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1) Republic-Asahi contracted with JDS Construction to complete a roadway and drainage project within 240 days. JDS obtained a performance bond from Stronghold Insurance for P795,000 in case of failure to satisfactorily perform.
2) JDS failed to complete the project on time. Republic-Asahi extrajudicially rescinded the contract and incurred additional expenses by hiring another contractor. It demanded payment from JDS and Stronghold Insurance.
3) Stronghold Insurance argued it was released from liability under the bond because the owner of JDS had died. The Court of Appeals ruled the surety's obligation was not extinguished by the contractor's death, and the owner could still pursue recovery
1) Republic-Asahi contracted with JDS Construction to complete a roadway and drainage project within 240 days. JDS obtained a performance bond from Stronghold Insurance for P795,000 in case of failure to satisfactorily perform.
2) JDS failed to complete the project on time. Republic-Asahi extrajudicially rescinded the contract and incurred additional expenses by hiring another contractor. It demanded payment from JDS and Stronghold Insurance.
3) Stronghold Insurance argued it was released from liability under the bond because the owner of JDS had died. The Court of Appeals ruled the surety's obligation was not extinguished by the contractor's death, and the owner could still pursue recovery
1) Republic-Asahi contracted with JDS Construction to complete a roadway and drainage project within 240 days. JDS obtained a performance bond from Stronghold Insurance for P795,000 in case of failure to satisfactorily perform.
2) JDS failed to complete the project on time. Republic-Asahi extrajudicially rescinded the contract and incurred additional expenses by hiring another contractor. It demanded payment from JDS and Stronghold Insurance.
3) Stronghold Insurance argued it was released from liability under the bond because the owner of JDS had died. The Court of Appeals ruled the surety's obligation was not extinguished by the contractor's death, and the owner could still pursue recovery
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.