CENON CERVANTES vs.

THE AUDITOR GENERAL allowance to the petitioners as such allowance necessarily

G.R. No. L-4043 May 26, 1952 constitute an item of expenditure in the corporation's budget.

FACTS: As correctly pointed out, the granting of allowance

amounted to an illegal increase of petitioners salary beyond
Cenon Cervantes as the manager of National Abaca and the limit fixed in the corporate charter.
other Fibers Corporation (NAFCO) created by
Commonwealth Act No. 332 approved on June 18, 1939. Regardless of whether quarter allowance should be
considered as compensation or not, the resolution of the
51% of the capital stock of which was subscribed by the board cannot be given effect since it was disapproved by the
National Government and the remainder to be offered to the Control Committee in the exercise of powers granted to it by
local government units and to the general public. EO 93.

The BOD was appointed by the President with consent of the

COA.

It was subject to the provisions of the corporation law in so

far as they were compatible with the provisions of its charter
and the purposes of which it was created and was to enjoy
the general powers mentioned in the corporation law in
addition to those granted in its charter.

Pursuant to RA No. 51 which authorizes the President to

effect changes in GOCCs, EO 53 was promulgated creating
the Government Enterprise Council. Its function was to
advise the President in the exercise of his power and control
over the corporations. The Council was to have a Control
Committee. One of its functions was to pass upon the yearly
budget of expenditures approved by the BOD.

Sometime in 1949, the BOD of NAFCO adopted a Board

Resolution granting quarter allowance to Cenon Cervantes of
not exceeding P400 a month. The said resolution was
disapproved by Control Committee on the ground that the
grant of the quarter allowance is an additional compensation
prohibited by NAFCOs charter and the financial condition of
the corporation did not warrant the granting of such
allowance.

Under its charter, the Chairman of the Board who was at the
same time the General Manager will receive a salary not to
exceed P15,000 per annum.

ISSUE:
Whether or not the grant of quarter allowance to Cenon
Cervantes as manager of NAFCO was not proper.

RULING:

YES.

With its controlling stock owned by the Government, NAFCO,

as a GOCC, was subject to the provisions of RA 51 and EO
93.

Consequently, it was also subject to the powers of the

Control Committee created in said executive order, among
which is the power of supervision for the purpose of insuring
efficiency and economy in the operations of the corporation
and also the power to pass upon the program of activities
and the yearly budget of expenditures approved by the
board of directors. It can hardly be questioned that under
these powers the Control Committee had the right to pass
upon, and consequently to approve or disapprove, the
resolution of the NAFCO board of directors granting quarters