Case Summary (G.R. No. 217454)
RTC Ruling: Lack of Binding Amendments; Mutual Claims
The Regional Trial Court held that the verbal amendments lacked binding effect because del Castillo had no actual authority evidenced by board resolutions or signed documents. It therefore: (a) ordered Agro to pay Vitarich ₱4,770,916.82 (deposit balance) with interest; and (b) granted Agro’s counterclaim, ordering Vitarich to pay Agro ₱25,430,292.72 (deficiency on toll fees) with interest. It also reconciled accounts to find Agro’s unpaid balance for live broilers.
Court of Appeals Ruling: Validity Under Apparent Authority
The Court of Appeals reversed the RTC. It found the verbal amendments valid and binding based on:
• Eighty-nine weekly billings prepared by Agro reflecting reduced rates.
• Testimony of Agro’s President admitting preparation of adjusted billings.
• Del Castillo’s testimony that he sought and received discretionary approval from Agro’s President.
Applying the doctrine of apparent authority, the CA held Agro estopped from denying del Castillo’s authority, given its acquiescence in and benefit from the reduced rates. It set aside Agro’s counterclaim award and ordered Agro to pay Vitarich ₱4,734,906.57 (deposit deficiency) and ₱3,989,851.82 (live broilers balance), plus 24% interest.
Issues on Petition
I. Whether the CA erred in applying apparent authority to bind Agro to rate reductions never ratified by its board.
II. Whether the parol evidence rule bars proof of the alleged verbal amendments.
Supreme Court Ruling: Affirmation of Apparent Authority and Parol Evidence Exception
The Supreme Court, under the 1987 Constitution, denied the petition. It confirmed that, under the doctrine of apparent authority, a corporation is estopped from denying its officer’s power when it knowingly permits and holds out the officer to the public as authorized. Agro:
• Prepared and sent 89 billings reflecting the amended rates without protest
Case Syllabus (G.R. No. 217454)
Facts and Background
- On October 5, 1995, Agro Food and Processing Corp. (“Agro”) and Vitarich Corporation (“Vitarich”) executed two simultaneous agreements:
- A Memorandum of Agreement (MOA) under which Vitarich paid a ₱20 million deposit to evaluate Agro’s chicken dressing plant for 45 days.
- A Toll Agreement under which Agro agreed to dress the chickens supplied by Vitarich for a specified toll fee (₱7.50/kg for fresh chilled and neckless, ₱5.50/kg for gallantina).
- At the end of the evaluation period, Vitarich formally offered to purchase the plant, which Agro did not accept, obliging Agro to return the ₱20 million deposit.
- The parties agreed to offset this deposit against 15% of the gross receipts from weekly toll‐fee billings until the deposit was fully satisfied.
- During the same period, Vitarich sold live broiler chickens on credit to Agro.
- Between 1996 and 1997, the parties allegedly made three verbal amendments to the toll fees, reducing rates and the percentage applied against the deposit.
Procedural History
- More than two years after the agreements, Vitarich filed a complaint for sums of money with damages in the Regional Trial Court (RTC), Branch 83, Malolos City, Bulacan, claiming:
- ₱4,770,916.82 plus interest for the balance of the ₱20 million deposit.
- ₱4,322,032.36 plus interest for the unpaid sale of live broiler chickens.
- Agro counterclaimed for ₱25,430,292.72 plus interest for unpaid toll fees.
- The RTC, in its December 29, 2005 Decision, held that the verbal amendments did not bind Agro and granted the counterclaim.
- Vitarich appealed.
- On August 28, 2014, the Court of Appeals (CA) reversed the RTC, found the verbal amendments valid under the principle that contracts are obligatory in any form, applied the doctrine of apparent authority, and ordered Agro to pay:
- ₱4,734,906.57 (deficiency on deposit offset).
- ₱3,989,851.82 (deficiency on live broiler sales).
- Agro’s motion for reconsideration was denied on March 9, 2015.
- Agro filed a Petition for Review on Certiorari before the Supreme Court.
Issues Presented
- Whether the CA gravely erred in applying the doctrine of apparent authority to bind Agro to the verbal amendments made by i