[27] FRANCISCO v. TOLL REGULATORY BOARD character or for a longer period than fifty years.
character or for a longer period than fifty years. Neither shall any such franchise or
G.R. No. 166910 | October 19, 2010 | Velasco Jr., J.
SUMMARY
Francisco et. al. filed a petition for certiorari against the Toll Regulatory Board assailing and
seeking to nullify certain statutory provisions, presidential actions and implementing orders,
toll operation related contracts and issuances on the construction, maintenance and
operation of the major tollway systems in Luzon. The petitions likewise seek to restrain and
permanently prohibit the implementation of the allegedly illegal toll fee rate hikes for the use
of the NLEX, SLEX and the South Metro Manila Skyway (SMMS). SC held that the TRB is
empowered to grant authority to operate toll facilities/systems.
TOPIC: Extent of Government Regulation; Franchise
DOCTRINE
A franchise is basically a legislative grant of a special privilege to a person. The term
franchise includes not only authorizations issuing directly from Congress in the form of
statute, but also those granted by administrative agencies to which the power to grant
franchise has been delegated by Congress. The power to authorize and control a public
utility is admittedly a prerogative that stems from the Legislature. Any suggestion, however,
that only Congress has the authority to grant a public utility franchise is not accurate.
There is nothing in the Constitution remotely indicating the necessity of a congressional
franchise before “each and every public utility may operate. Therefore, a special franchise
directly emanating from Congress is not necessary if the law already specifically authorizes
an administrative body to grant a franchise or to award a contract.
PROVISIONS APPLICABLE:
 Sec. (a) and (e) of PD 1112:
o Section 3(a): The TRB shall have the powers and duties to enter into
contracts in behalf of the PH with persons for the construction, operation,
and maintenance of toll facilities such as but not limited to national
highways, roads, bridges, and public thoroughfares.
o Sec. 3(e): The TRB shall have the power to operate a toll facility and to
issue therefore the necessary “Toll Operations Certificate” subject to such
conditions as shall be imposed by the Board (enumerated)
 Sec. 4 of PD 1894: The TRB is given jurisdiction and supervision over the grantee
with respect to the Expressways, the toll facilities necessarily appurtenant thereto
and, subject to the provisions of Secs 8 and 9, the toll that the grantee will charge
the users thereof.
 Art. XII, Sec. 11, 1987 Constitution: No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital is owned by such
citizens, nor shall such franchise, certificate, or authorization be exclusive in
right be granted except under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the common good so requires.
FACTS
 March 31, 1977: Then President Ferdinand E. Marcos issued Presidential Decree
No. 1112, authorizing the establishment of toll facilities on public improvements.
o This issuance, in its preamble, explicitly acknowledged “the huge financial
requirements” and the necessity of tapping “the resources of the private
sector” to implement the government’s infrastructure programs.
o In order to attract private sector involvement, PD 1112 allowed “the
collection of toll fees for the use of certain public improvements that would
allow a reasonable rate of return on investments.”
 The same decree created the Toll Regulatory Board (TRB) and invested it under
Sec. 3 (a) (d) and (e) with the power to enter, for the Republic, into contracts for
the construction, maintenance and operation of tollways, grant authority to operate
a toll facility, issue therefor the necessary Toll Operation Certificate (TOC) and fix
initial toll rates, and, from time to time, adjust the same after due notice and
hearing.
o On the same date, PD 1113 was issued, granting to the Philippine
National Construction Corporation (PNCC), then known as the
Construction and Development Corporation of the Philippines (CDCP), for
a period of 30 years [from May 1977 up to May 2007] a franchise to
construct, maintain and operate toll facilities in the North Luzon and South
Luzon Expressways, with the right to collect toll fees at such rates as the
TRB may fix and/or authorize.
o Particularly, Sec. 1 of PD 1113 delineates the coverage of the
expressways from Balintawak, Caloocan City to Carmen, Rosales,
Pangasinan and from Nichols, Pasay City to Lucena, Quezon.
 And because the franchise is not self-executing, as it was in fact
made subject, under Sec. 3 of P.D. 1113, to “such conditions as
may be imposed by the Board in an appropriate contract to be
executed for such purpose,” TRB and PNCC signed a Toll
Operation Agreement (TOA) on the North Luzon and South
Luzon Tollways, providing for the detailed terms and conditions
for the construction, maintenance and operation of the
expressway.
 December 22, 1983: PD 1894 was issued therein further granting PNCC a
franchise over the Metro Manila Expressway (MMEX), and the expanded and
delineated NLEX and SLEX.
o Particularly, PNCC was granted the “right, privilege and authority to
construct, maintain and operate any and all such extensions, linkages or
stretches, together with the toll facilities appurtenant thereto, from any
part of the North Luzon Expressway, South Luzon Expressway and/or
Metro Manila Expressway and/or to divert the original route and change
 the original end-points of the North Luzon Expressway and/or South
Luzon Expressway as may be approved by the TRB.”
o Under Sec. 2 of PD 1894, “the franchise granted the MMEX and all
extensions, linkages, stretches and diversions after the approval of the
decree that may be constructed after the approval of this decree on
December 22, 1983 shall likewise have a term of 30 years, commencing
from the date of completion of the project.”
 As expressly set out in PD 1113 and reiterated in PD 1894, PNCC may sell or
assign its franchise thereunder granted or cede the usufruct thereof upon the
President's approval.
o This same provision on franchise transfer and cession of usufruct is
likewise found in PD 1112.
 Then came the 1987 Constitution and its franchise provision.
 In 1993, the Government Corporate Counsel (GCC), acting on PNCC's request,
issued Opinion No. 224, s. 1993, later affirmed by the Secretary of Justice, holding
that PNCC may, subject to certain clearance and approval requirements, enter into
a joint venture agreement (JVA) with private entities without going into public
bidding in the selection of its JV partners.
o PNCC's query was evidently prompted by the need to seek out alternative
sources of financing for expanding and improving existing expressways,
and to link them to economic zones in the north and to the CALABARZON
area in the south.
 In 1994, DPWH, TRB, PNCC, and other government and private entities
executed a Memorandum of Understanding (MOA) for the entry of private
capital in the extension of the expressways north of Manila, over which PNCC has
a franchise.
o They executed Supplemental Toll Operations Agreements (STOA) to
implement the TOA.
o And so, PNCC entered into JVAs with private entities.
ISSUES w/ HOLDING & RATIO:
1. W/N the TRB is vested with the power and authority to grant what amounts to
a franchise over tollway facilities – YES, TRB is empowered to grant
authority to operate toll facilities/systems.
 It is clear that by explicit provision of law, the TRB was given the power to grant
administrative franchise for toll facility projects.
o Sec. 3 (a) and (e) of PD 1112 in relation to Sec. 4 of PD 1894 have
invested the TRB with power to grant a qualified person or entity with
authority to construct, maintain, and operate a toll facility and to issue the
toll operating permit or TOC.
o Sec. 3 (a) and (e) of PD 1112 and Sec. 4 of PD 1894 provide the power to
grant authority to operate toll facilities.
 For the constitutionality argument, the SC does not agree with
petitioners.
 The limiting thrust of the constitutional provision on the grant of franchise or other
forms of authorization to operate public utilities may, in context, be stated as
follows:
a. The grant shall be made only in favor of qualified Filipino citizens or
corporations;
b. Congress can impair the obligation of franchises, as contracts; and
c. No such authorization shall be exclusive or exceed 50 years.
 A franchise is basically a legislative grant of a special privilege to a person.
o The term franchise includes not only authorizations issuing directly from
Congress in the form of statute, but also those granted by administrative
agencies to which the power to grant franchise has been delegated by
Congress.
 The power to authorize and control a public utility is admittedly a prerogative
that stems from the Legislature.
o Any suggestion, however, that only Congress has the authority to grant a
public utility franchise is not accurate.
o As in Albano v. Reyes—a case decided under the aegis of the 1987
Constitution—there is nothing in the Constitution remotely indicating the
necessity of a congressional franchise before “each and every public
utility may operate.”
 Therefore, a special franchise directly emanating from Congress
is not necessary if the law already specifically authorizes an
administrative body to grant a franchise or to award a contract.
o The Court has already upheld the view that administrative agencies may
be vested with the authority to grant administrative franchises or
concessions over the operation of public utilities under their respective
jurisdiction and regulation, without need of the grant of a separate
legislative franchise.
 Under the 1987 Constitution, Congress has an explicit authority to grant a public
utility franchise.
o However, it may validly delegate its legislative authority, under the power
of subordinate legislation.
o Such delegation of legislative power to an administrative agency is
permitted in order to adapt to the increasing complexity of modern life.
o Its charter empowered the TRB to authorize the PNCC to operate toll
facilities so it may be stated as a corollary that the TRB, subject to certain
qualifications, can alter the conditions of such authorization.
 Well settled is the rule that a legislative franchise cannot be
modified or amended by an administrative body with general
delegated powers to grant authorities or franchises. However, in
this case, the law granting a direct franchise to PNCC specifically
conferred upon the TRB the power to impose conditions in an
appropriate contract.
2. W/N the TRB can enter into TOAs and promulgate toll rates and rule on
petitions for toll rate adjustments – YES.
  Administrative bodies have expertise in specific matters within the purview of their
respective jurisdictions.
o Accordingly, the law concedes to them the power to promulgate
implementing rules and regulations (IRR) to carry out declared statutory
policies. Provided, that the IRR conforms to the terms and standards
prescribed by that statute.
 The Court does not see an irreconcilable clash in the TRB’s statutory powers, such
that the exercise of one negates another.
o Petitioners have NOT shown that the TRB lacks the expertise,
competence, and capacity to implement its mandate of balancing the
interests of the toll-paying motoring public and the imperative of allowing
the concessionaires to recoup their investment with reasonable profits.
o Also, PD 1894 provides a formula for adjustment of toll rates that takes
into account the Peso-US Dollar exchange rate, interest rate and
construction materials price index, among other verifiable and quantifiable
variables.

RULING: WHEREFORE, the petitions in G.R. Nos. 166910 and 173630 are hereby
DENIED for lack of merit. No costs. SO ORDERED.