G.R. No. L-14617; February 18, 1920
R. Y. HANLON, plaintiff-appellee, vs. JOHN W. HAUSSERMANN and A. W. BEAM, defendants-appellants.

FACTS:
The Benguet Consolidated Mining Company, with its plant destroyed and without capital, entered into a contract on November 6, 1913, with plaintiff R.Y. Hanlon, an engineer. Hanlon agreed to rehabilitate the mining plant and secure sufficient development work in exchange for the company’s 501,000 unissued treasury shares. Key conditions included: Hanlon was to pay P75,000 into the company treasury within six months; upon payment, 250,000 shares would be issued to him; the remaining 251,000 shares would be held as security, to be released upon completion of the plant and payment of a company loan. Hanlon lacked personal funds, so on November 5, 1913, he entered a separate agreement with defendants John W. Haussermann and A.W. Beam (both company directors) and intervener George C. Sellner. In this agreement, Sellner undertook to secure P50,000 and Haussermann and Beam P25,000 of the required capital. However, Hanlon failed to pay the P75,000 by the May 6, 1914 deadline. Subsequently, Haussermann and Beam themselves raised the capital, rehabilitated the plant, and caused the company to issue the 501,000 shares to themselves. Hanlon (joined by Sellner as intervener) sued to compel defendants to account for profits and surrender 50,000 shares, claiming the defendants had fraudulently supplanted him. The trial court ruled in favor of Hanlon and Sellner, ordering defendants to surrender 48,000 shares total and pay dividends. Defendants appealed.

ISSUE:
Whether Hanlon, having failed to perform his essential obligation to pay the P75,000 within the stipulated time, is entitled to specific performance or an accounting of profits from the defendants who subsequently performed the contract.

RULING:
No. The Supreme Court reversed the trial court’s judgment and absolved the defendants. The Court held that time was of the essence of the contract between Hanlon and the mining company. The obligation to pay the P75,000 within six months was a condition precedent to Hanlon’s right to receive the shares. Hanlon’s failure to pay by the deadline constituted a default which terminated his rights under the contract. The Court emphasized that in contracts concerning mining propertya speculative and fluctuating venturetime is presumed to be of the essence. Furthermore, the separate agreement among Hanlon, Sellner, Haussermann, and Beam was merely a collaborative undertaking to raise funds; it did not make the defendants guarantors of Hanlon’s performance nor impose a fiduciary duty to perform the contract for his benefit after his default. Having rightfully acquired the shares after Hanlon’s default, the defendants owed no obligation to account to him. The action could not be maintained.