The term "capital" in Section 11, Article XII of the 1987 Constitution, pertaining to the 60% Filipino ownership requirement for public utilities, refers only to shares of stock that are entitled to vote in the election of directors, not the total outstanding capital stock which includes non-voting preferred shares.

The Philippine government, through the Presidential Commission on Good Government (PCGG), decided to privatize its shares in Philippine Telecommunications Investment Corporation (PTIC). PTIC was a significant shareholder in Philippine Long Distance Telephone Company (PLDT), a public utility. First Pacific Company Limited, a foreign entity, through its subsidiary Metro Pacific Assets Holdings, Inc. (MPAH), sought to acquire these government shares in PTIC. This impending acquisition raised concerns about potentially breaching the constitutional 60-40 Filipino-foreign ownership requirement in PLDT, as First Pacific already had substantial interests in PTIC, and consequently, in PLDT.

• The Philippine Legislature granted PLDT a franchise in 1928. In 1969, General Telephone and Electronics Corporation (GTE) sold 26% of PLDT's common shares to PTIC.
• Prime Holdings, Inc. (PHI) acquired 111,415 PTIC shares (46.125% of PTIC's capital stock), which were later sequestered by the PCGG and declared owned by the Republic of the Philippines.
• In 1999, First Pacific, a foreign investment firm, acquired the remaining 54% of PTIC's outstanding capital stock.
• On November 20, 2006, the Inter-Agency Privatization Council (IPC) announced the sale of the government's 111,415 PTIC shares via public bidding. Parallax Venture Fund XXVII won the bid.
• First Pacific, through its subsidiary MPAH, exercised its right of first refusal, matching Parallax's bid, and on February 14, 2007, entered into a Conditional Sale and Purchase Agreement with the Philippine Government for P25,217,556,000. The sale was completed on February 28, 2007.
• Petitioner Wilson P. Gamboa, a PLDT stockholder, claimed this sale increased First Pacific's common shareholdings in PLDT from 30.7% to 37%, and that total foreign common shareholdings in PLDT would reach 81.47%, violating the 40% constitutional limit.
• Petitioners-in-intervention Pablito V. Sanidad and Arno V. Sanidad, as PLDT subscribers, joined Gamboa's petition.
• PLDT's Articles of Incorporation grant common stockholders the exclusive right to vote for directors; preferred stockholders are denied this right.
• PLDT's 2010 General Information Sheet (GIS) showed that foreigners held 120,046,690 common shares (64.27%) while Filipinos held 66,750,622 common shares (35.73%).
• Filipinos owned 99.44% of PLDT's preferred shares, which constituted 77.85% of PLDT's authorized capital stock, but these shares had significantly lower dividend earnings (P1.00 per share vs. P70.00 for common shares in 2009) and no voting rights for directors.

• The consummation of the sale of 111,415 PTIC shares to First Pacific (MPAH) violates Section 11, Article XII of the 1987 Constitution, which limits foreign ownership of the capital of a public utility to not more than 40 percent.
• The term "capital" in the constitutional provision refers exclusively to common shares, as these are the shares entitled to vote and elect the board of directors, thereby exercising control over the corporation.
• The sale would result in First Pacific's common shareholdings in PLDT increasing from 30.7% to 37%, leading to total foreign common shareholdings in PLDT (including other foreign investors like NTT DoCoMo) of 51.56% or, based on NYSE data, 81.47%, far exceeding the 40% limit.
• Public respondents committed grave abuse of discretion by allowing the sale of PTIC shares to First Pacific.
• The sale of common shares to foreigners exceeding 40% of the entire subscribed common capital stock violates the constitutional limit on foreign ownership of a public utility.

• Public respondents (Finance Secretary Teves, Undersecretary Sevilla, PCGG Commissioner Abcede, SEC Chair Barin, represented by the OSG) argued that the auction was conducted with due diligence and transparency, and First Pacific's acquisition would not violate the 40% constitutional limit as PTIC holds only 13.847% of PLDT's common shares. They also raised procedural issues like lack of standing, jurisdiction, and the petition being a collateral attack on PLDT's franchise.
• Private respondent Manuel V. Pangilinan (PLDT/First Pacific) denied petitioner's factual allegations on ownership percentages and focused on procedural flaws such as lack of jurisdiction, standing, mootness, and denial of due process to foreign shareholders. He asserted that Section 11, Article XII does not impose a nationality requirement on shareholders for keeping their shares.
• Private respondent Napoleon L. Nazareno (PLDT) argued that "capital" includes both preferred and common shares, citing uniform interpretation by government agencies like the SEC, and that foreign shareholders must be impleaded.
• Private respondent Francisco Ed Lim (PSE) sought dismissal for failure to state a cause of action against him, asserting the PSE followed its rules and that the reliefs sought would harm the stock market.

• Whether the term "capital" in Section 11, Article XII of the 1987 Constitution, in the context of limiting foreign ownership in public utilities, refers to (a) the total common shares only, or (b) the total outstanding capital stock (combined total of common and non-voting preferred shares) of a public utility like PLDT.
• Whether the petitioner has locus standi to file the petition.
• Whether the Supreme Court has jurisdiction to take cognizance of the petition, particularly the prayer for declaratory relief, and if it can be treated as a petition for mandamus.

• The petition is PARTLY GRANTED. The Court ruled 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. In PLDT's case, this refers to common shares, as its preferred shares are explicitly denied voting rights for directors.
• The Court held that petitioner, as a PLDT stockholder and due to the transcendental importance of the constitutional issue affecting the national economy and Filipino control over public utilities, possesses locus standi.
• While the Supreme Court does not have original jurisdiction over declaratory relief, the petition was treated as one for mandamus because the interpretation of "capital" has far-reaching implications for the national economy.
• The Court reasoned that the constitutional intent behind the 60% Filipino ownership requirement is to ensure effective control by Filipinos over public utilities. Control is exercised through voting rights, primarily the election of the board of directors. Interpreting "capital" to include non-voting shares would allow foreigners to control public utilities despite owning a minority of voting stock, which is contrary to the Constitution.
• This interpretation is supported by the deliberations of the Constitutional Commission, where the term "capital" was understood to relate to "controlling interest" or "voting stock," and by the Foreign Investments Act of 1991 (R.A. No. 7042), which defines a "Philippine national" corporation based on 60% ownership by Filipinos of "the capital stock outstanding and entitled to vote."
• Full beneficial ownership of 60% of the outstanding capital stock entitled to vote, coupled with 60% of the voting rights, is constitutionally required for a public utility.
• The Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition of "capital" in determining the extent of allowable foreign ownership in PLDT and, if a violation of Section 11, Article XII of the Constitution is found, to impose the appropriate sanctions under the law.

• Locus Standi (Legal Standing) — The right of a party to appear and be heard before a court, requiring a personal and substantial interest in the case such that the party has sustained or is in immediate danger of sustaining some direct injury as a result of the challenged act. The Court found petitioner had standing as a PLDT stockholder whose interests could be affected by a constitutional violation and due to the transcendental importance of the issue.
• Transcendental Importance — A doctrine permitting the relaxation of procedural rules (like standing or hierarchy of courts) when the constitutional issue raised is of overriding significance to the public. Applied here to allow the Court to resolve the definition of "capital" due to its impact on the national economy and Filipino control over public utilities.
• Hierarchy of Courts — The principle that litigants must generally seek relief from lower courts before approaching higher courts. The Court acknowledged this but took cognizance of the case due to the purely legal and transcendentally important nature of the threshold issue, treating the petition for declaratory relief as one for mandamus.
• Mandamus — An extraordinary writ issued by a superior court to a lower court, corporation, board, or person, commanding the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station. The Court treated the petition for declaratory relief as mandamus to compel the SEC to perform its duty to enforce the Constitution according to the Court's interpretation of "capital."
• Constitutional Construction (Intent of the Framers/Verba Legis/Ratio Legis Est Anima) — Principles guiding the interpretation of constitutional provisions. The Court emphasized discerning the purpose of the framers, looking at the language of the provision, and understanding the spirit of the law. It used deliberations of the Constitutional Commission to determine that "capital" refers to shares that ensure control.
• Self-Executing Constitutional Provisions — Provisions of the Constitution that are complete in themselves and become operative without the aid of supplementary or enabling legislation. Section 11, Article XII of the Constitution was held to be self-executing, meaning it is directly enforceable.
• Control Test (Corporate Nationality) — A test to determine the nationality of a corporation based on the nationality of those who have voting control. The Foreign Investments Act of 1991, in defining "Philippine national," refers to "capital stock outstanding and entitled to vote," which the Court found consistent with its interpretation of "capital" in the Constitution as relating to control.
• Beneficial Ownership vs. Legal Title — Beneficial ownership refers to the right to enjoy the benefits of property, as opposed to mere legal title. The Court stressed that for the 60% Filipino ownership requirement, mere legal title is insufficient; Filipinos must have full beneficial ownership of the voting stock and the accompanying voting rights.

• "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."
• "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."
• "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."
• "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."
• "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."

• Salvacion v. Central Bank of the Philippines — Referenced to justify treating a petition for declaratory relief as one for mandamus when issues of grave injustice or far-reaching implications are present.
• Alliance of Government Workers v. Minister of Labor — Cited as an instance where a petition for declaratory relief was treated as mandamus due to the involvement of a constitutional principle with broad effects.
• Fernandez v. Cojuangco — Mentioned as a previous case involving similar issues regarding PLDT's capital structure, which the Court denied for disregarding the hierarchy of courts.
• Chavez v. PCGG — Cited to affirm that a citizen has standing to bring suit on matters of transcendental importance to the public.
• Manila Prince Hotel v. GSIS — Relied upon for the principle that constitutional provisions are presumed to be self-executing unless expressly stated otherwise.
• Soriano v. Ong Hoo — Used as an example where the Court directly applied constitutional provisions limiting land ownership to Filipinos, even without specific implementing legislation.
• Securities and Exchange Commission v. Court of Appeals — Cited to establish that the SEC has regulatory and adjudicative functions and can be compelled by mandamus to perform its statutory duties.

• Section 11, Article XII, 1987 Constitution — The central provision of the case, requiring that public utilities be at least 60% Filipino-owned in terms of "capital." The Court's ruling primarily interprets "capital" within this section.
• Section 19, Article II, 1987 Constitution — State policy on a "self-reliant and independent national economy effectively controlled by Filipinos." This was cited to support the interpretation of "capital" as ensuring Filipino control.
• Section 6, Corporation Code (Batas Pambansa Blg. 68) — Governs the classification of shares and voting rights, providing that no share may be deprived of voting rights except preferred or redeemable shares, and that there must always be a class of shares with complete voting rights. This supported the Court's focus on voting shares for determining control.
• Section 3(a), Foreign Investments Act of 1991 (R.A. No. 7042) — Defines a "Philippine national" corporation based on at least 60% of its "capital stock outstanding and entitled to vote" being owned by Filipino citizens. The Court cited this as a legislative interpretation consistent with its ruling.
• Implementing Rules and Regulations of R.A. No. 7042 — Further clarifies the definition of "Philippine national" and the application of the control test, emphasizing voting rights and beneficial ownership, supporting the Court's interpretation.
• Section 17(4), Corporation Code — Grants the SEC power to reject articles of incorporation if the required Filipino ownership of capital stock is not met. This establishes the SEC's role in enforcing nationality requirements.
• Section 5(d) and 5(m), Securities Regulation Code (R.A. No. 8799) — Vests the SEC with power to investigate compliance and suspend/revoke franchises. This highlights the SEC's mandate to ensure adherence to laws, including constitutional ownership limits.
• Presidential Decree No. 217 — Mentioned as the historical basis for PLDT requiring telephone line applicants to subscribe to non-voting preferred shares, explaining part of PLDT's capital structure.

• Justice Presbitero J. Velasco, Jr. (joined by Chief Justice Renato C. Corona) — Argued that the term "capital" in Section 11, Article XII of the Constitution should be interpreted to mean the total outstanding capital stock, including both common (voting) and preferred (non-voting) shares, consistent with the long-standing interpretation by the SEC and the intent of the Constitutional framers to use a broader term than just "voting stock." He contended that the petition suffered from procedural defects (lack of locus standi, lack of jurisdiction, improper remedy). He also believed that the Foreign Investments Act and the Anti-Dummy Law, which limits foreign participation in the governing body to their proportionate share in the total capital, already provide sufficient safeguards for Filipino control. He warned that a retroactive application of the majority's new definition would violate due process and negatively impact foreign investments.
• Justice Roberto A. Abad — Argued that Section 11, Article XII of the 1987 Constitution, regarding the limit on foreign ownership of public utilities, is not a self-executing provision. He contended that it lays down a general principle that requires enabling legislation from Congress to define crucial terms like "capital," establish rules for implementation, provide sanctions, and vest enforcement responsibility in an appropriate agency. He believed that the Court, by defining "capital," was engaging in judicial legislation, a function that belongs to Congress, especially given the confusing legislative signals and the deep economic repercussions of such a definition.