PASTOR M. ENDENCIA AND FERNANDO JUGO, PLAINTIFFS AND APPELLEES, VS. SATURNINO DAVID, AS COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLANT.

Endencia versus David

The Case

This is a joint appeal brought by the Collector of Internal Revenue against two justices of the appellate courts who sued to recover income taxes withheld from their judicial salaries. The action is essentially a suit for refund, and it matters because the Supreme Court is asked whether Congress may, by simple legislation, declare that taxing a judge's salary is not a diminution of compensation — a question that goes to the heart of the separation of powers and the independence of the Judiciary.

Procedural History

Justices Pastor M. Endencia and Fernando Jugo filed separate actions in the Court of First Instance of Manila against Saturnino David, as Collector of Internal Revenue, to recover income taxes collected on their salaries. Because the two cases raised the same question of law, they were jointly submitted for determination before Judge Higinio B. Macadaeg. The trial court, relying on the doctrine in Perfecto versus Meer, held that the collection of income taxes from the salaries of the two justices was a diminution of their compensation in violation of the Constitution, declared section 13 of Republic Act Number 590 unconstitutional, and ordered the refund of the taxes collected. The Collector of Internal Revenue appealed, and the case reached the Supreme Court by joint appeal.

Facts

Justice Pastor M. Endencia served as an Associate Justice of the Court of Appeals in 1951, with a salary fixed at twelve thousand pesos a year. The Collector of Internal Revenue collected one thousand seven hundred forty-four pesos and forty-five centavos from him as income tax on that salary for the year. Justice Fernando Jugo served as Presiding Justice of the Court of Appeals from January 1, 1950 to October 19, 1950, and as Associate Justice of the Supreme Court from October 20, 1950 to December 31, 1950. The Collector collected two thousand three hundred forty-five pesos and forty-six centavos from him as income tax on his salary for those periods.

Both justices sought refunds in the Court of First Instance of Manila. They invoked the doctrine in Perfecto versus Meer, where the Supreme Court had held that taxing the salary of a judicial officer is a diminution of such salary and violates the Constitution. The trial court agreed and ordered the refunds.

In the meantime, Congress enacted Republic Act Number 590. Section 13 of that law provided that no salary received by any public officer of the Republic shall be considered exempt from the income tax, and declared that payment of the tax is not a diminution of compensation fixed by the Constitution or by law. The Solicitor General argued that Congress enacted the law precisely because it did not receive the Perfecto versus Meer ruling favorably, and that the law now authorized and legalized the collection of income tax on the salaries of judicial officers.

Issues

• Whether or not section 13 of Republic Act Number 590 can justify and legalize the collection of income tax on the salary of judicial officers.
• Whether or not the Legislature may validly declare that the collection of income tax on the salary of a judicial officer is not a diminution of compensation, after the Supreme Court has held otherwise.
• Whether or not the collection of income tax on the salary of a judicial officer is in fact a diminution of such salary.

Applicable Provisions

Section 9, Article VIII of the Constitution provides:

SEC. 9. The members of the Supreme Court and all judges of inferior courts shall hold office during good behavior, until they reach the age of seventy years, or become incapacitated to discharge the duties of their office. They shall receive such compensation as may fixed by law, which shall not be diminished during their continuance in office. Until the Congress shall provide otherwise, the Chief Justice of the Supreme Court shall receive an annual compensation of sixteen thousand pesos, and each Associate Justice, fifteen thousand pesos.

This is the constitutional guarantee whose meaning is at stake: the salaries of judicial officers shall not be diminished during their continuance in office.

Section 13 of Republic Act Number 590 provides:

SEC. 13. No salary wherever received by any public officer of the Republic of the Philippines shall be considered as exempt from the income tax, payment of which is hereby declared not to be a diminution of his compensation fixed by the Constitution or by law.

This is the legislative enactment that the Court must test against the Constitution, because it attempts to define what constitutes a diminution of judicial compensation.

Ruling

On the first issue, the Court held that section 13 of Republic Act Number 590 cannot justify or legalize the collection of income tax on the salary of judicial officers. The Court reiterated the doctrine in Perfecto versus Meer that the collection of income tax on the salary of a judicial officer is a diminution thereof and violates the Constitution.

On the second issue, the Court held that the Legislature may not validly declare that the collection of income tax on a judicial officer's salary is not a diminution of compensation. The interpretation and application of the Constitution and of statutes belong exclusively to the Judicial department. The Court explained that the legislative act of interpreting the Constitution is an invasion of the province and jurisdiction of the Judiciary. The Court quoted with approval:

The legislature cannot, upon passing a law which violates a constitutional provision, validate it so as to prevent an attack thereon in the courts, by a declaration that it shall be so construed as not to violate the constitutional inhibition.

The Court reasoned that if the Legislature could declare what a law or a portion of the Constitution means, especially after the courts have already interpreted it in an actual case, a final court determination could be undermined or annulled by a subsequent legislative interpretation. That would violate the separation of powers.

On the third issue, the Court held that the collection of income tax on a salary is an actual and evident diminution thereof. Under the withholding system, the tax is deducted from the salary every payday, so the official does not receive his salary in full. Using Justice Endencia as an example, the Court showed that instead of receiving five hundred pesos every payday, he would actually receive four hundred twenty-seven pesos and thirty-one centavos, and instead of twelve thousand pesos a year, he would receive ten thousand two hundred fifty-five pesos and fifty-five centavos. The Court also stressed that the exemption is grounded on public policy — to preserve the independence of the Judiciary — and not primarily to benefit judicial officers. It cited Evans versus Gore, where Justice Van Devanter said:

The primary purpose of the prohibition against diminution was not to benefit the judges, but, like the clause in respect of tenure, to attract good and competent men to the bench and to promote that independence of action and judgment which is essential to the maintenance of the guaranties, limitations and pervading principles of the Constitution and to the administration of justice without respect to persons and with equal concern for the poor and the rich. Such being its purpose, it is to be construed, not as a private grant, but as a limitation imposed in the public interest; in other words, not restrictively, but in accord with its spirit and the principle on which it proceeds.

Doctrine

The collection of income tax on the salary of a judicial officer is a diminution of such salary and violates the constitutional guarantee in section 9, Article VIII, that the compensation of members of the Supreme Court and judges of inferior courts shall not be diminished during their continuance in office.

The interpretation and application of the Constitution and of statutes is within the exclusive province and jurisdiction of the Judicial department. The Legislature may not, by legislative fiat, declare what a constitutional provision means, especially after the courts have already interpreted it in an actual case. A legislative definition of a term is not conclusive of its meaning, and the Legislature cannot validate an unconstitutional law by declaring that it shall be construed so as not to violate the Constitution.

The constitutional exemption from diminution of judicial salaries is grounded on public policy — to preserve the independence of the Judiciary — and is to be construed not as a private grant but as a limitation imposed in the public interest.

Disposition

The decision appealed from was affirmed, with no pronouncement as to costs. The refunds ordered by the trial court in favor of Justices Endencia and Jugo stand.

Remember This

Remember that the Legislature makes the laws, but only the Judiciary interprets the Constitution — and a statute cannot declare away a constitutional guarantee. Examiners use this case to test the separation of powers and the non-diminution of judicial compensation under section 9, Article VIII of the Constitution.