Rallos vs. Yangco

A principal who has publicly held out another as his agent and invited third parties to deal with that agent is liable for the acts of the agent performed within the scope of the agency, even after the relationship has been terminated, if the principal fails to give due and timely notice of such termination to those third parties.

Teodoro R. Yangco operated a shipping and commission department for buying and selling leaf tobacco and other native products in Manila. He appointed Florentino Collantes as his attorney-in-fact or factor to manage the business. Florentino Rallos and others were clients who transacted with Yangco's business through Collantes.

Teodoro R. Yangco operated a shipping and commission department for buying and selling leaf tobacco and other native products in Manila. On November 27, 1907, Yangco sent a circular letter to Florentino Rallos, among others, announcing the opening of his business and introducing Florentino Collantes as his attorney-in-fact or factor. The circular specified the conditions under which the business would be conducted and explicitly stated that Collantes was granted public power of attorney to perform all acts necessary for carrying out Yangco's plans.

Accepting this invitation, Rallos and his co-plaintiffs engaged in considerable business with Yangco through Collantes, sending various produce to be sold on commission. In February 1909, the plaintiffs sent 218 bundles of leaf tobacco to Collantes, believing him to be Yangco's agent. Collantes received the tobacco, sold it for P1,744, and deducted charges of P206.96, leaving P1,537.08 belonging to the plaintiffs. Collantes, however, converted this sum to his own use.

Prior to the consignment of the tobacco, Yangco had severed his relations with Collantes, terminating the latter's status as his factor. This fact was unknown to the plaintiffs. Yangco did not provide any notice of the termination of the agency relationship to the plaintiffs. When the plaintiffs demanded payment of the converted sum from Yangco, the latter refused, arguing that Collantes was acting personally and not as his agent at the time the tobacco was received and sold. The plaintiffs then instituted an action to recover the amount.

• Scope of Agency: Defendant-appellant argued that at the time the tobacco was received and sold by Collantes, the latter was acting personally and not as his agent, thereby relieving him of any liability for the agent's conversion.

• Liability of Principal: Whether a principal is liable to a third party who, in good faith and without knowledge of the termination of the agency, sends goods to the former agent.

• Liability of Principal: Yes. The principal is liable for failing to give due and timely notice of the termination of the agency relationship to third parties who had been invited to deal with the agent.

• Liability of Principal: Having advertised the fact that Collantes was his agent and given a special invitation to the plaintiffs to deal with him, the defendant had a duty to notify the plaintiffs upon the termination of the principal-agent relationship. Because the defendant failed to provide due and timely notice of the severance, he is responsible to the plaintiffs for goods sent in good faith and without negligence to the former agent, who lacked actual or constructive knowledge of the termination.

• Liability of Principal for Failure to Notify Termination of Agency — A principal who holds out an agent to third parties and invites them to transact with that agent must notify those third parties when the agency is terminated. Failure to do so makes the principal liable for the acts of the former agent done within the scope of the original agency, provided the third party acted in good faith, without negligence, and without knowledge of the termination.

• "Having advertised the fact that Collantes was his agent and having given them a special invitation to deal with such agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and timely notice thereof to the plaintiffs." — This passage establishes the duty of the principal to notify third parties of the termination of an agency relationship.
• "Failing to do so, he is responsible to them for whatever goods may have been in good faith and without negligence sent to the agent without knowledge, actual or constructive, of the termination of such relationship." — This defines the resulting liability of the principal for the acts of the former agent when the duty to notify is breached.

Torres, Mapa, Johnson, and Carson, JJ., concur.