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G.R. No. L-15045 January 20, 1961

IN RE: PETITION FOR EXEMPTION FROM COVERAGE BY THE SOCIAL SECURITY SYSTEM.ROMAN CATHOLIC ARCHBISHOP OF MANILA, petitioner-appellant,vs.SOCIAL SECURITY COMMISSION, respondent-appellee.

Feria, Manglapus and Associates for petitioner-appellant.

Legal Staff, Social Security System and Solicitor General for respondent-appellee.

GUTIERREZ DAVID, J .:

On September 1, 1958, the Roman Catholic Archbishop of Manila, thru counsel, filed with the SocialSecurity Commission a request that "Catholic Charities, and all religious and charitable institutionsand/or organizations, which are directly or indirectly, wholly or partially, operated by the RomanCatholic Archbishop of Manila," be exempted from compulsory coverage of Republic Act No. 1161, asamended, otherwise known as the Social Security Law of 1954. The request was based on the claimthat the said Act is a labor law and does not cover religious and charitable institutions but is limited to

businesses and activities organized for profit. Acting upon the recommendation of its Legal Staff, theSocial Security Commission in its Resolution No. 572, series of 1958, denied the request. The RomanCatholic Archbishop of Manila, reiterating its arguments and raising constitutional objections,requested for reconsideration of the resolution. The request, however, was denied by the Commissionin its Resolution No. 767, series of 1958; hence, this appeal taken in pursuance of section 5(c) of

Republic Act No. 1161, as amended.

Section 9 of the Social Security Law, as amended, provides that coverage "in the System shall becompulsory upon all members between the age of sixteen and sixty rears inclusive, if they have beenfor at least six months a the service of an employer who is a member of the System, Provided, thatthe Commission may not compel any employer to become member of the System unless he shallhave been in operation for at least two years and has at the time of admission, if admitted formembership during the first year of the System's operation at least fifty employees, and if admitted for

membership the following year of operation and thereafter, at least six employees x x x." The termemployer" as used in the law is defined as any person, natural or juridical, domestic or foreign, whocarries in the Philippines any trade, business, industry, undertaking, or activity of any kind and usesthe services of another person who is under his orders as regards the employment, except theGovernment and any of its political subdivisions, branches or instrumentalities, including corporationsowned or controlled by the Government" (par. [c], see. 8), while an "employee" refers to "any personwho performs services for an 'employer' in which either or both mental and physical efforts are usedand who receives compensation for such services" (par. [d], see. 8). "Employment", according toparagraph [i] of said section 8, covers any service performed by an employer except those expresslyenumerated thereunder, like employment under the Government, or any of its political subdivisions,branches or instrumentalities including corporations owned and controlled by the Government,domestic service in a private home, employment purely casual, etc.

From the above legal provisions, it is apparent that the coverage of the Social Security Law ispredicated on the existence of an employer-employee relationship of more or less permanent nature

and extends to employment of all kinds except those expressly excluded.

Appellant contends that the term "employer" as defined in the law should — following the principleof ejusdem generis — be limited to those who carry on "undertakings or activities which have theelement of profit or gain, or which are pursued for profit or gain," because the phrase ,activity of anykind" in the definition is preceded by the words "any trade, business, industry, undertaking." Thecontention cannot be sustained. The rule ejusdem generisapplies only where there is uncertainty. It isnot controlling where the plain purpose and intent of the Legislature would thereby be hindered anddefeated. (Grosjean vs. American Paints Works [La], 160 So. 449). In the case at bar, the definition ofthe term "employer" is, we think, sufficiently comprehensive as to include religious and charitable

institutions or entities not organized for profit, like herein appellant, within its meaning. This is mademore evident by the fact that it contains an exception in which said institutions or entities are notincluded. And, certainly, had the Legislature really intended to limit the operation of the law to entities



organized for profit or gain, it would not have defined an "employer" in such a way as to include the

Government and yet make an express exception of it.

It is significant to note that when Republic Act No. 1161 was enacted, services performed in theemploy of institutions organized for religious or charitable purposes were by express provisions ofsaid Act excluded from coverage thereof (sec. 8, par. [j] subpars. 7 and 8). That portion of the law,

however, has been deleted by express provision of Republic Act No. 1792, which took effect in 1957.This is clear indication that the Legislature intended to include charitable and religious institutions

within the scope of the law.

In support of its contention that the Social Security Law was intended to cover only employment forprofit or gain, appellant also cites the discussions of the Senate, portions of which were quoted in itsbrief. There is, however, nothing whatsoever in those discussions touching upon the question ofwhether the law should be limited to organizations for profit or gain. Of course, the said discussionsdwelt at length upon the need of a law to meet the problems of industrializing society and upon theplight of an employer who fails to make a profit. But this is readily explained by the fact that themajority of those to be affected by the operation of the law are corporations and industries which are

established primarily for profit or gain.

Appellant further argues that the Social Security Law is a labor law and, consequently, following therule laid down in the case of Boy Scouts of the Philippines vs. Araos (G.R. No. L-10091, January 29,1958) and other cases

1, applies only to industry and occupation for purposes of profit and gain. The

cases cited, however, are not in point, for the reason that the law therein involved expressly limits its

application either to commercial, industrial, or agricultural establishments, or enterprises. .

Upon the other hand, the Social Security Law was enacted pursuant to the "policy of the Republic ofthe Philippines to develop, establish gradually and perfect a social security system which shall besuitable to the needs of the people throughout the Philippines and shall provide protection toemployees against the hazards of disability, sickness, old age and death." (See. 2, Republic Act No.1161, as amended.) Such enactment is a legitimate exercise of the police power. It affords protectionto labor, especially to working women and minors, and is in full accord with the constitutional

provisions on the "promotion of social justice to insure the well-being and economic security of all thepeople." Being in fact a social legislation, compatible with the policy of the Church to ameliorate livingconditions of the working class, appellant cannot arbitrarily delimit the extent of its provisions to

relations between capital and labor in industry and agriculture.

There is no merit in the claim that the inclusion of religious organizations under the coverage of theSocial Security Law violates the constitutional prohibition against the application of public funds forthe use, benefit or support of any priest who might be employed by appellant. The funds contributedto the System created by the law are not public funds, but funds belonging to the members which aremerely held in trust by the Government. At any rate, assuming that said funds are impressed with thecharacter of public funds, their payment as retirement death or disability benefits would not constitutea violation of the cited provisions of the Constitution, since such payment shall be made to the priest

not because he is a priest but because he is an employee.

Neither may it be validly argued that the enforcement of the Social Security Law impairs appellant'sright to disseminate religious information. All that is required of appellant is to make monthlycontributions to the System for covered employees in its employ. These contributions, contrary toappellant's contention, are not in the nature of taxes on employment." Together with the contributionsimposed upon the employees and the Government, they are intended for the protection of saidemployees against the hazards of disability, sickness, old age and death in line with the constitutional

mandate to promote social justice to insure the well-being and economic security of all the people.

IN VIEW OF THE FOREGOING, Resolutions Nos. 572 kind 767, series of 1958, of the Social Security

Commission are hereby affirmed. So ordered with costs against appellant.



G.R. No. L-21223 August 31, 1966

PHILIPPINE BLOOMING MILLS CO., INC. (As Employer) and FRANCISCO TONG (As AssistantGeneral Manager) and Attorney-in-Fact of SUSUMO SONODA, SENJI TANAKA, TAKASHIKOKUMAMOTO, HITOSHI NAKAMURA, TETSUO KODU, (Employees), petitioners and appellants,vs.

SOCIAL SECURITY SYSTEM, respondent and appellee.

Demetrio B. Salem for petitioners and appellants.Office of the Solicitor General Edilberto Barot and Solicitor Camilo D. Quiason for respondent and

appellee.

BARRERA, J.:

The facts of this case are not disputed:

The Philippine Blooming Mills Co., Inc., a domestic corporation since the start of its operations in1957, has been employing Japanese technicians under a pre-arranged contract of employment, the

minimum period of which employment is 6 months and the maximum is 24 months.

From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese technicians.In connection with the employment of these aliens, it sent an inquiry to the Social Security System(SSS) whether these employees are subject to compulsory coverage under the System, which inquirywas answered by the First Deputy Administrator of the SSS, under date of August 29, 1957, asfollows:

SIR:

With reference to your letter of August 24, 1957, hereunder are our answers to your

queries:

Aliens employed in the Philippines:

Aliens who are employed in the Philippines shall also be compulsorily covered. Butaliens who are employed temporarily shall, upon their departure from the Philippines,be entitled to a rebate of a proportionate amount of their contributions; theiremployers shall be entitled to the same proportionate rebate of their contributions in

behalf of said aliens employed by them. (Rule I, Sec. 3[d], Rules and Regulations.)

Starting September, 1957, and until the aforementioned Japanese employees left the Philippines onOctober 26, 1958, the corresponding premium contributions of the employer and the employees on

the latter's memberships in the SSS were as follows:

Name SS Number Monthly Salary

Amount of PremiumsContributed

2.5%

(Employee)

3.5%

(Employer)

Total

Susumu Sonoda 03-075177 P520.00 P175.00 P245.00 P420.00

Senji Tanaka 03-075178 520.00 175.00 245.00 420.00

Kahei Tanaka 03-075179 500.00 175.00 245.00 420.00

Takashiko Kumamoto 03-075180 500.00 175.00 245.00 420.00



case now is whether or not appellants are bound by the amended Rules requiring membership for two

years before refund of the premium contributions may be allowed.1äwphï1.ñët

These rules and regulations were promulgated to provide guidelines to be observed in theenforcement of the law. As a matter of fact, Section 3 of Rule I is merely an enumeration of the"general principles to (shall) guide the Commission" in the determination of the extent or scope of the

compulsory coverage of the law. One of these guiding principles is paragraph (d) relied upon byappellants, on the coverage of temporarily-employed aliens. It is not here pretended, that theamendment of this Section 3(d) of Rule I, as to eliminate the provision granting to these aliens theright to a refund of part of their premium contributions upon their departure from the Philippines, is not

in implementation of the law or beyond the authority of the Commission to do.

It may be argued, however, that while the amendment to the Rules may have been lawfully made bythe Commission and duly approved by the President on January 14, 1958, such amendment was onlypublished in the November 1958 issue of the Official Gazette, and after appellants' employment hadalready ceased. Suffice it to say, in this regard, that under Article 2 of the Civil Code,

5 the date of

publication of laws in the Official Gazette is material for the purpose of determining their effectivity,

only if the statutes themselves do not so provide.

In the present case, the original Rules and Regulations of the SSS specifically provide that anyamendment thereto subsequently adopted by the Commission, shall take effect on the date of itsapproval by the President. Consequently, the delayed publication of the amended rules in the OfficialGazette did not affect the date of their effectivity, which is January 14, 1958, when they wereapproved by the President. It follows that when the Japanese technicians were separated fromemployment in October, 1958, the rule governing refund of premiums is Rule IX of the amendedRules and Regulations, which requires membership for 2 years before such refund of premiums may

be allowed.

Wherefore, finding no error in the resolution of the Commission appealed from, the same is hereby

affirmed, with costs against the appellants. So ordered.

Pajarillo vs. SSS

G.R. No. L-21930 August 31, 1966

AGAPITA PAJARILLO, ET AL., petitioners-appellants,vs.SOCIAL SECURITY SYSTEM, respondent-appellee.

Paulino Manongdo for petitioners-appellants.

Orlando L. Espinas for respondent-appellee.

BARRERA, J.:

This is an appeal by Agapita Pajarillo, et al., from the resolution of the Social Security Commission,

denying their petition to be exempted from coverage of the Social Security System.

There is no controversy as to the facts of this case. Appellants are owners of fishing boats being used

for fishing at sea, namely:

Owner Name of Vessel

Agapita Pajarillo Bagong Kalayaan

Basilio Medina Stella Maris



Rosario Relloso Villa Florida

Teofila Campana Salenian

Melicia Totanes Nazareno

Melicia Totanes San Pedro

Ireneo Racelis Ricardo

Salvador Boral Villa Rosario

Cesar King Felipa

Ramon King Tacia

Jaime King Aday

Amelia Reyes Queen Mary

Amelia Reyes Nanay

Teofilo Nasis Teresita

Rosario Reyes Charing Uno

Rosario Reyes Charing Dos

Aurora Sales Aurora

As such property-owners, they enter into agreement1 with the so-called patrons or pilots, whereby the

latter take charge of appellants fishing vessels, equipment, and gear used for fishing. Once entrustedwith the equipment, the pilot "hires" the crew to man the boat and secures their provisions. This isusually financed from loans obtained in the form of advances from fish dealers, and payable in kind

when the boat returns with catch from the fishing trip. (pp. 23-24, t.s.n.).

These fishing trips are not regular. The fishermen go out to the sea only when there is no moon or it isnot yet very bright. For this reason, even in months of fine weather, the most that a boat can make are18 fishing days every month. These men have no regular income. If the trip yields a catch, theproceeds thereof are divided into three parts: one part goes to the owner of the boat and equipment;one part is set aside to cover expenses like crude oil and for maintenance of the boat, and the otherone-third is divided among the men, with the pilot getting 3 times the share of a crew-member; andthe "machinist", who tends or operates the engine of the motorized boat, receiving twice the share of

a crew-member. (pp. 9, 23, t.s.n.).

The men (usually 12 for every vessel, including the pilot) are under no obligation to stay in one outfit.Sometimes, they join as members of the crew for one night only; sometimes two, or three days. Then,they leave and join other outfits. (pp. 18-19, t.s.n.). Even the pilot himself is not bound to retain hischarge for any definite duration. He can return the boat to its owner anytime, if he does not want tomanage it anymore. (p. 11, t.s.n.). The vessel-owners, appellants in the present case, required toregister as employers with the Social Security System, filed a joint petition with the Social SecurityCommission, claiming that there exists no employer-employee relationship between them and thecrew of their fishing vessels, and praying that they be exempted from the compulsory coverage of thelaw. After hearing, their petition was denied, the Commission holding that while the services of thecrew-members are engaged by the pilots, the latter are mere employees or agents of the boat-owners. Thus, it is contended, a boat-owner can abolish the employment of the crew-members by

withdrawing from the pilot the authority to take charge of the vessel. Appellants, consequently, weredirected to report their coverage and that of their respective pilots and crew-members to the



Commission and to pay the prescribed premiums pursuant to Sections 18, 19 and 20 of the Republic

Act 1161, as amended. The boat-owners filed the present appeal.

The only issue raised before the Commission and presented in this appeal is, as stated by theCommission itself, "whether under the facts set forth above, there exists an employer-employeerelationship between the petitioners and the crew-members of their respective fishing boats within the

meaning of Republic Act 1161, as amended.

Under the law, an employer is a "person, natural or juridical, domestic or foreign, who carries on in thePhilippines any trade, business, industry, undertaking, or activity of any kind and uses the services ofanother person who is under his orders as regards the employment. "

2 In the case at bar, the pilots

are not under the orders of the boat-owners as regards their employment. They go out to sea notupon direction of the boat-owners, but upon their own volition as to when, how long and where to gofishing. Much less do the boat-owners in any way control the crew-members with whom the formerhave no relationship whatsoever. These crew-members simply join every trip for which the pilots allow

them, without any reference to the owners of the vessel.

On the other hand, an employee is defined as a "person who performs services for an 'employer' in

which either or both mental and physical efforts are used and who receives compensation for suchservices, where there is an employer-employee relationship."3 In the present case, neither the pilots

nor the crew-members receive compensation from the boat-owners. They only share in their owncatch produced by their own efforts. There is no showing that outside of their one-third share, theboat-owners have anything to do with the distribution of the rest of the catch among the pilots and thecrew-members. The latter perform no service for the boat-owners, but mainly for their own

benefit.1äwphï1.ñët

In the undertaking in question, the boat-owners obviously are not responsible for the wage, salary, orfee of the pilot and crew-members. Their sole participation in the venture is the furnishing or deliveryof the equipment used for fishing, after which, they merely wait for the boat's return and receive theirshare in the catch, if there is any. For this part, a person who joins the outfit is entitled to a share orparticipation in the fruit of the fishing trip. If it gives no return, the men get nothing. It appears to us,

therefore, that the undertaking is in the nature of a joint venture, with the boat-owner supplying theboat and its equipments, and the pilot and crew-members contributing the necessary labor, and the

parties getting specific shares for their respective contributions.

But, even assuming arguendo that the pilot and crew-members may be treated as employees of theboat-owners, they cannot also be made subject to compulsory coverage under the Social Security

Act. As previously stated, the men are under no obligation to remain in the outfit for any definiteperiod. Thus, one can be the crew-member of an outfit for one day and be the member of the crew ofanother vessel the next day. Also, a fishing boat has no regular schedule of fishing trips. It alldepends on the weather and other natural conditions, and the volition of the pilots and crew-menthemselves. And, even when a fishing trip is completed, it is no assurance of income for the fishermenand the boat-owner as well. Clearly, the services rendered by the fishermen are no different from theagricultural labor performed by a share or leasehold tenant or worker, which is specifically excluded

from the definition of "employment",4 and exempted from the coverage of the Social Security Act.

Add to this the extreme difficulty, if not impossibility, of determining the monthly wage of earning ofthese fishermen for the purpose of fixing the amount of their and the supposed employer'scontributions,

5 and there is even reason to exempt the parties to this kind of undertaking from

compulsory registration with the Social security System.

In view of the foregoing considerations, the resolution of the Social Security Commission appealedfrom is hereby set aside, and petitioners-appellants are declared exempted from compulsory

coverage of the Social Security law. No costs. So ordered.

G.R. No. L-14183 November 28, 1959



BENEDICTO DINGLASAN, petitioner,

vs.NATIONAL LABOR UNION,

respondent.

Rafael Dinglasan for petitioner.

Eulogio R. Lerum for respondent.

BARRERA, J.:

This is a petition to review the decision of the Court of Industrial Relations of February 27, 1958 (in

Case No. 3—ULP), finding the petitioner guilty of unfair labor practice under the Industrial Peace Act.1

On June 30, 1953, the respondent union filed with the above-mentioned court a complaint for allegedunfair labor practice committed by the petitioner, in that he locked out from employment 46 drivers,

members of the respondent union, on June 27, 1953.

Before filing his answer, the petitioner asked for the dismissal of the complaint on the grounds that thecourt had no jurisdiction over the person of the petitioner and the subject matter of the action, and the

respondent union was not the real party in interest. The petitioner claimed that there existed noemployer-employee relationship between the petitioner and the drivers, members of the respondentunion, the relationship being one of lessor and lessee only, as the jeeps being used by the saiddrivers were rented out by the petitioner under the so-called "boundary system". The motion wasdenied by the court in its order of February 16, 1954, but on petitioner's motion for reconsideration,the court, en banc, in its resolution of June 23, 1954, unanimously reconsidered its first order and

finally declared that there was no employer-employee relationship between the parties.

The respondent union appealed to this Court, and on March 23, 1956, we rendered a decision (in G.

R. No. L-7945)* reversing the said resolution and holding that an employer-employee relationship

existed between the parties. The said decision became final on May 29, 1956.

In view of the decision of this Court, the petitioner, on June 4, 1957, filed in the court

a quo

his answerto the complaint of June 30, 1953, denying (1) the legitimacy of the respondent union, and (2) thecharge unfair labor practice, claiming that he acted in good faith based on his honest belief that hewas not an employer of the drivers, members of the respondent union, but only a lessor of his

jeepneys.

Thereafter, the case was heard, and on February 27, 1958, the court rendered a decision, as follows:

It would appear that the main question at issue is whether the respondent has committed the

charges alleged in the complaint.

According to the complaint, the respondent had knowledge of the formation of a union onJune 26, 1953 and respondent upon learning the same decided on dismissing all the drivermembers because he did not want to have a union within his company. This Particular union,it turned out, was a chapter or affiliate of the complainant union which was organizedsometime on June 24, 1953. On June 27, 1953, the respondent dismissed the driversappearing in the complaint by refusing them the use of the jeepneys regularly assigned to

them.

On the other hand, respondent claims otherwise. The respondent, it is alleged fearing that astrike might be called by the drivers decided on not renting out the jeepneys on said date,

June 27, 1953.

Based on the versions submitted in evidence by the parties, it is clear that the respondentengaged in the unfair labor practice charged in the complaint, amounting to a virtual lockout

of his employee drivers, hence constituting discrimination under Republic Act No. 875. As therecords of this case disclose, the act of locking out committed by respondent was made



without the required notice and no collective bargaining negotiation were ever made. Themere suspicion by respondent, that a strike might be called by the union, is no justification for

such an act.

We hold therefore, the respondent guilty of the unfair labor practices in the complaint.

However, there are certain aspects of this case which merit consideration. It has beencontended by respondent, since the beginning of this case, that he is not the employer of thedrivers listed in the complaint and had honestly acted under the such belief. This very Courtitself, unanimously were of the same opinion that there was no employer-employeerelationship. In the application of the affirmative reliefs granted by the law, this good faith therespondent must be taken into consideration in those portions where the law allows this Courtto use it sound discretion and judgment. And the particular portion we have in mind in Section

5 of Republic Act No. 875.

Furthermore, it appears that some of the drivers listed in the complaint have neither toreturned to work or are already working elsewhere and there is a need for further proceedings

in this respect.

IN VIEW OF THE FOREGOING, this Court hereby orders the respondent:

(1) To cease and desist from further committing the unfair labor practices complained of;

(2) To reinstate the drivers listed in the complaint, except those who have been alreadyreinstated;

(3) To pay back wages to all drivers listed in the complaint, but in the exercise of the Court'sdiscretion said back wages shall commence only from May 29. 1956, based on the minimumdaily wage of P4.00, deducting therefrom and from said date the period when said drivershave found substantially equivalent and regular employment for themselves, for which reasonfurther hearings shall be had for the sole purpose of determining the respective amount of

back wages due each driver up to the time they are actually re-employed by respondent.

SO ORDERED.

On March 8, 1958, petitioner filed a motion for reconsidering which was denied by the court in its

resolution en banc , of July 30, 1958. hence, this petition for review.

It is the contention of responding union that petitioner, upon learning that his drivers had formed alabor union among themselves, refused on June 27, 1953, to let the muse and operate the jeepneysregularly assigned to them, which act, it is alleged, constitutes an unlawful lockout and an unfair laborpractice. The petitioner, on the other hand, claims that he did not lock out his drivers, members of therespondent union, on June 27, 1953, as contended by them. Believing honestly that no employer-

employee relationship existed between him and them, and fearing that the drivers were intending todeclare a strike and might abandon his jeepneys in the streets of the city, he decided, as aprecautionary measure to protect his interest, to suspend their operation temporarily and consult hisattorney. Upon obtaining his counsel's advice, he immediately announced to the drivers the followingmorning, June 28, that they could then take out his jeepneys. While some four or five of them neededpetitioner's request, the others refused to return to operate. Those who took advantage of petitioner'soffer had, however, to come back after a few hours because some of the drivers on strike hadadmonished them to return the jeepneys and join the strike. For some days this situation continueduntil on October 8, 1953, when the case was first submitted for decision, thirty-four (34) of the forty six

(46) drivers had already returned to work under the same conditions as before June 27, 1953.

We have examined the record and we are satisfied that what occurred on June 26, 1953, and the

days following was substantially as testified to by petitioner Benedicto Dinglasan and his witnesses,three of whom are among the drivers of his Jeepneys, two (Julio Ongpin and Francisco Leaño) arecompletely disinterested persons, two are patrolmen, and the remaining two are his employees, as



against the sole testimony of Juanito Cruz, President of the local group of the respondent labor union,and the essentially hear say declaration of Zosimo Yjares who claims to be the secretary of the

drivers' association.

While we agree with the lower court that the act of the petitioner in suspending the operation of his jeepneys on June 27, is legally and technically not in consonance with the industrial Peace Act (the

court

a quo

termed it "a virtual lockout") so as to entitle the drivers to be reinstated nevertheless, asthe trial court correctly stated in its decision,.

there are certain aspects of this case which merit consideration. It has been contended byrespondent, since the beginning of his case, that he is not the employer of the drivers listed inthe complaint and has honestly noted under such belief. This very Court itself, unanimouslywere of the same opinion that there was no employer-employee relationship. In theapplication of the affirmative reliefs granted by law, this good faith of the respondent must betaken into consideration in those portions where the law allows this court or use its sounddiscretion and judgment. The particular portion we have in mind is Section 5 of Republic Act

No. 875.

In the exercise of this discretion, that is, whether the reinstatement will be with or without back pay,aside from the fact that there was no willful violation of the Industrial Peace Act, there is an additionalcircumstance that may be considered in favor of herein petitioner. As already mentioned above,petitioner, the day following his suspension of the operation of the jeepneys, urged the drivers toreturn and resume the work, notwithstanding which, the latter not only refused, but even compelledthose who did, to joint the strike. It is clear therefrom that the cassation or stoppage of the operationafter June 27, was not the direct consequence of petitioner's locking them up or of any willful unfair ordiscriminatory act of the former, but the result of their (the drivers) voluntary and deliberate refusal toreturn to work. Taking into account the foregoing circumstances and considering their similarity tothose in the case of Philippines marine Radio Officers' Association vs. Court of Industrial Relation et

al ., 102 Phil., 373, wherein it was held that there is no reason for granting backpay if there is not beenany willful unfair labor practice or refusal of the respondent companies to admit their laborers back towork, while the drivers members of respondent union may, in this case, be entitled to reinstatement,

we find no justification for their receiving back wage for the period that they themselves refused toreturn to work.

Wherefore, the decision appealed from is accordingly modified in the sense that the reinstatement will

be without back pay. In all other respects, the same is affirmed, without costs. So ordered.

G.R. No. L-26298 September 28, 1984

CMS ESTATE, INC., petitioner,

vs.SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION,

respondents.

Sison Dominguez & Cervantes for petitioner.

The Legal Counsel for respondent SSS.

CUEVAS, J.:

This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security Commission inits Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System, declaring CMS subject tocompulsory coverage as of September 1, 1957 and "directing the Social Security System to effectsuch coverage of the petitioner's employees in its logging and real estate business conformably to the

provision of Republic Act No. 1161, as amended was certified to Us by the defunct Court of Appeals

1 for further disposition considering that purely questions of law are involved.



Petitioner is a domestic corporation organized primarily for the purpose of engaging in the real estatebusiness. On December 1, 1952, it started doing business with only six (6) employees. It's Articles ofIncorporation was amended on June 4, 1956 in order to engage in the logging business. TheSecurities and Exchange Commission issued the certificate of filing of said amended articles on June18, 1956. Petitioner likewise obtained an ordinary license from the Bureau of Forestry to operate a

forest concession of 13,000 hectares situated in the municipality of Baganga, Province of Davao.

On January 28, 1957, petitioner entered into a contract of management with one Eufracio D. Rojas forthe operation and exploitation of the forest concession The logging operation actually started on April1, 1957 with four monthly salaried employees. As of September 1, 1957, petitioner had 89 employeesand laborers in the logging operation. On December 26, 1957, petitioner revoked its contract ofmanagement with Mr. Rojas.

On August 1, 1958, petitioner became a member of the Social Security System with respect to its realestate business. On September 6, 1958, petitioner remitted to the System the sum of P203.13representing the initial premium on the monthly salaries of the employees in its logging business.However, on October 9, 1958, petitioner demanded the refund of the said amount, claiming that it isnot yet subject to compulsory coverage with respect to its logging business. The request was deniedby respondent System on the ground that the logging business was a mere expansion of petitioner'sactivities and for purposes of the Social Security Act, petitioner should be considered a member of the

System since December 1, 1952 when it commenced its real estate business.

On November 10, 1958, petitioner filed a petition with the Social Security Commission praying for the

determination of the effectivity date of the compulsory coverage of petitioner's logging business.

After both parties have submitted their respective memoranda, the Commission issued on January

14, 1960, Resolution No. 91, 2 the dispositive portion of which reads as follows:

Premises considered, the instant petition is hereby denied and petitioner is herebyadjudged to be subject to compulsory coverage as of Sept. 1, 1957 and the SocialSecurity System is hereby directed to effect such coverage of petitioner's employees

in its logging and real estate business conformably to the provisions of Rep. Act No.1161, as amended.

SO ORDERED.

Petitioner's motion for reconsideration was denied in Resolution No. 609 of the Commission.

These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits that

respondent Commission erred in holding —

(1) that the contributions required of employers and employees under our SocialSecurity Act of 1954 are not in the nature of excise taxes because the said Act was

allegedly enacted by Congress in the exercise of the police power of the State, not ofits taxing power;

(2) that no contractee — independent contractor relationship existed betweenpetitioner and Eufracio D. Rojas during the time that he was operating its forest

concession at Baganga, Davao;

(3) that a corporation which has been in operation for more than two years in onebusiness is immediately covered with respect to any new and independent business it

may subsequently engage in;

(4) that a corporation should be treated as a single employing unit for purposes of

coverage under the Social Security Act, irrespective of its separate, unrelated andindependent business established and operated at different places and on different

dates; and



(5) that Section 9 of the Social Security Act on the question of compulsory

membership and employers should be given a liberal interpretation.

Respondent, on the other hand, advances the following propositions, inter alia:

(1) that the Social Security Act speaks of compulsory coverage of employers and not

of business;

(2) that once an employer is initially covered under the Social Security Act, any otherbusiness undertaken or established by the same employer is likewise subject in spite

of the fact that the latter has not been in operation for at least two years;

(3) that petitioner's logging business while actually of a different, distinct, separateand independent nature from its real estate business should be considered as an

operation under the same management;

(4) that the amendment of petitioner's articles of incorporation, so as to enable it to

engage in the logging business did not alter the juridical personality of petitioner; and

(5) the petitioner's logging operation is a mere expansion of its business activities.

The Social Security Law was enacted pursuant to the policy of the government "to develop, establishgradually and perfect a social security system which shall be suitable to the needs of the peoplethroughout the Philippines, and shall provide protection against the hazards of disability, sickness, oldage and death" (Sec. 2, RA 1161, as amended). It is thus clear that said enactment implements thegeneral welfare mandate of the Constitution and constitutes a legitimate exercise of the police power

of the State. As held in the case of Philippine Blooming Mills Co., Inc., et al. vs. SSS

3 —

Membership in the SSS is not a result of bilateral, concensual agreement where therights and obligations of the parties are defined by and subject to their will, RA 1161

requires compulsory coverage of employees and employers under the System. It isactually a legal imposition on said employers and employees, designed to providesocial security to the workingmen. Membership in the SSS is therefore, in compliancewith the lawful exercise of the police power of the State, to which the principle of non-

impairment of the obligation of contract is not a proper defense.

xxx xxx xxx

The taxing power of the State is exercised for the purpose of raising revenues. However, under ourSocial Security Law, the emphasis is more on the promotion of the general welfare. The Act is notpart of out Internal Revenue Code nor are the contributions and premiums therein dealt with andprovided for, collectible by the Bureau of Internal Revenue. The funds contributed to the Systembelong to the members who will receive benefits, as a matter of right, whenever the hazards provided

by the law occur.

All that is required of appellant is to make monthly contributions to the System forcovered employees in its employ. These contributions, contrary to appellant'scontention, are not 'in the nature of taxes on employment.' Together with thecontributions imposed upon employees and the Government, they are intended forthe protection of said employees against the hazards of disability, sickness, old ageand death in line with the constitutional mandate to promote social justice to insure

the well-being and economic security of all the people.

4

Because of the broad social purpose of the Social Security Act, all doubts in construing the Act should

favor coverage rather than exemption.



Prior to its amendment, Sec. 9 of the Act provides that before an employer could be compelled tobecome a member of the System, he must have been in operation for at least two years and has atthe time of admission at least six employees. It should be pointed out that it is the employer, eithernatural, or judicial person, who is subject to compulsory coverage and not the business. If theintention of the legislature was to consider every venture of the employer as the basis of a separatecoverage, an express provision to that effect could have been made. Unfortunately, however, none of

that sort appeared provided for in the said law.

Should each business venture of the employer be considered as the basis of the coverage, anemployer with more than one line of business but with less than six employees in each, would neverbe covered although he has in his employ a total of more than six employees which is sufficient tobring him within the ambit of compulsory coverage. This would frustrate rather than foster the policy ofthe Act. The legislative intent must be respected. In the absence of an express provision for aseparate coverage for each kind of business, the reasonable interpretation is that once an employer iscovered in a particular kind of business, he should be automatically covered with respect to any newname. Any interpretation which would defeat rather than promote the ends for which the Social

Security Act was enacted should be eschewed. 5

Petitioner contends that the Commission cannot indiscriminately combine for purposes of coveragetwo distinct and separate businesses when one has not yet been in operation for more than two yearsthus rendering nugatory the period for more than two years thus rendering nugatory the period ofstabilization fixed by the Act. This contention lacks merit since the amendatory law, RA 2658, whichwas approved on June 18, 1960, eliminated the two-year stabilization period as employers nowbecome automatically covered immediately upon the start of the business.

Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:

Sec. 10. Effective date of coverage. — Compulsory coverage of the employer shall

take effect on the first day of his operation, and that of the employee on the date of

his employment. (Emphasis supplied)

As We have previously mentioned, it is the intention of the law to cover as many persons as possibleso as to promote the constitutional objective of social justice. It is axiomatic that a later law prevails

over a prior statute and moreover the legislative in tent must be given effect. 6

Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in anindependent business of his own consisting of the operation of the timber concession of the former.

Rojas was appointed as operations manager of the logging consession; 7 he has no power to appoint

or hire employees; as the term implies, he only manages the employees and it is petitioner whofurnishes him the necessary equipment for use in the logging business; and he is not free from thecontrol and direction of his employer in matter connected with the performance of his work. Thesefactors clearly indicate that Rojas is not an independent contractor but merely an employee of

petitioner; and should be entitled to the compulsory coverage of the Act.

The records indubitably show that petitioner started its real estate business on December 1, 1952while its logging operation was actually commenced on April 1, 1957. Applying the provision of Sec.10 of the Act, petitioner is subject to compulsory coverage as of December 1, 1952 with respect to the

real estate business and as of April 1, 1957 with respect to its logging operation.

WHEREFORE, premises considered, the appeal is hereby DISMISSED. With costs against petitioner.

SO ORDERED.

G.R. No. L-21642 July 30, 1966



SOCIAL SECURITY SYSTEM, petitioner-appellee,

vs.CANDELARIA D. DAVAC, ET AL.,

respondents;

LOURDES Tuplano, respondent-appellant.

J. Ma. Francisco and N. G. Bravo for respondent-appellant.

Office of the Solicitor General Arturo A. Alafriz, Solicitor Camilo D. Quiason and E. T. Duran for petitioner-appellee.

BARRERA, J.:

This is an appeal from the resolution of the Social Security Commission declaring respondentCandelaria Davac as the person entitled to receive the death benefits payable for the death ofPetronilo Davac.

The facts of the case as found by the Social Security Commission, briefly are: The late PetroniloDavac, a former employee of Lianga Bay Logging Co., Inc. became a member of the Social SecuritySystem (SSS for short) on September 1, 1957. As such member, he was assigned SS I.D. No. 08-

007137. In SSS form E-1 (Member's Record) which he accomplished and filed with the SSS onNovember 21, 1957, he designated respondent Candelaria Davac as his beneficiary and indicated hisrelationship to her as that of "wife". He died on April 5, 1959 and, thereupon, each of the respondents(Candelaria Davac and Lourdes Tuplano) filed their claims for death benefit with the SSS. It appearsfrom their respective claims and the documents submitted in support thereof, that the deceasedcontracted two marriages, the first, with claimant Lourdes Tuplano on August 29, 1946, who bore hima child, Romeo Davac, and the second, with Candelaria Davac on January 18, 1949, with whom hehad a minor daughter Elizabeth Davac. Due to their conflicting claims, the processing thereof washeld in abeyance, whereupon the SSS filed this petition praying that respondents be required tointerpose and litigate between themselves their conflicting claims over the death benefits in

question.1äwphï1.ñët

On February 25, 1963, the Social Security Commission issued the resolution referred to above, Not

satisfied with the said resolution, respondent Lourdes Tuplano brought to us the present appeal.

The only question to be determined herein is whether or not the Social Security Commission actedcorrectly in declaring respondent Candelaria Davac as the person entitled to receive the death

benefits in question.

Section 13, Republic Act No. 1161, as amended by Republic Act No. 1792, in force at the time

Petronilo Davac's death on April 5, 1959, provides:

1. SEC. 13. Upon the covered employee's death or total and permanent disability under suchconditions as the Commission may define, before becoming eligible for retirement and ifeither such death or disability is not compensable under the Workmen's Compensation Act,

he or, in case of his death,

his beneficiaries, as recorded by his employer

shall be entitled tothe following benefit: ... . (emphasis supplied.)

Under this provision, the beneficiary "as recorded" by the employee's employer is the one entitled to

the death benefits. In the case of Tecson vs. Social Security System, (L-15798, December 28, 1961),

this Court, construing said Section 13, said:

It may be true that the purpose of the coverage under the Social Security System is protectionof the employee as well as of his family, but this purpose or intention of the law cannot beenforced to the extent of contradicting the very provisions of said law as contained in Section13, thereof, ... . When the provision of a law are clear and explicit, the courts can do nothingbut apply its clear and explicit provisions (Velasco vs. Lopez, 1 Phil, 270; Caminetti vs. U.S.,

242 U.S. 470, 61 L. ed. 442).



But appellant contends that the designation herein made in the person of the second and, therefore,bigamous wife is null and void, because (1) it contravenes the provisions of the Civil Code, and (2) itdeprives the lawful wife of her share in the conjugal property as well as of her own and her child's

legitime in the inheritance.

As to the first point, appellant argues that a beneficiary under the Social Security System partakes of

the nature of a beneficiary in life insurance policy and, therefore, the same qualifications anddisqualifications should be applied.

Article 2012 of the New Civil Code provides:

ART. 2012. Any person who is forbidden from receiving any donation under Article 739cannot be named beneficiary of a life insurance policy by the person who cannot make any

donation to him according to said article.

And Article 739 of the same Code prescribes:

ART. 739. The following donations shall be void:

(1) Those made between persons who were guilty of adultery or concubinage at the time of

the donation;

x x x x x x x x x

Without deciding whether the naming of a beneficiary of the benefits accruing from membership in theSocial Security System is a donation, or that it creates a situation analogous to the relation of aninsured and the beneficiary under a life insurance policy, it is enough, for the purpose of the instantcase, to state that the disqualification mentioned in Article 739 is not applicable to herein appelleeCandelaria Davac because she was not guilty of concubinage, there being no proof that she had

knowledge of the previous marriage of her husband Petronilo.1

Regarding the second point raised by appellant, the benefits accruing from membership in the SocialSecurity System do not form part of the properties of the conjugal partnership of the covered member.They are disbursed from a public special fund created by Congress in pursuance to the declaredpolicy of the Republic "to develop, establish gradually and perfect a social security system which ...

shall provide protection against the hazards of disability, sickness, old age and death."2

The sources of this special fund are the covered employee's contribution (equal to 2-! per cent of the

employee's monthly compensation);3 the employer's contribution (equivalent to 3-! per cent of the

monthly compensation of the covered employee);4 and the Government contribution which consists in

yearly appropriation of public funds to assure the maintenance of an adequate working balance of the

funds of the System.5 Additionally, Section 21 of the Social Security Act, as amended by Republic Act

1792, provides:

SEC. 21. Government Guarantee. — The benefits prescribed in this Act shall not bediminished and to guarantee said benefits the Government of the Republic of the Philippines

accepts general responsibility for the solvency of the System.

From the foregoing provisions, it appears that the benefit receivable under the Act is in the nature of aspecial privilege or an arrangement secured by the law, pursuant to the policy of the State to providesocial security to the workingmen. The amounts that may thus be received cannot be considered asproperty earned by the member during his lifetime. His contribution to the fund, it may be noted,constitutes only an insignificant portion thereof. Then, the benefits are specifically declared not

transferable,6 and exempted from tax legal processes, and lien.

7Furthermore, in the settlement of

claims thereunder the procedure to be observed is governed not by the general provisions of law, but

by rules and regulations promulgated by the Commission. Thus, if the money is payable to the estateof a deceased member, it is the Commission, not the probate or regular court that determines the



person or persons to whom it is payable.8 that the benefits under the Social Security Act are not

intended by the lawmaking body to form part of the estate of the covered members may be gathered

from the subsequent amendment made to Section 15 thereof, as follows:

SEC. 15. Non-transferability of benefit. — The system shall pay the benefits provided for in

this Act to such persons as may be entitled thereto in accordance with the provisions of this

Act. Such benefits are not transferable, and no power of attorney or other document executedby those entitled thereto in favor of any agent, attorney, or any other individual for thecollection thereof in their behalf shall be recognized except when they are physically and

legally unable to collect personally such benefits: Provided, however , That in the case ofdeath benefits, if no beneficiary has been designated or the designation there of is void, saidbenefits shall be paid to the legal heirs in accordance with the laws of succession. (Rep. Act

2658, amending Rep. Act 1161.)

In short, if there is a named beneficiary and the designation is not invalid (as it is not so in this case),it is not the heirs of the employee who are entitled to receive the benefits (unless they are thedesignated beneficiaries themselves). It is only when there is no designated beneficiaries or when thedesignation is void, that the laws of succession are applicable. And we have already held that the

Social Security Act is not a law of succession.9

Wherefore, in view of the foregoing considerations, the resolution of the Social Security Commission

appealed from is hereby affirmed, with costs against the appellant.

So ordered.

G.R. No. 170735 December 17, 2007

IMMACULADA L. GARCIA, petitioner,

vs.SOCIAL SECURITY COMMISSION LEGAL AND COLLECTION, SOCIAL SECURITY

SYSTEM, respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This is petition for review on Certiorari under Rule 45 of the Rules of Court is assailing the 2 June2005 Decision

1and 8 December 2005 Resolution

2 both of the Court of Appeals in CA-G.R. SP No.

85923. the appellate court affirmed the --- Order and --- Resolution both of the Social SecurityCommission (SSC) in SSC Case No. 10048, finding Immaculada L. Garcia (Garcia), the solesurviving director of Impact Corporation, petitioner herein, liable for unremitted, albeit collected, SSS

contributions.

Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, andConsuelo Villanueva were directors

3 of Impact Corporation. The corporation was engaged in the

business of manufacturing aluminum tube containers and operated two factories. One was a "slug"foundry-factory located in Cuyapo, Nueva Ecija, while the other was an Extrusion Plant in Cainta,Metro Manila, which processed the "slugs" into aluminum collapsible tubes and similar containers for

toothpaste and other related products.

Records show that around 1978, Impact Corporation started encountering financial problems. By

1980, labor unrest besieged the corporation.

In March 1983, Impact Corporation filed with the Securities and Exchange Commission (SEC) aPetition for Suspension of Payments,

4 docketed as SEC Case No. 02423, in which it stated that:



[Impact Corporation] has been and still is engaged in the business of manufacturing

aluminum tube containers x x x.

x x x x

In brief, it is an on-going, viable, and profitable enterprise.

On 8 May 1985, the union of Impact Corporation filed a Notice of Strike with the Ministry of Laborwhich was followed by a declaration of strike on 28 July 1985. Subsequently, the Ministry of Laborcertified the labor dispute for compulsory arbitration to the National Labor Relations Commission(NLRC) in an Order

5 dated 25 August 1985. The Ministry of Labor, in the same Order, noted the

inability of Impact Corporation to pay wages, 13th month pay, and SSS remittances due to cash

liquidity problems. A portion of the order reads:

On the claims of unpaid wages, unpaid 13th month pay and non-remittance of loanamortization and SSS premiums, we are for directing the company to pay the same to theworkers and to remit loan amortizations and SSS premiums previously deducted from theirwages to the Social Security System. Such claims were never contested by the company

both during the hearing below and in our office. In fact, such claims were admitted by thecompany although it alleged cash liquidity as the main reason for such non-payment.

WHEREFORE, the dispute at Impact Corporation is hereby certified to the National LaborRelations Commission for compulsory arbitration in accordance with Article 264 (g) of the

Labor Code, as amended.

x x x x

The company is directed to pay all the entitled workers unpaid wages, unpaid 13th month payand to remit to the Social Security System loan amortizations and SSS premiums previously

deducted from the wages of the workers.6

On 3 July 1985, the Social Security System (SSS), through its Legal and Collection Division (LCD),filed a case before the SSC for the collection of unremitted SSS premium contributions withheld byImpact Corporation from its employees. The case which impleaded Impact Corporation as respondent

was docketed as SSC Case No. 10048.7

Impact Corporation was compulsorily covered by the SSS as an employer effective 15 July 1963 and

was assigned Employer I.D. No. 03-2745100-21.

In answer to the allegations raised in SSC Case No. 10048, Impact Corporation, through its then VicePresident Ricardo de Leon, explained in a letter dated 18 July 1985 that it had been confronted withstrikes in 1984 and layoffs were effected thereafter. It further argued that the P402,988.93 iserroneous. It explained among other things, that its operations had been suspended and that it was

waiting for the resolution on its Petition for Suspension of Payments by the SEC under SEC Case No.2423. Despite due notice, the corporation failed to appear at the hearings. The SSC ordered theinvestigating team of the SSS to determine if it can still file its claim for unpaid premium contributions

against the corporation under the Petition for Suspension of Payments.

In the meantime, the Petition for Suspension of Payments was dismissed which was pending beforethe SEC in an Order

8 dated 12 December 1985. Impact Corporation resumed operations but only for

its winding up and dissolution.9 Due to Impact Corporation’s liability and cash flow problems, all of its

assets, namely, its machineries, equipment, office furniture and fixtures, were sold to scrap dealers to

answer for its arrears in rentals.

On 1 December 1995, the SSS-LCD filed an amended Petition10

in SSC Case No. 10048 wherein the

directors of Impact Corporation were directly impleaded as respondents, namely: Eduardo de Leon,Ricardo de Leon,11

Pacita Fernandez, Consuelo Villanueva, and petitioner. The amounts sought to becollected totaled P453,845.78 andP10,856.85 for the periods August 1980 to December 1984 and



August 1981 to July 1984, respectively, and the penalties for late remittance at the rate of 3% permonth from the date the contributions fell due until fully paid pursuant to Section 22(a) of the Social

Security Law,12

as amended, in the amounts of P49,941.67 andP2,474,662.82.

Period Unremitted Amount Penalties(3% Interest Per Month)

August 1980 to December 1984 P 453,845.78 P49, 941.67

August 1981 to July 1984 P 10,856.85 P2, 474, 662.82

Summonses were not served upon Eduardo de Leon, Pacita Fernandez, and Consuelo Villanueva,their whereabouts unknown. They were all later determined to be deceased. On the other hand, due

to failure to file his responsive pleading, Ricardo de Leon was declared in default.

Petitioner filed with the SSC a Motion to Dismiss13

on grounds of prescription, lack of cause of actionand cessation of business, but the Motion was denied for lack of merit.

14 In her Answer with

Counterclaim15

dated 20 May 1999, petitioner averred that Impact Corporation had ceased operationsin 1980. In her defense, she insisted that she was a mere director without managerial functions, andshe ceased to be such in 1982. Even as a stockholder and director of Impact Corporation, petitioner

contended that she cannot be made personally liable for the corporate obligations of ImpactCorporation since her liability extended only up to the extent of her unpaid subscription, of which shehad none since her subscription was already fully paid. The petitioner raised the same arguments in

her Position Paper.16

On 23 January 1998, Ricardo de Leon died following the death, too, of Pacita Fernandez died on 7February 2000. In an Order dated 11 April 2000, the SSC directed the System to check if ImpactCorporation had leviable properties to which the investigating team of respondent SSS manifested

that the Impact Corporation had already been dissolved and its assets disposed of.17

In a Resolution dated 28 May 2003, the Social Security Commission ruled in favor of SSS and

declared petitioner liable to pay the unremitted contributions and penalties, stating the following:

WHEREFORE, premises considered, this Commission finds, and so holds, that respondentsImpact Corporation and/or Immaculada L. Garcia, as director and responsible officer of thesaid corporation, is liable to pay the SSS the amounts of P442,988.93, representing theunpaid SS contributions of their employees for the period August 1980 to December 1984,not inclusive, and P10,856.85, representing the balance of the unpaid SS contributions infavor of Donato Campos, Jaime Mascarenas, Bonifacio Franco and Romeo Fullon for theperiod August 1980 to December 1984, not inclusive, as well as the 3% per month penaltyimposed thereon for late payment in the amounts of P3,194,548.63 and P78,441.33,respectively, computed as of April 30, 2003. This is without prejudice to the right of the SSSto collect the penalties accruing after April 30, 2003 and to institute other appropriate actions

against the respondent corporation and/or its responsible officers.

Should the respondents pay their liability for unpaid SSS contributions within sixty (60) daysfrom receipt of a copy of this Resolution, the 3% per month penalty for late payment thereofshall be deemed condoned pursuant to SSC Res. No. 397-S.97, as amended by SSC Res.Nos. 112-S.98 and 982-S.99, implementing the provision on condonation of penalty under

Section 30 of R.A. No. 8282.

In the event the respondents fail to pay their liabilities within the aforestated period, let a writof execution be issued, pursuant to Section 22 (c) [2] of the SS Law, as amended, for the

satisfaction of their liabilities to the SSS.18

Petitioner filed a Motion for Reconsideration19

of the afore-quoted Decision but it was denied for lackof merit in an Order

20 dated 4 August 2004, thus:



Nowhere in the questioned Resolution dated May 28, 2003 is it stated that the other directorsof the defunct Impact Corporation are absolved from their contribution and penalty liabilities tothe SSS. It is certainly farthest from the intention of the petitioner SSS or this Commission topin the entire liability of Impact Corporation on movant Immaculada L. Garcia, to the exclusionof the directors of the corporation namely: Eduardo de Leon, Ricardo de Leon, PacitaFernandez and Conzuelo Villanueva, who were all impleaded as parties-respondents in this

case.

The case record shows that there was failure of service of summonses upon respondentsEduardo de Leon, Pacita Fernandez and Conzuelo Villanueva, who are all deceased, for thereason that their whereabouts are unknown. Moreover, neither the legal heirs nor the estateof the defaulted respondent Ricardo de Leon were substituted as parties-respondents in thiscase when he died on January 23, 1998. Needless to state, the Commission did not acquire

jurisdiction over the persons or estates of the other directors of Impact Corporation, hence, it

could not validly render any pronouncement as to their liabilities in this case.

Furthermore, the movant cannot raise in a motion for reconsideration the defense that shewas no longer a director of Impact Corporation in 1982, when she was allegedly eased out bythe managing directors of Impact Corporation as purportedly shown in the Deed of Sale and

Assignment of Shares of Stock dated January 22, 1982. This defense was neither pleaded inher Motion to Dismiss dated January 17, 1996 nor in her Answer with Counterclaim datedMay 18, 1999 and is, thus, deemed waived pursuant to Section 1, Rule 9 of the 1997 Rules ofCivil Procedure, which has suppletory application to the Revised Rules of Procedure of the

Commission.

Finally, this Commission has already ruled in the Order dated April 27, 1999 that since theoriginal Petition was filed by the SSS on July 3, 1985, and was merely amended onDecember 1, 1995 to implead the responsible officers of Impact Corporation, withoutchanging its causes of action, the same was instituted well within the 20-year prescriptiveperiod provided under Section 22 (b) of the SS Law, as amended, considering that the

contribution delinquency assessment covered the period August 1980 to December 1984.

In view thereof, the instant Motion for Reconsideration is hereby denied for lack of merit.

Petitioner elevated her case to the Court of Appeals via a Petition for Review. Respondent SSS filed

its Comment dated 20 January 2005, and petitioner submitted her Reply thereto on 4 April 2005.

The Court of Appeals, applying Section 28(f) of the Social Security Law,21

again ruled againstpetitioner. It dismissed the petitioner’s Petition in a Decision dated 2 June 2005, the dispositive

portion of which reads:

WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. Theassailed Resolution dated 28 May 2003 and the Order dated 4 August 2004 of the Social

Security Commission are AFFIRMED in toto.

22

Aggrieved, petitioner filed a Motion for Reconsideration of the appellate court’s Decision but her

Motion was denied in a Resolution dated 8 December 2005.

Hence, the instant Petition in which petitioner insists that the Court of Appeals committed grave errorin holding her solely liable for the collected but unremitted SSS premium contributions and theconsequent late penalty payments due thereon. Petitioner anchors her Petition on the following

arguments:

I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A MANAGING HEAD, DIRECTOROR PARTNER IS LIABLE ONLY FOR THE PENALTIES OF THE EMPLOYERCORPORATION AND NOT FOR UNPAID SSS CONTRIBUTIONS OF THE EMPLOYER

CORPORATION.



II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS, DIRECTORS OR PARTNERSWHO SHALL BE LIABLE TOGETHER WITH THE CORPORATION. IN THIS CASE,PETITIONER HAS CEASED TO BE A STOCKHOLDER OF IMPACT CORPORATION IN1982. EVEN WHILE SHE WAS A STOCKHOLDER, SHE NEVER PARTICIPATED IN THE

DAILY OPERATIONS OF IMPACT CORPORATION.

III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY DIRECTORS, TRUSTEESOR OFFICERS WHO PARTICIPATE IN UNLAWFUL ACTS OR ARE GUILTY OF GROSSNEGLIGENCE AND BAD FAITH SHALL BE PERSONALLY LIABLE. OTHERWISE, BEING AMERE STOCKHOLDER, SHE IS LIABLE ONLY TO THE EXTENT OF HER

SUBSCRIPTION.

IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE ECONOMIC LOSSES, EVENTSWHICH WERE NEITHER DESIRED NOR CAUSED BY ANY ACT OF THE PETITIONER.THUS, BY REASON OF FORTUITOUS EVENTS, THE PETITIONER SHOULD BE

ABSOLVED FROM LIABILITY.

V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED MISERABLY IN EXERTING

EFFORTS TO ACQUIRE JURISDICTION OVER THE LEVIABLE ASSETS OF IMPACTCORPORATION, PERSON/S AND/OR ESTATE/S OF THE OTHER DIRECTORS OR

OFFICERS OF IMPACT CORPORATION.

VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN NOT RENDERING AJUDGMENT BY DEFAULT AGAINST THE DIRECTORS UPON WHOM IT ACQUIRED

JURISDICTION.

Based on the foregoing, petitioner prays that the Decision dated 2 June 2005 and the Resolutiondated 8 December 2005 of the Court of Appeals be reversed and set aside, and a new one be

rendered absolving her of any and all liabilities under the Social Security Law.

In sum, the core issue to be resolved in this case is whether or not petitioner, as the only surviving

director of Impact Corporation, can be made solely liable for the corporate obligations of ImpactCorporation pertaining to unremitted SSS premium contributions and penalties therefore.

As a covered employer under the Social Security Law, it is the obligation of Impact Corporation underthe provisions of Sections 18, 19 and 22 thereof, as amended, to deduct from its duly coveredemployee’s monthly salaries their shares as premium contributions and remit the same to the SSS,

together with the employer’s shares of the contributions to the petitioner, for and in their behalf.

From all indications, the corporation has already been dissolved. Respondents are now going after

petitioner who is the only surviving director of Impact Corporation.

A cursory review of the alleged grave errors of law committed by the Court of Appeals above reveals

there seems to be no dispute as to the assessed liability of Impact Corporation for the unremitted SSSpremiums of its employees for the period January 1980 to December 1984.

There is also no dispute as to the fact that the employees’ SSS premium contributions have been

deducted from their salaries by Impact Corporation.

Petitioner in assailing the Court of Appeals Decision, distinguishes the penalties from the unremittedor unpaid SSS premium contributions. She points out that although the appellate court is of theopinion that the concerned officers of an employer corporation are liable for the penalties for non-remittance of premiums, it still affirmed the SSC Resolution holding petitioner liable for the unpaid

SSS premium contributions in addition to the penalties.

Petitioner avers that under the aforesaid provision, the liability does not include liability for theunremitted SSS premium contributions.



Petitioner’s argument is ridiculous. The interpretation petitioner would like us to adopt finds no supportin law or in jurisprudence. While the Court of Appeals Decision provided that Section 28(f) refers tothe liabilities pertaining to penalty for the non-remittance of SSS employee contributions, holding thatit is distinct from the amount of the supposed SSS remittances, petitioner mistakenly concluded thatSection 28(f) is applicable only to penalties and not to the liability of the employer for the unremittedpremium contributions. Clearly, a simplistic interpretation of the law is untenable. It is a rule in

statutory construction that every part of the statute must be interpreted with reference to thecontext, i.e., that every part of the statute must be considered together with the other parts, and keptsubservient to the general intent of the whole enactment.

23 The liability imposed as contemplated

under the foregoing Section 28(f) of the Social Security Law does not preclude the liability for the

unremitted amount. Relevant to Section 28(f) is Section 22 of the same law.

SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the precedingSection shall be remitted to the SSS within the first ten (10) days of each calendar monthfollowing the month for which they are applicable or within such time as the Commission mayprescribe. Every employer required to deduct and to remit such contributions shall be liablefor their payment and if any contribution is not paid to the SSS as herein prescribed, he shallpay besides the contribution a penalty thereon of three percent (3%) per month from the datethe contribution falls due until paid. If deemed expedient and advisable by the Commission,

the collection and remittance of contributions shall be made quarterly or semi-annually inadvance, the contributions payable by the employees to be advanced by their respectiveemployers: Provided, That upon separation of an employee, any contribution so paid inadvance but not due shall be credited or refunded to his employer.

Under Section 22(a), every employer is required to deduct and remit such contributions penalty refersto the 3% penalty that automatically attaches to the delayed SSS premium contributions. The spirit,rather than the letter of a law determines construction of a provision of law. It is a cardinal rule instatutory construction that in interpreting the meaning and scope of a term used in the law, a carefulreview of the whole law involved, as well as the intendment of the law, must be made.

24 Nowhere in

the provision or in the Decision can it be inferred that the persons liable are absolved from paying the

unremitted premium contributions.

Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply themregardless of personal belief or predilections - when the law is unambiguous and unequivocal,application not interpretation thereof is imperative.

25 However, where the language of a statute is

vague and ambiguous, an interpretation thereof is resorted to. An interpretation thereof is necessaryin instances where a literal interpretation would be either impossible or absurd or would lead to aninjustice. A law is deemed ambiguous when it is capable of being understood by reasonably well-informed persons in either of two or more senses.

26 The fact that a law admits of different

interpretations is the best evidence that it is vague and ambiguous.27

In the instant case, petitionerinterprets Section 28(f) of the Social Security Law as applicable only to penalties and not to theliability of the employer for the unremitted premium contributions. Respondents present a more logicalinterpretation that is consistent with the provisions as a whole and with the legislative intent behind

the Social Security Law.

This Court cannot be made to accept an interpretation that would defeat the intent of the law and its

legislators.28

Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the SocialSecurity Law, a mere director or officer of an employer corporation, and not necessarily a "managing"

director or officer, can be held liable for the unpaid SSS premium contributions.

Section 28(f) of the Social Security Law provides the following:

(f) If the act or omission penalized by this Act be committed by an association, partnership,corporation or any other institution, its managing head, directors or partners shall be liable to

the penalties provided in this Act for the offense.



This Court agrees in petitioner’s observation that the SSS did not even deny nor rebut the claim thatpetitioner was not the "managing head" of Impact Corporation. However, the Court of Appeals rightlyheld that petitioner, as a director of Impact Corporation, is among those officers covered by Section

28(f) of the Social Security Law.

Petitioner invokes the rule in statutory construction called ejusdem generic ; that is, where general

words follow an enumeration of persons or things, by words of a particular and specific meaning, suchgeneral words are not to be construed in their widest extent, but are to be held as applying only topersons or things of the same kind or class as those specifically mentioned. According to petitioner, tobe held liable under Section 28(f) of the Social Security Law, one must be the "managing head,""managing director," or "managing partner." This Court though finds no need to resort to statutoryconstruction. Section 28(f) of the Social Security Law imposes penalty on:

(1) the managing head;

(2) directors; or

(3) partners, for offenses committed by a juridical person

The said provision does not qualify that the director or partner should likewise be a "managing

director" or "managing partner."29

The law is clear and unambiguous.

Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, onlydirectors, trustees or officers who participate in unlawful acts or are guilty of gross negligence and badfaith shall be personally liable, and that being a mere stockholder, she is liable only to the extent of

her subscription.

Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers,provides:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully andknowingly vote for or assent to patently unlawful acts of the corporation or who are guilty ofgross negligence or bad faith in directing the affairs of the corporation or acquire any personalor pecuniary interest in conflict with their duty as such directors, or trustees shall be liable

jointly and severally for all damages resulting therefrom suffered by the corporation, its

stockholders or members and other persons.

Basic is the rule that a corporation is invested by law with a personality separate and distinct from thatof the persons composing it as well as from that of any other legal entity to which it may be related. Acorporation is a juridical entity with legal personality separate and distinct from those acting for and inits behalf and, in general, from the people comprising it. Following this, the general rule applied is thatobligations incurred by the corporation, acting through its directors, officers and employees, are itssole liabilities.

30 A director, officer, and employee of a corporation are generally not held personally

liable for obligations incurred by the corporation.

Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist towarrant the disregard of its independent being and the lifting of the corporate veil. This situation mightarise when a corporation is used to evade a just and due obligation or to justify a wrong, to shield orperpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a subterfuge to

commit injustice and so circumvent the law.31

Thus, Section 31 of the Corporation Law provides:

Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held

solidarily liable with the corporation in the following instances:

1. When directors and trustees or, in appropriate cases, the officers of

a corporation--



(a) vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders

or members, and other persons.

2. When a director or officer has consented to the issuance of watered stocks or who, havingknowledge thereof, did not forthwith file with the corporate secretary his written objectionthereto.

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself

personally and solidarily liable with the Corporation.

4. When a director, trustee or officer is made, by specific provision of law, personally liable for

his corporate action.32

The aforesaid provision states:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully andknowingly vote for or assent to patently unlawful acts of the corporation or who are guilty ofgross negligence or bad faith in directing the affairs of the corporation or acquire any personalor pecuniary interest in conflict with their duty as such directors, or trustees shall be liable

jointly and severally for all damages resulting therefrom suffered by the corporation, its

stockholders or members and other persons.

The situation of petitioner, as a director of Impact Corporation when said corporation failed to remitthe SSS premium contributions falls exactly under the fourth situation. Section 28(f) of the SocialSecurity Law imposes a civil liability for any act or omission pertaining to the violation of the Social

Security Law, to wit:

(f) If the act or omission penalized by this Act be committed by an association, partnership,corporation or any other institution, its managing head, directors or partners shall be liable to

the penalties provided in this Act for the offense.

In fact, criminal actions for violations of the Social Security Law are also provided under the Revised

Penal Code. The Social Security Law provides, in Section 28 thereof, to wit:

(h) Any employer who, after deducting the monthly contributions or loan amortizations fromhis employees’ compensation, fails to remit the said deductions to the SSS within thirty (30)days from the date they became due shall be presumed to have misappropriated suchcontributions or loan amortizations and shall suffer the penalties provided in Article Three

hundred fifteen of the Revised Penal Code.

(i) Criminal action arising from a violation of the provisions of this Act may be commenced bythe SSS or the employee concerned either under this Act or in appropriate cases under the

Revised Penal Code: x x x.

Respondents would like this Court to apply another exception to the rule that the persons comprising

a corporation are not personally liable for acts done in the performance of their duties.

The Court of Appeals in the appealed Decision stated:

Anent the unpaid SSS contributions of Impact Corporation’s employees, the officers of acorporation are liable in behalf of a corporation, which no longer exists or has ceasedoperations. Although as a rule, the officers and members of a corporation are not personallyliable for acts done in performance of their duties, this rule admits of exception, one of which



is when the employer corporation is no longer existing and is unable to satisfy the judgment infavor of the employee, the officers should be held liable for acting on behalf of thecorporation. Following the foregoing pronouncement, petitioner, as one of the directors ofImpact Corporation, together with the other directors of the defunct corporation, are liable for

the unpaid SSS contributions of their employees.33

On the other hand, the SSC, in its Resolution, presented this discussion:

Although as a rule, the officers and members of a corporation are not personally liable foracts done in the performance of their duties, this rule admits of exceptions, one of which iswhen the employer corporation is no longer existing and is unable to satisfy the judgment infavor of the employee, the officers should be held liable for acting on behalf of the

corporation. x x x.34

The rationale cited by respondents in the two preceding paragraphs need not have been appliedbecause the personal liability for the unremitted SSS premium contributions and the late penaltythereof attaches to the petitioner as a director of Impact Corporation during the period the amounts

became due and demandable by virtue of a direct provision of law.

Petitioner’s defense that since Impact Corporation suffered irreversible economic losses, and byreason of fortuitous events, she should be absolved from liability, is also untenable. The evidenceadduced totally belies this claim. A reference to the copy of the Petition for Suspension of Payments

filed by Impact Corporation on 18 March 1983 before the SEC contained an admission that:

"[I]t has been and still is engaged in business" and "has been and still is engaged in thebusiness of manufacturing aluminum tube containers" and "in brief, it is an on-going, viable,and profitable enterprise" which has "sufficient assets" and "actual and potential income-

generation capabilities."

The foregoing document negates petitioner’s assertion and supports the contention that during theperiod involved Impact Corporation was still engaged in business and was an ongoing, viable,

profitable enterprise. In fact, the latest SSS form RIA submitted by Impact Corporation is dated 7 May1984. The assessed SSS premium contributions and penalty are obligations imposed upon ImpactCorporation by law, and should have been remitted to the SSS within the first 10 days of eachcalendar month following the month for which they are applicable or within such time as the SSCprescribes.

35

This Court also notes the evident failure on the part of SSS to issue a judgment in default againstRicardo de Leon, who was the vice-president and officer of the corporation, upon his non-filing of aresponsive pleading after summons was served on him. As can be gleaned from Section 11 of theSSS Revised Rules of Procedure, the Commissioner is mandated to render a decision either grantingor denying the petition. Under the aforesaid provision, if respondent fails to answer within the timeprescribed, the Hearing Commissioner may, upon motion of petitioner, or motu proprio, declare

respondent in default and proceed to receive petitioner’s evidence ex parte and thereafterrecommend to the Commission either the granting or denial of the petition as the evidence may

warrant.36

On a final note, this Court sees it proper to quote verbatim respondents’ prefatory statement in

their Comment :

The Social Security System is a government agency imbued with a salutary purpose to carryout the policy of the State to establish, develop, promote and perfect a sound and viable taxexempt social security system suitable to the needs of the people throughout the Philippineswhich shall promote social justice and provide meaningful protection to members and theirbeneficiaries against the hazards of disability, sickness, maternity, old-age, death and other

contingencies resulting in loss of income or financial burden.

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