CENON CERVANTES vs.

THE AUDITOR GENERAL these powers the Control Committee had the right to pass
G.R. No. L-4043 May 26, 1952 upon, and consequently to approve or disapprove, the
resolution of the NAFCO board of directors granting quarters
FACTS: allowance to the petitioners as such allowance necessarily
constitute an item of expenditure in the corporation's budget.
Cenon Cervantes as the manager of National Abaca
and other Fibers Corporation (NAFCO) created by
Commonwealth Act No. 332 approved on June 18, As correctly pointed out, the granting of allowance
1939. amounted to an illegal increase of petitioners salary
beyond the limit fixed in the corporate charter.
51% of the capital stock of which was subscribed by
the National Government and the remainder to be Regardless of whether quarter allowance should be
offered to the local government units and to the considered as compensation or not, the resolution of
general public. the board cannot be given effect since it was
disapproved by the Control Committee in the
The BOD was appointed by the President with exercise of powers granted to it by EO 93.
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