Alvarez vs. Guingona
(Note: The income must be duly certified by the DOF)
31 JANUARY 1996 | PONENTE: HERMOSISIMA, JR | EN BANC
STATEMENT OF FACTS
 The petitioners, led by Sen. Heherson Alvarez, seek to question
the constitutionality of R.A. 7720, which was an act converting the
municipality of Santiago to an Independent Component City,
because:
1. The Act allegedly did not originate exclusively in the House
of Representatives, as mandated by Article 6, Sec. 24 of the
Constitution;
2. The Municipality of Santiago has not met the minimum
average income required under Sec. 450 of the LGC to be
converted into a component city.
 R.A. 7720 became such after the following processes:
1. On 18 April 1993, House Bill 8817, principally authored by
Cong. Abaya, was filed in the HRep.
2. On 5 May, 1993, the bill was referred to the House
Committee on Local Governments and House Committee on
Appropriations.
3. Three public hearings were subsequently held by the
committee and by 9 December 1993, the committee
submitted a favourable report.
4. On 13 December, the bill was passed on second reading,
and on 17 December, was approved on third reading.
5. On 28 January 1994, the bill was transmitted to the Senate.
6. Concurrently with the HRep, a Senate Bill was also filed in
the Senate on 19 May 1993, by Sen. Vicente Sotto III. This
was introduced shortly after the first reading of the House
bill.
7. On 23 February 1994, the Senate conducted public hearings
on the Senate Bill. On March 1, the committee submitted a
favourable report saying that House Bill 8817 was the same
with the Senate bill anyway. Sen. Alvarez was one of those
who approved the report as member of the Committee of
Local Governments.
8. On 3 March 1994, the senate bill was passed on second
reading, and on 14 March, was approved on third reading.
After this, the HRep approved the amendments made by the
Senate.
9. On 12 April 1994, the enrolled bill was submitted to the
President, and was signed by the Chief Executive on 5 May
1994 as R.A. 7720.
10. On 13 July 1994, a plebiscite was held and a great majority
of the registered voters of Santiago voted in favour of the
conversion of Santiago into a city.
ISSUES:
The issues as to the validity of R.A. 7720 are:
1. Are the Internal Revenue Allotments (IRA) to be included in
the computation of the average annual income of a
municipality for purposes of converting it into an independent
component city?
2. Considering that the Senate passed its own version of the
House Bill, can RA 7720 be considered to have originated
from the House?
HELD:
1. The annual income of an LGU includes the IRA.
2. RA 7720 was compliant with Art. 6, Sec. 24 of the
Constitution.
RATIONALE:
 Petitioners contend that Santiago could not qualify as a
component city because its average annual income for the last 2
consecutive years based on the 1991 constant prices, fall below
the required annual income of P20M to be converted into a city.
- They computed Santiago’s average annual income by
adding the total income of Santiago for 1991 and 1992,
deducting the IRA for both years, and then dividing the result
by two to get the average of the two years. The computation
resulted with P13M. This is below the requirement for
component cities.
- Petitioners contend that the DOF’s certification saying that
Santiago’s income is P21M is allegedly not accurate
because in their computation, the IRAs were not excluded.
- Petitioners insist that IRAs are not income but are transfers
and/or budgetary aid from the national government and that
they fluctuate, increase or decrease, depending on factors
such as population, land and equal sharing.
 SC: The petitioners are wrong. IRAs are part of an LGU’s income.
- To resolve this, the SC defined IRAs vis-à-vis the notion of
income of an LGU and the principles of autonomy and
decentralization underlying the institutionalization and
intensified empowerment of the local government system.
- An LGU is a political subdivision of the State. It is constituted
by law, and possessed of substantial control over its own
affairs. It remains to be an intra-sovereign subdivision of one
sovereign nation, but it is not intended to be an imperium in
imperio.
- An LGU is autonomous in the sense that it is given more
powers, authority, responsibilities and resources. Power is
deconcentrated, enabling peripheral LGUs to develop not
only at their own pace and discretion, but also with their own
resources and assets.
- At the practical side of a decentralized local government
system is matters of financial resources. With more power
and responsibility, an LGU operates on a wider scale, and
thus, more expenses are entailed. Thus, more resources are
needed for it to discharge its function. To avail such
resources, an LGU is vested with:
1. The right to create and broaden its own source of
revenue
2. The right to be allocated with a just share in national
taxes (the share being the IRA)
3. The right to be given its equitable share in the proceeds
of the utilization and development of national wealth, if
any, within its territorial boundaries.
- Funds from local taxes, IRAs and national wealth proceeds
accrue to the general fund of the local government and are
used to finance its operations subject to specified modes of
spending as specified in the LGC and its IRR. For example,
not less than 20% of the IRA must be set aside for local
development projects.
- With all these in mind, for purposes of budget preparation,
IRAs and the share in national wealth proceeds are
considered items of income. Besides, income is defined in
the LGC as “all revenues and receipts collected or received
forming the gross accretions of funds of the LGU.”
- IRAs are items of income because they form part of the
gross accretion of funds of the LGU. IRAs regularly and
automatically accrue to the local treasury without need of
any further action on the part of the LGU. They thus
constitute income with the LGU can rely upon for funds. The
DOF included the IRA in their computation of the LGU’s
average annual income and it was right.
- Futhermore, Sec. 450(c) of the LGC provides that the
average annual income shall include the income accruing to
the general fund, exclusive of special funds, transfers and
non-recurring income. IRAs are regular and recurring. It is
not a special fund. It has its own meaning in the LGC
(“funding support from the national government, its
instrumentalities and GOCCs”) making it distinct from special
funds or transfers.
- Therefore, the DOF Order certifying the income of Santiago
by including the IRAs, and excluding non-recurring receipts
such as national aids, grants, financial assistance, loan
proceeds, sale of fixed assets, etc is correct. The order must
be accorded with great weight.
 As to how RA 7220 was passed, it was compliant with the
Constitution
- The House bill was filed first than the Senate Bill. The House
Bill initiated the legislative process, so there was violation of
Sec. 24, Article 6. Besides, when the Senate Bill was
dependent on the House Bill. The Senate held in abeyance
any action on the Senate Bill until it received the House Bill.
- Filing a substitute bill in the Senate in anticipation of the
receipt of the bill from the house does not contravene the
constitutional requirement that a bill of local application
 should originate from the House, for as long as the Senate
does not act upon it until it receives a House bill.
- This issue was already addressed in Tolentino vs Secretary
of Finance, which involved the E-VAT Law which originated
as a revenue bill which must come from the House. In the
case, the court emphasized that the bill from the House may
undergo extensive changes in the Senate such that an
entirely new bill may be produced. To insist that the statute
should be substantially the same as the House bill is to deny
the Senate's power not only to concur with amendments but
to propose amendments.
- What the Constitution simply means is that the initiative for
filing bills of local application must come from the House on
the theory that members of the House can be expected to be
more sensitive to local needs and problems, since they are
elected from districts. Senators, on the other hand, are
expected to approach the problem from a national
perspective.

 Besides, every law has in its favour the presumption of

constitutionality. For RA 7220 to be nullified, there must be an
unequivocal breach of the Constitution. Its unconstitutionality
must be clearly established. In this case, petitioners failed to
overcome the presumption.