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Hemady Vs Luzon Surety

The Estate of K. H. Hemady contested a claim filed by Luzon Surety Co. based on twenty indemnity agreements guaranteed by Hemady. The trial court dismissed Luzon's claim, finding that premiums and stamps were not contemplated in the agreements and losses after Hemady's death were not chargeable to his estate. However, the Supreme Court ruled that while heirs are only liable up to the value received, they succeed both the rights and obligations of the deceased according to the Civil Code. Therefore, Hemady's liability as guarantor was not terminated by his death and Luzon's claim could be considered contingent on the estate.

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45 views2 pages

Hemady Vs Luzon Surety

The Estate of K. H. Hemady contested a claim filed by Luzon Surety Co. based on twenty indemnity agreements guaranteed by Hemady. The trial court dismissed Luzon's claim, finding that premiums and stamps were not contemplated in the agreements and losses after Hemady's death were not chargeable to his estate. However, the Supreme Court ruled that while heirs are only liable up to the value received, they succeed both the rights and obligations of the deceased according to the Civil Code. Therefore, Hemady's liability as guarantor was not terminated by his death and Luzon's claim could be considered contingent on the estate.

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© © All Rights Reserved
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G.R. No. L-8437.

November 28, 1956


ESTATE OF K. H. HEMADY, deceased,
vs.
LUZON SURETY CO., INC., claimant-Appellant.
REYES, J. B. L., J.

FACTS:

Luzon Surety Co. filed a claim against the late K. H. Hemady’s Estate based on
twenty different indemnity agreements or counter bonds subscribed by each
distinct principal and solidarily guaranteed by Hemady. It also prayed as
contingent claim the allowance of the value of the twenty bonds it had executed
in consideration of the counter bonds, and further asked for judgment for the
unpaid premiums and documentary stamps affixed to the bonds, with 12 percent
interest.

The Court of First Intance of Rizal dismissed Luzon Surety’s claim upon motion
of the Estate’s Administratrix and before an answer was filed by said company,
based on two grounds:
(1) The premiums due and cost of documentary stamps were not
contemplated under the indemnity agreements to be a part of the
undertaking of the guarantor Hemady, since they were not liabilities
incurred after the execution of the counter bonds; and
(2) Whatever losses may occur after Hemady's death, are not chargeable
to his estate, because upon his death he ceased to be guarantor.

The estate’s Administratrix further contends that upon the death of Hemady, his
liability as a guarantor terminated and therefore the claim cannot be considered
contingent.

ISSUE:
Whether or not the liability of Hemady as a guarantor was terminated.

No. While the responsibility of the heirs for the debts of their decedent cannot
exceed the value of the inheritance they receive, the principle remains intact that
these heirs succeed not only to the rights of the deceased but also to his
obligations, as expressly provided by Article 774 and 776 of the Civil Code.

Article 774: Succession is a mode of acquisition by virtue of which the property,


rights and obligations to the extent of the value of the inheritance of a person are
transmitted through his death to another or others either by his will or by
operation of law.

Article 776: The inheritance includes all the property, rights and obligations of a
person which are not extinguished by his death.
Whatever payment is thus made from the estate is ultimately a payment by the
heirs and distributees, since the amount of the paid claim in fact diminishes or
reduces the shares that the heirs would have been entitled to receive.

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