GAMBOA vs. TEVES (Conflict of Laws)

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.

FACTS:

-Gamboa is stockholder of PLDT.

-PTIC became a stockholder of PLDT because it acquired the shares of GTE in PLDT.

-PHI acquired shares in PTIC and those shares number to 111kplus. Therefore PHI became stockholder of PTIC.

-And the stockholding of PHI number to 111kplus was sequestered by government through PCGG.

-The government of the republic of the Philippines is now the holder of such shares.

-The government wanted to sell the 111k shares. The winning bidder is certain company.

-However the government notified First Pacific because the First Pacific is another stockholder of PLDT. First pacific failed to exercise its right of first refusal. Therefore its affiliate Metropacific was the one who bought the shares. 

-Gamboa together with other stockholder of PLDT question the sale and pray for its nullity on the ground that the effect of the sale of government of shares in PTIC will operate as indirect sale of approximately 6% of PLDT shares to First Pacific which is a foreign corporation that owned as well another shares with PLDT of approximately 30.7%plus. If it will acquire those shares being sold by the government its shares will increase to approximately 37% plus shares.

-That having been said,

The first pacific will now 37.plus %

While other foreign corp owned shares as well with PLDT aside from First Pacific, below are the approximate computation:

37% fist pacific

20+% other stockholder

30+% japanese entity

Which is violative to constitutional prohibition that foreign corporation should not own more than 40% of shares.

ISSUE:

(1) Definition of word capital, whether it shall include only commom shares or the combination of preferred and common shares.

RULING:

Common shares only.

The Articles of incorporation of PLDT provides that preferred shares does not have voting right (in all meeting) while common shares has.

It is violative to Corporation Law. Par 6 Sec 6. which providees that common share has complete voting right on election of directors while preferred shares does not have right to vote for such. That preferred shares are entitled to vote par 6 sec 6 on those cases enumerated under par 6 sec 6 of Corporation Law.

AASIMID

The constitution provides under sec 11 art 12 that 60% of capital shall be owned by filipino and no foreigner shall own more than 40%.

Morever, the SC ruled that the term cap sec 11 art 12 refers only to common shares.

Dissenting opinion:

According to Justice Velasco. 

Preferred share has no complete voting right not totally no voting rights.

Par 6 sec 6 Corporation Law

Enumerste instances where preferred share are entitled to vote:

Amendment of art of inco

Adoption and amendment of by laws

Consolidation

Increase / decrease of capital stocks

Bonded indebtedness

Merger

Investment of own or substantially own corporate assets

Dissolution

Those are not negligable in fact it holds salient matters. Therefore they should be determine in compliance with 60/40 rule.