Due process and judicial compensation

The Supreme Court, in Gamboa vs Teves (June 28, 2011) written by Justice Antonio T. Carpio, ruled that foreign investments in public utilities should be limited to 40 percent of voting shares only, not to the total outstanding capital stock that includes non-voting shares.

Foreign investors not heard. Prior to this decision, the Securities and Exchange Commission has – since 1935 when the Constitution was first approved –uniformly held that the entire capital stock of a corporation, including voting and non-voting, shall be used in determining the 40 percent allocation to non-Filipinos. On this basis, the government has since then enticed foreigners to invest here. Relying on this representation, many foreigners invested in Philippine companies.

The decision, I note, does not show that the foreigners who relied on this representation and invested here, have been summoned and asked their side. While one foreigner is mentioned in the title of the case, he has not been served with the petition or granted the opportunity to air his defense. Manuel V. Pangilinan, a Filipino, was sued “in his capacity as managing director of First Pacific Co. Ltd.” but First Pacific itself has not been included. Neither have the foreign chambers of commerce been impleaded.

The very first section of our Bill of Rights solemnly proclaims, “No person shall be deprived of life, liberty or property without due process of law.” Clearly, the word “person” includes foreigners and corporations that would be forced to unload their investments at bargain prices.

The most basic concept of due process is traced to Themistocles who cried, “Strike, but hear me first!” and the most oft-quoted definition of due process is traced to Daniel Webster, who referred to it as “a law that hears before it condemns, proceeds upon inquiry and renders judgment only after trial.”

One may even agree with the Supreme Court’s restriction on foreign stockholdings, but – with due respect – no one, not even the highest court of the land, may impose it without first hearing the persons who would be most adversely affected: in this case, the foreign investors.

I will refrain from discussing the substance of the ponencia and will confine my comment, in the meantime, to the absolute need for due process without which any decision would be void.

* * *

Adjusted judicial compensation. After four years of patient waiting, justices and judges will soon receive their increased paychecks after the Supreme Court (SC) recently approved (with some modifications) the Memorandum of Agreement, dated April 6, 2011, between the Department of Budget and Management (DBM) and the Philippine Judges Association, et al. Let me explain briefly.

Effective Nov. 11, 2006, Republic Act  9227 doubled the compensation of our magistrates by granting them the “Special Allowance for Justices and Judges” (SAJ). Hence, if their basic pay was P20,000 per month, they got another P20,000 as SAJ. To fund the SAJ, RA 9227 authorized the SC to increase docket fees.

Fully implemented during my tenure as chief justice, this pay increase was necessary to fill up the 600 vacancies (about 30 percent) in the trial courts. In many ways, these vacancies caused delays in adjudicating cases. Moreover, decent compensation, I thought, would discourage graft in the judiciary.

After I retired, then President Gloria Macapagal-Arroyo twice increased, by 10 percent each time, the basic pay of all government employees. Unfortunately, the increases for judges were charged to the SAJ that they were already receiving. Worse, since they formed part of basic salaries, the increases were subjected to withholding taxes, unlike the SAJ, which was not taxable. So, instead of being increased, judicial take home pay was effectively decreased!

Later, on June 17, 2009, Congress revised the Salary Standardization Law (SSL) and passed Joint Resolution No. 4 giving salary adjustments to all government employees, in four yearly “tranches” starting in 2009. Like the earlier 20 percent adjustment, the magistrates’ pay “tranches” were again charged to their SAJ.

More problems. Under this new SC resolution dated June 7, 2011, the justices and judges will be paid, tax free, with retroactive effect from June 24, 2010, the SAJ they were receiving as of Nov. 11, 2006. Their base pay will still be sourced from the national government, but the increases will be taken from the SAJ. If the SAJ is not enough to fund the increases, the DBM will cover the deficiency.

To illustrate, if, on Nov. 11, 2006, a judge had a basic monthly pay of P20,000, he was entitled to a non-taxable SAJ of P20,000 also. Under the new SC resolution, if the basic pay had been increased to P30,000, then the first P20,000 would still be sourced from the national government, while the pay increase of P10,000 would be taken from the SAJ. In addition, the original non-taxable SAJ of P20,000 will still be given from the SAJ. In short, the judge will have a base pay of P30,000 plus a SAJ of P20,000.

While this solution stabilized the judges’ pay, it presents new problems because the SAJ will not be sufficient to cover the pay increases. Hence, rank and file employees will cease getting SAJ “surpluses.” Worse, the SC may be forced to increase the docket fees, to the chagrin of poor litigants.

Instead of relying on the SAJ, Congress I think should fund the pay increases. After all, adjustments in other government offices are sourced from the national coffers.

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