The Auditor-General possesses discretionary power, not merely a ministerial duty, to examine the legality and regularity of government expenditures before countersigning treasury warrants; consequently, any novation of a government contract, such as a price increase altering a principal condition, must strictly comply with existing laws and executive orders, including requirements for public bidding and specified approvals, and failure to do so renders the novation invalid and the resulting expenditure unauthorized.

Petitioner Amadeo Matute held a contract with the Commonwealth Government, secured through public bidding, to supply fresh meat at predetermined prices. Subsequent to the contract's execution, the City of Manila increased the fees at the municipal slaughterhouse, which led the petitioner to request an increase in the contract price for the meat he supplied to the government. This price increase was granted by the Acting Purchasing Agent with the approval of the Undersecretary of Finance, but without a new public bidding or other approvals later deemed necessary by the Auditor-General.

• On December 24, 1936, petitioner Amadeo Matute contracted with the Commonwealth of the Philippines, through its Purchasing Agent and with the Secretary of Finance's approval, to supply fresh meat from January 1 to June 30, 1937, at P0.37/kilo for hindquarters and P0.38/kilo for boneless brisket.
• Due to an increase in municipal slaughterhouse fees by the City of Manila, petitioner requested a price increase of P0.015 per kilo for each class of meat.
• On March 2, 1937, C. E. Unson, technical adviser to the President and Acting Purchasing Agent, with the approval of Undersecretary of Finance Guillermo Gomez, granted this price increase, making hindquarters P0.385/kilo and brisket P0.395/kilo.
• Petitioner supplied hindquarters fresh meat to the Bureau of Prisons from March 1 to 15, 1937, at the increased price.
• On May 31, 1937, the Director of Prisons, with the Acting Purchasing Agent's approval, issued a treasury warrant for P330.73, representing the value of the meat supplied at the increased price.
• The respondent Auditor-General refused to countersign the treasury warrant and ordered its cancellation.
• The Auditor-General argued the price increase was illegal and void for lack of valuable consideration, absence of public bidding, and failure to consult the Auditor-General, Secretary of Justice, or obtain approval from the President, as required by Executive Order No. 16.

• The Auditor-General's function in countersigning a treasury warrant is merely ministerial, not discretionary.
• The amendment to the contract, specifically the increase in the price of meat, was a legal and valid modification.
• Executive Order No. 16, which requires public bidding for contract renewals, applies only to contracts for "public services" and not to contracts for the supply of goods like meat.
• Executive Order No. 98, which clarified E.O. No. 16 to include supply contracts, was issued after the price increase was granted and therefore cannot be applied retroactively.
• Executive Orders Nos. 16 and 98 are illegal and void because they constitute an unlawful usurpation of legislative powers, particularly the authority granted to the Purchasing Agent by Section 12 of Act No. 4007 to adjust contract terms.

• The Auditor-General, under Article X, Section 2 of the Constitution, has the discretionary power to assess the legality and regularity of government expenditures, including those arising from contracts.
• The act of countersigning a treasury warrant is not merely ministerial but involves a discretionary determination of whether the expenditure is irregular, unnecessary, excessive, or extravagant.
• The price increase granted to the petitioner was illegal and void because it lacked valuable consideration and was not subjected to public bidding as required for such a substantial modification.
• The modification of the contract (price increase) did not comply with Executive Order No. 16, which mandated public bidding for contract renewals or new contracts, and required consultation with the Auditor-General, Secretary of Justice, and the concerned Department Secretary, as well as the President's prior approval.
• The increase in the price of meat constituted a novation of the original contract, changing a principal condition, and thus required adherence to the formalities applicable to new government contracts.
• Executive Order No. 16, as intended by the President and clarified by Executive Order No. 98, applies to contracts for supplies, not just public services.
• Executive Orders Nos. 16 and 98 are valid exercises of the President's constitutional power to control executive departments and ensure the faithful execution of laws.

• Whether the Auditor-General possesses discretionary power, rather than a purely ministerial duty, to refuse to countersign a treasury warrant based on the perceived illegality or irregularity of the underlying contract or expenditure.
• Whether the amendment to the petitioner's contract, specifically the increase in the price of meat, was legally valid and enforceable despite the absence of a new public bidding and non-compliance with the procedural requirements of Executive Order No. 16.
• Whether Executive Orders Nos. 16 and 98 are applicable to the petitioner's contract for the supply of meat and whether these executive orders are constitutionally valid.

• The Supreme Court denied the petition for mandamus and subsequently denied the motion for reconsideration.
• The Court held that the Auditor-General's duty to countersign treasury warrants is not merely ministerial but involves discretionary power, derived from Article X, Section 2 of the Constitution, to examine and audit expenditures and to determine if they are irregular, unnecessary, excessive, or extravagant.
• The Court ruled that the increase in the price of meat was a novation of the original contract, as it changed one of its principal conditions (the price), and thus required compliance with the legal formalities for new government contracts.
• The Court found that the novation (price increase) was invalid because it failed to comply with Executive Order No. 16, which required public bidding for renewals or new contracts (interpreted to include such modifications) and specific consultations and approvals (Auditor-General, Secretary of Justice, Department Secretary, and President), none of which were secured.
• The Court affirmed the applicability of Executive Order No. 16 to contracts for supplies, noting the President's intent and the clarifying effect of Executive Order No. 98, and upheld the validity of these Executive Orders as legitimate exercises of the President's power under Article VII, Section 11(1) of the Constitution to control executive departments and ensure the faithful execution of laws.

• Discretionary Power of the Auditor-General — The Auditor-General is constitutionally mandated to audit government expenditures and has the discretion to determine their legality, regularity, necessity, and propriety, meaning the act of countersigning a warrant is not merely ministerial. In this case, the Auditor-General properly exercised this discretion by refusing to countersign a warrant for an expenditure arising from an illegally modified contract.
• Novation of Contract — An obligation is novated if its principal conditions are changed (Article 1203, Civil Code). A change in the price of a government supply contract is a change in a principal condition, thus constituting a novation. In this case, the price increase for meat supply was a novation that required adherence to the same legal formalities as a new contract, including public bidding under E.O. No. 16.
• Requirement of Public Bidding for Government Contracts — Public bidding is generally required for government contracts, including significant modifications or renewals, to ensure transparency, prevent favoritism, and obtain the best terms for the government. The price increase, being a novation, was invalid for lack of public bidding as mandated by E.O. No. 16.
• Executive Power of the President (Control over Executive Departments and Faithful Execution of Laws) — The President has control over all executive departments and the duty to ensure laws are faithfully executed (Art. VII, Sec. 11(1), Constitution), which includes the power to issue executive orders regulating government contracts to ensure compliance with law and prevent anomalies. E.O. Nos. 16 and 98 were upheld as valid exercises of this power, aimed at ensuring proper procurement procedures.

• "Now, then, may the Auditor-General refuse to countersign the treasury warrant in question? If, according to section 2, Article X of the Constitution, the Auditor-General has the right and duty to examine, audit and settle all accounts pertaining to the revenues and receipts * * * and to audit, in accordance with law, all expenditures of funds pertaining to the Government * * * and to bring to the attention of the proper administrative officer expenditures of funds or property which, in his opinion, are irregular, unnecessary, excessive, or extravagant, then it is logical to conclude therefrom that the act of countersigning the treasury warrant with his signature is not a merely ministerial duty of the Auditor-General, but a discretional power authorizing him to determine whether or not the expenditure in question is irregular, unnecessary, excessive, or extravagant."
• "The increase in the price of meat allowed the petitioner by the Acting Purchasing Agent undoubtedly constitutes a novation of the contract of December 24, 1936 entered into between the Government and petitioner after a public bidding had been held."
• "In the exercise of these constitutional powers, His Excellency, the President, as Chief Executive of the Government, may issue regulations for the enforcement and execution of the laws, and Executive Orders Nos. 16 and 98 have been issued, not for the purpose of amending or adding something to the law relating to contracts of supplies for the Government, but to better assure compliance therewith and to avoid even suspicions of favoritism or anomalies in the execution or renewal of said contracts."

• Ynchausti & Co. vs. Wright (47 Phil., 866) — Referenced to affirm the principle that the Auditor-General possesses discretionary power to ascertain, before countersigning a warrant, whether the disbursement in question is illegal or not.

• Constitution, Article X, Section 2 — This provision outlines the Auditor-General's powers and duties to audit government accounts and identify improper expenditures, serving as the legal basis for the Auditor-General's discretionary authority to refuse to countersign the warrant in this case.
• Executive Order No. 16 (dated February 3, 1936) — This executive order required public bidding for the renewal or entry into new government contracts for public service (interpreted to include supplies), and mandated specific consultations and Presidential approval for exceptions. The contract modification in this case failed to comply with these requirements.
• Executive Order No. 98 (dated April 24, 1937) — This order clarified E.O. No. 16 by explicitly including contracts for "furnishing supplies, materials and equipment" under the public bidding requirement. It was cited to support the interpretation that E.O. No. 16 also covered supply contracts.
• Civil Code, Article 1203 — This article defines novation, stating that obligations may be modified by changing their object or principal conditions. It was applied to classify the price increase in the meat supply contract as a novation.
• Act No. 4007, Section 12 — This law grants the Purchasing Agent power and discretion regarding government supply contracts. The petitioner argued E.O. No. 16 unlawfully restricted this power, but the Court disagreed, upholding the E.O.
• Constitution, Article VII, Section 11 (1) — This provision grants the President control over executive departments and the duty to ensure laws are faithfully executed. It was cited as the constitutional basis for the President's authority to issue Executive Orders Nos. 16 and 98 to regulate government contracting.