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ABS-CBN to SC: TV network did not commit violations and abuses
Station disputes SolGen’s quo warranto, says High court has no jurisdiction to hear case
REPUBLIC OF THE PHILIPPINES
SUPREME COURT
EN BANC
REPUBLIC OF THE PHILIPPINES
Represented by SOLICITOR
GENERAL JOSE C. CALIDA
Petitioner,
- versus –
G.R. NO. 251358
For: Quo Warranto
ABS-CBN CORPORATION and
ABS-CBN CONVERGENCE, INC.,
Respondents
X-----------------------------------------------------------------------------------X
COMMENT AD CAUTELAM
Respondents ABS-CBN CORPORATION (“ABS-CBN”) and
ABS-CBN CONVERGENCE, INC. (“Convergence”), by counsel,
in compliance with the Honorable Court’s Resolution dated Feb.
11, 2020, which they received on Feb. 13, 2020, respectfully state:
I.
The Petition must be dismissed on the following grounds:
Jurisdictional Grounds
A. A petition for quo warranto under Rule 66 of the
1997 Rules of Civil Procedure may not be brought
on the basis of misuse or abuse of a legislative
franchise.
B. Congress is the one empowered to revoke the
respective legislative franchises of Respondents.
Granting the Petition would violate the fundamen-
tal principle of separation of powers.
Procedural Grounds
C. The filing of the Petition directly with this Honor-
able Court violates the doctrine of hierarchy of
courts. It also disregards the fundamental rule
that this Court is not a trier of fact.
D. Assuming that Respondents committed the
violations alleged in the Petition, the Republic’s
remedy lies before administrative tribunals.
II.
Ad cautelam, Respondents submit that the Petition lacks merit.
E. ABS-CBN did not violate its legislative franchise
in offering Kapamilya Box Office (“KBO”) on its
digital terrestrial television service, “TVPlus”.
F. Convergence did not violate its franchise.
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Jurisdictional Grounds
A. A petition for quo warranto under
Rule 66 of the 1997 Rules of Civil Procedure
may not be brought on the basis of misuse
or abuse of a legislative franchise.
B. Congress is the one empowered to
revoke the respective legislative franchises
of Respondents. Granting the Petition
would violate the fundamental principle of
separation of powers.
G. The ABS-CBN Philippine Depository Receipts
(“PDRs”) do not violate the foreign ownership
restriction under the Constitution or the conditions
of ABS-CBN’s franchise.
H. The Petition, if granted, will have a chilling effect
on the press.
Arguments and Discussion
A. A petition for quo warranto
under Rule 66 of the 1997
1. The Republic filed its Petition for quo warranto to revoke or
forfeit the franchises of ABS-CBN and Convergence (for misuse
Procedural Grounds and abuse) on the basis of Section 1(a), Rule 66 of the 1997 Rules
of Civil Procedure, which provides:
C. The filing of the Petition directly with “SECTION 1. Action by Government against
individuals. An action for the usurpation of
this Honorable Court violates the doctrine a public office, position or franchise may be
of hierarchy of courts. It also disregards the commenced by a verified petition brought in the
name of the Republic of the Philippines against:
fundamental rule that this Court is not a
trier of fact. (a) A person who usurps, intrudes into, or
unlawfully holds or exercises a public office,
position or franchise xxx” (emphasis ours)
D. Assuming that Respondents
2. The Petition must be dismissed outright. This Honorable
committed the violations alleged in the Court does not have jurisdiction to revoke or forfeit Respondents’
Petition, the Republic’s remedy lies before legislative franchises under the above-mentioned rule relied upon.
administrative tribunals. 3. Quo warranto is a “prerogative writ by which the Government
can call upon any person to show by what warrant he holds a public
office or exercises a public franchise.” It is a proceeding “to deter-
mine the right to the use or exercise of a franchise or office and to
oust the holder from its enjoyment, if his claim is not well founded.”
4. Previously, under the 1964 Rules of Civil Procedure, the
grounds upon which the writ may be issued were more expansive
(than those under the currently effective 1997 Rules). Rule 66, Sec-
tions 1 and 2 of the 1964 Rules provide:
“Rule 66 QUO WARRANTO
Section 1. Action by Government against individuals.
— An action for the usurpation of office or franchise
may be brought in the name of the Republic of the Philip-
pines against: (a) A person who usurps, intrudes into, or
unlawfully holds or exercises a public office, or a fran-
chise, or an office in a corporation created by authority of
law; (b) A public officer who does or suffers an act which,
by the provisions of law, works a forfeiture of his office; (c)
An association of persons who act as a corporation within
the Philippines without being legally incorporated or without
lawful authority so to act.
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Sec. 2. Like actions against corporations. — A like
action may be brought against a corporation: (a) When it
has offended against a provision of an Act for its cre-
ation or renewal; (b) When it has forfeited its privileges
and franchises by nonuser; (c) When it has committed
or omitted an act which amounts to a surrender of its
corporate rights, privileges, or franchises; (d) When it
Rules of Civil Procedure may has misused a right, privilege, or franchise conferred
upon it by law, or when it has exercised a right, privilege,
not be brought on the basis or franchise in contravention of law.” (emphasis ours)
of misuse or abuse of a
legislative franchise. 5. Section 1, Rule 66 of the 1997 Rules is thus almost a repro-
duction of Section 1, Rule 66 of the 1964 Rules—both contemplate
“[a]n action for the usurpation” of an office or franchise against “[a]
Section 2, Rule 66 of the 1964 person who usurps, intrudes into, or unlawfully holds or exercises”
an office or franchise. (Subsections 1(b) and (c) are almost identical
Rules was not carried over to but not relevant here.) If any of the foregoing grounds exists, both
the 1997 Rules of Civil Section 10, Rule 66 of the 1964 Rules and Section 9, Rule 66 of the
1997 Rules provide that the defendant shall be excluded or ousted
Procedure. from the office or franchise.
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6. In contrast, Section 2 of the 1964 Rules was not carried
over to the 1997 Rules of Civil Procedure. Consequently, a petition
for quo warranto may no longer be filed on any of the following
grounds: (a) violation of the law creating the defendant-corporation;
(b) non-use of its corporate franchise; (c) surrender of a right, privi-
lege or franchise; or (d) its misuse or its exercise in contravention of
law. Section 12, Rule 66 of the 1964 Rules then provided that the
defendant-corporation found to have committed any of the foregoing
shall be “ousted and excluded therefrom and… dissolved.”
7. Rule 66 of the 1997 Rules of Civil Procedure is now limited
to quo warranto actions for usurpation of public office, position
or franchise. Accordingly, nothing in Rule 66 of the 1997 Rules of
Civil Procedure pertains to misuse or abuse of such public office,
position or franchise. Sections 5, 6, 9, 10, 11 and 12 of Rule 66 refer
particularly to actions for usurpation, with no corresponding provision
for the previous grounds of misuse or abuse.
8. It is a cardinal rule of statutory construction that, to ascertain
the intent behind a provision, one must consider the provision as
a whole and not its isolated part. “For taken in the abstract, a word
or phrase might easily convey a meaning quite different from the
one actually intended and evident when the word or phrase is con-
sidered with those with which it is associated. Thus, an apparently
general provision may have a limited application if viewed together
with other provisions.” Aboitiz Shipping Corp. v. City of Cebu, G.R.
No. L-14526. March 31, 1965.
9. Thus, the verified petition referred to in Section 1, Rule 66,
that is filed against “[a] person who usurps, intrudes into, or unlaw-
fully holds or exercises a public office, position or franchise” is one
that “commence[s]” “[a]n action for the usurpation of a public office,
position or franchise”. (emphasis ours) The phrase “unlawfully holds
or exercises” an office or franchise must be read within the context
of “usurpation” as used in the first clause of Section 1, as well as in
Sections 5, 6, 9, 10, 11 and 12 of Rule 66.
10. “Usurpation” is defined by Black’s Law Dictionary (6th edition,
1990) as an “unlawful seizure or assumption of sovereign power”.
“Usurpation of franchise or office” is defined as “unjustly intruding
upon or exercising any office, franchise, or liberty belonging to
another.” (emphasis ours) Hence, whether a person usurps, intrudes
into, or unlawfully holds or exercises a public office or a franchise, a
quo warranto action for usurpation against such person inquires into
whether that person unlawfully seized or assumed, or unjustly intruded
upon or exercised an office, franchise or liberty belonging to another.
The inquiry is, therefore, not concerned with acts subsequent to the
valid grant of an office, privilege or franchise, or to the implementation
thereof. This is consistent with the nature of a quo warranto—translated
literally “by what warrant”—which is a remedy that inquires into the
right of a person to exercise a special privilege.
11. Precisely because Rule 66 under the 1997 Rules con-
templates only actions for usurpation, “[w]hen the respondent is
found guilty of usurping into, intruding into, or unlawfully holding
or exercising a… franchise, judgment shall be rendered that such
respondent be ousted and altogether excluded therefrom, and
that the petitioner or relator, as the case may be, recover his costs.”
(Section 9, emphasis ours) Significantly, Rule 66 of the 1997 Rules
does not provide for the revocation or forfeiture of the franchise.
12. The Republic does not dispute the grant of Respondents’
franchises or their validity. What is challenged here is the right of
Respondents to continue exercising their franchises, given their
purported “violations”, “misuse” or “abuse” thereof (see Petition,
pars. 1, 4, 5, and 51). This is beyond the scope of a quo warranto
proceeding under Rule 66.
The Republic cites mere obiter
in Divinagracia.
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Granting the Petition means shutting
down what the Republic concedes to be the
country’s “largest media conglomerate…
reaching millions of viewers in all
corners of the country” and the “biggest
broadcasting entity… able to shape the
13. To support its Petition, the Republic cites Divinagracia v.
Consolidated Broadcasting System, Inc., G.R. No. 162272, April
7, 2009, and Philippine Long Distance Telephone Company v.
National Telecommunications Commission, G.R. No. 88404, Oct.
18, 1990 (“PLDT”).
14. Divinagracia does not apply as it did not even involve a peti-
tion for quo warranto. Rather, it was a complaint filed before the
National Telecommunications Commission (“NTC”) to cancel the
Provisional Authorities or certificates of public convenience (“CPCs”)
of Consolidated Broadcasting System, Inc. (“CBS”) and People’s
Broadcasting Service, Inc. (“PBS”). The complaint alleged that CBS
and PBS “misused” their legislative franchises when they failed to
publicly offer at least 30% of their respective common stocks. In
resolving the case, this Honorable Court ruled that the NTC has no
power to cancel the subject CPCs, as that would amount to giving
“a mere administrative agency veto power over the implementation
of the law and the enforcement of especially vested legal rights.”
As an aside, this Honorable Court remarked that the complainant-
petitioner should have resorted to a quo warranto proceeding under
Rule 66, citing PLDT, and Kilosbayan v. Morato, 316 Phil. 652 (1995).
15. This remark is an obiter dictum — “an opinion expressed
by a court upon some question of law that is not necessary in the
determination of the case before the court. It is a remark made,
or opinion expressed, by a judge, in his decision upon a cause by
the way, that is, incidentally or collaterally, and not directly upon
the question before him, or upon a point not necessarily involved
in the determination of the cause, or introduced by way of illustra-
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public’s opinion on a variety of issues,
apart from providing entertainment.”
This case, therefore, cannot be
resolved without “compromising” the
“fundamental guarantees of freedom of
speech and of the press.”
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tion, or analogy or argument. It does not embody the resolution or
determination of the court, and is made without argument, or full
consideration of the point.” Landbank of the Philippines v. Suntay,
G.R. No. 188376, Dec. 14, 2011.
16. The only issue in Divinagracia was whether the NTC had
the power to cancel the CPCs of the respondents. This Honorable
Court’s remark on quo warranto being the proper remedy against
the “non-use”, “misuse” or “abuse” of a legislative franchise was not
necessary to resolve that issue.
17. An obiter dictum “cannot be controlling jurisprudence to bind
our courts when it adjudicates similar cases upon the principle of
stare decisis.” Dee v. Harvest All Investment Limited, et al., G.R.
No. 224834, March 15, 2017. Hence, the above-quoted pronounce-
ment in Divinagracia is not controlling and cannot be cited by the
Republic as basis for its Petition. In fact, as discussed below, the
ratio decidendi of Divinagracia supports the dismissal of this Petition.
18. The Republic may not point to PLDT and Kilosbayan, es-
pecially when relied upon to vest jurisdiction where there is none.
Both cases were decided under the 1964 Rules. Moreover, this
Honorable Court’s remark in Kilosbayan — that “Quo Warranto is
specifically available as a remedy if it is thought that a government
corporation has offended against its corporate charter or misused
its franchise” — was likewise an obiter as it was not necessary to
resolve the issues of whether Kilosbayan, et al., had legal standing
to assail the validity of the subject contract, and of whether that
contract was valid.
B. Congress is the one
empowered to revoke the
respective legislative
franchises of Respondents.
Granting the Petition would
violate the fundamental
principle of separation of
powers.
Congress has power over
franchises.
19. Congress has the power to grant, amend, alter and repeal
a franchise, as provided in Section 11, Article XII of the Constitution:
“SECTION 11. No franchise, certificate, or any other
form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital
is owned by such citizens, nor shall such franchise, cer-
tificate, or authorization be exclusive in character or for
a longer period than fifty years. Neither shall any such
franchise or right be granted except under the condi-
tion that it shall be subject to amendment, alteration,
or repeal by the Congress when the common good so
requires…” (emphasis ours)
20. The Republic admits in paragraph 89 of the Petition
that: “The requirement to seek congressional approval for the
operation of legislative franchises and the transfer thereof by
the grantee to another corporation emanate from the provisions
of the fundamental law of the land. Section 11, Article XII of the
Constitution gave Congress not only the power to review
and approve the franchises of public utilities, including
those engaged in telecommunication services, but also
the power to amend, alter or repeal the franchises when
the common good so requires.” (Petition, par, 89, pp. 30-31,
emphasis ours)
21. The term “[to] repeal” is defined by Black’s Law Diction-
ary (6th edition, 1990) as “to revoke, abolish, annul, to rescind or
abrogate by authority.” By seeking the revocation of Respondents’
franchises (see Petition, pars. 4, 5, 51, 64, pp. 2, 16, 21) with this
Honorable Court, the Republic is effectively asking the Court to
repeal the laws which granted such franchises, i.e., R.A. Nos. 7966
and 8332.
22. Notably, Congress expressly reserved to itself the power to
cancel or revoke ABS-CBN’s and Convergence’s franchises. Section
14 of R.A. No. 7966 states:
“Section 14. Repealability and Non-exclusivity Claus-
es. — This franchise shall be subject to amendment,
alteration or repeal by the Congress of the Philippines
when the public interest so requires and shall not be
interpreted as an exclusive grant of the privileges herein
provided for.” (emphasis ours)
An identical provision can be found in Section 18 of R.A. No. 8332.
23. Congress exercises this authority through the House Com-
mittee on Legislative Franchises, which is expressly assigned to
deal with “[a]ll matters directly and principally relating to the grant,
amendment, extension or revocation of franchises”. Rules of the
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House of Representatives, emphasis ours. With respect to the Sen-
ate, the grant or amendment of legislative franchises” is assigned
to the Senate Committee on Public Services.
24. The Republic contends that a legislative franchise is “not
a right that can be exercised at will and pleasure. Rather, it is a
privilege subject to regulation under such conditions as the govern-
ment may see fit.” (Petition, pars. 1, 55, pp. 1, 17) This bolsters
Respondents’ position that their franchises may not be revoked or
forfeited in a quo warranto petition. This Honorable Court’s judicial
power, or the power “to settle actual controversies involving rights
which are legally demandable and enforceable” (Section 1, Article
VIII of the Constitution), is concerned with rights. If, indeed, a
franchise is not a right but a privilege, then the decision to grant
such privilege, as well as the decision to amend, revoke or forfeit
it, does not lie with the judiciary. These decisions involve policy
determination—or political questions. In Tanada v. Cuenco, 103
Phil. 1051, 1067 (1965), this Honorable Court defined political
questions as “those questions which, under the Constitution,
are to be decided by the people in their sovereign capacity, or in
regard to which full discretionary authority has been delegated to
the legislative or executive branch of the government.”
25. ABS-CBN’s current franchise will end on May 4, 2020, Con-
vergence’s on March 17, 2020. At least ten bills for the renewal of
ABS-CBN’s franchise have already been filed before the House of
Representatives, while at least one bill has been filed for the renewal
of Convergence’s franchise.
26. Congress is thus already faced with the question of whether
to renew Respondents’ franchises, to amend the same, to revoke
them altogether, or to grant entirely new franchises. Respondents
beseech this Honorable Court not to pre-empt Congress’s exercise
of its power.
27. In Ocampo, et al. v. Rear Admiral Enriquez, G.R. No. 225973,
Aug. 8, 2017, the Honorable Court declared that the judiciary should
not pre-empt Congress or usurp its inherent power to enact laws.
Courts should give Congress a chance to perform its duty, even if it
not be “the most expeditious approach”.
C. The filing of the Petition
directly with this Honorable
Court violates the doctrine
of hierarchy of courts. It also
disregards the fundamental
rule that this Court is not a
trier of fact.
The Republic violated the
doctrine of hierarchy of
Courts.
28. Direct recourse to this Honorable Court is “highly improper”
as a matter of policy, except in specific exceptional cases. Cabarles
v. Judge Maceda, G.R. No. 161330, Feb. 20, 2007.
29. The Republic cites Ang Nars Party-List v. Executive Secre-
tary, G.R. No. 215746, Oct. 8, 2019, to justify its direct resort to this
Honorable Court. Ironically, in that case, the Office of the Solicitor
General itself sought the dismissal of the petition for violating the
hierarchy of courts. This Honorable Court “relax[ed]” the rule and
resolved the petition, where the minimum pay of thousands of nurses
in the country was at issue.
24 BizNews Asia / March 2 - 9, 2020
30. Ang Nars does not help the Republic’s case. Direct in-
vocation of this Honorable Court’s original jurisdiction should
be allowed “only when there are special and important reasons
therefor, clearly and specifically set out in the petition.” According
to the Republic, the instant case is of transcendental importance
“because ABS-CBN’s franchise mandates it to serve the public by
its broadcast operations”, and because it is the “biggest broadcast-
ing entity” in the country. (Petition, par. 62, p. 21) The Republic
also said that “this is a case of first impression”. (Petition, par. 64,
p. 21) However, these are not “special and important reasons”
which would justify direct resort to this Honorable Court. The is-
sues involved, not the nature of the parties’ businesses and their
size, determine whether a case is of transcendental importance.
The Republic did not even discuss how it found the issues raised
in its Petition so compelling as to justify invoking this Honorable
Court’s jurisdiction in the first instance.
This Honorable Court is not a
trier of fact.
31. The Honorable Court in Ang Nars resolved only the legal
issue of whether Executive Order No. 811, which set the position
“Nurse I” at salary grade 11, violated Section 32 of R.A. No. 9173,
which set it at 15. Here, the Petition cannot be resolved without
disposing of factual questions which cannot be decided by this
Honorable Court as it is not a trier of fact. In Gios-Samar, Inc. v.
Department of Transportation and Communications and Civil Avia-
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tion Authority of the Philippines, G.R. No. 217158, March 12, 2019,
this Honorable Court reiterated that cases requiring the determination
of questions of fact cannot be brought directly to this Court, and this
rule cannot be disregarded by the mere invocation of transcendental
importance. This Honorable Court En Banc declared:
“Accordingly, for the guidance of the bench and the
bar, we reiterate that when a question before the Court
involves determination of a factual issue indispens-
able to the resolution of the legal issue, the Court will
refuse to resolve the question regardless of the allega-
tion or invocation of compelling reasons, such as the
transcendental or paramount importance of the case.
Such question must first be brought before the proper trial
courts or the CA, both of which are specially equipped to
try and resolve factual questions.” (Boldface ours)
32. The Court’s pronouncement in Gios-Samar was echoed
by former Chief Justice Lucas P. Bersamin in his statements to the
press in March and April 2019. See “Bersamin stresses hierarchy of
courts in managing cases”, Philippine News Agency, April 8, 2019,
Available: https://www.pna.gov.ph/articles/1066763; “SC to shun
‘premature, misfiled’ cases — Bersamin”, ABS-CBN News, March
29, 2019, Available: https://news.abs-cbn.com/news/03/29/19/
sc-to-shun-premature-misfiled-cases-bersamin.
33. A question of law exists when the question pertains solely
to what the law is on a given state of facts. When the controversy
involves the truth or falsity of certain facts, which requires an exami-
nation of the probative value of the evidence presented, the question
is one of fact. Cucueco v. Court of Appeals, et al., G.R. No. 139278,
Oct. 25, 2004.
There are factual issues to be
resolved in this case.
34. In resolving the Petition on its merits, factual issues will have
to be resolved, including:
a. Who offered the KBO to the viewing public;
b. Whether the KBO offerings were authorized by the NTC;
c. Whether there was a transfer of controlling interest in Multi-
Media Telephony, Inc. (now Respondent Convergence) or
of its franchise;
d. Whether Convergence could have complied with the require-
ments for the listing of its shares with the Philippine Stock
Exchange;
e. Whether stockholder rights were granted to holders of the
ABS-CBN PDRs; and
f. Whether the Securities and Exchange Commission (“SEC”)
approved the issuance and sale of the PDRs.
35. The Republic claims that the Petition “is based on facts
established no less by documents issued by Respondents and
submitted to government offices”; therefore, the Petition “does
not raise factual issues”. (Petition, par. 7, pp. 2-3) The Republic is
wrong. If this Honorable Court gives due course to the Petition, and
decides to “try” the foregoing issues, the Republic would have to
present its evidence-in-chief (Section 5, Rules of Civil Procedure),
authenticate them (Sections 20, 27, Rule 132, Revised Rules of
Evidence), and formally offer them (Sections 34, 35, Rule 132,
Revised Rules of Evidence), even if it were true that all such are
“documents issued by Respondents and submitted to government
offices”. (Petition, par. 7).
35.1. As an essential part of due process, Respondents
must then have the chance to refute the existence, genuine-
ness, competence and relevance of such evidence (Section
36, Rule 132, Revised Rules of Evidence), and may present its
own evidence to rebut the Republic’s case (Section 5, Rules
of Civil Procedure).
35.2. This Honorable Court would then examine evidence
presented by both sides and weigh their respective proba-
tive values in resolving the factual issues (Section 1, Rule
133, Revised Rules of Evidence). Simply put, this Honorable
Court would only be able to resolve the Petition on its merits
by becoming a “trier of facts”, which it categorically said in
Gios-Samar it is not.
D. Assuming that Respondents
committed the violations
alleged in the Petition, the
Republic’s remedy lies before
administrative tribunals.
Administrative tribunals have
primary jurisdiction over the
issues presented in the Petition.
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36. The violations supposedly committed by ABS-CBN and
Convergence are within the jurisdiction of administrative agencies,
i.e., the SEC, NTC, and Philippine Competition Commission (“PCC”),
and Congress.
37. Whether ABS-CBN operated a pay-per-view channel
through free-to-air signals, and whether ABS-CBN “monopolize[s]
the frequencies or airwaves” through its investment in Amcara, are
matters within the exclusive primary jurisdiction of the NTC and
the PCC.
38. On the other hand, issues on the purported transfer
of Convergence’s legislative franchise without Congressional
approval, and its failure to offer its shares to the public, should
have been left to Congress. Congress can, in turn seek the
assistance of the NTC and the SEC, as well as the PSE, in
resolving these issues.
39. On ABS-CBN PDRs, the Republic should have referred the
matter to the SEC for investigation and action, as the SEC is “the
government agency invested with the jurisdiction to determine at
the first instance the observance by a public utility of the nationality
requirement prescribed vis-à-vis the ownership of public utilities…”
Gamboa v. Teves, G.R. No. 176579, Oct. 9, 2012. In Gamboa, this
Honorable Court recognized the jurisdiction of the SEC and refused
to declare the sale of PLDT shares void, even if the facts were found
to be undisputed. This Court confined itself to the sole legal issue on
the definition of “capital” in Section 11, Article XII of the Constitution.
This was reiterated in Roy III v. Herbosa, G.R. No. 207246, a case
which the Republic itself cites.
40. This Honorable Court’s refusal to look into the legality of
the sale of the PLDT shares despite the Constitution’s nationality
requirements for public utilities, proves that the issue was not com-
pelling enough to disregard the hierarchy of courts.
41. It is noteworthy that with regard to the legal issues of Rappler,
Inc.’s PDRs, the Office of the Solicitor General referred the matter
to the SEC on Dec. 26, 2016, not to this Honorable Court. See Re:
Rappler Inc. and Rappler Holdings Corporation, SEC En Banc, SP
Case No. 08-17-001, Jan. 11, 2018.
42. Under the primary jurisdiction doctrine, an administra-
tive tribunal’s jurisdiction is deemed to be exclusive. “Under the
sense-making and expedient doctrine of primary administrative
jurisdiction, ‘xxx the courts cannot or will not determine a con-
troversy involving a question which is within the jurisdiction of
an administrative tribunal prior to the decision of that question
by the administrative tribunal, where the question demands the
exercise of sound administrative discretion requiring the special
knowledge, experience, and services of the administrative tri-
bunal to determine technical and intricate matters of fact, and a
uniformity of ruling is essential to comply with the purposes of
the regulatory statute administered.’” (Javier v. Court of Appeals,
G.R. No. 96617, Oct. 14, 1992)
43. Since the resolution of the issues raised by the Republic
requires the determination of highly-technical factual questions
best left to specialized agencies, this Honorable Court should act
in accordance with Gios-Samar, among other cases, and refuse to
resolve the Petition.
Ad cautelam, Respondents submit that the Petition lacks merit,
and further state:
E. ABS-CBN did not violate its
legislative franchise in
offering KBO on “TVPlus”.
26 BizNews Asia / March 2 - 9, 2020
44. The Republic contends that ABS-CBN launched a pay-per-
view channel, the KBO, through TVPlus in March 2016. (Petition,
par. 66, p. 22) It objects to the KBO pay-per-view on two grounds.
First, ABS-CBN supposedly “ha[d] no permit or authority from the
government, specifically NTC”, to launch the KBO Channel and
to continue to operate it. (Petition, par. 75, pp. 25-26) Second,
ABS-CBN “[used] the free-to-air frequency” when it offered KBO in
TVPlus, and thus should not have collected fees from the viewing
public. (Petition, pars. 80, 84, pp. 28-29)
45. The Republic’s objections are based on its misconceptions
about TVPlus and KBO, and even the nature of digital television tech-
nology and free-to-air channels. This Comment will demonstrate that:
(a) While TVPlus was and is an ABS-CBN service, KBO was
not when it was launched. KBO was a value-added ser-
vice (“VAS”) of Convergence.
(b) ABS-CBN only started offering KBO when Convergence
suspended its operations.
(c) NTC approved the KBO offerings.
(d) ABS-CBN is not prohibited by law, including its legislative
franchise, from providing pay-per-view services alongside
its “free-to-air” channels through the frequencies assigned
to it by NTC itself.
ABS-CBN launched TVPlus
pursuant to the NTC’s migration
plan.
46. Before the advent of digital technology, television and radio
broadcast stations used analog technology. Broadcast stations
would transmit signals over the airwaves on their respective as-
COVER
signed frequencies, with only one channel capable of being aired
on a frequency. In the 1990s, major technological developments
made it possible to reduce the amount of frequency bandwidth
for the transmission of television signals. This paved the way for
digital terrestrial television (“DTT”) where more than one chan-
nel, with better picture and sound quality, could be broadcast
per frequency.
47. NTC then developed a plan for all television and radio sta-
tions to migrate from analog to digital technology. This was pursuant
to the NTC’s mandate to encourage a “larger and more effective
and efficient use of television broadcasting facilities and spectrum”
(Executive Order No. 546 [1979]).
48. ABS-CBN launched its DTT Broadcast ((“DTTB”) service
called TVPlus in 2015 to comply with and support the government’s
digital migration plan. The plan contemplates an Analog Shut-Off
date on which “all analog television services in the Philippines”
would be terminated. (Sec. 1.11, MC No. 07-12-2014, Rules and
Regulations for Digital Terrestrial Television [DTT] Broadcast
Service, or the “DTTB Rules”. A copy is attached hereto as An-
nex “2”.)
49. DTT technology allowed ABS-CBN to broadcast six
channels with varied content using only one frequency for
each service area. These channels were “ABS-CBN”, “Sports
+ Action”, “DZMM Teleradyo”, “Knowledge Channel, “Cinemo!”
and “Yey!”, which were all broadcast for free by ABS-CBN to
those with TVPlus set-top boxes (available for a one-time fee of
Php1,999.00). This was in stark contrast to analog technology
where, for instance, ABS-CBN could air only one channel—Chan-
nel 2—through its assigned frequency. The TVPlus set-top boxes
are digital television receivers that are needed to receive DTT
broadcasts. Older analog television sets without DTT set-top
boxes are unable to receive and display DTT broadcasts. The
TVPlus set-top boxes allow users to also receive and view the
DTT broadcasts of other television networks, such as GMA and
TV5, among others.
50. DTT likewise allows broadcast stations to transmit encrypted
programs for decryption on the viewers’ end, enabling the provision
of pay-per-view services.
The KBO offerings were part of
Convergence’s value-added
services.
51. KBO was first offered to the public by Convergence as a
value-added service.
52. Convergence was registered with the NTC to provide value-
added services (“VAS”). (See Convergence’s Certificates of Reg-
istration for VAS, copies of which are attached hereto as Annexes
“3” and “3-A”.) In 2016, it began offering VAS which included
access to iWant TV, a video streaming and on demand platform for
movies, programs, and other content owned by ABS-CBN (“ABS-
CBN Content”). Most of these offerings further allowed access to
the same ABS-CBN Content through TVPlus (for ABS-CBNmobile
subscribers with TVPlus set-up boxes) for free.
53. ABS-CBN agreed with Convergence to set up a new channel
in TVPlus for such add-on ABS-CBN Content for the convenience
of ABS-CBNmobile users. This channel was named the “Kapamilya
Box Office” channel or KBO.
54. KBO was therefore a Convergence service. In fact, be-
fore the launch of all its KBO offerings, Convergence sought
and obtained NTC approvals. Copies of the letter-approvals of the
NTC are attached hereto as Annexes “4” to “4-L”.
54.1. That KBO was a Convergence service is evident in
the NTC’s letter-approvals, where the NTC required Conver-
gence to comply with Memorandum Order No. 07-07-2011 on
minimum speed for broadband connections. (This is applicable
to telecommunications service providers, not to television/radio
broadcast station operators.)
54.2. This can also be seen in the webpage cited by the
Republic (Petition, footnote 71, p. 22), which mentioned that
the KBO channel was available to ABS-CBN TVPlus users who
have ABS-CBNmobile SIM cards.
After Convergence suspended
its operations, ABS-CBN offered
KBO pay-per-view to TVPlus
viewers. ABS-CBN is allowed
under its legislative franchise
and the relevant NTC issuances
to offer such service.
(a) ABS-CBN’s legislative
franchise is broad enough
to cover pay-per-view
services.
55. After Convergence suspended its operations, ABS-CBN
started offering a pay-per-view service through the KBO Chan-
nel. Under Section 1 of R.A. No. 7966, ABS-CBN was granted the
franchise to “construct, operate, and maintain, for commercial
purposes and in the public interest, television and radio broad-
casting stations in and throughout the Philippines.” (emphasis ours)
The term “commercial purposes” is broad; it includes all kinds of
commercial activities and all kinds of sources of revenue, including
pay-per-view services.
56. The NTC itself sought guidance from the Department of
Justice (“DOJ”) as to whether television broadcasters are allowed
to offer pay-per-view services. In its Opinion No. 01, S. 2018, the
DOJ replied in the affirmative:
“The provisions of Section 1 of the standard text of
such franchises read as follows:
‘Section 1. Nature and Scope of Franchise.
— Subject to the provisions of the Constitution
and applicable laws, rules and regulations the
(name of corporation/company) hereunder
referred to as the grantee, its successors and
assigns, is hereby granted a franchise to con-
struct, install, establish, operate and maintain,
for commercial purposes and in the public
interest, television and radio broadcasting sta-
tions in and throughout the Philippines, through
microwave satellite or whatever means includ-
ing the use of any new technology in television
and radio systems, with the corresponding
auxiliaries or facilities, special broadcast and
other broadcast distribution services and relay
stations.’
xxx
BizNews Asia / March 2 - 9, 2020 27
 COVER
Resolving the issue raised vis-à-vis the wordings of
the provisions of Section 1 of the standard legislative
franchises of TV broadcasters, we find it clear enough
that broadcast companies can engage in Conditional
Access (CA) or Conditional Access System (CAS)
and, for the same reason can offer TV pay-per-view
services. The provisions of Section 1 are categorical
enough that there is no need for interpretation — only
application. There is nothing in said provisions that
would give any impression that ‘commercial purposes’
are limited only to income derived by TV broadcast
companies from paid advertisements.
xxx
To summarize, it is our opinion that TV broadcasters
may be allowed to engage in Conditional Access (CA)
or Conditional Access System (CAS), more specifi-
cally to offer TV pay-per-view services, provided that
it does not amount to CATV service, which shall only be
considered as such if it is ‘for purposes of providing multiple
channel CATV service’.” (emphasis ours)
57. The DOJ opinion thus squarely refutes the Republic’s
contention that “[b]roadcasting organizations are only allowed to
yield income from their contracts with commercial advertisers and
producers and direct sales,” and that “ABS-CBN Corporation is
prohibited from using the free-to-air signals to profit from the public,
except to comply with its contractual obligations under contracts with
commercial advertisers and producers.” (Petition, par. 84, p. 29) As
the DOJ observed, “[t]here is nothing in [the grant of the franchise]
that would give any impression that ‘commercial purposes’ are
limited only to income derived by TV broadcast companies from
paid advertisements.”
58. The Republic cites the case of ABS-CBN Broadcasting
Corporation v. Philippine Multi-Media System, G.R. No. 175769-
70, Jan. 19, 2009, to argue that broadcasters can only derive
income from advertisements and cannot charge fees for free-
to-air services. The Republic harps on the pronouncement that
“[n]o payment is required to view the said [free-to-air] channels
because these broadcasting networks do not generate revenue
from subscription from their viewers but from airtime revenue from
contracts with commercial advertisers and producers, as well as
from direct sales.”
59. The Republic again cites obiter dictum. Whether
broadcasters could charge fees from viewers for their free-to-air
signals or were limited to earning revenues from advertisements
was not the issue before this Honorable Court in that case. The
basic issue was whether Direct-to-Home satellite television service
providers could re-transmit the free-to-air broadcasts without
obtaining the broadcasters’ consent in light of the NTC’s “must
carry” rule.
(b) ABS-CBN’s use of
frequency for several
channels, including KBO,
was authorized by the NTC.
60. The Republic believes that ABS-CBN should use its assigned
frequency only for its “free-to-air” channel and for no other. It fails
to appreciate that DTT enables the simultaneous transmission of
several channels, both free-to-air and pay-per-view, using only one
frequency. Hence, ABS-CBN is able to air in its assigned frequency
not only the two free-to-air channels “ABS-CBN” and “Sports + Ac-
tion”, but also “DZMM Teleradyo”, “Knowledge Channel, “Cinemo!”
and “Yey!” (all for free), as well as KBO (pay-per-view). NTC ex-
pressly allowed ABS-CBN to do so in its Order dated May 14, 2019
(Petition, Annex “Q”), wherein it approved:
28 BizNews Asia / March 2 - 9, 2020
“the conversion from Analog Television Service to
Digital Terrestrial Television Broadcasting Station of
ABS-CBN CORPORATION using Channel 43 in Metro
Manila x x x
The P.A. is subject to the following conditions:
xxx
4. The use of Conditional Access System (CAS) on
DTTB service shall be subject to such Conditional
Access guidelines that the Commission or any other
relevant government agency may hereafter issue;”
(emphasis ours)
61. The Republic erroneously interprets condition no. 4 as pro-
hibiting the provision of CAS or pay-per-view before the issuance of
guidelines. (Petition, par. 69, p. 23) Condition no. 4 contains no such
prohibition. Instead, it directs ABS-CBN to comply with guidelines
on CAS which the NTC or any other relevant government agency
may issue in the future.
62. That the Broadcast Service Division recommended that
“[n]o Encryption of Conditional Access of programming content
shall be allowed” (Petition, par. 69, p. 23) is beside the point. The
NTC did not adopt such recommendation in its Order and did not
state that “no CAS shall be allowed”. Rather, it imposed as among
the conditions that ABS-CBN should comply with future guidelines
which government may impose.
63. The use of the word “may” in condition no. 4 contemplates
the possibility that no future guidelines would be issued. In fact, the
NTC has not issued one to date. To interpret the condition as prohibit-
ing CAS until guidelines are issued, effectively prevents ABS-CBN
from engaging in CAS. However, there is no such prohibition in the
current issuances of NTC on DTT (NTC MC 05-11-2013 and the
DTTB Rules). The DTTB Rules allow it and even mandate certain
standards for it.
The Republic’s position unduly
favors web streaming, cable
and satellite television
providers.
64. The Republic’s view puts Philippine television broadcasters
at a disadvantage as against foreign video streaming services, such
as “Netflix”, “Amazon Prime”, “Hulu”, “Viu”, and “Viki”. Their content
can actually be viewed by subscribers in the Philippines upon pay-
ment of fees, without regulation by any law or NTC rule.
65. Television broadcasters are also disadvantaged as against
cable and satellite television operators, which are allowed to offer
pay-per-view in addition to their two other income streams: monthly
subscriptions and advertisements.
ABS-CBN and Convergence
were not motivated by greed, as
the Republic suggests. The
KBO offering served an
important public interest.
66. The Republic’s insinuation that ABS-CBN was motivated
purely by commercial reasons, at the expense of the Filipino viewing
COVER
public, is completely off-base. Viewers do not have to pay for the six
standard channels that are available over TVPlus. Only those who
opt to watch KBO do, and they pay only minimal fees.
67. KBO caters to a large part of the population who cannot
afford to pay Php200.00-Php400.00 to watch one movie in the
cinemas. Through KBO, a viewer can watch movies and television
series episodes for the price of only Php30.00, or premium content
for Php99.00, together with his family, neighbors, or community.
The Republic is barred by
estoppel from proceeding
against Respondents.
68. The KBO offering advances the policy of the State. The
KBO channel is an opportunity for the public to buy TVPlus set-top
boxes, which would facilitate the government’s migration plan from
analog to digital television, and support its mandate to efficiently
use the frequency spectrum.
69. Respondents’ KBO offerings have been transparent and
well-publicized for four years. The NTC has never commenced any
action against ABS-CBN and/or Convergence for the KBO offering,
as this was not prohibited under any law or regulation. Presuming it
was, the Republic is estopped from proceeding against ABS-CBN/
Convergence. In Newsounds Broadcasting Network, Inc. v. Dy, G.R.
Nos. 170270 & 179411, April 2, 2009, this Honorable Court held
that the doctrine of equitable estoppel may be invoked against the
government in certain circumstances. “[W]hen there is no convinc-
ing evidence to prove irregularity or negligence on the part of the
government official whose acts are being disowned other than the
bare assertion on the part of the State, we have declined to apply
State immunity from estoppel.” Here, the Republic does not allege
any irregularity or negligence on the part of the NTC, upon whose
acts Convergence and ABS-CBN relied in offering KBO to the pub-
lic. The doctrine thus applies to bar the Republic from assailing the
KBO offering and imposing, as an extreme form of punishment, the
revocation of ABS-CBN’s franchise.
The NTC did not take action
against ABS-CBN for the live
telecast of the Pacquiao-
Mayweather fight.
70. The Republic particularly refers to the Pacquiao-Mayweather
fight, which was shown live on TVPlus on May 3, 2015. The Republic
adverted to the NTC’s letter dated April 29, 2015 wherein it directed
ABS-CBN “to refrain from offering any pay television service in [its]
DTT trials until such time that the Commission has come up with
appropriate guidelines for the same.” (Petition, par. 68, pp. 22-23)
Below is ABS-CBN’s explanation of what happened.
71. ABS-CBN made preparations for the live showing of the
Pacquiao-Mayweather fight primarily for the interest of Filipinos
who wished to see the fight live, not through delayed telecast on
free-to-air television. ABS-CBN thus entered into a commercial ar-
rangement with the Philippine licensee, Solar Sports, to have the
fight shown live through TVPlus. It was Solar Sports which required
that subscriptions to the live showing of the fight have a uniform fee
of Php2,500.00 per set-top box.
72. On April 1, 2015, ABS-CBN informed the NTC that it would
air the Pacquiao-Mayweather fight live through a pay-per-view of-
fering on TVPlus. ABS-CBN by then had a Demonstration Permit
from the NTC to test broadcast its DTTB service in Metro Manila
and Metro Cebu. (A copy of ABS-CBN’s Demonstration Permit dated
March 30, 2015 is attached hereto as Annex “5-A”.)
73. Twenty-eight days had lapsed by the time ABS-CBN received
NTC’s letter dated April 29, 2015. By then, only three calendar days
and only one business day remained until the May 3, 2015 fight.
ABS-CBN could no longer cancel the live viewing of the fight on
TVPlus as many viewers had already paid for the service. Never-
theless, ABS-CBN immediately complied with the NTC’s directive
and stopped “offering” or promoting the live viewing of the fight on
TVPlus.
74. A day after the fight, ABS-CBN explained to NTC, in
writing, why it could not have cancelled the live viewing of the
fight on TVPlus at the last minute. A copy of the letter is attached
hereto as Annex “6”. NTC did not reply to ABS-CBN’s letter,
and it did not initiate any proceedings against ABS-CBN either.
This only means that to the NTC, there was no wrongdoing by
ABS-CBN.
75. Even assuming that there was a violation of the NTC’s
April 29, 2015 “request” or of Commonwealth Act No. 146 (the
Public Service Law), the potential penalty would only be “a fine
of not exceeding two hundred pesos per day for every day dur-
ing which such default or violation continues” (Sec. 21, Public
Service Law). It certainly does not merit the revocation of ABS-
CBN’s franchise.
F. Convergence did not violate
its franchise.
There was no transfer of
“controlling interest in the
grantee [MTI]”. In any case, the
transfer of interest in Columbus
Technologies, Inc. (MTI’s
shareholder) does not require
Congressional approval.
76. Multi-Media Telephony, Inc. (“MTI”), now named ABS-CBN
Convergence, Inc., was incorporated on Sept. 20, 1993. In 1997,
MTI’s franchise was expanded to include mobile, cellular, wired or
wireless telecommunications systems and value-added services
(R.A. No. 8332, which amended R.A. No. 7908).
77. As of 2011, Columbus Technologies, Inc. (“Columbus”) held
95% of the equity of MTI.
77.1. On Dec. 29, 2011, the SEC approved the increase
in Columbus’s authorized capital stock. Sapientis Holdings
Corporation (“Sapientis”), a wholly-owned subsidiary of ABS-
CBN, subscribed to 70% of the increased capital stock of
Columbus. Copies of the Certificate of Filing of Amended Articles
of Incorporation of Columbus and the Certificate of Approval of
Increase of Capital Stock issued by the SEC on Dec. 29, 2011
are attached hereto as Annexes “7” and “8”.
78. On July 31, 2012, the SEC approved the increase in MTI’s
authorized capital stock from Php70 Million to Php800 Million. Of the
increase of Php730 Million, Columbus subscribed to 6,868,369,430
shares, thus increasing its shareholding in MTI to 99%. The SEC
also approved MTI’s change of name to ABS-CBN Convergence,
Inc. on July 31, 2012, contrary to the Republic’s insinuation that the
BizNews Asia / March 2 - 9, 2020 29
 COVER
change of name was approved by the SEC only on March 2, 2015
(Petition, pars. 29, 99, pp. 8 and 36).
78.1. Copies of the Certificate of Filing of Amended Articles
of Incorporation of MTI/Convergence and the Certificate of
Approval of Increase of Capital Stock issued by the SEC on
July 31, 2012 are attached hereto as Annexes “9” and “10”.
79. The Republic contends that “[Convergence] violated Section
15 of R.A. No. 7908, as amended by R.A. No. 8332, when the con-
trolling interest in [MTI], the grantee, was transferred to ABS-CBN.”
(Petition, par. 108, p. 41) The alleged transfer of controlling interest
supposedly amounts to a “transfer of the legislative franchise” without
any congressional approval. (Id.) The Republic is wrong.
80. Section 15 of R.A. No. 7908, as amended by R.A. No. 8332,
reads:
“SEC. 15. Sale, Lease, Transfer, Usufruct, etc. — The
grantee shall not lease, transfer, grant the usufruct of,
sell nor assign this franchise or the rights and privileges
acquired thereunder to any person, firm, company, corpo-
ration or other commercial or legal entity, nor merge with
any corporation or entity, nor shall the controlling interest
in the grantee be transferred, whether as a whole or
in parts and whether simultaneously or contemporane-
ously, to any such person, firm, company, corporation or
entity without the prior approval of the Congress of the
Philippines. Any person or entity to which this franchise
is sold, transferred or assigned, shall be subject to the
same conditions, terms, restrictions, and limitations of
this Act.” (emphasis ours)
81. First, there was never any transfer of shares in the grantee,
MTI. The controlling interest in MTI has always been, and still re-
mains with Columbus, even after Sapientis subscribed to 70% of
Columbus’s increased capital stock in 2011.
82. Second, the transfer of Columbus shares in 2011 did not
constitute a transfer of Convergence’s legislative franchise. In Philip-
pine Long Distance Telephone Co. v. National Telecommunications
Commission, G.R. No. 88404, Oct. 18, 1990, this Honorable Court
held that the sale of a franchise is different from the sale of shares
of stock of a corporation possessing such franchise. The former is
prohibited while the latter is not.
83. Third, the limitation in Section 15 should be read in conjunc-
tion with Section 23 of R.A. No. 7925 (Public Telecommunications
Policy Act), which provides:
“SECTION 23. Equality of Treatment in the Telecom-
munications Industry. — Any advantage, favor, privi-
lege, exemption, or immunity granted under existing
franchises, or may hereafter be granted, shall ipso
facto become part of previously granted telecommuni-
cations franchises and shall be accorded immediately
and unconditionally to the grantees of such franchises:
Provided, however, That the foregoing shall neither apply
to nor affect provisions of telecommunications franchises
concerning territory covered by the franchise, the life span
of the franchise, or the type of service authorized by the
franchise.” (emphasis ours)
84. In Philippine Long Distance Telephone Co.) Inc. v. City of
Davao, G.R. No. 143867, Aug. 22, 2001, this Honorable Court held
that “[t]he thrust of the law is to promote gradually the deregula-
tion of the entry, pricing and operations of all public telecommu-
nications entities and thus promote a level playing field in the
telecommunications industry.” Such policy would be defeated if
an advantage, favor, privilege, exemption, or immunity granted to
a telecommunications franchise is not similarly extended to MTI.
30 BizNews Asia / March 2 - 9, 2020
85. Even assuming that the congressional approval requirement
applies at the level of Columbus (and not just of MTI), the provisions
in other telecommunications franchises granted by Congress before
or after the enactment of R.A. No. 7925, which are more advanta-
geous than the provisions of MTI’s franchise, should ipso facto,
immediately and unconditionally, become part of MTI’s franchise.
86. In this regard, on March 30, 1995, Congress granted Ma-
ranao Telephone Company its franchise and prohibited the transfer,
assignment or sale of the controlling interest in the grantee only
“within five (5) years from the effectivity of this Act” (Sec. 11, R.A.
No. 7970, March 30, 1995). Assuming that the requirement of con-
gressional approval applies to the transfer of controlling interest in
Columbus, such requirement must be deemed to apply only for a
period of five years from the effectivity of MTI’s franchise (March
17, 1995), or only until March 17, 2000.
87. The following exceptions to the requirement of congressional
authority found in the telecommunications franchises of
Telecommunications Technologies Philippines, Inc., Island Country
Telecommunications, Inc., Schutzengel Telecom, Inc., and Innove
Communications, Inc. (formerly Isla Communications Company, Inc.),
should likewise be deemed incorporated in the franchise of MTI:
a. Any transfer or issuance of shares of stock in the imple-
mentation of requirement for the dispersal of the grantee’s
ownership;
b. Any transfer or sale of shares of stock to a foreign inves-
tor or investors;
c. Any issuance of shares to any foreign or local inves-
tor pursuant to or in connection with any increase in the
grantee’s authorized capital stock which shall result in the
dilution of the stockholdings of the grantee’s then existing
stockholders; and
d. Any combination thereof where such transfer, sale, or
issuance is effected in order to enable the grantee to raise the
necessary capital or financing for the provision of any of the
services authorized by the franchise and/or to carry out any
of the purposes for which the grantee has been incorporated
or organized.
88. As admitted by the Republic, Sapientis acquired 70% of
shares in Columbus by subscribing to the shares issued pursuant
to its increase in authorized capital stock. (Petition, pars. 26, 104,
pp. 7 and 37-40) This resulted in the dilution of the stockholdings
of Columbus’s then existing stockholders. Hence, Sapientis’s
acquisition of shares in Columbus did not require the approval of
Congress.
89. Consequently, there is no truth to the Republic’s assertion
that Respondents employed a web of corporate layering to circum-
vent the congressional approval requirement (Petition, pars, 101,
108, pp. 36-37, 41).
90. There was no attempt whatsoever to conceal Sapientis’ ac-
quisition of 70% shares in Columbus. Note 1 of the Annual Financial
Statements submitted by Convergence (formerly, MTI) as part of
its 2012 Annual Report to the NTC clearly states that: “On Dec. 29,
2011, the Philippine Securities and Exchange Commission (SEC)
approved the application of [Columbus] for the increase in authorized
capital stock and [Columbus’s] Amended Articles of Incorporation.
Subsequently, [Columbus] became a 70%-owned subsidiary of
Sapientis Holdings Corporation (Sapientis), a wholly owned
subsidiary of ABS-CBN Corporation (ABS-CBN), a publicly-
listed entity.” (emphasis ours)
90.1. A copy of the 2012 Annual Report submitted by Conver-
gence (formerly, MTI) to the NTC is attached hereto as Annex “11”.
COVER
91. The Republic falsely accuses MTI of “represent[ing] itself
as ABS-CBN Convergence”, purportedly allowing “the latter… to
use the former’s legislative franchise…” (Petition, par. 97, p. 35)
This is puzzling, since Convergence and MTI are the same entity,
“ABS-CBN Convergence, Inc.” being MTI’s new corporate name.
(see Annex “9’ hereof) A mere change in corporate name does
not affect the identity of the corporation. Philippine First Insurance
Company, Inc., v. Hartigan, G.R. No. L-26370, July 31, 1970. MTI’s
franchise, therefore, was not used by another entity.
Convergence was not qualified
to make a public offer of its
shares in the securities
exchange.
92. The Republic faults Convergence for failing to offer at least
30% of its outstanding capital stock to any securities exchange in
the Philippines within five years from the start of its operations.
However, it was legally impossible for Convergence to comply with
this requirement given its financial condition.
93. Section 16 of R.A. No. 7908, as amended, requires that at
least 30% of the outstanding capital stock of Convergence be of-
fered in a securities exchange. It follows that the offer must comply
with the rules of the exchange.
94. For a corporation to be allowed to initially list its shares
with the Main Board of the Philippine Stock Exchange (“PSE”) and
offer such shares to the public, it must submit proof of profitable
operations. The Main and SME Board Listing Rules adopted by
the PSE and approved by the SEC pursuant to Rule 39.1(C) of
the Implementing Rules and Regulations of the Securities Regu-
lation Code, require that the applicant must have “a cumulative
consolidated earnings before interest, taxes, depreciation, and
amortization (EBITDA), excluding nonrecurring items, of at least
P50 Million for three (3) full fiscal years immediately preceding
the application for listing and a minimum EBITDA of P10 Million
for each of the three fiscal years” and “a positive stockholders’
equity in the fiscal year immediately preceding the filing of the
listing application.”
95. Convergence started commercial operations in January
1997. As shown in the attached audited financial statements (An-
nexes “12” to “12-W”), Convergence has incurred losses in every
fiscal year from 1997 to present. In its latest Audited Financial State-
ments (for the year ended 2018), its total loss for 2018 alone was
recorded at Php165,527,963.00. It had a capital deficiency of over
Php6 billion as of the end of 2018.
96. Since Convergence cannot comply with the requirements
under the PSE’s Main and SME Board Listing Rules (which is the
only stock exchange in the Philippines), it cannot list and offer its
shares to the public. It was, therefore, legally impossible for it to
comply with Section 16.
96. “The law does not require that the impossible be done.
Nemo tenetur ad impossibile. The law obliges no one to perform an
impossibility. Laws and rules must be interpreted in a way that they
are in accordance with logic, common sense, reason and practical-
ity.” Santos v. PNOC Exploration Corporation, G.R. No. 170943, 23
September 2008, underscoring ours
ABS-CBN’s prior investment in
Amcara is not a violation of its
franchise.
97. The Republic further asserts that “ABS-CBN Corporation
acquired and used Amcara’s legislative franchise under R.A. No.
8135.” (Petition, par. 30, p. 8) This is false.
98. ABS-CBN no longer holds shares in Amcara Broadcasting
Network Inc. (“Amcara”). It made a previous investment in Amcara
in 1996 by buying 49% of Amcara’s shares, but divested the same
in January 2019. Accordingly, Amcara was not a subsidiary of
ABS-CBN, but merely an affiliate. (See ABS-CBN’s 2012 Amended
Annual Report pursuant to Section 17 of the Securities Regulation
Code [“SRC”] and Section 141 of the Corporation Code, Annex “K”
of the Petition, p. 8)
99. ABS-CBN’s 49% shareholding in Amcara did not constitute a
transfer of Amcara’s legislative franchise to ABS-CBN. As discussed,
this Honorable Court held in Philippine Long Distance Telephone
Co. v. National Telecommunications Commission, G.R. No. 88404,
18 October 1990, that the sale of a franchise is different from the
sale of shares of stock of a corporation possessing such franchise.
The former is prohibited while the latter is not.
100. The Republic also asserts that ABS-CBN’s prior investment
in Amcara demonstrates “[t]he temerity of ABS-CBN Corporation
to monopolize frequencies or airwaves of the State.” (Petition, par.
109, p. 41)
101. ABS-CBN has not “monopolized” the broadcast industry
by investing in Amcara. A monopoly consists of the “exclusive right
or power to carry on a particular business or trade, manufacture a
particular article, or control the sale or the whole supply of a particular
commodity. It is a form of market structure in which one or only a
few firms dominate the total sales of a product or service.” Garcia
v. Corona, et al., G.R. No. 132451, 17 December 1999.
102. The Philippine broadcast industry is diverse. There are
26 television stations and 31 radio stations in the National Capital
Region alone. This belies the Republic’s claim of monopoly of the
broadcast industry by ABS-CBN. Ironically, in seeking to revoke the
franchise granted to ABS-CBN, it is the Republic that is effectively
seeking to decrease the number and diversity of the participants in
the broadcast industry, thereby promoting a monopolistic environ-
ment.
103. In any case, if the Republic believes that ABS-CBN is
exercising a monopoly, its remedy is not to file a petition for quo
warranto with this Honorable Court, but to file a complaint with the
Philippine Competititon Commission, which is vested with the original
and primary jurisdiction to inquire, investigate, and hear and decide
cases involving any violation of the Philippine Competition Act and
other competition laws. (Section 12(a), R.A. No. 10667)
G. The PDRs do not violate the
foreign ownership restriction
under the Constitution or
the conditions of ABS-CBN’s
franchise.
The Republic’s characterization
of the PDRs is inaccurate.
104. The Republic contends that the issuance of ABS-CBN PDRs
to foreigners, through ABS-CBN Holdings, Inc., violates Article XVI,
Section 11(1) of the 1987 Constitution, which states that “[t]he own-
ership and management of mass media shall be limited to citizens
of the Philippines, or to corporations, cooperatives or associations,
wholly-owned and managed by such citizens. xxx” (emphasis ours)
BizNews Asia / March 2 - 9, 2020 31
 COVER
105. The Republic does not, as it could not, allege that the PDRs
permit foreigners to participate in the management of ABS-CBN.
Instead, its allegations are limited to the question of ownership.
106. The Republic recognizes that the “PDRs, per se, are not
evidence or statements or certificates of ownership of a corpora-
tion.” (Petition, par. 120, p. 45) It also acknowledges that “the actual
ownership of the underlying shares of ABS-CBN Corporation is
maintained by ABS Holdings.” (Petition, par. 139, p. 52) However,
the Republic insists that the PDRs are equivalent to shares be-
cause the holders thereof are entitled to “all the dividends of the
underlying shares of stock.” (Petition, par. 120, p. 45) The Republic
is wrong.
The PDRs were approved by the SEC.
107. Rule 8 of the SRC prohibits the sale/distribution or offer for
sale/distribution of securities within the Philippines without the seller/
offeror filing a registration statement with the securing the approval
of the SEC (subject to exceptions which are not applicable here).
108. In accordance with this rule, the ABS-CBN PDRs were
registered with, and approved by, the SEC in 1999 and 2014 before
they were sold to the public. After reviewing the provisions of the
PDRs and ultimately finding that these provisions were compliant
with Philippine law, the SEC issued Certificates of Permit to Offer
Securities for Sale to ABS-CBN Holdings dated 4 October 1999.
(Annex “13” hereof).
109. Additional ABS-CBN PDRs were issued subsequently and
these PDRS were also registered with, and approved by, the SEC
in 2014. The SEC similarly issued a Certificate of Permit to Offer
Securities for Sale to ABS-CBN Holdings dated 7 January 2014.
(Annex “14” hereof).
110. The terms and conditions of the PDRs clearly contemplated
the sale of these instruments (but not of the underlying ABS-CBN
share) to foreigners. These terms and conditions were evaluated
and approved by the SEC. That approval has never been revoked
and thus remains effective and subsisting to date.
111. Having approved the terms and conditions of the PDRs
through the SEC, and having never disavowed the SEC’s approval
of the PDRs, the Republic is now estopped from asserting that
those same terms violate the Constitutional restriction on foreign
ownership. Newsounds Broadcasting Network, Inc. v. Dy, supra.
112. Assuming arguendo that the SEC erred in approving the
issuance of the PDRs, its act of so approving was “an operative
fact” with “consequences which cannot justly be ignored.” This
Honorable Court recognized in Film Development Council of the
Philippines v. Colon Heritage Realty Corporation, G.R. No. 203754,
16 June 2015, that legal consequences attach to an executive (or
legislative) act prior to it being adjudged void, and that “[i]t would
indeed be ghastly unfair to prevent private respondent from relying
upon the [act declared void].” For the past twenty years, ABS-CBN
Holdings as the Issuer, ABS-CBN as the Company whose shares
are subject of the instrument, and those who traded in and still
hold these PDRs, relied in good faith on the SEC’s approval of the
offering and sale of the PDRs. It would be unfair to suddenly strip
ABS-CBN of its franchise for a purported wrongdoing which arose
only upon reliance on the imprimatur of the SEC.
The PDRs are not “equivalent to shares”.
113. In its Petition (par. 121, p. 45), the Republic itself alleges
that ABS-CBN PDRs are mere securities or equity derivatives.
32 BizNews Asia / March 2 - 9, 2020
It, therefore, recognizes that PDRs are not shares. Indeed, it char-
acterizes PDRs as “equivalent to shares.” (Petition, par. 120, p 45)
113.1. In a stock corporation, ownership is represented by
capital stock divided into shares. Revised Corporation Code,
Section 3.
113.2. On the other hand, a derivative, with respect to equity
securities, is “a financial instrument… whose value depends
on the interest in or performance of an underlying security,
but which does not require any investment of principal in the
underlying security.” Rule 3.1-1, Implementing Rules of the
Securities Regulation Code.
113.3. The Republic thus correctly recognizes the innate
distinction between a derivative and the underlying security.
114. However, the Republic insists that the PDRs are equiva-
lent to shares (Petition, par. 120, p. 45). It asserts that each PDR
“grants the PDR holders, upon payment of the exercise price of
P0.10 and subject to certain conditions, the delivery of one
ABS-CBN Corporation share or the sale and delivery of the pro-
ceeds of such sale of one ABS-CBN share.” (Petition, par. 121,
pp. 45-46)
115. What the Republic failed to elaborate on are the “certain
conditions” imposed on the right of a PDR Holder to the delivery of
an ABS-CBN Share, particularly in the case of foreigners. Under
Condition 5.3 of the PDR Instrument (Annex “15” hereof), if the
PDR holder is a foreigner and he exercises the PDR, the only right
he has is to receive the net proceeds of the sale of the underly-
ing ABS-CBN share after it is sold through an eligible broker in the
“open market” or the PSE. At no instance will the ABS-CBN share
be delivered to a foreigner.
The PDRs do not grant
ownership of ABS-CBN to
foreigners.
116. The Republic points to two rights of PDR holders as evi-
dence that the PDRs grant indirect beneficial ownership to foreign-
ers, i.e., (a) the PDR holders’ entitlement to dividends based on the
underlying shares; and (b) their supposed power to dispose of or
direct the disposition of such security. (see Petition, par. 132, p. 49)
117. The Republic’s objections rest on the false assumption that
the Constitution prohibits foreigners from benefiting, in some way,
even indirectly, from mass media corporations in the Philippines.
This Honorable Court in Gamboa v. Teves, G.R. No. 176579, 28
June 2011, has already rejected the Republic’s theory.
117.1. In Gamboa, this Court declared that the intent be-
hind the ownership restrictions in the Constitution is to prevent
foreigners from assuming effective control of certain industries
which have sensitive and vital roles in the economy and in
national security.
117.2. Effective control, in turn, was deemed to depend
upon two variables – (a) the grant of the power to elect the
Board of Directors; and (b) the right to full beneficial owner-
ship of the shares.
PDR Holders are not granted
the rights of shareholders of
ABS-CBN.
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118. The PDR holders’ rights are not equivalent to the full ben-
eficial ownership rights of the shareholders of ABS-CBN. Under
the Revised Corporation Code, the following rights are granted to
each shareholder:
a. Right to the issuance of a stock certificate (Section 62)
and to have certificates replaced in lieu of those lost, stolen or
destroyed (Section 72);
b. Right to have the transfer in his favor recorded in the
Stock and Transfer Book (Section 62);
c. Right to be informed of the annual or special meetings
of the corporation (Section 49);
d. Right to participate in the annual or special meetings of
the corporation (Section 49);
e. Right to vote on the following matters:
i. Elections of the Board of Directors (Section 23);
ii. Extension or Shortening of Corporate Term (Section
36);
iii. Increase or Decrease of Capital Stock (Section 37);
iv. Creation or Increase of Bonded Indebtedness (Sec-
tion 37);
v. Sale or Other Disposition of Assets (Section 39);
vi. Planned merger or consolidation (Section 75);
vii. Amendments of Bylaws (Section 47);
f. Right to be elected as a Director (Section 22);
g. Right to be elected as the President of the corporation
(Section 24);
h. Right to remove directors (Section 27);
i. Pre-emptive right over the sale of shares (Section 38);
j. Power to inspect and demand reproduction of corporate
books and records (Section 73);
k. Right to be furnished the financial statements of the
corporation (Section 74); and
l. Appraisal Right (Section 80).
119. The PDRs do not grant any of the foregoing rights to PDR
Holders as against ABS-CBN. In fact, Condition 4 of the PDR Instru-
ment states that unless there is a valid transfer of the share to a
Filipino citizen, ABS-CBN Holdings shall remain the registered owner
of the underlying ABS-CBN shares. Voting rights with respect to the
shares will likewise be retained and exercised by ABS-CBN Holdings:
“4. Ownership of Shares and Voting Rights
4.1 Pending exercise of the PDRs (subject as de-
scribed below), the Shares deliverable on exercise of the
PDRs shall be owned by and registered in the name of
the Issuer.
xxx
4.3 Neither the Security Agent nor any Holder shall
have voting rights with respect to the Shares. Until an
exercise of a PDR, the Issuer, as owner of Shares underly-
ing the relevant PDR, will retain and exercise such voting
rights relating to such Shares.”
120. Instead, the PDR Instrument grants only limited and specific
rights to its holders. Some of these rights arise from holding the
PDR itself, while others are only activated upon the “exercise” of the
PDR. See PDR Instrument dated 5 October 1999, Annex 14 hereof.
a. While the PDR is with the holder, and has not been ex-
ercised, the holder has the right to:
i. Certain cash distributions by ABS-CBN Holdings as
the Issuer of the PDRs; and
ii. Additional PDRs or adjustment to the terms of the
PDRs upon the occurrence of certain events, i.e., rights
issues, reorganizations, issuance of stock dividends of
ABS-CBN Corporation.
b. Upon the exercise of the PDR, the holder has the right
to:
i. Delivery of the underlying share, if the PDR Holder
is qualified under the law to own the Share; and
ii. Payment of the net proceeds from the sale of the
Share, if the PDR Holder is not qualified under the law to
own the Share.
(a) PDR holders are entitled only to
cash distributions from ABS-
CBN Holdings.
121. The right of a PDR Holder to receive cash distributions from
ABS-CBN Holdings is subject to Condition 9 of the PDR Instrument.
Condition 9 provides that the PDRs do not grant PDR Holders any
right to dividends declared by ABS-CBN. Not being shareholders of
ABS-CBN, they cannot demand ABS-CBN to declare dividends, or
claim such dividends directly from ABS-CBN. Instead, PDR Holders
are granted only the right to distribution from ABS-CBN Holdings
of the amount remaining after the expenses and other obligations
of ABS-CBN Holdings are paid.
121.1. When dividends are declared by ABS-CBN, only
ABS-CBN Holdings, as the shareholder or owner of the ABS-
CBN shares, receives such dividends. These dividends then
become part of the general assets of ABS-CBN Holdings. The
amounts received by ABS-CBN Holdings are then used to pay
its expenses and the general claims of its creditors, if any, before
any distribution to PDR Holders is undertaken.
122. In any event, this Honorable Court in Roy III v. Herbosa,
G.R. No. 207246, Resolution dated 18 April 2017, has clarified
that the right to receive dividends, by itself, does not determine full
beneficial ownership of shares. This Court declared:
“Once more, this is emphasized anew to disabuse
any notion that the dividends accruing to any particu-
lar stock are determinative of that stock’s ‘beneficial
ownership.’ Dividend declaration is dictated by the cor-
poration’s unrestricted retained earnings. On the other
hand, the corporation’s need of capital for expansion
programs and special reserve for probable contingen-
cies may limit retained earnings available for dividend
declaration. It bears repeating here that the Court in the
Gamboa Decision adopted the foregoing definition of the
term ‘capital’ in Section 11, Article XII of the 1987 Con-
stitution in express recognition of the sensitive and vital
position of public utilities both in the national economy
and for national security, so that the evident purpose of
BizNews Asia / March 2 - 9, 2020 33
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the citizenship requirement is to prevent aliens from as-
suming control of public utilities, which may be inimical
to the national interest. This purpose prescinds from the
‘benefits’/dividends that are derived from or accorded to
the particular stocks held by Filipinos vis-à-vis the stocks
held by aliens. So long as Filipinos have controlling
interest of a public utility corporation, their decision
to declare more dividends for a particular stock over
other kinds of stock is their sole prerogative – an act
of ownership that would presumably be for the benefit
of the public utility corporation itself.” (emphasis ours)
123. Since the voting power of the ABS-CBN shares remains with
Philippine stockholders, dividends accruing to investors, of whatever
nationality, is irrelevant. Hence, even assuming that the PDRs are
shares (they are not), and that what the PDR holders receive are
dividends from ABS-CBN, this right to receive dividends is not per
se determinative of that stock’s full “beneficial ownership”.
(b) PDR holders do not have
the power to dspose of or
direct the disposal of ABS-
CBN shares.
124. The Republic also argues that the “power to dispose of,
or direct the disposal of such PDRs… necessarily falls under the
definition of beneficial ownership.” (Petition, par. 132, p. 49) This
assertion has no support in both law and fact.
125. As discussed, the PDR Instrument only grants a foreign
PDR Holder the right to exercise the PDR, and upon such exercise,
the receive the proceeds from the sale in the stock market of the
underlying ABS-CBN share. This arrangement is not equivalent
to the power to dispose of the underlying ABS-CBN share, as the
foreign PDR holder has no right to sell that share, select the buyer,
or decide on the purchase price. In short, a foreign PDR Holder can
only trigger the sale of the share through ABS-CBN Holdings by ex-
ercising the PDR, but it has no other participation in the transaction.
126. Nonetheless, this Court has already clarified in Roy III that
a Filipino is the full beneficial owner of a share of stock if a Filipino
can vote on that share or he can dispose of such share (or both):
“Thus, the definition of ‘beneficial owner or benefi-
cial ownership’ in the SRC-IRR, which is in consonance
with the concept of ‘full beneficial ownership’ in the FIA-
IRR, is, as stressed in the Decision, relevant in resolving
only the question of who is the beneficial owner or has
beneficial ownership of each ‘specific stock’ of the
public utility company whose stocks are under review. If the
Filipino has the voting power of the ‘specific stock’, i.e.,
he can vote the stock or direct another to vote for him, or
the Filipino has the investment power over the ‘specific
stock’, i.e., he can dispose of the stock or direct another to
dispose of it for him, or both, i.e., he can vote and dispose
of that ‘specific stock’ or direct another to vote or dispose
it for him, then such Filipino is the ‘beneficial owner’ of
that ‘specific stock.’ Being considered Filipino, that ‘spe-
cific stock’ is then to be counted as part of the 60% Filipino
ownership requirement under the Constitution. The right
to the dividends, jus fruendi — a right emanating from
ownership of that ‘specific stock’ necessarily accrues to
its Filipino ‘beneficial owner’.” (emphasis ours)
127. Applying the above ruling, investment power does not, by
itself, vest the PDR holders with full beneficial ownership over the
underlying ABS-CBN shares. Ownership of the underlying ABS-CBN
shares still rests with a Filipino (ABS-CBN Holdings), considering
that the latter retains the all-important right to vote in the election
of directors of ABS-CBN and other matters submitted for the deter-
mination of ABS-CBN’s stockholders.
34 BizNews Asia / March 2 - 9, 2020
128. The portion of the Concurring Opinion of Justice Presbitero
Velasco cited by the Republic in its Petition, is a discussion on a
hypothetical scenario, and does not reflect the true ruling of this
Honorable Court in Roy, III, G.R. No. 207246, 22 November 2016.
In the majority opinion, this Court explained the import of its ruling
in Gamboa and categorically stated:
“The Court adopted the foregoing definition of the term ‘capital’
in Section 11, Article XII of the 1987 Constitution in furtherance of
‘the intent and letter of the Constitution that the ‘State shall de-
velop a self-reliant and independent national economy effectively
controlled by Filipinos’ [because a] broad definition unjustifiably
disregards who owns the all-important voting stock, which neces-
sarily equates to control of the public utility.’ The Court, recognizing
that the provision is an express recognition of the sensitive and
vital position of public utilities both in the national economy and
for national security, also pronounced that the evident purpose
of the citizenship requirement is to prevent aliens from assuming
control of public utilities, which may be inimical to the national
interest. Further, the Court noted that the foregoing interpretation
is consistent with the intent of the framers of the Constitution to
place in the hands of Filipino citizens the control and manage-
ment of public utilities; and, as revealed in the deliberations of
the Constitutional Commission, ‘capital’ refers to the voting stock
or controlling interest of a corporation.
In this regard, it would be apropos to state that since Filipinos
own at least 60% of the outstanding shares of stock entitled to vote
directors, which is what the Constitution precisely requires, then the
Filipino stockholders control the corporation, i.e., they dictate corpo-
rate actions and decisions, and they have all the rights of ownership
including, but not limited to, offering certain preferred shares that
may have greater economic interest to foreign investors – as the
need for capital for corporate pursuits (such as expansion), may be
good for the corporation that they own. Surely, these ‘true owners’
will not allow any dilution of their ownership and control if such move
will not be beneficial to them.” (emphasis ours)
129. The power to vote and control the affairs of the corpora-
tion, therefore, remains the essential element when determining
the ownership of a corporation. The Republic does not allege that
the PDRs grant control over ABS-CBN to foreigners. It therefore
acknowledges that control, and therefore ownership, over ABS-CBN
is with its Filipino shareholders, as required by the Constitution.
H. The Petition, if granted, will
have a chilling effect on the
press.
130. There are several reasons for the outright dismissal of the
Petition: (a) the Republic’s resort to quo warranto is wrong—Rule
66 of the present Rules of Civil Procedure does not contemplate the
revocation or forfeiture of a valid and existing franchise; (b) Congress
is already confronted with the question of whether Respondents
should continue their operations; and (c) presuming the Petition
is allowed under Rule 66, the Republic cannot directly invoke this
Honorable Court’s jurisdiction.
131. On top of this, the grounds relied upon by the Republic
do not justify the overkill penalty of revocation or forfeiture of Re-
spondents’ franchises. Neither ABS-CBN nor Convergence violated
any law or regulation: (a) the KBO offering was not prohibited; (b)
Convergence did not violate the provisions of its franchise on transfer
of “controlling interest in the [franchise] grantee” and dispersal of
ownership to the public; (c) it is simply absurd to accuse ABS-CBN
of monopolizing the broadcast industry for its past investment in
Amcara; and (d) the issuance and sale of PDRs do not violate the
foreign ownership restriction in the Constitution.
COVER
132. Respondents are presumed to be innocent. (Section 3(a),
Rule 131, Revised Rules on Evidence) It is also presumed that
“the law has been obeyed” and “official duty has been regularly
performed.” (Section 3(m) and (ff), Rule 131, Revised Rules on
Evidence) The onus, therefore, is on the Republic to prove why
this Honorable Court should disregard the actions of the regulatory
agencies involved—the NTC and the SEC—not only in refraining
from proceeding against Respondents, but more importantly in is-
suing the approvals on which Respondents relied. The Republic’s
Petition is barred by estoppel.
133. Finally, granting the Petition means shutting down what
the Republic concedes to be the country’s “largest media conglom-
erate… reaching millions of viewers in all corners of the country”
and the “biggest broadcasting entity… able to shape the public’s
opinion on a variety of issues, apart from providing entertainment.”
(Petition, par. 62, p. 21) This case, therefore, cannot be resolved
without “compromising” the “fundamental guarantees of freedom of
speech and of the press:”
“Whenever the force of government or any of its
political subdivisions bears upon close down a pri-
vate broadcasting station, the issue of free speech
infringement cannot be minimized, no matter the legal
justifications offered for the closure. In many respects,
the present petitions offer a textbook example of how the
constitutional guarantee of freedom of speech, expres-
sion and of the press may be unlawfully compromised.
Tragically, the lower courts involved in this case failed to
recognize or assert the fundamental dimensions, and it is
our duty to reverse, and to affirm the Constitution and the
most sacred rights it guarantees.” (Newsounds Broadcast-
ing Network Inc. v. Dy, supra, emphasis ours)
134. For the Republic to justify curtailment of the freedom of
speech and of the press with prior restraint (which is what the
revocation of ABS-CBN’s franchise would undeniably amount to),
it must satisfy the strict scrutiny test. (See Divinagracia, supra;
Newsounds Broadcasting Network Inc. v. Dy, supra.)
135. Under the strict scrutiny test, the Republic must prove:
(a) an important or substantial government interest, which is
unrelated to the suppression of free expression; (b) there is
a clear and present danger that will bring about the substantive
evils sought to be prevented; and (c) that government action must
be narrowly tailored to achieve that interest, and that the same
must be the least restrictive means for achieving that interest.
The Petition fails this test. Respondents’ Comment Ad Cautelam
(Re: Very Urgent Motion for the Issuance of a Gag Order) is herein
repleaded by reference.
136. The Republic does not allege any important government
interest or substantive evil which would justify preventing ABS-CBN
from broadcasting all of its programs on television and radio. All it
accused ABS-CBN of were offering pay-per-view services, investing
in Amcara, and issuing PDRs (ABS-CBN was not even the issuer
of these securities).
137. Even assuming that ABS-CBN committed infractions of its
franchise, revoking such franchise altogether is definitely not the
“least restrictive means” to achieve State interest. The Republic has
remedies before the NTC, the SEC and the PCC.
138. The Petition, therefore, must be denied. Revoking or forfeit-
ing ABS-CBN’s franchise would constitute improper prior restraint
on speech. It will create a chilling effect on the press. Other media
entities or broadcast networks will have to live in constant fear of
revocation of license over any perceived infraction. In the words of
Justice Antonio in his separate concurring opinion in Chavez, this
constant threat would “[freeze] radio and television stations into
deafening silence.”
Respondents incorporate below the foregoing arguments and
further state by way of:
Opposition to Application for Temporary
Restraining Order or Writ
of Preliminary Injunction
139. The Republic seeks the issuance of a “temporary restrain-
ing order or writ of preliminary injunction enjoining ABS-CBN from
further operating the KBO Channel and offering it to the general
public”. The Republic’s application is without merit and must be
denied on the following grounds:
A. The requisites for the issuance a temporary restraining order
(“TRO”) or a writ of preliminary injunction (“WPI”) are not
present.
B. Even assuming the requisites for the issuance of a TRO or
a WPI are present, this Honorable Court has no jurisdiction
to issue such provisional remedy, since it has no jurisdiction
over the main action for quo warranto.
C. A TRO or a WPI enjoining ABS-CBN from “further operat-
ing the KBO Channel and offering it to the public” is not
proper, because it would effectively reverse the status quo
and prejudge the merits of the Petition when Respondents
have yet to be completely heard thereon.
The requisites for the issuance a
TRO or a WPI are not present.
140. As a Republic itself admits, there are four requirements for
the issuance of a TRO or a WPI: (a) the applicant must have a clear
and unmistakable right, that is a right in esse; (b) there is a material
and substantial invasion of such right; (c) there is an urgent need
for the writ to prevent irreparable injury to the applicant; and (d) no
other ordinary, speedy, and adequate remedy exists to prevent the
infliction of irreparable injury. (Petition), par. 144) These requisites
are not present here.
141. Contrary to the Republic’s claim, it has no “clear and
unmistakable right to ensure that the grantee abides by the
legislative franchise” (Petition, par. 146) or “to enforce its laws
and rules” (Petititon, par. 150). What the Republic has is not a
legal right, but a duty (or power), through the Executive Depart-
ment, to ensure that grantees of legislative franchises comply
with relevant laws.
141.1. Indeed, one’s duty or power cannot be violated by
another person. It can only be exercised (and violated) by the
duty-holder. And the Republic (acting through the government)
has a mass of powers available to carry out its duty to imple-
ment the laws. As earlier pointed out, the Republic has sufficient
remedies under the relevant laws to make Respondents comply
with the terms of their franchises, or to penalize them for failure
to do so. Otherwise stated, the Republic does not need any
injunctive relief from this Honorable Court to be able to exercise
its duty or power to implement the law.
142. Respondents have not materially or substantially invaded
the Republic’s right “to ensure that [they abide] by [their] legislative
franchise[s]”, since there is no such right in the first place. Even
if Respondents were to concede that the right exists, the second
requisite for the issuance of a TRO or a WPI is still not present. As
earlier demonstrated, Respondents did not violate their respective
legislative franchises.
BizNews Asia / March 2 - 9, 2020 35

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143. The Republic failed to show how there is an urgent need for
the issuance of a TRO or a WPI to prevent irreparable injury to it. Its
claim for urgency is belied by the fact that it seeks to restrain the of-
fering of KBO on ABS-CBN’s TVPlus service only now, almost four
years after KBO was first made available on TVPlus in 2016. The
Republic also did not point to any specific irreparable injury it would
supposedly suffer as a result of result of KBO’s continued offering.
144. The Republic did not even allege that no other ordinary,
speech, and adequate remedy exists to prevent the infliction of
irreparable injury to it. This could only mean that it recognizes the
fact that such other ordinary, speedy, and adequate remedies do
exist (as Respondents have in fact pointed out above).
145. All told, since the Republic failed to satisfy the requisites for
the issuance of a TRO or a WPI, this Honorable Court must deny
the Republic’s application for injunctive relief.
Even assuming the requisites for
the issuance of a TRO or WPI are
present, this Honorable Court has
no jurisdiction to issue such
provisional remedy, since it has
no jurisdiction over the main
action for quo warranto.
146. It is settled that “[t]he power of a court to issue … provi-
sional injunctive reliefs coincides with its inherent power to issue
all auxiliary writs, processes, and other means necessary to carry
its acquired jurisdiction into effect.” Carpio-Morales v. Court
of Appeals (Sixth Division), G.R. Nos. 217126-27, 10 November
2015. As this Honorable Court has ruled in Castaño v. Lobingier,
G.R. No. 3378, 5 December 1907, “if there is no jurisdiction to
issue a writ of certiorari, there can be no jurisdiction to issue a
preliminary injunction ancillary thereto.” Castaño v. Lobingier,
G.R. No. 3378, 5 December 1907. Thus, if a court does not have
jurisdiction over a main action, it is also devoid of any authority
to act on any application for injunctive relief in the same petition.
(See BF Homes, Inc. v. Manila Electric Co., G.R. No. 171624, 6
December 2010)
147. In this case, Respondents have pointed out that the instant
Petition should be dismissed outright because a petition for quo
warranto is not available as a remedy to revoke a franchise granted
by Congress. Therefore, even assuming that the requisites for the
issuance of a TRO or WPI are present, this Honorable Court has no
jurisdiction to issue the provisional relief prayed for, since it has no
jurisdiction over the main action for quo warranto in the first place.
148. At the very least, since Respondents have pending objec-
tions to the propriety of the Petition and this Honorable Court’s
jurisdiction over the case, Respondents respectfully submit that the
Republic’s application for injunctive relief should not be entertained
until such objections have been resolved.
A TRO or a WPI enjoining ABS-
CBN from “further operating the
KBO Channel and offering it to
the public” is not proper, because
it would effectively reverse the
status quo and prejudge the
merits of the Petition when
36 BizNews Asia / March 2 - 9, 2020
FIL-AMS in New York, San Francisco
show support for ABS-CBN, free press
COVER COVER
NICK EMMANUEL C. VILLALUZ
PTR No. 8148307 / Jan. 20, 2020 / Makati City
Lifetime IBP No. 01673 / Zambales
OR No. 493155 / December 27, 1999
Roll of Attorneys No. 38499
MCLE Compliance No. VI-0010677 / July 24, 2018
MA. ELIZABETH L. LICERALDE
PTR No. 8148315 / Jan. 20, 2020 / Makati City
Lifetime IBP No. 015755 / Jan. 10, 2017 / Baguio-Benguet
NEWS.ABS-CBN.COM
OR No. 1063771 / Jan. 10, 2017
Roll of Attorneys No. 57229
MCLE Compliance No. VI-0018377
Valid until April 14, 2022
Respondents have yet to be injunction should not determine the merits of a case, or decide
completely heard thereon.
controverted facts.” MARIE MICHELLE B. GO
PTR No. 8148318 / Jan. 20, 2020 / Makati City
Lifetime IBP No. 014378 / Makati City
149. “More significantly, a preliminary injunction is merely a
RELIEFS OR No. 1024605 / Jan. 8, 2016
Roll of Attorneys No. 62620
provisional remedy, an adjunct to the main case subject to the latter’s MCLE Exemption No. VI-000356 / Jan. 29, 2018
outcome, the sole objective of which is to preserve the status WHEREFORE, it is respectfully prayed that this Honorable Court:
quo until the trial court hears fully the merits of the case. The status
quo should be that existing at the time of the filing of the case. 1. DENY petitioner’s application for a temporary restraining
The status quo usually preserved by a preliminary injunction is the order or writ of preliminary injunction; and
last actual, peaceable and uncontested status which preceded the JAYSON C. AGUILAR
actual controversy. The status quo ante litem is, ineluctably, 2. DISMISS the Petition on any or all of the foregoing grounds. PTR No. 8148323 / Jan. 20, 2020 / Makati City
the state of affairs which is existing at the time of the filing IBP No. 113128 / Jan. 10, 2020 / Quezon City
of the case. Indubitably, the trial court must not make use of Roll of Attorneys No. 66357
its injunctive power to alter such status.” Overseas Workers Respectfully submitted. MCLE Compliance No. VI-0006755 / March 6, 2018
Welfare Administration v. Chavez, G.R. No. 169802, 8 June 2007;
emphasis ours. Makati City for the City of Manila, 21 February 2020.
150. Here, the status quo existing at the time of the filing of the
Petition, and which ought to be preserved, is the continued show-
ing or availability of KBO channel on ABS-CBN’s TVPlus service. POBLADOR BAUTISTA & REYES
Thus, it is not proper to issue a TRO or a WPI restraining the same, Counsel for Respondents CHARLES RICHARD C. AVILA JR.
because such would effectively reverse the status quo. ABS-CBN CORPORATION PTR No. 8148324 / Jan. 20, 2020 / Makati City
and ABS-CBN CONVERGENCE, INC. IBP No. 113129 / Jan. 10, 2020 / Rizal
151. Moreover, “[t]he prevailing rule is that the courts should 5th Floor, SEDCCO I Building Roll of Attorneys No. 70175
avoid issuing a writ of preliminary injunction that would in effect 120 Rada corner Legaspi Streets MCLE No. Compliance No. VI-0014701 / Nov. 13, 2018
dispose of the main case without trial. Otherwise, there would Legaspi Village, Makati City
be a prejudgment of the main case and a reversal of the rule on Tel. No. 8893-7623 / Fax No. 8893-7622
the burden of proof since it would assume the proposition which Email Address: central@pbrlaw.com.ph
petitioners are inceptively bound to prove. Indeed, a complaint for
injunctive relief must be construed strictly against the pleader.” By: DESIREE N. SOKOKEN
Republic of the Philippines v. Spouses Lazo, G.R. No. 195594, PTR No. 8148325 / Jan. 20, 2020 / Makati City
29 September 2014. IBP No. 113130 / Jan. 10, 2020 / Mt. Province
Roll of Attorneys No. 71585
152. Therefore, this Honorable Court should not issue a TRO MCLE Compliance No. VI-0018933 / March 5, 2019
or a WPI against KBO’s continued showing. To do otherwise
would be to prejudge the merits of the case (i.e., whether KBO is
violative of ABS-CBN’s franchise), when Respondents have yet MARIO LUZA BAUTISTA Copy Furnished:
to be completely heard thereon. As ruled in Bank of the Philippine PTR No. 8148302 / Jan. 20, 2020 / Makati City
Islands v. Judge Hontanasas, G.R. No. 157163, 25 June 2014, “the Lifetime IBP No. 00060 / Makati City Office of the Solicitor General
power to issue a writ of injunction is to be exercised only where OR No. 345208 / March 1, 1993 Counsel for the Petitioner
the reason and necessity therefor are clearly established, and Roll of Attorneys No. 30196 134 Amorsolo Street
only in cases reasonably free from doubt. For, truly, a preliminary MCLE Compliance No. VI-0021794 / March 29, 2019 Legaspi Village, Makati City
BizNews Asia / March 2 - 9, 2020 37