G.R. No.

147561

June 22, 2006

STRONGHOLD INSURANCE COMPANY, INC., vs. REPUBLIC-ASAHI GLASS CORPORATION

Facts: Republic-Asahi entered with Jose Santos Jr., proprietor of JDS Construction, for the construction of
roadways and drainage system, which was supposed to be completed within a period of 240 days. In
order to guarantee the faithful and satisfactory performance of its undertakings JDS post a performance
bond of P795,000.00 with Petitioner Stronghold Insurance Co., Inc. (SICI). Respondent called the
attention of JDS to the alleged alarmingly slow pace of the construction, which resulted in the fear that the
construction will not be finished within the stipulated period. However, such was unheeded by JDS.
Dissatisfied with the progress of the work, Republic-Asahi extrajudicially rescinded the contract, but such
rescission shall not be construed as a waiver of respondents right to recover damages from JDS and
latters sureties. Thus, because of the failure to comply with the provisions of the contract, it had to hire
another contractor to finish the project, for which it incurred additional expenses. Thereafter, respondent
sent a letter to petitioner SICI filing its claim under the bond. Respondent then sent again another letter
reiterating the same demand but was unheeded. This prompted respondent to file a complaint against
JDS and SICI for payment representing additional expenses and damages. According to the Sheriffs
Return, summons were duly served on SICI, however, Jose Santos Jr. died the previous year, and JDS
was no longer at its address, and such whereabouts were unknown. SICI filed its answer, alleging that the
respondents money claims have been extinguished by the death of Santos. Even if this were not the
case, it had been released from liability under the performance bond because there was no liquidation,
with the active participation and involvement, pursuant to procedural due process, of herein surety and
Santos, hence there was no ascertainment of the corresponding liabilities of Santos and SICI under the
performance bond. Thus, such liquidation would be impossible since Santos is already dead. The
complaint against JDS and SICI was dismissed on the ground that the claim against JDS did not survive
the death of Santos. On Motion for Reconsideration, the dismissal of the case was reconsidered and the
case was reinstated, however, the case against Santos remains undisturbed. On appeal, the Court of
Appeals ruled that SICIs obligation under the surety agreement was not extinguished by the death of
Santos. Consequently Respondent could still go after SICI for the bond. Hence, this petition.
Issue: Whether or not the claims against SICI was extinguished from the death of Santos
Held: As a general rule, the death of either the creditor or the debtor does not extinguish the obligation.
Obligations are transmissible to the heirs, except when the transmission is prevented by the law, the
stipulations of the parties, or the nature of the obligation. Only obligations that are personal10 or are
identified with the persons themselves are extinguished by death.
Section 5 of Rule 8612 of the Rules of Court expressly allows the prosecution of money claims arising
from a contract against the estate of a deceased debtor. Evidently, those claims are not actually
extinguished. What is extinguished is only the obligees action or suit filed before the court, which is not
then acting as a probate court.
In the present case, whatever monetary liabilities or obligations Santos had under his contracts with
respondent were not intransmissible by their nature, by stipulation, or by provision of law. Hence, his
death did not result in the extinguishment of those obligations or liabilities, which merely passed on to his
estate. Death is not a defense that he or his estate can set up to wipe out the obligations under the
performance bond. Consequently, petitioner as surety cannot use his death to escape its monetary
obligation under its performance bond.