G.R. No. L-8437.

November 28, 1956

ESTATE OF K. H. HEMADY vs LUZON SURETY CO., INC.

Facts: The Luzon Surety Co. filed a claim against the Estate of Hemady based on twenty different indemnity
agreements, or counter bonds which the latter guaranteed during his lifetime.

The lower court dismissed the claims of Luzon Surety Co. on the ground that "whatever losses may occur after
Hemady’s death, are not chargeable to his estate, because upon his death he ceased to be guarantor."

x x x It should be noted that a new requirement has been added for a person to qualify as a guarantor, that is:
integrity. As correctly pointed out by the Administratrix, integrity is something purely personal and is not transmissible.
Upon the death of Hemady, his integrity was not transmitted to his estate or successors. Whatever loss therefore,
may occur after Hemady’s death, are not chargeable to his estate because upon his death he ceased to be a
guarantor.

Issue: Whether Hemady’s liability as solidary guarantor is extinguished by his death.

Ruling: NO. The contracts of suretyship were not rendered intransmissible by the nature of the undertaking, by the
stipulations in the contract, or by provision of law.

Heirs succeed not only to the rights of the deceased but also to his obligations. Art 776 states that the inheritance
includes all the property, rights, and obligations of a person which are not extinguished by law. Under the present
Civil Code (Article 1311), "Contracts take effect only as between the parties, their assigns and heirs, except in the
case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law."

Among those rights and obligations extinguished by law are those mentioned in Article 1311 – those that are not
transmissible (1) by their nature, or (2) by stipulation or (3) by provision of law. In this case, however, the contracts do
not fall under those categories – (1) the nature of the obligation of a surety/guarantor is not personal. A principal is
indifferent as to who pays him, as long as he is paid; (2) there is no stipulation w/c states so (3) There is nothing in
the law w/c states that a guaranty/suretyship is extinguished upon death of guarantor/surety.