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

In the case last cited (Rambin v. Ewing) the question presented was
whether the plaintiff there, who was a sales representative of a
cosmetics firm working on a commission basis, was to be considered
an employee. Said the Court:

Plaintiff's only remuneration was her commission of 40%,

plus $5 extra for every $250 of sales. Plaintiff was not
guaranteed any minimum compensation and she was not
allowed a drawing account or advance of any kind against Republic of the Philippines
unearned commissions. Plaintiff paid all of her traveling SUPREME COURT
expenses and she even had to pay the postage for sending Manila
orders to Avon.
SECOND DIVISION
The only office which Avon maintained in Shreveport was
an office for the city manager. Plaintiff worked from her G.R. No. L-55764 February 16, 1982
own home and she was never furnished any leads. The
relationship between plaintiff and Avon was terminable at
SOCIAL SECURITY SYSTEM, petitioner,
will . . .
vs.
COURT OF APPEALS and MANILA COSMOS AERATED WATER
xxx xxx xxx FACTORY, INC., respondents.

. . . A long line of decisions holds that commission sales

representatives are not employees within the coverage of
the Social Security Act. The underlying circumstances of
the relationship between the sales representatives and
company often vary widely from case to case, but
commission sales representatives have uniformly been
held to be outside the Social Security Act.
Considering the similarity between the definition of "employee" in
the Federal Social Security Act (U.S.) as amended and its definitions
in our own Social Security Act, and considering further that the local
statute is admittedly patterned after that of the United States, the
decisions of American courts on the matter before us may well be
accorded persuasive force. The logic of the situation indeed dictates
that where the element of control is absent; where a person who
works for another does so more or less at his own pleasure and is
not subject to definite hours or conditions of work, and in turn is
compensated according to the result of his efforts and not the
amount thereof, we should not find that the relationship of
employer and employee exists.
We have examined the contract form between petitioner and its
registered representatives and found nothing therein which would
indicate that the latter are under the control of the former in respect
of the means and methods they employ in the performance of their
work. The fact that for certain specified causes the relationship may
be terminated (e.g., failure to meet the annual quota of sales,
inability to make any sales production during a six-month period,
conduct detrimental to petitioner, etc.) does not mean that such
ABAD SANTOS, J:
This is a petition to review a decision of the Court of Appeals
in Social Security System, et al. vs. Manila Cosmos Aerated Water
Factory, Inc., CA-G.R. No. SP 03296-R, adverse to the petitioner. The
antecedent facts consist of the following:
In a petition filed with the Social Security Commission SSC the Social
Security System (SSS) together with Jose Concepcion, Manuel Chan,
Manuel Ong, Roberto Lai, Arturo Gonzales, William Co, Federico
Marcial, Santiago Mancuba, Jesus Crelencia, Alfredo So and Pedro
Aquino, the individual petitioners were sought to be declared
employees of Manila Cosmos AerAted Water Factory, Inc. (Cosmos)
and not independent contractors under the following Agreement to
Peddle Soft Drinks.
1. The MANUFACTURER shall provide the
PEDDLER with a delivery truck to be used by the
latter, under his own responsibility, exclusively in
the sales of the products of the former
purchased by the PEDDLER from the
MANUFACTURER;
2. The PEDDLER himself shall carefully and in
strict observance to traffic regulations, drive the
truck furnished him by the MANUFACTURER or
should he employ a driver or helpers, such driver
or helpers shall be his employees under his
direction and responsibility, and not that of the
MANUFACTURER, and their compensation
including salaries, wages, overtime pay,
separation pay, bonus or other remunerations
and privileges shall be for the PEDDLERS own
account;
3. The PEDDLER shall be responsible for any
damage to property, death or injuries to persons
or damage to the truck used by him caused by
his own acts or that of his driver and helpers;
4. The PEDDLER shall secure at his own expense
all necessary license and permits required by law
or ordinance, and shall bear any and all expenses
which may be incurred by him in the sales of the
MANUFACTURER'S products, covered by this
contract;
5. All goods soft drinks) purchased by the
PEDDLER shall be charged to him at a factory
price of P0.86 per case of the 6.6 oz. size, ex-
warehouse; PROVIDED, However, that, if the
PEDDLER purchases a total of not less than 200
cases of the 6.5 oz. size a day, he shall be
entitled to a dealer's discount of P7.30;
6. Upon the execution of this agreement, the
PEDDLER shall give a cash bond in the amount of
P500.00 against which the MANUFACTURER shall
charge the PEDDLER with any unpaid account at
the end of the day or with any damage to the
truck or other account which is properly
chargeable to the PEDDLER; within 30 days after
termination of this agreement, the cash bond,
after deducting proper charges, shall be returned
to the PEDDLER;
7. The PEDDLER shall liquidate and pay his
account at the end of each day, and his failure to
do so shall subject his cash bond or so much
thereof as may be necessary to such set offs and
payments as shall be proper against the accounts
in question;
8. This contract shall be effective only up to
December 31, 1962 and supersedes any or all
other previous contracts that may have been
entered into between the parties; However,
either of the parties may terminate the same
upon seven (7) days prior notice to the other;
9. Upon the termination of this agreement,
unless the same is renewed, the delivery truck
and such other equipment furnished by the
MANUFACTURER to the PEDDLER shall be
returned by the latter in good order and
workable condition, ordinary wear and tear
excepted, and shall promptly settle his
outstanding account if any, with the
manufacturer. (Rollo, pp. 24-25.)
The status of the individual petitioners was important because if
they were employees of Cosmos and not independent contractors,
then Cosmos would have "to pay the employer's share of premium
contributions (employer's and employees' share) for and in behalf of
the delivery helpers, as employees of respondent corporation, plus
the penalties thereon for late remittance of premium contributions,
covering the period of delinquency from the respective dates of
their coverage up to the present" as prayed for in the petition.
After hearing, the SSC rendered a resolution in favor of the SSS and
the peddlers holding that an employer-employee relationship
existed between Cosmos and the peddlers. Cosmos appealed to the
Court of Appeals and in a decision promulgated on October 16,
1979, that Court affirmed the resolution of the SSC. However, upon
a motion for reconsideration, the Court of Appeals on October 13,
1980, set aside its previous decision and reversed the resolution of
the SSC. Hence, the instant appeal where the petitioner is the SSS
alone; the individual peddlers have not seen fit to appeal.
We could have dismissed the instant petition by minute resolution
because precedents warrant such an action. But to put an end to
litigations of this sort and arrest what Cosmos calls judicial
harassment, a decision is in order.
In Mafinco Trading Corporation vs.Ople, et al. No. L-37790, March
25, 1976, 70 SCRA 139, the question was whether there was an
employer- employee relationship under the terms of a peddling
contract in words almost Identical to the one quoted above. This
Court, thru Mr. Justice Aquino said:
A restatement of the provisions of the peddling
contract is necessary in order to find out
whether under that instrument Repomanta and
Moralde were independent contractors or mere
employees of Mafinco.
Under the peddling contract, Mafinco would
provide the peddler with a delivery truck to be
used in the distribution of Cosmos soft drinks
(Par. 1). Should the peddler employ a driver and
helpers, he would be responsible for their
compensation and social security contributions
and he should comply with applicable labor laws
"in relation to his employees" (Par. 2).
The peddler would be responsible for any
damage to persons or property or to the truck
caused by his own acts or omissions or those of
his driver and helpers (Par. 3). Mafinco would
bear the cost of gasoline and maintenance of the
truck (Par. 4). The peddler would secure at his
own expense the necessary licenses and permits
and bear the expenses to be incurred in the sale
of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler
at P2.52 per case of 24 bottles, ex-warehouse.
Should he purchase at least 250 cases a day, he
would be entitled to a peddler's discount of
eleven pesos (Par. 6). The peddler would post a
cash bond in the sum of P1,500 to answer for his
obligations to Mafinco (Par. 7) and another cash
bond of P1,000 to answer for his obligations to
his employees (Par. 11). He should liquidate his
accounts at the end of each day (Par. 8). The
contract would be effective up to May 31, 1973.
Either party might terminate it upon five days
prior notice to the other (Par. 9).
We hold that under their peddling contracts of
Repomanta and Moralde were not employees of
Mafinco but were independent contractors as
found by the NLRC and its fact-finder and by the
committee appointed by the Secretary of labor
to look into the status of Cosmos and Mafinco
peddlers. They were distributors of Cosmos soft
drinks with their own capital and employees.
Ordinarily, an employee or a mere peddler does
not execute a formal contract of employment.
He is simply hired and he works under the
direction and control of the employer.
Repomanta and Moralde voluntarily executed
with Mafinco formal peddling contracts which
indicate the manner in which they would sell
Cosmos soft drinks. That circumstance signifies
that they were acting as independent
businessmen. They were free to sign or not to
sign that contract. If they did not want to sell
Cosmos products under the conditions defined in
that contract; they were free to reject it.
But having signed it, they were bound by its
stipulations and the consequences thereof under
existing labor laws. One such stipulation is the
right of the parties to terminate the contract
upon five days' prior notice (Par. 9). Whether the
termination in this case was an unwarranted
dismissal of an employee, as contended by
Repomanta and Moralde, is a point that cannot
be resolved without submission of evidence.
Using the contract itself as the sole criterion, the
termination should perforce be characterized as
simply the exercise of a right freely stipulated
upon by the parties.
In determining the existence of employer-
employee relationship, the following elements
are generally considered, namely: (1) the
selection and engagement of the employee; (2)
the payment of wages: (3) the power of
dismissal: and (4) the power to control the
employees' conduct — although the latter is flip,
most important element (Viaña Al-Lagadan and
Piga 99 Phil, 406, 411, Citing 35 Am. Jur. 445).
On the other hand, an independent contractor is
"one who exercise independent employment
and contracts to do a piece of work according to
his own methods and without being subject to
control of his employer except as to the result of
the work" (Mansal vs. P.P. Gocheco Lumber Co.,
96 Phil. 941).
Among the factors to be considered are whether
the contractor is carrying on an independent
business; whether the work is part of the
employer's general business; the nature and
extent of the work; the skill required; the term
and duration of the relationship; the right to
assign the performance of the work to another;
the power to terminate the relationship; the
existence of a contract for the performance of a
specified piece of work; the control and
supervision of the work; the employer's powers
and duties with respect to the hiring, firing, and
payment of the contractor's servants; the control
of the premises; the duty to supply the premises,
tools, appliances, material and labor; and the
mode, manner, and terms of payment. (56 C.J.S.
46).
Those tests to determine the existence of an
employer-employee relationship or whether the
person doing a particular work for another is an
independent contractor cannot be satisfactorily
applied in the instant case. It should be obvious
by now that the instant case is a penumbral, sui
generis case lying on the shadowy borderline
that separates an employee from an
independent contractor.
In determining whether the relationship is that
of employer and employee or whether one is an
independent contractor, "each case must be
determined on its own facts and all the features
of the relationship are to be considered" (56
C.J.S. 45). We are convinced that on the basis of
the peddling contract, no employer-employee
relationship was created. (At pp. 161-163,
emphasis supplied.)
We hold that conformably to Mafinco, the peddling contract
involved in the instant petition makes the peddler an independent
contractor. Additionally, We have taken into account the fact that
the individual petitioners before the SSC who were the principal
beneficiaries of the petition have become indifferent to their cause.
WHEREFORE, the judgment of the Court of Appeals is hereby
affirmed. Costs against the petitioner.
SO ORDERED.
Barredo (Chairman), Aquino, Concepcion, Jr., De Castro, Ericta and
Escolin, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-46058 December 14, 1987
SOCIAL SECURITY SYSTEM, petitioner,
vs.
COURT OF APPEALS and the QUALITY TOBACCO
CORPORATION, respondents.

PARAS, J.:
This is a petition for review on certiorari of the decision of the Court
of Appeals * dated March 16, 1977 in CA-G.R. No. 05087-SP entitled
Romeo Carreon, petitioner-appellee vs. Quality Tobacco
Corporation, respondent-appellant and Social Security System,
intervenor-appellee, reversing the Resolution dated January 21,
1976 of the Social Security System and dismissing the petition filed
by Romeo Carreon.
The facts are found by the Court of Appeals are as follows:
QTC, formerly U.S. Tobacco Corporation, is a firm
engaged in the manufacture and sale of
cigarettes. On August 12, 1972, QTC, as VENDOR,
entered into an agreement with CARREON, as
VENDEE, the salient provisions of which are as
follows:
2. The VENDEE shall purchase one or more
brands of cigarettes of the VENDOR on cash
basis only, subject to the discretion of the
VENDOR as to the brand and quantity thereof;
xxx xxx xxx
3. The VENDEE shall sell the cigarettes herein
mentioned only within Quezon Province and or
such other places as may be designated and or
limited thereafter by the VENDOR and only to
residents of, or retailers or jobbers doing, and
having their place of business in, said assigned
territory, strictly, at such prices set by the
VENDOR from time to time for the
aforementioned respective brands of cigarettes
in the sale thereof by the VENDEE in said
assigned territory. The VENDEE is fully aware
that a violation of this particular paragraph will
cause grave and serious consequences to the
VENDOR and that he shall be liable for all
damages caused by said violation.
4. The VENDEE shall be solely responsible for the
cigarettes delivered to him by the VENDOR as
well as for the aforementioned proceeds from
the sale thereof, and any loss thereof due to any
cause shall be solely for his own risk and
account.
xxx xxx xxx
6. The VENDOR may loan a delivery truck or
trucks to the VENDEE, which truck or trucks shall
be used by the VENDEE exclusively in connection
with this contract and at all time maintained by
the said VENDEE in good condition; and for as
long as the VENDEE may be allowed the use of
the VENDOR's truck or trucks, the VENDEE shall
pay all the expenses for gasoline, oil, repairs,
operating costs, maintenance, tires, spare parts,
etc., but the VENDOR may at its discretion
assume the payment of major repair.
xxx xxx xxx
9. This contract, may, however, be terminated
upon one (1) week's notice of either party at any
time.
10. In the event a court litigation should be
necessary to recover from the VENDEE any
amount due to the VENDOR, the VENDEE shall
pay to the VENDOR all such damages that the
VENDOR may suffer arising from the violation by
the VENDEE of any of the terms and conditions
of this contract and/or implementation and/or
instructions mentioned in Paragraph 7 hereof
plus the cost of suit and attorney's fees of at
least 20% of the amount sought to be recovered,
which in no case shall be less than Five Hundred
Pesos (P500.00) for the purposes of this
paragraph, venue of actions is hereby agreed to
be in the City of Manila and the VENDEE hereby
waives any other proper venue in any action
which may be brought by or against him in
connection with this contract or in connection
with other actions which may be brought
incident thereto.
The contract with CARREON was terminated by
QTC on December 18,1972.
On April 29, 1974, CARREON filed a petition with
the Social Security Commission alleging that he
was an employee of QTC, and asking that QTC be
ordered to report him for coverage under the
Social Security Law QTC answered claiming that
CARREON has not been an employee but was an
'Independent businessman.' The Social Security
System intervened and, taking the side of
CARREON, also asked that QTC be ordered to pay
Social Security contributions in respect of
CARREON. On January 21, 1976, the Social
Security Commission resolved CARREON's
petition, finding him to be an employee of QTC.
The rulings in U.S. Tobacco Corporation vs.
Benjamin Serna, et al., CA-G.R. No. 32041,
September 5, 1967, and The Shell Co. Phil. Ltd.
vs. Fireman's Insurance Co. of Newark, et al., 100
Phil. 757, were inter alia, relied upon.
Cognizant of the striking similarities obtaining in the case before it
and the Mafinco vs. Ople case decided by this Court on March 25,
1976, and relying solely on the doctrine laid down in said case, the
Court of Appeals issued the herein assailed decision dated March 16,
1977, the dispositive part of which reads:
WHEREFORE, the Resolution of the Social
Security Commission of January 21, 1976 in its
Case No. 2543 is hereby REVERSED and the
petition filed in said case by Romeo Carreon is
dismissed.
In a Motion for Reconsideration dated March 25, 1977, the Social
Security System sought the reconsideration of the aforequoted
decision (Rollo, pp. 43-49). However, finding no merit in said motion,
the Court of Appeals denied the same in its resolution dated April
14, 1977 (Rollo, pp. 50-51).
Hence this petition.
The First Division of this Court without giving due course to said
petition resolved to require the respondents to comment (Rollo, p.
64). Private respondent filed its Comment on August 9, 1977 (Rollo,
p. 69).
Thereafter, this Court resolved to give due course to the petition and
required the parties to submit simultaneous memoranda (Rollo, p.
74). On September 23, 1977, private respondent and petitioner filed
their respective memoranda (Rollo, pp. 80-118).
The issue raised by the petitioner before this Court is the very same
issue resolved by the Court of Appeals-that is, whether or not
Romeo Carreon is an employee or an independent contractor under
the contract aforequoted. Corollary thereto the question as to
whether or not the Mafinco case is applicable to this case was raised
by the parties.
The Court took cognizance of the fact that the question of whether
or not an employer-employee relationship exists in a certain
situation continues to bedevil the courts. Some businessmen with
the aid of lawyers have tried to avoid the bringing about of an
employer-employee relationship in some of their enterprises
because that juridical relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage,
termination pay and unionism.
For this reason, in order to put the issue at rest, this Court has laid
down in a formidable line of decisions the elements to be generally
considered in determining the existence of an employer-employee
relationship, as follows: a) selection and engagement of the
employee; b) the payment of wages; c) the power of dismissal; and
d) the employer's power to control the employee with respect to the
means and method by-which the work is to be accomplished. The
last which is the so-called "control test" is the most important
element (Brotherhood Labor Unity Movement of the Phils. vs.
Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs. International Labor and
Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading
Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs. Court
of Appeals, 37 SCRA 579 [1971]).
Applying the control test, that is, whether the employer controls or
has reserved the right to control the employee not only as to the
result of the work to be done but also as to the means and method
by which the same is to be accomplished, the question of whether or
not there is an employer-employee relationship for purposes of the
Social Security Act has been settled in this jurisdiction in the case of
Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other
words, where the element of control is absent; where a person who
works for another does so more or less at his own pleasure and is
not subject to definite hours or conditions of work, and in turn is
compensated according to the result of his effort, the relationship of
employer-employee does not exist. (SSS vs. Court of Appeals, 30
SCRA 210 [1969]).
It is the contention of petitioner that the Mafinco case which has
been the sole basis of the Court of Appeals' finding that Romeo
Carreon is an independent contractor is not applicable in the instant
petition, there being no substantial parallelism between said
contract and the contract of purchase and sale in this case. It
pointed out that there are in the Mafinco contract provisions which
by express implication point to the status of the peddler as an
independent contractor such as: a) that should the peddler employ a
driver or helpers, the latter shall be his employee/s and his/their
compensation shall be for the peddler's account; that the peddler
shall comply with the provisions of the Social Security Act and all
applicable laws (par. 2); b) peddler is responsible for damage to
property, death or injuries to persons covered by his own acts or
omissions or those of his driver or helpers (par. 3); c) peddler is
required to secure at his own expense all necessary licenses and
permits and to bear all expenses which may be incurred in the sale
of soft drinks (par. 5); d) the peddler is to furnish a performance
bond of P l,000.00 in favor of Mafinco to assure performance by the
peddler of his obligation to his employee under the Social Security
Act (par. 11), which provisions are notably absent in the contract in
the case at bar (Rollo, pp. 103-104).
It further contends that the Court of Appeals in an effort to justify its
holding picked out only paragraphs 1, 2, 4, 6 and 9 of the Mafinco
contract and thereafter concluded that the two contracts are similar.
Private respondent on the other hand, avers that the Mafinco
contract is applicable to the case at bar. The two contracts need not
embody almost the same provisions in order that they may be
considered similar. It is enough that the aspect of similarity arising
from the terms and condition be considered because of their
relevance to the issue, is relatively much stronger than the
dissimilarity.
Private respondent likewise maintains that the decision was
correctly concluded not only on the similarity of the two contracts
but also on factual evidence adduced at the trial and since
respondent Court has already examined the facts and passed
judgment on the basis thereof, its decision is no longer subject to
review. Stated otherwise, the Court of Appeals "looked behind the
contract" but found the evidence insufficient to justify a finding that
the terms of the contract were not followed. That the evidence for
Carreon and SSS failed to pierce" the contract (Rollo, p. 83).
Private respondent's contention is untenable.
The distinction between a question of law and a question of fact is
explained in our jurisprudence in Ramos vs. Pepsi Cola Bottling Co.
(19 SCRA 289, 292 [1967]), to wit:
For a question to be one of law it must involve
no examination of the probative value of the
evidence presented by the litigants or any of
them and the distinction is well-known. There is
a question of law in a given case when the doubt
or difference arises as to what the law is in a
certain state of facts; there is a question of fact
when the doubt arises as to the truth or the
falsehood of alleged facts.
cited in G.R. No. L-39767, Lorenzo Hernandez vs. The Court of
Appeals, March 31, 1987.
In the case at bar, it is evident that the basic contention is what the
law is in the given state of facts. More than that, the well-settled
rule that the finding of facts of the Court of Appeals is conclusive on
the parties, admits of exceptions among which are: (1) when the
findings of fact of the Court of Appeals are contrary to those of the
trial court and (2) when the findings of fact of the Court of Appeals
are premised on the supposed absence of evidence and are
contradicted by evidence on record (Sacay vs. Sandiganbayan, 142
SCRA 609 [1986]; Manlapaz vs. Court of Appeals, 147 SCRA 239
[1987]).
In this case, the Court of Appeals ruled that there is not enough
evidence to show that the contract between Carreon and QTC was
not reflective of their agreement to warrant reformation. As earlier
pointed out, the Court of Appeals did not consider the entirety of
the contract but only portions thereof which led to the conclusion
that Carreon was an independent contractor.
Thus, after a study of the records and applying the "control tests,"
there appears to be no question that the existence of an employer-
employee relationship between Romeo Carreon and QTC has been
established, based on the following "undisputed" facts as pointed
out by the Solicitor General, to wit: (a) QTC assigned a definite sales
territory for Romeo Carreon; (b) QTC provided Romeo Carreon with
a delivery truck for the exclusive use of the latter in his sales
activities; (c) QTC dictated the price of the cigarettes sold by Romeo
Carreon; (d) QTC prescribed what brand of cigarettes Romeo
Carreon could sell; (e) QTC determined the persons to whom Romeo
Carreon could sell, (f) QTC issued circulars and memoranda relative
to Romeo Carreon's sales activities; (g) QTC required Romeo Carreon
to submit to it daily, weekly and monthly reports; (h) QTC grounded
Romeo Carreon for six months in 1966; (i) Romeo Carreon was
supervised by sales coordinators of QTC; (j) Romeo Carreon was
subject to payment of damages and loss even of accrued rights for
any violation of instructions made by QTC in relation to his sales
activities; and (k) Romeo Carreon was paid an allowance by QTC. All
these indicate control and supervision over Carreon's work.
Moreover, it is elementary that findings of administrative agencies
are generally accorded not only. respect but also of finality (Rosario
Bros, Inc. vs. Ople, 131 SCRA 72 [1984]).
PREMISES CONSIDERED, the decision of the Court of Appeals dated
March 16, 1987 and its resolution of April 14, 1977 are hereby
REVERSED and SET ASIDE, and the resolution of the Social Security
Commission dated January 21,1976 is AFFIRMED and REINSTATED.
SO ORDERED.
Teehankee, C.J., Narvasa Cruz and Gancayco, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN
LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.
NARVASA, C.J.:
The question before the Court here is whether or not persons
rendering caddying services for members of golf clubs and their
guests in said clubs' courses or premises are the employees of such
clubs and therefore within the compulsory coverage of the Social
Security System (SSS).
That question appears to have been involved, either directly or
peripherally, in three separate proceedings, all initiated by or on
behalf of herein private respondent and his fellow caddies. That
which gave rise to the present petition for review was originally filed
with the Social Security Commission (SSC) via petition of seventeen
(17) persons who styled themselves "Caddies of Manila Golf and
Country Club-PTCCEA" for coverage and availment of benefits under
the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical,
Clerical, Commercial Employees Association," with which the
petitioners claimed to be affiliated. The petition, docketed as SSC
Case No. 5443, alleged in essence that although the petitioners were
employees of the Manila Golf and Country Club, a domestic
corporation, the latter had not registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same
question were filed or were pending; these were:
(1) a certification election case filed with the
Labor Relations Division of the Ministry of Labor
by the PTCCEA on behalf of the same caddies of
the Manila Golf and Country Club, the case being
titled "Philippine Technical, Clerical, Commercial
Association vs. Manila Golf and Country Club"
and docketed as Case No. R4-LRDX-M-10-504-78;
it appears to have been resolved in favor of the
petitioners therein by Med-Arbiter Orlando S.
Rojo who was thereafter upheld by Director
Carmelo S. Noriel, denying the Club's motion for
reconsideration; 1
(2) a compulsory arbitration case initiated before
the Arbitration Branch of the Ministry of Labor
by the same labor organization, titled "Philippine
Technical, Clerical, Commercial Employees
Association (PTCCEA), Fermin Lamar and
Raymundo Jomok vs. Manila Golf and Country
Club, Inc., Miguel Celdran, Henry Lim and
Geronimo Alejo;" it was dismissed for lack of
merit by Labor Arbiter Cornelio T. Linsangan, a
decision later affirmed on appeal by the National
Labor Relations Commission on the ground that
there was no employer-employee relationship
 between the petitioning caddies and the
respondent Club. 2
In the case before the SSC, the respondent Club filed answer praying
for the dismissal of the petition, alleging in substance that the
petitioners, caddies by occupation, were allowed into the Club
premises to render services as such to the individual members and
guests playing the Club's golf course and who themselves paid for
such services; that as such caddies, the petitioners were not subject
to the direction and control of the Club as regards the manner in
which they performed their work; and hence, they were not the
Club's employees.
Subsequently, all but two of the seventeen petitioners of their own
accord withdrew their claim for social security coverage, avowedly
coming to realize that indeed there was no employment relationship
between them and the Club. The case continued, and was eventually
adjudicated by the SSC after protracted proceedings only as regards
the two holdouts, Fermin Llamar and Raymundo Jomok. The
Commission dismissed the petition for lack of merit, 3ruling:
. . . that the caddy's fees were paid by the golf
players themselves and not by respondent club.
For instance, petitioner Raymundo Jomok
averred that for their services as caddies a
caddy's Claim Stub (Exh. "1-A") is issued by a
player who will in turn hand over to
management the other portion of the stub
known as Caddy Ticket (Exh. "1") so that by this
arrangement management will know how much
a caddy will be paid (TSN, p. 80, July 23, 1980).
Likewise, petitioner Fermin Llamar admitted that
caddy works on his own in accordance with the
rules and regulations (TSN, p. 24, February 26,
1980) but petitioner Jomok could not state any
policy of respondent that directs the manner of
caddying (TSN, pp. 76-77, July 23, 1980). While
respondent club promulgates rules and
regulations on the assignment, deportment and
conduct of caddies (Exh. "C") the same are
designed to impose personal discipline among
the caddies but not to direct or conduct their
actual work. In fact, a golf player is at liberty to
choose a caddy of his preference regardless of
the respondent club's group rotation system and
has the discretion on whether or not to pay a
caddy. As testified to by petitioner Llamar that
their income depends on the number of players
engaging their services and liberality of the latter
(TSN, pp. 10-11, Feb. 26, 1980). This lends
credence to respondent's assertion that the
caddies are never their employees in the
absence of two elements, namely, (1) payment
of wages and (2) control or supervision over
them. In this connection, our Supreme Court
ruled that in the determination of the existence
of an employer-employee relationship, the
"control test" shall be considered decisive
(Philippine Manufacturing Co. vs. Geronimo and
Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco
Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al.
vs. The Manila Hotel Co., 101 Phil. 358, LVN
Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . .
(reference being made also to Investment
Planning Corporation Phil. vs. SSS 21 SCRA 925).
Records show the respondent club had reported
for SS coverage Graciano Awit and Daniel
Quijano, as bat unloader and helper,
respectively, including their ground men, house
and administrative personnel, a situation
indicative of the latter's concern with the rights
and welfare of its employees under the SS law,
as amended. The unrebutted testimony of Col.
Generoso A. Alejo (Ret.) that the ID cards issued
to the caddies merely intended to identify the
holders as accredited caddies of the club and
privilege(d) to ply their trade or occupation
within its premises which could be withdrawn
anytime for loss of confidence. This gives us a
reasonable ground to state that the defense
posture of respondent that petitioners were
never its employees is well taken.4
From this Resolution appeal was taken to the Intermediate appellate
Court by the union representing Llamar and Jomok. After the appeal
was docketed 5 and some months before decision thereon was
reached and promulgated, Raymundo Jomok's appeal was dismissed
at his instance, leaving Fermin Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await
judgment by the Labor Relations Division of
National Capital Regional Office in the
certification election case (R-4-LRD-M-10-504-
78) supra, on the precise issue of the existence
of employer-employee relationship between the
respondent club and the appellants, it being
contended that said issue was "a function of the
proper labor office"; and
(2) adjudicating that self same issue a manner
contrary to the ruling of the Director of the
Bureau of Labor Relations, which "has not only
become final but (has been) executed or
(become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first
assigned error, dismissing it as of the least importance. Nor, it would
appear, did it find any greater merit in the second alleged error.
Although said Court reserved the appealed SSC decision and
declared Fermin Llamar an employee of the Manila Gold and
Country Club, ordering that he be reported as such for social security
coverage and paid any corresponding benefits, 8 it conspicuously
ignored the issue of res adjudicata raised in said second assignment.
Instead, it drew basis for the reversal from this Court's ruling
in Investment Planning Corporation of the Philippines vs. Social
Security System, supra 9 and declared that upon the evidence, the
questioned employer-employee relationship between the Club and
Fermin Llamar passed the so-called "control test," establishment in
the case — i.e., "whether the employer controls or has reserved the
right to control the employee not only as to the result of the work to
be done but also as to the means and methods by which the same is
to be accomplished," — the Club's control over the caddies
encompassing:
(a) the promulgation of no less than twenty-four
(24) rules and regulations just about every
aspect of the conduct that the caddy must
observe, or avoid, when serving as such, any
violation of any which could subject him to
disciplinary action, which may include
suspending or cutting off his access to the club
premises;
(b) the devising and enforcement of a group
rotation system whereby a caddy is assigned a
number which designates his turn to serve a
player;
(c) the club's "suggesting" the rate of fees
payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact
that the caddies were paid by the players, not by the Club, that they
observed no definite working hours and earned no fixed income. It
quoted with approval from an American decision 10 to the effect
that: "whether the club paid the caddies and afterward collected in
the first instance, the caddies were still employees of the club." This,
no matter that the case which produced this ruling had a slightly
different factual cast, apparently having involved a claim for
workmen's compensation made by a caddy who, about to leave the
premises of the club where he worked, was hit and injured by an
automobile then negotiating the club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare
mention thereof, as already pointed out, is now among the
mainways of the private respondent's defenses to the petition for
review. Considered in the perspective of the incidents just
recounted, it illustrates as well as anything can, why the practice of
forum-shopping justly merits censure and punitive sanction. Because
the same question of employer-employee relationship has been
dragged into three different fora, willy-nilly and in quick succession,
it has birthed controversy as to which of the resulting adjudications
must now be recognized as decisive. On the one hand, there is the
certification case [R4-LRDX-M-10-504-78), where the decision of the
Med-Arbiter found for the existence of employer-employee
relationship between the parties, was affirmed by Director Carmelo
S. Noriel, who ordered a certification election held, a disposition
never thereafter appealed according to the private respondent; on
the other, the compulsory arbitration case (NCR Case No. AB-4-
1771-79), instituted by or for the same respondent at about the
same time, which was dismissed for lack of merit by the Labor
Arbiter, which was afterwards affirmed by the NLRC itself on the
ground that there existed no such relationship between the Club and
the private respondent. And, as if matters were not already
complicated enough, the same respondent, with the support and
assistance of the PTCCEA, saw fit, also contemporaneously, to
initiate still a third proceeding for compulsory social security
coverage with the Social Security Commission (SSC Case No. 5443),
with the result already mentioned.
Before this Court, the petitioner Club now contends that the
decision of the Med-Arbiter in the certification case had never
become final, being in fact the subject of three pending and
unresolved motions for reconsideration, as well as of a later motion
for early resolution. 11 Unfortunately, none of these motions is
incorporated or reproduced in the record before the Court. And, for
his part, the private respondent contends, not only that said
decision had been appealed to and been affirmed by the Director of
the BLR, but that a certification election had in fact been held, which
resulted in the PTCCEA being recognized as the sole bargaining agent
of the caddies of the Manila Golf and Country Club with respect to
wages, hours of work, terms of employment, etc. 12 Whatever the
truth about these opposing contentions, which the record before
the Court does not adequately disclose, the more controlling
consideration would seem to be that, however, final it may become,
the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all
further dispute between the parties as to the existence, or non-
existence, of employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by
prior judgment, to apply, the following essential requisites must
concur: (1) there must be a final judgment or order; (2) said
judgment or order must be on the merits; (3) the court rendering
the same must have jurisdiction over the subject matter and the
parties; and (4) there must be between the two cases identity of
parties, identity of subject matter and identity of cause of action. 13
Clearly implicit in these requisites is that the action or proceedings in
which is issued the "prior Judgment" that would operate in bar of a
subsequent action between the same parties for the same cause,
be adversarial, or contentious, "one having opposing parties; (is)
contested, as distinguished from an ex parte hearing or proceeding. .
. . of which the party seeking relief has given legal notice to the
other party and afforded the latter an opportunity to contest
it" 14 and a certification case is not such a proceeding, as this Court
already ruled:
A certification proceedings is not a "litigation" in
the sense in which the term is commonly
understood, but mere investigation of a non-
adversary, fact-finding character, in which the
investigating agency plays the part of a
disinterested investigator seeking merely to
ascertain the desires of the employees as to the
matter of their representation. The court enjoys
a wide discretion in determining the procedure
necessary to insure the fair and free choice of
bargaining representatives by the employees.15
Indeed, if any ruling or judgment can be said to operate as res
adjudicata on the contested issue of employer-employee
relationship between present petitioner and the private respondent,
it would logically be that rendered in the compulsory arbitration
case (NCR Case No. AB-4-771-79, supra), petitioner having asserted,
without dispute from the private respondent, that said issue was
there squarely raised and litigated, resulting in a ruling of the
Arbitration Branch (of the same Ministry of Labor) that such
relationship did not exist, and which ruling was thereafter affirmed
by the National Labor Relations Commission in an appeal taken by
said respondent. 16
In any case, this Court is not inclined to allow private respondent the
benefit of any doubt as to which of the conflicting ruling just
adverted to should be accorded primacy, given the fact that it was
he who actively sought them simultaneously, as it were, from
separate fora, and even if the graver sanctions more lately imposed
by the Court for forum-shopping may not be applied to him rotation of caddies is not absolute because a
retroactively. player is at liberty to choose a caddy of his
preference regardless of the caddy's order in the
Accordingly, the IAC is not to be faulted for ignoring private rotation.
respondent's invocation of res adjudicata; on contrary, it acted
correctly in doing so. It can happen that a caddy who has rendered
services to a player on one day may still find
Said Court’s holding that upon the facts, there exists (or existed) a sufficient time to work elsewhere. Under such
relationship of employer and employee between petitioner and circumstances, he may then leave the premises
private respondent is, however, another matter. The Court does not of petitioner and go to such other place of work
agree that said facts necessarily or logically point to such a that he wishes (sic). Or a caddy who is on call for
relationship, and to the exclusion of any form of arrangements, a particular day may deliberately absent himself
other than of employment, that would make the respondent's if he has more profitable caddying, or another,
services available to the members and guest of the petitioner. engagement in some other place. These are
things beyond petitioner's control and for which
it imposes no direct sanctions on the caddies. . .
As long as it is, the list made in the appealed decision detailing the
. 18
various matters of conduct, dress, language, etc. covered by the
petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as to WHEREFORE, the Decision of the Intermediate Appellant Court,
leave them little or no freedom of choice whatsoever in the manner review of which is sought, is reversed and set aside, it being hereby
of carrying out their services. In the very nature of things, caddies declared that the private respondent, Fermin Llamar, is not an
must submit to some supervision of their conduct while enjoying the employee of petitioner Manila Golf and Country Club and that
privilege of pursuing their occupation within the premises and petitioner is under no obligation to report him for compulsory
grounds of whatever club they do their work in. For all that is made coverage to the Social Security System. No pronouncement as to
to appear, they work for the club to which they attach themselves costs.
on sufference but, on the other hand, also without having to
observe any working hours, free to leave anytime they please, to SO ORDERED.
stay away for as long they like. It is not pretended that if found
remiss in the observance of said rules, any discipline may be meted THIRD DIVISION
them beyond barring them from the premises which, it may be
supposed, the Club may do in any case even absent any breach of
the rules, and without violating any right to work on their part. All REPUBLIC OF THE G.R. No. 172101
these considerations clash frontally with the concept of PHILIPPINES, represented Present:
employment. by the SOCIAL SECURITY
COMMISSION and SOCIAL YNARES-
The IAC would point to the fact that the Club suggests the rate of SECURITY SYSTEM, SANTIAGO, J.,Chairperso
fees payable by the players to the caddies as still another indication Petitioners, n,
of the latter's status as employees. It seems to the Court, however, AUSTRIA-MARTINEZ,
that the intendment of such fact is to the contrary, showing that the AZCUNA,
Club has not the measure of control over the incidents of the CHICO-NAZARIO, and
caddies' work and compensation that an employer would possess. - versus - REYES, JJ.

The Court agrees with petitioner that the group rotation system so-
called, is less a measure of employer control than an assurance that Promulgated:
the work is fairly distributed, a caddy who is absent when his turn ASIAPRO COOPERATIVE,
number is called simply losing his turn to serve and being assigned Respondent. November 23, 2007
instead the last number for the day. 17 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

By and large, there appears nothing in the record to refute the

petitioner's claim that:
DECISION

(Petitioner) has no means of compelling the

presence of a caddy. A caddy is not required to
CHICO-NAZARIO, J.:
exercise his occupation in the premises of
petitioner. He may work with any other golf club
or he may seek employment a caddy or
otherwise with any entity or individual without Before this Court is a Petition for Review
restriction by petitioner. . . .
on Certiorari under Rule 45 of the 1997 Revised Rules of Civil
. . . In the final analysis, petitioner has no was of Procedure seeking to annul and set aside the Decision[1] and
compelling the presence of the caddies as they
are not required to render a definite number of Resolution[2] of the Court of Appeals in CA-G.R. SP No. 87236, dated
hours of work on a single day. Even the group
5 January 2006 and 20 March 2006, respectively, which annulled and who were assigned to Stanfilco requested the services of the latter

set aside the Orders of the Social Security Commission (SSC) in SSC to register them with petitioner SSS as self-employed and to remit

Case No. 6-15507-03, dated 17 February 2004[3] and 16 September their contributions as such. Also, to comply with Section 19-A of

2004,[4] respectively, thereby dismissing the petition-complaint Republic Act No. 1161, as amended by Republic Act No. 8282, the

dated 12 June 2003 filed by herein petitioner Social Security System SSS contributions of the said owners-members were equal to the

(SSS) against herein respondent. share of both the employer and the employee.

Herein petitioner Republic of the Philippines is represented by the

SSC, a quasi-judicial body authorized by law to resolve disputes On 26 September 2002, however, petitioner SSS through

arising under Republic Act No. 1161, as amended by Republic Act its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a

No. 8282.[5] Petitioner SSS is a government corporation created by letter[11] to the respondent cooperative, addressed to its Chief

virtue of Republic Act No. 1161, as amended. On the other hand, Executive Officer (CEO) and General Manager Leo G. Parma,

herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose informing the latter that based on the Service Contracts it executed

cooperative created pursuant to Republic Act No. 6938[6] and duly with Stanfilco, respondent cooperative is actually a manpower
registered with the Cooperative Development Authority (CDA) on 23 contractor supplying employees to Stanfilco and for that reason, it is

November 1999 with Registration Certificate No. 0-623-2460.[7] an employer of its owners-members working with Stanfilco.Thus,

respondent cooperative should register itself with petitioner SSS as

The antecedents of this case are as follows: an employer and make the corresponding report and remittance of

premium contributions in accordance with the Social Security Law of

Respondent Asiapro, as a cooperative, is composed of 1997. On 9 October 2002,[12] respondent cooperative, through its

owners-members. Under its by-laws, owners-members are of two counsel, sent a reply to petitioner SSSs letter asserting that it is not

categories, to wit: (1) regular member, who is entitled to all the an employer because its owners-members are the cooperative itself;

rights and privileges of membership; and (2) associate member, who hence, it cannot be its own employer. Again, on 21 October

has no right to vote and be voted upon and shall be entitled only to 2002,[13] petitioner SSS sent a letter to respondent cooperative

such rights and privileges provided in its by-laws.[8] Its primary ordering the latter to register as an employer and report its owners-

objectives are to provide savings and credit facilities and to develop members as employees for compulsory coverage with the petitioner

other livelihood services for its owners-members. In the discharge of SSS. Respondent cooperative continuously ignored the demand of

the aforesaid primary objectives, respondent cooperative entered petitioner SSS.

into several Service Contracts[9] with Stanfilco - a division of DOLE

Philippines, Inc. and a company based in Bukidnon. The owners- Accordingly, petitioner SSS, on 12 June 2003, filed a

members do not receive compensation or wages from the Petition[14] before petitioner SSC against the respondent cooperative

respondent cooperative. Instead, they receive a share in the service and Stanfilco praying that the respondent cooperative or, in the

surplus[10] which the respondent cooperative earns from different alternative, Stanfilco be directed to register as an employer and to

areas of trade it engages in, such as the income derived from the report respondent cooperatives owners-members as covered

said Service Contracts with Stanfilco. The owners-members get their employees under the compulsory coverage of SSS and to remit the

income from the service surplus generated by the quality and necessary contributions in accordance with the Social Security Law

amount of services they rendered, which is determined by the Board of 1997. The same was docketed as SSC Case No. 6-15507-
of Directors of the respondent cooperative. 03.Respondent cooperative filed its Answer with Motion to Dismiss

alleging that no employer-employee relationship exists between it

In order to enjoy the benefits under the Social Security and its owners-members, thus, petitioner SSC has no jurisdiction

Law of 1997, the owners-members of the respondent cooperative,

 jurisdiction in cases
over the respondent cooperative. Stanfilco, on the other hand, filed where there is no
an Answer with Cross-claim against the respondent cooperative. dispute as to the
existence of an
employer-
employee
On 17 February 2004, petitioner SSC issued an Order
relationship.
denying the Motion to Dismiss filed by the respondent C. Contrary to the
holding of the
cooperative. The respondent cooperative moved for the [petitioner] SSC,
the legal issue of
reconsideration of the said Order, but it was likewise denied in
employer-
another Order issued by the SSC dated 16 September 2004. employee
relationship raised
in [respondents]
Intending to appeal the above Orders, respondent Motion to Dismiss
can be preliminarily
cooperative filed a Motion for Extension of Time to File a Petition for resolved through
summary hearings
Review before the Court of Appeals. Subsequently, respondent prior to the hearing
cooperative filed a Manifestation stating that it was no longer filing a on the
merits. However,
Petition for Review. In its place, respondent cooperative filed a any inquiry beyond
a preliminary
Petition for Certiorari before the Court of Appeals, docketed as CA-
determination, as
G.R. SP No. 87236, with the following assignment of errors: what [petitioner
SSC] wants to
accomplish, would
I. The Orders dated 17 February be to encroach on
2004 and 16 September 2004 of the jurisdiction of
[herein petitioner] SSC were issued the National Labor
with grave abuse of discretion Relations
amounting to a (sic) lack or excess of Commission
jurisdiction in that: [NLRC], which is
the more
A. [Petitioner] SSC competent body
arbitrarily clothed with power
proceeded with the to resolve issues
case as if it has relating to the
jurisdiction over existence of an
the petition a quo, employment
considering that it relationship.
failed to first
resolve the issue of II. At any rate, the
the existence of an [petitioner] SSC has no
employer- jurisdiction to take
employee cognizance of the petition a
relationship quo.
between
[respondent] A. [Respondent] is
cooperative and its not an employer
owners-members. within the
B. While indeed, the contemplation of
[petitioner] SSC has the Labor Law but
jurisdiction over all is a multi-purpose
disputes arising cooperative
under the SSS Law created pursuant
with respect to to Republic Act No.
coverage, benefits, 6938 and
contributions, and composed of
related matters, it owners-members,
is respectfully not employees.
submitted that B. The rights and
[petitioner] SSC obligations of the
may only assume owners-members
 of [respondent]
cooperative are denying respondents Motion to Dismiss. The said issue is supported
derived from their by the following arguments:
Membership
Agreements, the
Cooperatives By- I. The [petitioner SSC] has
Laws, and Republic jurisdiction over the petition-
Act No. 6938, and complaint filed before it by the
not from any [petitioner SSS] under R.A. No. 8282.
contract of
employment or II. Respondent [cooperative] is
from the Labor estopped from questioning the
Laws. Moreover, jurisdiction of petitioner SSC after
said owners- invoking its jurisdiction by filing an
members enjoy [A]nswer with [M]otion to [D]ismiss
rights that are not before it.
consistent with
being mere III. The [petitioner SSC] did not act
employees of a with grave abuse of discretion in
company, such as denying respondent [cooperatives]
the right to [M]otion to [D]ismiss.
participate and
vote in decision- IV. The existence of an employer-
making for the employee relationship is a question of
cooperative. fact where presentation of evidence is
C. As found by the necessary.
Bureau of Internal
Revenue [BIR], the V. There is an employer-employee
owners-members relationship between [respondent
of [respondent] cooperative] and its [owners-
cooperative are not members].
paid any
compensation
income.[15] (Empha
Petitioners claim that SSC has jurisdiction over the
sis supplied.)
petition-complaint filed before it by petitioner SSS as it involved an

issue of whether or not a worker is entitled to compulsory coverage

On 5 January 2006, the Court of Appeals rendered a
under the SSS Law. Petitioners avow that Section 5 of Republic Act
Decision granting the petition filed by the respondent
No. 1161, as amended by Republic Act No. 8282, expressly confers
cooperative. The decretal portion of the Decision reads:
upon petitioner SSC the power to settle disputes on compulsory

WHEREFORE, the petition is GRANTED. The coverage, benefits, contributions and penalties thereon or any other
assailed Orders dated [17 February 2004] and
matter related thereto. Likewise, Section 9 of the same law clearly
[16 September 2004], are ANNULLEDand SET
ASIDE and a new one is entered DISMISSING the provides that SSS coverage is compulsory upon all employees. Thus,
petition-complaint dated [12 June 2003] of
[herein petitioner] Social Security System.[16] when petitioner SSS filed a petition-complaint against the

Aggrieved by the aforesaid Decision, petitioner SSS moved respondent cooperative and Stanfilco before the petitioner SSC for

for a reconsideration, but it was denied by the appellate court in its the compulsory coverage of respondent cooperatives owners-

Resolution dated 20 March 2006. members as well as for collection of unpaid SSS contributions, it was

very obvious that the subject matter of the aforesaid petition-

Hence, this Petition. complaint was within the expertise and jurisdiction of the SSC.

In its Memorandum, petitioners raise the issue of whether Petitioners similarly assert that granting arguendo that

or not the Court of Appeals erred in not finding that the SSC has there is a prior need to determine the existence of an employer-

jurisdiction over the subject matter and it has a valid basis in employee relationship between the respondent cooperative and its
owners-members, said issue does not preclude petitioner SSC from relationship between the respondent cooperative and its owners-

taking cognizance of the aforesaid petition-complaint. Considering members. Respondent cooperative claims that the question of

that the principal relief sought in the said petition-complaint has to whether an employer-employee relationship exists between it and

be resolved by reference to the Social Security Law and not to the its owners-members is a legal and not a factual issue as the facts are

Labor Code or other labor relations statutes, therefore, jurisdiction undisputed and need only to be interpreted by the applicable law

over the same solely belongs to petitioner SSC. and jurisprudence.

Petitioners further claim that the denial of the respondent Lastly, respondent cooperative asserts that it cannot be

cooperatives Motion to Dismiss grounded on the alleged lack of considered estopped from assailing the jurisdiction of petitioner SSC

employer-employee relationship does not constitute grave abuse of simply because it filed an Answer with Motion to Dismiss, especially

discretion on the part of petitioner SSC because the latter has the where the issue of jurisdiction is raised at the very first instance and

authority and power to deny the same. Moreover, the existence of where the only relief being sought is the dismissal of the petition-

an employer-employee relationship is a question of fact where complaint for lack of jurisdiction.

presentation of evidence is necessary. Petitioners also maintain that

the respondent cooperative is already estopped from assailing the From the foregoing arguments of the parties, the issues

jurisdiction of the petitioner SSC because it has already filed its may be summarized into:

Answer before it, thus, respondent cooperative has already

I. Whether the petitioner SSC has
submitted itself to the jurisdiction of the petitioner SSC. jurisdiction over the petition-
complaint filed before it by petitioner
SSS against the respondent
Finally, petitioners contend that there is an employer- cooperative.
employee relationship between the respondent cooperative and its
II. Whether the respondent
owners-members. The respondent cooperative is the employer of its cooperative is estopped from assailing
the jurisdiction of petitioner SSC since
owners-members considering that it undertook to provide services it had already filed an Answer with
Motion to Dismiss before the said
to Stanfilco, the performance of which is under the full and sole
body.
control of the respondent cooperative.

Petitioner SSCs jurisdiction is clearly stated in Section 5 of

On the other hand, respondent cooperative alleges that its
Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS
owners-members own the cooperative, thus, no employer-employee
Revised Rules of Procedure.
relationship can arise between them. The persons of the employer

and the employee are merged in the owners-members

Section 5 of Republic Act No. 8282 provides:
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.
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.)

Respondent cooperative further avers that the Court of

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules
Appeals correctly ruled that petitioner SSC acted with grave abuse of
of Procedure states:
discretion when it assumed jurisdiction over the petition-complaint

without determining first if there was an employer-employee

 Section 1. Jurisdiction. Any dispute arising under
the Social Security Act with respect to coverage,
entitlement of benefits, collection and
settlement of contributions and penalties
thereon, or any other matter related thereto,
shall be cognizable by the Commission after the
SSS through its President, Manager or Officer-in-
charge of the
Department/Branch/Representative Office
concerned had first taken action thereon in
writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue
regarding the compulsory coverage of the SSS is well within the
exclusive domain of the petitioner SSC. It is important to note,
though, that the mandatory coverage under the SSS Law is premised
on the existence of an employer-employee 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 In determining the existence of an employer-employee

an employer-employee relationship without need of waiting for a relationship, the following elements are considered: (1) the selection

prior pronouncement or submitting the issue to the NLRC for prior and engagement of the workers; (2) the payment of wages by

determination. Since both the petitioner SSC and the NLRC are whatever means; (3) the power of dismissal; and (4) the power to

independent bodies and their jurisdiction are well-defined by the control the workers conduct, with the latter assuming primacy in the

separate statutes creating them, petitioner SSC has the authority to overall consideration.[25] The most important element is the

inquire into the relationship existing between the worker and the employers control of the employees conduct, not only as to the

person or entity to whom he renders service to determine if the result of the work to be done, but also as to the means and

employment, indeed, is one that is excepted by the Social Security methods to accomplish.[26] The power of control refers to the

Law of 1997 from compulsory coverage.[21] existence of the power and not necessarily to the actual exercise

thereof. It is not essential for the employer to actually supervise the

Even before the petitioner SSC could make a performance of duties of the employee; it is enough that the

determination of the existence of an employer-employee employer has the right to wield that power.[27] All the aforesaid
relationship, however, the respondent cooperative already elevated elements are present in this case.

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 First. It is expressly provided in the Service Contracts that it

thereof, the petitioner SSC became a party to the said Petition is the respondent cooperative which has the exclusive discretion in

for Certioraripursuant to Section 5(b)[22] of Republic Act No. the selection and engagement of the owners-members as well as

8282. The appellate court ruled in favor of the respondent its team leaders who will be assigned at Stanfilco.[28]Second. Wages

cooperative by declaring that the petitioner SSC has no jurisdiction are defined as remuneration or earnings, however designated,

over the petition-complaint filed before it because there was no capable of being expressed in terms of money, whether fixed or

employer-employee relationship between the respondent ascertained, on a time, task, piece or commission basis, or other

cooperative and its owners-members. Resultantly, the petitioners method of calculating the same, which is payable by an employer to

SSS and SSC, representing the Republic of the Philippines, filed a an employee under a written or unwritten contract of employment

Petition for Review before this Court. 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

Although as a rule, in the exercise of the Supreme Courts in the service surplus given by the respondent cooperative to its
power of review, the Court is not a trier of facts and the findings of owners-members were in reality wages, as the same were

fact of the Court of Appeals are conclusive and binding on the equivalent to an amount not lower than that prescribed by existing

Court,[23] said rule is not without exceptions. There are several labor laws, rules and regulations, including the wage order

recognized exceptions[24] in which factual issues may be resolved by applicable to the area and industry; or the same shall not be lower

this Court. One of these exceptions finds application in this present than the prevailing rates of wages.[30] It cannot be doubted then that

case which is, when the findings of fact are conflicting. There are, those stipends or shares in the service surplus are indeed wages,

indeed, conflicting findings espoused by the petitioner SSC and the because these are given to the owners-members as compensation in

appellate court relative to the existence of employer-employee rendering services to respondent cooperatives client,

relationship between the respondent cooperative and its owners- Stanfilco. Third. It is also stated in the above-mentioned Service
members, which necessitates a departure from the oft-repeated rule Contracts that it is the respondent cooperative which has the power

that factual issues may not be the subject of appeals to this Court. 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
respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the
respondent cooperative and Stanfilco expressly provide that there
shall be no employer-employee relationship between
respondent cooperative and its owners-members.[34] This Court,
however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-
employer relationship actually exists between the respondent
cooperative and its owners-members. The four elements in the four-
fold test for the existence of an employment relationship have been
complied with. The respondent cooperative must not be allowed to
deny its employment relationship with its owners-members by
invoking the questionable Service Contracts provision, when in
actuality, it does exist. The existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show
otherwise. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.[35]
It is settled that the contracting parties may establish such
stipulations, clauses, terms and conditions as they want, and their
agreement would have the force of law between
them. However, the agreed terms and conditions must not be
contrary to law, morals, customs, public policy or public
order.[36] The Service Contract provision in question must be struck
down for being contrary to law and public policy since it is
apparently being used by the respondent cooperative merely to
circumvent the compulsory coverage of its employees, who are also
its owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made
in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-
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.
the
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
the 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
 SO ORDERED.
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 MINITA V. CHICO-NAZARIO
Associate Justice
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 WE CONCUR:

and an employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent

cooperative had registered itself with the Cooperative Development

Authority, as evidenced by its Certificate of Registration No. 0-623-

2460.[40] In its by-laws,[41] its Board of Directors directs, controls, and

supervises the business and manages the property of the

respondent cooperative. Clearly then, the management of the affairs

of the respondent cooperative is vested in its Board of Directors and

not in its owners-members as a whole. Therefore, it is completely

logical that the respondent cooperative, as a juridical person

represented by its Board of Directors, can enter into an employment

with its owners-members.

In sum, having declared that there is an employer-

employee relationship between the respondent cooperative and its

owners-member, we conclude that the petitioner SSC has

jurisdiction over the petition-complaint filed before it by the

petitioner SSS. This being our conclusion, it is no longer necessary to

discuss the issue of whether the respondent 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 REVERSED and SET ASIDE. The

Orders of the petitioner SSC dated 17 February 2004 and 16

September 2004 are hereby REINSTATED. 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.