University of the Philippines 97 Cervantes v Auditor General

College of Law (Evening) (1952)

Administrative Law Judicial Function; Promotion of Simplicity, Economy or Reyes
Efficiency
Summary
The Court here, in disallowing the grant of the quarters allowance to Cervantes as Manager of NAFCO, relied on the
authority conferred upon the Control Committee of the Government Enterprises Council by virtue of E.O. No. 93, s.
1947 which vested in it the power of supervision for the purpose of insuring efficiency and economy in the operations
of the corporation and to pass upon program of activities and yearly budget of expenditures. The “quarters allowance”
being in the nature of an item of expenditure, is within the power of the Control Committee to approve or disapprove.
The Facts
• In 1949, Cenon Cervantes (“Cervantes”), petitioner in this case, was the manager of the National Abaca and
other Fibers Corporation (“NAFCO”). He was granted quarters allowance by virtue of a resolution of the Board
of Directors.
• This resolution granting him the quarters allowance was submitted to the Control Committee of the
Government Enterprises Council (“Control Committee”) for approval which was disapproved by said
Committee on the basis of the recommendations of the NAFCO Auditor, which recommendation was
concurred in by the Auditor General.
• According to the recommendation, the resolution in question should not be approved because first, the
quarters allowance constituted additional compensation prohibited by NAFCO’s Charter which fixes the salary
of the General Manager at a sum not to exceed ₱15,000.00 a year and second, that the precarious financial
condition of the corporation did not warrant the granting of such allowance.
• Cervantes asked the Control Committee several times to reconsider its action and to approve his claim for the
quarters allowance. In referring his repeated requests for reconsideration to the Auditor General, the latter
merely reaffirmed his previous recommendation and emphasized the fact that the corporation’s finances had
not improved. Hence, Cervantes was constrained to file a petition to review the decision of the Auditor General
with the Supreme Court.
Issue/s
W/N Cervantes’ claim for the quarters allowance should be approved by the Control Committee
No.

The Court, in holding that NAFCO is a government-owned-and-controlled-corporation stated that it is subject

to the provisions of R.A. No. 51 (1946) and E.O. No. 93 (1947). As such, it is subject to the powers of the Control
Committee of the Government Enterprises Council, 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. Thus, under
the grant of such authority to the Control Committee under E.O. No. 93, the Control Committee had the right
to pass upon, and consequently, to approve or disapprove, the resolution of the NAFCO Board of Directors
granting the quarters allowance because this allowance necessarily constituted an item of expenditure.

The Court also noted that the Control Committee had good grounds for disapproving the resolution, because
as pointed out by the Auditor General, the granting of the allowance amounted to an illegal increase of
Cervantes’ salary beyond the limit fixed in the corporate charter and was furthermore, not justified in view of
the precarious financial condition of the corporation.
W/N E.O. No. 93 is null and void
No.

Cervantes also raised the argument that the E.O. No. 93 is null and void for being an illegal delegation of
legislative power and for having been promulgated beyond the period of 1-year limitation in the law upon which
it is based. The Court did not find merit in these arguments stating that the argument that it had been
promulgated beyond the period provided for by law disregarded the rule that in the computation of the time
for doing an act, the first day is excluded and the last is included. In this case, the Act was approved on October
4, 1946 and the President was given a period of 1 year within which to promulgate his executive order and that
order was in fact promulgated on October 4, 1947.
 On the argument of undue delegation, the Court held that the same argument is also without merit because
Republic Act No. 51 in authorizing the President of the Philippines, among others, to make reforms and changes
in government-controlled corporations, lays down a standard and policy that the purpose shall be to meet the
exigencies attendant upon the establishment of the free and independent government of the Philippines and
to promote simplicity, economy and efficiency in their operations.
W/N the quarters allowance is not compensation
The Court did not definitely rule on this issue but only made the pronouncement that regardless of whether
quarters allowance should be considered as compensation or not, the resolution of the board of the directors
authorizing payment thereof to the petitioner cannot be given effect since it was disapproved by the Control
Committee in the exercise of powers granted to it by Executive Order No. 93.

Furthermore, the Court stated that even if there is no definite rule as to the nature of a quarters allowance, the
grant thereof cannot be insisted upon because E.O. No. 332 prohibits the payment of additional compensation
to those working for the Government and its Instrumentalities, including government-controlled corporations.
Lastly, the Court cited E.O. No. 77 which amended E.O. No. 332 which expressly exempting from the prohibition
the payment of quarters allowance "in favor of local government officials and employees entitled to this under
existing law." The amendment is a clear indication that quarters allowance was meant to be included in the
term "additional compensation", for otherwise the amendment would not have expressly excepted it from the
prohibition.
Ruling
In view of the foregoing, the petition for review is dismissed, with costs.