G.R. No. 211389 – EDGARDO C. DE LEON, petitioner, vs. PHILIPPINE LONG DISTANCE COMPANY, INC., respondent.

LEONEN, J.

Rule Synopsis

The violation of Article XII, Section 11 of the Constitution is a factual question.

Facts

In 1973, the State adopted the concept of “telephone subscriber self-financing” through Presidential Decree No. 217, by which a telephone subscriber had to purchase shares of PLDT-the sole telephone utility at the time-to partly finance the corporation’s capital investments in telephone installations. In relation to this, PLDT issued preferred shares (10% Cumulative Convertible) under its “Subscriber Investment Plan.” Petitioner Edgardo De Leon owned 180 of these preferred shares.

In September 2011, PLDT redeemed the Subscribers Investment Plan preferred shares. Affected shareholders were also given the option of either: (1) claiming their redemption payments; or (2) converting their preferred stocks to common shares on or before January 9, 2012. Instead of surrendering his preferred shares or converting his preferred shares to common shares, De Leon wrote PLDT on January 31, 2012, together with Perfecto R. Yasay, Jr. (Yasay, Jr.), another preferred shareholder owning 180 Subscriber Investment Plan preferred shares. They objected to the redemption of the Subscribers Investment Plan preferred shares and demanded that PLDT reverse its earlier actions of either redeeming or converting the preferred shares. PLDT refused.

Among others, De Leon’s camp argued that the additional preferred shares were created to circumvent the nationality requirements for public utilities under Article XII, Section 11 of the Constitution, as well as the ruling in Gamboa, which provided that a public utility corporation’s “capital” under Article XII, Section 11 consists of shares of stock entitled to vote. Thus, by redeeming the Subscribers Investment Plan preferred shares, the respondent’s outstanding capital stock allegedly became dominated by aliens.

Issues

Is the petitioner’s argument correct?

Ruling and Discussion

No. The Petitioner is not correct.

Unless expressly prohibited by some other law, a public utility corporation may issue and repurchase redeemable shares upon the expiration of a fixed period.

The petitioner had no evidence substantiating his allegations. It is true that as a public utility corporation, at least 60% of PLDT’s capital must be Filipino-owned. Furthermore, in Gamboa, the Supreme Court held that the “capital” referred to in Article XII, Section 11 consists of stock shares entitled to vote in the election of directors, which, in the respondent’s case, are the common shares. However, in this case, the petitioner did not explain how he arrived at the conclusion that redeeming the Subscriber Investment Plan preferred shares would result in a violation of Article XII, Section 1 of the Constitution. First, the redemption of the Subscriber Investment Plan preferred shares was done in accordance with the law Presidential Decree No. 217. Second, there is no evidence that the creation of the additional 150,000,000 voting preferred shares will result in foreign control of the respondent’s voting stock.

The violation of Article XII, Section 11 of the Constitution is a factual question, which was not proven by the petitioner.

dispositive

Petition denied.