G.R. No.

L-21223

August 31, 1966

PHILIPPINE BLOOMING MILLS CO., INC. (As Employer) and FRANCISCO TONG (As
Assistant General Manager) and Attorney-in-Fact of SUSUMO SONODA, SENJI TANAKA,
TAKASHIKO KUMAMOTO, HITOSHI NAKAMURA, TETSUO KODU, (Employees), petitioners
and appellants,
vs.
SOCIAL SECURITY SYSTEM, respondent and appellee.

Demetrio B. Salem for petitioners and appellants.

Office of the Solicitor General Edilberto Barot and Solicitor Camilo D. Quiason for respondent and
appellee.

BARRERA, J.:

The facts of this case are not disputed:

The Philippine Blooming Mills Co., Inc., a domestic corporation since the start of its operations in 1957,
has been employing Japanese technicians under a pre-arranged contract of employment, the minimum
period of which employment is 6 months and the maximum is 24 months.

From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese technicians. In
connection with the employment of these aliens, it sent an inquiry to the Social Security System (SSS)
whether these employees are subject to compulsory coverage under the System, which inquiry was
answered by the First Deputy Administrator of the SSS, under date of August 29, 1957, as follows:

SIR:

With reference to your letter of August 24, 1957, hereunder are our answers to your queries:

Aliens employed in the Philippines:

Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who are
employed temporarily shall, upon their departure from the Philippines, be entitled to a rebate of a
1|Page

proportionate amount of their contributions; their employers shall be entitled to the same proportionate
rebate of their contributions in behalf of said aliens employed by them. (Rule I, Sec. 3[d], Rules and
Regulations.)

Starting September, 1957, and until the aforementioned Japanese employees left the Philippines on
October 26, 1958, the corresponding premium contributions of the employer and the employees on the
latter's memberships in the SSS were as follows:

Name SS Number

Monthly Salary Amount of Premiums

Contributed
2.5%
(Employee)

3.5%

(Employer)

Total

Susumu Sonoda 03-075177

P520.00

P175.00

Senji Tanaka

03-075178

520.00 175.00 245.00 420.00

Kahei Tanaka 03-075179

500.00 175.00 245.00 420.00

P245.00

Takashiko Kumamoto 03-075180

500.00 175.00 245.00 420.00

Hitoshi Nakamura

500.00 175.00 245.00 420.00

Tetsuo Kudo

03-075181

03-075182

P420.00

500.00 175.00 245.00 420.00

Total
P1,050.00
P1,470.00
P2,520.00
On October 7, 1958, the Assistant General Manager of the corporation, on its behalf and as attorney-infact of the Japanese technicians, filed a claim with the SSS for the refund of the premiums paid to the
System, on the ground of termination of the members' employment. As this claim was denied, they filed a
petition with the Social Security Commission for the return or refund of the premiums, in the total sum of
P2,520.00, paid by the employer corporation and the 6 Japanese employees, plus attorneys' fees. This
claim was controverted by the SSS, alleging that Rule IX of the Rules and Regulations of the System, as
amended, requires membership in the System for at least 2 years before a separated or resigned employee
may be allowed a return of his personal contributions. Under the same rule, the employer is not also
entitled to a refund of the premium contributions it had paid.

After hearing, the Commission denied the petition for the reason that, although under the original
provisions of Section 3 (d) of Rule I of the Rules and Regulations of the SSS, alien-employees (who are
2|Page

employed temporarily) and their employers are entitled to a rebate of a proportionate amount of their
respective contributions upon the employees' departure from the Philippines, said rule was amended by
eliminating that portion granting a return of the premium contributions. This amendment became effective
on January 14, 1958, or before the employment of the subject aliens terminated. The rights of covered
employees who are separated from employment, under the present Rules, are covered by Rule IX which
allows a return of the premiums only if they have been members for at least 2 years.

It is this resolution of the Commission that is the subject of the present appeal, appellants contending that
the amendment of the Rules and Regulations of the SSS, insofar as it eliminates the provision on the
return of premium contributions, originally embodied in Section 3(d) of Rule I, constituted an impairment
of obligations of contract. It is claimed, in effect, that when appellants-employees became members in
September, 1957, and paid the corresponding premiums to the System, it1 is subject to the condition that
upon their departure from the Philippines, these employees, as well as their employer, are entitled to a
rebate of a proportionate amount of their respective contributions.

The contention cannot be sustained. Appellants' argument is based on the theory that the employees'
membership in the System established contractual relationship between the members and the System, in
the sense contemplated and protected by the constitutional prohibition against its impairment by law. But,
membership in this institution is not the result of a bilateral, consensual agreement where the rights and
obligations of the parties are defined by and subject to their will. Republic Act 1161 requires compulsory
coverage of employers and employees under the System. It is actually a legal imposition, on said
employers and employees, designed to provide social security to the workingmen. Membership in the
SSS is, therefore, in compliance with a lawful exercise of the police power of the State, to which the
principle of non-impairment of the obligation of contract is not a proper defense.

As pointed out by the Solicitor General, the issue that should be determined in this case is whether, in
implementing the SSS law and denying appellants' claim for refund of their premium contributions, due
process was observed.

The Rules and Regulations promulgated by the SSS, pursuant to the rule-making authority granted in
Section 4(a) of Republic Act 1161, was duly approved by the President on July 18, 1957, and published in
the Official Gazette on September 15, 1957.2 These rules and regulations, among others, provide:

DETERMINATION OF COMPULSORY COVERAGE

3|Page

3. The determination of whether an employer or an employee shall be compulsorily covered shall be

vested in the Commission. The following general principles shall guide the Commission in deciding each
case:

xxx

xxx

xxx

(d) Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who ate
employed temporarily and whose visas are only for fixed terms shall, upon their departure from the
Philippines, be entitled to a rebate of a proportionate amount of their contributions; their employers shall
be entitled to the same proportionate rebate of their contributions in behalf of said aliens employed by
them.

XI

AMENDMENTS AND EFFECTIVITY

1. The Commission may, by appropriate resolution, amend, repeal, revise and/or modify all or any part or
parts of these Rules and Regulations, as well as adopt any additional rule or rules, whenever the need
therefor should arise. Any amendment and/or additional rule, however, shall not take effect until and after
the corresponding resolution of the Commission has been submitted to and approved by the President of
the Philippines.

2. These Rules and Regulations, any amendment thereof, or any additional rule or rules subsequently
adopted by the Commission, shall take effect on the date they are approved by the President of the
Philippines.

Rule I Section 3 (d) and Rule IX, however, were later amended, which amendment was approved by the
President on January 14, 1958, to read as follows:

(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec. 3, Rule I)

EFFECT OF SEPARATION FROM EMPLOYMENT

When an employee under compulsory coverage is separated from employment, his employer's
contribution on his account shall cease at the end of the month of separation; but such employee may
4|Page

continue his membership in the System and receive the benefits of the Act, as amended, in accordance
with these rules. If he continues paying the 6 per cent monthly premiums representing his as well as the
employer's contribution, based on his monthly salary at the time of his separation; but if at the time of his
separation the covered employee has been a member of the System for at least two years, he shall have
the option to choose any one of the following adjustments of his membership in the System:

1. A refund of an amount equivalent to his total contributions of two and one-half per centum plus
interests at the rate of three per centum per annum, compounded annually;

xxx

xxx

x x x (Rule IX)

These amended Rules were published in the November 10, 1958 issue of the Official Gazette.3

It is not here disputed that the Rules and Regulations of the SSS, having been promulgated in
implementation of a law, have the force and effect of a statute;" that the amendment thereto, although
approved by the President on January 14, 1958, was published in the Official Gazette in November, 1958,
or after the employment of the Japanese technicians had ceased and the corresponding claim for the
refund of the premium contributions was filed with the System. The question pertinent to this case now is
whether or not appellants are bound by the amended Rules requiring membership for two years before
refund of the premium contributions may be allowed.1wph1.t

These rules and regulations were promulgated to provide guidelines to be observed in the enforcement of
the law. As a matter of fact, Section 3 of Rule I is merely an enumeration of the "general principles to
(shall) guide the Commission" in the determination of the extent or scope of the compulsory coverage of
the law. One of these guiding principles is paragraph (d) relied upon by appellants, on the coverage of
temporarily-employed aliens. It is not here pretended, that the amendment of this Section 3(d) of Rule I,
as to eliminate the provision granting to these aliens the right to a refund of part of their premium
contributions upon their departure from the Philippines, is not in implementation of the law or beyond the
authority of the Commission to do.

It may be argued, however, that while the amendment to the Rules may have been lawfully made by the
Commission and duly approved by the President on January 14, 1958, such amendment was only
published in the November 1958 issue of the Official Gazette, and after appellants' employment had
already ceased. Suffice it to say, in this regard, that under Article 2 of the Civil Code,5 the date of
publication of laws in the Official Gazette is material for the purpose of determining their effectivity, only
if the statutes themselves do not so provide.

In the present case, the original Rules and Regulations of the SSS specifically provide that any
amendment thereto subsequently adopted by the Commission, shall take effect on the date of its approval
5|Page

by the President. Consequently, the delayed publication of the amended rules in the Official Gazette did
not affect the date of their effectivity, which is January 14, 1958, when they were approved by the
President. It follows that when the Japanese technicians were separated from employment in October,
1958, the rule governing refund of premiums is Rule IX of the amended Rules and Regulations, which
requires membership for 2 years before such refund of premiums may be allowed.

Wherefore, finding no error in the resolution of the Commission appealed from, the same is hereby
affirmed, with costs against the appellants. So ordered.

6|Page

EN BANC

G.R. No. L-21448

August 30, 1967

POBLETE CONSTRUCTION CO., petitioner,

vs.
JUDITH ASIAIN, SOCIAL SECURITY COMMISSION and BENITO MACRHON, in his
capacity as Sheriff of Rizal, respondents.

Fernando B. Duque and Yolanda F. Bustamante for petitioner.

Orlando V. Calsado for respondent Asiain.
Office of the Solicitor General Arturo A. Alafriz, Solicitor C. D. Quiason, L. A. L. Javellana and E. T.
Duran for Social Security Commission.

MAKALINTAL, J.:

Miguel Asiain was an employee of the Poblete Construction Company from 1956 until his death on
November 22, 1959, with a monthly salary of P300. Upon his death his widow, Judith Asiain, for herself
and her minor children, filed a petition before the Social Security Commission against the company and
its manager, Domingo Poblete (Case No. 78), to recover the following sum: (1) P3,600.00 equivalent to
one year's salary of the deceased; (2) P600.00 representing his unpaid salary for two months; (3) P288.00
"representing the cash received by respondents from their laborers as contribution to the family of the
deceased;" and (4) P2,000.00 by way of attorney's fees.

The respondents below moved to dismiss the petition on the grounds that the Social Security Commission
had no jurisdiction over the subject-matter and that the petitioner Judith Asiain had no capacity to sue.
The Commission denied the motion to dismiss in its order of February 25, 1960 and ordered the
respondents to file their answer. When no answer was forthcoming, the respondents were declared in
default in an order dated March 9, 1960, and the petitioners were allowed to present their evidence.

In its resolution of September 15, 1960 the Commission declared itself without jurisdiction to entertain
the claims in the petition except the one for the sum of P3,600, which it awarded on the basis of the
evidence adduced at the hearing and pursuant to Section 24 of Republic Act No. 1161, as amended. A
subsequent motion for reconsideration filed by the respondents was denied, and they elevated the case for
review by the Court of Appeals, which upon proper application issued a writ of preliminary injunction to
stop all further proceedings below, including execution of the award.
7|Page

The case was afterwards certified to the Court for the reason that when the respondents below were
declared in default they lost their standing before the Commission, and not having regained the same by a
motion to set aside or petition for relief, they had no right to appeal from the default judgment; and that in
any event no questions of fact are involved and hence, if at all appealable, the appeal should be directly to
this Court.

The procedural issues, we believe, need not concern us. The main point raised here by the Poblete
Construction Company, which it raised also in its motion to dismiss before the Commission, is that the
said body had no jurisdiction to entertain the claim of P3,600, which should have been presented before
the ordinary courts. This claim was filed under Section 24 of the Social Security Act (R.A. 1191 as
amended), which provides:

Sec. 24. Employment records and reports.(a) Each employer shall report immediately to the System the
names, ages, civil status, occupations, salaries and dependents of all his employees who are in his employ
and who are or may later be subject to compulsory coverage: Provided, That if an employee subject to
compulsory coverage should die or become sick or disabled without the System having previously
received a report about him from his employer, the said employer shall pay to the employee or his legal
heirs damages equivalent to the benefits to which said employee would have been entitled had his name
been reported on time by the employer to the System.

It appears that although the deceased Miguel Asiain had been employed in the Poblete Construction
Company since 1956 and had accomplished SSS Form E-1 (Employees' Date Record) and transmitted the
same to the said company's Manila Office, it was never filed with the Social Security System for the
reason, according to the company, that he refused to have his share of the corresponding monthly
contributions deducted from his salary. Upon these facts the company maintains that the deceased was not
a member of the System when he died and hence the adjudication of the claim for damages under Section
24, supra, does not pertain to the Commission but to the courts of justice.

We find the argument untenable. There is no question that the deceased Miguel Asiain was subject to
compulsory coverage in the Social Security System.1 It was the duty of the employer to "report
immediately to the System" his name, age, civil status, occupation, salary and dependents. Compliance
with this duty did not depend upon the employee's willingness to give his share of the contribution.
Section 24 is mandatory, to such an extent that if the employee should die or become sick or disabled
without the report having been made by the employer, the latter is liable for an amount equivalent to the
benefits to which the employee would have been entitled had such report been made. It is true that the
provision uses the word "damages" in referring to the amount that may be claimed. But this fact alone
does not mean that the Social Security Commission lacks jurisdiction to award the same. Section 5(a) of
the Social Security Act provides that "the filing, determination and settlement of claims shall be governed
by the rules and regulations promulgated by the Commission;" and the rules and regulations thus
promulgated state that "the effectivity of membership in the System, as well as the final determination and
settlement of claims, shall be vested in the Commission." The term "claims" is broad enough to include a
8|Page

claim for "damages" under Section 24. Otherwise an employer could nullify the jurisdiction of the
Commission by the simple expedient of not making a report as required by said Section. The collection of
the employee's share is a duty imposed by law, and his unwillingness to have it deducted from his salary
does not excuse the employer's failure to make the report aforesaid. It is precisely in this situation that the
employer is liable, and there is no question as to the amount of such liability in this case.

The decision of the Social Security Commission is affirmed, and the writ of preliminary injunction is
dissolved, with costs against herein petitioner. 1wph1.t

Concepcion, C.J., Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando,
JJ., concur.

9|Page

REYNALDO CANO CHUA, doing G.R. No. 125837

business under the name &
style PRIME MOVER CONSTRUCTION DEVELOPMENT, Present:
Petitioner,
PUNO, J.,
- versus - Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,*
TINGA, and
COURT OF APPEALS, SOCIAL CHICO-NAZARIO, JJ.,*
SECURITY COMMISSION, SOCIAL
SECURITY SYSTEM, ANDRES
PAGUIO, PABLO CANALE, RUEL
PANGAN, AURELIO PAGUIO, Promulgated:
ROLANDO TRINIDAD, ROMEO
TAPANG and CARLOS MALIWAT,
Respondents. October 6, 2004

x-------------------------------------------------------------------x

DECISION

TINGA, J.:

10 | P a g e

This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. CV No. 38269 dated
06 March 1996, and its Resolution dated 30 July 1996 denying petitioners Motion for Reconsideration,[2]
affirming the Order of the Social Security Commission (SSC) dated 1 February 1995[3] which held that
private respondents were regular employees of the petitioner and ordered petitioner to pay the Social
Security System (SSS) for its unpaid contributions, as well as penalty for the delayed remittance thereof.

On 20 August 1985, private respondents Andres Paguio, Pablo Canale, Ruel Pangan, Aurelio Paguio,
Rolando Trinidad, Romeo Tapang and Carlos Maliwat (hereinafter referred to as respondents) filed a
Petition[4] with the SSC for SSS coverage and contributions against petitioner Reynaldo Chua, owner of
Prime Mover Construction Development, claiming that they were all regular employees of the petitioner
in his construction business.[5]
Private respondents claimed that they were assigned by petitioner in his various construction projects
continuously in the following capacity, since the period

indicated, and with the corresponding basic salaries,[6] to wit:

Andres Paguio Carpenter 1977 P 42/day

Pablo Canale Mason 1977 42/day
Ruel Pangan Mason 1979 39/day
Aurelio Paguio Fine grading 1979 42/day
Romeo Tapang Fine grading 1979 42/day
Rolando Trinidad Carpenter 1983 (Jan.) 39/day
Carlos Maliwat Mason 1977 42/day

Private respondents alleged that petitioner dismissed all of them without justifiable grounds and without
notice to them and to the then Ministry of Labor and Employment. They further alleged that petitioner did
not report them to the SSS for compulsory coverage in flagrant violation of the Social Security Act.[7]

In his Answer,[8] petitioner claimed that private respondents had no cause of action against him, and
assuming there was any, the same was barred by prescription and laches. In addition, he claimed that
private respondents were not regular employees, but project employees whose work had been fixed for a
specific project or undertaking the completion of which was determined at the time of their engagement.
11 | P a g e

This being the case, he concluded that said employees were not entitled to coverage under the Social
Security Act.[9]

Meanwhile, the SSS filed a Petition in Intervention[10] alleging that it has an interest in the petition filed
by private respondents as it is charged with the implementation and enforcement of the provisions of the
Social Security Act. The SSS stated that it is the mandatory obligation of every employer to report its
employees to the SSS for coverage and to remit the required contribution, including the penalty imposed
for late premium remittances.
On 01 February 1995, the SSC issued its Order[11] which ruled in favor of private respondents. The SSC,
relying on NLRC Case No. RAB-III-8-2373-85,[12] declared private respondents to be petitioners regular
employees.[13] It ordered petitioner to pay the SSS the unpaid SS/EC and Medicare contributions plus
penalty for the delayed remittance thereof, without prejudice to

any other penalties which may have accrued.[14] The SSC denied the Motion for Reconsideration[15] of
petitioner for lack of merit.[16]

Petitioner elevated the matter to the Court of Appeals via a Petition for Review.[17] He claimed that
private respondents were project employees, whose periods of employment were terminated upon
completion of the project. Thus, he claimed, no employer-employee relation existed between the
parties.[18] There being no employer-employee relationship, private respondents are not entitled to
coverage under the Social Security Act.[19] In addition, petitioner claimed that private respondents length
of service did not change their status from project to regular employees.[20]

Moreover, granting that private respondents were entitled to coverage under the Act, petitioner claimed
that the SSC erred in imposing penalties since his failure to include private respondents under SSS
coverage was neither willful nor deliberate, but due to the honest belief that project employees are not
regular employees.[21] Likewise, he claimed that the SSC erred in ordering payment of contributions and
penalties even for long periods between projects when private respondents were not working.[22]

Petitioner also questioned the failure to apply the rules on prescription of actions and of laches, claiming
that the case, being one for the injury to the rights of the private respondents, should have been filed
within four (4) years from the time their cause of action accrued, or from the time they were hired as
project employees. He added that private respondents went into a long swoon, folded their arms and
closed their eyes[23] and filed their claim only in 1985, or six (6) years or eight (8) years after they were
taken in by petitioner.[24]

12 | P a g e

In resolving the petition, the Court of Appeals synthesized the issues in the petition, to wit: (1) whether
private respondents were regular employees of petitioner, and whether their causes of action as such are
barred by prescription or laches; (2) if so, whether petitioner is now liable to pay the SSS contributions
and penalties during the period of employment.[25]

The Court of Appeals, citing Article 280 of the Labor Code,[26] declared that private respondents were
all regular employees of the petitioner in relation to certain activities since they all worked either as
masons, carpenters and fine graders in petitioners various construction projects for at least one year, and
that their work was necessary and desirable to petitioners business which involved the construction of
roads and bridges.[27] It cited the case of Mehitabel Furniture Company, Inc. v. NLRC,[28] particularly
the ruling therein which states:

By petitioners own admission, the private respondents have been hired to work on certain special orders
that as a matter of business policy it cannot decline. These projects are necessary or desirable in its usual
business or trade, otherwise they would not have accepted . Significantly, such special orders are not
really seasonal but more or less regular, requiring the virtually continuous services of the temporary
workers. The NLRC also correctly observed that if we were to accept respondents theory, it would have
no regular workers because all of its orders would be special undertakings or projects. The petitioner
could then hire all its workers on a contract basis only and prevent them from attaining permanent status.

Furthermore, the NLRC has determined that the private respondents have worked for more than one year
in the so-called special projects of the petitioner and so fall under the second condition specified in the
above-quoted provision (Article 280, Labor Code).[29]

The Court of Appeals rejected the claim of prescription, stating that the filing of private respondents
claims was well within the twenty (20)-year period provided by the Social Security Act.[30] It found that
the principle of laches could not also apply to the instant case since delay could not be attributed to
private respondents, having filed the case within the prescriptive period, and that there was no evidence
that petitioner lacked knowledge that private respondents would assert their rights.[31]

Petitioner filed a Motion for Reconsideration,[32] claiming that the Court of Appeals overlooked (1) the
doctrine that length of service of a project employee is not the controlling test of employment tenure, and
(2) petitioners failure to place private respondents under SSS coverage was in good faith. The motion was
denied for lack of merit.[33]

13 | P a g e

In the present Petition for Review, petitioner again insists that private respondents were not regular, but
project, employees and thus not subject to SSS coverage. In addition, petitioner claims that assuming
private respondents were subject to SSS coverage, their petition was barred by prescription and laches.
Moreover, petitioner invokes the defense of good faith, or his honest belief that project employees are not
regular employees under Article 280 of the Labor Code.

Petitioners arguments are mere reiterations of his arguments submitted before the SSC and the Court of
Appeals. More importantly, petitioner wants this Court to review factual questions already passed upon
by the SSC and the Court of Appeals which are not cognizable by a petition for review under Rule 45.
Well-entrenched is the rule that the Supreme Courts jurisdiction in a petition for review is limited to
reviewing or revising errors of law allegedly committed by the appellate court, the findings of fact being
generally conclusive on the Court and it is not for the Court to weigh evidence all over again.[34]
Stripped of the lengthy, if not repetitive, disquisition of the private parties in the case, and also of the
public respondents, on the nature of private respondents employment, the controversy boils down to one
issue: the entitlement of private respondents to compulsory SSS coverage.
The Social Security Act was enacted pursuant to the policy of the government to develop, establish
gradually and perfect a social security system which shall be suitable to the needs of the laborers
throughout the Philippines, and shall provide protection against the hazards of disability, sickness, old age
and death.[35] It provides for compulsory coverage of all employees not over sixty years of age and their
employers.[36]

Well-settled is the rule that the mandatory coverage of Republic Act No. 1161, as amended, is premised
on the existence of an employer-employee relationship, the essential elements of which are: (a) selection
and engagement of the employee; (b) payment of wages; (c) the power of dismissal; and (d) the power of
control with regard to the means and methods by which the work is to be accomplished, with the power of
control being the most determinative factor.[37]

There is no dispute that private respondents were employees of petitioner. Petitioner himself admitted that
they worked in his construction projects,[38] although the period of their employment was allegedly coterminus with their phase of work.[39] Even without such admission from petitioner, the existence of an
employer-employee relationship between the parties can easily be determined by the application of the
control test,[40] the elements of which are enumerated above. It is clear that private respondents are
employees of petitioner, the latter having control over the results of the work done, as well as the means
and methods by which the same were accomplished. Suffice it to say that regardless of the nature of their
employment, whether it is regular or project, private respondents are subject of the compulsory coverage
under the SSS Law, their employment not falling under the exceptions provided by the law.[41] This rule
is in accord with the Courts ruling in Luzon Stevedoring Corp. v. SSS[42] to the effect that all employees,
regardless of tenure, would qualify for compulsory membership in the SSS, except those classes of
employees contemplated in Section 8(j) of the Social Security Act.[43]

14 | P a g e

This Court also finds no reason to deviate from the finding of the Court of Appeals regarding the nature
of employment of private respondents. Despite the insistence of petitioner that they were project
employees, the facts show that as masons, carpenters and fine graders in petitioners various construction
projects, they performed work which was usually necessary and desirable to petitioners business which
involves construction of roads and bridges. In Violeta v. NLRC,[44] this Court ruled that to be exempted
from the presumption of regularity of employment, the agreement between a project employee and his
employer must strictly conform to the requirements and conditions under Article 280 of the Labor Code.
It is not enough that an employee is hired for a specific project or phase of work. There must also be a
determination of, or a clear agreement on, the completion or termination of the project at the time the
employee was engaged if the objectives of Article 280 are to be achieved.[45] This second requirement
was not met in this case.

Moreover, while it may be true that private respondents were initially hired for specific projects or
undertakings, the repeated re-hiring and continuing need for their services over a long span of timethe
shortest being two years and the longest being eighthave undeniably made them regular employees.[46]
This Court has held that an employment ceases to be co-terminus with specific projects when the
employee is continuously rehired due to the demands of the employers business and re-engaged for many
more projects without interruption.[47] The Court likewise takes note of the fact that, as cited by the SSC,
even the National Labor Relations Commission in a labor case involving the same parties, found that
private respondents were regular employees of the petitioner.[48]

Another cogent factor militates against the allegations of the petitioner. In the proceedings before the SSC
and the Court of Appeals, petitioner was unable to show that private respondents were appraised of the
project nature of their employment, the specific projects themselves or any phase thereof undertaken by
petitioner and for which private respondents were hired. He failed to show any document such as private
respondents employment contracts and employment records that would indicate the dates of hiring and
termination in relation to the particular construction project or phases in which they were employed.[49]
Moreover, it is peculiar that petitioner did not show proof that he submitted reports of termination after
the completion of his construction projects, considering that he alleges that private respondents were hired
and rehired for various projects or phases of work therein.

Anent the issue of prescription, this Court rules that private respondents right to file their claim had not
yet prescribed at the time of the filing of their petition, considering that a mere eight (8) years had passed
from the time delinquency was discovered or the proper assessment was made. Republic Act No. 1161, as
amended, prescribes a period of twenty (20) years, from the time the delinquency is known or assessment
is made by the SSS, within which to file a claim for non-remittance against employers.[50]

Likewise, this Court is in full accord with the findings of the Court of Appeals that private respondents
are not guilty of laches. The principle of laches or stale demands ordains that the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising due diligence could or
should have been done earlier, or the negligence or omission to assert a right within a reasonable time,
warrants a presumption that the party entitled to assert it either has abandoned it or declined to assert
15 | P a g e

it.[51] In the instant case, this Court finds no proof that private respondents had failed or neglected to
assert their right, considering that they filed their claim within the period prescribed by law.

This Court finds no merit in petitioners protestations of good faith. In United Christian Missionary
Society v. Social Security Commission,[52] this Court ruled that good faith or bad faith is irrelevant for
purposes of assessment and collection of the penalty for delayed remittance of premiums, since the law
makes no distinction between an employer who professes good reasons for delaying the remittance of
premiums and another who deliberately disregards the legal duty imposed upon him to make such
remittance.[53] For the same reasons, petitioner cannot now invoke the defense of good faith.

WHEREFORE, the Petition is DENIED. The Decision and Resolution of the Court of Appeals
promulgated on 6 March 1996 and 30 July 1996 respectively, are AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 119891

August 21, 1995

BEN STA. RITA, petitioner,

vs.
THE COURT OF APPEALS, THE PEOPLE OF THE PHILIPPINES and THE SOCIAL
SECURITY SYSTEM, respondents.
16 | P a g e

RESOLUTION

FELICIANO, J.:

This is a Petition for Review an Certiorari of the Decision of the Court of Appeals ("CA") in CA-G.R. SP.
No. 34384 which ordered the Regional Trial Court ("RTC"), Branch 92, Quezon City, to reinstate
Criminal Case No. Q-92-35426 filed against petitioner Ben Sta. Rita.

Petitioner Sta. Rita was charged in the RTC with violating Section 2(a) in relation to Sections 22(d) and
28(e) of Republic Act No. 1161, as amended, otherwise known as the Social Security Law. The
Information alleged that petitioner, "as President/General Manager of B. Sta. Rita Co., Inc. a
compulsorily (sic) covered employer under the Social Security Law, as amended, did then and there
willfully and unlawfully fail, neglect and refuse and still fails, neglects and refuses to remit to the Social
Security System contributions for SSS, Medicare and Employees Compensation for its covered
employees." 1

Petitioner Sta. Rita moved to dismiss said criminal case on the following grounds:

1.

That the facts charged do not constitute an offense, and;

2.

That the RTC has no jurisdiction over this case. 2

The RTC sustained petitioner's motion and dismissed the criminal case filed against him. It ruled that the
Memorandum of Agreement entered into between the Department of Labor and Employment ("DOLE")
and the Social Security System ("SSS") extending the coverage of Social Security, Medical Care and
Employment Compensation laws to Filipino seafarers on board foreign vessels was null and void as it
was entered into by the Administrator of the SSS without the sanction of the Commission and approval of
the President of the Philippines, in contravention of Section 4 (a) of R.A. No. 1161, as amended. 3

The People, through the Solicitor General, filed in the Court of Appeals a petition for certiorari,
prohibition and mandamus assailing the order of dismissal issued by the trial court. Respondent appellate
court granted the petition and ordered the Presiding Judge of the trial court to reinstate the criminal case

17 | P a g e

against petitioner. A motion for reconsideration thereof was denied by the CA in a Resolution dated 17
April 1995.

Thereafter, petitioner filed in this Court a motion for extension of thirty (30) days from the expiration of
reglementary period within which to file a petition for review on certiorari. The Court granted the motion
and gave petitioner until 9 June 1995 to file the petition with warning that no further extension will be
given. Despite the warning, the petition was filed only on 13 June 1995 or four (4) days after the due date.
Moreover, it failed to comply with requirement no. 2 of Circular No. 1-88, as amended and Circular No.
19-91 of the Court as it did not contain an affidavit of service of copies thereof to respondents. It was only
on 14 July 1995, through an ex-parte manifestation, that the affidavit of service was belatedly submitted
to this Court.

In the Petition for Review, petitioner Sta. Rita contends that the Filipino seafarers recruited by B. Sta.
Rita Co. and deployed on board foreign vessels outside the Philippines are exempt from the coverage of
R.A. No. 1161 under Section 8 (j) (5) thereof:

Terms Defined

EMPLOYMENT Any service performed by an employee for his employer, except

xxx

xxx

xxx

(5)
Service performed on or in connection with an alien vessel by an employee if he is employed
when such vessel is outside the Philippines.

xxx

xxx

xxx

According to petitioner, the Memorandum of Agreement entered into by the DOLE and the SSS is null
and void as it has the effect of amending the aforequoted provision of R.A. No. 1161 by expanding its
coverage. This allegedly cannot be done as only Congress may validly amend legislative enactments.

Petitioner prays that the Court set aside the decision of the Court of Appeals ordering the reinstatement of
Criminal Case No. Q-92-35426 and that the Order of the RTC dismissing the same be upheld.

18 | P a g e

It is well-settled in our jurisdiction that the right to appeal is a statutory right and a party who seeks to
avail of the right must comply with the rules. 4 These rules, particularly the statutory requirement for
perfecting an appeal within the reglementary period laid down by law, must be strictly followed as they
are considered indispensable interdictions against needless delays and for orderly discharge of judicial
business. 5 Petitioner's failure to seasonably file the Petition and its failure to comply with the
aforequoted Circulars of the Court necessitate the denial of the Petition.

Besides, even if the Petition had been filed on time and had complied with the Circulars, it would still
have to be denied as petitioner has failed to show that respondent appellate court committed any
reversible error in rendering the assailed decision.

The Court agrees with the CA that the Information filed against petitioner was sufficient as it clearly
stated the designation of the offense by the statute, i.e. violation of the Social Security Law, and the acts
or omissions complained of as constituting the offense, i.e., petitioner's failure to remit his contributions
to the SSS. The CA found that there is prima facie evidence to support the allegations in the Information
and to warrant the prosecution of petitioner.

Respondent appellate court correctly upheld the validity of the Memorandum of Agreement entered into
between the DOLE and the SSS. Upon the one hand, contrary to the trial court's finding, the
Memorandum of Agreement was approved by the Social Security Commission per the Commission's
Resolution No. 437, dated 14 July 1988. 6 Upon the other hand, the Memorandum of Agreement is not a
rule or regulation enacted by the Commission in the exercise of the latter's quasi-legislative authority
Under Section 4 (a) of R.A. No. 1161, as amended, which reads as follows:

Sec. 4. Powers and Duties of the Commission. For the attainment of its main objectives as set forth in
section two hereof, the Commission shall have the following powers and duties:

(a)
To adopt, amend and rescind, subject to the approval of the President, such rules and regulations
as may be necessary to carry out the provisions and purposes of this Act.

xxx

xxx

xxx

What the Memorandum of Agreement did was to record the understanding between the SSS on the one
hand and the DOLE on the other hand that the latter would include among the provisions of the Standard
Contract of Employment required in case of overseas employment, a stipulation providing for coverage of
the Filipino seafarer by the SSS. The Memorandum of Agreement is not an implementing rule or
regulation of the Social Security Commission which, under Section 4 (a) abovequoted, is subject to the
approval of the President. Indeed, as a matter of strict law, the participation of the SSS in the
establishment by the DOLE of a uniform stipulation in the Standard Contract of Employment for Filipino
19 | P a g e

seafarers was not necessary; the Memorandum of Agreement related simply to the administrative
convenience of the two (2) agencies of government.

Moreover, the Court finds no merit in petitioner's contention that Section 8 (j) (5) of R.A. No. 1161, as
amended, absolutely exempts Filipino seafarers on board foreign vessels from the coverage of the SSS
statute. Section 8 (j) (5) simply defines the term "employment" and does not in any way relate to the
scope of coverage of the Social Security System. That coverage is, upon the other hand, set out in Section
9 of R.A. No. 1161 as amended, which defines the scope of SSS coverage in the following terms:

Sec. 9 Compulsory Coverage. (a) Coverage in the SSS shall be compulsory upon all employees not
over sixty years of age and their employers; Provided, . . . .

(b)
Fillpinos recruited in the Philippines by foreign employers for employment abroad may be
covered by the SSS on a voluntary basis. (As amended by Sec. 2, P.D. No. 177, S-1973 and Sec. 6, P.D.
No. 735-S-1975) (Emphasis supplied)

It will be seen that the Memorandum of Agreement is in line with paragraph 9 (b) of the Social Security
statute quoted above. The Memorandum of Agreement provides, inter alia, that:

xxx

xxx

xxx

NOW THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree and
stipulate that one of the conditions that will be imposed by the Department of Labor and Employment is
the contract for overseas employment is the registration for coverage of seafarers with the Social Security
System, through the manning agencies as the authorized representatives of the foreign employers in
conformity with Section 9, paragraph (b) of the Social Security Law (R.A. No. 1161, as amended),
subject to the following terms and conditions:

xxx

xxx

xxx 7

(Emphasis supplied)

Thus, the Standard Contract of Employment to be entered into between foreign shipowners and Filipino
seafarers is the instrument by which the former express their assent to the inclusion of the latter in the
coverage of the Social Security Act. In other words, the extension of the coverage of the Social Security
System to Filipino seafarers arises by virtue of the assent given in the contract of employment signed by
20 | P a g e

employer and seafarer; that same contract binds petitioner Sta. Rita or B. Sta. Rita Company, who is
solidarily liable with the foreign shipowners/employers.

It may be noted that foreign shipowners and manning agencies had generally expressed their conformity
to the inclusion of Filipino seafarers within the coverage of the Social Security Act even prior to the
signing of the DOLE-SSS Memorandum of Agreement. Thus, the Whereas clauses of the Memorandum
of Agreement state that:

WHEREAS, in the 74th Maritime Session (ILO) held from September 24 to October 9, 1987 in Geneva,
it was agreed that as an internationally accepted principle, seafarers shall have the right to social security
protection;

xxx

xxx

xxx

WHEREAS, after a series of consultations with seafaring unions and manning agencies, it was the
consensus that Philippine social security coverage be extended to seafarers under the employ of vessels
flying foreign flags;

xxx

xxx

xxx 8

(Emphasis supplied)

It is, finally, worthy of special note that by extending the benefits of the Social Security Act to Filipino
seafarers on board foreign vessels, the individual employment agreements entered into with the
stipulation for such coverage contemplated in the DOLE-SSS Memorandum of Agreement, merely give
effect to the constitutional mandate to the State to afford protection to labor whether "local or overseas." 9
Nullification of the SSS stipulation in those individual employment contracts, through nullification of the
Memorandum of Agreement, constituted serious reversible error on the part of the trial court. That
petitioner should seek to deprive his countrymen of social security protection after his foreign principal
had agreed to such protection, is cause for dismay and is to be deplored.

The Court of Appeals properly held that the reinstatement of the criminal case against petitioner did not
violate his right against double jeopardy since the dismissal of the information by the trial court had been
effected at his own instance. 10 There are only two (2) instances where double jeopardy will attach
notwithstanding the fact that the case was dismissed with the express consent of the accused. The first is
where the ground for dismissal is insufficiency of evidence for the prosecution; and the second is where
the criminal proceedings have been unreasonably prolonged in violation of the accused's right to speedy
21 | P a g e

trial. 11 Neither situation exists in the case at bar. There is no legal impediment to the reinstatement of
Criminal Case No. Q-92-35426 against petitioner Sta. Rita.

WHEREFORE, the Court Resolved to DENY the Petition for having been filed late, for failure to comply
with applicable Court Circulars and for lack of merit. The assailed Decision of the Court of Appeals is
hereby AFFIRMED. Cost against petitioner.

G.R. No. 119891

August 21, 1995

BEN STA. RITA, petitioner,

vs.
THE COURT OF APPEALS, THE PEOPLE OF THE PHILIPPINES and THE SOCIAL
SECURITY SYSTEM, respondents.

RESOLUTION

FELICIANO, J.:

22 | P a g e

This is a Petition for Review an Certiorari of the Decision of the Court of Appeals ("CA") in CA-G.R. SP.
No. 34384 which ordered the Regional Trial Court ("RTC"), Branch 92, Quezon City, to reinstate
Criminal Case No. Q-92-35426 filed against petitioner Ben Sta. Rita.

Petitioner Sta. Rita was charged in the RTC with violating Section 2(a) in relation to Sections 22(d) and
28(e) of Republic Act No. 1161, as amended, otherwise known as the Social Security Law. The
Information alleged that petitioner, "as President/General Manager of B. Sta. Rita Co., Inc. a
compulsorily (sic) covered employer under the Social Security Law, as amended, did then and there
willfully and unlawfully fail, neglect and refuse and still fails, neglects and refuses to remit to the Social
Security System contributions for SSS, Medicare and Employees Compensation for its covered
employees." 1

Petitioner Sta. Rita moved to dismiss said criminal case on the following grounds:

1.

That the facts charged do not constitute an offense, and;

2.

That the RTC has no jurisdiction over this case. 2

The RTC sustained petitioner's motion and dismissed the criminal case filed against him. It ruled that the
Memorandum of Agreement entered into between the Department of Labor and Employment ("DOLE")
and the Social Security System ("SSS") extending the coverage of Social Security, Medical Care and
Employment Compensation laws to Filipino seafarers on board foreign vessels was null and void as it
was entered into by the Administrator of the SSS without the sanction of the Commission and approval of
the President of the Philippines, in contravention of Section 4 (a) of R.A. No. 1161, as amended. 3

The People, through the Solicitor General, filed in the Court of Appeals a petition for certiorari,
prohibition and mandamus assailing the order of dismissal issued by the trial court. Respondent appellate
court granted the petition and ordered the Presiding Judge of the trial court to reinstate the criminal case
against petitioner. A motion for reconsideration thereof was denied by the CA in a Resolution dated 17
April 1995.

Thereafter, petitioner filed in this Court a motion for extension of thirty (30) days from the expiration of
reglementary period within which to file a petition for review on certiorari. The Court granted the motion
and gave petitioner until 9 June 1995 to file the petition with warning that no further extension will be
given. Despite the warning, the petition was filed only on 13 June 1995 or four (4) days after the due date.
Moreover, it failed to comply with requirement no. 2 of Circular No. 1-88, as amended and Circular No.
19-91 of the Court as it did not contain an affidavit of service of copies thereof to respondents. It was only
23 | P a g e

on 14 July 1995, through an ex-parte manifestation, that the affidavit of service was belatedly submitted
to this Court.

In the Petition for Review, petitioner Sta. Rita contends that the Filipino seafarers recruited by B. Sta.
Rita Co. and deployed on board foreign vessels outside the Philippines are exempt from the coverage of
R.A. No. 1161 under Section 8 (j) (5) thereof:

Terms Defined

EMPLOYMENT Any service performed by an employee for his employer, except

xxx

xxx

xxx

(5)
Service performed on or in connection with an alien vessel by an employee if he is employed
when such vessel is outside the Philippines.

xxx

xxx

xxx

According to petitioner, the Memorandum of Agreement entered into by the DOLE and the SSS is null
and void as it has the effect of amending the aforequoted provision of R.A. No. 1161 by expanding its
coverage. This allegedly cannot be done as only Congress may validly amend legislative enactments.

Petitioner prays that the Court set aside the decision of the Court of Appeals ordering the reinstatement of
Criminal Case No. Q-92-35426 and that the Order of the RTC dismissing the same be upheld.

It is well-settled in our jurisdiction that the right to appeal is a statutory right and a party who seeks to
avail of the right must comply with the rules. 4 These rules, particularly the statutory requirement for
perfecting an appeal within the reglementary period laid down by law, must be strictly followed as they
are considered indispensable interdictions against needless delays and for orderly discharge of judicial
business. 5 Petitioner's failure to seasonably file the Petition and its failure to comply with the
aforequoted Circulars of the Court necessitate the denial of the Petition.

Besides, even if the Petition had been filed on time and had complied with the Circulars, it would still
have to be denied as petitioner has failed to show that respondent appellate court committed any
reversible error in rendering the assailed decision.
24 | P a g e

The Court agrees with the CA that the Information filed against petitioner was sufficient as it clearly
stated the designation of the offense by the statute, i.e. violation of the Social Security Law, and the acts
or omissions complained of as constituting the offense, i.e., petitioner's failure to remit his contributions
to the SSS. The CA found that there is prima facie evidence to support the allegations in the Information
and to warrant the prosecution of petitioner.

Respondent appellate court correctly upheld the validity of the Memorandum of Agreement entered into
between the DOLE and the SSS. Upon the one hand, contrary to the trial court's finding, the
Memorandum of Agreement was approved by the Social Security Commission per the Commission's
Resolution No. 437, dated 14 July 1988. 6 Upon the other hand, the Memorandum of Agreement is not a
rule or regulation enacted by the Commission in the exercise of the latter's quasi-legislative authority
Under Section 4 (a) of R.A. No. 1161, as amended, which reads as follows:

Sec. 4. Powers and Duties of the Commission. For the attainment of its main objectives as set forth in
section two hereof, the Commission shall have the following powers and duties:

(a)
To adopt, amend and rescind, subject to the approval of the President, such rules and regulations
as may be necessary to carry out the provisions and purposes of this Act.

xxx

xxx

xxx

What the Memorandum of Agreement did was to record the understanding between the SSS on the one
hand and the DOLE on the other hand that the latter would include among the provisions of the Standard
Contract of Employment required in case of overseas employment, a stipulation providing for coverage of
the Filipino seafarer by the SSS. The Memorandum of Agreement is not an implementing rule or
regulation of the Social Security Commission which, under Section 4 (a) abovequoted, is subject to the
approval of the President. Indeed, as a matter of strict law, the participation of the SSS in the
establishment by the DOLE of a uniform stipulation in the Standard Contract of Employment for Filipino
seafarers was not necessary; the Memorandum of Agreement related simply to the administrative
convenience of the two (2) agencies of government.

Moreover, the Court finds no merit in petitioner's contention that Section 8 (j) (5) of R.A. No. 1161, as
amended, absolutely exempts Filipino seafarers on board foreign vessels from the coverage of the SSS
statute. Section 8 (j) (5) simply defines the term "employment" and does not in any way relate to the
scope of coverage of the Social Security System. That coverage is, upon the other hand, set out in Section
9 of R.A. No. 1161 as amended, which defines the scope of SSS coverage in the following terms:

25 | P a g e

Sec. 9 Compulsory Coverage. (a) Coverage in the SSS shall be compulsory upon all employees not
over sixty years of age and their employers; Provided, . . . .

(b)
Fillpinos recruited in the Philippines by foreign employers for employment abroad may be
covered by the SSS on a voluntary basis. (As amended by Sec. 2, P.D. No. 177, S-1973 and Sec. 6, P.D.
No. 735-S-1975) (Emphasis supplied)

It will be seen that the Memorandum of Agreement is in line with paragraph 9 (b) of the Social Security
statute quoted above. The Memorandum of Agreement provides, inter alia, that:

xxx

xxx

xxx

NOW THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree and
stipulate that one of the conditions that will be imposed by the Department of Labor and Employment is
the contract for overseas employment is the registration for coverage of seafarers with the Social Security
System, through the manning agencies as the authorized representatives of the foreign employers in
conformity with Section 9, paragraph (b) of the Social Security Law (R.A. No. 1161, as amended),
subject to the following terms and conditions:

xxx

xxx

xxx 7

(Emphasis supplied)

Thus, the Standard Contract of Employment to be entered into between foreign shipowners and Filipino
seafarers is the instrument by which the former express their assent to the inclusion of the latter in the
coverage of the Social Security Act. In other words, the extension of the coverage of the Social Security
System to Filipino seafarers arises by virtue of the assent given in the contract of employment signed by
employer and seafarer; that same contract binds petitioner Sta. Rita or B. Sta. Rita Company, who is
solidarily liable with the foreign shipowners/employers.

It may be noted that foreign shipowners and manning agencies had generally expressed their conformity
to the inclusion of Filipino seafarers within the coverage of the Social Security Act even prior to the
signing of the DOLE-SSS Memorandum of Agreement. Thus, the Whereas clauses of the Memorandum
of Agreement state that:

26 | P a g e

WHEREAS, in the 74th Maritime Session (ILO) held from September 24 to October 9, 1987 in Geneva,
it was agreed that as an internationally accepted principle, seafarers shall have the right to social security
protection;

xxx

xxx

xxx

WHEREAS, after a series of consultations with seafaring unions and manning agencies, it was the
consensus that Philippine social security coverage be extended to seafarers under the employ of vessels
flying foreign flags;

xxx

xxx

xxx 8

(Emphasis supplied)

It is, finally, worthy of special note that by extending the benefits of the Social Security Act to Filipino
seafarers on board foreign vessels, the individual employment agreements entered into with the
stipulation for such coverage contemplated in the DOLE-SSS Memorandum of Agreement, merely give
effect to the constitutional mandate to the State to afford protection to labor whether "local or overseas." 9
Nullification of the SSS stipulation in those individual employment contracts, through nullification of the
Memorandum of Agreement, constituted serious reversible error on the part of the trial court. That
petitioner should seek to deprive his countrymen of social security protection after his foreign principal
had agreed to such protection, is cause for dismay and is to be deplored.

The Court of Appeals properly held that the reinstatement of the criminal case against petitioner did not
violate his right against double jeopardy since the dismissal of the information by the trial court had been
effected at his own instance. 10 There are only two (2) instances where double jeopardy will attach
notwithstanding the fact that the case was dismissed with the express consent of the accused. The first is
where the ground for dismissal is insufficiency of evidence for the prosecution; and the second is where
the criminal proceedings have been unreasonably prolonged in violation of the accused's right to speedy
trial. 11 Neither situation exists in the case at bar. There is no legal impediment to the reinstatement of
Criminal Case No. Q-92-35426 against petitioner Sta. Rita.

WHEREFORE, the Court Resolved to DENY the Petition for having been filed late, for failure to comply
with applicable Court Circulars and for lack of merit. The assailed Decision of the Court of Appeals is
hereby AFFIRMED. Cost against petitioner.

27 | P a g e

ELENA P. DYCAICO, G.R. No. 161357

Petitioner,
Present:

DAVIDE, JR., C.J.,

PUNO,
PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
28 | P a g e

SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
SOCIAL SECURITY SYSTEM CHICO-NAZARIO* and
and SOCIAL SECURITY GARCIA, JJ.
COMMISSION,
Respondents. Promulgated:

November 30, 2005

x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review under Rule 45 of the Rules of Court filed by Elena P. Dycaico
which seeks to reverse and set aside the Decision[1] dated April 15, 2003 of the Court of Appeals (CA) in
CA-G.R. SP

No. 69632. The assailed decision affirmed the Resolution dated February 6, 2002 of the Social Security
Commission (SSC), denying the petitioners claim for survivors pension accruing from the death of her
husband Bonifacio S. Dycaico, a Social Security System (SSS) member-pensioner. Likewise sought to be
reversed and set aside is the appellate courts Resolution dated December 15, 2003, denying the petitioners
motion for reconsideration.

29 | P a g e

The case arose from the following undisputed facts:

Bonifacio S. Dycaico became a member of the SSS on January 24, 1980. In his self-employed data record
(SSS Form RS-1), he named the petitioner, Elena P. Dycaico, and their eight children as his beneficiaries.
At that time, Bonifacio and Elena lived together as husband and wife without the benefit of marriage.

In June 1989, Bonifacio was considered retired and began receiving his monthly pension from the SSS.
He continued to receive the monthly pension until he passed away on June 19, 1997. A few months prior
to his death, however, Bonifacio married the petitioner on January 6, 1997.

Shortly after Bonifacios death, the petitioner filed with the SSS an application for survivors pension. Her
application, however, was denied on the ground that under Section 12-B(d) of Republic Act (Rep. Act)
No. 8282 or the Social Security Law[2] she could not be considered a primary beneficiary of Bonifacio as
of the date of his retirement. The said proviso reads:
Sec. 12-B. Retirement Benefits.

(d) Upon the death of the retired member, his primary beneficiaries as of the date of his retirement shall
be entitled to receive the monthly pension.

Applying this proviso, the petitioner was informed that the

Records show that the member [referring to Bonifacio] was considered retired on June 5, 1989 and
monthly pension was cancelled upon our receipt of a report on his death on June 19, 1997. In your death
claim application, submitted marriage contract with the deceased member shows that you were married in
1997 or after his retirement date; hence, you could not be considered his primary beneficiary.

In view of this, we regret that there is no other benefit due you. However, if you do not conform with us,
you may file a formal petition with our Social Security Commission to determine your benefit
eligibility.[3]

On July 9, 2001, the petitioner filed with the SSC a petition alleging that the denial of her survivors
pension was unjustified. She contended that Bonifacio designated her and their children as primary
beneficiaries in his SSS Form RS-1 and that it was not indicated therein that only legitimate family
members could be made beneficiaries. Section 12-B(d) of Rep. Act No. 8282 does not, likewise, require
30 | P a g e

that the primary beneficiaries be legitimate relatives of the member to be entitled to the survivors pension.
The SSS is legally bound to respect Bonifacios designation of them as his
beneficiaries. Further, Rep. Act No. 8282 should be interpreted to promote social justice.

On February 6, 2002, the SSC promulgated its Resolution affirming the denial of the petitioners claim.
The SSC refuted the petitioners contention that primary beneficiaries need not be legitimate family
members by citing the definitions of primary beneficiaries and dependents in Section 8 of Rep. Act No.
8282. Under paragraph (k) of the said provision, primary beneficiaries are [t]he dependent spouse until he
or she remarries, the dependent legitimate, legitimated or legally adopted, and illegitimate children
Paragraph (e) of the same provision, on the other hand, defines dependents as the following: (1) [t]he
legal spouse entitled by law to receive support from the member; (2) [t]he legitimate, legitimated or
legally adopted, and illegitimate child who is unmarried, not gainfully employed and has not reached
twenty-one (21) years of age, or if over twenty-one (21) years of age, he is congenitally or while still a
minor has been permanently incapacitated and incapable of self-support, physically or mentally; and (3)
[t]he parent who is receiving regular support from the member. Based on the foregoing, according to the
SSC, it has consistently ruled that entitlement to the survivors pension in ones capacity as primary
beneficiary is premised on the legitimacy of relationship with and dependency for support upon the
deceased SSS member during his lifetime.

Under Section 12-B(d) of Rep. Act No. 8282, the primary beneficiaries who are entitled to survivors
pension are those who qualify as
such as of the date of retirement of the deceased member. Hence, the petitioner, who was not then the
legitimate spouse of Bonifacio as of the date of his retirement, could not be considered his primary
beneficiary. The SSC further opined that Bonifacios designation of the petitioner as one of his primary
beneficiaries in his SSS Form RS-1 is void, not only on moral considerations but also for
misrepresentation. Accordingly, the petitioner is not entitled to claim the survivors pension under Section
12-B(d) of Rep. Act No. 8282.

Aggrieved, the petitioner filed with the CA a petition for review of the SSCs February 6, 2002
Resolution. In the assailed Decision, dated April 15, 2003, the appellate court dismissed the petition.
Citing the same provisions in Rep. Act No. 8282 as those cited by the SSC, the CA declared that since the
petitioner was merely the common-law wife of Bonifacio at the time of his retirement in 1989, his
designation of the petitioner as one of his beneficiaries in the SSS Form RS-1 in 1980 is void. The CA
further observed that Bonifacios children with the petitioner could no longer qualify as primary
beneficiaries because they have all reached twenty-one (21) years of age. The decretal portion of the
assailed decision reads:

WHEREFORE, premises considered, the Petition is DISMISSED and the assailed 06 February 2002
Resolution of respondent Commission is hereby AFFIRMED in toto. No costs.

31 | P a g e

SO ORDERED.[4]

The petitioner sought reconsideration of the said decision but in the assailed Resolution dated December
15, 2003, the appellate court denied her motion. Hence, the petitioners recourse to this Court.

The petitioner points out that the term primary beneficiaries as used in Section 12-B(d) of Rep. Act No.
8282 does not have any qualification. She thus theorizes that regardless of whether the primary
beneficiary designated by the member as such is legitimate or not, he or she is entitled to the survivors
pension. Reliance by the appellate court and the SSC on the definitions of primary beneficiaries and
dependents in Section 8 of Rep. Act No. 8282 is allegedly unwarranted because these definitions cannot
modify Section 12-B(d) thereof.

The petitioner maintains that when she and Bonifacio got married in January 1997, a few months before
he passed away, they merely intended to legalize their relationship and had no intention to commit any
fraud. Further, since Rep. Act No. 8282 is a social legislation, it should be construed liberally in favor of
claimants like the petitioner. She cites the Courts pronouncement that the sympathy of the law on social
security is toward its beneficiaries, and the law, by its own terms, requires a construction of utmost
liberality in their favor.[5]

The SSS, on the other hand, contends that Section 12-B(d) of Rep. Act No. 8282 should be read in
conjunction with the definition of the terms dependents and primary beneficiaries in Section 8 thereof.
Since the petitioner was not as yet the legal spouse of Bonifacio at the time of his retirement in 1989, she
is not entitled to claim the survivors pension accruing at the time of his death. The SSS insists that the
designation by Bonifacio of the petitioner and their illegitimate children in his SSS Form RS-1 is void.

According to the SSS, there is nothing in Rep. Act No. 8282 which provides that should there be no
primary or secondary beneficiaries, the benefit accruing from the death of a member should go to his
designated common-law spouse and that to rule otherwise would be to condone the designation of
common-law spouses as beneficiaries, a clear case of circumventing the SS Law and a violation of public
policy and morals.[6] Finally, the SSS is of the opinion that Section 12-B(d) of Rep. Act No. 8282 is clear
and explicit; hence, there is no room for its interpretation, only for application.

In the Resolution dated July 19, 2005, the Court required the parties, as well as the Office of the Solicitor
General, to file their respective comments on the issue of whether or not the proviso as of the date of his
retirement in Section 12-B(d) of Rep. Act No. 8282 violates the equal protection and due process clauses
of the Constitution. The Court believes that this issue is intertwined with and indispensable to the
resolution of the merits of the petition.

32 | P a g e

In compliance therewith, in its comment, the SSC argues that the proviso as of the date of his retirement
in Section 12-B(d) of Rep. Act No. 8282 does not run afoul of the equal protection clause of the
Constitution as it merely determines the reckoning date of qualification and entitlement of beneficiaries to
the survivorship pension. It asserts that this classification of beneficiaries is based on valid and substantial
distinctions that are germane to the legislative purpose of Rep. Act No. 8282.

The SSC also impugns the marriage of the petitioner to Bonifacio after his retirement stating that it was
contracted as an afterthought to enable her to qualify for the survivorship pension upon the latters death. It
further alleges that there is no violation of the due process clause as the petitioner was given her day in
court and was able to present her side.

The SSS filed its separate comment and therein insists that the petitioner was not the legitimate spouse of
the deceased member at the time when the contingency occurred (his retirement) and, therefore, she could
not be considered a primary beneficiary within the contemplation of Rep. Act No. 8282. The SSS posits
that the statutes intent is to give survivorship pension only to primary beneficiaries at the time of the
retirement of the deceased member. Rep. Act No. 8282 itself ordains the persons entitled thereto and
cannot be subject of change by the SSS.

The Solicitor General agrees with the stance taken by the SSS that the proviso as of the date of his
retirement merely marks the period when the primary beneficiary must be so to be entitled to the benefits.
It does not violate the equal protection clause because the classification resulting therefrom rests on
substantial distinctions. Moreover, the condition as to the period for entitlement, i.e., as of the date of the
members retirement, is relevant as it set the parameters for those availing of the benefits and it applies to
all those similarly situated. The Solicitor General is also of the view that the said proviso does not offend
the due process clause because claimants are given the opportunity to file their claims and to prove their
case before the Commission.

For clarity, Section 12-B(d) of Rep. Act No. 8282 is quoted anew below:

Sec. 12-B. Retirement Benefits.

(d) Upon the death of the retired member, his primary beneficiaries as of the date of his retirement shall
be entitled to receive the monthly pension.

Under Section 8(k) of the same law, the primary beneficiaries are:

33 | P a g e

1.

The dependent spouse until he or she remarries; and

2.

The dependent legitimate, legitimated or legally adopted, and illegitimate children.

Further, the dependent spouse and dependent children are qualified under paragraph (e) of the same
section as follows:

1.

The legal spouse entitled by law to receive support until he or she remarries; and

2. The dependent legitimate, legitimated or legally adopted, and illegitimate child who is unmarried,
not gainfully employed and has not reached twenty-one (21) years of age, or if over twenty-one years of
age, he is congenitally or while still a minor has been permanently incapacitated and incapable of selfsupport, physically or mentally.

The SSS denied the petitioners application for survivors pension on the sole ground that she was not the
legal spouse of Bonifacio as of the date of his retirement; hence, she could not be considered as his
primary beneficiary under Section 12-B(d) of Rep. Act No. 8282.

The Court holds that the proviso as of the date of his retirement in Section 12-B(d) of Rep. Act No. 8282,
which qualifies the term primary beneficiaries, is unconstitutional for it violates the due process and equal
protection clauses of the Constitution.[7]

In an analogous case, Government Service Insurance System v. Montesclaros,[8] the Court invalidated
the proviso in Presidential Decree (P.D.) No. 1146[9] which stated that the dependent spouse shall not be
entitled to said pension if his marriage with the pensioner is contracted within three years before the
pensioner qualified for the pension. In the said case, the Court characterized retirement benefits as
property interest of the pensioner as well as his or her surviving spouse. The proviso, which denied a
dependent spouses claim for survivorship pension if the dependent spouse contracted marriage to the
pensioner within the three-year prohibited period, was declared offensive to the due process clause. There
was outright confiscation of benefits due the surviving spouse without giving him or her an opportunity to
be heard. The proviso was also held to infringe the equal protection clause as it discriminated against
dependent spouses who contracted their respective marriages to pensioners within three years before they
qualified for their pension.

For reasons which shall be discussed shortly, the proviso as of the date of his retirement in Section 12B(d) of Rep. Act No. 8282 similarly violates the due process and equal protection clauses of the
Constitution.
34 | P a g e

The proviso infringes the equal protection clause

As illustrated by the petitioners case, the proviso as of the date of his retirement in Section 12-B(d) of
Rep. Act No. 8282 which qualifies the term primary beneficiaries results in the classification of
dependent spouses as primary beneficiaries into two groups:

(1) Those dependent spouses whose respective marriages to SSS members were contracted prior to the
latters retirement; and
(2) Those dependent spouses whose respective marriages to SSS members were contracted after the
latters retirement.

Underlying these two classifications of dependent spouses is that their respective marriages are valid. In
other words, both groups are legitimate or legal spouses. The distinction between them lies solely on the
date the marriage was contracted. The petitioner belongs to the second group of dependent spouses, i.e.,
her marriage to Bonifacio was contracted after his retirement. As such, she and those similarly situated do
not qualify as primary beneficiaries under Section 12-B(d) of Rep. Act No. 8282 and, therefore, are not
entitled to survivors pension under the same provision by reason of the subject proviso.

It is noted that the eligibility of dependent children who are biological offsprings of a retired SSS member
to be considered as his primary beneficiaries under Section 12-B(d) of Rep. Act No. 8282 is not
substantially affected by the proviso as of the date of his retirement. A biological child, whether
legitimate, legitimated or illegitimate, is entitled to survivors pension upon the death of a retired SSS
member so long as the said child is unmarried, not gainfully employed and has not reached twenty-one
(21) years of age, or if over twenty-one (21) years of age, he or she is congenitally or while still a minor
has been permanently incapacitated and incapable of self-support, physically or mentally.

On the other hand, the eligibility of legally adopted children to be considered primary beneficiaries under
Section 12-B(d) of Rep. Act No. 8282 is affected by the proviso as of the date of his retirement in the
same manner as the dependent spouses. A legally adopted child who satisfies the requirements in Section
8(e)(2)[10] thereof is considered a primary beneficiary of a retired SSS member upon the latters death
only if the said child had been legally adopted prior to the members retirement. One who was legally
adopted by the SSS member after his or her retirement does not qualify as a primary beneficiary for the
purpose of entitlement to survivors pension under Section 12-B(d) of Rep. Act No. 8282.

In any case, the issue that now confronts the Court involves a dependent spouse who claims to have been
unjustly deprived of her survivors pension under Section 12-B(d) of Rep. Act No. 8282. Hence, the
subsequent discussion will focus on the resultant classification of the dependent spouses as primary
beneficiaries under the said provision.
35 | P a g e

As earlier stated, the petitioner belongs to the second group of dependent spouses, i.e., her marriage to
Bonifacio was contracted after his retirement. She and those similarly situated are undoubtedly
discriminated against as the proviso as of the date of his retirement disqualifies them from being
considered primary beneficiaries for the purpose of entitlement to survivors pension.

Generally, a statute based on reasonable classification does not violate the constitutional guaranty of the
equal protection clause of the law.[11] With respect to Rep. Act No. 8282, in particular, as a social
security law, it is recognized that it is permeated with provisions that draw lines in classifying those who
are to receive benefits. Congressional decisions in this regard are entitled to deference as those of the
institution charged under our scheme of government with the primary responsibility for making such
judgments in light of competing policies and interests.[12]

However, as in other statutes, the classification in Rep. Act No. 8282 with respect to entitlement to
benefits, to be valid and reasonable, must satisfy the following requirements: (1) it must rest on
substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be limited to
existing conditions only; and (4) it must apply equally to all members of the same class.[13]

The legislative history of Rep. Act No. 8282 does not bear out the purpose of Congress in inserting the
proviso as of the date of his retirement to qualify the term primary beneficiaries in Section 12-B(d)
thereof. To the Courts mind, however, it reflects congressional concern with the possibility of
relationships entered after retirement for the purpose of obtaining benefits. In particular, the proviso was
apparently intended to prevent sham marriages or those contracted by persons solely to enable one spouse
to claim benefits upon the anticipated death of the other spouse.

This concern is concededly valid. However, classifying dependent spouses and determining their
entitlement to survivors pension based on whether the marriage was contracted before or after the
retirement of the other spouse, regardless of the duration of the said marriage, bears no relation to the
achievement of the policy objective of the law, i.e., provide meaningful protection to members and their
beneficiaries against the hazard of disability, sickness, maternity, old age, death and other contingencies
resulting in loss of income or financial burden."[14] The nexus of the classification to the policy objective
is vague and flimsy. Put differently, such classification of dependent spouses is not germane to the
aforesaid policy objective.

For if it were the intention of Congress to prevent sham marriages or those entered in contemplation of
imminent death, then it should have prescribed a definite duration-of-relationship or durational period of
relationship as one of the requirements for entitlement to survivors pension. For example, in the United
States, a provision in their social security law which excludes from social security benefits the surviving
wife and stepchild of a deceased wage earner who had their respective relationships to the wage earner for
less than nine months prior to his death, was declared valid.[15] Thus, nine months is recognized in the
36 | P a g e

United States as the minimum duration of a marriage to consider it as having been contracted in good
faith for the purpose of entitlement to survivorship pension.

In contrast, the proviso as of the date of his retirement in Section 12-B(d) in Rep. Act No. 8282
effectively disqualifies from entitlement to survivors pension all those dependent spouses whose
respective marriages to retired SSS members were contracted after the latters retirement. The duration of
the marriage is not even considered. It is observed that, in certain instances, the retirement age under Rep.
Act No. 8282 is sixty (60)
years old.[16] A marriage contracted by a retired SSS member after the said age may still last for more
than ten years, assuming the member lives up to over seventy (70) years old. In such a case, it cannot be
said that the marriage was a sham or was entered into solely for the purpose of enabling one spouse to
obtain the financial benefits due upon the death of the other spouse. Nonetheless, the said surviving
spouse is not entitled to survivors pension because he or she is not a primary beneficiary as of the date of
retirement of the SSS member following Section 12-B(d) of Rep. Act No. 8282.

Further, the classification of dependent spouses on the basis of whether their respective marriages to the
SSS member were contracted prior to or after the latters retirement for the purpose of entitlement to
survivors pension does not rest on real and substantial distinctions. It is arbitrary and discriminatory. It is
too sweeping because the proviso as of the date of his retirement, which effectively disqualifies the
dependent spouses whose respective marriages to the retired SSS member were contracted after the latters
retirement as primary beneficiaries, unfairly lumps all these marriages as sham relationships or were
contracted solely for the purpose of acquiring benefits accruing upon the death of the other spouse. The
proviso thus unduly prejudices the rights of the legal surviving spouse, like the petitioner, and defeats the
avowed policy of the law to provide meaningful protection to members and their beneficiaries against the
hazards of disability, sickness, maternity, old age, death, and other contingencies resulting in loss of
income or financial burden.[17]

The proviso infringes the due process clause

As earlier opined, in Government Service Insurance System v. Montesclaros,[18] the Court characterized
retirement benefits as a property interest of a retiree. We held therein that [i]n a pension plan where
employee participation is mandatory, the prevailing view is that employees have contractual or vested
rights in the pension where the pension is part of the terms of employment.[19] Thus, it was ruled that,
where the employee retires and meets the eligibility requirements, he acquires a vested right to benefits
that is protected by the due process clause and [r]etirees enjoy a protected property interest whenever they
acquire a right to immediate payment under pre-existing law.[20] Further, since pursuant to the pertinent
law therein, the dependent spouse is entitled to survivorship pension, a widows right to receive pension
following the demise of her husband is also part of the husbands contractual compensation.[21]

Although the subject matter in the above-cited case involved the retirement benefits under P.D. No. 1146
or the Revised Government Service Insurance Act of 1977[22] covering government employees, the
37 | P a g e

pronouncement therein that retirees enjoy a protected property interest in their retirement benefits applies
squarely to those in the private sector under Rep. Act No. 8282. This is so because the mandatory
contributions of both the employers[23] and the employees[24] to the SSS do not, likewise, make the
retirement benefits under Rep. Act No. 8282 mere gratuity but form part of the latters compensation.
Even the retirement benefits of self-employed individuals, like Bonifacio, who have been included in the
compulsory coverage of Rep. Act No. 8282[25] are not mere gratuity because they are required to pay
both the employer and employee contributions.[26] Further, under Rep. Act No. 8282, the surviving
spouse is entitled to survivors pension accruing on the death of the member; hence, the surviving spouses
right to receive such benefit following the demise of the wife or husband, as the case may be, is also part
of the latters contractual compensation.

The proviso as of the date of his retirement in Section 12-B(d) of Rep. Act No. 8282 runs afoul of the due
process clause as it outrightly deprives the surviving spouses whose respective marriages to the retired
SSS members were contracted after the latters retirement of their survivors benefits. There is outright
confiscation of benefits due such surviving spouses without giving them an opportunity to be heard.

By this outright disqualification of the surviving spouses whose respective marriages to SSS members
were contracted after the latters retirement, the proviso as of the date of his retirement qualifying the term
primary beneficiaries for the purpose of entitlement to survivors pension has created the presumption that
marriages contracted after the retirement date of SSS members were entered into for the purpose of
securing the benefits under Rep. Act No. 8282. This presumption, moreover, is conclusive because the
said surviving spouses are not afforded any opportunity to disprove the presence of the illicit purpose.
The proviso, as it creates this conclusive presumption, is unconstitutional because it presumes a fact
which is not necessarily or universally true. In the United States, this kind of presumption is characterized
as an irrebuttable presumption and statutes creating permanent and irrebutable presumptions have long
been disfavored under the due process clause. [27]

In the petitioners case, for example, she asserted that when she and Bonifacio got married in 1997, it was
merely to legalize their relationship and not to commit fraud. This claim is quite believable. After all, they
had been living together since 1980 and, in fact, during that time their eldest child was already twentyfour (24) years old. However, the petitioner was not given any opportunity to prove her claim that she was
Bonifacios bona fide legal spouse as she was automatically disqualified from being considered as his
primary beneficiary. In effect, the petitioner was deprived of the survivors benefits, a property interest,
accruing from the death of Bonifacio without any opportunity to be heard. Standards of due process
require that the petitioner be allowed to present evidence to prove that her marriage to Bonifacio was
contracted in good faith and as his bona fide spouse she is entitled to the survivors pension accruing upon
his death.[28] Hence, the proviso as of the date of his retirement in Section 12-B(d) which deprives the
petitioner and those similarly situated dependent spouses of retired SSS members this opportunity to be
heard must be struck down.

Conclusion
38 | P a g e

Even as the proviso as of the date of his retirement in Section 12-B(d) is nullified, the enumeration of
primary beneficiaries for the purpose of entitlement to survivors pension is not substantially affected since
the following persons are considered as such under Section 8(k) of Rep. Act No. 8282:

(1) The dependent spouse until he or she remarries; and

(2) The dependent legitimate, legitimated or legally adopted, and illegitimate children.

In relation thereto, Section 8(e) thereof qualifies the dependent spouse and dependent children as follows:
(1) The legal spouse entitled by law to receive support from the member;
(2) The legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not gainfully
employed and has not reached twenty-one years (21) of age, or if over twenty-one (21) years of age, he is
congenitally or while still a minor has been permanently incapacitated and incapable of self-support,
physically or mentally.

Finally, the Court concedes that the petitioner did not raise the issue of the validity of the proviso as of the
date of his retirement in Section 12-B(d) of Rep. Act No. 8282. The rule is that the Court does not decide
questions of a constitutional nature unless absolutely necessary to a decision of the case.[29] However,
the question of the constitutionality of the proviso is absolutely necessary for the proper resolution of the
present case. Accordingly, the Court required the parties to present their arguments on this issue and
proceeded to pass upon the same in the exercise of its equity jurisdiction and in order to render substantial
justice to the petitioner who, presumably in her advanced age by now, deserves to receive forthwith the
survivors pension accruing upon the death of her husband.

WHEREFORE, the petition is GRANTED. The Decision dated April 15, 2003 and Resolution dated
December 15, 2003 of the Court of Appeals in CA-G.R. SP No. 69632 are REVERSED and SET ASIDE.
The proviso as of the date of his retirement in Section 12-B(d) of Rep. Act No. 8282 is declared VOID for
being contrary to the due process and equal protection clauses of the Constitution. The Social Security
System cannot deny the claim of petitioner Elena P. Dycaico for survivors pension on the basis of this
invalid proviso.

SO ORDERED.

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FIL-STAR MARITIME CORPORATION, CAPTAIN VICTORIO S. MIGALLOS and

GRANDSLAM ENTERPRISE CORPORATION,
Petitioners,

- versus -

40 | P a g e

HANZIEL O. ROSETE,
Respondent.

G.R. No. 192686

Present:

VELASCO, JR., J., Chairperson,

PERALTA,

ABAD,

PEREZ,* and

MENDOZA, JJ.

Promulgated:
November 23, 2011

x -----------------------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:

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This is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure assailing
the March 23, 2010 Decision[2] and the June 8, 2010 Resolution[3] of the Court of Appeals (CA), in CAG.R. SP No. 103256, which reversed the October 17, 2007 Resolution[4] of the National Labor Relations
Commission (NLRC) and ordered the reinstatement of the May 21, 2007 Decision[5] of the Labor Arbiter
(LA), awarding disability benefits to respondent Hanziel Rosete (respondent).

In 2005, petitioner Fil-Star Maritime Corporation (Fil-Star), the local manning agency of co-petitioner
Grandslam Enterprise Corporation (Grandslam), hired respondent as third officer on board the oceangoing vessel M/V Ansac Asia. He was in charge of the loading and unloading operations of the vessels
cargo primarily consisting of soda ash in bulk. Respondent stated that the nature of his work exposed him
to minute particles of soda ash during the loading and unloading operations. On November 22, 2005,
respondent finished his contract and returned to the Philippines.
Thereafter, the petitioners re-hired respondent to work as second officer on their vessel for a period of
nine (9) months. On January 5, 2006, respondent underwent a pre-employment medical examination
(PEME) with First Medical Team Health Care Specialist Group,[6] the company accredited physician,
and was pronounced fit to work. On board the vessel, he was tasked to make an inventory of the vessels
property for annual inspection. According to respondent, he worked diligently and oftentimes worked odd
hours just to familiarize himself with his new job. He averred that overtime work and the violent motions
of the vessel due to weather inclemency caused undue strain to his eyes and his physical well-being.

On February 14, 2006 or a little over a month from his embarkation, respondent experienced an abrupt
blurring of his left eye. He reported it to his captain and was advised to do an eye wash to relieve his pain
until they reached Chiba, Japan. After the vessel arrived in Chiba, respondent was not able to seek
medical advice because he was tasked to man the ships navigation equipment. Five days later, respondent
was able to receive medical attention in Kawasaki, Japan. Respondent was diagnosed with Central Retinal
Vein Occlusion and immediately underwent three rounds of laser surgery on February 28, 2006, March 2,
2006 and March 4, 2006.

On March 9, 2006, respondent was declared fit for travel and was subsequently repatriated to the
Philippines. Upon arrival in Manila, respondent went to the Metropolitan Hospital but could not get
immediate treatment. On March 19, 2006, he experienced severe pain in his left eye so he insisted that he
be admitted to the hospital. Respondent underwent another series of laser surgery on March 22 and 25,
April 6, 18, and 25, 2006.

On August 11, 2006, Dr. Antonio Say declared respondents left eye to be legally blind with poor
possibility of recovery. Relevant portions of the medical certificate read:

A. Left eye is legally blind

42 | P a g e

B. Partial permanent disability

Partial because the visual activity of the right eye is 20/20.
It is permanent because the poor visual activity of the left eye, hand movement, has poor prognosis
for visual recovery.[7]

The petitioners denied his claim for permanent total disability and only rated his incapacity as Grade 7.
Respondent stressed that, under their Collective Bargaining Agreement (CBA), he should be considered
legally blind meriting entitlement to permanent total disability benefits in the sum of US$105,000.00 for
being unable to perform his job for more than 120 days from his repatriation.

Thus, on August 29, 2006, respondent filed a complaint against Fil-Star, Capt. Victorio S. Migallos and
Grandslam for disability benefits, damages and attorneys fees.

The petitioners averred that after almost a month aboard the vessel, respondent complained of a sudden
blurring of his left eye. They referred him to the Honmoku Hospital where a Dr. Yasuhiko Tomita
diagnosed him with Central Retinal Vein Occlusion, left eye and Neo-Vascular Glaucoma, left eye,
suspicion. After his repatriation, they immediately referred him to the Metropolitan Medical Center where
he was treated and underwent a series of Panretinal Photocoagulation Session to prevent further
neovascular formation. They shouldered the expenses for all these procedures. They, however, argued
that respondent was not qualified for disability benefits, damages and attorneys fees because his illness
was not an occupational disease or work-related.

On May 21, 2007, Labor Arbiter Pablo C. Espiritu, Jr. (the LA) ruled in favor of respondent.[8] The
decretal portion reads:

WHEREFORE, premises considered, respondents Filstar Maritime Corporation and Grandslam

Enterprise Corp. are jointly and severally liable to pay complainant full total and permanent disability
benefits in the amount of US$105,000.00 or its equivalent amount in Philippine currency at the time of
payment.

Respondents are further ordered to pay 10% attorneys fees based on the total judgment award.

All monetary claims are hereby dismissed.

SO ORDERED.[9]

43 | P a g e

The LA reasoned out that respondent left the Philippines in good condition, thus, it could be logically
inferred that he contracted the illness while on board the vessel. As respondent was not able to perform
his job for more than 120 days since his repatriation, he became entitled to permanent disability benefits.
Based on their CBA, respondent should be awarded US$105,000.00.[10]

Not in conformity with the ruling, the petitioners appealed to the NLRC which, in its October 17, 2007
Resolution, modified the L.A. Decision by reducing respondents disability benefits from US$105,000.00
to US$20,900.00.[11] As modified, the decretal portion reads:

WHEREFORE, the assailed Decision dated 21 May 2007 is hereby MODIFIED by ordering the
respondents to pay jointly and severally complainant Hanziel O. Rosete a disability benefit of US$20,900,
the amount equivalent to Grade 7 under POEA Standard Employment Contract.

The payment of ten percent (10%) attorneys fees based on the judgment award is hereby AFFIRMED.

SO ORDERED.[12]

The NLRC ruled that the grant of US$105,000.00 based on the provisions of the CBA had no legal basis
because disability benefits under Article 28 thereon would refer only to permanent disability resulting
from accident while in employment.[13] The NLRC held respondent was entitled to disability benefits but
only up to Grade 7 as recommended by his own physician, Dr. George Pile.[14]

Both parties moved for reconsideration of said decision, but their respective motions were denied by the
NLRC in its Resolution dated January 15, 2008.[15]

Respondent elevated the case to the CA via petition for certiorari under Rule 65 of the Rules of Court.[16]
On March 23, 2010, the CA reversed the NLRCs decision. The fallo reads:

WHEREFORE, the petition is GRANTED. The Resolutions dated October 17, 2007 and January 15,
2008 of the National Labor Relations Commission (NLRC), Quezon City, in NLRC-LAC (OFW-M) No.
07-000018-07(3) NLRC-OFW Case No. 06-08-02629-00 are ANNULLED and SET ASIDE. The Labor
Arbiters Decision dated May 21, 2007 is REINSTATED in full.

44 | P a g e

SO ORDERED.[17]

The CA held that there was no doubt that respondent was unable to work for more than one hundred
twenty days (120) the requisite period for a grant of total disability benefits. Although the petitioners
claimed that their CBA provision should be controlling, the CA clarified that the relevant provisions of
the POEA-SEC pertaining to permanent total disability remain essential parts of the parties valid and
binding contract.[18] The CA further stated that although respondents Central Retinal Vein Occlusion
was not listed as an occupational disease, he successfully established a causal connection from his work
as a seaman to his illness. It stressed that compensability of a non-occupational disease, reasonable proof
and not direct proof of a causal connection between the work and the ailment is required.[19]

Petitioners Motion for Reconsideration[20] was likewise denied by the CA in its June 8, 2010 Resolution.

Hence, this petition.[21]

Petitioners submit the following issues for resolution:

WHETHER OR NOT THE COURT OF APPEALS COMMITTED PATENT AND REVERSIBLE

ERROR IN RULING THAT PRIVATE RESPONDENT HANZIEL O. ROSETE IS ENTITLED TO
TOTAL PERMANENT DISABILITY BENEFITS

II

WHETHER OR NOT THE COURT OF APPEALS COMMITTED PATENT AND REVERSIBLE

ERROR RULING THAT PRIVATE RESPONDENT HANZIEL O. ROSETE IS ENTITLED TO
DISABILITY BENEFITS UNDER THE COLLECTIVE BARGAINING AGREEMENT

III

WHETHER OR NOT THE COURT OF APPEALS COMMITTED PATENT AND REVERSIBLE

ERROR IN RULING THAT PRIVATE RESPONDENT HANZIEL O. ROSETE IS ENTITLED TO
ATTORNEYS FEES.[22]

45 | P a g e

The petitioners contend that the CA erred in ruling that respondent was entitled to permanent and total
disability benefits and for applying the provision of their CBA to award respondent US$105,000.00. They
aver that Article 28 of their CBA only pertains to permanent disability suffered as a result of an
accident.[23]

The petition is partly meritorious.

The first issue is whether respondent is entitled to claim disability benefits from the petitioners.

There is no quibble that respondent is entitled to disability benefits. The Standard Employment Contract
(SEC) for seafarers was created by the Philippine Overseas Employment Administration (POEA)
pursuant to its mandate under Executive Order (E.O.) No. 247[24] dated July 21, 1987 to secure the best
terms and conditions of employment of Filipino contract workers and ensure compliance therewith and to
promote and protect the well-being of Filipino workers overseas.[25]

In this case, respondent was diagnosed with Central Retinal Vein Occlusion of his left eye. Central retinal
vein occlusion is medically defined as the blockage of the central retinal vein by a thrombus. It causes
painless vision loss which is usually sudden, but it can also occur gradually over a period of days to
weeks.[26] This condition, despite numerous medical procedures undertaken, eventually led to a total loss
of sight of respondents left eye. Loss of one bodily function falls within the definition of disability which
is essentially "loss or impairment of a physical or mental function resulting from injury or sickness."[27]

Although Central Retinal Vein Occlusion is not listed as one of the occupational diseases under Section
32-A of the 2000 Amended Terms of POEA-SEC,[28] the resulting disability which is loss of sight of one
eye, is specifically mentioned in Section 32 thereof (Schedule of Disability or Impediment for Injuries
Suffered and Diseases Including Occupational Diseases or Illness Contracted). More importantly, Section
20 (B), paragraph (4) states that those illnesses not listed in Section 32 of this Contract are disputably
presumed as work-related.[29]

The disputable presumption that a particular injury or illness that results in disability, or in some cases
death, is work-related stands in the absence of contrary evidence. In the case at bench, the said
presumption was not overturned by the petitioners. Although, the employer is not the insurer of the health
of his employees, he takes them as he finds them and assumes the risk of liability.[30] Consequently, the
Court concurs with the finding of the courts below that respondents disability is compensable.

Now, the Court shall determine whether respondent is entitled to be awarded permanent total or
permanent partial disability benefits.

46 | P a g e

It should be noted that the company-designated physician assessed the loss of respondents left eye as a
permanent partial disability while respondents own physician indicated his disability as Grade 7.

The Court is more inclined to rule, however, that respondent is suffering from a permanent total disability
as he was unable to return to his job that he was trained to do for more than one hundred twenty days
already. The recent case of Valenzona v. Fair Shipping Corporation, et al.,[31] citing Quitoriano v.
Jebsens Maritime, Inc.,[32] elucidated the concept of permanent total disability, in this wise:

Thus, Court has applied the Labor Code concept of permanent total disability to the case of seafarers. x x
x

xxxx

There are three kinds of disability benefits under the Labor Code, as amended by P.D. No. 626: (1)
temporary total disability, (2) permanent total disability, and (3) permanent partial disability. Section 2,
Rule VII of the Implementing Rules of Book V of the Labor Code differentiates the disabilities as
follows:

Sec. 2. Disability. - (a) A total disability is temporary if as a result of the injury or sickness the employee
is unable to perform any gainful occupation for a continuous period not exceeding 120 days, except as
otherwise provided for in Rule X of these Rules.

(b) A disability is total and permanent if as a result of the injury or sickness the employee is unable to
perform any gainful occupation for a continuous period exceeding 120 days, except as otherwise provided
for in Rule X of these Rules.

(c) A disability is partial and permanent if as a result of the injury or sickness the employee suffers a
permanent partial loss of the use of any part of his body.

In Vicente v. ECC (G.R. No. 85024, January 23, 1991, 193 SCRA 190, 195):

x x x the test of whether or not an employee suffers from 'permanent total disability' is a showing of the
capacity of the employee to continue performing his work notwithstanding the disability he incurred.
Thus, if by reason of the injury or sickness he sustained, the employee is unable to perform his customary
job for more than 120 days and he does not come within the coverage of Rule X of the Amended Rules on
47 | P a g e

Employees Compensability (which, in more detailed manner, describes what constitutes temporary total
disability), then the said employee undoubtedly suffers from 'permanent total disability' regardless of
whether or not he loses the use of any part of his body.

A total disability does not require that the employee be absolutely disabled or totally paralyzed. What is
necessary is that the injury must be such that the employee cannot pursue his usual work and earn
therefrom (Austria v. Court of Appeals, G.R. No. 146636, Aug. 12, 2002, 387 SCRA 216, 221). On the
other hand, a total disability is considered permanent if it lasts continuously for more than 120 days.
Thus, in the very recent case of Crystal Shipping, Inc. v. Natividad (G.R. No. 134028, December 17,
1999, 321 SCRA 268, 270-271), we held:

Permanent disability is inability of a worker to perform his job for more than 120 days, regardless of
whether or not he lose[s] the use of any part of his body. x x x

Total disability, on the other hand, means the disablement of an employee to earn wages in the same kind
of work of similar nature that he was trained for, or accustomed to perform, or any kind of work which a
person of his mentality and attainments could do. It does not mean absolute helplessness. In disability
compensation, it is not the injury which is compensated, but rather it is the incapacity to work resulting in
the impairment of one's earning capacity.[33] [Emphasis and underscoring supplied]

A total disability does not require that the employee be completely disabled, or totally paralyzed. What is
necessary is that the injury must be such that the employee cannot pursue his or her usual work and earn
from it.[34] On the other hand, a total disability is considered permanent if it lasts continuously for more
than 120 days.[35] What is crucial is whether the employee who suffers from disability could still
perform his work notwithstanding the disability he incurred. Evidently, respondent was not able to return
to his job as a seafarer after his left eye was declared legally blind. Records show that the petitioners did
not give him a new overseas assignment after his disability. This only shows that his disability effectively
barred his chances to be deployed abroad as an officer of an ocean-going vessel.

Therefore, it is fitting that respondent be entitled to permanent total disability benefits considering that he
would not able to resume his position as a maritime officer and the probability that he would be hired by
other maritime employers would be close to impossible. Indeed, a sight-impaired maritime applicant
cannot stand in the same footing as his healthy co-applicant.

The next issue to be resolved is whether respondents entitlement to permanent total disability benefits
should be based on the CBA or his POEA-SEC which integrated the 2000 Amended Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels.

48 | P a g e

The Court holds that respondent is entitled to claim permanent total disability benefits based on his
POEA-SEC and not based on their CBA as earlier ruled by the L.A. and later affirmed by the CA.

The CBA provisions on disability are not applicable to respondents case because Article 28 thereon
specifically refers to disability sustained after an accident. Article 28 of the ITF-JSU/AMOSUP CBA
specifically states that:

Article 28: Disability

28.1 A seafarer who suffers permanent disability as a result of an accident whilst in the employment of
the Company regardless of fault, including accidents occurring while travelling to or from the ship, and
whose ability to work as a seafarer as a result thereof, but excluding permanent disability due to wilful
acts, shall be in addition to sick pay, be entitled to compensation according to the provisions of this
Agreement. [Emphasis supplied]

Respondent failed to show that the blurring of his left eye was caused by an accident on board the ship.
Thus, Article 28 of the CBA cannot be used to compute his disability benefits.

Accordingly, what should govern the computation of his disability benefits is the POEA-SEC
incorporating the 2000 POEA Amended Standard Terms and Conditions. Under Section 20 (B),
paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions, to wit:

SECTION 20. COMPENSATION AND BENEFITS

xxxx

B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS

The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of
his contract are as follows:

xxxx

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6. In case of permanent total or partial disability of the seafarer caused by either injury or illness the
seafarer shall be compensated in accordance with the schedule of benefits enumerated in Section 32 of
this Contract. Computation of his benefits arising from an illness or disease shall be governed by the rates
and the rules of compensation applicable at the time the illness or disease was contracted. [Emphases and
underscoring supplied]

Based on the schedule of disability under Section 32 of the 2000 POEA Amended Standard Terms and
Conditions, permanent total disability is classified as Grade 1. Thus, respondents disability benefit should
be computed as follows:

Grade 1: US$50,000.00 x 120% = US$60,000.00

As to the award of attorneys fees, the Court likewise affirms the ruling that respondent is entitled to it as
provided under Article 2208 of the Civil Code:

Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:

xxxx

(8) In actions for indemnity under workmens compensation and employers liability laws;

xxxx

In the case at bench, respondent was compelled to litigate in order to claim disability benefits from the
petitioners. Thus, the award of attorneys fees is justified pursuant to Article 2208 (8) of the Civil Code.

WHEREFORE, the petition is PARTIALLY GRANTED. The March 23, 2010 Decision of the Court of
Appeals is hereby MODIFIED in the sense that petitioners Fil-star Maritime Corporation and Grandslam
Enterprise Corp. are jointly and severally liable to pay respondent Hanziel O. Rosete full total and
permanent disability benefits in the amount of US$60,000.00 or its equivalent amount in Philippine
currency at the time of payment. All other aspects of the CA Decision stand.

SO ORDERED.

50 | P a g e

ROMARICO J. MENDOZA,
Petitioner,

- versus -

PEOPLE OF THE PHILIPPINES,

51 | P a g e

Respondent.
G.R. No. 183891

Present:

CARPIO MORALES, J.,

Chairperson,
BRION,
BERSAMIN,
ABAD,* and
VILLARAMA, JR., JJ.

Promulgated:
August 3, 2010

x--------------------------------------------------x

DECISION
CARPIO MORALES, J.:
For failure to remit the Social Security System (SSS) premium contributions of employees of the Summa
Alta Tierra Industries, Inc. (SATII) of which he was president, Romarico J. Mendoza (petitioner) was
convicted of violation of Section 22(a) and (d) vis--vis Section 28 of R.A. No. 8282 or the Social Security
Act of 1997 by the Regional Trial Court of Iligan City, Branch 4. His conviction was affirmed by the
Court of Appeals.[1]

The Information against petitioner[2] reads:

xxxx

That sometime during the month of August 1998 to July 1999, in the City of Iligan, Philippines, and
within the jurisdiction of this Honorable Court, the said accused, being then the proprietor of Summa Alta
Tierra Industries, Inc., duly registered employer with the Social Security System (SSS), did then and there
52 | P a g e

willfully, unlawfully and feloniously fail and/or refuse to remit the SSS premium contributions in favor of
its employees amounting to P421, 151.09 to the prejudice of his employees.

Contrary to and in violation of Sec. 22(a) and (d) in relation to Sec. 28 of Republic Act No. 8282, as
amended (emphasis and underscoring supplied)

The monthly premium contributions of SATII employees to SSS which petitioner admittedly failed to
remit covered the period August 1998 to July 1999[3] amounting to P421,151.09 inclusive of
penalties.[4]

After petitioner was advised by the SSS to pay the above-said amount, he proposed to settle it over a
period of 18 months[5] which proposal the SSS approved by Memorandum of September 12, 2000.[6]
Despite the grant of petitioners request for several extensions of time to settle the delinquency in
installments,[7] petitioner failed, hence, his indictment.

Petitioner sought to exculpate himself by explaining that during the questioned period, SATII shut down
due to the general decline in the economy.[8]

Finding for the prosecution, the trial court, as reflected above, convicted petitioner, disposing as follows:

WHEREFORE, premises considered, the Court finds Romarico J. Mendoza, guilty as charged beyond
reasonable doubt. Accordingly, he is hereby meted the penalty of 6 years and 1 day to 8 years.

The accused is further ordered to pay the Social Security System the unpaid premium contributions of his
employees including the penalties in the sum of P421, 151.09.
SO ORDERED. [9] (emphasis supplied)

And as also reflected above, the Court of Appeals affirmed the trial courts decision, by Decision of July
March 5, 2007,[10] it noting that the Social Security Act is a special law, hence, lack of criminal intent or
good faith is not a defense in the commission of the proscribed act.

53 | P a g e

The appellate court brushed aside petitioners claim that he is merely a conduit of SATII and, therefore,
should not be held personally liable for its liabilities. It held that petitioner, as President, Chairman and
Chief Executive Officer of SATII, is the managing head who is liable for the act or omission penalized
under Section 28(f) of the Social Security Act.

Petitioner contended in his motion for reconsideration that Section 28(f) of the Act which reads:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or
any other institution, its managing head, directors or partners shall be liable for the penalties provided in
this Act for the offense.

should be interpreted as follows:

If an association, the one liable is the managing head; if a partnership, the ones liable are the partners; and
if a corporation, the ones liable are the directors. (underscoring supplied)

The appellate court denied petitioners motion, hence, the present petition for review on certiorari.

Petitioner maintains, inter alia, that the managing head or president or general manager of a corporation is
not among those specifically mentioned as liable in the above-quoted Section 28(f). And he calls attention
to an alleged congenital infirmity in the Information[11] in that he was charged as proprietor and not as
director of SATII.

Further, petitioner claims that the lower courts erred in penalizing him with six years and one day to eight
years of imprisonment considering the mitigating and alternative circumstances present, namely: his
being merely vicariously liable; his good faith in failing to remit the contributions; his payment of the
premium contributions of SATII out of his personal funds; and his being economically useful, given his
academic credentials, he having graduated from a prime university in Manila and being a reputable
businessman.

The petition lacks merit.

Remittance of contribution to the SSS under Section 22(a) of the Social Security Act is mandatory.
United Christian Missionary Society v. Social Security Commission[12] explicitly explains:

54 | P a g e

No discretion or alternative is granted respondent Commission in the enforcement of the laws mandate
that the employer who fails to comply with his legal obligation to remit the premiums to the System
within the prescribed period shall pay a penalty of three 3% per month. The prescribed penalty is
evidently of a punitive character, provided by the legislature to assure that employers do not take lightly
the States exercise of the police power in the implementation of the Republics declared policy to develop,
establish gradually and perfect a social security system which shall be suitable to the needs of the people
throughout the Philippines and (to) provide protection to employers against the hazards of disability,
sickness, old age and death.[Section 2, Social Security Act; Roman Catholic Archbishop v. Social
Security Commission, 1 SCRA 10, January 20, 1961] In this concept, good faith or bad faith is rendered
irrelevant, since the law makes no distinction between an employer who professes good reasons for
delaying the remittance of premiums and another who deliberately disregards the legal duty imposed upon
him to make such remittance. From the moment the remittance of premiums due is delayed, the penalty
immediately attaches to the delayed premium payments by force of law. (emphasis and underscoring
supplied)

Failure to comply with the law being malum prohibitum, intent to commit it or good faith is
immaterial.[13]

The provision of the law being clear and unambiguous, petitioners interpretation that a proprietor, as he
was designated in the Information, is not among those specifically mentioned under Sec. 28(f) as liable,
does not lie. For the word connotes management, control and power over a business entity.[14] There is
thus, as Garcia v. Social Security Commission Legal and Collection enjoins,[15]

. . . no need to resort to statutory construction [for] Section 28(f) of the Social Security Law imposes
penalty on:

(1) the managing head;

(2) directors; or

(3) partners, for offenses committed by a juridical person. (emphasis supplied)

The term managing head in Section 28(f) is used, in its broadest connotation, not to any specific
organizational or managerial nomenclature. To heed petitioners reasoning would allow unscrupulous
businessmen to conveniently escape liability by the creative adoption of managerial titles.
55 | P a g e

While the Court affirms the appellate courts decision, there is a need to modify the penalty imposed on
petitioner. The appellate court affirmed the trial courts imposition of penalty on the basis of Sec. 28(e) of
the Social Security Act which reads:

Sec. 28. Penal Clause. (e) Whoever fails or refuses to comply with the provisions of this Act or with the
rules and regulations promulgated by the Commission, shall be punished by a fine of not less than Five
thousand pesos (P5,0000.00) nor more than Twenty thousand pesos (P5,000.00) nor more than Twenty
thousand pesos (P20,000.00), or imprisonment for not less than six (6) years and one (1) day nor more
than twelve (12) years or both, at the discretion of the court. x x x

The proper penalty for this specific offense committed by petitioner is, however, provided in Section 28
(h) of the same Act which reads:

Sec. 28. Penal Clause (h) Any employer who after deducting the monthly contributions or loan
amortizations from his employees compensation, fails to remit the said deductions to the SSS within
thirty (30) days from the date they became due shall be presumed to have misappropriated such
contributions or loan amortizations and shall suffer the penalties provided in Article Three hundred fifteen
[Art. 315] of the Revised Penal Code. (emphasis and underscoring supplied)

Article 315 of the Revised Penal Code provides that the penalty in this case should be

x x x prision correccional in its maximum period to prision mayor in its minimum period, if the amount of
the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if such amount exceeds the latter
sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for
each additional 10,000 pesos; but the penalty which may be imposed shall not exceed twenty years. In
such cases, and in connection with the accessory penalties which may be imposed and for the purpose of
the other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal, as the
case may be;

x x x x.

Since the above-quoted Sec. 28 (h) of the Social Security Act (a special law) adopted the penalty from the
Revised Penal Code, the Indeterminate Sentence Law also finds application.[16]

56 | P a g e

Taking into account the misappropriated P421,151.09 and the Courts discourse in People v. Gabres[17]
on the proper imposition of the indeterminate penalty in Article 315, the appropriate penalty in this case
should range from four (4) years and two (2) months of prision correccional, as minimum, to twenty (20)
years of reclusion temporal, as maximum.

WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-G.R. CR No. 27630 are
AFFIRMED with MODIFICATION. Petitioner is sentenced to an indeterminate prison term of four (4)
years and two (2) months of prision correccional, as minimum, to twenty (20) years of reclusion temporal,
as maximum.

Costs against petitioner.

SO ORDERED.

G.R. No. 170735

December 17, 2007

IMMACULADA L. GARCIA, petitioner,

vs.
SOCIAL SECURITY COMMISSION LEGAL AND COLLECTION, SOCIAL SECURITY
SYSTEM, respondents.

DECISION

57 | P a g e

CHICO-NAZARIO, J.:

This is petition for review on Certiorari under Rule 45 of the Rules of Court is assailing the 2 June 2005
Decision1 and 8 December 2005 Resolution2 both of the Court of Appeals in CA-G.R. SP No. 85923. the
appellate court affirmed the --- Order and --- Resolution both of the Social Security Commission (SSC) in
SSC Case No. 10048, finding Immaculada L. Garcia (Garcia), the sole surviving director of Impact
Corporation, petitioner herein, liable for unremitted, albeit collected, SSS contributions.

Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and Consuelo
Villanueva were directors3 of Impact Corporation. The corporation was engaged in the business of
manufacturing aluminum tube containers and operated two factories. One was a "slug" foundry-factory
located in Cuyapo, Nueva Ecija, while the other was an Extrusion Plant in Cainta, Metro Manila, which
processed the "slugs" into aluminum collapsible tubes and similar containers for toothpaste and other
related products.

Records show that around 1978, Impact Corporation started encountering financial problems. By 1980,
labor unrest besieged the corporation.

In March 1983, Impact Corporation filed with the Securities and Exchange Commission (SEC) a Petition
for Suspension of Payments,4 docketed as SEC Case No. 02423, in which it stated that:

[Impact Corporation] has been and still is engaged in the business of manufacturing aluminum tube
containers x x x.

xxxx

In brief, it is an on-going, viable, and profitable enterprise.

On 8 May 1985, the union of Impact Corporation filed a Notice of Strike with the Ministry of Labor
which was followed by a declaration of strike on 28 July 1985. Subsequently, the Ministry of Labor
certified the labor dispute for compulsory arbitration to the National Labor Relations Commission
(NLRC) in an Order5 dated 25 August 1985. The Ministry of Labor, in the same Order, noted the
inability of Impact Corporation to pay wages, 13th month pay, and SSS remittances due to cash liquidity
problems. A portion of the order reads:

58 | P a g e

On the claims of unpaid wages, unpaid 13th month pay and non-remittance of loan amortization and SSS
premiums, we are for directing the company to pay the same to the workers and to remit loan
amortizations and SSS premiums previously deducted from their wages to the Social Security System.
Such claims were never contested by the company both during the hearing below and in our office. In
fact, such claims were admitted by the company although it alleged cash liquidity as the main reason for
such non-payment.

WHEREFORE, the dispute at Impact Corporation is hereby certified to the National Labor Relations
Commission for compulsory arbitration in accordance with Article 264 (g) of the Labor Code, as
amended.

xxxx

The company is directed to pay all the entitled workers unpaid wages, unpaid 13th month pay and to
remit to the Social Security System loan amortizations and SSS premiums previously deducted from the
wages of the workers.6

On 3 July 1985, the Social Security System (SSS), through its Legal and Collection Division (LCD), filed
a case before the SSC for the collection of unremitted SSS premium contributions withheld by Impact
Corporation from its employees. The case which impleaded Impact Corporation as respondent was
docketed as SSC Case No. 10048.7

Impact Corporation was compulsorily covered by the SSS as an employer effective 15 July 1963 and was
assigned Employer I.D. No. 03-2745100-21.

In answer to the allegations raised in SSC Case No. 10048, Impact Corporation, through its then Vice
President Ricardo de Leon, explained in a letter dated 18 July 1985 that it had been confronted with
strikes in 1984 and layoffs were effected thereafter. It further argued that the P402,988.93 is erroneous. It
explained among other things, that its operations had been suspended and that it was waiting for the
resolution on its Petition for Suspension of Payments by the SEC under SEC Case No. 2423. Despite due
notice, the corporation failed to appear at the hearings. The SSC ordered the investigating team of the SSS
to determine if it can still file its claim for unpaid premium contributions against the corporation under the
Petition for Suspension of Payments.

In the meantime, the Petition for Suspension of Payments was dismissed which was pending before the
SEC in an Order8 dated 12 December 1985. Impact Corporation resumed operations but only for its
winding up and dissolution.9 Due to Impact Corporations liability and cash flow problems, all of its
assets, namely, its machineries, equipment, office furniture and fixtures, were sold to scrap dealers to
answer for its arrears in rentals.
59 | P a g e

On 1 December 1995, the SSS-LCD filed an amended Petition10 in SSC Case No. 10048 wherein the
directors of Impact Corporation were directly impleaded as respondents, namely: Eduardo de Leon,
Ricardo de Leon,11 Pacita Fernandez, Consuelo Villanueva, and petitioner. The amounts sought to be
collected totaled P453,845.78 and P10,856.85 for the periods August 1980 to December 1984 and August
1981 to July 1984, respectively, and the penalties for late remittance at the rate of 3% per month from the
date the contributions fell due until fully paid pursuant to Section 22(a) of the Social Security Law,12 as
amended, in the amounts of P49,941.67 and P2,474,662.82.

Period

Unremitted Amount

Penalties
(3% Interest Per Month)

Total

August 1980 to December 1984

P 453,845.78

P49, 941.67

503,787.45

August 1981 to July 1984

P 10,856.85

P2, 474, 662.82

60 | P a g e

2,485,519.67

Summonses were not served upon Eduardo de Leon, Pacita Fernandez, and Consuelo Villanueva, their
whereabouts unknown. They were all later determined to be deceased. On the other hand, due to failure to
file his responsive pleading, Ricardo de Leon was declared in default.

Petitioner filed with the SSC a Motion to Dismiss13 on grounds of prescription, lack of cause of action
and cessation of business, but the Motion was denied for lack of merit.14 In her Answer with
Counterclaim15 dated 20 May 1999, petitioner averred that Impact Corporation had ceased operations in
1980. In her defense, she insisted that she was a mere director without managerial functions, and she
ceased to be such in 1982. Even as a stockholder and director of Impact Corporation, petitioner contended
that she cannot be made personally liable for the corporate obligations of Impact Corporation since her
liability extended only up to the extent of her unpaid subscription, of which she had none since her
subscription was already fully paid. The petitioner raised the same arguments in her Position Paper. 16

On 23 January 1998, Ricardo de Leon died following the death, too, of Pacita Fernandez died on 7
February 2000. In an Order dated 11 April 2000, the SSC directed the System to check if Impact
Corporation had leviable properties to which the investigating team of respondent SSS manifested that the
Impact Corporation had already been dissolved and its assets disposed of.17

In a Resolution dated 28 May 2003, the Social Security Commission ruled in favor of SSS and declared
petitioner liable to pay the unremitted contributions and penalties, stating the following:

WHEREFORE, premises considered, this Commission finds, and so holds, that respondents Impact
Corporation and/or Immaculada L. Garcia, as director and responsible officer of the said corporation, is
liable to pay the SSS the amounts of P442,988.93, representing the unpaid SS contributions of their
employees for the period August 1980 to December 1984, not inclusive, and P10,856.85, representing the
balance of the unpaid SS contributions in favor of Donato Campos, Jaime Mascarenas, Bonifacio Franco
and Romeo Fullon for the period August 1980 to December 1984, not inclusive, as well as the 3% per
month penalty imposed thereon for late payment in the amounts of P3,194,548.63 and P78,441.33,
respectively, computed as of April 30, 2003. This is without prejudice to the right of the SSS to collect
the penalties accruing after April 30, 2003 and to institute other appropriate actions against the respondent
corporation and/or its responsible officers.

Should the respondents pay their liability for unpaid SSS contributions within sixty (60) days from receipt
of a copy of this Resolution, the 3% per month penalty for late payment thereof shall be deemed
condoned pursuant to SSC Res. No. 397-S.97, as amended by SSC Res. Nos. 112-S.98 and 982-S.99,
implementing the provision on condonation of penalty under Section 30 of R.A. No. 8282.

61 | P a g e

In the event the respondents fail to pay their liabilities within the aforestated period, let a writ of
execution be issued, pursuant to Section 22 (c) [2] of the SS Law, as amended, for the satisfaction of their
liabilities to the SSS.18

Petitioner filed a Motion for Reconsideration19 of the afore-quoted Decision but it was denied for lack of
merit in an Order20 dated 4 August 2004, thus:

Nowhere in the questioned Resolution dated May 28, 2003 is it stated that the other directors of the
defunct Impact Corporation are absolved from their contribution and penalty liabilities to the SSS. It is
certainly farthest from the intention of the petitioner SSS or this Commission to pin the entire liability of
Impact Corporation on movant Immaculada L. Garcia, to the exclusion of the directors of the corporation
namely: Eduardo de Leon, Ricardo de Leon, Pacita Fernandez and Conzuelo Villanueva, who were all
impleaded as parties-respondents in this case.

The case record shows that there was failure of service of summonses upon respondents Eduardo de
Leon, Pacita Fernandez and Conzuelo Villanueva, who are all deceased, for the reason that their
whereabouts are unknown. Moreover, neither the legal heirs nor the estate of the defaulted respondent
Ricardo de Leon were substituted as parties-respondents in this case when he died on January 23, 1998.
Needless to state, the Commission did not acquire jurisdiction over the persons or estates of the other
directors of Impact Corporation, hence, it could not validly render any pronouncement as to their
liabilities in this case.

Furthermore, the movant cannot raise in a motion for reconsideration the defense that she was no longer a
director of Impact Corporation in 1982, when she was allegedly eased out by the managing directors of
Impact Corporation as purportedly shown in the Deed of Sale and Assignment of Shares of Stock dated
January 22, 1982. This defense was neither pleaded in her Motion to Dismiss dated January 17, 1996 nor
in her Answer with Counterclaim dated May 18, 1999 and is, thus, deemed waived pursuant to Section 1,
Rule 9 of the 1997 Rules of Civil Procedure, which has suppletory application to the Revised Rules of
Procedure of the Commission.

Finally, this Commission has already ruled in the Order dated April 27, 1999 that since the original
Petition was filed by the SSS on July 3, 1985, and was merely amended on December 1, 1995 to implead
the responsible officers of Impact Corporation, without changing its causes of action, the same was
instituted well within the 20-year prescriptive period provided under Section 22 (b) of the SS Law, as
amended, considering that the contribution delinquency assessment covered the period August 1980 to
December 1984.

In view thereof, the instant Motion for Reconsideration is hereby denied for lack of merit.

62 | P a g e

Petitioner elevated her case to the Court of Appeals via a Petition for Review. Respondent SSS filed its
Comment dated 20 January 2005, and petitioner submitted her Reply thereto on 4 April 2005.

The Court of Appeals, applying Section 28(f) of the Social Security Law,21 again ruled against petitioner.
It dismissed the petitioners Petition in a Decision dated 2 June 2005, the dispositive portion of which
reads:

WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. The assailed
Resolution dated 28 May 2003 and the Order dated 4 August 2004 of the Social Security Commission are
AFFIRMED in toto.22

Aggrieved, petitioner filed a Motion for Reconsideration of the appellate courts Decision but her Motion
was denied in a Resolution dated 8 December 2005.

Hence, the instant Petition in which petitioner insists that the Court of Appeals committed grave error in
holding her solely liable for the collected but unremitted SSS premium contributions and the consequent
late penalty payments due thereon. Petitioner anchors her Petition on the following arguments:

I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A MANAGING HEAD, DIRECTOR OR
PARTNER IS LIABLE ONLY FOR THE PENALTIES OF THE EMPLOYER CORPORATION AND
NOT FOR UNPAID SSS CONTRIBUTIONS OF THE EMPLOYER CORPORATION.

II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS, DIRECTORS OR PARTNERS WHO
SHALL BE LIABLE TOGETHER WITH THE CORPORATION. IN THIS CASE, PETITIONER HAS
CEASED TO BE A STOCKHOLDER OF IMPACT CORPORATION IN 1982. EVEN WHILE SHE
WAS A STOCKHOLDER, SHE NEVER PARTICIPATED IN THE DAILY OPERATIONS OF
IMPACT CORPORATION.

III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY DIRECTORS, TRUSTEES OR

OFFICERS WHO PARTICIPATE IN UNLAWFUL ACTS OR ARE GUILTY OF GROSS
NEGLIGENCE AND BAD FAITH SHALL BE PERSONALLY LIABLE. OTHERWISE, BEING A
MERE STOCKHOLDER, SHE IS LIABLE ONLY TO THE EXTENT OF HER SUBSCRIPTION.

IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE ECONOMIC LOSSES, EVENTS

WHICH WERE NEITHER DESIRED NOR CAUSED BY ANY ACT OF THE PETITIONER. THUS,
BY REASON OF FORTUITOUS EVENTS, THE PETITIONER SHOULD BE ABSOLVED FROM
LIABILITY.
63 | P a g e

V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED MISERABLY IN EXERTING EFFORTS

TO ACQUIRE JURISDICTION OVER THE LEVIABLE ASSETS OF IMPACT CORPORATION,
PERSON/S AND/OR ESTATE/S OF THE OTHER DIRECTORS OR OFFICERS OF IMPACT
CORPORATION.

VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN NOT RENDERING A JUDGMENT

BY DEFAULT AGAINST THE DIRECTORS UPON WHOM IT ACQUIRED JURISDICTION.

Based on the foregoing, petitioner prays that the Decision dated 2 June 2005 and the Resolution dated 8
December 2005 of the Court of Appeals be reversed and set aside, and a new one be rendered absolving
her of any and all liabilities under the Social Security Law.

In sum, the core issue to be resolved in this case is whether or not petitioner, as the only surviving director
of Impact Corporation, can be made solely liable for the corporate obligations of Impact Corporation
pertaining to unremitted SSS premium contributions and penalties therefore.

As a covered employer under the Social Security Law, it is the obligation of Impact Corporation under the
provisions of Sections 18, 19 and 22 thereof, as amended, to deduct from its duly covered employees
monthly salaries their shares as premium contributions and remit the same to the SSS, together with the
employers shares of the contributions to the petitioner, for and in their behalf.

From all indications, the corporation has already been dissolved. Respondents are now going after
petitioner who is the only surviving director of Impact Corporation.

A cursory review of the alleged grave errors of law committed by the Court of Appeals above reveals
there seems to be no dispute as to the assessed liability of Impact Corporation for the unremitted SSS
premiums of its employees for the period January 1980 to December 1984.

There is also no dispute as to the fact that the employees SSS premium contributions have been deducted
from their salaries by Impact Corporation.

Petitioner in assailing the Court of Appeals Decision, distinguishes the penalties from the unremitted or
unpaid SSS premium contributions. She points out that although the appellate court is of the opinion that
the concerned officers of an employer corporation are liable for the penalties for non-remittance of
premiums, it still affirmed the SSC Resolution holding petitioner liable for the unpaid SSS premium
contributions in addition to the penalties.
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Petitioner avers that under the aforesaid provision, the liability does not include liability for the
unremitted SSS premium contributions.

Petitioners argument is ridiculous. The interpretation petitioner would like us to adopt finds no support in
law or in jurisprudence. While the Court of Appeals Decision provided that Section 28(f) refers to the
liabilities pertaining to penalty for the non-remittance of SSS employee contributions, holding that it is
distinct from the amount of the supposed SSS remittances, petitioner mistakenly concluded that Section
28(f) is applicable only to penalties and not to the liability of the employer for the unremitted premium
contributions. Clearly, a simplistic interpretation of the law is untenable. It is a rule in statutory
construction that every part of the statute must be interpreted with reference to the context, i.e., that every
part of the statute must be considered together with the other parts, and kept subservient to the general
intent of the whole enactment.23 The liability imposed as contemplated under the foregoing Section 28(f)
of the Social Security Law does not preclude the liability for the unremitted amount. Relevant to Section
28(f) is Section 22 of the same law.

SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the preceding Section shall be
remitted to the SSS within the first ten (10) days of each calendar month following the month for which
they are applicable or within such time as the Commission may prescribe. Every employer required to
deduct and to remit such contributions shall be liable for their payment and if any contribution is not paid
to the SSS as herein prescribed, he shall pay besides the contribution a penalty thereon of three percent
(3%) per month from the date the contribution falls due until paid. If deemed expedient and advisable by
the Commission, the collection and remittance of contributions shall be made quarterly or semi-annually
in advance, the contributions payable by the employees to be advanced by their respective employers:
Provided, That upon separation of an employee, any contribution so paid in advance but not due shall be
credited or refunded to his employer.

Under Section 22(a), every employer is required to deduct and remit such contributions penalty refers to
the 3% penalty that automatically attaches to the delayed SSS premium contributions. The spirit, rather
than the letter of a law determines construction of a provision of law. It is a cardinal rule in statutory
construction that in interpreting the meaning and scope of a term used in the law, a careful review of the
whole law involved, as well as the intendment of the law, must be made.24 Nowhere in the provision or
in the Decision can it be inferred that the persons liable are absolved from paying the unremitted premium
contributions.

Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply them
regardless of personal belief or predilections - when the law is unambiguous and unequivocal, application
not interpretation thereof is imperative.25 However, where the language of a statute is vague and
ambiguous, an interpretation thereof is resorted to. An interpretation thereof is necessary in instances
where a literal interpretation would be either impossible or absurd or would lead to an injustice. A law is
deemed ambiguous when it is capable of being understood by reasonably well-informed persons in either
of two or more senses.26 The fact that a law admits of different interpretations is the best evidence that it
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is vague and ambiguous.27 In the instant case, petitioner interprets Section 28(f) of the Social Security
Law as applicable only to penalties and not to the liability of the employer for the unremitted premium
contributions. Respondents present a more logical interpretation that is consistent with the provisions as a
whole and with the legislative intent behind the Social Security Law.

This Court cannot be made to accept an interpretation that would defeat the intent of the law and its
legislators.28

Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the Social
Security Law, a mere director or officer of an employer corporation, and not necessarily a "managing"
director or officer, can be held liable for the unpaid SSS premium contributions.

Section 28(f) of the Social Security Law provides the following:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or
any other institution, its managing head, directors or partners shall be liable to the penalties provided in
this Act for the offense.

This Court agrees in petitioners observation that the SSS did not even deny nor rebut the claim that
petitioner was not the "managing head" of Impact Corporation. However, the Court of Appeals rightly
held that petitioner, as a director of Impact Corporation, is among those officers covered by Section 28(f)
of the Social Security Law.

Petitioner invokes the rule in statutory construction called ejusdem generic; that is, where general words
follow an enumeration of persons or things, by words of a particular and specific meaning, such general
words are not to be construed in their widest extent, but are to be held as applying only to persons or
things of the same kind or class as those specifically mentioned. According to petitioner, to be held liable
under Section 28(f) of the Social Security Law, one must be the "managing head," "managing director,"
or "managing partner." This Court though finds no need to resort to statutory construction. Section 28(f)
of the Social Security Law imposes penalty on:

(1) the managing head;

(2) directors; or

(3) partners, for offenses committed by a juridical person

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The said provision does not qualify that the director or partner should likewise be a "managing director"
or "managing partner."29 The law is clear and unambiguous.

Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only directors,
trustees or officers who participate in unlawful acts or are guilty of gross negligence and bad faith shall be
personally liable, and that being a mere stockholder, she is liable only to the extent of her subscription.

Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers, provides:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly
vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad
faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.

Basic is the rule that a corporation is invested by law with a personality separate and distinct from that of
the persons composing it as well as from that of any other legal entity to which it may be related. A
corporation is a juridical entity with legal personality separate and distinct from those acting for and in its
behalf and, in general, from the people comprising it. Following this, the general rule applied is that
obligations incurred by the corporation, acting through its directors, officers and employees, are its sole
liabilities.30 A director, officer, and employee of a corporation are generally not held personally liable for
obligations incurred by the corporation.

Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to
warrant the disregard of its independent being and the lifting of the corporate veil. This situation might
arise when a corporation is used to evade a just and due obligation or to justify a wrong, to shield or
perpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a subterfuge to commit
injustice and so circumvent the law.31 Thus, Section 31 of the Corporation Law provides:

Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held solidarily
liable with the corporation in the following instances:

1. When directors and trustees or, in appropriate cases, the officers of

a corporation--

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(a) vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and
other persons.

2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary his written objection thereto.

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and
solidarily liable with the Corporation.

4. When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action. 32

The aforesaid provision states:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly
vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad
faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.

The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit the
SSS premium contributions falls exactly under the fourth situation. Section 28(f) of the Social Security
Law imposes a civil liability for any act or omission pertaining to the violation of the Social Security
Law, to wit:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or
any other institution, its managing head, directors or partners shall be liable to the penalties provided in
this Act for the offense.

In fact, criminal actions for violations of the Social Security Law are also provided under the Revised
Penal Code. The Social Security Law provides, in Section 28 thereof, to wit:
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(h) Any employer who, after deducting the monthly contributions or loan amortizations from his
employees compensation, fails to remit the said deductions to the SSS within thirty (30) days from the
date they became due shall be presumed to have misappropriated such contributions or loan amortizations
and shall suffer the penalties provided in Article Three hundred fifteen of the Revised Penal Code.

(i) Criminal action arising from a violation of the provisions of this Act may be commenced by the SSS or
the employee concerned either under this Act or in appropriate cases under the Revised Penal Code: x x x.

Respondents would like this Court to apply another exception to the rule that the persons comprising a
corporation are not personally liable for acts done in the performance of their duties.

The Court of Appeals in the appealed Decision stated:

Anent the unpaid SSS contributions of Impact Corporations employees, the officers of a corporation are
liable in behalf of a corporation, which no longer exists or has ceased operations. Although as a rule, the
officers and members of a corporation are not personally liable for acts done in performance of their
duties, this rule admits of exception, one of which is when the employer corporation is no longer existing
and is unable to satisfy the judgment in favor of the employee, the officers should be held liable for acting
on behalf of the corporation. Following the foregoing pronouncement, petitioner, as one of the directors
of Impact Corporation, together with the other directors of the defunct corporation, are liable for the
unpaid SSS contributions of their employees.33

On the other hand, the SSC, in its Resolution, presented this discussion:

Although as a rule, the officers and members of a corporation are not personally liable for acts done in the
performance of their duties, this rule admits of exceptions, one of which is when the employer corporation
is no longer existing and is unable to satisfy the judgment in favor of the employee, the officers should be
held liable for acting on behalf of the corporation. x x x.34

The rationale cited by respondents in the two preceding paragraphs need not have been applied because
the personal liability for the unremitted SSS premium contributions and the late penalty thereof attaches
to the petitioner as a director of Impact Corporation during the period the amounts became due and
demandable by virtue of a direct provision of law.

Petitioners defense that since Impact Corporation suffered irreversible economic losses, and by reason of
fortuitous events, she should be absolved from liability, is also untenable. The evidence adduced totally
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belies this claim. A reference to the copy of the Petition for Suspension of Payments filed by Impact
Corporation on 18 March 1983 before the SEC contained an admission that:

"[I]t has been and still is engaged in business" and "has been and still is engaged in the business of
manufacturing aluminum tube containers" and "in brief, it is an on-going, viable, and profitable
enterprise" which has "sufficient assets" and "actual and potential income-generation capabilities."

The foregoing document negates petitioners assertion and supports the contention that during the period
involved Impact Corporation was still engaged in business and was an ongoing, viable, profitable
enterprise. In fact, the latest SSS form RIA submitted by Impact Corporation is dated 7 May 1984. The
assessed SSS premium contributions and penalty are obligations imposed upon Impact Corporation by
law, and should have been remitted to the SSS within the first 10 days of each calendar month following
the month for which they are applicable or within such time as the SSC prescribes.35

This Court also notes the evident failure on the part of SSS to issue a judgment in default against Ricardo
de Leon, who was the vice-president and officer of the corporation, upon his non-filing of a responsive
pleading after summons was served on him. As can be gleaned from Section 11 of the SSS Revised Rules
of Procedure, the Commissioner is mandated to render a decision either granting or denying the petition.
Under the aforesaid provision, if respondent fails to answer within the time prescribed, the Hearing
Commissioner may, upon motion of petitioner, or motu proprio, declare respondent in default and
proceed to receive petitioners evidence ex parte and thereafter recommend to the Commission either the
granting or denial of the petition as the evidence may warrant.36

On a final note, this Court sees it proper to quote verbatim respondents prefatory statement in their
Comment:

The Social Security System is a government agency imbued with a salutary purpose to carry out the
policy of the State to establish, develop, promote and perfect a sound and viable tax exempt social
security system suitable to the needs of the people throughout the Philippines which shall promote social
justice and provide meaningful protection to members and their beneficiaries against the hazards of
disability, sickness, maternity, old-age, death and other contingencies resulting in loss of income or
financial burden.

The soundness and viability of the funds of the SSS in turn depends on the contributions of its covered
employee and employer members, which it invests in order to deliver the basic social benefits and
privileges to its members. The entitlement to and amount of benefits and privileges of the covered
members are contribution-based. Both the soundness and viability of the funds of the SSS as well as the
entitlement and amount of benefits and privileges of its members are adversely affected to a great extent
by the non-remittance of the much-needed contributions.37

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The sympathy of the law on social security is toward its beneficiaries. This Court will not turn a blind eye
on the perpetration of injustice. This Court cannot and will not allow itself to be made an instrument nor
be privy to any attempt at the perpetration of injustice.

Following the doctrine laid down in Laguna Transportation Co., Inc. v. Social Security System,38 this
Court rules that although a corporation once formed is conferred a juridical personality separate and
distinct from the persons comprising it, it is but a legal fiction introduced for purposes of convenience and
to subserve the ends of justice. The concept cannot be extended to a point beyond its reasons and policy,
and when invoked in support of an end subversive of this policy, will be disregarded by the courts.

WHEREFORE, pursuant to the foregoing, the Decision of the Court of Appeals dated 2 June 2005 in CAG.R. SP No. 85923 is hereby AFFIRMED WITH FINALITY. Petitioner Immaculada L. Garcia, as sole
surviving director of Impact Corporation is hereby ORDERED to pay for the collected and unremitted
SSS contributions of Impact Corporation. The case is REMANDED to the SSS for computation of the
exact amount and collection thereof.

SO ORDERED.

SOCIAL SECURITY SYSTEM, petitioner, vs. THE COURT OF APPEALS and CONCHITA
AYALDE, respondents.
DECISION
YNARES-SANTIAGO, J.:

In a petition before the Social Security Commission, Margarita Tana, widow of the late Ignacio Tana, Sr.,
alleged that her husband was, before his demise, an employee of Conchita Ayalde as a farmhand in the
two (2) sugarcane plantations she owned (known as Hda. No. Audit B-70 located in Pontevedra, La
Carlota City) and leased from the University of the Philippines (known as Hda. Audit B-15-M situated in
La Granja, La Carlota City). She further alleged that Tana worked continuously six (6) days a week, four
(4) weeks a month, and for twelve (12) months every year between January 1961 to April 1979. For his
labor, Tana allegedly received a regular salary according to the minimum wage prevailing at the time. She
71 | P a g e

further alleged that throughout the given period, social security contributions, as well as medicare and
employees compensation premiums were deducted from Tanas wages. It was only after his death that
Margarita discovered that Tana was never reported for coverage, nor were his contributions/premiums
remitted to the Social Security System (SSS). Consequently, she was deprived of the burial grant and
pension benefits accruing to the heirs of Tana had he been reported for coverage.

Hence, she prayed that the Commission issue an order directing:

1. respondents Conchita Ayalde and Antero Maghari as her administrator to pay the premium
contributions of the deceased Ignacio Tana, Sr. and report his name for SSS coverage; and

2. the SSS to grant petitioner Margarita Tana the funeral and pension benefits due her.[1]

The SSS, in a petition-in-intervention, revealed that neither Hda. B-70 nor respondents Ayalde and
Maghari were registered members-employers of the SSS, and consequently, Ignacio Tana, Sr. was never
registered as a member-employee. Likewise, SSS records reflected that there was no way of verifying
whether the alleged premium contributions were remitted since the respondents were not registered
members-employers. Being the agency charged with the implementation and enforcement of the
provisions of the Social Security Law, as amended, the SSS asked the Commissions leave to intervene in
the case.[2]

In his answer, respondent Antero Maghari raised the defense that he was a mere employee who was hired
as an overseer of Hda. B-70 sometime during crop years 1964-65 to 1971-72, and as such, his job was
limited to those defined for him by the employer which never involved matters relating to the SSS.
Hence, he prayed that the case against him be dismissed for lack of cause of action.[3]

For her part, respondent Ayalde belied the allegation that Ignacio Tana, Sr. was her employee, admitting
only that he was hired intermittently as an independent contractor to plow, harrow, or burrow Hda. No.
Audit B-15-M. Tana used his own carabao and other implements, and he followed his own schedule of
work hours. Ayalde further alleged that she never exercised control over the manner by which Tana
performed his work as an independent contractor. Moreover, Ayalde averred that way back in 1971, the
University of the Philippines had already terminated the lease over Hda. B-15-M and she had since
surrendered possession thereof to the University of the Philippines. Consequently, Ignacio Tana, Sr. was
no longer hired to work thereon starting in crop year 1971-72, while he was never contracted to work in
Hda. No. Audit B-70. She also prayed for the dismissal of the case considering that Ignacio Tana, Sr. was
never her employee.[4]

After hearing both parties, the Social Security Commission issued a Resolution on January 28, 1988, the
dispositive portion of which reads:
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After a careful evaluation of the testimonies of the petitioner and her witnesses, as well as the testimony
of the respondent together with her documentary evidences, this Commission finds that the late Ignacio
Tana was employed by respondent Conchita Ayalde from January 1961 to March 1979. The testimony of
the petitioner which was corroborated by Agaton Libawas and Aurelio Tana, co-workers of the deceased
Ignacio Tana, sufficienty established the latters employment with the respondent.

As regards respondent Antero Maghari, he is absolved from liability because he is a mere employee of
Conchita Ayalde.

PREMISES CONSIDERED, this Commission finds and so holds that the late Ignacio Tana had been
employed continuously from January 1961 to March 1979 in Hda. B-70 and Hda. B-15-M which are
owned and leased, respectively, by respondent Conchita (Concepcion) Ayalde with a salary based on the
Minimum Wage prevailing during his employment.

Not having reported the petitioners husband for coverage with the SSS, respondent Conchita
(Concepcion) Ayalde is, therefore, liable for the payment of damages equivalent to the death benefits in
the amount of P7,067.40 plus the amount of P750.00 representing funeral benefit or a total of P7,817.40.

Further, the SSS is ordered to pay to the petitioner her accrued pension covering the period after the 5year guaranteed period corresponding to the employers liability.

SO ORDERED.[5]

Respondent Ayalde filed a motion for reconsideration[6]which the Commission denied for lack of merit
in an Order dated November 3, 1988.[7]

Not satisfied with the Commissions ruling, Ayalde appealed to the Court of Appeals, docketed as CAG.R. SP No. 16427, raising the following assignment of errors:

The Social Security Commission erred in not finding that there is sufficient evidence to show that:

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(a) The deceased Ignacio Tana, Sr. never worked in the farmland of respondent-appellant situated in
Pontevedra, La Carlota City, otherwise known as Hacienda No. Audit B-70, (Pontevedra B-70 Farm for
short), in any capacity, whether as a daily or monthly laborer or as independent contractor;

(b) During the time that respondent-appellant was leasing a portion of the land of the University of the
Philippines, otherwise known as Hacienda Audit No. B-15-M, (La Granja B-15 Farm for short), the
deceased Ignacio Tana, Sr. was hired thereat on a pakyaw basis, or as an independent contractor,
performing the services of an arador (Plower), for which he was proficient, using his own carabao and
farming implements on his own time and discretion within the period demanded by the nature of the job
contracted.

II

The Social Security Commission erred in holding that there is no evidence whatsoever to show that
respondent-appellant was no longer leasing La Granja B-15 Farm.

III

The Social Security Commission erred in not holding that the deceased Ignacio Tana, having been hired
as an independent contractor on pakyaw basis, did not fall within the coverage of the Social Security
Law.[8]

The Court of Appeals rendered judgment in favor of respondent-appellant Conchita Ayalde and dismissed
the claim of petitioner Margarita Tan.

The SSS, as intervenor-appellee, filed a Motion for Reconsideration, which was denied on the ground that
the arguments advanced are mere reiterations of issues and arguments already considered and passed
upon in the decision in question which are utterly insufficient to justify a modification or reversal of said
decision.[9]

Hence, this petition for review on certiorari on the following assigned errors:

1) The Court of Appeals was in error in ruling that an employee working under the pakyaw system is
considered under the law to be an independent contractor.

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2) The Court of Appeals was in error in not giving due consideration to the fundamental tenet that doubts
in the interpretation and implementation of labor and social welfare laws should be resolved in favor of
labor.

3) The Court of Appeals was in error in disregarding the settled rule that the factual findings of
administrative bodies on matters within their competence shall not be disturbed by the courts.

4) The Court of Appeals was in error in ruling that even granting arguendo that Ignacio Tana was
employed by Conchita Ayalde, such employment did not entitle him to compulsory coverage since he was
not paid any regular daily wage or basic pay and he did not work for an uninterrupted period of at least
six months in a year in accordance with Section 8(j) (1) of the SS Law.

The pivotal issue to be resolved in this petition is whether or not an agricultural laborer who was hired on
pakyaw basis can be considered an employee entitled to compulsory coverage and corresponding benefits
under the Social Security Law.

Petitioner, Social Security System (or SSS), argues that the deceased Ignacio Tana, Sr., who was hired by
Conchita Ayalde on pakyaw basis to perform specific tasks in her sugarcane plantations, should be
considered an employee; and as such, his heirs are entitled to pension and burial benefits.

The Court of Appeals, however, ruled otherwise, reversing the ruling of the Social Security Commission
and declaring that the late Ignacio Tana, Sr. was an independent contractor, and in the absence of an
employer-employee relationship between Tana and Ayalde, the latter cannot be compelled to pay to his
heirs the burial and pension benefits under the SS Law.

At the outset, we reiterate the well-settled doctrine that the existence of an employer-employee
relationship is ultimately a question of fact.[10] And while it is the general rule that factual issues are not
within the province of the Supreme Court, said rule is not without exception. In cases, such as this one,
where there are conflicting and contradictory findings of fact, this Court has not hesitated to scrutinize the
records to determine the facts for itself.[11] Our disquisition of the facts shall be our guide as to whose
findings are supported by substantial evidence.

The mandatory coverage under the SSS Law (Republic Act No. 1161, as amended by PD 1202 and PD
1636) is premised on the existence of an employer-employee relationship, and Section 8(d) defines an
employee as any person who performs services for an employer in which either or both mental and
physical efforts are used and who receives compensation for such services where there is an employeremployee relationship. The essential elements of an employer-employee relationship are: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power

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of control with regard to the means and methods by which the work is to be accomplished, with the power
of control being the most determinative factor.[12]

There is no question that Tana was selected and his services engaged by either Ayalde herself, or by
Antero Maghari, her overseer. Corollarily, they also held the prerogative of dismissing or terminating
Tanas employment. The dispute is in the question of payment of wages. Claimant Margarita Tana and her
corroborating witnesses testified that her husband was paid daily wages per quincena as well as on
pakyaw basis. Ayalde, on the other hand, insists that Tana was paid solely on pakyaw basis. To support
her claim, she presented payrolls covering the period January of 1974 to January of 1976;[13] and
November of 1978 to May of 1979.[14]

A careful perusal of the records readily show that the exhibits offered are not complete, and are but a
mere sampling of payrolls. While the names of the supposed laborers appear therein, their signatures are
nowhere to be found. And while they cover the years 1975, 1976 and portions of 1978 and 1979, they do
not cover the 18-year period during which Tana was supposed to have worked in Ayaldes plantations.
Also an admitted fact is that these exhibits only cover Hda. B70, Ayalde having averred that all her
records and payrolls for the other plantation (Hda. B-15-M) were either destroyed or lost.[15]

To our mind, these documents are not only sadly lacking, they are also unworthy of credence. The fact
that Tanas name does not appear in the payrolls for the years 1975, 1976 and part of 1978 and 1979, is no
proof that he did not work in Hda. B70 in the years 1961 to 1974, and the rest of 1978 and 1979. The
veracity of the alleged documents as payrolls are doubtful considering that the laborers named therein
never affixed their signatures to show that they actually received the amounts indicated corresponding to
their names. Moreover, no record was shown pertaining to Hda. B-15-M, where Tana was supposed to
have worked. Even Ayalde admitted that she hired Tana as arador and sometimes as laborer during
milling in Hda. B-15-M.[16] In light of her incomplete documentary evidence, Ayaldes denial that Tana
was her employee in Hda. B-70 or Hda. B-15-M must fail.

In contrast to Ayaldes evidence, or lack thereof, is Margarita Tanas positive testimony, corroborated by
two (2) other witnesses. On the matter of wages, they testified as follows:

Margarita Tana:

Q. During the employment of your late husband, was he paid any wages?

A. Yes, he was paid.

Q. What was the manner of payment of his salary, was it on pakyaw or daily basis?
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A. Daily basis.

Q. How many times did he receive his salary in a months time?

A. 2 times.

Q. You mean, payday in Hda. B-70 is every 15 days?

A. Yes, sir.

xxxxxxxxx

ATTY. GALVAN:

To prove that it is material to the main question because if ever the hacienda maintains complete payrolls
of their employees, then the burden of proof lies in the petitioner..

HEARING OFFICER:

Let the witness answer, if she knows.

WITNESS:

There was no payroll, only pad paper.

ATTY. GALVAN: (continuing)

Q. Were the names of workers of the hacienda all listed in that pad paper every payday?

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A. Yes, we just sign on pad paper because we have no payroll to be signed.

xxxxxxxxx

Q. What do you understand by payroll?

A. Payroll is the list where the whole laborers are listed and receive their salaries.

Q. And how did that differ from the pad paper which you said you signed?

A. There is a difference.

Q. What is the difference?

A. In the payroll, at the end there is a column for signature but in the pad paper, we only sign directly.

Q. Did it contain the amount that you receive?

A. Yes, sir.

Q. And the date corresponding to the payroll pad?

A. I am not sure but it only enumerates our names and then we were given our salaries.

Q. Now, did you have a copy of that?

ATTY. GALVAN:

Objection, Your Honor, it is not the petitioner who had a copy, it is usually the owner because the
preparation of the payrolls is done by the employer who..
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ATTY. UNGCO:

That is why Im asking ..

HEARING OFFICER:

Let the witness answer. Objection overruled.

WITNESS:

I dont have.

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Q. When you are receiving daily wage of P4.00 how much was your quincenal together with your
husband?

A. The highest salary I received for my own was P30.00 in one quincena.

Q. What about the salary of your husband, how much?

A. The same.

Q. Was this P30.00 per quincena later on increased?

A. There was an increase because formerly it was P4.00 now it is P8.00.

Q. In 1979 how much was your husbands salary per quincena?

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A. In one quincena my husband receives P60.00 while I only receive P30.00.[17]

AGATON LIBAWAS:

Q. During your employment, do you sign payrolls everytime you draw your salary?

A. We sign on intermediate pad.

Q. You mean, the practice of the hacienda is to have the names of the laborers receiving that salaries
listed on that intermediate pad?

A. Yes, sir.[18]

AURELIO TANA:

Q. By the way, how many times did you receive your salaries in a month?

A. We receive our wages twice a month that is, every 15 days.

Q. Did you sign payrolls everytime you received your salaries?

A. In the pad paper as substitute payroll.

Q. Do you know if all the workers of the hacienda were listed in that payrolls?

A. Yes, sir.

Q. Who was in charge in giving your salaries?

A. Antero Maghari.[19]
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These witnesses did not waver in their assertion that while Tana was hired by Ayalde as an arador on
pakyaw basis, he was also paid a daily wage which Ayaldes overseer disbursed every fifteen (15) days. It
is also undisputed that they were made to acknowledge receipt of their wages by signing on sheets of
ruled paper, which are different from those presented by Ayalde as documentary evidence. In fine, we
find that the testimonies of Margarita Tana, Agaton Libawas and Aurelio Tana prevail over the
incomplete and inconsistent documentary evidence of Ayalde.

In the parallel case of Opulencia Ice Plant and Storage v. NLRC, the petitioners argued that since Manuel
P. Esitas name does not appear in the payrolls of the company it necessarily means that he was not an
employee. This Court held:

Petitioners further argue that complainant miserably failed to present any documentary evidence to prove
his employment. There was no timesheet, pay slip and/or payroll/cash voucher to speak of. Absence of
these material documents are necessarily fatal to complainants cause.

We do not agree. No particular form of evidence is required to prove the existence of an employeremployee relationship. Any competent and relevant evidence to prove the relationship may be admitted.
For, if only documentary evidence would be required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no employer would wish to come out with any trace of
the illegality he has authored considering that it should take much weightier proof to invalidate a written
instrument. Thus, as in this case where the employer-employee relationship between petitioners and Esita
was sufficiently proved by testimonial evidence, the absence of time sheet, time record or payroll has
become inconsequential.[20] (Underscoring ours)

Clearly, then, the testimonial evidence of the claimant and her witnesses constitute positive and credible
evidence of the existence of an employer-employee relationship between Tana and Ayalde. As the
employer, the latter is duty-bound to keep faithful and complete records of her business affairs, not the
least of which would be the salaries of the workers. And yet, the documents presented have been
selective, few and incomplete in substance and content. Consequently, Ayalde has failed to convince us
that, indeed, Tana was not her employee.

The argument is raised that Tana is an independenent contractor because he was hired and paid wages on
pakyaw basis. We find this assertion to be specious for several reasons.

First, while Tana was sometimes hired as an arador or plower for intermittent periods, he was hired to do
other tasks in Ayaldes plantations. Ayalde herself admitted as much, although she minimized the extent of
Tanas labors. On the other hand, the claimant and her witnesses were direct and firm in their testimonies,
to wit:
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MARGARITA TANA:

Q. Was your late husbands work continuous or not?

A. His work was continuous except on Sundays.

Q. Mrs. Witness, in January 1961, how many days in a week did your late husband work?

A. 4 weeks in January 1961.

Q. And how many months for that year did he work?

A. 12 months.

Q. Is this working pattern of your husband, considering that you testified that he worked continuously, the
same all throughout his employment from 1961 to 1978?

A. Yes, he worked continuously from 1961 to 1978 for 6 days a week, 4 weeks a month and 12 months
each year.

Q. Mrs. Witness, how many months did your husband work in 1979 considering that he died in 1979?

A. 3 months.

Q. What was the nature of the work of your late husband from 1961 until his death in 1979?

A. Cutting canes, hauling canes with the use of canecarts, plowing, hauling fertilizers, weeding and
stubble cleaning.

xxxxxxxxx
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Q. Now, the other co-workers of yours, you said they were Agaton Libawas, Narciso Dueas, Juan Dueas,
and Aurelio Tana, what were their jobs?

A. Hauling canes by the use of bull carts and cutting canes. Their works are the same with that of my
husbands.

Q. But you mentioned among the duties of your husband as arador meaning plowing the fields?

A. Yes, he was also plowing because that is one of his duties.[21]

AGATON LIBAWAS:

Q. How about petitioner Margarita Tana and the late Ignacio Tana, were they regular workers, or extra
workers?

A. They were regular workers.

Q. In your case, Mr. Witness, considering that according to you, you are only a relief worker, please
inform the Commission how many months each year from 1961 to 1984 did you work in Hda. B-70 and
Hda. B-15M with Conchita Ayalde?

A. During milling season, I worked 2 months, during cultivation if they are short of plowers then they
would call me to work for at least 3 months as a plower.

Q. So, all in all, each year, from 1961 to 1984 your average working months in Hda. B-70 and B-15M are
5 months each year?

A. Yes, sir.

Q. Mr. Witness, to prove that you have worked there, will you please inform at least 5 laborers of Hda. B70 and B-15M of Conchita Ayalde?

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A. Juan Dueas, Narciso Dueas, Aurelio Tana, Ignacio and Margarita Tana.

xxxxxxxxx

Q. Will you please inform the Commission if the deceased Ignacio Tana which is according to you, was a
regular worker of the 2 haciendas, if how many months did he work during lifetime from 1961 until he
died in 1979?

A. His work was continuous.

Q. And by continuous you mean he worked straight 12 months each year except in 1979?

A. He worked only for 10 months because the 2 months are already preparation for cultivation.

xxxxxxxxx

Q. And according to you, in a years time, you worked only for at least 5 months in Hda. B-70 and B-15M,
is that correct?

A. Yes.

Q. And during this time that you are working in your riceland you will agree with me that you do not
know whether the laborers of this Hda. B-70 and Had B-15M are really working because you are devoting
your time in your riceland, is that correct?

A. I knew because the place of their work is just near my house, it is along the way.

Q. How about when the canes are already tall, can you actually see the workers in Hda. B-70 and B-15M
when you are busy at your riceland?

A. Yes, because they have to pass in my house.

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Q. Is there no other passage in that hacienda except that road in front of your house?

A. Yes.

Q. Are you sure about that?

A. Yes, I am sure.[22]

AURELIO TANA:

Q. Do you know what is the work of the petitioner during the time when you were together working in the
field?

A. We were working together, like cutting and loading canes, hoeing, weeding, applying fertilizers,
digging canals and plowing.

Q. During your employment in the said hacienda where were you residing?

A. There inside the hacienda.

Q. What about the petitioner?

A. The same.

Q. How far is your house from the house of the petitioner?

A. About 20 arms-length.

Q. How far is Hda. B-70 from Hda. B-15.

A. It is very near it is divided by the road.

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Q. What road are you referring to?

A. Highway road from Barangay Buenavista to La Granja.

Q. During your employment will you please inform the Commission the frequency of work of the late
Ignacio Tana?

A. 4 weeks a month, 6 days a week, 12 months a year.

Q. Why is it that you are in a position to inform the Commission about the period of employment of
Ignacio Tana?

A. Because we were together working.[23]

It is indubitable, therefore, that Tana worked continuously for Ayalde, not only as arador on pakyaw
basis, but as a regular farmhand, doing backbreaking jobs for Ayaldes business. There is no shred of
evidence to show that Tana was only a seasonal worker, much less a migrant worker. All witnesses,
including Ayalde herself, testified that Tana and his family resided in the plantation. If he was a mere
pakyaw worker or independent contractor, then there would be no reason for Ayalde to allow them to live
inside her property for free. The only logical explanation is that he was working for most part of the year
exclusively for Ayalde, in return for which the latter gratuitously allowed Tana and his family to reside in
her property.

The Court of Appeals, in finding for Ayalde, relied on the claimants and her witnesses admission that her
husband was hired as an arador on pakyaw basis, but it failed to appreciate the rest of their testimonies.
Just because he was, for short periods of time, hired on pakyaw basis does not necessarily mean that he
was not employed to do other tasks for the remainder of the year. Even Ayalde admitted that Tana did
other jobs when he was not hired to plow. Consequently, the conclusion culled from their testimonies to
the effect that Tana was mainly and solely an arador was at best a selective appreciation of portions of the
entire evidence. It was the Social Security Commission that took into consideration all the documentary
and testimonial evidence on record.

Secondly, Ayalde made much ado of her claim that Tana could not be her employee because she
exercised no control over his work hours and method of performing his task as arador. It is also an
admitted fact that Tana, Jr. used his own carabao and tools. Thus, she contends that, applying the control
test, Tana was not an employee but an independent contractor.
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A closer scrutiny of the records, however, reveals that while Ayalde herself may not have directly
imposed on Tana the manner and methods to follow in performing his tasks, she did exercise control
through her overseer.

Be that as it may, the power of control refers merely to the existence of the power. It is not essential for
the employer to actually supervise the performance of duties of the employee; it is sufficient that the
former has a right to wield the power.[24] Certainly, Ayalde, on her own or through her overseer, wielded
the power to hire or dismiss, to check on the work, be it in progress or quality, of the laborers. As the
owner/lessee of the plantations, she possessed the power to control everyone working therein and
everything taking place therein.

Jurisprudence provides other equally important considerations which support the conclusion that Tana
was not an independent contractor. First, Tana cannot be said to be engaged in a distinct occupation or
business. His carabao and plow may be useful in his livelihood, but he is not independently engaged in
the business of farming or plowing. Second, he had been working exclusively for Ayalde for eighteen
(18) years prior to his demise. Third, there is no dispute that Ayalde was in the business of growing
sugarcane in the two plantations for commercial purposes. There is also no question that plowing or
preparing the soil for planting is a major part of the regular business of Ayalde.

Under the circumstances, the relationship between Ayalde and Tana has more of the attributes of
employer-employee than that of an independent contractor hired to perform a specific project. In the case
of Dy Keh Beng v. International Labor,[25] we cited our long-standing ruling in Sunripe Coconut
Products Co. v. Court of Industrial Relations, to wit:

When a worker possesses some attributes of an employee and others of an independent contractor, which
make him fall within an intermediate area, he may be classified under the category of an employee when
the economic facts of the relations make it more nearly one of employment than one of independent
business enterprise with respect to the ends sought to be accomplished. (Underscoring Ours)[26]

We find the above-quoted ruling to be applicable in the case of Tana. There is preponderance of evidence
to support the conclusion that he was an employee rather than an independent contractor.

The Court of Appeals also erred when it ruled, on the alternative, that if ever Tana was an employee, he
was still ineligible for compulsory coverage because he was not paid any regular daily wage and he did
not work for an uninterrupted period of at least six months in a year in accordance with Section 8(j) (I) of
the Social Security Law. There is substantial testimonial evidence to prove that Tana was paid a daily
wage, and he worked continuously for most part of the year, even while he was also occasionally called
on to plow the soil on a pakyaw basis. As a farm laborer who has worked exclusively for Ayalde for
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eighteen (18) years, Tana should be entitled to compulsory coverage under the Social Security Law,
whether his service was continuous or broken.

Margarita Tana alleged that SSS premiums were deducted from Tanas salary, testifying, thus:

Q. Were there deductions from the salaries of your husband while he was employed with the respondent
from 1961 to 1979?

A. Yes, there were deductions but I do not know because they were the ones deducting it.

Q. Why do you know that his salaries were deducted for SSS premiums?

A. Because Antero Maghari asked me and my husband to sign SSS papers and he told us that they will
take care of everything.

Q. How much were the deductions every payday?

A. I do not know how much because our daily wage was only P4.00.[27]

Agaton Libawas, also testified:

Q. Mr. Witness, in your 15-day wages do you notice any deductions from it?

A. There were deductions and we were informed that it was for SSS.

Q. Mr. Witness, since when were there deductions from your salaries?

A. Since 1961.

Q. Up to when?

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A. Up to 1979.

Q. Mr. Witness, are you a member of the SSS?

A. No.

Q. How about petitioner, if you know?

A. No, also.

Q. What happened to the deductions did you not ask your employer?

A. We asked but we were answered that we were being remitted for our SSS.

Q. Did you not verify?

A. No, because I just relied on their statement.[28]

Ayalde failed to counter these positive assertions. Even on the assumption that there were no deductions,
the fact remains that Tana was and should have been covered under the Social Security Law. The
circumstances of his employment place him outside the ambit of the exception provided in Section 8(j) of
Republic Act No. 1611, as amended by Section 4 of R.A. 2658.

WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in C.A.-G.R. SP No.
16427 and the Resolution dated June 14, 1991 are hereby REVERSED and SET ASIDE. The Resolution
of the Social Security Commission in SSC Case No. 8851 is REINSTATED.

No costs.

SO ORDERED.

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