G.R. No. L-9287, December 4, 1914
LEON JUDA, doing business under the firm name of Juda Brothers, plaintiff-appellant, vs. Mrs. E. O. CLAYTON and E. O. CLAYTON, her husband, defendants-appellees.

FACTS:
Leon Juda, a wholesale merchant from San Francisco, sued Mrs. E. O. Clayton, a retailer in Manila, to recover a balance due for merchandise sold and delivered. The balance essentially represented the value of goods shipped by Juda which Clayton later returned as unsatisfactory and unsalable. Clayton claimed she was entitled to credit for these returns, which would extinguish the claimed balance. There was no express agreement at the outset regarding returns. However, the record showed a course of dealing where Clayton had previously returned unsatisfactory goods on several occasions, and Juda had consistently accepted them and credited her account. Correspondence between the parties indicated Juda’s awareness and implicit acceptance of this practice, including letters where he acknowledged returns and hoped future shipments would be more satisfactory to avoid “other returns.” In September 1911, Clayton traveled to San Francisco, returned some goods personally, and received credit. Before leaving Manila, she had instructed her manager to select and return further unsatisfactory goods from recent shipments, which were later shipped to Juda. Juda denied Clayton’s right to credit for this last batch of returns.

ISSUE:
Whether, under the circumstances, the defendant (Clayton) had the right to return the goods she found unsatisfactory and receive credit for them on her account.

RULING:
Yes. The Supreme Court affirmed the trial court’s dismissal of the complaint.
1. Right to Return Goods: The Court held that the correspondence between the parties, coupled with their prior conduct, established a mutually accepted course of dealing. Juda’s repeated acceptance of returned goods and his granting of credit, along with letters expressing hope to avoid future returns, confirmed Clayton’s reasonable belief that she had the right to return unsuitable goods. This course of dealing became an implied term of their contractual relationship.
2. No Valid “Account Stated”: The Court rejected Juda’s argument that an “account stated” had been created when he sent a statement (which excluded credit for the contested returns) and Clayton did not immediately object. An account stated requires an agreement on the balance. Clayton’s silence could not be construed as acquiescence because Juda was fully aware that the correctness of the account was disputedspecifically, the issue of credit for the returned goods. Her failure to object did not constitute a waiver of her claim, especially since Juda retained the returned goods.
Therefore, Clayton was entitled to credit for the value of the returned goods, which exceeded the balance Juda sought to collect.