SSS v.

ATLANTIC GULF AND PACIFIC COMPANY

Petitioner: Social Security System

Respondent: Atlantic Gulf and Pacific Company of Manila, Inc. and Semirara Coal Corporation (collectively as private
respondents)
Date of Promulgation: April 30, 2008
Ponente: Tinga

Facts:
 AG&P alleged that they informed the SSS in writing of its premiums and loan amortization delinquencies amounting to
P7.3 Million. AG&P proposed to pay its said arrears by end of 2000, but requested for the condonation of all penalties.
 In turn, the defendant SSS suggested two (2) options to AG&P, either to pay by installment or through "dacion en
pago".
 AG&P chose to settle its obligation with the SSS under dacion en pago of its property situated in Baguio with an
appraised value of about P80.0 Million. SSS proposes to carve-out from the said property an area sufficient to cover
plaintiffs’ delinquencies. AG&P, however, is not amenable to subdivide its Baguio property.
 AG&P then made another proposal to SSS. This time, offering as payment a portion of its lot situated in Batangas.
 In addition, SSS informed AG&P of its decision to include other companies within the umbrella of DMCI group with
arrearages with the SSS. In the process of elimination of the companies belonging to the DMCI group with possible
outstanding obligation with the SSS, it was only SEMIRARA which was left with outstanding delinquencies with the
SSS. Thus, SEMIRARA’s inclusion in the proposed settlement through dacion en pago.
 In its Resolution No. 270, finally approved AG&P’s proposal to settle its and SEMIRARA’s delinquencies through dacion
en pago.
 From the time of the approval of AG&P’s proposal up to the present, AG&P is religiously remitting the premium
contributions and loan amortization of its member-employees to the defendant SSS.
 To effect the property transfer, a Deed of Assignment has to be executed between the AG&P and SSS.
 Because of SSS failure to execute the Deed of Assignment to effect said transfer, AG&P prepared the draft and
submitted it to the Office of the Vice-President.
 Unfortunately, SSS failed to take any action on said Deed of Assignment causing AG&P to re-submit it to the same
office.
 More than a year after the approval of AG&P’s proposal, SSS sent the revised copy of the Deed of Assignment to AG&P.
However, the amount of the plaintiffs’ obligation appearing in the approved Deed of Assignment has ballooned from
P29,261,902.45 to P40,846,610.64 allegedly because of the additional interests and penalty charges assessed on
plaintiffs’ outstanding obligation.
 AG&P demanded for the waiver and deletion of the additional interests on the ground that delay in the approval of the
deed and the subsequent delay in conveyance of the property in defendant’s name was solely attributable to the
defendant SSS.
 AG&P and SEMIRARA maintain their willingness to settle their alleged obligation of P29,261,902.45 to SSS. Defendant,
however, refused to accept the payment through dacion en pago, unless plaintiffs also pay the additional interests and
penalties being charged.
 Private respondents AG & P and SEMIRARA against SSS before the RTC.
 SSS moved for the dismissal of the complaint for lack of jurisdiction and non-exhaustion of administrative remedies.
 RTC: in favor of SSS. It granted SSS motion and dismissed private respondents’ complaint. The lower court believes
that the subject matter is the payment of contributions and the corresponding penalties which are within the ambit of
Sec. 5 (a) of R.A. No. 1161, as amended by R.A. No. 8282. Thus, the Court having no jurisdiction over the subject matter
of the instant complaint.
 MR by AG&P: denied
 CA: in favor or AG&P. The CA reversed and set aside the trial court’s challenged order, granted private respondents’
appeal and ordered the trial court to proceed with the civil case with dispatch. It held that the subject of the complaint
is no longer the payment of the premium and loan amortization delinquencies, as well as the penalties appurtenant
thereto, but the enforcement of the dacion en pago pursuant to SSS Resolution No. 270. The action then is one for
specific performance which case law holds is an action incapable of pecuniary estimation falling under the jurisdiction
of the Regional Trial Court.
 MR by SSS: denied

Issue: WON the Social Security Commission’s (the Commission) has jurisdiction over the complaint to a case arising from the
non-implementation of a dacion en pago as a means of settlement of liabilities

Held: NO. The Court restated the rule that what determines the nature of the action, as well as the tribunal or body, which has
jurisdiction over the case are the allegations in the complaint.
The pertinent provision of law detailing the jurisdiction of the Commission is Section 5(a) of R.A. No. 1161, as amended by R.A.
No. 8282, otherwise known as the Social Security Act of 1997, to wit:

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,
and any case filed with respect thereto shall be heard by the Commission, or any of its members, or by hearing
officers duly authorized by the Commission and decided within the mandatory period of twenty (20) days after
the submission of the evidence. The filing, determination and settlement of disputes shall be governed by the rules
and regulations promulgated by the Commission.

The law clearly vests upon the Commission jurisdiction over "disputes arising under this Act with respect to coverage,
benefits, contributions and penalties thereon or any matter related thereto...". Dispute is defined as "a conflict or controversy."

From the allegations of respondents’ complaint, it readily appears that there is no longer any dispute with respect to
respondents’ accountability to the SSS. Respondents had, in fact, admitted their delinquency and offered to settle them by way
of dacion en pago subsequently approved by the SSS in Resolution No. 270-s. 2001. SSS stated in said resolution that "the
dacion en pago proposal of AG&P Co. of Manila and Semirara Coals Corporation to pay their liabilities in the total amount of
P30,652,710.71 as of 31 March 2001 by offering their 5.8 ha. property located in San Pascual, Batangas, be, as it is hereby,
approved..” This statement unequivocally evinces its consent to the dacion en pago.

In Vda. de Jayme v. Court of Appeals,10 the Court ruled significantly as follows:

Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted
equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the
creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of
the nature of sale, that is the creditor is really buying the thing or property of the debtor, payment for which is to be
charged against the debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain,
and cause or consideration must be present. In its modern concept, what actually takes place in dacion en pago is an
objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an
obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any
case, common consent is an essential prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt or
obligation.

The controversy, instead, lies in the non-implementation of the approved and agreed dacion en pago on the part of
the SSS. As such, respondents filed a suit to obtain its enforcement which is a suit for specific performance and one incapable
of pecuniary estimation beyond the competence of the Commission. Pertinently, the Court ruled in Singson v. Isabela Sawmill,
as follows:

In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has
adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery
of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction in the municipal courts
or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other
than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal
relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms
of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).

CIR v. CA and ATENEO DE MANILA UNIVERSITY

Petitioner: Commissioner of Internal Revenue

Respondent: Court of Appeals and Ateneo De Manila University (private respondent)
Date of Promulgation: April 18, 1997
Ponente: Panganiban

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE COURT OF APPEALS, THE COURT OF TAX APPEALS and ATENEO
DE MANILA UNIVERSITY, respondents.

Facts:
 Private respondent Ateneo is a non-stock, non-profit educational institution with auxiliary units and branches all over
the Philippines.
  One such auxiliary unit is the Institute of Philippine Culture (IPC), which has no legal personality separate and distinct
from that of Ateneo. The IPC is a Philippine unit engaged in social science studies of Philippine society and culture.
Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations
and government agencies.
 Ateneo received from petitioner Commissioner of Internal Revenue a demand letter assessing private respondent the
sum of P174,043.97 for alleged deficiency contractors tax, and an assessment in the sum of P1,141,837 for alleged
deficiency income tax.
 Denying said tax liabilities, Ateneo sent the CIR a letter-protest and subsequently, a memorandum contesting the
validity of the assessments.
 CIR rendered a letter-decision canceling the assessment for deficiency income tax but modifying the assessment for
deficiency contractors tax by increasing the amount due to P193,475.55.
 Ateneo requested for a reconsideration or reinvestigation of the modified assessment. At the same time, it filed in the
respondent CTA a petition for review of the said letter-decision of the petitioner.
 While the petition was pending before the respondent court, petitioner issued a final decision reducing the
assessment for deficiency contractors tax from P193,475.55 to P46,516.41, exclusive of surcharge and interest.
 CTA: in favor of Ateneo. It set aside CIR’s final decision and cancelled the deficiency contractors tax assessment.
 CA: affirmed the Court of Tax Appeals.

Issues: (1) WON there is a contract of sale by Ateneo

(2) WON Ateneo through ICP is performing the work of an independent contractor making it subject to contractors tax (in case
ask din to ni Sir kasi ito talaga yung main issue nung case, need kasi malaman kung engaged in business of selling their research
yung ateneo for it to be subject to contractor’s tax)

Held: (1) NO. It is also well to stress that the questioned transactions of Ateneos Institute of Philippine Culture cannot be
deemed either as a contract of sale or a contract for a piece of work.
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. By its very nature, a contract of sale
requires a transfer of ownership. Thus, Article 1458 of the Civil Code expressly makes the obligation to transfer ownership as
an essential element of the contract of sale, following modern codes, such as the German and the Swiss. Even in the absence of
this express requirement, however, most writers, including Sanchez Roman, Gayoso, Valverde, Ruggiero, Colin and Capitant,
have considered such transfer of ownership as the primary purpose of sale. Perez and Alguer follow the same view, stating
that the delivery of the thing does not mean a mere physical transfer, but is a means of transmitting ownership. Transfer of
title or an agreement to transfer it for a price paid or promised to be paid is the essence of sale.

In the case of a contract for a piece of work, the contractor binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. x x x If the contractor agrees to produce the work from materials furnished
by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. x x x.

Ineludably, whether the contract be one of sale or one for a piece of work, a transfer of ownership is involved and a party
necessarily walks away with an object. In the case at bench, it is clear from the evidence on record that there was no sale either
of objects or services because, as adverted to earlier, there was no transfer of ownership over the research data obtained or
the results of research projects undertaken by the Institute of Philippine Culture.

Furthermore, it is clear that the research activity of the Institute of Philippine Culture is done in pursuance of maintaining
Ateneos university status and not in the course of an independent business of selling such research with profit in mind.

It is also clear that the funds received by Ateneos Institute of Philippine Culture are not given in the concept of a fee or price in
exchange for the performance of a service or delivery of an object. Rather, the amounts are in the nature of an endowment or
donation given by IPCs benefactors solely for the purpose of sponsoring or funding the research with no strings attached. As
found by the two courts below, such sponsorships are subject to IPCs terms and conditions. No proprietary or commercial
research is done, and IPC retains the ownership of the results of the research, including the absolute right to publish the same.
The copyrights over the results of the research are owned by Ateneo and, consequently, no portion thereof may be reproduced
without its permission. The amounts given to IPC, therefore, may not be deemed as fees or gross receipts that can be subjected
to the three percent contractors tax.

(2) NO. Sec. 205 of the National Internal Revenue Code germane to the case before us read:

SEC. 205. Contractors, proprietors or operators of dockyards, and others. -- A contractors tax of three per centum of the gross
receipts is hereby imposed on the following:
xxxxxxxxx
(16) Business agents and other independent contractors, except persons, associations and corporations under contract for
embroidery and apparel for export, as well as their agents and contractors, and except gross receipts of or from a pioneer
industry registered with the Board of Investments under the provisions of Republic Act No. 5186;
xxxxxxxxx

The term independent contractors include persons (juridical or natural) not enumerated above (but not including individuals
subject to the occupation tax under Section 12 of the Local Tax Code) whose activity consists essentially of the sale of all
kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the
physical or mental faculties of such contractors or their employees.

After reviewing the records of this case, we find no evidence that Ateneos Institute of Philippine Culture ever sold its services
for a fee to anyone or was ever engaged in a business apart from and independently of the academic purposes of the
university. In the first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for
sale of services were ever entered into by the private respondent.

The facts show that IPC, as a unit of the private respondent, is not engaged in business. Undisputedly, private respondent is
mandated by law to undertake research activities to maintain its university status. In fact, the research activities being carried
out by the IPC is focused not on business or profit but on social sciences studies of Philippine society and culture. Since it can
only finance a limited number of IPCs research projects, private respondent occasionally accepts sponsorship for unfunded
IPC research projects from international organizations, private foundations and governmental agencies. However, such
sponsorships are subject to private respondents terms and conditions, among which are, that the research is confined to topics
consistent with the private respondents academic agenda; that no proprietary or commercial purpose research is done; and
that private respondent retains not only the absolute right to publish but also the ownership of the results of the research
conducted by the IPC. Quite clearly, the aforementioned terms and conditions belie the allegation that private respondent is a
contractor or is engaged in business.

For another, it bears stressing that private respondent is a non-stock, non-profit educational corporation. The fact that it
accepted sponsorship for IPCs unfunded projects is merely incidental. For, the main function of the IPC is to undertake
research projects under the academic agenda of the private respondent. Moreover, the records do not show that in accepting
sponsorship of research work, IPC realized profits from such work. On the contrary, the evidence shows that for about 30
years, IPC had continuously operated at a loss, which means that sponsored funds are less than actual expenses for its
research projects. That IPC has been operating at a loss loudly bespeaks of the fact that education and not profit is the motive
for undertaking the research projects.

INCHAUSTI & CO. VS. CROMWELL

Petitioner: Inchausti and Co.

Respondent: Ellis Cromwell as Collector of Internal Revenue
Date of Promulgation: October 16, 1911
Ponente: Moreland

Facts:
 Inchausti is engaged in the business of buying and selling at wholesale hemp.
 It is customary to sell hemp in bales which are made by compressing the loose fiber by means of presses, covering two
sides of the bale with matting, and fastening it by means of strips of rattan. The operation of bailing hemp is
designated among merchants by the word "prensaje."
 In all sales of hemp by the Inchausti, the price is quoted to the buyer at so much per picul, no mention being made of
bailing; but with the tacit understanding, unless otherwise expressly agreed, that the hemp will be delivered in bales
and that, according to custom, a charge is to be made against the buyer under the denomination of "prensaje."
 This charge is made in the same manner in all cases, even when the operation of bailing was performed by the
Inchausti or by its principal long before the contract of sale was made.
 Inchausti has always paid to the respondent CIR the tax collectible under the provisions of section 139 of Act No. 1189
upon the selling price expressly agreed upon for all hemp sold by the plaintiff firm both for its own account and on
commission, but has not paid the said tax upon sums received from the purchaser of such hemp under the
denomination of "prensaje."
 The CIR made demand in writing upon the Inchausti for the payment within the period of five (5) days of the sum of
P1,370.68 as a tax of 1/3 of 1% on the sums of money which the CIR claimed to be entitled to receive, under the
 provisions of the said section 139 of Act No. 1189, upon the said sums of money so collected from purchasers of hemp
under the denomination of "prensaje."
 Inchausti paid to the CIR under protest the said sum of P1,370.69, and on the same date appealed against the ruling by
which Inchausti was required to make said payment.
 CIR overruled said protest and adversely decided said appeal, and refused and still refuses to return to plaintiff the
said sum of P1,370.68 or any part thereof.
 Inchausti’s contention: that the tax assessed upon the aggregate sum of said charges made against said purchasers of
hemp, under the denomination of "prensaje" is illegal upon the ground that the said charge does not constitute a part
of the selling price of the hemp, but is a charge made for the service of baling the hemp.
 CIR’s contention: the said charge made under the denomination of "prensaje" is in truth and in fact a part of the gross
value of the hemp sold and of its actual selling price, and that therefore the tax imposed by section 139 of Act No. 1189
lawfully accrued on said sums and that the collection thereof was lawfully and properly made.
 The RTC dismissed the complaint. Inchausti filed in the SC.

Issue: WON the charge for the bailing was a part of a contract of sale

Held: YES. It is customary to sell hemp in bales, and that the price quoted in the market for hemp per picul is the price for the
hemp baled. The fact is that among large dealers like the plaintiff in this case it is practically impossible to handle hemp
without its being baled. In all dealings in hemp in the general market, the selling price consists of the value of the hemp loose
plus the cost and expense of putting it into marketable form.

The word "price" signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into
consideration for the fixing of the price, put to the debit of the vendee and agreed to by him.

The distinction between a contract of sale and one for work, labor, and materials is tested by the inquiry whether the
thing transferred is one not in existence and which never would have existed but for the order of the party desiring to
acquire it, or a thing which would have existed and been the subject of sale to some other person, even if the order
had not been given.

It is clear that in the case at bar the hemp was in existence in baled form before the agreements of sale were made, or, at least,
would have been in existence even if none of the individual sales here in question had been consummated. It would have been
baled, nevertheless, for sale to someone else, since, according to the agreed statement of facts, it is customary to sell hemp in
bales.

When a person stipulates for the future sale of articles which he is habitually making, and which at the time are not
made or finished, it is essentially a contract of sale. It is a contract for labor when the article is made pursuant to
agreement. If the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand for sale to
anyone, and no change or modification of it is made at the defendant's request, it is a contract of sale, even though it
may be entirely made after, and in consequence of, the defendant's order for it.

It has been held in Massachusetts that a contract to make is a contract of sale if the article ordered is already
substantially in existence at the time of the order and merely requires some alteration, modification, or adoption to
the buyer's wishes or purposes. It is also held in that state that a contract for the sale of an article which the vendor in
the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at
the time or not, is a contract for the sale of goods to which the statute of frauds applies. But if the goods are to be
manufactured especially for the purchaser and upon his special order, and not for the general market, the case is not
within the statute.

In this case, the baling was performed for the general market and was not something done by Inchausti which was a result of
any peculiar wording of the particular contract between him and his vendee. It is undoubted that the plaintiff prepared his
hemp for the general market. This would be necessary. One whose exposes goods for sale in the market must have them in
marketable form. The hemp in question would not have been in that condition if it had not been baled. The baling, therefore,
was nothing peculiar to the contract between the plaintiff and his vendee. It was precisely the same contract that was made by
every other seller of hemp, engaged as was the plaintiff, and resulted simply in the transfer of title to goods already prepared
for the general market.

Section 139 [Act No. 1189] of the Internal Revenue Law provides that:

There shall be paid by each merchant and manufacturer a tax at the rate of one-third of one per centum on the
gross value in money of all goods, wares and merchandise sold, bartered or exchanged in the Philippine Islands,
 and that this tax shall be assessed on the actual selling price at which every such merchant or manufacturer
disposes of his commodities.

It is agreed, as we have before stated, that hemp is sold in bales. Therefore, baling is performed before the sale. The purchaser
of hemp owes to the seller nothing whatever by reason of their contract except the value of the hemp delivered. That value,
that sum which the purchaser pays to the vendee, is the true selling price of the hemp, and every item which enters into such
price is a part of such selling price. By force of the custom prevailing among hemp dealers in the Philippine Islands, a
purchaser of hemp in the market, unless he expressly stipulates that it shall be delivered to him in loose form, obligates
himself to purchase and pay for baled hemp. Whether or not such agreement is express or implied, whether it is actual or tacit,
it has the same force. After such an agreement has once been made by the purchaser, he has no right to insists thereafter that
the seller shall furnish him with unbaled hemp.

It is undoubted that the vendees, in the sales referred to in the case at bar, would have no right, after having made their
contracts, to insists on the delivery of loose hemp with the purpose in view themselves to perform the baling and thus save 75
centavos per bale. It is unquestioned that the seller, the plaintiff, would have stood upon his original contract of sale, that is,
the obligation to deliver baled hemp, and would have forced his vendees to accept baled hemp, he himself retaining among his
own profits those which accrued from the proceed of baling.