Severino v Severino [G.R. No. 34642, September 24, 1931] STREET, J.

FACTS:

Melecio Severino upon his death, left considerable properties. To end litigation among heirs, a compromise was effected where defendant Guillermo (son of MS) took over the property of deceased and agreed to pay installment of 100K to plaintiff (wife of MS) payable first in 40K cash upon execution of document in 3 equal installments. Enrique Echauz became guarantor.

Upon failure to pay the balance, plaintiff filed and action against the defendant and Echauz. Enchauz contends that he received nothing from affixing his signature in the document and the contract lacked the consideration as to him.

ISSUE: WON there is a consideration for the guaranty?

HELD:

The proof shows that the money claimed in this action has never been paid and is still owing to the plaintiff; and the only defense worth noting in this decision is the assertion on the part of Enrique Echaus that he received nothing for affixing his signature as guarantor to the contract which is the subject of suit and that in effect the contract was lacking in consideration as to him.

The guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto.

The compromise and dismissal of a lawsuit is recognized in law as a valuable consideration; and the dismissal of the action which Felicitas Villanueva and Fabiola Severino had instituted against Guillermo Severino was an adequate consideration to support the promise on the part of Guillermo Severino to pay the sum of money stipulated in the contract which is the subject of this action. The promise of the appellant Echaus as guarantor therefore binding.

It is neither necessary that guarantor or surety should receive any part of the benefit, if such there be accruing to his principal.

Thus, judgment affirmed.

Estate of KH Hemady v Luzon Surety Co.

Civil Law – Wills and Succession – Transmissible Obligations

Luzon Surety filed a claim against the estate of K.H. Hemady based on indemnity agreements (counterbonds) subscribed by distinct principals and by the deceased K.H. Hemady as surety (solidary guarantor). As a contingent claim, Luzon Surety prayed for the allowance of the value of the indemnity agreements it had executed. The lower court dismissed the claim of Luzon Surety 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 a guarantor.”

ISSUES: What obligations are transmissible upon the death of the decedent? Are contingent claims chargeable against the estate?

HELD: Under the present Civil Code (Article 1311), the rule is that “Contracts take effect only as between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.” While in our successional system the responsibility of the heirs for the debts of their decedent cannot exceed the value of the inheritance they receive from him, the principle remains intact that these heirs succeed not only to the rights of the deceased but also to his obligations. Articles 774 and 776 of the New Civil Code expressly so provide, thereby confirming Article 1311.

In Mojica v. Fernandez, the Supreme Court ruled — “Under the Civil Code the heirs, by virtue of the rights of succession are subrogated to all the rights and obligations of the deceased (Article 661) and can not be regarded as third parties with respect to a contract to which the deceased was a party, touching the estate of the deceased x x x which comes in to their hands by right of inheritance; they take such property subject to all the obligations resting thereon in the hands of him from whom they derive their rights.” The third exception to the transmissibility of obligations under Article 1311 exists when they are ‘not transmissible by operation of law.’ The provision makes reference to those cases where the law expresses that the rights or obligations are extinguished by death, as is the case in legal support, parental authority, usufruct, contracts for a piece of work, partnership and agency. By contrast, the articles of the Civil Code that regulate guaranty or suretyship contain no provision that the guaranty is extinguished upon the death of the guarantor or the surety.

The contracts of suretyship in favor of Luzon Surety Co. not being rendered intransmissible due to the nature of the undertaking, nor by stipulations of the contracts themselves, nor by provision of law, his eventual liability therefrom necessarily passed upon his death to his heirs. The contracts, therefore, give rise to contingent claims provable against his estate. A contingent liability of a deceased person is part and parcel of the mass of obligations that must be paid if and when the contingent liability is converted

into a real liability. Therefore, the settlement or final liquidation of the estate must be deferred until such time as the bonded indebtedness is paid.