Title
Agro Food and Processing Corp. vs. Vitarich Corp.
Case
G.R. No. 217454
Decision Date
Jan 11, 2021
Agro and Vitarich disputed toll fee amendments made verbally by Agro’s Finance Manager without board approval. Court upheld amendments under apparent authority, ruling Agro bound by its conduct.
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Case Digest (G.R. No. 217454)

Facts:

Background of the Case:
This case involves a dispute between Agro Food and Processing Corp. (Agro) and Vitarich Corporation (Vitarich) over the authority of a corporate officer to amend a contract without explicit authorization from the corporation's board of directors.

Execution of Agreements:
On October 5, 1995, Agro and Vitarich executed two agreements:

  1. A Memorandum of Agreement (MOA) where Vitarich offered to buy Agro’s chicken dressing plant in Bulacan.
  2. A Toll Agreement where Agro agreed to dress chickens supplied by Vitarich for a toll fee.

Deposit and Evaluation Period:
Pursuant to the MOA, Vitarich paid Agro a P20 million deposit and was given 45 days to evaluate the plant. Vitarich made an offer to purchase, but Agro did not accept it, necessitating the return of the deposit.

Offset Agreement:
Since Vitarich owed Agro toll fees under the Toll Agreement, the parties agreed to offset the P20 million deposit by deducting 15% of the weekly toll fees until the deposit was fully repaid.

Verbal Amendments to Toll Fees:
From 1996 to 1997, the parties verbally amended the toll fees three times. Agro’s Finance Manager, Chito del Castillo, implemented these amendments without explicit board authorization.

Complaint Filed by Vitarich:
Vitarich filed a complaint for sum of money, claiming Agro owed:

  1. P4,770,916.82 as the remaining balance of the P20 million deposit.
  2. P4,322,032.36 for the unpaid sale of live broiler chickens.

Agro’s Defense:
Agro disputed the claim, arguing that the verbal amendments were invalid since del Castillo lacked authority from the board of directors to amend the Toll Agreement.

Issue:

  1. Whether the Court of Appeals erred in applying the doctrine of apparent authority to hold that the reduced toll dressing rates agreed upon by del Castillo were binding on Agro, despite the lack of authorization or ratification from Agro’s board of directors.
  2. Whether the Court of Appeals erred in ruling that the reduction of the toll dressing rates was not barred by the parol evidence rule.

Ruling:

The Supreme Court denied Agro’s petition and affirmed the decision of the Court of Appeals. The appellate court’s application of the doctrine of apparent authority was upheld, and the verbal amendments to the toll fees were deemed binding on Agro. The Court also ruled that the parol evidence rule did not bar the proof of the verbal amendments, as they were raised in Vitarich’s Amended Complaint.

Ratio:

  1. Doctrine of Apparent Authority: The Court emphasized that apparent authority is determined by the acts of the principal (Agro) and not the agent (del Castillo). Agro’s conduct, including preparing 89 weekly billings reflecting the amendments and not contesting the amendments for over two years, demonstrated that it clothed del Castillo with apparent authority. Agro also accepted the benefits of the amendments, further estopping it from denying their validity.

  2. Parol Evidence Rule: The Court ruled that the parol evidence rule did not apply because the issue of the verbal amendments was explicitly raised in Vitarich’s Amended Complaint, falling within the exceptions to the rule.

Thus, the Supreme Court held Agro bound by the verbal amendments under the doctrine of apparent authority and affirmed the Court of Appeals’ decision.


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