Safic Alcan & Cie v. Imperial Vegetable Oil Co., Inc.
REITERATIONFacts
The Antecedents: Petitioner Safic Alcan & Cie (Safic), a French corporation, filed a complaint against respondent Imperial Vegetable Oil Co., Inc. (IVO) for failure to deliver 2,000 long tons of crude coconut oil under two purchase contracts (Nos. A601446 and A601655) for US$222.50 per ton, to be delivered in January 1987. IVO offered a "wash out" settlement, agreeing to pay Safic the difference between the contract price and the prevailing market price, amounting to US$293,500.00, which IVO failed to pay. Safic also claimed IVO failed to make marginal deposits on eight other purchase contracts (Nos. A601297A/B, A601384, A601385, A601391, A601415, A601681, A601683 and A601770A/B/C) for 4,750 tons of crude coconut oil, amounting to US$391,593.62, as per trade customs governed by N.I.O.P. and FOSFA Contracts. Procedural History: The Regional Trial Court (RTC) issued a writ of preliminary attachment and placed IVO's assets under receivership. IVO, in its answer, raised defenses of lack of legal capacity to sue, speculative contracts entered into by its President, Dominador Monteverde, without board authority, and violation of Article 2018 of the Civil Code. The RTC dismissed Safic's complaint and IVO's counterclaims, dissolving the attachment and receivership. Both parties appealed to the Court of Appeals (CA), which affirmed the RTC's decision. Safic then filed a petition for review with the Supreme Court. The Petition: Safic argued that the CA erred in declaring the 1986 forward contracts unauthorized, distinguishing them from the 1985 contracts, and in holding that Safic failed to prove damages. Safic maintained that Dominador Monteverde had implied authority and that IVO was estopped from denying liability.
Issue(s)
Whether the 1986 forward contracts entered into by Dominador Monteverde, IVO's President, were binding on IVO. Whether Safic sufficiently proved its claim for damages.
Ruling
The petition is denied for lack of merit. The Court of Appeals did not err in affirming the trial court's decision dismissing Safic's complaint.
Ratio Decidendi
On the binding nature of the 1986 forward contracts: The Court held that Dominador Monteverde, as IVO's President, did not have blanket authority to bind the corporation. His actions were subject to the instructions of the Board of Directors. The evidence showed that the Board was unaware of the 1986 contracts and had previously rejected Monteverde's proposal to engage in speculative contracts. Safic failed to ascertain Monteverde's authority, and thus could not rely on the doctrine of implied agency, especially since the 1985 contracts, while similar, were not identical and did not establish a pattern of identical speculative dealings. Article 1898 of the Civil Code provides that acts of an agent beyond their authority do not bind the principal unless ratified, and if the third party is aware of the limits of the agent's authority, the principal is not liable. There was no ratification by IVO, as the contracts were not reported to the Board or recorded in the company's books. The Court distinguished the 1986 contracts from the 1985 contracts based on delivery periods, payment methods (telegraphic transfer vs. letter of credit), lack of reporting to the Central Bank, and non-recording in company books, all indicating speculative trading for Monteverde's personal benefit rather than legitimate corporate business. On Safic's claim for damages: The Court found that Safic failed to substantiate its claim for actual damages. The "wash out" agreements were deemed ultra vires and not binding on IVO. Safic's claim that it had to buy coconut oil from others at higher prices was not supported by evidence. The Court noted Safic's failure to produce crucial documents, such as resale contracts, pooling and sales contracts, contracts for the purchase of oil from other sources, and related invoices, despite a court order. This failure led the trial court to presume that such documents, if produced, would have been adverse to Safic's claim. The method Safic proposed for computing damages was deemed conjectural and based on unproven assumptions.
Main Doctrine
Contracts entered into by a corporate officer beyond the scope of their authority do not bind the corporation unless ratified, and the third party dealing with the agent is under duty to ascertain the agent's authority.