Unimasters Conglomeration, Inc. v. Tacloban City

 

Unimasters Conglomeration, Inc. v. Tacloban City

G.R. No. 214195

March 23, 2022

 

FACTS:

Leyte Park Hotel Inc. (LPHI), which stands on Magsaysay Boulevard, Tacloban City, is co-owned by Assets Privatization Trust (APT), now Privatization and Management Office (PMO), the Province of Leyte, and the Philippine Tourism Authority (PTA), now Tourism Infrastructure and Enterprise Zone Authority (TIEZA). Thereafter, APT, representing the owners of LPHI, entered into a Contract of Lease with Unimasters Conglomeration Incorporated (UCI). It is stipulated in the said contract that “real property taxes shall be for the account of the LESSOR and any payment of real property taxes by the LESSEE shall be credited against any amount due from LESSEE to LESSOR.” Despite several notices demanding compliance with the provisions of the contract, UCI failed to settle real property taxes due which prompted the City of Tacloban, through its City Treasurer, to file a collection case. The CTA En Banc ultimately ruled that UCI was liable for unpaid real property taxes. In the present petition, UCI alleges that the provision in the contract whereby PMO, PTA and the Province of Leyte contractually assumed liability to pay the taxes due should be enforced as against City of Tacloban.

ISSUE:

Whether or not the City of Tacloban should be bound by the said contractual stipulation.

RULING:

No. The Court affirmed the ruling of the CTA Division which found UCI liable to pay real property taxes over the LPHI property. The first paragraph of Article 1311 provides that contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. In this case, the contractual obligations of the parties under the lease agreement concern petitioner UCI and the lessors only. Respondent Tacloban City Government is not privy to the lease contract. Where there is no privity of contract, there is likewise no obligation or liability to speak about. Indeed, not being a party to the contract and without showing that it had knowledge of the same, the local government of Tacloban City cannot be automatically bound by said agreement.