No. L-18062. February 28, 1963.

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs.

ACOJE MINING COMPANY, INC., defendant-
appellant.

Corporations; Ultra vires act defined; When corporate acts may

be performed outside the scope of powers expressly con​ferred.·While
as a rule an ultra vires act is one committed out​side the object for
which a corporation is created as defined by the law of its
organization and therefore beyond the powers conferred upon it by
law (19 C.J.S., Section 965, p. 419), there are however certain
corporate acts that may be performed out​side of the scope of the
powers expressly conferred if they are necessary to promote the
interest or welfare of the corporation, such as the establishment, in
the case at bar, of a local post office in a mining camp which is far
removed from the postal facilities or means of communications
accorded to- people living in a city or municipality.
Same; Same; Ultra vires act distinguished from illegal act;
Enforcement of ultra vires act on the ground of estoppel.·An illegal
act is void and cannot be validated, while an ultra vires act is
merely voidable and can be enforced by performance, ratifi​cation or
estoppel, or on equitable grounds. In the present case the validity of
the resolution of the Board of Directors of the corporation accepting
full responsibility in connection with funds to be received by its
postmaster, should be upheld on the ground of estoppel.
Same; Assumption of responsibility; Responsibility in pres​ent
case that of principal and not that of guarantor.·That the
responsibility of the defendant corporation is not just that of a
guarantor but of a principal is clear from the resolution of its Board
of Directors in which the corporation assumed „full responsibility
for all cash received by the Postmaster‰.

APPEAL from a decision of the Court of First Instance of

Manila. Bocar, J.
The facts are stated in the opinion of the Court.
Solicitor General for plaintiff-appellee.
Jalandoni & Jamir for defendant-appellant.
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362 SUPREME COURT REPORTS ANNOTATED

Republic vs. Acoje Mining Co., Inc.

BAUTISTA ANGELO, J.:
On May 17, 1948, the Acoje Mining Company, Inc. wrote
the Director of Posts requesting the opening of a post,
telegraph and money order offices at its mining camp at
Sta. Cruz, Zambales, to service its employees and their
families that were living in said camp. Acting on the
request, the Director of Posts wrote in reply stating that if
aside from free quarters the company would provide for all
essential equipment and assign a responsible employee to
perform the duties of a postmaster without compensation
from his office until such time as funds therefor may be
available he would agree to put up the offices requested.
The company in turn replied signifying its willingness to
comply with all the requirements outlined in the letter of
the Director of Posts requesting at the same time that it be
furnished with the necessary forms for the early
establishment of a post office branch.
On April 11, 1949, the Director of Posts again wrote a
letter to the company stating among other things that „In
cases where a post office will be opened under
circumstances similar to the present, it is the policy of this
office to have the company assume direct responsibility for
whatever pecuniary loss may be suffered by the Bureau of
Posts by reason of any act of dishonesty, carelessness or
negligence on the part of the employee of the company who
is assigned to take charge of the post office,‰ thereby
suggesting that a resolution be adopted by the board of
directors of the company expressing conformity to the
above condition relative to the responsibility to be assumed
buy it in the event a post office branch is opened as
requested. On September 2, 1949, the company informed
the Director of Posts of the passage by its board of directors
of a resolution of the following tenor: „That the
requirement of the Bureau of Posts that the Company
should accept full responsibility for all cash received by the
Postmaster be complied with, and that a copy of this
resolution be forwarded to the Bureau of Posts.‰ The letter
further states that the company feels that that resolution
fulfills the last condition imposed by the Director of Posts
and that, therefore, it would request that an

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VOL. 7, FEBRUARY 28, 1963 363

Republic vs. Acoje Mining Co., Inc.

inspector be sent to the camp for the purpose of

acquainting the postmaster with the details of the
operation of the branch office.
The post office branch was opened at the camp on
October 13, 1949 with one Hilario M. Sanchez as
postmaster. He is an employee of the company. On May 11,
1954, the postmaster went on a three-day leave but never
returned. The company immediately informed the officials
of the Manila Post Office and the provincial auditor of
Zambales of SanchezÊ disappearance with the result that
the accounts of the postmaster were checked and a
shortage was found in the amount of P13,867.24.
The several demands made upon the company for the
payment of the shortage in line with the liability it has
assumed having failed, the government commenced the
present action on September 10, 1954 before the Court of
First Instance of Manila seeking to recover the amount of
Pl3,867.24. The company in its answer denied liability for
said amount contending that the resolution of the board of
directors wherein it assumed responsibility for the act of
the postmaster is ultra vires, and in any event its liability
under said resolution is only that of a guarantor who
answers only after the exhaustion of the properties of the
principal, aside from the fact that the loss claimed by the
plaintiff is not supported by the office record.
After trial, the court a quo found that, of the amount
claimed by plaintiff totalling P13,867.24, only the sum of
P9,515.25 was supported by the evidence, and so it
rendered judgment for the plaintiff only for the amount last
mentioned. The court rejected the contention that the
resolution adopted by the company is ultra vires and that
the obligation it has assumed is merely that of a guarantor.
Defendant took the present appeal.
The contention that the resolution adopted by the
company dated August 31, 1949 is ultra vires in the sense
that it has no authority to act on a matter which may
render the company liable as a guarantor has no factual or
legal basis. In the first place, it should be noted that
 364

364 SUPREME COURT REPORTS ANNOTATED

Republic vs. Acoje Mining Co., Inc.

the opening of a post office branch at the mining camp of

appellant corporation was undertaken because of a request
submitted by it to promote the convenience and benefit of
its employees. The idea did not come from the government,
and the Director of Posts was prevailed upon to agree to
the request only after studying the necessity for its
establishment and after imposing upon the company
certain requirements intended to safeguard and protect the
interest of the government. Thus, after the company had
signified its willingness to comply with the requirement of
the government that it furnish free quarters and all the
essential equipment that may be necessary for the
operation of the office including the assignment of an
employee who will perform the duties of a postmaster, the
Director of Posts agreed to the opening of the post office
stating that „In cases where a post office will be opened
under circumstances similar to the present, it is the policy
of this office to have the company assume direct
responsibility for whatever pecuniary loss may be suffered
by the Bureau of Posts by reason of any act of dishonesty,
carelessness or negligence on the part of the employee of
the company who is assigned to take charge of the post
office,‰ and accepting this condition, the company, thru its
board of directors, adopted forthwith a resolution of the
following tenor: „That the requirement of the Bureau of
Posts that the company should accept full responsibility for
all cash received by the Postmaster, be complied with, and
that a copy of this resolution be forwarded to the Bureau of
Posts.‰ On the basis of the foregoing facts, it is evident that
the company cannot now be heard to complain that it is not
liable for the irregularity committed by its employee upon
the technical plea that the resolution approved by its board
of directors is ultra vires. The least that can be said is that
it cannot now go back on its plighted word on the ground of
estoppel.
The claim that the resolution adopted by the board of
directors of appellant company is an ultra vires act cannot
also be entertained it appearing that the same covers a
subject which concerns the benefit, convenience and wel-
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VOL. 7, FEBRUARY 28, 1963 365

Republic vs. Acoje Mining Co., Inc.

fare of its employees and their families. While as a rule an

ultra vires act is one committed outside the object for which
a corporation is created as defined by the law of its
organization and therefore beyond the powers conferred
upon it by law (19 C.J.S., Section 965, p. 419), there are
however certain corporate acts that may be performed
outside of the scope of the powers expressly conferred if
they are necessary to promote the interest or welfare of the
corporation. Thus, it has been held that „although not
expressly authorized to do so a corporation may become a
surety where the particular transaction is reasonably
necessary or proper to the conduct of its business,‰1 and
here it is undisputed that the establishment of the local
post office is a reasonable and proper adjunct to the
conduct of the business of appellant company. Indeed, such
post office is a vital improvement in the living condition of
its employees and laborers who came to settle in its mining
camp which is far removed from the postal facilities or
means of communication accorded to people living in a city
or municipality.
Even assuming arguendo that the resolution in question
constitutes an ultra vires act, the same however is not void
for it was approved not in contravention of law, customs,
public order or public policy. The term ultra vires should be
distinguished from an illegal act for the former is merely
voidable which may be enforced by performance,
ratification, or estoppel, while the latter is void and cannot
be validated.2 It being merely voidable, an ultra vires act
can be enforced or validated if there are equitable grounds
for taking such action. Here it is fair that the resolution be
upheld at least on the ground of estoppel. On this point, the
authorities are overwhelming:

„The weight of authority in the state courts is to the effect that a

transaction which is merely ultra vires and not malum

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1 Thomson on Corporations, 3rd ed. Vol. 3, p. 973 citing Deming v. Maas, 18

Cal. App. 330, 123 Pac. 204; Depot Realty Syndicate v. Enterprise Brewing Co.,
87 Ore. 560, 170 Pac. 294, 171 Pac. 223, L.R.A. 1918C, 1001.
2 19 C.J.S., Section 966, p. 422, citing Smith v. Baltimore and O. R. Co., D.
C. Pa., 48 F. 2d 861, 870.

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366 SUPREME COURT REPORTS ANNOTATED

Republic vs. Acoje Mining Co., Inc.

in se or malum prohibitum, is, if performed by one party, not void as

between the parties to all intents and purposes, and that an action
may be brought directly on the transaction and relief had according
to its terms.‰ (19 C.J.S., Section 976, p. 432, citing Nettles v. Rhett,
C.C.A.S.C., 94 F. 2d, reversing, D.C., 20 F. Supp. 48)
„This rule is based on the consideration that as between private
corporations, one party cannot receive the benefits which are
embraced in total performance of a contract made with it by
another party and then set up the invalidity of the transaction as a
defense.‰ (London & Lancashire Indemnity Co. of America v.
Fairbanks Steam Shovel Co., 147 N.E. 329, 332, 112 Ohio St. 136.)
„The defense of ultra vires rests on violation of trust or duty
toward stockholders, and should not be entertained where its
allowance will do greater wrong to innocent parties dealing with
corporation..
„The acceptance of benefits arising from the performance by the
other party may give rise to an estoppel precluding repudiation of
the transaction. (19 C.J.S., Section 976, p. 433.)
„The current of modern authorities favors the rule that where
the ultra vires transaction has been executed by the other party and
the corporation has received the benefit of it, the law interposes an
estoppel, and will not permit the validity of the transaction or
contract to be questioned, and this is especially true where there is
nothing in the circumstances to put the other party to the
transaction on notice that the corporation has exceeded its powers
in entering into it and has in so doing overstepped the line of
corporate privileges.‰ (19 C.J.S., Section 977, pp. 435-437, citing
Williams v. Peoples Building & Loan AssÊn, 97 S.W. 2d 930, 193 Ark.
118; Hays v. Galion Gas Light Co., 29 Ohio St. 330)

Neither can we entertain the claim of appellant that its

liability is only that of a guarantor. On this point, we agree
with the following comment of the court a quo: „A mere
reading of the resolution of the Board of Directors dated
 August 31, 1949, upon which the plaintiff based its claim
would show that the responsibility of the defendant
company is not just that of a guarantor. Notice that the
phraseology and the terms employed are so clear and
sweeping and that the defendant assumed Âfull
responsibility for all cash received by the Postmaster.Ê Here
the responsibility of the defendant is not just that of a
guarantor. It is clearly that of a principal.‰

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Republic vs. Acoje Mining Co., Inc.

WHEREFORE, the decision appealed from is affirmed.

No costs.

Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes,

J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal,
JJ., concur.

Decision affirmed.

Note.·Whenever the corporate entity is being used as

an alter ego or business conduit for the sole benefit of the
stockholders, or to defeat public convenience, justify wrong,
protect fraud, or defend crime, the individual stock​holders
may be held liable for the obligations contracted by the
corporation (McConnel, et al. v. Court of Appeals, L-10510,
March 17, 1961, 1 SCRA 722).
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