COVER COVER COVER COVER 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 1. The Republic filed its Petition for quo warranto to revoke or SUPREME COURT forfeit the franchises of ABS-CBN and Convergence (for misuse Jurisdictional Grounds Procedural Grounds and abuse) on the basis of Section 1(a), Rule 66 of the 1997 Rules EN BANC of Civil Procedure, which provides:

REPUBLIC OF THE PHILIPPINES A. A petition for quo warranto under C. The filing of the Petition directly with “SECTION 1. Action by Government against Represented by SOLICITOR individuals. An action for the usurpation of GENERAL JOSE C. CALIDA Rule 66 of the 1997 Rules of Civil Procedure this Honorable Court violates the doctrine a public office, position or franchise may be Petitioner, may not be brought on the basis of misuse of hierarchy of courts. It also disregards the commenced by a verified petition brought in the name of the Republic of the Philippines against: - versus – or abuse of a legislative franchise. fundamental rule that this Court is not a trier of fact. (a) A person who usurps, intrudes into, or G.R. NO. 251358 unlawfully holds or exercises a public office, For: Quo Warranto B. Congress is the one empowered to position or franchise xxx” (emphasis ours) revoke the respective legislative franchises D. Assuming that Respondents ABS-CBN CORPORATION and 2. The Petition must be dismissed outright. This Honorable ABS-CBN CONVERGENCE, INC., of Respondents. Granting the Petition committed the violations alleged in the Court does not have jurisdiction to revoke or forfeit Respondents’ Respondents would violate the fundamental principle of Petition, the Republic’s remedy lies before legislative franchises under the above-mentioned rule relied upon. X------X separation of powers. 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 COMMENT AD CAUTELAM 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 Respondents ABS-CBN CORPORATION (“ABS-CBN”) and oust the holder from its enjoyment, if his claim is not well founded.” ABS-CBN CONVERGENCE, INC. (“Convergence”), by counsel, in compliance with the Honorable Court’s Resolution dated Feb. 4. Previously, under the 1964 Rules of Civil Procedure, the 11, 2020, which they received on Feb. 13, 2020, respectfully state: grounds upon which the writ may be issued were more expansive (than those under the currently effective 1997 Rules). Rule 66, Sec- I. tions 1 and 2 of the 1964 Rules provide:

The Petition must be dismissed on the following grounds: “Rule 66 QUO WARRANTO

Jurisdictional Grounds Section 1. Action by Government against individuals. — An action for the usurpation of office or franchise A. A petition for quo warranto under Rule 66 of the may be brought in the name of the Republic of the Philip- 1997 Rules of Civil Procedure may not be brought pines against: (a) A person who usurps, intrudes into, or on the basis of misuse or abuse of a legislative unlawfully holds or exercises a public office, or afran - franchise. chise, or an office in a corporation created by authority of law; (b) A public officer who does or suffers an act which, B. Congress is the one empowered to revoke the by the provisions of law, works a forfeiture of his office; (c) respective legislative franchises of Respondents. An association of persons who act as a corporation within Granting the Petition would violate the fundamen- the Philippines without being legally incorporated or without tal principle of separation of powers. lawful authority so to act.

Procedural Grounds Sec. 2. Like actions against corporations. — A like action may be brought against a corporation: (a) When it C. The filing of the Petition directly with this Honor- has offended against a provision of an Act for its cre- able Court violates the doctrine of hierarchy of ation or renewal; (b) When it has forfeited its privileges courts. It also disregards the fundamental rule NEWS.ABS-CBN.COM and franchises by nonuser; (c) When it has committed that this Court is not a trier of fact. or omitted an act which amounts to a surrender of its corporate rights, privileges, or franchises; (d) When it D. Assuming that Respondents committed the G. The ABS-CBN Philippine Depository Receipts Rules of Civil Procedure may has misused a right, privilege, or franchise conferred (“PDRs”) do not violate the foreign ownership violations alleged in the Petition, the Republic’s not be brought on the basis upon it by law, or when it has exercised a right, privilege, remedy lies before administrative tribunals. restriction under the Constitution or the conditions or franchise in contravention of law.” (emphasis ours) of ABS-CBN’s franchise. of misuse or abuse of a II. legislative franchise. 5. Section 1, Rule 66 of the 1997 Rules is thus almost a repro- H. The Petition, if granted, will have a chilling effect duction of Section 1, Rule 66 of the 1964 Rules—both contemplate Ad cautelam, Respondents submit that the Petition lacks merit. on the press. “[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” E. ABS-CBN did not violate its legislative franchise Arguments and Discussion an office or franchise. (Subsections 1(b) and (c) are almost identical in offering Kapamilya Box Office (“KBO”) on its Rules was not carried over to but not relevant here.) If any of the foregoing grounds exists, both digital terrestrial television service, “TVPlus”. A. A petition for quo warranto 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 F. Convergence did not violate its franchise. under Rule 66 of the 1997 Procedure. from the office or franchise. 20 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 21 COVER COVER

6. In contrast, Section 2 of the 1964 Rules was not carried Granting the Petition means shutting public’s opinion on a variety of issues, over to the 1997 Rules of Civil Procedure. Consequently, a petition B. Congress is the one for quo warranto may no longer be filed on any of the following down what the Republic concedes to be the apart from providing entertainment.” empowered to revoke the grounds: (a) violation of the law creating the defendant-corporation; country’s “largest media conglomerate… This case, therefore, cannot be (b) non-use of its corporate franchise; (c) surrender of a right, privi- respective legislative lege or franchise; or (d) its misuse or its exercise in contravention of reaching millions of viewers in all resolved without “compromising” the franchises of Respondents. law. Section 12, Rule 66 of the 1964 Rules then provided that the corners of the country” and the “biggest “fundamental guarantees of freedom of Granting the Petition would defendant-corporation found to have committed any of the foregoing shall be “ousted and excluded therefrom and… dissolved.” broadcasting entity… able to shape the speech and of the press.” violate the fundamental principle of separation of 7. Rule 66 of the 1997 Rules of Civil Procedure is now limited to quo warranto actions for usurpation of public office, position powers. 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 Congress has power over particularly to actions for usurpation, with no corresponding provision franchises. for the previous grounds of misuse or abuse.

8. It is a cardinal rule of statutory construction that, to ascertain 19. Congress has the power to grant, amend, alter and repeal the intent behind a provision, one must consider the provision as a franchise, as provided in Section 11, Article XII of the Constitution: 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 “SECTION 11. No franchise, certificate, or any other one actually intended and evident when the word or phrase is con- form of authorization for the operation of a public utility sidered with those with which it is associated. Thus, an apparently shall be granted except to citizens of the Philippines or to general provision may have a limited application if viewed together corporations or associations organized under the laws of with other provisions.” Aboitiz Shipping Corp. v. City of Cebu, G.R. the Philippines at least sixty per centum of whose capital No. L-14526. March 31, 1965. is owned by such citizens, nor shall such franchise, cer- tificate, or authorization be exclusive in character or for 9. Thus, the verified petition referred to in Section 1, Rule 66, a longer period than fifty years. Neither shall any such that is filed against “[a] person who usurps, intrudes into, or unlaw- franchise or right be granted except under the condi- fully holds or exercises a public office, position or franchise” is one tion that it shall be subject to amendment, alteration, that “commence[s]” “[a]n action for the usurpation of a public office, or repeal by the Congress when the common good so position or franchise”. (emphasis ours) The phrase “unlawfully holds requires…” (emphasis ours) 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 20. The Republic admits in paragraph 89 of the Petition Sections 5, 6, 9, 10, 11 and 12 of Rule 66. that: “The requirement to seek congressional approval for the operation of legislative franchises and the transfer thereof by 10. “Usurpation” is defined by Black’s Law Dictionary (6th edition, the grantee to another corporation emanate from the provisions 1990) as an “unlawful seizure or assumption of sovereign power”. of the fundamental law of the land. Section 11, Article XII of the

“Usurpation of franchise or office” is defined as “unjustly intruding NEWS.ABS-CBN.COM Constitution gave Congress not only the power to review upon or exercising any office, franchise, or liberty belonging to and approve the franchises of public utilities, including another.” (emphasis ours) Hence, whether a person usurps, intrudes those engaged in telecommunication services, but also into, or unlawfully holds or exercises a public office or a franchise, a 13. To support its Petition, the Republic cites Divinagracia v. tion, or analogy or argument. It does not embody the resolution or the power to amend, alter or repeal the franchises when quo warranto action for usurpation against such person inquires into Consolidated Broadcasting System, Inc., G.R. No. 162272, April determination of the court, and is made without argument, or full the common good so requires.” (Petition, par, 89, pp. 30-31, whether that person unlawfully seized or assumed, or unjustly intruded 7, 2009, and Philippine Long Distance Telephone Company v. consideration of the point.” Landbank of the Philippines v. Suntay, emphasis ours) upon or exercised an office, franchise or libertybelonging to another. National Telecommunications Commission, G.R. No. 88404, Oct. G.R. No. 188376, Dec. 14, 2011. The inquiry is, therefore, not concerned with acts subsequent to the 18, 1990 (“PLDT”). 21. The term “[to] repeal” is defined by Black’s Law Diction- valid grant of an office, privilege or franchise, or to the implementation 16. The only issue in Divinagracia was whether the NTC had ary (6th edition, 1990) as “to revoke, abolish, annul, to rescind or thereof. This is consistent with the nature of a quo warranto—translated 14. Divinagracia does not apply as it did not even involve a peti- the power to cancel the CPCs of the respondents. This Honorable abrogate by authority.” By seeking the revocation of Respondents’ literally “by what warrant”—which is a remedy that inquires into the tion for quo warranto. Rather, it was a complaint filed before the Court’s remark on quo warranto being the proper remedy against franchises (see Petition, pars. 4, 5, 51, 64, pp. 2, 16, 21) with this right of a person to exercise a special privilege. National Telecommunications Commission (“NTC”) to cancel the the “non-use”, “misuse” or “abuse” of a legislative franchise was not Honorable Court, the Republic is effectively asking the Court to Provisional Authorities or certificates of public convenience (“CPCs”) necessary to resolve that issue. repeal the laws which granted such franchises, i.e., R.A. Nos. 7966 11. Precisely because Rule 66 under the 1997 Rules con- of Consolidated Broadcasting System, Inc. (“CBS”) and People’s and 8332. templates only actions for usurpation, “[w]hen the respondent is Broadcasting Service, Inc. (“PBS”). The complaint alleged that CBS 17. An obiter dictum “cannot be controlling jurisprudence to bind found guilty of usurping into, intruding into, or unlawfully holding and PBS “misused” their legislative franchises when they failed to our courts when it adjudicates similar cases upon the principle of 22. Notably, Congress expressly reserved to itself the power to or exercising a… franchise, judgment shall be rendered that such publicly offer at least 30% of their respective common stocks. In stare decisis.” Dee v. Harvest All Investment Limited, et al., G.R. cancel or revoke ABS-CBN’s and Convergence’s franchises. Section respondent be ousted and altogether excluded therefrom, and resolving the case, this Honorable Court ruled that the NTC has no No. 224834, March 15, 2017. Hence, the above-quoted pronounce- 14 of R.A. No. 7966 states: that the petitioner or relator, as the case may be, recover his costs.” power to cancel the subject CPCs, as that would amount to giving ment in Divinagracia is not controlling and cannot be cited by the (Section 9, emphasis ours) Significantly, Rule 66 of the1997 Rules “a mere administrative agency veto power over the implementation Republic as basis for its Petition. In fact, as discussed below, the “Section 14. Repealability and Non-exclusivity Claus- does not provide for the revocation or forfeiture of the franchise. of the law and the enforcement of especially vested legal rights.” ratio decidendi of Divinagracia supports the dismissal of this Petition. es. — This franchise shall be subject to amendment, As an aside, this Honorable Court remarked that the complainant- alteration or repeal by the Congress of the Philippines 12. The Republic does not dispute the grant of Respondents’ petitioner should have resorted to a quo warranto proceeding under 18. The Republic may not point to PLDT and Kilosbayan, es- when the public interest so requires and shall not be franchises or their validity. What is challenged here is the right of Rule 66, citing PLDT, and Kilosbayan v. Morato, 316 Phil. 652 (1995). pecially when relied upon to vest jurisdiction where there is none. interpreted as an exclusive grant of the privileges herein Respondents to continue exercising their franchises, given their Both cases were decided under the 1964 Rules. Moreover, this provided for.” (emphasis ours) purported “violations”, “misuse” or “abuse” thereof (see Petition, 15. This remark is an obiter dictum — “an opinion expressed Honorable Court’s remark in Kilosbayan — that “Quo Warranto is pars. 1, 4, 5, and 51). This is beyond the scope of a quo warranto by a court upon some question of law that is not necessary in the specifically available as a remedy if it is thought that a government An identical provision can be found in Section 18 of R.A. No. 8332. proceeding under Rule 66. determination of the case before the court. It is a remark made, corporation has offended against its corporate charter or misused or opinion expressed, by a judge, in his decision upon a cause by its franchise” — was likewise an obiter as it was not necessary to 23. Congress exercises this authority through the House Com- the way, that is, incidentally or collaterally, and not directly upon resolve the issues of whether Kilosbayan, et al., had legal standing mittee on Legislative Franchises, which is expressly assigned to The Republic cites mere obiter the question before him, or upon a point not necessarily involved to assail the validity of the subject contract, and of whether that deal with “[a]ll matters directly and principally relating to the grant, in Divinagracia. in the determination of the cause, or introduced by way of illustra- contract was valid. amendment, extension or revocation of franchises”. Rules of the 22 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 23 COVER COVER

House of Representatives, emphasis ours. With respect to the Sen- is one of fact. Cucueco v. Court of Appeals, et al., G.R. No. 139278, ate, the grant or amendment of legislative franchises” is assigned Oct. 25, 2004. to the Senate Committee on Public Services.

24. The Republic contends that a legislative franchise is “not There are factual issues to be a right that can be exercised at will and pleasure. Rather, it is a resolved in this case. 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 34. In resolving the Petition on its merits, factual issues will have forfeited in a quo warranto petition. This Honorable Court’s judicial to be resolved, including: power, or the power “to settle actual controversies involving rights which are legally demandable and enforceable” (Section 1, Article a. Who offered the KBO to the viewing public; VIII of the Constitution), is concerned with rights. If, indeed, a franchise is not a right but a privilege, then the decision to grant b. Whether the KBO offerings were authorized by the NTC; such privilege, as well as the decision to amend, revoke or forfeit it, does not lie with the judiciary. These decisions involve policy c. Whether there was a transfer of controlling interest in Multi- determination—or political questions. In Tanada v. Cuenco, 103 Media Telephony, Inc. (now Respondent Convergence) or Phil. 1051, 1067 (1965), this Honorable Court defined political of its franchise; questions as “those questions which, under the Constitution, are to be decided by the people in their sovereign capacity, or in d. Whether Convergence could have complied with the require- regard to which full discretionary authority has been delegated to ments for the listing of its shares with the Philippine Stock the legislative or executive branch of the government.” Exchange;

25. ABS-CBN’s current franchise will end on May 4, 2020, Con- e. Whether stockholder rights were granted to holders of the vergence’s on March 17, 2020. At least ten bills for the renewal of ABS-CBN PDRs; and ABS-CBN’s franchise have already been filed before the House of Representatives, while at least one bill has been filed for the renewal f. Whether the Securities and Exchange Commission (“SEC”) of Convergence’s franchise. approved the issuance and sale of the PDRs.

26. Congress is thus already faced with the question of whether 35. The Republic claims that the Petition “is based on facts to renew Respondents’ franchises, to amend the same, to revoke established no less by documents issued by Respondents and them altogether, or to grant entirely new franchises. Respondents submitted to government offices”; therefore, the Petition “does beseech this Honorable Court not to pre-empt Congress’s exercise not raise factual issues”. (Petition, par. 7, pp. 2-3) The Republic is of its power. wrong. If this Honorable Court gives due course to the Petition, and decides to “try” the foregoing issues, the Republic would have to 27. In Ocampo, et al. v. Rear Admiral Enriquez, G.R. No. 225973, present its evidence-in-chief (Section 5, Rules of Civil Procedure), Aug. 8, 2017, the Honorable Court declared that the judiciary should authenticate them (Sections 20, 27, Rule 132, Revised Rules of not pre-empt Congress or usurp its inherent power to enact laws. Evidence), and formally offer them (Sections 34, 35, Rule 132,

Courts should give Congress a chance to perform its duty, even if it NEWS.ABS-CBN.COM Revised Rules of Evidence), even if it were true that all such are not be “the most expeditious approach”. “documents issued by Respondents and submitted to government offices”. (Petition, par. 7). 30. Ang Nars does not help the Republic’s case. Direct in- tion Authority of the Philippines, G.R. No. 217158, March 12, 2019, C. The filing of the Petition vocation of this Honorable Court’s original jurisdiction should this Honorable Court reiterated that cases requiring the determination 35.1. As an essential part of due process, Respondents be allowed “only when there are special and important reasons of questions of fact cannot be brought directly to this Court, and this must then have the chance to refute the existence, genuine- directly with this Honorable therefor, clearly and specifically set out in the petition.” According rule cannot be disregarded by the mere invocation of transcendental ness, competence and relevance of such evidence (Section Court violates the doctrine to the Republic, the instant case is of transcendental importance importance. This Honorable Court En Banc declared: 36, Rule 132, Revised Rules of Evidence), and may present its “because ABS-CBN’s franchise mandates it to serve the public by own evidence to rebut the Republic’s case (Section 5, Rules of hierarchy of courts. It also its broadcast operations”, and because it is the “biggest broadcast- “Accordingly, for the guidance of the bench and the of Civil Procedure). disregards the fundamental ing entity” in the country. (Petition, par. 62, p. 21) The Republic bar, we reiterate that when a question before the Court also said that “this is a case of first impression”. (Petition, par. 64, involves determination of a factual issue indispens- 35.2. This Honorable Court would then examine evidence rule that this Court is not a p. 21) However, these are not “special and important reasons” able to the resolution of the legal issue, the Court will presented by both sides and weigh their respective proba- trier of fact. which would justify direct resort to this Honorable Court. The is- refuse to resolve the question regardless of the allega- tive values in resolving the factual issues (Section 1, Rule sues involved, not the nature of the parties’ businesses and their tion or invocation of compelling reasons, such as the 133, Revised Rules of Evidence). Simply put, this Honorable size, determine whether a case is of transcendental importance. transcendental or paramount importance of the case. Court would only be able to resolve the Petition on its merits The Republic violated the The Republic did not even discuss how it found the issues raised Such question must first be brought before the proper trial by becoming a “trier of facts”, which it categorically said in in its Petition so compelling as to justify invoking this Honorable courts or the CA, both of which are specially equipped to Gios-Samar it is not. doctrine of hierarchy of Court’s jurisdiction in the first instance. try and resolve factual questions.” (Boldface ours) Courts. 32. The Court’s pronouncement in Gios-Samar was echoed D. Assuming that Respondents This Honorable Court is not a by former Chief Justice Lucas P. Bersamin in his statements to the 28. Direct recourse to this Honorable Court is “highly improper” press in March and April 2019. See “Bersamin stresses hierarchy of committed the violations as a matter of policy, except in specific exceptional cases.Cabarles trier of fact. courts in managing cases”, Philippine News Agency, April 8, 2019, v. Judge Maceda, G.R. No. 161330, Feb. 20, 2007. Available: https://www.pna.gov.ph/articles/1066763; “SC to shun alleged in the Petition, the ‘premature, misfiled’ cases — Bersamin”, ABS-CBN News, March Republic’s remedy lies before 29. The Republic cites Ang Nars Party-List v. Executive Secre- 31. The Honorable Court in Ang Nars resolved only the legal 29, 2019, Available: https://news.abs-cbn.com/news/03/29/19/ tary, G.R. No. 215746, Oct. 8, 2019, to justify its direct resort to this issue of whether Executive Order No. 811, which set the position sc-to-shun-premature-misfiled-cases-bersamin. administrative tribunals. Honorable Court. Ironically, in that case, the Office of the Solicitor “Nurse I” at salary grade 11, violated Section 32 of R.A. No. 9173, General itself sought the dismissal of the petition for violating the which set it at 15. Here, the Petition cannot be resolved without 33. A question of law exists when the question pertains solely Administrative tribunals have hierarchy of courts. This Honorable Court “relax[ed]” the rule and disposing of factual questions which cannot be decided by this to what the law is on a given state of facts. When the controversy primary jurisdiction over the resolved the petition, where the minimum pay of thousands of nurses Honorable Court as it is not a trier of fact. In Gios-Samar, Inc. v. involves the truth or falsity of certain facts, which requires an exami- in the country was at issue. Department of Transportation and Communications and Civil Avia- nation of the probative value of the evidence presented, the question issues presented in the Petition. 24 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 25 COVER COVER

36. The violations supposedly committed by ABS-CBN and signed frequencies, with only one channel capable of being aired and obtained NTC approvals. Copies of the letter-approvals of the Convergence are within the jurisdiction of administrative agencies, on a frequency. In the 1990s, major technological developments NTC are attached hereto as Annexes “4” to “4-L”. i.e., the SEC, NTC, and Philippine Competition Commission (“PCC”), made it possible to reduce the amount of frequency bandwidth and Congress. for the transmission of television signals. This paved the way for 54.1. That KBO was a Convergence service is evident in digital terrestrial television (“DTT”) where more than one chan- the NTC’s letter-approvals, where the NTC required Conver- 37. Whether ABS-CBN operated a pay-per-view channel nel, with better picture and sound quality, could be broadcast gence to comply with Memorandum Order No. 07-07-2011 on through free-to-air signals, and whether ABS-CBN “monopolize[s] per frequency. minimum speed for broadband connections. (This is applicable the frequencies or airwaves” through its investment in Amcara, are to telecommunications service providers, not to television/radio matters within the exclusive primary jurisdiction of the NTC and 47. NTC then developed a plan for all television and radio sta- broadcast station operators.) the PCC. tions to migrate from analog to digital technology. This was pursuant to the NTC’s mandate to encourage a “larger and more effective 54.2. This can also be seen in the webpage cited by the 38. On the other hand, issues on the purported transfer and efficient use of television broadcasting facilities and spectrum” Republic (Petition, footnote 71, p. 22), which mentioned that of Convergence’s legislative franchise without Congressional (Executive Order No. 546 [1979]). the KBO channel was available to ABS-CBN TVPlus users who approval, and its failure to offer its shares to the public, should have ABS-CBNmobile SIM cards. have been left to Congress. Congress can, in turn seek the 48. ABS-CBN launched its DTT Broadcast ((“DTTB”) service assistance of the NTC and the SEC, as well as the PSE, in called TVPlus in 2015 to comply with and support the government’s resolving these issues. digital migration plan. The plan contemplates an Analog Shut-Off date on which “all analog television services in the Philippines” After Convergence suspended 39. On ABS-CBN PDRs, the Republic should have referred the would be terminated. (Sec. 1.11, MC No. 07-12-2014, Rules and its operations, ABS-CBN offered matter to the SEC for investigation and action, as the SEC is “the Regulations for Digital Terrestrial Television [DTT] Broadcast KBO pay-per-view to TVPlus government agency invested with the jurisdiction to determine at Service, or the “DTTB Rules”. A copy is attached hereto as An- the first instance the observance by a public utility of the nationality nex “2”.) viewers. ABS-CBN is allowed requirement prescribed vis-à-vis the ownership of public utilities…” under its legislative franchise Gamboa v. Teves, G.R. No. 176579, Oct. 9, 2012. In Gamboa, this 49. DTT technology allowed ABS-CBN to broadcast six Honorable Court recognized the jurisdiction of the SEC and refused channels with varied content using only one frequency for and the relevant NTC issuances to declare the sale of PLDT shares void, even if the facts were found each service area. These channels were “ABS-CBN”, “Sports to offer such service. to be undisputed. This Court confined itself to the solelegal issue on + Action”, “DZMM Teleradyo”, “Knowledge Channel, “Cinemo!” the definition of “capital” in Section 11, Article XII of the Constitution. and “Yey!”, which were all broadcast for free by ABS-CBN to This was reiterated in Roy III v. Herbosa, G.R. No. 207246, a case those with TVPlus set-top boxes (available for a one-time fee of (a) ABS-CBN’s legislative which the Republic itself cites. Php1,999.00). This was in stark contrast to analog technology franchise is broad enough where, for instance, ABS-CBN could air only one channel—Chan- to cover pay-per-view 40. This Honorable Court’s refusal to look into the legality of nel 2—through its assigned frequency. The TVPlus set-top boxes services. the sale of the PLDT shares despite the Constitution’s nationality are digital television receivers that are needed to receive DTT requirements for public utilities, proves that the issue was not com- 44. The Republic contends that ABS-CBN launched a pay-per- broadcasts. Older analog television sets without DTT set-top 55. After Convergence suspended its operations, ABS-CBN pelling enough to disregard the hierarchy of courts. 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. boxes are unable to receive and display DTT broadcasts. The started offering a pay-per-view service through the KBO Chan- TVPlus set-top boxes allow users to also receive and view the 41. It is noteworthy that with regard to the legal issues of Rappler, First, ABS-CBN supposedly “ha[d] no permit or authority from the nel. Under Section 1 of R.A. No. 7966, ABS-CBN was granted the government, specifically NTC”, to launch the KBO Channel and DTT broadcasts of other television networks, such as GMA and franchise to “construct, operate, and maintain, for commercial Inc.’s PDRs, the Office of the Solicitor General referred the matter TV5, among others. to the SEC on Dec. 26, 2016, not to this Honorable Court. See Re: to continue to operate it. (Petition, par. 75, pp. 25-26) Second, purposes and in the public interest, television and radio broad- ABS-CBN “[used] the free-to-air frequency” when it offered KBO in casting stations in and throughout the Philippines.” (emphasis ours) Rappler Inc. and Rappler Holdings Corporation, SEC En Banc, SP 50. DTT likewise allows broadcast stations to transmit encrypted Case No. 08-17-001, Jan. 11, 2018. TVPlus, and thus should not have collected fees from the viewing The term “commercial purposes” is broad; it includes all kinds of public. (Petition, pars. 80, 84, pp. 28-29) programs for decryption on the viewers’ end, enabling the provision commercial activities and all kinds of sources of revenue, including of pay-per-view services. 42. Under the primary jurisdiction doctrine, an administra- pay-per-view services. tive tribunal’s jurisdiction is deemed to be exclusive. “Under the 45. The Republic’s objections are based on its misconceptions sense-making and expedient doctrine of primary administrative about TVPlus and KBO, and even the nature of digital television tech- 56. The NTC itself sought guidance from the Department of jurisdiction, ‘xxx the courts cannot or will not determine a con- nology and free-to-air channels. This Comment will demonstrate that: The KBO offerings were part of Justice (“DOJ”) as to whether television broadcasters are allowed troversy involving a question which is within the jurisdiction of Convergence’s value-added to offer pay-per-view services. In its Opinion No. 01, S. 2018, the an administrative tribunal prior to the decision of that question (a) While TVPlus was and is an ABS-CBN service, KBO was DOJ replied in the affirmative: by the administrative tribunal, where the question demands the not when it was launched. KBO was a value-added ser- services. exercise of sound administrative discretion requiring the special vice (“VAS”) of Convergence. “The provisions of Section 1 of the standard text of knowledge, experience, and services of the administrative tri- such franchises read as follows: bunal to determine technical and intricate matters of fact, and a (b) ABS-CBN only started offering KBO when Convergence 51. KBO was first offeredto the public by Convergence as a uniformity of ruling is essential to comply with the purposes of suspended its operations. value-added service. ‘Section 1. Nature and Scope of Franchise. the regulatory statute administered.’” (Javier v. Court of Appeals, — Subject to the provisions of the Constitution G.R. No. 96617, Oct. 14, 1992) (c) NTC approved the KBO offerings. 52. Convergence was registered with the NTC to provide value- and applicable laws, rules and regulations the added services (“VAS”). (See Convergence’s Certificates of Reg- (name of corporation/company) hereunder 43. Since the resolution of the issues raised by the Republic (d) ABS-CBN is not prohibited by law, including its legislative istration for VAS, copies of which are attached hereto as Annexes referred to as the grantee, its successors and requires the determination of highly-technical factual questions franchise, from providing pay-per-view services alongside “3” and “3-A”.) In 2016, it began offering VAS which included assigns, is hereby granted a franchise to con- best left to specialized agencies, this Honorable Court should act its “free-to-air” channels through the frequencies assigned access to iWant TV, a video streaming and on demand platform for struct, install, establish, operate and maintain, in accordance with Gios-Samar, among other cases, and refuse to to it by NTC itself. movies, programs, and other content owned by ABS-CBN (“ABS- for commercial purposes and in the public resolve the Petition. CBN Content”). Most of these offerings further allowed access to interest, television and radio broadcasting sta- the same ABS-CBN Content through TVPlus (for ABS-CBNmobile tions in and throughout the Philippines, through Ad cautelam, Respondents submit that the Petition lacks merit, ABS-CBN launched TVPlus subscribers with TVPlus set-up boxes) for free. microwave satellite or whatever means includ- and further state: ing the use of any new technology in television pursuant to the NTC’s migration 53. ABS-CBN agreed with Convergence to set up a new channel and radio systems, with the corresponding plan. in TVPlus for such add-on ABS-CBN Content for the convenience auxiliaries or facilities, special broadcast and of ABS-CBNmobile users. This channel was named the “Kapamilya other broadcast distribution services and relay E. ABS-CBN did not violate its Box Office” channel or KBO. stations.’ legislative franchise in 46. Before the advent of digital technology, television and radio broadcast stations used analog technology. Broadcast stations 54. KBO was therefore a Convergence service. In fact, be- x x x offering KBO on “TVPlus”. would transmit signals over the airwaves on their respective as- fore the launch of all its KBO offerings, Convergence sought 26 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 27 COVER COVER

Resolving the issue raised vis-à-vis the wordings of “the conversion from Analog Television Service to public, is completely off-base. Viewers do not have to pay for the six from the NTC to test broadcast its DTTB service in Metro Manila the provisions of Section 1 of the standard legislative Digital Terrestrial Television Broadcasting Station of standard channels that are available over TVPlus. Only those who and Metro Cebu. (A copy of ABS-CBN’s Demonstration Permit dated franchises of TV broadcasters, we find it clear enough ABS-CBN CORPORATION using Channel 43 in Metro opt to watch KBO do, and they pay only minimal fees. March 30, 2015 is attached hereto as Annex “5-A”.) that broadcast companies can engage in Conditional Manila x x x Access (CA) or Conditional Access System (CAS) 67. KBO caters to a large part of the population who cannot 73. Twenty-eight days had lapsed by the time ABS-CBN received and, for the same reason can offer TV pay-per-view The P.A. is subject to the following conditions: afford to pay Php200.00-Php400.00 to watch one movie in the NTC’s letter dated April 29, 2015. By then, only three calendar days services. The provisions of Section 1 are categorical cinemas. Through KBO, a viewer can watch movies and television and only one business day remained until the May 3, 2015 fight. enough that there is no need for interpretation — only x x x series episodes for the price of only Php30.00, or premium content ABS-CBN could no longer cancel the live viewing of the fight on application. There is nothing in said provisions that for Php99.00, together with his family, neighbors, or community. TVPlus as many viewers had already paid for the service. Never- would give any impression that ‘commercial purposes’ 4. The use of Conditional Access System (CAS) on theless, ABS-CBN immediately complied with the NTC’s directive are limited only to income derived by TV broadcast DTTB service shall be subject to such Conditional and stopped “offering” or promoting the live viewing of the fight on companies from paid advertisements. Access guidelines that the Commission or any other The Republic is barred by TVPlus. relevant government agency may hereafter issue;” x x x (emphasis ours) estoppel from proceeding 74. A day after the fight, ABS-CBN explained to NTC, in against Respondents. writing, why it could not have cancelled the live viewing of the To summarize, it is our opinion that TV broadcasters 61. The Republic erroneously interprets condition no. 4 as pro- fight on TVPlus at the last minute. A copy of the letter is attached may be allowed to engage in Conditional Access (CA) hibiting the provision of CAS or pay-per-view before the issuance of hereto as Annex “6”. NTC did not reply to ABS-CBN’s letter, or Conditional Access System (CAS), more specifi- guidelines. (Petition, par. 69, p. 23) Condition no. 4 contains no such 68. The KBO offering advances the policy of the State. The and it did not initiate any proceedings against ABS-CBN either. cally to offer TV pay-per-view services, provided that prohibition. Instead, it directs ABS-CBN to comply with guidelines KBO channel is an opportunity for the public to buy TVPlus set-top This only means that to the NTC, there was no wrongdoing by it does not amount to CATV service, which shall only be on CAS which the NTC or any other relevant government agency boxes, which would facilitate the government’s migration plan from ABS-CBN. considered as such if it is ‘for purposes of providing multiple may issue in the future. analog to digital television, and support its mandate to efficiently channel CATV service’.” (emphasis ours) use the frequency spectrum. 75. Even assuming that there was a violation of the NTC’s 62. That the Broadcast Service Division recommended that April 29, 2015 “request” or of Commonwealth Act No. 146 (the “[n]o Encryption of Conditional Access of programming content 69. Respondents’ KBO offerings have been transparent and Public Service Law), the potential penalty would only be “a fine 57. The DOJ opinion thus squarely refutes the Republic’s shall be allowed” (Petition, par. 69, p. 23) is beside the point. The well-publicized for four years. The NTC has never commenced any of not exceeding two hundred pesos per day for every day dur- contention that “[b]roadcasting organizations are only allowed to NTC did not adopt such recommendation in its Order and did not action against ABS-CBN and/or Convergence for the KBO offering, ing which such default or violation continues” (Sec. 21, Public yield income from their contracts with commercial advertisers and state that “no CAS shall be allowed”. Rather, it imposed as among as this was not prohibited under any law or regulation. Presuming it Service Law). It certainly does not merit the revocation of ABS- producers and direct sales,” and that “ABS-CBN Corporation is the conditions that ABS-CBN should comply with future guidelines was, the Republic is estopped from proceeding against ABS-CBN/ CBN’s franchise. prohibited from using the free-to-air signals to profit from the public, which government may impose. Convergence. In Newsounds Broadcasting Network, Inc. v. Dy, G.R. except to comply with its contractual obligations under contracts with Nos. 170270 & 179411, April 2, 2009, this Honorable Court held commercial advertisers and producers.” (Petition, par. 84, p. 29) As 63. The use of the word “may” in condition no. 4 contemplates that the doctrine of equitable estoppel may be invoked against the F. Convergence did not violate the DOJ observed, “[t]here is nothing in [the grant of the franchise] the possibility that no future guidelines would be issued. In fact, the government in certain circumstances. “[W]hen there is no convinc- that would give any impression that ‘commercial purposes’ are NTC has not issued one to date. To interpret the condition as prohibit- ing evidence to prove irregularity or negligence on the part of the its franchise. limited only to income derived by TV broadcast companies from ing CAS until guidelines are issued, effectively prevents ABS-CBN government official whose acts are being disowned other than the paid advertisements.” from engaging in CAS. However, there is no such prohibition in the bare assertion on the part of the State, we have declined to apply current issuances of NTC on DTT (NTC MC 05-11-2013 and the State immunity from estoppel.” Here, the Republic does not allege There was no transfer of 58. The Republic cites the case of ABS-CBN Broadcasting DTTB Rules). The DTTB Rules allow it and even mandate certain any irregularity or negligence on the part of the NTC, upon whose “controlling interest in the Corporation v. Philippine Multi-Media System, G.R. No. 175769- standards for it. acts Convergence and ABS-CBN relied in offering KBO to the pub- 70, Jan. 19, 2009, to argue that broadcasters can only derive lic. The doctrine thus applies to bar the Republic from assailing the grantee [MTI]”. In any case, the income from advertisements and cannot charge fees for free- KBO offering and imposing, as an extreme form of punishment, the transfer of interest in Columbus to-air services. The Republic harps on the pronouncement that revocation of ABS-CBN’s franchise. “[n]o payment is required to view the said [free-to-air] channels The Republic’s position unduly Technologies, Inc. (MTI’s because these broadcasting networks do not generate revenue favors web streaming, cable shareholder) does not require from subscription from their viewers but from airtime revenue from and satellite television contracts with commercial advertisers and producers, as well as The NTC did not take action Congressional approval. from direct sales.” providers. against ABS-CBN for the live 59. The Republic again cites obiter dictum. Whether telecast of the Pacquiao- 76. Multi-Media Telephony, Inc. (“MTI”), now named ABS-CBN broadcasters could charge fees from viewers for their free-to-air 64. The Republic’s view puts Philippine television broadcasters Mayweather fight. Convergence, Inc., was incorporated on Sept. 20, 1993. In 1997, signals or were limited to earning revenues from advertisements at a disadvantage as against foreign video streaming services, such MTI’s franchise was expanded to include mobile, cellular, wired or was not the issue before this Honorable Court in that case. The as “Netflix”, “Amazon Prime”, “Hulu”, “Viu”, and “Viki”. Their content wireless telecommunications systems and value-added services basic issue was whether Direct-to-Home satellite television service can actually be viewed by subscribers in the Philippines upon pay- 70. The Republic particularly refers to the Pacquiao-Mayweather (R.A. No. 8332, which amended R.A. No. 7908). providers could re-transmit the free-to-air broadcasts without ment of fees, without regulation by any law or NTC rule. fight, which was shown live on TVPlus on May 3, 2015. The Republic obtaining the broadcasters’ consent in light of the NTC’s “must adverted to the NTC’s letter dated April 29, 2015 wherein it directed 77. As of 2011, Columbus Technologies, Inc. (“Columbus”) held carry” rule. 65. Television broadcasters are also disadvantaged as against ABS-CBN “to refrain from offering any pay television service in [its] 95% of the equity of MTI. cable and satellite television operators, which are allowed to offer DTT trials until such time that the Commission has come up with (b) ABS-CBN’s use of pay-per-view in addition to their two other income streams: monthly appropriate guidelines for the same.” (Petition, par. 68, pp. 22-23) 77.1. On Dec. 29, 2011, the SEC approved the increase frequency for several subscriptions and advertisements. Below is ABS-CBN’s explanation of what happened. in Columbus’s authorized capital stock. Sapientis Holdings channels, including KBO, Corporation (“Sapientis”), a wholly-owned subsidiary of ABS- was authorized by the NTC. 71. ABS-CBN made preparations for the live showing of the CBN, subscribed to 70% of the increased capital stock of ABS-CBN and Convergence Pacquiao-Mayweather fight primarily for the interest of Filipinos Columbus. Copies of the Certificate of Filing of Amended Articles 60. The Republic believes that ABS-CBN should use its assigned who wished to see the fight live, not through delayed telecast on of Incorporation of Columbus and the Certificate of Approval of frequency only for its “free-to-air” channel and for no other. It fails were not motivated by greed, as free-to-air television. ABS-CBN thus entered into a commercial ar- Increase of Capital Stock issued by the SEC on Dec. 29, 2011 to appreciate that DTT enables the simultaneous transmission of the Republic suggests. The rangement with the Philippine licensee, Solar Sports, to have the are attached hereto as Annexes “7” and “8”. several channels, both free-to-air and pay-per-view, using only one fight shown live through TVPlus. It was Solar Sports which required frequency. Hence, ABS-CBN is able to air in its assigned frequency KBO offering served an that subscriptions to the live showing of the fight have a uniform fee 78. On July 31, 2012, the SEC approved the increase in MTI’s not only the two free-to-air channels “ABS-CBN” and “Sports + Ac- important public interest. of Php2,500.00 per set-top box. authorized capital stock from Php70 Million to Php800 Million. Of the tion”, but also “DZMM Teleradyo”, “Knowledge Channel, “Cinemo!” increase of Php730 Million, Columbus subscribed to 6,868,369,430 and “Yey!” (all for free), as well as KBO (pay-per-view). NTC ex- 72. On April 1, 2015, ABS-CBN informed the NTC that it would shares, thus increasing its shareholding in MTI to 99%. The SEC pressly allowed ABS-CBN to do so in its Order dated May 14, 2019 66. The Republic’s insinuation that ABS-CBN was motivated air the Pacquiao-Mayweather fight live through a pay-per-view of- also approved MTI’s change of name to ABS-CBN Convergence, (Petition, Annex “Q”), wherein it approved: purely by commercial reasons, at the expense of the Filipino viewing fering on TVPlus. ABS-CBN by then had a Demonstration Permit Inc. on July 31, 2012, contrary to the Republic’s insinuation that the 28 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 29 COVER COVER change of name was approved by the SEC only on March 2, 2015 85. Even assuming that the congressional approval requirement 91. The Republic falsely accuses MTI of “represent[ing] itself 97. The Republic further asserts that “ABS-CBN Corporation (Petition, pars. 29, 99, pp. 8 and 36). applies at the level of Columbus (and not just of MTI), the provisions as ABS-CBN Convergence”, purportedly allowing “the latter… to acquired and used Amcara’s legislative franchise under R.A. No. in other telecommunications franchises granted by Congress before use the former’s legislative franchise…” (Petition, par. 97, p. 35) 8135.” (Petition, par. 30, p. 8) This is false. 78.1. Copies of the Certificate of Filing of Amended Articles or after the enactment of R.A. No. 7925, which are more advanta- This is puzzling, since Convergence and MTI are the same entity, of Incorporation of MTI/Convergence and the Certificate of geous than the provisions of MTI’s franchise, should ipso facto, “ABS-CBN Convergence, Inc.” being MTI’s new corporate name. 98. ABS-CBN no longer holds shares in Amcara Broadcasting Approval of Increase of Capital Stock issued by the SEC on immediately and unconditionally, become part of MTI’s franchise. (see Annex “9’ hereof) A mere change in corporate name does Network Inc. (“Amcara”). It made a previous investment in Amcara July 31, 2012 are attached hereto as Annexes “9” and “10”. not affect the identity of the corporation. Philippine First Insurance in 1996 by buying 49% of Amcara’s shares, but divested the same 86. In this regard, on March 30, 1995, Congress granted Ma- Company, Inc., v. Hartigan, G.R. No. L-26370, July 31, 1970. MTI’s in January 2019. Accordingly, Amcara was not a subsidiary of 79. The Republic contends that “[Convergence] violated Section ranao Telephone Company its franchise and prohibited the transfer, franchise, therefore, was not used by another entity. ABS-CBN, but merely an affiliate. (See ABS-CBN’s 2012 Amended 15 of R.A. No. 7908, as amended by R.A. No. 8332, when the con- assignment or sale of the controlling interest in the grantee only Annual Report pursuant to Section 17 of the Securities Regulation trolling interest in [MTI], the grantee, was transferred to ABS-CBN.” “within five (5) years from the effectivity of this Act” (Sec. 11, R.A. Code [“SRC”] and Section 141 of the Corporation Code, Annex “K” (Petition, par. 108, p. 41) The alleged transfer of controlling interest No. 7970, March 30, 1995). Assuming that the requirement of con- Convergence was not qualified of the Petition, p. 8) supposedly amounts to a “transfer of the legislative franchise” without gressional approval applies to the transfer of controlling interest in any congressional approval. (Id.) The Republic is wrong. Columbus, such requirement must be deemed to apply only for a to make a public offer of its 99. ABS-CBN’s 49% shareholding in Amcara did not constitute a period of five years from the effectivity of MTI’s franchise (March shares in the securities transfer of Amcara’s legislative franchise to ABS-CBN. As discussed, 80. Section 15 of R.A. No. 7908, as amended by R.A. No. 8332, 17, 1995), or only until March 17, 2000. this Honorable Court held in Philippine Long Distance Telephone reads: exchange. Co. v. National Telecommunications Commission, G.R. No. 88404, 87. The following exceptions to the requirement of congressional 18 October 1990, that the sale of a franchise is different from the “SEC. 15. Sale, Lease, Transfer, Usufruct, etc. — The authority found in the telecommunications franchises of sale of shares of stock of a corporation possessing such franchise. 92. The Republic faults Convergence for failing to offer at least The former is prohibited while the latter is not. grantee shall not lease, transfer, grant the usufruct of, Telecommunications Technologies Philippines, Inc., Island Country 30% of its outstanding capital stock to any securities exchange in sell nor assign this franchise or the rights and privileges Telecommunications, Inc., Schutzengel Telecom, Inc., and Innove the Philippines within five years from the start of its operations. acquired thereunder to any person, firm, company, corpo- Communications, Inc. (formerly Isla Communications Company, Inc.), 100. The Republic also asserts that ABS-CBN’s prior investment However, it was legally impossible for Convergence to comply with in Amcara demonstrates “[t]he temerity of ABS-CBN Corporation ration or other commercial or legal entity, nor merge with should likewise be deemed incorporated in the franchise of MTI: this requirement given its financial condition. any corporation or entity, nor shall the controlling interest to monopolize frequencies or airwaves of the State.” (Petition, par. 109, p. 41) in the grantee be transferred, whether as a whole or a. Any transfer or issuance of shares of stock in the imple- 93. Section 16 of R.A. No. 7908, as amended, requires that at in parts and whether simultaneously or contemporane- mentation of requirement for the dispersal of the grantee’s least 30% of the outstanding capital stock of Convergence be of- ously, to any such person, firm, company, corporation or ownership; 101. ABS-CBN has not “monopolized” the broadcast industry fered in a securities exchange. It follows that the offer must comply by investing in Amcara. A monopoly consists of the “exclusive right entity without the prior approval of the Congress of the with the rules of the exchange. Philippines. Any person or entity to which this franchise b. Any transfer or sale of shares of stock to a foreign inves- or power to carry on a particular business or trade, manufacture a is sold, transferred or assigned, shall be subject to the tor or investors; particular article, or control the sale or the whole supply of a particular 94. For a corporation to be allowed to initially list its shares commodity. It is a form of market structure in which one or only a same conditions, terms, restrictions, and limitations of with the Main Board of the Philippine Stock Exchange (“PSE”) and this Act.” (emphasis ours) c. Any issuance of shares to any foreign or local inves- few firms dominate the total sales of a product or service.” Garcia offer such shares to the public, it must submit proof of profitable v. Corona, et al., G.R. No. 132451, 17 December 1999. tor pursuant to or in connection with any increase in the operations. The Main and SME Board Listing Rules adopted by 81. First, there was never any transfer of shares in the grantee, grantee’s authorized capital stock which shall result in the the PSE and approved by the SEC pursuant to Rule 39.1(C) of MTI. The controlling interest in MTI has always been, and still re- dilution of the stockholdings of the grantee’s then existing 102. The Philippine broadcast industry is diverse. There are the Implementing Rules and Regulations of the Securities Regu- 26 television stations and 31 radio stations in the National Capital mains with Columbus, even after Sapientis subscribed to 70% of stockholders; and lation Code, require that the applicant must have “a cumulative Columbus’s increased capital stock in 2011. Region alone. This belies the Republic’s claim of monopoly of the consolidated earnings before interest, taxes, depreciation, and broadcast industry by ABS-CBN. Ironically, in seeking to revoke the d. Any combination thereof where such transfer, sale, or amortization (EBITDA), excluding nonrecurring items, of at least 82. Second, the transfer of Columbus shares in 2011 did not issuance is effected in order to enable the grantee to raise the franchise granted to ABS-CBN, it is the Republic that is effectively P50 Million for three (3) full fiscal years immediately preceding seeking to decrease the number and diversity of the participants in constitute a transfer of Convergence’s legislative franchise. In Philip- necessary capital or financing for the provision of any of the the application for listing and a minimum EBITDA of P10 Million pine Long Distance Telephone Co. v. National Telecommunications services authorized by the franchise and/or to carry out any the broadcast industry, thereby promoting a monopolistic environ- for each of the three fiscal years” and “a positive stockholders’ ment. Commission, G.R. No. 88404, Oct. 18, 1990, this Honorable Court of the purposes for which the grantee has been incorporated equity in the fiscal year immediately preceding the filing of the held that the sale of a franchise is different from the sale of shares or organized. listing application.” of stock of a corporation possessing such franchise. The former is 103. In any case, if the Republic believes that ABS-CBN is prohibited while the latter is not. 88. As admitted by the Republic, Sapientis acquired 70% of exercising a monopoly, its remedy is not to file a petition for quo 95. Convergence started commercial operations in January warranto with this Honorable Court, but to file a complaint with the shares in Columbus by subscribing to the shares issued pursuant 1997. As shown in the attached audited financial statements (An- 83. Third, the limitation in Section 15 should be read in conjunc- to its increase in authorized capital stock. (Petition, pars. 26, 104, Philippine Competititon Commission, which is vested with the original nexes “12” to “12-W”), Convergence has incurred losses in every and primary jurisdiction to inquire, investigate, and hear and decide tion with Section 23 of R.A. No. 7925 (Public Telecommunications pp. 7 and 37-40) This resulted in the dilution of the stockholdings fiscal year from 1997 to present. In its latest Audited Financial State- Policy Act), which provides: of Columbus’s then existing stockholders. Hence, Sapientis’s cases involving any violation of the Philippine Competition Act and ments (for the year ended 2018), its total loss for 2018 alone was other competition laws. (Section 12(a), R.A. No. 10667) acquisition of shares in Columbus did not require the approval of recorded at Php165,527,963.00. It had a capital deficiency of over “SECTION 23. Equality of Treatment in the Telecom- Congress. Php6 billion as of the end of 2018. munications Industry. — Any advantage, favor, privi- lege, exemption, or immunity granted under existing 89. Consequently, there is no truth to the Republic’s assertion 96. Since Convergence cannot comply with the requirements G. The PDRs do not violate the franchises, or may hereafter be granted, shall ipso that Respondents employed a web of corporate layering to circum- under the PSE’s Main and SME Board Listing Rules (which is the foreign ownership restriction facto become part of previously granted telecommuni- vent the congressional approval requirement (Petition, pars, 101, only stock exchange in the Philippines), it cannot list and offer its cations franchises and shall be accorded immediately 108, pp. 36-37, 41). shares to the public. It was, therefore, legally impossible for it to under the Constitution or and unconditionally to the grantees of such franchises: comply with Section 16. Provided, however, That the foregoing shall neither apply 90. There was no attempt whatsoever to conceal Sapientis’ ac- the conditions of ABS-CBN’s to nor affect provisions of telecommunications franchises quisition of 70% shares in Columbus. Note 1 of the Annual Financial 96. “The law does not require that the impossible be done. franchise. concerning territory covered by the franchise, the life span Statements submitted by Convergence (formerly, MTI) as part of Nemo tenetur ad impossibile. The law obliges no one to perform an of the franchise, or the type of service authorized by the its 2012 Annual Report to the NTC clearly states that: “On Dec. 29, impossibility. Laws and rules must be interpreted in a way that they The Republic’s characterization franchise.” (emphasis ours) 2011, the Philippine Securities and Exchange Commission (SEC) are in accordance with logic, common sense, reason and practical- approved the application of [Columbus] for the increase in authorized ity.” Santos v. PNOC Exploration Corporation, G.R. No. 170943, 23 of the PDRs is inaccurate. 84. In Philippine Long Distance Telephone Co.) Inc. v. City of capital stock and [Columbus’s] Amended Articles of Incorporation. September 2008, underscoring ours Davao, G.R. No. 143867, Aug. 22, 2001, this Honorable Court held Subsequently, [Columbus] became a 70%-owned subsidiary of that “[t]he thrust of the law is to promote gradually the deregula- Sapientis Holdings Corporation (Sapientis), a wholly owned 104. The Republic contends that the issuance of ABS-CBN PDRs tion of the entry, pricing and operations of all public telecommu- subsidiary of ABS-CBN Corporation (ABS-CBN), a publicly- to foreigners, through ABS-CBN Holdings, Inc., violates Article XVI, nications entities and thus promote a level playing field in the listed entity.” (emphasis ours) ABS-CBN’s prior investment in Section 11(1) of the 1987 Constitution, which states that “[t]he own- telecommunications industry.” Such policy would be defeated if Amcara is not a violation of its ership and management of mass media shall be limited to citizens an advantage, favor, privilege, exemption, or immunity granted to 90.1. A copy of the 2012 Annual Report submitted by Conver- of the Philippines, or to corporations, cooperatives or associations, a telecommunications franchise is not similarly extended to MTI. gence (formerly, MTI) to the NTC is attached hereto as Annex “11”. franchise. wholly-owned and managed by such citizens. xxx” (emphasis ours) 30 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 31 COVER COVER

105. The Republic does not, as it could not, allege that the PDRs It, therefore, recognizes that PDRs are not shares. Indeed, it char- 118. The PDR holders’ rights are not equivalent to the full ben- exercise of a PDR, the Issuer, as owner of Shares underly- permit foreigners to participate in the management of ABS-CBN. acterizes PDRs as “equivalent to shares.” (Petition, par. 120, p 45) eficial ownership rights of the shareholders of ABS-CBN. Under ing the relevant PDR, will retain and exercise such voting Instead, its allegations are limited to the question of ownership. the Revised Corporation Code, the following rights are granted to rights relating to such Shares.” 113.1. In a stock corporation, ownership is represented by each shareholder: 106. The Republic recognizes that the “PDRs, per se, are not capital stock divided into shares. Revised Corporation Code, 120. Instead, the PDR Instrument grants only limited and specific evidence or statements or certificates of ownership of a corpora- Section 3. a. Right to the issuance of a stock certificate (Section 62) rights to its holders. Some of these rights arise from holding the tion.” (Petition, par. 120, p. 45) It also acknowledges that “the actual and to have certificates replaced in lieu of those lost, stolen or PDR itself, while others are only activated upon the “exercise” of the ownership of the underlying shares of ABS-CBN Corporation is 113.2. On the other hand, a derivative, with respect to equity destroyed (Section 72); PDR. See PDR Instrument dated 5 October 1999, Annex 14 hereof. maintained by ABS Holdings.” (Petition, par. 139, p. 52) However, securities, is “a financial instrument… whose value depends the Republic insists that the PDRs are equivalent to shares be- on the interest in or performance of an underlying security, b. Right to have the transfer in his favor recorded in the a. While the PDR is with the holder, and has not been ex- cause the holders thereof are entitled to “all the dividends of the but which does not require any investment of principal in the Stock and Transfer Book (Section 62); ercised, the holder has the right to: underlying shares of stock.” (Petition, par. 120, p. 45) The Republic underlying security.” Rule 3.1-1, Implementing Rules of the is wrong. Securities Regulation Code. c. Right to be informed of the annual or special meetings i. Certain cash distributions by ABS-CBN Holdings as of the corporation (Section 49); the Issuer of the PDRs; and 113.3. The Republic thus correctly recognizes the innate distinction between a derivative and the underlying security. The PDRs were approved by the SEC. d. Right to participate in the annual or special meetings of ii. Additional PDRs or adjustment to the terms of the the corporation (Section 49); PDRs upon the occurrence of certain events, i.e., rights 114. However, the Republic insists that the PDRs are equiva- issues, reorganizations, issuance of stock dividends of lent to shares (Petition, par. 120, p. 45). It asserts that each PDR 107. Rule 8 of the SRC prohibits the sale/distribution or offer for e. Right to vote on the following matters: ABS-CBN Corporation. “grants the PDR holders, upon payment of the exercise price of sale/distribution of securities within the Philippines without the seller/ P0.10 and subject to certain conditions, the delivery of one offeror filing a registration statement with the securing the approval i. Elections of the Board of Directors (Section 23); b. Upon the exercise of the PDR, the holder has the right ABS-CBN Corporation share or the sale and delivery of the pro- of the SEC (subject to exceptions which are not applicable here). to: ceeds of such sale of one ABS-CBN share.” (Petition, par. 121, ii. Extension or Shortening of Corporate Term (Section pp. 45-46) 108. In accordance with this rule, the ABS-CBN PDRs were 36); i. Delivery of the underlying share, if the PDR Holder registered with, and approved by, the SEC in 1999 and 2014 before is qualified under the law to own the Share; and 115. What the Republic failed to elaborate on are the “certain they were sold to the public. After reviewing the provisions of the iii. Increase or Decrease of Capital Stock (Section 37); conditions” imposed on the right of a PDR Holder to the delivery of PDRs and ultimately finding that these provisions were compliant ii. Payment of the net proceeds from the sale of the an ABS-CBN Share, particularly in the case of foreigners. Under with Philippine law, the SEC issued Certificates of Permit to Offer iv. Creation or Increase of Bonded Indebtedness (Sec- Share, if the PDR Holder is not qualified under the law to Condition 5.3 of the PDR Instrument (Annex “15” hereof), if the Securities for Sale to ABS-CBN Holdings dated 4 October 1999. tion 37); own the Share. PDR holder is a foreigner and he exercises the PDR, the only right (Annex “13” hereof). he has is to receive the net proceeds of the sale of the underly- v. Sale or Other Disposition of Assets (Section 39); (a) PDR holders are entitled only to ing ABS-CBN share after it is sold through an eligible broker in the 109. Additional ABS-CBN PDRs were issued subsequently and cash distributions from ABS- “open market” or the PSE. At no instance will the ABS-CBN share these PDRS were also registered with, and approved by, the SEC vi. Planned merger or consolidation (Section 75); CBN Holdings. in 2014. The SEC similarly issued a Certificate of Permit to Offer be delivered to a foreigner. Securities for Sale to ABS-CBN Holdings dated 7 January 2014. vii. Amendments of Bylaws (Section 47); 121. The right of a PDR Holder to receive cash distributions from (Annex “14” hereof). ABS-CBN Holdings is subject to Condition 9 of the PDR Instrument. The PDRs do not grant f. Right to be elected as a Director (Section 22); Condition 9 provides that the PDRs do not grant PDR Holders any 110. The terms and conditions of the PDRs clearly contemplated right to dividends declared by ABS-CBN. Not being shareholders of the sale of these instruments (but not of the underlying ABS-CBN ownership of ABS-CBN to g. Right to be elected as the President of the corporation ABS-CBN, they cannot demand ABS-CBN to declare dividends, or share) to foreigners. These terms and conditions were evaluated foreigners. (Section 24); claim such dividends directly from ABS-CBN. Instead, PDR Holders and approved by the SEC. That approval has never been revoked are granted only the right to distribution from ABS-CBN Holdings and thus remains effective and subsisting to date. h. Right to remove directors (Section 27); of the amount remaining after the expenses and other obligations 116. The Republic points to two rights of PDR holders as evi- of ABS-CBN Holdings are paid. 111. Having approved the terms and conditions of the PDRs dence that the PDRs grant indirect beneficial ownership to foreign- i. Pre-emptive right over the sale of shares (Section 38); through the SEC, and having never disavowed the SEC’s approval ers, i.e., (a) the PDR holders’ entitlement to dividends based on the 121.1. When dividends are declared by ABS-CBN, only of the PDRs, the Republic is now estopped from asserting that underlying shares; and (b) their supposed power to dispose of or j. Power to inspect and demand reproduction of corporate ABS-CBN Holdings, as the shareholder or owner of the ABS- those same terms violate the Constitutional restriction on foreign direct the disposition of such security. (see Petition, par. 132, p. 49) books and records (Section 73); CBN shares, receives such dividends. These dividends then ownership. Newsounds Broadcasting Network, Inc. v. Dy, supra. become part of the general assets of ABS-CBN Holdings. The 117. The Republic’s objections rest on the false assumption that k. Right to be furnished the financial statements of the amounts received by ABS-CBN Holdings are then used to pay 112. Assuming arguendo that the SEC erred in approving the the Constitution prohibits foreigners from benefiting, in some way, corporation (Section 74); and its expenses and the general claims of its creditors, if any, before issuance of the PDRs, its act of so approving was “an operative even indirectly, from mass media corporations in the Philippines. any distribution to PDR Holders is undertaken. fact” with “consequences which cannot justly be ignored.” This This Honorable Court in Gamboa v. Teves, G.R. No. 176579, 28 l. Appraisal Right (Section 80). Honorable Court recognized in Film Development Council of the June 2011, has already rejected the Republic’s theory. 122. In any event, this Honorable Court in Roy III v. Herbosa, Philippines v. Colon Heritage Realty Corporation, G.R. No. 203754, 119. The PDRs do not grant any of the foregoing rights to PDR G.R. No. 207246, Resolution dated 18 April 2017, has clarified 16 June 2015, that legal consequences attach to an executive (or 117.1. In Gamboa, this Court declared that the intent be- Holders as against ABS-CBN. In fact, Condition 4 of the PDR Instru- that the right to receive dividends, by itself, does not determine full legislative) act prior to it being adjudged void, and that “[i]t would hind the ownership restrictions in the Constitution is to prevent ment states that unless there is a valid transfer of the share to a beneficial ownership of shares. This Court declared: indeed be ghastly unfair to prevent private respondent from relying foreigners from assuming effective control of certain industries Filipino citizen, ABS-CBN Holdings shall remain the registered owner upon the [act declared void].” For the past twenty years, ABS-CBN which have sensitive and vital roles in the economy and in of the underlying ABS-CBN shares. Voting rights with respect to the “Once more, this is emphasized anew to disabuse Holdings as the Issuer, ABS-CBN as the Company whose shares national security. shares will likewise be retained and exercised by ABS-CBN Holdings: any notion that the dividends accruing to any particu- are subject of the instrument, and those who traded in and still lar stock are determinative of that stock’s ‘beneficial hold these PDRs, relied in good faith on the SEC’s approval of the 117.2. Effective control, in turn, was deemed to depend “4. Ownership of Shares and Voting Rights ownership.’ Dividend declaration is dictated by the cor- offering and sale of the PDRs. It would be unfair to suddenly strip upon two variables – (a) the grant of the power to elect the poration’s unrestricted retained earnings. On the other ABS-CBN of its franchise for a purported wrongdoing which arose Board of Directors; and (b) the right to full beneficial owner- 4.1 Pending exercise of the PDRs (subject as de- hand, the corporation’s need of capital for expansion only upon reliance on the imprimatur of the SEC. ship of the shares. scribed below), the Shares deliverable on exercise of the programs and special reserve for probable contingen- PDRs shall be owned by and registered in the name of cies may limit retained earnings available for dividend the Issuer. declaration. It bears repeating here that the Court in the The PDRs are not “equivalent to shares”. PDR Holders are not granted Gamboa Decision adopted the foregoing definition of the xxx term ‘capital’ in Section 11, Article XII of the 1987 Con- the rights of shareholders of stitution in express recognition of the sensitive and vital 113. In its Petition (par. 121, p. 45), the Republic itself alleges ABS-CBN. 4.3 Neither the Security Agent nor any Holder shall position of public utilities both in the national economy that ABS-CBN PDRs are mere securities or equity derivatives. have voting rights with respect to the Shares. Until an and for national security, so that the evident purpose of 32 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 33 COVER COVER

the citizenship requirement is to prevent aliens from as- 128. The portion of the Concurring Opinion of Justice Presbitero 132. Respondents are presumed to be innocent. (Section 3(a), Respondents incorporate below the foregoing arguments and suming control of public utilities, which may be inimical Velasco cited by the Republic in its Petition, is a discussion on a Rule 131, Revised Rules on Evidence) It is also presumed that further state by way of: to the national interest. This purpose prescinds from the hypothetical scenario, and does not reflect the true ruling of this “the law has been obeyed” and “official duty has been regularly ‘benefits’/dividends that are derived from or accorded to Honorable Court in Roy, III, G.R. No. 207246, 22 November 2016. performed.” (Section 3(m) and (ff), Rule 131, Revised Rules on Opposition to Application for Temporary the particular stocks held by Filipinos vis-à-vis the stocks In the majority opinion, this Court explained the import of its ruling Evidence) The onus, therefore, is on the Republic to prove why held by aliens. So long as Filipinos have controlling in Gamboa and categorically stated: this Honorable Court should disregard the actions of the regulatory Restraining Order or Writ interest of a public utility corporation, their decision agencies involved—the NTC and the SEC—not only in refraining of Preliminary Injunction to declare more dividends for a particular stock over “The Court adopted the foregoing definition of the term ‘capital’ from proceeding against Respondents, but more importantly in is- other kinds of stock is their sole prerogative – an act in Section 11, Article XII of the 1987 Constitution in furtherance of suing the approvals on which Respondents relied. The Republic’s ‘the intent and letter of the Constitution that the ‘State shall de- of ownership that would presumably be for the benefit Petition is barred by estoppel. 139. The Republic seeks the issuance of a “temporary restrain- velop a self-reliant and independent national economy effectively of the public utility corporation itself.” (emphasis ours) ing order or writ of preliminary injunction enjoining ABS-CBN from controlled by Filipinos’ [because a] broad definition unjustifiably 133. Finally, granting the Petition means shutting down what further operating the KBO Channel and offering it to the general disregards who owns the all-important voting stock, which neces- 123. Since the voting power of the ABS-CBN shares remains with the Republic concedes to be the country’s “largest media conglom- public”. The Republic’s application is without merit and must be sarily equates to control of the public utility.’ The Court, recognizing Philippine stockholders, dividends accruing to investors, of whatever erate… reaching millions of viewers in all corners of the country” denied on the following grounds: nationality, is irrelevant. Hence, even assuming that the PDRs are that the provision is an express recognition of the sensitive and and the “biggest broadcasting entity… able to shape the public’s vital position of public utilities both in the national economy and shares (they are not), and that what the PDR holders receive are opinion on a variety of issues, apart from providing entertainment.” A. The requisites for the issuance a temporary restraining order for national security, also pronounced that the evident purpose dividends from ABS-CBN, this right to receive dividends is not per (Petition, par. 62, p. 21) This case, therefore, cannot be resolved (“TRO”) or a writ of preliminary injunction (“WPI”) are not of the citizenship requirement is to prevent aliens from assuming se determinative of that stock’s full “beneficial ownership”. without “compromising” the “fundamental guarantees of freedom of present. control of public utilities, which may be inimical to the national speech and of the press:” interest. Further, the Court noted that the foregoing interpretation (b) PDR holders do not have B. Even assuming the requisites for the issuance of a TRO or is consistent with the intent of the framers of the Constitution to the power to dspose of or “Whenever the force of government or any of its a WPI are present, this Honorable Court has no jurisdiction place in the hands of Filipino citizens the control and manage- direct the disposal of ABS- political subdivisions bears upon close down a pri- to issue such provisional remedy, since it has no jurisdiction ment of public utilities; and, as revealed in the deliberations of CBN shares. vate broadcasting station, the issue of free speech over the main action for quo warranto. the Constitutional Commission, ‘capital’ refers to the voting stock infringement cannot be minimized, no matter the legal or controlling interest of a corporation. 124. The Republic also argues that the “power to dispose of, justifications offered for the closure. In many respects, C. A TRO or a WPI enjoining ABS-CBN from “further operat- or direct the disposal of such PDRs… necessarily falls under the the present petitions offer a textbook example of how the ing the KBO Channel and offering it to the public” is not In this regard, it would be apropos to state that since Filipinos definition of beneficial ownership.” (Petition, par. 132, p. 49) This constitutional guarantee of freedom of speech, expres- proper, because it would effectively reverse the status quo own at least 60% of the outstanding shares of stock entitled to vote assertion has no support in both law and fact. sion and of the press may be unlawfully compromised. and prejudge the merits of the Petition when Respondents directors, which is what the Constitution precisely requires, then the Tragically, the lower courts involved in this case failed to have yet to be completely heard thereon. 125. As discussed, the PDR Instrument only grants a foreign Filipino stockholders control the corporation, i.e., they dictate corpo- recognize or assert the fundamental dimensions, and it is PDR Holder the right to exercise the PDR, and upon such exercise, rate actions and decisions, and they have all the rights of ownership our duty to reverse, and to affirm the Constitution and the the receive the proceeds from the sale in the stock market of the including, but not limited to, offering certain preferred shares that most sacred rights it guarantees.” (Newsounds Broadcast- underlying ABS-CBN share. This arrangement is not equivalent may have greater economic interest to foreign investors – as the ing Network Inc. v. Dy, supra, emphasis ours) The requisites for the issuance a to the power to dispose of the underlying ABS-CBN share, as the need for capital for corporate pursuits (such as expansion), may be TRO or a WPI are not present. foreign PDR holder has no right to sell that share, select the buyer, good for the corporation that they own. Surely, these ‘true owners’ 134. For the Republic to justify curtailment of the freedom of or decide on the purchase price. In short, a foreign PDR Holder can will not allow any dilution of their ownership and control if such move speech and of the press with prior restraint (which is what the only trigger the sale of the share through ABS-CBN Holdings by ex- will not be beneficial to them.” (emphasis ours) revocation of ABS-CBN’s franchise would undeniably amount to), 140. As a Republic itself admits, there are four requirements for ercising the PDR, but it has no other participation in the transaction. it must satisfy the strict scrutiny test. (See Divinagracia, supra; the issuance of a TRO or a WPI: (a) the applicant must have a clear 129. The power to vote and control the affairs of the corpora- Newsounds Broadcasting Network Inc. v. Dy, supra.) and unmistakable right, that is a right in esse; (b) there is a material 126. Nonetheless, this Court has already clarified inRoy III that tion, therefore, remains the essential element when determining and substantial invasion of such right; (c) there is an urgent need a Filipino is the full beneficial owner of a share of stock if a Filipino the ownership of a corporation. The Republic does not allege that 135. Under the strict scrutiny test, the Republic must prove: for the writ to prevent irreparable injury to the applicant; and (d) no can vote on that share or he can dispose of such share (or both): the PDRs grant control over ABS-CBN to foreigners. It therefore (a) an important or substantial government interest, which is other ordinary, speedy, and adequate remedy exists to prevent the acknowledges that control, and therefore ownership, over ABS-CBN unrelated to the suppression of free expression; (b) there is infliction of irreparable injury. (Petition), par. 144) These requisites “Thus, the definition of ‘beneficial owner or benefi- is with its Filipino shareholders, as required by the Constitution. a clear and present danger that will bring about the substantive are not present here. cial ownership’ in the SRC-IRR, which is in consonance evils sought to be prevented; and (c) that government action must with the concept of ‘full beneficial ownership’ in the FIA- be narrowly tailored to achieve that interest, and that the same 141. Contrary to the Republic’s claim, it has no “clear and IRR, is, as stressed in the Decision, relevant in resolving H. The Petition, if granted, will must be the least restrictive means for achieving that interest. unmistakable right to ensure that the grantee abides by the only the question of who is the beneficial owner or has The Petition fails this test. Respondents’ Comment Ad Cautelam legislative franchise” (Petition, par. 146) or “to enforce its laws beneficial ownership of each ‘specific stock’ of the have a chilling effect on the (Re: Very Urgent Motion for the Issuance of a Gag Order) is herein and rules” (Petititon, par. 150). What the Republic has is not a public utility company whose stocks are under review. If the press. repleaded by reference. legal right, but a duty (or power), through the Executive Depart- Filipino has the voting power of the ‘specific stock’, i.e., ment, to ensure that grantees of legislative franchises comply he can vote the stock or direct another to vote for him, or 136. The Republic does not allege any important government with relevant laws. the Filipino has the investment power over the ‘specific 130. There are several reasons for the outright dismissal of the interest or substantive evil which would justify preventing ABS-CBN stock’, i.e., he can dispose of the stock or direct another to Petition: (a) the Republic’s resort to quo warranto is wrong—Rule from broadcasting all of its programs on television and radio. All it 141.1. Indeed, one’s duty or power cannot be violated by dispose of it for him, or both, i.e., he can vote and dispose 66 of the present Rules of Civil Procedure does not contemplate the accused ABS-CBN of were offering pay-per-view services, investing another person. It can only be exercised (and violated) by the of that ‘specific stock’ or direct another to vote or dispose revocation or forfeiture of a valid and existing franchise; (b) Congress in Amcara, and issuing PDRs (ABS-CBN was not even the issuer duty-holder. And the Republic (acting through the government) it for him, then such Filipino is the ‘beneficial owner’ of is already confronted with the question of whether Respondents of these securities). has a mass of powers available to carry out its duty to imple- that ‘specific stock.’Being considered Filipino, that ‘spe- should continue their operations; and (c) presuming the Petition ment the laws. As earlier pointed out, the Republic has sufficient cific stock’ is then to be counted as part of the 60% Filipino is allowed under Rule 66, the Republic cannot directly invoke this 137. Even assuming that ABS-CBN committed infractions of its remedies under the relevant laws to make Respondents comply ownership requirement under the Constitution. The right Honorable Court’s jurisdiction. franchise, revoking such franchise altogether is definitely not the with the terms of their franchises, or to penalize them for failure to the dividends, jus fruendi — a right emanating from “least restrictive means” to achieve State interest. The Republic has to do so. Otherwise stated, the Republic does not need any ownership of that ‘specific stock’necessarily accrues to 131. On top of this, the grounds relied upon by the Republic remedies before the NTC, the SEC and the PCC. injunctive relief from this Honorable Court to be able to exercise its Filipino ‘beneficial owner’.” (emphasis ours) do not justify the overkill penalty of revocation or forfeiture of Re- its duty or power to implement the law. spondents’ franchises. Neither ABS-CBN nor Convergence violated 138. The Petition, therefore, must be denied. Revoking or forfeit- 127. Applying the above ruling, investment power does not, by any law or regulation: (a) the KBO offering was not prohibited; (b) ing ABS-CBN’s franchise would constitute improper prior restraint 142. Respondents have not materially or substantially invaded itself, vest the PDR holders with full beneficial ownership over the Convergence did not violate the provisions of its franchise on transfer on speech. It will create a chilling effect on the press. Other media the Republic’s right “to ensure that [they abide] by [their] legislative underlying ABS-CBN shares. Ownership of the underlying ABS-CBN of “controlling interest in the [franchise] grantee” and dispersal of entities or broadcast networks will have to live in constant fear of franchise[s]”, since there is no such right in the first place. Even shares still rests with a Filipino (ABS-CBN Holdings), considering ownership to the public; (c) it is simply absurd to accuse ABS-CBN revocation of license over any perceived infraction. In the words of if Respondents were to concede that the right exists, the second that the latter retains the all-important right to vote in the election of monopolizing the broadcast industry for its past investment in Justice Antonio in his separate concurring opinion in Chavez, this requisite for the issuance of a TRO or a WPI is still not present. As of directors of ABS-CBN and other matters submitted for the deter- Amcara; and (d) the issuance and sale of PDRs do not violate the constant threat would “[freeze] radio and television stations into earlier demonstrated, Respondents did not violate their respective mination of ABS-CBN’s stockholders. foreign ownership restriction in the Constitution. deafening silence.” legislative franchises. 34 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 35 FIL-AMS in New York, San Francisco show support for ABS-CBN, free press COVER COVER COVER COVER

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 NICK EMMANUEL C. VILLALUZ Republic also did not point to any specific irreparable injury it would PTR No. 8148307 / Jan. 20, 2020 / Makati City supposedly suffer as a result of result of KBO’s continued offering. Lifetime IBP No. 01673 / Zambales OR No. 493155 / December 27, 1999 144. The Republic did not even allege that no other ordinary, Roll of Attorneys No. 38499 speech, and adequate remedy exists to prevent the infliction of MCLE Compliance No. VI-0010677 / July 24, 2018 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. MA. ELIZABETH L. LICERALDE PTR No. 8148315 / Jan. 20, 2020 / Makati City Lifetime IBP No. 015755 / Jan. 10, 2017 / Baguio-Benguet Even assuming the requisites for OR No. 1063771 / Jan. 10, 2017 Roll of Attorneys No. 57229 the issuance of a TRO or WPI are MCLE Compliance No. VI-0018377 present, this Honorable Court has Valid until April 14, 2022

no jurisdiction to issue such NEWS.ABS-CBN.COM provisional remedy, since it has no jurisdiction over the main Respondents have yet to be injunction should not determine the merits of a case, or decide action for quo warranto. controverted facts.” MARIE MICHELLE B. GO completely heard thereon. PTR No. 8148318 / Jan. 20, 2020 / Makati City Lifetime IBP No. 014378 / Makati City 146. It is settled that “[t]he power of a court to issue … provi- RELIEFS OR No. 1024605 / Jan. 8, 2016 sional injunctive reliefs coincides with its inherent power to issue 149. “More significantly, a preliminary injunction is merely a Roll of Attorneys No. 62620 all auxiliary writs, processes, and other means necessary to carry provisional remedy, an adjunct to the main case subject to the latter’s MCLE Exemption No. VI-000356 / Jan. 29, 2018 its acquired jurisdiction into effect.” Carpio-Morales v. Court outcome, the sole objective of which is to preserve the status WHEREFORE, it is respectfully prayed that this Honorable Court: of Appeals (Sixth Division), G.R. Nos. 217126-27, 10 November quo until the trial court hears fully the merits of the case. The status 2015. As this Honorable Court has ruled in Castaño v. Lobingier, quo should be that existing at the time of the filing of the case. 1. DENY petitioner’s application for a temporary restraining G.R. No. 3378, 5 December 1907, “if there is no jurisdiction to The status quo usually preserved by a preliminary injunction is the order or writ of preliminary injunction; and issue a writ of certiorari, there can be no jurisdiction to issue a last actual, peaceable and uncontested status which preceded the JAYSON C. AGUILAR preliminary injunction ancillary thereto.” Castaño v. Lobingier, 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 G.R. No. 3378, 5 December 1907. Thus, if a court does not have the state of affairs which is existing at the time of the filing IBP No. 113128 / Jan. 10, 2020 / Quezon City jurisdiction over a main action, it is also devoid of any authority of the case. Indubitably, the trial court must not make use of Roll of Attorneys No. 66357 to act on any application for injunctive relief in the same petition. its injunctive power to alter such status.” Overseas Workers Respectfully submitted. MCLE Compliance No. VI-0006755 / March 6, 2018 (See BF Homes, Inc. v. Manila Electric Co., G.R. No. 171624, 6 Welfare Administration v. Chavez, G.R. No. 169802, 8 June 2007; December 2010) emphasis ours. Makati City for the City of Manila, 21 February 2020.

147. In this case, Respondents have pointed out that the instant 150. Here, the status quo existing at the time of the filing of the Petition should be dismissed outright because a petition for quo Petition, and which ought to be preserved, is the continued show- warranto is not available as a remedy to revoke a franchise granted ing or availability of KBO channel on ABS-CBN’s TVPlus service. POBLADOR BAUTISTA & REYES by Congress. Therefore, even assuming that the requisites for the Thus, it is not proper to issue a TRO or a WPI restraining the same, Counsel for Respondents CHARLES RICHARD C. AVILA JR. issuance of a TRO or WPI are present, this Honorable Court has no because such would effectively reverse the status quo. ABS-CBN CORPORATION PTR No. 8148324 / Jan. 20, 2020 / Makati City jurisdiction to issue the provisional relief prayed for, since it has no and ABS-CBN CONVERGENCE, INC. IBP No. 113129 / Jan. 10, 2020 / Rizal jurisdiction over the main action for quo warranto in the first place. 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 148. At the very least, since Respondents have pending objec- dispose of the main case without trial. Otherwise, there would Legaspi Village, Makati City tions to the propriety of the Petition and this Honorable Court’s be a prejudgment of the main case and a reversal of the rule on Tel. No. 8893-7623 / Fax No. 8893-7622 jurisdiction over the case, Respondents respectfully submit that the the burden of proof since it would assume the proposition which Email Address: [email protected] Republic’s application for injunctive relief should not be entertained petitioners are inceptively bound to prove. Indeed, a complaint for until such objections have been resolved. 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 A TRO or a WPI enjoining ABS- 152. Therefore, this Honorable Court should not issue a TRO MCLE Compliance No. VI-0018933 / March 5, 2019 CBN from “further operating the or a WPI against KBO’s continued showing. To do otherwise KBO Channel and offering it to 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: the public” is not proper, because to be completely heard thereon. As ruled in Bank of the Philippine PTR No. 8148302 / Jan. 20, 2020 / Makati City it would effectively reverse the 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 status quo and prejudge the the reason and necessity therefor are clearly established, and Roll of Attorneys No. 30196 134 Amorsolo Street merits of the Petition when only in cases reasonably free from doubt. For, truly, a preliminary MCLE Compliance No. VI-0021794 / March 29, 2019 Legaspi Village, Makati City 36 BizNews Asia / March 2 - 9, 2020 BizNews Asia / March 2 - 9, 2020 37