Perfecto v. Meer [GR L-2348, 27 February 1950]

First Division, Bengzon (p): 8 concur.


Facts: Article VIII, section 9 of the Constitution provides that the members of the Supreme Court and all judges of inferior courts “shall receive such compensation as may be fixed by law, which shall not be diminished during their continuance in office”. It also provides that “until Congress shall provide otherwise, the Chief Justice of the Supreme Court shall receive an annual compensation of P16,000, and each Associate Justice, P15,000″. When in 1945 Justice Perfecto assumed office, Congress had not “provided otherwise”, by fixing a different salary for associate justices. He received salary at the rate provided by the Constitution, i. e., P15,000 a year. In April 1947 the Collector of Internal Revenue required Justice Gregorio Perfecto to pay income tax upon his salary as member of this Court during the year 1946.


After paying the amount (P802), Perfecto instituted the action in the Manila CFI contending that the assessment was illegal, his salary not being taxable for the reason that imposition of taxes thereon would reduce it in violation of the Constitution. The Manila judge upheld his contention, and required the refund of the amount collected. The defendant appealed.


The Supreme Court affirmed the judgment.

  1. Supreme Court cannot escape duty to resolve case even if appellee has passed away
    The death of Justice Perfecto should have freed the Court from the embarrassment of passing upon the claim of a colleague. Still, as the outcome indirectly affects all the members of the Court, consideration of the matter is not without its vexing feature. Adjudication may not be declined, because (a) the Court is not not legally disqualified; (b) jurisdiction may not be renounced, as it is the defendant who appeals to the Court, and there is no other tribunal to which the controversy may be referred; (c) supreme courts in the United States have decided similar disputes relating to themselves; (d) the question touches all the members of the judiciary from top to bottom; and (e) the issue involves the right of other constitutional officers whose compensation is equally protected by the Constitution, for instance, the President, the Auditor-General and the members of the Commission on Elections.
  2. Salaries of judicial officers cannot be diminished
    The Constitution of the United States, like ours, forbids the diminution of the compensation of Judges of the Supreme Court and of inferior courts. Various states, except Wisconsin and Missouri, provide the rule where the Constitution of a state provides that the salaries of its judicial officers shall not be diminished during their continuance in office, it has been held that the state legislature cannot impose a tax upon the compensation paid to the judges of its court.
  3. Tax measures on compensations of judges in the United States
    (1st period) No attempt was made to tax the compensation of Federal judges up to 1862.
    (2nd period, 1862-1918) In July 1862, a statute was passed subjecting the salaries of “civil officers of the United States” to an income tax of 3%. Revenue officers, construed it as including the compensation of all judges, which CJ Taney , speaking for the judiciary protested to the Secretary of the Treasury. The US SC declared the act void, based on the lack of the legislative authority to reduce the compensation of members of the Judiciary and the effect of such legislation to separation of powers. The protest was unheeded, although it apparently bore the approval of the whole SC, that ordered it printed among its records. But in 1869 Attorney-General Hoar upon the request of the Secretary of the Treasury rendered an opinion agreeing with the CJ. The collection of the tax was consequently discontinued and the amounts theretofore received were all refunded. For half a century thereafter judges’ salaries were not taxed as income.
    (3rd period, 1919-1938) The Federal Income Tax Act of 24 February 1919 expressly provided that taxable income shall include “the compensation of the judges of the Supreme Court and inferior courts of the United States”. Under such Act, Walter Evans, United States judge since 1899, paid income tax on his salary; and maintaining that the impost reduced his compensation, he sued to recover the money he had delivered under protest. He was upheld in 1920 by the Supreme Court in an epoch-making decision explaining the purpose, history and meaning of the Constitutional provision forbidding impairment of judicial salaries and the effect of an income tax upon the salary of a judge. On 1 September 1919, Samuel J. Graham assumed office as judge of the United States court of claims. His salary was taxed by virtue of the same income tax of 24 February 1919. He filed action for reimbursement, submitting the same theory in Evans v. Gore. The US SC in 1925 reaffirmed that decision, and declaring that the law had made no distinction as to judges appointed before and after its passage. (4th period, 1939) Foiled in their previous attempts, the Revenue men persisted, and succeeded in inserting in the United States Revenue Act of June 1932 the modified proviso that “gross income” on which taxes were payable included the compensation “of judges of courts of the United States taking office after 6 June 1932. Joseph W. Woodrough qualified as United States circuit judge on 1 May 1933. His salary as judge was taxed, and before the US SC the issue of decrease of remuneration again came up. The court, however, ruled against him, declaring in 1939 that Congress had the power to adopt the law; holding that to subject the  members of the judiciary to a general tax is merely to recognize that judges also are citizens, and that their particular function in government does not generate an immunity from sharing with their fellow citizens the material burden of the government whose Constitution and laws they are charged with administering. (O’Malley vs. Woodrough)
  1. Separation of powers
    The Constitution was framed on the fundamental theory that a larger measure of liberty and justice would be assured by vesting the three powers — the legislative, the executive, and the judicial — in separate departments, each relatively independent of the others and it was recognized that without this independence — if it was not made both real and enduring — the separation would fail of its purpose. All agreed that restraints and checks must be imposed to secure the requisite measure of independence; for otherwise the legislative department, inherently the strongest, might encroach on or even come to dominate the others, and the judicial, naturally the weakest, might be dwarf or swayed by the other two, especially by the legislative.
  2. Independence of the judiciary; prohibition against diminution
    The courts are the balance wheel of the whole constitutional system; which is so balanced and controlled. Other constitutional systems lack complete poise and certainty of operation because they lack the support and interpretation of authoritative, undisputable courts of law. It is clear beyond all need of exposition that for the definite maintenance of constitutional understandings it is indispensable, alike for the preservation of the liberty of the individual and for the preservation of the integrity of the powers of the government, that there should be some nonpolitical forum in which those understandings can be impartially debated and determined. That forum our courts supply. There the individual may assert his rights; there the government must accept definition of its authority. There the individual may challenge the legality of governmental action and have it adjudged by the test of fundamental principles, and that test the government must abide; there the government can check the too aggressive self-assertion of the individual and establish its power upon lines which all can comprehend and heed. The constitutional powers of the courts constitute the ultimate safeguard alike of individual privilege and of governmental prerogative. It is in this sense that our judiciary is the balance wheel of our entire system; it is meant to maintain that nice adjustment between individual rights and governmental powers which constitutes political liberty.
    The Constitution provides that judges shall hold their offices during good behavior, and shall at stated times receive for their services a compensation which shall not be diminished during their continuance in office. Thus, next to permanency in office, nothing can contribute more to the independence of the judges than a fixed provision for their support. In the general course of human nature, a power over a man’s subsistence amounts to a power over his will. The independence of the judges as of far greater importance than any revenue that could come from taxing their salaries.
  3. The exemption of the judicial salary from reduction by taxation not a gratuity or privilege
    The undiminishable character of judicial salaries is not a mere privilege of judges, personal and therefore waivable, but a basic limitation upon legislative or executive action imposed in the public interest (Evans vs. Gore). The exemption is essentially and primarily compensation based upon valuable consideration. The covenant on the part of the government is a guaranty whose fulfillment is as much as part of the consideration agreed as is the money salary. The undertaking has its own particular value to the citizens in securing the independence of the judiciary in crises; and in the establishment of the compensation upon a permanent foundation whereby judicial preferment may be prudently accepted by those who are qualified by talent, knowledge, integrity and capacity, but are not possessed of such a private fortune as to make an assured salary an object of personal concern. Thus, 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.
  4. Appreciation of the O’Malley case; 16th amendment has no counterpart provision in the Philippine Constitution; citation thus loses much of its force
    To grasp the full import of the O’Malley precedent, it should be borne in mind that it does not entirely overturn Miles vs. Graham (”To the extent that what the Court now says is inconsistent with what was said in Miles vs. Graham, the latter can not survive”) and that it does not expressly touch nor amend the doctrine in Evans vs. Gore, although it indicates that the Congressional Act in dispute avoided in part the consequences of that case.  The shift of position from Evans to O’Malley is predicated on the proposition that he 16th Amendment empowered Congress “to collect taxes on incomes from whatever source derived” admitting of no exception; thus the disfavor of the Evans ruling in the United States; as it virtually struck out the words “from whatever source derived” from the Amendment. It is claimed that the words of the amendment are sufficiently strong to overrule pro tanto the provisions of Article III, Section 1 which prohibits the reduction in the salaries of a federal judge. The undisclosed factor, the 16th Amendment, has no counterpart in the Philippine legal system as the Philippine Constitution does not repeat it. Wherefore, as the underlying influence and the unuttered reason has no validity in this jurisdiction, the broad generality loses much of its force.
  5. The administrative and judicial stand consistent the US scenario prior to O’Malley
    The administrative and judicial stands in the Philippines is consistent with the second period of the status of judicial taxation in the United States, the views of CJ Taney and of Attorney-General Hoar and the constant practice from 1869 to 1938, i.e., when the Income Tax Law merely taxes “income” in general, it does not include salaries of judges protected from diminution. The prohibition of diminution was the prevailing belief in the US when it was deemed transplanted in the country, and which the 1935 Constitutional Convention approved. Evans vs. Gore and Miles vs. Graham were then outstanding doctrines; and the inference is not illogical that in restraining the impairment of judicial compensation the Fathers of the Constitution intended to preclude taxation of the same. Unless and until our Legislature approves an amendment to the Income Tax Law expressly taxing “the salaries of judges thereafter appointed”, the O’Malley case is not relevant.
  6. Taxability of judge’s salaries resolved on question of policy but must be enunciated by congressional enactment The O’Malley decision resolved the issue of taxability of judges’ salaries into a question of policy. But that policy must be enunciated by Congressional enactment, as was done in the O’Malley case, not by Executive Fiat or interpretation. It must be noted that the tax exemption does not proclaim a general tax immunity for men on the bench as they pay taxes. Upon buying gasoline, or cars or other commodities, owning real property, and on incomes other than their judicial salaries; they pay the corresponding duties, taxes, or the assessment levied.
  1. Presidential gesture to waive exemption not binding for the Court to likewise follow
    Without the voluntary act of the President, his salary would not be taxable, because of constitutional protection against diminution. To argue from this executive gesture that the judiciary could, and should act in like manner is to assume that, in the matter of compensation and power and need of security, the judiciary is on a par with the Executive. Such assumption certainly ignores the prevailing state of affairs.