Safic Alcan & Cie vs Imperial Vegetable Oil Co., Inc.

written by Howard

G.R. No. 126751 – 407 Phil. 884 – 355 SCRA 559 – Mercantile Law – Corporation Law – Ultra Vires Acts of Corporate Officers 

In 1985, Safic Alcan & Cie (SAC), a corporation, entered into an agreement with Imperial Vegetable Oil Co., Inc. (IVO) whereby the latter shall deliver tons of coconut oil to SAC. Both parties complied. IVO was represented by its president, Dominador Monteverde. In 1986, SAC again entered into several agreements with IVO but this time it was agreed that IVO shall deliver the coconut oil 8 months from the agreement or sometime in 1987. This time, IVO failed to deliver and SAC sued IVO.

IVO in its defense aver that Monteverde was acting beyond his power as president when he made the 1986 agreement with SAC; that Monteverde is acting beyond his power because the 1986 contracts were speculative in nature and speculative contracts are prohibited by the by-laws of IVO.

SAC insists that there is an implied agency between IVO and Monteverde because SAC and Monteverde has been transacting since 1985 and that IVO benefited from said transactions.

ISSUE: Whether or not Monteverde’s act in entering into the 1986 contracts is ultra vires.

HELD: Yes. It was proven by IVO, when they presented a copy of their by-laws, that Monteverde acted beyond his authority when he entered into speculative contracts with SAC in 1986. The 1986 contracts are speculative because at the time of the contracts, the coconuts are not even growing at that time and are yet to be harvested. Hence, the 1986 contracts are sales of mere expectations – and this is something prohibited by the by-laws and the Board of Directors of IVO.

There can be no implied agency too simply because there has been a previous transaction between SAC and IVO where IVO was represented by Monteverde. This is because the 1985 contract and the 1986 contracts are very different. The 1985 contract is not speculative while the 1986 contracts are speculative hence, SAC should have secured the confirmation by IVO’s Board that Monteverde is indeed authorized to enter into such agreements. Further, Monteverde did not even present the said 1986 agreements before the Board of Directors so there was, in fact, no occasion at all for ratification. The contracts were not even reported in IVO’s export sales book and turn-out book. Neither were they reflected in other books and records of the corporation. It must be pointed out that the Board of Directors, not Monteverde, exercises corporate power. Clearly, Monteverde’s speculative contracts with Safic never bound IVO and Safic cannot therefore enforce those contracts against IVO.

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