Alvarez vs.

Guingona
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. (Note: The income must be duly certified by the DOF)
- 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.