ordered to pay the
plaintiff bank the sum of P140,000.00 with interest at 16% per annum from November 27, 1980 until fully paid.

Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum of P231,120.81 with interest
at 12% per annum from July 1, 1981, until fully paid and the sum of P331,870.97 with interest from March 28,
1981, until fully paid.

All the defendants are also ordered to pay, jointly and severally, the plaintiff the sum of P100,000.00 as and for
reasonable attorney's fee and the further sum equivalent to 3% per annum of the respective principal sums from
the dates above stated as penalty charge until fully paid, plus one percent (1%) of the principal sums as service
charge.

With costs against the defendants.

SO ORDERED. 1

From the above decision only defendant Fermin Canlas appealed to the then Intermediate Court (now the Court Appeals). His
contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment
Manufacturing, Inc, he should not be held personally liable for such authorized corporate acts that he performed. It is now the
contention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo
Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes.

We find merit in this appeal.

From the records, these facts are established: Defendant Shozo Yamaguchi and private respondent Fermin Canlas were
President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board
Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to apply
for credit facilities with the petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust receipts
accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each of which were uniformly
worded in the following manner:

___________, after date, for value received, I/we, jointly and severaIly promise to pay to the ORDER of the
REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(....) Philippine
Currency...

On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and Fermin Canlas above their
printed names with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the promissory notes appeared:
"Please credit proceeds of this note to:

________ Savings Account ______XX Current Account

No. 1372-00257-6

of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran horizontally across the pages.

In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment Manufacturing, Inc. was apparently rubber
stamped above the signatures of defendant and private respondent.

On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing
Corporation.

On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered among others, by the nine
promissory notes with interest thereon, plus attorney's fees and penalty charges. The complainant was originally brought against
Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing, Inc. as defendant
and substitute Pinch Manufacturing Corporation it its place. Defendants Pinch Manufacturing Corporation and Shozo Yamaguchi did
not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only private respondent
Fermin Canlas filed an Amended Answer wherein he, denied having issued the promissory notes in question since according to him,
he was not an officer of Pinch Manufacturing Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that when he
issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were in blank, the typewritten entries
not appearing therein prior to the time he affixed his signature.

In the mind of this Court, the only issue material to the resolution of this appeal is whether private respondent Fermin Canlas is
solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory
notes.

We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature for the
following reasons:

The promissory motes are negotiable instruments and must be governed by the Negotiable Instruments Law. 2

Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as
such.3 By signing the notes, the maker promises to pay to the order of the payee or any holder 4 according to the tenor thereof.5
Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the
promissory notes. As such, he cannot escape liability arising therefrom.

Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and
severally liable thereon.6 An instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or more
persons, makes them solidarily liable. 7 The fact that the singular pronoun is used indicates that the promise is individual as to each
other; meaning that each of the co-signers is deemed to have made an independent singular promise to pay the notes in full.

In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and certain, without reason for
ambiguity, by the presence of the phrase "joint and several" as describing the unconditional promise to pay to the order of Republic
Planters Bank. A joint and several note is one in which the makers bind themselves both jointly and individually to the payee so that
all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit. 8 A joint and several
obligation in common law corresponds to a civil law solidary obligation; that is, one of several debtors bound in such wise that each
is liable for the entire amount, and not merely for his proportionate share. 9 By making a joint and several promise to pay to the
order of Republic Planters Bank, private respondent Fermin Canlas assumed the solidary liability of a debtor and the payee may
choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing Corporation as solidary debtors.

As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of the makers in the notes will
affect the liability of the makers, We do not find it necessary to resolve and decide, because it is immaterial and will not affect to the
liability of private respondent Fermin Canlas as a joint and several debtor of the notes. With or without the presence of said phrase,
private respondent Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor.

Finally, the respondent Court made a grave error in holding that an amendment in a corporation's Articles of Incorporation effecting
a change of corporate name, in this case from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation
extinguished the personality of the original corporation.

The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is
the same corporation with a different name, and its character is in no respect changed. 10

A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law, has
no affect on the identity of the corporation, or on its property, rights, or liabilities. 11

The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted
or incurred.12

As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into
by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and
the change of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by
the acts of its agents if authorized by the Board. Under the Negotiable Instruments Law, the liability of a person signing as an agent is
specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person adds to his
signature words indicating that he signs for or on behalf of a principal , or in a representative capacity, he is not
liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or
as filling a representative character, without disclosing his principal, does not exempt him from personal liability.

Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative
capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to take holder of the
instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not
admissible to avoid the agent's personal liability. 13

On the private respondent's contention that the promissory notes were delivered to him in blank for his signature, we rule
otherwise. A careful examination of the notes in question shows that they are the stereotype printed form of promissory notes
generally used by commercial banking institutions to be signed by their clients in obtaining loans. Such printed notes are incomplete
because there are blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest,
date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the borrower-debtor 's perusal.
An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable
Instruments Law which provides, in so far as relevant to this case, thus:

Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the person in
possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In order, however,
 that any such instrument when completed may be enforced against any person who became a party thereto prior
to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time...

Proof that the notes were signed in blank was only the self-serving testimony of private respondent Fermin Canlas, as determined by
the trial court, so that the trial court ''doubts the defendant (Canlas) signed in blank the promissory notes". We chose to believe the
bank's testimony that the notes were filled up before they were given to private respondent Fermin Canlas and defendant Shozo
Yamaguchi for their signatures as joint and several promissors. For signing the notes above their typewritten names, they bound
themselves as unconditional makers. We take judicial notice of the customary procedure of commercial banks of requiring their
clientele to sign promissory notes prepared by the banks in printed form with blank spaces already filled up as per agreed terms of
the loan, leaving the borrowers-debtors to do nothing but read the terms and conditions therein printed and to sign as makers or co-
makers. When the notes were given to private respondent Fermin Canlas for his signature, the notes were complete in the sense
that the spaces for the material particular had been filled up by the bank as per agreement. The notes were not incomplete
instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe
Instruments Law is not applicable.

The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing the interest rate on the promissory notes
from 16% to 12% per annum does not squarely apply to the instant petition. In the abovecited case, the rate of 12% was applied to
forebearances of money, goods or credit and court judgemets thereon, only in the absence of any stipulation between the parties.

In the case at bar however , it was found by the trial court that the rate of interest is 9% per annum, which interest rate the plaintiff
may at any time without notice, raise within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed the
interest at 16% per annum.

This Court has held that the rates under the Usury Law, as amended by Presidential Decree No. 116, are applicable only to interests
by way of compensation for the use or forebearance of money. Article 2209 of the Civil Code, on the other hand, governs interests
by way of damages.15 This fine distinction was not taken into consideration by the appellate court, which instead made a general
statement that the interest rate be at 12% per annum.

Inasmuch as this Court had declared that increases in interest rates are not subject to any ceiling prescribed by the Usury Law, the
appellate court erred in limiting the interest rates at 12% per annum. Central Bank Circular No. 905, Series of 1982 removed the
Usury Law ceiling on interest rates. 16

In the 1ight of the foregoing analysis and under the plain language of the statute and jurisprudence on the matter, the decision of
the respondent: Court of Appeals absolving private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby
rendered declaring private respondent Fermin Canlas jointly and severally liable on all the nine promissory notes with the following
sums and at 16% interest per annum from the dates indicated, to wit:

Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from January 29, 1981 until fully paid; under
promissory note marked as Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under the promissory note
denominated as Exhibit C, the amount of P166,466.00 with interest from January 29, 1981; under the promissory note denominated
as Exhibit D, the amount of P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory note marked as
Exhibit E, the amount of P86,130.31 with interest from January 29, 1981; under the promissory note marked as Exhibit F, the sum of
P140,000.00 with interest from November 27, 1980 until fully paid; under the promissory note marked as Exhibit G, the amount of
P12,703.70 with interest from November 27, 1980; the promissory note marked as Exhibit H, the sum of P281,875.91 with interest
from January 29, 1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with interest on January 29, 1981.

The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and Shozo
Yamaguchi, for not having appealed from the decision of the trial court, shall be adjudged in accordance with the judgment
rendered by the Court a quo.

With respect to attorney's fees, and penalty and service charges, the private respondent Fermin Canlas is hereby held jointly and
solidarity liable with defendants for the amounts found, by the Court a quo. With costs against private respondent.

SO ORDERED.
G.R. NO. 175278

GSIS FAMILY BANK - THRIFT BANK [Formerly Inc.], Petitioner,

vs.
BPI FAMILY BANK, Respondent.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari filed by GSIS Family Bank - Thrift Bank 1 assailing the Court of Appeals Decision2 dated March
29, 2006 (Decision) and Resolution3 dated October 23, 2006 which denied petitioner's petition for review of the Securities and
Ex.change Commission Decision dated February 22, 2005 (SEC En Banc Decision). The SEC En Banc Decision 4 prohibited petitioner
from using the word "Family" as part of its corporate name and ordered petitioner to delete the word from its name. 5

Facts

Petitioner was originally organized as Royal Savings Bank and started operations in 1971. Beginning 1983 and 1984, petitioner
encountered liquidity problems. On July 9, 1984, it was placed under receivership and later temporarily closed by the Central Bank of
the Philippines. Two (2) months after its closure, petitioner reopened and was renamed Comsavings Bank, Inc. under the
management of the Commercial Bank of Manila. 6

In 1987, the Government Service Insurance System (GSIS) acquired petitioner from the Commercial Bank of Manila. Petitioner's
management and control was thus transferred to GSIS. 7 To improve its marketability to the public, especially to the members of the
GSIS, petitioner sought Securities and Exchange Commission (SEC) approval to change its corporate name to "GSIS Family Bank, a
Thrift Bank."8 Petitioner likewise applied with the Department of Trade and Industry (DTI) and Bangko Sentral ng Pilpinas (BSP) for
authority to use "GSIS Family Bank, a Thrift Bank" as its business name. The DTI and the BSP approved the applications. 9 Thus,
petitioner operates under the corporate name "GSIS Family Bank – a Thrift Bank," pursuant to the DTI Certificate of Registration No.
741375 and the Monetary Board Circular approval.10

Respondent BPI Family Bank was a product of the merger between the Family Bank and Trust Company (FBTC) and the Bank of the
Philippine Islands (BPI).11 On June 27, 1969, the Gotianum family registered with the SEC the corporate name "Family First Savings
Bank," which was amended to "Family Savings Bank," and then later to "Family Bank and Trust Company." 12 Since its incorporation,
the bank has been commonly known as "Family Bank." In 1985, Family Bank merged with BPI, and the latter acquired all the rights,
privileges, properties, and interests of Family Bank, including the right to use names, such as "Family First Savings Bank,"

"Family Bank," and "Family Bank and Trust Company." BPI Family Savings Bank was registered with the SEC as a wholly-owned
subsidiary of BPI. BPI Family Savings Bank then registered with the Bureau of Domestic Trade the trade or business name "BPI Family
Bank," and acquired a reputation and goodwill under the name. 13

Proceedings before the SEC

Eventually, it reached respondent’s attention that petitioner is using or attempting to use the name "Family Bank." Thus, on March
8, 2002, respondent petitioned the SEC Company Registration and Monitoring Department (SEC CRMD) to disallow or prevent the
registration of the name "GSIS Family Bank" or any other corporate name with the words "Family Bank" in it. Respondent claimed
exclusive ownership to the name "Family Bank," having acquired the name since its purchase and merger with Family Bank and Trust
Company way back 1985.14 Respondent also alleged that through the years, it has been known as "BPI Family Bank" or simply
"Family Bank" both locally and internationally. As such, it has acquired a reputation and goodwill under the name, not only with
clients here and abroad, but also with correspondent and competitor banks, and the public in general. 15

Respondent prayed the SEC CRMD to disallow or prevent the registration of the name "GSIS Family Bank" or any other corporate
name with the words "Family Bank" should the same be presented for registration.

Respondent likewise prayed the SEC CRMD to issue an order directing petitioner or any other corporation to change its corporate
name if the names have already been registered with the SEC. 16
The SEC CRMD was thus confronted with the issue of whether the names BPI Family Bank and GSIS Family Bank are confusingly
similar as to require the amendment of the name of the latter corporation.

The SEC CRMD declared that upon the merger of FBTC with the BPI in 1985, the latter acquired the right to the use of the name of
the absorbed corporation. Thus, BPI Family Bank has a prior right to the use of the name

Family Bank in the banking industry, arising from its long and extensive nationwide use, coupled with its registration with the
Intellectual Property Office (IPO) of the name "Family Bank" as its trade name. Applying the rule of "priority in registration" based on
the legal maxim first in time, first in right, the SEC CRMD concluded that BPI has the preferential right to the use of the name "Family
Bank." More, GSIS and Comsavings Bank were then fully aware of the existence and use of the name "Family Bank" by FBTC prior to
the latter's merger with BPI.17

The SEC CRMD also held that there exists a confusing similarity between the corporate names BPI Family Bank and GSIS Family Bank.
It explained that although not identical, the corporate names are indisputably similar, as to cause confusion in the public mind, even
with the exercise of reasonable care and observation, especially so since both corporations are engaged in the banking business. 18

In a decision19 dated May 19, 2003, the SEC CRMD said, PREMISES CONSIDERED respondent GSIS FAMILY BANK is hereby directed to
refrain from using the word "Family" as part of its name and make good its commitment to change its name by deleting or dropping
the subject word from its corporate name within [thirty (30) days] from the date of actual receipt hereof. 20

Petitioner appealed21 the decision to the SEC En Banc, which denied the appeal, and upheld the SEC CRMD in the SEC En Banc
Decision.22 Petitioner elevated the SEC En Banc Decision to the Court of Appeals, raising the following issues:

1. Whether the use by GSIS Family Bank of the words "Family Bank" is deceptively and confusingly similar to the name BPI
Family Bank;

2. Whether the use by Comsavings Bank of "GSIS Family Bank" as its business constitutes unfair competition;

3. Whether BPI Family Bank is guilty of forum shopping;

4. Whether the approval of the DTI and the BSP of petitioner's application to use the name GSIS Family Bank constitutes its
authority to the lawful and valid use of such trade name or trade mark;

5. Whether the application of respondent BPI Family Bank for the exclusive use of the name "Family Bank," a generic name,
though not yet approved by IPO of the Bureau of Patents, has barred the GSIS Family Bank from using such trade mark or
name.23

Court of Appeals Ruling

The Court of Appeals ruled that the approvals by the BSP and by the DTI of petitioner’s application to use the name "GSIS Family
Bank" do not constitute authority for its lawful and valid use. It said that the SEC has absolute jurisdiction, supervision and control
over all corporations.24 The Court of Appeals held that respondent was entitled to the exclusive use of the corporate name because
of its prior adoption of the name "Family Bank" since 1969. 25 There is confusing similarity in the corporate names because
"[c]onfusion as to the possible association with GSIS might arise if we were to allow Comsavings Bank to add its parent company’s
acronym, ‘GSIS’ to ‘Family Bank.’ This is true especially considering both companies belong to the banking industry. Proof of actual
confusion need not be shown. It suffices that confusion is probably or likely to occur." 26The Court of Appeals also ruled out forum
shopping because not all the requirements of litis pendentia are present. 27

The dispositive portion of the decision read,

WHEREFORE, the instant petition for review is hereby DISMISSED for lack of merit. 28

After its Motion for Reconsideration was denied,29 petitioner brought the decision to this Court via a Petition for Review on
Certiorari.30

Issues in the Petition

Petitioner raised the following issues in its petition:

I. The Court of Appeals gravely erred in affirming the SEC Resolution finding the word "Family" not generic despite its
unregistered status with the IPO of the Bureau of Patents and the use by GSIS-Family Bank in its corporate name of the
words "[F]amily [B]ank" as deceptive and [confusingly similar] to the name BPI Family Bank; 31

II. The Court of Appeals gravely erred when it ruled that the respondent is not guilty of forum shopping despite the filing of
three (3) similar complaints before the DTI and BSP and with the SEC without the requisite certification of non-forum
shopping attached thereto;32

III. The Court of Appeals gravely erred when it completely disregarded the opinion of the Banko Sentral ng Pilipinas that the
use by the herein petitioner of the trade name GSIS Family Bank – Thrift Bank is not similar or does not deceive or likely
cause any deception to the public.33

Court's Ruling

We uphold the decision of the Court of Appeals.

Section 18 of the Corporation Code provides,

Section 18. Corporate name. – No corporate name may be allowed by the Securities and Exchange Commission if the proposed
name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the
Commission shall issue an amended certificate of incorporation under the amended name.

In Philips Export B.V. v. Court of Appeals,34 this Court ruled that to fall within the prohibition of the law on the right to the exclusive
use of a corporate name, two requisites must be proven, namely:

(1) that the complainant corporation acquired a prior right over the use of such corporate name; and

(2) the proposed name is either

(a) identical or

(b) deceptive or confusingly similar to that of any existing corporation or to any other name already protected by
law; or

(c) patently deceptive, confusing or contrary to existing law. 35

These two requisites are present in this case. On the first requisite of a prior right, Industrial Refractories Corporation of the
Philippines v. Court of Appeals (IRCP case)36 is instructive. In that case, Refractories Corporation of the Philippines (RCP) filed before
the SEC a petition to compel Industrial Refractories Corporation of the Philippines (IRCP) to change its corporate name on the ground
that its corporate name is confusingly similar with that of RCP’s such that the public may be confused into believing that they are
one and the same corporation. The SEC and the Court of Appeals found for petitioner, and ordered IRCP to delete or drop from its
corporate name the word "Refractories." Upon appeal of IRCP, this Court upheld the decision of the CA.

Applying the priority of adoption rule to determine prior right, this Court said that RCP has acquired the right to use the word
"Refractories" as part of its corporate name, being its prior registrant. In arriving at this conclusion, the Court considered that RCP
was incorporated on October 13, 1976 and since then continuously used the corporate name "Refractories Corp. of the Philippines."
Meanwhile, IRCP only started using its corporate name "Industrial Refractories Corp. of the Philippines" when it amended its Articles
of Incorporation on August 23, 1985.37

In this case, respondent was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family Bank. Petitioner, on the other
hand, was incorporated as GSIS Family – Thrift Bank only in 2002, 38 or at least seventeen (17) years after respondent started using its
name. Following the precedent in the IRCP case, we rule that respondent has the prior right over the use of the corporate name.
The second requisite in the Philips Export case likewise obtains on two points: the proposed name is (a) identical or (b) deceptive or
confusingly similar to that of any existing corporation or to any other name already protected by law.

On the first point (a), the words "Family Bank" present in both petitioner and respondent's corporate name satisfy the requirement
that there be identical names in the existing corporate name and the proposed one.

Respondent cannot justify its claim under Section 3 of the Revised Guidelines in the Approval of Corporate and Partnership Names, 39
to wit:

3. The name shall not be identical, misleading or confusingly similar to one already registered by another corporation or partnership
with the Commission or a sole proprietorship registered with the Department of Trade and Industry.

If the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive word
different from the name of the company already registered.

Section 3 states that if there be identical, misleading or confusingly similar name to one already registered by another corporation or
partnership with the SEC, the proposed name must contain at least one distinctive word different from the name of the company
already registered. To show contrast with respondent's corporate name, petitioner used the words "GSIS" and "thrift." But these are
not sufficiently distinct words that differentiate petitioner's corporate name from respondent's. While "GSIS" is merely an acronym
of the proper name by which petitioner is identified, the word "thrift" is simply a classification of the type of bank that petitioner is.
Even if the classification of the bank as "thrift" is appended to petitioner's proposed corporate name, it will not make the said
corporate name distinct from respondent's because the latter is likewise engaged in the banking business.

This Court used the same analysis in Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. v. Iglesia ng
Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan. 40 In that case, Iglesia ng Dios Kay Cristo Jesus filed a case before the SEC to
compel Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus to change its corporate name, and to prevent it from using the same or
similar name on the ground that the same causes confusion among their members as well as the public. Ang mga Kaanib sa Iglesia ng
Dios Kay Kristo Hesus claimed that it complied with SEC Memorandum Circular No. 14-2000 by adding not only two, but eight words
to their registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which effectively distinguished it from Iglesia ng
Dios Kay Cristo Jesus. This Court rejected the argument, thus:

The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly observed by
the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in the
Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid confusion or difficulty in
distinguishing petitioner from respondent. This is especially so, since both petitioner and respondent corporations are using
the same acronym – H.S.K.; not to mention the fact that both are espousing religious beliefs and operating in the same
place. Xxx41

On the second point (b), there is a deceptive and confusing similarity between petitioner's proposed name and respondent's
corporate name, as found by the SEC.42 In determining the existence of confusing similarity in corporate names, the test is whether
the similarity is such as to mislead a person using ordinary care and discrimination. 43 And even without such proof of actual
confusion between the two corporate names, it suffices that confusion is probable or likely to occur. 44

Petitioner's corporate name is "GSIS Family Bank—A Thrift Bank" and respondent's corporate name is "BPI Family Bank." The only
words that distinguish the two are "BPI," "GSIS," and "Thrift." The first two words are merely the acronyms of the proper names by
which the two corporations identify themselves; and the third word simply describes the classification of the bank. The overriding
consideration in determining whether a person, using ordinary care and discrimination, might be misled is the circumstance that
both petitioner and respondent are engaged in the same business of banking. "The likelihood of confusion is accentuated in cases
where the goods or business of one corporation are the same or substantially the same to that of another corporation." 45

Respondent alleged that upon seeing a Comsavings Bank branch with the signage "GSIS Family Bank" displayed at its premises, some
of the respondent’s officers and their clients began asking questions. These include whether GSIS has acquired Family Bank; whether
there is a joint arrangement between GSIS and Family Bank; whether there is a joint arrangement between BPI and GSIS regarding
Family Bank; whether Comsavings Bank has acquired Family Bank; and whether there is there an arrangement among Comsavings
Bank, GSIS, BPI, and Family Bank regarding BPI Family Bank and GSIS Family Bank. 46 The SEC made a finding that "[i]t is not a remote
possibility that the public may entertain the idea that a relationship or arrangement indeed exists between BPI and GSIS due to the
use of the term ‘Family Bank’ in their corporate names." 47
Findings of fact of quasi-judicial agencies, like the SEC, are generally accorded respect and even finality by this Court, if supported by
substantial evidence, in recognition of their expertise on the specific matters under their consideration, more so if the same has
been upheld by the appellate court, as in this case.48

Petitioner cannot argue that the word "family" is a generic or descriptive name, which cannot be appropriated exclusively by
respondent. "Family," as used in respondent's corporate name, is not generic. Generic marks are commonly used as the name or
description of a kind of goods, such as "Lite" for beer or "Chocolate Fudge" for chocolate soda drink. Descriptive marks, on the other
hand, convey the characteristics, function, qualities or ingredients of a product to one who has never seen it or does not know it
exists, such as "Arthriticare" for arthritis medication. 49

Under the facts of this case, the word "family" cannot be separated from the word "bank." 50 In asserting their claims before the SEC
up to the Court of Appeals, both petitioner and respondent refer to the phrase "Family Bank" in their submissions. This coined
phrase, neither being generic nor descriptive, is merely suggestive and may properly be regarded as arbitrary. Arbitrary marks are
"words or phrases used as a mark that appear to be random in the context of its use. They are generally considered to be easily
remembered because of their arbitrariness. They are original and unexpected in relation to the products they endorse, thus,
becoming themselves distinctive."51 Suggestive marks, on the other hand, "are marks which merely suggest some quality or
ingredient of goods. xxx The strength of the suggestive marks lies on how the public perceives the word in relation to the product or
service."52

In Ang v. Teodoro,53 this Court ruled that the words "Ang Tibay" is not a descriptive term within the meaning of the Trademark Law
but rather a fanciful or coined phrase. 54 In so ruling, this Court considered the etymology and meaning of the Tagalog words, "Ang
Tibay" to determine whether they relate to the quality or description of the merchandise to which respondent therein applied them
as trademark, thus:

We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they are a
descriptive term, i.e., whether they relate to the quality or description of the merchandise to which respondent has applied them as
a trade-mark. The word "ang" is a definite article meaning "the" in English. It is also used as an adverb, a contraction of the word
"anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang ganda!" Tibay is a
root word from which are derived the verb magpatibay (to strengthen); the nouns pagkamatibay (strength, durability), katibayan
(proof, support, strength), katibaytibayan (superior strength); and the adjectives matibay (strong, durable, lasting), napakatibay (very
strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting
admiration of strength or durability. For instance, one who tries hard but fails to break an object exclaims, "Ang tibay!" ("How
strong!") It may also be used in a sentence thus, "Ang tibay ng sapatos mo!" ("How durable your shoes are!") The phrase "ang tibay"
is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to mean
"durable shoes," but "matibay na sapatos" or "sapatos na matibay."

From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark Law but rather a fanciful
or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. xxx 55 (Underscoring supplied).

The word "family" is defined as "a group consisting of parents and children living together in a household" or "a group of people
related to one another by blood or marriage." 56 Bank, on the other hand, is defined as "a financial establishment that invests money
deposited by customers, pays it out when requested, makes loans at interest, and exchanges currency." 57 By definition, there can be
no expected relation between the word "family" and the banking business of respondent. Rather, the words suggest that
respondent’s bank is where family savings should be deposited. More, as in the Ang case, the phrase "family bank" cannot be used
to define an object.

Petitioner’s argument that the opinion of the BSP and the certificate of registration granted to it by the DTI constitute authority for it
to use "GSIS Family Bank" as corporate name is also untenable.

The enforcement of the protection accorded by Section 18 of the Corporation Code to corporate names is lodged exclusively in the
SEC. The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of the SEC Reorganization
Act,58 as amended.59 By express mandate, the SEC has absolute jurisdiction, supervision and control over all corporations. 60 It is the
SEC’s duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved, but more so
for the protection of the public. It has authority to de-register at all times, and under all circumstances corporate names which in its
estimation are likely to generate confusion. 61
The SEC62 correctly applied Section 18 of the Corporation Code, and Section 15 of SEC Memorandum Circular No. 14-2000, pertinent
portions of which provide:

In implementing Section 18 of the Corporation Code of the Philippines (BP 69), the following revised guidelines in the approval of
corporate and partnership names are hereby adopted for the information and guidance of all concerned:

xxx

15. Registrant corporations or partnership shall submit a letter undertaking to change their corporate or partnership name in case
another person or firm has acquired a prior right to the use of the said firm name or the same is deceptively or confusingly similar to
one already registered unless this undertaking is already included as one of the provisions of the articles of incorporation or
partnership of the registrant.

The SEC, after finding merit in respondent's claims, can compel petitioner to abide by its commitment "to change its corporate name
in the event that another person, firm or entity has acquired a prior right to use of said name or one similar to it." 63

Clearly, the only determination relevant to this case is that one made by the SEC in the exercise of its express mandate under the
law. The BSP opinion invoked by petitioner even acknowledges that "the issue on whether a proposed name is identical or
deceptively similar to that of any of existing corporation is matter within the official jurisdiction and competence of the SEC." 64

Judicial notice65 may also be taken of the action of the IPO in approving respondent’s registration of the trademark "BPI Family Bank"
and its logo on October 17, 2008. The certificate of registration of a mark shall be prima facie evidence of the validity of the
registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same in connection with the
goods or services and those that are related thereto specified in the certificate. 66

Finally, we uphold the Court of Appeals' finding that the issue of forum shopping was belatedly raised by petitioner and, thus, cannot
anymore be considered at the appellate stage of the proceedings. Petitioner raised the issue of forum shopping for the first time
only on appeal.67 Petitioner argued that the complaints filed by respondent did not contain certifications against non-forum
shopping, in violation of Section 5, Rule 7 of the Rules of Court. 68

In S.C. Megaworld Construction and Development Corporation vs. Parada, 69 this Court said that objections relating to non-
compliance with the verification and certification of non-forum shopping should be raised in the proceedings below, and not for the
first time on appeal. In that case, S.C. Megaworld argued that the complaint for collection of sum of money should have been
dismissed outright by the trial court on account of an invalid nonforum shopping certification. It alleged that the Special Power of
Attorney granted to Parada did not specifically include an authority for the latter to sign the verification and certification of non-
forum shopping, thus rendering the complaint defective for violation of Sections 4 and 5 of Rule 7 of the Rules of Court. On motion
for reconsideration of the decision of the Court of Appeals, petitioner raised for the first time, the issue of forum shopping. The
Court ruled against S.C. Megaworld, thus:

It is well-settled that no question will be entertained on appeal unless it has been raised in the proceedings below. Points of law,
theories, issues and arguments not brought to the attention of the lower court, administrative agency or quasi-judicial body, need
not be considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness
and due process impel this rule. Any issue raised for the first time on appeal is barred by estoppel. 70

In this case, the fact that respondent filed a case before the DTI was made known to petitioner 71 long before the SEC rendered its
decision. Yet, despite its knowledge, petitioner failed to question the alleged forum shopping before the SEC. The exceptions to the
general rule that forum shopping should be raised in the earliest opportunity, as explained in the cited case of Young v. Keng Seng, 72
do not obtain in this case.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals dated March 29, 2006 is hereby AFFIRMED.

SO ORDERED.
G.R. No. 184008, August 03, 2016

INDIAN CHAMBER OF COMMERCE PHILS., INC., Petitioner, v. FILIPINO INDIAN CHAMBER OF COMMERCE IN THE PHILIPPINES, INC.,
Respondent.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 assailing the Decision and Resolution of the Court of Appeals (CA) dated May 15, 2008 2 and
August 4, 2008,3 respectively, in CA-G.R. SP No. 97320. The Decision and Resolution affirmed the Securities and Exchange
Commission En Banc (SEC En Banc) Decision dated November 30, 20064 directing petitioner Indian Chamber of Commerce Phils., Inc.
to modify its corporate name.

The Facts

Filipino-Indian Chamber of Commerce of the Philippines, Inc. (defunct FICCPI) was originally registered with the SEC as Indian
Chamber of Commerce of Manila, Inc. on November 24, 1951, with SEC Registration Number 6465 5 On October 7, 1959, it amended
its corporate name into Indian Chamber of Commerce of the Philippines, Inc., and further amended it into Filipino-Indian Chamber
of Commerce of the Philippines, Inc. on

March 4, 1977,.6 Pursuant to its Articles of Incorporation, and without applying for an extension of its corporate term, the defunct
FICCPI's term of existence expired on November 24, 2001. 7chanrobleslaw

SEC Case No. 05-008

On January 20, 2005, Mr. Naresh Mansukhani (Mansukhani) reserved the   corporate   name   "Filipino   Indian   Chamber   of
Commerce   in  the Philippines, Inc." (FICCPI), for the period from January 20, 2005 to April 20, 2005, with the Company Registration
and Monitoring Department (CRMD) of the SEC.8 In an opposition letter dated April 1, 2005, Ram Sitaldas (Sitaldas), claiming to be a
representative of the defunct FICCPI, alleged that the corporate name has been used by the defunct FICCPI since 1951, and that the
reservation by another person who is not its member or representative is illegal. 9chanrobleslaw

The CRMD called the parties for a conference and required them to submit their position papers. Subsequently, on May 27, 2005,
the CRMD rendered a decision granting Mansukhani's reservation, holding that he possesses the better right over the corporate
name.11 The CRMD ruled that the defunct FICCPI has no legal personality to oppose the reservation of the corporate name by
Mansukhani. After the expiration of the defunct FICCPFs corporate existence, without any act on its part to extend its term, its right
over the name ended. Thus, the name "Filipino Indian Chamber of Commerce in the Philippines, Inc." is free for appropriation by any
party.12chanrobleslaw

Sitaldas appealed the decision of the CRMD to the SEC En Bane, which appeal was docketed as SEC Case No. 05-008. On December 7,
2005, the SEC En Bane denied the appeal,13 thus:ChanRoblesVirtualawlibrary
WHEREFORE,   premises   considered,   the   instant appeal is HEREBY DISMISSED for lack of merit. Let a copy of this decision be
furnished the Company Registration and Monitoring Department of this Commission for its appropriate action. 14 (Emphasis in the
original.)
Sitaldas appealed the SEC En Banc decision to the CA, docketed as CA-G.R. SP No. 92740. On September 27, 2006, the CA affirmed
the decision of the SEC En Banc15. It ruled that Mansukhani, reserving the name 'Filipino Indian Chamber of Commerce in the
Philippines, Inc.," has the of the better right over the corporate name. It ruled that with the expiration corporate life of the defunct
FICCPI, without an extension having been filed and granted, it lost its legal personality as a corporation. 16 Thus, the CA affirmed the
SEC En Banc ruling that after the expiration of its term, the defunct FICCPI's rights over the name also ended. 17 The CA also cited SEC
Memorandum Circular No. 14-200018 which gives protection to corporate names for a period of three years after the approval of the
dissolution of the corporation.19 It noted that the reservation for the use of the corporate name "Filipino Indian Chamber of
Commerce in the Philippines, Inc.," and the opposition were filed only in January 2005, way beyond this three-year
period.20chanrobleslaw

On March 14, 2006, pending resolution by the CA, the SEC issued the Certificate of Incorporation of respondent FICCPI, pursuant to
its ruling in SEC Case No. 05-008.

SEC Case No. 06-014

Meanwhile, on December 8, 2005,22 Mr. Pracash Dayacanl, who allegedly represented the defunct FICCPI, filed an application with
the CRMD for the reservation of the corporate name "Indian Chamber of Commerce Phils., Inc." (ICCPI). 23 Upon knowledge,
Mansukhani, in a letter dated February 14, 2006, 24 formally opposed the application. Mansukhani cited the SEC En Banc decision in
SEC Case No. 05-008 recognizing him as the one possessing the better right over the corporate name "Filipino Chamber of
Commerce in the Philippines, Inc.25cralawredchanrobleslaw

In a letter dated April 5, 200626 the CRMD denied Mansukhani's opposition. It stated that the name "Indian Chamber of Commerce
Phils., Inc." is not deceptively or confusingly similar to "Filipino Indian Chamber of Commerce in the Philippines, Inc." On the same
date, the CRMD approved and issued the Certificate of Incorporation 27 of petitioner ICCPI.

Thus, respondent FICCPI, through Mansukhani, appealed the CRMD's decision to the SEC En Banc.28 The appeal was docketed as SEC
Case No. 06-014. On November 30, 2006, the SEC En Bane granted the appeal filed by FICCPI, 29 and reversed the CRMD's decision.
Citing Section 18 of the Corporation Code,30 the SEC En Bane made a finding that "both from the standpoint of their [ICCPI and
FICCPI] corporate names and the purposes for which they were established, there exist[s] a similarity that could inevitably lead to
confusion."31 It also ruled that "oppositor [FICCPI] has the prior right to use its corporate name to the exclusion of the others. It was
registered with the Commission on March 14, 2006 while respondent [ICCPI] was registered on April 05, 2006. By virtue of
oppositor's [FICCPI] prior appropriation and use of its name, it is entitled to protection against  the use of identical or similar name of
another corporation."32
Thus, the SEC En Banc ruled, to wit:
WHEREFORE, the appeal is hereby granted and the assailed Order dated April 05, 2006 is hereby REVERSED and SET ASIDE and
respondent is directed to change or modify its corporate name within thirty (30) days from the date of actual receipt hereof.

SO ORDERED.33 (Emphasis in the original.)

ICCPI appealed the SEC En Banc decision in SEC Case No. 06-014 to the CA.34 The appeal, docketed as CA-G.R. SP No. 97320, raised
the following issues:

A. The Honorable SEC En Banc committed serious error when it held that petitioner's corporate name (ICCPI) could inevitably
lead to confusion;

B. Respondent's corporate name (FICCPI) did not acquire secondary meaning; and cralawlawlibrary

C. The Honorable SEC En Bane violated the rule of equal protection when it denied petitioner (ICCPI) the use of the descriptive
generic words. 35

In a decision dated May 15, 2008,36 the CA affirmed the decision of the SEC En Banc. It held that by simply looking at the corporate
names of ICCPI and FICCPI, one may readily notice the striking similarity between the two. Thus, an ordinary person using ordinary
care and discrimination may be led to believe that the corporate names of ICCPI and FICCPI refer to one and the same corporation. 37
The CA further ruled that ICCPI's corporate name did not comply with the requirements of SEC Memorandum Circular No. 14-2000.
It noted that under the facts of this case, it is the registered corporate name, FICCPI, which contains the word (Filipino) making it
different from the proposed
corporate name. SEC Memorandum Circular No. 14-2000 requires, however, that it should be the proposed corporate name which
should contain one distinctive word different from the name of the corporation already registered, and not the other way around, as
In this case.39 Finally, the CA held that the SEC En Bane did not violate ICCPFs right to equal protection when it ordered ICCPI to
change its corporate name. The SEC En Bane merely compelled ICCPI to comply with its undertaking to change its corporate name in
case another person or firm has acquired a prior right to the use of the said name or the same is deceptively or confusingly similar to
one already registered with the SEC.40
The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the petition filed in this case is hereby DENIED and the assailed Decision of the Securities and
Exchange Commission en banc in SEC EN BANC Case No. 06-014 is hereby AFFIRMED.

SO ORDERED.41   (Emphasis in the original.)

In its Resolution dated August 4, 2008,42 the CA denied the Motion for Reconsideration filed by ICCPI.
The Petition43

ICCPI now appeals the CA decision before this Court raisin; following arguments:

A. The Honorable Court of Appeals committed serious error when it upheld the findings of the SEC En Banc;

B. The Honorable Court of Appeals committed serious error when it held that there is similarity between the petitioner and
the respondent (sic) corporate name that would inevitably lead to confusion; and cralawlawlibrary

C. Respondent's corporate name did not acquire secondarymeaning. 44

The Court's Ruling

We uphold the decision of the CA.

Section 18 of the Coiporation Code expressly prohibits the use of a corporate name which is identical or deceptively or confusingly
similar to that of any existing corporation:ChanRoblesVirtualawlibrary
No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended
certificate of
incorporation under the amended name. (Underscoring supplied.)
In Philips Export B. V. v. Court of Appeals,45 this Court ruled that to fall within the prohibition, two requisites must be proven, to wit:

1.  that the complainant corporation acquired a prior right over the use of such corporate name; and cralawlawlibrary

2.  the proposed name is either:

chanRoblesvirtualLawlibrary(a)     identical; or
(b)    deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or
(c)     patently deceptive,  confusing or contrary to existing law.46

These two requisites are present in this case.

FICCPI acquired a prior right over

the use of the corporate name

In Industrial Refractories Corporation of the Philippines v. Court of Appeals, 47 the Court applied the priority of adoption rule to
determine prior right, taking into consideration the dates when the parties used their respective corporate names. It ruled that
"Refractories Corporation of the Philippines" (RCP), as opposed to "Industrial Refractories Corporation of the Philippines" (IRCP), has
acquired the right to use the word "Refractories" as part of its corporate name, being its prior registrant on October 13, 1976. The
Court noted that IRCP only started using its corporate name when it amended its Articles of Incorporation on August 23,
1985.48chanrobleslaw

In this case, FICCPI was incorporated on March 14, 2006. On the other hand, ICCPI was incorporated only on April 5, 2006, or a
month after FICCPI registered its corporate name. Thus, applying the principle in the Refractories case, we hold that FICCPI, which
was incorporated earlier, acquired a prior right over the use of the corporate name.

ICCPI cannot argue that it first incorporated and held the "Filipino Indian Chamber of Commerce," in 1977; and that it established
the name's goodwill until it failed to renew its name due to oversight. 49 It is settled that a corporation is ipso facto dissolved as soon
as its term of existence expires.50 SEC Memorandum Circular No. 14-2000 likewise provides for the use of corporate names of
dissolved corporations:ChanRoblesVirtualawlibrary
14. The name of a dissolved firm shall not be allowed to be used by other firms within three (3) years after the approval of the
dissolution of the corporation by the Commission, unless allowed by the last stockholders representing at least majority of the
outstanding capital stock of the dissolved firm.
When the term of existence of the defunct FICCPI expired on November 24, 2001, its corporate name cannot be used by other
corporations within three years from that date, until November 24, 2004. FICCPI reserved the name "Filipino Indian Chamber of
Commerce in the Philippines, Inc." on January 20, 2005, or beyond the three-year period. Thus, the SEC was correct when it allowed
FICCPI to use the reserved corporate name.

ICCPI's name is identical and

deceptively or confusingly similar to
that of FICCPI

The second requisite in the Philips Export case likewise obtains in two respects: the proposed name is (a) identical or (b) deceptively
or confusingly similar to that of any existing corporation or to any other name already protected by law.

On the first point, ICCPI's name is identical to that of FICCPI. ICCPFs and FICCPFs corporate names both contain the same words
"Indian Chamber of Commerce." ICCPI argues that the word "Filipino" in FICCPFs corporate name makes it easily distinguishable
from ICCPI.51 It adds that confusion and deception are effectively precluded by appending the word "Filipino" to the phrase "Indian
Chamber of Commerce."52 Further, ICCPI claims that the corporate name of FICCPI uses the words "in the Philippines" while ICCPI
uses only "Phils, Inc."53chanrobleslaw

ICCPFs arguments are without merit. These words do not effectively distinguish the corporate names. On the one hand, the word
"Filipino" is merely a description, referring to a Filipino citizen or one living in the Philippines, to describe the corporation's members.
On the other, the words "in the Philippines" and "Phils., Inc." are simply geographical locations of the corporations which, even if
appended to both the corporate names, will not make one distinct from the other. Under the facts of this case, these words cannot
be separated from each other such that each word can be considered to add distinction to the corporate names. Taken together, the
words in the phrase "in the Philippines" and in the phrase "Phils. Inc." are synonymous—they both mean the location of the
corporation.

The same principle was adopted by this Court in Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc.
v. Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan: 54
Significantly, the only difference between the corporate names of petitioner and respondent are the words SALIGAN and SUHAY.
These words are synonymous-both mean ground, foundation or support. Hence, this case is on all fours with Universal Mills
Corporation v. Universal Textile Mills, Inc., where the Court ruled that the corporate names Universal Mills Corporation and
Universal Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable care and observation" confusion may
arise.55 (Italics in the original.)
Thus, the CA is correct when it ruled, "[a]s correctly found by the SEC en bane, the word 'Filipino' in the corporate name of the
respondent [FICCPI] is merely descriptive and can hardly serve as an effective differentiating medium necessary to avoid confusion.
The other two words alluded to by petitioner [ICCPI] that allegedly distinguishes its corporate name from that of the respondent are
the words  'in'  and 'the'  in the respondent's corporate name. To our mind, the presence of the words 'in' and 'the' in respondent's
corporate name does not, in any way, make an effective distinction to that of petitioner." 56chanrobleslaw

Petitioner cannot argue that the combination of words in respondent's corporate name is merely descriptive and generic, and
consequently cannot be appropriated as a corporate name to the exclusion of the others. 57 Save for the words "Filipino," "in the,"
and "Inc.," the corporate names of petitioner and respondent are identical in all other respects. This issue was also discussed in the
Iglesia case where this Court held,

Furthermore, the wholesale appropriation by petitioner of respondent's corporate name cannot find justification under the generic
word rule. We agree with the Court of Appeals' conclusion that a contrary ruling would encourage other corporations to adopt
verbatim and register an
existing and protected corporate name, to the detriment of the public. 58chanrobleslaw

On the second point, ICCPI's corporate name is deceptively or confusingly similar to that of FICCPI. It is settled that to determire the
existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person, using ordinary
care and discrimination. In so doing, the court must examine the record as well as the names themselves. 59 Proof of actual confusion
need not be shown. It suffices that confusion is probably or likely to occur. 60chanrobleslaw

In this case, the overriding consideration in determining wheiher a person, using ordinary care and discrimination, might be misled is
the circumstance that both ICCPI and FICCPI have a common primary purpose, that is, the promotion of Filipino-Indian business in
the Philippines.

The primary purposes of ICCPI as provided in its Articles of Incorporation are:

 a. Develop a stronger sense of brotherhood;

b. Enhance the prestige of the Filipino-Indian business community in the Philippines;

c. Promote cordial business relations with Filipinos and other business  communities  in the  Philippines,  and other overseas
Indian business organizations;

d. Respond fully to the needs of a progressive economy and the Filipino-Indian Business community;

e. Promote and foster relations between the people and Governments of the Republics of the Philippines and

India in areas of Industry, Trade, and Culture.61chanroblesvirtuallawlibrary

Likewise, the primary purpose of FICCPI is "[t]o actively promote and enhance the Filipino-Indian business relationship especially in
view of [current] local and global business trends." 62chanrobleslaw

Considering these corporate purposes, the  SEC En Banc made a finding that "[i]t is apparent that both from the standpoint of their
corporate names and the purposes for which they were established, there exist a I similarity that could inevitably lead to
confusion."63 This finding of the SEC En Bane was fully concurred with and adopted by the CA. 64chanrobleslaw

Findings of fact of quasi-judicial agencies, like the SEC, are generally accorded respect and even finality by this Court, if supported by
substantial evidence, in recognition of their expertise on the specific matters under their consideration, and more so if the same has
been upheld by the appellate court,65 as in this case.

Petitioner cannot argue that the CA erred when it upheld the SEC En Banc's decision to cancel ICCPFs corporate name.66 By express
mandate of law, the SEC has absolute jurisdiction, supervision and control over all corporations. 67 It is the SEC's duty to prevent
confusion in the use of corporate names not only for the protection of the corporation involved, but more so for the protection of
the public. It has the authority to de-register at all times, and under all circumstances corporate names which in its estimation are
likely to generate confusion.68chanrobleslaw

Pursuant to its mandate, the SEC En Banc correctly applied Section 18 of the Corporation Code, and Section 15 of SEC Memorandum
Circular No. 14-2000:ChanRoblesVirtualawlibrary
In implementing Section 18 of the Corporation Code of the Philippines (BP 68), the following revised guidelines in the approval of
corporate and partnership names are hereby adopted   for   the    information   and   guidelines    of   all concerned:

chanRoblesvirtualLawlibrary
xxx

15. Registrant corporations or partnership shall submit a letter undertaking to change their corporate or partnership name in case
another person or firm has acquired a prior right to the use of said firm name or the same is deceptively or confusingly similar to one
already registered unless this undertaking is already included as one of the provisions of the articles of incorporation or partnership
of the registrant.
Finding merit in respondent's claims, the SEC En Bane merely compelled petitioner to comply with its undertaking. 69chanrobleslaw

WHEREFORE, the petition is DENIED. The Decision of the CA dated May 15, 2008 in CA-G.R. SP No. 97320 is hereby AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrary
G.R. No. 104175 June 25, 1993

YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA, petitioners,

vs.
THE HONORABLE COURT OF APPEALS (THIRTEENTH DIVISION) AND GEORGE CHIONG ROXAS, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioners.

Antonio Nuyles for private respondent.

QUIASON, J.:

Petitioners seek to set aside the decision of respondent Court of Appeals in CA-G.R. SP No. 25237, which reversed the Order dated
February 8, 1991 issued by the Regional Trial Court, Branch 11, Cebu City in Civil Case No. CEB 6967. The order of the trial court
denied the motion to dismiss filed by respondent George C. Roxas of the complaint for collection filed by petitioners.

It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia, its president,
Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to
Roxas. The purchase price was P8,000,000.00 payable as follows: a downpayment of P4,000,000.00 and the balance of
P4,000,000.00 in four post dated checks of P1,000,000.00 each.

Immediately after the execution of the agreement, Roxas took full control of the four markets of CMDC. However, the vendors held
on to the stock certificates of CMDC as security pending full payment of the balance of the purchase price.

The first check of P4,000,000.00, representing the down-payment, was honored by the drawee bank but the four other checks
representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas sold one of the markets to a third party. Out of
the proceeds of the sale, YASCO received P600,000.00, leaving a balance of P3,400,000.00 (Rollo, p. 176).

Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the CMDC shares to
Nemesio Garcia.

On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu City, praying that Roxas be
ordered to pay petitioners the sum of P3,400,00.00 or that full control of the three markets be turned over to YASCO and Garcia. The
complaint also prayed for the forfeiture of the partial payment of P4,600,000.00 and the payment of attorney's fees and costs (Rollo,
p. 290).

Roxas filed two motions for extension of time to submit his answer. But despite said motion, he failed to do so causing petitioners to
file a motion to have him declared in default. Roxas then filed, through a new counsel, a third motion for extension of time to submit
a responsive pleading.

On August 19, 1988, the trial court declared Roxas in default. The order of default was, however, lifted upon motion of Roxas.

On August 22, 1988, Roxas filed a motion to dismiss on the grounds that:

1. The complaint did not state a cause of action due to non-joinder of indispensable parties;

2. The claim or demand set forth in the complaint had been waived, abandoned or otherwise extinguished; and

3. The venue was improperly laid (Rollo, p. 299).

After a hearing, wherein testimonial and documentary evidence were presented by both parties, the trial court in an Order dated
February 8, 1991 denied Roxas' motion to dismiss. After receiving said order, Roxas filed another motion for extension of time to
submit his answer. He also filed a motion for reconsideration, which the trial court denied in its Order dated April 10, 1991 for being
pro-forma (Rollo, p. 17). Roxas was again declared in default, on the ground that his motion for reconsideration did not toll the
running of the period to file his answer.

On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with the required affidavit
or merit. But without waiting for the resolution of the motion, he filed a petition for certiorari with the Court of Appeals.

The Court of Appeals sustained the findings of the trial court with regard to the first two grounds raised in the motion to dismiss but
ordered the dismissal of the complaint on the ground of improper venue (Rollo, p. 49).

A subsequent motion for reconsideration by petitioner was to no avail.

Petitioners now come before us, alleging that the Court of Appeals
erred in:

1. holding the venue should be in Pasay City, and not in Cebu City (where both petitioners/plaintiffs are residents;

2. not finding that Roxas is estopped from questioning the choice of venue (Rollo, p. 19).

The petition is meritorious.

In holding that the venue was improperly laid in Cebu City, the Court of Appeals relied on the address of YASCO, as appearing in the
Deed of Sale dated October 28, 1987, which is "No. 1708 Dominga Street, Pasay City." This was the same address written in YASCO's
letters and several commercial documents in the possession of Roxas (Decision, p. 12; Rollo, p. 48).

In the case of Garcia, the Court of Appeals said that he gave Pasay City as his address in three letters which he sent to Roxas'
brothers and sisters (Decision, p. 12; Rollo, p. 47). The appellate court held that Roxas was led by petitioners to believe that their
residence is in Pasay City and that he had relied upon those representations (Decision, p. 12, Rollo, p. 47).

The Court of Appeals erred in holding that the venue was improperly laid in Cebu City.

In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff [Sec. 2(b)
Rule 4, Revised Rules of Court].

There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both plaintiffs aver in their complaint that
they are residents of Cebu City, thus:

1.1. Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic corporation duly organized and existing under
Philippine laws with principal place of business at M. J. Cuenco Avenue, Cebu City. It also has a branch office at
1708 Dominga Street, Pasay City, Metro Manila.

Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with business address at Young Auto Supply
Co., Inc., M. J. Cuenco Avenue, Cebu City. . . . (Complaint, p. 1; Rollo, p. 81).

The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:

THIRD That the place where the principal office of the corporation is to be established or located is at Cebu City,
Philippines (as amended on December 20, 1980 and further amended on December 20, 1984) (Rollo, p. 273).

A corporation has no residence in the same sense in which this term is applied to a natural person. But for practical purposes, a
corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of
incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 256 [1916] Clavecilla Radio System v. Antillon, 19 SCRA 379 [1967]).
The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where the principal
office of the corporation is to be located which must be within the Philippines" (Sec. 14 [3]). The purpose of this requirement is to fix
the residence of a corporation in a definite place, instead of allowing it to be ambulatory.

In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot be filed against a corporation
in any place where the corporation maintains its branch offices. The Court ruled that to allow an action to be instituted in any place
where the corporation has branch offices, would create confusion and work untold inconvenience to said entity. By the same token,
a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also
the residence of a co-plaintiff or a defendant.

If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its principal place of business
was in Cebu City, Roxas could argue that YASCO was in estoppel because it misled Roxas to believe that Pasay City was its principal
place of business. But this is not the case before us.

With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal place of business is located, it
becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning
the choice of Cebu City as the venue.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals appealed from is SET ASIDE and the Order dated
February 8, 1991 of the Regional Trial Court is REINSTATED.

SO ORDERED.
G.R. No. 176579               June 28, 2011

WILSON P. GAMBOA, Petitioner,

vs.
FINANCE SECRETARY MARGARITO B. TEVES, FINANCE UNDERSECRETARY JOHN P. SEVILLA, AND COMMISSIONER RICARDO
ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS,
RESPECTIVELY, OF THE PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN HIS CAPACITY AS
DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L.
NAZARENO OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES EXCHANGE COMMISSION,
and PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE, Respondents.
PABLITO V. SANIDAD and ARNO V. SANIDAD, Petitioners-in-Intervention.

DECISION

CARPIO, J.:

The Case

This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of
Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific
Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific).

The Antecedents

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as
follows:1

On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in
telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major
PLDT stockholder, sold 26 percent of the outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was
incorporated by several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415
shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla.
In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on Good Government
(PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC, were later declared
by this Court to be owned by the Republic of the Philippines. 2

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the
outstanding capital stock of PTIC. On 20 November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine Government
announced that it would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public
bidding to be conducted on 4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two
bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of ₱25.6
billion or US$510 million.

Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC
shares by matching the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and
instead, yielded its right to PTIC itself which was then given by IPC until 2 March 2007 to buy the PTIC shares. On 14 February 2007,
First Pacific, through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or
46.125 percent of the outstanding capital stock of PTIC, with the Philippine Government for the price of ₱25,217,556,000 or
US$510,580,189. The sale was completed on 28 February 2007.

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect
sale of 12 million shares or about 6.3 percent of the outstanding common shares of PLDT. With the sale, First Pacific’s common
shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in
PLDT to about 81.47 percent. This violates 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 percent. 3

On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG
Commissioner Ricardo Abcede allege the following relevant facts:

On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263
PLDT common shares, or 13.847 percent of the total PLDT outstanding common shares. PHI, on the other hand, was incorporated in
1977, and became the owner of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three
Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were
sequestered by the PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand
Marcos. The sequestered PTIC shares were reconveyed to the Republic of the Philippines in accordance with this Court’s decision 4
which became final and executory on 8 August 2006.

The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares
of stock of PLDT, and designated the Inter-Agency Privatization Council (IPC), composed of the Department of Finance and the PCGG,
as the disposing entity. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20
November 2006, a pre-bid conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8
December 2006. The extension was published in nine different newspapers.

During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of ₱25,217,556,000.
The government notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February
2007 to exercise its right of first refusal in accordance with PTIC’s Articles of Incorporation. First Pacific announced its intention to
match Parallax’s bid.

On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the
particulars of the then impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended
the public hearing. The HR Committee Report No. 2270 concluded that: (a) the auction of the government’s 111,415 PTIC shares
bore due diligence, transparency and conformity with existing legal procedures; and (b) First Pacific’s intended acquisition of the
government’s 111,415 PTIC shares resulting in First Pacific’s 100% ownership of PTIC will not violate the 40 percent constitutional
limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding common shares of
PLDT.5 On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of PTIC.

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC
shares or 46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First
Pacific and its affiliates); (b) Parallax offered the highest bid amounting to ₱25,217,556,000; (c) pursuant to the right of first refusal in
favor of PTIC and its shareholders granted in PTIC’s Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of first
refusal by matching the highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was
consummated when MPAH paid IPC ₱25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares.
Respondent Pangilinan denies the other allegations of facts of petitioner.

On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of
sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase
in First Pacific’s common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMo’s
common shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40
percent constitutional limit.6 Petitioner asserts:

If and when the sale is completed, First Pacific’s equity in PLDT will go up from 30.7 percent to 37.0 percent of its common – or
voting- stockholdings, x x x. Hence, the consummation of the sale will put the two largest foreign investors in PLDT – First Pacific and
Japan’s NTT DoCoMo, which is the world’s largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity.
x x x With the completion of the sale, data culled from the official website of the New York Stock Exchange (www.nyse.com) showed
that those foreign entities, which own at least five percent of common equity, will collectively own 81.47 percent of PLDT’s common
equity. x x x

x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock
Exchange for the period 2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of
40 percent ownership as early as 2003. x x x"7
Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First
Pacific violates the constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave
abuse of discretion in allowing the sale of the 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to
foreigners in excess of 40 percent of the entire subscribed common capital stock violates the constitutional limit on foreign
ownership of a public utility.8

On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached Petition-in-
Intervention. In the Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention.

Petitioners-in-intervention "join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by
respondents of the 111,415 PTIC shares to First Pacific or assignee." Petitioners-in-intervention claim that, as PLDT subscribers, they
have a "stake in the outcome of the controversy x x x where the Philippine Government is completing the sale of government owned
assets in [PLDT], unquestionably a public utility, in violation of the nationality restrictions of the Philippine Constitution."

The Issue

This Court is not a trier of facts. Factual questions such as those raised by petitioner, 9 which indisputably demand a thorough
examination of the evidence of the parties, are generally beyond this Court’s jurisdiction. Adhering to this well-settled principle, the
Court shall confine the resolution of the instant controversy solely on the threshold and purely legal issue of whether the term
"capital" in Section 11, Article XII of the Constitution refers to the total common shares only or to the total outstanding capital stock
(combined total of common and non-voting preferred shares) of PLDT, a public utility.

The Ruling of the Court

The petition is partly meritorious.

Petition for declaratory relief treated as petition for mandamus

At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is
within the original jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the
Court of Appeals. The actions for declaratory relief, 10 injunction, and annulment of sale are not embraced within the original
jurisdiction of the Supreme Court. On this ground alone, the petition could have been dismissed outright.

While direct resort to this Court may be justified in a petition for prohibition, 11 the Court shall nevertheless refrain from discussing
the grounds in support of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when
MPAH paid IPC ₱25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares.

However, since the threshold and purely legal issue on the definition of the term "capital" in Section 11, Article XII of the
Constitution has far-reaching implications to the national economy, the Court treats the petition for declaratory relief as one for
mandamus.12

In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as one for mandamus
considering the grave injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape
committed by a foreign tourist against a Filipino minor and the execution of the final judgment in the civil case for damages on the
tourist’s dollar deposit with a local bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting foreign
currency deposits from attachment, garnishment or any other order or process of any court, inapplicable due to the peculiar
circumstances of the case. The Court held that "injustice would result especially to a citizen aggrieved by a foreign guest like accused
x x x" that would "negate Article 10 of the Civil Code which provides that ‘in case of doubt in the interpretation or application of
laws, it is presumed that the lawmaking body intended right and justice to prevail.’" The Court therefore required respondents
Central Bank of the Philippines, the local bank, and the accused to comply with the writ of execution issued in the civil case for
damages and to release the dollar deposit of the accused to satisfy the judgment.

In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the procedural infirmity of the petition
for declaratory relief and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully
excluded petitioners, who were government employees, from the enjoyment of rights to which they were entitled under the law.
Specifically, the question was: "Are the branches, agencies, subdivisions, and instrumentalities of the Government, including
government owned or controlled corporations included among the four ‘employers’ under Presidential Decree No. 851 which are
required to pay their employees x x x a thirteenth (13th) month pay x x x ?" The Constitutional principle involved therein affected all
government employees, clearly justifying a relaxation of the technical rules of procedure, and certainly requiring the interpretation
of the assailed presidential decree.

In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has far-
reaching implications. As this Court held in Salvacion:

The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been
recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated
as one for mandamus.15 (Emphasis supplied)

In the present case, petitioner seeks primarily the interpretation of the term "capital" in Section 11, Article XII of the Constitution. He
prays that this Court declare that the term "capital" refers to common shares only, and that such shares constitute "the sole basis in
determining foreign equity in a public utility." Petitioner further asks this Court to declare any ruling inconsistent with such
interpretation unconstitutional.

The interpretation of the term "capital" in Section 11, Article XII of the Constitution has far-reaching implications to the national
economy. In fact, a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their own
country. What is at stake here is whether Filipinos or foreigners will have effective control of the national economy. Indeed, if ever
there is a legal issue that has far-reaching implications to the entire nation, and to future generations of Filipinos, it is the threshhold
legal issue presented in this case.

The Court first encountered the issue on the definition of the term "capital" in Section 11, Article XII of the Constitution in the case
of Fernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case involved the same public utility (PLDT) and substantially the
same private respondents. Despite the importance and novelty of the constitutional issue raised therein and despite the fact that
the petition involved a purely legal question, the Court declined to resolve the case on the merits, and instead denied the same for
disregarding the hierarchy of courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Court’s
Decision of 21 February 2003 via a petition for review under Rule 45. The Court’s Resolution, denying the petition, became final on
21 December 2004.

The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issue which is of
transcendental importance to the national economy and a fundamental requirement to a faithful adherence to our Constitution. The
Court must forthwith seize such opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the
entire Filipino people, to ensure, in the words of the Constitution, "a self-reliant and independent national economy effectively
controlled by Filipinos."18 Besides, in the light of vague and confusing positions taken by government agencies on this purely legal
issue, present and future foreign investors in this country deserve, as a matter of basic fairness, a categorical ruling from this Court
on the extent of their participation in the capital of public utilities and other nationalized businesses.

Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since
the 1935 Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the
term "capital," which appears not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production
and joint venture agreements for the development of our natural resources, 19 in Section 7, Article XII on ownership of private lands, 20
in Section 10, Article XII on the reservation of certain investments to Filipino citizens, 21 in Section 4(2), Article XIV on the ownership
of educational institutions,22 and in Section 11(2), Article XVI on the ownership of advertising companies. 23

Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to
violate the nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the
Constitution, then there is a possibility that PLDT’s franchise could be revoked, a dire consequence directly affecting petitioner’s
interest as a stockholder.

More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The
fundamental and threshold legal issue in this case, involving the national economy and the economic welfare of the Filipino people,
far outweighs any perceived impediment in the legal personality of the petitioner to bring this action.
In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public,
thus:

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the
enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is
a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the
result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern,
a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and
enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners’ legal
standing, the Court declared that the right they sought to be enforced ‘is a public right recognized by no less than the fundamental
law of the land.’

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that ‘when a mandamus proceeding involves the
assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and,
therefore, part of the general ‘public’ which possesses the right.’

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned
contract for the development, management and operation of the Manila International Container Terminal, ‘public interest [was]
definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and
the magnitude of the financial consideration involved.’ We concluded that, as a consequence, the disclosure provision in the
Constitution would constitute sufficient authority for upholding the petitioner’s standing. (Emphasis supplied)

Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the
requisite locus standi.

Definition of the Term "Capital" in

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to
wit:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per
centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or
for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation
or association must be citizens of the Philippines. (Emphasis supplied)

The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:

Section 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per
centum of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that
it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The State shall
encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of
any public utility enterprise shall be limited to their proportionate share in the capital thereof. (Emphasis supplied)

The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz:

Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines sixty per centum of
the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except
under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires.
(Emphasis supplied)

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision
in the 1987 Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention. 25 The
1987 Constitution "provides for the Filipinization of public utilities by requiring that any form of authorization for the operation of
public utilities should be granted only to ‘citizens of the Philippines or to corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital is owned by such citizens.’ The provision is [an express] recognition of the
sensitive and vital position of public utilities both in the national economy and for national security." 26 The evident purpose of the
citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest. 27
This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic goal of the
1987 Constitution: to "conserve and develop our patrimony" 28 and ensure "a self-reliant and independent national economy
effectively controlled by Filipinos."29

Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement
prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at
least 60 percent of its "capital" must be owned by Filipino citizens.

The crux of the controversy is the definition of the term "capital." Does the term "capital" in Section 11, Article XII of the
Constitution refer to common shares or to the total outstanding capital stock (combined total of common and non-voting preferred
shares)?

Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because
such shares are entitled to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term
"capital" in Section 11, Article XII of the Constitution refers to "the ownership of common capital stock subscribed and outstanding,
which class of shares alone, under the corporate set-up of PLDT, can vote and elect members of the board of directors." It is
undisputed that PLDT’s non-voting preferred shares are held mostly by Filipino citizens. 30 This arose from Presidential Decree No.
217,31 issued on 16 June 1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to
non-voting preferred shares to pay for the investment cost of installing the telephone line. 32

Petitioners-in-intervention basically reiterate petitioner’s arguments and adopt petitioner’s definition of the term "capital." 33
Petitioners-in-intervention allege that "the approximate foreign ownership of common capital stock of PLDT x x x already amounts to
at least 63.54% of the total outstanding common stock," which means that foreigners exercise significant control over PLDT, patently
violating the 40 percent foreign equity limitation in public utilities prescribed by the Constitution.

Respondents, on the other hand, do not offer any definition of the term "capital" in Section 11, Article XII of the Constitution. More
importantly, private respondents Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the common shares
of PLDT are held by foreigners.

In particular, respondent Nazareno’s Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition
and the supposed violation of the due process rights of the "affected foreign common shareholders." Respondent Nazareno does
not deny petitioner’s allegation of foreigners’ dominating the common shareholdings of PLDT. Nazareno stressed mainly that the
petition "seeks to divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of
their ownership over their shares." Thus, "the foreign natural and juridical PLDT shareholders must be impleaded in this suit so that
they can be heard."34 Essentially, Nazareno invokes denial of due process on behalf of the foreign common shareholders.

While Nazareno does not introduce any definition of the term "capital," he states that "among the factual assertions that need to
be established to counter petitioner’s allegations is the uniform interpretation by government agencies (such as the SEC),
institutions and corporations (such as the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of
including both preferred shares and common shares in "controlling interest" in view of testing compliance with the 40%
constitutional limitation on foreign ownership in public utilities."35

Similarly, respondent Manuel V. Pangilinan does not define the term "capital" in Section 11, Article XII of the Constitution. Neither
does he refute petitioner’s claim of foreigners holding more than 40 percent of PLDT’s common shares. Instead, respondent
Pangilinan focuses on the procedural flaws of the petition and the alleged violation of the due process rights of foreigners.
Respondent Pangilinan emphasizes in his Memorandum (1) the absence of this Court’s jurisdiction over the petition; (2) petitioner’s
lack of standing; (3) mootness of the petition; (4) non-availability of declaratory relief; and (5) the denial of due process rights.
Moreover, respondent Pangilinan alleges that the issue should be whether "owners of shares in PLDT as well as owners of shares in
companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies without any law
requiring them to surrender their shares and also without notice and trial."

Respondent Pangilinan further asserts that "Section 11, [Article XII of the Constitution] imposes no nationality requirement on the
shareholders of the utility company as a condition for keeping their shares in the utility company." According to him, "Section 11
does not authorize taking one person’s property (the shareholder’s stock in the utility company) on the basis of another party’s
alleged failure to satisfy a requirement that is a condition only for that other party’s retention of another piece of property (the
utility company being at least 60% Filipino-owned to keep its franchise)." 36

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede,
and Chairman Fe Barin, is likewise silent on the definition of the term "capital." In its Memorandum 37 dated 24 September 2007, the
OSG also limits its discussion on the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, non-
inclusion of interested parties, and lack of basis for injunction. The OSG does not present any definition or interpretation of the term
"capital" in Section 11, Article XII of the Constitution. The OSG contends that "the petition actually partakes of a collateral attack on
PLDT’s franchise as a public utility," which in effect requires a "full-blown trial where all the parties in interest are given their day in
court."38

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not
also define the term "capital" and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action
against Lim; (2) the PSE allegedly implemented its rules and required all listed companies, including PLDT, to make proper and timely
disclosures; and (3) the reliefs prayed for in the petition would adversely impact the stock market.

In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended
that the term "capital" in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus:

The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of
stock entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x

Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially
nationalized activities is for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the
Trial Court’s ruling upholding respondents’ arguments were to be given credence, it would be possible for the ownership structure of
a public utility corporation to be divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks.
Following the Trial Court’s ruling adopting respondents’ arguments, the common shares can be owned entirely by foreigners thus
creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control the public utility
corporation.

xxxx

Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling
interest.

xxxx

Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to
ownership of shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it
must be shown that the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner
PLDT, since it is already admitted that the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition
of SMART shares through the Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between the foreign
principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution.

Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the
meaning of the word "capital" as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares
subscribed and paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as common or preferred,
cannot stand in the face of a clear legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were
rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it to state that as between the law and an
opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are merely advisory and cannot
prevail over the clear intent of the framers of the Constitution.

In the same vein, the SEC’s construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that
finally determine what a law means.39

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal
B. Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando
B. Vea, argued that the term "capital" in Section 11, Article XII of the Constitution includes preferred shares since the Constitution
does not distinguish among classes of stock, thus:

16. The Constitution applies its foreign ownership limitation on the corporation’s "capital," without distinction as to classes of
shares. x x x

In this connection, the Corporation Code – which was already in force at the time the present (1987) Constitution was drafted –
defined outstanding capital stock as follows:

Section 137. Outstanding capital stock defined. – The term "outstanding capital stock", as used in this Code, means the total shares
of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except
treasury shares.

Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of
shares, in determining the outstanding capital stock (the "capital") of a corporation. Consequently, petitioner’s suggestion to reckon
PLDT’s foreign equity only on the basis of PLDT’s outstanding common shares is without legal basis. The language of the Constitution
should be understood in the sense it has in common use.

xxxx

17. But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of
the Constitutional Commission (Vol. III) – which petitioner misleadingly cited in the Petition x x x – which supports petitioner’s view
that only common shares should form the basis for computing a public utility’s foreign equity.

xxxx

18. In addition, the SEC – the government agency primarily responsible for implementing the Corporation Code, and which also has
the responsibility of ensuring compliance with the Constitution’s foreign equity restrictions as regards nationalized activities x x x –
has categorically ruled that both common and preferred shares are properly considered in determining outstanding capital stock and
the nationality composition thereof.40

We agree with petitioner and petitioners-in-intervention. The term "capital" in Section 11, Article XII of the 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, 41 and not to the
total outstanding capital stock comprising both common and non-voting preferred shares.

The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any
of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation:
Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have
complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for
in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building
and loan associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in
case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation
which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par
value. The Board of Directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares
of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with
the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall
not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a
consideration less than the value of five (₱5.00) pesos per share: Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all
respects to every other share.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another corporation or other corporations;

7. Investment of corporate funds in another corporation or business in accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in
this Code shall be deemed to refer only to stocks with voting rights.

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation. 43 This is
exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation. 44
In the absence of provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the
same voting rights as common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the
right to vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely investors in
the corporation for income in the same manner as bondholders. 45 In fact, under the Corporation Code only preferred or redeemable
shares can be deprived of the right to vote.46 Common shares cannot be deprived of the right to vote in any corporate meeting, and
any provision in the articles of incorporation restricting the right of common shareholders to vote is invalid. 47

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.

This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control
and management of public utilities. As revealed in the deliberations of the Constitutional Commission, "capital" refers to the voting
stock or controlling interest of a corporation, to wit:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3,
60-40 in Section 9 and 2/3-1/3 in Section 15.

MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the Committee
please enlighten me on this?

MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft.
The phrase that is contained here which we adopted from the UP draft is "60 percent of voting stock."

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be
entitled to vote.

MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests in
another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?

MR. VILLEGAS. Yes, that is the understanding of the Committee.

MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. Yes.48

xxxx

MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest."

MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty
percent of whose CAPITAL is owned by such citizens."

MR. VILLEGAS. Yes.

MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens.

MR. VILLEGAS. That is right.

MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the capital is
owned by them, but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have a situation where
the corporation is controlled by foreigners despite being the minority because they have the voting capital. That is the anomaly
that would result here.

MR. BENGZON. No, the reason we eliminated the word "stock" as stated in the 1973 and 1935 Constitutions is that according to
Commissioner Rodrigo, there are associations that do not have stocks. That is why we say "CAPITAL."

MR. AZCUNA. We should not eliminate the phrase "controlling interest."

MR. BENGZON. In the case of stock corporations, it is assumed. 49 (Emphasis supplied)

Thus, 60 percent of the "capital" assumes, or should result in, "controlling interest" in the corporation. Reinforcing this
interpretation of the term "capital," as referring to controlling interest or shares entitled to vote, is the definition of a "Philippine
national" in the Foreign Investments Act of 1991, 50 to wit:

SEC. 3. Definitions. - As used in this Act:

a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by
citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad
and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital
stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit
of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange
Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of
both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the
Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered
a "Philippine national." (Emphasis supplied)

In explaining the definition of a "Philippine national," the Implementing Rules and Regulations of the Foreign Investments Act of
1991 provide:

b. "Philippine national" shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens
of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital
stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent [60%] of the fund
will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a
Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and
entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the
members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall
be considered a Philippine national. The control test shall be applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock
whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks,
the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or
Philippine nationals.

Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals.
(Emphasis supplied)

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]."

Under Section 10, Article XII of the Constitution, Congress may "reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may
prescribe, certain areas of investments." Thus, in numerous laws Congress has reserved certain areas of investments to Filipino
citizens or to corporations at least sixty percent of the "capital" of which is owned by Filipino citizens. Some of these laws are: (1)
Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna
Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471;
(5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055;
and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term "capital" in Section 11, Article XII of the Constitution is also used in
the same context in numerous laws reserving certain areas of investments to Filipino citizens.
To construe broadly the term "capital" as the total outstanding capital stock, including both common and non-voting preferred
shares, grossly contravenes the intent and letter of the Constitution that the "State shall develop a self-reliant and independent
national economy effectively controlled by Filipinos." A broad definition unjustifiably disregards who owns the all-important voting
stock, which necessarily equates to control of the public utility.

We shall illustrate the glaring anomaly in giving a broad definition to the term "capital." Let us assume that a corporation has 100
common shares owned by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share
having a par value of one peso (₱1.00) per share. Under the broad definition of the term "capital," such corporation would be
considered compliant with the 40 percent constitutional limit on foreign equity of public utilities since the overwhelming majority, or
more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd.

In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold
only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the
other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have
no control over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language
of the Constitution, to place the control of public utilities in the hands of Filipinos. It also renders illusory the State policy of an
independent national economy effectively controlled by Filipinos.

The example given is not theoretical but can be found in the real world, and in fact exists in the present case.

Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDT’s Articles of Incorporation
expressly state that "the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the
election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or
to receive notice of any meeting of stockholders." 51

On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDT’s Articles of
Incorporation52 state that "each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by
him on all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote
for the election of directors and for all other purposes."53

In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control
over PLDT. Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control
over PLDT. In fact, under PLDT’s Articles of Incorporation, holders of common shares have voting rights for all purposes, while
holders of preferred shares have no voting right for any purpose whatsoever.

It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based
on PLDT’s 2010 General Information Sheet (GIS), 54 which is a document required to be submitted annually to the Securities and
Exchange Commission,55 foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common
shares.56 In other words, foreigners hold 64.27% of the total number of PLDT’s common shares, while Filipinos hold only 35.73%.
Since holding a majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount
of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section
11, Article XII of the Constitution.

Moreover, the Dividend Declarations of PLDT for 2009, 57 as submitted to the SEC, shows that per share the SIP 58 preferred shares
earn a pittance in dividends compared to the common shares. PLDT declared dividends for the common shares at ₱70.00 per share,
while the declared dividends for the preferred shares amounted to a measly ₱1.00 per share. 59 So the preferred shares not only
cannot vote in the election of directors, they also have very little and obviously negligible dividend earning capacity compared to
common shares.

As shown in PLDT’s 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares is ₱5.00 per share, whereas the par
value of preferred shares is ₱10.00 per share. In other words, preferred shares have twice the par value of common shares but
cannot elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned
by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares. 61 Worse, preferred shares constitute 77.85% of the
authorized capital stock of PLDT while common shares constitute only 22.15%. 62 This undeniably shows that beneficial interest in
PLDT is not with the non-voting preferred shares but with the common shares, blatantly violating the constitutional requirement of
60 percent Filipino control and Filipino beneficial ownership in a public utility.
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance
with the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of
the voting rights, is constitutionally required for the State’s grant of authority to operate a public utility. The undisputed fact that the
PLDT preferred shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares
earn, grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a public
utility.

In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This
directly contravenes the express command in Section 11, Article XII of the Constitution that "[n]o franchise, certificate, or any other
form of authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws
of the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x."

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the
election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT’s common shares, constituting a
minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no
voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn; 63 (5) preferred shares have twice the
par value of common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares
only 22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution.

Incidentally, the fact that PLDT common shares with a par value of ₱5.00 have a current stock market value of ₱2,328.00 per share, 64
while PLDT preferred shares with a par value of ₱10.00 per share have a current stock market value ranging from only ₱10.92 to
₱11.06 per share,65 is a glaring confirmation by the market that control and beneficial ownership of PLDT rest with the common
shares, not with the preferred shares.

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. The
Court must perform its solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in the words of the
Constitution, "a self-reliant and independent national economy effectively controlled by Filipinos."

Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinos specific areas of
investment, such as the development of natural resources and ownership of land, educational institutions and advertising business,
is self-executing. There is no need for legislation to implement these self-executing provisions of the Constitution. The rationale why
these constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:

x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption
now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation
instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law.
This can be cataclysmic. That is why the prevailing view is, as it has always been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the contrary is
clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the
legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of
the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute.
(Emphasis supplied)

In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that
constitutional provisions are presumed to be self-executing. Justice Puno stated:

Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their
enforcement. The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental
law ratified by the sovereign people can be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the
unyielding rule that legislative actions may give breath to constitutional rights but congressional inaction should not suffocate
them.
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person
under custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is
unnecessary to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the
protection of property. The same treatment is accorded to constitutional provisions forbidding the taking or damaging of property
for public use without just compensation. (Emphasis supplied)

Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935,
1973 and 1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68 this Court ruled:

x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen
and the alien have violated the law, none of them should have a recourse against the other, and it should only be the State that
should be allowed to intervene and determine what is to be done with the property subject of the violation. We have said that what
the State should do or could do in such matters is a matter of public policy, entirely beyond the scope of judicial authority.
(Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what
policy should be followed in cases of violations against the constitutional prohibition, courts of justice cannot go beyond by
declaring the disposition to be null and void as violative of the Constitution. x x x (Emphasis supplied)

To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last
75 years, not one of the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60
percent of the "capital" of which is owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987
Constitutions miserably failed to effectively reserve to Filipinos specific areas of investment, like the operation by corporations of
public utilities, the exploitation by corporations of mineral resources, the ownership by corporations of real estate, and the
ownership of educational institutions. All the legislatures that convened since 1935 also miserably failed to enact legislations to
implement these vital constitutional provisions that determine who will effectively control the national economy, Filipinos or
foreigners. This Court cannot allow such an absurd interpretation of the Constitution.

This Court has held that the SEC "has both regulatory and adjudicative functions." 69 Under its regulatory functions, the SEC can be
compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or
quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it
administers or enforces when it is mandated by law to investigate such violation.1awphi1

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of
Incorporation of any corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the
Philippines has not been complied with as required by existing laws or the Constitution." Thus, the SEC is the government agency
tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the
ownership of public utilities. This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the
present case, can direct the SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected
to do based on the 2010 GIS that respondent PLDT submitted to the SEC.

Under Section 5(m) of the Securities Regulation Code, 71 the SEC is vested with the "power and function" to "suspend or revoke, after
proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of
the grounds provided by law." The SEC is mandated under Section 5(d) of the same Code with the "power and function" to
"investigate x x x the activities of persons to ensure compliance" with the laws and regulations that SEC administers or enforces.
The GIS that all corporations are required to submit to SEC annually should put the SEC on guard against violations of the nationality
requirement prescribed in the Constitution and existing laws. This Court can compel the SEC, in a petition for declaratory relief that
is treated as a petition for mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of the
Constitution in view of the ownership structure of PLDT’s voting shares, as admitted by respondents and as stated in PLDT’s 2010 GIS
that PLDT submitted to SEC.

WHEREFORE, we PARTLY GRANT the petition and rule 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.

SO ORDERED.
G.R. No. 176579               October 9, 2012

HEIRS OF WILSON P. GAMBOA,* Petitioners,

vs.
FINANCE SECRETARYMARGARITO 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,
RESPECTIVELY, OF THE PRIVATIZATION COUNCIL, CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN HIS CAPACITY AS
DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L.
NAZARENO OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES AND EXCHANGE
COMMISSION, and PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE, Respondents.

PABLITO V. SANIDAD and ARNO V. SANIDAD, Petitioner-in-Intervention.

RESOLUTION

CARPIO, J.:

This resolves the motions for reconsideration of the 28 June 2011 Decision filed by (1) the Philippine Stock Exchange's (PSE)
President, 1 (2) Manuel V. Pangilinan (Pangilinan),2 (3) Napoleon L. Nazareno (Nazareno ), 3 and ( 4) the Securities and Exchange
Commission (SEC)4 (collectively, movants ).

The Office of the Solicitor General (OSG) initially filed a motion for reconsideration on behalfofthe SEC, 5 assailing the 28 June 2011
Decision. However, it subsequently filed a Consolidated Comment on behalf of the State, 6 declaring expressly that it agrees with the
Court's definition of the term "capital" in Section 11, Article XII of the Constitution. During the Oral Arguments on 26 June 2012, the
OSG reiterated its position consistent with the Court's 28 June 2011 Decision.

We deny the motions for reconsideration.

I.
Far-reaching implications of the legal issue justify
treatment of petition for declaratory relief as one for mandamus.

As we emphatically stated in the 28 June 2011 Decision, the interpretation of the term "capital" in Section 11, Article XII of the
Constitution has far-reaching implications to the national economy. In fact, a resolution of this issue will determine whether Filipinos
are masters, or second-class citizens, in their own country. What is at stake here is whether Filipinos or foreigners will have effective
control of the Philippine national economy. Indeed, if ever there is a legal issue that has far-reaching implications to the entire
nation, and to future generations of Filipinos, it is the threshold legal issue presented in this case.

Contrary to Pangilinan’s narrow view, the serious economic consequences resulting in the interpretation of the term "capital" in
Section 11, Article XII of the Constitution undoubtedly demand an immediate adjudication of this issue. Simply put, the far-reaching
implications of this issue justify the treatment of the petition as one for mandamus. 7

In Luzon Stevedoring Corp. v. Anti-Dummy Board,8 the Court deemed it wise and expedient to resolve the case although the petition
for declaratory relief could be outrightly dismissed for being procedurally defective. There, appellant admittedly had already
committed a breach of the Public Service Act in relation to the Anti-Dummy Law since it had been employing non- American aliens
long before the decision in a prior similar case. However, the main issue in Luzon Stevedoring was of transcendental importance,
involving the exercise or enjoyment of rights, franchises, privileges, properties and businesses which only Filipinos and qualified
corporations could exercise or enjoy under the Constitution and the statutes. Moreover, the same issue could be raised by appellant
in an appropriate action. Thus, in Luzon Stevedoring the Court deemed it necessary to finally dispose of the case for the guidance of
all concerned, despite the apparent procedural flaw in the petition.
The circumstances surrounding the present case, such as the supposed procedural defect of the petition and the pivotal legal issue
involved, resemble those in Luzon Stevedoring. Consequently, in the interest of substantial justice and faithful adherence to the
Constitution, we opted to resolve this case for the guidance of the public and all concerned parties.

II.
No change of any long-standing rule;
thus, no redefinition of the term "capital."

Movants contend that the term "capital" in Section 11, Article XII of the Constitution has long been settled and defined to refer to
the total outstanding shares of stock, whether voting or non-voting. In fact, movants claim that the SEC, which is the administrative
agency tasked to enforce the 60-40 ownership requirement in favor of Filipino citizens in the Constitution and various statutes, has
consistently adopted this particular definition in its numerous opinions. Movants point out that with the 28 June 2011 Decision, the
Court in effect introduced a "new" definition or "midstream redefinition" 9 of the term "capital" in Section 11, Article XII of the
Constitution.

This is egregious error.

For more than 75 years since the 1935 Constitution, the Court has not interpreted or defined the term "capital" found in various
economic provisions of the 1935, 1973 and 1987 Constitutions. There has never been a judicial precedent interpreting the term
"capital" in the 1935, 1973 and 1987 Constitutions, until now. Hence, it is patently wrong and utterly baseless to claim that the Court
in defining the term "capital" in its 28 June 2011 Decision modified, reversed, or set aside the purported long-standing definition of
the term "capital," which supposedly refers to the total outstanding shares of stock, whether voting or non-voting. To repeat, until
the present case there has never been a Court ruling categorically defining the term "capital" found in the various economic
provisions of the 1935, 1973 and 1987 Philippine Constitutions.

The opinions of the SEC, as well as of the Department of Justice (DOJ), on the definition of the term "capital" as referring to both
voting and non-voting shares (combined total of common and preferred shares) are, in the first place, conflicting and inconsistent.
There is no basis whatsoever to the claim that the SEC and the DOJ have consistently and uniformly adopted a definition of the term
"capital" contrary to the definition that this Court adopted in its 28 June 2011 Decision.

In DOJ Opinion No. 130, s. 1985,10 dated 7 October 1985, the scope of the term "capital" in Section 9, Article XIV of the 1973
Constitution was raised, that is, whether the term "capital" includes "both preferred and common stocks." The issue was raised in
relation to a stock-swap transaction between a Filipino and a Japanese corporation, both stockholders of a domestic corporation
that owned lands in the Philippines. Then Minister of Justice Estelito P. Mendoza ruled that the resulting ownership structure of the
corporation would be unconstitutional because 60% of the voting stock would be owned by Japanese while Filipinos would own only
40% of the voting stock, although when the non-voting stock is added, Filipinos would own 60% of the combined voting and non-
voting stock. This ownership structure is remarkably similar to the current ownership structure of PLDT. Minister Mendoza ruled:

xxxx

Thus, the Filipino group still owns sixty (60%) of the entire subscribed capital stock (common and preferred) while the Japanese
investors control sixty percent (60%) of the common (voting) shares.

It is your position that x x x since Section 9, Article XIV of the Constitution uses the word "capital," which is construed "to include
both preferred and common shares" and "that where the law does not distinguish, the courts shall not distinguish."

xxxx

In light of the foregoing jurisprudence, it is my opinion that the stock-swap transaction in question may not be constitutionally
upheld. While it may be ordinary corporate practice to classify corporate shares into common voting shares and preferred non-
voting shares, any arrangement which attempts to defeat the constitutional purpose should be eschewed. Thus, the resultant equity
arrangement which would place ownership of 60%11 of the common (voting) shares in the Japanese group, while retaining 60% of
the total percentage of common and preferred shares in Filipino hands would amount to circumvention of the principle of control
by Philippine stockholders that is implicit in the 60% Philippine nationality requirement in the Constitution. (Emphasis supplied)

In short, Minister Mendoza categorically rejected the theory that the term "capital" in Section 9, Article XIV of the 1973 Constitution
includes "both preferred and common stocks" treated as the same class of shares regardless of differences in voting rights and
privileges. Minister Mendoza stressed that the 60-40 ownership requirement in favor of Filipino citizens in the Constitution is not
complied with unless the corporation "satisfies the criterion of beneficial ownership" and that in applying the same "the primordial
consideration is situs of control."

On the other hand, in Opinion No. 23-10 dated 18 August 2010, addressed to Castillo Laman Tan Pantaleon & San Jose, then SEC
General Counsel Vernette G. Umali-Paco applied the Voting Control Test, that is, using only the voting stock to determine whether a
corporation is a Philippine national. The Opinion states:

Applying the foregoing, particularly the Control Test, MLRC is deemed as a Philippine national because: (1) sixty percent (60%) of its
outstanding capital stock entitled to vote is owned by a Philippine national, the Trustee; and (2) at least sixty percent (60%) of the
ERF will accrue to the benefit of Philippine nationals. Still pursuant to the Control Test, MLRC’s investment in 60% of BFDC’s
outstanding capital stock entitled to vote shall be deemed as of Philippine nationality, thereby qualifying BFDC to own private
land.

Further, under, and for purposes of, the FIA, MLRC and BFDC are both Philippine nationals, considering that: (1) sixty percent (60%)
of their respective outstanding capital stock entitled to vote is owned by a Philippine national (i.e., by the Trustee, in the case of
MLRC; and by MLRC, in the case of BFDC); and (2) at least 60% of their respective board of directors are Filipino citizens. (Boldfacing
and italicization supplied)

Clearly, these DOJ and SEC opinions are compatible with the Court’s interpretation of the 60-40 ownership requirement in favor of
Filipino citizens mandated by the Constitution for certain economic activities. At the same time, these opinions highlight the
conflicting, contradictory, and inconsistent positions taken by the DOJ and the SEC on the definition of the term "capital" found in
the economic provisions of the Constitution.

The opinions issued by SEC legal officers do not have the force and effect of SEC rules and regulations because only the SEC en banc
can adopt rules and regulations. As expressly provided in Section 4.6 of the Securities Regulation Code, 12 the SEC cannot delegate to
any of its individual Commissioner or staff the power to adopt any rule or regulation. Further, under Section 5.1 of the same Code, it
is the SEC as a collegial body, and not any of its legal officers, that is empowered to issue opinions and approve rules and
regulations. Thus:

4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any department or office of the Commission, an
individual Commissioner or staff member of the Commission except its review or appellate authority and its power to adopt, alter
and supplement any rule or regulation.

The Commission may review upon its own initiative or upon the petition of any interested party any action of any department or
office, individual Commissioner, or staff member of the Commission.

SEC. 5. Powers and Functions of the Commission.- 5.1. The Commission shall act with transparency and shall have the powers and
functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing
Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and
functions:

xxxx

(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise
compliance with such rules, regulations and orders;

x x x x (Emphasis supplied)

Thus, the act of the individual Commissioners or legal officers of the SEC in issuing opinions that have the effect of SEC rules or
regulations is ultra vires. Under Sections 4.6 and 5.1(g) of the Code, only the SEC en banc can "issue opinions" that have the force
and effect of rules or regulations. Section 4.6 of the Code bars the SEC en banc from delegating to any individual Commissioner or
staff the power to adopt rules or regulations. In short, any opinion of individual Commissioners or SEC legal officers does not
constitute a rule or regulation of the SEC.

The SEC admits during the Oral Arguments that only the SEC en banc, and not any of its individual commissioners or legal staff, is
empowered to issue opinions which have the same binding effect as SEC rules and regulations, thus:
JUSTICE CARPIO:

So, under the law, it is the Commission En Banc that can issue an

SEC Opinion, correct?

COMMISSIONER GAITE:13

That’s correct, Your Honor.

JUSTICE CARPIO:

Can the Commission En Banc delegate this function to an SEC officer?

COMMISSIONER GAITE:

Yes, Your Honor, we have delegated it to the General Counsel.

JUSTICE CARPIO:

It can be delegated. What cannot be delegated by the Commission En Banc to a commissioner or an individual employee of
the Commission?

COMMISSIONER GAITE:

Novel opinions that [have] to be decided by the En Banc...

JUSTICE CARPIO:

What cannot be delegated, among others, is the power to adopt or amend rules and regulations, correct?

COMMISSIONER GAITE:

That’s correct, Your Honor.

JUSTICE CARPIO:

So, you combine the two (2), the SEC officer, if delegated that power, can issue an opinion but that opinion does not
constitute a rule or regulation, correct?

COMMISSIONER GAITE:

Correct, Your Honor.

JUSTICE CARPIO:

So, all of these opinions that you mentioned they are not rules and regulations, correct?

COMMISSIONER GAITE:

They are not rules and regulations.

JUSTICE CARPIO:

If they are not rules and regulations, they apply only to that particular situation and will not constitute a precedent, correct?
COMMISSIONER GAITE:

Yes, Your Honor.14 (Emphasis supplied)

Significantly, the SEC en banc, which is the collegial body statutorily empowered to issue rules and opinions on behalf of the SEC, has
adopted even the Grandfather Rule in determining compliance with the 60-40 ownership requirement in favor of Filipino citizens
mandated by the Constitution for certain economic activities. This prevailing SEC ruling, which the SEC correctly adopted to thwart
any circumvention of the required Filipino "ownership and control," is laid down in the 25 March 2010 SEC en banc ruling in
Redmont Consolidated Mines, Corp. v. McArthur Mining, Inc., et al.,15 to wit:

The avowed purpose of the Constitution is to place in the hands of Filipinos the exploitation of our natural resources. Necessarily,
therefore, the Rule interpreting the constitutional provision should not diminish that right through the legal fiction of corporate
ownership and control. But the constitutional provision, as interpreted and practiced via the 1967 SEC Rules, has favored foreigners
contrary to the command of the Constitution. Hence, the Grandfather Rule must be applied to accurately determine the actual
participation, both direct and indirect, of foreigners in a corporation engaged in a nationalized activity or business.

Compliance with the constitutional limitation(s) on engaging in nationalized activities must be determined by ascertaining if 60% of
the investing corporation’s outstanding capital stock is owned by "Filipino citizens", or as interpreted, by natural or individual Filipino
citizens. If such investing corporation is in turn owned to some extent by another investing corporation, the same process must be
observed. One must not stop until the citizenships of the individual or natural stockholders of layer after layer of investing
corporations have been established, the very essence of the Grandfather Rule.

Lastly, it was the intent of the framers of the 1987 Constitution to adopt the Grandfather Rule. In one of the discussions on what is
now Article XII of the present Constitution, the framers made the following exchange:

MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3,
60-40 in Section 9, and 2/3-1/3 in Section 15.

MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with the question: ‘Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation’? Will the Committee please
enlighten me on this?

MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft.
The phrase that is contained here which we adopted from the UP draft is ‘60 percent of voting stock.’

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be
entitled to vote.

MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you. With respect to an investment by one corporation in another corporation, say, a corporation with 60-40
percent equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the
grandfather rule?

MR. VILLEGAS. Yes, that is the understanding of the Committee.

MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. Yes. (Boldfacing and underscoring supplied; italicization in the original)

This SEC en banc ruling conforms to our 28 June 2011 Decision that 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 Filipinoowned "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."

The interpretation by legal officers of the SEC of the term "capital," embodied in various opinions which respondents relied upon, is
merely preliminary and an opinion only of such officers. To repeat, any such opinion does not constitute an SEC rule or regulation. In
fact, many of these opinions contain a disclaimer which expressly states: "x x x the foregoing opinion is based solely on facts
disclosed in your query and relevant only to the particular issue raised therein and shall not be used in the nature of a standing rule
binding upon the Commission in other cases whether of similar or dissimilar circumstances."16 Thus, the opinions clearly make a
caveat that they do not constitute binding precedents on any one, not even on the SEC itself.

Likewise, the opinions of the SEC en banc, as well as of the DOJ, interpreting the law are neither conclusive nor controlling and thus,
do not bind the Court. It is hornbook doctrine that any interpretation of the law that administrative or quasi-judicial agencies make
is only preliminary, never conclusive on the Court. The power to make a final interpretation of the law, in this case the term "capital"
in Section 11, Article XII of the 1987 Constitution, lies with this Court, not with any other government entity.

In his motion for reconsideration, the PSE President cites the cases of National Telecommunications Commission v. Court of Appeals 17
and Philippine Long Distance Telephone Company v. National Telecommunications Commission 18 in arguing that the Court has already
defined the term "capital" in Section 11, Article XII of the 1987 Constitution. 19

The PSE President is grossly mistaken. In both cases of National Telecommunications v. Court of Appeals 20 and Philippine Long
Distance Telephone Company v. National Telecommunications Commission, 21 the Court did not define the term "capital" as found in
Section 11, Article XII of the 1987 Constitution. In fact, these two cases never mentioned, discussed or cited Section 11, Article XII
of the Constitution or any of its economic provisions, and thus cannot serve as precedent in the interpretation of Section 11,
Article XII of the Constitution. These two cases dealt solely with the determination of the correct regulatory fees under Section
40(e) and (f) of the Public Service Act, to wit:

(e) For annual reimbursement of the expenses incurred by the Commission in the supervision of other public services and/or in the
regulation or fixing of their rates, twenty centavos for each one hundred pesos or fraction thereof, of the capital stock subscribed or
paid, or if no shares have been issued, of the capital invested, or of the property and equipment whichever is higher.

(f) For the issue or increase of capital stock, twenty centavos for each one hundred pesos or fraction thereof, of the increased
capital. (Emphasis supplied)

The Court’s interpretation in these two cases of the terms "capital stock subscribed or paid," "capital stock" and "capital" does not
pertain to, and cannot control, the definition of the term "capital" as used in Section 11, Article XII of the Constitution, or any of the
economic provisions of the Constitution where the term "capital" is found. The definition of the term "capital" found in the
Constitution must not be taken out of context. A careful reading of these two cases reveals that the terms "capital stock subscribed
or paid," "capital stock" and "capital" were defined solely to determine the basis for computing the supervision and regulation fees
under Section 40(e) and (f) of the Public Service Act.

III.
Filipinization of Public Utilities

The Preamble of the 1987 Constitution, as the prologue of the supreme law of the land, embodies the ideals that the Constitution
intends to achieve.22 The Preamble reads:

We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and humane society, and establish a
Government that shall embody our ideals and aspirations, promote the common good, conserve and develop our patrimony, and
secure to ourselves and our posterity, the blessings of independence and democracy under the rule of law and a regime of truth,
justice, freedom, love, equality, and peace, do ordain and promulgate this Constitution. (Emphasis supplied)
Consistent with these ideals, Section 19, Article II of the 1987 Constitution declares as State policy the development of a national
economy "effectively controlled" by Filipinos:

Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.

Fortifying the State policy of a Filipino-controlled economy, the Constitution decrees:

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates,
reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such
citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that
will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to
qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its
national goals and priorities.23

Under Section 10, Article XII of the 1987 Constitution, Congress may "reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may
prescribe, certain areas of investments." Thus, in numerous laws Congress has reserved certain areas of investments to Filipino
citizens or to corporations at least sixty percent of the "capital" of which is owned by Filipino citizens. Some of these laws are: (1)
Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna
Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471;
(5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055;
and (7) Ship Mortgage Decree or P.D. No. 1521.

With respect to public utilities, the 1987 Constitution specifically ordains:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per
centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or
for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation
or association must be citizens of the Philippines. (Emphasis supplied)

This provision, which mandates the Filipinization of public utilities, requires that any form of authorization for the operation of public
utilities shall be granted only to "citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such citizens." "The provision is [an express] recognition of the
sensitive and vital position of public utilities both in the national economy and for national security." 24

The 1987 Constitution reserves the ownership and operation of public utilities exclusively to (1) Filipino citizens, or (2) corporations
or associations at least 60 percent of whose "capital" is owned by Filipino citizens. Hence, in the case of individuals, only Filipino
citizens can validly own and operate a public utility. In the case of corporations or associations, at least 60 percent of their "capital"
must be owned by Filipino citizens. In other words, under Section 11, Article XII of the 1987 Constitution, to own and operate a
public utility a corporation’s capital must at least be 60 percent owned by Philippine nationals.

IV.
Definition of "Philippine National"

Pursuant to the express mandate of Section 11, Article XII of the 1987 Constitution, Congress enacted Republic Act No. 7042 or the
Foreign Investments Act of 1991 (FIA), as amended, which defined a "Philippine national" as follows:

SEC. 3. Definitions. - As used in this Act:

a. The term "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by
citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad
and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital
stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit
of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange
Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of
both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the
Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered
a "Philippine national." (Boldfacing, italicization and underscoring supplied)

Thus, the FIA clearly and unequivocally defines a "Philippine national" as a Philippine citizen, or a domestic corporation at least "60%
of the capital stock outstanding and entitled to vote" is owned by Philippine citizens.

The definition of a "Philippine national" in the FIA reiterated the meaning of such term as provided in its predecessor statute,
Executive Order No. 226 or the Omnibus Investments Code of 1987,25 which was issued by then President Corazon C. Aquino. Article
15 of this Code states:

Article 15. "Philippine national" shall mean a citizen of the Philippines or a diplomatic partnership or association wholly-owned by
citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or
other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the
fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own
stock in a registered enterprise, at least sixty per cent (60%) of the capital stock outstanding and entitled to vote of both
corporations must be owned and held by the citizens of the Philippines and at least sixty per cent (60%) of the members of the Board
of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine
national. (Boldfacing, italicization and underscoring supplied)

Under Article 48(3)26 of the Omnibus Investments Code of 1987, "no corporation x x x which is not a ‘Philippine national’ x x x shall do
business

x x x in the Philippines x x x without first securing from the Board of Investments a written certificate to the effect that such business
or economic activity x x x would not conflict with the Constitution or laws of the Philippines." 27 Thus, a "non-Philippine national"
cannot own and operate a reserved economic activity like a public utility. This means, of course, that only a "Philippine national" can
own and operate a public utility.

In turn, the definition of a "Philippine national" under Article 15 of the Omnibus Investments Code of 1987 was a reiteration of the
meaning of such term as provided in Article 14 of the Omnibus Investments Code of 1981,28 to wit:

Article 14. "Philippine national" shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by
citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent (60%) of the
capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or
other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the
fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own
stock in a registered enterprise, at least sixty per cent (60%) of the capital stock outstanding and entitled to vote of both
corporations must be owned and held by the citizens of the Philippines and at least sixty per cent (60%) of the members of the Board
of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine
national. (Boldfacing, italicization and underscoring supplied)

Under Article 69(3) of the Omnibus Investments Code of 1981, "no corporation x x x which is not a ‘Philippine national’ x x x shall do
business x x x in the Philippines x x x without first securing a written certificate from the Board of Investments to the effect that such
business or economic activity x x x would not conflict with the Constitution or laws of the Philippines." 29 Thus, a "non-Philippine
national" cannot own and operate a reserved economic activity like a public utility. Again, this means that only a "Philippine
national" can own and operate a public utility.
Prior to the Omnibus Investments Code of 1981, Republic Act No. 5186 30 or the Investment Incentives Act, which took effect on 16
September 1967, contained a similar definition of a "Philippine national," to wit:

(f) "Philippine National" shall mean a citizen of the Philippines; or a partnership or association wholly owned by citizens of the
Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a Philippine National and at least sixty per cent of the fund will
accrue to the benefit of Philippine Nationals: Provided, That where a corporation and its non-Filipino stockholders own stock in a
registered enterprise, at least sixty per cent of the capital stock outstanding and entitled to vote of both corporations must be
owned and held by the citizens of the Philippines and at least sixty per cent of the members of the Board of Directors of both
corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine National. (Boldfacing,
italicization and underscoring supplied)

Under Section 3 of Republic Act No. 5455 or the Foreign Business Regulations Act, which took effect on 30 September 1968, if the
investment in a domestic enterprise by non-Philippine nationals exceeds 30% of its outstanding capital stock, such enterprise must
obtain prior approval from the Board of Investments before accepting such investment. Such approval shall not be granted if the
investment "would conflict with existing constitutional provisions and laws regulating the degree of required ownership by
Philippine nationals in the enterprise."31 A "non-Philippine national" cannot own and operate a reserved economic activity like a
public utility. Again, this means that only a "Philippine national" can own and operate a public utility.

The FIA, like all its predecessor statutes, clearly defines a "Philippine national" as a Filipino citizen, or a domestic corporation "at
least sixty percent (60%) of the capital stock outstanding and entitled to vote" is owned by Filipino citizens. A domestic corporation
is a "Philippine national" only if at least 60% of its voting stock is owned by Filipino citizens. This definition of a "Philippine national"
is crucial in the present case because the FIA reiterates and clarifies Section 11, Article XII of the 1987 Constitution, which limits the
ownership and operation of public utilities to Filipino citizens or to corporations or associations at least 60% Filipino-owned.

The FIA is the basic law governing foreign investments in the Philippines, irrespective of the nature of business and area of
investment. The FIA spells out the procedures by which non-Philippine nationals can invest in the Philippines. Among the key
features of this law is the concept of a negative list or the Foreign Investments Negative List. 32 Section 8 of the law states:

SEC. 8. List of Investment Areas Reserved to Philippine Nationals [Foreign Investment Negative List]. - The Foreign Investment
Negative List shall have two 2 component lists: A and B:

a. List A shall enumerate the areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws.

b. List B shall contain the areas of activities and enterprises regulated pursuant to law:

1. which are defense-related activities, requiring prior clearance and authorization from the Department of National Defense [DND]
to engage in such activity, such as the manufacture, repair, storage and/or distribution of firearms, ammunition, lethal weapons,
military ordinance, explosives, pyrotechnics and similar materials; unless such manufacturing or repair activity is specifically
authorized, with a substantial export component, to a non-Philippine national by the Secretary of National Defense; or

2. which have implications on public health and morals, such as the manufacture and distribution of dangerous drugs; all forms of
gambling; nightclubs, bars, beer houses, dance halls, sauna and steam bathhouses and massage clinics. (Boldfacing, underscoring
and italicization supplied)

Section 8 of the FIA enumerates the investment areas "reserved to Philippine nationals." Foreign Investment Negative List A
consists of "areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws," where foreign
equity participation in any enterprise shall be limited to the maximum percentage expressly prescribed by the Constitution and
other specific laws. In short, to own and operate a public utility in the Philippines one must be a "Philippine national" as defined
in the FIA. The FIA is abundant notice to foreign investors to what extent they can invest in public utilities in the Philippines.

To repeat, among the areas of investment covered by the Foreign Investment Negative List A is the ownership and operation of
public utilities, which the Constitution expressly reserves to Filipino citizens and to corporations at least 60% owned by Filipino
citizens. In other words, Negative List A of the FIA reserves the ownership and operation of public utilities only to "Philippine
nationals," defined in Section 3(a) of the FIA as "(1) a citizen of the Philippines; x x x or (3) a corporation organized under the laws
of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or (4) a corporation organized abroad and registered as doing business in the Philippines under the
Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by
Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals."

Clearly, from the effectivity of the Investment Incentives Act of 1967 to the adoption of the Omnibus Investments Code of 1981, to
the enactment of the Omnibus Investments Code of 1987, and to the passage of the present Foreign Investments Act of 1991, or for
more than four decades, the statutory definition of the term "Philippine national" has been uniform and consistent: it means a
Filipino citizen, or a domestic corporation at least 60% of the voting stock is owned by Filipinos. Likewise, these same statutes
have uniformly and consistently required that only "Philippine nationals" could own and operate public utilities in the Philippines.
The following exchange during the Oral Arguments is revealing:

JUSTICE CARPIO:

Counsel, I have some questions. You are aware of the Foreign Investments Act of 1991, x x x? And the FIA of 1991 took
effect in 1991, correct? That’s over twenty (20) years ago, correct?

COMMISSIONER GAITE:

Correct, Your Honor.

JUSTICE CARPIO:

And Section 8 of the Foreign Investments Act of 1991 states that []only Philippine nationals can own and operate public
utilities[], correct?

COMMISSIONER GAITE:

Yes, Your Honor.

JUSTICE CARPIO:

And the same Foreign Investments Act of 1991 defines a "Philippine national" either as a citizen of the Philippines, or if it is
a corporation at least sixty percent (60%) of the voting stock is owned by citizens of the Philippines, correct?

COMMISSIONER GAITE:

Correct, Your Honor.

JUSTICE CARPIO:

And, you are also aware that under the predecessor law of the Foreign Investments Act of 1991, the Omnibus Investments
Act of 1987, the same provisions apply: x x x only Philippine nationals can own and operate a public utility and the
Philippine national, if it is a corporation, x x x sixty percent (60%) of the capital stock of that corporation must be owned by
citizens of the Philippines, correct?

COMMISSIONER GAITE:

Correct, Your Honor.

JUSTICE CARPIO:

And even prior to the Omnibus Investments Act of 1987, under the Omnibus Investments Act of 1981, the same rules apply:
x x x only a Philippine national can own and operate a public utility and a Philippine national, if it is a corporation, sixty
percent (60%) of its x x x voting stock, must be owned by citizens of the Philippines, correct?
COMMISSIONER GAITE:

Correct, Your Honor.

JUSTICE CARPIO:

And even prior to that, under [the]1967 Investments Incentives Act and the Foreign Company Act of 1968, the same rules
applied, correct?

COMMISSIONER GAITE:

Correct, Your Honor.

JUSTICE CARPIO:

So, for the last four (4) decades, x x x, the law has been very consistent – only a Philippine national can own and operate
a public utility, and a Philippine national, if it is a corporation, x x x at least sixty percent (60%) of the voting stock must
be owned by citizens of the Philippines, correct?

COMMISSIONER GAITE:

Correct, Your Honor.33 (Emphasis supplied)

Government agencies like the SEC cannot simply ignore Sections 3(a) and 8 of the FIA which categorically prescribe that certain
economic activities, like the ownership and operation of public utilities, are reserved to corporations "at least sixty percent (60%) of
the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines." Foreign Investment Negative List
A refers to "activities reserved to Philippine nationals by mandate of the Constitution and specific laws." The FIA is the basic statute
regulating foreign investments in the Philippines. Government agencies tasked with regulating or monitoring foreign investments,
as well as counsels of foreign investors, should start with the FIA in determining to what extent a particular foreign investment is
allowed in the Philippines. Foreign investors and their counsels who ignore the FIA do so at their own peril. Foreign investors and
their counsels who rely on opinions of SEC legal officers that obviously contradict the FIA do so also at their own peril.

Occasional opinions of SEC legal officers that obviously contradict the FIA should immediately raise a red flag. There are already
numerous opinions of SEC legal officers that cite the definition of a "Philippine national" in Section 3(a) of the FIA in determining
whether a particular corporation is qualified to own and operate a nationalized or partially nationalized business in the Philippines.
This shows that SEC legal officers are not only aware of, but also rely on and invoke, the provisions of the FIA in ascertaining the
eligibility of a corporation to engage in partially nationalized industries. The following are some of such opinions:

1. Opinion of 23 March 1993, addressed to Mr. Francis F. How;

2. Opinion of 14 April 1993, addressed to Director Angeles T. Wong of the Philippine Overseas Employment Administration;

3. Opinion of 23 November 1993, addressed to Messrs. Dominador Almeda and Renato S. Calma;

4. Opinion of 7 December 1993, addressed to Roco Bunag Kapunan Migallos & Jardeleza;

5. SEC Opinion No. 49-04, addressed to Romulo Mabanta Buenaventura Sayoc & De Los Angeles;

6. SEC-OGC Opinion No. 17-07, addressed to Mr. Reynaldo G. David; and

7. SEC-OGC Opinion No. 03-08, addressed to Attys. Ruby Rose J. Yusi and Rudyard S. Arbolado.

The SEC legal officers’ occasional but blatant disregard of the definition of the term "Philippine national" in the FIA signifies their lack
of integrity and competence in resolving issues on the 60-40 ownership requirement in favor of Filipino citizens in Section 11, Article
XII of the Constitution.
The PSE President argues that the term "Philippine national" defined in the FIA should be limited and interpreted to refer to
corporations seeking to avail of tax and fiscal incentives under investment incentives laws and cannot be equated with the term
"capital" in Section 11, Article XII of the 1987 Constitution. Pangilinan similarly contends that the FIA and its predecessor statutes do
not apply to "companies which have not registered and obtained special incentives under the schemes established by those laws."

Both are desperately grasping at straws. The FIA does not grant tax or fiscal incentives to any enterprise. Tax and fiscal incentives to
investments are granted separately under the Omnibus Investments Code of 1987, not under the FIA. In fact, the FIA expressly
repealed Articles 44 to 56 of Book II of the Omnibus Investments Code of 1987, which articles previously regulated foreign
investments in nationalized or partially nationalized industries.

The FIA is the applicable law regulating foreign investments in nationalized or partially nationalized industries. There is nothing in the
FIA, or even in the Omnibus Investments Code of 1987 or its predecessor statutes, that states, expressly or impliedly, that the FIA or
its predecessor statutes do not apply to enterprises not availing of tax and fiscal incentives under the Code. The FIA and its
predecessor statutes apply to investments in all domestic enterprises, whether or not such enterprises enjoy tax and fiscal incentives
under the Omnibus Investments Code of 1987 or its predecessor statutes. The reason is quite obvious – mere non-availment of tax
and fiscal incentives by a non-Philippine national cannot exempt it from Section 11, Article XII of the Constitution regulating
foreign investments in public utilities. In fact, the Board of Investments’ Primer on Investment Policies in the Philippines,34 which is
given out to foreign investors, provides:

PART III. FOREIGN INVESTMENTS WITHOUT INCENTIVES

Investors who do not seek incentives and/or whose chosen activities do not qualify for incentives, (i.e., the activity is not listed in the
IPP, and they are not exporting at least 70% of their production) may go ahead and make the investments without seeking
incentives. They only have to be guided by the Foreign Investments Negative List (FINL).

The FINL clearly defines investment areas requiring at least 60% Filipino ownership. All other areas outside of this list are fully open
to foreign investors. (Emphasis supplied)

V.
Right to elect directors, coupled with beneficial ownership,
translates to effective control.

The 28 June 2011 Decision declares that the 60 percent Filipino ownership required by 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. To
repeat, we held:

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)

This is consistent with Section 3 of the FIA which provides that where 100% of the capital stock is held by "a trustee of funds for
pension or other employee retirement or separation benefits," the trustee is a Philippine national if "at least sixty percent (60%) of
the fund will accrue to the benefit of Philippine nationals." Likewise, Section 1(b) of the Implementing Rules of the FIA provides that
"for stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights, is essential."

Since the constitutional requirement of at least 60 percent Filipino ownership applies not only to voting control of the corporation
but also to the beneficial ownership of the corporation, it is therefore imperative that such requirement apply uniformly and across
the board to all classes of shares, regardless of nomenclature and category, comprising the capital of a corporation. Under the
Corporation Code, capital stock35 consists of all classes of shares issued to stockholders, that is, common shares as well as preferred
shares, which may have different rights, privileges or restrictions as stated in the articles of incorporation. 36

The Corporation Code allows denial of the right to vote to preferred and redeemable shares, but disallows denial of the right to vote
in specific corporate matters. Thus, common shares have the right to vote in the election of directors, while preferred shares may be
denied such right. Nonetheless, preferred shares, even if denied the right to vote in the election of directors, are entitled to vote on
the following corporate matters: (1) amendment of articles of incorporation; (2) increase and decrease of capital stock; (3) incurring,
creating or increasing bonded indebtedness; (4) sale, lease, mortgage or other disposition of substantially all corporate assets; (5)
investment of funds in another business or corporation or for a purpose other than the primary purpose for which the corporation
was organized; (6) adoption, amendment and repeal of by-laws; (7) merger and consolidation; and (8) dissolution of corporation. 37

Since a specific class of shares may have rights and privileges or restrictions different from the rest of the shares in a corporation, the
60-40 ownership requirement in favor of Filipino citizens in Section 11, Article XII of the Constitution must apply not only to shares
with voting rights but also to shares without voting rights. Preferred shares, denied the right to vote in the election of directors, are
anyway still entitled to vote on the eight specific corporate matters mentioned above. Thus, if a corporation, engaged in a partially
nationalized industry, issues a mixture of common and preferred non-voting shares, at least 60 percent of the common shares
and at least 60 percent of the preferred non-voting shares must be owned by Filipinos. Of course, if a corporation issues only a
single class of shares, at least 60 percent of such shares must necessarily be owned by Filipinos. In short, the 60-40 ownership
requirement in favor of Filipino citizens must apply separately to each class of shares, whether common, preferred non-voting,
preferred voting or any other class of shares. This uniform application of the 60-40 ownership requirement in favor of Filipino
citizens clearly breathes life to the constitutional command that the ownership and operation of public utilities shall be reserved
exclusively to corporations at least 60 percent of whose capital is Filipino-owned. Applying uniformly the 60-40 ownership
requirement in favor of Filipino citizens to each class of shares, regardless of differences in voting rights, privileges and restrictions,
guarantees effective Filipino control of public utilities, as mandated by the Constitution.

Moreover, such uniform application to each class of shares insures that the "controlling interest" in public utilities always lies in the
hands of Filipino citizens. This addresses and extinguishes Pangilinan’s worry that foreigners, owning most of the non-voting shares,
will exercise greater control over fundamental corporate matters requiring two-thirds or majority vote of all shareholders.

VI.
Intent of the framers of the Constitution

While Justice Velasco quoted in his Dissenting Opinion 38 a portion of the deliberations of the Constitutional Commission to support
his claim that the term "capital" refers to the total outstanding shares of stock, whether voting or non-voting, the following excerpts
of the deliberations reveal otherwise. It is clear from the following exchange that the term "capital" refers to controlling interest of
a corporation, thus:

MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3,
60-40 in Section 9 and 2/3-1/3 in Section 15.

MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do we base the equity requirement, is it on the
authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the Committee
please enlighten me on this?

MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft.
The phrase that is contained here which we adopted from the UP draft is "60 percent of voting stock."

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be
entitled to vote.

MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests in
another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?

MR. VILLEGAS. Yes, that is the understanding of the Committee.

MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. Yes.39

xxxx

MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling interest."

MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: "corporations or associations at least sixty
percent of whose CAPITAL is owned by such citizens."

MR. VILLEGAS. Yes.

MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens.

MR. VILLEGAS. That is right.

MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the capital is
owned by them, but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have a situation where
the corporation is controlled by foreigners despite being the minority because they have the voting capital. That is the anomaly
that would result here.

MR. BENGZON. No, the reason we eliminated the word "stock" as stated in the 1973 and 1935 Constitutions is that according to
Commissioner Rodrigo, there are associations that do not have stocks. That is why we say "CAPITAL."

MR. AZCUNA. We should not eliminate the phrase "controlling interest."

MR. BENGZON. In the case of stock corporations, it is assumed. 40 (Boldfacing and underscoring supplied)

Thus, 60 percent of the "capital" assumes, or should result in, a "controlling interest" in the corporation.

The use of the term "capital" was intended to replace the word "stock" because associations without stocks can operate public
utilities as long as they meet the 60-40 ownership requirement in favor of Filipino citizens prescribed in Section 11, Article XII of the
Constitution. However, this did not change the intent of the framers of the Constitution to reserve exclusively to Philippine nationals
the "controlling interest" in public utilities.

During the drafting of the 1935 Constitution, economic protectionism was "the battle-cry of the nationalists in the Convention." 41 The
same battle-cry resulted in the nationalization of the public utilities. 42 This is also the same intent of the framers of the 1987
Constitution who adopted the exact formulation embodied in the 1935 and 1973 Constitutions on foreign equity limitations in
partially nationalized industries.

The OSG, in its own behalf and as counsel for the State, 43 agrees fully with the Court’s interpretation of the term "capital." In its
Consolidated Comment, the OSG explains that the deletion of the phrase "controlling interest" and replacement of the word "stock"
with the term "capital" were intended specifically to extend the scope of the entities qualified to operate public utilities to include
associations without stocks. The framers’ omission of the phrase "controlling interest" did not mean the inclusion of all shares of
stock, whether voting or non-voting. The OSG reiterated essentially the Court’s declaration that the Constitution reserved exclusively
to Philippine nationals the ownership and operation of public utilities consistent with the State’s policy to "develop a self-reliant and
independent national economy effectively controlled by Filipinos."

As we held in our 28 June 2011 Decision, to construe broadly the term "capital" as the total outstanding capital stock, treated as a
single class regardless of the actual classification of shares, grossly contravenes the intent and letter of the Constitution that the
"State shall develop a self-reliant and independent national economy effectively controlled by Filipinos." We illustrated the glaring
anomaly which would result in defining the term "capital" as the total outstanding capital stock of a corporation, treated as a single
class of shares regardless of the actual classification of shares, to wit:
Let us assume that a corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred shares owned by
Filipinos, with both classes of share having a par value of one peso (₱ 1.00) per share. Under the broad definition of the term
"capital," such corporation would be considered compliant with the 40 percent constitutional limit on foreign equity of public
utilities since the overwhelming majority, or more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This
is obviously absurd.

In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold
only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the
other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have
no control over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language
of the Constitution, to place the control of public utilities in the hands of Filipinos. x x x

Further, even if foreigners who own more than forty percent of the voting shares elect an all-Filipino board of directors, this
situation does not guarantee Filipino control and does not in any way cure the violation of the Constitution. The independence of the
Filipino board members so elected by such foreign shareholders is highly doubtful. As the OSG pointed out, quoting Justice George
Sutherland’s words in Humphrey’s Executor v. US,44 "x x x it is quite evident that one who holds his office only during the pleasure of
another cannot be depended upon to maintain an attitude of independence against the latter’s will." Allowing foreign shareholders
to elect a controlling majority of the board, even if all the directors are Filipinos, grossly circumvents the letter and intent of the
Constitution and defeats the very purpose of our nationalization laws.

VII.
Last sentence of Section 11, Article XII of the Constitution

The last sentence of Section 11, Article XII of the 1987 Constitution reads:

The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate
share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

During the Oral Arguments, the OSG emphasized that there was never a question on the intent of the framers of the Constitution to
limit foreign ownership, and assure majority Filipino ownership and control of public utilities. The OSG argued, "while the delegates
disagreed as to the percentage threshold to adopt, x x x the records show they clearly understood that Filipino control of the public
utility corporation can only be and is obtained only through the election of a majority of the members of the board."

Indeed, the only point of contention during the deliberations of the Constitutional Commission on 23 August 1986 was the extent of
majority Filipino control of public utilities. This is evident from the following exchange:

THE PRESIDENT. Commissioner Jamir is recognized.

MR. JAMIR. Madam President, my proposed amendment on lines 20 and 21 is to delete the phrase "two thirds of whose voting stock
or controlling interest," and instead substitute the words "SIXTY PERCENT OF WHOSE CAPITAL" so that the sentence will read: "No
franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the Philippines at least SIXTY PERCENT OF WHOSE CAPITAL
is owned by such citizens."

xxxx

THE PRESIDENT: Will Commissioner Jamir first explain?

MR. JAMIR. Yes, in this Article on National Economy and Patrimony, there were two previous sections in which we fixed the Filipino
equity to 60 percent as against 40 percent for foreigners. It is only in this Section 15 with respect to public utilities that the
committee proposal was increased to two-thirds. I think it would be better to harmonize this provision by providing that even in the
case of public utilities, the minimum equity for Filipino citizens should be 60 percent.

MR. ROMULO. Madam President.

THE PRESIDENT. Commissioner Romulo is recognized.

MR. ROMULO. My reason for supporting the amendment is based on the discussions I have had with representatives of the Filipino
majority owners of the international record carriers, and the subsequent memoranda they submitted to me. x x x

Their second point is that under the Corporation Code, the management and control of a corporation is vested in the board of
directors, not in the officers but in the board of directors. The officers are only agents of the board. And they believe that with 60
percent of the equity, the Filipino majority stockholders undeniably control the board. Only on important corporate acts can the 40-
percent foreign equity exercise a veto, x x x.

x x x x45

MS. ROSARIO BRAID. Madam President.

THE PRESIDENT. Commissioner Rosario Braid is recognized.

MS. ROSARIO BRAID. Yes, in the interest of equal time, may I also read from a memorandum by the spokesman of the Philippine
Chamber of Communications on why they would like to maintain the present equity, I am referring to the 66 2/3. They would prefer
to have a 75-25 ratio but would settle for 66 2/3. x x x

xxxx

THE PRESIDENT. Just to clarify, would Commissioner Rosario Braid support the proposal of two-thirds rather than the 60 percent?

MS. ROSARIO BRAID. I have added a clause that will put management in the hands of Filipino citizens.

x x x x46

While they had differing views on the percentage of Filipino ownership of capital, it is clear that the framers of the Constitution
intended public utilities to be majority Filipino-owned and controlled. To ensure that Filipinos control public utilities, the framers of
the Constitution approved, as additional safeguard, the inclusion of the last sentence of Section 11, Article XII of the Constitution
commanding that "[t]he participation of foreign investors in the governing body of any public utility enterprise shall be limited to
their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be
citizens of the Philippines." In other words, the last sentence of Section 11, Article XII of the Constitution mandates that (1) the
participation of foreign investors in the governing body of the corporation or association shall be limited to their proportionate share
in the capital of such entity; and (2) all officers of the corporation or association must be Filipino citizens.

Commissioner Rosario Braid proposed the inclusion of the phrase requiring the managing officers of the corporation or association
to be Filipino citizens specifically to prevent management contracts, which were designed primarily to circumvent the Filipinization
of public utilities, and to assure Filipino control of public utilities, thus:

MS. ROSARIO BRAID. x x x They also like to suggest that we amend this provision by adding a phrase which states: "THE
MANAGEMENT BODY OF EVERY CORPORATION OR ASSOCIATION SHALL IN ALL CASES BE CONTROLLED BY CITIZENS OF THE
PHILIPPINES." I have with me their position paper.

THE PRESIDENT. The Commissioner may proceed.

MS. ROSARIO BRAID. The three major international record carriers in the Philippines, which Commissioner Romulo mentioned –
Philippine Global Communications, Eastern Telecommunications, Globe Mackay Cable – are 40-percent owned by foreign
multinational companies and 60-percent owned by their respective Filipino partners. All three, however, also have management
contracts with these foreign companies – Philcom with RCA, ETPI with Cable and Wireless PLC, and GMCR with ITT. Up to the present
time, the general managers of these carriers are foreigners. While the foreigners in these common carriers are only minority owners,
the foreign multinationals are the ones managing and controlling their operations by virtue of their management contracts and by
virtue of their strength in the governing bodies of these carriers. 47

xxxx
MR. OPLE. I think a number of us have agreed to ask Commissioner Rosario Braid to propose an amendment with respect to the
operating management of public utilities, and in this amendment, we are associated with Fr. Bernas, Commissioners Nieva and
Rodrigo. Commissioner Rosario Braid will state this amendment now.

Thank you.

MS. ROSARIO BRAID. Madam President.

THE PRESIDENT. This is still on Section 15.

MS. ROSARIO BRAID. Yes.

MR. VILLEGAS. Yes, Madam President.

xxxx

MS. ROSARIO BRAID. Madam President, I propose a new section to read: ‘THE MANAGEMENT BODY OF EVERY CORPORATION OR
ASSOCIATION SHALL IN ALL CASES BE CONTROLLED BY CITIZENS OF THE PHILIPPINES."

This will prevent management contracts and assure control by Filipino citizens. Will the committee assure us that this amendment
will insure that past activities such as management contracts will no longer be possible under this amendment?

xxxx

FR. BERNAS. Madam President.

THE PRESIDENT. Commissioner Bernas is recognized.

FR. BERNAS. Will the committee accept a reformulation of the first part?

MR. BENGZON. Let us hear it.

FR. BERNAS. The reformulation will be essentially the formula of the 1973 Constitution which reads: "THE PARTICIPATION OF
FOREIGN INVESTORS IN THE GOVERNING BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL BE LIMITED TO THEIR PROPORTIONATE
SHARE IN THE CAPITAL THEREOF AND..."

MR. VILLEGAS. "ALL THE EXECUTIVE AND MANAGING OFFICERS OF SUCH CORPORATIONS AND ASSOCIATIONS MUST BE CITIZENS OF
THE PHILIPPINES."

MR. BENGZON. Will Commissioner Bernas read the whole thing again?

FR. BERNAS. "THE PARTICIPATION OF FOREIGN INVESTORS IN THE GOVERNING BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL BE
LIMITED TO THEIR PROPORTIONATE SHARE IN THE CAPITAL THEREOF..." I do not have the rest of the copy.

MR. BENGZON. "AND ALL THE EXECUTIVE AND MANAGING OFFICERS OF SUCH CORPORATIONS OR ASSOCIATIONS MUST BE
CITIZENS OF THE PHILIPPINES." Is that correct?

MR. VILLEGAS. Yes.

MR. BENGZON. Madam President, I think that was said in a more elegant language. We accept the amendment. Is that all right with
Commissioner Rosario Braid?

MS. ROSARIO BRAID. Yes.

xxxx
MR. DE LOS REYES. The governing body refers to the board of directors and trustees.

MR. VILLEGAS. That is right.

MR. BENGZON. Yes, the governing body refers to the board of directors.

MR. REGALADO. It is accepted.

MR. RAMA. The body is now ready to vote, Madam President.

VOTING

xxxx

The results show 29 votes in favor and none against; so the proposed amendment is approved.

xxxx

THE PRESIDENT. All right. Can we proceed now to vote on Section 15?

MR. RAMA. Yes, Madam President.

THE PRESIDENT. Will the chairman of the committee please read Section 15?

MR. VILLEGAS. The entire Section 15, as amended, reads: "No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under
the laws of the Philippines at least 60 PERCENT OF WHOSE CAPITAL is owned by such citizens." May I request Commissioner Bengzon
to please continue reading.

MR. BENGZON. "THE PARTICIPATION OF FOREIGN INVESTORS IN THE GOVERNING BODY OF ANY PUBLIC UTILITY ENTERPRISE SHALL
BE LIMITED TO THEIR PROPORTIONATE SHARE IN THE CAPITAL THEREOF AND ALL THE EXECUTIVE AND MANAGING OFFICERS OF
SUCH CORPORATIONS OR ASSOCIATIONS MUST BE CITIZENS OF THE PHILIPPINES."

MR. VILLEGAS. "NOR SHALL SUCH FRANCHISE, CERTIFICATE OR AUTHORIZATION BE EXCLUSIVE IN CHARACTER OR FOR A PERIOD
LONGER THAN TWENTY-FIVE YEARS RENEWABLE FOR NOT MORE THAN TWENTY-FIVE YEARS. Neither shall any such franchise or
right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by Congress when the
common good so requires. The State shall encourage equity participation in public utilities by the general public."

VOTING

xxxx

The results show 29 votes in favor and 4 against; Section 15, as amended, is approved. 48 (Emphasis supplied)

The last sentence of Section 11, Article XII of the 1987 Constitution, particularly the provision on the limited participation of foreign
investors in the governing body of public utilities, is a reiteration of the last sentence of Section 5, Article XIV of the 1973
Constitution,49 signifying its importance in reserving ownership and control of public utilities to Filipino citizens.

VIII.
The undisputed facts

There is no dispute, and respondents do not claim the contrary, that (1) foreigners own 64.27% of the common shares of PLDT,
which class of shares exercises the sole right to vote in the election of directors, and thus foreigners control PLDT; (2) Filipinos own
only 35.73% of PLDT’s common shares, constituting a minority of the voting stock, and thus Filipinos do not control PLDT; (3)
preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that
common shares earn;50 (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute 77.85%
of the authorized capital stock of PLDT and common shares only 22.15%.

Despite the foregoing facts, the Court did not decide, and in fact refrained from ruling on the question of whether PLDT violated the
60-40 ownership requirement in favor of Filipino citizens in Section 11, Article XII of the 1987 Constitution. Such question
indisputably calls for a presentation and determination of evidence through a hearing, which is generally outside the province of the
Court’s jurisdiction, but well within the SEC’s statutory powers. Thus, for obvious reasons, the Court limited its decision on the purely
legal and threshold issue on the definition of the term "capital" in Section 11, Article XII of the Constitution and directed the SEC to
apply such definition in determining the exact percentage of foreign ownership in PLDT.

IX.
PLDT is not an indispensable party;
SEC is impleaded in this case.

In his petition, Gamboa prays, among others:

xxxx

5. For the Honorable Court to issue a declaratory relief that ownership of common or voting shares is the sole basis in determining
foreign equity in a public utility and that any other government rulings, opinions, and regulations inconsistent with this declaratory
relief be declared unconstitutional and a violation of the intent and spirit of the 1987 Constitution;

6. For the Honorable Court to declare null and void all sales of common stocks to foreigners in excess of 40 percent of the total
subscribed common shareholdings; and

7. For the Honorable Court to direct the Securities and Exchange Commission and Philippine Stock Exchange to require PLDT to
make a public disclosure of all of its foreign shareholdings and their actual and real beneficial owners.

Other relief(s) just and equitable are likewise prayed for. (Emphasis supplied)

As can be gleaned from his prayer, Gamboa clearly asks this Court to compel the SEC to perform its statutory duty to investigate
whether "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has been complied
with [by PLDT] as required by x x x the Constitution."51 Such plea clearly negates SEC’s argument that it was not impleaded.

Granting that only the SEC Chairman was impleaded in this case, the Court has ample powers to order the SEC’s compliance with its
directive contained in the 28 June 2011 Decision in view of the far-reaching implications of this case. In Domingo v. Scheer,52 the
Court dispensed with the amendment of the pleadings to implead the Bureau of Customs considering (1) the unique backdrop of the
case; (2) the utmost need to avoid further delays; and (3) the issue of public interest involved. The Court held:

The Court may be curing the defect in this case by adding the BOC as party-petitioner. The petition should not be dismissed because
the second action would only be a repetition of the first. In Salvador, et al., v. Court of Appeals, et al., we held that this Court has full
powers, apart from that power and authority which is inherent, to amend the processes, pleadings, proceedings and decisions by
substituting as party-plaintiff the real party-in-interest. The Court has the power to avoid delay in the disposition of this case, to
order its amendment as to implead the BOC as party-respondent. Indeed, it may no longer be necessary to do so taking into
account the unique backdrop in this case, involving as it does an issue of public interest. After all, the Office of the Solicitor General
has represented the petitioner in the instant proceedings, as well as in the appellate court, and maintained the validity of the
deportation order and of the BOC’s Omnibus Resolution. It cannot, thus, be claimed by the State that the BOC was not afforded its
day in court, simply because only the petitioner, the Chairperson of the BOC, was the respondent in the CA, and the petitioner in the
instant recourse. In Alonso v. Villamor, we had the occasion to state:

There is nothing sacred about processes or pleadings, their forms or contents. Their sole purpose is to facilitate the application of
justice to the rival claims of contending parties. They were created, not to hinder and delay, but to facilitate and promote, the
administration of justice. They do not constitute the thing itself, which courts are always striving to secure to litigants. They are
designed as the means best adapted to obtain that thing. In other words, they are a means to an end. When they lose the character
of the one and become the other, the administration of justice is at fault and courts are correspondingly remiss in the performance
of their obvious duty.53 (Emphasis supplied)
In any event, the SEC has expressly manifested 54 that it will abide by the Court’s decision and defer to the Court’s definition of the
term "capital" in Section 11, Article XII of the Constitution. Further, the SEC entered its special appearance in this case and argued
during the Oral Arguments, indicating its submission to the Court’s jurisdiction. It is clear, therefore, that there exists no legal
impediment against the proper and immediate implementation of the Court’s directive to the SEC.

PLDT is an indispensable party only insofar as the other issues, particularly the factual questions, are concerned. In other words,
PLDT must be impleaded in order to fully resolve the issues on (1) whether the sale of 111,415 PTIC shares to First Pacific violates the
constitutional limit on foreign ownership of PLDT; (2) whether the sale of common shares to foreigners exceeded the 40 percent
limit on foreign equity in PLDT; and (3) whether the total percentage of the PLDT common shares with voting rights complies with
the 60-40 ownership requirement in favor of Filipino citizens under the Constitution for the ownership and operation of PLDT. These
issues indisputably call for an examination of the parties’ respective evidence, and thus are clearly within the jurisdiction of the SEC.
In short, PLDT must be impleaded, and must necessarily be heard, in the proceedings before the SEC where the factual issues will be
thoroughly threshed out and resolved.

Notably, the foregoing issues were left untouched by the Court. The Court did not rule on the factual issues raised by Gamboa,
except the single and purely legal issue on the definition of the term "capital" in Section 11, Article XII of the Constitution. The Court
confined the resolution of the instant case to this threshold legal issue in deference to the fact-finding power of the SEC.

Needless to state, the Court can validly, properly, and fully dispose of the fundamental legal issue in this case even without the
participation of PLDT since defining the term "capital" in Section 11, Article XII of the Constitution does not, in any way, depend on
whether PLDT was impleaded. Simply put, PLDT is not indispensable for a complete resolution of the purely legal question in this
case.55 In fact, the Court, by treating the petition as one for mandamus, 56 merely directed the SEC to apply the Court’s definition of
the term "capital" in Section 11, Article XII of the Constitution in determining whether PLDT committed any violation of the said
constitutional provision. The dispositive portion of the Court’s ruling is addressed not to PLDT but solely to the SEC, which is the
administrative agency tasked to enforce the 60-40 ownership requirement in favor of Filipino citizens in Section 11, Article XII of
the Constitution.

Since the Court limited its resolution on the purely legal issue on the definition of the term "capital" in Section 11, Article XII of the
1987 Constitution, and directed the SEC to investigate any violation by PLDT of the 60-40 ownership requirement in favor of Filipino
citizens under the Constitution,57 there is no deprivation of PLDT’s property or denial of PLDT’s right to due process, contrary to
Pangilinan and Nazareno’s misimpression. Due process will be afforded to PLDT when it presents proof to the SEC that it complies, as
it claims here, with Section 11, Article XII of the Constitution.

X.
Foreign Investments in the Philippines

Movants fear that the 28 June 2011 Decision would spell disaster to our economy, as it may result in a sudden flight of existing
foreign investors to "friendlier" countries and simultaneously deterring new foreign investors to our country. In particular, the PSE
claims that the 28 June 2011 Decision may result in the following: (1) loss of more than ₱ 630 billion in foreign investments in PSE-
listed shares; (2) massive decrease in foreign trading transactions; (3) lower PSE Composite Index; and (4) local investors not
investing in PSE-listed shares.58

Dr. Bernardo M. Villegas, one of the amici curiae in the Oral Arguments, shared movants’ apprehension. Without providing specific
details, he pointed out the depressing state of the Philippine economy compared to our neighboring countries which boast of
growing economies. Further, Dr. Villegas explained that the solution to our economic woes is for the government to "take-over"
strategic industries, such as the public utilities sector, thus:

JUSTICE CARPIO:

I would like also to get from you Dr. Villegas if you have additional information on whether this high FDI 59 countries in East Asia have
allowed foreigners x x x control [of] their public utilities, so that we can compare apples with apples.

DR. VILLEGAS:

Correct, but let me just make a comment. When these neighbors of ours find an industry strategic, their solution is not to "Filipinize"
or "Vietnamize" or "Singaporize." Their solution is to make sure that those industries are in the hands of state enterprises. So, in
these countries, nationalization means the government takes over. And because their governments are competent and honest
enough to the public, that is the solution. x x x 60 (Emphasis supplied)

If government ownership of public utilities is the solution, then foreign investments in our public utilities serve no purpose.
Obviously, there can never be foreign investments in public utilities if, as Dr. Villegas claims, the "solution is to make sure that those
industries are in the hands of state enterprises." Dr. Villegas’s argument that foreign investments in telecommunication companies
like PLDT are badly needed to save our ailing economy contradicts his own theory that the solution is for government to take over
these companies. Dr. Villegas is barking up the wrong tree since State ownership of public utilities and foreign investments in such
industries are diametrically opposed concepts, which cannot possibly be reconciled.

In any event, the experience of our neighboring countries cannot be used as argument to decide the present case differently for two
reasons. First, the governments of our neighboring countries have, as claimed by Dr. Villegas, taken over ownership and control of
their strategic public utilities like the telecommunications industry. Second, our Constitution has specific provisions limiting foreign
ownership in public utilities which the Court is sworn to uphold regardless of the experience of our neighboring countries.

In our jurisdiction, the Constitution expressly reserves the ownership and operation of public utilities to Filipino citizens, or
corporations or associations at least 60 percent of whose capital belongs to Filipinos. Following Dr. Villegas’s claim, the Philippines
appears to be more liberal in allowing foreign investors to own 40 percent of public utilities, unlike in other Asian countries whose
governments own and operate such industries.

XI.
Prospective Application of Sanctions

In its Motion for Partial Reconsideration, the SEC sought to clarify the reckoning period of the application and imposition of
appropriate sanctions against PLDT if found violating Section 11, Article XII of the Constitution.1avvphi1

As discussed, the Court has directed the SEC to investigate and determine whether PLDT violated Section 11, Article XII of the
Constitution. Thus, there is no dispute that it is only after the SEC has determined PLDT’s violation, if any exists at the time of the
commencement of the administrative case or investigation, that the SEC may impose the statutory sanctions against PLDT. In other
words, once the 28 June 2011 Decision becomes final, the SEC shall impose the appropriate sanctions only if it finds after due
hearing that, at the start of the administrative case or investigation, there is an existing violation of Section 11, Article XII of the
Constitution. Under prevailing jurisprudence, public utilities that fail to comply with the nationality requirement under Section 11,
Article XII and the FIA can cure their deficiencies prior to the start of the administrative case or investigation. 61

XII.
Final Word

The Constitution expressly declares as State policy the development of an economy "effectively controlled" by Filipinos. Consistent
with such State policy, the Constitution explicitly reserves the ownership and operation of public utilities to Philippine nationals, who
are defined in the Foreign Investments Act of 1991 as Filipino citizens, or corporations or associations at least 60 percent of whose
capital with voting rights belongs to Filipinos. The FIA’s implementing rules explain that "[f]or stocks to be deemed owned and held
by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial
ownership of the stocks, coupled with appropriate voting rights is essential." In effect, the FIA clarifies, reiterates and confirms the
interpretation that the term "capital" in Section 11, Article XII of the 1987 Constitution refers to shares with voting rights, as well as
with full beneficial ownership. This is precisely because the right to vote in the election of directors, coupled with full beneficial
ownership of stocks, translates to effective control of a corporation.

Any other construction of the term "capital" in Section 11, Article XII of the Constitution contravenes the letter and intent of the
Constitution. Any other meaning of the term "capital" openly invites alien domination of economic activities reserved exclusively to
Philippine nationals. Therefore, respondents’ interpretation will ultimately result in handing over effective control of our national
economy to foreigners in patent violation of the Constitution, making Filipinos second-class citizens in their own country.

Filipinos have only to remind themselves of how this country was exploited under the Parity Amendment, which gave Americans the
same rights as Filipinos in the exploitation of natural resources, and in the ownership and control of public utilities, in the
Philippines. To do this the 1935 Constitution, which contained the same 60 percent Filipino ownership and control requirement as
the present 1987 Constitution, had to be amended to give Americans parity rights with Filipinos. There was bitter opposition to the
Parity Amendment62 and many Filipinos eagerly awaited its expiration. In late 1968, PLDT was one of the American-controlled public
utilities that became Filipino-controlled when the controlling American stockholders divested in anticipation of the expiration of the
Parity Amendment on 3 July 1974.63 No economic suicide happened when control of public utilities and mining corporations passed
to Filipinos’ hands upon expiration of the Parity Amendment.

Movants’ interpretation of the term "capital" would bring us back to the same evils spawned by the Parity Amendment, effectively
giving foreigners parity rights with Filipinos, but this time even without any amendment to the present Constitution. Worse,
movants’ interpretation opens up our national economy to effective control not only by Americans but also by all foreigners, be
they Indonesians, Malaysians or Chinese, even in the absence of reciprocal treaty arrangements. At least the Parity Amendment,
as implemented by the Laurel-Langley Agreement, gave the capital-starved Filipinos theoretical parity – the same rights as
Americans to exploit natural resources, and to own and control public utilities, in the United States of America. Here, movants’
interpretation would effectively mean a unilateral opening up of our national economy to all foreigners, without any reciprocal
arrangements. That would mean that Indonesians, Malaysians and Chinese nationals could effectively control our mining companies
and public utilities while Filipinos, even if they have the capital, could not control similar corporations in these countries.

The 1935, 1973 and 1987 Constitutions have the same 60 percent Filipino ownership and control requirement for public utilities like
PLOT. Any deviation from this requirement necessitates an amendment to the Constitution as exemplified by the Parity Amendment.
This Court has no power to amend the Constitution for its power and duty is only to faithfully apply and interpret the Constitution.

WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No further pleadings shall be entertained.

SO ORDERED.

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

JOSE M. ROY III, Petitioner, v. CHAIRPERSON TERESITA HERBOSA,THE SECURITIES AND EXCHANGE COMMISSION, AND
PHILILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondents.

WILSON C. GAMBOA, JR., DANIEL V. CARTAGENA, JOHN WARREN P. GABINETE, ANTONIO V. PESINA, JR., MODESTO MARTIN Y.
MAMON III, AND GERARDO C. EREBAREN, Petitioners-in-Intervention,

PHILIPPINE STOCK EXCHANGE, INC., Respondent-in-Intervention,

SHAREHOLDERS' ASSOCIATION OF THE PHILIPPINES, INC., Respondent-in-Intervention.

DECISION

CAGUIOA, J.:

The petitions1 before the Court are special civil actions for certiorari under Rule 65 of the Rules of Court seeking to annul
Memorandum Circular No. 8, Series of 2013 ("SEC-MC No. 8") issued by the Securities and Exchange Commission ("SEC") for
allegedly being in violation of the Court's Decision 2 ("Gamboa Decision") and Resolution3 ("Gamboa Resolution") in Gamboa v.
Finance Secretary Teves, G.R. No. 176579, respectively promulgated on June 28, 2011, and October 9, 2012, which jurisprudentially
established the proper interpretation of Section 11, Article XII of the Constitution.chanroblesvirtuallawlibrary

The Antecedents

On June 28, 2011, the Court issued the Gamboa Decision, the dispositive portion of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, we PARTLY GRANT the petition and rule 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.

SO ORDERED.4
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, viz:chanRoblesvirtualLawlibrary
WHEREFORE, we DENY the motions for reconsideration WITH FINALITY. No further pleadings shall be entertained.

SO ORDERED.5
The Gamboa Decision attained finality on October 18, 2012, and Entry of Judgment was thereafter issued on December 11, 2012. 6

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 (attached thereto) 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.7

On November 9, 2012, the SEC held the scheduled dialogue and more than 100 representatives from various organizations,
government agencies, the academe and the private sector attended. 8

On January 8, 2013, the SEC received a copy of the Entry of Judgment 9 from the Court certifying that on October 18, 2012, the
Gamboa Decision had become final and executory.10

On March 25, 2013, the SEC posted another Notice in its website soliciting from the public comments and suggestions on the draft
guidelines.11

On April 22, 2013, petitioner Atty. Jose M. Roy III ("Roy") submitted his written comments on the draft guidelines. 12

On May 20, 2013, the SEC, through respondent Chairperson Teresita J. Herbosa, issued SEC-MC No. 8 entitled "Guidelines on
Compliance with the Filipino-Foreign Ownership Requirements Prescribed in the Constitution and/or Existing Laws by Corporations
Engaged in Nationalized and Partly Nationalized Activities." It was published in the Philippine Daily Inquirer and the Business Mirror
on May 22, 2013.13 Section 2 of SEC-MC No. 8 provides:chanRoblesvirtualLawlibrary
Section 2. All covered corporations shall, at all times, observe the constitutional or statutory ownership requirement. For purposes
of determining compliance therewith, the required percentage of Filipino ownership shall be applied to BOTH (a) the total number
of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock,
whether or not entitled to vote in the election of directors.

Corporations covered by special laws which provide specific citizenship requirements shall comply with the provisions of said law. 14
On June 10, 2013, petitioner Roy, as a lawyer and taxpayer, filed the Petition, 15 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.

Wilson C. Gamboa, Jr.,16 Daniel V. Cartagena, John Warren P. Gabinete, Antonio V. Pesina, Jr., Modesto Martin Y. Mamon III, and
Gerardo C. Erebaren ("intervenors Gamboa, et al.") filed a Motion for Leave to File Petition-in-Intervention 17 on July 30, 2013, which
the Court granted. The Petition-in-Intervention 18 filed by intervenors Gamboa, et al. mirrored the issues, arguments and prayer of
petitioner Roy.

On September 5, 2013, respondent PLDT filed its Comment (on the Petition dated 10 June 2013). 19 PLDT posited that the Petition
should be dismissed because it violates the doctrine of hierarchy of courts as there are no compelling reasons to invoke the Court's
original jurisdiction; it is prematurely filed because petitioner Roy failed to exhaust administrative remedies before the SEC; the
principal actions/remedies of mandamus and declaratory relief are not within the exclusive and/or original jurisdiction of the Court;
the petition for certiorari is an inappropriate remedy since the SEC issued SEC-MC No. 8 in the exercise of its quasi-legislative power;
it deprives the necessary and indispensable parties of their constitutional right to due process; and the SEC merely implemented the
dispositive portion of the Gamboa Decision.

On September 20, 2013, respondents Chairperson Teresita Herbosa and SEC filed their Consolidated Comment. 20 They sought the
dismissal of the petitions on the following grounds: (1) the petitioners do not possess locus standi to assail the constitutionality of
SEC-MC No. 8; (2) a petition for certiorari under Rule 65 is not the appropriate and proper remedy to assail the validity and
constitutionality of the SEC-MC No. 8; (3) the direct resort to the Court violates the doctrine of hierarchy of courts; (4) the SEC did
not abuse its discretion; (5) on PLDT's compliance with the capital requirement as stated in the Gamboa ruling, the petitioners'
challenge is premature considering that the SEC has not yet issued a definitive ruling thereon.

On October 22, 2013, PLDT filed its Comment (on the Petition-in-Intervention dated 16 July 2013).21 PLDT adopted the position that
intervenors Gamboa, et al. have no standing and are not the proper party to question the constitutionality of SEC-MC No. 8; they are
in no position to assail SEC-MC No. 8 considering that they did not participate in the public consultations or give comments thereon;
and their Petition-in-Intervention is a disguised motion for reconsideration of the Gamboa Decision and Resolution.

On May 7, 2014, Petitioner Roy and intervenors Gamboa, et al.22 filed their Joint Consolidated Reply with Motion for Issuance of
Temporary Restraining Order.23

On May 22, 2014, PLDT filed its Rejoinder [To Petitioner and Petitioners-in-Intervention's Joint Consolidated Reply dated 7 May
2014] and Opposition [To Petitioner and Petitioners-in-Intervention's Motion for Issuance of a Temporary Restraining Order dated 7
May 2014].24

On June 18, 2014, the Philippine Stock Exchange, Inc. ("PSE") filed its Motion to Intervene with Leave of Court 25 and its Comment-in
Intervention.26 The PSE alleged that it has standing to intervene as the primary regulator of the stock exchange and will sustain direct
injury should the petitions be granted. The PSE argued that in the Gamboa ruling, "capital" refers only to shares entitled to vote in
the election of directors, and excludes those not so entitled; and the dispositive portion of the decision is the controlling factor that
determines and settles the questions presented in the case. The PSE further argued that adopting a new interpretation of Section 11,
Article XII of the Constitution violates the policy of conclusiveness of judgment, stare decisis, and the State's obligation to maintain a
stable and predictable legal framework for foreign investors under international treaties; and adopting a new definition of "capital"
will prove disastrous for the Philippine stock market. The Court granted the Motion to Intervene filed by PSE. 27
PLDT filed its Consolidated Memorandum28 on February 10, 2015.

On June 1, 2016, Shareholders' Association of the Philippines, Inc. 29 ("SHAREPHIL") filed an Omnibus Motion [1] For Leave to
Intervene; and [2] To Admit Attached Comment-in-Intervention. 30 The Court granted the Omnibus Motion of SHAREPHIL. 31

On June 30, 2016, petitioner Roy filed his Opposition and Reply to Interventions of Philippine Stock Exchange and Sharephil. 32
Intervenors Gamboa, et al. then filed on September 14, 2016, their Reply (to Interventions by Philippine Stock Exchange and
Sharephil).33

The Issues

The twin issues of the Petition and the Petition-in-Intervention are: (1) whether the SEC gravely abused its discretion in issuing SEC-
MC No. 8 in light of the Gamboa Decision and Gamboa Resolution, and (2) whether the SEC gravely abused its discretion in ruling
that PLDT is compliant with the constitutional limitation on foreign ownership.chanroblesvirtuallawlibrary

The Court's Ruling

At the outset, the Court disposes of the second issue for being without merit. In its Consolidated Comment dated September 13,
2013,34 the SEC already clarified that it "has not yet issued a definitive ruling anent PLDT's compliance with the limitation on foreign
ownership imposed under the Constitution and relevant laws [and i]n fact, a careful perusal of x x x SEC-MC No. 8 readily reveals that
all existing covered corporations which are non-compliant with Section 2 thereof were given a period of one (1) year from the
effectivity of the same within which to comply with said ownership requirement. x x x." 35 Thus, in the absence of a definitive ruling
by the SEC on PLDT's compliance with the capital requirement pursuant to the Gamboa Decision and Resolution, any question
relative to the inexistent ruling is premature.

Also, considering that the Court is not a trier of facts and is in no position to make a factual determination of PLDT's compliance with
the constitutional provision under review, the Court can only resolve the first issue, which is a pure question of law. However, before
the Court tackles the first issue, it has to rule on certain procedural challenges that have been raised.chanroblesvirtuallawlibrary

The Procedural Issues

The Court may exercise its power of judicial review and take cognizance of a case when the following specific requisites are met: (1)
there is an actual case or controversy calling for the exercise of judicial power; (2) the petitioner has standing to question the validity
of the subject act or issuance, i.e., he has a personal and substantial interest in the case that he has sustained, or will sustain, direct
injury as a result of the enforcement of the act or issuance; (3) the question of constitutionality is raised at the earliest opportunity;
and (4) the constitutional question is the very lis mota of the case.36

The first two requisites of judicial review are not met.

Petitioners' failure to sufficiently allege, much less establish, the existence of the first two requisites for the exercise of judicial
review warrants the perfunctory dismissal of the petitions.

a. No actual controversy.

Regarding the first requisite, the Court in Belgica v. Ochoa37 stressed anew that an actual case or controversy is one which involves a
conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial resolution as distinguished from a hypothetical or
abstract difference or dispute since the courts will decline to pass upon constitutional issues through advisory opinions, bereft as
they are of authority to resolve hypothetical or moot questions. Related to the requirement of an actual case or controversy is the
requirement of "ripeness", and a question is ripe for adjudication when the act being challenged has a direct adverse effect on the
individual challenging it.

Petitioners have failed to show that there IS an actual case or controversy which is ripe for adjudication.

The Petition and the Petition-in-Intervention identically allege:chanRoblesvirtualLawlibrary

3. The standing interpretation of the SEC found in MC8 practically encourages circumvention of the 60-40 ownership rule by
impliedly allowing the creation of several classes of voting shares with different degrees of beneficial ownership over the same, but
at the same time, not imposing a 40% limit on foreign ownership of the higher yielding stocks. 38

4. For instance, a situation may arise where a corporation may issue several classes of shares of stock, one of which are common
shares with rights to elect directors, another are preferred shares with rights to elect directors but with much lesser entitlement to
dividends, and still another class of preferred shares with no rights to elect the directors and even less dividends. In this situation,
the corporation may issue common shares to foreigners amounting to forty percent (40%) of the outstanding capital stock and issue
preferred shares entitled to vote the directors of the corporation to Filipinos consisting of 60% 39 percent (sic) of the outstanding
capital stock entitled to vote. Although it may appear that the 60-40 rule has been complied with, the beneficial ownership of the
corporation remains with the foreign stockholder since the Filipino owners of the preferred shares have only a miniscule share in the
dividends and profit of the corporation. Plainly, this situation runs contrary to the Constitution and the ruling of this x x x Court. 40
Petitioners' hypothetical illustration as to how SEC-MC No. 8 "practically encourages circumvention of the 60-40 ownership rule" is
evidently speculative and fraught with conjectures and assumptions. There is clearly wanting specific facts against which the veracity
of the conclusions purportedly following from the speculations and assumptions can be validated. The lack of a specific factual
milieu from which the petitions originated renders any pronouncement from the Court as a purely advisory opinion and not a
decision binding on identified and definite parties and on a known set of facts.

Firstly, unlike in Gamboa, the identity of the public utility corporation, the capital of which is at issue, is unknown. Its outstanding
capital stock and the actual composition thereof in terms of numbers, classes, preferences and features are all theoretical. The
description "preferred shares with rights to elect directors but with much lesser entitlement to dividends, and still another class of
preferred shares with no rights to elect the directors and even less dividends" is ambiguous. What are the specific dividend policies
or entitlements of the purported preferred shares? How are the preferred shares' dividend policies different from those of the
common shares? Why and how did the fictional public utility corporation issue those preferred shares intended to be owned by
Filipinos? What are the actual features of the foreign-owned common shares which make them superior over those owned by
Filipinos? How did it come to be that Filipino holders of preferred shares ended up with "only a miniscule share in the dividends and
profit of the [hypothetical] corporation"? Any answer to any of these questions will, at best, be contingent, conjectural, indefinite or
anticipatory.

Secondly, preferred shares usually have preference over the common shares in the payment of dividends. If most of the "preferred
shares with rights to elect directors but with much lesser entitlement to dividends" and the other "class of preferred shares with no
rights to elect the directors and even less dividends" are owned by Filipinos, they stand to receive their dividend entitlement ahead
of the foreigners, who are common shareholders. For the common shareholders to have "bigger dividends" as compared to the
dividends paid to the preferred shareholders, which are supposedly predominantly owned by Filipinos, there must still be
unrestricted retained earnings of the fictional corporation left after payment of the dividends declared in favor of the preferred
shareholders. The fictional illustration does not even intimate how this situation can be possible. No permutation of unrestricted
retained earnings of the hypothetical corporation is shown that makes the present conclusion of the petitioners achievable. Also, no
concrete meaning to the petitioners' claim of the Filipinos' "miniscule share in the dividends and profit of the [fictional] corporation"
is demonstrated.

Thirdly, petitioners fail to allege or show how their hypothetical illustration will directly and adversely affect them. That is impossible
since their relationship to the fictional corporation is a matter of guesswork.

From the foregoing, it is evident that the Court can only surmise or speculate on the situation or controversy that the petitioners
contemplate to present for judicial determination. Petitioners are likewise conspicuously silent on the direct adverse impact to them
of the implementation of SEC-MC No. 8. Thus, the petitions must fail because the Court is barred from rendering a decision based on
assumptions, speculations, conjectures and hypothetical or fictional illustrations, more so in the present case which is not even ripe
for decision.

b. No locus standi.

The personal and substantial interest that enables a party to have legal standing is one that is both material, an interest in issue and
to be affected by the government action, as distinguished from mere interest in the issue involved, or a mere incidental interest, and
real, which means a present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate, or
consequential interest.41cralawred

As to injury, the party must show that (1) he will personally suffer some actual or threatened injury because of the allegedly illegal
conduct of the government; (2) the injury is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a
favorable action.42 If the asserted injury is more imagined than real, or is merely superficial and insubstantial, an excursion into
constitutional adjudication by the courts is not warranted. 43

Petitioners have no legal standing to question the constitutionality of SEC-MC No. 8.

To establish his standing, petitioner Roy merely claimed that he has standing to question SEC-MC No. 8 "as a concerned citizen, an
officer of the Court and as a taxpayer" as well as "the senior law partner of his own law firm[, which] x x x is a subscriber of PLDT." 44
On the other hand, intervenors Gamboa, et al. allege, as basis of their locus standi, their "[b]eing lawyers and officers of the Court"
and "citizens x x x and taxpayers."45

The Court has previously emphasized that the locus standi requisite is not met by the expedient invocation of one's citizenship or
membership in the bar who has an interest in ensuring that laws and orders of the Philippine government are legally and validly
issued as these supposed interests are too general, which are shared by other groups and by the whole citizenry. 46 Per their
allegations, the personal interest invoked by petitioners as citizens and members of the bar in the validity or invalidity of SEC-MC No.
8 is at best equivocal, and totally insufficient.

Petitioners' status as taxpayers is also of no moment. As often reiterated by the Court, a taxpayer's suit is allowed only when the
petitioner has demonstrated the direct correlation of the act complained of and the disbursement of public funds in contravention
of law or the Constitution, or has shown that the case involves the exercise of the spending or taxing power of Congress. 47 SEC-MC
No. 8 does not involve an additional expenditure of public funds and the taxing or spending power of Congress.

The allegation that petitioner Roy's law firm is a "subscriber of PLDT" is ambiguous. It is unclear whether his law firm is a "subscriber"
of PLDT's shares of stock or of its various telecommunication services. Petitioner Roy has not identified the specific direct and
substantial injury he or his law firm stands to suffer as "subscriber of PLDT" as a result of the issuance of SEC-MC No. 8 and its
enforcement.

As correctly observed by respondent PLDT, "(w]hether or not the constitutionality of SEC-MC No. 8 is upheld, the rights and
privileges of all PLDT subscribers, as with all the rest of subscribers of other corporations, are necessarily and equally preserved and
protected. Nothing is added [to] or removed from a PLDT subscriber in terms of the extent of his or her participation, relative to
what he or she had originally enjoyed from the beginning. In the most practical sense, a PLDT subscriber loses or gains nothing in the
event that SEC-MC No. 8 is either sustained or struck down by [the Court]." 48

More importantly, the issue regarding PLDT's compliance with Section 11, Article XII of the Constitution has been earlier ruled as
premature and beyond the Court's jurisdiction. Thus, petitioner Roy's allegation that his law firm is a "subscriber of PLDT" is
insufficient to clothe him with locus standi.

Petitioners' cursory incantation of "transcendental importance x x x of the rules on foreign ownership of corporations or entities
vested with public interest"49 does not automatically justify the brushing aside of the strict observance of the requisites for the
Court's exercise of judicial review. An indiscriminate disregard of the requisites every time "transcendental or paramount
importance or significance" is invoked would result in an unacceptable corruption of the settled doctrine of locus standi, as every
worthy cause is an interest shared by the general public. 50

In the present case, the general and equivocal allegations of petitioners on their legal standing do not justify the relaxation of the
locus standi rule. While the Court has taken an increasingly liberal approach to the rule of locus standi, evolving from the stringent
requirements of personal injury to the broader transcendental importance doctrine, such liberality is not to be abused. 51

The Rule on the Hierarchy of Courts has been violated.

The Court in Bañez, Jr. v. Concepcion52 stressed that:chanRoblesvirtualLawlibrary

The Court must enjoin the observance of the policy on the hierarchy of courts, and now affirms that the policy is not to be ignored
without serious consequences. The strictness of the policy is designed to shied the Court from having to deal with causes that are
also well within the competence of the lower courts, and thus leave time to the Court to deal with the more fundamental and more
essential tasks that the Constitution has assigned to it. The Court may act on petitions for the extraordinary writs of certiorari,
prohibition and mandamus only when absolutely necessary or when serious and important reasons exist to justifY an exception to
the policy. x x x
x x x Where the issuance of an extraordinary writ is also within the competence of the Court of Appeals or a Regional Trial Court, it is
in either of these courts that the specific action for the writ's procurement must be presented. This is and should continue to be the
policy in this regard, a policy that courts and lawyers must strictly observe. x x x 53
Petitioners' invocation of "transcendental importance" is hollow and does not merit the relaxation of the rule on hierarchy of courts.
There being no special, important or compelling reason that justified the direct filing of the petitions in the Court in violation of the
policy on hierarchy of courts, their outright dismissal on this ground is further warranted. 54

The petitioners failed to implead indispensable parties.

The cogent submissions of the PSE in its Comment-in-Intervention dated June 16, 2014 55 and SHAREPHIL in its Omnibus Motion [1]
For Leave to Intervene; and [2] To Admit Attached Comment-in-Intervention dated May 30, 2016 56 demonstrate how petitioners
should have impleaded not only PLDT but all other corporations in nationalized and partlynationalized industries because the
propriety of the SEC's enforcement of the Court's interpretation of "capital" through SEC-MC No. 8 affects them as well.

Under Section 3, Rule 7 of the Rules of Court, an indispensable party is a party-in-interest without whom there can be no final
determination of an action. Indispensable parties are those with such a material and direct interest in the controversy that a final
decree would necessarily affect their rights, so that the court cannot proceed without their presence. 57 The interests of such
indispensable parties in the subject matter of the suit and the relief are so bound with those of the other parties that their legal
presence as parties to the proceeding is an absolute necessity and a complete and efficient determination of the equities and rights
of the parties is not possible if they are not joined. 58

Other than PLDT, the petitions failed to join or implead other public utility corporations subject to the same restriction imposed by
Section 11, Article XII of the Constitution. These corporations are in danger of losing their franchise and property if they are found
not compliant with the restrictive interpretation of the constitutional provision under review which is being espoused by petitioners.
They should be afforded due notice and opportunity to be heard, lest they be deprived of their property without due process.

Not only are public utility corporations other than PLDT directly and materially affected by the outcome of the petitions, their
shareholders also stand to suffer in case they will be forced to divest their shareholdings to ensure compliance with the said
restrictive interpretation of the term "capital". As explained by SHAREPIDL, in five corporations alone, more than Php158 Billion
worth of shares must be divested by foreign shareholders and absorbed by Filipino investors if petitioners' position is upheld. 59

Petitioners' disregard of the rights of these other corporations and numerous shareholders constitutes another fatal procedural flaw,
justifYing the dismissal of their petitions. Without giving all of them their day in court, they will definitely be deprived of their
property without due process of law.

During the deliberations, Justice Velasco stressed on the foregoing procedural objections to the granting of the petitions; and Justice
Bersamin added that the special civil action for certiorari and prohibition is not the proper remedy to assail SEC-MC No. 8 because it
was not issued under the adjudicatory or quasi-judicial functions of the SEC.chanroblesvirtuallawlibrary

The Substantive Issue

The only substantive issue that the petitions assert is whether the SEC's issuance of SEC-MC No. 8 is tainted with grave abuse of
discretion.

The Court holds that, even if the resolution of the procedural issues were conceded in favor of petitioners, the petitions, being
anchored on Rule 65, must nonetheless fail because the 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.

The ratio in the Gamboa Decision and Gamboa Resolution.

To determine what the Court directed the SEC to do - and therefore resolve whether what the SEC did amounted to grave abuse of
discretion - the Court resorts to the decretal portion of the Gamboa Decision, as this is the portion of the decision that a party relies
upon to determine his or her rights and duties,60viz:chanRoblesvirtualLawlibrary
WHEREFORE, we PARTLY GRANT the petition and rule that the term "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). 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 II, Article XII of the
Constitution, to impose the appropriate sanctions under the law. 61
In turn, the Gamboa Resolution stated:chanRoblesvirtualLawlibrary
In any event, the SEC has expressly manifested 62 that it will abide by the Court's decision and defer to the Court's definition of the
term "capital" in Section II, Article XII of the Constitution. Further, the SEC entered its special appearance in this case and argued
during the Oral Arguments, indicating its submission to the Court's jurisdiction. It is clear, therefore, that there exists no legal
impediment against the proper and immediate implementation of the Court's directive to the SEC.
xxxx

x x x The dispositive portion of the Court's ruling is addressed not to PLDT but solely to the SEC, which is the administrative agency
tasked to enforce the 60-40 ownership requirement in favor of Filipino citizens in Section 11, Article XII of the Constitution. 63
To recall, the sole issue in the Gamboa case was: "whether the term 'capital' in Section 11, Article XII of the Constitution refers to the
total common shares only or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of
PLDT, a public utility." 64

The Court directly answered the Issue and consistently defined the term "capital" as follows:chanRoblesvirtualLawlibrary
x x x The term "capital" in Section 11, Article XII of the 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 comprising both
common and non voting preferred shares.

xxxx

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.65
The decretal portion of the Gamboa Decision follows the definition of the term "capital" in the body of the decision, to wit: "x x x we
x x x rule 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)."66

The Court adopted the foregoing definition of the term "capital" in Section 11, Article XII of the 1987 Constitution in furtherance of
"the intent and letter of the Constitution that the 'State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos' [because a] broad definition unjustifiably disregards who owns the all-important voting stock, which
necessarily equates to control of the public utility." 67 The Court, recognizing that the provision is an express recognition of the
sensitive and vital position of public utilities both in the national economy and for national security, also pronounced that the
evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to
the national interest.68 Further, the Court noted that the foregoing interpretation is consistent with the intent of the framers of the
Constitution to place in the hands of Filipino citizens the control and management of public utilities; and, as revealed in the
deliberations of the Constitutional Commission, "capital" refers to the voting stock or controlling interest of a corporation.69

In this regard, it would be apropos to state that since Filipinos own at least 60% of the outstanding shares of stock entitled to vote
directors, which is what the Constitution precisely requires, then the Filipino stockholders control the corporation, i.e., they dictate
corporate actions and decisions, and they have all the rights of ownership including, but not limited to, offering certain preferred
shares that may have greater economic interest to foreign investors - as the need for capital for corporate pursuits (such as
expansion), may be good for the corporation that they own. Surely, these "true owners" will not allow any dilution of their
ownership and control if such move will not be beneficial to them.

As owners of the corporation, the economic benefits will necessarily accrue to them. There is thus no logical reason why Filipino
shareholders will allow foreigners to have greater economic benefits than them. It is illogical to speculate that they will create shares
which have features that will give greater economic interests or benefits than they are holding and not benefit from such offering, or
that they will allow foreigners to profit more than them from their own corporation - unless they are dummies. But, Commonwealth
Act No. 108, the Anti-Dummy Law, is NOT in issue in these petitions. Notably, even if the shares of a particular public utility were
owned 100% Filipino, that does not discount the possibility of a dummy situation from arising. Hence, even if the 60-40 ownership in
favor of Filipinos rule is applied separately to each class of shares of a public utility corporation, as the petitioners insist, the rule can
easily be side-stepped by a dummy relationship. In other words, even applying the 60-40 Filipino foreign ownership rule to each
class of shares will not assure the lofty purpose enunciated by petitioners.

The Court observed further in the Gamboa Decision that reinforcing this interpretation of the term "capital", as referring to interests
or shares entitled to vote, is the definition of a Philippine national in the Foreign Investments Act of 1991 ("FIA"), which is explained
in the Implementing Rules and Regulations of the FIA ("FIA-IRR"). The FIA-IRR provides:chanRoblesvirtualLawlibrary
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock
whether fully paid or not, but only such stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the
voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine
nationals.70
Echoing the FIA-IRR, the Court stated in the Gamboa Decision that:chanRoblesvirtualLawlibrary
Mere legal title is insufficient to meet the 60 percent Filipinoowned "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]."

xxxx

The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance
with the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of
the voting rights, is constitutionally required for the State's grant of authority to operate a public utility. x x x 71
Was the definition of the term "capital" in Section 11, Article XII of the 1987 Constitution declared for the first time by the Court in
the Gamboa Decision modified in the Gamboa Resolution?

The Court is convinced that it was not. The Gamboa Resolution consists of 51 pages (excluding the dissenting opinions of Associate
Justices Velasco and Abad). For the most part of the Gamboa Resolution, the Court, after reviewing SEC and DOJ 72 Opinions as well
as the provisions of the FIA and its predecessor statutes, 73 reiterated that both the Voting Control Test and the Beneficial Ownership
Test must be applied to determine whether a corporation is a "Philippine national" 74 and that a "Philippine national," as defined in
the FIA and all its predecessor statutes, is "a Filipino citizen, or a domestic corporation "at least sixty percent (60%) of the capital
stock outstanding and entitled to vote," is owned by Filipino citizens. A domestic corporation is a "Philippine national" only if at
least 60% of its voting stock is owned by Filipino citizens."75 The Court also reiterated that, from the deliberations of the
Constitutional Commission, it is evident that the term "capital" refers to controlling interest of a corporation,76 and the framers of
the Constitution intended public utilities to be majority Filipino-owned and controlled.

The "Final Word" of the Gamboa Resolution put to rest the Court's interpretation of the term "capital", and this is quoted verbatim,
to wit:chanRoblesvirtualLawlibrary
XII.
Final Word

The Constitution expressly declares as State policy the development of an economy "effectively controlled" by Filipinos. Consistent
with such State policy, the Constitution explicitly reserves the ownership and operation of public utilities to Philippine nationals, who
are defined in the Foreign Investments Act of 1991 as Filipino citizens, or corporations or associations at least 60 percent of whose
capital with voting rights belongs to Filipinos. The FIA's implementing rules explain that "[f]or stocks to be deemed owned and held
by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial
ownership of stocks, coupled with appropriate voting rights is essential." In effect, the FIA clarifies, reiterates and confirms the
interpretation that the term "capital" in Section 11, Article XII of the 1987 Constitution refers to shares with voting rights, as well as
with full beneficial ownership. This is precisely because the right to vote in the election of directors, coupled with full beneficial
ownership of stocks, translates to effective control of a corporation. 77
Everything told, the Court, in both the Gamboa Decision and Gamboa Resolution, finally settled with the PIA's definition of
"Philippine national" as expounded in the FIA-IRR in construing the term "capital" in Section 11, Article XII of the 1987 Constitution.

The assailed SEC-MC No. 8.

The relevant provision in the assailed SEC-MC No. 8 IS Section 2, which provides:chanRoblesvirtualLawlibrary
Section 2. All covered corporations shall, at all times, observe the constitutional or statutory ownership requirement. For purposes
of determining compliance therewith, the required percentage of Filipino ownership shall be applied to BOTH (a) the total number
of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock,
whether or not entitled to vote in the election of directors. 78
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 "[f]ull beneficial ownership of 60 percent of the outstanding capital stock, coupled
with 60 percent of the voting rights is required."79 Clearly, SEC-MC No. 8 cannot be said to have been issued with grave abuse of
discretion.

A simple illustration involving Company X with three kinds of shares of stock, easily shows how compliance with the requirements of
SEC-MC No. 8 will necessarily result to full and faithful compliance with the Gamboa Decision as well as the Gamboa Resolution.

The following is the composition of the outstanding capital stock of Company X:chanRoblesvirtualLawlibrary
100 common shares
100 Class A preferred shares (with right to elect directors)
100 Class B preferred shares (without right to elect directors)

SEC-MC No. 8 GAMBOA DECISION

(1) 60% (required percentage of Filipino) applied to the total "shares of stock entitled to vote in the election of directors" 80
number of outstanding shares of stock entitled to vote in the (60% of the voting rights)
election of directors

If at least a total of 120 of common shares and Class A preferred shares (in any combination) are owned and controlled by Filipinos,
Company X is compliant with the 60% of the voting rights in favor of Filipinos requirement of both SEC-MC No. 8 and the Gamboa
Decision.

SEC-MC No. 8 GAMBOA DECISION/RESOLUTION

(2) 60% (required percentage of Filipino) applied to BOTH (a) the
total number of outstanding shares of stock, entitled to vote in
the election of directors; AND (b) the total number of
outstanding shares of stock, whether or not entitled to vote in
the election of directors.
"Full beneficial ownership of 60 percent of the outstanding
capital stock, coupled with 60 percent of the voting rights" 81 or
"Full beneficial ownership of the stocks, coupled with
appropriate voting rights x x x shares with voting rights, as well
as with full beneficial ownership"82

If at least a total of 180 shares of all the outstanding capital stock of Company X are owned and controlled by Filipinos, provided that
among those 180 shares a total of 120 of the common shares and Class A preferred shares (in any combination) are owned and
controlled by Filipinos, then Company X is compliant with both requirements of voting rights and beneficial ownership under SEC-MC
No. 8 and the Gamboa Decision and Resolution.

From the foregoing illustration, SEC-MC No. 8 simply implemented, and is fully in accordance with, the Gamboa Decision and
Resolution.

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
(Republic Act No. 8799; "SRC") and its implementing rules. 83

The full beneficial ownership test.

The minority justifies the application of the 60-40 Filipino-foreign ownership rule separately to each class of shares of a public utility
corporation in this fashion:chanRoblesvirtualLawlibrary
x x x The words "own and control," used to qualify the minimum Filipino participation in Section 11, Article XII of the Constitution,
reflects the importance of Filipinos having both the ability to influence the corporation through voting rights and economic benefits.
In other words, full ownership up to 60% of a public utility encompasses both control and economic rights, both of which must stay
in Filipino hands. Filipinos, who own 60% of the controlling interest, must also own 60% of the economic interest in a public utility.

x x x In mixed class or dual structured corporations, however, there is variance in the proportion of stockholders' controlling interest
visa-vis their economic ownership rights. This resulting variation is recognized by the Implementing Rules and Regulations (IRR) of
the Securities Regulation Code, which defined beneficial ownership as that may exist either through voting power and/or through
investment returns. By using and/or in defining beneficial ownership, the IRR, in effect, recognizes a possible situation where voting
power is not commensurate to investment power.
The definition of "beneficial owner" or "beneficial ownership" in the Implementing Rules and Regulations of the Securities
Regulation Code ("SRC-IRR") is consistent with the concept of"full beneficial ownership" in the FIA-IRR.

As defined in the SRC-IRR, "[b]eneficial owner or beneficial ownership means any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which includes the power to vote or
direct the voting of such security) and/or investment returns or power (which includes the power to dispose of, or direct the
disposition of such security) x x x."84

While it is correct to state that beneficial ownership is that which may exist either through voting power and/or investment returns,
it does not follow, as espoused by the minority opinion, that the SRC-IRR, in effect, recognizes a possible situation where voting
power is not commensurate to investment power. That is a wrong syllogism. The fallacy arises from a misunderstanding on what the
definition is for. The "beneficial ownership" referred to in the definition, while it may ultimately and indirectly refer to the overall
ownership of the corporation, more pertinently refers to the ownership of the share subject of the question: is it Filipino-owned or
not?

As noted earlier, the FIA-IRR states:chanRoblesvirtualLawlibrary

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock
whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the
voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine
nationals.85
The emphasized portions in the foregoing provision is the equivalent of the so-called "beneficial ownership test". That is all.

The term "full beneficial ownership" found in the FIA-IRR is to be understood in the context of the entire paragraph defining the
term "Philippine national". Mere legal title is not enough to meet the required Filipino equity, which means that it is not sufficient
that a share is registered in the name of a Filipino citizen or national, i.e., he should also have full beneficial ownership of the share.
If the voting right of a share held in the name of a Filipino citizen or national is assigned or transferred to an alien, that share is not to
be counted in the determination of the required Filipino equity. In the same vein, if the dividends and other fruits and accessions of
the share do not accrue to a Filipino citizen or national, then that share is also to be excluded or not counted.

In this regard, it is worth reiterating the Court's pronouncement in the Gamboa Decision, which is consistent with the FIA-IRR,
viz:chanRoblesvirtualLawlibrary
Mere legal title is insufficient to meet the 60 percent Filipinoowned "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. x x x

xxxx

The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance
with the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent
of the voting rights, is constitutionally required (or the State's grant of authority to operate a public utility. x x x.86
And the "Final Word" of the Gamboa Resolution is in full accord with the foregoing pronouncement of the Court, to
wit:chanRoblesvirtualLawlibrary
XII.
Final Word

x x x The FIA's implementing rules explain that "[f]or stocks to be deemed owned and held by Philippine citizens or Philippine
nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with
appropriate voting rights is essential."87
Given that beneficial ownership of the outstanding capital stock of the public utility corporation has to be determined for purposes
of compliance with the 60% Filipino ownership requirement, the definition in the SRC-IRR can now be applied to resolve only the
question of who is the beneficial owner or who has beneficial ownership of each "specific stock" of the said corporation. Thus, if a
"specific stock" is owned by a Filipino in the books of the corporation, but the stock's voting power or disposing power belongs to a
foreigner, then that "specific stock" will not be deemed as "beneficially owned" by a Filipino.

Stated inversely, if the Filipino has the "specific stock's" voting power (he can vote the stock or direct another to vote for him), or the
Filipino has the investment power over the "specific stock" (he can dispose of the stock or direct another to dispose it for him), or he
has both (he can vote and dispose of the "specific stock" or direct another to vote or dispose it for him), then such Filipino is the
"beneficial owner" of that "specific stock" and that "specific stock" is considered (or counted) as part of the 60% Filipino ownership
of the corporation. In the end, all those "specific stocks" that are determined to be Filipino (per definition of "beneficial owner" or
"beneficial ownership") will be added together and their sum must be equivalent to at least 60% of the total outstanding shares of
stock entitled to vote in the election of directors and at least 60% of the total number of outstanding shares of stock, whether or not
entitled to vote in the election of directors.

To reiterate, the "beneficial owner or beneficial ownership" definition in the SRC-IRR is understood only in determining the
respective nationalities of the outstanding capital stock of a public utility corporation in order to determine its compliance with the
percentage of Filipino ownership required by the Constitution.

The restrictive re-interpretation of "capital" as insisted by the petitioners is unwarranted.

Petitioners' insistence that the 60% Filipino equity requirement must be applied to each class of shares is simply beyond the literal
text and contemplation of Section 11, Article XII of the 1987 Constitution, viz:chanRoblesvirtualLawlibrary
Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum or
whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation
or association must be citizens of the Philippines.
As worded, effective control by Filipino citizens of a public utility is already assured in the provision. With respect to a stock
corporation engaged in the business of a public utility, the constitutional provision mandates three safeguards: (1) 60% of its capital
must be owned by Filipino citizens; (2) participation of foreign investors in its board of directors is limited to their proportionate
share in its capital; and (3) all its executive and managing officers must be citizens of the Philippines.

In the exhaustive review made by the Court in the Gamboa Resolution of the deliberations of the Constitutional Commission, the
opinions of the framers of the 1987 Constitution, the opinions of the SEC and the DOJ as well as the provisions of the FIA, its
implementing rules and its predecessor statutes, the intention to apply the voting control test and the beneficial ownership test was
not mentioned in reference to "each class of shares." Even the Gamboa Decision was silent on this point.

To be sure, the application of the 60-40 Filipino-foreign ownership requirement separately to each class of shares, whether
common, preferred non-voting, preferred voting or any other class of shares fails to understand and appreciate the nature and
features of stocks as financial instruments. 88

There are basically only two types of shares or stocks, i.e., common stock and preferred stock. However, the classes and variety of
shares that a corporation may issue are dictated by the confluence of the corporation's financial position and needs, business
opportunities, short-term and long term targets, risks involved, to name a few; and they can be classified and re-classified from time
to time. With respect to preferred shares, there are cumulative preferred shares, non-cumulative preferred shares, convertible
preferred shares, participating preferred shares.

Because of the different features of preferred shares, it is required that the presentation and disclosure of these financial
instruments in financial statements should be in accordance with the substance of the contractual arrangement and the definitions
of a financial liability, a financial asset and an equity instrument. 89

Under IAS90 32.16, a financial instrument is an equity instrument only if (a) the instrument includes no contractual obligation to
deliver cash or another financial asset to another entity, and (b) if the instrument will or may be settled in the issuer's own equity
instruments, it is either: (i) a non derivative that includes no contractual obligation for the issuer to deliver a variable number of its
own equity instruments; or (ii) a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another
financial asset for a fixed number of its own equity instruments. 91

The following are illustrations of how preferred shares should be presented and disclosed:chanRoblesvirtualLawlibrary
Illustration - preference shares

If an entity issues preference (preferred) shares that pay a fixed rate of dividend and that have a mandatory redemption feature at a
future date, the substance is that they are a contractual obligation to deliver cash and, therefore, should be recognized as a liability.
[IAS 32.18(a)] In contrast, preference shares that do not have a fixed maturity, and where the issuer does not have a contractual
obligation to make any payment are equity. In this example even though both instruments are legally termed preference shares they
have different contractual terms and one is a financial liability while the other is equity.

Illustration - issuance of fixed monetary amount of equity instruments

A contractual right or obligation to receive or deliver a number of its own shares or other equity instruments that varies so that the
fair value of the entity's own equity instruments to be received or delivered equals the fixed monetary amount of the contractual
right or obligation is a financial liability. [IAS 32.20]

Illustration - one party bas a choice over bow an instrument is settled

When a derivative financial instrument gives one party a choice over how it is settled (for instance, the issuer or the holder can
choose settlement net in cash or by exchanging shares for cash), it is a financial asset or a financial liability unless all of the
settlement alternatives would result in it being an equity instrument. [IAS 32.26] 92
The fact that from an accounting standpoint, the substance or essence of the financial instrument is the key determinant whether it
should be categorized as a financial liability or an equity instrument, there is no compelling reason why the same treatment may not
be recognized from a legal perspective. Thus, to require Filipino shareholders to acquire preferred shares that are substantially
debts, in order to meet the "restrictive" Filipino ownership requirement that petitioners espouse, may not bode well for the
Philippine corporation and its Filipino shareholders.

Parenthetically, given the innumerable permutations that the types and classes of stocks may take, requiring the SEC and other
government agencies to keep track of the ever-changing capital classes of corporations will be impracticable, if not downright
impossible. And the law does not require the impossible. (Lex non cogit ad impossibilia.)93

That stock corporations are allowed to create shares of different classes with varying features is a flexibility that is granted, among
others, for the corporation to attract and generate capital (funds) from both local and foreign capital markets. This access to capital -
which a stock corporation may need for expansion, debt relief/repayment, working capital requirement and other corporate pursuits
- will be greatly eroded with further unwarranted limitations that are not articulated in the Constitution. The intricacies and delicate
balance between debt instruments (liabilities) and equity (capital) that stock corporations need to calibrate to fund their business
requirements and achieve their financial targets are better left to the judgment of their boards and officers, whose bounden duty is
to steer their companies to financial stability and profitability and who are ultimately answerable to their shareholders.

Going back to the illustration above, the restrictive meaning of the term "capital" espoused by petitioners will definitely be complied
with if 60% of each of the three classes of shares of Company X, consisting of 100 common shares, 100 Class A preferred shares (with
right to elect directors) and 100 Class B preferred shares (without right to elect directors), is owned by Filipinos. However, what if
the 60% Filipino ownership in each class of preferred shares, i.e., 60 Class A preferred shares and 60 Class B preferred shares, is not
fully subscribed or achieved because there are not enough Filipino takers? Company X will be deprived of capital that would
otherwise be accessible to it were it not for this unwarranted "restrictive" meaning of "capital".

The fact that all shares have the right to vote in 8 specific corporate actions as provided in Section 6 of the Corporation Code does
not per se justify the favorable adoption of the restrictive re-interpretation of "capital" as the petitioners espouse. As observed in
the Gamboa Decision, viz:chanRoblesvirtualLawlibrary
The Corporation Code of the Philippines classifies shares as common or preferred, thus:chanRoblesvirtualLawlibrary
Sec. 6. Classification of shares. The shares of stock of stock corporations may be divided into classes or series of shares, or both, any
of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation:
Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have
complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for
in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building
and loan associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in
case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation
which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par
value. The Board of Directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares
of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with
the Securities and Exchange Commission.

xxxx

A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all
respects to every other share.

Where the articles of incorporation provide for non voting shares in the cases allowed by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following matters:cralawlawlibrary

1. Amendment of the articles of incorporation;ChanRoblesVirtualawlibrary

2. Adoption and amendment of by-laws;ChanRoblesVirtualawlibrary

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate
property;ChanRoblesVirtualawlibrary

4. Incurring, creating or increasing bonded indebtedness;ChanRoblesVirtualawlibrary

5. Increase or decrease of capital stock;ChanRoblesVirtualawlibrary

6. Merger or consolidation of the corporation with another corporation or other corporations;ChanRoblesVirtualawlibrary

7. Investment of corporate funds in another corporation or business in accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in
this Code shall be deemed to refer only to stocks with voting rights.
Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation. This is
exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation.
In the absence of provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the
same voting rights as common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the
right to vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely investors in
the corporation for income in the same manner as bondholders. In fact, under the Corporation Code only preferred or redeemable
shares can be deprived of the right to vote. Common shares cannot be deprived of the right to vote in any corporate meeting, and
any provision in the articles of incorporation restricting the right of common shareholders to vote is invalid.

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.

This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control
and management of public utilities. As revealed in the deliberations of the Constitutional Commission, "capital" refers to the voting
stock or controlling interest of a corporation x x x.94
The Gamboa Decision held that preferred shares are to be factored in only if they are entitled to vote in the election of directors. If
preferred shares have no voting rights, then they cannot elect members of the board of directors, which wields control of the
corporation. As to the right of non voting preferred shares to vote in the 8 instances enumerated in Section 6 of the Corporation
Code, the Gamboa Decision considered them but, in the end, did not find them significant in resolving the issue of the proper
interpretation of the word "capital" in Section 11, Article XII of the Constitution.

Therefore, to now insist in the present case that preferred shares be regarded differently from their unambiguous treatment in the
Gamboa Decision is enough proof that the Gamboa Decision, which had attained finality more than 4 years ago, is being drastically
changed or expanded.

In this regard, it should be noted that the 8 corporate matters enumerated in Section 6 of the Corporation Code require, at the
outset, a favorable recommendation by the management to the board. As mandated by Section 11, Article XII of the Constitution, all
the executive and managing officers of a public utility company must be Filipinos. Thus, the all-Filipino management team must first
be convinced that any of the 8 corporate actions in Section 6 will be to the best interest of the company. Then, when the all-Filipino
management team recommends this to the board, a majority of the board has to approve the recommendation and, as required by
the Constitution, foreign participation in the board cannot exceed 40% of the total number of board seats. Since the Filipino
directors comprise the majority, they, if united, do not even need the vote of the foreign directors to approve the intended
corporate act. After approval by the board, all the shareholders (with and without voting rights) will vote on the corporate action.
The required vote in the shareholders' meeting is 2/3 of the outstanding capital stock. 95 Given the super majority vote requirement,
foreign shareholders cannot dictate upon their Filipino counterpart. However, foreigners (if owning at least a third of the
outstanding capital stock) must agree with Filipino shareholders for the corporate action to be approved. The 2/3 voting
requirement applies to all corporations, given the significance of the 8 corporate actions contemplated in Section 6 of the
Corporation Code.

In short, if the Filipino officers, directors and shareholders will not approve of the corporate act, the foreigners are helpless.

Allowing stockholders holding preferred shares without voting rights to vote in the 8 corporate matters enumerated in Section 6 is
an acknowledgment of their right of ownership. If the owners of preferred shares without right to vote/elect directors are not
allowed to vote in any of those 8 corporate actions, then they will not be entitled to the appraisal right provided under Section 81 96
of the Corporation Code in the event that they dissent in the corporate act. As required in Section 82, the appraisal right can only be
exercised by any stockholder who voted against the proposed action. Thus, without recognizing the right of every stockholder to
vote in the 8 instances enumerated in Section 6, the stockholder cannot exercise his appraisal right in case he votes against the
corporate action. In simple terms, the right to vote in the 8 instances enumerated in Section 6 is more in furtherance of the
stockholder's right of ownership rather than as a mode of control.

As to financial interest, giving short-lived preferred or superior terms to certain classes or series of shares may be a welcome option
to expand capital, without the Filipino shareholders putting up additional substantial capital and/or losing ownership and control of
the company. For shareholders who are not keen on the creation of those shares, they may opt to avail themselves of their appraisal
right. As acknowledged in the Gamboa Decision, preferred shareholders are merely investors in the company for income in the same
manner as bondholders. Without a lucrative package, including an attractive return of investment, preferred shares will not be
subscribed and the much-needed additional capital will be elusive. A too restrictive definition of "capital", one which was never
contemplated in the Gamboa Decision, will surely have a dampening effect on the business milieu by eroding the flexibility inherent
in the issuance of preferred shares with varying terms and conditions. Consequently, the rights and prerogatives of the owners of
the corporation will be unwarrantedly stymied.

Moreover, the restrictive interpretation of the term "capital" would have a tremendous impact on the country as a whole and to all
Filipinos.

The PSE's Comment-in-Intervention dated June 16, 2014 97 warns that:chanRoblesvirtualLawlibrary

80. [R]edefining "capital" as used in Section 11, Article XII of the 1987 Constitution and adopting the supposed "Effective Control
Test" will lead to disastrous consequences to the Philippine stock market.

81. Current data of the PSE show that, if the "Effective Control Test" were applied, the total value of shares that would be deemed in
excess of the foreign-ownership limits based on stock prices as of 30 April 2014 is One Hundred Fifty Nine Billion Six Hundred Thirty
Eight Million Eight Hundred Forty Five Thousand Two Hundred Six Pesos and Eighty Nine Cents (Php159,638,845,206.89).

82. The aforementioned value of investments would have to be discharged by foreign holders, and consequently must be absorbed
by Filipino investors. Needless to state, the lack of investments may lead to shutdown of the affected enterprises and to
immeasurable consequences to the Philippine economy. 98
In its Omnibus Motion [1] For Leave to Intervene; and [2] To Admit Attached Comment-in-Intervention dated May 30, 2016, 99
SHAREPHIL further warns that "[t]he restrictive re-interpretation of the term "capital" will result in massive forced divestment of
foreign stockholdings in Philippine corporations."100 SHAREPHIL explains:chanRoblesvirtualLawlibrary
4.51. On 16 October 2012, Deutsche Bank released a Market Research Study, which analyzed the implications of the ruling in
Gamboa. The Market Research Study stated that:chanRoblesvirtualLawlibrary
"If this thinking is applied and becomes established precedent, it would significantly expand on the rules for determining nationality
in partially nationalized industries. If that were to happen, not only will PLDT's move to issue the 150m voting prefs be inadequate to
address the issue, a large number of listed companies with similar capital structures could also be affected."
4.52. In five (5) companies alone, One Hundred Fifty Eight Billion Pesos (PhP158,000,000,000.00) worth of shares will have to be sold
by foreign shareholders in a forced divestment, if the obiter in Gamboa were to be implemented. Foreign shareholders of PLDT will
have to divest One Hundred Three Billion Eight Hundred Sixty Million Pesos (PhP103,860,000,000.00) worth of shares.

a. Foreign shareholders of Globe Telecom will have to divest Thirty Eight Billion Two Hundred Fifty Million Pesos
(PhP38,250,000,000.00) worth of shares.

b. Foreign shareholders of Ayala Land will have to divest Seventeen Billion Five Hundred Fifty Million Pesos
(PhP17,550,000,000.00) worth of shares.

c. Foreign shareholders of ICTSI will have to divest Six Billion Four Hundred Ninety Million Pesos
(PhP6,490,000,000.00) worth of shares.

d. Foreign shareholders of MWC will have to divest Seven Billion Seven Hundred Fourteen Million Pesos
(PhP7,714,000,000.00) worth of shares.

4.53. Clearly, the local stock market which has an average value turn-over of Seven Billion Pesos cannot adequately absorb the influx
of shares caused by the forced divestment. As a result, foreign stockholders will have to sell these shares at bargain prices just to
comply with the Obiter.

4.54. These shares being part of the Philippine index, their forced divestment vis-a-vis the inability of the local stock market to
absorb these shares will necessarily bring immense downward pressure on the index. A domino-effect implosion of the Philippine
stock market and the Philippine economy, in general is not remote. x x x. 101
Petitioners have failed to counter or refute these submissions of the PSE and SHAREPHIL. These unrefuted observations indicate to
the Court that a restrictive interpretation - or rather, re-interpretation, of "capital", as already defined with finality in the Gamboa
Decision and Resolution - directly affects the well-being of the country and cannot be labelled as "irrelevant and impertinent
concerns x x x add[ing] burden [to] the Court." 102 These observations by the PSE103 and SHAREPHIL,104 unless refuted, must be
considered by the Court to be valid and sound.

The Court in Abacus Securities Corp. v. Ampil105 observed that: "[s]tock market transactions affect the general public and the national
economy. The rise and fall of stock market indices reflect to a considerable degree the state of the economy. Trends in stock prices
tend to herald changes in business conditions. Consequently, securities transactions are impressed with public interest x x x." 106 The
importance of the stock market in the economy cannot simply be glossed over.

In view of the foregoing, the pronouncement of the Court in the Gamboa Resolution - the constitutional requirement to apply
uniformly and across the board to all classes of shares, regardless of nomenclature and category, comprising the capital of a
corporation107 - is clearly an obiter dictum that cannot override the Court's unequivocal definition of the term "capital" in both the
Gamboa Decision and Resolution.

Nowhere in the discussion of the definition of the term "capital" in Section 11, Article XII of the 1987 Constitution in the Gamboa
Decision did the Court mention the 60% Filipino equity requirement to be applied to each class of shares. The definition of
"Philippine national" in the FIA and expounded in its IRR, which the Court adopted in its interpretation of the term "capital", does
not support such application. In fact, even the Final Word of the Gamboa Resolution does not even intimate or suggest the need for
a clarification or re-interpretation.

To revisit or even clarify the unequivocal definition of the term "capital" as referring "only to shares of stock entitled to vote in the
election of directors" and apply the 60% Filipino ownership requirement to each class of share is effectively and unwarrantedly
amending or changing the Gamboa Decision and Resolution. The Gamboa Decision and Resolution Doctrine did NOT make any
definitive ruling that the 60% Filipino ownership requirement was intended to apply to each class of share.

In Malayang Manggagawa ng Stayfast Phils., Inc. v. NLRC,108 the Court stated:chanRoblesvirtualLawlibrary

Where a petition for certiorari under Rule 65 of the Rules of Court alleges grave abuse of discretion, the petitioner should establish
that the respondent court or tribunal acted in a capricious, whimsical, arbitrary or despotic manner in the exercise of its
jurisdiction as to be equivalent to lack of jurisdiction. This is so because "grave abuse of discretion" is well-defined and not an
amorphous concept that may easily be manipulated to suit one's purpose. In this connection, Yu v. Judge Reyes-Carpio, is
instructive:chanRoblesvirtualLawlibrary
The term "grave abuse of discretion" has a specific meaning. An act of a court or tribunal can only be considered as with grave abuse
of discretion when such act is done in a "capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction." The
abuse of discretion must be so patent and gross as to amount to an "evasion of a positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by
reason of passion and hostility." Furthermore, the use of a petition for certiorari is restricted only to "truly extraordinary cases
wherein the act of the lower court or quasi-judicial body is wholly void." From the foregoing definition, it is clear that the special civil
action of certiorari under Rule 65 can only strike an act down for having been done with grave abuse of discretion if the petitioner
could manifestly show that such act was patent and gross. x x x.
The onus rests on petitioners to clearly and sufficiently establish that the SEC, in issuing SEC-MC No. 8, acted in a capricious,
whimsical, arbitrary or despotic manner in the exercise of its jurisdiction as to be equivalent to lack of jurisdiction or that the SEC's
abuse of discretion is so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law and the Gamboa Decision and Resolution. Petitioners miserably failed in
this respect.

The clear and unequivocal definition of "capital" in Gamboa has attained finality.

It is an elementary principle in procedure that the resolution of the court in a given issue as embodied in the dispositive portion or
fallo of a decision controls the settlement of rights of the parties and the questions, notwithstanding statement in the body of the
decision which may be somewhat confusing, inasmuch as the dispositive part of a final decision is definite, clear and unequivocal
and can be wholly given effect without need of interpretation or construction. 109

As explained above, the fallo or decretal/dispositive portions of both the Gamboa Decision and Resolution are definite, clear and
unequivocaL While there is a passage in the body of the Gamboa Resolution that might have appeared contrary to the fallo of the
Gamboa Decision - capitalized upon by petitioners to espouse a restrictive re-interpretation of "capital" - the definiteness and clarity
of the fallo of the Gamboa Decision must control over the obiter dictum in the Gamboa Resolution regarding the application of the
60-40 Filipino-foreign ownership requirement to "each class of shares, regardless of differences in voting rights, privileges and
restrictions."

The final judgment as rendered is the judgment of the court irrespective of all seemingly contrary statements in the decision
because at the root of the doctrine that the premises must yield to the conclusion is, side by side with the need of writing finis to
litigations, the recognition of the truth that "the trained intuition of the judge continually leads him to right results for which he is
puzzled to give unimpeachable legal reasons."110

Petitioners cannot, after Gamboa has attained finality, seek a belated correction or reconsideration of the Court's unequivocal
definition of the term "capital". At the core of the doctrine of finality of judgments is that public policy and sound practice demand
that, at the risk of occasional errors, judgments of courts should become final at some definite date fixed by law and the very objects
for which courts were instituted was to put an end to controversies. 111 Indeed, the definition of the term "capital" in the fallo of the
Gamboa Decision has acquired finality.

Because the SEC acted pursuant to the Court's pronouncements in both the Gamboa Decision and Gamboa Resolution, then it could
not have gravely abused its discretion. That portion found in the body of the Gamboa Resolution which the petitioners rely upon is
nothing more than an obiter dictum and the SEC could not be expected to apply it as it was not - is not - a binding pronouncement of
the Court.112

Furthermore, as opined by Justice Bersamin during the deliberations, the doctrine of immutability of judgment precludes the Court
from re examining the definition of "capital" under Section 11, Article XII of the Constitution. Under the doctrine of finality and
immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified
in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and even if the modification is
made by the court that rendered it or by the Highest Court of the land. Any act that violates the principle must be immediately
stricken down.113 The petitions have not succeeded in pointing to any exceptions to the doctrine of finality of judgments, under
which the present case falls, to wit: (1) the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no
prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its
execution unjust and inequitable.114

With the foregoing disquisition, the Court rules that SEC-MC No. 8 is not contrary to the Court's definition and interpretation of the
term "capital". Accordingly, the petitions must be denied for failing to show grave abuse of discretion in the issuance of SEC-MC No.
8.

The petitions are second motions for Reconsideration, which are proscribed.

As Justice Bersamin further noted during the deliberations, the petitions are in reality second motions for reconsideration prohibited
by the Internal Rules of the Supreme Court.115 The parties, particularly intervenors Gamboa, et al., could have filed a motion for
clarification in Gamboa in order to fill in the perceived shortcoming occasioned by the non-inclusion in the dispositive portion of the
Gamboa Resolution of what was discussed in the body. 116 The statement in the fallo of the Gamboa Resolution to the effect that
"[n]o further pleadings shall be entertained" could not be a hindrance to a motion for clarification that sought an unadulterated
inquiry arising upon an ambiguity in the decision.117

Closing

Ultimately, the key to nationalism is in the individual. Particularly for a public utility corporation or association, whether stock or
non-stock, it starts with the Filipino shareholder or member who, together with other Filipino shareholders or members wielding
60% voting power, elects the Filipino director who, in turn, together with other Filipino directors comprising a majority of the board
of directors or trustees, appoints and employs the all-Filipino management team. This is what is envisioned by the Constitution to
assure effective control by Filipinos. If the safeguards, which are already stringent, fail, i.e., a public utility corporation whose voting
stocks are beneficially owned by Filipinos, the majority of its directors are Filipinos, and all its managing officers are Filipinos, is pro-
alien (or worse, dummies), then that is not the fault or failure of the Constitution. It is the breakdown of nationalism in each of the
Filipino shareholders, Filipino directors and Filipino officers of that corporation. No Constitution, no decision of the Court, no
legislation, no matter how ultranationalistic they are, can guarantee nationalism.

WHEREFORE, premises considered, the Court DENIES the Petition and Petition-in-Intervention.

SO ORDERED.ChanRoblesVirtualawlibrary

G.R. No. 207246, April 18, 2017

JOSE M. ROY III, Petitioner, v. CHAIRPERSON TERESITA HERBOSA,THE SECURITIES AND EXCHANGE COMMISSION, AND PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY, Respondents.; ILSON C. GAMBOA, JR., DANIEL V. CARTAGENA, JOHN WARREN P.
GABINETE, ANTONIO V. PESINA, JR., MODESTO MARTIN Y. MAMON III, AND GERARDO C. EREBAREN, Petitioners-In-Intervention,
PHILIPPINE STOCK EXCHANGE, INC., Respondent-In-Intervention, SHAREHOLDERS' ASSOCIATION OF THE PHILIPPINES, INC.,
Respondent-In-Intervention.

RESOLUTION

CAGUIOA, J.:

Before the Court is the Motion for Reconsideration dated January 19, 2017 1 (the Motion) filed by petitioner Jose M. Roy III (movant)
seeking the reversal and setting aside of the Decision dated November 22, 2016 2 (the Decision) which denied the movant's petition,
and declared that the Securities and Exchange Commission (SEC) did not commit grave abuse of discretion in issuing Memorandum
Circular No. 8, Series of 2013 (SEC-MC No. 8) as the same was in compliance with, and in fealty to, the decision of the Court in
Gamboa v. Finance Secretary Teves,3 (Gamboa Decision) and the resolution4 denying the Motion for Reconsideration therein
(Gamboa Resolution).

The Motion presents no compelling and new arguments to justify the reconsideration of the Decision.

The grounds raised by movant are: (1) He has the requisite standing because this case is one of transcendental importance; (2) The
Court has the constitutional duty to exercise judicial review over any grave abuse of discretion by any instrumentality of
government; (3) He did not rely on an obiter dictum; and (4) The Court should have treated the petition as the appropriate device to
explain the Gamboa Decision.

The Decision has already exhaustively discussed and directly passed upon these grounds. Movant's petition was dismissed based on
both procedural and substantive grounds.

Regarding the procedural grounds, the Court ruled that petitioners (movant and petitioners-in-intervention) failed to sufficiently
allege and establish the existence of a case or controversy and locus standi on their part to warrant the Court's exercise of judicial
review; the rule on the hierarchy of courts was violated; and petitioners failed to implead indispensable parties such as the
Philippine Stock Exchange, Inc. and Shareholders' Association of the Philippines, Inc. 5

In connection with the failure to implead indispensable parties, the Court's Decision held:

Under Section 3, Rule 7 of the Rules of Court, an indispensable party is a party-in-interest without whom there can be no final
determination of an action. Indispensable parties are those with such a material and direct interest in the controversy that a final
decree would necessarily affect their rights, so that the court cannot proceed without their presence. The interests of such
indispensable parties in the subject matter of the suit and the relief are so bound with those of the other parties that their legal
presence as parties to the proceeding is an absolute necessity and a complete and efficient determination of the equities and rights
of the parties is not possible if they are not joined.

Other than PLDT, the petitions failed to join or implead other public utility corporations subject to the same restriction imposed by
Section 11, Article XII of the Constitution. These corporations are in danger of losing their franchise and property if they are found
not compliant with the restrictive interpretation of the constitutional provision under review which is being espoused by petitioners.
They should be afforded due notice and opportunity to be heard, lest they be deprived of their property without due process.

Not only are public utility corporations other than PLDT directly and materially affected by the outcome of the petitions, their
shareholders also stand to suffer in case they will be forced to divest their shareholdings to ensure compliance with the said
restrictive interpretation of the term "capital". As explained by SHAREPHIL, in five corporations alone, more than Php158 Billion
worth of shares must be divested by foreign shareholders and absorbed by Filipino investors if petitioners' position is upheld.

Petitioners' disregard of the rights of these other corporations and numerous shareholders constitutes another fatal procedural flaw,
justifying the dismissal of their petitions. Without giving all of them their day in court, they will definitely be deprived of their
property without due process of law.6
This is highlighted to clear any m1s1mpression that the Gamboa Decision and Gamboa Resolution made a categorical ruling on the
meaning of the word "capital" under Section 11, Article XII of the Constitution only in respect of, or only confined to, respondent
Philippine Long Distance Telephone Company (PLDT). Nothing is further from the truth. Indeed, a fair reading of the Gamboa
Decision and Gamboa Resolution shows that the Court's pronouncements therein would affect all public utilities, and not just
respondent PLDT.

On the substantive grounds, the Court disposed of the issue on whether the SEC gravely abused its discretion in ruling that
respondent PLDT is compliant with the limitation on foreign ownership under the Constitution and other relevant laws as without
merit. The Court reasoned that "in the absence of a definitive ruling by the SEC on PLDT's compliance with the capital requirement
pursuant to the Gamboa Decision and Resolution, any question relative to the inexistent ruling is premature." 7

In resolving the other substantive issue raised by petitioners, the Court held that:chanRoblesvirtualLawlibrary
[E]ven if the resolution of the procedural issues were conceded in favor of petitioners, the petitions, being anchored on Rule 65,
must nonetheless fail because the 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.8
To belabor the point, movant's petition is not a continuation of the Gamboa case as the Gamboa Decision attained finality on
October 18, 2012, and thereafter Entry of Judgment was issued on December 11, 2012. 9

As regards movant's repeated invocation of the transcendental importance of the Gamboa case, this does not ipso facto accord
locus standi to movant. Being a new petition, movant had the burden to justify his locus standi in his own petition. The Court,
however, was not persuaded by his justification.

Pursuant to the Court's constitutional duty to exercise judicial review, the Court has conclusively found no grave abuse of discretion
on the part of SEC in issuing SEC-MC No. 8.

The Decision has painstakingly explained why it considered as obiter dictum that pronouncement in the Gamboa Resolution that the
constitutional requirement on Filipino ownership should "apply uniformly and across the board to all classes of shares, regardless of
nomenclature and category, comprising the capital of a corporation." 9-a The Court stated that:chanRoblesvirtualLawlibrary
[T]he fallo or decretal/dispositive portions of both the Gamboa Decision and Resolution are definite, clear and unequivocal. While
there is a passage in the body of the Gamboa Resolution that might have appeared contrary to the fallo of the Gamboa Decision xxx
the definiteness and clarity of the fallo of the Gamboa Decision must control over the obiter dictum in the Gamboa Resolution
regarding the application of the 60-40 Filipino-foreign ownership requirement to "each class of shares, regardless of differences in
voting rights, privileges and restrictions."10
To the Court's mind and, as exhaustively demonstrated in the Decision, the dispositive portion of the Gamboa Decision was in no
way modified by the Gamboa Resolution.

The heart of the controversy is the interpretation of Section 11, Article XII of the Constitution, which provides: "No franchise,
certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is
owned by such citizens xxx."

The Gamboa Decision already held, in no uncertain terms, that what the Constitution requires is "[f]ull [and legal] beneficial
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights xxx must rest in the hands of
Filipino nationals xxx."11And, precisely that is what SEC-MC No. 8 provides, viz.: "xxx For purposes of determining compliance [with
the constitutional or statutory ownership], the required percentage of Filipino ownership shall be applied to BOTH (a) the total
number of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares
of stock, whether or not entitled to vote xxx." 12

In construing "full beneficial ownership," the Implementing Rules and Regulations of the Foreign Investments Act of 1991 (FIA-IRR)
provides:chanRoblesvirtualLawlibrary
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the
voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine
nationals.13
In tum, "beneficial owner" or "beneficial ownership" is defined in the Implementing Rules and Regulations of the Securities
Regulation Code (SRC-IRR) as:chanRoblesvirtualLawlibrary
[A]ny person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares
voting power (which includes the power to vote or direct the voting of such security) and/or investment returns or power (which
includes the power to dispose of, or direct the disposition of such security) xxx. 14
Thus, the definition of "beneficial owner or beneficial ownership" in the SRC-IRR, which is in consonance with the concept of "full
beneficial ownership" in the FIA-IRR, is, as stressed in the Decision, relevant in resolving only the question of who is the beneficial
owner or has beneficial ownership of each "specific stock" of the public utility company whose stocks are under review. If the
Filipino has the voting power of the "specific stock", i.e., he can vote the stock or direct another to vote for him, or the Filipino has
the investment power over the "specific stock", i.e., he can dispose of the stock or direct another to dispose of it for him, or both,
i.e., he can vote and dispose of that "specific stock" or direct another to vote or dispose it for him, then such Filipino is the
"beneficial owner" of that "specific stock." Being considered Filipino, that "specific stock" is then to be counted as part of the 60%
Filipino ownership requirement under the Constitution. The right to the dividends, jus fruendi - a right emanating from ownership of
that "specific stock" necessarily accrues to its Filipino "beneficial owner."

Once more, this is emphasized anew to disabuse any notion that the dividends accruing to any particular stock are determinative of
that stock's "beneficial ownership." Dividend declaration is dictated by the corporation's unrestricted retained earnings. On the
other hand, the corporation's need of capital for expansion programs and special reserve for probable contingencies may limit
retained earnings available for dividend declaration. 15 It bears repeating here that the Court in the Gamboa Decision adopted the
foregoing definition of the term "capital" in Section 11, Article XII of the 1987 Constitution in express recognition of the sensitive and
vital position of public utilities both in the national economy and for national security, so that the evident purpose of the citizenship
requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest. 16 This
purpose prescinds from the "benefits"/dividends that are derived from or accorded to the particular stocks held by Filipinos vis-a-vis
the stocks held by aliens. So long as Filipinos have controlling interest of a public utility corporation, their decision to declare more
dividends for a particular stock over other kinds of stock is their sole prerogative - an act of ownership that would presumably be for
the benefit of the public utility corporation itself. Thus, as explained in the Decision:chanRoblesvirtualLawlibrary
In this regard, it would be apropos to state that since Filipinos own at least 60% of the outstanding shares of stock entitled to vote
directors, which is what the Constitution precisely requires, then the Filipino stockholders control the corporation, i.e., they dictate
corporate actions and decisions, and they have all the rights of ownership including, but not limited to, offering certain preferred
shares that may have greater economic interest to foreign investors  as the need for capital for corporate pursuits (such as
expansion), may be good for the corporation that they own. Surely, these "true owners" will not allow any dilution of their
ownership and control if such move will not be beneficial to them. 17
Finally, as to how the SEC will classify or treat certain stocks with voting rights held by a trust fund that is created by the public entity
whose compliance with the limitation on foreign ownership under the Constitution is under scrutiny, and how the SEC will
determine if such public utility does, in fact, control how the said stocks will be voted, and whether, resultantly, the trust fund would
be considered as Philippine national or not - lengthily discussed in the dissenting opinion of Justice Carpio - is speculative at this
juncture. The Court cannot engage in guesswork. Thus, there is need of an actual case or controversy before the Court may exercise
its power of judicial review. The movant's petition is not that actual case or controversy.

Thus, the discussion of Justice Carpio's dissenting opinion as to the voting preferred shares created by respondent PLDT, their
acquisition by BTF Holdings, Inc., which appears to be a wholly-owned company of the PLDT Beneficial Trust Fund (BTF), and
whether or not it is respondent PLDT's management that controls BTF and BTF Holdings, Inc.  all these are factual matters that are
outside the ambit of this Court's review which, as stated in the beginning, is confined to determining whether or not the SEC
committed grave abuse of discretion in issuing SEC-MC No. 8; that is, whether or not SEC-MC No.8 violated the ruling of the Court in
Gamboa v. Finance Secretary Teves,18 and the resolution in Heirs of Wilson P. Gamboa v. Finance Sec. Teves19 denying the Motion for
Reconsideration therein as to the proper understanding of "capital".

To be sure, it would be more prudent and advisable for the Court to await the SEC's prior determination of the citizenship of specific
shares of stock held in trust - based on proven facts - before the Court proceeds to pass upon the legality of such determination.

As to whether respondent PLDT is currently in compliance with the Constitutional provision regarding public utility entities, the Court
must likewise await the SEC's determination thereof applying SEC-MC No. 8. After all, as stated in the Decision, it is the SEC which is
the government agency with the competent expertise and the mandate of law to make such determination.

In conclusion, the basic issues raised in the Motion having been duly considered and passed upon by the Court in the Decision and
no substantial argument having been adduced to warrant the reconsideration sought, the Court resolves to DENY the Motion with
FINALITY.

WHEREFORE, the subject Motion for Reconsideration is hereby DENIED WITH FINALITY. No further pleadings or motions shall be
entertained in this case. Let entry of final judgment be issued immediately.

SO ORDERED.
G.R. No. 195580               April 21, 2014
NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., and MCARTHUR MINING,
INC., Petitioners,
vs.
REDMONT CONSOLIDATED MINES CORP., Respondent.

DECISION

VELASCO, JR., J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 filed by Narra Nickel and Mining Development Corp.
(Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining Inc. (McArthur), which seeks to reverse the
October 1, 2010 Decision1 and the February 15, 2011 Resolution of the Court of Appeals (CA).

The Facts

Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a domestic corporation organized
and existing under Philippine laws, took interest in mining and exploring certain areas of the province of Palawan. After
inquiring with the Department of Environment and Natural Resources (DENR), it learned that the areas where it wanted to
undertake exploration and mining activities where already covered by Mineral Production Sharing Agreement (MPSA)
applications of petitioners Narra, Tesoro and McArthur.

Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining, Inc. (SMMI), filed an application for an MPSA
and Exploration Permit (EP) with the Mines and Geo-Sciences Bureau (MGB), Region IV-B, Office of the Department of
Environment and Natural Resources (DENR).

Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in Barangay Sumbiling,
Municipality of Bataraza, Province of Palawan and EPA-IVB-44 which includes an area of 3,720 hectares in Barangay
Malatagao, Bataraza, Palawan. The MPSA and EP were then transferred to Madridejos Mining Corporation (MMC) and, on
November 6, 2006, assigned to petitioner McArthur.2

Petitioner Narra acquired its MPSA from Alpha Resources and Development Corporation and Patricia Louise Mining &
Development Corporation (PLMDC) which previously filed an application for an MPSA with the MGB, Region IV-B, DENR on
January 6, 1992. Through the said application, the DENR issued MPSA-IV-1-12 covering an area of 3.277 hectares in
barangays Calategas and San Isidro, Municipality of Narra, Palawan. Subsequently, PLMDC conveyed, transferred and/or
assigned its rights and interests over the MPSA application in favor of Narra.

Another MPSA application of SMMI was filed with the DENR Region IV-B, labeled as MPSA-AMA-IVB-154 (formerly EPA-IVB-
47) over 3,402 hectares in Barangays Malinao and Princesa Urduja, Municipality of Narra, Province of Palawan. SMMI
subsequently conveyed, transferred and assigned its rights and interest over the said MPSA application to Tesoro.

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3) separate petitions for the
denial of petitioners’ applications for MPSA designated as AMA-IVB-153, AMA-IVB-154 and MPSA IV-1-12.

In the petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra are owned and
controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont reasoned that since MBMI is a
considerable stockholder of petitioners, it was the driving force behind petitioners’ filing of the MPSAs over the areas
covered by applications since it knows that it can only participate in mining activities through corporations which are
deemed Filipino citizens. Redmont argued that given that petitioners’ capital stocks were mostly owned by MBMI, they were
likewise disqualified from engaging in mining activities through MPSAs, which are reserved only for Filipino citizens.

In their Answers, petitioners averred that they were qualified persons under Section 3(aq) of Republic Act No. (RA) 7942 or
the Philippine Mining Act of 1995 which provided:

Sec. 3 Definition of Terms. As used in and for purposes of this Act, the following terms, whether in singular or plural, shall
mean:

xxxx

(aq) "Qualified person" means any citizen of the Philippines with capacity to contract, or a corporation, partnership,
association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and financial
capability to undertake mineral resources development and duly registered in accordance with law at least sixty per cent
(60%) of the capital of which is owned by citizens of the Philippines: Provided, That a legally organized foreign-owned
corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical
assistance agreement or mineral processing permit.

Additionally, they stated that their nationality as applicants is immaterial because they also applied for Financial or Technical
Assistance Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur, AFTA-IVB-08 for Tesoro and AFTA-IVB-07 for
Narra, which are granted to foreign-owned corporations. Nevertheless, they claimed that the issue on nationality should not
be raised since McArthur, Tesoro and Narra are in fact Philippine Nationals as 60% of their capital is owned by citizens of the
Philippines. They asserted that though MBMI owns 40% of the shares of PLMC (which owns 5,997 shares of Narra), 3 40% of
the shares of MMC (which owns 5,997 shares of McArthur)4 and 40% of the shares of SLMC (which, in turn, owns 5,997
shares of Tesoro),5 the shares of MBMI will not make it the owner of at least 60% of the capital stock of each of petitioners.
They added that the best tool used in determining the nationality of a corporation is the "control test," embodied in Sec. 3 of
RA 7042 or the Foreign Investments Act of 1991. They also claimed that the POA of DENR did not have jurisdiction over the
issues in Redmont’s petition since they are not enumerated in Sec. 77 of RA 7942. Finally, they stressed that Redmont has no
personality to sue them because it has no pending claim or application over the areas applied for by petitioners.

On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining MPSAs. It held:

[I]t is clearly established that respondents are not qualified applicants to engage in mining activities. On the other hand,
[Redmont] having filed its own applications for an EPA over the areas earlier covered by the MPSA application of
respondents may be considered if and when they are qualified under the law. The violation of the requirements for the
issuance and/or grant of permits over mining areas is clearly established thus, there is reason to believe that the cancellation
and/or revocation of permits already issued under the premises is in order and open the areas covered to other qualified
applicants.

xxxx

WHEREFORE, the Panel of Arbitrators finds the Respondents, McArthur Mining Inc., Tesoro Mining and Development, Inc.,
and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being considered as Foreign Corporations. Their
Mineral Production Sharing Agreement (MPSA) are hereby x x x DECLARED NULL AND VOID. 6

The POA considered petitioners as foreign corporations being "effectively controlled" by MBMI, a 100% Canadian company
and declared their MPSAs null and void. In the same Resolution, it gave due course to Redmont’s EPAs. Thereafter, on
February 7, 2008, the POA issued an Order7 denying the Motion for Reconsideration filed by petitioners.

Aggrieved by the Resolution and Order of the POA, McArthur and Tesoro filed a joint Notice of Appeal 8 and Memorandum of
Appeal9 with the Mines Adjudication Board (MAB) while Narra separately filed its Notice of Appeal 10 and Memorandum of
Appeal.11

In their respective memorandum, petitioners emphasized that they are qualified persons under the law. Also, through a
letter, they informed the MAB that they had their individual MPSA applications converted to FTAAs. McArthur’s FTAA was
denominated as AFTA-IVB-0912 on May 2007, while Tesoro’s MPSA application was converted to AFTA-IVB-08 13 on May 28,
2007, and Narra’s FTAA was converted to AFTA-IVB-07 14 on March 30, 2006.

Pending the resolution of the appeal filed by petitioners with the MAB, Redmont filed a Complaint 15 with the Securities and
Exchange Commission (SEC), seeking the revocation of the certificates for registration of petitioners on the ground that they
are foreign-owned or controlled corporations engaged in mining in violation of Philippine laws. Thereafter, Redmont filed on
September 1, 2008 a Manifestation and Motion to Suspend Proceeding before the MAB praying for the suspension of the
proceedings on the appeals filed by McArthur, Tesoro and Narra.

Subsequently, on September 8, 2008, Redmont filed before the Regional Trial Court of Quezon City, Branch 92 (RTC) a
Complaint16 for injunction with application for issuance of a temporary restraining order (TRO) and/or writ of preliminary
injunction, docketed as Civil Case No. 08-63379. Redmont prayed for the deferral of the MAB proceedings pending the
resolution of the Complaint before the SEC.

But before the RTC can resolve Redmont’s Complaint and applications for injunctive reliefs, the MAB issued an Order on
September 10, 2008, finding the appeal meritorious. It held:

WHEREFORE, in view of the foregoing, the Mines Adjudication Board hereby REVERSES and SETS ASIDE the Resolution dated
14 December 2007 of the Panel of Arbitrators of Region IV-B (MIMAROPA) in POA-DENR Case Nos. 2001-01, 2007-02 and
2007-03, and its Order dated 07 February 2008 denying the Motions for Reconsideration of the Appellants. The Petition filed
by Redmont Consolidated Mines Corporation on 02 January 2007 is hereby ordered DISMISSED. 17

Belatedly, on September 16, 2008, the RTC issued an Order 18 granting Redmont’s application for a TRO and setting the case
for hearing the prayer for the issuance of a writ of preliminary injunction on September 19, 2008.

Meanwhile, on September 22, 2008, Redmont filed a Motion for Reconsideration 19 of the September 10, 2008 Order of the
MAB. Subsequently, it filed a Supplemental Motion for Reconsideration 20 on September 29, 2008.

Before the MAB could resolve Redmont’s Motion for Reconsideration and Supplemental Motion for Reconsideration,
Redmont filed before the RTC a Supplemental Complaint21 in Civil Case No. 08-63379.

On October 6, 2008, the RTC issued an Order22 granting the issuance of a writ of preliminary injunction enjoining the MAB
from finally disposing of the appeals of petitioners and from resolving Redmont’s Motion for Reconsideration and
Supplement Motion for Reconsideration of the MAB’s September 10, 2008 Resolution.

On July 1, 2009, however, the MAB issued a second Order denying Redmont’s Motion for Reconsideration and Supplemental
Motion for Reconsideration and resolving the appeals filed by petitioners.

Hence, the petition for review filed by Redmont before the CA, assailing the Orders issued by the MAB. On October 1, 2010,
the CA rendered a Decision, the dispositive of which reads:

WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed Orders, dated September 10, 2008 and July 1, 2009 of the
Mining Adjudication Board are reversed and set aside. The findings of the Panel of Arbitrators of the Department of
Environment and Natural Resources that respondents McArthur, Tesoro and Narra are foreign corporations is upheld and,
therefore, the rejection of their applications for Mineral Product Sharing Agreement should be recommended to the
Secretary of the DENR.

With respect to the applications of respondents McArthur, Tesoro and Narra for Financial or Technical Assistance Agreement
(FTAA) or conversion of their MPSA applications to FTAA, the matter for its rejection or approval is left for determination by
the Secretary of the DENR and the President of the Republic of the Philippines.

SO ORDERED.23

In a Resolution dated February 15, 2011, the CA denied the Motion for Reconsideration filed by petitioners.

After a careful review of the records, the CA found that there was doubt as to the nationality of petitioners when it realized
that petitioners had a common major investor, MBMI, a corporation composed of 100% Canadians. Pursuant to the first
sentence of paragraph 7 of Department of Justice (DOJ) Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which
implemented the requirement of the Constitution and other laws pertaining to the exploitation of natural resources, the CA
used the "grandfather rule" to determine the nationality of petitioners. It provided:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be
considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less
than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. Thus, if
100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be recorded as owned by Filipinos. But if less than
60%, or say, 50% of the capital stock or capital of the corporation or partnership, respectively, belongs to Filipino citizens,
only 50,000 shares shall be recorded as belonging to aliens. 24 (emphasis supplied)

In determining the nationality of petitioners, the CA looked into their corporate structures and their corresponding common
shareholders. Using the grandfather rule, the CA discovered that MBMI in effect owned majority of the common stocks of
the petitioners as well as at least 60% equity interest of other majority shareholders of petitioners through joint venture
agreements. The CA found that through a "web of corporate layering, it is clear that one common controlling investor in all
mining corporations involved x x x is MBMI." 25 Thus, it concluded that petitioners McArthur, Tesoro and Narra are also in
partnership with, or privies-in-interest of, MBMI.

Furthermore, the CA viewed the conversion of the MPSA applications of petitioners into FTAA applications suspicious in
nature and, as a consequence, it recommended the rejection of petitioners’ MPSA applications by the Secretary of the DENR.

With regard to the settlement of disputes over rights to mining areas, the CA pointed out that the POA has jurisdiction over
them and that it also has the power to determine the of nationality of petitioners as a prerequisite of the Constitution prior
the conferring of rights to "co-production, joint venture or production-sharing agreements" of the state to mining rights.
However, it also stated that the POA’s jurisdiction is limited only to the resolution of the dispute and not on the approval or
rejection of the MPSAs. It stipulated that only the Secretary of the DENR is vested with the power to approve or reject
applications for MPSA.

Finally, the CA upheld the findings of the POA in its December 14, 2007 Resolution which considered petitioners McArthur,
Tesoro and Narra as foreign corporations. Nevertheless, the CA determined that the POA’s declaration that the MPSAs of
McArthur, Tesoro and Narra are void is highly improper.

While the petition was pending with the CA, Redmont filed with the Office of the President (OP) a petition dated May 7,
2010 seeking the cancellation of petitioners’ FTAAs. The OP rendered a Decision 26 on April 6, 2011, wherein it canceled and
revoked petitioners’ FTAAs for violating and circumventing the "Constitution x x x[,] the Small Scale Mining Law and
Environmental Compliance Certificate as well as Sections 3 and 8 of the Foreign Investment Act and E.O. 584." 27 The OP, in
affirming the cancellation of the issued FTAAs, agreed with Redmont stating that petitioners committed violations against
the abovementioned laws and failed to submit evidence to negate them. The Decision further quoted the December 14,
2007 Order of the POA focusing on the alleged misrepresentation and claims made by petitioners of being domestic or
Filipino corporations and the admitted continued mining operation of PMDC using their locally secured Small Scale Mining
Permit inside the area earlier applied for an MPSA application which was eventually transferred to Narra. It also agreed with
the POA’s estimation that the filing of the FTAA applications by petitioners is a clear admission that they are "not capable of
conducting a large scale mining operation and that they need the financial and technical assistance of a foreign entity in their
operation, that is why they sought the participation of MBMI Resources, Inc." 28 The Decision further quoted:

The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate the violations and
lack of qualification of the respondent corporations to engage in mining. The filing of the FTAA application conversion which
is allowed foreign corporation of the earlier MPSA is an admission that indeed the respondent is not Filipino but rather of
foreign nationality who is disqualified under the laws. Corporate documents of MBMI Resources, Inc. furnished its
stockholders in their head office in Canada suggest that they are conducting operation only through their local
counterparts.29

The Motion for Reconsideration of the Decision was further denied by the OP in a Resolution 30 dated July 6, 2011. Petitioners
then filed a Petition for Review on Certiorari of the OP’s Decision and Resolution with the CA, docketed as CA-G.R. SP No.
120409. In the CA Decision dated February 29, 2012, the CA affirmed the Decision and Resolution of the OP. Thereafter,
petitioners appealed the same CA decision to this Court which is now pending with a different division.

Thus, the instant petition for review against the October 1, 2010 Decision of the CA. Petitioners put forth the following errors
of the CA:
 I.

The Court of Appeals erred when it did not dismiss the case for mootness despite the fact that the subject matter of
the controversy, the MPSA Applications, have already been converted into FTAA applications and that the same
have already been granted.

II.

The Court of Appeals erred when it did not dismiss the case for lack of jurisdiction considering that the Panel of
Arbitrators has no jurisdiction to determine the nationality of Narra, Tesoro and McArthur.

III.

The Court of Appeals erred when it did not dismiss the case on account of Redmont’s willful forum shopping.

IV.

The Court of Appeals’ ruling that Narra, Tesoro and McArthur are foreign corporations based on the "Grandfather
Rule" is contrary to law, particularly the express mandate of the Foreign Investments Act of 1991, as amended, and
the FIA Rules.

V.

The Court of Appeals erred when it applied the exceptions to the res inter alios acta rule.

VI.

The Court of Appeals erred when it concluded that the conversion of the MPSA Applications into FTAA Applications
were of "suspicious nature" as the same is based on mere conjectures and surmises without any shred of evidence
to show the same.31

We find the petition to be without merit.

This case not moot and academic

The claim of petitioners that the CA erred in not rendering the instant case as moot is without merit.

Basically, a case is said to be moot and/or academic when it "ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value." 32 Thus, the courts "generally
decline jurisdiction over the case or dismiss it on the ground of mootness." 33

The "mootness" principle, however, does accept certain exceptions and the mere raising of an issue of "mootness" will not
deter the courts from trying a case when there is a valid reason to do so. In David v. Macapagal-Arroyo (David), the Court
provided four instances where courts can decide an otherwise moot case, thus:

1.) There is a grave violation of the Constitution;

2.) The exceptional character of the situation and paramount public interest is involved;

3.) When constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and
the public; and

4.) The case is capable of repetition yet evading review.34

All of the exceptions stated above are present in the instant case. We of this Court note that a grave violation of the
Constitution, specifically Section 2 of Article XII, is being committed by a foreign corporation right under our country’s nose
through a myriad of corporate layering under different, allegedly, Filipino corporations. The intricate corporate layering
utilized by the Canadian company, MBMI, is of exceptional character and involves paramount public interest since it
undeniably affects the exploitation of our Country’s natural resources. The corresponding actions of petitioners during the
lifetime and existence of the instant case raise questions as what principle is to be applied to cases with similar issues. No
definite ruling on such principle has been pronounced by the Court; hence, the disposition of the issues or errors in the
instant case will serve as a guide "to the bench, the bar and the public." 35 Finally, the instant case is capable of repetition yet
evading review, since the Canadian company, MBMI, can keep on utilizing dummy Filipino corporations through various
schemes of corporate layering and conversion of applications to skirt the constitutional prohibition against foreign mining in
Philippine soil.

Conversion of MPSA applications to FTAA applications

We shall discuss the first error in conjunction with the sixth error presented by petitioners since both involve the conversion
of MPSA applications to FTAA applications. Petitioners propound that the CA erred in ruling against them since the
questioned MPSA applications were already converted into FTAA applications; thus, the issue on the prohibition relating to
MPSA applications of foreign mining corporations is academic. Also, petitioners would want us to correct the CA’s finding
which deemed the aforementioned conversions of applications as suspicious in nature, since it is based on mere conjectures
and surmises and not supported with evidence.

We disagree.

The CA’s analysis of the actions of petitioners after the case was filed against them by respondent is on point. The changing
of applications by petitioners from one type to another just because a case was filed against them, in truth, would raise not a
few sceptics’ eyebrows. What is the reason for such conversion? Did the said conversion not stem from the case challenging
their citizenship and to have the case dismissed against them for being "moot"? It is quite obvious that it is petitioners’
strategy to have the case dismissed against them for being "moot."

Consider the history of this case and how petitioners responded to every action done by the court or appropriate
government agency: on January 2, 2007, Redmont filed three separate petitions for denial of the MPSA applications of
petitioners before the POA. On June 15, 2007, petitioners filed a conversion of their MPSA applications to FTAAs. The POA, in
its December 14, 2007 Resolution, observed this suspect change of applications while the case was pending before it and
held:

The filing of the Financial or Technical Assistance Agreement application is a clear admission that the respondents are not
capable of conducting a large scale mining operation and that they need the financial and technical assistance of a foreign
entity in their operation that is why they sought the participation of MBMI Resources, Inc. The participation of MBMI in the
corporation only proves the fact that it is the Canadian company that will provide the finances and the resources to operate
the mining areas for the greater benefit and interest of the same and not the Filipino stockholders who only have a less
substantial financial stake in the corporation.

xxxx

x x x The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate the violations
and lack of qualification of the respondent corporations to engage in mining. The filing of the FTAA application conversion
which is allowed foreign corporation of the earlier MPSA is an admission that indeed the respondent is not Filipino but
rather of foreign nationality who is disqualified under the laws. Corporate documents of MBMI Resources, Inc. furnished its
stockholders in their head office in Canada suggest that they are conducting operation only through their local
counterparts.36

On October 1, 2010, the CA rendered a Decision which partially granted the petition, reversing and setting aside the
September 10, 2008 and July 1, 2009 Orders of the MAB. In the said Decision, the CA upheld the findings of the POA of the
DENR that the herein petitioners are in fact foreign corporations thus a recommendation of the rejection of their MPSA
applications were recommended to the Secretary of the DENR. With respect to the FTAA applications or conversion of the
MPSA applications to FTAAs, the CA deferred the matter for the determination of the Secretary of the DENR and the
President of the Republic of the Philippines.37

In their Motion for Reconsideration dated October 26, 2010, petitioners prayed for the dismissal of the petition asserting
that on April 5, 2010, then President Gloria Macapagal-Arroyo signed and issued in their favor FTAA No. 05-2010-IVB, which
rendered the petition moot and academic. However, the CA, in a Resolution dated February 15, 2011 denied their motion for
being a mere "rehash of their claims and defenses." 38 Standing firm on its Decision, the CA affirmed the ruling that
petitioners are, in fact, foreign corporations. On April 5, 2011, petitioners elevated the case to us via a Petition for Review on
Certiorari under Rule 45, questioning the Decision of the CA. Interestingly, the OP rendered a Decision dated April 6, 2011, a
day after this petition for review was filed, cancelling and revoking the FTAAs, quoting the Order of the POA and stating that
petitioners are foreign corporations since they needed the financial strength of MBMI, Inc. in order to conduct large scale
mining operations. The OP Decision also based the cancellation on the misrepresentation of facts and the violation of the
"Small Scale Mining Law and Environmental Compliance Certificate as well as Sections 3 and 8 of the Foreign Investment Act
and E.O. 584."39 On July 6, 2011, the OP issued a Resolution, denying the Motion for Reconsideration filed by the petitioners.

Respondent Redmont, in its Comment dated October 10, 2011, made known to the Court the fact of the OP’s Decision and
Resolution. In their Reply, petitioners chose to ignore the OP Decision and continued to reuse their old arguments claiming
that they were granted FTAAs and, thus, the case was moot. Petitioners filed a Manifestation and Submission dated October
19, 2012,40 wherein they asserted that the present petition is moot since, in a remarkable turn of events, MBMI was able to
sell/assign all its shares/interest in the "holding companies" to DMCI Mining Corporation (DMCI), a Filipino corporation and,
in effect, making their respective corporations fully-Filipino owned.

Again, it is quite evident that petitioners have been trying to have this case dismissed for being "moot." Their final act,
wherein MBMI was able to allegedly sell/assign all its shares and interest in the petitioner "holding companies" to DMCI,
only proves that they were in fact not Filipino corporations from the start. The recent divesting of interest by MBMI will not
change the stand of this Court with respect to the nationality of petitioners prior the suspicious change in their corporate
structures. The new documents filed by petitioners are factual evidence that this Court has no power to verify.

The only thing clear and proved in this Court is the fact that the OP declared that petitioner corporations have violated
several mining laws and made misrepresentations and falsehood in their applications for FTAA which lead to the revocation
of the said FTAAs, demonstrating that petitioners are not beyond going against or around the law using shifty actions and
strategies. Thus, in this instance, we can say that their claim of mootness is moot in itself because their defense of
conversion of MPSAs to FTAAs has been discredited by the OP Decision.

Grandfather test

The main issue in this case is centered on the issue of petitioners’ nationality, whether Filipino or foreign. In their previous
petitions, they had been adamant in insisting that they were Filipino corporations, until they submitted their Manifestation
and Submission dated October 19, 2012 where they stated the alleged change of corporate ownership to reflect their
Filipino ownership. Thus, there is a need to determine the nationality of petitioner corporations.

Basically, there are two acknowledged tests in determining the nationality of a corporation: the control test and the
grandfather rule. Paragraph 7 of DOJ Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented the
requirement of the Constitution and other laws pertaining to the controlling interests in enterprises engaged in the
exploitation of natural resources owned by Filipino citizens, provides:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be
considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less
than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. Thus, if
100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be recorded as owned by Filipinos. But if less than
60%, or say, 50% of the capital stock or capital of the corporation or partnership, respectively, belongs to Filipino citizens,
only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shall be recorded as belonging to aliens.

The first part of paragraph 7, DOJ Opinion No. 020, stating "shares belonging to corporations or partnerships at least 60% of
the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality," pertains to the control test
or the liberal rule. On the other hand, the second part of the DOJ Opinion which provides, "if the percentage of the Filipino
ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage
shall be counted as Philippine nationality," pertains to the stricter, more stringent grandfather rule.

Prior to this recent change of events, petitioners were constant in advocating the application of the "control test" under RA
7042, as amended by RA 8179, otherwise known as the Foreign Investments Act (FIA), rather than using the stricter
grandfather rule. The pertinent provision under Sec. 3 of the FIA provides:

SECTION 3. Definitions. - As used in this Act:

a.) The term Philippine national shall mean a citizen of the Philippines; or a domestic partnership or association wholly
owned by the citizens of the Philippines; a corporation organized under the laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for
pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty
percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That were a corporation and its non-
Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent
(60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens
of the Philippines and at least sixty percent (60%) of the members of the Board of Directors, in order that the corporation
shall be considered a Philippine national. (emphasis supplied)

The grandfather rule, petitioners reasoned, has no leg to stand on in the instant case since the definition of a "Philippine
National" under Sec. 3 of the FIA does not provide for it. They further claim that the grandfather rule "has been abandoned
and is no longer the applicable rule."41 They also opined that the last portion of Sec. 3 of the FIA admits the application of a
"corporate layering" scheme of corporations. Petitioners claim that the clear and unambiguous wordings of the statute
preclude the court from construing it and prevent the court’s use of discretion in applying the law. They said that the plain,
literal meaning of the statute meant the application of the control test is obligatory.

We disagree. "Corporate layering" is admittedly allowed by the FIA; but if it is used to circumvent the Constitution and
pertinent laws, then it becomes illegal. Further, the pronouncement of petitioners that the grandfather rule has already
been abandoned must be discredited for lack of basis.

Art. XII, Sec. 2 of the Constitution provides:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception
of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of
natural resources shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be
for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law.

xxxx

The President may enter into agreements with Foreign-owned corporations involving either technical or financial assistance
for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the
general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of
the country. In such agreements, the State shall promote the development and use of local scientific and technical
resources. (emphasis supplied)

The emphasized portion of Sec. 2 which focuses on the State entering into different types of agreements for the exploration,
development, and utilization of natural resources with entities who are deemed Filipino due to 60 percent ownership of
capital is pertinent to this case, since the issues are centered on the utilization of our country’s natural resources or
specifically, mining. Thus, there is a need to ascertain the nationality of petitioners since, as the Constitution so provides,
such agreements are only allowed corporations or associations "at least 60 percent of such capital is owned by such
citizens." The deliberations in the Records of the 1986 Constitutional Commission shed light on how a citizenship of a
corporation will be determined:

Mr. BENNAGEN: Did I hear right that the Chairman’s interpretation of an independent national economy is freedom from
undue foreign control? What is the meaning of undue foreign control?

MR. VILLEGAS: Undue foreign control is foreign control which sacrifices national sovereignty and the welfare of the Filipino
in the economic sphere.

MR. BENNAGEN: Why does it have to be qualified still with the word "undue"? Why not simply freedom from foreign
control? I think that is the meaning of independence, because as phrased, it still allows for foreign control.

MR. VILLEGAS: It will now depend on the interpretation because if, for example, we retain the 60/40 possibility in the
cultivation of natural resources, 40 percent involves some control; not total control, but some control.

MR. BENNAGEN: In any case, I think in due time we will propose some amendments.

MR. VILLEGAS: Yes. But we will be open to improvement of the phraseology.

Mr. BENNAGEN: Yes.

Thank you, Mr. Vice-President.

xxxx

MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in
Section 3, 60-40 in Section 9, and 2/3-1/3 in Section 15.

MR. VILLEGAS: That is right.

MR. NOLLEDO: In teaching law, we are always faced with the question: ‘Where do we base the equity requirement, is it on
the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation’? Will the
Committee please enlighten me on this?

MR. VILLEGAS: We have just had a long discussion with the members of the team from the UP Law Center who provided us
with a draft. The phrase that is contained here which we adopted from the UP draft is ‘60 percent of the voting stock.’

MR. NOLLEDO: That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock
shall be entitled to vote.

MR. VILLEGAS: That is right.

MR. NOLLEDO: Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity
invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?

MR. VILLEGAS: Yes, that is the understanding of the Committee.

MR. NOLLEDO: Therefore, we need additional Filipino capital?

MR. VILLEGAS: Yes.42 (emphasis supplied)

It is apparent that it is the intention of the framers of the Constitution to apply the grandfather rule in cases where corporate
layering is present.

Elementary in statutory construction is when there is conflict between the Constitution and a statute, the Constitution will
prevail. In this instance, specifically pertaining to the provisions under Art. XII of the Constitution on National Economy and
Patrimony, Sec. 3 of the FIA will have no place of application. As decreed by the honorable framers of our Constitution, the
grandfather rule prevails and must be applied.

Likewise, paragraph 7, DOJ Opinion No. 020, Series of 2005 provides:

The above-quoted SEC Rules provide for the manner of calculating the Filipino interest in a corporation for purposes, among
others, of determining compliance with nationality requirements (the ‘Investee Corporation’). Such manner of computation
is necessary since the shares in the Investee Corporation may be owned both by individual stockholders (‘Investing
Individuals’) and by corporations and partnerships (‘Investing Corporation’). The said rules thus provide for the
determination of nationality depending on the ownership of the Investee Corporation and, in certain instances, the Investing
Corporation.

Under the above-quoted SEC Rules, there are two cases in determining the nationality of the Investee Corporation. The first
case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and pertains to the portion in
said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares belonging to corporations or partnerships at least 60% of the
capital of which is owned by Filipino citizens shall be considered as of Philippine nationality.’ Under the liberal Control Test,
there is no need to further trace the ownership of the 60% (or more) Filipino stockholdings of the Investing Corporation
since a corporation which is at least 60% Filipino-owned is considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said Paragraph 7 of the 1967
SEC Rules which states, "but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only
the number of shares corresponding to such percentage shall be counted as of Philippine nationality." Under the Strict Rule
or Grandfather Rule Proper, the combined totals in the Investing Corporation and the Investee Corporation must be traced
(i.e., "grandfathered") to determine the total percentage of Filipino ownership.

Moreover, the ultimate Filipino ownership of the shares must first be traced to the level of the Investing Corporation and
added to the shares directly owned in the Investee Corporation x x x.

xxxx

In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of the SEC Rule applies
only when the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in cases where the joint venture corporation with
Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests in other joint venture corporation
which is either 60-40% Filipino-alien or the 59% less Filipino). Stated differently, where the 60-40 Filipino- foreign equity
ownership is not in doubt, the Grandfather Rule will not apply. (emphasis supplied)

After a scrutiny of the evidence extant on record, the Court finds that this case calls for the application of the grandfather
rule since, as ruled by the POA and affirmed by the OP, doubt prevails and persists in the corporate ownership of petitioners.
Also, as found by the CA, doubt is present in the 60-40 Filipino equity ownership of petitioners Narra, McArthur and Tesoro,
since their common investor, the 100% Canadian corporation––MBMI, funded them. However, petitioners also claim that
there is "doubt" only when the stockholdings of Filipinos are less than 60%. 43

The assertion of petitioners that "doubt" only exists when the stockholdings are less than 60% fails to convince this Court.
DOJ Opinion No. 20, which petitioners quoted in their petition, only made an example of an instance where "doubt" as to
the ownership of the corporation exists. It would be ludicrous to limit the application of the said word only to the instances
where the stockholdings of non-Filipino stockholders are more than 40% of the total stockholdings in a corporation. The
corporations interested in circumventing our laws would clearly strive to have "60% Filipino Ownership" at face value. It
would be senseless for these applying corporations to state in their respective articles of incorporation that they have less
than 60% Filipino stockholders since the applications will be denied instantly. Thus, various corporate schemes and layerings
are utilized to circumvent the application of the Constitution.

Obviously, the instant case presents a situation which exhibits a scheme employed by stockholders to circumvent the law,
creating a cloud of doubt in the Court’s mind. To determine, therefore, the actual participation, direct or indirect, of MBMI,
the grandfather rule must be used.

McArthur Mining, Inc.

To establish the actual ownership, interest or participation of MBMI in each of petitioners’ corporate structure, they have to
be "grandfathered."

As previously discussed, McArthur acquired its MPSA application from MMC, which acquired its application from SMMI.
McArthur has a capital stock of ten million pesos (PhP 10,000,000) divided into 10,000 common shares at one thousand
pesos (PhP 1,000) per share, subscribed to by the following: 44

Name Nationality Number of Shares Amount Subscribed Amount Paid

Madridejos Mining Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00

Corporation

MBMI Resources, Inc. Canadian 3,998 PhP 3,998,000.0 PhP 1,878,174.60

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Esguerra Filipino 1 PhP 1,000.00 PhP 1,000.00

Manuel A. Agcaoili Filipino 1 PhP 1,000.00 PhP 1,000.00

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP 10,000,000.00 PhP 2,708,174.60

(emphasis supplied)

Interestingly, looking at the corporate structure of MMC, we take note that it has a similar structure and composition as
McArthur. In fact, it would seem that MBMI is also a major investor and "controls" 45 MBMI and also, similar nominal
shareholders were present, i.e. Fernando B. Esguerra (Esguerra), Lauro L. Salazar (Salazar), Michael T. Mason (Mason) and
Kenneth Cawkell (Cawkell):

Madridejos Mining Corporation

Name Nationality Number of Shares Amount Subscribed Amount Paid

Olympic Mines & Filipino 6,663 PhP 6,663,000.00 PhP 0

Development

Corp.

MBMI Resources, Canadian 3,331 PhP 3,331,000.00 PhP 2,803,900.00

Inc.
 Amanti Limson Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Lauro Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Emmanuel G. Filipino 1 PhP 1,000.00 PhP 1,000.00

Hernando

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP 10,000,000.00 PhP 2,809,900.00

(emphasis supplied)
Noticeably, Olympic Mines & Development Corporation (Olympic) did not pay any amount with respect to the number of
shares they subscribed to in the corporation, which is quite absurd since Olympic is the major stockholder in MMC. MBMI’s
2006 Annual Report sheds light on why Olympic failed to pay any amount with respect to the number of shares it subscribed
to. It states that Olympic entered into joint venture agreements with several Philippine companies, wherein it holds directly
and indirectly a 60% effective equity interest in the Olympic Properties. 46 Quoting the said Annual report:

On September 9, 2004, the Company and Olympic Mines & Development Corporation ("Olympic") entered into a series of
agreements including a Property Purchase and Development Agreement (the Transaction Documents) with respect to three
nickel laterite properties in Palawan, Philippines (the "Olympic Properties"). The Transaction Documents effectively establish
a joint venture between the Company and Olympic for purposes of developing the Olympic Properties. The Company holds
directly and indirectly an initial 60% interest in the joint venture. Under certain circumstances and upon achieving certain
milestones, the Company may earn up to a 100% interest, subject to a 2.5% net revenue royalty. 47 (emphasis supplied)

Thus, as demonstrated in this first corporation, McArthur, when it is "grandfathered," company layering was utilized by
MBMI to gain control over McArthur. It is apparent that MBMI has more than 60% or more equity interest in McArthur,
making the latter a foreign corporation.

Tesoro Mining and Development, Inc.

Tesoro, which acquired its MPSA application from SMMI, has a capital stock of ten million pesos (PhP 10,000,000) divided
into ten thousand (10,000) common shares at PhP 1,000 per share, as demonstrated below:

[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Nationality Number of Amount Amount Paid

Name
Shares Subscribed

Sara Marie Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00

Mining, Inc.

MBMI Canadian 3,998 PhP 3,998,000.00 PhP 1,878,174.60

 Resources, Inc.

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Manuel A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Agcaoili

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP 10,000,000.00 PhP 2,708,174.60

(emphasis supplied)
Except for the name "Sara Marie Mining, Inc.," the table above shows exactly the same figures as the corporate structure of
petitioner McArthur, down to the last centavo. All the other shareholders are the same: MBMI, Salazar, Esguerra, Agcaoili,
Mason and Cawkell. The figures under "Nationality," "Number of Shares," "Amount Subscribed," and "Amount Paid" are
exactly the same. Delving deeper, we scrutinize SMMI’s corporate structure:

Sara Marie Mining, Inc.

[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Nationality Number of Amount Amount Paid

Name
Shares Subscribed

Olympic Mines & Filipino 6,663 PhP 6,663,000.00 PhP 0

Development

Corp.

MBMI Resources, Canadian 3,331 PhP 3,331,000.00 PhP 2,794,000.00

Inc.

Amanti Limson Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Lauro Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

 Emmanuel G. Filipino 1 PhP 1,000.00 PhP 1,000.00

Hernando

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP 10,000,000.00 PhP 2,809,900.00

(emphasis supplied)
After subsequently studying SMMI’s corporate structure, it is not farfetched for us to spot the glaring similarity between
SMMI and MMC’s corporate structure. Again, the presence of identical stockholders, namely: Olympic, MBMI, Amanti
Limson (Limson), Esguerra, Salazar, Hernando, Mason and Cawkell. The figures under the headings "Nationality," "Number of
Shares," "Amount Subscribed," and "Amount Paid" are exactly the same except for the amount paid by MBMI which now
reflects the amount of two million seven hundred ninety four thousand pesos (PhP 2,794,000). Oddly, the total value of the
amount paid is two million eight hundred nine thousand nine hundred pesos (PhP 2,809,900).

Accordingly, after "grandfathering" petitioner Tesoro and factoring in Olympic’s participation in SMMI’s corporate structure,
it is clear that MBMI is in control of Tesoro and owns 60% or more equity interest in Tesoro. This makes petitioner Tesoro a
non-Filipino corporation and, thus, disqualifies it to participate in the exploitation, utilization and development of our natural
resources.

Narra Nickel Mining and Development Corporation

Moving on to the last petitioner, Narra, which is the transferee and assignee of PLMDC’s MPSA application, whose corporate
structure’s arrangement is similar to that of the first two petitioners discussed. The capital stock of Narra is ten million pesos
(PhP 10,000,000), which is divided into ten thousand common shares (10,000) at one thousand pesos (PhP 1,000) per share,
shown as follows:

[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Nationality Number of Amount Amount Paid

Name
Shares Subscribed

Patricia Louise Filipino 5,997 PhP 5,997,000.00 PhP 1,677,000.00

Mining &

Development

Corp.

MBMI Canadian 3,998 PhP 3,996,000.00 PhP 1,116,000.00

Resources, Inc.

Higinio C. Filipino 1 PhP 1,000.00 PhP 1,000.00

Mendoza, Jr.

Henry E. Filipino 1 PhP 1,000.00 PhP 1,000.00

 Fernandez

Manuel A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Agcaoili

Ma. Elena A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Bocalan

Bayani H. Agabin Filipino 1 PhP 1,000.00 PhP 1,000.00

Robert L. American 1 PhP 1,000.00 PhP 1,000.00

McCurdy

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP 10,000,000.00 PhP 2,800,000.00

(emphasis supplied)

Again, MBMI, along with other nominal stockholders, i.e., Mason, Agcaoili and Esguerra, is present in this corporate
structure.

Patricia Louise Mining & Development Corporation

Using the grandfather method, we further look and examine PLMDC’s corporate structure:

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Palawan Alpha South Resources Filipino 6,596 PhP 6,596,000.00 PhP 0

Development Corporation

MBMI Resources, Canadian 3,396 PhP 3,396,000.00 PhP 2,796,000.00

Inc.

Higinio C. Mendoza, Jr. Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Esguerra Filipino 1 PhP 1,000.00 PhP 1,000.00

Henry E. Fernandez Filipino 1 PhP 1,000.00 PhP 1,000.00

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Manuel A. Agcaoili Filipino 1 PhP 1,000.00 PhP 1,000.00

Bayani H. Agabin Filipino 1 PhP 1,000.00 PhP 1,000.00

 Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP PhP 2,708,174.60

10,000,000.00 (emphasis
supplied)

Yet again, the usual players in petitioners’ corporate structures are present. Similarly, the amount of money paid by the 2nd
tier majority stock holder, in this case, Palawan Alpha South Resources and Development Corp. (PASRDC), is zero.

Studying MBMI’s Summary of Significant Accounting Policies dated October 31, 2005 explains the reason behind the intricate
corporate layering that MBMI immersed itself in:

JOINT VENTURES The Company’s ownership interests in various mining ventures engaged in the acquisition, exploration and
development of mineral properties in the Philippines is described as follows:

(a) Olympic Group

The Philippine companies holding the Olympic Property, and the ownership and interests therein, are as follows:

Olympic- Philippines (the "Olympic Group")

Sara Marie Mining Properties Ltd. ("Sara Marie") 33.3%

Tesoro Mining & Development, Inc. (Tesoro) 60.0%

Pursuant to the Olympic joint venture agreement the Company holds directly and indirectly an effective equity interest in
the Olympic Property of 60.0%. Pursuant to a shareholders’ agreement, the Company exercises joint control over the
companies in the Olympic Group.

(b) Alpha Group

The Philippine companies holding the Alpha Property, and the ownership interests therein, are as follows:

Alpha- Philippines (the "Alpha Group")

Patricia Louise Mining Development Inc. ("Patricia") 34.0%

Narra Nickel Mining & Development Corporation (Narra) 60.4%

Under a joint venture agreement the Company holds directly and indirectly an effective equity interest in the Alpha Property
of 60.4%. Pursuant to a shareholders’ agreement, the Company exercises joint control over the companies in the Alpha
Group.48 (emphasis supplied)

Concluding from the above-stated facts, it is quite safe to say that petitioners McArthur, Tesoro and Narra are not Filipino
since MBMI, a 100% Canadian corporation, owns 60% or more of their equity interests. Such conclusion is derived from
grandfathering petitioners’ corporate owners, namely: MMI, SMMI and PLMDC. Going further and adding to the picture,
MBMI’s Summary of Significant Accounting Policies statement– –regarding the "joint venture" agreements that it entered
into with the "Olympic" and "Alpha" groups––involves SMMI, Tesoro, PLMDC and Narra. Noticeably, the ownership of the
"layered" corporations boils down to MBMI, Olympic or corporations under the "Alpha" group wherein MBMI has joint
venture agreements with, practically exercising majority control over the corporations mentioned. In effect, whether looking
at the capital structure or the underlying relationships between and among the corporations, petitioners are NOT Filipino
nationals and must be considered foreign since 60% or more of their capital stocks or equity interests are owned by MBMI.
Application of the res inter alios acta rule

Petitioners question the CA’s use of the exception of the res inter alios acta or the "admission by co-partner or agent" rule
and "admission by privies" under the Rules of Court in the instant case, by pointing out that statements made by MBMI
should not be admitted in this case since it is not a party to the case and that it is not a "partner" of petitioners.

Secs. 29 and 31, Rule 130 of the Revised Rules of Court provide:

Sec. 29. Admission by co-partner or agent.- The act or declaration of a partner or agent of the party within the scope of his
authority and during the existence of the partnership or agency, may be given in evidence against such party after the
partnership or agency is shown by evidence other than such act or declaration itself. The same rule applies to the act or
declaration of a joint owner, joint debtor, or other person jointly interested with the party.

Sec. 31. Admission by privies.- Where one derives title to property from another, the act, declaration, or omission of the
latter, while holding the title, in relation to the property, is evidence against the former.

Petitioners claim that before the above-mentioned Rule can be applied to a case, "the partnership relation must be shown,
and that proof of the fact must be made by evidence other than the admission itself." 49 Thus, petitioners assert that the CA
erred in finding that a partnership relationship exists between them and MBMI because, in fact, no such partnership exists.

Partnerships vs. joint venture agreements

Petitioners claim that the CA erred in applying Sec. 29, Rule 130 of the Rules by stating that "by entering into a joint venture,
MBMI have a joint interest" with Narra, Tesoro and McArthur. They challenged the conclusion of the CA which pertains to
the close characteristics of

"partnerships" and "joint venture agreements." Further, they asserted that before this particular partnership can be formed,
it should have been formally reduced into writing since the capital involved is more than three thousand pesos (PhP 3,000).
Being that there is no evidence of written agreement to form a partnership between petitioners and MBMI, no partnership
was created.

We disagree.

A partnership is defined as two or more persons who bind themselves to contribute money, property, or industry to a
common fund with the intention of dividing the profits among themselves. 50 On the other hand, joint ventures have been
deemed to be "akin" to partnerships since it is difficult to distinguish between joint ventures and partnerships. Thus:

[T]he relations of the parties to a joint venture and the nature of their association are so similar and closely akin to a
partnership that it is ordinarily held that their rights, duties, and liabilities are to be tested by rules which are closely
analogous to and substantially the same, if not exactly the same, as those which govern partnership. In fact, it has been said
that the trend in the law has been to blur the distinctions between a partnership and a joint venture, very little law being
found applicable to one that does not apply to the other. 51

Though some claim that partnerships and joint ventures are totally different animals, there are very few rules that
differentiate one from the other; thus, joint ventures are deemed "akin" or similar to a partnership. In fact, in joint venture
agreements, rules and legal incidents governing partnerships are applied. 52

Accordingly, culled from the incidents and records of this case, it can be assumed that the relationships entered between
and among petitioners and MBMI are no simple "joint venture agreements." As a rule, corporations are prohibited from
entering into partnership agreements; consequently, corporations enter into joint venture agreements with other
corporations or partnerships for certain transactions in order to form "pseudo partnerships."

Obviously, as the intricate web of "ventures" entered into by and among petitioners and MBMI was executed to circumvent
the legal prohibition against corporations entering into partnerships, then the relationship created should be deemed as
"partnerships," and the laws on partnership should be applied. Thus, a joint venture agreement between and among
corporations may be seen as similar to partnerships since the elements of partnership are present.

Considering that the relationships found between petitioners and MBMI are considered to be partnerships, then the CA is
justified in applying Sec. 29, Rule 130 of the Rules by stating that "by entering into a joint venture, MBMI have a joint
interest" with Narra, Tesoro and McArthur.

Panel of Arbitrators’ jurisdiction

We affirm the ruling of the CA in declaring that the POA has jurisdiction over the instant case. The POA has jurisdiction to
settle disputes over rights to mining areas which definitely involve the petitions filed by Redmont against petitioners Narra,
McArthur and Tesoro. Redmont, by filing its petition against petitioners, is asserting the right of Filipinos over mining areas in
the Philippines against alleged foreign-owned mining corporations. Such claim constitutes a "dispute" found in Sec. 77 of RA
7942:

Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall have exclusive and
original jurisdiction to hear and decide the following:

(a) Disputes involving rights to mining areas

(b) Disputes involving mineral agreements or permits

We held in Celestial Nickel Mining Exploration Corporation v. Macroasia Corp.: 53

The phrase "disputes involving rights to mining areas" refers to any adverse claim, protest, or opposition to an application
for mineral agreement. The POA therefore has the jurisdiction to resolve any adverse claim, protest, or opposition to a
pending application for a mineral agreement filed with the concerned Regional Office of the MGB. This is clear from Secs. 38
and 41 of the DENR AO 96-40, which provide:

Sec. 38.

xxxx

Within thirty (30) calendar days from the last date of publication/posting/radio announcements, the authorized officer(s) of
the concerned office(s) shall issue a certification(s) that the publication/posting/radio announcement have been complied
with. Any adverse claim, protest, opposition shall be filed directly, within thirty (30) calendar days from the last date of
publication/posting/radio announcement, with the concerned Regional Office or through any concerned PENRO or CENRO
for filing in the concerned Regional Office for purposes of its resolution by the Panel of Arbitrators pursuant to the provisions
of this Act and these implementing rules and regulations. Upon final resolution of any adverse claim, protest or opposition,
the Panel of Arbitrators shall likewise issue a certification to that effect within five (5) working days from the date of finality
of resolution thereof. Where there is no adverse claim, protest or opposition, the Panel of Arbitrators shall likewise issue a
Certification to that effect within five working days therefrom.

xxxx

No Mineral Agreement shall be approved unless the requirements under this Section are fully complied with and any
adverse claim/protest/opposition is finally resolved by the Panel of Arbitrators.

Sec. 41.

xxxx

Within fifteen (15) working days form the receipt of the Certification issued by the Panel of Arbitrators as provided in Section
38 hereof, the concerned Regional Director shall initially evaluate the Mineral Agreement applications in areas outside
Mineral reservations. He/She shall thereafter endorse his/her findings to the Bureau for further evaluation by the Director
within fifteen (15) working days from receipt of forwarded documents. Thereafter, the Director shall endorse the same to
the secretary for consideration/approval within fifteen working days from receipt of such endorsement.

In case of Mineral Agreement applications in areas with Mineral Reservations, within fifteen (15) working days from receipt
of the Certification issued by the Panel of Arbitrators as provided for in Section 38 hereof, the same shall be evaluated and
endorsed by the Director to the Secretary for consideration/approval within fifteen days from receipt of such endorsement.
(emphasis supplied)

It has been made clear from the aforecited provisions that the "disputes involving rights to mining areas" under Sec. 77(a)
specifically refer only to those disputes relative to the applications for a mineral agreement or conferment of mining rights.

The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is further elucidated by
Secs. 219 and 43 of DENR AO 95-936, which read:

Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.- Notwithstanding the provisions of Sections 28, 43 and 57 above,
any adverse claim, protest or opposition specified in said sections may also be filed directly with the Panel of Arbitrators
within the concerned periods for filing such claim, protest or opposition as specified in said Sections.

Sec. 43. Publication/Posting of Mineral Agreement.-

xxxx

The Regional Director or concerned Regional Director shall also cause the posting of the application on the bulletin boards of
the Bureau, concerned Regional office(s) and in the concerned province(s) and municipality(ies), copy furnished the
barangays where the proposed contract area is located once a week for two (2) consecutive weeks in a language generally
understood in the locality. After forty-five (45) days from the last date of publication/posting has been made and no adverse
claim, protest or opposition was filed within the said forty-five (45) days, the concerned offices shall issue a certification that
publication/posting has been made and that no adverse claim, protest or opposition of whatever nature has been filed. On
the other hand, if there be any adverse claim, protest or opposition, the same shall be filed within forty-five (45) days from
the last date of publication/posting, with the Regional Offices concerned, or through the Department’s Community
Environment and Natural Resources Officers (CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to
be filed at the Regional Office for resolution of the Panel of Arbitrators. However previously published valid and subsisting
mining claims are exempted from posted/posting required under this Section.

No mineral agreement shall be approved unless the requirements under this section are fully complied with and any
opposition/adverse claim is dealt with in writing by the Director and resolved by the Panel of Arbitrators. (Emphasis
supplied.)

It has been made clear from the aforecited provisions that the "disputes involving rights to mining areas" under Sec. 77(a)
specifically refer only to those disputes relative to the applications for a mineral agreement or conferment of mining rights.

The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is further elucidated by
Secs. 219 and 43 of DENRO AO 95-936, which reads:

Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.- Notwithstanding the provisions of Sections 28, 43 and 57 above,
any adverse claim, protest or opposition specified in said sections may also be filed directly with the Panel of Arbitrators
within the concerned periods for filing such claim, protest or opposition as specified in said Sections.

Sec. 43. Publication/Posting of Mineral Agreement Application.-

xxxx

The Regional Director or concerned Regional Director shall also cause the posting of the application on the bulletin boards of
the Bureau, concerned Regional office(s) and in the concerned province(s) and municipality(ies), copy furnished the
barangays where the proposed contract area is located once a week for two (2) consecutive weeks in a language generally
understood in the locality. After forty-five (45) days from the last date of publication/posting has been made and no adverse
claim, protest or opposition was filed within the said forty-five (45) days, the concerned offices shall issue a certification that
publication/posting has been made and that no adverse claim, protest or opposition of whatever nature has been filed. On
the other hand, if there be any adverse claim, protest or opposition, the same shall be filed within forty-five (45) days from
the last date of publication/posting, with the Regional offices concerned, or through the Department’s Community
Environment and Natural Resources Officers (CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to
be filed at the Regional Office for resolution of the Panel of Arbitrators. However, previously published valid and subsisting
mining claims are exempted from posted/posting required under this Section.

No mineral agreement shall be approved unless the requirements under this section are fully complied with and any
opposition/adverse claim is dealt with in writing by the Director and resolved by the Panel of Arbitrators. (Emphasis
supplied.)

These provisions lead us to conclude that the power of the POA to resolve any adverse claim, opposition, or protest relative
to mining rights under Sec. 77(a) of RA 7942 is confined only to adverse claims, conflicts and oppositions relating to
applications for the grant of mineral rights.

POA’s jurisdiction is confined only to resolutions of such adverse claims, conflicts and oppositions and it has no authority to
approve or reject said applications. Such power is vested in the DENR Secretary upon recommendation of the MGB Director.
Clearly, POA’s jurisdiction over "disputes involving rights to mining areas" has nothing to do with the cancellation of existing
mineral agreements. (emphasis ours)

Accordingly, as we enunciated in Celestial, the POA unquestionably has jurisdiction to resolve disputes over MPSA
applications subject of Redmont’s petitions. However, said jurisdiction does not include either the approval or rejection of
the MPSA applications, which is vested only upon the Secretary of the DENR. Thus, the finding of the POA, with respect to
the rejection of petitioners’ MPSA applications being that they are foreign corporation, is valid.

Justice Marvic Mario Victor F. Leonen, in his Dissent, asserts that it is the regular courts, not the POA, that has jurisdiction
over the MPSA applications of petitioners.

This postulation is incorrect.

It is basic that the jurisdiction of the court is determined by the statute in force at the time of the commencement of the
action.54

Sec. 19, Batas Pambansa Blg. 129 or "The Judiciary Reorganization

Act of 1980" reads:

Sec. 19. Jurisdiction in Civil Cases.—Regional Trial Courts shall exercise exclusive original jurisdiction:

1. In all civil actions in which the subject of the litigation is incapable of pecuniary estimation.

On the other hand, the jurisdiction of POA is unequivocal from Sec. 77 of RA 7942:

Section 77. Panel of Arbitrators.—

x x x Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall have
exclusive and original jurisdiction to hear and decide the following:

(c) Disputes involving rights to mining areas

(d) Disputes involving mineral agreements or permits

It is clear that POA has exclusive and original jurisdiction over any and all disputes involving rights to mining areas. One such
dispute is an MPSA application to which an adverse claim, protest or opposition is filed by another interested
 applicant.1âwphi1 In the case at bar, the dispute arose or originated from MPSA applications where petitioners are asserting
their rights to mining areas subject of their respective MPSA applications. Since respondent filed 3 separate petitions for the
denial of said applications, then a controversy has developed between the parties and it is POA’s jurisdiction to resolve said
disputes.

Moreover, the jurisdiction of the RTC involves civil actions while what petitioners filed with the DENR Regional Office or any
concerned DENRE or CENRO are MPSA applications. Thus POA has jurisdiction.

Furthermore, the POA has jurisdiction over the MPSA applications under the doctrine of primary jurisdiction. Euro-med
Laboratories v. Province of Batangas55 elucidates:

The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized
training and knowledge of an administrative body, relief must first be obtained in an administrative proceeding before resort
to the courts is had even if the matter may well be within their proper jurisdiction.

Whatever may be the decision of the POA will eventually reach the court system via a resort to the CA and to this Court as a
last recourse.

Selling of MBMI’s shares to DMCI

As stated before, petitioners’ Manifestation and Submission dated October 19, 2012 would want us to declare the instant
petition moot and academic due to the transfer and conveyance of all the shareholdings and interests of MBMI to DMCI, a
corporation duly organized and existing under Philippine laws and is at least 60% Philippine-owned. 56 Petitioners reasoned
that they now cannot be considered as foreign-owned; the transfer of their shares supposedly cured the "defect" of their
previous nationality. They claimed that their current FTAA contract with the State should stand since "even wholly-owned
foreign corporations can enter into an FTAA with the State." 57 Petitioners stress that there should no longer be any issue left
as regards their qualification to enter into FTAA contracts since they are qualified to engage in mining activities in the
Philippines. Thus, whether the "grandfather rule" or the "control test" is used, the nationalities of petitioners cannot be
doubted since it would pass both tests.

The sale of the MBMI shareholdings to DMCI does not have any bearing in the instant case and said fact should be
disregarded. The manifestation can no longer be considered by us since it is being tackled in G.R. No. 202877 pending before
this Court.1âwphi1 Thus, the question of whether petitioners, allegedly a Philippine-owned corporation due to the sale of
MBMI's shareholdings to DMCI, are allowed to enter into FTAAs with the State is a non-issue in this case.

In ending, the "control test" is still the prevailing mode of determining whether or not a corporation is a Filipino corporation,
within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake the exploration, development and utilization
of the natural resources of the Philippines. When in the mind of the Court there is doubt, based on the attendant facts and
circumstances of the case, in the 60-40 Filipino-equity ownership in the corporation, then it may apply the "grandfather
rule."

WHEREFORE, premises considered, the instant petition is DENIED. The assailed Court of Appeals Decision dated October 1,
2010 and Resolution dated February 15, 2011 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 195580, January 28, 2015

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., AND MCARTHUR MINING, INC.,
Petitioners, v. REDMONT CONSOLIDATED MINES CORP., Respondent.
RESOLUTION

VELASCO JR., J.:

Beforethe Court is the Motion for Reconsideration of its April 21, 2014 Decision, which denied the Petition for Review on Certiorari
under Rule 45 jointly interposed by petitioners Narra Nickel and Mining Development Corp. (Narra), Tesoro Mining and
Development, Inc. (Tesoro), and McArthur Mining Inc. (McArthur), and affirmed the October 1, 2010 Decision and February 15, 2011
Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 109703.

Very simply, the challenged Decision sustained the appellate court’s ruling that petitioners, being foreign corporations,are not
entitled to Mineral Production Sharing Agreements (MPSAs). In reaching its conclusion, this Court upheld with approval the
appellate court’s finding that there was doubt as to petitioners’ nationality since a 100% Canadian-owned firm, MBMI Resources,
Inc. (MBMI), effectively owns60% of the common stocks of the petitioners by owning equity interest of petitioners’ other majority
corporate shareholders.

In a strongly worded Motion for Reconsideration dated June 5, 2014, petitioners-movants argued, in the main, that the Court’s
Decision was not in accord with law and logic.In its September 2, 2014 Comment, on the other hand, respondent Redmont
Consolidated Mines Corp. (Redmont) countered that petitioners’ motion for reconsideration is nothing but a rehash of their
arguments and should, thus, be denied outright for being pro-forma. Petitioners have interposed on September 30, 2014 their Reply
to the respondent’s Comment.

After considering the parties’ positions, as articulated in their respective submissions, We resolve to deny the motion for
reconsideration.

I.
The case has not been rendered moot and academic

Petitioners have first off criticized the Court for resolving in its Decision a substantive issue, which, as argued, has supposedly been
rendered moot by the fact that petitioners’ applications for MPSAs had already been converted to an application for a Financial
Technical Assistance Agreement (FTAA), as petitioners have in fact been granted an FTAA. Further, the nationality issue, so
petitioners presently claim, had been rendered moribund by the fact that MBMI had already divested itself and sold all its
shareholdings in the petitioners, as well as in their corporate stockholders, to a Filipino corporation—DMCI Mining Corporation
(DMCI).

As a counterpoint, respondent Redmont avers that the present case has not been rendered moot by the supposed issuance of an
FTAA in petitioners’ favor as this FTAA was subsequently revoked by the Office of the President (OP) and is currently a subject of a
petition pending in the Court’s First Division. Redmont likewise contends that the supposed sale of MBMI’s interest in the petitioners
and in their “holding companies” is a question of fact that is outside the Court’s province to verify in a Rule 45 certiorari proceedings.
In any case, assuming that the controversy has been rendered moot, Redmont claims that its resolution on the merits is still justified
by the fact that petitioners have violated a constitutional provision, the violation is capable of repetition yet evading review, and the
present case involves a matter of public concern.

Indeed, as the Court clarified in its Decision, the conversion of the MPSA application to one for FTAAs and the issuance by the OP of
an FTAA in petitioners’ favor are irrelevant. The OP itself has already cancelled and revoked the FTAA thus issued to petitioners.
Petitioners curiously have omitted this critical fact in their motion for reconsideration. Furthermore, the supposed sale by MBMI of
its shares in the petitioner-corporations and in their holding companies is not only a question of fact that this Court is without
authority to verify, it also does not negate any violation of the Constitutional provisions previously committed before any such sale.

We can assume for the nonce that the controversy had indeed been rendered moot by these two events. As this Court has time and
again declared, the “moot and academic” principle is not a magical formula that automatically dissuades courts in resolving a case. 1 
The Court may still take cognizance of an otherwise moot and academic case, if it finds that (a) there is a grave violation of the
Constitution; (b) the situation is of exceptional character and paramount public interest is involved; (c) the constitutional issue raised
requires formulation of controlling principles to guide the bench, the bar, and the public; and (d) the case is capable of repetition yet
evading review.2]  The Court’s April 21, 2014 Decision explained in some detail that all four (4) of the foregoing circumstances are
present in the case. If only to stress a point, we will do so again.

First, allowing the issuance of MPSAs to applicants that are owned and controlled by a 100% foreign-owned corporation, albeit
through an intricate web of corporate layering involving alleged Filipino corporations, is tantamount to permitting a blatant violation
of Section 2, Article XII of the Constitution. The Court simply cannot allow this breach and inhibit itself from resolving the
controversy on the facile pretext that the case had already been rendered academic.

Second, the elaborate corporate layering resorted to by petitioners so as to make it appear that there is compliance with the
minimum Filipino ownership in the Constitution is deftly exceptional in character. More importantly, the case is of paramount public
interest, as the corporate layering employed by petitioners was evidently designed to circumvent the constitutional caveat allowing
only Filipino citizens and corporations 60%-owned by Filipino citizens to explore, develop, and use the country’s natural resources.

Third, the facts of the case, involving as they do a web of corporate layering intended to go around the Filipino ownership
requirement in the Constitution and pertinent laws, require the establishment of a definite principle that will ensure that the
Constitutional provision reserving to Filipino citizens or “corporations at least sixty per centum of whose capital is owned by such
citizens” be effectively enforced and complied with. The case, therefore, is an opportunity to establish a controlling principle that
will “guide the bench, the bar, and the public.”

Lastly, the petitioners’ actions during the lifetime and existence of the instant case that gave rise to the present controversy are
capable of repetition yet evading review because, as shown by petitioners’ actions, foreign corporations can easily utilize dummy
Filipino corporations through various schemes and stratagems to skirt the constitutional prohibition against foreign mining in
Philippine soil.

II.

The application of the Grandfather Rule is justified by the circumstances of the case to determine the nationality of petitioners.

To petitioners, the Court’s application of the Grandfather Rule to determine their nationality is erroneous and allegedly without
basis in the Constitution, the Foreign Investments Act of 1991 (FIA), the Philippine Mining Act of 1995, 3 and the Rules issued by the
Securities and Exchange Commission (SEC). These laws and rules supposedly espouse the application of the Control Test in verifying
the Philippine nationality of corporate entities for purposes of determining compliance with Sec. 2, Art. XII of the Constitution that
only “corporations or associations at least sixty per centum of whose capital is owned by such [Filipino] citizens” may enjoy certain
rights and privileges, like the exploration and development of natural resources.

The application of the Grandfather Rule in the

present case does not eschew the Control Test.

Clearly, petitioners have misread, and failed to appreciate the clear import of, the Court’s April 21, 2014 Decision. Nowhere in that
disposition did the Court foreclose the application of the Control Test in determining which corporations may be considered as
Philippine nationals. Instead, to borrow Justice Leonen’s term, the Court used the Grandfather Rule as a “supplement” to the Control
Test so that the intent underlying the averted Sec.2, Art. XII of the Constitution be given effect. The following excerpts of the April
21, 2014 Decision cannot be clearer:chanRoblesvirtualLawlibrary

In ending, the “control test” is still the prevailing mode of determining whether or not a corporation is a Filipino corporation,
within the ambit of Sec. 2, Art. XII of the 1987 Constitution, entitled to undertake the exploration, development and utilization of the
natural resources of the Philippines. When in the mind of the Court, there is doubt, based on the attendant facts and
circumstances of the case, in the 60-40 Filipino equity ownership in the corporation, then it may apply the “grandfather
rule.”(emphasis supplied)

With that, the use of the Grandfather Rule as a “supplement” to the Control Test is not proscribed by the Constitution or the
Philippine Mining Act of 1995.

The Grandfather Rule implements the intent of

the Filipinization provisions of the Constitution.

To reiterate, Sec. 2, Art. XII of the Constitution reserves the exploration, development, and utilization of natural resources to Filipino
citizens and “corporations or associations at least sixty per centum of whose capital is owned by such citizens.” Similarly, Section
3(aq) of the Philippine Mining Act of 1995considers a “corporation xxx registered in accordance with law at least sixty per cent of the
capital of which is owned by citizens of the Philippines” as a person qualified to undertake a mining operation. Consistent with this
objective, the Grandfather Rule was originally conceived to look into the citizenship of the individuals who ultimately own and
control the shares of stock of a corporation for purposes of determining compliance with the constitutional requirement of Filipino
ownership.It cannot, therefore, be denied that the framers of the Constitution have not foreclosed the Grandfather Rule as a tool in
verifying the nationality of corporations for purposes of ascertaining their right to participate in nationalized or partly nationalized
activities. The following excerpts from the Record of the 1986 Constitutional Commission suggest as
much:chanRoblesvirtualLawlibrary

MR. NOLLEDO:  In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3,
60-40 in Section 9, and 2/3-1/3 in Section 15.

MR. VILLEGAS:  That is right.

x xxx

MR. NOLLEDO:  Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests in
another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?

MR. VILLEGAS:  Yes, that is the understanding of the Committee.

As further defined by Dean Cesar Villanueva, the Grandfather Rule is “the method by which the percentage of Filipino equity in a
corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other
nationalization laws, is computed, in cases where corporate shareholders are present, by attributing the nationality of the second
or even subsequent tier of ownership to determine the nationality of the corporate shareholder.”4 Thus, to arrive at the actual
Filipino ownership and control in a corporation, both the direct and indirect shareholdings in the corporation are determined.

This concept of stock attribution inherent in the Grandfather Rule to determine the ultimate ownership in a corporation is observed
by the Bureau of Internal Revenue (BIR) in applying Section 127 (B) 5 of the National Internal Revenue Code on taxes imposed on
closely held corporations, in relation to Section 96 of the Corporation Code 6 on close corporations. Thus, in BIR Ruling No. 148-10,
Commissioner Kim Henares held:chanRoblesvirtualLawlibrary

In the case of a multi-tiered corporation, the stock attribution rule must be allowed to run continuously along the chain of
ownership until it finally reaches the individual stockholders. This is in consonance with the “grandfather rule” adopted in the
Philippines under Section 96 of the Corporation Code (Batas Pambansa Blg. 68) which provides that notwithstanding the fact that
all the issued stock of a corporation are held by not more than twenty persons, among others, a corporation is nonetheless not to be
deemed a close corporation when at least two thirds of its voting stock or voting rights is owned or controlled by another
corporation which is not a close corporation.7

In SEC-OGC Opinion No. 10-31 dated December 9, 2010 (SEC Opinion 10-31),the SEC applied the Grandfather Rule even if the
corporation engaged in mining operation passes the 60-40 requirement of the Control Test, viz:chanRoblesvirtualLawlibrary

You allege that the structure of MML’s ownership in PHILSAGA is as follows: (1) MML owns 40% equity in MEDC, while the 60% is
ostensibly owned by Philippine individual citizens who are actually MML’s controlled nominees; (2) MEDC, in turn,owns 60% equity
in MOHC, while MML owns the remaining 40%; (3) Lastly, MOHC owns 60% of PHILSAGA, while MML owns the remaining 40%. You
provide the following figure to illustrate this structure:chanRoblesvirtualLawlibrary

xxxx

We note that the Constitution and the statute use the concept “Philippine citizens.” Article III, Section 1 of the Constitution provides
who are Philippine citizens: x x x This enumeration is exhaustive. In other words, there can be no other Philippine citizens other than
those falling within the enumeration provided by the Constitution. Obviously, only natural persons are susceptible of citizenship.
Thus, for purposes of the Constitutional and statutory restrictions on foreign participation in the exploitation of mineral resources, a
corporation investing in a mining joint venture can never be considered as a Philippine citizen.

The Supreme Court En Banc confirms this [in]… Pedro R. Palting, vs. San Jose Petroleum [Inc.]. The Court held that a corporation
investing in another corporation engaged in a nationalized activity cannot beconsidered as a citizen for purposes of the
Constitutional provision restricting foreign exploitation of natural resources:chanRoblesvirtualLawlibrary

xxxx
Accordingly, we opine that we must look into the citizenship of the individual stockholders, i.e. natural persons, of that investor-
corporation in order to determine if the Constitutional and statutory restrictions are complied with. If the shares of stock of the
immediate investor corporation is in turn held and controlled by another corporation, then we must look into the citizenship of the
individual stockholders of the latter corporation. In other words, if there are layers of intervening corporations investing in a
mining joint venture, we must delve into the citizenship of the individual stockholders of each corporation. This is the strict
application of the grandfather rule, which the Commission has been consistently applying prior to the 1990s.

Indeed, the framers of the Constitution intended for the “grandfather rule” to apply in case a 60%-40% Filipino-Foreign equity
corporation invests in another corporation engaging in an activity where the Constitution restricts foreign participation.

xxxx

Accordingly, under the structure you represented, the joint mining venture is 87.04 % foreign owned, while it is only 12.96% owned
by Philippine citizens. Thus, the constitutional requirement of 60% ownership by Philippine citizens is violated. (emphasis supplied)

Similarly, in the eponymous Redmont Consolidated Mines Corporation v. McArthur Mining Inc., et al., 8 the SEC en banc applied the
Grandfather Rule despite the fact that the subject corporations ostensibly have satisfied the 60-40 Filipino equity requirement. The
SEC en banc held that to attain the Constitutional objective of reserving to Filipinos the utilization of natural resources, one should
not stop where the percentage of the capital stock is 60%. Thus:chanRoblesvirtualLawlibrary

[D]oubt, we believe, exists in the instant case because the foreign investor, MBMI, provided practically all the funds of the
remaining appellee-corporations. The records disclose that: (1) Olympic Mines and Development Corporation (“OMDC”), a domestic
corporation, and MBMI subscribed to 6,663 and 3,331 shares, respectively, out of the authorized capital stock of Madridejos;
however, OMDC paid nothing for this subscription while MBMI paid P2,803,900.00 out of its total subscription cost of
P3,331,000.00; (2) Palawan Alpha South Resource Development Corp. (“Palawan Alpha”), also a domestic corporation, and MBMI
subscribed to 6,596 and 3,996 shares, respectively, out of the authorized capital stock of Patricia Louise; however, Palawan Alpha
paid nothing for this subscription while MBMI paid P2,796,000.00 out of its total subscription cost of P3,996,000.00; (3) OMDC and
MBMI subscribed to 6,663 and 3,331 shares, respectively, out of the authorized capital stock of Sara Marie; however, OMDC paid
nothing for this subscription while MBMI paid P2,794,000.00 out of its total subscription cost of P3,331,000.00; and (4) Falcon Ridge
Resources Management Corp. (“Falcon Ridge”), another domestic corporation, and MBMI subscribed to 5,997 and 3,998 shares,
respectively, out of the authorized capital stock of San Juanico; however, Falcon Ridge paid nothing for this subscription while MBMI
paid P2,500,000.00 out of its total subscription cost of P3,998,000.00. Thus, pursuant to the afore-quoted DOJ Opinion, the
Grandfather Rule must be used.

xxxx

The avowed purpose of the Constitution is to place in the hands of Filipinos the exploitation of our natural resources. Necessarily,
therefore, the Rule interpreting the constitutional provision should not diminish that right through the legal fiction of corporate
ownership and control. But the constitutional provision, as interpreted and practiced via the 1967 SEC Rules, has favored foreigners
contrary to the command of the Constitution. Hence, the Grandfather Rule must be applied to accurately determine the actual
participation, both direct and indirect, of foreigners in a corporation engaged in a nationalized activity or business.

The method employed in the Grandfather Rule of attributing the shareholdings of a given corporate shareholder to the second or
even the subsequent tier of ownership hews with the rule that the “beneficial ownership” of corporations engaged in nationalized
activities must reside in the hands of Filipino citizens. Thus, even if the 60-40 Filipino equity requirement appears to have been
satisfied, the Department of Justice (DOJ), in its Opinion No. 144, S. of 1977, stated that an agreement that may distort the actual
economic or beneficial ownership of a mining corporation may be struck down as violative of the constitutional requirement,
viz:chanRoblesvirtualLawlibrary

In this connection, you raise the following specific questions:chanRoblesvirtualLawlibrary

1. Can a Philippine corporation with 30% equity owned by foreigners enter into a mining service contract with a foreign company
granting the latter a share of not more than 40% from the proceeds of the operations?

xxxx

By law, a mining lease may be granted only to a Filipino citizen, or to a corporation or partnership registered with the [SEC] at
least 60% of the capital of which is owned by Filipino citizens and possessing x x x. The sixty percent Philippine equity requirement
in mineral resource exploitation x x x is intended to insure, among other purposes, the conservation of indigenous natural
resources, for Filipino posterity x x x. I think it is implicit in this provision, even if it refers merely to ownership of stock in the
corporation holding the mining concession, that beneficial ownership of the right to dispose, exploit, utilize, and develop natural
resources shall pertain to Filipino citizens, and that the nationality requirement is not satisfied unless Filipinos are the principal
beneficiaries in the exploitation of the country’s natural resources. This criterion of beneficial ownership is tacitly adopted in
Section 44 of P.D. No. 463, above-quoted, which limits the service fee in service contracts to 40% of the proceeds of the operation,
thereby implying that the 60-40 benefit-sharing ration is derived from the 60-40 equity requirement in the Constitution.

xxxx

It is obvious that while payments to a service contractor may be justified as a service fee, and therefore, properly deductible from
gross proceeds, the service contract could be employed as a means of going about or circumventing the constitutional limit on
foreign equity participation and the obvious constitutional policy to insure that Filipinos retain beneficial ownership of our
mineral resources. Thus, every service contract scheme has to be evaluated in its entirety, on a case to case basis, to determine
reasonableness of the total “service fee” x x x like the options available to the contractor to become equity participant in the
Philippine entity holding the concession, or to acquire rights in the processing and marketing stages. x x x (emphasis supplied)

The “beneficial ownership” requirement was subsequently used in tandem with the “situs of control” to determine the nationality of
a corporation in DOJ Opinion No. 84, S. of 1988, through the Grandfather Rule, despite the fact that both the investee and investor
corporations purportedly satisfy the 60-40 Filipino equity requirement:9chanroblesvirtuallawlibrary

This refers to your request for opinion on whether or not there may be an investment in real estate by a domestic corporation (the
investing corporation) seventy percent (70%) of the capital stock of which is owned by another domestic corporation with at least
60%-40% Filipino-Foreign Equity, while the remaining thirty percent (30%) of the capital stock is owned by a foreign corporation.

xxxx

This Department has had the occasion to rule in several opinions that it is implicit in the constitutional provisions, even if it refers
merely to ownership of stock in the corporation holding the land or natural resource concession, that the nationality requirement is
not satisfied unless it meets the criterion of beneficial ownership, i.e. Filipinos are the principal beneficiaries in the exploration of
natural resources (Op. No. 144, s. 1977; Op. No. 130, s. 1985), and that in applying the same “the primordial consideration is situs
of control, whether in a stock or non-stock corporation” (Op. No. 178, s. 1974). As stated in the Register of Deeds vs. Ung Sui Si
Temple (97 Phil. 58), obviously to insure that corporations and associations allowed to acquire agricultural land or to exploit natural
resources “shall be controlled by Filipinos.” Accordingly, any arrangement which attempts to defeat the constitutional purpose
should be eschewed (Op. No 130, s. 1985).

We are informed that in the registration of corporations with the [SEC], compliance with the sixty per centum requirement is being
monitored by SEC under the “Grandfather Rule” a method by which the percentage of Filipino equity in corporations engaged in
nationalized and/or partly nationalized areas of activities provided for under the Constitution and other national laws is accurately
computed, and the diminution if said equity prevented (SEC Memo, S. 1976). The “Grandfather Rule” is applied specifically in cases
where the corporation has corporate stockholders with alien stockholdings, otherwise, if the rule is not applied, the presence of
such corporate stockholders could diminish the effective control of Filipinos.

Applying the “Grandfather Rule” in the instant case, the result is as follows: xxx the total foreign equity in the investing corporation
is 58% while the Filipino equity is only 42%, in the investing corporation, subject of your query, is disqualified from investing in real
estate, which is a nationalized activity, as it does not meet the 60%-40% Filipino-Foreign equity requirement under the Constitution.

This pairing of the concepts “beneficial ownership” and the “situs of control” in determining what constitutes “capital” has been
adopted by this Court in Heirs of Gamboa v. Teves.10In its October 9, 2012 Resolution, the Court clarified,
thus:chanRoblesvirtualLawlibrary

This is consistent with Section 3 of the FIA which provides that where 100% of the capital stock is held by “a trustee of funds for
pension or other employee retirement or separation benefits,” the trustee is a Philippine national if “at least sixty percent (60%) of
the fund will accrue to the benefit of Philippine nationals.” Likewise, Section 1(b) of the Implementing Rules of the FIA provides that
“for stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the
required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights, is essential.” (emphasis
supplied)
In emphasizing the twin requirements of “beneficial ownership” and “control” in determining compliance with the required Filipino
equity in Gamboa, the en banc Court explicitly cited with approval the SEC en banc’s application in Redmont Consolidated Mines,
Corp. v. McArthur Mining, Inc., et al. of the Grandfather Rule, to wit:chanRoblesvirtualLawlibrary

Significantly, the SEC en banc, which is the collegial body statutorily empowered to issue rules and opinions on behalf of SEC, has
adopted the Grandfather Rule in determining compliance with the 60-40 ownership requirement in favor of Filipino citizens
mandated by the Constitution for certain economic activities. This prevailing SEC ruling, which the SEC correctly adopted to thwart
any circumvention of the required Filipino “ownership and control,” is laid down in the 25 March 2010 SEC en banc ruling in
Redmont Consolidated Mines, Corp. v. McArthur Mining, Inc., et al. xxx(emphasis supplied)

Applying Gamboa, the Court, in Express Investments III Private Ltd. v. Bayantel Communications, Inc., 11 denied the foreign creditors’
proposal to convert part of Bayantel’s debts to common shares of the company at a rate of 77.7%. Supposedly, the conversion of
the debts to common shares by the foreign creditors would be done, both directly and indirectly, in order to meet the control test
principle under the FIA. Under the proposed structure, the foreign creditors would own 40% of the outstanding capital stock of the
telecommunications company on a direct basis, while the remaining 40% of shares would be registered to a holding company that
shall retain, on a direct basis, the other 60% equity reserved for Filipino citizens. Nonetheless, the Court found the proposal non-
compliant with the Constitutional requirement of Filipino ownership as the proposed structure would give more than 60% of the
ownership of the common shares of Bayantel to the foreign corporations, viz:chanRoblesvirtualLawlibrary

In its Rehabilitation Plan, among the material financial commitments made by respondent Bayantel is that its shareholders shall
relinquish the agreed-upon amount of common stock[s] as payment to Unsecured Creditors as per the Term Sheet. Evidently, the
parties intend to convert the unsustainable portion of respondent’s debt into common stocks, which have voting rights. If we
indulge petitioners on their proposal, the Omnibus Creditors which are foreign corporations, shall have control over 77.7% of
Bayantel, a public utility company. This is precisely the scenario proscribed by the Filipinization provision of the Constitution.
Therefore, the Court of Appeals acted correctly in sustaining the 40% debt-to-equity ceiling on conversion. (emphasis supplied)

As shown by the quoted legislative enactments, administrative rulings, opinions, and this Court’s decisions, the Grandfather Rule not
only finds basis, but more importantly, it implements the Filipino equity requirement, in the Constitution.

Application of the Grandfather

Rule with the Control Test.

Admittedly, an ongoing quandary obtains as to the role of the Grandfather Rule in determining compliance with the minimum
Filipino equity requirement vis-à-vis the Control Test. This confusion springs from the erroneous assumption that the use of one
method forecloses the use of the other.

As exemplified by the above rulings, opinions, decisions and this Court’s April 21, 2014 Decision, the Control Test can be, as it has
been, applied jointly with the Grandfather Rule to determine the observance of foreign ownership restriction in nationalized
economic activities. The Control Test and the Grandfather Rule are not, as it were, incompatible ownership-determinant methods
that can only be applied alternative to each other. Rather, these methods can, if appropriate, be used cumulatively in the
determination of the ownership and control of corporations engaged in fully or partly nationalized activities, as the mining
operation involved in this case or the operation of public utilities as in Gamboa or Bayantel.

The Grandfather Rule, standing alone, should not be used to determine the Filipino ownership and control in a corporation, as it
could result in an otherwise foreign corporation rendered qualified to perform nationalized or partly nationalized activities. Hence, it
is only when the Control Test is first complied with that the Grandfather Rule may be applied. Put in another manner, if the
subject corporation’s Filipino equity falls below the threshold 60%, the corporation is immediately considered foreign-owned, in
which case, the need to resort to the Grandfather Rule disappears.

On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity requirement can be considered a Filipino
corporation if there is no doubt as to who has the “beneficial ownership” and “control” of the corporation. In that instance, there
is no need for a dissection or further inquiry on the ownership of the corporate shareholders in both the investing and investee
corporation or the application of the Grandfather Rule.12As a corollary rule, even if the 60-40 Filipino to foreign equity ratio is
apparently met by the subject or investee corporation, a resort to the Grandfather Rule is necessary if doubt exists as to the locus
of the “beneficial ownership” and “control.” In this case, a further investigation as to the nationality of the personalities with the
beneficial ownership and control of the corporate shareholders in both the investing and investee corporations is necessary.
As explained in the April 21, 2012 Decision, the “doubt” that demands the application of the Grandfather Rule in addition to or in
tandem with the Control Test is not confined to, or more bluntly, does not refer to the fact that the apparent Filipino ownership of
the corporation’s equity falls below the 60% threshold. Rather, “doubt” refers to various indicia that the “beneficial ownership”
and “control” of the corporation do not in fact reside in Filipino shareholders but in foreign stakeholders. As provided in DOJ
Opinion No. 165, Series of 1984, which applied the pertinent provisions of the Anti-Dummy Law in relation to the minimum Filipino
equity requirement in the Constitution, “significant indicators of the dummy status” have been recognized in view of reports “that
some Filipino investors or businessmen are being utilized or [are] allowing themselves to be used as dummies by foreign investors”
specifically in joint ventures for national resource exploitation. These indicators are:chanRoblesvirtualLawlibrary

1. That the foreign investors provide practically all the funds for the joint investment undertaken by these Filipino businessmen and
their foreign partner;chanrobleslaw

2. That the foreign investors undertake to provide practically all the technological support for the joint venture;chanrobleslaw

3. That the foreign investors, while being minority stockholders, manage the company and prepare all economic viability studies.

Thus, In the Matter of the Petition for Revocation of the Certificate of Registration of Linear Works Realty Development Corporation,13
the SEC held that when foreigners contribute more capital to an enterprise, doubt exists as to the actual control and ownership of
the subject corporation even if the 60% Filipino equity threshold is met. Hence, the SEC in that one ordered a further investigation,
viz:chanRoblesvirtualLawlibrary

x x x  The [SEC Enforcement and Prosecution Department (EPD)] maintained that the basis for determining the level of foreign
participation is the number of shares subscribed, regardless of the par value. Applying such an interpretation, the EPD rules that the
foreign equity participation in Linear works Realty Development Corporation amounts to 26.41% of the corporation’s capital stock
since the amount of shares subscribed by foreign nationals is 1,795 only out of the 6,795 shares. Thus, the subject corporation is
compliant with the 40% limit on foreign equity participation. Accordingly, the EPD dismissed the complaint, and did not pursue any
investigation against the subject corporation.

xxxx

x x x [I]n this respect we find no error in the assailed order made by the EPD. The EPD did not err when it did not take into account
the par value of shares in determining compliance with the constitutional and statutory restrictions on foreign equity.cralawred
However, we are aware that some unscrupulous individuals employ schemes to circumvent the constitutional and statutory
restrictions on foreign equity. In the present case, the fact that the shares of the Japanese nationals have a greater par value but
only have similar rights to those held by Philippine citizens having much lower par value, is highly suspicious. This is because a
reasonable investor would expect to have greater control and economic rights than other investors who invested less capital than
him. Thus, it is reasonable to suspect that there may be secret arrangements between the corporation and the stockholders wherein
the Japanese nationals who subscribed to the shares with greater par value actually have greater control and economic rights
contrary to the equality of shares based on the articles of incorporation.

With this in mind, we find it proper for the EPD to investigate the subject corporation. The EPD is advised to avail of the
Commission’s subpoena powers in order to gather sufficient evidence, and file the necessary complaint.

As will be discussed, even if at first glance the petitioners comply with the 60-40 Filipino to foreign equity ratio, doubt exists in the
present case that gives rise to a reasonable suspicion that the Filipino shareholders do not actually have the requisite number of
control and beneficial ownership in petitioners Narra, Tesoro, and McArthur. Hence, a further investigation and dissection of the
extent of the ownership of the corporate shareholders through the Grandfather Rule is justified.

Parenthetically, it is advanced that the application of the Grandfather Rule is impractical as tracing the shareholdings to the point
when natural persons hold rights to the stocks may very well lead to an investigation ad infinitum. Suffice it to say in this regard that,
while the Grandfather Rule was originally intended to trace the shareholdings to the point where natural persons hold the shares,
the SEC had already set up a limit as to the number of corporate layers the attribution of the nationality of the corporate
shareholders may be applied.

In a 1977 internal memorandum, the SEC suggested applying the Grandfather Rule on two (2) levels of corporate relations for
publicly-held corporations or where the shares are traded in the stock exchanges, and to three (3) levels for closely held
corporations or the shares of which are not traded in the stock exchanges. 14 These limits comply with the requirement in Palting v.
San Jose Petroleum , Inc.15that the application of the Grandfather Rule cannot go beyond the level of what is reasonable.

A doubt exists as to the extent of control and

beneficial ownership of MBMI over the petitioners
and their investing corporate stockholders.

In the Decision subject of this recourse, the Court applied the Grandfather Rule to determine the matter of true ownership and
control over the petitioners as doubt exists as to the actual extent of the participation of MBMI in the equity of the petitioners and
their investing corporations.

We considered the following membership and control structures and like nuances:chanRoblesvirtualLawlibrary

Tesoro

Supposedly Filipino corporation Sara Marie Mining, Inc. (Sara Marie) holds 59.97% of the 10,000 common shares of petitioner Tesoro
while the Canadian-owned company, MBMI, holds 39.98% of its shares.

Name Nationality Number of Shares Amount Amount Paid

  Subscribed
Sara Marie Mining, Inc. Filipino 5,997 P5,997,000.00 P825,000.00
MBMI Resources, Inc.16 Canadian 3,998 P3,998,000.00 P1,878,174.60
Lauro L. Salazar Filipino 1 P1,000.00 P1,000.00
Fernando B. Esguerra Filipino 1 P1,000.00 P1,000.00
Manuel A. Agcaoili Filipino 1 P1,000.00 P1,000.00
Michael T. Mason American 1 P1,000.00 P1,000.00
Kenneth Cawkel Canadian 1 P1,000.00 P1,000.00
  Total 10,000 P10,000,000.00 P2,708,174.60

In turn, the Filipino corporation Olympic Mines & Development Corp. (Olympic) holds 66.63% of Sara Marie’s shares while the same
Canadian company MBMI holds 33.31% of Sara Marie’s shares. Nonetheless, it is admitted that Olympic did not pay a single peso for
its shares. On the contrary, MBMI paid for 99% of the paid-up capital of Sara Marie.

Name Nationality Number of Shares Amount Amount Paid

Subscribed
Olympic Mines & Development Filipino 6,663 P6,663,000.00 P0.00
Corp.17
MBMI Resources, Inc. Canadian 3,331 P3,331,000.00 P2,794,000.00
Amanti Limson Filipino 1 P1,000.00 P1,000.00
Fernando B. Esguerra Filipino 1 P1,000.00 P1,000.00
Lauro Salazar Filipino 1 P1,000.00 P1,000.00
Emmanuel G. Hernando Filipino 1 P1,000.00 P1,000.00
Michael T. Mason American 1 P1,000.00 P1,000.00
Kenneth Cawkel Canadian 1 P1,000.00 P1,000.00
  Total 10,000 P10,000,000.00 P2,800,000.00

The fact that MBMI had practically provided all the funds in Sara Marie and Tesoro creates serious doubt as to the true extent of
its (MBMI) control and ownership over both Sara Marie and Tesoro since, as observed by the SEC, “a reasonable investor would
expect to have greater control and economic rights than other investors who invested less capital than him.” The application of the
Grandfather Rule is clearly called for, and as shown below, the Filipinos’ control and economic benefits in petitioner Tesoro (through
Sara Marie) fall below the threshold 60%, viz:chanRoblesvirtualLawlibrary

Filipino participation in petitioner Tesoro: 40.01%

66.67 (Filipino equity in Sara Marie)  x59.97 (Sara Marie’s share in Tesoro) = 39.98%
100
39.98% + .03% (shares of individual Filipino shareholders [SHs] in Tesoro)
=40.01%
  =====
Foreign participation in petitioner Tesoro: 59.99%
33.33 (Foreign equity in Sara Marie)  x  59.97 (Sara Marie’s share in Tesoro) = 19.99%
100

19.99% + 39.98% (MBMI’s direct participation in Tesoro) + .02% (shares of foreign individual SHs in Tesoro)
= 59.99%
   =====
With only 40.01% Filipino ownership in petitioner Tesoro, as compared to 59.99% foreign ownership of its shares, it is clear that
petitioner Tesoro does not comply with the minimum Filipino equity requirement imposed in Sec. 2, Art. XII of the Constitution.
Hence, the appellate court’s observation that Tesoro is a foreign corporation not entitled to an MPSA is apt.

McArthur

Petitioner McArthur follows the corporate layering structure of Tesoro, as 59.97% of its 10, 000 common shares is owned by
supposedly Filipino Madridejos Mining Corporation (Madridejos), while 39.98% belonged to the Canadian MBMI.

Name Nationality Number of Shares Amount Amount Paid

Subscribed
Madridejos Mining Corporation Filipino 5,997 P5,997,000.00 P825,000.00
MBMI Resources, Inc.[18 Canadian 3,998 P3,998,000.00 P1,878,174.60
Lauro Salazar Filipino 1 P1,000.00 P1,000.00
Fernando B. Esguerra Filipino 1 P1,000.00 P1,000.00
Manuel A. Agcaoili Filipino 1 P1,000.00 P1,000.00
Michael T. Mason American 1 P1,000.00 P1,000.00
Kenneth Cawkel Canadian 1 P1,000.00 P1,000.00
  Total 10,000 P10,000,000.00 P2,708,174.60

In turn, 66.63% of Madridejos’ shares were held by Olympic while 33.31% of its shares belonged to MBMI. Yet again, Olympic did not
contribute to the paid-up capital of Madridejos and it was MBMI that provided 99.79% of the paid-up capital of Madridejos.

Name Nationality Number of Shares Amount Amount Paid

Subscribed
Olympic Mines & Development Filipino 6,663 P6,663,000.00 P0.00
Corp.19
MBMI Resources, Inc. Canadian 3,331 P3,331,000.00 P2,803,900.00
Amanti Limson Filipino 1 P1,000.00 P1,000.00
Fernando B. Esguerra Filipino 1 P1,000.00 P1,000.00
Lauro Salazar Filipino 1 P1,000.00 P1,000.00
Emmanuel G. Hernando Filipino 1 P1,000.00 P1,000.00
Michael T. Mason American 1 P1,000.00 P1,000.00
Kenneth Cawkel Canadian 1 P1,000.00 P1,000.00
  Total 10,000 P10,000,000.00 P2,809,900.00

Again, the fact that MBMI had practically provided all the funds in Madridejos and McArthur creates serious doubt as to the true
extent of its control and ownership of MBMI over both Madridejos and McArthur. The application of the Grandfather Rule is
clearly called for, and as will be shown below, MBMI,along with the other foreign shareholders, breached the maximum limit of 40%
ownership in petitioner McArthur, rendering the petitioner disqualified to an MPSA:chanRoblesvirtualLawlibrary
Filipino participation in petitioner McArthur: 40.01%

66.67 (Filipino equity in Madridejos)  x  59.97 (Madridejos’ share in McArthur) = 39.98%

100

39.98% + .03% (shares of individual Filipino SHs in McArthur)

=40.01%
  =====

Foreign participation in petitioner McArthur: 59.99%

33.33 (Foreign equity in Madridejos)  x  59.97 (Madridejos’ share in McArthur) = 19.99%

100

19.99% + 39.98% (MBMI’s direct participation in McArthur) + .02% (shares of foreign individual SHs in McArthur)
= 59.99%
  =====

As with petitioner Tesoro, with only 40.01% Filipino ownership in petitioner McArthur, as compared to 59.99% foreign ownership of
its shares, it is clear that petitioner McArthur does not comply with the minimum Filipino equity requirement imposed in Sec. 2, Art.
XII of the Constitution. Thus, the appellate court did not err in holding that petitioner McArthur is a foreign corporation not entitled
to an MPSA.

Narra

As for petitioner Narra, 59.97% of its shares belonged to Patricia Louise Mining & Development Corporation (PLMDC), while
Canadian MBMI held 39.98% of its shares.

Name Nationality Number of Shares Amount Amount Paid

Subscribed
Patricia Lousie Mining and Filipino 5,997 P5,997,000.00 P1,677,000.00
Development Corp.
MBMI Resources, Inc.[20 Canadian 3,996 P3,996,000.00 P1,116,000.00
Higinio C. Mendoza, Jr. Filipino 1 P1,000.00 P1,000.00
Henry E. Fernandez Filipino 1 P1,000.00 P1,000.00
Ma. Elena A. Bocalan Filipino 1 P1,000.00 P1,000.00
Michael T. Mason American 1 P1,000.00 P1,000.00
Robert L. McCurdy Canadian 1 P1,000.00 P1,000.00
Manuel A. Agcaoili Filipino 1 P1,000.00 P1,000.00
Bayani H. Agabin Filipino 1 P1,000.00 P1,000.00
  Total 10,000 P10,000,000.00 P2,800,000.00

PLMDC’s shares, in turn, were held by Palawan Alpha South Resources Development Corporation (PASRDC), which subscribed to
65.96% of PLMDC’s shares, and the Canadian MBMI, which subscribed to 33.96% of PLMDC’s shares.

Name Nationality Number of Shares Amount Amount Paid

Subscribed
Palawan Alpha South Resource Filipino 6,596 P6,596,000.00 P0
Development Corp.
MBMI Resources, Inc.[21 Canadian 3,396 P3,396,000.00 P2,796,000.00
Higinio C. Mendoza, Jr. Filipino 1 P1,000.00 P1,000.00
Fernando B. Esguerra Filipino 1 P1,000.00 P1,000.00
Henry E. Fernandez Filipino 1 P1,000.00 P1,000.00
Ma. Elena A. Bocalan Filipino 1 P1,000.00 P1,000.00
Michael T. Mason American 1 P1,000.00 P1,000.00
Robert L. McCurdy Canadian 1 P1,000.00 P1,000.00
Manuel A. Agcaoili Filipino 1 P1,000.00 P1,000.00
Bayani H. Agabin Filipino 1 P1,000.00 P1,000.00
  Total 10,000 P10,000,000.00 P2,804,000.00

Yet again, PASRDC did not pay for any of its subscribed shares, while MBMI contributed 99.75% of PLMDC’s paid-up capital. This fact
creates serious doubt as to the true extent of MBMI’s control and ownership over both PLMDC and Narra since “a reasonable
investor would expect to have greater control and economic rights than other investors who invested less capital than him.” Thus,
the application of the Grandfather Rule is justified. And as will be shown, it is clear that the Filipino ownership in petitioner Narrafalls
below the limit prescribed in both the Constitution and the Philippine Mining Act of 1995.

Filipino participation in petitioner Narra: 39.64%

66.02 (Filipino equity in PLMDC)  x  59.97 (PLMDC’s share in Narra) = 39.59%

100

39.59% + .05% (shares of individual Filipino SHs in McArthur)

=39.64%
  ====
Foreign participation in petitioner Narra: 60.36%

33.98 (Foreign equity in PLMDC)  x  59.97 (PLMDC’s share in Narra) = 20.38%

100

20.38% + 39.96% (MBMI’s direct participation in Narra) + .02% (shares of foreign individual SHs in McArthur)
= 60.36%
  =====

With 60.36% foreign ownership in petitioner Narra, as compared to only 39.64% Filipino ownership of its shares, it is clear that
petitioner Narra does not comply with the minimum Filipino equity requirement imposed in Section 2, Article XII of the Constitution.
Hence, the appellate court did not err in holding that petitioner McArthur is a foreign corporation not entitled to an MPSA.

It must be noted that the foregoing determination and computation of petitioners’ Filipino equity composition was based on their
common shareholdings, not preferred or redeemable shares. Section 6 of the Corporation Code of the Philippines explicitly provides
that “no share may be deprived of voting rights except those classified as ‘preferred’ or ‘redeemable’ shares.” Further, as Justice
Leonen puts it, there is “no indication that any of the shares x x x do not have voting rights, [thus] it must be assumed that all such
shares have voting rights.”22 It cannot therefore be gainsaid that the foregoing computation hewed with the pronouncements of
Gamboa, as implemented by SEC Memorandum Circular No. 8, Series of 2013, (SEC Memo No. 8) 23Section 2 of which
states:chanRoblesvirtualLawlibrary

Section 2. All covered corporations shall, at all times, observe the constitutional or statutory requirement. For purposes of
determining compliance therewith, the required percentage of Filipino ownership shall be applied to BOTH (a) the total outstanding
shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not
entitled to vote in the election of directors.

In fact, there is no indication that herein petitioners issued any other class of shares besides the 10,000 common shares. Neither is it
suggested that the common shares were further divided into voting or non-voting common shares. Hence, for purposes of this case,
items a) and b) in SEC Memo No. 8 both refer to the 10,000 common shares of each of the petitioners, and there is no need to
separately apply the 60-40 ratio to any segment or part of the said common shares.

III.
In mining disputes, the POA has jurisdiction to pass upon the nationality
of applications for MPSAs

Petitioners also scoffed at this Court’s decision to uphold the jurisdiction of the Panel of Arbitrators (POA) of the Department of
Environment and Natural Resources (DENR) since the POA’s determination of petitioners’ nationalities is supposedly beyond its
limited jurisdiction, as defined in Gonzales v. Climax Mining Ltd.24 and Philex Mining Corp. v. Zaldivia.25chanroblesvirtuallawlibrary

The April 21, 2014 Decision did not dilute, much less overturn, this Court’s pronouncements in either Gonzales or Philex Mining that
POA’s jurisdiction “is limited only to mining disputes which raise questions of fact,” and not judicial questions cognizable by regular
courts of justice. However, to properly recognize and give effect to the jurisdiction vested in the POA by Section 77 of the Philippine
Mining Act of 1995,26 and in parallel with this Court’s ruling in Celestial Nickel Mining Exploration Corporation v. Macroasia
Corp.,27the Court has recognized in its Decision that in resolving disputes “involving rights to mining areas” and “involving mineral
agreements or permits,” the POA has jurisdiction to make a preliminary finding of the required nationality of the corporate applicant
in order to determine its right to a mining area or a mineral agreement.

There is certainly nothing novel or aberrant in this approach. In ejectment and unlawful detainer cases, where the subject of inquiry
is possession de facto, the jurisdiction of the municipal trial courts to make a preliminary adjudication regarding ownership of the
real property involved is allowed, but only for purposes of ruling on the determinative issue of material possession.

The present case arose from petitioners’ MPSA applications, in which they asserted their respective rights to the mining areas each
applied for. Since respondent Redmont, itself an applicant for exploration permits over the same mining areas, filed petitions for the
denial of petitioners’ applications, it should be clear that there exists a controversy between the parties and it is POA’s jurisdiction to
resolve the said dispute. POA’s ruling on Redmont’s assertion that petitioners are foreign corporations not entitled to MPSA is but a
necessary incident of its disposition of the mining dispute presented before it, which is whether the petitioners are entitled to
MPSAs.

Indeed, as the POA has jurisdiction to entertain “disputes involving rights to mining areas,” it necessarily follows that the POA
likewise wields the authority to pass upon the nationality issue involving petitioners, since the resolution of this issue is essential and
indispensable in the resolution of the main issue, i.e., the determination of the petitioners’ right to the mining areas through MPSAs.

WHEREFORE, We DENY the motion for reconsideration WITH FINALITY. No further pleadings shall be entertained. Let entry of
judgment be made in due course.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

I dissent from the majority’s Resolution denying with finality the Motion for Reconsideration filed by petitioners. I maintain the
positions I articulated in my Dissent to the April 21, 2014 Decision.

I welcome the majority’s statements clarifying the relative applicability of the Grandfather Rule in relation to the Control Test. I
particularly welcome the clarification that “it is only when the Control Test is first complied with that the Grandfather Rule may be
applied.”1 This is in line with the position I articulated in my Dissent to the April 21, 2014 Decision that the Control Test should find
priority in application, with the Grandfather Rule being applicable only as a “supplement.” 2chanroblesvirtuallawlibrary

However, I maintain that the Panel of Arbitrators of the Department of Environment and Natural Resources (DENR Panel of
Arbitrators) never had jurisdiction to rule on the nationalities of petitioners Narra Nickel Mining and Development Corp. (Narra),
Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining, Inc. (McArthur) and on the question of whether they should
be qualified to hold Mineral Production Sharing Agreements (MPSA). It is error for the majority to rule that petitioners are foreign
corporations proceeding from the actions of a body which never had jurisdiction and competence to rule on the judicial question of
nationality.

Likewise, I maintain that respondent Redmont Consolidated Mines Corp. (Redmont) engaged in blatant forum shopping. This, the
lack of jurisdiction and competence of the DENR Panel of Arbitrators, and the error of proceeding from the acts of an incompetent
body are sufficient grounds for granting the Petition and should suffice as bases for granting the present Motion for Reconsideration.
I

The DENR Panel of Arbitrators had no competence to rule on the

Petitions filed by Redmont

The jurisdiction of the DENR Panel of Arbitrators is spelled out in Section 77 of Republic Act No. 7942, otherwise known as the
Philippine Mining Act of 1995 (the “Mining Act”):chanRoblesvirtualLawlibrary

Section 77. Panel of Arbitrators – . . . . Within thirty (30) working days, after the submission of the case by the parties for decision,
the panel shall have exclusive and original jurisdiction to hear and decide on the following:chanRoblesvirtualLawlibrary
(a) Disputes involving rights to mining areas;
(b) Disputes involving mineral agreements or permit;
(c) Disputes involving surface owners, occupants and claimholders/concessionaires; and
(d) Disputes pending before the Bureau and the Department at the date of the effectivity of this Act.

The April 21, 2014 Decision sustained the jurisdiction of the DENR Panel of Arbitrators, relying on pronouncements made in Celestial
Nickel Mining Exploration Corporation v. Macroasia Corp. 3 which construed the phrase “disputes involving rights to mining areas” as
referring “to any adverse claim, protest, or opposition to an application for mineral agreement.” 4chanroblesvirtuallawlibrary

However, the Decision interpreted Section 77 of the Mining Act in a manner that runs afoul of this court’s pronouncements in its
Decision penned by Associate Justice Dante Tinga in Gonzales v. Climax Mining Ltd.5 and in its Decision penned by Associate Justice
J.B.L. Reyes in Philex Mining Corp. v. Zaldivia.6chanroblesvirtuallawlibrary

As pointed out in my Dissent to the April 21, 2014 Decision, “Gonzales v. Climax Mining Ltd., 7 ruled on the jurisdiction of the Panel of
Arbitrators as follows:”

We now come to the meat of the case which revolves mainly around the question of jurisdiction by the Panel of Arbitrators: Does
the Panel of Arbitrators have jurisdiction over the complaint for declaration of nullity and/or termination of the subject contracts on
the ground of fraud, oppression and violation of the Constitution? This issue may be distilled into the more basic question of
whether the Complaint raises a mining dispute or a judicial question.

A judicial question is a question that is proper for determination by the courts, as opposed to a moot question or one properly
decided by the executive or legislative branch. A judicial question is raised when the determination of the question involves the
exercise of a judicial function; that is, the question involves the determination of what the law is and what the legal rights of the
parties are with respect to the matter in controversy.

On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs, or permits, and
(c) surface owners, occupants and claimholders/concessionaires. Under Republic Act No. 7942 (otherwise known as the Philippine
Mining Act of 1995), the Panel of Arbitrators has exclusive and original jurisdiction to hear and decide these mining disputes. The
Court of Appeals, in its questioned decision, correctly stated that the Panel’s jurisdiction is limited only to those mining disputes
which raise questions of fact or matters requiring the application of technological knowledge and experience. 8 (Emphasis
supplied, citation omitted)

Philex Mining Corp. v. Zaldivia9 settled what “questions of fact” are appropriate for resolution in a mining
dispute:chanRoblesvirtualLawlibrary

We see nothing in [S]ections 61 and 73 of the Mining Law that indicates a legislative intent to confer real judicial power upon the
Director of Mines. The very terms of [S]ection 73 of the Mining Law, as amended by Republic Act No. 4388, in requiring that the
adverse claim must “state in full detail the nature, boundaries and extent of the adverse claim” show that the conflicts to be decided
by reason of such adverse claim refer primarily to questions of fact. This is made even clearer by the explanatory note to House Bill
No. 2522, later to become Republic Act 4388, that “[S]ections 61 and 73 that refer to the overlapping of claims are amended to
expedite resolutions of mining conflicts * * *.” The controversies to be submitted and resolved by the Director of Mines under the
sections refer ther[e]fore only to the overlapping of claims and administrative matters incidental thereto. 10 (Emphasis supplied)

The DENR Panel of Arbitrators, as its name denotes, is an arbitral body. It is not a court of law. Its competence rests in its capacity to
resolve factual issues arising between parties with competing mining claims and requiring the application of technical expertise.
In this case, Redmont has not even shown that it has a competing mining claim. It has asked only that petitioners be declared as not
qualified to enter into MPSAs.

By sustaining the jurisdiction of the DENR Panel of Arbitrators, the majority effectively diminishes (if not totally abandons) the
distinction made in Gonzales and Philex between “mining disputes” and “judicial questions.” Per Gonzales and Philex, judicial
questions are cognizable only by courts of justice, not by the DENR Panel of Arbitrators.

The majority’s reference to Celestial takes out of context the pronouncements made therein. To reiterate what I have stated in my
Dissent to the April 21, 2014 Decision, “[t]he pronouncements in Celestial cited by the ponencia were made to address the
assertions of Celestial Nickel and Mining Corporation (Celestial Nickel) and Blue Ridge Mineral Corporation (Blue Ridge) that the
Panel of Arbitrators had the power to cancel existing mineral agreements pursuant to Section 77 of the Mining Act. . . . These
pronouncements did not undo or abandon the distinction, clarified in Gonzales, between judicial questions and mining
disputes.”11chanroblesvirtuallawlibrary

The crux of this case relates to a matter that is beyond the competence of the DENR Panel of Arbitrators. It does not pertain to the
intricacies and specifications of mining operations. Rather, it pertains to the legal status of petitioners and the rights or inhibitions
accruing to them on account of their status. It pertains to a judicial question.

II

On the applicability of the Grandfather Rule

I maintain the position I elucidated in my Dissent to the April 21, 2014 Decision. The Control Test, rather than the Grandfather Rule,
finds priority application in reckoning the nationalities of corporations engaged in nationalized economic activities.

The Grandfather Rule finds no basis in the text of the 1987 Constitution. It is true that the records of the Constitutional Commission
“indicate an affirmative reference to the Grandfather Rule.” 12 However, whatever references these records make to the Grandfather
Rule is not indicative of a consensus among all members of the Constitutional Commission. At most, these references are advisory
and not binding on this court.13 Ultimately, what is controlling is the text of the Constitution itself. This text is silent on the precise
means of reckoning foreign ownership.

In contrast, the Control Test is firmly enshrined by congressional dictum in a statute, specifically, Republic Act No. 8179, otherwise
known as the Foreign Investments Act (FIA). As this court has pointed out, “[t]he FIA is the basic law governing foreign investments
in the Philippines, irrespective of the nature of business and area of investment.” 14chanroblesvirtuallawlibrary

Section 3 (a) of the Foreign Investments Act defines a “Philippine national” as including “a corporation organized under the laws of
the Philippines of which at least sixty per cent (60%) of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines.” In my Dissent to the April 21, 2014 Decision:chanRoblesvirtualLawlibrary

This is a definition that is consistent with the first part of paragraph 7 of the 1967 SEC Rules, which [originally articulated] the Control
Test: “[s]hares belonging to corporations or partnerships at least 60 per cent of the capital of which is owned by Filipino citizens shall
be considered as of Philippine nationality.” 15

The Control Test serves the rationale for nationalization of economic activities. It ensures effective control by Filipinos and satisfies
the requirement of beneficial ownership.

On the matter of control, my Dissent to the April 21, 2014 Decision explained that:chanRoblesvirtualLawlibrary

It is a matter of transitivity16 that if Filipino stockholders control a corporation which, in turn, controls another corporation, then the
Filipino stockholders control the latter corporation, albeit indirectly or through the former corporation.

An illustration is apt.

Suppose that a corporation, “C”, is engaged in a nationalized activity requiring that 60% of its capital be owned by Filipinos and that
this 60% is owned by another corporation, “B”, while the remaining 40% is owned by stockholders, collectively referred to as “Y”. Y is
composed entirely of foreign nationals. As for B, 60% of its capital is owned by stockholders collectively referred to as “A”, while the
remaining 40% is owned by stockholders collectively referred to as “X”. The collective A, is composed entirely of Philippine nationals,
while the collective X is composed entirely of foreign nationals. (N.b., in this illustration, capital is understood to mean “shares of
stock entitled to vote in the election of directors,” per the definition in Gamboa17). Thus:chanRoblesvirtualLawlibrary

A: 60% X: 40%

B: 60% Y: 40%

By owning 60% of B’s capital, A controls B. Likewise, by owning 60% of C’s capital, B controls C. From this, it follows, as a matter of
transitivity, that A controls C; albeit indirectly, that is, through B.

This “control” holds true regardless of the aggregate foreign capital in B and C. As explained in Gamboa, control by stockholders is a
matter resting on the ability to vote in the election of directors:chanRoblesvirtualLawlibrary
Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation. This is
exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation. 18
B will not be outvoted by Y in matters relating to C, while A will not be outvoted by X in matters relating to B. Since all actions taken
by B must necessarily be in conformity with the will of A, anything that B does in relation to C is, in effect, in conformity with the will
of A. No amount of aggregating the foreign capital in B and C will enable X to outvote A, nor Y to outvote B.

In effect, A controls C, through B. Stated otherwise, the collective Filipinos in A, effectively control C, through their control of B. 19

From the definition of “beneficial owner or beneficial ownership” provided by the Implementing Rules and Regulations (amended
2004) of Republic Act No. 8799, otherwise known as the Securities Regulation Code, “there are two (2) ways through which one may
be a beneficial owner of securities, such as shares of stock: first, by having or sharing voting power; and second, by having or sharing
investment returns or power.”20 The Implementing Rules use “and/or”; thus, these are alternative means which may or may not
concur.

On the first — voting power — my Dissent to the April 21, 2014 Decision pointed out that:chanRoblesvirtualLawlibrary

Voting power, as discussed previously, ultimately rests on the controlling stockholders of the controlling investor corporation. To go
back to the previous illustration, voting power ultimately rests on A, it having the voting power in B which, in turn, has the voting
power in C.21

On the second — investment returns or power — the same Dissent pointed out that:chanRoblesvirtualLawlibrary

As to investment returns or power, it is ultimately A which enjoys investment power. It controls B’s investment decisions – including
the disposition of securities held by B – and (again, through B) controls C’s investment decisions.

Similarly, it is ultimately A which benefits from investment returns generated through C. Any income generated by C redounds to B’s
benefit, that is, through income obtained from C, B gains funds or assets which it can use either to finance itself in respect of capital
and/or operations. This is a direct benefit to B, itself a Philippine national. This is also an indirect benefit to A, a collectivity of
Philippine nationals, as then, its business – B – not only becomes more viable as a going concern but also becomes equipped to
funnel income to A.

Moreover, beneficial ownership need not be direct. A controlling shareholder is deemed the indirect beneficial owner of securities
(e.g., shares) held by a corporation of which he or she is a controlling shareholder. Thus, in the previous illustration, A, the
controlling shareholder of B, is the indirect beneficial owner of the shares in C to the extent that they are held by B. 22

However, 60 percent equity ownership is but a minimum. It is in this regard that the Dissent to the April 21, 2014 Decision
recognized that the Grandfather Rule properly finds application as a “supplement” to the Control Test:chanRoblesvirtualLawlibrary

Bare ownership of 60% of a corporation’s shares would not suffice. What is necessary is such ownership as will ensure control of a
corporation.

In Gamboa, “[f]ull beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is
required.”23With this in mind, the Grandfather Rule may be used as a supplement to the Control Test, that is, as a further check to
ensure that control and beneficial ownership of a corporation is in fact lodged in Filipinos.

For instance, Department of Justice Opinion No. 165, series of 1984, identified the following “significant indicators” or badges of
“dummy status”:chanRoblesvirtualLawlibrary

1. That the foreign investor provides practically all the funds for the joint investment undertaken by Filipino
businessmen and their foreign partner[;]
2. That the foreign investors undertake to provide practically all the technological support for the joint venture[; and]
3. That the foreign investors, while being minority stockholders, manage the company and prepare all economic
viability studies.24

In instances where methods are employed to disable Filipinos from exercising control and reaping the economic benefits of an
enterprise, the ostensible control vested by ownership of 60% of a corporation’s capital may be pierced. Then, the Grandfather Rule
allows for a further, more exacting examination of who actually controls and benefits from holding such capital. 25

The majority’s Resolution denying the present Motion for Reconsideration recognizes that the Grandfather Rule alone does not
suffice for reckoning Filipino and foreign equity ownership in corporations engaged in nationalized economic activities. The majority
echoes the characterization of the applicability of the Grandfather Rule as only supplementary 26 and
explains:chanRoblesvirtualLawlibrary

The Grandfather Rule, standing alone, should not be used to determine the Filipino ownership and control in a corporation, as it
could result to an otherwise foreign corporation rendered qualified to perform nationalized or partly nationalized activities. Hence, it
is only when the Control Test is first complied with that the Grandfather Rule may be applied. Put in another manner, if the
subject corporation’s Filipino equity falls below the threshold 60%, the corporation is immediately considered foreign-owned, in
which case, the need to resort to the Grandfather Rule disappears.

On the other hand, a corporation that complies with the 60-40 Filipino to foreign equity requirement can be considered a Filipino
corporation if there is no doubt as to who has the “beneficial ownership” and “control” of the corporation. In that instance, there
is no need for a dissection or further inquiry on the ownership of the corporate shareholders in both the investing and investee
corporation or the application of the Grandfather Rule. As a corollary rule, even if the 60-40 Filipino to foreign equity is apparently
met by the subject or investee corporation, a resort to the Grandfather Rule is necessary if doubt exists as to the locus of the
“beneficial ownership” and “control.”27

III

Proceeding from the actions of the DENR

Panel of Arbitrators is improper

Following the above-quoted portion in its discussion, the majority states that “[i]n this case, a further investigation as to the
nationality of the personalities with the beneficial ownership and control of the corporate shareholders in both the investing and
investee corporations is necessary.”28chanroblesvirtuallawlibrary

The majority then proceeds to an analysis of the equity structures of petitioners. The analysis notes that 59.97% of Narra’s 10,000
shares29 is held by Patricia Louise Mining and Development Corporation (Patricia Louise), 65.96% of whose shares is, in turn, held by
Palawan Alpha South Resources Development Corporation (PASRDC). It adds that 59.97% of Tesoro’s 10,000 common shares is held
by Sara Marie Mining, Inc. (Sara Marie), a Filipino corporation, 66.63% of whose shares is, in turn, held by Olympic Mines and
Development Corporation (Olympic), another Filipino corporation. Finally, 59.97% of McArthur’s 10,000 common shares is held by
Madridejos Mining Corporation (Madridejos), a Filipino corporation, 66.63% of whose shares is, in turn, held by Olympic.

The majority also notes that 39.98% of Narra’s shares is held by Canadian corporation MBMI Resources, Inc. (MBMI), while 39.98%
of Tesoro’s and McArthur’s common shares is held by MBMI. 30 It adds that in the case of the majority shareholder of Narra (i.e.,
Patricia Louise), 33.96% of its shares is owned by MBMI, while in the cases of the respective majority shareholders of Tesoro and
McArthur (i.e., Sara Marie, and Madridejos, respectively), 33.31% of their shares is held by MBMI.

The respective Filipino majority shareholders of Patricia Louise, Sara Marie, and Madridejos (i.e., PASRDC in the case of Patricia
Louise, and Olympic in the cases of Sara Marie and Madridejos) did not pay for shares. Instead, MBMI paid for their respective paid-
up capital. The majority concludes, applying the Grandfather Rule, that a foreign corporation — MBMI — breached the permissible
maximum of 40% foreign equity participation in the three (3) petitioner corporations and that petitioners are foreign corporations
not entitled to mineral production sharing agreements.

My Dissent to the April 21, 2014 Decision noted the inadequacy of relying merely on the denomination of shares as common or
preferred:chanRoblesvirtualLawlibrary

Proceeding from the findings of the Court of Appeals in its October 1, 2010 decision in CA-G.R. SP No. 109703, it appears that at least
60% of equities in Narra, Tesoro, and McArthur is owned by Philippine nationals. Per this initial analysis, Narra, Tesoro, and
McArthur ostensibly satisfy the requirements of the Control Test in order that they may be deemed Filipino corporations.

Attention must be drawn to how these findings fail to indicate which (fractional) portion of these equities consist of “shares of stock
entitled to vote in the election of directors” or, if there is even any such portion of shares which are not entitled to vote. These
findings fail to indicate any distinction between common shares and preferred shares (not entitled to vote). Absent a basis for
reckoning non-voting shares, there is, thus, no basis for diminishing the 60% Filipino equity holding in Narra, Tesoro, and McArthur
and undermining their having ostensibly satisfied the requirements of the Control Test in order to be deemed Filipino corporations
qualified to enter into MPSAs.31

It is the majority’s position that the mere reckoning of how shares are denominated — whether common or preferred — suffices. I,
however, proffer an analysis that requires looking into the actual voting rights vested on each class of shares. While it is true that
preferred shares are generally viewed as non-voting shares, a conclusion that the preferred shares involved in this case are totally
bereft of voting rights is not warranted by a cursory consideration of how they are denominated.

The same Dissent conceded that a “more thorough consideration . . . could yield an entirely different conclusion.” 32 This is what the
majority endeavors to embark on. However, it is improper to proceed, as the majority does, from the action of a body without
competence and jurisdiction as well as the imprudent acts of forum shopping of Redmont, and, in the process, lend legitimacy to the
DENR Panel of Arbitrators’ and Redmont’s illicit actions:chanRoblesvirtualLawlibrary

Having made these observations, it should not be discounted that a more thorough consideration – as has been intimated in the
earlier disquisition regarding how 60% Filipino equity ownership is but a minimum and how the Grandfather Rule may be applied to
further examine actual Filipino ownership – could yield an entirely different conclusion. In fact, Redmont has asserted that such a
situation avails.

However, the contingencies of this case must restrain the court’s consideration of Redmont’s claims. Redmont sought relief from a
body without jurisdiction – the Panel of Arbitrators – and has engaged in blatant forum shopping. It has taken liberties with and
ran amok of rules that define fair play. It is, therefore, bound by its lapses and indiscretions and must bear the consequences of its
imprudence.33

IV

Redmont engaged in blatant forum shopping

It would be remiss of this court to overlook Redmont’s acts of forum shopping. To do so would enable Redmont to profit from its
own imprudence and for this court to countenance a manifest disrespect for courts and quasi-judicial bodies. As extensively
discussed in my Dissent to the April 21, 2014 Decision:chanRoblesvirtualLawlibrary

Redmont has taken at least four (4) distinct routes all seeking substantially the same remedy. Stripped of their verbosity and
legalese, Redmont’s petitions before the DENR Panel of Arbitrators, complaint before the Regional Trial Court, complaint before the
Securities and Exchange Commission, and petition before the Office of the President all seek to prevent Narra, Tesoro, and McArthur
as well as their co-respondents and/or co-defendants from engaging in mining operations. Moreover, these are all grounded on the
same cause (i.e., that they are disqualified from doing so because they fail to satisfy the requisite Filipino equity ownership) and
premised on the same facts or circumstances.

Redmont has created a situation where multiple tribunals must rule on the extent to which the parties adverse to Redmont have
met the requisite Filipino equity ownership. It is certainly possible that conflicting decisions will be issued by the various tribunals
over which Redmont’s various applications for relief have been lodged. It is, thus, glaring that the very evil sought to be prevented
by the rule against forum shopping is being foisted by Redmont.

....
It strains credulity to accept that Redmont’s actions have not been willful. By filing petitions with the DENR Panel of Arbitrators,
Redmont started the entire series of events that have culminated in: first, the present petition; second, the de-consolidated G.R. No.
205513; and third, at least one (1) more petition filed with this court. 34chanroblesvirtuallawlibrary

Following the adverse decision of the Panel of Arbitrators, Narra, Tesoro, and McArthur pursued appeals before the Mines
Adjudication Board. This is all but a logical consequence of the POA’s adverse decision. While the appeal before the MAB was
pending, Redmont filed a complaint with the SEC and then filed a complaint with the Regional Trial Court to enjoin the MAB from
proceeding. Redmont seems to have conveniently forgotten that it was its own actions that gave rise to the proceedings before the
MAB in the first place. Moreover, even as all these were pending and in various stages of appeal and/or review, Redmont still filed a
petition before the Office of the President.

Consistent with Rule 7, Section 5 of the 1997 Rules of Civil Procedure, the actions subject of these consolidated petitions must be
dismissed with prejudice.35

Apart from the Petition subject of the present Motion for Reconsideration, two (2) other cases involving the same parties are now
pending with this court. The first, G.R. No. 205513, relates to a Complaint for Revocation of the certificates of registration of Narra,
Tesoro, and McArthur filed by Redmont with the Securities and Exchange Commission. G.R. No. 205513 was consolidated but later
de-consolidated with this case. The second is a case pending with this court’s First Division. This relates to the Petition filed by
Redmont with the Office of the President in which it sought the cancellation of the financial or technical assistance agreement
(FTAA) applications of Narra, Tesoro, and McArthur.

That there are now three (3) simultaneously pending Petitions with this court is the result of Redmont’s contemporaneously having
sought remedies from:chanRoblesvirtualLawlibrary

1. The DENR Panel of Arbitrators;

2. The Securities and Exchange Commission;
3. The Regional Trial Court, Quezon City; and
4. The Office of the President.

While this and the two other cases pending with this court diverge as to the procedural routes they have taken, they all boil down to
the central issue of the nationalities of Narra, Tesoro and McArthur. It is manifest that Redmont engaged in blatant forum shopping.
The April 21, 2014 Decision effectively rewarded Redmont’s abuse of court processes. Worse, maintaining the status quo of having a
multiplicity of cases reinforces the stance of leaving Redmont to reap the benefits of its unconscionable scheme.

ACCORDINGLY, I vote to grant the Motion for Reconsideration. I reiterate my vote to GRANT the Petition for Review on Certiorari
subject of G.R. No. 195580. The assailed Decision dated October 1, 2010 and the assailed Resolution dated February 15, 2011 of the
Court of Appeals Seventh Division in CA-G.R. SP No. 109703, which reversed and set aside the September 10, 2008 and July 1, 2009
Orders of the Mines Adjudication Board, should be SET ASIDE and DECLARED NULL AND VOID. The September 10, 2008 Order of the
Mines Adjudication Board dismissing the Petitions filed by Redmont Consolidated Mines with the DENR Panel of Arbitrators must be
REINSTATED.

G.R. No. L-8451        December 20, 1957

THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC., petitioner,
vs.
THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF DAVAO CITY, respondents.

Teodoro Padilla, for petitioner.

Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista and Troadio T. Quianzon, Jr., for
respondents.

FELIX, J.:

This is a petition for mandamus filed by the Roman Catholic Apostolic Administrator of Davao seeking the reversal of a resolution by
the Land Registration Commissioner in L.R.C. Consulta No. 14. The facts of the case are as follows:

On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City of Davao, executed a deed of sale of a parcel of land
located in the same city covered by Transfer Certificate No. 2263, in favor of the Roman Catholic Apostolic Administrator of Davao
Inc., s corporation sole organized and existing in accordance with Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as
actual incumbent. When the deed of sale was presented to Register of Deeds of Davao for registration, the latter.

having in mind a previous resolution of the Fourth Branch of the Court of First Instance of Manila wherein the
Carmelite Nuns of Davao were made to prepare an affidavit to the effect that 60 per cent of the members of their
corporation were Filipino citizens when they sought to register in favor of their congregation of deed of donation
of a parcel of land—

required said corporation sole to submit a similar affidavit declaring that 60 per cent of the members thereof were Filipino citizens.

The vendee in the letter dated June 28, 1954, expressed willingness to submit an affidavit, both not in the same tenor as that made
the Progress of the Carmelite Nuns because the two cases were not similar, for whereas the congregation of the Carmelite Nuns had
five incorporators, the corporation sole has only one; that according to their articles of incorporation, the organization of the
Carmelite Nuns became the owner of properties donated to it, whereas the case at bar, the totality of the Catholic population of
Davao would become the owner of the property bought to be registered.

As the Register of Deeds entertained some doubts as to the registerability if the document, the matter was referred to the Land
Registration Commissioner en consulta for resolution in accordance with section 4 of Republic Act No. 1151. Proper hearing on the
matter was conducted by the Commissioner and after the petitioner corporation had filed its memorandum, a resolution was
rendered on September 21, 1954, holding that in view of the provisions of Section 1 and 5 of Article XIII of the Philippine
Constitution, the vendee was not qualified to acquire private lands in the Philippines in the absence of proof that at least 60 per
centum of the capital, property, or assets of the Roman Catholic Apostolic Administrator of Davao, Inc., was actually owned or
controlled by Filipino citizens, there being no question that the present incumbent of the corporation sole was a Canadian citizen. It
was also the opinion of the Land Registration Commissioner that section 159 of the corporation Law relied upon by the vendee was
rendered operative by the aforementioned provisions of the Constitution with respect to real estate, unless the precise condition set
therein — that at least 60 per cent of its capital is owned by Filipino citizens — be present, and, therefore, ordered the Registered
Deeds of Davao to deny registration of the deed of sale in the absence of proof of compliance with such condition.

After the motion to reconsider said resolution was denied, an action for mandamus was instituted with this Court by said
corporation sole, alleging that under the Corporation Law as well as the settled jurisprudence on the matter, the deed of sale
executed by Mateo L. Rodis in favor of petitioner is actually a deed of sale in favor of the Catholic Church which is qualified to
acquire private agricultural lands for the establishment and maintenance of places of worship, and prayed that judgment be
rendered reserving and setting aside the resolution of the Land Registration Commissioner in question. In its resolution of November
15, 1954, this Court gave due course to this petition providing that the procedure prescribed for appeals from the Public Service
Commission of the Securities and Exchange Commissions (Rule 43), be followed.

Section 5 of Article XIII of the Philippine Constitution reads as follows:

 SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except
to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the
Philippines.

Section 1 of the same Article also provides the following:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, water, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation,
development, or utilization shall be limited to cititzens of the Philippines, or to corporations or associations at least sixty per centum
of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT, grant, lease, or concession AT THE TIME OF THE
INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER CONSTITUTION. Natural resources, with the exception of public
agricultural land, shall not be alienated, and no license, concession, or leases for the exploitation, development, or utilization of any
of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except
as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which
cases other than the development and limit of the grant.

In virtue of the foregoing mandates of the Constitution, who are considered "qualified" to acquire and hold agricultural lands in the
Philippines? What is the effect of these constitutional prohibition of the right of a religious corporation recognized by our
Corporation Law and registered as a corporation sole, to possess, acquire and register real estates in its name when the Head,
Manager, Administrator or actual incumbent is an alien?

Petitioner consistently maintained that a corporation sole, irrespective of the citizenship of its incumbent, is not prohibited or
disqualified to acquire and hold real properties. The Corporation Law and the Canon Law are explicit in their provisions that a
corporation sole or "ordinary" is not the owner of the of the properties that he may acquire but merely the administrator thereof.
The Canon Law also specified that church temporalities are owned by the Catholic Church as a "moral person" or by the diocess as
minor "moral persons" with the ordinary or bishop as administrator.

And elaborating on the composition of the Catholic Church in the Philippines, petitioner explained that as a religious society or
organization, it is made up of 2 elements or divisions — the clergy or religious members and the faithful or lay members. The 1948
figures of the Bureau of Census showed that there were 277,551 Catholics in Davao and aliens residing therein numbered 3,465.
Ever granting that all these foreigners are Catholics, petitioner contends that Filipino citizens form more than 80 per cent of the
entire Catholics population of that area. As to its clergy and religious composition, counsel for petitioner presented the Catholic
Directory of the Philippines for 1954 (Annex A) which revealed that as of that year, Filipino clergy and women novices comprise
already 60.5 per cent of the group. It was, therefore, allowed that the constitutional requirement was fully met and satisfied.

Respondents, on the other hand, averred that although it might be true that petitioner is not the owner of the land purchased, yet
he has control over the same, with full power to administer, take possession of, alienate, transfer, encumber, sell or dispose of any
or all lands and their improvements registered in the name of the corporation sole and can collect, receive, demand or sue for all
money or values of any kind that may be kind that may become due or owing to said corporation, and vested with authority to enter
into agreements with any persons, concerns or entities in connection with said real properties, or in other words, actually exercising
all rights of ownership over the properties. It was their stand that the theory that properties registered in the name of the
corporation sole are held in true for the benefit of the Catholic population of a place, as of Davao in the case at bar should be
sustained because a conglomeration of persons cannot just be pointed out as the cestui que trust or recipient of the benefits from
the property allegedly administered in their behalf. Neither can it be said that the mass of people referred to as such beneficiary
exercise ant right of ownership over the same. This set-up, respondents argued, falls short of a trust. The respondents instead tried
to prove that in reality, the beneficiary of ecclesiastical properties are not members or faithful of the church but someone else, by
quoting a portion a portion of the ought of fidelity subscribed by a bishop upon his elevation to the episcopacy wherein he promises
to render to the Pontificial Father or his successors an account of his pastoral office and of all things appertaining to the state of this
church.

Respondents likewise advanced the opinion that in construing the constitutional provision calling for 60 per cent of Filipino
citizenship, the criterion of the properties or assets thereof.

In solving the problem thus submitted to our consideration, We can say the following: A corporation sole is a special form of
corporation usually associated with the clergy. Conceived and introduced into the common law by sheer necessity, this legal creation
which was referred to as "that unhappy freak of English law" was designed to facilitate the exercise of the functions of ownership
carried on by the clerics for and on behalf of the church which was regarded as the property owner (See I Couvier's Law Dictionary,
p. 682-683).

A corporation sole consists of one person only, and his successors (who will always be one at a time), in some particular station, who
are incorporated by law in order to give them some legal capacities and advantages, particularly that of perpetuity, which in their
natural persons they could not have had. In this sense, the king is a sole corporation; so is a bishop, or dens, distinct from their
several chapters (Reid vs. Barry, 93 Fla. 849, 112 So. 846).

The provisions of our Corporation law on religious corporations are illuminating and sustain the stand of petitioner. Section 154
thereof provides:

SEC. 154. — For the administration of the temporalities of any religious denomination, society or church and the
management of the estates and the properties thereof, it shall be lawful for the bishop, chief priest, or presiding
either of any such religious denomination, society or church to become a corporation sole, unless inconsistent wit
the rules, regulations or discipline of his religious denomination, society or church or forbidden by competent
authority thereof.

See also the pertinent provisions of the succeeding sections of the same Corporation Law copied hereunder:

SEC. 155. In order to become a corporation sole the bishop, chief priest, or presiding elder of any religious
denomination, society or church must file with the Securities and Exchange Commissioner articles of incorporation
setting forth the following facts:

xxx xxx xxx.

(3) That as such bishop, chief priest, or presiding elder he is charged with the administration of the temporalities
and the management of the estates and properties of his religious denomination, society, or church within its
territorial jurisdiction, describing it;

xxx xxx xxx.

(As amended by Commonwealth Act No. 287).

SEC. 157. From and after the filing with the Securities and Exchange Commissioner of the said articles of
incorporation, which verified by affidavit or affirmation as aforesaid and accompanied by the copy of the
commission, certificate of election, or letters of appointment of the bishop, chief priest, or presiding elder, duly
certified as prescribed in the section immediately preceding such the bishop, chief priest, or presiding elder, as the
case may be, shall become a corporation sole and all temporalities, estates, and properties the religious
denomination, society, or church therefore administered or managed by him as such bishop, chief priest, or
presiding elder, shall be held in trust by him as a corporation sole, for the use, purpose, behalf, and sole benefit of
his religious denomination, society, or church, including hospitals, schools, colleges, orphan, asylums, parsonages,
and cemeteries thereof. For the filing of such articles of incorporation, the Securities and Exchange Commissioner
shall collect twenty-five pesos. (As amended by Commonwealth Act. No. 287); and.

SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or
by the diocese, synod, or district organization of any religious denomination or church shall, on its incorporation,
pass to the corporation and shall be held in trust for the use, purpose behalf, and benefit of the religious society,
or order so incorporated or of the church of which the diocese, or district organization is an organized and
constituent part.

The Cannon Law contains similar provisions regarding the duties of the corporation sole or ordinary as administrator of the church
properties, as follows:

Al Ordinario local pertenence vigilar diligentemente sobre la administracion de todos los bienes eclesiasticos que
se hallan en su territorio y no estuvieren sustraidos de su jurisdiccion, salvs las prescriciones legitimas que le
concedan mas aamplios derechos.
 Teniendo en cuenta los derechos y las legitimas costumbres y circunstancias, procuraran los Ordinarios regular
todo lo concerniente a la administracion de los bienes eclesciasticos, dando las oportunas instucciones
particularles dentro del narco del derecho comun. (Title XXVIII, Codigo de Derecho Canonico, Lib. III, Canon 1519).1

That leaves no room for doubt that the bishops or archbishops, as the case may be, as corporation's sole are merely administrators
of the church properties that come to their possession, in which they hold in trust for the church. It can also be said that while it is
true that church properties could be administered by a natural persons, problems regarding succession to said properties can not be
avoided to rise upon his death. Through this legal fiction, however, church properties acquired by the incumbent of a corporation
sole pass, by operation of law, upon his death not his personal heirs but to his successor in office. It could be seen, therefore, that a
corporation sole is created not only to administer the temporalities of the church or religious society where he belongs but also to
hold and transmit the same to his successor in said office. If the ownership or title to the properties do not pass to the
administrators, who are the owners of church properties?.

Bouscaren and Elis, S.J., authorities on cannon law, on their treatise comment:

In matters regarding property belonging to the Universal Church and to the Apostolic See, the Supreme Pontiff
exercises his office of supreme administrator through the Roman Curia; in matters regarding other church
property, through the administrators of the individual moral persons in the Church according to that norms, laid
down in the Code of Cannon Law. This does not mean, however, that the Roman Pontiff is the owner of all the
church property; but merely that he is the supreme guardian (Bouscaren and Ellis, Cannon Law, A Text and
Commentary, p. 764).

and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia Canonica, ruled in the case of Trinidad vs. Roman Catholic
Archbishop of Manila, 63 Phil. 881, that:

The second question to be decided is in whom the ownership of the properties constituting the endowment of the
ecclesiastical or collative chaplaincies is vested.

Canonists entertain different opinions as to the persons in whom the ownership of the ecclesiastical properties is
vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many
doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more
probable that ownership, strictly speaking, does not reside in the latter, and, consequently, ecclesiastical
properties are owned by the churches, institutions and canonically established private corporations to which said
properties have been donated.

Considering that nowhere can We find any provision conferring ownership of church properties on the Pope although he appears to
be the supreme administrator or guardian of his flock, nor on the corporation sole or heads of dioceses as they are admittedly mere
administrators of said properties, ownership of these temporalities logically fall and develop upon the church, diocese or
congregation acquiring the same. Although this question of ownership of ecclesiastical properties has off and on been mentioned in
several decisions of the Court yet in no instance was the subject of citizenship of this religious society been passed upon.

We are not unaware of the opinion expressed by the late Justice Perfecto in his dissent in the case of Agustines vs. Court of First
Instance of Bulacan, 80 Phil. 565, to the effect that "the Roman Catholic Archbishop of Manila is only a branch of a universal church
by the Pope, with permanent residence in Rome, Italy". There is no question that the Roman Catholic Church existing in the
Philippines is a tributary and part of the international religious organization, for the word "Roman" clearly expresses its unity with
and recognizes the authority of the Pope in Rome. However, lest We become hasty in drawing conclusions, We have to analyze and
take note of the nature of the government established in the Vatican City, of which it was said:

GOVERNMENT. In the Roman Catholic Church supreme authority and jurisdiction over clergy and laity alike as held
by the pope who (since the Middle Ages) is elected by the cardinals assembled in conclave, and holds office until
his death or legitimate abdication. . . While the pope is obviously independent of the laws made, and the officials
appointed, by himself or his predecessors, he usually exercises his administrative authority according to the code
of canon law and through the congregations, tribunals and offices of the Curia Romana. In their respective
territories (called generally dioceses) and over their respective subjects, the patriarchs, metropolitans or
archbishops and bishops exercise a jurisdiction which is called ordinary (as attached by law to an office given to a
person. . . (Collier's Encyclopedia, Vol. 17, p. 93).
While it is true and We have to concede that in the profession of their faith, the Roman Pontiff is the supreme head; that in the
religious matters, in the exercise of their belief, the Catholic congregation of the faithful throughout the world seeks the guidance
and direction of their Spiritual Father in the Vatican, yet it cannot be said that there is a merger of personalities resultant therein.
Neither can it be said that the political and civil rights of the faithful, inherent or acquired under the laws of their country, are
affected by that relationship with the Pope. The fact that the Roman Catholic Church in almost every country springs from that
society that saw its beginning in Europe and the fact that the clergy of this faith derive their authorities and receive orders from the
Holy See do not give or bestow the citizenship of the Pope upon these branches. Citizenship is a political right which cannot be
acquired by a sort of "radiation". We have to realize that although there is a fraternity among all the catholic countries and the
dioceses therein all over the globe, the universality that the word "catholic" implies, merely characterize their faith, a uniformity in
the practice and the interpretation of their dogma and in the exercise of their belief, but certainly they are separate and
independent from one another in jurisdiction, governed by different laws under which they are incorporated, and entirely
independent on the others in the management and ownership of their temporalities. To allow theory that the Roman Catholic
Churches all over the world follow the citizenship of their Supreme Head, the Pontifical Father, would lead to the absurdity of finding
the citizens of a country who embrace the Catholic faith and become members of that religious society, likewise citizens of the
Vatican or of Italy. And this is more so if We consider that the Pope himself may be an Italian or national of any other country of the
world. The same thing be said with regard to the nationality or citizenship of the corporation sole created under the laws of the
Philippines, which is not altered by the change of citizenship of the incumbent bishops or head of said corporation sole.

We must therefore, declare that although a branch of the Universal Roman Catholic Apostolic Church, every Roman Catholic Church
in different countries, if it exercises its mission and is lawfully incorporated in accordance with the laws of the country where it is
located, is considered an entity or person with all the rights and privileges granted to such artificial being under the laws of that
country, separate and distinct from the personality of the Roman Pontiff or the Holy See, without prejudice to its religious relations
with the latter which are governed by the Canon Law or their rules and regulations.

We certainly are conscious of the fact that whatever conclusion We may draw on this matter will have a far reaching influence, nor
can We overlook the pages of history that arouse indignation and criticisms against church landholdings. This nurtured feeling that
snowbailed into a strong nationalistic sentiment manifested itself when the provisions on natural to be embodied in the Philippine
Constitution were framed, but all that has been said on this regard referred more particularly to landholdings of religious
corporations known as "Friar Estates" which have already bee acquired by our government, and not to properties held by
corporations sole which, We repeat, are properties held in trust for the benefit of the faithful residing within its territorial
jurisdiction. Though that same feeling probably precipitated and influenced to a large extent the doctrine laid down in the
celebrated Krivenco decision, We have to take this matter in the light of legal provisions and jurisprudence actually obtaining,
irrespective of sentiments.

The question now left for our determination is whether the Universal Roman Catholic Apostolic Church in the Philippines, or better
still, the corporation sole named the Roman Catholic Apostolic Administrator of Davao, Inc., is qualified to acquire private
agricultural lands in the Philippines pursuant to the provisions of Article XIII of the Constitution.

We see from sections 1 and 5 of said Article quoted before, that only persons or corporations qualified to acquire hold lands of the
public domain in the Philippines may acquire or be assigned and hold private agricultural lands. Consequently, the decisive factor in
the present controversy hinges on the proposition or whether or not the petitioner in this case can acquire agricultural lands of the
public domain.

From the data secured from the Securities and Exchange Commission, We find that the Roman Catholic Bishop of Zamboanga was
incorporated (as a corporation sole) in September, 1912, principally to administer its temporalities and manage its properties.
Probably due to the ravages of the last war, its articles of incorporation were reconstructed in the Securities and Exchange
Commission on April 8, 1948. At first, this corporation sole administered all the temporalities of the church existing or located in the
island of Mindanao. Later on, however, new dioceses were formed and new corporations sole were created to correspond with the
territorial jurisdiction of the new dioceses, one of them being petitioner herein, the Roman Catholic Apostolic Administrator of
Davao, Inc., which was registered with the Securities and Exchange Commission on September 12, 1950, and succeeded in the
administrative for all the "temporalities" of the Roman Catholic Church existing in Davao.

According to our Corporation Law, Public Act No. 1549, approved April 1, 1906, a corporation sole.

is organized and composed of a single individual, the head of any religious society or church, for the
ADMINISTRATION of the temporalities of such society or church. By "temporalities" is meant estate and properties
not used exclusively for religious worship. The successor in office of such religious head or chief priest incorporated
 as a corporation sole shall become the corporation sole on ascension to office, and shall be permitted to transact
business as such on filing with the Securities and Exchange Commission a copy of his commission, certificate of
election or letter of appointment duly certified by any notary public or clerk of court of record (Guevara's The
Philippine Corporation Law, p. 223).

The Corporation Law also contains the following provisions:

SECTION 159. Any corporation sole may purchase and hold real estate and personal; property for its church,
charitable, benevolent, or educational purposes, and may receive bequests or gifts of such purposes. Such
corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from the Court
of First Instance of the province in which the property is situated; but before making the order proof must be
made to the satisfaction of the Court that notice of the application for leave to mortgage or sell has been given by
publication or otherwise in such manner and for such time as said Court or the Judge thereof may have directed,
and that it is to the interest of the corporation that leave to mortgage or sell must be made by petition, duly
verified by the bishop, chief priest, or presiding elder acting as corporation sole, and may be opposed by any
member of the religious denomination, society or church represented by the corporation sole: Provided, however,
That in cases where the rules, regulations, and discipline of the religious denomination, society or church
concerned represented by such corporation sole regulate the methods of acquiring, holding, selling and
mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the
intervention of the Courts shall not be necessary.

It can, therefore, be noticed that the power of a corporation sole to purchase real property, like the power exercised in the case at
bar, it is not restricted although the power to sell or mortgage sometimes is, depending upon the rules, regulations, and discipline of
the church concerned represented by said corporation sole. If corporations sole can purchase and sell real estate for its church,
charitable, benevolent, or educational purposes, can they register said real properties? As provided by law, lands held in trust for
specific purposes me be subject of registration (section 69, Act 496), and the capacity of a corporation sole, like petitioner herein, to
register lands belonging to it is acknowledged, and title thereto may be issued in its name (Bishop of Nueva Segovia vs. Insular
Government, 26 Phil. 300-1913). Indeed it is absurd that while the corporations sole that might be in need of acquiring lands for the
erection of temples where the faithful can pray, or schools and cemeteries which they are expressly authorized by law to acquire in
connection with the propagation of the Roman Catholic Apostolic faith or in furtherance of their freedom of religion they could not
register said properties in their name. As professor Javier J. Nepomuceno very well says "Man in his search for the immortal and
imponderable, has, even before the dawn of recorded history, erected temples to the Unknown God, and there is no doubt that he
will continue to do so for all time to come, as long as he continues 'imploring the aid of Divine Providence'" (Nepomuceno's
Corporation Sole, VI Ateneo Law Journal, No. 1, p. 41, September, 1956). Under the circumstances of this case, We might safely state
that even before the establishment of the Philippine Commonwealth and of the Republic of the Philippines every corporation sole
then organized and registered had by express provision of law the necessary power and qualification to purchase in its name private
lands located in the territory in which it exercised its functions or ministry and for which it was created, independently of the
nationality of its incumbent unique and single member and head, the bishop of the dioceses. It can be also maintained without fear
of being gainsaid that the Roman Catholic Apostolic Church in the Philippines has no nationality and that the framers of the
Constitution, as will be hereunder explained, did not have in mind the religious corporations sole when they provided that 60 per
centum of the capital thereof be owned by Filipino citizens.

There could be no controversy as to the fact that a duly registered corporation sole is an artificial being having the right of
succession and the power, attributes, and properties expressly authorized by law or incident to its existence (section 1, Corporation
Law). In outlining the general powers of a corporation. Public Act. No. 1459 provides among others:

SEC. 13. Every corporation has the power:

(5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and otherwise deal with such real and personal
property as the purpose for which the corporation was formed may permit, and the transaction of the lawful
business of the corporation may reasonably and necessarily require, unless otherwise prescribed in this Act: . . .

In implementation of the same and specially made applicable to a form of corporation recognized by the same law, Section 159
aforequoted expressly allowed the corporation sole to purchase and hold real as well as personal properties necessary for the
promotion of the objects for which said corporation sole is created. Respondent Land Registration Commissioner, however,
maintained that since the Philippine Constitution is a later enactment than public Act No. 1459, the provisions of Section 159 in
amplification of Section 13 thereof, as regard real properties, should be considered repealed by the former.
There is a reason to believe that when the specific provision of the Constitution invoked by respondent Commissioner was under
consideration, the framers of the same did not have in mind or overlooked this particular form of corporation. It is undeniable that
the naturalization and conservation of our national resources was one of the dominating objectives of the Convention and in drafting
the present Article XII of the Constitution, the delegates were goaded by the desire (1) to insure their conservation for Filipino
posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the country of foreign control
through peaceful economic penetration; and (3) to prevent making the Philippines a source of international conflicts with the
consequent danger to its internal security and independence (See The Framing of the Philippine Constitution by Professor Jose M.
Aruego, a Delegate to the Constitutional Convention, Vol. II. P. 592-604). In the same book Delegate Aruego, explaining the reason
behind the first consideration, wrote:

At the time of the framing of Philippine Constitution, Filipino capital had been to be rather shy. Filipinos hesitated s
a general rule to invest a considerable sum of their capital for the development, exploitation and utilization of the
natural resources of the country. They had not as yet been so used to corporate as the peoples of the west. This
general apathy, the delegates knew, would mean the retardation of the development of the natural resources,
unless foreign capital would be encouraged to come and help in that development. They knew that the
naturalization of the natural resources would certainly not encourage the INVESTMENT OF FOREIGN CAPITAL into
them. But there was a general feeling in the Convention that it was better to have such a development retarded or
even postpone together until such time when the Filipinos would be ready and willing to undertake it rather than
permit the natural resources to be placed under the ownership or control of foreigners in order that they might be
immediately be developed, with the Filipinos of the future serving not as owners but utmost as tenants or workers
under foreign masters. By all means, the delegates believed, the natural resources should be conserved for Filipino
posterity.

It could be distilled from the foregoing that the farmers of the Constitution intended said provisions as barrier for foreigners or
corporations financed by such foreigners to acquire, exploit and develop our natural resources, saving these undeveloped wealth for
our people to clear and enrich when they are already prepared and capable of doing so. But that is not the case of corporations sole
in the Philippines, for, We repeat, they are mere administrators of the "temporalities" or properties titled in their name and for the
benefit of the members of their respective religion composed of an overwhelming majority of Filipinos. No mention nor allusion
whatsoever is made in the Constitution as to the prohibition against or the liability of the Roman Catholic Church in the Philippines
to acquire and hold agricultural lands. Although there were some discussions on landholdings, they were mostly confined in the
inclusion of the provision allowing the Government to break big landed estates to put an end to absentee landlordism.

But let us suppose, for the sake of argument, that the above referred to inhibitory clause of Section 1 of Article XIII of the
constitution does have bearing on the petitioner's case; even so the clause requiring that at least 60 per centum of the capital of the
corporation be owned by Filipinos is subordinated to the petitioner's aforesaid right already existing at the time of the inauguration
of the Commonwealth and the Republic of the Philippines. In the language of Mr. Justice Jose P. Laurel (a delegate to the
Constitutional Convention), in his concurring opinion of the case of Gold Creek mining Corporation, petitioner vs. Eulogio Rodriguez,
Secretary of Agriculture and Commerce, and Quirico Abadilla, Director of the Bureau of Mines, respondent, 66 Phil. 259:

The saving clause in the section involved of the Constitution was originally embodied in the report submitted by
the Committee on Naturalization and Preservation of Land and Other Natural Resources to the Constitutional
Convention on September 17, 1954. It was later inserted in the first draft of the Constitution as section 13 of
Article XIII thereof, and finally incorporated as we find it now. Slight have been the changes undergone by the
proviso from the time when it comes out of the committee until it was finally adopted. When first submitted and
as inserted to the first draft of the Constitution it reads: 'subject to any right, grant, lease, or concession existing in
respect thereto on the date of the adoption of the Constitution'. As finally adopted, the proviso reads: 'subject to
any existing right, grant, lease, or concession at the time of the inauguration of the Government established under
this Constitution'. This recognition is not mere graciousness but springs form the just character of the government
established. The framers of the Constitution were not obscured by the rhetoric of democracy or swayed to hostility
by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean
destruction or annihilation of acquired property rights. Withal, they erected a government neither episodic nor
stationary but well-nigh conservative in the protection of property rights. This notwithstanding nationalistic and
socialistic traits discoverable upon even a sudden dip into a variety of the provisions embodied in the instrument.

The writer of this decision wishes to state at this juncture that during the deliberation of this case he submitted to the consideration
of the Court the question that may be termed the "vested right saving clause" contained in Section 1, Article XII of the Constitution,
but some of the members of this Court either did not agree with the theory of the writer, or were not ready to take a definite stand
on the particular point I am now to discuss deferring our ruling on such debatable question for a better occasion, inasmuch as the
determination thereof is not absolutely necessary for the solution of the problem involved in this case. In his desire to face the issues
squarely, the writer will endeavor, at least as a disgression, to explain and develop his theory, not as a lucubration of the Court, but
of his own, for he deems it better and convenient to go over the cycle of reasons that are linked to one another and that step by step
lead Us to conclude as We do in the dispositive part of this decision.

It will be noticed that Section 1 of Article XIII of the Constitution provides, among other things, that "all agricultural lands of the
public domain and their disposition shall be limited to citizens of the Philippines or to corporations at least 60 per centum of the
capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF THE INAUGURATION OF THE
GOVERNMENT ESTABLISHED UNDER THIS CONSTITUTION."

As recounted by Mr. Justice Laurel in the aforementioned case of Gold Creek Mining Corporation vs. Rodriguez et al., 66 Phil. 259,
"this recognition (in the clause already quoted), is not mere graciousness but springs from the just character of the government
established. The farmers of the Constitution were not obscured by the rhetoric of democracy or swayed to hostility by an intense
spirit of nationalism. They well knew that conservation of our natural resources did not mean destruction or annihilation of
ACQUIRED PROPERTY RIGHTS".

But respondents' counsel may argue that the preexisting right of acquisition of public or private lands by a corporation which does
not fulfill this 60 per cent requisite, refers to purchases of the Constitution and not to later transactions. This argument would imply
that even assuming that petitioner had at the time of the enactment of the Constitution the right to purchase real property or right
could not be exercised after the effectivity of our Constitution, because said power or right of corporations sole, like the herein
petitioner, conferred in virtue of the aforequoted provisions of the Corporation Law, could no longer be exercised in view of the
requisite therein prescribed that at least 60 per centum of the capital of the corporation had to be Filipino. It has been shown before
that: (1) the corporation sole, unlike the ordinary corporations which are formed by no less than 5 incorporators, is composed of
only one persons, usually the head or bishop of the diocese, a unit which is not subject to expansion for the purpose of determining
any percentage whatsoever; (2) the corporation sole is only the administrator and not the owner of the temporalities located in the
territory comprised by said corporation sole; (3) such temporalities are administered for and on behalf of the faithful residing in the
diocese or territory of the corporation sole; and (4) the latter, as such, has no nationality and the citizenship of the incumbent
Ordinary has nothing to do with the operation, management or administration of the corporation sole, nor effects the citizenship of
the faithful connected with their respective dioceses or corporation sole.

In view of these peculiarities of the corporation sole, it would seem obvious that when the specific provision of the Constitution
invoked by respondent Commissioner (section 1, Art. XIII), was under consideration, the framers of the same did not have in mind or
overlooked this particular form of corporation. If this were so, as the facts and circumstances already indicated tend to prove it to be
so, then the inescapable conclusion would be that this requirement of at least 60 per cent of Filipino capital was never intended to
apply to corporations sole, and the existence or not a vested right becomes unquestionably immaterial.

But let us assumed that the questioned proviso is material. yet We might say that a reading of said Section 1 will show that it does
not refer to any actual acquisition of land up to the right, qualification or power to acquire and hold private real property. The
population of the Philippines, Catholic to a high percentage, is ever increasing. In the practice of religion of their faithful the
corporation sole may be in need of more temples where to pray, more schools where the children of the congregation could be
taught in the principles of their religion, more hospitals where their sick could be treated, more hallow or consecrated grounds or
cemeteries where Catholics could be buried, many more than those actually existing at the time of the enactment of our
Constitution. This being the case, could it be logically maintained that because the corporation sole which, by express provision of
law, has the power to hold and acquire real estate and personal property of its churches, charitable benevolent, or educational
purposes (section 159, Corporation Law) it has to stop its growth and restrain its necessities just because the corporation sole is a
non-stock corporation composed of only one person who in his unity does not admit of any percentage, especially when that person
is not the owner but merely an administrator of the temporalities of the corporation sole? The writer leaves the answer to whoever
may read and consider this portion of the decision.

Anyway, as stated before, this question is not a decisive factor in disposing the case, for even if We were to disregard such saving
clause of the Constitution, which reads: subject to any existing right, grant, etc., at the same time of the inauguration of the
Government established under this Constitution, yet We would have, under the evidence on record, sufficient grounds to uphold
petitioner's contention on this matter.

In this case of the Register of Deeds of Rizal vs. Ung Sui Si Temple, 2 G.R. No. L-6776, promulgated May 21, 1955, wherein this
question was considered from a different angle, this Court through Mr. Justice J.B.L. Reyes, said:
 The fact that the appellant religious organization has no capital stock does not suffice to escape the Constitutional
inhibition, since it is admitted that its members are of foreign nationality. The purpose of the sixty per centum
requirement is obviously to ensure that corporation or associations allowed to acquire agricultural land or to
exploit natural resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in the
absence of capital stock, the controlling membership should be composed of Filipino citizens.

In that case respondent-appellant Ung Siu Si Temple was not a corporation sole but a corporation aggregate, i.e., an unregistered
organization operating through 3 trustees, all of Chinese nationality, and that is why this Court laid down the doctrine just quoted.
With regard to petitioner, which likewise is a non-stock corporation, the case is different, because it is a registered corporation sole,
evidently of no nationality and registered mainly to administer the temporalities and manage the properties belonging to the faithful
of said church residing in Davao. But even if we were to go over the record to inquire into the composing membership to determine
whether the citizenship requirement is satisfied or not, we would find undeniable proof that the members of the Roman Catholic
Apostolic faith within the territory of Davao are predominantly Filipino citizens. As indicated before, petitioner has presented
evidence to establish that the clergy and lay members of this religion fully covers the percentage of Filipino citizens required by the
Constitution. These facts are not controverted by respondents and our conclusion in this point is sensibly obvious.

Dissenting Opinion—Discussed. — After having developed our theory in the case and arrived at the findings and conclusions already
expressed in this decision. We now deem it proper to analyze and delve into the basic foundation on which the dissenting opinion
stands up. Being aware of the transcendental and far-reaching effects that Our ruling on the matter might have, this case was
thoroughly considered from all points of view, the Court sparing no effort to solve the delicate problems involved herein.

At the deliberations had to attain this end, two ways were open to a prompt dispatch of the case: (1) the reversal of the doctrine We
laid down in the celebrated Krivenko case by excluding urban lots and properties from the group of the term "private agricultural
lands" use in this section 5, Article XIII of the Constitution; and (2) by driving Our reasons to a point that might indirectly cause the
appointment of Filipino bishops or Ordinary to head the corporations sole created to administer the temporalities of the Roman
Catholic Church in the Philippines. With regard to the first way, a great majority of the members of this Court were not yet prepared
nor agreeable to follow that course, for reasons that are obvious. As to the second way, it seems to be misleading because the
nationality of the head of a diocese constituted as a corporation sole has no material bearing on the functions of the latter, which
are limited to the administration of the temporalities of the Roman Catholic Apostolic Church in the Philippines.

Upon going over the grounds on which the dissenting opinion is based, it may be noticed that its author lingered on the outskirts of
the issues, thus throwing the main points in controversy out of focus. Of course We fully agree, as stated by Professor Aruego, that
the framers of our Constitution had at heart to insure the conservation of the natural resources of Our motherland of Filipino
posterity; to serve them as an instrument of national defense, helping prevent the extension into the country of foreign control
through peaceful economic penetration; and to prevent making the Philippines a source of international conflicts with the
consequent danger to its internal security and independence. But all these precautions adopted by the Delegates to Our
Constitutional Assembly could have not been intended for or directed against cases like the one at bar. The emphasis and
wonderings on the statement that once the capacity of a corporation sole to acquire private agricultural lands is admitted there will
be no limit to the areas that it may hold and that this will pave the way for the "revival or revitalization of religious landholdings that
proved so troublesome in our past", cannot even furnish the "penumbra" of a threat to the future of the Filipino people. In the first
place, the right of Filipino citizens, including those of foreign extraction, and Philippine corporations, to acquire private lands is not
subject to any restriction or limit as to quantity or area, and We certainly do not see any wrong in that. The right of Filipino citizens
and corporations to acquire public agricultural lands is already limited by law. In the second place, corporations sole cannot be
considered as aliens because they have no nationality at all. Corporations sole are, under the law, mere administrators of the
temporalities of the Roman Catholic Church in the Philippines. In the third place, every corporation, be it aggregate or sole, is only
entitled to purchase, convey, sell, lease, let, mortgage, encumber and otherwise deal with real properties when it is pursuant to or in
consonance with the purposes for which the corporation was formed, and when the transactions of the lawful business of the
corporation reasonably and necessarily require such dealing — section 13-(5) of the Corporation Law, Public Act No. 1459 — and
considering these provisions in conjunction with Section 159 of the same law which provides that a corporation sole may only
"purchase and hold real estate and personal properties for its church, charitable, benevolent or educational purposes", the above
mentioned fear of revitalization of religious landholdings in the Philippines is absolutely dispelled. The fact that the law thus
expressly authorizes the corporations sole to receive bequests or gifts of real properties (which were the main source that the friars
had to acquire their big haciendas during the Spanish regime), is a clear indication that the requisite that bequests or gifts of real
estate be for charitable, benevolent, or educational purposes, was, in the opinion of the legislators, considered sufficient and
adequate protection against the revitalization of religious landholdings.

Finally, and as previously stated, We have reason to believe that when the Delegates to the Constitutional Convention drafted and
approved Article XIII of the Constitution they do not have in mind the corporation sole. We come to this finding because the
Constitutional Assembly, composed as it was by a great number of eminent lawyers and jurists, was like any other legislative body
empowered to enact either the Constitution of the country or any public statute, presumed to know the conditions existing as to
particular subject matter when it enacted a statute (Board of Commerce of Orange Country vs. Bain, 92 S.E. 176; N. C. 377).

Immemorial customs are presumed to have been always in the mind of the Legislature in enacting legislation. (In
re Kruger's Estate, 121 A. 109; 277 P. 326).

The Legislative is presumed to have a knowledge of the state of the law on the subjects upon which it legislates.
(Clover Valley Land and Stock Co. vs. Lamb et al., 187, p. 723,726.)

The Court in construing a statute, will assume that the legislature acted with full knowledge of the prior legislation
on the subject and its construction by the courts. (Johns vs. Town of Sheridan, 89 N. E. 899, 44 Ind. App. 620.).

The Legislature is presumed to have been familiar with the subject with which it was dealing . . . . (Landers vs.
Commonwealth, 101 S. E. 778, 781.).

The Legislature is presumed to know principles of statutory construction. (People vs. Lowell, 230 N. W. 202, 250
Mich. 349, followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.).

It is not to be presumed that a provision was inserted in a constitution or statute without reason, or that a result
was intended inconsistent with the judgment of men of common sense guided by reason" (Mitchell vs. Lawden,
123 N.E. 566, 288 Ill. 326.) See City of Decatur vs. German, 142 N. E. 252, 310 Ill. 591, and may other authorities
that can be cited in support hereof.

Consequently, the Constitutional Assembly must have known:

1. That a corporation sole is organized by and composed of a single individual, the head of any religious society or
church operating within the zone, area or jurisdiction covered by said corporation sole (Article 155, Public Act No.
1459);

2. That a corporation sole is a non-stock corporation;

3. That the Ordinary ( the corporation sole proper) does not own the temporalities which he merely administers;

4. That under the law the nationality of said Ordinary or of any administrator has absolutely no bearing on the
nationality of the person desiring to acquire real property in the Philippines by purchase or other lawful means
other than by hereditary succession, who according to the Constitution must be a Filipino (sections 1 and 5, Article
XIII).

5. That section 159 of the Corporation Law expressly authorized the corporation sole to purchase and hold real
estate for its church, charitable, benevolent or educational purposes, and to receive bequests or gifts for such
purposes;

6. That in approving our Magna Carta the Delegates to the Constitutional Convention, almost all of whom were
Roman Catholics, could not have intended to curtail the propagation of the Roman Catholic faith or the expansion
of the activities of their church, knowing pretty well that with the growth of our population more places of
worship, more schools where our youth could be taught and trained; more hallow grounds where to bury our dead
would be needed in the course of time.

Long before the enactment of our Constitution the law authorized the corporations sole even to receive bequests or gifts of real
estates and this Court could not, without any clear and specific provision of the Constitution, declare that any real property donated,
let as say this year, could no longer be registered in the name of the corporation sole to which it was conveyed. That would be an
absurdity that should not receive our sanction on the pretext that corporations sole which have no nationality and are non-stock
corporations composed of only one person in the capacity of administrator, have to establish first that at least sixty per centum of
their capital belong to Filipino citizens. The new Civil Code even provides:
 ART. 10. — In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body
intended right and justice to prevail.

Moreover, under the laws of the Philippines, the administrator of the properties of a Filipino can acquire, in the name of the latter,
private lands without any limitation whatsoever, and that is so because the properties thus acquired are not for and would not
belong to the administrator but to the Filipino whom he represents. But the dissenting Justice inquires: If the Ordinary is only the
administrator, for whom does he administer? And who can alter or overrule his acts? We will forthwith proceed to answer these
questions. The corporations sole by reason of their peculiar constitution and form of operation have no designed owner of its
temporalities, although by the terms of the law it can be safely implied that the Ordinary holds them in trust for the benefit of the
Roman Catholic faithful to their respective locality or diocese. Borrowing the very words of the law, We may say that the
temporalities of every corporation sole are held in trust for the use, purpose, behalf and benefit of the religious society, or order so
incorporated or of the church to which the diocese, synod, or district organization is an organized and constituent part (section 163
of the Corporation Law).

In connection with the powers of the Ordinary over the temporalities of the corporation sole, let us see now what is the meaning
and scope of the word "control". According to the Merriam-Webster's New International Dictionary, 2nd ed., p. 580, on of the
acceptations of the word "control" is:

4. To exercise restraining or directing influence over; to dominate; regulate; hence, to hold from action; to curb;
subject; also, Obs. — to overpower.

SYN: restrain, rule, govern, guide, direct; check, subdue.

It is true that under section 159 of the Corporation Law, the intervention of the courts is not necessary, to mortgage or sell real
property held by the corporation sole where the rules, regulations and discipline of the religious denomination, society or church
concerned presented by such corporation sole regulates the methods of acquiring, holding, selling and mortgaging real estate, and
that the Roman Catholic faithful residing in the jurisdiction of the corporation sole has no say either in the manner of acquiring or of
selling real property. It may be also admitted that the faithful of the diocese cannot govern or overrule the acts of the Ordinary, but
all this does not mean that the latter can administer the temporalities of the corporation sole without check or restraint. We must
not forget that when a corporation sole is incorporated under Philippine laws, the head and only member thereof subjects himself to
the jurisdiction of the Philippine courts of justice and these tribunals can thus entertain grievances arising out of or with respect to
the temporalities of the church which came into the possession of the corporation sole as administrator. It may be alleged that the
courts cannot intervene as to the matters of doctrine or teachings of the Roman Catholic Church. That is correct, but the courts may
step in, at the instance of the faithful for whom the temporalities are being held in trust, to check undue exercise by the corporation
sole of its power as administrator to insure that they are used for the purpose or purposes for which the corporation sole was
created.

American authorities have these to say:

It has been held that the courts have jurisdiction over an action brought by persons claiming to be members of a
church, who allege a wrongful and fraudulent diversion of the church property to uses foreign to the purposes of
the church, since no ecclesiastical question is involved and equity will protect from wrongful diversion of the
property (Hendryx vs. Peoples United Church, 42 Wash. 336, 4 L.R.A. — n.s. — 1154).

The courts of the State have no general jurisdiction and control over the officers of such corporations in respect to
the performance of their official duties; but as in respect to the property which they hold for the corporation, they
stand in position of TRUSTEES and the courts may exercise the same supervision as in other cases of trust (Ramsey
vs. Hicks, 174 Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. — n.s. — 665; Hendryx vs. Peoples United Church,
supra.).

Courts of the state do not interfere with the administration of church rules or discipline unless civil rights become
involved and which must be protected (Morris St., Baptist Church vs. Dart, 67 S.C. 338, 45 S.E. 753, and others). (All
cited in Vol. II, Cooley's Constitutional Limitations, p. 960-964.).

If the Constitutional Assembly was aware of all the facts above enumerated and of the provisions of law relative to existing
conditions as to management and operation of corporations sole in the Philippines, and if, on the other hand, almost all of the
Delegates thereto embraced the Roman Catholic faith, can it be imagined even for an instant that when Article XIII of the
Constitution was approved the framers thereof intended to prevent or curtail from then on the acquisition sole, either by purchase
or donation, of real properties that they might need for the propagation of the faith and for there religious and Christian activities
such as the moral education of the youth, the care, attention and treatment of the sick and the burial of the dead of the Roman
Catholic faithful residing in the jurisdiction of the respective corporations sole? The mere indulgence in said thought would impress
upon Us a feeling of apprehension and absurdity. And that is precisely the leit motiv that permeates the whole fabric of the
dissenting opinion.

It seems from the foregoing that the main problem We are confronted with in this appeal, hinges around the necessity of a proper
and adequate interpretation of sections 1 and 5 of Article XIII of the Constitution. Let Us then be guided by the principles of statutory
construction laid down by the authorities on the matter:

The most important single factor in determining the intention of the people from whom the constitution emanated
is the language in which it is expressed. The words employed are to be taken in their natural sense, except that
legal or technical terms are to be given their technical meaning. The imperfections of language as a vehicle for
conveying meanings result in ambiguities that must be resolved by result to extraneous aids for discovering the
intent of the framers. Among the more important of these are a consideration of the history of the times when the
provision was adopted and of the purposes aimed at in its adoption. The debates of constitutional convention,
contemporaneous construction, and practical construction by the legislative and executive departments, especially
if long continued, may be resorted to resolve, but not to create, ambiguities. . . . Consideration of the
consequences flowing from alternative constructions of doubtful provisions constitutes an important interpretative
device. . . . The purposes of many of the broadly phrased constitutional limitations were the promotion of policies
that do not lend themselves to definite and specific formulation. The courts have had to define those policies and
have often drawn on natural law and natural rights theories in doing so. The interpretation of constitutions tends
to respond to changing conceptions of political and social values. The extent to which these extraneous aids affect
the judicial construction of constitutions cannot be formulated in precise rules, but their influence cannot be
ignored in describing the essentials of the process (Rottschaeffer on Constitutional Law, 1939 ed., p. 18-19).

There are times that when even the literal expression of legislation may be inconsistent with the general objectives
of policy behind it, and on the basis of equity or spirit of the statute the courts rationalize a restricted meaning of
the latter. A restricted interpretation is usually applied where the effect of literal interpretation will make for
injustice and absurdity or, in the words of one court, the language must be so unreasonable 'as to shock general
common sense'. (Vol. 3, Sutherland on Statutory Construction, 3rd ed., 150.).

A constitution is not intended to be a limitation on the development of a country nor an obstruction to its progress
and foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs. Bank of New York and Trust Co., 294 N. Y. S.648;
56 N.E. 2d. 745, 293 N.Y. 749).

Although the meaning or principles of a constitution remain fixed and unchanged from the time of its adoption, a
constitution must be construed as if intended to stand for a great length of time, and it is progressive and not
static. Accordingly, it should not receive too narrow or literal an interpretation but rather the meaning given it
should be applied in such manner as to meet new or changed conditions as they arise (U.S. vs. Lassic, 313 U.S. 299,
85 L. Ed., 1368).

Effect should be given to the purpose indicated by a fair interpretation of the language used and that construction
which effectuates, rather than that which destroys a plain intent or purpose of a constitutional provision, is not
only favored but will be adopted (State ex rel. Randolph Country vs. Walden, 206 S.W. 2d 979).

It is quite generally held that in arriving at the intent and purpose the construction should be broad or liberal or
equitable, as the better method of ascertaining that intent, rather than technical (Great Southern Life Ins. Co. vs.
City of Austin, 243 S.W. 778).

All these authorities uphold our conviction that the framers of the Constitution had not in mind the corporations sole, nor intended
to apply them the provisions of section 1 and 5 of said Article XIII when they passed and approved the same. And if it were so as We
think it is, herein petitioner, the Roman Catholic Apostolic Administrator of Davao, Inc., could not be deprived of the right to acquire
by purchase or donation real properties for charitable, benevolent and educational purposes, nor of the right to register the same in
its name with the Register of Deeds of Davao, an indispensable requisite prescribed by the Land Registration Act for lands covered
by the Torrens system.
We leave as the last theme for discussion the much debated question above referred to as "the vested right saving clause"
contained in section 1, Article XIII of the Constitution. The dissenting Justice hurls upon the personal opinion expressed on the
matter by the writer of the decision the most pointed darts of his severe criticism. We think, however, that this strong dissent should
have been spared, because as clearly indicated before, some members of this Court either did not agree with the theory of the
writer or were not ready to take a definite stand on that particular point, so that there being no majority opinion thereon there was
no need of any dissension therefrom. But as the criticism has been made the writer deems it necessary to say a few words of
explanation.

The writer fully agrees with the dissenting Justice that ordinarily "a capacity to acquire (property) in futuro, is not in itself a vested or
existing property right that the Constitution protects from impairment. For a property right to be vested (or acquired) there must be
a transition from the potential or contingent to the actual, and the proprietary interest must have attached to a thing; it must have
become 'fixed and established'" (Balboa vs. Farrales, 51 Phil. 498). But the case at bar has to be considered as an exception to the
rule because among the rights granted by section 159 of the Corporation Law was the right to receive bequests or gifts of real
properties for charitable, benevolent and educational purposes. And this right to receive such bequests or gifts (which implies
donations in futuro), is not a mere potentiality that could be impaired without any specific provision in the Constitution to that
effect, especially when the impairment would disturbingly affect the propagation of the religious faith of the immense majority of
the Filipino people and the curtailment of the activities of their Church. That is why the writer gave us a basis of his contention what
Professor Aruego said in his book "The Framing of the Philippine Constitution" and the enlightening opinion of Mr. Justice Jose P.
Laurel, another Delegate to the Constitutional Convention, in his concurring opinion in the case of Goldcreek Mining Co. vs. Eulogio
Rodriguez et al., 66 Phil. 259. Anyway the majority of the Court did not deem necessary to pass upon said "vested right saving
clause" for the final determination of this case.

JUDGMENT

Wherefore, the resolution of the respondent Land Registration Commission of September 21, 1954, holding that in view of the
provisions of sections 1 and 5 of Article XIII of the Philippine Constitution the vendee (petitioner) is not qualified to acquire lands in
the Philippines in the absence of proof that at least 60 per centum of the capital, properties or assets of the Roman Catholic
Apostolic Administrator of Davao, Inc. is actually owned or controlled by Filipino citizens, and denying the registration of the deed of
sale in the absence of proof of compliance with such requisite, is hereby reversed. Consequently, the respondent Register of Deeds
of the City of Davao is ordered to register the deed of sale executed by Mateo L. Rodis in favor of the Roman Catholic Apostolic
Administrator of Davao, Inc., which is the subject of the present litigation. No pronouncement is made as to costs. It is so ordered.

Bautista Angelo and Endencia, JJ., concur.

Paras, C.J., and Bengzon, J., concur in the result.

LABRADOR, J., concurring:

The case at bar squarely present this important legal question: Has the bishop or ordinary of the Roman Catholic Church who is not a
Filipino citizen, as corporation sole, the right to register land, belonging to the Church over which he presides, in view of the
Krivenko decision? Mr. Justice Felix sustains the affirmative view while Mr. Justice J. B. L. Reyes, the negative. As the undersigned
understands it, the reason given for this last view is that the constitutional provision prohibiting land ownership by foreigners also
extends to control because this lies within the scope and purpose of the prohibition.

To our way of thinking, the question at issue depends for its resolution upon another, namely, who is the owner of the land or
property of the Church sought to be registered? Under the Canon Law the parish and the diocese have the right to acquire and own
property.

SEC. 1. La Iglesia catolica y la Sede Apostolica, libre e independientemente de la potestad civil, tiene derecho
innato de adquirir, retener y administrar bienes temporales para el logro de sus propios fines.

SEC. 2. Tambien las iglesias particulares y demas personas morales erigidas por la autoridad eclesiastica en persona
juridica, tienen derecho, a tenor de los sagrados canones, de adquirir, retener y administrar bienes temporales.
(Canon 1495) (Codigo de Derecho Canonico por Miguelez-Alonzo-Cabreros, 4a ed., p. 562.).

The Canon Law further states that Church property belongs to the non-collegiate moral person called the parish, or to the diocese.
 In canon law the ownership of ecclesiastical goods belongs to each separate juridical person in the Church (C.
1499). The property of St. John's Church does not belong to the Pope, the bishop, the pastor, or even to the people
of the parish. It belongs to the non-collegiate moral person called the parish, which has been lawfully erected. It is
not like a stock company. The civil law does not recognize this canonical principle; it insists on an act of civil
incorporation or some other legal device. (Ready Answers in Canon Law by Rev. P.J. Lydon, DD., 3rd ed., 1948, p.
576.).

Parish. 3. A portion or subdivision of a diocese committed to the spiritual jurisdiction or care of a priest or minister,
called rector or pastor. In the Protestant Episcopal Church, it is a territorial division usually following civil bounds,
as those of a town. In the Roman Catholic Church, it is usually territorial, but whenever, as in some parts of the
United States there are different rites and languages, the boundaries and jurisdiction are determined by right or
language; as, a Ruthenian or Polish parish. "5. The inhabitants or members of a parish, collectively.

Diocese. 3. Eccl. The circuit or extent of a bishop's jurisdiction; the district in which a bishop has authority.
(Webster's New International Dictionary).

We are aware of the fact that some writers believe that ownership of ecclesiastical properties resides in the Roman Catholic Pontiff
as Head of the Universal Church, but the better opinion seems to be that they do belong to the parishes and diocese as above
indicated.

Canonists entertain different opinions as to the person in whom the ownership of the ecclesiastical properties is
vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many
doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more
probable that ownership, strictly speaking, does not reside in the latter and, consequently, ecclesiastical properties
are owned by the churches, institutions and canonically established private corporations to which said properties
have been donated. (3 Campos y Pulido, Legislacion y Jurisprudencia Canonica, P. 420, cited in Trinidad vs. Roman
Catholic Archbishop of Manila, 63 Phil., 881, 888-889.).

The property in question, therefore, appears to belong to the parish or the diocese of Davao. But the Roman Catholics of Davao are
not organized as a juridical person, either under the Canon law or under the Civil Law. Neither is there any provision in either for
their organization as a juridical person. Registration of the property in the name of the Roman Catholics of Davao is, therefore,
impossible.

As under the Civil Law, however, the organization of parishes and dioceses as juridical persons is not expressly provided for, the
corporation law has set up the fiction known as the "corporation sole."

It tolerates the corporation sole wherever and as long as the state law does not permit the legal incorporation of
the parish or diocese. The bishop officially is the legal owner. (Ready Answers in Canon Law, supra, p. 577.) .

and authorizes it to purchase and hold real estate for the Church.

SEC. 159. Any corporation sole may purchase and hold real estate and personal property for its church, charitable,
benevolent, or educational purposes, and may receive bequests or gifts for such purposes. Such corporation may
mortgage or sell real property held by it upon obtaining an order for that purpose from the Court of First Instance
of the province in which the property is situated; but before making the order proof must be made to the
satisfaction of the court that notice of the application for leave to mortgage or sell has been given by publication or
otherwise in such manner and for such time as said court or the judge thereof may have directed, and that it is to
the interest of the corporation that leave to mortgage or sell should be granted. The application for leave to
mortgage or sell must be made by petition, duly verified by the bishop, chief priest, or presiding elder, acting as
corporation sole, and may be opposed by any member of the religious denomination, society, or church
represented by the corporation sole: Provided, however, That in cases when the rules, regulations and discipline of
the religious denomination, society or church concerned represented by such corporation sole regulate the
methods of acquiring, holding, selling, and mortgaging real estate and personal property, such rules, regulations,
and discipline shall control and the intervention of the courts shall not be necessary. (The Corporation Law.)

And in accordance with the above section, temporalities of the Church or of parish or a diocese are allowed to be registered in the
name of the corporation sole for purposes of administration and in trust for the real owners.
The mere fact that the Corporation Law authorizes the corporation sole to acquire and hold real estate or other property does not
make the latter the real owner thereof, as his tenure of Church property is merely for the purposes of administration. As stated
above, the bishop is only the legal (technical) owner or trustee, the parish or diocese being the beneficial owner, or cestui que trust.

Having arrived at the conclusion that the property in question belongs actually either to the parish or to the dioceses of Davao, the
next question that possess for solution is, In case of said property, whose nationality must be considered for the purpose of
determining the applicability of the constitutional provision limiting ownership of land to Filipinos, that of the bishop or chief priest
who registers as corporation sole, or that of the constituents of the parish or diocese who are the beneficial owners of the land? We
believe that of a latter must be considered, and not that of the priest clothed with the corporate fiction and denominated as the
corporation sole. The corporation sole is a mere contrivance to enable a church to acquire, own and manage properties belonging to
the church. It is only a means to an end. The constitutional provision could not have been meant to apply to the means through
which and by which property may be owned or acquired, but to the ultimate owner of the property. Hence, the citizenship of the
priest forming the corporation sole should be no impediment if the parish or diocese which owns the property is qualified to own
and possess the property.

We can take judicial notice of the fact that a great majority of the constituents of the parish or diocese of Davao are Roman
Catholics. The affidavit demanded is therefore, a mere formality.

The dissenting opinion sustains the proposition that control, not actual ownership, is the factor that determines whether the
constitutional prohibition against alien ownership of lands should or should not apply. We may assume the correctness of the
proposition that the Holy See exercises control cannot be real and actual but merely theoretical. In any case, the constitutional
prohibition is limited by its terms to ownership and ownership alone. And should the corporation sole abuse its powers and
authority in relation to the administration or disposal of the property contrary to the wishes of the constituents of the parish or the
diocese, the act may always be questioned as ultra vires.

We agree, therefore, with the reversal of the order.

Montemayor and Reyes, A., JJ., concur.

REYES, J.B.L., dissenting:

I regret not being able to assent to the opinion of Mr. Justice Felix. The decision of the Supreme Court in this case will be of far
reaching results, for once the capacity of corporations sole to acquire public and private agricultural lands is admitted, there will be
no limit to the areas they may hold until the Legislature implements section 3 of Article XIII of the Constitution, empowering it to set
a limit to the size of private agricultural land that may be held; and even then it can only be done without prejudice to rights
acquired prior to the enactment of such law. In other words, even if a limitative law is adopted, it will not affect the landholdings
acquired before the law become effective, no matter how vast the estate should be.

The Constitutional restrictions to the acquisition of agricultural land are well known:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State,
and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to
any existing right, grant, lease, or concession at the time of the inauguration of the Government established under
this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall
be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water
rights for irrigation, water supply fisheries, or industrial uses other than the development of water power, in which
cases beneficial use may be the measure and the limit of the grant. (Article XII, Constitution of the Phil.).

SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.
(Art. XII, Constitution of the Phil.).

In requiring corporations or associations to have sixty per cent (60%) of their capital owned by Filipino citizens, the constitution
manifestly disregarded the corporate fiction, i.e., the juridical personality of such corporations or associations. It went behind the
corporate entity and looked at the natural persons that composed it, and demanded that a clear majority in interest (60%) should be
Filipino. To me this was done to ensure that the control of its properties (not merely the beneficial ownership thereof) remained in
Filipino hands. (Aruego, Framing of the Constitution, Vol. 2. pp. 604, 606.) .

The nationalization of the natural resources of the country was intended (1) to insure their conservation for
Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the country
of foreign control through peaceful economic penetration; and (3) to prevent making the Philippines a source of
international conflicts with the consequent danger to its internal security and independence. . . .

The convention permitted aliens to acquire an interest in the natural resources of the country and in private
agricultural lands as component elements of corporations or associations. The maximum limit of interest that they
could hold in a corporation or association would be only forty per centum of the capital. Accordingly the control of
the corporation or association would remain in Filipino hands.

In its report the committee on nationalization and preservation of lands and other natural resources
recommended that the maximum limit of interest that aliens could hold in a corporation or association should be
only twenty-five per centum of the capital. The purpose of the committee was to enable Filipino-controlled
corporations or associations, if necessary, to interest aliens to join their technical or managerial staff by giving
them a part interest in the same. The sub-committee of seven embodied this recommendation in the first draft of
the Constitution; but in the revised article on General Provisions, it raised the amount to forty per centum.
(emphasis supplied.)

It was in recognition of this basic rule that we held in Register of Deeds vs. Ung Siu Si Temple, 51 Off. Gaz. p. 2866, that if the
association had no capital, its controlling membership must be composed of Filipinos. Because ownership divorced from control is
not true ownership.

From these premises it can be deduced that the preliminary question to be decide by the court is the following: what and who
exercises the power of control in the corporation sole known as "The Roman Catholic Apostolic Administrator of Davao, Inc."?.

Under section 155 of the Corporation Law, the bishop, or other religious head, as corporation sole, is "charged with the
administration of the temporalities of his church." It becomes then pertinent to inquire: if he is only an administrator, for whom
does he administer? And who can alter or overrule his acts?

If his acts as administrator can not be overridden, or altered, except by himself, then obviously the control of the corporation and its
temporalities is in the bishop himself, and he must be a Filipino citizen. If, on the other hand, the final say as to management,
exploitation, encumbrance or disposition of the temporalities resides in another individual or body of individuals, then the control
resides there. To possess constitutional capacity to acquire agricultural land or other natural resources, that body making the final
decision for the corporation must have at least 60 per cent Filipino membership.

By this test, the body of members professing the Catholic faith in the diocese of Davao does not constitute the controlling
membership. For under the rules of the Roman Catholic Church the faithful can not control the acts of the Ordinary; they cannot
override his decision, just as they do not elect or remove him. Only his hierarchical superiors can do that; the control is from above,
not from below. Hence, the fact that 90 per cent (or even 100 per cent) of the faithful in the diocese should be composed of Filipino
citizens is totally devoid of significance from the standpoint of the constitutional restrictions in question (see Codex, Canons 1518
and 1530, paragraph 1, No. 3).

Moreover, I do not think that the body of Catholic faithful in the Davao diocese can be taken, for the purpose here under
consideration, as the Church represented by the Ordinary of Davao. That body does not constitute an entity or unit separate and
apart from the rest of the faithful throughout the world that compose the Roman Catholic Church that has always claimed
ecumenical (universal) character. There is nom Catholic Church of Davao district and independent of the Catholic Church of Manila,
Lipa or Rome. All those professing Catholic faith are members of only one single church or religious group. Thus the Iglesia Filipina
Independiente is not part of the Catholic Church, precisely because of its independence.

If, the, the Catholic Church of Davao is part and parcel of the universal Catholic Church, it can not be considered separate and apart
from it in this case. And if considered with it, obviously the condition of 60 per cent Filipino membership is not satisfied when all the
Catholic faithful in the world are taken into account.
The unity and singleness of the various diocese of the church appears expressly recognized in section 163 of the Corporation Law,
which provides that the corporation (sole) shall hold the temporalities, not for the diocese; but for the benefit "of the church of
which the diocese — is an organized or constituent part."

SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or
by the diocese synod, or district organization of any religious denomination or church shall, on its incorporation,
pass to the corporation and shall be held in trust for the use purpose, behalf, and benefit of the religious society or
order so incorporated or of the church of which the diocese, synod, or district organization is an organized and
constituent part.

So that, even from the standpoint of beneficial ownership, the dioceses of Davao can not be viewed as a group legally isolated from
the Catholic Church as a whole.

Nor does court control over the acts of the corporation sole constitute a guarantee of Filipino control that would satisfy the
purposes of the constitution, for the reason that under section 159 (last proviso) of the Corporation law, the court intervention is
dispensed with where the rules and discipline of the church already regulate the acquisition and disposition of real estate and
personal property.

Provided however, that in cases where the rules, regulations and discipline of the religious denomination, society,
or church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling, and
mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the
intervention of the courts shall not be necessary. (emphasis supplied.)

It is argued that a distinction must be drawn between the lands to be devoted to purely religious purposes and the lands held in
ordinary ownership. But where in the Constitution is such a distinction drawn? Under it, capacity to acquire agricultural land for the
erection of a church is capacity to acquire agricultural lands for any lawful purpose, whether it be for convents or schools or
seminaries or haciendas for their support or land to be held solely for enjoyment of the revenue. Once the capacity to acquire is
granted, the way is paved for the revitalization of religious landholdings that proved so troublesome in our past. I cannot conceive
that the Constitution intended to revive them.

It is also argued that, before the Constitution was adopted, the corporations sole had, by express statute, the right to acquire
agricultural land; and that the Constitution was not intended to destroy such "acquired property rights." If followed, the argument
destroys the constitutional restrictions. All aliens had a capacity to acquire agricultural land before the Constitution came into effect,
because no prohibition existed previously. Must their right to acquire and hold agricultural land be conceded in spite of the
Constitution?.

That the law should have expressly conferred capacity to acquire land upon corporations sole was not due any special predilection
for them; it was exclusively due to the principle that corporation, as artificial entities, have no inherent rights, but only those granted
by the sovereign. Unless conferred, the corporate right would not exist.

Furthermore, a capacity to acquire in futuro, is not in itself a vested existing property right that the Constitution protects from
impairment. For a property right to be vested (or acquired) there must be a transition from the potential, or contingent, to the
actual, and the proprietary interest must have attached to a thing, it must have become "fixed or established "(Balboa vs. Farrales,
51 Phil. 498). If mere potentialities cannot be impaired, then the law would become unchangeable, for every variation in it will
reduce some one's legal ability to do or not to do. Already in Benguet Consolidated vs. Pineda, 3 52 Off. Gaz. 1961, we have ruled that
no one has a vested right in statutory privileges or exemptions. And in the concurring opinion in Gold Creek Mining Corp. vs.
Rodriguez, 66 Phil. 259 (cited by Justice Felix), Mr. Justice Laurel squarely declared that "contingency or expectation is neither
property right." (cas. cit., p. 269.) Finally, the point is also made that the Ordinary, as religious corporation sole, has no citizenship,
and is not an alien. The answer is that under the Constitution of the Republic, it is not enough that the acquirer of agricultural land
be not an alien; he must be a Filipino or controlled by Filipinos.

Wherefore, I am constrained to conclude:

(1) That the capacity of religious corporations sole to acquire agricultural land depends upon 60 per cent Filipino membership of the
group or body exercising control of the corporation;lawphi1.net
(2) That if control of any such corporation should be vested in a single person, then such person must be a Filipino
citizen;1awphi1.net

(3) That in the absence of evidence on these points, the order appealed from, denying registration of the conveyance, should be
affirmed.

Concepcion, J., concur.