G.R. No.
3246 February 9, 1907
CADWALLADER & COMPANY, plaintiff-appellant,
vs.
SMITH, BELL & COMPANY and HENRY W. PEABODY & COMPANY, defendants-appellees.
FACTS:
the Pacific Export Lumber Company of Portland shipped upon the steamer Quito (581) piles to the
defendant, Henry W. Peabody & Company, at Manila, on the sale of which before storage the consignees
were to receive a commission of one half of whatever sum was obtained over $15 for each pile and 5 per
cent of the price of the piles sold after storage.
After the arrival of the steamer, Peabody and Company wrote the agent of the Pacific Company at Shanghai
that for lack of a demand the piles would have to be sold at considerably less than $15 apiece; whereupon
the company's agent directed them to make the best possible offer for the piles, in response they
telegraphed him an offer of $12 apiece. It was accepted by him, in consequence of which the defendant paid
the Pacific Company $6,972.
It appeared that Peabody & Company had entered into negotiations with the Insular Purchasing Agent for
the sale for the piles at $20 a piece, and sold to the Government of two hundred and thirteen (213) piles at
$19 each. More of them were afterwards sold to the Government at the same figure and the remainder to
other parties at carrying prices, w/c amounted $10,41.66, higher than the amount paid by the defendant to
the plaintiff therefor.
Thus it is clear that at the time when the agents were buying from their principal these piles at $12 apiece on
the strength of their representation that no better price was obtainable, they had already sold a substantial
part of them at $19.
In these transactions the defendant, Smith, Bell & Company, were associated with the defendants, Henry W.
Peabody & Company, who conducted the negotiations, and are consequently accountable with them.
ISSUE: WoN the contract of sale is subject for annulment.
RULING: YES
It is plaint that in concealing from their principal the negotiations with the Government, resulting in a sale of the piles
at 19 a piece and in misrepresenting the condition of the market, the agents committed a breach of duty from which
they should benefit. The contract of sale to themselves thereby induced was founded on their fraud and was
SUBJECT TO ANNULMENT BY THE AGGRIEVED PARTY. (Civil Code, articles 1265 and 1269.) Upon
annulment the parties should be restored to their original position by mutual restitution. (Article 1303 and
1306.) Therefore the defendants are not entitled to retain their commission realized upon the piles included
under the contract so annulled. In respect of the 213 piles, which at the time of the making of this contract on
August 5 they had already sold under the original agency, their commission should be allowed.
The court below found the net amount due from the defendants to the plaintiff for the Quito piles, after deducting the
expense of landing the same and $543.10 commission, was $1,760.88, on which it allowed interest at the rate of 6
per cent from March 1, 1903. This amount should be increased by the addition thereto of the amount of the
commission disallowed, to wit, $331.17 giving $2,092.05. Interest computed on this sum to the date of the entry of
judgment below amounts to $359.77, which added to the principal sum makes $2,241.82, the amount of plaintiff's
claim, which is to be deducted from defendants' counterclaim of $6,993.80, leaving a balance of $4,541.98,
equivalent to 9,083.96 pesos, the amount for which judgment below should have been entered in favor of the
defendants.
Let the judgment of the Court of First Instance be modified accordingly, without costs to either party.
