G.R. No. 207246 , November 22, 2016
Jose M. Roy III, Petitioner, vs. Chairperson Teresita Herbosa, the Securities and Exchange Commission, and Philippine Long Distance Telephone Company, Respondents.

FACTS

This case involves a challenge to SEC Memorandum Circular No. 8, Series of 2013 (SEC MC No. 8), which was issued to implement the Court’s ruling in Gamboa v. Teves. In Gamboa, the Court interpreted the term “capital” in the constitutional provision requiring at least 60% Filipino ownership of public utilities. The June 28, 2011 Decision initially held that “capital” refers only to shares with voting rights. However, in the subsequent October 9, 2012 Resolution denying the motions for reconsideration with finality, the Court clarified and amplified its ruling. It explicitly stated that the 60-40 ownership requirement must apply uniformly and separately to each class of shares, whether voting or non-voting, to ensure beneficial ownership rests with Filipino citizens.
Petitioner Jose M. Roy III argued that SEC MC No. 8 failed to comply with this final and clarified ruling. The circular’s Section 2 required the 60% Filipino ownership to be applied to both (a) the total number of outstanding capital stock and (b) the total number of outstanding capital stock with voting rights. Roy contended this aggregate approach contravened the Gamboa Resolution’s directive for a per-class application, thereby allowing potential circumvention of the constitutional mandate.

ISSUE

Whether SEC Memorandum Circular No. 8 is compliant with the final and executory ruling of the Court in Gamboa v. Teves.

RULING

In his dissenting opinion, Justice Mendoza held that SEC MC No. 8 is non-compliant and must be amended. The legal logic centers on the doctrine of finality and immutability of judgments. A final ruling includes not only the dispositive portion of a decision but also the clarifications and amplifications contained in subsequent resolutions issued before the judgment becomes final and executory. The Gamboa Resolution of October 9, 2012, which explicitly mandated the separate application of the 60-40 rule to each class of shares, is an integral part of the Court’s final ruling. It is this complete ruling that attains immutability.
Therefore, any implementing rule that ignores this clarified standard is inherently non-compliant. SEC MC No. 8’s aggregate approach, applying the requirement to the total outstanding capital stock and the total voting stock, deviates from the per-class application expressly commanded by the final Gamboa ruling. This deviation creates a loophole, as it would permit a corporation to issue a class of non-voting shares overwhelmingly owned by foreigners, so long as the aggregate totals for all classes combined meet the 60% Filipino threshold. Such a scheme violates the constitutional intent to reserve effective control and beneficial ownership of public utilities to Filipino citizens, as definitively interpreted in Gamboa. Consequently, the dissenting opinion concludes the circular is invalid for failing to conform to the Court’s final and binding interpretation.