G.R. No. 47678 and 47679; June 17, 1941
EL HOGAR FILIPINO Y JOHN GORDON, demandantes, EL HOGAR FILIPINO, demandante y apelante, vs. ISIDORO DE SANTOS y BANCO DE LAS ISLAS FILIPINAS, demandados y apelados.

FACTS

On October 19, 1938, El Hogar Filipino filed a petition requesting that from the sum of P7,390.84, which the court had ordered delivered to the Bank of the Philippine Islands, the amount of P4,002.60 (representing the land tax for the first semester of 1938 on properties adjudicated to El Hogar) be deducted and paid, with the remainder then given to the bank. The Bank opposed this, arguing it was contrary to the stipulation agreed upon by the parties and approved by the court. The court denied the petition on January 5, 1938 (presumably 1939, based on context), and after a motion for reconsideration was also denied, El Hogar appealed.
The properties originally belonged to Dr. Isidoro de Santos and were adjudicated to El Hogar Filipino at a public auction. The sale of the Hacienda of Cuyapo and Nampicuan was confirmed by the court on July 27, 1938, and the sale of properties in Manila was approved on August 18, 1938.
On August 18, 1938, El Hogar and the Bank filed a joint motion requesting the court to order the depositary to distribute the funds in its possession as follows: P85,728.72 to El Hogar (full payment of its credit with interest up to July 31, 1938) and P8,990.12 to the Bank (as partial payment of its P45,000 credit), with these amounts to be paid immediately. The court granted this motion on August 31, 1938, and also ordered the depositary to deliver to El Hogar the rentals from the properties starting August 1, 1938. On the same date, the court approved the depositary’s accounts submitted on July 1 and August 16, 1938. In Exhibits D and E attached to the depositary’s final report of July 1, 1938, it was noted that the properties adjudicated to El Hogar owed the land tax for the first semester of 1938 amounting to P4,002.60, payable no later than June 30, 1938, and that this amount had not been paid or reserved from the available funds distributed. Subsequently, on September 17, 1938, the depositary moved to amend the August 31 order, reducing the Bank’s share to P7,390.84 and increasing El Hogar’s share by P873.10, which the court granted on September 30, 1938.

ISSUE

Who should pay, or from which funds should be paid, the land tax for the first semester of 1938 on the properties that belonged to Dr. Isidoro de Santos and were adjudicated to El Hogar Filipino?

RULING

The Supreme Court ruled that the land tax must be paid by El Hogar Filipino. The court confirmed the lower court’s order denying El Hogar’s petition, with costs against El Hogar.
The Court reasoned that under the Revised Administrative Code, the owner of real property is responsible for declaring it for taxation, and the land tax must be paid no later than June 30 of each year. El Hogar only became the owner of the properties on the dates the sales were confirmed by the court (July 27 and August 18, 1938). Strictly speaking, the tax for the first semester of 1938 should have been paid from the funds held by the depositary before the final approval of its accounts on August 31, 1938. However, El Hogar and the Bank, with the acquiescence of the depositary (who was also a creditor), agreed that all funds existing up to August 31, 1938, would be distributed as stipulated in their joint motion. No money from the property rentals remained under administration. Therefore, it is obvious and just that the said land tax be borne by El Hogar, the current owner of the properties subject to the tax.
Allowing the tax to be paid from part of the money adjudicated to the Bank would necessarily violate the agreement entered into by the parties. Contracts have the force of law between the contracting parties (Articles 1091 and 1258, Civil Code). El Hogar cannot claim error or inadvertence in giving its consent to the agreement because the depositary had specifically called the parties’ attention in Exhibit E to the fact that the land tax was pending and no money had been reserved for its payment.