Case Summary (G.R. No. 168757)
Key Dates and Agreements
October 5, 1995 — Agro and Vitarich executed two simultaneous contracts: (1) a Memorandum of Agreement (MOA) under which Vitarich offered to buy Agro’s chicken dressing plant and paid a P20,000,000 deposit; and (2) a Toll Agreement under which Agro would dress chickens supplied by Vitarich for specified toll fees (initially Php 7.50/kg for fresh chilled and neckless, Php 5.50/kg for gallantina). The MOA gave Vitarich 45 days to evaluate the plant; Vitarich later offered to purchase but Agro did not accept, leading to the obligation to return the P20 million deposit, to be offset by deductions from toll fee billings.
Factual Background and Post-Agreement Conduct
The parties agreed that the P20 million deposit would be returned by continuous deductions of 15% of gross receipts on weekly toll fee billings. Vitarich also sold live broiler chickens to Agro on credit. Between 1996 and 1997 the toll rates were purportedly reduced by verbal amendments on three occasions, resulting in lower toll fees and reduced percentages deducted from the deposit (including periods where deductions were 10% or 7.5%). Vitarich’s claim of amended rates was supported by 89 weekly billings reflecting the reduced rates, which were prepared by Agro and sent to Vitarich.
Trial Court Ruling (RTC, Dec. 29, 2005)
The RTC found the alleged verbal amendments did not bind Agro because documentary proof (signatures or conformes) of authorization was lacking. Consequently, the RTC rejected Vitarich’s claim based on the verbal amendments, awarded Vitarich P4,770,916.82 for the live broiler sales (plus interest), and granted Agro’s counterclaim in the amount of P25,430,292.72 as deficiency payment on toll billings based on the original Toll Agreement rates.
Court of Appeals Ruling (Assailed Decision)
The Court of Appeals set aside the RTC judgment and held the verbal amendments were valid and binding on Agro. The CA relied primarily on the 89 weekly billings prepared by Agro reflecting reduced rates, testimony including admission by Agro’s President that his firm prepared such billings, and del Castillo’s testimony that he was authorized to implement the amendments. The CA applied the doctrine of apparent authority, concluding Agro had clothed del Castillo with authority or had acquiesced to his acts; it therefore ordered Agro to pay Vitarich Php 4,734,906.57 (balance of deposit) and Php 3,989,851.82 (deficiency on live broilers), with interest, and set aside Agro’s award.
Issues Presented to the Supreme Court
- Whether the Court of Appeals committed reversible error in applying the doctrine of apparent authority and holding that del Castillo’s reductions to toll rates bind Agro despite lack of express board authorization or ratification. 2. Whether the Court of Appeals erred in admitting proof of the verbal amendments in light of the parol evidence rule.
Legal Principles Applied — Apparent Authority
The Supreme Court reiterated that apparent authority is determined by the acts of the principal, not the acts of the agent; a corporation is estopped from denying an officer’s authority where it knowingly permits the officer to act within apparent authority or holds the officer out as possessing such power. The existence of apparent authority may be shown by the general manner in which a corporation holds out an officer and also by the corporation’s acquiescence in acts of a particular nature with actual or constructive knowledge, even if those acts are beyond ordinary powers.
Evidence and Reasoning Supporting Apparent Authority
The Court examined the evidence relied upon by the CA: 89 weekly billings over two years showing three distinct reductions in toll rates; changes affecting both rates and the percentage deducted from the deposit; the fact that Agro prepared and submitted these billings without timely protest; Agro’s receipt of demand letters without contesting the reduced billings until its amended answer; and Agro’s acceptance of benefits from the adjustments (notably extension of time to satisfy the deposit and increased profits from changes in gallantina pricing). Given this totality — repeated billing patterns, lack of objection, and acceptance of benefits — the Court concluded Agro reasonably appeared to have knowledge of and acquiesced in del Castillo’s acts, thereby creating apparent authority.
Parol Evidence Rule and Admissibility of Verbal Amendments
The Court found no merit in Agro’s contention that the parol evidence rule barred proof of the verbal amendments. The CA correctly noted that the is
...continue readingCase Syllabus (G.R. No. 168757)
Case Caption, Court and Date
- Supreme Court of the Philippines, Third Division, G.R. No. 217454, Decision promulgated January 11, 2021.
- Case caption as presented in the source: AGRO FOOD AND PROCESSING CORP., Petitioner, v. VITARICH CORPORATION, Respondent.
- Decision in the Supreme Court authored by Justice Hernando; concurrence noted by Leonen, J. (Chairperson), Inting, Delos Santos, and Rosario, JJ.
Nature and Core Legal Question
- Petition for Review on Certiorari challenging the Court of Appeals’ August 28, 2014 Decision and March 9, 2015 Resolution in CA-G.R. CV. No. 90550.
- Central legal questions concern (a) the application of the doctrine of apparent authority to bind a corporation by amendments effected by a corporate officer without express board authorization, and (b) whether the asserted verbal amendments are barred by the parol evidence rule.
Parties and Roles
- Petitioner: Agro Food and Processing Corporation (Agro) — defendant in the lower courts and appellant before the Court of Appeals; petitioner in the Supreme Court.
- Respondent: Vitarich Corporation (Vitarich) — plaintiff in the lower courts and appellee before the Court of Appeals; respondent in the Supreme Court.
- Key corporate officer implicated: Chito del Castillo (del Castillo), Finance Manager of Agro, alleged by Vitarich to have implemented verbal amendments to the toll fees and to have authority to do so.
Underlying Agreements (October 1995)
- Two agreements executed simultaneously on October 5, 1995:
- Memorandum of Agreement (MOA): Vitarich offered to buy Agro’s chicken dressing plant in Bulacan; Vitarich paid a deposit of Php20,000,000 and was given forty-five (45) days to evaluate facilities.
- Toll Agreement: Agro agreed to dress chickens supplied by Vitarich for a toll fee, with original toll fees specified by chicken type: Php7.50/kg for "fresh chilled", Php7.50/kg for "neckless", and Php5.50/kg for "gallantina".
- At the end of the 45-day evaluation period Vitarich made a formal purchase offer which Agro did not accept, thereby obligating Agro to return the Php20,000,000 deposit.
Agreement on Return of Deposit and Concurrent Transactions
- Parties agreed to return the Php20,000,000 deposit by continuous offsets of fifteen percent (15%) of gross receipts on weekly billings of the toll fees until the deposit was satisfied.
- During the period when the deposit was being offset, Vitarich sold live broiler chickens to Agro on credit.
Alleged Verbal Amendments (1996–1997)
- Vitarich alleged that the parties made and implemented verbal amendments to the toll fees on three occasions between 1996 and 1997.
- Vitarich’s claimed amendments (as provided in the source):
- First amendment: Php6.75/kg for "fresh chilled", Php6.75/kg for "neckless", and Php4.95/kg for "gallantina".
- Second amendment: Php6.05/kg for "fresh chilled", Php6.05/kg for "neckless", and Php4.55/kg for "gallantina".
- Third amendment: Php5.75/kg for "fresh chilled" and Php5.75/kg for "gallantina".
- Vitarich asserts that its claim for the balance from the deposit (relevant amount in the Petition) was computed based on the toll fees reflected in the original Toll Agreement and on the verbal amendments.
Pleadings and Monetary Claims
- Vitarich filed a complaint for sum of money with damages before the RTC alleging two principal monetary claims:
- Php4,770,916.82 plus interest — alleged balance from the Php20,000,000 deposit (first amount relevant to the Petition).
- Php4,322,032.36 plus interest — alleged balance on the sale of live broiler chickens to Agro.
- Agro disputed Vitarich’s computations and specifically disputed the binding nature of the alleged verbal amendments, asserting del Castillo lacked authority from Agro’s board to amend the Toll Agreement.
Regional Trial Court (Branch 83, Malolos City) Decision (December 29, 2005)
- Trial court ruled that the verbal amendments did not bind Agro due to lack of any signature or conforme in the documentary evidence presented by Vitarich.
- As a consequence, the trial court found Vitarich not entitled to its claim for the alleged deposit balance based on the amendments.
- The RTC nevertheless found an unpaid account by Agro on the sale of live broilers and rendered the following dispositive relief:
- Ordered Agro to pay Vitarich Php4,770,916.82 plus interest of Php93,828.03 from January 9, 1998 to March 9, 1998 and an additional interest of 12% per annum from March 10, 1998 until fully paid (relative to the purchase of live broilers).
- Ordered Vitarich to pay Agro Php25,430,292.72 as deficiency payment on the billing based on the toll rates in the Toll Processing Agreement dated October 4, 1995 plus legal interest from filing of complaint until fully paid.
- Each party to bear payment of attorney’s fees to their respective counsels; no pronouncement as to costs.
Court of Appeals Decision (August 28, 2014) and Resolution (March 9, 2015)
- Court of Appeals set aside the RTC Decision and held that the verbal amendments to the toll fees were valid and obligatory on Agro under the general principle that contracts are obligatory in whatever form they were entered into.
- CA relied on evidence demonstrating the existence and implementation of the amendments:
- Eighty-nine (89) weekly billings reflecting the amended rates, which billings were prepared by Agro.
- Testimony by Agro’s President admitting Agro prepared such billings.
- Testimony by del Castillo that he was authorized to implement the amendments.
- CA applied the doctrine of apparent authority, concluding del Castillo was clothed with authority by Agro’s board to concur in and implement the amendments.
- CA set aside the RTC award to Agro of Php25,430,292.72 for lack of basis.
- Dispositive relief by CA: Ordered Agro to pay Vitarich Php4,734,906.57 (representing the deficiency of Vitarich’s Php20,000,000 deposit) and Php3,989,851.82 (representing Agro’s obligation on the sale of live broilers), subject to 24% interest from November 1997 until fully paid.
- Agro’s Motion for Reconsideration before the CA was denied in the March 9, 2015 Resolution.