Agro Food and Processing Corp. v. Vitarich Corporation
REITERATIONFacts
The Antecedents: Agro Food and Processing Corp. (Agro) and Vitarich Corporation (Vitarich) executed a Memorandum of Agreement (MOA) for Vitarich's purchase of Agro's chicken dressing plant and a Toll Agreement for Agro to dress Vitarich's chickens for a fee. Vitarich paid a P20 million deposit for the plant. Agro did not accept Vitarich's offer to purchase, necessitating the return of the deposit. The parties agreed to offset the P20 million deposit through deductions of 15% of weekly toll fees. Vitarich also sold live broiler chickens to Agro on credit. Procedural History: Vitarich filed a complaint for sum of money, alleging Agro owed P4,770,916.82 (balance of the deposit) and P4,322,032.36 (balance on broiler sales). Vitarich based the deposit claim on the original Toll Agreement and subsequent verbal amendments to toll fees made by Agro's Finance Manager, Chito del Castillo (del Castillo), from 1996 to 1997. Agro disputed the claim, arguing the verbal amendments were not binding as del Castillo lacked authority from the board of directors. The RTC ruled that the amendments were not binding due to lack of signatures and granted Agro's counterclaim for P25,430,292.72. The Court of Appeals (CA) set aside the RTC decision, holding the verbal amendments valid and binding under the doctrine of apparent authority, finding Agro liable to Vitarich for P4,734,906.57 (deposit balance) and P3,989,851.82 (broiler sales balance). Agro's motion for reconsideration was denied. The Petition: Agro argued the CA erred in applying the doctrine of apparent authority, as it was based on del Castillo's acts, not Agro's conduct, and that Vitarich was barred by the parol evidence rule from proving verbal amendments.
Issue(s)
Whether the Court of Appeals committed a reversible error of law when it applied the doctrine of apparent authority and held that the reduced toll dressing rates prepared by Mr. del Castillo are binding on Agro, despite the fact that the reduction of the toll dressing rates were never authorized or ratified by Agro's Board of Directors. Whether the Court of Appeals committed a reversible error of law when it held that the reduction of the toll dressing rates is not barred by the parol evidence rule.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that Agro is bound by the verbal amendments to the toll fees under the doctrine of apparent authority, and the parol evidence rule does not bar proof of these amendments.
Ratio Decidendi
On Issue 1: The Court affirmed the Court of Appeals' application of the doctrine of apparent authority. It clarified that apparent authority is determined by the acts of the principal, meaning whether the corporation knowingly permits its officer to act on its behalf and holds the officer out to the public as possessing the power to do those acts. In this case, Agro's conduct demonstrated apparent authority. This was evidenced by Agro preparing over eighty-nine (89) weekly billings reflecting the amendments over a span of two years, with three instances of amendments. Agro never contested these amended toll fees, nor did it question del Castillo's authority even after receiving demand letters, only raising the issue in its Answer. Furthermore, Agro accepted the benefits arising from the amendments, such as the extended period for its P20 million deposit payment due to the reduced percentage of billings deducted, and potentially increased profits from adjusted chicken prices. The Court reiterated that a corporation is estopped from denying an officer's authority when it intentionally or negligently clothes the officer with apparent authority, and innocent third parties deal with the officer in good faith. On Issue 2: The Court found no reversible error in the appellate court's ruling that the parol evidence rule does not bar proof of the verbal amendments. This is because the issue of the amendments was raised in Vitarich's Amended Complaint, which falls under an exception to the parol evidence rule. The rule generally prohibits the introduction of evidence to contradict or vary the terms of a written agreement, but it does not apply when the existence of an oral agreement, or its modification, is put in issue by the pleadings. Vitarich's complaint explicitly alleged and sought to enforce the verbal amendments, thereby opening the door for evidence to prove their existence and terms. The Court found it incredulous to assert that Agro only committed a mistake given the multiple transactions and the duration over which the amendments were implemented and reflected in the billings.
Main Doctrine
A corporation is estopped from denying an officer's authority if it knowingly permits the officer to act within the scope of an apparent authority and holds the officer out to the public as possessing the power to do those acts. The corporation's acquiescence in the officer's acts, with actual or constructive knowledge thereof, can establish apparent authority.