THIRD DIVISION
[ G.R. No. 217454, January 11, 2021 ]
AGRO FOOD AND PROCESSING CORP., Petitioner, v. VITARICH CORPORATION, Respondent.
D E C I S I O N
HERNANDO, J.:
This Petition for Review on Certiorari1 assails the August 28, 2014 Decision2 and March 9, 2015 Resolution3 of the Court of Appeals inCA-GR. CV. No. 90550.4 The assailed Decision set aside the December 29, 2005 Decision5 of the Regional Trial Court (RTC), Branch 83 of Malolos City, Bulacan which ordered petitioner Agro Food and Processing Corp. (Agro) to pay respondent Vitarich Corporation (Vitarich) the amount of P4,770,916.82 with interest, and Vitarich to pay Agro the amount of P25,430,292.72 with interest;6 and instead ordered Agro to pay Vitarich the amounts of P4,734,906.57 and P3,989,851.82 with interest.7 In its assailed Resolution, the appellate court denied Agro's Motion for Reconsideration.8
Antecedents
This case involves a corporation officer's authority to amend an original contract without actual authority from the corporation's board of directors. Agro's position is that the amendments are not binding on the corporation since the officer had no actual authority from its board of directors. For Vitarich, the amendments are binding pursuant to the doctrine of apparent authority, among others.
The undisputed facts are as follows.
On October 5, 1995, Agro and Vitarich simultaneously executed two agreements:.first, a Memorandum of Agreement (MOA) under which Vitarich offered to buy Agro's chicken dressing plant located in Bulacan; and second, a Toll Agreement under which Agro agreed to dress the chickens supplied by Vitarich for a toll fee.9
Pursuant to the MOA, Vitarich paid P20 million as deposit to Agro and was given a period of forty-five (45) days within which to evaluate the dressing plant facilities.10 At the end of the period, Vitarich formally made its offer to purchase, but Agro did not accept the offer.11 Thus, Agro needed to return the P20 million deposit.12
Since Vitarich was obligated to pay toll fees to Agro pursuant to the Toll Agreement, the parties agreed that the manner of returning the P20 million deposit shall be through deductions of fifteen percent (15%) of the gross receipts on the weekly billings of the toll fees.13 In other words, the P20 million deposit shall be continuously offset with fifteen percent (15%) of the toll fees to be paid by Vitarich until the obligation is satisfied. During that period, Vitarich also sold on credit live broiler chickens to Agro.14
More than two (2) years later, Vitarich filed a complaint for sum of money with damages against Agro before the RTC alleging that Agro was liable for the following amounts: first, P4,770,916.82 plus interest, representing the balance from the P20 million deposit, and second, P4,322,032.36 plus interest, representing the balance on the sale oflive broiler chickens to Agro.15
Regarding the first amount, which is the relevant amount in the Petition, Vitarich stated that it was based not only on the toll fees reflected on the original Toll Agreement, but also on the verbal amendments to the toll fees made and implemented by the parties thrice from 1996 to 1997.16
Agro disputed the computation made by Vitarich.17 It argued that the amount of P4,770,916.82 was inaccurate as it was based on the alleged verbal amendments to the toll fees, which amendments were not binding on Agro as they were entered into by Vitarich and Agro's Finance Manager, Chito del Castillo (del Castillo), which allegedly had no authority to amend the original Toll Agreement from Agro's board of directors.18
Ruling of the Regional Trial Court:
In its December 29, 2005 Decision, the trial court held that the amendments did not bind Agro considering the lack of any signature or conforme to the documentary evidence presented by Vitarich.19 Consequently, Vitarich was not entitled to its claim.20
Further, it granted Agro's counterclaim in the amount of P25,430,292.72 plus interest, representing Vitarich's unpaid account with Agro.21 However, as to the sale of live broiler chickens, the trial court held that after reconciliation of the accounts, Agro had an unpaid account with Vitarich.22
The dispositive portion of the trial court's Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, to wit:
1. ordering defendant Agro Foods to pay plaintiff the amount of P4,770,916.82 plus interest of P93,828.03 from January 9, 1998 to March 9, 1998 and an additional interest of 12% per annum from March 10, 1998 until the said amount is fully paid relative to the purchase of live broilers; and
2. ordering plaintiff to pay defendant Agro Foods the amount of P25,430,292.72 as deficiency payment on the billing based on the toll rates as provided by the Toll Processing Agreement dated October 4, 1995 plus the legal rate of interest from the date of filing of this complaint until the said amount is fully paid.
Further, plaintiff Vitarich Corp. and defendant Agro Food shall bear the payment of attorney's fees to their respective counsels.
No pronouncement as to costs.
SO ORDERED.23
Ruling of the Court of Appeals:
The appellate court, in its assailed Decision, set aside the December 29, 2005 Decision of the RTC and held that the verbal amendments to the toll fees were valid and obligatory on Agro, pursuant to the principle that contracts are obligatory in whatever form they may have been entered into.24
It found that Vitarich was able to establish the existence of the amendments based on the eighty nine (89) weekly billings reflecting such amendments, which billings were notably prepared by Agro, as well as from the testimony of Agro's President who admitted that his firm prepared such billings and del Castillo's own testimony that he was authorized to implement the amendments.25
Further, the appellate court applied the doctrine of apparent authority in arriving at the conclusion that del Castillo was clothed with authority by Agro's board of directors in concurring and implementing the amendments.26 As for the trial court's award of P25,430,292.72 to Agro, the appellate court set aside the same for lack of basis.27
The dispositive portion of the assailed Decision reads:
We SET ASIDE the Decision dated 29 December 2005, issued by the Regional Trial Court, Branch 83, Malolos City, Bulacan, and instead, we ORDER defendant-appellee Agro Food and Processing Corporation to pay plaintiff-appellant Vitarich Corporation Php 4,734,906.57 (representing the deficiency of plaintiff-appellant Vitarich Corporation's Php 20,000,000.00 deposit) and Php 3,989,851.82 (representing defendant-apppellee Agro Food and Processing Corporation's obligation on the sale of live broilers), subject to 24% interest computed from November 1997 until fully paid.
IT IS SO ORDERED.28
Agro moved for reconsideration which was, however, denied by the CA in its assailed Resolution.29 Hence, this Petition.
The Petition:
In its Petition, Agro argues that the appellate court erroneously applied the doctrine of apparent authority, which is determined based on the acts of the principal and not by the acts of the agent.30 Since the CA relied on the weekly billings prepared by del Castillo and his testimony that he was authorized to implement the amendments, and not on Agro's conduct per se, it erred in applying the doctrine of apparent authority.31 Further, Vitarich was barred from proving the existence of the verbal amendments pursuant to the parol evidence rule.32
In its Comment,33 Vitarich counters that the CA correctly applied the doctrine of apparent authority as shown by Agro's conduct of preparing over eighty-nine (89) billings reflecting the amendments, never contesting the payment of such billings, and never questioning the authority of del Castillo to agree to the amendments in their two (2) years of doing business together.34
According to Vitarich, the totality of Agro's acts and conduct belie Agro's claim oflack of authority on the part of del Castillo.35 Further, Vitarich maintains that the issue of the verbal amendments was raised in the Amended Complaint, thus not covered by the parol evidence rule.36
Issues
The Petition raises two issues:
I
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.
II
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.37
Our Ruling
The Petition is devoid of merit.
Agro is correct that "apparent authority is determined by the acts of the principal and not by the acts of the agent."38 As applied to corporations, the doctrine of apparent authority provides that "a corporation [is] estopped from denying the [officer's] authority if it knowingly permits [such officer] to act within the scope of an apparent authority, and it holds him out to the public as possessing the power to do those acts."39
Thus, it is the corporation's acts which determine the existence of apparent authority, i.e., whether the corporation knowingly permits its officer to act on its behalf and holds such officer out to the public as having the authority to do those acts.ℒαwρhi৷
Here, a reading of the assailed Decision gives the impression that in applying the doctrine of apparent authority, the appellate court only considered del Castillo's testimony that he was authorized by Agro's President to implement the amendments, and not the acts of Agro itself as required under the doctrine of apparent authority:
Under the doctrine of apparent authority, if a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority.
Del Castillo had apparent authority to implement the verbal amendments to the parties' agreement. Del Castillo testified:
"Q: When you implemented the reduction did you seek or did you try to seek an advice from your higher up or the President of Agro Food?
A: Yes sir.
Q: Before you sent?
A. Yes sir.
Court: Before you decided, because according to you when Vitarich Corporation refused to release the payment to you, correct me if I am wrong, you decided to reduce the billings?
A: Yes sir.
Q: But before you tried to reduce the billings you sought the advice of your higher up, meaning the Presiding? (sic)
A: Yes sir.
Q: When you sought the advice or the assistance of the President, could you more or less tell us what was the tenor of the assistance you sought with the President?
A: I was told that there was a negotiation but it is discretionary on my part to decide so that I can make the adjustment because if the negotiation bug down, all negotiation will not materialize.
Q: With that advice you continued to send billings at a reduced amount?
A: Yes sir."
Since the parties agreed on the reduced dressing rates, we find defendant-appellee Agro Food liable to plaintiff-appellant Vitarich for Php4,734,906.57, representing the balance of plaintiff-appellant Vitarich's Php20,000,000.00 deposit, and Php3,989,851.82 as deficiency on the sale of live broilers.40 (Citations omitted.)
However, after carefully examining the evidence presented by Vitarich and passed upon by the appellate court in arriving at its ruling, as reflected in the assailed Decision,41 We find the appellate court's application of the doctrine of apparent authority well-supported by the law and the evidence, thus:
The Brief for the Appellant thrusts: plaintiff-appellant Vitarich was able to prove by preponderance of evidence that the parties agreed to the changes in the dressing fees; while the MOA did not contain the signature of the authorized representatives of defendant-appellee Agro Food, defendant-appellee Agro concurred in, and implemented the amendments, as evidenced by defendan-tappellee Agro Food's 89 weekly billings; the changes in the billing statements occurred thrice in the span of 89 weeks since the start of the Toll Agreement; changes in the rates began [on] I June 1996, or on the 22nd week of the transactions, and could not be solely attributed as a mistake of defendant-appellee Agro Food's accounting department; defendant-appellee Agro Food used the original rates, indicated in the Toll Agreement, for its weekly billings from, 6-12 January 1996 to 25-31 May 1996, or for 21 weeks; however, beginning 1-7 June 1996 to 27 July - 2 August 1996, or for 9 weeks, defendant-appellee Agro Food's billing statements used reduced rates (i.e., Php 6.75/k.g. for fresh chilled; and Php 4.95/k.g. for gallantina); from 3-9 August 1996 to 26 Ju1y to 1 August 1997, the weekly billings showed a rate of Php 6.05/kg. for fresh chilled, and Php 4.55/k.g. for gallantina; aside from the changes in the dressing rates, the rate of the billing fees deducted from the deposit, was correspondingly reduced; defendant-appellee Agro Food deducted from its billings the amount equivalent to 10%, and not 15%; starting on 3-9 August 1996, until 6-7 December 1997, only 7.5% of the billings was deducted; upon receipt of the letters requiring payment of the obligation, defendant-appellee Agro Food's authorized representatives did not protest, nor did they question the authority of Del Castillo if there was really an underpayment, defendant-appellee Agro Food should have protested immediately after the receipt of the letters but the defendant-appellee Agro Food raised the alleged underpayment for the first time only in its amended Answer; the authorization of an officer of the corporation need not be express, and it may be implied (i.e., by the acquiescence of its board of directors); under the doctrine of apparent authority, defendant-appellee Agro Food cannot deny the authority of Del Castillo to make the adjustments, as Del Castillo was fully aware of the changes, and continuously reflected the reduced dressing fees in the billing statements; only the defendant-appellee Agro Food prepared the billing statements, and plaintiff-appellant Vitarich did not participate in the preparation of the statements; Del Castillo testified that he was authorized make the adjustments in the dressing fees; considering that Del Castillo (defendant appellee Agro Food's Finance Manager) sent 89 weekly billing statements to plaintiff-appellant Vitarich in a span of two years, and the transaction involved a huge amount of money, it was presumed that the defendant-appellee Agro Food's Board of Directors concurred in the amendments; since the defendant-appellee Agro Food accepted the benefits of the reduced fees, then defendant-appellee Agro Food was bound by the oral amendments and cannot repudiate the same; in the original agreement, defendant-appellee Agro Food was supposed to apply 15% of the gross receipts as partial payment for the Php 20,000,000.00 deposit, but because of the verbal agreements, defendant-appellee Agro Food deducted from the gross receipts a lower percentage; the statute of frauds does not apply to contracts executed fully or partially; considering the mu1tiple transactions, it was incredulous to assert that defendant-appellee Agro Food only committed a mistake; the preparation and submission of the billings were presumed to be regular, and defendant-appellee Agro Food failed to overthrow the presumption of regularity of the transactions.42 (Citation omitted, emphasis supplied.)
Thus, evaluating the evidence presented by Vitarich, the conduct by which Agro clothed del Castillo with authority is evident on the following: first, in over a span of two (2) years, with over eighty nine (89) billings and three (3) instances of amendments, Agro never contested the amended toll fees; second, even after receipt of several demand letters from Vitarich, Agro never made an issue of the amended toll fees, and only raised the same in its Answer; and third, Agro accepted the benefits arising from the amendments through the extension of the period for its payment of the P20 million deposit (brought about by the decrease in the percentage of billings to be deducted from the P20 million deposit), not to mention Agro's corresponding increase in profits due to the increase or amendment in the price of gallantina (type of chicken supplied by Agro) in the third amendment.43
It bears stressing that the existence of apparent authority may be ascertained not only through the "general manner in which the corporation holds out an officer or agent as having the apparent authority to act in general", but also through the corporation's "acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers".44
Here, it is easy to see that Agro, reasonably appearing to have knowledge of the amendments, acquiesced to the same. Indeed, Agro never contested nor protested the amendments; on the contrary, it even accepted the benefits arising therefrom.45 "When a corporation intentionally or negligently clothes its officer with apparent authority to act in its behalf, it is estopped from denying its officer's apparent authority as to innocent third parties who dealt with this officer in good faith."46
Considering the foregoing, We do not find a reversible error in the appellate court's finding that the amendments were binding on Agro under the doctrine of apparent authority.
Finally, We need not belabor the second point raised by Agro - that the existence of the verbal amendments may not be proved pursuant to the parol evidence rule47 - because it has absolutely no basis in fact and in law. The appellate court is correct that the issue of the amendments was raised in Vitarich's Amended Complaint, and therefore covered by the exception to the parol evidence rule.48
WHEREFORE, the Petition is hereby DENIED. The assailed August 28, 2014 Decision and March 9, 2015 Resolution of the Court of Appeals in CA-G.R. CV. No. 90550, are AFFIRMED. Costs on petitioner.
SO ORDERED.
Leonen, J., (Chairperson), Inting, Delos Santos, and Rosario, JJ., concur.
Footnotes
1Rollo, pp. 9-28.
2Id. at 31-48; penned by Associate Justice Nina G. Antonio-Valenzuela and concurred in by Associate Justices Francisco P. Acosta and Jane Aurora C. Lantion.
3Id. at 50-51.
4Id. at 9.
5Id. at 100-106; penned by Judge Guillermo P. Agloro.
6Id. at 48, 106.
7Id. at 48.
8Id. at 50-51.
9Id. at 31-32. The toll fee is based on the type of chicken: Php 7.50 per kilo for 'fresh chilled', Php 7.50 per kilo for 'neckless', and Php 5.50 per kilo for 'gallantina'.
10Id. at 32.
11Id. at 11, 32.
12Id. at 32.
13Id. at 11.
14Id.at 101.
15Id. at 32.
16Id. at 35-36. Vitarich claims that the amendments resulted to the following toll fees: first amendment, Php 6.75 per kilo for 'fresh chilled', Php 6.75 per kilo for 'neckless', and Php 4.95 per kilo for 'gallantina'; second amendment, Php 6.Ci5 per kilo for 'fresh chilled', Php 6.05 per kilo for 'neckless', and Php 4.55 per kilo for 'gallantina'; and third amendment, Php 5.75 per kilo for 'fresh chilled' and Php 5.75 per kilo for 'gallantina'.
17Id. at 33.
18Id. at 37.
19Id. at 103.
20Id. at 103, 106.
21Id. at 105-106.
22Id. at 103.
23Id. at 106.
24Id. at 42-43.
25Id. at 44-45.
26Id. at 46-47.
27Id. at 47-48.
28Id. at 48.
29Id. at 50-51.
30Id. at 16-22.
31Id.
32Id. at 22-23.
33Id. at 113-134.
34Id. at 123-130.
35Id.
36Id. at 130-133.
37Id. at 15-16.
38Calubad v. Ricarcen Development Corp., 817 Phil. 509, 527 (2017), citing Banate v. Philippine Countryside Rural Bank (Liloan, Cebu),Inc., 639 Phil. 35,47 (2010).
39Georg v. Holy Trinity College, Inc., 790 Phil. 631, 665 (2016), citing Advance Paper Corp. v. Arma Traders Corp., 723 Phil. 401,417 (2013).
40Rollo. pp. 46-47.
41Id. at 40-41.
42Id.
43Id.
44Phil. Realty and Holdings Corp. v. Ley Construction and Development Corp., 667 Phil. 32, 43 (2011), citing People's Aircargo and Warehousing Co., Inc. v. Court of Appeals, 357 Phil. 850 (1998).
45Rollo, pp. 40-41.
46Calubad v. Ricarcen Development Corp., supra note 38 at 512, citing Yao Ka Sin Trading v. Court of Appeals, 285 Phil. 345, 367 (1992).
47Rollo, pp. 22-23.
48Id. at 44.
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