REPUBLIC OF THE PHILIPPINES

SUPREME COURT
MANILA

Republic of the Philippines,

represented by SOLICITOR GENRAL JOSE C.
CALIDA,
Plaintiff,
G.R. No.
- versus - __________
For: Quo Warranto
ABS-CBN CORPORATION (FORMERLY
ABS-CBN BROADCASTING
CORPORATION) AND ABS-CBN
CONVERGE, INC. (FORMERLY MULTI-
MEDIA TELEPHONY, INC.)
Respondent,
x---------------------------- x

COMMENTS AND OPPOSITION

TO THE PETITION

,
Comes Now, is the Respondent ABS-CBN
Corporation represented by its counsel
Atty. 1, Atty 2, Atty 3, Atty. 4, Atty. 5,
Atty. 6 , Atty. 7
Lucena City 4301
 REPUBLIC OF THE PHILIPPINES
SUPREME COURT
MANILA

Republic of the Philippines,

represented by SOLICITOR GENRAL JOSE C.
CALIDA,
Plaintiff,
G.R. No.
- versus - __________
For: Quo Warranto
ABS-CBN CORPORATION (FORMERLY
ABS-CBN BROADCASTING
CORPORATION) AND ABS-CBN
CONVERGE, INC. (FORMERLY MULTI-
MEDIA TELEPHONY, INC.)
Respondent,
x---------------------------- x

COMMENTS AND
OPPOSITION TO
THE PETITION

COMES NOW, the respondent ABS-CBN CORPORATION (FORMERLY

ABS-CBN BROADCASTING CORPORATION) AND ABS-CBN
CONVERGE, INC. (FORMERLY MULTI-MEDIA TELEPHONY, INC.),
by the undersigned counsel, and unto this HONORABLE TRIBUNAL, most
respectfully SUBMITS his/this COMMENTS and VIGOROUS
OPPOSITION to the Petition, as follows:
COMMENTS & OPPOSITION
Page
2
x--------------------
X

BRIEF STATEMENT OF THE

AVERMENTS OF THE PETITION

(1) The Honorable Solicitor General contends that private respondent

ABS-CBN CORPORATION AND ABS-CBN CONVERGE, INC.,
grantees of legislative franchise- have been at the forefront of
Philippine mainstream media purportedly “ in the service of the
Filipino people: are charging the public for such service for fee which
is beyond the scope of its legislative franchise. Furthermore, the
Honorable Solicitor General, ABS-CBN usage of Multi-Media
Telephony’s franchise without approval from Congress in addition to
its violation for non-offering to the Public its outstanding capital
stock.
Lastly, he added that opines that the respondent ABS-CBN
Corporation, hiding behind an elaborately crafted corporate veil, has
been allowing foreign investment to partake in the ownership of the
mass media giant in violation of the Constitution.

PREFATORY STATEMENT

(2) We most respectfully but firmly disagree with the above stated
sweeping allegation and mislead asservations of the Solicitor General.

(3) In the first place, the averment that what is stake is of transcendental
importance is a mere excuse to accommodate the statement made by
Digots on (https://www.rappler.com/newsbreak/iq/249550-timeline-duterte-
against-abs-cbn-franchise-renewal_) that he will prevent the renewal of ABS
CBN Franchise [foot note] which amount to suppression of the
freedom of the press.

(4) The allegations that the violation of ABS CBN crafting corporate veil
in allowing foreign investment in a nationalized industry along with
franchise violation in connection with RA --- (R.A 7966 , RA 8332) is
clearly a blatant attempt to IMMEDIATELY BECLOUD the ISSUE
 and CAMOUFLAGE the FACTS that ABS-CBN complies with all
pertinent law governing its franchise and has secured all necessary
government and regulatory approvals for its business operation
specifically:

(a) all broadcasting offerings, including KBO, have received the

necessary government regulatory approval and are not prohibited
by its franchise;
(b) ABS-CBN Holdings’ Philippine Deposit Receipt or PDRs were
evaluated and approved by the Securities and Exchange
Commission and the Philippine Stock Exchange prior to its
public offering. These are the same instruments used by other
broadcast companies to raise capital for the improvement of
service;
(c) The ownership of ABS-CBN in ABS-CBN Converge was
undertaken under the same law and structures that have been
utilized by other telecommunication companies. These are
transfers that are approved under the Public Telecommunications
Policy Act and are fully compliant with the law.

(5) This quo warranto case is a blatant attempt to influence the Congress
in relation to the renewal of ABS-CBN franchise pending before the
House of Representative which was filed last July 1, 2019 and the first
panel hearing was held last August 27, 2019. The filling of quo
warranto case is ill-timed given that Congress has already resumed its
session.

(6) Finally, the Petitioner is trying to make it appear that it is its mission
to prevent abuse and misuse of special privileges. On the contrary,
several broadcasting network (basis/foot note) was able to renew their
franchise knowing that like ABS CBN it has been the practice of
broadcasting Network to issue PDR to improve service.

(7) ABS-CBN remains to be committed in its mission to serve the people

especially at this time millions of Filipinos rely on our service in
delivering information, it is noteworthy to mention that ABS-CBN has
been constantly practicing Corporate Social Responsibility as
evidenced by the foundation aiming to embarked projects and
programs that cater to the material, physical and educational needs of
the less fortunate in this country.
 COUNTER STATEMENT

COMMENTS AND REFUTATION

I. Procedural
a. Quo Warranto is the proper
remedy to forfeit the franchise of
respondent ABS-CBN Corporation
and ABS-CBN Converge, Inc. for
gross violation of their franchises.
(8) The petitioner asserts that the action for quo warranto is proper citing
Section 1 (a), Rule 66 of the Rules of Court. Let it be noted that the
provision cited therein stated for “usurpation of public office, position
or franchise” ABS-CBN Corporation and ABS-CBN Converge are
grantee of a Legislative franchise by virtue of RA 7966__ and RA
8332__, thus, the claim of usurpation is untenable.
(9) That a quo warranto petition before the Supreme Court is not the
proper remedy since the 1997 Rules of Court limits the filing of quo
warranto petition only to actions involving usurpation and not misuse
of its franchise. The proper venue to raise violations of the franchise
is in Congress which granted the franchise. (https://news.abs-
cbn.com/news/02/24/20/abs-cbn-abs-cbn-convergence-seek-dismissal-of-quo-warranto-petition?
fbclid=IwAR10MbCpMTtnC75YGD6-fSIMrHggqW6csnDgKVWjgvAb6LHB7rS_B-h_-t0)

(10) The petitioner asserts that “the Solicitor General is obliged to

commence such action upon complaint, and upon good reason to
believe xxx”. Let it be noted that the alleged violation mentioned by
the petitioner were dated May 2015___ for KBO, March 2 2015____
for Multimedia Telephony Corporation and _October 16,2019__ for
issuance of PDR. It is quite ironic that the Honorable Solicitor
General filed its case only now after Digots announced his opposition
to the renewal of ABS-CBN franchise.
(11) As to the jurisdiction and hierarchy of Courts. The exceptions
mentioned in paragraph 60 citing Diocese of Bacolod vs. Commission
on Elections applies to certiorari. Furthermore, in the same case it
was mentioned that direct recourse to this court (Supreme Court) is
improper because Supreme Court is a court of last resort.
(12) In the case here present examination of facts is essential as ABS-
CBN notified and acquired the necessary permit from the government
with regards to the violations the petitioners claim. However Supreme
Court is not a trier of facts as it was held in its various decision made [
Section 5 (2) (e) Article 8 of 1987 philippine Consitution ]
(13) The transcendental importance continuously raise by Solicitor
General is questionable, let it be noted that the alleged violation of
ABS-CBN was dated back 1998, such claim is purely malevolent. In
sustaining such claim they should have filed their case as early as
 2016 when Digots assume office. Singling out ABS-CBN due to
unfavourable treatment as perceived by Digots during presidential
campaign amounts TO SUPPRESSION OF FREEDOM OF THE
PRESS a direct violation of the Constitution.
(14) The claim that ABS-CBN abuse its franchise is nothing but
SPECULATIVE. Let it be REITERATED that prior to launch of any
broadcasting product the necessary permit from the regulatory body
was secured (cite senate hearing). Section 21 of CA 146 (Public
Service Law) provides that Public Service …shall be fined Php
200.00 day. As claimed by the Honorable Solicitor General that ABC-
CBN is a Public Service owing its existence to its franchise, thus, the
cancelation of franchise is without merit granting that there is a law on
such alleged violation.
(15) The revocation of ABS-CBN franchise prayed for by the Honorable
Solicitor General to serve as precedent in revocating franchise,
absence of notice and hearing and a valid ground on such matter
would amount to violation of the equal protection and due process
clause enshrined in the Constitution.
II. Substantive
A. Respondent ABS-CBN Corporation
violated its legislative franchise
when it operated a pay per view
channel through free-to air-signals.

(16) From the words of the petitioner ABS-CBN Corporation

secured approval from NTC citing paragraphs 69, 70 and 71 in the
petition, thus it is clear the ABC-CBN Corporation did its job to
comply with the requirements of the law. As the petitioner cited ABS-
CBN Corporation was directed by the NTC to “refrain from offering
any pay television services in [its] DDT trials until such time that the
Commission has come up with appropriate guidelines for the same ”.
However this does not entail prohibition on ABS-CBN to offer KBO.
Therefore, ABS-CBN can still offer its KBO services awaiting
appropriate guidelines to be issued.
(17) When NTC approved ABS-CBN pay per view service it only
impose a condition that its service shall be subject to such
Conditional Access Guidelines that the commission or any other
government agency may hereafter issue (Cite basis). Thus, it is
noteworthy to mention that REFRAIN is different from
PROHIBITION.
 B. ABS-CBN Convergence, Inc.
violated its franchise under RA No.
7908, as amended by RA No. 8332.
a. Respondent ABS-CBN Convergence,
Inc. violated RA No. 7908, as
amended by RA No. 8332, when the
transfer of the subject legislative
franchise was made without prior
approval

(18) Let it be noted that Section 23 of RA No. 7925 provides that

“Any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall ipso facto
become part of previously granted telecommunications franchises and
shall be accorded immediately and unconditionally to the grantees of
such franchises. On March 30, 1995, the Congress enacted RA No.
7970, granting Maranao Telephone Company a Franchise to Install,
operate and maintain telephone system. It is provided under Section
11 of the said statute that “the grantee shall not, without the previous
and explicit approval of the Congress of the Philippines, directly or
indirectly, transfer, sell or assign this franchise to any person,
association, company or corporation, or other legal entity. The
controlling interest in the grantee shall not be transferred, assigned or
sold, whether in whole or in parts, simultaneously or
contemporaneously, within five (5) years from the effectivity of this
Act”. Such advantage/privilege that benefited Maranao must also be
given to Multimedia Telephony, Inc. (MTI) in light of the provision of
the law that governs the telecommunications industry (RA No. 7925).
The franchise of MTI was granted in 1995. Thus, by 2000, it may
directly or indirectly, without authority from Congress, transfer, sell
or assign its franchise to any entity, including ABS-CBN
Convergence which came into the picture only in 2015.

(19) Questions on the validity of corporate layering as a means of

structuring the ownership of companies have been raised following a
spate of Supreme Court decisions relating to companies where
minimum Filipino ownership is required by our Constitution and laws.
Applying the control test, the Supreme Court recently recognized
corporate layering in the case of Narra Nickel Mining and
Development Corp. v. Redmont Consoidated Mines Corp. (G.R. No.
195580, April 21, 2014). The control test basically provides that
shares belonging to corporations or partnerships at least 60 percent of
 the capital of which is owned by Filipino citizens shall be considered
of Philippine nationality.

(20) There was never any transfer of shares in the grantee, MTI.
The controlling interest in MTI has always been, and still remains
with Columbus, even after Sapientis subscribed to 70% of Columbus’
increased capital stock in 2011. The Main and SME Board Listing
Rules adopted by the Philippine Stock Exchange and approved by the
Securities and Exchange Commission...require that the applicant must
have a ‘cumulative consolidated earnings before interest, taxes,
depreciation and amortization..” ... Convergence has incurred losses in
every fiscal year from 1997 to present... Since Convergence cannot
comply with the requirements under PSE’s Main and SME Board
Listing Rules, it cannot list and offer its shares to the public.
(21)

III. ABS-CBN Corporation’s issuance of

Philippine Depositary Receipt through
ABS-CBN Holding Corporation
violates the foreign ownership
restriction of mass media provided
under Section 11, Article XVI of the
Constitution.
(22) That the issuance of PDR is a common practice among media
network to raise additional fund for the improvement of service (cite
source). Furthermore, as mentioned by PSE, PDRs traded in exchange
are not considered as evidence or statement nor certificate of
ownership of a corporation (cite source). In addition the Supreme
Court in case of Teves vs. Gamboa mentioned that beneficial
ownership does not merely depend on the receipt of dividends what is
determinative is whether such owner exercise control.

(23) In Gamboa vs Teves, the Supreme Court held that “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 common and non-voting
preferred shares [of PLDT]. 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.

ADDITIONAL ARGUMENT

OPPOSITION TO THE PRAYER