G.R. No. 14617 - Hanlon vs. Haussermann

The case involves R. Y. Hanlon as Plaintiff and Appellee, and John W. Haussermann together with A. W. Beam as Defendants and Appellants, with George C. Sellner acting as an Intervener.
The dispute arises from a profit-sharing agreement concerning the flotation and rehabilitation project of the Benguet Consolidated Mining Company.

The profit-sharing agreement contains several clauses detailing the obligations of the parties.
In the introductory portion of the contract, a general undertaking to cooperate in facilitating Hanlon’s project is stated.
Paragraph I of the contract imposes on each associate a duty “to do all in his power to float said project and make the same a success.”
Paragraph II of the contract specifies that the project shall be floated by raising capital in a prescribed manner and within a fixed time period (notably by May 6, 1914).
Clause (d) of paragraph II, central to the dispute, discusses a “guarantee” whereby the associates commit to obtaining the necessary subscriptions to raise capital within the allotted time period.

Counsel for one side argued that the language and punctuation of clause (d) indicate that the discharge applies solely to the specific guarantee of raising capital, leaving the broader obligation to assist Hanlon intact.
The court, upon thorough examination, determined that the promise (whether termed as guarantee or promise) set forth, in substantive terms, the principal object of the parties’ cooperation—namely, the successful flotation of the project through the raising of capital.
It was emphasized that the duty to assist in the project and the specific obligation to raise capital under clause (d) are inseparable. Once the specific obligation was discharged, the attendant general duty was necessarily extinguished as well.

Prior to Hanlon’s departure for the United States, he executed a specific power of attorney in favor of Beam, linking the attorney’s powers to the realization of the contracts dated November 5 and 6.
The contracts, however, became inoperative without any fault on the part of the defendants on May 6, 1914.
The issue arose whether Beam, who later acted under new auspices, could still be held accountable under an implied duty derived from the earlier power of attorney and the contract’s subject matter.
The examination questioned if an implied obligation could exist concurrently with an express contract that had already been discharged.

Whether clause (d) of paragraph II of the profit-sharing agreement creates a distinct obligation limited to raising capital or also sustains the broader duty to promote Hanlon’s project.

Whether the discharge of the specific obligation (the guarantee to raise capital) automatically extinguishes the general duty to assist in the promotion of the project.

Whether Beam, acting as attorney-in-fact under a specific power of attorney, was under a continuing duty to act for Hanlon once the express contract had become inoperative.
Whether any implied duty could be validly inferred from the power of attorney in circumstances where the express contractual obligations were already discharged.

Whether the application of general equitable principles or implied obligations can override or supplement the express terms of a contract that was clearly negotiated and discharged.