G.R. No. 154126 - Allied Banking Corp. vs. Quezon City Government

The Quezon City government enacted City Ordinance No. 357, Series of 1995, for a general revision of real property assessments.
Section 3 of the ordinance mandated that the City Assessor use a new schedule and assessment levels—15% for residential properties and 40% for commercial and industrial properties—as prescribed in the 1993 Quezon City Revenue Code.
A proviso provided that parcels sold, ceded, transferred, or conveyed for remuneratory consideration would be taxed based on the higher of the actual amount in the deed of conveyance or the current approved zonal valuation from the Bureau of Internal Revenue (BIR).

On July 1, 1998, petitioner, Allied Banking Corporation acting as trustee for College Assurance Plan of the Philippines, Inc. (CAP), purchased a 1,000-square-meter parcel along Aurora Boulevard, Quezon City, for P38,000,000.00.
Prior to the sale, the previous owners paid annual real property tax based on a fair market value of P4,500,000.00 and an assessed value of P1,800,000.00.
After acquisition, under the new ordinance, the property’s market value was pegged at the sale price of P38,000,000.00, with an assessed value of P15,200,000.00, resulting in a significantly increased quarterly real estate tax.

The petitioner subsequently paid the re-assessed tax from the first quarter of 1999 to the third quarter of 2000.
Several tax payments (specifically for certain quarters in 1999 and 2000) were made under protest.
In its written protest, the petitioner challenged Section 3, contending that the re-assessment based on the deed of conveyance violated constitutional provisions of equal protection and uniformity in taxation and was inconsistent with the Local Government Code.

On August 11, 2000, the petitioner filed a petition for prohibition and declaratory relief alleging that Section 3 (specifically the re-assessment proviso) was null and void, and sought:

A declaration of nullity of Section 3;
An injunction against the respondents (Quezon City Government, Treasurer, Assessor, and City Mayor) from further implementing the ordinance;
A refund of the P633,150.00 allegedly erroneously collected; and
Payment of attorney’s fees amounting to P1,000,000.00.

The petitioner argued that the re-assessment method would lead to arbitrary, oppressive, and confiscatory taxation, also violating Sections 219 and 220 of the Local Government Code which restrict revisions to property assessments to once every three years, except under specific circumstances.

Prior to the respondents filing a responsive pleading, the Quezon City government enacted Ordinance No. SP-1032, S-2001 on March 6, 2001, which repealed the contentious proviso in Section 3, giving it prospective effect.
After the repeal, the petitioner moved to declare the respondents in default for failing to answer, while the respondents moved to dismiss the petition as moot and academic regarding the repealed proviso.
The trial court dismissed the petition on the grounds that (a) an appropriate administrative remedy existed for the refund claim and had not been exhausted, and (b) the ordinance had already been partially repudiated by the local legislature’s later enactment.

Whether the trial court erred in dismissing the case for failure to exhaust administrative remedies;
Whether Section 3 of Quezon City Ordinance No. 357, though abrogated, served as a valid basis for collecting real estate taxes prior to its repeal.

The petitioner’s appeal also raised the issue of whether the repealing ordinance should be given retroactive effect, affecting its claim for refund and overall relief.

Whether the trial court erred in dismissing the petitioner’s case for not exhausting administrative remedies before seeking judicial relief.
Whether Section 3 of Quezon City Ordinance No. 357—particularly the proviso linking the taxable value to the deed of conveyance or BIR zonal valuation—is legally valid under the Local Government Code and its implementing rules and regulations.
Whether the repeal of the contentious provision and its prospective application renders the petitioner’s claims moot, or if there is a basis for retroactive effect regarding the tax collected.
Whether the petitioner’s claim for refund, and the calculation of attorney’s fees, can proceed despite the availability of an administrative appeal process.