Commission on Audit of the Province of Cebu vs. Province of Cebu

Salaries and personnel-related benefits of teachers appointed by local school boards for extension classes are chargeable against the Special Education Fund (SEF) under the doctrine of necessary implication and the surviving provisions of R.A. No. 5447; however, college scholarship grants are not chargeable to the SEF where the Local Government Code of 1991 intentionally omitted the specific authorization found in R.A. No. 5447.

The dispute centers on the interpretation of the Special Education Fund (SEF) created under R.A. No. 5447 (1969) and its interplay with the Local Government Code of 1991 (R.A. No. 7160). The SEF is constituted from an additional 1% real property tax and portions of taxes on Virginia-type cigarettes. The issue arose when the COA questioned the Province of Cebu's disbursement of SEF funds for teacher salaries and scholarships, leading to a test of whether the LGC fully repealed R.A. No. 5447 and what expenditures remain valid under the new statutory framework.

• Audit conducted by the COA for the Province of Cebu for the period January to June 1998
• COA issued Notices of Suspension against the Province for charging teacher salaries and scholarship grants to the SEF
• Province of Cebu filed a Petition for Declaratory Relief with the RTC of Cebu, Branch 20 (Civil Case No. CEB-24422)
• RTC rendered decision on December 13, 1999, declaring the questioned expenses as authorized SEF expenditures and nullifying the COA's audit findings
• COA filed the instant Petition for Review with the SC

• The Provincial Governor of Cebu, acting as chairman of the local school board under Section 98 of the Local Government Code, appointed classroom teachers who had no items in the DECS plantilla to handle extension classes for public schools
• The Province charged the salaries and personnel-related benefits of these teachers to the provincial SEF
• The Province also charged college scholarship grants to the SEF
• The COA issued Notices of Suspension, taking the position that these disbursements were not authorized expenditures of the SEF
• The Province, represented by the Governor, filed a petition for declaratory relief to resolve the uncertainty regarding SEF disposition

• Full Repeal of R.A. No. 5447: The Local Government Code of 1991 repealed R.A. No. 5447, leaving only Sections 235, 272, and 100(c) of the Code to govern SEF disposition
• Expressio Unius Est Exclusio Alterius: Since salaries, personnel-related benefits, and scholarship grants are not enumerated in Sections 272 and 100(c) of the LGC as authorized SEF expenditures, they are excluded by implication
• Limited Scope of Local School Board Authority: Under Section 99 of the LGC, local school boards may only determine "annual supplementary budgetary needs for the operation and maintenance of public schools," which excludes personnel-related benefits because operation and maintenance pertain principally to the DECS
• Improper Remedy: The petition for declaratory relief should have been denied because the Notices of Suspension issued by the COA constituted a breach or violation of the statute, making the remedy unavailable under Rule 63, Section 1 of the 1997 Rules of Civil Procedure

• Partial Repeal Only: Only Section 3 of R.A. No. 5447 (regarding taxes on Virginia-type cigarettes) was repealed by the LGC, not the entire statute; the provisions allocating funds for teacher salaries remain in force
• Legislative Intent: The legislative deliberations on the LGC demonstrate clear intent that the SEF should cover salaries of teachers for extension classes, as revealed in the exchange between Senators Pimentel and Guingona, and the House deliberations involving Representative De Pedro
• Doctrine of Necessary Implication: The establishment and maintenance of extension classes necessarily implies the hiring and compensation of teachers; ex necessitate legis, such salaries are valid SEF charges
• Proper Remedy: No breach had occurred that would bar declaratory relief because the applicability of the statute to future transactions remained unresolved, following Shell Company of the Philippines, Ltd. v. Municipality of Sipocot

• Procedural Issue: Whether the RTC properly gave due course to the petition for declaratory relief despite the COA's issuance of Notices of Suspension
• Substantive Issues:
  • Whether R.A. No. 5447 was entirely repealed by the Local Government Code of 1991
  • Whether salaries and personnel-related benefits of teachers appointed for extension classes may be charged to the SEF
  • Whether college scholarship grants may be charged to the SEF

• Procedural: Yes. The RTC did not err in giving due course to the petition. The Notices of Suspension did not constitute a breach that would bar the action because the applicability of the statute to future transactions remained to be resolved, following Shell Company of the Philippines, Ltd. v. Municipality of Sipocot
• Substantive:
  • Partial Repeal Only: Only Section 3 of R.A. No. 5447 was expressly repealed by Section 534(c) of the LGC. The legislature is presumed to know existing laws and repeals specifically; the failure to expressly repeal Section 1 of R.A. No. 5447 indicates no intent to repeal provisions regarding teacher salaries where no irreconcilable inconsistency exists
  • Teacher Salaries Allowed: Yes. Salaries and personnel-related benefits of teachers appointed by local school boards for extension classes are chargeable to the SEF. This is supported by: (a) legislative intent shown in Senate and House deliberations; (b) the doctrine of necessary implication (ex necessitate legis), as compensation is indispensable to establishing extension classes; and (c) the surviving provisions of R.A. No. 5447
  • Scholarships Not Allowed: No. College scholarship grants are not chargeable to the SEF. The specific authorization for scholarships in R.A. No. 5447 was intentionally omitted in the LGC (casus omissus pro omisso habendus est). Scholarship grants are neither necessary nor indispensable to the operation and maintenance of public schools and must be charged to the General Funds of the province

• Expressio Unius Est Exclusio Alterius — The specific mention of certain things excludes others not mentioned. The COA invoked this to argue that unlisted expenses are excluded, but the SC rejected its application for teacher salaries because legislative intent and necessary implication prevailed over strict enumeration
• Casus Omissus Pro Omisso Habendus Est — A person, object, or thing omitted from an enumeration in a statute must be held to have been omitted intentionally. The SC applied this to hold that the omission of scholarship grants from the LGC (despite their inclusion in R.A. No. 5447) was deliberate, and the SC cannot supply the omission
• Ex Necessitate Legis (Doctrine of Necessary Implication) — Every statute is understood to contain all provisions necessary to effectuate its object, including collateral and subsidiary consequences fairly and logically inferred from its terms. The SC held that the establishment of extension classes necessarily implies the power to hire and compensate teachers, making such salaries valid SEF charges
• Legislative Intent as Controlling Factor — In statutory construction, the intent of the legislature prevails over literal interpretation. The SC examined the deliberations of the Senate (July 30, 1990) and House of Representatives (August 16, 1990) to determine that Congress intended the SEF to cover teacher salaries for extension classes
• Express Repeal Over Implied Repeal — Repeals of law must be express and specific. The SC held that Section 534(c) of the LGC expressly repealed only Section 3 of R.A. No. 5447, leaving Section 1 (regarding teacher salaries) in force

• "It is a basic precept in statutory construction that the intent of the legislature is the controlling factor in the interpretation of a statute."
• "Every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly and logically inferred from its terms. Ex necessitate legis."
• "Casus omissus pro omisso habendus est. A person, object, or thing omitted from an enumeration in a statute must be held to have been omitted intentionally. It is not for this Court to supply such grant of scholarship where the legislature has omitted it."
• "The legislature is presumed to know the existing laws, such that whenever it intends to repeal a particular or specific provision of law, it does so expressly."

• National Tobacco Administration v. Commission on Audit (311 SCRA 755) — Cited for the principle that legislative intent controls statutory interpretation
• Mecano v. Commission on Audit (216 SCRA 500) — Cited for the rule that failure to add a specific repealing clause indicates no intent to repeal existing law unless irreconcilable inconsistency exists
• Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor (312 SCRA 104) — Cited for the doctrine of necessary implication (ex necessitate legis)
• Shell Company of the Philippines, Ltd. v. Municipality of Sipocot (105 Phil. 1263) — Cited for the rule that declaratory relief will prosper despite breach if the applicability of the statute to future transactions remains unresolved

• R.A. No. 5447 (An Act Creating a Special Education Fund) — Section 1 (activities financed including extension classes and teacher salaries); Section 3 (allocation of cigarette taxes, expressly repealed)
• P.D. No. 464 (Real Property Tax Code) — Imposed the additional 1% tax on real property accruing to the SEF
• R.A. No. 7160 (Local Government Code of 1991):
  • Section 235 — Authority to levy additional 1% tax for SEF
  • Section 272 — Authorized expenditures of SEF (operation/maintenance, construction, research, books, sports)
  • Section 100(c) — Priority budget items (construction/repair, extension classes, sports)
  • Section 99 — Functions of local school boards
  • Section 534(c) — Repealing clause (specifically repealing only Section 3 of R.A. No. 5447)
  • Rule 63, Section 1 of the 1997 Rules of Civil Procedure — Requirements for declaratory relief petitions

• N/A (Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, De Leon, Jr., Sandoval-Gutierrez, and Carpio, JJ., concurred; Buena, J., on official leave)