GR L 14617; (December, 1920) (Digest)
G.R. No. L-14617, December 9, 1920
R. Y. HANLON, plaintiff-appellee, vs. JOHN W. HAUSSERMANN and A. W. BEAM, defendants-appellants.
FACTS:
R. Y. Hanlon entered into a profit-sharing agreement with John W. Haussermann, A. W. Beam, and George C. Sellner to rehabilitate the Benguet Consolidated Mining Company. The agreement, dated November 5 and 6, 1913, obligated the parties to cooperate and assist Hanlon in floating the project. A specific clause (clause (d) of paragraph II) provided that if the necessary capital was not raised by May 6, 1914, the obligation of Haussermann and Beam to raise their share would be discharged. Hanlon also executed a power of attorney in favor of Beam to act in furtherance of the agreement. The capital was not raised by the stipulated date. Subsequently, Haussermann and Beam became involved in a new and separate venture to rehabilitate the mine. Hanlon filed a suit, claiming that Haussermann and Beam breached their fiduciary duties and that their involvement in the new venture inured to the benefit of the original joint enterprise.
ISSUE:
Whether the discharge of Haussermann and Beam from their specific obligation to raise capital under clause (d) of the profit-sharing agreement also extinguished any broader implied or equitable obligations they might have had to promote the Hanlon project, thereby precluding Hanlon’s claim for breach of duty.
RULING:
The Supreme Court denied the motion for reconsideration and held that the discharge was complete and barred Hanlon’s claim. The Court ruled that the specific obligation to raise capital within the stipulated period was the principal and definitive duty undertaken by Haussermann and Beam under the agreement. The discharge of this specific obligation pursuant to clause (d) necessarily extinguished any broader, general obligation to promote the project that was expressed in the contract. The Court further held that no implied legal or equitable duty can arise from a subject matter already governed by an express contract. Since the express contract was discharged according to its own terms, no separate fiduciary or equitable obligation stemming from the same relationship could be enforced. The power of attorney executed in Beam’s favor was ancillary to the main agreement and, with the agreement’s discharge, Beam incurred no liability for failing to act under it. The subsequent actions of Haussermann and Beam in a new venture did not create an obligation to account to Hanlon under the defunct agreement.