Stronghold Insurance vs. Rep. Asahi Glass Corp.

G.R. No. 147561 June 22, 2006

Facts:

Republic Asahi entered into a contract with JDS Construction for the construction
of roadways and a damage drainage system in Republic Asahis compound in Pasig
City, where respondent was to pay JDS P5,300,000.00, which was to be completed
within 240 days. In order to post a performance bond, JDS executed jointly and
severally with Stronghold Insurance Co., Inc. Several times prior to November 1989,
respondents engineer called the attention of JDS to the alleged alarmingly slow pace of
the construction. Dissatisfied with the progress of the work undertaken, respondent
extrajudicially rescinded the contract and wrote a letter to SICI to file claim under the
bond. Respondent filed complaint against JDS and SICI. Jose D. Santos dies and JDS
was no longer at its address and whereabouts were unknown. SICI filed its answer
alleging that the money claims have been extinguished by death.

Issue:

Whether or not petitioners liability under the performance bond was

automatically extinguished by death of Santos, the principal.

Held:

As a general rule, the death of either creditor or 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 personal or are identified with the person themselves are
extinguished by death. Section 5 of Rule 86 of the Rules of Court expressly allows the
prosecution of money claims arising from contract against the estate of a deceased
debtor.

Under the law and jurisprudence, respondent may sue, separately or together the
principal debtor and the petitioner herein, in view of the solidary nature of their liability.
The death of the principal debtor will not work to convert, decrease or nullify the
substantive right of the solidary creditor. Evidently, despite the death of the principal
debtor, respondent may still sue petitioner alone, in accordance with the solidary nature
of the latters liability under the performance bond.