213 U.S. 419 (1909)
Repide owned three-fourths of the shares of the corporation's stock.1 He served as administrator general of the company with large powers at the time of the stock purchase.2 Repide engaged in negotiations that led to the sale of the company’s lands, together with all the other friar lands, to the Government at a price that greatly enhanced the value of the stock.3
Before the negotiations for the sale were completed, Repide employed an agent to purchase the stock.4 He concealed from the plaintiff’s agent his own identity and his knowledge of the state of the negotiations and their probable result.5
The Court of First Instance at Manila gave judgment in favor of the plaintiffs on two grounds.6 One ground was that the agent of the plaintiff had no authority to make the sale.7 The other ground was that the defendant had been guilty of fraud in concealing facts from the seller affecting the value of the stock at the time the sale was concluded.8
Upon appeal to the Supreme Court of the islands, the judgment was affirmed by a divided court on the ground of lack of authority of the plaintiff’s agent to make the sale.9 The court did not affirm on the ground of fraud.10 When the motion for a new trial was granted on account of newly-discovered evidence, the majority of the court held that the second power of attorney authorized the sale.11 The majority also held there was no fraud, so the judgment for the plaintiff was reversed and the complaint was dismissed.12
This court reviews the judgment of the Supreme Court dismissing the complaint of the plaintiff.13
Whether the defendant obtained the purchase of the stock by fraud or deceit?14
Under articles 1265 and 1269 of the Civil Code of the Philippine Islands, consent given by deceit is void.15 Deceit exists when by words or insidious machinations on the part of one contracting party the other is induced to execute a contract which without them he would not have made.16 This includes the concealment or omission of material facts with intent to deceive when a duty to disclose exists under the circumstances.17 Such concealment is equivalent to misrepresentation.18
Yes. Repide employed an agent to purchase the stock before negotiations for the sale of the lands were completed.19 He concealed from the plaintiff’s agent both his own identity and his knowledge of the state of the negotiations and their probable result.20 The Court of First Instance at Manila gave judgment for the plaintiffs.21 One reason was that the defendant had been guilty of fraud in concealing facts from the seller affecting the value of the stock at the time the sale was concluded.22 Upon appeal the Supreme Court of the islands initially affirmed on the separate ground of lack of agent authority.23 It later reversed and dismissed the complaint after receiving new evidence of authority.24 The court held there was no fraud.25
This court reviews the dismissal. The concealment constituted deceit.26 The facts show Repide acted with intent to induce the sale at a lower price by hiding information that would have led the plaintiff’s agent to refuse the transaction.27 The agent of the plaintiff remained ignorant of the negotiations.28 He would not have sold at the price obtained had the true state of affairs and the defendant’s identity been known.29
Whether under the circumstances it was the duty of the defendant to disclose to the agent of the plaintiff the facts bearing upon or which might affect the value of the stock?32
Although the ordinary relationship between directors and shareholders in a business corporation does not impose a fiduciary duty to disclose general knowledge of share value, a duty to disclose material facts arises under special circumstances.33 The duty arises where the director owns a controlling interest.34 It also arises where the director serves as administrator general with large powers.35 The duty further arises where the director participates as agent in negotiations for the sale of the corporation’s sole valuable asset.36 The director possesses unique knowledge of the negotiations’ progress and probable outcome that directly affects share value.37
Yes. Repide owned three-fourths of the shares of the corporation's stock. He was administrator general of the company with large powers at the time of the purchase of the stock.38 He was engaged in the negotiations which finally led to the sale of the company’s lands, together with all the other friar lands, to the Government at a price which very greatly enhanced the value of the stock.39 Before the negotiations for the sale were completed the defendant employed an agent to purchase the stock.40 He concealed from the plaintiff’s agent his own identity and his knowledge of the state of the negotiations and their probable result, with which he was familiar as the agent of the shareholders.41
These combined facts created a duty to disclose.42 No one knew as well as Repide the exact condition of the negotiations.43 No one knew as well as Repide the probability of the sale of the lands to the Government.44 No one knew as well as Repide the probable price that might be obtained on such sale.45 The lands were the only valuable asset owned by the company.46 Concealing his identity when procuring the purchase was strong evidence of the intent to avoid disclosure and any questions about the negotiations.47
Under the circumstances the defendant had a duty to disclose to the agent of the plaintiff the facts bearing upon or which might affect the value of the stock.48