UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW Transpo

E2024 Professor Reyes

Baliwag Transit, Inc. v. CA
G.R. No. L-57493 – January 7, 1987
Second division | Paras, J.

Topic: Regulation of Public Transport as a Public Utility or Public Service; Kabit System

Parties:
PETITIONER RESPONDENTS
Baliwag Transit, Inc. (Baliwag) CA
Roman Martinez

Doctrine:
The Kabit System is an arrangement whereby a person who has been granted a certificate of convenience
allows another person who owns motor vehicles to operate under such franchise for a fee.

The determining factor is the possession of a franchise to operate, which negates the existence of the Kabit
System and not the issuance of one SS ID Number for both bus lines from which the existence of said system
was inferred.

FACTS OF THE CASE

Two passenger bus lines with similar buses and routs were being operated by firm names “Baliwag Transit”
and “Baliwag Transit, Inc.” (Baliwag). The former was owned by the late Tuazon who continued to operate
it until his death, while the latter was owned by Baliwag. Both bus lines operate under different grants of
franchises by the PSC but were issued only one ID Number by the SSS.

Martinez, who claimed to be an employee of both bus lines, filed a petition with the Social Security
Commission to compel Baliwag to remit to the SSS his SSS premium contributions. Martinez alleged that he
was employed by Baliwag as conductor and later as inspector with corresponding salary increases, and that
Baliwag deducted from his salaries the premium contributions, but what was remitted to the SSS was only for
a period shorter than his actual stay as an employee, which is at a much lesser amount.

Baliwag denied having employed Martinez, stating that he was employed by Tuazon who was operating
Baliwag Transit, which were separate and distinct from the buses operated by Baliwag, owned by De Tengco.
Both bus lines had different offices, maintenance and repair shops, garages, books of account, and managers.
The employment of Martinez lasted until Tuazon’s bankruptcy; it was Tuazon who deducted from Martinez
the amount corresponding to his SSS contributions for the years in question, but allegedly did not remit the
same. Baliwag also claimed that Martinez allowed 17 years to elapse and at a time when Tuazon was already
dead before filing the petition with the Social Security Commission.

The Social Security Commission found that there was no ER-EE relationship between Baliwag and Martinez
as would warrant further remittance of SSS contributions for and in behalf of Martinez.

On appeal, the CA found that Tuazon operated his buses under the Kabit System, reversed and set aside the
Social Security Commission resolution.

ISSUE/S & RATIO/S

W/N the issuance by the SSS of one SS-ID-Number to two bus lines necessarily indicates that one of
them operates his buses under the “Kabit System”—NO.
• The Kabit System is an arrangement whereby a person who has been granted a certificate of
convenience allows another person who owns motor vehicles to operate under such franchise for a fee.
o The determining factor is the possession of a franchise to operate, which negates the existence
of the Kabit System and not the issuance of one SS ID Number for both bus lines from which
the existence of said system was inferred.
 UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW Transpo
E2024 Professor Reyes
o ITC, it is undisputed that De Tengco and Tuazon were granted separate franchises to operate
public utility buses, both operating between Manila and Baliwag routes. However, the
franchises of Tuazon were cancelled when he terminated his operation.
o Evidently, both bus lines operated under their own franchises but opted to retain the firm name
“Baliwag Transit” with slight modification, obviously to take advantage of the goodwill such
firm name enjoys with the riding public.
• While it is admitted that Baliwag was the one who remitted the SSS premiums of Martinez, it has also
been established by witness testimonies that such arrangement was done purposely to accommodate
the request of the late Tueazon, the uncle of De Tengco, and the money came from him. There is no
reason why such testimonies should not be given credence as the records fail to show that said
witnesses have any motive to falsify or perjure their testimonies.
• The Social Security Commission arrive at the conclusion that Martinez was already an employee of
the late Tuazon who, despite having separate office, employees and buses, did not report him for
coverage to the SSS.
o Since the ER-EE relationship between Tuazon and Martinez was established, the remittance of
SSS contributions of Martinez is the responsibility of his employer, Tuazon, regardless of the
existence or non-existence of the Kabit System.
o Moreover, the fact that Martinez allowed 17 years to elapse before filing his petition means
that his action has already prescribed under the Civil Code.

RULING
CA decision reversed and set aside; resolution of the Social Security Commission is reinstated.

NOTES