Q: Was I allowed to purchase the esrog for myself?
A: The concern that your chavrusa brought up is indeed an issue that arises regularly. Consider, for example, a manufacturer who delivered merchandise to a salesman to sell on commission. After a period of time, market conditions changed, causing an increase in the value of the goods. The salesman is now interested in buying the merchandise so that he can pocket the additional profit. He claims that when he originally obtained the merchandise, his intent had been to purchase it at the price specified by the manufacturer. The manufacturer contends that the salesman was only an agent to sell the merchandise to others, and as long as the merchandise has not yet been sold, it remains the property of the principal and the increased value is his.
Shulchan Aruch (C.M. 185:2) rules that an agent may not purchase the merchandise he was assigned to sell, even at the price specified by the principal. The reason is that the agent was authorized to sell the merchandise, thereby precluding him from being able to purchase it for himself. A sale, by definition, involves the transfer of merchandise from the domain of one party to the domain of another; one who is authorized to sell merchandise cannot effect a sale to himself, since the property has not left the domain of the seller (Tur in the name of Rashba, see also Nesivos 185:1).
Shach 3 cites authorities that allow the agent to purchase the merchandise for himself. The rationale is that once the principal sets a price, he remains the owner of the property, and when the agent purchases it for himself, it is transferred from the domain of the principal to the domain of the agent (Machaneh Ephraim: Shluchin #20).
Since the matter is subject to debate, one would not be able to collect from the one who is in possession of the disputed property (Erech Shai).
However, in your case involving an esrog, all opinions would agree that you performed a valid kinyan (proprietary act) on the esrog. The reason is that it is assumed that the supplier would have no issue with the salesman purchasing the esrog for himself, since he certainly is not interested in the agent purchasing his esrog from another supplier. As such, all opinions agree that you made a valid kinyan on the esrog (Shoel U’Meishiv Mahadurah 5:22).