DUE PROCESS

It is a cardinal rule in law that due process must always be observed.

Consistent with, a corporation enjoys constitutional rights and generally, it
enjoys the same protection that the law grants to individuals.
The right to due process is enshrined in Section 1 of Article III
of the Constitution (the ―Bill of Rights‖), which provides that,
―[n]o person shall be deprived of life, liberty or property
without due process of law, nor shall any person be
denied equal protection of the laws.‖10

The said provision applies not only to natural persons but as

well as to juridical persons like RAPPLER and RHC as exemplified in
the case of White Light Corporation v. City of Manila,11 where the
Supreme Court ruled that even corporations and partnerships are
protected by the guaranty insofar as their property is concerned.
There is no controversy with regard to creation of Investigative Panel as it is
expressly provided by law under the Securities Regulations Code Sec 4.6, viz:
The commission may, for the purposes of efficiency, delegate any of its
functions to any department or office of the Commission, an individual
Commissioner or staff member of Commission except its review or appellate
authority and its power to adpot, alter and supplement any rule and regulation.
Nevertheless, it was the adoption of the findings of the investigative panel that
was wrong and used it as a basis to issue a show cause order for Rappler to
explain why the Certificate of Incorporation should not be revoked.

Facts showed that the power of the Special Panel was limited to
―conducting a formal, in-depth examination‖ of RAPPLER and RHC.
The Special Panel‘s scope of authority was limited to examination as
provided by the copy of SEC Resolution 437 series of 2017 and that
the SEC Rules of Procedure defines an investigation as ―an inquiry or
proceeding by the Operating Department that has authority over the
subject matter to determine if there are sufficient grounds to warrant
the commencement of an administrative sanction. It is crystal clear that the
Special Panel granting its power was acted beyond the scope of its delegated
authority and non observance of the proper action.
Under the Republic Act 8799, known as The Securitiies Regulation Code,
Sec.5.1(M),to wit;
Xxx
5.1 The Commission shall act with transparency and shall have the powers
and functions provided by this Code, Presidential No.902-A,the Corporation
Code, the Investment Houses Law, the Financing Company Act and other
existing laws. Pursuant thereto the Commission shall have , among others, the
following powers and functions:
(m) Suspend, or revoke, after proper notice and hearing the franchise or
certificate of registration of corporations, partnerships or associations, upon
any grounds provided by law.

Thus, as a person in contemplation of law, procedural due

process must be accorded to them by means of giving them the right to be
notified and the opportunity to be heard. Accordingly, non-compliance of these
twin requirements constitutes violation of the fundamental due process of law.
The reason behind is to prevent coming up
with a harsh decision without sufficient basis.
RAPPLER had the right to defend itself not through explanation in a show
cause order but thru standing trial before a competent court which have
jurisdiction to take cognizance. Furthermore, Rappler never given the chance
to adduce evidence on their behalf in and during the trial.

Show Cause Order

In the legal system, an order to show cause is a court order requiring an
individual or entity to expalin, justiify or prove something. The order to show
cause form requires the identities of all parties to the case, the case number,
and the court in which the matter has been filed. Thhe OSC must contain the
request being made, or relief sought, by the person filing. The OSC form must
be accompanied by the “Affidavit in Support of Order to show Cause”.
Supporting documents may be attached tonthe affidavit, which is then
attached to the OSC. This document package must be taken to the court clerk,
who will assign a hearing date and time. The time for service is shortened for
an OSC, and so the filing party must be didligent in ensuring the documents
are properly served on the opposition, and a proof of service filed with the
court.
A show cause order is submitted to a judge, who reads the applicant’s papers
and decides the deadline for the reponding party’s submission of papers. The
judge may order an opposing party to appear “fortwith” in urgent cases. It is
clear that the resolution if the Show Cause Order has its own procedure to be
observed.
But, in the graphic below,it shows how the SEC cut short the process for
Rappler, depriving it of the rightful opportunities to defend itself. They merely
relied on what is stated through a show cause order without observing the
process hereof. The SEC had prejudged RAPPLER from thr time it issued a
Show Cause Order against it.
The standard procedure for an administrative action under the
SEC Rules is as follows:
insert flow chart:
However, this is the procedure applied in this particular case by the
SEC:
Insert flow chart:

Hence, when the Special Panel was mandated by the SEC En

Banc to conduct an examination, it was mandated only to determine ifthere
exists sufficient basis to initiate administrative charges against
RAPPLER and/or RHC. The Special Panel did not have the power,
authority or jurisdiction to adjudge RAPPLER and/or RHC
administratively liable and to impose administrative sanctions.
Reading of the Show Cause Order served upon RAPPLER and RHC
reveals that the Special Panel had already made a finding that
RAPPLER and RHC were liable under the various laws cited in that
order.
As stated in the case of, Paredes vs. Morales at.al, what should guide judicial
action is the principle that a party-litigant is to be given the fullest opportunity
to establish the merits of his complaint or defense rather than for him to lose
life, liberty or properties on technicalities.
Due process dictates that petitioners be deprived of their right to be heard and
present evidence to support their allegations, if, and onluy if, there exists
sufficient basis in fact and in law to do so. There being a manifect lack of such
basis in this case, petitioners would be unjustly denied of th eopportunity to
fully defend themselves should the Court affirmed the questioned orders which
were evidently issued with grave abuse of discretion.
Likewise, RAPPLER’s goal is to strengthen civic engagement and enhance
the commitment of every citizen to participate and impact their world.
RAPPLER’s platform allows the free exchange of ideas and emotiions with
minimal consideration. Divesting its right in attaining its objectives would result
to violation of its right as a juridical person concerning national economy and
patrimony embedded under the Philippine Constitution Art.XII,Sec.1, to wit:
The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount
of goods and services produced by the nation for the benefit of the
people; and an expanding productivty as the key to raising the quality of
life for all,especially the underprivileged.
 In the pursuit of these goals, all sectors of the economy and all regions
of the country shall be given optimum opportunity to develop. Private
enterprises, including corporations, cooperatives, and similar collective
organizations shall be encouraged to broaden the base of their
ownership.
Furthermore, it also contemplates that individuals and private groups,
including corporations, cooperatives, and similar collective organizations, shall
have the right to own, establish, and operate economic entterprises, subject to
the duty of the State to promote distributive justice and to intervene when the
common giid so demands.
Thus, RAPPLER having complied with the nationality requirement wherein
atleast sixty per centum of its capital is owned by the citizens of the
Philippines, having its Boards and Directors are all Filipinos who have voting
powers should not be deprived including its priveleges and protection
accorded by the law to enjoy its corporate rights.

Therefore, the decision made by SEC amounts to a violation of

right to procedural due process since RHC and RI were not afforded
an opportunity to be heard, and ―where the denial of the fundamental
right of due process is apparent, a decision rendered in disregard of
that right is void for lack of jurisdiction.

THE CANCELLING THE CERTIFICATE OF INCORPORATION OF

RAPPLER ON THE SOLE BASIS THAT RHC, ITS SUBSIDIARY
COMPANY, ISSUED PDR TO A FOREIGN CORPORATION
VIOLATES CONSTITUTIONAL GUARANTEE OF EQUAL
PROTECTION.

It is well-entrenched doctrine in the case of Pepsi-Cola v.

Butuan City, 50

―[t]hat corporation as an artificial being enjoys

constitutional guarantee of equal protection. Classification
to be valid, must, be reasonable and this requirement is
not deemed satisfied unless:
(1) it is based upon substantial distinctions which make
real differences;
(2) these are germane to the purpose of the legislation
or ordinance;
(3) the classification applies, not only to present
conditions, but, also, to future conditions substantially
identical to those of the present; and
(4) the classification applies equally to all those who
belong to the same class.‖
Hence, all persons subject to legislation shall be treated alike
under similar circumstances and conditions both in the privileges
conferred and liabilities imposed.

The Assailed Decision, the SEC En Banc (a) punished

RAPPLER and RHC for an act that was never committed; (b)
singled
out the OMIDYAR PDR when there exist PDRs with similar
conditions
that have been long standing and approved by the SEC.
RAPPLER sought advice on how to properly and legally
structure its business and investment package. In due course,
RAPPLER was made aware
that SkyCable and Globe Telecom, Inc.,
and even mass media companies such as ABS-CBN Corporation
(―ABS-CBN‖) and GMA Network, Inc. (―GMA 7‖), secure funding
from
their parent holding companies, which sold PDRs to foreigners.
Two
of these PDRs, were approved by the SEC and are currently listed
and publicly traded in the Philippine Stock Exchange (―PSE‖).
With the idea of raising funds through PDRs, RAPPLER started
looking for relevant impact investors, which would neither own nor
control RAPPLER, and indeed would not hold equity or voting
interests in RAPPLER, but would provide funding and add value to
the business.

RHC was established for the purpose of global expansion. It

issued PDRs as a legitimate business undertaking in order to
achieve its goal. The SEC En Banc should not have taken that the
creation ofRHC is for the sole purpose of circumventing the law
and avoiding liability, considering that SEC has granted the
existence of other parent holding companies (of companies with
nationality equity
restrictions).
The table below shows that after ABS-CBN Holdings
Corporation, GMA Holdings, Inc., Globe Telecom Holdings, Inc.
and
Lopez Holdings Corporation were incorporated, they issued PDRs
Insert TABLE.

From the circumstances, no substantial distinction makes

ABSCBN, GMA and RAPPLER to be treated differently. Thus, it is
clear that decision of SEC En Banc singled out RAPPLER in
revoking itsCertification of Incorporation.
Moreover, the SEC En Banc had the opportunity to review the
NBM PDR and found nothing illegal or irregular in its terms. The
SECEn Banc also ruled that the NBM PDR was valid because,
accordingto it, ―only the ON PDR contains a repugnant
provision.‖51
Therefore, the issue is limited to the unique terms found only in the
ON PDRs. 52 From such situation, it can be assumed that SEC En
Banc applied the law differently and anchor their decision on mere
presumptions.

Thus, it is illogical for RAPPLER to have given control to

OMIDYAR, and not to NBM, when the latter holds more PDRs than
the former. NBM olds 12,028,718 PDRs while OMIDYAR holds
only 7,217,257 PDRs.

Assuming, that the terms of the OMIDYAR PDR, in particular

Clause 12.2.2, are illegal, it was certainly not the intention of
RAPPLER and RHC to violate any law. As the PDRs are more
sophisticated securities, RAPPLER and RHC sought counsel‘s
advice and guidance in crafting its terms and relied upon this
advice and guidance in issuing them. This shows good faith on the
part of
RAPPLER and RHC.

Moreover, there are no specific laws or cases dealing with the

validity of the term of PDRs. As such, Article 526 of the Civil Code
provides, in part, that a ―mistake upon a doubtful or difficult
question of law may be the basis of good faith.‖
In the case of City of Manila v. Laguio, Jr., the Court
expounded the meaning and scope of equal protection, thus:53
―Equal protection requires that all persons or things
similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed. Similar subjects, in other
words, should not be treated differently, so as to give undue
favor to some and unjustly discriminate against others. The
guarantee means that no person or class of persons shall be
denied the same protection of laws which is enjoyed by other
persons or other classes in like circumstances. The ―equal
protection of the laws is a pledge of the protection of equal laws.‖
It limits governmental discrimination. The equal protection clause
extends to artificial persons but only insofar as their property is
concerned

As jurisprudence elucidates in the case of Bartolome vs Social

Security System and Scanmar Maritime Services Inc., equal
protection simply requires that all persons or things similarly
situated should be treated alike, both as to rights conferred and
responsibilities imposed. It requires public bodies and institutions to
treat similarly situated individuals in a similar manner. The concept
of equal protection, however, does not require the universal
application of the laws to all persons or things without distinction.
What it simply
requires is equality among equals as determined according to a
valid classification. Indeed, the equal protection clause permits
classification. Such classification, however, to be valid must pass
the test of reasonableness. The test has four requisites: (1) The
classification rests on substantial distinctions; (2) It is germane to
the purpose of the law; (3) It is not limited to existing conditions
only; and
(4) It applies equally to all members of the same class. "Superficial
differences do not make for a valid classification."54

Therefore, the cancellation of the certificate of incorporation of

RAPPLER on the sole basis, its subsidiary company, issued PDR
to a
foreign corporation violates constitutional guarantee of equal
protection clause as guaranteed to every person, including juridical
persons such as corporations.

PURELY PROCEDURAL

In the landmark case of Ang Tibay v. the Court of Industrial

Relations, et al.,83 the Supreme Court set forth the requirements for
procedural due process before administrative agencies such as the
SEC, thus:
“…The fact, however, that the Court of Industrial
Relations may be said to be free from the rigidity of certain procedural
requirements does not mean that it
can, in justifiable cases before it, entirely ignore or
disregard the fundamental and essential requirements of
due process in trials and investigations of an
administrative character. There are primary rights which
must be respected even in proceedings of this character:

(1) The first of these rights is the right to a hearing, which

includes the right of the party interested or affected to
present his own case and submit evidence in support
thereof…‘the liberty and property of the citizen shall be
protected by the rudimentary requirements of fair play’
.
(2) Not only must the party be given an opportunity to
present his case and to adduce evidence tending to
establish the rights which he asserts but the tribunal
must consider the evidence presented…‘the right to
adduce evidence, without the corresponding duty on the
part of the board to consider it, is vain. Such right is
conspicuously futile if the person or persons to whom the
evidence is presented can thrust it aside without notice or
consideration.’

(3) ‘While the duty to deliberate does not impose the

obligation to decide right, it does imply a necessity
which cannot be disregarded, namely, that of having
something to support it is a nullity, a place when
directly attached.’ This principle emanates from the more
fundamental is contrary to the vesting of unlimited
power anywhere. Law is both a grant and a limitation
upon power.

(4) Not only must there be some evidence to support a

finding or conclusion…, but the evidence must be
‘substantial.’… It means such relevant evidence as a
reasonable mind accept as adequate to support a
conclusion… The statute provides that ‘the rules of
evidence prevailing in courts of law and equity shall not
be controlling.’ The obvious purpose of this and similar
provisions is to free administrative boards from the
compulsion of technical rules so that the mere admission
of matter which would be deemed incompetent inn
judicial proceedings would not invalidate the
administrative order… But this assurance of a desirable
flexibility in administrative procedure does not go far as
to justify orders without a basis in evidence having rational probative force.
Mere uncorroborated hearsay or
rumor does not constitute substantial evidence…’

(5) The decision must be rendered on the evidence

presented at the hearing, or at least contained in the
record and disclosed to the parties affected… It should
not, however, detract from their duty actively to see that
the law is enforced, and for that purpose, to use the
authorized legal methods of securing evidence and
informing itself of facts material and relevant to the
controversy. Boards of inquiry may be appointed for the
purpose of investigating and determining the facts in any
given case, but their report and decision are only
advisory. (Section 9, Commonwealth Act No. 103.) The
Court of Industrial Relations may refer any industrial or
agricultural dispute or any matter under its consideration
or advisement to a local board of inquiry, a provincial
fiscal. a justice of the peace or any public official in any
part of the Philippines for investigation, report and
recommendation, and may delegate to such board or
public official such powers and functions as the said
Court of Industrial Relations may deem necessary, but
such delegation shall not affect the exercise of the Court
itself of any of its powers…
(6) The Court of Industrial Relations or any of its
judges, therefore, must act on its or his own
independent consideration of the law and facts of the
controversy, and not simply accept the views of a
subordinate in arriving at a decision. It may be that the
volume of work is such that it is literally Relations
personally to decide all controversies coming before
them. In the United States the difficulty is solved with the
enactment of statutory authority authorizing examiners
or other subordinates to render final decision, with the
right to appeal to board or commission, but in our case
there is no such statutory authority.
(7) The Court of Industrial Relations should, in all
controversial questions, render its decision in such a
manner that the parties to the proceeding can know the
various issues involved, and the reasons for the decision
rendered. The performance of this duty is inseparable
from the authority conferred upon it.”

In the case of Adajar v. Develos,99 the Supreme Court stated

that it is the burden of the complainant, and not the respondents, to
prove that they violated the law, thus:
“Settled is the rule that in administrative proceedings,
the burden of proof that the respondent committed the
act complained of rests on the complainant.
He must be
able to show this by substantial evidence, or such
relevant evidence as a reasonable mind may accept as
adequate to support a conclusion. Otherwise, the
complaint must be dismissed.”
Worse, the Special Panel recommended the imposition of
revocation on RAPPLER and RHC directly to the Commission En
Banc. No Formal Charge was filed against RAPPLER and RHC as
required by the SEC Rules.
There was also no formal administrative action filed against
RAPPLER and RHC before the SEC. Without an administrative
action, surely, no administrative sanction, including the suspension
or revocation of the corporation’s franchise, could have been imposed
by the SEC En Banc.

Without the benefit of an administrative proceeding (which

necessarily includes Notice of the Formal Charge and hearing), the
Special Panel found that RAPPLER and RHC violated the foreign
equity restrictions applicable to mass media outfits. What is worse is
that the SEC En Banc accepted the direct recourse to it, instead of
directing the Special Panel to observe the SEC Rules. The SEC En Banc also
adopted the findings of the Special Panel in its Investigation
Report in toto.

For these reasons, RAPPLER and RHC were deprived of the

following procedural rights under the SEC Rules of Procedure:

a. The right to the issuance of a Formal Charge, which

should specify the charges and attach the evidence upon which
it is based;

b. The right to respond to a Formal Charge;

c. The right to be heard on the Formal Charge and to

present evidence in its defense;

d. The right to be informed of the basis of the decision of the

Special Panel and to move for reconsideration thereof; and

e. The right to appeal the decision of the Special Panel to the

SEC En Banc.

There was no finding whatsoever that OMIDYAR actually

exercised control over RAPPLER, which finding was the basis for the
revocation of the certificates of incorporation of both RAPPLER and
RHC and the annulment of the OMIDYAR PDR.