[G.R. No. 139455.

March 28, 2003]

REPUBLIC OF THE PHILIPPINES represented by EMPLOYEES

COMPENSATION
COMMISSION, petitioner,
vs. PEDRO
MARIANO, respondent.
For an eleven-year period starting January 1983, respondent Pedro
Mariano was an employee of LGP Printing Press. During his employment,
Mariano worked in various capacities, including that of a machine operator,
paper cutter, monotype composer, film developer, and supervisor of the
printing press.
[3]

Sometime in February 1994, Marianos service abruptly ended when he

could no longer perform any work due to a heart ailment.
Mariano filed a claim for employees compensation benefit with the SSS. In
its medical evaluation dated April 15, 1997, SSS denied his claim on the
ground that there was no causal connection between his ailment and his job
as film developer.
[5]

On July 1, 1997, the SSS forwarded the record of respondents case to the
ECC. In a letter dated September 12, 1997, the ECC remanded respondents
case to the SSS for reception of additional documentary evidence.
On February 9, 1998, the SSS directed respondent to submit the following:
(1) complete clinical abstract if he was confined; and (2) records of
consultation due to hypertension.
[6]

Meanwhile, respondent had consulted Dr. Rogelio Mariano, whose

diagnosis showed he was suffering from Parkinsons disease and
hypertension, as per the medical certificate dated April 20, 1998.
[7]

The SSS once again submitted respondents case records to the ECC
for review.
On October 23, 1998, the ECC, through Executive Director Teofilo E.
Hebron, dismissed respondents claim. Hebron ruled that the respondent had

failed to establish a causal connection between Parkinsons Disease and the

working conditions at the printing press. On respondents claim for
compensation for Essential Hypertension, the ECC found that respondent had
failed to adduce sufficient evidence to establish that his ailment had caused
impairment of any of his body organs, which in turn could permanently prevent
him from engaging in a gainful occupation.
[8]

I.

THE DECISION OF THE COURT OF APPEALS SOUGHT TO BE REVIEWED IS

NOT IN ACCORDANCE WITH LAW, PARTICULARLY SECTION 1 (B), RULE III
OF THE RULES IMPLEMENTING THE PROVISIONS OF TITLE II, BOOK IV OF
THE LABOR CODE.
II.

THE COURT OF APPEALS ERRED IN RULING THAT THERE EXISTS A

CAUSAL CONNECTION BETWEEN RESPONDENTS PARKINSONS DISEASE
AND THE WORKING CONDITIONS AT THE PRINTING PRESS.
[10]

For the petitioner, the OSG contends that the rule implementing P.D. No.
626 does not list Parkinsons Disease as an occupational ailment, hence, it is
not compensable. Respondent counters that the nature of his functions at LGP
clearly brought about the onset of Parkinsons Disease. Moreover,
assuming arguendo, that Parkinsons Disease is non-compensable, his other
ailment - Essential Hypertension is covered by P.D. No. 626. He contends that
the risk of contracting Essential Hypertension was increased by his job at LGP.
[11]

Parkinsons disease, while it is true that this disease is not included in the
list of compensable diseases under the law then prevailing, it was found by
the Court of Appeals that the conditions prevailing at LGP largely led to the
progression of the ailment. The respondents functions entailed constant
exposure to hazardous or toxic chemicals such as carbon disulfate, carbon
monoxide, or manganese. As the ECC itself admitted in its judgment, the
exposure to these toxic substances is among the possible causes of this
disease. Where it was established that the claimants ailment occurred during
and in the course of his employment, it must be presumed that the nature of
the claimants employment is the cause of the disease.
[16]

[17]

Second, even if we were to assume that Parkinsons Disease is not

compensable, there can be no question that Essential Hypertension is a
compensable illness, following our ruling in Government Service Insurance
System v. Gabriel, that hypertension and heart ailments are compensable
illnesses. The respondent herein was diagnosed to have developed
Incomplete Right Bundle Branch Block, a disease caused by a delay in the
depolarization of the right ventricle. Right Bundle Branch Block is an
intraventricular conduction defect common in individuals with otherwise
normal hearts as well as in many diseased processes, including ischemic
heart disease, inflammatory disease, infiltrative disease, cardiomyopathy, and
postcardiotomy. We note that respondent was also diagnosed as having
hypertension and a medical certification was issued to that effect.
[18]

[19]

[20]

[21]

In upholding respondent Marianos claim, the Court of Appeals found that

among the various jobs the respondent performed were those of a machine
operator, paper cutter, monotype composer, and later as supervisor, most of
which are physical and stressful in character. In established cases of Essential
Hypertension, the blood pressure fluctuates widely in response to emotional
stress and physical activity. Given the nature of his assigned job and the
printing business, with its tight deadlines entailing large amounts of rush work,
indeed the emotional and physical stress of respondents work at the printing
press caused, and then exacerbated, his hypertension. On this score, we hold
that the Court of Appeals did not err in liberally construing the rules
implementing P.D. No. 626. In matters of labor and social legislation, it is well
established that doubts in the interpretation and application of the law are
resolved liberally in favor of the worker and strictly against the employer.
[24]

[25]

While the SSS and ECC may be commended for their vigilance against
sustaining unjustified claims that would only drain funds meant for deserving
disabled employees, respondent Marianos case does not fall in that
class. Said agencies ought to realize, in our view, that strict interpretation of
the rules should not result in the denial of assistance to those in need and
qualified therefor. Workers whose capabilities have been diminished, if not
completely impaired, as a consequence of their service, ought to be given
benefits they deserve under the law. Compassion for them is not a dole-out,
but a right.
[26]

WHEREFORE, the instant petition is DENIED. The assailed decision of

the Court of Appeals, dated July 26, 1999, in CA-G.R. SP No. UDK-2898 is
AFFIRMED.
G.R. No. 170735

December 17, 2007

IMMACULADA L. GARCIA, petitioner,

vs.
SOCIAL SECURITY COMMISSION LEGAL AND COLLECTION, SOCIAL SECURITY
SYSTEM, respondents.
DECISION
CHICO-NAZARIO, J.:
Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and
Consuelo Villanueva were directors3 of Impact Corporation. The corporation was engaged in the
business of manufacturing aluminum tube containers and operated two factories. One was a "slug"
foundry-factory located in Cuyapo, Nueva Ecija, while the other was an Extrusion Plant in Cainta,
Metro Manila, which processed the "slugs" into aluminum collapsible tubes and similar containers for
toothpaste and other related products.
Records show that around 1978, Impact Corporation started encountering financial problems. By
1980, labor unrest besieged the corporation.
In March 1983, Impact Corporation filed with the Securities and Exchange Commission (SEC) a
Petition for Suspension of Payments,4 docketed as SEC Case No. 02423, in which it stated that:
[Impact Corporation] has been and still is engaged in the business of manufacturing
aluminum tube containers x x x.
xxxx
In brief, it is an on-going, viable, and profitable enterprise.
On 8 May 1985, the union of Impact Corporation filed a Notice of Strike with the Ministry of Labor
which was followed by a declaration of strike on 28 July 1985. Subsequently, the Ministry of Labor
certified the labor dispute for compulsory arbitration to the National Labor Relations Commission
(NLRC) in an Order5 dated 25 August 1985. The Ministry of Labor, in the same Order, noted the
inability of Impact Corporation to pay wages, 13th month pay, and SSS remittances due to cash
liquidity problems. A portion of the order reads:
On the claims of unpaid wages, unpaid 13th month pay and non-remittance of loan
amortization and SSS premiums, we are for directing the company to pay the same to the
workers and to remit loan amortizations and SSS premiums previously deducted from their
wages to the Social Security System. Such claims were never contested by the company
both during the hearing below and in our office. In fact, such claims were admitted by the
company although it alleged cash liquidity as the main reason for such non-payment.

WHEREFORE, the dispute at Impact Corporation is hereby certified to the National Labor
Relations Commission for compulsory arbitration in accordance with Article 264 (g) of the
Labor Code, as amended.
xxxx
The company is directed to pay all the entitled workers unpaid wages, unpaid 13th month
pay and to remit to the Social Security System loan amortizations and SSS premiums
previously deducted from the wages of the workers.6
On 3 July 1985, the Social Security System (SSS), through its Legal and Collection Division (LCD),
filed a case before the SSC for the collection of unremitted SSS premium contributions withheld by
Impact Corporation from its employees. The case which impleaded Impact Corporation as
respondent was docketed as SSC Case No. 10048. 7
Impact Corporation was compulsorily covered by the SSS as an employer effective 15 July 1963 and
was assigned Employer I.D. No. 03-2745100-21.
In answer to the allegations raised in SSC Case No. 10048, Impact Corporation, through its then
Vice President Ricardo de Leon, explained in a letter dated 18 July 1985 that it had been confronted
with strikes in 1984 and layoffs were effected thereafter. It further argued that the P402,988.93 is
erroneous. It explained among other things, that its operations had been suspended and that it was
waiting for the resolution on its Petition for Suspension of Payments by the SEC under SEC Case
No. 2423. Despite due notice, the corporation failed to appear at the hearings. The SSC ordered the
investigating team of the SSS to determine if it can still file its claim for unpaid premium contributions
against the corporation under the Petition for Suspension of Payments.
In the meantime, the Petition for Suspension of Payments was dismissed which was pending before
the SEC in an Order8 dated 12 December 1985. Impact Corporation resumed operations but only for
its winding up and dissolution.9 Due to Impact Corporations liability and cash flow problems, all of its
assets, namely, its machineries, equipment, office furniture and fixtures, were sold to scrap dealers
to answer for its arrears in rentals.
On 1 December 1995, the SSS-LCD filed an amended Petition 10 in SSC Case No. 10048 wherein
the directors of Impact Corporation were directly impleaded as respondents, namely: Eduardo de
Leon, Ricardo de Leon,11Pacita Fernandez, Consuelo Villanueva, and petitioner. The amounts
sought to be collected totaled P453,845.78 and P10,856.85 for the periods August 1980 to
December 1984 and August 1981 to July 1984, respectively, and the penalties for late remittance at
the rate of 3% per month from the date the contributions fell due until fully paid pursuant to Section
22(a) of the Social Security Law,12 as amended, in the amounts of P49,941.67 andP2,474,662.82.

Period

August 1980 to December 1984

August 1981 to July 1984

Unremitted
Amount

Penalties
(3% Interest Per
Month)

Total

P 453,845.78

P49, 941.67

503,787.45

P 10,856.85

P2, 474, 662.82

2,485,519.67

Summonses were not served upon Eduardo de Leon, Pacita Fernandez, and Consuelo Villanueva,
their whereabouts unknown. They were all later determined to be deceased. On the other hand, due
to failure to file his responsive pleading, Ricardo de Leon was declared in default.
Petitioner filed with the SSC a Motion to Dismiss13 on grounds of prescription, lack of cause of action
and cessation of business, but the Motion was denied for lack of merit. 14 In her Answer with
Counterclaim15 dated 20 May 1999, petitioner averred that Impact Corporation had ceased
operations in 1980. In her defense, she insisted that she was a mere director without managerial
functions, and she ceased to be such in 1982. Even as a stockholder and director of Impact
Corporation, petitioner contended that she cannot be made personally liable for the corporate
obligations of Impact Corporation since her liability extended only up to the extent of her unpaid
subscription, of which she had none since her subscription was already fully paid. The petitioner
raised the same arguments in her Position Paper. 16
On 23 January 1998, Ricardo de Leon died following the death, too, of Pacita Fernandez died on 7
February 2000. In an Order dated 11 April 2000, the SSC directed the System to check if Impact
Corporation had leviable properties to which the investigating team of respondent SSS manifested
that the Impact Corporation had already been dissolved and its assets disposed of. 17
In a Resolution dated 28 May 2003, the Social Security Commission ruled in favor of SSS and
declared petitioner liable to pay the unremitted contributions and penalties, stating the following:
WHEREFORE, premises considered, this Commission finds, and so holds, that respondents
Impact Corporation and/or Immaculada L. Garcia, as director and responsible officer of the
said corporation, is liable to pay the SSS the amounts of P442,988.93, representing the
unpaid SS contributions of their employees for the period August 1980 to December 1984,
not inclusive, and P10,856.85, representing the balance of the unpaid SS contributions in
favor of Donato Campos, Jaime Mascarenas, Bonifacio Franco and Romeo Fullon for the
period August 1980 to December 1984, not inclusive, as well as the 3% per month penalty
imposed thereon for late payment in the amounts of P3,194,548.63 and P78,441.33,
respectively, computed as of April 30, 2003. This is without prejudice to the right of the SSS
to collect the penalties accruing after April 30, 2003 and to institute other appropriate actions
against the respondent corporation and/or its responsible officers.
Should the respondents pay their liability for unpaid SSS contributions within sixty (60) days
from receipt of a copy of this Resolution, the 3% per month penalty for late payment thereof
shall be deemed condoned pursuant to SSC Res. No. 397-S.97, as amended by SSC Res.
Nos. 112-S.98 and 982-S.99, implementing the provision on condonation of penalty under
Section 30 of R.A. No. 8282.
In the event the respondents fail to pay their liabilities within the aforestated period, let a writ
of execution be issued, pursuant to Section 22 (c) [2] of the SS Law, as amended, for the
satisfaction of their liabilities to the SSS.18
Petitioner filed a Motion for Reconsideration19 of the afore-quoted Decision but it was denied for lack
of merit in an Order20 dated 4 August 2004, thus:

Nowhere in the questioned Resolution dated May 28, 2003 is it stated that the other directors
of the defunct Impact Corporation are absolved from their contribution and penalty liabilities
to the SSS. It is certainly farthest from the intention of the petitioner SSS or this Commission
to pin the entire liability of Impact Corporation on movant Immaculada L. Garcia, to the
exclusion of the directors of the corporation namely: Eduardo de Leon, Ricardo de Leon,
Pacita Fernandez and Conzuelo Villanueva, who were all impleaded as parties-respondents
in this case.
The case record shows that there was failure of service of summonses upon respondents
Eduardo de Leon, Pacita Fernandez and Conzuelo Villanueva, who are all deceased, for the
reason that their whereabouts are unknown. Moreover, neither the legal heirs nor the estate
of the defaulted respondent Ricardo de Leon were substituted as parties-respondents in this
case when he died on January 23, 1998. Needless to state, the Commission did not acquire
jurisdiction over the persons or estates of the other directors of Impact Corporation, hence, it
could not validly render any pronouncement as to their liabilities in this case.
Furthermore, the movant cannot raise in a motion for reconsideration the defense that she
was no longer a director of Impact Corporation in 1982, when she was allegedly eased out
by the managing directors of Impact Corporation as purportedly shown in the Deed of Sale
and Assignment of Shares of Stock dated January 22, 1982. This defense was neither
pleaded in her Motion to Dismiss dated January 17, 1996 nor in her Answer with
Counterclaim dated May 18, 1999 and is, thus, deemed waived pursuant to Section 1, Rule
9 of the 1997 Rules of Civil Procedure, which has suppletory application to the Revised
Rules of Procedure of the Commission.
Finally, this Commission has already ruled in the Order dated April 27, 1999 that since the
original Petition was filed by the SSS on July 3, 1985, and was merely amended on
December 1, 1995 to implead the responsible officers of Impact Corporation, without
changing its causes of action, the same was instituted well within the 20-year prescriptive
period provided under Section 22 (b) of the SS Law, as amended, considering that the
contribution delinquency assessment covered the period August 1980 to December 1984.
In view thereof, the instant Motion for Reconsideration is hereby denied for lack of merit.
Petitioner elevated her case to the Court of Appeals via a Petition for Review. Respondent SSS filed
its Comment dated 20 January 2005, and petitioner submitted her Reply thereto on 4 April 2005.
The Court of Appeals, applying Section 28(f) of the Social Security Law,21 again ruled against
petitioner. It dismissed the petitioners Petition in a Decision dated 2 June 2005, the dispositive
portion of which reads:
WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. The
assailed Resolution dated 28 May 2003 and the Order dated 4 August 2004 of the Social
Security Commission are AFFIRMED in toto.22
Aggrieved, petitioner filed a Motion for Reconsideration of the appellate courts Decision but her
Motion was denied in a Resolution dated 8 December 2005.
Hence, the instant Petition in which petitioner insists that the Court of Appeals committed grave error
in holding her solely liable for the collected but unremitted SSS premium contributions and the
consequent late penalty payments due thereon. Petitioner anchors her Petition on the following
arguments:

I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A MANAGING HEAD, DIRECTOR
OR PARTNER IS LIABLE ONLY FOR THE PENALTIES OF THE EMPLOYER
CORPORATION AND NOT FOR UNPAID SSS CONTRIBUTIONS OF THE EMPLOYER
CORPORATION.
II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS, DIRECTORS OR PARTNERS
WHO SHALL BE LIABLE TOGETHER WITH THE CORPORATION. IN THIS CASE,
PETITIONER HAS CEASED TO BE A STOCKHOLDER OF IMPACT CORPORATION IN
1982. EVEN WHILE SHE WAS A STOCKHOLDER, SHE NEVER PARTICIPATED IN THE
DAILY OPERATIONS OF IMPACT CORPORATION.
III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY DIRECTORS, TRUSTEES
OR OFFICERS WHO PARTICIPATE IN UNLAWFUL ACTS OR ARE GUILTY OF GROSS
NEGLIGENCE AND BAD FAITH SHALL BE PERSONALLY LIABLE. OTHERWISE, BEING A
MERE STOCKHOLDER, SHE IS LIABLE ONLY TO THE EXTENT OF HER
SUBSCRIPTION.
IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE ECONOMIC LOSSES, EVENTS
WHICH WERE NEITHER DESIRED NOR CAUSED BY ANY ACT OF THE PETITIONER.
THUS, BY REASON OF FORTUITOUS EVENTS, THE PETITIONER SHOULD BE
ABSOLVED FROM LIABILITY.
V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED MISERABLY IN EXERTING
EFFORTS TO ACQUIRE JURISDICTION OVER THE LEVIABLE ASSETS OF IMPACT
CORPORATION, PERSON/S AND/OR ESTATE/S OF THE OTHER DIRECTORS OR
OFFICERS OF IMPACT CORPORATION.
VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN NOT RENDERING A
JUDGMENT BY DEFAULT AGAINST THE DIRECTORS UPON WHOM IT ACQUIRED
JURISDICTION.
Based on the foregoing, petitioner prays that the Decision dated 2 June 2005 and the Resolution
dated 8 December 2005 of the Court of Appeals be reversed and set aside, and a new one be
rendered absolving her of any and all liabilities under the Social Security Law.
In sum, the core issue to be resolved in this case is whether or not petitioner, as the only surviving
director of Impact Corporation, can be made solely liable for the corporate obligations of Impact
Corporation pertaining to unremitted SSS premium contributions and penalties therefore.
As a covered employer under the Social Security Law, it is the obligation of Impact Corporation
under the provisions of Sections 18, 19 and 22 thereof, as amended, to deduct from its duly covered
employees monthly salaries their shares as premium contributions and remit the same to the SSS,
together with the employers shares of the contributions to the petitioner, for and in their behalf.
From all indications, the corporation has already been dissolved. Respondents are now going after
petitioner who is the only surviving director of Impact Corporation.
A cursory review of the alleged grave errors of law committed by the Court of Appeals above reveals
there seems to be no dispute as to the assessed liability of Impact Corporation for the unremitted
SSS premiums of its employees for the period January 1980 to December 1984.

There is also no dispute as to the fact that the employees SSS premium contributions have been
deducted from their salaries by Impact Corporation.
Petitioner in assailing the Court of Appeals Decision, distinguishes the penalties from the unremitted
or unpaid SSS premium contributions. She points out that although the appellate court is of the
opinion that the concerned officers of an employer corporation are liable for the penalties for nonremittance of premiums, it still affirmed the SSC Resolution holding petitioner liable for the unpaid
SSS premium contributions in addition to the penalties.
Petitioner avers that under the aforesaid provision, the liability does not include liability for the
unremitted SSS premium contributions.
Petitioners argument is ridiculous. The interpretation petitioner would like us to adopt finds no
support in law or in jurisprudence. While the Court of Appeals Decision provided that Section 28(f)
refers to the liabilities pertaining to penalty for the non-remittance of SSS employee contributions,
holding that it is distinct from the amount of the supposed SSS remittances, petitioner mistakenly
concluded that Section 28(f) is applicable only to penalties and not to the liability of the employer for
the unremitted premium contributions. Clearly, a simplistic interpretation of the law is untenable. It is
a rule in statutory construction that every part of the statute must be interpreted with reference to the
context, i.e., that every part of the statute must be considered together with the other parts, and kept
subservient to the general intent of the whole enactment.23 The liability imposed as contemplated
under the foregoing Section 28(f) of the Social Security Law does not preclude the liability for the
unremitted amount. Relevant to Section 28(f) is Section 22 of the same law.
SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the preceding
Section shall be remitted to the SSS within the first ten (10) days of each calendar month
following the month for which they are applicable or within such time as the Commission may
prescribe. Every employer required to deduct and to remit such contributions shall be liable
for their payment and if any contribution is not paid to the SSS as herein prescribed, he shall
pay besides the contribution a penalty thereon of three percent (3%) per month from the date
the contribution falls due until paid. If deemed expedient and advisable by the Commission,
the collection and remittance of contributions shall be made quarterly or semi-annually in
advance, the contributions payable by the employees to be advanced by their respective
employers:Provided, That upon separation of an employee, any contribution so paid in
advance but not due shall be credited or refunded to his employer.
Under Section 22(a), every employer is required to deduct and remit such contributions penalty
refers to the 3% penalty that automatically attaches to the delayed SSS premium contributions. The
spirit, rather than the letter of a law determines construction of a provision of law. It is a cardinal rule
in statutory construction that in interpreting the meaning and scope of a term used in the law, a
careful review of the whole law involved, as well as the intendment of the law, must be
made.24 Nowhere in the provision or in the Decision can it be inferred that the persons liable are
absolved from paying the unremitted premium contributions.
Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply them
regardless of personal belief or predilections - when the law is unambiguous and unequivocal,
application not interpretation thereof is imperative.25 However, where the language of a statute is
vague and ambiguous, an interpretation thereof is resorted to. An interpretation thereof is necessary
in instances where a literal interpretation would be either impossible or absurd or would lead to an
injustice. A law is deemed ambiguous when it is capable of being understood by reasonably wellinformed persons in either of two or more senses.26 The fact that a law admits of different
interpretations is the best evidence that it is vague and ambiguous.27 In the instant case, petitioner

interprets Section 28(f) of the Social Security Law as applicable only to penalties and not to the
liability of the employer for the unremitted premium contributions. Respondents present a more
logical interpretation that is consistent with the provisions as a whole and with the legislative intent
behind the Social Security Law.
This Court cannot be made to accept an interpretation that would defeat the intent of the law and its
legislators.28
Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the Social
Security Law, a mere director or officer of an employer corporation, and not necessarily a
"managing" director or officer, can be held liable for the unpaid SSS premium contributions.
Section 28(f) of the Social Security Law provides the following:
(f) If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing head, directors or partners shall be liable to
the penalties provided in this Act for the offense.
This Court agrees in petitioners observation that the SSS did not even deny nor rebut the claim that
petitioner was not the "managing head" of Impact Corporation. However, the Court of Appeals rightly
held that petitioner, as a director of Impact Corporation, is among those officers covered by Section
28(f) of the Social Security Law.
Petitioner invokes the rule in statutory construction called ejusdem generic; that is, where general
words follow an enumeration of persons or things, by words of a particular and specific meaning,
such general words are not to be construed in their widest extent, but are to be held as applying only
to persons or things of the same kind or class as those specifically mentioned. According to
petitioner, to be held liable under Section 28(f) of the Social Security Law, one must be the
"managing head," "managing director," or "managing partner." This Court though finds no need to
resort to statutory construction. Section 28(f) of the Social Security Law imposes penalty on:
(1) the managing head;
(2) directors; or
(3) partners, for offenses committed by a juridical person
The said provision does not qualify that the director or partner should likewise be a "managing
director" or "managing partner."29 The law is clear and unambiguous.
Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only
directors, trustees or officers who participate in unlawful acts or are guilty of gross negligence and
bad faith shall be personally liable, and that being a mere stockholder, she is liable only to the extent
of her subscription.
Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers,
provides:
SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any

personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
Basic is the rule that a corporation is invested by law with a personality separate and distinct from
that of the persons composing it as well as from that of any other legal entity to which it may be
related. A corporation is a juridical entity with legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it. Following this, the general
rule applied is that obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities.30 A director, officer, and employee of a corporation are generally not
held personally liable for obligations incurred by the corporation.
Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to
warrant the disregard of its independent being and the lifting of the corporate veil. This situation
might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to
shield or perpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a
subterfuge to commit injustice and so circumvent the law.31 Thus, Section 31 of the Corporation Law
provides:
Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held
solidarily liable with the corporation in the following instances:
1. When directors and trustees or, in appropriate cases, the officers of
a corporation-(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders
or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the Corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally liable
for his corporate action. 32
The aforesaid provision states:
SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be
liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.

The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit
the SSS premium contributions falls exactly under the fourth situation. Section 28(f) of the Social
Security Law imposes a civil liability for any act or omission pertaining to the violation of the Social
Security Law, to wit:
(f) If the act or omission penalized by this Act be committed by an association, partnership,
corporation or any other institution, its managing head, directors or partners shall be liable to
the penalties provided in this Act for the offense.
In fact, criminal actions for violations of the Social Security Law are also provided under the Revised
Penal Code. The Social Security Law provides, in Section 28 thereof, to wit:
(h) Any employer who, after deducting the monthly contributions or loan amortizations from
his employees compensation, fails to remit the said deductions to the SSS within thirty (30)
days from the date they became due shall be presumed to have misappropriated such
contributions or loan amortizations and shall suffer the penalties provided in Article Three
hundred fifteen of the Revised Penal Code.
(i) Criminal action arising from a violation of the provisions of this Act may be commenced by
the SSS or the employee concerned either under this Act or in appropriate cases under the
Revised Penal Code: x x x.
Respondents would like this Court to apply another exception to the rule that the persons comprising
a corporation are not personally liable for acts done in the performance of their duties.
The Court of Appeals in the appealed Decision stated:
Anent the unpaid SSS contributions of Impact Corporations employees, the officers of a
corporation are liable in behalf of a corporation, which no longer exists or has ceased
operations. Although as a rule, the officers and members of a corporation are not personally
liable for acts done in performance of their duties, this rule admits of exception, one of which
is when the employer corporation is no longer existing and is unable to satisfy the judgment
in favor of the employee, the officers should be held liable for acting on behalf of the
corporation. Following the foregoing pronouncement, petitioner, as one of the directors of
Impact Corporation, together with the other directors of the defunct corporation, are liable for
the unpaid SSS contributions of their employees.33
On the other hand, the SSC, in its Resolution, presented this discussion:
Although as a rule, the officers and members of a corporation are not personally liable for
acts done in the performance of their duties, this rule admits of exceptions, one of which is
when the employer corporation is no longer existing and is unable to satisfy the judgment in
favor of the employee, the officers should be held liable for acting on behalf of the
corporation. x x x.34
The rationale cited by respondents in the two preceding paragraphs need not have been applied
because the personal liability for the unremitted SSS premium contributions and the late penalty
thereof attaches to the petitioner as a director of Impact Corporation during the period the amounts
became due and demandable by virtue of a direct provision of law.

Petitioners defense that since Impact Corporation suffered irreversible economic losses, and by
reason of fortuitous events, she should be absolved from liability, is also untenable. The evidence
adduced totally belies this claim. A reference to the copy of the Petition for Suspension of Payments
filed by Impact Corporation on 18 March 1983 before the SEC contained an admission that:
"[I]t has been and still is engaged in business" and "has been and still is engaged in the
business of manufacturing aluminum tube containers" and "in brief, it is an on-going, viable,
and profitable enterprise" which has "sufficient assets" and "actual and potential incomegeneration capabilities."
The foregoing document negates petitioners assertion and supports the contention that during the
period involved Impact Corporation was still engaged in business and was an ongoing, viable,
profitable enterprise. In fact, the latest SSS form RIA submitted by Impact Corporation is dated 7
May 1984. The assessed SSS premium contributions and penalty are obligations imposed upon
Impact Corporation by law, and should have been remitted to the SSS within the first 10 days of
each calendar month following the month for which they are applicable or within such time as the
SSC prescribes.35
This Court also notes the evident failure on the part of SSS to issue a judgment in default against
Ricardo de Leon, who was the vice-president and officer of the corporation, upon his non-filing of a
responsive pleading after summons was served on him. As can be gleaned from Section 11 of the
SSS Revised Rules of Procedure, the Commissioner is mandated to render a decision either
granting or denying the petition. Under the aforesaid provision, if respondent fails to answer within
the time prescribed, the Hearing Commissioner may, upon motion of petitioner, or motu proprio,
declare respondent in default and proceed to receive petitioners evidence ex parteand thereafter
recommend to the Commission either the granting or denial of the petition as the evidence may
warrant.36
On a final note, this Court sees it proper to quote verbatim respondents prefatory statement in
their Comment:
The Social Security System is a government agency imbued with a salutary purpose to carry
out the policy of the State to establish, develop, promote and perfect a sound and viable tax
exempt social security system suitable to the needs of the people throughout the Philippines
which shall promote social justice and provide meaningful protection to members and their
beneficiaries against the hazards of disability, sickness, maternity, old-age, death and other
contingencies resulting in loss of income or financial burden.
The soundness and viability of the funds of the SSS in turn depends on the contributions of
its covered employee and employer members, which it invests in order to deliver the basic
social benefits and privileges to its members. The entitlement to and amount of benefits and
privileges of the covered members are contribution-based. Both the soundness and viability
of the funds of the SSS as well as the entitlement and amount of benefits and privileges of its
members are adversely affected to a great extent by the non-remittance of the much-needed
contributions.37
The sympathy of the law on social security is toward its beneficiaries. This Court will not turn a blind
eye on the perpetration of injustice. This Court cannot and will not allow itself to be made an
instrument nor be privy to any attempt at the perpetration of injustice.
Following the doctrine laid down in Laguna Transportation Co., Inc. v. Social Security System,38 this
Court rules that although a corporation once formed is conferred a juridical personality separate and

distinct from the persons comprising it, it is but a legal fiction introduced for purposes of convenience
and to subserve the ends of justice. The concept cannot be extended to a point beyond its reasons
and policy, and when invoked in support of an end subversive of this policy, will be disregarded by
the courts.
WHEREFORE, pursuant to the foregoing, the Decision of the Court of Appeals dated 2 June 2005
in CA-G.R. SP No. 85923 is hereby AFFIRMED WITH FINALITY. Petitioner Immaculada L. Garcia,
as sole surviving director of Impact Corporation is hereby ORDERED to pay for the collected and
unremitted SSS contributions of Impact Corporation. The case is REMANDED to the SSS for
computation of the exact amount and collection thereof.
SO ORDERED.
G.R. No. L-21223

August 31, 1966

PHILIPPINE BLOOMING MILLS CO., INC. (As Employer) and FRANCISCO TONG (As Assistant
General Manager) and Attorney-in-Fact of SUSUMO SONODA, SENJI TANAKA, TAKASHIKO
KUMAMOTO, HITOSHI NAKAMURA, TETSUO KODU, (Employees), petitioners and appellants,
vs.
SOCIAL SECURITY SYSTEM, respondent and appellee.
Demetrio B. Salem for petitioners and appellants.
Office of the Solicitor General Edilberto Barot and Solicitor Camilo D. Quiason for respondent and
appellee.
BARRERA, J.:
The facts of this case are not disputed:
The Philippine Blooming Mills Co., Inc., a domestic corporation since the start of its operations in
1957, has been employing Japanese technicians under a pre-arranged contract of employment, the
minimum period of which employment is 6 months and the maximum is 24 months.
From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese technicians.
In connection with the employment of these aliens, it sent an inquiry to the Social Security System
(SSS) whether these employees are subject to compulsory coverage under the System, which
inquiry was answered by the First Deputy Administrator of the SSS, under date of August 29, 1957,
as follows:
SIR:
With reference to your letter of August 24, 1957, hereunder are our answers to your
queries:
Aliens employed in the Philippines:
Aliens who are employed in the Philippines shall also be compulsorily covered. But
aliens who are employed temporarily shall, upon their departure from the Philippines,
be entitled to a rebate of a proportionate amount of their contributions; their
employers shall be entitled to the same proportionate rebate of their contributions in
behalf of said aliens employed by them. (Rule I, Sec. 3[d], Rules and Regulations.)

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

Name

SS Number

Monthly Salary

Amount of Premiums
Contributed
2.5%
(Employee)

3.5%
(Employer)

Total

Susumu Sonoda

03-075177

P520.00

P175.00

P245.00

P420.00

Senji Tanaka

03-075178

520.00

175.00

245.00

420.00

Kahei Tanaka

03-075179

500.00

175.00

245.00

420.00

Takashiko Kumamoto

03-075180

500.00

175.00

245.00

420.00

Hitoshi Nakamura

03-075181

500.00

175.00

245.00

420.00

Tetsuo Kudo

03-075182

500.00

175.00

245.00

420.00

Total

P1,050.00

P1,470.00

P2,520.00

On October 7, 1958, the Assistant General Manager of the corporation, on its behalf and as
attorney-in-fact of the Japanese technicians, filed a claim with the SSS for the refund of the
premiums paid to the System, on the ground of termination of the members' employment. As this
claim was denied, they filed a petition with the Social Security Commission for the return or refund of
the premiums, in the total sum of P2,520.00, paid by the employer corporation and the 6 Japanese
employees, plus attorneys' fees. This claim was controverted by the SSS, alleging that Rule IX of the
Rules and Regulations of the System, as amended, requires membership in the System for at least
2 years before a separated or resigned employee may be allowed a return of his personal
contributions. Under the same rule, the employer is not also entitled to a refund of the premium
contributions it had paid.
After hearing, the Commission denied the petition for the reason that, although under the original
provisions of Section 3 (d) of Rule I of the Rules and Regulations of the SSS, alien-employees (who
are employed temporarily) and their employers are entitled to a rebate of a proportionate amount of
their respective contributions upon the employees' departure from the Philippines, said rule was
amended by eliminating that portion granting a return of the premium contributions. This amendment
became effective on January 14, 1958, or before the employment of the subject aliens terminated.
The rights of covered employees who are separated from employment, under the present Rules, are
covered by Rule IX which allows a return of the premiums only if they have been members for at
least 2 years.
It is this resolution of the Commission that is the subject of the present appeal, appellants
contending that the amendment of the Rules and Regulations of the SSS, insofar as it eliminates the
provision on the return of premium contributions, originally embodied in Section 3(d) of Rule I,
constituted an impairment of obligations of contract. It is claimed, in effect, that when appellantsemployees became members in September, 1957, and paid the corresponding premiums to the
System, it1 is subject to the condition that upon their departure from the Philippines, these
employees, as well as their employer, are entitled to a rebate of a proportionate amount of their
respective contributions.

The contention cannot be sustained. Appellants' argument is based on the theory that the
employees' membership in the System established contractual relationship between the members
and the System, in the sense contemplated and protected by the constitutional prohibition against its
impairment by law. But, membership in this institution is not the result of a bilateral, consensual
agreement where the rights and obligations of the parties are defined by and subject to their will.
Republic Act 1161 requires compulsory coverage of employers and employees under the System. It
is actually a legal imposition, on said employers and employees, designed to provide social security
to the workingmen. Membership in the SSS is, therefore, in compliance with a lawful exercise of the
police power of the State, to which the principle of non-impairment of the obligation of contract is not
a proper defense.
As pointed out by the Solicitor General, the issue that should be determined in this case is whether,
in implementing the SSS law and denying appellants' claim for refund of their premium contributions,
due process was observed.
The Rules and Regulations promulgated by the SSS, pursuant to the rule-making authority granted
in Section 4(a) of Republic Act 1161, was duly approved by the President on July 18, 1957, and
published in the Official Gazette on September 15, 1957.2 These rules and regulations, among
others, provide:
I
DETERMINATION OF COMPULSORY COVERAGE
3. The determination of whether an employer or an employee shall be compulsorily covered shall be
vested in the Commission. The following general principles shall guide the Commission in deciding
each case:
xxx

xxx

xxx

(d) Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who
ate employed temporarily and whose visas are only for fixed terms shall, upon their departure from
the Philippines, be entitled to a rebate of a proportionate amount of their contributions; their
employers shall be entitled to the same proportionate rebate of their contributions in behalf of said
aliens employed by them.
XI
AMENDMENTS AND EFFECTIVITY
1. The Commission may, by appropriate resolution, amend, repeal, revise and/or modify all
or any part or parts of these Rules and Regulations, as well as adopt any additional rule or
rules, whenever the need therefor should arise. Any amendment and/or additional rule,
however, shall not take effect until and after the corresponding resolution of the Commission
has been submitted to and approved by the President of the Philippines.
2. These Rules and Regulations, any amendment thereof, or any additional rule or rules
subsequently adopted by the Commission, shall take effect on the date they are approved by
the President of the Philippines.

Rule I Section 3 (d) and Rule IX, however, were later amended, which amendment was approved by
the President on January 14, 1958, to read as follows:
(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec. 3,
Rule I)
EFFECT OF SEPARATION FROM EMPLOYMENT
When an employee under compulsory coverage is separated from employment, his
employer's contribution on his account shall cease at the end of the month of separation; but
such employee may continue his membership in the System and receive the benefits of the
Act, as amended, in accordance with these rules. If he continues paying the 6 per cent
monthly premiums representing his as well as the employer's contribution, based on his
monthly salary at the time of his separation; but if at the time of his separation the covered
employee has been a member of the System for at least two years, he shall have the option
to choose any one of the following adjustments of his membership in the System:
1. A refund of an amount equivalent to his total contributions of two and one-half per centum
plus interests at the rate of three per centum per annum, compounded annually;
xxx

xxx

x x x (Rule IX)

These amended Rules were published in the November 10, 1958 issue of the Official Gazette. 3
It is not here disputed that the Rules and Regulations of the SSS, having been promulgated in
implementation of a law, have the force and effect of a statute;" that the amendment thereto,
although approved by the President on January 14, 1958, was published in the Official Gazette in
November, 1958, or after the employment of the Japanese technicians had ceased and the
corresponding claim for the refund of the premium contributions was filed with the System. The
question pertinent to this case now is whether or not appellants are bound by the amended Rules
requiring membership for two years before refund of the premium contributions may be allowed.
1wph1.t

These rules and regulations were promulgated to provide guidelines to be observed in the
enforcement of the law. As a matter of fact, Section 3 of Rule I is merely an enumeration of the
"general principles to (shall) guide the Commission" in the determination of the extent or scope of
the compulsory coverage of the law. One of these guiding principles is paragraph (d) relied upon by
appellants, on the coverage of temporarily-employed aliens. It is not here pretended, that the
amendment of this Section 3(d) of Rule I, as to eliminate the provision granting to these aliens the
right to a refund of part of their premium contributions upon their departure from the Philippines, is
not in implementation of the law or beyond the authority of the Commission to do.
It may be argued, however, that while the amendment to the Rules may have been lawfully made by
the Commission and duly approved by the President on January 14, 1958, such amendment was
only published in the November 1958 issue of the Official Gazette, and after appellants' employment
had already ceased. Suffice it to say, in this regard, that under Article 2 of the Civil Code, 5 the date of
publication of laws in the Official Gazette is material for the purpose of determining their effectivity,
only if the statutes themselves do not so provide.
In the present case, the original Rules and Regulations of the SSS specifically provide that any
amendment thereto subsequently adopted by the Commission, shall take effect on the date of its
approval by the President. Consequently, the delayed publication of the amended rules in the Official

Gazette did not affect the date of their effectivity, which is January 14, 1958, when they were
approved by the President. It follows that when the Japanese technicians were separated from
employment in October, 1958, the rule governing refund of premiums is Rule IX of the amended
Rules and Regulations, which requires membership for 2 years before such refund of premiums may
be allowed.
Wherefore, finding no error in the resolution of the Commission appealed from, the same is hereby
affirmed, with costs against the appellants. So ordered.
G.R. No. L-15045

January 20, 1961

IN RE: PETITION FOR EXEMPTION FROM COVERAGE BY THE SOCIAL SECURITY SYSTEM.
ROMAN CATHOLIC ARCHBISHOP OF MANILA, petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Feria, Manglapus and Associates for petitioner-appellant.
Legal Staff, Social Security System and Solicitor General for respondent-appellee.
GUTIERREZ DAVID, J.:
On September 1, 1958, the Roman Catholic Archbishop of Manila, thru counsel, filed with the Social
Security Commission a request that "Catholic Charities, and all religious and charitable institutions
and/or organizations, which are directly or indirectly, wholly or partially, operated by the Roman
Catholic Archbishop of Manila," be exempted from compulsory coverage of Republic Act No. 1161,
as amended, otherwise known as the Social Security Law of 1954. The request was based on the
claim that the said Act is a labor law and does not cover religious and charitable institutions but is
limited to businesses and activities organized for profit. Acting upon the recommendation of its Legal
Staff, the Social Security Commission in its Resolution No. 572, series of 1958, denied the request.
The Roman Catholic Archbishop of Manila, reiterating its arguments and raising constitutional
objections, requested for reconsideration of the resolution. The request, however, was denied by the
Commission in its Resolution No. 767, series of 1958; hence, this appeal taken in pursuance of
section 5(c) of Republic Act No. 1161, as amended.
Section 9 of the Social Security Law, as amended, provides that coverage "in the System shall be
compulsory upon all members between the age of sixteen and sixty rears inclusive, if they have
been for at least six months a the service of an employer who is a member of the System, Provided,
that the Commission may not compel any employer to become member of the System unless he
shall have been in operation for at least two years and has at the time of admission, if admitted for
membership during the first year of the System's operation at least fifty employees, and if admitted
for membership the following year of operation and thereafter, at least six employees x x x." The
term employer" as used in the law is defined as any person, natural or juridical, domestic or foreign,
who carries in the Philippines any trade, business, industry, undertaking, or activity of any kind and
uses the services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government" (par. [c], see. 8), while an "employee" refers to
"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" (par. [d], see. 8). "Employment",
according to paragraph [i] of said section 8, covers any service performed by an employer except
those expressly enumerated thereunder, like employment under the Government, or any of its
political subdivisions, branches or instrumentalities including corporations owned and controlled by
the Government, domestic service in a private home, employment purely casual, etc.
From the above legal provisions, it is apparent that the coverage of the Social Security Law is
predicated on the existence of an employer-employee relationship of more or less permanent nature
and extends to employment of all kinds except those expressly excluded.
Appellant contends that the term "employer" as defined in the law should following the principle
of ejusdem generis be limited to those who carry on "undertakings or activities which have the
element of profit or gain, or which are pursued for profit or gain," because the phrase ,activity of any
kind" in the definition is preceded by the words "any trade, business, industry, undertaking." The
contention cannot be sustained. The rule ejusdem generis applies only where there is uncertainty. It
is not controlling where the plain purpose and intent of the Legislature would thereby be hindered
and defeated. (Grosjean vs. American Paints Works [La], 160 So. 449). In the case at bar, the
definition of the term "employer" is, we think, sufficiently comprehensive as to include religious and
charitable institutions or entities not organized for profit, like herein appellant, within its meaning.
This is made more evident by the fact that it contains an exception in which said institutions or
entities are not included. And, certainly, had the Legislature really intended to limit the operation of
the law to entities organized for profit or gain, it would not have defined an "employer" in such a way
as to include the Government and yet make an express exception of it.
It is significant to note that when Republic Act No. 1161 was enacted, services performed in the
employ of institutions organized for religious or charitable purposes were by express provisions of
said Act excluded from coverage thereof (sec. 8, par. [j] subpars. 7 and 8). That portion of the law,
however, has been deleted by express provision of Republic Act No. 1792, which took effect in 1957.
This is clear indication that the Legislature intended to include charitable and religious institutions
within the scope of the law.
In support of its contention that the Social Security Law was intended to cover only employment for
profit or gain, appellant also cites the discussions of the Senate, portions of which were quoted in its
brief. There is, however, nothing whatsoever in those discussions touching upon the question of
whether the law should be limited to organizations for profit or gain. Of course, the said discussions
dwelt at length upon the need of a law to meet the problems of industrializing society and upon the
plight of an employer who fails to make a profit. But this is readily explained by the fact that the
majority of those to be affected by the operation of the law are corporations and industries which are
established primarily for profit or gain.
Appellant further argues that the Social Security Law is a labor law and, consequently, following the
rule laid down in the case of Boy Scouts of the Philippines vs. Araos (G.R. No. L-10091, January 29,
1958) and other cases1, applies only to industry and occupation for purposes of profit and gain. The
cases cited, however, are not in point, for the reason that the law therein involved expressly limits its
application either to commercial, industrial, or agricultural establishments, or enterprises. .

Upon the other hand, the Social Security Law was enacted pursuant to the "policy of the Republic of
the Philippines to develop, establish gradually and perfect a social security system which shall be
suitable to the needs of the people throughout the Philippines and shall provide protection to
employees against the hazards of disability, sickness, old age and death." (See. 2, Republic Act No.
1161, as amended.) Such enactment is a legitimate exercise of the police power. It affords protection
to labor, especially to working women and minors, and is in full accord with the constitutional
provisions on the "promotion of social justice to insure the well-being and economic security of all the
people." Being in fact a social legislation, compatible with the policy of the Church to ameliorate
living conditions of the working class, appellant cannot arbitrarily delimit the extent of its provisions to
relations between capital and labor in industry and agriculture.
There is no merit in the claim that the inclusion of religious organizations under the coverage of the
Social Security Law violates the constitutional prohibition against the application of public funds for
the use, benefit or support of any priest who might be employed by appellant. The funds contributed
to the System created by the law are not public funds, but funds belonging to the members which
are merely held in trust by the Government. At any rate, assuming that said funds are impressed
with the character of public funds, their payment as retirement death or disability benefits would not
constitute a violation of the cited provisions of the Constitution, since such payment shall be made to
the priest not because he is a priest but because he is an employee.
Neither may it be validly argued that the enforcement of the Social Security Law impairs appellant's
right to disseminate religious information. All that is required of appellant is to make monthly
contributions to the System for covered employees in its employ. These contributions, contrary to
appellant's contention, are not in the nature of taxes on employment." Together with the contributions
imposed upon the employees and the Government, they are intended for the protection of said
employees against the hazards of disability, sickness, old age and death in line with the
constitutional mandate to promote social justice to insure the well-being and economic security of all
the people.
IN VIEW OF THE FOREGOING, Resolutions Nos. 572 kind 767, series of 1958, of the Social
Security Commission are hereby affirmed. So ordered with costs against appellant.
HERMINIO FLORES and HERMINIA FLORES, petitioners,
vs.
FUNERARIA NUESTRO and /or FORTUNATO NUESTRO and the NATIONAL LABOR
RELATIONS COMMISSION, respondents.

YAP, J.:
In this petition for certiorari, petitioners seek to annul and set aside the decision of the National
Labor Relations Commission (NLRC), dated December 6, 1983, dismissing their complaint for illegal
dismissal but ordering respondents to pay them their living allowances from October 1980 until
October 1982 when their employment was terminated. Petitioners pray that judgment be rendered
ordering the respondents (1) to reinstate them to their former or equivalent positions, with full

backwages from the time of their illegal dismisss up to their actual reinstatement, or if reinstatement
should become impossible because of the strained relations between petitioners and respondent, to
pay them separation pay; and (b) to pay petitioners their unpaid benefits provided for under all the
labor standard laws invoked by them.
It appears from the record that petitioner spouses Herminio and Herminia Flores had worked for
respondent Fortunato Nuestro in his funeral parlor known as Funeraria Nuestro since June, 1976,
respectively, as helper- utility man and as bookkeeper, embalmer and cashier. On October 7, 1980,
respondent Fortunato Nuestro registered the petitioner spouses with the Social Security System, as
his employees with a monthly salary of P200.00 each. Thereafter, Herminio Flores was paid P750.00
a month, plus P200.00 monthly allowance, while Herminia's salary was increased to P500.00 a
month. The petitioners were given living quarters right inside the compound of the funeral parlor.
On October 30,1982, Herminio Flores and respondent Fortunato Nuestro had an altercation, during
which the former was physically assaulted by the latter and suffered a punctured wound on the lower
and an abrasion in the scapular region (L). Herminio was treated at the Bataan Provincial Hospital
and subsequently, he filed an action for slight physical injuries against the respondent, which was
docketed as Criminal Case No. 2249 of the Municipal Court of Pilar, Bataan. Respondent, however,
claimed that he merely shoved the arm of Herminio when the latter pointed a finger at him and
uttered abusive remarks against him. As a result of the incident and fearing for his safety, petitioner
Herminio Flores, together with his family, was compelled to vacate his living quarters at the funerall
parlor and had to seek protection from the Integrated National Police of Pilar, Bataan.
On November 15, 1982, petitioners filed a complaint against respondent for illegal dismissal,
underpayment of living allowances, non-payment of five (5) days incentive leave and non-payment
of overtime compensation. The respondent denied the existence of employer-employee relation with
the petitioners and further alleged that in any event the petitioners had abandoned their work on
October 30, 1982.
On May 23,1983, Labor Arbiter Federico Bernardo rendered a decision finding that no employeremployee relationship existed between the parties and dismissing the complaint. He held that
Herminio Flores was merely a contractual worker paid on a piece-work basis, while Herminia Flores
was a domestic helper; and that on October 30, 1982, they abandoned their work.
On appeal, the National Labor Relations Commission, while holding that an employer-employee
relationship existed between the parties, found that the petitioners had abandoned their work, thus
precluding them from seeking reinstatement with backwages. However, the Commission ordered
respondent to pay the petitioners their living allowances from October 1980 until October 1982 when
the employment relations were severed.
In finding the distance of an employer-employee relationship between respondent and petitioners,
the NLRC committed no grave abuse of discretion. That the respondent had registered the
petitioners with the Social Security System is proof that they were indeed his employees. The
coverage of Social Security Law is predicated on the existence of an employer-employee
relationship. 1

On the issue of abandonment, however, we find the ruling of the NLRC that petitioners had
abandoned their employment to be contrary to the evidence. To constitute abandonment, there must
be a clear and deliberate intent to discontinue one's employment without any intention of returning
back . 2 The record shows that petitioners were only compelled to leave the premises, which they
regarded as their home, when the respondent inflicted physical injuries upon petitioner Herminio Flores.
Apparently, what they had given up was only their place of residence but not their jobs. The immediate
filing of a complaint for illegal dismissal against respondent with a prayer for reinstatement shows that
petitioners were not abandoning their work . 3 As aptly observed by the Solicitor General, to uphold the
ruling of the respondent Commission that the petitioners abandoned their job "is to put a premium on the
commission of a crime by an employer against an employee to force the latter to leave his employment so
as to preclude said employee from seeking reinstatement with backwages."
Where there is a finding of illegal dismiss, the general principle is that an employee is entitled to
reinstatement and to receive backwages from the date of his dismissal up to the time of his
reinstatement. However, the circumstances in this case make the reinstatement of petitioners no
longer feasible; any possible confrontation between the parties in view of their already strained
relationship should be avoided. An award of six (6) months backwages based on their latest is a
reasonable alternative to reinstatement under the circumstances. 4 As found by the respondent
Commission, respondent should also pay the petitioners their living allowances from October 1980 until
October 1982 when their employment relations were severed. As to petitioners' other money claims, we
find no reason to disturb the Commission's ruling disallowing them for insufficiency of evidence.
WHEREFORE, the decision appealed from is modified, and respondent is hereby ordered to pay
each petitioner 1) backwages equivalent to six (6) months pay, and 2) cost of living allowances from
October 1980 until October 1982.
SO ORDERED.

REPUBLIC
OF
THE
PHILIPPINES, represented by the
SOCIAL
SECURITY
COMMISSION
and
SOCIAL
SECURITY SYSTEM,
Petitioners,

G.R. No. 172101

Present:
YNARES-SANTIAGO,
J.,Chairperson,
AUSTRIA-MARTINEZ,
AZCUNA,
CHICO-NAZARIO, and
REYES, JJ.

- versus Promulgated:
ASIAPRO COOPERATIVE,
November 23, 2007
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

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
Decision[1] and Resolution[2] 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. 615507-03, dated 17 February 2004[3] and 16 September 2004,[4] respectively,
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 quasijudicial 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. 6938 [6] 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 ownersmembers. 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
surplus[10] 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 selfemployed 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 letter [11] 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 SSSs 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 ownersmembers 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 cooperatives 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.

B.

[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 ownersmembers.
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.

II.

Contrary to the holding of the [petitioner] SSC, the

legal issue of employer-employee relationship raised
in [respondents] 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.

At any rate, the [petitioner] SSC has no jurisdiction to

take cognizance of the petition a quo.
A.

B.

C.

[Respondent] is not an employer within the

contemplation of the Labor Law but is a multipurpose cooperative created pursuant to Republic
Act No. 6938 and composed of owners-members,
not employees.
The rights and obligations of the owners-members
of [respondent] cooperative are derived from their
Membership Agreements, the Cooperatives ByLaws, 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.
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], areANNULLED 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 respondents Motion to Dismiss. The
said issue is supported by the following arguments:
I.

The [petitioner SSC] has jurisdiction over the petitioncomplaint 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 [cooperatives] [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 petitioncomplaint against the respondent cooperative and Stanfilco before the petitioner
SSC for the compulsory coverage of respondent cooperatives 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 petitioncomplaint. Considering that the principal relief sought in the said petitioncomplaint 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 cooperatives
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 ownersmembers themselves. Likewise, respondent cooperatives 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 SSCs 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 Commissionafter 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
relationship[17] 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 (P5,000.00) 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 employeremployee relationship between the respondent cooperative and its ownersmembers.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 Courts 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 exceptions[24] 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 workers conduct, with the latter assuming primacy
in the overall consideration.[25] The most important element is the employers
control of the employees 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 cooperatives 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 employeremployee relationship between the respondent cooperative and its ownersmembers.[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-Calleja[37] 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.
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-members 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 ownersmembers 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 cooperative was estopped from assailing the
jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is
hereby 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, respectively,
are hereby REVERSEDand SET ASIDE. The Orders of the petitioner SSC
dated 17 February 2004 and 16 September 2004 are herebyREINSTATED. The
petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint
filed before it by the petitioner SSS as regards the compulsory coverage of the
respondent cooperative and its owners-members. No costs.

SO ORDERED.
G.R. No. L-26712-16

December 27, 1969

UNITED CHRISTIAN MISSIONARY SOCIETY, UNITED CHURCH BOARD FOR WORLD

MINISTERS, BOARD OF FOREIGN MISSION OF THE REFORMED CHURCH IN AMERICA,
BOARD OF MISSION OF THE EVANGELICAL UNITED PRESBYTERIAN CHURCH,
COMMISSION OF ECUMENICAL MISSION ON RELATIONS OF THE UNITED PRESBYTERIAN
CHURCH, petitioners,
vs.
SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, respondents.
Sedfrey A. Ordoez for petitioners.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete
and Solicitor Buenaventura J. Guerrero for respondents.
TEEHANKEE, J.:
In this appeal from an order of the Social Security Commission, we uphold the Commission's Order
dismissing the petition before it, on the ground that in the absence of an express provision in the
Social Security Act1 vesting in the Commission the power to condone penalties, it has no legal
authority to condone, waive or relinquish the penalty for late premium remittances mandatorily
imposed under the Social Security Act.
The five petitioners originally filed on November 20, 1964 separate petitions with respondent
Commission, contesting the social security coverage of American missionaries who perform religious
missionary work in the Philippines under specific employment contracts with petitioners. After
several hearings, however, petitioners commendably desisted from further contesting said coverage,
manifesting that they had adopted a policy of cooperation with the Philippine authorities in its
program of social amelioration, with which they are in complete accord. They instead filed their
consolidated amended petition dated May 7, 1966, praying for condonation of assessed penalties
against them for delayed social security premium remittances in the aggregate amount of
P69,446.42 for the period from September, 1958 to September, 1963.
In support of their request for condonation, petitioners alleged that they had labored under the
impression that as international organizations, they were not subject to coverage under the
Philippine Social Security System, but upon advice by certain Social Security System officials, they
paid to the System in October, 1963, the total amount of P81,341.80, representing their back
premiums for the period from September, 1958 to September, 1963. They further claimed that the
penalties assessed against them appear to be inequitable, citing several resolutions of respondent
Commission which in the past allegedly permitted condonation of such penalties.
On May 25, 1966, respondent System filed a Motion to Dismiss on the ground that "the Social
Security Commission has no power or authority to condone penalties for late premium remittance, to
which petitioners filed their opposition of June 15, 1966, and in turn, respondent filed its reply thereto
of June 22, 1966.
Respondent Commission set the Motion to Dismiss for hearing and oral argument on July 20, 1966.
At the hearing, petitioners' counsel made no appearance but submitted their Memorandum in lieu of
oral argument. Upon petition of the System's Counsel, the Commission gave the parties a further
period of fifteen days to submit their Memorandum consolidating their arguments, after which the

motion would be deemed submitted for decision. Petitioners stood on their original memorandum,
and respondent System filed its memorandum on August 4, 1966.
On September 22, 1966, respondent Commission issued its Order dismissing the petition, as
follows:
Considering all of the foregoing, this Commission finds, and so holds, that in the absence of
an express provision in the Social Security Act vesting in the Commission the power to
condone penalties, it cannot legally do so. The policy enunciated in Commission Resolution
No. 536, series of 1964, cited by the parties, in their respective pleadings, has been
reiterated in Commission Resolution No. 878, dated August 18, 1966, wherein the
Commission adopting the recommendation of the Committee on Legal Matters and
Legislation of the Social Security Commission ruled that it "has no power to condone, waive
or relinquish the penalties for late premium remittances which may be imposed under the
Social Security Act."
WHEREFORE, the petition is hereby dismissed and petitioners are directed to pay the
respondent System, within thirty (30) days from receipt of this Order, the amount of
P69,446.42 representing the penalties payable by them, broken down as follows:

United Christian Missionary Society

Board of Mission of the Evangelical United Brothers

Church

P5,253.53

7,891.74

United Church Board for World Ministers

12,353.75

Commission on Ecumenical Mission & Relations

33,019.36

Board of Foreign Mission of the Reformed Church in

America

10,928.04

TOTAL

P 69,446.42

Upon failure of the petitioners to comply with this Order within the period specified herein, a
warrant shall be issued to the Sheriff of the Province of Rizal to levy and sell so much of the
property of the petitioners as may be necessary to satisfy the aforestated liability of the
petitioners to the System.

This Court is thus confronted on appeal with this question of first impression as to whether or not
respondent Commission erred in ruling that it has no authority under the Social Security Act to
condone the penalty prescribed by law for late premium remittances.
We find no error in the Commission's action.
1. The plain text and intent of the pertinent provisions of the Social Security Act clearly rule out
petitioners' posture that the respondent Commission should assume, as against the mandatory
imposition of the 3% penalty per month for late payment of premium remittances, the discretionary
authority of condoning, waiving or relinquishing such penalty.
The pertinent portion of Section 22 (a) of the Social Security Act peremptorily provides that:
SEC 22. Remittance of premiums. (a) The contributions imposed in the preceding
sections shall be remitted to the System within the first seven days of each calendar month
following the month for which they are applicable or within such time as the Commission may
prescribe. "Every employer required to deduct and to remit such contribution shall be liable
for their payment and if any contribution is not paid to the system, as herein prescribed, he
shall pay besides the contribution a penalty thereon of three per centum per month from the
date the contribution falls due until paid . . .2
No discretion or alternative is granted respondent Commission in the enforcement of the law's
mandate that the employer who fails to comply with his legal obligation to remit the premiums to the
System within the prescribed period shall pay a penalty of three 3% per month. The prescribed
penalty is evidently of a punitive character, provided by the legislature to assure that employers do
not take lightly the State's exercise of the police power in the implementation of the Republic's
declared policy "to develop, establish gradually and perfect a social security system which shall be
suitable to the needs of the people throughout the Philippines and (to) provide protection to
employers against the hazards of disability, sickness, old age and death."3 In this concept, good faith
or bad faith is rendered irrelevant, since the law makes no distinction between an employer who
professes good reasons for delaying the remittance of premiums and another who deliberately
disregards the legal duty imposed upon him to make such remittance. From the moment the
remittance of premiums due is delayed, the penalty immediately attaches to the delayed premium
payments by force of law.
2. Petitioners contend that in the exercise of the respondent Commission's power of direction and
control over the system, as provided in Section 3 of the Act, it does have the authority to condone
the penalty for late payment under Section 4 (1), whereby it is empowered to "perform such other
acts as it may deem appropriate for the proper enforcement of this Act." The law does not bear out
this contention. Section 4 of the Social Security Act precisely enumerates the powers of the
Commission. Nowhere from said powers of the Commission may it be shown that the Commission is
granted expressly or by implication the authority to condone penalties imposed by the Act.
3. Moreover, the funds contributed to the System by compulsion of law have already been held by us
to be "funds belonging to the members which are merely held in trust by the Government." 4 Being a
mere trustee of the funds of the System which actually belong to the members, respondent
Commission cannot legally perform any acts affecting the same, including condonation of penalties,
that would diminish the property rights of the owners and beneficiaries of such funds without an
express or specific authority therefor.
4. Where the language of the law is clear and the intent of the legislature is equally plain, there is no
room for interpretation and construction of the statute. The Court is therefore bound to uphold

respondent Commission's refusal to arrogate unto itself the authority to condone penalties for late
payment of social security premiums, for otherwise we would be sanctioning the Commission's
reading into the law discretionary powers that are not actually provided therein, and hindering and
defeating the plain purpose and intent of the legislature.
5. Petitioners cite fourteen instances in the past wherein respondent Commission had granted
condonation of penalties on delayed premium payments. They charge the Commission with grave
abuse of discretion in not having uniformly applied to their cases its former policy of granting
condonation of penalties. They invoke more compelling considerations of equity in their cases, in
that they are non-profit religious organizations who minister to the spiritual needs of the Filipino
people, and that their delay in the payment of their premiums was not of a contumacious or
deliberate defiance of the law but was prompted by a well-founded belief that the Social Security Act
did not apply to their missionaries.
The past instances of alleged condonation granted by the Commission are not, however, before the
Court, and the unilateral conclusion asserted by petitioners that the Commission had granted such
condonations would be of no avail, without a review of the pertinent records of said cases.
Nevertheless, assuming such conclusion to be correct, the Commission, in its appealed Order of
September 22, 1966 makes of record that since its Resolution No. 536, series of 1964, which it
reiterated in another resolution dated August 18, 1966, it had definitely taken the legal stand,
pursuant to the recommendation of its Committee on Legal Matters and Legislation, that in the
absence of an express provision in the Social Security Act vesting in the Commission the power to
condone penalties, it "has no power to condone, waive or relinquish the penalties for late premium
remittances which may be imposed under the Social Security Act."
6. The Commission cannot be faulted for this correct legal position. Granting that it had erred in the
past in granting condonation of penalties without legal authority, the Court has held time and again
that "it is a well-known rule that erroneous application and enforcement of the law by public officers
do not block subsequent correct application of the statute and that the Government is never
estopped by mistake or error on the part of its agents."5 Petitioners' lack of intent to deliberately
violate the law may be conceded, and was borne out by their later withdrawal in May, 1966 of their
original petitions in November, 1964 contesting their social security coverage. The point, however, is
that they followed the wrong procedure in questioning the applicability of the Social Security Act to
them, in that they failed for five years to pay the premiums prescribed by law and thus incurred the
3% penalty thereon per month mandatorily imposed by law for late payment. The proper procedure
would have been to pay the premiums and then contest their liability therefor, thereby preventing the
penalty from attaching. This would have been the prudent course, considering that the Act provides
in Section 22 (b) thereof that the premiums which the employer refuses or neglects to pay may be
collected by the System in the same manner as taxes under the National Internal Revenue Code,
and that at the time they instituted their petitions in 1964 contesting their coverage, the Court had
already ruled in effect against their contest three years earlier, when it held in Roman Catholic
Archbishop vs. Social Security Commission6 that the legislature had clearly intended to include
charitable and religious institutions and other non-profit institutions, such as petitioners, within the
scope and coverage of the Social Security Act.
7. No grave abuse of discretion was committed, therefore, by the Commission in issuing its Order
dismissing the petition for condonation of penalties for late payment of premiums, as claimed by
petitioners in their second and last error assigned. Petitioners were duly heard by the Commission
and were given due opportunity to adduce all their arguments, as in fact they filed their
Memorandum in lieu of oral argument and waived the presentation of an additional memorandum.
The mere fact that there was a pending appeal in the Court of Appeals from an identical ruling of the
Commission in an earlier case as to its lack of authority to condone penalties does not mean, as

petitioners contend, that the Commission was thereby shorn of its authority and discretion to dismiss
their petition on the same legal ground.7 The Commission's action has thus paved the way for a final
ruling of the Court on the matter.
ACCORDINGLY, the order appealed from is hereby affirmed, without pronouncement as to costs.
OPULENCIA ICE PLANT AND STORAGE AND/OR DR. MELCHOR OPULENCIA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), LABOR ARBITER
NUMERIANO VILLENA AND MANUEL P. ESITA, respondents.
Inocentes, De Leon, Leogardo, Atienza, Magnaye & Azucena (IDLAMA) Law Offices for petitioners.
Noli J. De los Santos for private respondent.

BELLOSILLO, J.:
MANUEL P. ESITA was for twenty (20) years a compressor operator of Tiongson Ice Plant in San
Pablo City. In 1980 he was hired as compressor operator-mechanic for the ice plants of petitioner Dr.
Melchor Opulencia located in Tanauan, Batangas, and Calamba, Laguna. Initially assigned at the ice
plant in Tanauan, Esita would work from seven o'clock in the morning to five o'clock in the afternoon
receiving a daily wage of P35.00.
In 1986, Esita was transferred to the ice plant in Calamba, which was then undergoing overhauling,
taking the place of compressor operator Lorenzo Eseta, who was relieved because he was already
old and weak. For less than a month, Esita helped in the construction-remodeling of Dr. Opulencia's
house.
On 6 February 1989, for demanding the correct amount of wages due him, Esita was dismissed from
service. Consequently, he filed with Sub-Regional Arbitration Branch IV, San Pablo City, a complaint
for illegal dismissal, underpayment, non-payment for overtime, legal holiday, premium for holiday
and rest day, 13th month, separation/retirement pay and allowances against petitioners.
Petitioners deny that Esita is an employee. They claim that Esita could not have been employed in
1980 because the Tanauan ice plant was not in operation due to low voltage of electricity and that
Esita was merely a helper/peon of one of the contractors they had engaged to do major repairs and
renovation of the Tanauan ice plant in 1986. Petitioners further allege that when they had the
Calamba ice plant repaired and expanded, Esita likewise rendered services in a similar capacity, and
thus admitting that he worked as a helper/peon in the repair or remodeling of Dr. Opulencia's
residence in Tanauan.
Opulencia likewise maintains that while he refused the insistent pleas of Esita for employment in the
ice plants due to lack of vacancy, he nonetheless allowed him to stay in the premises of the ice plant
for free and to collect fees for crushing or loading ice of the customers and dealers of the ice plant.
Opulencia claims that in addition, Esita enjoyed free electricity and water, and was allowed to

cultivate crops within the premises of the ice plant to augment his income. Petitioners however admit
that "following the tradition of 'pakikisama' and as a token of gratitude of the part of the complainant
(Esita), he helps in the cleaning of the ice plant premises and engine room whenever he is
requested to do so, and this happens only (at) twice a month."
On 8 December 1989, Labor Arbiter Nemeriano D. Villena rendered a decision 1 finding the existence
of an employer-employee relationship between petitioners and Esita and accordingly directed them to pay
him P33,518.02 representing separation pay, underpayment of wages, allowances, 13th month, holiday,
premium for holiday, and rest day pays. The claim for overtime pay was however dismissed for lack of
basis, i.e., Esita failed to prove that overtime services were actually rendered.
On 29 November 1990, the Third Division of the National Labor Relations Commission, in Case No.
RAB-IV-2-2206-89, affirmed the decision of Labor Arbiter Villena but reduced the monetary award to
P28,344.60 as it was not proven that Esita worked every day including rest days and on the days
before the legal holidays. On 26 March 1991, petitioners' motion for reconsideration was denied.
In this present recourse, petitioners seek reversal of the ruling of public respondents Labor Arbiter
and NLRC, raising the following arguments: that public respondents have no jurisdiction over the
instant case; that Esita's work in the repair and construction of Dr. Opulencia's residence could not
have ripened into a regular employment; that petitioners' benevolence in allowing Esita to stay inside
the company's premises free of charge for humanitarian reason deserves commendation rather than
imposition of undue penalty; that Esita's name does not appear in the payrolls of the company which
necessarily means that he was not an employee; and, that Esita's statements are inconsistent and
deserving of disbelief. On 13 May 1991, petitioners' prayer for a temporary restraining order to
prevent respondents from enforcing the assailed resolutions of NLRC was granted.
The instant petition lacks merit, hence, must be dismissed.
Petitioners allege that there is no employer-employee relationship between them and Esita;
consequently, public respondents have no jurisdiction over the case. Petitioners even go to the
extent of asserting that "in case like the one at bar where employer-employee relationship has been
questioned from the very start, Labor Arbiters and the NLRC have no jurisdiction and should not
assume jurisdiction therein."
While the Labor Arbiter and the NLRC may subsequently be found without jurisdiction over a case
when it would later appear that no employer-employee relationship existed between the contending
parties, such is not the situation in this case where the employer-employee relationship between the
petitioners and Esita was clearly established. If the argument of petitioners were to be allowed, then
unscrupulous employers could readily avoid the jurisdiction of the Labor Arbiters and NLRC, and
may even elude compliance with labor laws only on the bare assertion that an employer-employee
relationship does not exist.
Petitioners further argue that "complainant miserably failed to present any documentary evidence to
prove his employment. There was no time sheet, pay slip and/or payroll/cash voucher to speak of.
Absence of these material documents are necessary fatal to complainant's cause."

We do not agree. No particular form of evidence is required to prove the existence of an employeremployee relationship. Any competent and relevant evidence to prove the relationship may be
admitted. For, if only documentary evidence would be required to show that relationship, no
scheming employer would ever be brought before the bar of justice, as no employer would wish to
come out with any trace of the illegality he has authored considering that it should take much
weightier proof to invalidate a written instrument. 2 Thus, as in this case where the employer-employee
relationship between petitioners and Esita was sufficiently proved by testimonial evidence, the absence of
time sheet, time record or payroll has become inconsequential.
The petitioners' reliance on Sevilla v. Court of Appeals 3 is misplaced. In that case, we did not consider
the inclusion of employer's name in the payroll as an independently crucial evidence to prove an
employer-employee relation. Moreover, for a payroll to be utilized to disprove the employment of a
person, it must contain a true and complete list of the employees. But, in this case, the testimonies of
petitioners' witnesses admit that not all the names of the employees were reflected in the payroll.
In their Consolidated Reply, petitioners assert that "employees who were absent were naturally not
included in the weekly payrolls." 4 But this simply emphasizes the obvious. Petitioners' payrolls do not
contain the complete list of the employees, so that the payroll slips cannot be an accurate basis in
determining who are and are not their employees. In addition, as the Solicitor General observes: ". . . . the
payroll slips submitted by petitioners do not cover the entire period of nine years during which private
respondent claims to have been employed by them, but only the periods from November 2 to November
29, 1986 and April 26 to May 30, 1987 . . . . It should be noted that petitioners repeatedly failed or refused
to submit all payroll slips covering the period during which private respondent claims to have been
employed by them despite repeated directives from the Labor Arbiter . . . ." 5 In this regard, we can aptly
apply the disputable presumption that evidence willfully suppressed would be adverse if produced. 6
Petitioners further contend that the claim of Esita that he worked from seven o'clock in the morning
to five o'clock in the afternoon, which is presumed to be continuous, is hardly credible because
otherwise he would not have had the time to tend his crops. 7 As against this positive assertion of
Esita, it behooves petitioners to prove the contrary. It is not enough that they raise the issue of probability,
nay, improbability, of the conclusions of public respondents based on the facts bared before them, for in
case of doubt, the factual findings of the tribunal which had the opportunity to peruse the conflicting
pieces of evidence should be sustained.
The petitioners point out that even granting arguendo that Esita was indeed a mechanic, he could
never be a regular employee because his presence would be required only when there was a need
for repair. We cannot sustain this argument. This circumstance cannot affect the regular status of
employment of Esita. An employee who is required to remain on call in the employer's premises or
so close thereto that he cannot use the time effectively and gainfully for his own purpose shall be
considered as working while on call. 8 In sum, the determination of regular and casual employment 9 is
not affected by the fact that the employee's regular presence in the place of work is not required, the more
significant consideration being that the work of the employee is usually necessary or desirable in the
business of the employer. More importantly, Esita worked for 9 years and, under the Labor Code, "any
employee who has rendered at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to that activity in which he is employed . . . ." 10

The petitioners would give the impression that the repair of the ice plant and the renovation of the
residence of Dr. Opulencia were voluntarily extended by Esita because "[r]espondent did it on their
(sic) own." Unfortunately for petitioners, we cannot permit these baseless assertions to prevail
against the factual findings of public respondents which went through the sanitizing process of a
public hearing. The same observation may be made of the alleged inconsistencies in Esita's
testimonies. Moreover, on the claim that Esita's construction work could not ripen into a regular
employment in the ice plant because the construction work was only temporary and unrelated to the
ice-making business, needless to say, the one month spent by Esita in construction is insignificant
compared to his nine-year service as compressor operator in determining the status of his
employment as such, and considering further that it was Dr. Opulencia who requested Esita to work
in the construction of his house.
In allowing Esita to stay in the premises of the ice plant and permitting him to cultivate crops to
augment his income, there is no doubt that petitioners should be commended; however, in view of
the existence of an employer-employee relationship as found by public respondents, we cannot treat
humanitarian reasons as justification for emasculating or taking away the rights and privileges of
employees granted by law. Benevolence, it is said, does not operate as a license to circumvent labor
laws. If petitioners were genuinely altruistic in extending to their employees privileges that are not
even required by law, then there is no reason why they should not be required to give their
employees what they are entitled to receive. Moreover, as found by public respondents, Esita was
enjoying the same privileges granted to the other employees of petitioners, so that in thus treating
Esita, he cannot be considered any less than a legitimate employee of petitioners.
WHEREFORE, there being no grave abuse of discretion on the part of public respondents, the
instant petition is DISMISSED. Accordingly, the restraining order we issued on 13 May 1991 is
LIFTED.
SO ORDERED.