FIRST DIVISION

[G.R. No. 14617. February 18, 1920.]

R. Y. HANLON, plaintiff-appellee, vs. JOHN W. HAUSSERMANN

and A. W. BEAM, defendants-appellants. GEORGE C. SELLNER,
intervener.

Cohn & Fisher for appellants.

Thomas D. Aitken and Gibbs, McDonough & Johnson for appellees.

SYLLABUS

1. CONTRACTS; INTERPRETATION; SPECIAL PROVISION CONTROLS

GENERAL PROVISION. — It is a rudimentary canon of interpretation that all
parts of a writing should be construed together and a special provision in a
written contract controls the general.
2. ID.; ID.; DISCHARGE OF ONE PARTY AS RESULT OF
NONPERFORMANCE BY OTHER. — The obligations of two parties to a contract
were so expressed as to constitute mutual concurrent conditions, and it was
expressly provided that the failure of one to perform within a stipulated
period would discharge the other. Held: That upon failure of one to perform,
the other was wholly discharged from the contract, not only with reference to
the particular party in default, but also with reference to another contracting
party who was not an immediate party to the engagement in respect to
which the default had occurred.
3. FIDUCIARIES; TERMINATION OF RELATION; RIGHT OF PARTY TO
ACT FOR SELF. — After the termination of an agency, partnership, or joint
adventure the party who stood in the fiduciary relation to the other is free to
act in his own interest with respect to the same subject-matter, provided he
has done nothing during the continuance of the relation to lay a foundation
for an undue advantage to himself To act as fiduciary of another does not
necessarily imply the creation of a permanent disability in the fiduciary to
act for himself in regard to the same subject-matter.
4. ID.; ID.; ID.; CASE AT BAR. — Four contracting parties agreed to
promote a joint enterprise for the rehabilitation of a mining plant which had
been destroyed by flood. The engagement of three of the parties was limited
to an undertaking to raise money within a stated period by subscribing to or
selling shares of the mining company. One of the parties who had
undertaken thus to raise money defaulted, and under the express provisions
of the contract the two other parties to this agreement were discharged. At a
later date these two, who were at the same time stockholders and officials of
the mining company, procured a contract from the mining company by
which they proceeded to restore the mining plant upon their own account.
Held: That they were not compellable to share with their former associates
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 the profits thus obtained.
5. CONTRACT; RESCISSION; JUDICIAL ACTION. — No judicial action
for the rescission of a contract is necessary to terminate the obligation
where the contract itself contains a resolutory provision by virtue of which
the obligation is already extinguished. Nor is a judicial rescission necessary
for the protection of a party occupying a purely defensive attitude when the
contract has not been performed by either.
6. CORPORATIONS; CONTRACTS; RIGHT OF THIRD PERSON TO
INQUIRE INTO VALIDITY OF CORPORATE CONTRACT. — A stranger to a
corporate contract who seeks to recover from one of the immediate parties
to the contract a share of the gains acquired by the latter thereunder will not
be permitted to question the validity of the contract on the ground of lack of
authority in the corporate officer to execute it.
7. CONTRACTS; DELINQUENCY IN PERFORMANCE AT DATE STATED;
DISCHARGE OF OTHER PARTY. — Whether one party to a contract Is
discharged by the failure of the other to comply with a certain stipulation on
or before the time set for performance, must be determined with reference
to the intention of the parties as deduced from the contract itself, in relation
with the circumstances under which the contract was made.
8. ID.; SPECIFIC PERFORMANCE; WHEN TIME IS OF ESSENCE OF
CONTRACT. — Time is said to be of the essence of a contract whenever the
clear intention of the contracting parties appears to be that performance
shall be accomplished on or before a stipulated date. In such case
performance at the date fixed by the party who is bound to render
performance on that date is a condition precedent to his right to enforce
performance as against the other contracting party.
9. ID.; ID.; ID.; INTENTION OF CONTRACTING PARTIES. — It is not
necessary, in order to make time of the essence of a contract, that the
contract should expressly so declare. Words of this import need not be used.
It is sufficient that the intention to this effect should appear; and there are
certain situations wherein it is held, from the nature of the agreement itself,
that time is of the essence of the contract. Among contracts of this character
are those which relate to sales, or options for the sale of mining properties.

DECISION

STREET, J : p

This action was originally instituted by R. Y. Hanlon to compel the

defendants, John W. Haussermann and A. W. Beam, to account for a share of
the profits gained by them in rehabilitating the plant of the Benguet
Consolidated Mining Company and in particular to compel them to surrender
to the plaintiff 50,000 shares of the stock of said company, with dividends
paid thereon. A few days after the action was begun G. C. Sellner was
permitted to intervene in like interest with Hanlon and to the same extent.
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 Thereafter the case was conducted in all respects as if Hanlon and Sellner
had been co-plaintiffs from the beginning. At the hearing judgment was
rendered requiring the defendants to surrender to Hanlon and Sellner
respectively 24,000 shares each of the stock of said company. and to pay
the dividends declared and paid on said stock for the years 1916 and 1917.
From this judgment the defendants appealed.
The controlling features of this controversy are disclosed in
documentary evidence, and the other facts necessary to a proper
understanding of the case are stated in the narrative part of the opinion of
the trial judge. As both parties to the appeal agree that his statement of
facts is substantially correct, we adopt his findings of fact as the basis of our
own statement, with such transposition, omissions, and additions as seen
desirable for the easier comprehension of the case.
The Benguet Consolidated Mining Company is a corporation which was
organized in 1903 with an authorized capital stock of one million dollars, of
the par value of one dollar per share, of which stock 499,000 shares had
been issued prior to November 1913, and 501,000 shares then remained in
the treasury as unissued stock. The par value of the shares was changed to
one peso per share after the organization of the corporation.
In the year 1909 the milling plant of said company, situated near
Baguio in the subprovince of Benguet, Philippine Islands upon a partially
developed quartz mine, was badly damaged and partly destroyed by high
water, and in 1911 it was completely destroyed by like causes. The company
was thereafter without working capital, and without credit, and therefore
unable to rebuild the plant.
In October and November 1913, and for a long time prior thereto, the
defendant John W. Haussermann and A. W. Beam were shareholders in said
mining company and members of its board of directors, and were at said
time vice-president and secretary-treasurer, respectively, of said company.
In October, 1913, the plaintiff R. Y. Hanlon, an experienced mining
engineer, upon the solicitation of the defendant Beam, presented to the
board of directors of the Benguet Consolidated Mining Company a
proposition for the rehabilitation of the company, and asked an option for
thirty days within which to thoroughly examine the property; which
proposition, with certain amendments, was finally accepted by said
company; and thereafter, on November 6, 1913, within the option period,
the terms of that proposition and acceptance were incorporated in a written
contract between the plaintiff and the company, in which the said company
acted by and through the defendant John YV. Haussermann as vice-President
and the defendant A. W. Beam as secretary. In this contract it appears that
for and in consideration of the issuance and delivery to said Hanlon or to his
order of the 501,000 shares of the unissued capital stock of said mining
company, the said Hanlon undertook, promised, and agreed to do or cause
to be done sufficient development work on the mining properties of said
company to enable the company to mine and take out not less than sixty
tons of ore per day, and to give an extraction of not less than 85 per cent of
the gold content of the ore; and the terms and conditions upon which said
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 undertaking was based may be briefly stated as follows: (1) said Hanlon was
to pay into the treasury of the mining company the sum of P75,000 in cash
within six months from that date; (2) upon the payment of said P75,000 in
cash there was to be issued and delivered to said Hanlon or to his order
250,000 shares of said unissued stock; (3) prescribing the purposes for
which said P75,000 should be disbursed by said mining company upon the
order of said Hanlon; (4) providing for raising an additional sum of P75,000
by obtaining a loan in the name of said mining company upon the security of
its properties and assets, such additional indebtedness to be paid and
discharged within eighteen months from date of said agreement; (5)
providing for the payment of the then indebtedness of said mining company
amounting to P13,105.08; (6) providing for the distribution of the net
earnings after the payment of the indebtedness mentioned in paragraphs 4
and 5; (7) providing that, for the purpose of securing and guaranteeing the
faithful performance of each and every undertaking in said agreement
mentioned to be fulfilled by said Hanlon, 250,000 of said 501,000 shares
should remain on deposit with said mining company, to be released,
surrendered and delivered to said Hanlon or to his order, as follows:
"151,000 shares to be released, surrendered and delivered to the said party
of the first part, or his order, when said milling plant shall have been duly
completed and the operation thereof commenced; the balance of said
shares, to wit 100,000, shall remain on deposit with the party of the second
part until the above mentioned loan to be secured by the assets of the
company shall have been fully paid and discharged, in which event said
shares shall be released, surrendered and delivered to the party of the first
part, or his order;" (8) providing that in the event the earnings of the
company should be insufficient to pay all indebtedness within the time
provided in paragraphs 4 and 6, the balance remaining due thereon was to
be paid by said Hanlon, and if he neglected to pay off and discharge the
balance due, then the said mining company was to have the right and
authority to sell and dispose of the 100,000 shares of stock remaining in its
possession at public or private sale at the prevailing market price, or as
many of said shares as might be necessary to fully liquidate and discharge
the balance of said indebtedness remaining unpaid; (9) providing for taking
out insurance by said mining company for the protection of said Hanlon, to
cover the full value of said plant during its erection and after the completion
thereof for a period of not less than eighteen months after the same shall
have been placed in operation.
As was at the time well known to all parties concerned herein the
plaintiff Hanlon was personally without the financial resources necessary to
enable him to contribute P75,000 towards the project indicated in the
contract Exhibit B, above set forth; and in order to overcome this obstacle he
was compelled to seek the assistance of others. Haussermann and Beam,
being cognizant of this necessity, agreed to find P25,000 of the necessary
capital, and for the remainder the plaintiff relied upon G. C. Sellner, a
business man of the city of Manila, who, upon being approached, agreed to
advance P50,000. A verbal understanding with reference to this matter had
been ' attained by the four parties to this litigation before the contract
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 Exhibit B between Hanlon and the mining company had been formally
executed, and this agreement was in fact reduced to writing and signed on
November 5, 1913, one day prior to the execution of the contract between
Hanlon and the mining company.
In this contract of November 5, 1913, (Exhibit A), the four parties, to
wit: Hanlon, Sellner, Haussermann, and Beam, agreed to collaborate in the
flotation of the project outlined in the contract Exhibit B, and defined the
manner in which the necessary capital of P75,000 was to be raised. As this
contract is absolutely vital in the present litigation its provisions are set out
in full:
"Whereas, R. Y. Hanlon has submitted a proposition to the
Benguet Consolidated Mining Co., a copy of which is hereto attached
for reference; and
"Whereas, the Board of Directors of the Benguet Consolidated
Mining Co., has accepted such proposition as amended; and
"Whereas, said parties have agreed to cooperate and assist the
said Hanlon in the flotation of said proposition;
"Now, therefore, this agreement made by and between the
undersigned as follows:
I.
"It is mutually agreed by and between the parties hereto that
each shall do all in his power to float said proposition and make the
same a success.
"II.
"It is mutually agreed that said proposition shall be floated in the
following manner, to wit:
"(a) That 301,000 shares of the Benguet Consolidated Mining
Company shall be set aside and offered for sale for the purpose of
raising the sum of P75,000 required to the paid to the Benguet
Consolidated Mining Company in accordance with said proposition.
"(b) That of said sum of P75,000, the said George Sellner
agrees and undertakes to secure and obtain subscriptions for the sum
of P50,000.
"(c) That John W. Haussermann and A. W. Beam undertake
and agree to secure and obtain subscriptions for the sum of P25,000.
"(d) The said Sellner, Haussermann and Beam hereby
guarantee that the subscriptions to be obtained by them as
hereinabove stated shall be fully paid within six (6) months from the
date of the acceptance on the part of the said Hanlon of the option
granted by said company; it being understood and agreed that if for
any cause the said Sellner shall fail to obtain subscriptions and
payment thereof to the amount of P50,000 within the time herein
specified, then and in that event the obligation of the said
Haussermann and Beam shall be discharged; and, on the other hand, if
for any cause said Haussermann and Beam shall fail to obtain
subscriptions for the P5,000 and payment thereof within the time
herein mentioned, then and in that event, the said Sellner shall be
released from his obligation.
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 "It is mutually understood and agreed that each of the parties
mentioned in this paragraph shall from time to time advise the other
parties as to the number of subscriptions obtained and the amount of
payments thereon.
"III.
"That out of the remaining 200,000 shares of the Benguet
Consolidated Mining Co., to be issued under said proposition each of
said parties hereto, that is to say: George Sellner, John W.
Haussermann, A. W. Beam and R. Y. Hanlon shall be entitled to receive
one-fourth thereof, or 50,000 shares, as compensation for the services
rendered in the flotation of this proposition.
"IV.
"The necessary funds to cover preliminary expenses, such as
expenses to examining the properties of the Benguet Consolidated
Mining Co., freight charges and other charges on ore samples, cost of
testing same, etc., shall be supplied by Messrs. Sellner, Haussermann
and Beam, which said sum shall be reimbursed to said parties out of
the P75,000 fund raised by the sale of the P301,000 shares of stock
hereinabove in Paragraph II, Subsection A, hereof, mentioned.
"V.
"Cash for the loan of P5,000 to be made to the Benguet
Consolidated Mining Co., as provided in the proposition of the said
Hanlon, shall be furnished by Messrs. Sellner, Haussermann and Beam,
in equal proportions as needed by the company.
"In witness whereof, the respective parties hereto have hereunto
set their hands at Manila, P. I., this 5th day of November, 1913.
(Sgd.) "R. Y. HANLON,
(Sgd.) "GEORGE C. SELLNER,
(Sgd.) "JOHN W. HAUSSERMANN,
(Sgd.) "A. W. BEAM.
During the period which intervened between the making of the
preliminary verbal agreement and the final execution of this contract, the
plaintiff, Hanlon, at the expenses of the joint adventure went from Manila to
the Benguet Consolidated mining properties, near Baguio, accompanied by
the defendant Beam at the expense of said mining company, and said
Hanlon made a preliminary investigation and examination of the properties,
selected and surveyed a suitable mill site and took out about half a ton of
ore samples which it had been agreed were to be forwarded to the United
States for tests for use by him in the selection of the machinery best suited
for the treatment of such ore; and said Hanlon reported to his coadventurers
that it was a very feasible scheme, and that there was enough ore in sight to
well repay the investment of P125,000, which was the sum estimated by
said Hanlon to be necessary to equip the property.
Soon after the contract Exhibits B and A were made the plaintiff Hanlon
departed for the United States, in contemplation of which event he executed
a special power of attorney, on November 10, 1913, constituting and
appointing Beam his special agent and attorney in fact, for and in his name,
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 to do and perform the following acts:
"To vote at the meetings of any company or companies, and
otherwise to act as my proxy or representative, in respect of any
shares of stock now held, or which may hereafter be acquired by me
therein, and for that purpose to sign and execute any proxy or other
instrument in my name and on my behalf;
"To secure subscriptions in my name for the shares of the
Benguet Consolidated Mining Co., to be issued to me under and by
virtue of an agreement entered into with said company on November
6, 1913, and to enter into the necessary agreements for the sale of
said shares.
"To demand, sue for, and receive all debts, moneys, securities for
money, goods, chattels or other personal property to which I am now or
may hereafter become entitled, or which are now or may become due,
owing or payable to me from any person or persons whomsoever, and
in my name to give effectual receipts and discharges for the same."
Prior to that time, on May 27, 1913, the plaintiff Hanlon had given one
A. Gnandt of the city of Manila a power of attorney with general and
comprehensive powers, and "with full power of substitution and revocation ;"
and thereafter on March 14, 1914, said Gnandt, owing to his intended
departure from the Philippine Islands, executed a power of attorney in favor
of said A. W. Beam, with the same general powers which had been conferred
upon him, and Beam became Hanlon's sole agent in the Philippine Islands.
Said original power of attorney had no special relation to the rehabilitation
proposition, but both the original and the substitute specifically authorized
the attorney in fact:
"To make, sign, execute and deliver any and all contracts,
agreements, receipts and documents of any nature and kind
whatsoever."
After the enumeration of other general and specific powers, Beam was
finally authorized:
"To do any and all things necessary or proper for the due
performance and execution of the foregoing powers." By reference to
the contract of November 5, 1913, (Exhibit A), it will be seen that
301,000 shares of the stock of the Benguet Consolidated Mining
Company were to be used to raise the P75,000 which Hanlon was
bound to supply to the mining company; and the contract
contemplated that these shares should be disposed of at 25 centavos
per share. As Sellner had agreed to raise P50,000, it resulted that
200,000 shares had to be allocated to him; while Haussermann and
Beam had at their disposal 100,000 shares, with which to raise 25,000.
Sellner, Haussermann, and Beam furthermore guaranteed that the
subscriptions to be obtained by them should be fully paid within six
months from the date of the acceptance by Hanlon of the contract with
the mining company, that is, from November 6, 1913.
In prosecution of the common purpose, Haussermann and Beam
proceeded, after the departure of Hanlon, to procure subscriptions upon the
stock at their disposal, part being subscribed by themselves severally and
part sold upon subscription to outsiders; and during the next two or three
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 months the block of shares allotted to them was subscribed. As a
consequence of this they were thereafter prepared to pay in, or to cause to
be paid in, the entire amount which they were obligated to raise. Doubts,
however, presently arose as to the ability of Sellner to obtain subscriptions or
produce the P75,000, which he was obligated to bring in; and as early as in
February of 1914, Beam cabled to Hanlon in America "Sellner unable to pay.
Have you any instructions ?" Upon receipt of this cablegram, Hanlon cabled
Sellner to use every effort to raise the money and also cabled Beam to
obtain the money elsewhere if Sellner could not supply it. Furthermore, in
order to be prepared against the contingency of Sellner's ultimate inability to
respond, Hanlon attempted to enlist the interest of capitalists in San
Francisco but in this was unsuccessful. It will be observed that, although by
the exact letter of the contract, Sellner was obligated to obtain subscriptions
for the sum of P50,000, he nevertheless desired to keep the entire 200,000
shares assigned to him exclusively for himself, and proceeding on the
assumption that he had in effect underwritten a subscription for the whole
block of shares, he made no effort to obtain subscriptions from anybody else
for any part of these shares. Meanwhile Haussermann and Beam were in
touch with Sellner, urging him to action but without avail, Sellner being in
fact wholly unable to fulfill his undertaking. In this condition of affairs the
period of six months specified in the contracts of November 5 and 6 for the
raising of the sum of P75,000 passed.

Thereafter Haussermann and Beam assumed that they were absolved

from the obligations of their contract of November 5, 1913, with Hanlon and
Sellner, and that the mining company was no longer bound by its contract of
November 6, 1913, with Hanlon. They therefore proceeded, as parties
interested in the rehabilitation of the mining company, to make other
arrangements for financing the project. They found it possible to effectuate
this through the offices of Sendres of the Bank of the Philippine Islands, and
in order to do so, a new contract was made between the mining company
and Beam, with Haussermann as silent partner of the latter, whereby a
bonus of 96,000 shares was conceded to the promoter instead of the
100,000 shares which would have accrued to Haussermann and Beam if the
Hanlon project had gone through. As a result of this, the profits of each were
reduced by the amount of 2,000 shares below what they might have realized
under the Hanlon contract of November 5. Another feature of the new
project was that some of those who had subscribed to the stock of the
mining company through Beam under the Hanlon project were retained as
stockholders in the new scheme of flotation. Some, however, dropped out,
with the result that Haussermann and Beam were compelled to increase
their subscriptions materially.
As preliminary to the new scheme of financing the corporation, the
board of directors of the mining company, composed of Haussermann Beam,
and Sendres, saw fit at a special meeting on June 19, 1914, to adopt a
resolution declaring the contract of November 6, 1913, between Hanlon and
the company to be cancelled by reason of the failure of Hanlon to pay in the
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 sum of P75,000 in cash on or before May 6, 1914.
Immediately after the adoption of this resolution, the new plan for
financing the mining company was unfolded by Mr. Beam to the Board in a
letter, addressed by him to the Directors. In its parts relating to financial
arrangements said letter is as follows:
"MANILA, P. I., June 17, 1914.
"To the DIRECTORS OF THE BENGUET CONSOLIDATED MINING
Co.,
"Manila, P. I.
"GENTLEMEN:
"The undersigned hereby applies for an option for 30 days over
501,000 shares of unissued stock of your corporation. . . .
"I have canvassed the local field for capital and am reasonably
assured that the required capital will be available as follows:
"405,000 shares have been subscribed for at 20 and 25 cents per
share, making up a total of P86,000, which sums is payable to the
company in four equal monthly installments commencing July 15,1914.
. . Arrangements have been made whereby the Bank of Philippine
Islands will grant the company an overdraft to the extent of P50,000
thus affording P136,000. . . .
"The balance of the 501,000 shares of unissued stock, or 96,000
shares, are to be issued to my order when the total sum of 86,000
subscribed as above stated shall have been paid to the company. The
said shares are to be placed in the hands of the Bank of the Philippine
Islands in escrow to be held by the said bank and delivered to my order
as soon as the overdraft hereinbefore mentioned shall be fully paid and
liquidated.
"It is further understood that the bank shall have full power and
authority to vote said shares until such time as said overdraft is repaid
to the company.
"For the payment of the overdraft guaranteed by the Bank of the
Philippine Islands, it is understood that the total net earning of the
company shall be used, and the term 'net earnings' shall be
understood to mean the gross value of gold recovered less actual
operation expense.
"Trusting that the foregoing may meet with your approval and
acceptance, I am
"Yours very truly,
(Sgd.) "A. W. BEAM."
Upon motion of Sendres, the proposition of Beam was accepted;
Sendres and Haussermann voting in favor of the same. At the same special
meeting it was moved and seconded and unanimously carried that a
meeting of the shareholders of the company be called for the purpose of
passing upon the action of the directors in accepting the proposition made
by Beam. At this special meeting of the shareholders, held at 4 :30 p. m.,
June 29, 1914, there were 310,405 shares of the 499,000 shares of issued
stock represented at the meeting. The stockholders personally present were
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 A. W. Beam, E. Sendres, and O. M. Shuman; and various other shareholders
were represented by Beam as proxy, and the Bank of the Philippine Islands
was represented by Sendres as proxy. It appears from the minutes of said
special meeting that Beam's proposition, which had been accepted by the
board of directors, as above stated, was submitted to the meeting and after
being read was ordered to be attached to the minutes. After due discussion
by the shareholders present, Shuman moved that the action of the board of
directors accepting Beam's proposition be approved, and this motion was
duly seconded and unanimously carried.
The Beam project was carried out, and the mining company was
brought to a dividend-paying basis, paying a quarterly dividend of five per
cent; and at the time of the trial of this case the shares of stock in the
market had risen from twenty centavos to P1.50 or higher. The defendants
about 1916 received 48,000 shares each as their profits. It is stated in the
appellants' brief, without denial from the appellee, that said shares have
appreciated subsequently to the trial below to the value of P2 each. The trial
court held that the plaintiffs, as coadventurers with the defendants in the
project for the rehabilitation of the mining company, are each entitled to
recover the one-fourth part of the 96,000 shares obtained from the mining
company by the defendants, or 24,000 shares, with dividends paid, and to be
paid beginning with the year 1916. It is thus apparent that the value of the
interest awarded to each of the plaintiffs is considerably in excess of
$25,000 (U. S. currency).
So far as Beam's material scheme for the improvement of the mining
property is concerned it followed the same lines and embodied the same
ideas as had been entertained while the Hanlon project was in course of
promotion; and it is contended for the plaintiffs that there was an unfair
appropriation by Beam of the labors and ideas of Hanlon. This is denied by
the defendants, whose testimony tends to minimize the extent of Hanlon's
contribution to the project in labor and ideas. We believe it unnecessary to
enter into the merits of this contention, as in our opinion the solution of the
case must be determined by other considerations.
An examination of the rights of the parties to this litigation must begin
with the interpretation of the contract of November 5, 1913. Some
discussion is indulged in the briefs of counsel upon the question whether
that contract constitutes a partnership among the four signatories or a mere
enterprise upon joint account (cuenta en partipacion) under the Code of
Commerce. This question seems to us of academy rather than practical
importance; for whatever be the character of the relation thus created, each
party was undoubtedly bound to use good faith towards the other, so long as
the relation subsisted.
In paragraph I of said contract each party obligates himself to do all in
his power to "float" the Hanlon proposition, i. e., as indicated in the contract
of November 6, between Hanlon and the mining company. This means of
course that each was to do what he could to make that project for the
rehabilitation of the mining company a success. The word flotation, however,
points more particularly to the effort to raise money, since, as all man know,
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 it takes capital to make any enterprise of this kind go. In paragraph II of the
same contract the manner in which the flotation is to, be effected is
described, namely, that Sellner is to obtain subscriptions for P50,000 and
Haussermann and Beam for P5,000. This involved, as we have already
stated, the allocation of 200,000 shares to Sellner and 100,000 to Hanlon
and Beam.
Now the two paragraphs of the contract to which reference has been
made must be construed together, and it is entirely clear that the general
language used in the first paragraph is limited by that used in the second
paragraph. In other words, though in the first paragraph the parties agree to
help float the project, they are tied up, in regard to the manner of effecting
the flotation, to the method agreed upon in the second. We can by no means
lend our assent to the proposition that the first paragraph created an
obligation, independent of the provisions of paragraph II, which continued to
subsist after the method of flotation described in paragraph II became
impossible of fulfillment. It is a rudimentary canon of interpretation that all
parts of a writing are to be construed together (6 R. C. L., p. 837) and that
the particular controls the general. (Art. 1288, Civ. Code; 13 C. J., p. 537.)
It seems too plain for argument that so long as that contract was in
force, Sellner did not have any right to intermeddle with the 100,000 shares
allotted to Haussermann and Beam. Neither could the latter dispose of the
200,000 shares allotted to Sellner. Indeed, Sellner, by reserving to himself all
of these 200,000 shares and sitting tightly, as he did, on this block of stock,
made it impossible for Haussermann, Beam, or anybody else, to raise money
by selling those shares within the period fixed as the limit of his guaranty.
'There was absolutely, as everybody knew, no other means to raise money
except by the sale of stock; and when Hanlon cabled-to Beam in February to
obtain the money elsewhere if Sellner could not supply it, he was directing
the impossible, unless Sellner should release the block of shares assigned to
him, which he never did. As a matter of fact it appears that this quantity of
the stock of the mining company could not then have been sold at 25 cents
per share in the Manila market to anybody; and in the end in order tc get
Sendres and the Bank of the Philippine Islands to take part in the Beam
project 260,000 shares had to go at 20 centavos per share.

By referring to subsection (d) of paragraph II of the contract of

November 5, 1913, it will be seen that the promises with reference to the
obtaining of subscriptions are mutual concurrent conditions; and it is
expressly declared in the contract that upon the default of either party the
obligation of the other shall be discharged. From this it is clear that upon the
happening of the condition which occurred in this case, i. e., the default of
Sellner to pay to the mining company on or before May 6, 1914, the sum of
money which he had undertaken to find, Haussermann and Beam were
discharged.
This is a typical case of a resolutory condition under the civil law. The
contract expressly provides that upon the happening of a future and
uncertain negative event, the obligation created by the agreement shall
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 cease to exist.
"In conditional obligations the acquisition of rights as well as the
extinction of those already acquired shall depend upon the event
constituting the condition." (Civ. Code, art. 1114.)
"If the condition consists in the happening of an event within a
fixed period the obligation shall be extinguished from the time the
period elapses or when it becomes certain that the event will not take
place." (Civ. Code, art. 1117.)
The right of Hanlon to require any further aid or assistance from these
defendants after May 6, 1914, was expressly subordinated to a resolutory
condition, and the contract itself declares in precise language that the effect
of the non-fulfillment of the condition shall be precisely the same as that
which the statute attaches to it — the extinction of the obligation.
In the argument of the plaintiffs at this point a distinction is drawn
between the discharge from the guaranty to raise money at the stated time
and the discharge from the contract as an entirety; and it is insisted that
while the defendants were discharged from liability to Sellner on their
guaranty to have the money forthcoming on May 6, they were not
discharged from their liability on the contract, considered in its broader
features, and especially were not discharged with reference to their
obligation to Hanlon. This argument proceeds on the erroneous assumption
that the defendants were bound to discover some other method of flotation
after the plan prescribed in the contract had become impossible of fulfillment
and to proceed therewith for the benefit of all four of the parties.
Furthermore, this conception of the case is apparently over-refined and not
in harmony with the common-sense view of the situation as it must have
presented itself to the contracting parties at the time. The obtaining of
capital was fundamentally necessary before the project could be proceeded
with; and it was obvious enough that, if the parties should fail to raise the
money, the whole scheme must collapse like a stock of cards. The provisions
relative to the getting in of capital are the principal features of the contract,
other matters being of subordinate importance. In our opinion the
contracting parties must have understood and intended that Haussermann
and Beam would be discharged from the contract in its entirety by the failure
of Sellner to comply with his obligation. This is the plainest, simplest, and
most obvious meaning of which the words used are capable and we believe
it to be their correct interpretation. We are not to suppose that either of the
signatories intended for those words to operate as a trap for the others; and
such would certainly be the effect of the provision in question if the words
are to be understood as referring to a discharge from the guaranty merely,
leaving the contract intact in other respects.
It is insisted in behalf of the plaintiffs that Haussermann and Beam, as
well as Sellner, defaulted in the performance of the contract of November 5,
1913, and that, not having performed their obligation to obtain subscriptions
for the sum of P25,000 and to cause payment to be made into the
company's treasury on or before May 6, 1914, they cannot take advantage
of the similar default of Sellner. This suggestion is irrelevant to the
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 fundamental issue. The question here is not whether Haussermann and
Beam have a right of action for damages against Sellner. If they were suing
him, it would be pertinent to say that they could not maintain the action
because they themselves had not caused the money to be paid in which they
had agreed to raise. The question here is different, namely, whether
Haussermann and Beam have been discharged from the contract of
November 5, 1913, by the default of Sellner; and this question must, under
the contract, be answered by reference to the acts of Sellner. Upon this point
it is irrelevant to say that the discharge was mutual as between the two
parties and not merely one-sided.
The interpretation which we have placed upon the contract of
November 5, 1913, exerts a decisive influence upon this litigation, and
makes a reversal of the appealed judgment inevitable. There are, however,
certain subordinate features of the case which, as disposed in the appellee's
brief, appear to justify the conclusion of the trial judge; and we deem it
desirable to say something with reference to the questions thus presented.
It will be noted that there is no resolutory provision in the contract of
November 6, 1913, between Hanlon and the mining company, declaring that
said contract would be discharged or abrogated upon the failure of Hanlon to
supply, within the period specified, the money which he had obligated
himself to raise. In other words, time is not expressly made of the essence of
this contract. From this it is argued for the plaintiffs that this contract
remained in force after May 6, 1914, notwithstanding the failure of Hanlon to
supply the funds which he had agreed to find, and indeed it is insisted upon
the authority of Ocejo, Perez & Co. vs. International Banking Corporation (87
Phil. Rep., 631), that the mining company could not be relieved from that
contract without obtaining a judicial rescission in an action specially brought
for that purpose. The reply to this is two-fold.
In the first place the present action is not based upon the contract
between Hanlon and the mining company; and it is clear that if Hanlon had
sued the mining company, as for example, in an action seeking to recover
damages for breach of its contract with him, he would have been confronted
by the insuperable obstacle that he had never supplied, nor offered to
supply, one penny of the P75,000, which he had obligated himself to bind,
and which was absolutely necessary to the rehabilitation of the company.
The benefits of a contract are not for him who has failed to comply with its
obligations. It may be admitted that the resolution of the Board of Directors
of the mining company, on June 19, 1914, declaring the contract of
November 6, 1913, with Hanlon to be cancelled, considered alone, was
without legal effect, since one party to a contract cannot absolve himself
from its obligations without the consent of the other.
With reference to the second point, namely, that a Judicial rescission
was necessary to absolve the mining company from its obligations to Hanlon
under the contract of December 6, 1913, we will say that we consider the
doctrine of Ocejo, Perez & Co. vs. International Banking Corporation (37 Phil.
Rep., 631), to be inapplicable. The contract there in question was one
relating to a sale of goods, and it had been fully performed on the part of the
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 vendor by delivery. This court held that delivery had the effect of passing
title, and that while the failure of the purchaser to pay the price gave the
seller a right to sue for a rescission of the contract, the failure of the buyer to
pay the purchase price did not ipso facto produce a reversion of title to the
vendor, or authorize him, upon his election to rescind, to treat the goods as
his own property and retake them by writ of replevin. In the present case the
contract between Hanlon and the mining company was executory as to both
parties, and the obligation of the company to deliver the shares could not
arise until Hanlon should pay or tender payment of the money. The situation
is similar to that which arises every day in business transactions in which the
purchaser of goods upon an executory contract fails to take delivery and pay
the purchase price. The vendor in such case is entitled to resell the goods. If
he is obliged to sell for less than the contract price, he holds the buyer for
the difference; if he sells for as much as or more than the contract price, the
breach of the contract by the original buyer is damnum absque injuria. But it
has never been held that there is any need of an action of rescission to
authorize the vendor, who is still in possession, to dispose of the property
where the buyer fails to pay the price and take delivery. Of course no judicial
proceeding could be necessary to rescind a contract which, like that of
November 5, 1913, contains a resolutory provision by virtue of which the
obligation is already extinguished.
Much reliance is placed by counsel for the plaintiffs upon certain
American decisions holding that partners, agents, Joint adventurers, and
other persons occupying similar fiduciary relations to one another, must not
be allowed to obtain any undue advantage of their associates or to retain
any profit which others do not share. We have no criticism to make against
this salutary doctrine when properly applied and would be slow to assume
that our civil law requires any less degree of good faith between parties so
circumstanced than is required by the courts of equity in other countries. For
instance, we feel quite sure that this Court would have no difficulty in
subscribing to the doctrine which is stated in Lind vs. Webber (36 Nev., 623;
50 L. R. A. [N. S.] 1046), with reference to joint adventurers as follows:
"We further find that the law is well established that the relation
between joint adventurers is fiduciary in its character and the utmost
good faith is required of the trustee, to whom the deal or property may
be intrusted, and such trustee will be held strictly to account to his
coadventurers, and that he will not be permitted, by reason of the
possession of the property or profits whichever the case may be to
enjoy an unfair advantage, or have any greater rights in the property
by reason of the fact that he is in possession of the property or profits
as trustee, than his co-adventurers are entitled to. The mere fact that
he is intrusted with the rights of his co-adventurers imposes upon him
the sacred duty of guarding their rights equally with his own, and he is
required to account strictly to his co-adventurers, and, if he is recreant
to his trust, any rights they may be denied are recoverable."

In Flagg vs. Mann (9 Fed. Cas., 202; Fed. Case No. 4847), it appeared
that Flagg and Mann had an agreement to purchase a tract of land on joint
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 account. The court held that where parties are interested together by mutual
agreement, and a purchase is made agreeably thereto, neither party can
exclude the other from what was intended to be for the common benefit;
and any private benefit, touching the common right, which is secured by
either party must be shared by both. Justice Story, acting as Circuit Justice,
said that the doctrine in question was "a wholesome and equitable principle,
which by declaring the sole purchase to be for the joint benefit, takes away
the temptation to commit a dishonest act, founded in the desire of obtaining
a selfish gain to the injury of a co-contractor, and thus adds strength to
wavering virtue, by making good faith an essential ingredient in the validity
of the purchase. There is not, therefore, any novelty in the doctrine of Mr.
Canchellor Kent, notwithstanding the suggestion at the bar to the contrary;
and it stands approved equally by ancient and modern authority, by the
positive rule of the Roman Law, the general recognition of continental
Europe, and the actual jurisprudence of England and America."
We deem it unnecessary to proceed to an elaborate analysis of the
array of cases cited by the appellee as containing applications of the
doctrine above stated. Suffice it to say that, upon examination, such of these
decisions as have reference to joint adventures will be found to deal with the
situation where the associates are not only joint adventurers but are joint
adventurers merely. In the present case Haussermann and Beam were
stockholders and officials in the mining company from a time long anterior to
the beginning of their relations with Hanlon. They were not merely
coadventurers with Hanlon, but in addition were in a fiduciary relation with
the mining company and its other shareholders, to whom they owed duties
as well as to Hanlon. It does not appear that the defendants acquired any
special knowledge of the mine or of the feasibility of its reconstruction by
reason of their relation with Hanlon which they did not already have; and
they probably were in no better situation as regards the facts relating to the
mine after the failure of the Hanlon contract than they were before. The fact
of their having been formerly associated with Hanlon certainly did not
preclude them from making use of the information which they possessed as
stockholders and officers of the mining company long before they came into
contact with him.
After the termination of an agency, partnership, or joint adventure,
each of the parties is free to act in his own interest, provided he has done
nothing during the continuance of the relation to lay a foundation for an
undue advantage to himself. To act as agent for another does not
necessarily imply the creation of a permanent disability in the agent to act
for himself in regard to the same subject-matter; and certainly no case has
been called to our attention in which the equitable doctrine above referred to
has been so applied as to prevent an owner of property from doing what he
pleased with his own after such a contract as that of November 5, 1913,
between the parties to this lawsuit had lapsed.
In the present case so far as we can see, the defendants acted in good
faith for the accomplishment of the common purpose and to the full extent
of their obligation during the continuance of their contract; and if Sellner had
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 not defaulted, or if Hanlon had been able to produce the necessary capital
from some other source, during the time set for raising the money, the
original project would undoubtedly have proceeded to its consummation.
Certainly, no act of the defendants can be pointed to which prevented or
retarded its realization; and we are of the opinion that, under the
circumstances, nothing more could be required of the defendants than a full
and honest compliance with their contract. As this had been discharged
through the fault of another they can not be held liable upon it. Certainly, we
cannot accede to the proposition that the defendants by making the
contracts in question had discapacitated themselves and their company for
an indefinite period from seeking other means of financing the company's
necessities, save only upon the penalty of surrendering a share of their
ultimate gain to the two adventurers who are plaintiffs in this action.
The power of attorney which Hanlon left. with Beam upon departing for
America was executed chiefly to enable Haussermann and Beam to comply
with their obligation to raise P25,000 by the sale of shares. This feature of
the power of attorney was manifestly subordinate to the purpose of the joint
agreement of November 5, 1913. Certainly, under that power, Beam could
not have disposed of any of the stock allotted to Sellner; neither was he
bound, or even authorized, after the joint agreement was at an end, to use
the power for Hanlon's benefit, even supposing — contrary to the proven
fact — that purchasers to the necessary extent could have been found for
the shares at 25 centavos per share.
As we have already stated, some of the individuals who originally
subscribed to the Hanlon project were carried as stockholders into the new
project engineered by Beam, being credited with any payments previously
made by them. In other words, the mining company honored these
subscriptions, although the Hanlon project on which they were based had
fallen through. This circumstance cannot in our opinion alter the
fundamental features of the case. Taken all together these subscriptions
were for only a part of the P25,000 which the defendants had undertaken to
raise and were by no means sufficient to finance the Hanlon project without
the assistance which Sellner had agreed to give. Of course if Beam, acting as
attorney in fact of Hanlon, had obtained a sufficient number of subscriptions
to finance the Hanlon project, and concealing this fact, had subsequently
utilized the same subscriptions to finance his own scheme, the case would
be different. But the revealed facts do not bear out this imputation.
It should be noted in this connection that the mining company had
approved the subscriptions obtained by Haussermann and Beam and had,
prior to May 6, 1914, accepted part payment of the amount due upon some
of them. It is not at all clear that, under these circumstances, the company
could have repudiated these subscriptions, even if its officers had desired to
do so; and if the mining company was bound either legally or morally to
recognize them, it cannot be imputed to the defendants as an act of bad
faith that such subscriptions were so recognized.
The trial court held that Haussermann, by reason of his interest in the
Beam project, was disqualified to act as a director of the mining company
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 upon the resolution accepting that project; and it was accordingly declared
that said resolution was without legal effect. We are of the opinion that the
circumstance referred to could at the most have had no further effect than to
render the contract with Beam voidable and not void; and the irregularity
involved in Haussermann's participation in that resolution was doubtless
cured by the later ratification of the contract at a meeting of the
stockholders. However this may be, the plaintiffs are not in a position to
question the validity of the contract of the mining company with Beam since
the purpose of the action is to secure a share in the gains acquired under
that contract.
In the course of the preceding discussion we have already noted the
fact that no resolutory provision contemplating the possible failure of Hanlon
to supply the necessary capital within the period of six months is found in
the contract of November 6, 1913, between Hanlon and the mining
company. In other words, time was not expressly made of the essence of
that contract. It should not be too hastily inferred from this that the mining
company continued to be bound by that contract after Hanlon had defaulted
in Procuring the money which he had obligated himself to supply. Whether
that contract continued to be binding after the date stated is a question
which does not clearly appear to be necessary to the decision of this case,
but the attorneys for Hanlon earnestly insist that said contract did in fact
continue to be binding upon the mining company after May 6, 1914; and
upon this assumption taken in connection with the power held by Beam as
attorney in fact of Hanlon, it is argued that the right of action of Hanlon is
complete, as against Beam and Haussermann, even without reference to the
profit-sharing agreement of November 5. We consider this contention to be
unsound; and the correctness of our position on this point can, we think, be
clearly demonstrated by considering for a moment the question whether
time was in fact of the essence of the contract of November 6, 1913, in
other words, Was the mining company discharged by the default of Hanlon in
the performance of that agreement?
Whether a party to a contract is impliedly discharged by the failure of
the other to comply with a certain stipulation on or before the time set for
performance, must be determined with reference to the intention of the
parties as deduced from the contract itself in relation with the circumstances
under which the contract was made.
Upon referring to the contract now in question — i. e., the contract of
November 6, 1913 — it will be seen that the leading stipulation following
immediately after the general paragraph at the beginning of the contract, is
that which relates to the raising of capital by Hanlon. It reads as follows:
"1. Said party of the first part agrees to pay into the treasury
of the party of the second part the sum of Seventy-five Thousand Pesos
(P75,000) in cash within six (6) months from the date of this
agreement."
Clearly, all the possibilities and potentialities of the situation with
respect to the rehabilitation of the Benguet mining property, depended upon
the fulfillment of that stipulation; and in fact nearly all the other subsequent
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 provisions of the contract are concerned in one way or another with the acts
and things that were contemplated to be done with that money after it
should be paid into the company's treasury. Only in the event of such
payment were shares to be issued to Hanlon, and it was stipulated that the
money so to be paid in should be disbursed to pay the expenses of the very
improvements which Hanlon had agreed to make. There can then be no
doubt that compliance on the part of Hanlon with this stipulation was viewed
by the parties as the pivotal fact in the whole scheme.

Again, it will be recalled that this contract (Exhibit B) between Hanlon

and the mining company was not in fact executed until the day following
that on which the profit-sharing agreement (Exhibit A) was executed by the
four parties to this lawsuit. In other words, Haussermann and Beam, as
officials of the mining company, refrained from executing the company's
contract until Hanlon had obligated himself by the profit-sharing agreement.
Indeed, these two contracts should really be considered as constituting a
single transaction; and it is obvious enough that the prime motive which
induced Haussermann and Beam to place their signature upon the contract
of November 6 was that they already had the profit-sharing agreement
securely in their hands. Therefore, when the contract of November 6,
between Hanlon and the mining company was signed, ail the parties who
participated therein acted with full knowledge of the provisions contained in
the profit-sharing agreement; and in particular the minds of all must have
been riveted upon the provisions of paragraph II of the profit-sharing
agreement, wherein is described the manner in which the project to which
the parties were then affixing their signatures should be financially realized
("floated"). In subsection (d) of the same paragraph II, as will be
remembered, are found the words which declare that Haussermann and
Beam would be discharged if Sellner should fail to pay into the company's
treasury on or before the expiration of the prescribed period the money
which he had agreed to raise. Under these conditions it is apparent enough
that the parties to the later contract treated time as of the essence of the
agreement and intended that the failure of Hanlon to supply the necessary
capital within the time stated should put an end to the whole project. In view
of the fact that an express resolutory provision had been inserted in the
profit sharing agreement, it must have seemed superfluous to insert such
express clause in the later contract. Any extension of time, therefore, that
the mining company might have made after May 6, 1914, with respect to the
date of performance by Hanlon would have been purely a matter of grace,
and not demandable by Hanlon as of absolute right. It is needless to say in
this connection that the default of Sellner was the default of Hanlon.
An examination of the decisions of the American and English courts
reveals a great mass of material devoted to the discussion of the question
whether in a given case time is of the essence of a contract. As presented in
those courts, the question commonly arises where a contracting party, who
has himself failed to comply with some agreement, tenders performance
after the stipulated time has passed, and upon the refusal of the other party
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 to accept the delayed performance the delinquent party resorts to the court
of equity to compel the other party to proceed. The equitable doctrine there
recognized as applicable in such situation is that if the contracting parties
have treated time as of the essence of the contract, the delinquency will not
be excused and specific performance will not be granted; but on the other
hand, if it appears that time has not been made of the essence of the
contract, equity will relieve from the delinquency and specific performance
may be granted, due compensation being made for the damage caused by
the delay. In such cases the courts take account of the difference between
that which is matter of substance and that which is matter of mere form.
To illustrate: the rule has been firmly established from an early date in
courts of equity that in agreements for the sale of land, time is not ordinarily
of the essence of the contract; that is to say, acts which one of the parties
has stipulated to perform on a given date may be performed at a later date.
Delay in the payment of the purchase money, for instance, does not
necessarily result in the forfeiture of the rights of the purchaser under the
contract, since mere delay in the payment of money may be compensated
by the allowance of interest. (36 Cyc., 707-708.) In discussing this subject,
Pomeroy says: "Time may be essential; It is so whenever the intention of the
parties is clear that the-performance of its terms shall be accomplished
exactly at the stipulated day. The intention must then govern. A delay
cannot be excused. A performance at the time is essential; any default will
defeat the right to specific enforcement." (4 Pomeroy Eq. Jur., 3rd ed., sec.
1408.) Again, says the same writer: "It is well settled that where the parties
have so stipulated as to make the time of payment of the essence of the
contract, within the view of equity as well as of the law, a court of equity
cannot relieve a vendee who has made default. With respect to this rule
there is no doubt; the only difficulty is in determining when time has thus
been made essential. It is also equally certain that when the contract is
made to depend upon a condition precedent — in other words, when no right
shall vest until certain acts have been done, as, for example, until the
vendee has paid certain sums at certain specified times — then, also a court
of equity will not relieve the vendee against the forfeiture incurred by a
breach of such condition precedent." (1 Pomeroy Eq. Jur., 3rd ed., sec. 455.)
As has been determined in innumerable cases it is not necessary, in
order to make time of the essences of a contract, that the contract should
expressly so declare. Words of this import need not to be used. It is sufficient
that the intention to this effect should appear; and there are certain
situations wherein it is held, from the nature of the agreement itself, that
time is of the essence of the contract.
"Time may be of the essence, without express stipulation that
effect, by implication from the nature of the contract itself, or of the
subject-matter, or of the circumstances under which the contract is
made." (36 Cyc., 709.)
In agreements which are executed in the form of options, time is
always held to be of the essence of the contract; and it is well recognized
that in such contracts acceptance of the option and payment of the purchase
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 price constitute conditions precedent to specific enforcement. The same is
true generally of all unilateral contracts. (36 Cyc., 711.) In mercantile
contracts for the manufacture and sale of goods time is also held to be of the
essence of the agreement. (13 C. J., 688.) Likewise, where the subject-
matter of a contract is of speculative or fluctuating value it is held that the
parties must have intended time to be of the essence (13 C. J., 688.) Most
conspicuous among all the situations where time is presumed to be of the
essence of a contract from the mere nature of the subject-matter is that
where the contract relates to mining property. As has been well said by the
Supreme Court of the United States, such property requires, and of all
properties perhaps the most requires, the persons interested in it to be
vigilant and active in asserting their rights. (Waterman vs. Banks, 144 U. S.,
394 ; 36 L. ed., 47g, 483.) Hence it is uniformly held that time is of the
essence of the contract in the case of an option on mining property, or a
contract for the sale thereof, even though there is no express stipulation to
that effect. (27 Cyc., 675). The same idea is clearly applicable to a contract
like that now under consideration which provides for the rehabilitation of a
mining plant with funds to be supplied by the contractor within a limited
period.
Under the doctrine above expounded it is evident that Hanlon would be
entitled to no relief against the mining company in an action of specific
performance, even if he had been prepared and had offered, after May 6,
1914, to advance the requisite money and proceed with the performance of
the contract. Much less can he be considered entitled to relief where he has
remained in default throughout and has at no time offered to comply with
the obligations incumbent upon himself.
Our conclusion, upon a careful examination of the whole case, is that
the action cannot be maintained. The judgment is accordingly reversed and
the defendants are absolved from the complaint. No express pronouncement
will be made as to costs of either instance.
Arellano, C. J., Torres, Araullo, Malcolm and Avanceña, JJ., concur.

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