Republic of the Philippines R.A. No. 2658). These representatives are in reality commission agents.
SUPREME COURT The uncontradicted testimony of petitioner's lone witness, who was its
Manila
EN BANC
G.R. No. L-19124 November 18, 1967
INVESTMENT PLANNING CORPORATION OF THE
PHILIPPINES, petitioner-appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.
MAKALINTAL, J.:
Petitioner is a domestic corporation engaged in business management
and the sale of securities. It has two classes of agents who sell its
investment plans: (1) salaried employees who keep definite hours and
work under the control and supervision of the company; and (2)
registered representatives who work on commission basis.
On August 27, 1960 petitioner, through counsel, applied to respondent
Social Security Commission for exemption of its so-called registered
representatives from the compulsory coverage of the Social Security
Act. The application was denied in a letter signed by the Secretary to the
Commission on January 16, 1961. A motion to reconsider was filed and
also denied, after hearing, by the Commission itself in its resolution
dated September 8, 1961. The matter was thereafter elevated to this
Court for review.
The issue submitted for decision here is whether petitioner's registered
representatives are employees within the meaning of the Social Security
Act (R.A. No. 1161 as amended). Section 8 (d) thereof defines the term
"employee" — for purposes of the Act — 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, employer-employee relationship." (As amended by Sec.4,
assistant sales director, is that these agents are recruited and trained by
him particularly for the job of selling "'Filipinos Mutual Fund" shares,
made to undergo a test after such training and, if successful, are given
license to practice by the Securities and Exchange Commission. They
then execute an agreement with petitioner with respect to the sale of
FMF shares to the general public. Among the features of said agreement
which respondent Commission considered pertinent to the issue are: (a)
an agent is paid compensation for services in the form of commission;
(b) in the event of death or resignation he or his legal representative
shall be paid the balance of the commission corresponding to him; (c) he
is subject to a set of rules and regulations governing the performance of
his duties under the agreement; (d) he is required to put up a
performance bond; and (e) his services may be terminated for certain
causes. At the same time the Commission found from the evidence and
so stated in its resolution that the agents "are not required to report
(for work) at any time; they do not have to devote their time exclusively
to or work solely for petitioner; the time and the effort they spend in
their work depend entirely upon their own will and initiative; they are
not required to account for their time nor submit a record of their
activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain
percentage of their sales." The record also reveals that the commission
earned by an agent on his sales is directly deducted by him from the
amount he receives from the investor and turns over to the company
the amount invested after such deduction is made. The majority of the
agents are regularly employed elsewhere — either in the government or
in private enterprises.
Of the three requirements under Section 8 (d) of the Social Security Act
it is admitted that the first is present in respect of the agents whose
status is in question. They exert both mental and physical efforts in the
performance of their services. The compensation they receive, however,
is not necessarily for those efforts but rather for the results thereof, that
is, for actual sales that they make. This point is relevant in the
determination of whether or not the third requisite is also present,
namely, the existence of employer-employee relationship. Petitioner
points out that in effect such compensation is paid not by it but by the
investor, as shown by the basis on which the amount of the commission
is fixed and the manner in which it is collected.
Petitioner submits that its commission agents, engaged under the terms
and conditions already enumerated, are not employees but independent
contractors, as defined in Article 1713 of the Civil Code, which provides:
Art. 1713. By the contract for a piece of work the contractor
binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The
contractor may either employ only his labor or skill, or also
furnish the material.
We are convinced from the facts that the work of petitioner's agents or
registered representatives more nearly approximates that of an
independent contractor than that of an employee. The latter is paid for
the labor he performs, that is, for the acts of which such labor consists;
the former is paid for the result thereof. This Court has recognized the
distinction in Chartered Bank, et al. vs. Constantino, 56 Phil. 717, where it
said:
On this point, the distinguished commentator Manresa in
referring to Article 1588 of the (Spanish) Civil Code has the
following to say. . . .
The code does not begin by giving a general idea of the subject
matter, but by fixing its two distinguishing characteristics.
But such an idea was not absolutely necessary because the
difference between the lease of work by contract or for a fixed
price and the lease of services of hired servants or laborers is
sufficiently clear. In the latter, the direct object of the contract
is the lessor's labor; the acts in which such labor consists,
performed for the benefit of the lessee, are taken into account
immediately. In work done by contract or for a fixed price, the
lessor's labor is indeed an important, a most important factor;
but it is not the direct object of the contract, nor is it
immediately taken into account. The object which the parties
consider, which they bear in mind in order to determine the
cause of the contract, and upon which they really give their
consent, is not the labor but its result, the complete and
finished work, the aggregate of the lessor's acts embodied in
something material, which is the useful object of the contract. .
. . (Manresa Commentarios al Codigo Civil, Vol. X, ed., pp. 774-
775.)
Even if an agent of petitioner should devote all of his time and effort
trying to sell its investment plans would not necessarily be entitled to
compensation therefor. His right to compensation depends upon and is
measured by the tangible results he produces.
The specific question of when there is "employer-employee
relationship" for purposes of the Social Security Act has not yet been
settled in this jurisdiction by any decision of this Court. But in other
connections wherein the term is used the test that has been generally
applied is the so-called control test, that is, whether the "employer"
controls or has reserved the right to control the "employee" not only as
to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished.
Thus in Philippine Manufacturing Company vs. Geronimo, et al., L-6968,
November 29, 1954, involving the Workmen's Compensation Act, we
read:
. . . Garcia, a painting contractor, had a contract undertaken to
paint a water tank belonging to the Company "in accordance
with specifications and price stipulated," and with "the actual
supervision of the work (being) taken care of by" himself.
Clearly, this made Garcia an independent contractor, for while
the company prescribed what should be done, the doing of it
and the supervision thereof was left entirely to him, all of which
meant that he was free to do the job according to his own
 method without being subject to the control of the company
except as to the result.
Cruz, et al. vs. The Manila Hotel Company, L-9110, April 30, 1957, presented
the issue of who were to be considered employees of the defendant
firm for purposes of separation gratuity. LVN Pictures, Inc. vs. Phil.
Musicians Guild, et al., L-12582, January 28, 1961, involved the status of
certain musicians for purposes of determining the appropriate
bargaining representative of the employees. In both instances the
"control" test was followed. (See also Mansal vs. P.P. Gocheco Lumber
Co., L-8017, April 30, 1955; and Viana vs. Allagadan, et al., L-8967, May 31,
1956.)
In the United States, the Federal Social Security Act of 1935 set forth no
definition of the term 'employee' other than that it 'includes an officer
of a corporation.' Under that Act the U.S. Supreme Court adopted for a
time and in several cases the so-called 'economic-reality' test instead of
the 'control' test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs.
Birmingham, Ibid, 1947, both decided in June 1947). In the Bartels case
the Court said:
In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 SCt
1463, supra, we held that the relationship of employer-
employee, which determines the liability for employment taxes
under the Social Security Act was not to be determined solely
by the idea of control which an alleged employer may or could
exercise over the details of the service rendered to his business
by the worker or workers. Obviously control is characteristically
associated with the employer-employee relationship, but in the
application of social legislation employees are those who as a
matter of economic reality are dependent upon the business to
which they render service. In Silk, we pointed out that
permanency of the relation, the skill required, the investment in
the facilities for work and opportunities for profit or less from
the activities were also factors that should enter into judicial
determination as to the coverage of the Social Security Act. It is
the total situation that controls. The standards are as important
in the entertainment field as we have just said, in Silk, that they
were in that of distribution and transportation. (91 Law, Ed.
1947, 1953;)
However, the 'economic-reality' test was subsequently abandoned as
not reflective of the intention of Congress in the enactment of the
original Security Act of 1935. The change was accomplished by means of
an amendatory Act passed in 1948, which was construed and applied in
later cases. In Benson vs. Social Security Board, 172 F. 2d. 682, the U.S.
Supreme Court said:
After the decision by the Supreme Court in the Silk case, the
Treasury Department revamped its Regulation, 12 Fed. Reg.
7966, using the test set out in the Silk case for determining the
existence of an employer-employee relationship. Apparently
this was not the concept of such a relationship that Congress
had in mind in the passage of such remedial acts as the one
involved here because thereafter on June 14, 1948, Congress
enacted Public Law 642, 42 U.S C.A. Sec. 1301 (a) (6). Section
1101(a) (6) of the Social Security Act was amended to read as
follows:
The term "employee" includes an officer of a
corporation, but such term does not include (1) any
individual who, under the usual common-law rules
applicable in determining the employer-employee
relationship, has the status of an independent
contractor or (2) any individual (except an officer of a
corporation) who is not an employee under such
common law rules.
While it is not necessary to explore the full effect of this
enactment in the determination of the existence of employer-
employee relationships arising in the future, we think it can
fairly be said that the intent of Congress was to say that in
determining in a given case whether under the Social Security
Act such a relationship exists, the common-law elements of
 such a relationship, as recognized and applied by the courts
generally at the time of the passage of the Act, were the
standard to be used . . . .
The common-law principles expressly adopted by the United States
Congress are summarized in Corpus Juris Secundum as follows:
Under the common-law principles as to tests of the
independent contractor relationship, discussed in Master and
Servant, and applicable in determining coverage under the
Social Security Act and related taxing provisions, the significant
factor in determining the relationship of the parties is the
presence or absence of a supervisory power to control the
method and detail of performance of the service, and the
degree to which the principal may intervene to exercise such
control, the presence of such power of control being indicative
of an employment relationship and the absence of such power
being indicative of the relationship of independent contractor.
In other words, the test of existence of the relationship of
independent contractor, which relationship is not taxable under
the Social Security Act and related provisions, is whether the
one who is claimed to be an independent contractor has
contracted to do the work according to his own methods and
without being subject to the control of the employer except as
to the result of the work. (81 C.J.S. Sec. 5, pp. 24-25); See also
Millard's Inc. vs. United States, 46 F. Supp. 385; Schmidt vs.
Ewing, 108 F. Supp. 505; Ramblin vs. Ewing, 106 F. Supp. 268.
In the case last cited (Rambin v. Ewing) the question presented was
whether the plaintiff there, who was a sales representative of a
cosmetics firm working on a commission basis, was to be considered an
employee. Said the Court:
Plaintiff's only remuneration was her commission of 40%, plus $5
extra for every $250 of sales. Plaintiff was not guaranteed any
minimum compensation and she was not allowed a drawing
account or advance of any kind against unearned commissions.
Plaintiff paid all of her traveling expenses and she even had to
pay the postage for sending orders to Avon.
The only office which Avon maintained in Shreveport was an
office for the city manager. Plaintiff worked from her own
home and she was never furnished any leads. The relationship
between plaintiff and Avon was terminable at will . . .
xxx xxx xxx
. . . A long line of decisions holds that commission sales
representatives are not employees within the coverage of the
Social Security Act. The underlying circumstances of the
relationship between the sales representatives and company
often vary widely from case to case, but commission sales
representatives have uniformly been held to be outside the
Social Security Act.
Considering the similarity between the definition of "employee" in the
Federal Social Security Act (U.S.) as amended and its definitions in our
own Social Security Act, and considering further that the local statute is
admittedly patterned after that of the United States, the decisions of
American courts on the matter before us may well be accorded
persuasive force. The logic of the situation indeed dictates that where
the element of control is absent; where a person who works for another
does so more or less at his own pleasure and is not subject to definite
hours or conditions of work, and in turn is compensated according to
the result of his efforts and not the amount thereof, we should not find
that the relationship of employer and employee exists.
We have examined the contract form between petitioner and its
registered representatives and found nothing therein which would
indicate that the latter are under the control of the former in respect of
the means and methods they employ in the performance of their work.
The fact that for certain specified causes the relationship may be
terminated (e.g., failure to meet the annual quota of sales, inability to
make any sales production during a six-month period, conduct
detrimental to petitioner, etc.) does not mean that such control exists, Republic of the Philippines
for the causes of termination thus specified have no relation to the SUPREME COURT
means and methods of work that are ordinarily required of or imposed Manila
upon employees.
SECOND DIVISION
In view of the foregoing considerations, the resolution of respondent
Social Security Commission subject of this appeal is reversed and set G.R. No. L-55764 February 16, 1982
aside, without pronouncement as to costs.
SOCIAL SECURITY SYSTEM, petitioner,
vs.
COURT OF APPEALS and MANILA COSMOS AERATED WATER FACTORY,
INC., respondents.

ABAD SANTOS, J:

This is a petition to review a decision of the Court of Appeals in Social

Security System, et al. vs. Manila Cosmos Aerated Water Factory, Inc., CA-
G.R. No. SP 03296-R, adverse to the petitioner. The antecedent facts
consist of the following:

In a petition filed with the Social Security Commission SSC the Social
Security System (SSS) together with Jose Concepcion, Manuel Chan,
Manuel Ong, Roberto Lai, Arturo Gonzales, William Co, Federico Marcial,
Santiago Mancuba, Jesus Crelencia, Alfredo So and Pedro Aquino, the
individual petitioners were sought to be declared employees of Manila
Cosmos AerAted Water Factory, Inc. (Cosmos) and not independent
contractors under the following Agreement to Peddle Soft Drinks.

1. The MANUFACTURER shall provide the PEDDLER

with a delivery truck to be used by the latter, under his
own responsibility, exclusively in the sales of the
products of the former purchased by the PEDDLER
from the MANUFACTURER;

2. The PEDDLER himself shall carefully and in strict

observance to traffic regulations, drive the truck
furnished him by the MANUFACTURER or should he
employ a driver or helpers, such driver or helpers shall
be his employees under his direction and responsibility,
and not that of the MANUFACTURER, and their
compensation including salaries, wages, overtime pay,
separation pay, bonus or other remunerations and
privileges shall be for the PEDDLERS own account;
3. The PEDDLER shall be responsible for any damage to
property, death or injuries to persons or damage to the
truck used by him caused by his own acts or that of his
driver and helpers;
4. The PEDDLER shall secure at his own expense all
necessary license and permits required by law or
ordinance, and shall bear any and all expenses which
may be incurred by him in the sales of the
MANUFACTURER'S products, covered by this contract;
5. All goods soft drinks) purchased by the PEDDLER
shall be charged to him at a factory price of P0.86 per
case of the 6.6 oz. size, ex-warehouse; PROVIDED,
However, that, if the PEDDLER purchases a total of not
less than 200 cases of the 6.5 oz. size a day, he shall be
entitled to a dealer's discount of P7.30;
6. Upon the execution of this agreement, the PEDDLER
shall give a cash bond in the amount of P500.00 against
which the MANUFACTURER shall charge the PEDDLER
with any unpaid account at the end of the day or with
any damage to the truck or other account which is
properly chargeable to the PEDDLER; within 30 days
after termination of this agreement, the cash bond,
after deducting proper charges, shall be returned to
the PEDDLER;
7. The PEDDLER shall liquidate and pay his account at
the end of each day, and his failure to do so shall
subject his cash bond or so much thereof as may be
necessary to such set offs and payments as shall be
proper against the accounts in question;
8. This contract shall be effective only up to December
31, 1962 and supersedes any or all other previous
contracts that may have been entered into between
the parties; However, either of the parties may
terminate the same upon seven (7) days prior notice to
the other;
9. Upon the termination of this agreement, unless the
same is renewed, the delivery truck and such other
equipment furnished by the MANUFACTURER to the
PEDDLER shall be returned by the latter in good order
and workable condition, ordinary wear and tear
excepted, and shall promptly settle his outstanding
account if any, with the manufacturer. (Rollo, pp. 24-
25.)
The status of the individual petitioners was important because if they
were employees of Cosmos and not independent contractors, then
Cosmos would have "to pay the employer's share of premium
contributions (employer's and employees' share) for and in behalf of the
delivery helpers, as employees of respondent corporation, plus the
penalties thereon for late remittance of premium contributions,
covering the period of delinquency from the respective dates of their
coverage up to the present" as prayed for in the petition.
After hearing, the SSC rendered a resolution in favor of the SSS and the
peddlers holding that an employer-employee relationship existed
between Cosmos and the peddlers. Cosmos appealed to the Court of
Appeals and in a decision promulgated on October 16, 1979, that Court
affirmed the resolution of the SSC. However, upon a motion for
reconsideration, the Court of Appeals on October 13, 1980, set aside its
previous decision and reversed the resolution of the SSC. Hence, the
instant appeal where the petitioner is the SSS alone; the individual
peddlers have not seen fit to appeal.
We could have dismissed the instant petition by minute resolution
because precedents warrant such an action. But to put an end to
litigations of this sort and arrest what Cosmos calls judicial harassment,
a decision is in order.
In Mafinco Trading Corporation vs.Ople, et al. No. L-37790, March 25,
1976, 70 SCRA 139, the question was whether there was an employer-
employee relationship under the terms of a peddling contract in words
almost Identical to the one quoted above. This Court, thru Mr. Justice
Aquino said:
A restatement of the provisions of the peddling
contract is necessary in order to find out whether
under that instrument Repomanta and Moralde were
independent contractors or mere employees of
Mafinco.
Under the peddling contract, Mafinco would provide
the peddler with a delivery truck to be used in the
distribution of Cosmos soft drinks (Par. 1). Should the
peddler employ a driver and helpers, he would be
responsible for their compensation and social security
contributions and he should comply with applicable
labor laws "in relation to his employees" (Par. 2).
The peddler would be responsible for any damage to
persons or property or to the truck caused by his own
acts or omissions or those of his driver and helpers
(Par. 3). Mafinco would bear the cost of gasoline and
maintenance of the truck (Par. 4). The peddler would
secure at his own expense the necessary licenses and
permits and bear the expenses to be incurred in the
sale of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler at
P2.52 per case of 24 bottles, ex-warehouse. Should he
purchase at least 250 cases a day, he would be entitled
to a peddler's discount of eleven pesos (Par. 6). The
peddler would post a cash bond in the sum of P1,500 to
answer for his obligations to Mafinco (Par. 7) and
another cash bond of P1,000 to answer for his
obligations to his employees (Par. 11). He should
liquidate his accounts at the end of each day (Par. 8).
The contract would be effective up to May 31, 1973.
Either party might terminate it upon five days prior
notice to the other (Par. 9).
We hold that under their peddling contracts of
Repomanta and Moralde were not employees of
Mafinco but were independent contractors as found by
the NLRC and its fact-finder and by the committee
appointed by the Secretary of labor to look into the
status of Cosmos and Mafinco peddlers. They were
distributors of Cosmos soft drinks with their own
capital and employees. Ordinarily, an employee or a
mere peddler does not execute a formal contract of
employment. He is simply hired and he works under the
direction and control of the employer.
Repomanta and Moralde voluntarily executed with
Mafinco formal peddling contracts which indicate the
manner in which they would sell Cosmos soft drinks.
That circumstance signifies that they were acting as
independent businessmen. They were free to sign or
not to sign that contract. If they did not want to sell
Cosmos products under the conditions defined in that
contract; they were free to reject it.
But having signed it, they were bound by its
stipulations and the consequences thereof under
existing labor laws. One such stipulation is the right of
the parties to terminate the contract upon five days'
prior notice (Par. 9). Whether the termination in this
case was an unwarranted dismissal of an employee, as
contended by Repomanta and Moralde, is a point that
cannot be resolved without submission of evidence.
Using the contract itself as the sole criterion, the
termination should perforce be characterized as simply
the exercise of a right freely stipulated upon by the
parties.
In determining the existence of employer-employee
relationship, the following elements are generally
considered, namely: (1) the selection and engagement
of the employee; (2) the payment of wages: (3) the
power of dismissal: and (4) the power to control the
employees' conduct — although the latter is flip, most
important element (Viaña Al-Lagadan and Piga 99 Phil,
406, 411, Citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one
who exercise independent employment and contracts
to do a piece of work according to his own methods
and without being subject to control of his employer
except as to the result of the work" (Mansal vs. P.P.
Gocheco Lumber Co., 96 Phil. 941).
Among the factors to be considered are whether the
contractor is carrying on an independent business;
whether the work is part of the employer's general
business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the
right to assign the performance of the work to another;
the power to terminate the relationship; the existence
of a contract for the performance of a specified piece
of work; the control and supervision of the work; the
employer's powers and duties with respect to the
hiring, firing, and payment of the contractor's servants;
the control of the premises; the duty to supply the
premises, tools, appliances, material and labor; and the
mode, manner, and terms of payment. (56 C.J.S. 46).
Those tests to determine the existence of an employer-
employee relationship or whether the person doing a
particular work for another is an independent
contractor cannot be satisfactorily applied in the
instant case. It should be obvious by now that the
instant case is a penumbral, sui generis case lying on the
shadowy borderline that separates an employee from
an independent contractor.
In determining whether the relationship is that of
employer and employee or whether one is an
independent contractor, "each case must be
determined on its own facts and all the features of the
relationship are to be considered" (56 C.J.S. 45). We are
convinced that on the basis of the peddling contract, no
employer-employee relationship was created. (At pp. 161-
163, emphasis supplied.)
We hold that conformably to Mafinco, the peddling contract involved in
the instant petition makes the peddler an independent contractor.
Additionally, We have taken into account the fact that the individual
petitioners before the SSC who were the principal beneficiaries of the
petition have become indifferent to their cause.
WHEREFORE, the judgment of the Court of Appeals is hereby affirmed.
Costs against the petitioner.
 Republic of the Philippines 3. The VENDEE shall sell the cigarettes herein
SUPREME COURT mentioned only within Quezon Province and or such
Manila other places as may be designated and or limited
thereafter by the VENDOR and only to residents of, or
FIRST DIVISION retailers or jobbers doing, and having their place of
business in, said assigned territory, strictly, at such
G.R. No. L-46058 December 14, 1987 prices set by the VENDOR from time to time for the
aforementioned respective brands of cigarettes in the
sale thereof by the VENDEE in said assigned territory.
SOCIAL SECURITY SYSTEM, petitioner,
The VENDEE is fully aware that a violation of this
vs.
particular paragraph will cause grave and serious
COURT OF APPEALS and the QUALITY TOBACCO
consequences to the VENDOR and that he shall be
CORPORATION, respondents.
liable for all damages caused by said violation.
PARAS, J.:
4. The VENDEE shall be solely responsible for the
cigarettes delivered to him by the VENDOR as well as
This is a petition for review on certiorari of the decision of the Court of
for the aforementioned proceeds from the sale
Appeals * dated March 16, 1977 in CA-G.R. No. 05087-SP entitled Romeo
thereof, and any loss thereof due to any cause shall be
Carreon, petitioner-appellee vs. Quality Tobacco Corporation,
solely for his own risk and account.
respondent-appellant and Social Security System, intervenor-appellee,
reversing the Resolution dated January 21, 1976 of the Social Security
xxx xxx xxx
System and dismissing the petition filed by Romeo Carreon.

6. The VENDOR may loan a delivery truck or trucks to

The facts are found by the Court of Appeals are as follows:
the VENDEE, which truck or trucks shall be used by the
VENDEE exclusively in connection with this contract
QTC, formerly U.S. Tobacco Corporation, is a firm
and at all time maintained by the said VENDEE in good
engaged in the manufacture and sale of cigarettes. On
condition; and for as long as the VENDEE may be
August 12, 1972, QTC, as VENDOR, entered into an
allowed the use of the VENDOR's truck or trucks, the
agreement with CARREON, as VENDEE, the salient
VENDEE shall pay all the expenses for gasoline, oil,
provisions of which are as follows:
repairs, operating costs, maintenance, tires, spare
parts, etc., but the VENDOR may at its discretion
2. The VENDEE shall purchase one or more brands of assume the payment of major repair.
cigarettes of the VENDOR on cash basis only, subject to
the discretion of the VENDOR as to the brand and
xxx xxx xxx
quantity thereof;
9. This contract, may, however, be terminated upon
xxx xxx xxx
one (1) week's notice of either party at any time.
10. In the event a court litigation should be necessary to
recover from the VENDEE any amount due to the
VENDOR, the VENDEE shall pay to the VENDOR all such
damages that the VENDOR may suffer arising from the
violation by the VENDEE of any of the terms and
conditions of this contract and/or implementation
and/or instructions mentioned in Paragraph 7 hereof
plus the cost of suit and attorney's fees of at least 20%
of the amount sought to be recovered, which in no
case shall be less than Five Hundred Pesos (P500.00)
for the purposes of this paragraph, venue of actions is
hereby agreed to be in the City of Manila and the
VENDEE hereby waives any other proper venue in any
action which may be brought by or against him in
connection with this contract or in connection with
other actions which may be brought incident thereto.
The contract with CARREON was terminated by QTC on
December 18,1972.
On April 29, 1974, CARREON filed a petition with the
Social Security Commission alleging that he was an
employee of QTC, and asking that QTC be ordered to
report him for coverage under the Social Security Law
QTC answered claiming that CARREON has not been an
employee but was an 'Independent businessman.' The
Social Security System intervened and, taking the side
of CARREON, also asked that QTC be ordered to pay
Social Security contributions in respect of CARREON.
On January 21, 1976, the Social Security Commission
resolved CARREON's petition, finding him to be an
employee of QTC. The rulings in U.S. Tobacco
Corporation vs. Benjamin Serna, et al., CA-G.R. No.
32041, September 5, 1967, and The Shell Co. Phil. Ltd. vs.
Fireman's Insurance Co. of Newark, et al., 100 Phil. 757,
were inter alia, relied upon.
Cognizant of the striking similarities obtaining in the case before it and
the Mafinco vs. Ople case decided by this Court on March 25, 1976, and
relying solely on the doctrine laid down in said case, the Court of
Appeals issued the herein assailed decision dated March 16, 1977, the
dispositive part of which reads:
WHEREFORE, the Resolution of the Social Security
Commission of January 21, 1976 in its Case No. 2543 is
hereby REVERSED and the petition filed in said case by
Romeo Carreon is dismissed.
In a Motion for Reconsideration dated March 25, 1977, the Social
Security System sought the reconsideration of the aforequoted decision
(Rollo, pp. 43-49). However, finding no merit in said motion, the Court of
Appeals denied the same in its resolution dated April 14, 1977 (Rollo, pp.
50-51).
Hence this petition.
The First Division of this Court without giving due course to said petition
resolved to require the respondents to comment (Rollo, p. 64). Private
respondent filed its Comment on August 9, 1977 (Rollo, p. 69).
Thereafter, this Court resolved to give due course to the petition and
required the parties to submit simultaneous memoranda (Rollo, p. 74).
On September 23, 1977, private respondent and petitioner filed their
respective memoranda (Rollo, pp. 80-118).
The issue raised by the petitioner before this Court is the very same issue
resolved by the Court of Appeals-that is, whether or not Romeo Carreon
is an employee or an independent contractor under the contract
aforequoted. Corollary thereto the question as to whether or not the
Mafinco case is applicable to this case was raised by the parties.
The Court took cognizance of the fact that the question of whether or
not an employer-employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen with the aid of
lawyers have tried to avoid the bringing about of an employer-employee
relationship in some of their enterprises because that juridical relation
spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay and unionism.
For this reason, in order to put the issue at rest, this Court has laid down
in a formidable line of decisions the elements to be generally considered
in determining the existence of an employer-employee relationship, as
follows: a) selection and engagement of the employee; b) the payment
of wages; c) the power of dismissal; and d) the employer's power to
control the employee with respect to the means and method by-which
the work is to be accomplished. The last which is the so-called "control
test" is the most important element (Brotherhood Labor Unity
Movement of the Phils. vs. Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs.
International Labor and Marine Union of the Phil., 90 SCRA 162 [1979];
Mafinco Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security
System vs. Court of Appeals, 37 SCRA 579 [1971]).
Applying the control test, that is, whether the employer controls or has
reserved the right to control the employee not only as to the result of
the work to be done but also as to the means and method by which the
same is to be accomplished, the question of whether or not there is an
employer-employee relationship for purposes of the Social Security Act
has been settled in this jurisdiction in the case of Investment Planning
Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where the element of
control is absent; where a person who works for another does so more
or less at his own pleasure and is not subject to definite hours or
conditions of work, and in turn is compensated according to the result
of his effort, the relationship of employer-employee does not exist. (SSS
vs. Court of Appeals, 30 SCRA 210 [1969]).
It is the contention of petitioner that the Mafinco case which has been
the sole basis of the Court of Appeals' finding that Romeo Carreon is an
independent contractor is not applicable in the instant petition, there
being no substantial parallelism between said contract and the contract
of purchase and sale in this case. It pointed out that there are in the
Mafinco contract provisions which by express implication point to the
status of the peddler as an independent contractor such as: a) that
should the peddler employ a driver or helpers, the latter shall be his
employee/s and his/their compensation shall be for the peddler's
account; that the peddler shall comply with the provisions of the Social
Security Act and all applicable laws (par. 2); b) peddler is responsible for
damage to property, death or injuries to persons covered by his own
acts or omissions or those of his driver or helpers (par. 3); c) peddler is
required to secure at his own expense all necessary licenses and permits
and to bear all expenses which may be incurred in the sale of soft drinks
(par. 5); d) the peddler is to furnish a performance bond of P l,000.00 in
favor of Mafinco to assure performance by the peddler of his obligation
to his employee under the Social Security Act (par. 11), which provisions
are notably absent in the contract in the case at bar (Rollo, pp. 103-104).
It further contends that the Court of Appeals in an effort to justify its
holding picked out only paragraphs 1, 2, 4, 6 and 9 of the Mafinco
contract and thereafter concluded that the two contracts are similar.
Private respondent on the other hand, avers that the Mafinco contract is
applicable to the case at bar. The two contracts need not embody
almost the same provisions in order that they may be considered similar.
It is enough that the aspect of similarity arising from the terms and
condition be considered because of their relevance to the issue, is
relatively much stronger than the dissimilarity.
Private respondent likewise maintains that the decision was correctly
concluded not only on the similarity of the two contracts but also on
factual evidence adduced at the trial and since respondent Court has
already examined the facts and passed judgment on the basis thereof,
its decision is no longer subject to review. Stated otherwise, the Court of
Appeals "looked behind the contract" but found the evidence
insufficient to justify a finding that the terms of the contract were not
followed. That the evidence for Carreon and SSS failed to pierce" the
contract (Rollo, p. 83).
Private respondent's contention is untenable.
The distinction between a question of law and a question of fact is
explained in our jurisprudence in Ramos vs. Pepsi Cola Bottling Co. (19
SCRA 289, 292 [1967]), to wit:
For a question to be one of law it must involve no
examination of the probative value of the evidence
presented by the litigants or any of them and the
distinction is well-known. There is a question of law in a
given case when the doubt or difference arises as to
what the law is in a certain state of facts; there is a
question of fact when the doubt arises as to the truth
or the falsehood of alleged facts.
cited in G.R. No. L-39767, Lorenzo Hernandez vs. The Court of Appeals,
March 31, 1987.
In the case at bar, it is evident that the basic contention is what the law
is in the given state of facts. More than that, the well-settled rule that
the finding of facts of the Court of Appeals is conclusive on the parties,
admits of exceptions among which are: (1) when the findings of fact of
the Court of Appeals are contrary to those of the trial court and (2)
when the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and are contradicted by evidence on
record (Sacay vs. Sandiganbayan, 142 SCRA 609 [1986]; Manlapaz vs.
Court of Appeals, 147 SCRA 239 [1987]).
In this case, the Court of Appeals ruled that there is not enough
evidence to show that the contract between Carreon and QTC was not
reflective of their agreement to warrant reformation. As earlier pointed
out, the Court of Appeals did not consider the entirety of the contract
but only portions thereof which led to the conclusion that Carreon was
an independent contractor.
Thus, after a study of the records and applying the "control tests," there
appears to be no question that the existence of an employer-employee
relationship between Romeo Carreon and QTC has been established,
based on the following "undisputed" facts as pointed out by the
Solicitor General, to wit: (a) QTC assigned a definite sales territory for
Romeo Carreon; (b) QTC provided Romeo Carreon with a delivery truck
for the exclusive use of the latter in his sales activities; (c) QTC dictated
the price of the cigarettes sold by Romeo Carreon; (d) QTC prescribed
what brand of cigarettes Romeo Carreon could sell; (e) QTC determined
the persons to whom Romeo Carreon could sell, (f) QTC issued circulars
and memoranda relative to Romeo Carreon's sales activities; (g) QTC
required Romeo Carreon to submit to it daily, weekly and monthly
reports; (h) QTC grounded Romeo Carreon for six months in 1966; (i)
Romeo Carreon was supervised by sales coordinators of QTC; (j) Romeo
Carreon was subject to payment of damages and loss even of accrued
rights for any violation of instructions made by QTC in relation to his
sales activities; and (k) Romeo Carreon was paid an allowance by QTC.
All these indicate control and supervision over Carreon's work.
Moreover, it is elementary that findings of administrative agencies are
generally accorded not only. respect but also of finality (Rosario Bros,
Inc. vs. Ople, 131 SCRA 72 [1984]).
PREMISES CONSIDERED, the decision of the Court of Appeals dated
March 16, 1987 and its resolution of April 14, 1977 are hereby REVERSED
and SET ASIDE, and the resolution of the Social Security Commission
dated January 21,1976 is AFFIRMED and REINSTATED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
NARVASA, C.J.:
The question before the Court here is whether or not persons rendering
caddying services for members of golf clubs and their guests in said
clubs' courses or premises are the employees of such clubs and
therefore within the compulsory coverage of the Social Security System
(SSS).
That question appears to have been involved, either directly or
peripherally, in three separate proceedings, all initiated by or on behalf
of herein private respondent and his fellow caddies. That which gave rise
to the present petition for review was originally filed with the Social
Security Commission (SSC) via petition of seventeen (17) persons who
styled themselves "Caddies of Manila Golf and Country Club-PTCCEA" for
coverage and availment of benefits under the Social Security Act as
amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical,
Commercial Employees Association," with which the petitioners claimed
to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in
essence that although the petitioners were employees of the Manila
Golf and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same
question were filed or were pending; these were:
(1) a certification election case filed with the Labor
Relations Division of the Ministry of Labor by the
PTCCEA on behalf of the same caddies of the Manila
Golf and Country Club, the case being titled "Philippine
Technical, Clerical, Commercial Association vs. Manila
Golf and Country Club" and docketed as Case No. R4-
LRDX-M-10-504-78; it appears to have been resolved in
favor of the petitioners therein by Med-Arbiter Orlando
S. Rojo who was thereafter upheld by Director Carmelo
S. Noriel, denying the Club's motion for
reconsideration; 1
(2) a compulsory arbitration case initiated before the
Arbitration Branch of the Ministry of Labor by the same
labor organization, titled "Philippine Technical, Clerical,
Commercial Employees Association (PTCCEA), Fermin
Lamar and Raymundo Jomok vs. Manila Golf and
Country Club, Inc., Miguel Celdran, Henry Lim and
Geronimo Alejo;" it was dismissed for lack of merit by
Labor Arbiter Cornelio T. Linsangan, a decision later
affirmed on appeal by the National Labor Relations
Commission on the ground that there was no
employer-employee relationship between the
petitioning caddies and the respondent Club. 2
In the case before the SSC, the respondent Club filed answer praying for
the dismissal of the petition, alleging in substance that the petitioners,
caddies by occupation, were allowed into the Club premises to render
services as such to the individual members and guests playing the Club's
golf course and who themselves paid for such services; that as such
caddies, the petitioners were not subject to the direction and control of
the Club as regards the manner in which they performed their work; and
hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own
accord withdrew their claim for social security coverage, avowedly
coming to realize that indeed there was no employment relationship
between them and the Club. The case continued, and was eventually
adjudicated by the SSC after protracted proceedings only as regards the
two holdouts, Fermin Llamar and Raymundo Jomok. The Commission
dismissed the petition for lack of merit, 3ruling:
. . . that the caddy's fees were paid by the golf players
themselves and not by respondent club. For instance,
petitioner Raymundo Jomok averred that for their
services as caddies a caddy's Claim Stub (Exh. "1-A") is
issued by a player who will in turn hand over to
management the other portion of the stub known as
Caddy Ticket (Exh. "1") so that by this arrangement
management will know how much a caddy will be paid
(TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin
Llamar admitted that caddy works on his own in
accordance with the rules and regulations (TSN, p. 24,
February 26, 1980) but petitioner Jomok could not
state any policy of respondent that directs the manner
of caddying (TSN, pp. 76-77, July 23, 1980). While
respondent club promulgates rules and regulations on
the assignment, deportment and conduct of caddies
(Exh. "C") the same are designed to impose personal
discipline among the caddies but not to direct or
conduct their actual work. In fact, a golf player is at
liberty to choose a caddy of his preference regardless
of the respondent club's group rotation system and has
the discretion on whether or not to pay a caddy. As
testified to by petitioner Llamar that their income
depends on the number of players engaging their
services and liberality of the latter (TSN, pp. 10-11, Feb.
26, 1980). This lends credence to respondent's
assertion that the caddies are never their employees in
the absence of two elements, namely, (1) payment of
wages and (2) control or supervision over them. In this
connection, our Supreme Court ruled that in the
determination of the existence of an employer-
employee relationship, the "control test" shall be
considered decisive (Philippine Manufacturing Co. vs.
Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P.
Coheco Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs.
The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs.
Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference
being made also to Investment Planning Corporation
Phil. vs. SSS 21 SCRA 925).
Records show the respondent club had reported for SS
coverage Graciano Awit and Daniel Quijano, as bat
unloader and helper, respectively, including their
ground men, house and administrative personnel, a
situation indicative of the latter's concern with the
rights and welfare of its employees under the SS law,
as amended. The unrebutted testimony of Col.
Generoso A. Alejo (Ret.) that the ID cards issued to the
caddies merely intended to identify the holders as
accredited caddies of the club and privilege(d) to ply
their trade or occupation within its premises which
could be withdrawn anytime for loss of confidence.
This gives us a reasonable ground to state that the
defense posture of respondent that petitioners were
never its employees is well taken.4
From this Resolution appeal was taken to the Intermediate appellate
Court by the union representing Llamar and Jomok. After the appeal
was docketed 5 and some months before decision thereon was reached
and promulgated, Raymundo Jomok's appeal was dismissed at his
instance, leaving Fermin Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
 (1) refusing to suspend the proceedings to await
judgment by the Labor Relations Division of National
Capital Regional Office in the certification election case
(R-4-LRD-M-10-504-78) supra, on the precise issue of
the existence of employer-employee relationship
between the respondent club and the appellants, it
being contended that said issue was "a function of the
proper labor office"; and
(2) adjudicating that self same issue a manner contrary
to the ruling of the Director of the Bureau of Labor
Relations, which "has not only become final but (has
been) executed or (become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first assigned
error, dismissing it as of the least importance. Nor, it would appear, did
it find any greater merit in the second alleged error. Although said Court
reserved the appealed SSC decision and declared Fermin Llamar an
employee of the Manila Gold and Country Club, ordering that he be
reported as such for social security coverage and paid any
corresponding benefits, 8 it conspicuously ignored the issue of res
adjudicata raised in said second assignment. Instead, it drew basis for
the reversal from this Court's ruling in Investment Planning Corporation
of the Philippines vs. Social Security System, supra 9 and declared that
upon the evidence, the questioned employer-employee relationship
between the Club and Fermin Llamar passed the so-called "control test,"
establishment in the case — i.e., "whether the employer controls or has
reserved the right to control the employee not only as to the result of
the work to be done but also as to the means and methods by which the
same is to be accomplished," — the Club's control over the caddies
encompassing:
(a) the promulgation of no less than twenty-four (24)
rules and regulations just about every aspect of the
conduct that the caddy must observe, or avoid, when
serving as such, any violation of any which could
subject him to disciplinary action, which may include
suspending or cutting off his access to the club
premises;
(b) the devising and enforcement of a group rotation
system whereby a caddy is assigned a number which
designates his turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to
the caddies.
Deemed of title or no moment by the Appellate Court was the fact that
the caddies were paid by the players, not by the Club, that they
observed no definite working hours and earned no fixed income. It
quoted with approval from an American decision 10 to the effect that:
"whether the club paid the caddies and afterward collected in the first
instance, the caddies were still employees of the club." This, no matter
that the case which produced this ruling had a slightly different factual
cast, apparently having involved a claim for workmen's compensation
made by a caddy who, about to leave the premises of the club where he
worked, was hit and injured by an automobile then negotiating the
club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare
mention thereof, as already pointed out, is now among the mainways of
the private respondent's defenses to the petition for review. Considered
in the perspective of the incidents just recounted, it illustrates as well as
anything can, why the practice of forum-shopping justly merits censure
and punitive sanction. Because the same question of employer-
employee relationship has been dragged into three different fora, willy-
nilly and in quick succession, it has birthed controversy as to which of
the resulting adjudications must now be recognized as decisive. On the
one hand, there is the certification case [R4-LRDX-M-10-504-78), where
the decision of the Med-Arbiter found for the existence of employer-
employee relationship between the parties, was affirmed by Director
Carmelo S. Noriel, who ordered a certification election held, a
disposition never thereafter appealed according to the private
respondent; on the other, the compulsory arbitration case (NCR Case
No. AB-4-1771-79), instituted by or for the same respondent at about the
same time, which was dismissed for lack of merit by the Labor Arbiter,
which was afterwards affirmed by the NLRC itself on the ground that
there existed no such relationship between the Club and the private
respondent. And, as if matters were not already complicated enough,
the same respondent, with the support and assistance of the PTCCEA,
saw fit, also contemporaneously, to initiate still a third proceeding for
compulsory social security coverage with the Social Security Commission
(SSC Case No. 5443), with the result already mentioned.
Before this Court, the petitioner Club now contends that the decision of
the Med-Arbiter in the certification case had never become final, being
in fact the subject of three pending and unresolved motions for
reconsideration, as well as of a later motion for early
resolution. 11 Unfortunately, none of these motions is incorporated or
reproduced in the record before the Court. And, for his part, the private
respondent contends, not only that said decision had been appealed to
and been affirmed by the Director of the BLR, but that a certification
election had in fact been held, which resulted in the PTCCEA being
recognized as the sole bargaining agent of the caddies of the Manila
Golf and Country Club with respect to wages, hours of work, terms of
employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not adequately
disclose, the more controlling consideration would seem to be that,
however, final it may become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further
dispute between the parties as to the existence, or non-existence, of
employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by prior
judgment, to apply, the following essential requisites must concur: (1)
there must be a final judgment or order; (2) said judgment or order must
be on the merits; (3) the court rendering the same must have jurisdiction
over the subject matter and the parties; and (4) there must be between
the two cases identity of parties, identity of subject matter and identity
of cause of action. 13
Clearly implicit in these requisites is that the action or proceedings in
which is issued the "prior Judgment" that would operate in bar of a
subsequent action between the same parties for the same cause,
be adversarial, or contentious, "one having opposing parties; (is)
contested, as distinguished from an ex parte hearing or proceeding. . . .
of which the party seeking relief has given legal notice to the other party
and afforded the latter an opportunity to contest it" 14 and a certification
case is not such a proceeding, as this Court already ruled:
A certification proceedings is not a "litigation" in the
sense in which the term is commonly understood, but
mere investigation of a non-adversary, fact-finding
character, in which the investigating agency plays the
part of a disinterested investigator seeking merely to
ascertain the desires of the employees as to the matter
of their representation. The court enjoys a wide
discretion in determining the procedure necessary to
insure the fair and free choice of bargaining
representatives by the employees.15
Indeed, if any ruling or judgment can be said to operate as res
adjudicata on the contested issue of employer-employee relationship
between present petitioner and the private respondent, it would
logically be that rendered in the compulsory arbitration case (NCR Case
No. AB-4-771-79, supra), petitioner having asserted, without dispute from
the private respondent, that said issue was there squarely raised and
litigated, resulting in a ruling of the Arbitration Branch (of the same
Ministry of Labor) that such relationship did not exist, and which ruling
was thereafter affirmed by the National Labor Relations Commission in
an appeal taken by said respondent. 16
In any case, this Court is not inclined to allow private respondent the
benefit of any doubt as to which of the conflicting ruling just adverted to
should be accorded primacy, given the fact that it was he who actively
sought them simultaneously, as it were, from separate fora, and even if
the graver sanctions more lately imposed by the Court for forum-
shopping may not be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private
respondent's invocation of res adjudicata; on contrary, it acted correctly
in doing so.
Said Court’s holding that upon the facts, there exists (or existed) a
relationship of employer and employee between petitioner and private
respondent is, however, another matter. The Court does not agree that
said facts necessarily or logically point to such a relationship, and to the
exclusion of any form of arrangements, other than of employment, that
would make the respondent's services available to the members and
guest of the petitioner.
As long as it is, the list made in the appealed decision detailing the
various matters of conduct, dress, language, etc. covered by the
petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as to
leave them little or no freedom of choice whatsoever in the manner of
carrying out their services. In the very nature of things, caddies must
submit to some supervision of their conduct while enjoying the privilege
of pursuing their occupation within the premises and grounds of
whatever club they do their work in. For all that is made to appear, they
work for the club to which they attach themselves on sufference but, on
the other hand, also without having to observe any working hours, free
to leave anytime they please, to stay away for as long they like. It is not
pretended that if found remiss in the observance of said rules, any
discipline may be meted them beyond barring them from the premises
which, it may be supposed, the Club may do in any case even absent any
breach of the rules, and without violating any right to work on their part.
All these considerations clash frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of fees
payable by the players to the caddies as still another indication of the
latter's status as employees. It seems to the Court, however, that the
intendment of such fact is to the contrary, showing that the Club has not
the measure of control over the incidents of the caddies' work and
compensation that an employer would possess.
The Court agrees with petitioner that the group rotation system so-
called, is less a measure of employer control than an assurance that the
work is fairly distributed, a caddy who is absent when his turn number is
called simply losing his turn to serve and being assigned instead the last
number for the day. 17
By and large, there appears nothing in the record to refute the
petitioner's claim that:
(Petitioner) has no means of compelling the presence
of a caddy. A caddy is not required to exercise his
occupation in the premises of petitioner. He may work
with any other golf club or he may seek employment a
caddy or otherwise with any entity or individual
without restriction by petitioner. . . .
. . . In the final analysis, petitioner has no was of
compelling the presence of the caddies as they are not
required to render a definite number of hours of work
on a single day. Even the group rotation of caddies is
not absolute because a player is at liberty to choose a
caddy of his preference regardless of the caddy's order
in the rotation.
It can happen that a caddy who has rendered services
to a player on one day may still find sufficient time to
work elsewhere. Under such circumstances, he may
then leave the premises of petitioner and go to such
other place of work that he wishes (sic). Or a caddy
who is on call for a particular day may deliberately
absent himself if he has more profitable caddying, or
another, engagement in some other place. These are
things beyond petitioner's control and for which it
imposes no direct sanctions on the caddies. . . . 18
WHEREFORE, the Decision of the Intermediate Appellant Court, review
of which is sought, is reversed and set aside, it being hereby declared
that the private respondent, Fermin Llamar, is not an employee of Republic of the Philippines
petitioner Manila Golf and Country Club and that petitioner is under no SUPREME COURT
obligation to report him for compulsory coverage to the Social Security Manila
System. No pronouncement as to costs.
THIRD DIVISION

G.R. No. 172101 November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY

COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of

the 1997 Revised Rules of Civil Procedure seeking to annul and set aside
the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No.
87236, dated 5 January 2006 and 20 March 2006, respectively, which
annulled and set aside the Orders of the Social Security Commission
(SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16
September 2004,4respectively, thereby dismissing the petition-
complaint dated 12 June 2003 filed by herein petitioner Social Security
System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a

quasi-judicial body authorized by law to resolve disputes arising under
Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner
SSS is a government corporation created by virtue of Republic Act No.
1161, as amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created pursuant
to Republic Act No. 69386 and duly registered with the Cooperative
Development Authority (CDA) on 23 November 1999 with Registration
Certificate No. 0-623-2460.7

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-
members. Under its by-laws, owners-members are of two categories, to
wit: (1) regular member, who is entitled to all the rights and privileges of
membership; and (2) associate member, who has no right to vote and be
voted upon and shall be entitled only to such rights and privileges
provided in its by-laws.8 Its primary objectives are to provide savings and
credit facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service Contracts 9 with
Stanfilco - a division of DOLE Philippines, Inc. and a company based in
Bukidnon. The owners-members do not receive compensation or wages
from the respondent cooperative. Instead, they receive a share in the
service surplus10 which the respondent cooperative earns from different
areas of trade it engages in, such as the income derived from the said
Service Contracts with Stanfilco. The owners-members get their income
from the service surplus generated by the quality and amount of
services they rendered, which is determined by the Board of Directors of
the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the
owners-members of the respondent cooperative, who were assigned to
Stanfilco requested the services of the latter to register them with
petitioner SSS as self-employed and to remit their contributions as such.
Also, to comply with Section 19-A of Republic Act No. 1161, as amended
by Republic Act No. 8282, the SSS contributions of the said owners-
members were equal to the share of both the employer and the
employee.
On 26 September 2002, however, petitioner SSS through its Vice-
President for Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the
respondent cooperative, addressed to its Chief Executive Officer (CEO)
and General Manager Leo G. Parma, informing the latter that based on
the Service Contracts it executed with Stanfilco, respondent cooperative
is actually a manpower contractor supplying employees to Stanfilco and
for that reason, it is an employer of its owners-members working with
Stanfilco. Thus, respondent cooperative should register itself with
petitioner SSS as an employer and make the corresponding report and
remittance of premium contributions in accordance with the Social
Security Law of 1997. On 9 October 2002,12 respondent cooperative,
through its counsel, sent a reply to petitioner SSS’s letter asserting that
it is not an employer because its owners-members are the cooperative
itself; hence, it cannot be its own employer. Again, on 21 October
2002,13 petitioner SSS sent a letter to respondent cooperative ordering
the latter to register as an employer and report its owners-members as
employees for compulsory coverage with the petitioner SSS.
Respondent cooperative continuously ignored the demand of petitioner
SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition 14 before
petitioner SSC against the respondent cooperative and Stanfilco praying
that the respondent cooperative or, in the alternative, Stanfilco be
directed to register as an employer and to report respondent
cooperative’s owners-members as covered employees under the
compulsory coverage of SSS and to remit the necessary contributions in
accordance with the Social Security Law of 1997. The same was
docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its
Answer with Motion to Dismiss alleging that no employer-employee
relationship exists between it and its owners-members, thus, petitioner
SSC has no jurisdiction over the respondent cooperative. Stanfilco, on
the other hand, filed an Answer with Cross-claim against the respondent
cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion
to Dismiss filed by the respondent cooperative. The respondent
cooperative moved for the reconsideration of the said Order, but it was
likewise denied in another Order issued by the SSC dated 16 September
2004.
Intending to appeal the above Orders, respondent cooperative filed a
Motion for Extension of Time to File a Petition for Review before the
Court of Appeals. Subsequently, respondent cooperative filed a
Manifestation stating that it was no longer filing a Petition for Review. In
its place, respondent cooperative filed a Petition for Certiorari before
the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the
following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein
petitioner] SSC were issued with grave abuse of discretion amounting to
a (sic) lack or excess of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it
has jurisdiction over the petition a quo, considering that it failed
to first resolve the issue of the existence of an employer-
employee relationship between [respondent] cooperative and
its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to coverage,
benefits, contributions, and related matters, it is respectfully
submitted that [petitioner] SSC may only assume jurisdiction in
cases where there is no dispute as to the existence of an
employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue
of employer-employee relationship raised in [respondent’s]
Motion to Dismiss can be preliminarily resolved through
summary hearings prior to the hearing on the merits. However,
any inquiry beyond a preliminary determination, as what
[petitioner SSC] wants to accomplish, would be to encroach on
the jurisdiction of the National Labor Relations Commission
[NLRC], which is the more competent body clothed with power
to resolve issues relating to the existence of an employment
relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance
of the petition a quo.
A. [Respondent] is not an employer within the contemplation of
the Labor Law but is a multi-purpose cooperative created
pursuant to Republic Act No. 6938 and composed of owners-
members, not employees.
B. The rights and obligations of the owners-members of
[respondent] cooperative are derived from their Membership
Agreements, the Cooperatives By-Laws, and Republic Act No.
6938, and not from any contract of employment or from the
Labor Laws. Moreover, said owners-members enjoy rights that
are not consistent with being mere employees of a company,
such as the right to participate and vote in decision-making for
the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the
owners-members of [respondent] cooperative are not paid any
compensation income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting
the petition filed by the respondent cooperative. The decretal portion of
the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17
February 2004] and [16 September 2004], are ANNULLED and SET ASIDE
and a new one is entered DISMISSING the petition-complaint dated [12
June 2003] of [herein petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a
reconsideration, but it was denied by the appellate court in its
Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the
Court of Appeals erred in not finding that the SSC has jurisdiction over
the subject matter and it has a valid basis in denying respondent’s
Motion to Dismiss. The said issue is supported by the following
arguments:
I. The [petitioner SSC] has jurisdiction over the petition-
complaint filed before it by the [petitioner SSS] under R.A. No.
8282.
 II. Respondent [cooperative] is estopped from questioning the
jurisdiction of petitioner SSC after invoking its jurisdiction by
filing an [A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of
discretion in denying respondent [cooperative’s] [M]otion to
[D]ismiss.
IV. The existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between
[respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint
filed before it by petitioner SSS as it involved an issue of whether or not
a worker is entitled to compulsory coverage under the SSS Law.
Petitioners avow that Section 5 of Republic Act No. 1161, as amended by
Republic Act No. 8282, expressly confers upon petitioner SSC the power
to settle disputes on compulsory coverage, benefits, contributions and
penalties thereon or any other matter related thereto. Likewise, Section
9 of the same law clearly provides that SSS coverage is compulsory upon
all employees. Thus, when petitioner SSS filed a petition-complaint
against the respondent cooperative and Stanfilco before the petitioner
SSC for the compulsory coverage of respondent cooperative’s owners-
members as well as for collection of unpaid SSS contributions, it was
very obvious that the subject matter of the aforesaid petition-complaint
was within the expertise and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior
need to determine the existence of an employer-employee relationship
between the respondent cooperative and its owners-members, said
issue does not preclude petitioner SSC from taking cognizance of the
aforesaid petition-complaint. Considering that the principal relief sought
in the said petition-complaint has to be resolved by reference to the
Social Security Law and not to the Labor Code or other labor relations
statutes, therefore, jurisdiction over the same solely belongs to
petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s
Motion to Dismiss grounded on the alleged lack of employer-employee
relationship does not constitute grave abuse of discretion on the part of
petitioner SSC because the latter has the authority and power to deny
the same. Moreover, the existence of an employer-employee
relationship is a question of fact where presentation of evidence is
necessary. Petitioners also maintain that the respondent cooperative is
already estopped from assailing the jurisdiction of the petitioner SSC
because it has already filed its Answer before it, thus, respondent
cooperative has already submitted itself to the jurisdiction of the
petitioner SSC.
Finally, petitioners contend that there is an employer-employee
relationship between the respondent cooperative and its owners-
members. The respondent cooperative is the employer of its owners-
members considering that it undertook to provide services to Stanfilco,
the performance of which is under the full and sole control of the
respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-
members own the cooperative, thus, no employer-employee
relationship can arise between them. The persons of the employer and
the employee are merged in the owners-members themselves. Likewise,
respondent cooperative’s owners-members even requested the
respondent cooperative to register them with the petitioner SSS as self-
employed individuals. Hence, petitioner SSC has no jurisdiction over the
petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals
correctly ruled that petitioner SSC acted with grave abuse of discretion
when it assumed jurisdiction over the petition-complaint without
determining first if there was an employer-employee relationship
between the respondent cooperative and its owners-members.
Respondent cooperative claims that the question of whether an
employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed
and need only to be interpreted by the applicable law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered
estopped from assailing the jurisdiction of petitioner SSC simply because
it filed an Answer with Motion to Dismiss, especially where the issue of
jurisdiction is raised at the very first instance and where the only relief
being sought is the dismissal of the petition-complaint for lack of
jurisdiction.
From the foregoing arguments of the parties, the issues may be
summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-
complaint filed before it by petitioner SSS against the
respondent cooperative.
II. Whether the respondent cooperative is estopped from
assailing the jurisdiction of petitioner SSC since it had already
filed an Answer with Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act
No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of
Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act
with respect to coverage, benefits, contributions and penalties thereon
or any other matter related thereto, shall be cognizable by the
Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure
states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act
with respect to coverage, entitlement of benefits, collection and
settlement of contributions and penalties thereon, or any other matter
related thereto, shall be cognizable by the Commission after the SSS
through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken
action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the
compulsory coverage of the SSS is well within the exclusive domain of
the petitioner SSC. It is important to note, though, that the mandatory
coverage under the SSS Law is premised on the existence of an
employer-employee relationship17 except in cases of compulsory
coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set
up in the Answer or in the Motion to Dismiss, determine which court has
jurisdiction over an action; otherwise, the question of jurisdiction would
depend almost entirely upon the defendant. 18 Moreover, it is well-
settled that once jurisdiction is acquired by the court, it remains with it
until the full termination of the case.19 The said principle may be applied
even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the
petitioner SSC against the respondent cooperative and Stanfilco alleges
that the owners-members of the respondent cooperative are subject to
the compulsory coverage of the SSS because they are employees of the
respondent cooperative. Consequently, the respondent cooperative
being the employer of its owners-members must register as employer
and report its owners-members as covered members of the SSS and
remit the necessary premium contributions in accordance with the
Social Security Law of 1997. Accordingly, based on the aforesaid
allegations in the petition-complaint filed before the petitioner SSC, the
case clearly falls within its jurisdiction. Although the Answer with Motion
to Dismiss filed by the respondent cooperative challenged the
jurisdiction of the petitioner SSC on the alleged lack of employer-
employee relationship between itself and its owners-members, the same
is not enough to deprive the petitioner SSC of its jurisdiction over the
petition-complaint filed before it. Thus, the petitioner SSC cannot be
faulted for initially assuming jurisdiction over the petition-complaint of
the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship
between the respondent cooperative and its owners-members was put
in issue and considering that the compulsory coverage of the SSS Law is
predicated on the existence of such relationship, it behooves the
petitioner SSC to determine if there is really an employer-employee
relationship that exists between the respondent cooperative and its
owners-members.
The question on the existence of an employer-employee relationship is
not within the exclusive jurisdiction of the National Labor Relations
Commission (NLRC). Article 217 of the Labor Code enumerating the
jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. -
(a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (₱5,000.00)
regardless of whether accompanied with a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for Social
Security, it would necessarily include issues on the coverage thereof,
because claims are undeniably rooted in the coverage by the system.
Hence, the question on the existence of an employer-employee
relationship for the purpose of determining the coverage of the Social
Security System is explicitly excluded from the jurisdiction of the NLRC
and falls within the jurisdiction of the SSC which is primarily charged
with the duty of settling disputes arising under the Social Security Law
of 1997.
On the basis thereof, considering that the petition-complaint of the
petitioner SSS involved the issue of compulsory coverage of the owners-
members of the respondent cooperative, this Court agrees with the
petitioner SSC when it declared in its Order dated 17 February 2004 that
as an incident to the issue of compulsory coverage, it may inquire into
the presence or absence of an employer-employee relationship without
need of waiting for a prior pronouncement or submitting the issue to
the NLRC for prior determination. Since both the petitioner SSC and the
NLRC are independent bodies and their jurisdiction are well-defined by
the separate statutes creating them, petitioner SSC has the authority to
inquire into the relationship existing between the worker and the
person or entity to whom he renders service to determine if the
employment, indeed, is one that is excepted by the Social Security Law
of 1997 from compulsory coverage.21
Even before the petitioner SSC could make a determination of the
existence of an employer-employee relationship, however, the
respondent cooperative already elevated the Order of the petitioner
SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a
Petition for Certiorari. As a consequence thereof, the petitioner SSC
became a party to the said Petition for Certiorari pursuant to Section
5(b)22 of Republic Act No. 8282. The appellate court ruled in favor of the
respondent cooperative by declaring that the petitioner SSC has no
jurisdiction over the petition-complaint filed before it because there was
no employer-employee relationship between the respondent
cooperative and its owners-members. Resultantly, the petitioners SSS
and SSC, representing the Republic of the Philippines, filed a Petition for
Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s power of
review, the Court is not a trier of facts and the findings of fact of the
Court of Appeals are conclusive and binding on the Court, 23 said rule is
not without exceptions. There are several recognized exceptions24 in
which factual issues may be resolved by this Court. One of these
exceptions finds application in this present case which is, when the
findings of fact are conflicting. There are, indeed, conflicting findings
espoused by the petitioner SSC and the appellate court relative to the
existence of employer-employee relationship between the respondent
cooperative and its owners-members, which necessitates a departure
from the oft-repeated rule that factual issues may not be the subject of
appeals to this Court.
In determining the existence of an employer-employee relationship, the
following elements are considered: (1) the selection and engagement of
the workers; (2) the payment of wages by whatever means; (3) the
power of dismissal; and (4) the power to control the worker’s conduct,
with the latter assuming primacy in the overall consideration. 25The most
important element is the employer’s control of the employee’s conduct,
not only as to the result of the work to be done, but also as to the
means and methods to accomplish.26 The power of control refers to the
existence of the power and not necessarily to the actual exercise
thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer
has the right to wield that power.27 All the aforesaid elements are
present in this case.
First. It is expressly provided in the Service Contracts that it is the
respondent cooperative which has the exclusive discretion in the
selection and engagement of the owners-members as well as its team
leaders who will be assigned at Stanfilco.28 Second. Wages are defined
as "remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained, on a time,
task, piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written
or unwritten contract of employment for work done or to be done, or
for service rendered or to be rendered." 29 In this case, the weekly
stipends or the so-called shares in the service surplus given by the
respondent cooperative to its owners-members were in reality wages,
as the same were equivalent to an amount not lower than that
prescribed by existing labor laws, rules and regulations, including the
wage order applicable to the area and industry; or the same shall not be
lower than the prevailing rates of wages.30 It cannot be doubted then
that those stipends or shares in the service surplus are indeed wages,
because these are given to the owners-members as compensation in
rendering services to respondent cooperative’s client, Stanfilco. Third. It
is also stated in the above-mentioned Service Contracts that it is the
respondent cooperative which has the power to investigate, discipline
and remove the owners-members and its team leaders who were
rendering services at Stanfilco.31 Fourth. As earlier opined, of the four
elements of the employer-employee relationship, the "control test" is
the most important. In the case at bar, it is the respondent cooperative
which has the sole control over the manner and means of performing
the services under the Service Contracts with Stanfilco as well as the
means and methods of work.32 Also, the respondent cooperative is
solely and entirely responsible for its owners-members, team leaders
and other representatives at Stanfilco.33 All these clearly prove that,
indeed, there is an employer-employee relationship between the
respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent
cooperative and Stanfilco expressly provide that there shall be no
employer-employee relationship between the respondent cooperative
and its owners-members.34 This Court, however, cannot give the said
provision force and effect.
As previously pointed out by this Court, an employee-employer
relationship actually exists between the respondent cooperative and its
owners-members. The four elements in the four-fold test for the
existence of an employment relationship have been complied with. The
respondent cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The
existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract, when the terms and surrounding
circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it should
be.35
It is settled that the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their agreement would
have the force of law between them. However, the agreed terms and
conditions must not be contrary to law, morals, customs, public policy or
public order.36 The Service Contract provision in question must be struck
down for being contrary to law and public policy since it is apparently
being used by the respondent cooperative merely to circumvent the
compulsory coverage of its employees, who are also its owners-
members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in
Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it
held that:
A cooperative, therefore, is by its nature different from an ordinary
business concern, being run either by persons, partnerships, or
corporations. Its owners and/or members are the ones who run and
operate the business while the others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-
owner thereof cannot invoke the right to collective bargaining for
certainly an owner cannot bargain with himself or his co-owners. In the
opinion of August 14, 1981 of the Solicitor General he correctly opined
that employees of cooperatives who are themselves members of the
cooperative have no right to form or join labor organizations for
purposes of collective bargaining for being themselves co-owners of the
cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are
not members or co-owners thereof, certainly such employees are
entitled to exercise the rights of all workers to organization, collective
bargaining, negotiations and others as are enshrined in the Constitution
and existing laws of the country.
The situation in the aforesaid case is very much different from the
present case. The declaration made by the Court in the aforesaid case
was made in the context of whether an employee who is also an owner-
member of a cooperative can exercise the right to bargain collectively
with the employer who is the cooperative wherein he is an owner-
member. Obviously, an owner-member cannot bargain collectively with
the cooperative of which he is also the owner because an owner cannot
bargain with himself. In the instant case, there is no issue regarding an
owner-member’s right to bargain collectively with the cooperative. The
question involved here is whether an employer-employee relationship
can exist between the cooperative and an owner-member. In fact, a
closer look at Cooperative Rural Bank of Davao City, Inc. will show that it
actually recognized that an owner-member of a cooperative can be its
own employee.
It bears stressing, too, that a cooperative acquires juridical personality
upon its registration with the Cooperative Development Authority. 38 It
has its Board of Directors, which directs and supervises its business;
meaning, its Board of Directors is the one in charge in the conduct and
management of its affairs.39 With that, a cooperative can be likened to a
corporation with a personality separate and distinct from its owners-
members. Consequently, an owner-member of a cooperative can be an
employee of the latter and an employer-employee relationship can exist
between them.
In the present case, it is not disputed that the respondent cooperative
had registered itself with the Cooperative Development Authority, as
evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-
laws,41 its Board of Directors directs, controls, and supervises the
business and manages the property of the respondent cooperative.
Clearly then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its owners-
members as a whole. Therefore, it is completely logical that the
respondent cooperative, as a juridical person represented by its Board of
Directors, can enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship
between the respondent cooperative and its owners-member, we
conclude that the petitioner SSC has jurisdiction over the petition-
complaint filed before it by the petitioner SSS. This being our conclusion,
it is no longer necessary to discuss the issue of whether the respondent Republic of the Philippines
cooperative was estopped from assailing the jurisdiction of the SUPREME COURT
petitioner SSC when it filed its Answer with Motion to Dismiss. Manila

WHEREFORE, premises considered, the instant Petition is hereby THIRD DIVISION

GRANTED. The Decision and the Resolution of the Court of Appeals in
CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, G.R. No. 119891 August 21, 1995
respectively, are hereby REVERSED and SET ASIDE. The Orders of the
petitioner SSC dated 17 February 2004 and 16 September 2004 are BEN STA. RITA, petitioner,
hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue vs.
hearing the petition-complaint filed before it by the petitioner SSS as THE COURT OF APPEALS, THE PEOPLE OF THE PHILIPPINES and THE
regards the compulsory coverage of the respondent cooperative and its SOCIAL SECURITY SYSTEM, respondents.
owners-members. No costs.
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 EMPLOYMENT — Any service performed by an employee for his
filed against him. It ruled that the Memorandum of Agreement entered employer, except —
into between the Department of Labor and Employment ("DOLE") and
the Social Security System ("SSS") extending the coverage of Social xxx xxx xxx
Security, Medical Care and Employment Compensation laws to Filipino
seafarers on board foreign vessels was null and void as it was entered (5) Service performed on or in connection with an alien vessel
into by the Administrator of the SSS without the sanction of the by an employee if he is employed when such vessel is outside
Commission and approval of the President of the Philippines, in the Philippines.
contravention of Section 4 (a) of R.A. No. 1161, as amended.3
xxx xxx xxx
The People, through the Solicitor General, filed in the Court of Appeals a
petition for certiorari, prohibition and mandamus assailing the order of
According to petitioner, the Memorandum of Agreement entered into
dismissal issued by the trial court. Respondent appellate court granted
by the DOLE and the SSS is null and void as it has the effect of amending
the petition and ordered the Presiding Judge of the trial court to
the aforequoted provision of R.A. No. 1161 by expanding its coverage.
reinstate the criminal case against petitioner. A motion for
This allegedly cannot be done as only Congress may validly amend
reconsideration thereof was denied by the CA in a Resolution dated 17
legislative enactments.
April 1995.
Petitioner prays that the Court set aside the decision of the Court of
Thereafter, petitioner filed in this Court a motion for extension of thirty
Appeals ordering the reinstatement of Criminal Case No. Q-92-35426 and
(30) days from the expiration of reglementary period within which to file
that the Order of the RTC dismissing the same be upheld.
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
It is well-settled in our jurisdiction that the right to appeal is a statutory
further extension will be given. Despite the warning, the petition was
right and a party who seeks to avail of the right must comply with the
filed only on 13 June 1995 or four (4) days after the due date. Moreover,
rules.4 These rules, particularly the statutory requirement for perfecting
it failed to comply with requirement no. 2 of Circular No. 1-88, as
an appeal within the reglementary period laid down by law, must be
amended and Circular No. 19-91 of the Court as it did not contain an
strictly followed as they are considered indispensable interdictions
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 against needless delays and for orderly discharge of judicial
business.5 Petitioner's failure to seasonably file the Petition and its
was belatedly submitted to this Court.
failure to comply with the aforequoted Circulars of the Court necessitate
the denial of the Petition.
In the Petition for Review, petitioner Sta. Rita contends that the Filipino
seafarers recruited by B. Sta. Rita Co. and deployed on board foreign
Besides, even if the Petition had been filed on time and had complied
vessels outside the Philippines are exempt from the coverage of R.A. No.
with the Circulars, it would still have to be denied as petitioner has failed
1161 under Section 8 (j) (5) thereof:
to show that respondent appellate court committed any reversible error
in rendering the assailed decision.
Terms Defined
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:
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, It is, finally, worthy of special note that by extending the benefits of the
as amended), subject to the following terms and conditions: Social Security Act to Filipino seafarers on board foreign vessels, the
individual employment agreements entered into with the stipulation for
xxx xxx xxx7 such coverage contemplated in the DOLE-SSS Memorandum of
Agreement, merely give effect to the constitutional mandate to the
(Emphasis supplied) 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
Thus, the Standard Contract of Employment to be entered into between
Agreement, constituted serious reversible error on the part of the trial
foreign shipowners and Filipino seafarers is the instrument by which the
court. That petitioner should seek to deprive his countrymen of social
former express their assent to the inclusion of the latter in the coverage
security protection after his foreign principal had agreed to such
of the Social Security Act. In other words, the extension of the coverage
protection, is cause for dismay and is to be deplored.
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 The Court of Appeals properly held that the reinstatement of the
Company, who is solidarily liable with the foreign shipowners/employers. 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
It may be noted that foreign shipowners and manning agencies had
where double jeopardy will attach notwithstanding the fact that the
generally expressed their conformity to the inclusion of Filipino
case was dismissed with the express consent of the accused. The first is
seafarers within the coverage of the Social Security Act even prior to the
where the ground for dismissal is insufficiency of evidence for the
signing of the DOLE-SSS Memorandum of Agreement. Thus, the
prosecution; and the second is where the criminal proceedings have
Whereas clauses of the Memorandum of Agreement state that:
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
WHEREAS, in the 74th Maritime Session (ILO) held from
impediment to the reinstatement of Criminal Case No. Q-92-35426
September 24 to October 9, 1987 in Geneva, it was agreed
against petitioner Sta. Rita.
that as an internationally accepted principle, seafarers shall have
the right to social security protection;
WHEREFORE, the Court Resolved to DENY the Petition for having been
filed late, for failure to comply with applicable Court Circulars and for
xxx xxx xxx
lack of merit. The assailed Decision of the Court of Appeals is hereby
AFFIRMED. Cost against petitioner.
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 xxx8

(Emphasis supplied)