G.R. No. 154126 . October 11, 2005.
Allied Banking Corporation as Trustee for the Trust Fund of College Assurance Plan Philippines, Inc. (CAP), Petitioner, vs. The Quezon City Government, the Quezon City Treasurer, the Quezon City Assessor and the City Mayor of Quezon City, Respondents.

FACTS

Quezon City enacted Ordinance No. 357, S-1995, which contained a proviso in Section 3. This proviso mandated that parcels of land sold or transferred after the ordinance’s effectivity would be subject to real estate tax based on the actual consideration in the deed of conveyance or the BIR zonal valuation, whichever was higher. Petitioner, as trustee, purchased a parcel of land for ₱38,000,000. Following the acquisition, the City Assessor issued a new tax declaration pegging the market value at the purchase price, resulting in a substantially higher annual real property tax compared to the previous owner’s assessment. Petitioner paid the taxes for several quarters under protest.
Petitioner filed a petition for prohibition and declaratory relief before the RTC, assailing the ordinance as unconstitutional for violating the equal protection and uniformity of taxation clauses. It argued the proviso created an invalid classification between transferred and non-transferred properties and violated Sections 219 and 220 of the Local Government Code, which prohibit increasing assessments more than once every three years except under specific conditions. During the pendency of the case, Quezon City itself repealed the assailed proviso via Ordinance No. SP-1032, S-2001.

ISSUE

Whether Section 3 of Quezon City Ordinance No. 357, S-1995 is valid.

RULING

No. The Supreme Court affirmed the dismissal of the petition but declared the assailed proviso void. The Court ruled that the proviso constituted an invalid classification. It created two classes of properties based solely on the occurrence of a transfer: those recently transferred, taxed based on the latest sale price, and those not transferred, taxed based on a general revision schedule. This classification was not based on substantial distinctions germane to the purpose of real property taxation, which is to apportion the tax burden according to the property’s value. The classification was arbitrary and violated the constitutional requirement of uniformity, which mandates that all properties of the same class be taxed at the same rate.
Furthermore, the proviso contravened Sections 219 and 220 of the Local Government Code. These provisions establish a general rule that real property shall be assessed at its current fair market value, but such assessment shall not be increased more often than once every three years. The ordinance’s mechanism triggered a re-assessment upon every transfer, effectively permitting an increase outside the statutory three-year cycle without falling under the recognized exceptions (e.g., new improvements or change in actual use). Therefore, the proviso was declared unconstitutional and invalid.