G.R. No. L-3538 May 28, 1952
JUAN LUNA SUBDIVISION, INC., plaintiff-appellee, vs. M. SARMIENTO, ET AL., defendants-appellants.

FACTS

The plaintiff, Juan Luna Subdivision, Inc., issued a check for P2,210.52 to the City Treasurer of Manila on December 29, 1941, to cover its land tax for the second semester of 1941, the exact amount of which was undetermined. The check was drawn on the Philippine Trust Company, where the plaintiff had sufficient funds. The City Treasurer accepted the check and recorded it as a deposit. On February 20, 1942, after verifying the exact tax due was P341.60, the City Treasurer’s office applied that amount to the tax and noted the balance of P1,868.92 as a credit to the plaintiff. The check was deposited by the City Treasurer with the Philippine National Bank, its sole depository. The Philippine Trust Company, after reopening during the Japanese occupation, received and cashed the check on May 1, 1944, debiting the plaintiff’s account. After liberation, both the City Treasurer (refusing to refund or credit the deposit) and the Philippine Trust Company (refusing to reverse the debit) disclaimed liability for the amount. The plaintiff sued both in the alternative. A separate issue involved the applicability of Commonwealth Act No. 703 , which remitted certain land taxes, to the amount paid.

ISSUE

1. Whether the City Treasurer or the Philippine Trust Company is liable to refund the amount of the check to the plaintiff.
2. Whether Commonwealth Act No. 703 , which remitted land taxes for the second semester of 1941 under certain conditions, applies to the tax amount already paid by the plaintiff, thereby entitling it to a refund of the entire check amount.

RULING

1. The City Treasurer is liable to refund the balance of the deposit (P1,868.92) to the plaintiff. The check was accepted by the City Treasurer, deposited with the Philippine National Bank, and subsequently paid by the drawee bank, the Philippine Trust Company. This released the plaintiff from liability on the check. The City Treasurer became a creditor of the Philippine National Bank. Any failure by the City Treasurer to collect or utilize the credit is its own responsibility and does not affect the plaintiff’s right to a refund of the deposit held in trust. The Philippine Trust Company properly paid the check and was not liable.
2. Commonwealth Act No. 703 remits only taxes that were “due and payable” (i.e., unpaid) at the time of its enactment, not taxes already collected. Therefore, the plaintiff is not entitled to a refund of the P341.60 already applied to its 1941 tax liability as of February 20, 1942, as that amount was legally paid and became part of the city’s general funds. The remission under the Act was intended to relieve taxpayers who would have to pay delinquent taxes with genuine currency after having used near-worthless Japanese military notes, and to avoid the administrative burden of refunding taxes paid during the occupation. The judgment is modified: the City Treasurer is ordered to refund P1,868.92 to the plaintiff, not the full P2,210.52.