EN BANC

[G.R. No. L-13555. May 30, 1962.]

THE SOCIAL SECURITY COMMISSION, petitioner, vs. THE HON. JUDGE FROILAN
BAYONA, ET AL., respondents.

Crispin D. Baizas and Solicitor General for petitioner.

M. Herras and D. F . Guytingco for respondents.

SYLLABUS
1. WORDS AND PHRASES; IRREPARABLE INJURY. Damages are irreparable within the meaning of the rule
relative to the issuance of injunction where there is no standard by which their amount can be measured with
reasonable accuracy (Crouch vs. Central Labor Council, 83 ALR, 193). An irreparable injury which a court of
equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce hurt,
inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of
measurement (Phipps vs. Rogue River Valley Canal Co., 7 ALR, 741). An irreparable injury to authorize an
injunction consists of "a serious charge of, or is destructive to, the property it affects, either physically or in the
character in which it has been held and enjoined, or when the property has some peculiar quality or use, so that
its pecuniary value will not fairly recompense the owner of the loss thereof" (Dunker vs. Field and Tub Club, 92 P.,
502). It does not have reference to the amount of damages that may be caused but rather to the difficulty of
measuring the damages inflicted. If full compensation can be obtained by way of damages, equity will not apply
the remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 446).

DECISION

BAUTISTA ANGELO, J p:
On August 30, 1957, the Faculty Club of the University of Santo Tomas, Inc. and San Beda College Lay Faculty
Club, Inc. filed a petition for declaratory relief with preliminary injunction before the Court of First Instance of
Manila alleging in substance that they have existing agreements with their respective employers the University
of Santo Tomas and San Beda College for the establishment of gratuity and retirement funds which have been
in operation prior to September 1, 1957; that the Social Security Commission tried to compel them to integrate
their private systems into the Social Security System on said date; that inasmuch as their private systems grant
more benefits to the members than the Social Security System the integration of their private systems would
deprive their members of property without due process of law, as well as would impair the obligation of their
contract to the detriment of the members. Hence, they prayed for the issuance of preliminary injunction ex
parte commanding the Social Security Commission to desist from compelling them to integrate during the
pendency of the case on the ground that, unless said Commission is enjoined, it might enforce the penal
provisions of the Social Security Act.

On August 30, 1957, the court a quo, Judge Froilan Bayona, presiding, issued ex parte a writ of preliminary
injunction enjoining the Social Security Commission from compelling the integration sought for.
On September 7, 1957, the Social Security Commission moved to dissolve the preliminary injunction on the
following grounds: (1) a statute is presumed constitutional; (2) there is no irreparable injury shown to justify the
issuance of injunction; (3) injunction does not lie against laws for public welfare; (4) injunction does not lie against
enforcement of penal laws; (5) injunction does not lie to stop the collection of contributions under the Social
Security Law; and (6) the preliminary injunction was barred by laches.
The motion to dissolve was denied. A motion for reconsideration of the order having likewise been denied, the
Social Security Commission filed the present petition for certiorari with preliminary injunction.
In charging respondent judge with having acted with grave abuse of discretion in issuing the writ of preliminary
injunction ex parte, petitioner advances the following reasons:
1. Respondent judge enjoined the enforcement of the Social Security Law for the benefit of an
insignificant few who had manifested their defiance against its implementation. It is his
sworn duty to enforce the law and not to tamper with it. The task of suspending the
operation of a social legislation is a matter of extreme delicacy because it is an
interference with the official acts not only of the duly elected representatives of the
people but also of the highest magistrate of the land.
2. The order of respondent judge in effect enjoined the enforcement of a penal statute which he
has no power to do. The rule is that equity will not intervene for the purpose of
enjoining the enforcement of a penal statute even if the same is alleged to be
unconstitutional since such invalidity should be interposed as a defense in a
prosecution based on such statute.
3. Respondent judge cannot enjoin the collection of contributions under the Social Security Law
for the same have the category of taxes which are collectible under the National
Internal Revenue Code.
4. A writ of preliminary injunction should be issued only to prevent great and irreparable injury.
The injury must be actual, positive, substantial and irremediable at law. Respondent
corporations have not shown that they would suffer such injury if the injunction were not
issued.
5. The order of respondent judge places the government in a worse position than a private
litigant for the latter may secure the lifting of an injunction by filing a counterbond. Such
right cannot be exercised by the government for the latter is not by law required to file a
bond.
Respondent corporations, on the other hand, advance the following arguments in refutation of those adduced by
petitioner:
1. It is erroneous to state that the writ of preliminary injunction has the effect of suspending the
operation of the Social Security Law. That law, regardless of any injunction, continues
to be in force except only with respect to those who have private plans of their own in
existence at the time of the effectivity of the law.
2. It is not also correct to state that courts have no power to enjoin the enforcement of penal
statutes even if they are alleged to be unconstitutional, for there are cases in this

jurisdiction which hold that, under penal statutes affecting persons and property rights,
where their constitutionality is doubtful, courts may grant preliminary injunction.
3. While under the law the contributions to the system shall be collected in the same manner as
taxes under the National Revenue Code, the same may be enjoined if special
circumstances exist having relation to the existence of irreparable injury.
4. Petitioner is also in error when it states that respondent corporations have not shown that the
non-issuance of the injunction would cause them irreparable injury. This injury consists
of the following:
(a) To lift the injunction would mean to take away the availability of the funds of
respondent corporation from their members who may borrow them in case of
necessity;
(b) To dissolve the injunction would be to take away respondents' funds which they
may never be able to get back taking note of Section 31 of the Social Security
Act, as amended, which says that no person shall be deemed to be vested with
any property or right by virtue of the enactment of said Act;
(c) If respondent corporations refuse to join the Social Security System, criminal
prosecution would ensue against their officers and members.
A careful evaluation of the foregoing arguments provide us with some observations.
A law is presumed constitutional until otherwise declared by judicial interpretation. The task of suspending the
operation of a law even if alleged to be unconstitutional is a matter of extreme delicacy because it is an
interference with the official acts not only of the duly elected representatives of the people but also of the highest
magistrate of the land. This notwithstanding, respondent corporations resisted the integration of their private
systems into the system established by the Social Security Act, and in order to avoid being recreant to their duty
which may result in their prosecution, they filed the present petition seeking a judicial declaration on its
constitutionality. But pending such action, they sought the restraining hand of the court on the plea that unless the
enforcement of the law is restrained, they would suffer an irreparable injury.
At this stage of the proceeding, it is not the task of the Court to pass on the question of constitutionality of the law.
This concerns the merits of the case. We shall confine our inquiry into the propriety of the issuance of the writ
which is the main issue raised in this petition. The foremost inquiry regarding this issue is the existence or nonexistence of irreparable injury which seems to be the main basis of the issuance of the writ.
Damages are irreparable within the meaning of the rule relative to the issuance of injunction where there is no
standard by which their amount can be measured with reasonable accuracy (Crouch v Central Labor Council, 83
ALR, 193). "An irreparable injury which a court of equity will enjoin includes that degree of wrong of a repeated
and continuing kind which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and
not by any accurate standard of measurement" (Phipps v Rogue River Valley Canal Co., 7 ALR, 741). An
irreparable injury to authorize an injunction consists of "a serious charge of, or is destructive to, the property it
affects, either physically or in the character in which it has been held and enjoined, or when the property has
some peculiar quality or use, so that its pecuniary value will not fairly recompense the owner of the loss thereof"
(Dunker v. Field and Tub Club, 92 P., 502).
Respondent corporations made a lengthy discourse on the matter of irreparable injury they may suffer if the
injunction were not issued, but the array of figures they have laid out merely succeeded in proving that the
damage, if any they may suffer, is susceptible of mathematical computation. It is not then irreparable. As already

stated, this term has a definite meaning in law. It does not have reference to the amount of damages that may be
caused but rather to the difficulty of measuring the damages inflicted. If full compensation can be obtained by way
of damages, equity will not apply the remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 446).

Neither can respondent corporations contend that their integration would mean the destruction of their existing
private systems. The most that can happen would be a diminution of benefits in proportion to the reduction of the
contributions to their private systems. But while they may suffer such reduction in benefits they also stand to
benefit under the government system. Bear in mind that the integration does not mean the discontinuance of the
private system for under the law three alternatives are open to respondents in effecting the integration. 1 In other
words, respondents may continue with whatever private social systems they may have at present as a
complement to the benefits afforded to them under the government system without prejudice to their integration
into the government security system.
It may be conceded that, if the injunction be lifted, the possible damages respondents may suffer are their
contributions and those of their employers to the government security system. But restoration of said contributions
had been assured by petitioner should the provision under consideration be declared unconstitutional and invalid.
There can always be an appropriate arrangement to provide for refund in the event of such circumstance. Surely,
the millions of pesos available to the Social Security System would be more than sufficient to compensate
respondents for the contributions they have made.
The same thing may not be said if the enforcement of the law is restrained, for then respondents would be more
harassed and prejudiced in case the constitutionality of the law is upheld, since they will have to pay all the back
contributions from September, 1957, including interests, up to the time the preliminary injunction is dissolved.
Restoration would then be much more difficult in view of the contingencies that may arise with regard to the
members of their private systems. There are, to be sure, more weighty reasons favoring the lifting of the injunction
issued by respondent judge.
PREMISES CONSIDERED, petition is granted. The writ of preliminary injunction issued by respondent judge is
hereby lifted. No costs.
Padilla, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ ., concur.
Concepcion, C . J ., took no part.
Footnotes
1.(a) To abandon totally their private systems and be integrated into the government system; (b) to integrate
into the government system so much of their contributions as required by law and continue with their
systems with respect to the excess of their contributions; and (c) to be covered by the government
system and continue in full force their private systems (Section 9, Republic Act 1161).
||| (SSS v. Bayona, G.R. No. L-13555, [May 30, 1962], 115 PHIL 106-112)

FIRST DIVISION
[G.R. No. 167050. June 1, 2011.]
SOCIAL SECURITY COMMISSION, petitioner, vs. RIZAL POULTRY and LIVESTOCK
ASSOCIATION, INC., BSD AGRO INDUSTRIAL DEVELOPMENT CORPORATION and
BENJAMIN SAN DIEGO, respondents.

DECISION

PEREZ, J p:
This petition for certiorari challenges the Decision 1 dated 20 September 2004 and Resolution 2 dated 9 February
2005 of the Court of Appeals. The instant case stemmed from a petition filed by Alberto Angeles (Angeles) before
the Social Security Commission (SSC) to compel respondents Rizal Poultry and Livestock Association, Inc. (Rizal
Poultry) or BSD Agro Industrial Development Corporation (BSD Agro) to remit to the Social Security System
(SSS) all contributions due for and in his behalf. Respondents countered with a Motion to Dismiss 3 citing rulings
of the National Labor Relations Commission (NLRC) and Court of Appeals regarding the absence of employeremployee relationship between Angeles and the respondents.
As a brief backgrounder, Angeles had earlier filed a complaint for illegal dismissal against BSD Agro and/or its
owner, Benjamin San Diego (San Diego). The Labor Arbiter initially found that Angeles was an employee and that
he was illegally dismissed. On appeal, however, the NLRC reversed the Labor Arbiter's Decision and held that no
employer-employee relationship existed between Angeles and respondents. The ruling was anchored on the
finding that the duties performed by Angeles, such as carpentry, plumbing, painting and electrical works, were not
independent and integral steps in the essential operations of the company, which is engaged in the poultry
business. 4 Angeles elevated the case to the Court of Appeals via petition for certiorari. The appellate court
affirmed the NLRC ruling and upheld the absence of employer-employee relationship. 5 Angeles moved for
reconsideration but it was denied by the Court of Appeals. 6 No further appeal was undertaken, hence, an entry of
judgment was made on 26 May 2001. 7
At any rate, the SSC did not take into consideration the decision of the NLRC. It denied respondents' motion to
dismiss in an Order dated 19 February 2002. The SSC ratiocinated, thus:
Decisions of the NLRC and other tribunals on the issue of existence of employer-employee
relationship between parties are not binding on the Commission. At most, such finding has only
a persuasive effect and does not constitute res judicata as a ground for dismissal of an action
pending before Us. While it is true that the parties before the NLRC and in this case are the
same, the issues and subject matter are entirely different. The labor case is for illegal dismissal
with demand for backwages and other monetary claims, while the present action is for
remittance of unpaid SS[S] contributions. In other words, although in both suits the respondents
invoke lack of employer-employee relationship, the same does not proceed from identical
causes of action as one is for violation of the Labor Code while the instant case is for violation
of the SS[S] Law. AcSCaI
Moreover, the respondents' arguments raising the absence of employer-employee relationship
as a defense already traverse the very issues of the case at bar, i.e., the petitioner's fact of

employment and entitlement to SS[S] coverage. Generally, factual matters should not weigh in
resolving a motion to dismiss when it is based on the ground of failure to state a cause of
action, but rather, merely the sufficiency or insufficienciy of the allegations in the complaint. . . .
. In this respect, it must be observed that the petitioner very categorically set forth in his
Petition, that he was employed by the respondent(s) from 1985 to 1997. 8
A subsequent motion for reconsideration filed by respondents was likewise denied on 11 June 2002. The SSC
reiterated that the principle of res judicata does not apply in this case because of the "absence of the
indispensable element of 'identity of cause of action.'" 9
Unfazed, respondents sought recourse before the Court of Appeals by way of a petition for certiorari. The Court of
Appeals reversed the rulings of the SSC and held that there is a common issue between the cases before the
SSC and in the NLRC; and it is whether there existed an employer-employee relationship between Angeles and
respondents. Thus, the case falls squarely under the principle of res judicata, particularly under the rule on
conclusiveness of judgment, as enunciated in Smith Bell and Co. v. Court of Appeals. 10
The Court of Appeals disposed, thus:
WHEREFORE, the petition is GRANTED. The Order dated February 19, 2000 and the
Resolution dated June 11, 2002 rendered by public respondent Social Security Commissoin in
SSC Case No. 9-15225-01 are hereby REVERSED and SET ASIDE and the respondent
commission is ordered to DISMISS Social Security Commission Case No. 9-15225-01. 11
After the denial of their motion for reconsideration in a Resolution 12 dated 9 February 2005, petitioner filed the
instant petition.
For our consideration are the issues raised by petitioner, to wit:
WHETHER OR NOT THE DECISION OF THE NLRC AND THE COURT OF APPEALS,
FINDING NO EMPLOYER-EMPLOYEE RELATIONSHIP, CONSTITUTES RES JUDICATA AS
A RULE ON CONCLUSIVENESS OF JUDGMENT AS TO PRECLUDE THE RELITIGATION
OF THE ISSUE OF EMPLOYER-EMPLOYEE RELATIONSHIP IN A SUBSEQUENT CASE
FILED BEFORE THE PETITIONER.
WHETHER OR NOT RESPONDENT COURT OF APPEALS MAY ORDER OUTRIGHT THE
DISMISSAL OF THE SSC CASE IN THE CERTIORARI PROCEEDINGS BEFORE IT. 13
SSC maintains that the prior judgment rendered by the NLRC and Court of Appeals, that no employer-employee
relationship existed between the parties, does not have the force of res judicata by prior judgment or as a rule on
the conclusiveness of judgment. It contends that the labor dispute and the SSC claim do not proceed from the
same cause of action in that the action before SSC is for non-remittance of SSS contributions while the NLRC
case was for illegal dismissal. The element of identity of parties is likewise unavailing in this case, according to
SSC. Aside from SSS intervening, another employer, Rizal Poultry, was added as respondent in the case lodged
before the SSC. There is no showing that BSD Agro and Rizal Poultry refer to the same juridical entity. Thus, the
finding of absence of employer-employee relationship between BSD Agro and Angeles could not automatically
extend to Rizal Poultry. Consequently, SSC assails the order of dismissal of the case lodged before it. cIDHSC
SSC also claims that the evidence submitted in the SSC case is different from that adduced in the NLRC case.
Rather than ordering the dismissal of the SSC case, the Court of Appeals should have allowed SSC to resolve the
case on its merits by applying the Social Security Act of 1997.
Respondents assert that the findings of the NLRC are conclusive upon the SSC under the principle of res
judicata and in line with the ruling in Smith Bell v. Court of Appeals. Respondents argue that there is substantially

an identity of parties in the NLRC and SSC cases because Angeles himself, in his Petition, treated Rizal Poultry,
BSD Agro and San Diego as one and the same entity.
Respondents oppose the view proffered by SSC that the evidence to prove the existence of employer-employee
relationship obtaining before the NLRC and SSS are entirely different. Respondents opine that the definition of an
employee always proceeds from the existence of an employer-employee relationship.
In essence, the main issue to be resolved is whether res judicata applies so as to preclude the SSC from
resolving anew the existence of employer-employee relationship, which issue was previously determined in the
NLRC case.
Res judicata embraces two concepts: (1) bar by prior judgment as enunciated in Rule 39, Section 47 (b) of the
Rules of Civil Procedure; and (2) conclusiveness of judgment in Rule 39, Section 47 (c). 14
There is "bar by prior judgment" when, as between the first case where the judgment was rendered and the
second case that is sought to be barred, there is identity of parties, subject matter, and causes of action. In this
instance, the judgment in the first case constitutes an absolute bar to the second action. 15
But where there is identity of parties in the first and second cases, but no identity of causes of action, the first
judgment is conclusive only as to those matters actually and directly controverted and determined and not as to
matters merely involved therein. This is the concept of res judicata known as "conclusiveness of judgment."
Stated differently, any right, fact or matter in issue directly adjudicated or necessarily involved in the determination
of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the
judgment therein and cannot again be litigated between the parties and their privies, whether or not the claim,
demand, purpose, or subject matter of the two actions is the same. 16
Thus, if a particular point or question is in issue in the second action, and the judgment will depend on the
determination of that particular point or question, a former judgment between the same parties or their privies will
be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit.
Identity of cause of action is not required but merely identity of issue. 17
The elements of res judicata are: (1) the judgment sought to bar the new action must be final; (2) the decision
must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the disposition
of the case must be a judgment on the merits; and (4) there must be as between the first and second action,
identity of parties, subject matter, and causes of action. Should identity of parties, subject matter, and causes of
action be shown in the two cases, then res judicata in its aspect as a "bar by prior judgment" would apply. If as
between the two cases, only identity of parties can be shown, but not identical causes of action, then res
judicata as "conclusiveness of judgment" applies. 18 ATcEDS
Verily, the principle of res judicata in the mode of "conclusiveness of judgment" applies in this case. The first
element is present in this case. The NLRC ruling was affirmed by the Court of Appeals. It was a judicial
affirmation through a decision duly promulgated and rendered final and executory when no appeal was
undertaken within the reglementary period. The jurisdiction of the NLRC, which is a quasi-judicial body, was
undisputed. Neither can the jurisdiction of the Court of Appeals over the NLRC decision be the subject of a
dispute. The NLRC case was clearly decided on its merits; likewise on the merits was the affirmance of the NLRC
by the Court of Appeals.
With respect to the fourth element of identity of parties, we hold that there is substantial compliance.
The parties in SSC and NLRC cases are not strictly identical. Rizal Poultry was impleaded as additional
respondent in the SSC case. Jurisprudence however does not dictate absolute identity but only substantial

identity. 19 There is substantial identity of parties when there is a community of interest between a party in the
first case and a party in the second case, even if the latter was not impleaded in the first case. 20
BSD Agro, Rizal Poultry and San Diego were litigating under one and the same entity both before the NLRC and
the SSC. Although Rizal Poultry is not a party in the NLRC case, there are numerous indications that all the while,
Rizal Poultry was also an employer of Angeles together with BSD Agro and San Diego. Angeles admitted before
the NLRC that he was employed by BSD Agro and San Diego from 1985 until 1997. 21 He made a similar claim
in his Petition before the SSC including as employer Rizal Poultry as respondent. 22 Angeles presented as
evidence before the SSC his Identification Card and a Job Order to prove his employment in Rizal Poultry. He
clarified in his Opposition to the Motion to Dismiss 23 filed before SSC that he failed to adduce these as evidence
before the NLRC even if it would have proven his employment with BSD Agro. Most significantly, the three
respondents, BSD Agro, Rizal Poultry and San Diego, litigated as one entity before the SSC. They were
represented by one counsel and they submitted their pleadings as such one entity. Certainly, and at the very
least, a community of interest exists among them. We therefore rule that there is substantial if not actual identity
of parties both in the NLRC and SSC cases.
As previously stated, an identity in the cause of action need not obtain in order to apply res judicata by
"conclusiveness of judgment." An identity of issues would suffice.
The remittance of SSS contributions is mandated by Section 22 (a) of the Social Security Act of 1997, viz.:
SEC. 22.Remittance of Contributions. (a) The contributions imposed in the preceding
Section shall be remitted to the SSS within the first ten (10) days of each calendar month
following the month for which they are applicable or within such time as the Commission may
prescribe. Every employer required to deduct and to remit such contributions shall be liable for
their payment and if any contribution is not paid to the SSS as herein prescribed, he shall pay
besides the contribution a penalty thereon of three percent (3%) per month from the date the
contribution falls due until paid. . . . .
The mandatory coverage under the Social Security Act is premised on the existence of an employer-employee
relationship. 24 This is evident from Section 9 (a) which provides:
SEC. 9.Coverage. (a) Coverage in the SSS shall be compulsory upon all employees not
over sixty (60) years of age and their employers: Provided, That in the case of domestic
helpers, their monthly income shall not be less than One thousand pesos (P1,000.00) a month .
...
Section 8 (d) of the same law defines an employee as any person who performs services for an employer in
which either or both mental or physical efforts are used and who receives compensation for such services, where
there is an employer-employee relationship. The illegal dismissal case before the NLRC involved an inquiry into
the existence or non-existence of an employer-employee relationship. The very same inquiry is needed in the
SSC case. And there was no indication therein that there is an essential conceptual difference between the
definition of "employee" under the Labor Code and the Social Security Act.
In the instant case, therefore, res judicata in the concept of "conclusiveness of judgment" applies. The judgment
in the NLRC case pertaining to a finding of an absence of employer-employee relationship between Angeles and
respondents is conclusive on the SSC case.
A case in point is Smith Bell and Co. v. Court of Appeals 25 which, contrary to SSC, is apt and proper reference.
Smith Bell availed of the services of private respondents to transport cargoes from the pier to the company's
warehouse. Cases were filed against Smith Bell, one for illegal dismissal before the NLRC and the other one with
the SSC, to direct Smith Bell to report all private respondents to the SSS for coverage. While the SSC case was

pending before the Court of Appeals, Smith Bell presented the resolution of the Supreme Court in G.R. No. L44620, which affirmed the NLRC, Secretary of Labor, and Court of Appeals' finding that no employer-employee
relationship existed between the parties, to constitute as bar to the SSC case. We granted the petition of Smith
Bell and ordered the dismissal of the case. We held that the controversy is squarely covered by the principle
of res judicata, particularly under the rule on "conclusiveness of judgment." Therefore, the judgment in G.R. No. L44620 bars the SSC case, as the relief sought in the latter case is inextricably related to the ruling in G.R. No. L44620 to the effect that private respondents are not employees of Smith Bell. IHDCcT
The fairly recent case of Co v. People, 26 likewise applies to the present case. An information was filed against
Co by private respondent spouses who claim to be employees of the former for violation of the Social Security
Act, specifically for non-remittance of SSS contributions. Earlier, respondent spouses had filed a labor case for
illegal dismissal. The NLRC finally ruled that there was no employer-employee relationship between her and
respondent spouses. Co then filed a motion to quash the information, arguing that the facts alleged in the
Information did not constitute an offense because respondent spouses were not her employees. In support of her
motion, she cited the NLRC ruling. This Court applied Smith Bell and declared that the final and executory NLRC
decision to the effect that respondent spouses were not the employees of petitioner is a ruling binding in the case
for violation of the Social Security Act. The Court further stated that the doctrine of "conclusiveness of judgment"
also applies in criminal cases. 27
Applying the rule on res judicata by "conclusiveness of judgment" in conjunction with the aforecited cases, the
Court of Appeals aptly ruled, thus:
In SSC Case No. 9-15225-01, private respondent Angeles is seeking to compel herein
petitioners to remit to the Social Security System (SSS) all contributions due for and in his
behalf, whereas in NLRC NCR CA 018066-99 (NLRC RAB-IV-5-9028-97-RI) private
respondent prayed for the declaration of his dismissal illegal. In SSC No. 9-15225-01, private
respondent, in seeking to enforce his alleged right to compulsory SSS coverage, alleged that
he had been an employee of petitioners; whereas to support his position in the labor case that
he was illegally dismissed by petitioners BSD Agro and/or Benjamin San Diego, he asserted
that there was an employer-employee relationship existing between him and petitioners at the
time of his dismissal in 1997. Simply stated, the issue common to both cases is whether there
existed an employer-employee relationship between private respondent and petitioners at the
time of the acts complaint of were committed both in SSC Case No. 9-15225-01 and NLRC
NCR CA 018066-99 (NLRC RAB-IV-5-9028-977-RI).
The issue of employer-employee relationship was laid to rest in CA G.R. SP. No. 55383,
through this Court's Decision dated October 27, 2000 which has long attained finality. Our
affirmation of the NLRC decision of May 18, 1999 was an adjudication on the merits of the
case.
Considering the foregoing circumstances, the instant case falls squarely under the umbrage
of res judicata, particularly, under the rule on conclusiveness of judgment. Following this rule,
as enunciated in Smith Bell and Co. and Carriaga, Jr. cases, We hold that the relief sought in
SSC Case No. 9-15225-01 is inextricably related to Our ruling in CA G.R. SP No. 55383 to the
effect that private respondent was not an employee of petitioners. 28
The NLRC decision on the absence of employer-employee relationship being binding in the SSC case, we affirm
the dismissal by Court of Appeals of the SSC case.
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated 20 September
2004, as well as its Resolution dated 9 February 2005, isAFFIRMED.

THIRD DIVISION
[G.R. NO. 172101. November 23, 2007.]
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION
and SOCIAL SECURITY SYSTEM, petitioners, vs. ASIAPRO COOPERATIVE, respondent.

DECISION

CHICO-NAZARIO, J p:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil
Procedure seeking to annul and set aside the Decision 1 and Resolution 2 of the Court of Appeals in CA-G.R. SP
No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of
the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 2004 3 and 16
September 2004, 4 respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein
petitioner Social Security System (SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to
resolve disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282. 5 Petitioner SSS is
a government corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein
respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No.
6938 6 and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460. 7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members
are of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership;
and (2) associate member, who has no right to vote and be voted upon and shall be entitled only to such rights
and privileges provided in its by-laws. 8 Its primary objectives are to provide savings and credit facilities and to
develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service Contracts 9 with Stanfilco a division of DOLE Philippines,
Inc. and a company based in Bukidnon. The owners-members do not receive compensation or wages from the
respondent cooperative. Instead, they receive a share in the service surplus 10 which the respondent cooperative
earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with
Stanfilco. The owners-members get their income from the service surplus generated by the quality and amount of
services they rendered, which is determined by the Board of Directors of the respondent cooperative. DaTHAc
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent
cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner
SSS as self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act
No. 1161, as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal
to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A.
Jara, sent a letter 11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General

Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco,
respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it
is an employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself
with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions
in accordance with the Social Security Law of 1997. On 9 October 2002, 12 respondent cooperative, through its
counsel, sent a reply to petitioner SSS's letter asserting that it is not an employer because its owners-members
are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002, 13petitioner SSS
sent a letter to respondent cooperative ordering the latter to register as an employer and report its ownersmembers as employees for compulsory coverage with the petitioner SSS. Respondent cooperative continuously
ignored the demand of petitioner SSS. IAETDc
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition 14 before petitioner SSC against the respondent
cooperative and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to
register as an employer and to report respondent cooperative's owners-members as covered employees under
the compulsory coverage of SSS and to remit the necessary contributions in accordance with the Social Security
Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer
with Motion to Dismiss alleging that no employer-employee relationship exists between it and its ownersmembers, thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand,
filed an Answer with Cross-claim against the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent
cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise
denied in another Order issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a
Petition for Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation
stating that it was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition
for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of
errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were
issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction
in that: SITCEA
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the
petition a quo, considering that it failed to first resolve the issue of the
existence of an employer-employee relationship between [respondent]
cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the
SSS Law with respect to coverage, benefits, contributions, and related matters,
it is respectfully submitted that [petitioner] SSC may only assume jurisdiction in
cases where there is no dispute as to the existence of an employer-employee
relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee
relationship raised in [respondent's] Motion to Dismiss can be preliminarily
resolved through summary hearings prior to the hearing on the merits.
However, any inquiry beyond a preliminary determination, as what [petitioner
SSC] wants to accomplish, would be to encroach on the jurisdiction of the
National Labor Relations Commission [NLRC], which is the more competent

body clothed with power to resolve issues relating to the existence of an

employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a
quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law but is a
multi-purpose cooperative created pursuant to Republic Act No. 6938 and
composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are
derived from their Membership Agreements, the Cooperatives By-Laws,
and Republic Act No. 6938, and not from any contract of employment or from
the Labor Laws. Moreover, said owners-members enjoy rights that are not
consistent with being mere employees of a company, such as the right to
participate and vote in decision-making for the cooperative. aCcEHS
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of
[respondent] cooperative are not paid any compensation income. 15(Emphasis
supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent
cooperative. The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and
[16 September 2004], are ANNULLED and SET ASIDE and a new one is
entered DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social
Security System. 16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the
appellate court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that
the SSC has jurisdiction over the subject matter and it has a valid basis in denying respondent's Motion
to Dismiss. The said issue is supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the
[petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner
SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss
before it. IEDHAT
III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent
[cooperative's] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where
presentation of evidence is necessary.
V. There is an employer-employee relationship between [respondent cooperative] and its
[owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it
involved an issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners
avow that Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon
petitioner SSC the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon
or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is
compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent
cooperative and Stanfilco before the petitioner SSC for the compulsory coverage of respondent cooperative's
owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the subject matter
of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an
employer-employee relationship between the respondent cooperative and its owners-members, said issue does
not preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the
principal relief sought in the said petition-complaint has to be resolved by reference to the Social Security
Law and not to the Labor Code or other labor relations statutes, therefore, jurisdiction over the same solely
belongs to petitioner SSC. DEIHSa
Petitioners further claim that the denial of the respondent cooperative's Motion to Dismiss grounded on the
alleged lack of employer-employee relationship does not constitute grave abuse of discretion on the part of
petitioner SSC because the latter has the authority and power to deny the same. Moreover, the existence of an
employer-employee relationship is a question of fact where presentation of evidence is necessary. Petitioners
also maintain that the respondent cooperative is already estopped from assailing the jurisdiction of the petitioner
SSC because it has already filed its Answer before it, thus, respondent cooperative has already submitted itself to
the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative
and its owners-members. The respondent cooperative is the employer of its owners-members considering that it
undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the
respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no
employer-employee relationship can arise between them. The persons of the employer and the employee are
merged in the owners-members themselves. Likewise, respondent cooperative's owners-members even
requested the respondent cooperative to register them with the petitioner SSS as self-employed individuals.
Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with
grave abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there
was an employer-employee relationship between the respondent cooperative and its owners-members.
Respondent cooperative claims that the question of whether an employer-employee relationship exists between it
and its owners-members is a legal and not a factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence. IDATCE
Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of
petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction
is raised at the very first instance and where the only relief being sought is the dismissal of the petition-complaint
for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it
by petitioner SSS against the respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of
petitioner SSC since it had already filed an Answer with Motion to Dismiss before
the said body.
Petitioner SSC's jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III
of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to
coverage, benefits, contributions and penalties thereon or any other matter related thereto,
shall be cognizable by the Commission, . . . . (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. Any dispute arising under the Social Security Act with respect to
coverage, entitlement of benefits, collection and settlement of contributions and penalties
thereon, or any other matter related thereto, shall be cognizable by the 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.) cSCADE
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. IaHAcT
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 employeremployee 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) . . . .
xxx xxx xxx
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations, including
those of persons in domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement. 20
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues
on the coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the
question on the existence of an employer-employee relationship for the purpose of determining the coverage
of the Social Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the
jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the Social
Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of
compulsory coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner
SSC when it declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory
coverage, it may inquire into the presence or absence of an employer-employee relationship without need of
waiting for a prior pronouncement or submitting the issue to the NLRC for prior determination. Since both the
petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the separate
statutes creating them, petitioner SSC has the authority to inquire into the relationship existing between the
worker and the person or entity to whom he renders service to determine if the employment, indeed, is one that is
excepted by the Social Security Law of 1997 from compulsory coverage. 21
Even before the petitioner SSC could make a determination of the existence of an employer-employee
relationship, however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its
Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the
petitioner SSC became a party to the said Petition for Certiorari pursuant to Section 5 (b) 22 of Republic Act No.
8282. The appellate court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no
jurisdiction over the petition-complaint filed before it because there was no employer-employee relationship
between the respondent cooperative and its owners-members. Resultantly, the petitioners SSS and SSC,
representing the Republic of the Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and the
findings of fact of the Court of Appeals are conclusive and binding on the Court, 23 said rule is not without
exceptions. There are several recognized exceptions 24 in which factual issues may be resolved by this Court.
One of these exceptions finds application in this present case which is, when the findings of fact are conflicting.
There are, indeed, conflicting findings espoused by the petitioner SSC and the appellate court relative to the
existence of employer-employee relationship between the respondent cooperative and its owners-members,
which necessitates a departure from the oft-repeated rule that factual issues may not be the subject of appeals to
this Court. cECaHA

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of
dismissal; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. 25 The most important element is the employer's control of the employee's conduct, not
only as to the result of the work to be done, but also as to the means and methods to accomplish. 26 The
power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not
essential for the employer to actually supervise the performance of duties of the employee; it is enough that the
employer has the right to wield that power. 27 All the aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has
the exclusive discretion in the selection and engagement of the owners-members as well as its team
leaders who will be assigned at Stanfilco. 28 Second. Wages are defined as "remuneration or earnings,
however designated, capable of being expressed in terms of money, whether fixed or ascertained, on a time,
task, piece or commission basis, or other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work done or to be done, or for
service rendered or to be rendered." 29 In this case, the weekly stipends or the so-called shares in the service
surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were
equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the
wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates of
wages. 30 It cannot be doubted then that those stipends or shares in the service surplus are indeed wages,
because these are given to the owners-members as compensation in rendering services to respondent
cooperative's client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts that it is the
respondent cooperative which has the power to investigate, discipline and remove the owners-members and
its team leaders who were rendering services at Stanfilco. 31 Fourth. As earlier opined, of the four elements of
the employer-employee relationship, the "control test" is the most important. In the case at bar, it is
the respondent cooperative which has the sole control over the manner and means of performing the
services under the Service Contracts with Stanfilco as well as the means and methods of work. 32 Also,
the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other
representatives at Stanfilco. 33 All these clearly prove that, indeed, there is an employer-employee relationship
between the respondent cooperative and its owners-members. DIETHS
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 the respondent cooperative and its ownersmembers. 34 This Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually exists between the
respondent cooperative and its owners-members. The four elements in the four-fold test for the existence of an
employment relationship have been complied with. The respondent cooperative must not be allowed to deny its
employment relationship with its owners-members by invoking the questionable Service Contracts provision,
when in actuality, it does exist. The existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise.
The employment status of a person is defined and prescribed by law and not by what the parties say it
should be. 35
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However, the agreed terms and
conditions must not be contrary to law, morals, customs, public policy or public order. 36 The Service
Contract provision in question must be struck down for being contrary to law and public policy since it is
apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its
employees, who are also its owners-members, by the Social Security Law. AIHTEa

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. FerrerCalleja 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 . . . .
An employee therefore of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining for certainly an owner cannot bargain
with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he
correctly opined that employees of cooperatives who are themselves members of the
cooperative have no right to form or join labor organizations for purposes of collective
bargaining for being themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees who are not members or coowners 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-member's 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. TIHCcA
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative
Development Authority. 38 It has its Board of Directors, which directs and supervises its business; meaning, its
Board of Directors is the one in charge in the conduct and management of its affairs. 39 With that, a cooperative
can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently,
an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can
exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460. 40 In its by-laws, 41 its
Board of Directors directs, controls, and supervises the business and manages the property of the respondent
cooperative. Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of
Directors and not in its 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. IAcTaC
SO ORDERED.
||| (Republic v. Asiapro Cooperative, G.R. NO. 172101, [November 23, 2007], 563 PHIL 979-1003)

EN BANC
[G.R. No. L-21448. August 30, 1967.]
POBLETE CONSTRUCTION CO., petitioner, vs. JUDITH ASIAIN, SOCIAL SECURITY
COMMISSION, and BENITO MACRHON, in his capacity as Sheriff of Rizal, respondents.

Fernando B. Duque and Yolando F . Bustamante for petitioner.

Solicitor General A. A. Alafriz, Solicitor C .D. Quiason and Atty. L.A.L. Javellana and E. T . Duran for respondent
SSC.
Orlando V . Calsado for-respondent Asiain.

SYLLABUS
1. SOCIAL SECURITY SYSTEM; COMPULSORY COVERAGE; EMPLOYEE'S UNWILLINGNESS TO GIVE HIS
SHARE OF THE CONTRIBUTION; EFFECT THEREOF. There is no question that the deceased
Miguel Asiain was subject to compulsory coverage in the Social Security System, although the deceased's SSS
Form E-1 (Employees' Date Record) was never filed with the Social Security System for the reason, according to
the company, that he refused to have his share of the corresponding monthly contributions deducted from his
salary. It was the duty of the employer to "report immediately to the System" his name, age, civil status,
occupation, salary and dependents Compliance with this duty did not depend upon the employee's willingness to
give his share of the contribution. Section 24 is mandatory, to such an extent that if the employee should die or
become sick or disabled without the report having been made by the employer, the latter is liable for an amount
equivalent to the benefits to which the employee would have been entitled had such report been made.
2. ID.; ID.; ID.; ID.; CLAIMS IN SECTION 5(a) OF THE SOCIAL SECURITY ACT DEEMED TO INCLUDE CLAIM
FOR DAMAGES UNDER SECTION 24; JURISDICTION OF SOCIAL SECURITY COMMISSION TO AWARD
DAMAGES AFFIRMED. It is true that Section 24 uses the word "damages" in referring to the amount that may
be claimed. But this fact alone does not mean that the Social Security Commission lacks jurisdiction to award the
same. Section 5(a) of the Social Security Act provides that "the filing, determination and settlement of claims shall
be governed by the rules and regulations promulgated by the Commission;" and the rules and regulations thus
promulgated state that "the effectivity of membership in the System, as well as the final determination and
settlement of claims, shall be vested in the Commission." The term 'claims" is broad enough to include a claim for
damages under Section 24. Otherwise am employer could nullify the jurisdiction of the Commission by the simple
expedient of not making a report as required by said Section.

DECISION

MAKALINTAL, J p:
Miguel Asiain was an employee of the Poblete Construction Company from 1956 until his death on November 22,
1959, with a monthly salary of P300. Upon his death his widow, Judith Asiain, for herself and her minor children,

filed a petition before the Social Security Commission against the company and its manager,
DomingoPoblete (Case No. 78), to recover the following sums: (1) P3,600.00 equivalent to one year's salary of
the deceased; (2) P600.00 representing his unpaid salary for two months; (3) P288,00 "representing the cash
received by respondents from their laborers as contribution to the family of the deceased;" and (4) P2,000.00 by
way of attorney's fees.
The respondents below moved to dismiss the petition on the grounds that the Social Security Commission had no
jurisdiction over the subject-matter and that the petitioner Judith Asiain had no capacity to sue. The Commission
denied the motion to dismiss in its order of February 25, 1960 and ordered the respondents to file their answer.
When no answer was forthcoming, the respondents were declared in default in an order dated March 9, 1960,
and the petitioners were allowed to present their evidence.
In its resolution of September 15, 1960 the Commission declared itself without jurisdiction to entertain the claims
in the petition except the one for the sum of P3,600, which it awarded on the basis of the evidence adduced at the
hearing and pursuant to Section 24 of Republic Act No. 1161, as amended. A subsequent motion for
reconsideration filed by the respondents was denied, and they elevated the case for review by the Court of
Appeals, which upon proper application issued a writ of preliminary injunction to stop all further proceedings
below, including execution of the award.
The case was afterwards certified to this Court for the reason that when the respondents below were declared in
default they lost their standing before the Commission, and not having regained the same by a motion to set aside
or petition for relief, they had no right to appeal from the default judgment; and that in any event no questions of
fact are involved and hence, if at all appealable, the appeal should be directly to this Court.
The procedural issues, we believe, need not concern us. The main point raised here by the Poblete Construction
Company, which it raised also in its motion to dismiss before the Commission, is that the said body had no
jurisdiction to entertain the claim of P3,600, which should have been presented before the ordinary courts. This
claim was filed under Section 24 of the Social Security Act (R.A. 1161, as amended), which provides:
'SEC. 24. Employment records and reports. (a) each employer shall report immediately to
the System the names, ages, civil status, occupations, salaries and dependents of all his
employees who are in his employ and who are or may later be subject to compulsory coverage:
Provided, That if an employee subject to compulsory coverage should die or become sick or
disabled without the System having previously received a report about him from his employer,
the said employer shall pay to the employee or his legal heirs damages equivalent to the
benefits to which said employee would have been entitled had his name been reported on time
by the employer to the System."
It appears that although the deceased Miguel Asiain had been employed in the Poblete Construction Company
since 1956 and had accomplished SSS Form E-1 (Employees' Date Record) and transmitted the same to the said
company's Manila Office, it was never filed with the Social Security System for the reason, according to the
company, that he refused to have his share of the corresponding monthly contributions deducted from his salary.
Upon these facts the company maintains that the deceased was not a member of the System when he died and
hence the adjudication of the claim for damages under Section 24, supra, does not pertain to the Commission but
to the courts of justice.
We find the argument untenable. There is no question that the deceased Miguel Asiain was subject to compulsory
coverage in the Social Security System. 1 It was the duty of the employer to "report immediately to the System"
his name, age, civil status, occupation, salary and dependents. Compliance with this duty did not depend upon
the employee's willingness to give his share of the contribution. Section 24 is mandatory, to such an extent that if
the employee should die or become sick or disabled without the report having been made by the employer, the

latter is liable for an amount equivalent to the benefits to which the employee would have been entitled had such
report been made. It is true that the provision uses the word "damages" in referring to the amount that may be
claimed. But this fact alone does not mean that the Social Security Commission lacks jurisdiction to award the
same. Section 5(a) of the Social Security Act provides that "the filing, determination and settlement of claims shall
be governed by the rules and regulations promulgated by the Commission;" and the rules and regulations thus
promulgated state that "the effectivity of membership in the System, as well as the final determination and
settlement of claims, shall be vested in the Commission." The term "claims" is broad enough to include a claim for
"damages" under Section 24. Otherwise an employer could nullify the jurisdiction of the Commission by the
simple expedient of not making a report as required by said Section. The collection of the employee's share is a
duty imposed by law, and his unwillingness to have it deducted from his salary does not excuse the employer's
failure to make the report aforesaid. It is precisely in this situation that the employer is liable, and there is no
question as to the amount of such liability in this case.
The decision of the Social Security Commission is affirmed, and the writ of preliminary injunction is dissolved, with
costs against herein petitioner.
||| (Poblete Construction Co. v. Asiain, G.R. No. L-21448, [August 30, 1967], 127 PHIL 573-577)

SECOND DIVISION
[G.R. No. 125837. October 6, 2004.]
REYNALDO CANO CHUA, doing business under the name & style PRIME MOVER
CONSTRUCTION DEVELOPMENT, petitioner, vs. COURT OF APPEALS, SOCIAL
SECURITY COMMISSION, SOCIAL SECURITY SYSTEM, ANDRES PAGUIO, PABLO
CANALE, RUEL PANGAN, AURELIO PAGUIO, ROLANDO TRINIDAD, ROMEO TAPANG
and CARLOS MALIWAT, respondents.

DECISION

TINGA, J p:
This is a petition for review of the Decision 1 of the Court of Appeals in CA-G.R. CV No. 38269 dated 06 March
1996, and its Resolution dated 30 July 1996 denying petitioner's Motion for Reconsideration, 2 affirming the Order
of the Social Security Commission (SSC) dated 1 February 1995 3 which held that private respondents were
regular employees of the petitioner and ordered petitioner to pay the Social Security System (SSS) for its unpaid
contributions, as well as penalty for the delayed remittance thereof.
On 20 August 1985, private respondents Andres Paguio, Pablo Canale, Ruel Pangan, Aurelio Paguio, Rolando
Trinidad, Romeo Tapang and Carlos Maliwat (hereinafter referred to as respondents) filed a Petition 4 with the
SSC for SSS coverage and contributions against petitioner Reynaldo Chua, owner of Prime Mover Construction
Development, claiming that they were all regular employees of the petitioner in his construction business. 5
Private respondents claimed that they were assigned by petitioner in his various construction projects
continuously in the following capacity, since the period indicated, and with the corresponding basic salaries, 6 to
wit:
Andres Paguio Carpenter 1977 P42/day
Pablo Canale Mason 1977 42/day
Ruel Pangan Mason 1979 39/day
Aurelio Paguio Fine grading 1979 42/day
Romeo Tapang Fine grading 1979 42/day
Rolando Trinidad Carpenter 1983 (Jan.) 39/day
Carlos Maliwat Mason 1977 42/day
Private respondents alleged that petitioner dismissed all of them without justifiable grounds and without notice to
them and to the then Ministry of Labor and Employment. They further alleged that petitioner did not report them to
the SSS for compulsory coverage in flagrant violation of the Social Security Act. 7
In his Answer, 8 petitioner claimed that private respondents had no cause of action against him, and assuming
there was any, the same was barred by prescription and laches. In addition, he claimed that private respondents

were not regular employees, but project employees whose work had been fixed for a specific project or
undertaking the completion of which was determined at the time of their engagement. This being the case, he
concluded that said employees were not entitled to coverage under the Social Security Act. 9
Meanwhile, the SSS filed a Petition in Intervention 10 alleging that it has an interest in the petition filed by private
respondents as it is charged with the implementation and enforcement of the provisions of the Social Security Act.
The SSS stated that it is the mandatory obligation of every employer to report its employees to the SSS for
coverage and to remit the required contribution, including the penalty imposed for late premium
remittances. CSIDEc
On 01 February 1995, the SSC issued its Order 11 which ruled in favor of private respondents. The SSC, relying
on NLRC Case No. RAB-III-8-2373-85, 12 declared private respondents to be petitioner's regular employees. 13 It
ordered petitioner to pay the SSS the unpaid SS/EC and Medicare contributions plus penalty for the delayed
remittance thereof, without prejudice to any other penalties which may have accrued. 14 The SSC denied
the Motion for Reconsideration 15 of petitioner for lack of merit.16
Petitioner elevated the matter to the Court of Appeals via a Petition for Review. 17 He claimed that private
respondents were project employees, whose periods of employment were terminated upon completion of the
project. Thus, he claimed, no employer-employee relation existed between the parties. 18 There being no
employer-employee relationship, private respondents are not entitled to coverage under the Social Security
Act. 19 In addition, petitioner claimed that private respondents' length of service did not change their status from
project to regular employees. 20
Moreover, granting that private respondents were entitled to coverage under the Act, petitioner claimed that the
SSC erred in imposing penalties since his failure to include private respondents under SSS coverage was neither
willful nor deliberate, but due to the honest belief that project employees are not regular employees. 21Likewise,
he claimed that the SSC erred in ordering payment of contributions and penalties even for long periods between
projects when private respondents were not working. 22
Petitioner also questioned the failure to apply the rules on prescription of actions and of laches, claiming that the
case, being one for the injury to the rights of the private respondents, should have been filed within four (4) years
from the time their cause of action accrued, or from the time they were hired as project employees. He added that
private respondents "went into a long swoon, folded their arms and closed their eyes" 23 and filed their claim only
in 1985, or six (6) years or eight (8) years after they were taken in by petitioner. 24
In resolving the petition, the Court of Appeals synthesized the issues in the petition, to wit: (1) whether private
respondents were regular employees of petitioner, and whether their causes of action as such are barred by
prescription or laches; (2) if so, whether petitioner is now liable to pay the SSS contributions and penalties during
the period of employment. 25
The Court of Appeals, citing Article 280 of the Labor Code, 26 declared that private respondents were all regular
employees of the petitioner in relation to certain activities since they all worked either as masons, carpenters and
fine graders in petitioner's various construction projects for at least one year, and that their work was necessary
and desirable to petitioner's business which involved the construction of roads and bridges. 27 It cited the case
of Mehitabel Furniture Company, Inc. v. NLRC,28 particularly the ruling therein which states:
By petitioner's own admission, the private respondents have been hired to work on certain
special orders that as a matter of business policy it cannot decline. These projects are
necessary or desirable in its usual business or trade, otherwise they would not have accepted .
. . Significantly, such special orders are not really seasonal but more or less regular, requiring
the virtually continuous services of the "temporary workers." The NLRC also correctly observed

that "if we were to accept respondent's theory, it would have no regular workers because all of
its orders would be special undertakings or projects." The petitioner could then hire all its
workers on a contract basis only and prevent them from attaining permanent status . . .
Furthermore, the NLRC has determined that the private respondents have worked for more
than one year in the so-called "special projects" of the petitioner and so fall under the second
condition specified in the above-quoted provision (Article 280, Labor Code). 29
The Court of Appeals rejected the claim of prescription, stating that the filing of private respondents' claims was
well within the twenty (20)-year period provided by the Social Security Act. 30 It found that the principle of laches
could not also apply to the instant case since delay could not be attributed to private respondents, having filed the
case within the prescriptive period, and that there was no evidence that petitioner lacked knowledge that private
respondents would assert their rights. 31
Petitioner filed a Motion for Reconsideration, 32 claiming that the Court of Appeals overlooked (1) the doctrine
that length of service of a project employee is not the controlling test of employment tenure, and (2) petitioner's
failure to place private respondents under SSS coverage was in good faith. The motion was denied for lack of
merit. 33
In the present Petition for Review, petitioner again insists that private respondents were not regular, but project,
employees and thus not subject to SSS coverage. In addition, petitioner claims that assuming private respondents
were subject to SSS coverage, their petition was barred by prescription and laches. Moreover, petitioner invokes
the defense of good faith, or his honest belief that project employees are not regular employees under Article 280
of the Labor Code. aHcACT
Petitioner's arguments are mere reiterations of his arguments submitted before the SSC and the Court of
Appeals. More importantly, petitioner wants this Court to review factual questions already passed upon by the
SSC and the Court of Appeals which are not cognizable by a petition for review under Rule 45. Well-entrenched is
the rule that the Supreme Court's jurisdiction in a petition for review is limited to reviewing or revising errors of law
allegedly committed by the appellate court, the findings of fact being generally conclusive on the Court and it is
not for the Court to weigh evidence all over again. 34
Stripped of the lengthy, if not repetitive, disquisition of the private parties in the case, and also of the public
respondents, on the nature of private respondents' employment, the controversy boils down to one issue: the
entitlement of private respondents to compulsory SSS coverage.
The Social Security Act was enacted pursuant to the policy of the government "to develop, establish gradually and
perfect a social security system which shall be suitable to the needs of the laborers throughout the Philippines,
and shall provide protection against the hazards of disability, sickness, old age and death." 35 It provides for
compulsory coverage of all employees not over sixty years of age and their employers. 36

Well-settled is the rule that the mandatory coverage of Republic Act No. 1161, as amended, is premised on the
existence of an employer-employee relationship, the essential elements of which are: (a) selection and
engagement of the employee; (b) payment of wages; (c) the power of dismissal; and (d) the power of control with
regard to the means and methods by which the work is to be accomplished, with the power of control being the
most determinative factor. 37
There is no dispute that private respondents were employees of petitioner. Petitioner himself admitted that they
worked in his construction projects, 38 although the period of their employment was allegedly co-terminus with
their phase of work. 39 Even without such admission from petitioner, the existence of an employer-employee

relationship between the parties can easily be determined by the application of the "control test," 40 the elements
of which are enumerated above. It is clear that private respondents are employees of petitioner, the latter having
control over the results of the work done, as well as the means and methods by which the same were
accomplished. Suffice it to say that regardless of the nature of their employment, whether it is regular or project,
private respondents are subject of the compulsory coverage under the SSS Law, their employment not falling
under the exceptions provided by the law. 41 This rule is in accord with the Court's ruling in Luzon Stevedoring
Corp. v. SSS 42 to the effect that all employees, regardless of tenure, would qualify for compulsory membership
in the SSS, except those classes of employees contemplated in Section 8(j) of the Social Security Act. 43
This Court also finds no reason to deviate from the finding of the Court of Appeals regarding the nature of
employment of private respondents. Despite the insistence of petitioner that they were project employees, the
facts show that as masons, carpenters and fine graders in petitioner's various construction projects, they
performed work which was usually necessary and desirable to petitioner's business which involves construction of
roads and bridges. In Violeta v. NLRC, 44 this Court ruled that to be exempted from the presumption of regularity
of employment, the agreement between a project employee and his employer must strictly conform to the
requirements and conditions under Article 280 of the Labor Code. It is not enough that an employee is hired for a
specific project or phase of work. There must also be a determination of, or a clear agreement on, the completion
or termination of the project at the time the employee was engaged if the objectives of Article 280 are to be
achieved. 45 This second requirement was not met in this case.
Moreover, while it may be true that private respondents were initially hired for specific projects or undertakings,
the repeated re-hiring and continuing need for their services over a long span of time the shortest being two
years and the longest being eight have undeniably made them regular employees. 46 This Court has held that
an employment ceases to be co-terminus with specific projects when the employee is continuously rehired due to
the demands of the employer's business and re-engaged for many more projects without interruption. 47 The
Court likewise takes note of the fact that, as cited by the SSC, even the National Labor Relations Commission in a
labor case involving the same parties, found that private respondents were regular employees of the petitioner. 48
Another cogent factor militates against the allegations of the petitioner. In the proceedings before the SSC and
the Court of Appeals, petitioner was unable to show that private respondents were appraised of the project nature
of their employment, the specific projects themselves or any phase thereof undertaken by petitioner and for which
private respondents were hired. He failed to show any document such as private respondents' employment
contracts and employment records that would indicate the dates of hiring and termination in relation to the
particular construction project or phases in which they were employed. 49 Moreover, it is peculiar that petitioner
did not show proof that he submitted reports of termination after the completion of his construction projects,
considering that he alleges that private respondents were hired and rehired for various projects or phases of work
therein.
Anent the issue of prescription, this Court rules that private respondents' right to file their claim had not yet
prescribed at the time of the filing of their petition, considering that a mere eight (8) years had passed from the
time delinquency was discovered or the proper assessment was made. Republic Act No. 1161, as amended,
prescribes a period of twenty (20) years, from the time the delinquency is known or assessment is made by the
SSS, within which to file a claim for non-remittance against employers. 50
Likewise, this Court is in full accord with the findings of the Court of Appeals that private respondents are not
guilty of laches. The principle of laches or "stale demands" ordains that the failure or neglect, for an unreasonable
and unexplained length of time, to do that which by exercising due diligence could or should have been done
earlier, or the negligence or omission to assert a right within a reasonable time, warrants a presumption that the
party entitled to assert it either has abandoned it or declined to assert it. 51 In the instant case, this Court finds no

proof that private respondents had failed or neglected to assert their right, considering that they filed their claim
within the period prescribed by law. STHDAc
This Court finds no merit in petitioner's protestations of good faith. In United Christian Missionary Society v. Social
Security Commission, 52 this Court ruled that good faith or bad faith is irrelevant for purposes of assessment and
collection of the penalty for delayed remittance of premiums, since the law makes no distinction between an
employer who professes good reasons for delaying the remittance of premiums and another who deliberately
disregards the legal duty imposed upon him to make such remittance. 53 For the same reasons, petitioner cannot
now invoke the defense of good faith.
WHEREFORE, the Petition is DENIED. The Decision and Resolution of the Court of Appeals promulgated on 6
March 1996 and 30 July 1996 respectively, are AFFIRMED. Costs against petitioner.
SO ORDERED.
||| (Chua v. Court of Appeals, G.R. No. 125837, [October 6, 2004], 483 PHIL 126-141)

THIRD DIVISION
[G.R. No. 119891. August 21, 1995.]
BEN STA. RITA, petitioner, vs. THE COURT OF APPEALS, THE PEOPLE OF THE
PHILIPPINES and THE SOCIAL SECURITY SYSTEM, respondents.

Dennis B. Recon & Associates for petitioner.

The Solicitor General for respondents.

SYLLABUS
1. REMEDIAL LAW; APPEAL; STATUTORY RIGHT; COMPLIANCE WITH THE RULES, REQUIRED. It is
well-settled in our jurisdiction that the right to appeal is a statutory right and a party who seeks to avail of the right
must comply with the rules. (Spouses Gil and Elma del Rosario vs. Court of Appeals, G.R. No. 113890 [1995])
These rules, particularly the statutory requirement for perfecting an appeal within the reglementary period laid
down by law, must be strictly followed as they are considered indispensable interdictions against needless delays
and for orderly discharge of judicial business. (Bank of America, NT & SA vs. Gerochi, Jr., 230 SCRA 9 [1994])
Petitioner's failure to seasonably file the Petition and its failure to comply with the aforequoted Circulars of the
Court necessitate the denial of the Petition.
2. LABOR AND SOCIAL LEGISLATION; MEMORANDUM OF AGREEMENT ENTERED INTO BY DOLE AND
SSS; NATURE AND PURPOSE THEREOF. Respondent appellate court correctly upheld the validity of the
Memorandum of Agreement entered into between the DOLE and the SSS. Upon the one hand, contrary to the
trial court's finding, the Memorandum of Agreement was approved by the Social Security Commission per the
Commission's Resolution No. 437, dated 14 July 1988. Upon the other hand, the Memorandum of Agreement
is not a rule or regulation enacted by the Commission in the exercise of the latter's quasi-legislative authority
under Section 4(a) of R.A. No. 1161, as amended, which reads as follows: "Sec. 4. Powers and Duties of the
Commission. For the attainment of its main objectives as set forth in section two hereof, the Commission shall
have the following powers and duties: (a) To adopt, amend and rescind, subject to the approval of the President,
such rules and regulations as may be necessary to carry out the provisions and purposes of this Act. . . ." What
the Memorandum of Agreement did was to record the understanding between the SSS on the one hand and the
DOLE on the other hand that the latter would include among the provisions of the Standard Contract of
Employment required in case of overseas employment, a stipulation providing for coverage of the Filipino seafarer
by the SSS. The Memorandum of Agreement is not an implementing rule or regulation of the Social Security
Commission which, under Section 4(a) abovequoted, is subject to the approval of the President. Indeed, as a
matter of strict law, the participation of the SSS in the establishment by the DOLE of a uniform stipulation in the
Standard Contract of Employment for Filipino seafarers was not necessary; the Memorandum of Agreement
related simply to the administrative convenience of the two (2) agencies of government. It is worthy of special
note that by extending the benefits of the Social Security Act to Filipino seafarers on board foreign vessels, the
individual employment agreements entered into with the stipulation for such coverage contemplated in the DOLESSS Memorandum of Agreement, merely give effect to the constitutional mandate to the State to afford protection
to labor whether "local or overseas." (Article XIII, Section 3, 1987 Constitution) Nullification of the SSS stipulation
in those individual employment contracts, through nullification of the Memorandum of Agreement, constituted
serious reversible error on the part of the trial court. That petitioner should seek to deprive his countrymen of

social security protection after his foreign principal had agreed to such protection, is cause for dismay and is to be
deplored.
3. ID.; R.A. NO. 1161 (SOCIAL SECURITY LAW), AS AMENDED; COVERAGE THEREOF EXTENDED TO
FILIPINO SEAFARERS ON BOARD FOREIGN VESSELS. The Court finds no merit in petitioner's contention
that Section 8(j)(5) of R.A. No. 1161, as amended, absolutely exempts Filipino seafarers on board foreign vessels
from the coverage of the SSS statute. Section 8(j)(5) simply defines the term "employment" and does not in any
way relate to the scope of coverage of the Social Security System. That coverage is, upon the other hand, set out
in Section 9 of R.A. No. 1161 as amended, which defines the scope of SSS coverage in the following terms: "Sec.
9.Compulsory Coverage. (a) Coverage in the SSS shall be compulsory upon all employees not over sixty years
of age and their employers; Provided, . . . (b) Filipinos recruited in the Philippines by foreign-based employers for
employment abroad may be covered by the SSS on a voluntary basis." (As amended by Sec. 2, P.D. No. 177, S1973 and Sec. 6, P.D. No. 735-S-1975) It will be seen that the Memorandum of Agreement is in line with
paragraph 9(b) of the Social Security statute quoted above. The Memorandum of Agreement provides, inter alia,
that: ". . . NOW THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree and
stipulate that one of the conditions that will be imposed by the Department of Labor and Employment in the
contract for overseas employment is the registration for coverage of seafarers with the Social Security System,
through the manning agenies as the authorized representatives of the foreign employers in conformity with
Section 9, paragraph (b) of the Social Security Law (R.A. No. 1161, as amended), subject to the following terms
and conditions: . . ." Thus, the Standard Contract of Employment to be entered into between foreign shipowners
and Filipino seafarers is the instrument by which the former express their assent to the inclusion of the latter in the
coverage of the Social Security Act. In other words, the extension of the coverage of the Social Security System
to Filipino seafarers arises by virtue of the assent given in the contract of employment signed by employer and
seafarer; that same contract binds petitioner Sta. Rita or B. Sta. Rita Company, who is solidarily liable with the
foreign shipowners/employers. It may be noted that foreign shipowners and manning agencies had generally
expressed their conformity to the inclusion of Filipino seafarers within the coverage of the Social Security Act
even prior to the signing of the DOLE-SSS Memorandum of Agreement.
4. REMEDIAL LAW; CRIMINAL PROCEDURE; RIGHT AGAINST DOUBLE JEOPARDY; WHEN NOT
VIOLATED; CASE AT BAR. The Court of Appeals properly held that the reinstatement of the criminal case
against petitioner did not violate his right against double jeopardy since the dismissal of the information by the trial
court had been effected at his own instance. (Rule 117, Section 7, Rules of Court) There are only two (2)
instances where double jeopardy will attach notwithstanding the fact that the case was dismissed with the express
consent of the accused. The first is where the ground for dismissal is insufficiency of evidence for the prosecution;
and the second is where the criminal proceedings have been unreasonably prolonged in violation of the accused's
right to speedy trial. (People v. Quizada , 160 SCRA 516 [1988]) Neither situation exists in the case at bar. There
is no legal impediment to the reinstatement of Criminal Case No. Q-92-35426 against petitioner Sta. Rita.

RESOLUTION

FELICIANO, J p:
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals ("CA") in CA-G.R. Sp. No. 34384
which ordered the Regional Trial Court ("RTC"), Branch 92, Quezon City, to reinstate Criminal Case No. Q-9235426 filed against petitioner Ben Sta. Rita.

Petitioner Sta. Rita was charged in the RTC with violating Section 2(a) in relation to Sections 22(d) and 28(e)
of Republic Act No. 1161, as amended, otherwise known as the Social Security Law. The Information alleged that
petitioner, "as President/General Manager of B. Sta. Rita Co., Inc. a compulsorily (sic) covered employer under
the Social Security Law, as amended, did then and there wilfully and unlawfully fail, neglect and refuse and still
fails, neglects and refuses to remit to the Social Security System contributions for SSS, Medicare and Employees
Compensation for its covered employees." 1
Petitioner Sta. Rita moved to dismiss said criminal case on the following grounds:
1. That the facts charged do not constitute an offense; and
2. That the RTC has no jurisdiction over this case. 2
The RTC sustained petitioner's motion and dismissed the criminal case filed against him. It ruled that the
Memorandum of Agreement entered into between the Department of Labor and Employment ("DOLE") and
the Social Security System ("SSS") extending the coverage of Social Security, Medical Care and Employment
Compensation laws to Filipino seafarers on board foreign vessels was null and void as it was entered into by
the Administrator of the SSS without the sanction of the Commission and approval of the President of the
Philippines, in contravention of Section 4(a) of R.A. No. 1161, as amended. 3
The People, through the Solicitor General, filed in the Court of Appeals a petition for certiorari, prohibition and
mandamus assailing the order of dismissal issued by the trial court. Respondent appellate court granted the
petition and ordered the Presiding Judge of the trial court to reinstate the criminal case against petitioner. A
motion for reconsideration thereof was denied by the CA in a Resolution dated 17 April 1995.
Thereafter, petitioner filed in this Court a motion for extension of thirty (30) days from the expiration of
reglementary period within which to file a petition for review on certiorari. The Court granted the motion and gave
petitioner until 9 June 1995 to file the petition with warning that no further extension will be given. Despite the
warning, the petition was filed only on 13 June 1995 or four (4) days after the due date. Moreover, it failed to
comply with requirement No. 2 of Circular No. 1-88, as amended and Circular No. 19-91 of the Court as it did not
contain an affidavit of service of copies thereof to respondents. It was only on 14 July 1995, through an exparte manifestation, that the affidavit of service was belatedly submitted to this Court.

In the Petition for Review, petitioner Sta. Rita contends that the Filipino seafarers recruited by B. Sta.
Rita Co. and deployed on board foreign vessels outside the Philippines are exempt from the coverage of R.A.
No. 1161 under Section 8 (j) (5) thereof:
"Terms Defined
EMPLOYMENT Any service performed by an employee for his employer, except
xxx xxx xxx
(5) Service performed on or in connection with an alien vessel by an employee if he is
employed when such vessel is outside the Philippines
xxx xxx xxx"
According to petitioner, the Memorandum of Agreement entered into by the DOLE and the SSS is null and
void as it has the effect of amending the aforequoted provision of R.A. No. 1161 by expanding its coverage.
This allegedly cannot be done as only Congress may validly amend legislative enactments.

Petitioner prays that the Court set aside the decision of the Court of Appeals ordering the reinstatement of
Criminal Case No. Q-92-35426 and that the Order of the RTC dismissing the same be upheld.
It is well-settled in our jurisdiction that the right to appeal is a statutory right and a party who seeks to avail of the
right must comply with the rules. 4 These rules, particularly the statutory requirement for perfecting an appeal
within the reglementary period laid down by law, must be strictly followed as they are considered indispensable
interdictions against needless delays and for orderly discharge of judicial business. 5 Petitioner's failure to
seasonably file the Petition and its failure to comply with the aforequoted Circulars of the Court necessitate the
denial of the Petition.
Besides, even if the Petition had been filed on time and had complied with the Circulars, it would still have to be
denied as petitioner has failed to show that respondent appellate court committed any reversible error in
rendering the assailed decision.
The Court agrees with the CA that the Information filed against petitioner was sufficient as it clearly stated the
designation of the offense by the statute, i.e. violation of the Social Security Law, and the acts or omissions
complained of as constituting the offense, i.e., petitioner's failure to remit his contributions to the SSS. The CA
found that there is prima facie evidence to support the allegations in the Information and to warrant the
prosecution of petitioner.
Respondent appellate court correctly upheld the validity of the Memorandum of Agreement entered into between
the DOLE and the SSS. Upon the one hand, contrary to the trial court's finding, the Memorandum of Agreement
was approved by the Social Security Commission per the Commission's Resolution No. 437, dated 14 July
1988. 6 Upon the other hand, the Memorandum of Agreement is not a rule or regulation enacted by the
Commission in the exercise of the latter's quasi-legislative authority under Section 4 (a) of R.A. No. 1161, as
amended, which reads as follows:
"SECTION 4. Powers and Duties of the Commission. For the attainment of its main
objectives as set forth in section two hereof, the Commission shall have the following powers
and duties:
(a) To adopt, amend and rescind, subject to the approval of the President, such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act.
xxx xxx xxx"
What the Memorandum of Agreement did was to record the understanding between the SSS on the one hand
and the DOLE on the other hand that the latter would include among the provisions of the Standard Contract
of Employment required in case of overseas employment, a stipulation providing for coverage of the Filipino
seafarer by the SSS. The Memorandum of Agreement is not an implementing rule or regulation of the Social
Security Commission which, under Section 4 (a) abovequoted, is subject to the approval of the President.
Indeed, as a matter of strict law, the participation of the SSS in the establishment by the DOLE of a uniform
stipulation in the Standard Contract of Employment for Filipino seafarers was not necessary; the
Memorandum of Agreement related simply to the administrative convenience of the two (2) agencies of
government.
Moreover, the Court finds no merit in petitioner's contention that Section 8 (j) (5) of R.A. No. 1161, as
amended, absolutely exempts Filipino seafarers on board foreign vessels from the coverage of the SSS
statute. Section 8 (j) (5) simply defines the term "employment" and does not in any way relate to the scope of
coverage of the Social Security System. That coverage is, upon the other hand, set out in Section 9 of R.A.
No. 1161 as amended, which defines the scope of SSS coverage in the following terms:

"SECTION 9. Compulsory Coverage. (a) Coverage in the SSS shall be compulsory

upon all employees not over sixty years of age and their employers; Provided, . . .
(b) Filipinos recruited in the Philippines by foreign-based employers for employment abroad
may be covered by the SSS on a voluntary basis." (As amended by Sec. 2, P.D. No. 177, S1973 and Sec. 6, P.D No. 735-S-1975) (Emphasis supplied)
It will be seen that the Memorandum of Agreement is in line with paragraph 9 (b) of the Social
Security statute quoted above. The Memorandum of Agreement provides, inter alia, that:
"xxx xxx xxx
NOW THEREFORE, for and in consideration of the foregoing premises, the parties hereto
agree and stipulate that one of the conditions that will be imposed by the Department of Labor
and Employment in the contract for overseas employment is the registration for coverage of
seafarers with the Social Security System, through the manning agencies as the authorized
representatives of the foreign employers in conformity with Section 9, paragraph (b) of the
Social Security Law (R.A. No. 1161, as amended), subject to the following terms and
conditions:
xxx xxx xxx" 7 (Emphasis supplied)
Thus, the Standard Contract of Employment to be entered into between foreign shipowners and Filipino
seafarers is the instrument by which the former express their assent to the inclusion of the latter in the
coverage of the Social Security Act. In other words, the extension of the coverage of the Social Security
System to Filipino seafarers arises by virtue of the assent given in the contract of employment signed by
employer and seafarer; that same contract binds petitioner Sta. Rita or B. Sta. Rita Company, who is solidarily
liable with the foreign shipowners/employers.
It may be noted that foreign shipowners and manning agencies had generally expressed their
conformity to the inclusion of Filipino seafarers within the coverage of the Social Security Act even prior to the
signing of the DOLE-SSS Memorandum of Agreement. Thus, the Whereas clauses of the Memorandum of
Agreement state that:
"WHEREAS, in the 74th Maritime Session (ILO) held from September 24 to October 9, 1987 in
Geneva, it was agreed that as an internationally accepted principle, seafarers shall have the
right to social security protection;
xxx xxx xxx
WHEREAS, after a series of consultations with seafaring unions and manning agencies, it was
the consensus that Philippine social security coverage be extended to seafarers under the
employ of vessels flying foreign flags;
xxx xxx xxx" 8 (Emphasis supplied)
It is, finally, worthy of special note that by extending the benefits of the Social Security Act to Filipino seafarers on
board foreign vessels, the individual employment agreements entered into with the stipulation for such coverage
contemplated in the DOLE-SSS Memorandum of Agreement, merely give effect to the constitutional mandate to
the State to afford protection to labor whether "local or overseas." 9 Nullification of the SSS stipulation in those
individual employment contracts, through nullification of the Memorandum of Agreement, constituted serious
reversible error on the part of the trial court. That petitioner should seek to deprive his countrymen of social
security protection after his foreign principal had agreed to such protection, is cause for dismay and is to be
deplored.

The Court of Appeals properly held that the reinstatement of the criminal case against petitioner did not violate his
right against double jeopardy since the dismissal of the information by the trial court had been effected at his own
instance. 10 There are only two (2) instances where double jeopardy will attach notwithstanding the fact that the
case was dismissed with the express consent of the accused. The first is where the ground for dismissal is
insufficiency of evidence for the prosecution; and the second is where the criminal proceedings have been
unreasonably prolonged in violation of the accused's right to speedy trial. 11 Neither situation exists in the case at
bar. There is no legal impediment to the reinstatement of Criminal Case No. Q-92-35426 against petitioner Sta.
Rita.
WHEREFORE, the Court Resolved to DENY the Petition for having been filed late, for failure to
comply with applicable Court Circulars and for lack of merit. The assailed Decision of the Court of Appeals is
hereby AFFIRMED. Costs against petitioner.
||| (Sta. Rita v. Court of Appeals, G.R. No. 119891 (Resolution), [August 21, 1995], 317 PHIL 578-589)

THIRD DIVISION
[G.R. No. 165545. March 24, 2006.]
SOCIAL SECURITY SYSTEM, petitioner, vs. TERESITA JARQUE VDA. DE
BAILON, respondent.

DECISION

CARPIO MORALES, J p:
The Court of Appeals Decision 1 dated June 23, 2004 2 and Resolution dated September 28, 2004 3 reversing
the Resolution dated April 2, 2003 4 and Order dated June 4, 2003 5 of the Social Security Commission (SSC) in
SSC Case No. 4-15149-01 are challenged in the present petition for review on certiorari.
On April 25, 1955, Clemente G. Bailon (Bailon) and Alice P. Diaz (Alice) contracted marriage in Barcelona,
Sorsogon. 6
More than 15 years later or on October 9, 1970, Bailon filed before the then Court of First Instance (CFI) of
Sorsogon a petition 7 to declare Alice presumptively dead.
By Order of December 10, 1970, 8 the CFI granted the petition, disposing as follows:
WHEREFORE, there being no opposition filed against the petition notwithstanding the
publication of the Notice of Hearing in a newspaper of general circulation in the country, Alice
Diaz is hereby declared to [sic] all legal intents and purposes, except for those of
succession, presumptively dead.
SO ORDERED. 9 (Underscoring supplied)
Close to 13 years after his wife Alice was declared presumptively dead or on August 8, 1983, Bailon contracted
marriage with Teresita Jarque (respondent) in Casiguran, Sorsogon. 10
On January 30, 1998, Bailon, who was a member of the Social Security System (SSS) since 1960 and a retiree
pensioner thereof effective July 1994, died. 11
Respondent thereupon filed a claim for funeral benefits, and was granted P12,000 12 by the SSS.
Respondent filed on March 11, 1998 an additional claim for death benefits 13 which was also granted by the SSS
on April 6, 1998. 14
Cecilia Bailon-Yap (Cecilia), who claimed to be a daughter of Bailon and one Elisa Jayona (Elisa) contested
before the SSS the release to respondent of the death and funeral benefits. She claimed that Bailon contracted
three marriages in his lifetime, the first with Alice, the second with her mother Elisa, and the third with respondent,
all of whom are still alive; she, together with her siblings, paid for Bailon's medical and funeral expenses; and all
the documents submitted by respondent to the SSS in support of her claims are spurious. DSETcC
In support of her claim, Cecilia and her sister Norma Bailon Chavez (Norma) submitted an Affidavit dated
February 13, 1999 15 averring that they are two of nine children of Bailon and Elisa who cohabited as husband

and wife as early as 1958; and they were reserving their right to file the necessary court action to contest the
marriage between Bailon and respondent as they personally know that Alice is "still very much alive." 16
In the meantime, on April 5, 1999, a certain Hermes P. Diaz, claiming to be the brother and guardian of "Aliz P.
Diaz," filed before the SSS a claim for death benefits accruing from Bailon's death, 17 he further attesting in a
sworn statement 18 that it was Norma who defrayed Bailon's funeral expenses.
Elisa and seven of her children 19 subsequently filed claims for death benefits as Bailon's beneficiaries before the
SSS. 20
Atty. Marites C. de la Torre of the Legal Unit of the SSS Bicol Cluster, Naga City recommended the cancellation
of payment of death pension benefits to respondent and the issuance of an order for the refund of the amount
paid to her from February 1998 to May 1999 representing such benefits; the denial of the claim of Alice on the
ground that she was not dependent upon Bailon for support during his lifetime; and the payment of the balance of
the five-year guaranteed pension to Bailon's beneficiaries according to the order of preference provided under the
law, after the amount erroneously paid to respondent has been collected. The pertinent portions of the
Memorandum read:
1. Aliz [sic] Diaz never disappeared. The court must have been misled by misrepresentation in
declaring the first wife, Aliz [sic] Diaz, as presumptively dead.
xxx xxx xxx
. . . the Order of the court in the "Petition to Declare Alice Diaz Presumptively Dead," did not
become final. The presence of Aliz [sic] Diaz, is contrary proof that rendered it invalid.
xxx xxx xxx
3. It was the deceased member who abandoned his wife, Aliz [sic] Diaz. He, being in bad faith,
and is the deserting spouse, his remarriage is void, being bigamous.
xxx xxx xxx
In this case, it is the deceased member who was the deserting spouse and who remarried, thus
his marriage to Teresita Jarque, for the second time was void as it was bigamous. To require
affidavit of reappearance to terminate the second marriage is not necessary as there is no
disappearance of Aliz [sic] Diaz, the first wife, and a voidable marriage [sic], to speak
of. 21 (Underscoring supplied)
In the meantime, the SSS Sorsogon Branch, by letter of August 16, 2000, 22 advised respondent that as Cecilia
and Norma were the ones who defrayed Bailon's funeral expenses, she should return the P12,000 paid to her.
In a separate letter dated September 7, 1999, 23 the SSS advised respondent of the cancellation of her monthly
pension for death benefits in view of the opinion rendered by its legal department that her marriage with Bailon
was void as it was contracted while the latter's marriage with Alice was still subsisting; and the December 10,
1970 CFI Order declaring Alice presumptively dead did not become final, her "presence" being "contrary proof"
against the validity of the order. It thus requested respondent to return the amount of P24,000 representing the
total amount of monthly pension she had received from the SSS from February 1998 to May 1999. EcTIDA
Respondent protested the cancellation of her monthly pension for death benefits by letter to the SSS dated
October 12, 1999. 24 In a subsequent letter dated November 27, 1999 25 to the SSC, she reiterated her request
for the release of her monthly pension, asserting that her marriage with Bailon was not declared before any court

of justice as bigamous or unlawful, hence, it remained valid and subsisting for all legal intents and purposes as in
fact Bailon designated her as his beneficiary.
The SSS, however, by letter to respondent dated January 21, 2000, 26 maintained the denial of her claim for and
the discontinuance of payment of monthly pension. It advised her, however, that she was not deprived of her right
to file a petition with the SSC.
Respondent thus filed a petition 27 against the SSS before the SSC for the restoration to her of her entitlement to
monthly pension.
In the meantime, respondent informed the SSS that she was returning, under protest, the amount of P12,000
representing the funeral benefits she received, she alleging that Norma and her siblings "forcibly and coercively
prevented her from spending any amount during Bailon's wake." 28
After the SSS filed its Answer 29 to respondent's petition, and the parties filed their respective Position Papers,
one Alicia P. Diaz filed an Affidavit 30 dated August 14, 2002 with the SSS Naga Branch attesting that she is the
widow of Bailon; she had only recently come to know of the petition filed by Bailon to declare her presumptively
dead; it is not true that she disappeared as Bailon could have easily located her, she having stayed at her parents'
residence in Barcelona, Sorsogon after she found out that Bailon was having an extramarital affair; and Bailon
used to visit her even after their separation.
By Resolution of April 2, 2003, the SSC found that the marriage of respondent to Bailon was void and, therefore,
she was "just a common-law-wife." Accordingly it disposed as follows, quoted verbatim:
WHEREFORE, this Commission finds, and so holds, that petitioner Teresita Jarque-Bailon is
not the legitimate spouse and primary beneficiary of SSS member Clemente Bailon.
Accordingly, the petitioner is hereby ordered to refund to the SSS the amount of P24,000.00
representing the death benefit she received therefrom for the period February 1998 until May
1999 as well as P12,000.00 representing the funeral benefit.
The SSS is hereby ordered to pay Alice (a.k.a. Aliz) Diaz-Bailon the appropriate death benefit
arising from the demise of SSS member Clemente Bailon in accordance with Section 8(e) and
(k) as well as Section 13 of the SS Law, as amended, and its prevailing rules and regulations
and to inform this Commission of its compliance herewith.
SO ORDERED. 31 (Underscoring supplied)
In so ruling against respondent, the SSC ratiocinated.
After a thorough examination of the evidence at hand, this Commission comes to the inevitable
conclusion that the petitioner is not the legitimate wife of the deceased member.
xxx xxx xxx
There is . . . ample evidence pointing to the fact that, contrary to the declaration of the then CFI
of Sorsogon (10th Judicial District), the first wife never disappeared as the deceased member
represented in bad faith. This Commission accords credence to the findings of the SSS
contained in its Memorandum dated August 9, 1999, 32revealing that Alice (a.k.a. Aliz) Diaz
never left Barcelona, Sorsogon, after her separation from Clemente Bailon . . . . cSCTID
As the declaration of presumptive death was extracted by the deceased member using artifice
and by exerting fraud upon the unsuspecting court of law, . . . it never had the effect of giving
the deceased member the right to marry anew. . . . [I]t is clear that the marriage to the petitioner

is void, considering that the first marriage on April 25, 1955 to Alice Diaz was not previously
annulled, invalidated or otherwise dissolved during the lifetime of the parties thereto. . . . as
determined through the investigation conducted by the SSS, Clemente Bailon was the
abandoning spouse, not Alice Diaz Bailon.

xxx xxx xxx

It having been established, by substantial evidence, that the petitioner was just a common-law
wife of the deceased member, it necessarily follows that she is not entitled as a primary
beneficiary, to the latter's death benefit. . . .
xxx xxx xxx
It having been determined that Teresita Jarque was not the legitimate surviving spouse and
primary beneficiary of Clemente Bailon, it behooves her to refund the total amount of death
benefit she received from the SSS for the period from February 1998 until May 1999 pursuant
to the principle of solutio indebiti . . .
Likewise, it appearing that she was not the one who actually defrayed the cost of the wake and
burial of Clemente Bailon, she must return the amount of P12,000.00which was earlier given to
her by the SSS as funeral benefit. 33 (Underscoring supplied)
Respondent's Motion for Reconsideration 34 having been denied by Order of June 4, 2003, she filed a petition for
review 35 before the Court of Appeals (CA).
By Decision of June 23, 2004, the CA reversed and set aside the April 2, 2003 Resolution and June 4, 2003
Order of the SSC and thus ordered the SSS to pay respondent all the pension benefits due her. Held the CA:
. . . [T]he paramount concern in this case transcends the issue of whether or not the decision of
the then CFI, now RTC, declaring Alice Diaz presumptively dead has attained finality but, more
importantly, whether or not the respondents SSS and Commission can validly re-evaluate the
findings of the RTC, and on its own, declare the latter's decision to be bereft of any basis. On
similar import, can respondents SSS and Commission validly declare the first marriage
subsisting and the second marriage null and void?
xxx xxx xxx
. . . while it is true that a judgment declaring a person presumptively dead never attains finality
as the finding that "the person is unheard of in seven years is merely a presumption juris
tantum," the second marriage contracted by a person with an absent spouse endures until
annulled. It is only the competent court that can nullify the second marriage pursuant to
Article 87 of the Civil Code and upon the reappearance of the missing spouse, which action for
annulment may be filed.Nowhere does the law contemplates [sic] the possibility that
respondent SSS may validly declare the second marriage null and void on the basis alone of its
own investigation and declare that the decision of the RTC declaring one to be presumptively
dead is without basis.
Respondent SSS cannot arrogate upon itself the authority to review the decision of the
regular courts under the pretext of determining the actual and lawful beneficiaries of its
members. Notwithstanding its opinion as to the soundness of the findings of the RTC, it should

extend due credence to the decision of the RTC absent of [sic] any judicial pronouncement to
the contrary. . . . SCEDaT
. . . [A]ssuming arguendo that respondent SSS actually possesses the authority to declare the
decision of the RTC to be without basis, the procedure it followed was offensive to the principle
of fair play and thus its findings are of doubtful quality considering that petitioner Teresita was
not given ample opportunity to present evidence for and her behalf.
xxx xxx xxx
Respondent SSS is correct in stating that the filing of an Affidavit of Reappearance with the
Civil Registry is no longer practical under the premises. Indeed, there is no more first marriage
to restore as the marital bond between Alice Diaz and Clemente Bailon was already terminated
upon the latter's death. Neither is there a second marriage to terminate because the second
marriage was likewise dissolved by the death of Clemente Bailon.
However, it is not correct to conclude that simply because the filing of the Affidavit of
Reappearance with the Civil Registry where parties to the subsequent marriage reside is
already inutile, the respondent SSS has now the authority to review the decision of the RTC
and consequently declare the second marriage null and void. 36(Emphasis and underscoring
supplied)
The SSC and the SSS separately filed their Motions for Reconsideration 37 which were both denied for lack of
merit.
Hence, the SSS' present petition for review on certiorari 38 anchored on the following grounds:
I
THE DECISION OF THE HONORABLE COURT OF APPEALS IS CONTRARY TO LAW.
II
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OF JURISDICTION. 39
The SSS faults the CA for failing to give due consideration to the findings of facts of the SSC on the prior and
subsisting marriage between Bailon and Alice; in disregarding the authority of the SSC to determine to whom,
between Alice and respondent, the death benefits should be awarded pursuant to Section 5 40 of the Social
Security Law; and in declaring that the SSS did not give respondent due process or ample opportunity to present
evidence in her behalf.
The SSS submits that "the observations and findings relative to the CFI proceedings are of no moment to the
present controversy, as the same may be considered only as obiter dicta in view of the SSC's finding of the
existence of a prior and subsisting marriage between Bailon and Alice by virtue of which Alice has a better right to
the death benefits." 41
The petition fails.
That the SSC is empowered to settle any dispute with respect to SSS coverage, benefits and contributions, there
is no doubt. In so exercising such power, however, it cannot review, much less reverse, decisions rendered by
courts of law as it did in the case at bar when it declared that the December 10, 1970 CFI Order was obtained
through fraud and subsequently disregarded the same, making its own findings with respect to the validity of
Bailon and Alice's marriage on the one hand and the invalidity of Bailon and respondent's marriage on the other.

In interfering with and passing upon the CFI Order, the SSC virtually acted as an appellate court. The law does
not give the SSC unfettered discretion to trifle with orders of regular courts in the exercise of its authority to
determine the beneficiaries of the SSS. DAHSaT
The two marriages involved herein having been solemnized prior to the effectivity on August 3, 1988 of the Family
Code, the applicable law to determine their validity is the Civil Code which was the law in effect at the time of their
celebration. 42
Article 83 of the Civil Code 43 provides:
Art. 83. Any marriage subsequently contracted by any person during the lifetime of the first
spouse of such person with any person other than such first spouse shall be illegal and void
from its performance, unless:
(1) The first marriage was annulled or dissolved; or
(2) The first spouse had been absent for seven consecutive years at the time of the second
marriage without the spouse present having news of the absentee being alive, or if the
absentee, though he has been absent for less than seven years, is generally considered as
dead and believed to be so by the spouse present at the time of contracting such subsequent
marriage, or if the absentee is presumed dead according to Articles 390 and 391.
The marriage so contracted shall be valid in any of the three cases until declared null and
void by a competent court. (Emphasis and underscoring supplied)
Under the foregoing provision of the Civil Code, a subsequent marriage contracted during the lifetime of the first
spouse is illegal and void ab initio unless the prior marriage is first annulled or dissolved or contracted under any
of the three exceptional circumstances. It bears noting that the marriage under any of these exceptional cases is
deemed valid "until declared null and void by a competent court." It follows that the onus probandi in these cases
rests on the party assailing the second marriage. 44
In the case at bar, as found by the CFI, Alice had been absent for 15 consecutive years 45 when Bailon sought
the declaration of her presumptive death, which judicial declaration was not even a requirement then for purposes
of remarriage. 46
Eminent jurist Arturo M. Tolentino (now deceased) commented:
Where a person has entered into two successive marriages, a presumption arises in favor of
the validity of the second marriage, and the burden is on the party attacking the validity of the
second marriage to prove that the first marriage had not been dissolved; it is not enough to
prove the first marriage, for it must also be shown that it had not ended when the second
marriage was contracted. The presumption in favor of the innocence of the defendant from
crime or wrong and of the legality of his second marriage, will prevail over the presumption of
the continuance of life of the first spouse or of the continuance of the marital relation with such
first spouse. 47 (Underscoring supplied)
Under the Civil Code, a subsequent marriage being voidable, 48 it is terminated by final judgment of annulment
in a case instituted by the absent spouse who reappears or by either of the spouses in the subsequent marriage.
Under the Family Code, no judicial proceeding to annul a subsequent marriage is necessary. Thus Article 42
thereof provides:

Art. 42. The subsequent marriage referred to in the preceding Article shall be automatically
terminated by the recording of the affidavit of reappearance of the absent spouse, unless
there is a judgment annulling the previous marriage or declaring it void ab initio.
A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil
registry of the residence of the parties to the subsequent marriage at the instance of any
interested person, with due notice to the spouses of the subsequent marriage and without
prejudice to the fact of reappearance being judicially determined in case such fact is disputed.
(Emphasis and underscoring supplied)

The termination of the subsequent marriage by affidavit provided by the above-quoted provision of the Family
Code does not preclude the filing of an action in court to prove the reappearance of the absentee and obtain a
declaration of dissolution or termination of the subsequent marriage. 49
If the absentee reappears, but no step is taken to terminate the subsequent marriage, either by affidavit or by
court action, such absentee's mere reappearance, even if made known to the spouses in the subsequent
marriage, will not terminate such marriage. 50 Since the second marriage has been contracted because of a
presumption that the former spouse is dead, such presumption continues inspite of the spouse's physical
reappearance, and by fiction of law, he or she must still be regarded as legally an absentee until the subsequent
marriage is terminated as provided by law. 51
If the subsequent marriage is not terminated by registration of an affidavit of reappearance or by judicial
declaration but by death of either spouse as in the case at bar, Tolentino submits:
. . . [G]enerally if a subsequent marriage is dissolved by the death of either spouse, the effects
of dissolution of valid marriages shall arise. The good or bad faith of either spouse can no
longer be raised, because, as in annullable or voidable marriages, the marriage cannot be
questioned except in a direct action for annulment. 52(Underscoring supplied) SaITHC
Similarly, Lapuz v. Eufemio 53 instructs:
In fact, even if the bigamous marriage had not been void ab initio but only voidable under
Article 83, paragraph 2, of the Civil Code, because the second marriage had been contracted
with the first wife having been an absentee for seven consecutive years, or when she had been
generally believed dead, still the action for annulment became extinguished as soon as one of
the three persons involved had died, as provided in Article 87, paragraph 2, of the Code,
requiring that the action for annulment should be brought during the lifetime of any one of
the parties involved. And furthermore, the liquidation of any conjugal partnership that might
have resulted from such voidable marriage must be carried out "in the testate or intestate
proceedings of the deceased spouse," as expressly provided in Section 2 of the Revised Rule
73, and not in the annulment proceeding. 54 (Emphasis and underscoring supplied)
It bears reiterating that a voidable marriage cannot be assailed collaterally except in a direct proceeding.
Consequently, such marriages can be assailed only during the lifetime of the parties and not after the death of
either, in which case the parties and their offspring will be left as if the marriage had been perfectly valid. 55 Upon
the death of either, the marriage cannot be impeached, and is made good ab initio. 56
In the case at bar, as no step was taken to nullify, in accordance with law, Bailon's and respondent's marriage
prior to the former's death in 1998, respondent is rightfully the dependent spouse-beneficiary of Bailon.
In light of the foregoing discussions, consideration of the other issues raised has been rendered unnecessary.

EN BANC
[G.R. No. L-15045. January 20, 1961.]
IN RE PETITION FOR EXEMPTION FROM COVERAGE BY THE SOCIAL SECURITY
SYSTEM. CATHOLIC ARCHBISHOP OF MANILA, petitioner-appellant, vs.SOCIAL
SECURITY COMMISSION, respondent-appellee.

Feria, Manglapus & Associates for petitioner-appellant.

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

SYLLABUS
1. SOCIAL SECURITY; COVERAGE; EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP NECESSARY.
The coverage of the Social Security Law is predicated on the existence of an employer-employee relationship
of more or less permanent nature and extends to employment of all kinds except those expressly excluded.
2. ID.; ID.; ID.; RELIGIOUS, CHARITABLE AND NON-PROFIT ENTITIES INCLUDED IN TERM "EMPLOYER".
The term "employer" in the Social Security Law is sufficiently comprehensive as to include religious and
charitable institutions or entities not organized for profit within its meaning. This is evident by the fact that it
contains an exception in which said institutions or entities are not included. Had the Legislature 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.
3. ID.; ID.; ID.; DELETION OF PERTINENT PORTION OF REPUBLIC ACT NO. 1161 CLEAR INDICATION OF
LEGISLATIVE INTENT. The fact that the portion of Republic Act No. 1161 which provides that services
performed in the employ of institutions organized for religious or charitable purposes were by express provisions
of said Act excluded from coverage thereof (sec. 8, par (j) sub-pars. 7 and 8), is clear indication that the
Legislature intended to include charitable and religious institutions within the scope of the law.
4. ID.; ID.; ID.; SOCIAL SECURITY LAW LEGITIMATE EXERCISE OF POLICE POWER. The Social Security
Law is a legitimate exercise of the police power of the State. It affords protection to labor, especially to working
women and minors, and is in full accord with the constitutional provisions on the "promotion of social justice to
insure the well being and economic security of all the people." Being in fact a social legislation, compatible with
the policy of the Church to ameliorate living conditions of the working class, the extent of its provisions cannot
arbitrarily be delimited to relations between capital and labor in industry and agriculture.
5. ID.; ID.; ID.; NATURE OF FUNDS CONTRIBUTED TO THE SOCIAL SECURITY SYSTEM. The funds
contributed to the System created by the Social Security Law are not public funds, but funds belonging to the
members which are merely held in trust by the Government. hence, the inclusion of religious organization under
the coverage of the law does not violate the constitutional prohibition against the application of public funds for the
use, benefit or support of any priest who might be employed by the Church.
6. ID.; ID.; ID.; ENFORCEMENT OF SOCIAL SECURITY LAW NOT IMPAIRMENT OF CHURCH RIGHT. The
enforcement of the Social Security Law does not impair the right of the Church to disseminate religious
information, because all that the law requires of the Church is to make monthly contributions to the System for
covered employees in its employ. These contributions are not "in the nature of taxes on employment." Together

with the contributions imposed upon the employees and the Government, they are intended for protection of said
employees against the hazards of disability, sickness, old age and death in line with the constitutional mandate to
promote social justice to insure to well being and economic security of all the people.
7. STATUTORY CONSTRUCTION; PRINCIPLE OF EJUSDEM GENERIS; WHEN APPLICABLE. The principle
of ejusdem generis applies only where there is uncertainty. It is not controlling where the plain purpose and intent
of the Legislature would thereby be hindered and defeated (Grosjean vs. American Paints Works (La), 160 So.
499).

DECISION

GUTIERREZ DAVID, J p:
On September 1, 1958, the Roman Catholic Archbishop of Manila, thru counsel, filed with the Social Security
Commission a request that "Catholic Charities, and all religious and charitable institutions and/or organizations,
which are directly or indirectly, wholly or partially, operated by the Roman Catholic Archbishop of Manila," be
exempted from compulsory coverage of Republic Act No. 1161, as amended, otherwise known as the Social
Security Law of 1954. The request was based on the claim that the said Act is a labor law and does not cover
religious and charitable institutions but is limited to businesses and activities organized for profit. Acting upon the
recommendation of its Legal Staff, the Social Security Commission in its Resolution No. 572, series of 1958,
denied the request. The Roman Catholic Archbishop of Manila, reiterating its arguments and raising constitutional
objections, requested for reconsideration of the resolution. The request, however, was denied by the Commission
in its Resolution No. 767, series of 1958; hence, this appeal taken in pursuance of section 5 (c) of Republic Act
No. 1161, as amended.
Section 9 of the Social Security Law, as amended, provides that coverage "in the System shall be compulsory
upon all employees between the age of sixteen and sixty years inclusive, if they have been for at least six months
in the service of an employer who is a member of the System, Provided, that the Commission may not compel
any employer to become a member of the System unless he shall have been in operation for at least two years
and has at the time of admission, if admitted for membership during the first year of the System's operation at
least fifty employees, and if admitted for membership the following year of operation and thereafter, at least six
employees . . .." The term "employer" as used in the law is defined as "any person, natural or juridical, domestic
or foreign, who carries in the Philippines any trade, business, industry, undertaking, or activity of any kind and
uses the services of another person who is under his orders as regards the employment, except the Government
and any of its political subdivisions, branches or instrumentalities, including corporations owned or controlled by
the Government" (par. [c], sec. 8), while an "employee" refers to "any person who performs services for an
`employer' in which either or both mental and physical efforts are used and who receives compensation for such
services" (par. [d] sec. 8). "Employment", according to paragraph [j] of said section 8, covers any service
performed by an employer except those expressly enumerated thereunder, like employment under the
Government, or any of its political subdivisions, branches or instrumentalities including corporations owned and
controlled by the Government, domestic service in a private home, employment purely casual, etc.
From the above legal provisions, it is apparent that the coverage of the Social Security Law is predicated on the
existence of an employer-employee relationship of more or less permanent nature and extends to employment of
all kinds except those expressly excluded.
Appellant contends that the term "employer" as defined in the law should following the principle of ejusdem
generis be limited to those who carry on "undertakings or activities which have the element of profit or gain, or

which are pursued for profit or gain," because the phrase "activity of any kind" in the definition is preceded by the
words "any trade, business, industry, undertaking." The contention cannot be sustained. The rule ejusdem
generis applies only where there is uncertainty. It is not controlling where the plain purpose and intent of the
Legislature would thereby be hindered and defeated. (Grosjean vs. American Paints Works [La], 160 So. 449). In
the case at bar, the definition of the term "employer" is, we think, sufficiently comprehensive as to include
religious and charitable institutions or entities not organized for profit, like herein appellant, within its meaning.
This is made more evident by the fact that it contains an exception in which said institutions or entities are not
included. And, certainly, had the Legislature really intended to limit the operation of the law to entities organized
for profit or gain, it would not have defined an "employer" in such a way as to include the Government and yet
make an express exception of it.
It is significant to note that when Republic Act No. 1161 was enacted, services performed in the employ of
institutions organized for religious or charitable purposes were by express provisions of said Act excluded from
coverage thereof (sec. 8, par. [j], subpars. 7 and 8). That portion of the law, however, has been deleted by
express provision of Republic Act No. 1792, which took effect in 1957. This is clear indication that the Legislature
intended to include charitable and religious institutions within the scope of the law.
In support of its contention that the Social Security Law was intended to cover only employment for profit or gain,
appellant also cites the discussions of the Senate, portions of which were quoted in its brief. There is, however,
nothing whatsoever in those discussions touching upon the question of whether the law should be limited to
organizations for profit or gain. Of course, the said discussions dwelt at length upon the need of a law to meet the
problems of industrializing society and upon the plight of an employer who fails to make a profit. But this is readily
explained by the fact that the majority of those to be affected by the operation of the law are corporations and
industries which are established primarily for profit or gain.
Appellant further argues that the Social Security Law is a labor law and, consequently, following the rule laid down
in the case of Boy Scouts of the Philippines vs. Araos (G.R. No. L-10091, January 29, 1958) and other 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 of the
Philippines to develop, establish gradually and perfect a social security system which shall be suitable to the
needs of the people throughout the Philippines and shall provide protection to employees against the hazards of
disability, sickness, old age and death." (Sec. 2, Republic Act No. 1161, as amended.) Such enactment is a
legitimate exercise of the police power. It affords protection to labor, especially to working women and minors,
and is in full accord with the constitutional provisions on the "promotion of social justice to insure the well being
and economic security of all the people." Being in fact a social legislation, compatible with the policy of the Church
to ameliorate living conditions of the working class, appellant cannot arbitrarily delimit the extent of its provisions
to relations between capital and labor in industry and agriculture.
There is no merit in the claim that the inclusion of religious organizations under the coverage of the Social
Security Law violates the constitutional prohibition against the application of public funds for the use, benefit or
support of any priest who might be employed by appellant. The funds contributed to the System created by the
law are not public funds, but funds belonging to the members which are merely held in trust by the Government.
At any rate, assuming that said funds are impressed with the character of public funds, their payment as
retirement, death or disability benefits would not constitute a violation of the cited provision of the Constitution,
since such payment shall be made to the priest not because he is a priest but because he is an employee.

Neither may it be validly argued that the enforcement of the Social Security Law impairs appellant's right to
disseminate religious information. All that is required of appellant is to make monthly contributions to the System
for covered employees in its employ. These contributions, contrary to appellant's contention, are not "in the nature
of taxes on employment." Together with the contributions imposed upon the employees and the Government, they
are intended for the protection of said employees against the hazards of disability, sickness, old age and death in
line with the constitutional mandate to promote social justice to insure the well-being and economic security of all
the people.
IN VIEW OF THE FOREGOING, Resolutions Nos. 572 and 767, series of 1958, of the Social Security
Commission are hereby affirmed. So ordered with costs against appellant.
||| (In re Catholic Archbishop of Manila v. Social Security Commission, G.R. No. L-15045, [January 20, 1961], 110
PHIL 616-622)

EN BANC
[G.R. No. 161357. November 30, 2005.]
ELENA P. DYCAICO, petitioner, vs. SOCIAL SECURITY SYSTEM and SOCIAL SECURITY
COMMISSION, respondents.

DECISION

CALLEJO, SR., J p:
Before the Court is the petition for review under Rule 45 of the Rules of Court filed by Elena P. Dycaico which
seeks to reverse and set aside the Decision 1 dated April 15, 2003 of the Court of Appeals (CA) in CA-G.R. SP
No. 69632. The assailed decision affirmed the Resolution dated February 6, 2002 of the Social Security
Commission (SSC), denying the petitioner's claim for survivor's pension accruing from the death of her husband
Bonifacio S. Dycaico, a Social Security System (SSS) member-pensioner. Likewise sought to be reversed and set
aside is the appellate court's Resolution dated December 15, 2003, denying the petitioner's motion for
reconsideration.
The case arose from the following undisputed facts:
Bonifacio S. Dycaico became a member of the SSS on January 24, 1980. In his self-employed data record (SSS
Form RS-1), he named the petitioner, Elena P. Dycaico, and their eight children as his beneficiaries. At that time,
Bonifacio and Elena lived together as husband and wife without the benefit of marriage.
In June 1989, Bonifacio was considered retired and began receiving his monthly pension from the SSS. He
continued to receive the monthly pension until he passed away on June 19, 1997. A few months prior to his
death, however, Bonifacio married the petitioner on January 6, 1997.
Shortly after Bonifacio's death, the petitioner filed with the SSS an application for survivor's pension. Her
application, however, was denied on the ground that under Section 12-B(d) of Republic Act (Rep. Act) No. 8282
or the Social Security Law 2 she could not be considered a primary beneficiary of Bonifacio as of the date of his
retirement. The said proviso reads:
Sec. 12-B. Retirement Benefits.
xxx xxx xxx
(d) Upon the death of the retired member, his primary beneficiaries as of the date of his
retirement shall be entitled to receive the monthly pension. . . .
Applying this proviso, the petitioner was informed that the
Records show that the member [referring to Bonifacio] was considered retired on June 5, 1989
and monthly pension was cancelled upon our receipt of a report on his death on June 19, 1997.
In your death claim application, submitted marriage contract with the deceased member shows
that you were married in 1997 or after his retirement date; hence, you could not be considered
his primary beneficiary. EaTCSA

In view of this, we regret that there is no other benefit due you. However, if you do not conform
with us, you may file a formal petition with our Social Security Commission to determine your
benefit eligibility. 3
On July 9, 2001, the petitioner filed with the SSC a petition alleging that the denial of her survivor's pension was
unjustified. She contended that Bonifacio designated her and their children as primary beneficiaries in his SSS
Form RS-1 and that it was not indicated therein that only legitimate family members could be made beneficiaries.
Section 12-B(d) of Rep. Act No. 8282 does not, likewise, require that the primary beneficiaries be legitimate
relatives of the member to be entitled to the survivor's pension. The SSS is legally bound to respect Bonifacio's
designation of them as his beneficiaries. Further, Rep. Act No. 8282 should be interpreted to promote social
justice.
On February 6, 2002, the SSC promulgated its Resolution affirming the denial of the petitioner's claim. The SSC
refuted the petitioner's contention that primary beneficiaries need not be legitimate family members by citing the
definitions of "primary beneficiaries" and "dependents" in Section 8 of Rep. Act No. 8282. Under paragraph (k) of
the said provision, "primary beneficiaries" are "[t]he dependent spouse until he or she remarries, the dependent
legitimate, legitimated or legally adopted, and illegitimate children . . ." Paragraph (e) of the same provision, on
the other hand, defines "dependents" as the following: "(1) [t]he legal spouse entitled by law to receive support
from the member; (2) [t]he legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not
gainfully employed and has not reached twenty-one (21) years of age, or if over twenty-one (21) years of age, he
is congenitally or while still a minor has been permanently incapacitated and incapable of self-support, physically
or mentally; and (3) [t]he parent who is receiving regular support from the member." Based on the foregoing,
according to the SSC, it has consistently ruled that entitlement to the survivor's pension in one's capacity as
primary beneficiary is premised on the legitimacy of relationship with and dependency for support upon the
deceased SSS member during his lifetime.
Under Section 12-B(d) of Rep. Act No. 8282, the primary beneficiaries who are entitled to survivor's pension are
those who qualify as such as of the date of retirement of the deceased member. Hence, the petitioner, who was
not then the legitimate spouse of Bonifacio as of the date of his retirement, could not be considered his primary
beneficiary. The SSC further opined that Bonifacio's designation of the petitioner as one of his primary
beneficiaries in his SSS Form RS-1 is void, not only on moral considerations but also for misrepresentation.
Accordingly, the petitioner is not entitled to claim the survivor's pension under Section 12-B(d) of Rep. Act No.
8282.
Aggrieved, the petitioner filed with the CA a petition for review of the SSC's February 6, 2002 Resolution. In the
assailed Decision, dated April 15, 2003, the appellate court dismissed the petition. Citing the same provisions
in Rep. Act No. 8282 as those cited by the SSC, the CA declared that since the petitioner was merely the
common-law wife of Bonifacio at the time of his retirement in 1989, his designation of the petitioner as one of his
beneficiaries in the SSS Form RS-1 in 1980 is void. The CA further observed that Bonifacio's children with the
petitioner could no longer qualify as primary beneficiaries because they have all reached twenty-one (21) years of
age. The decretal portion of the assailed decision reads:
WHEREFORE, premises considered, the Petition is DISMISSED and the assailed 06 February
2002 Resolution of respondent Commission is hereby AFFIRMED in toto. No costs.
SO ORDERED. 4
The petitioner sought reconsideration of the said decision but in the assailed Resolution dated December 15,
2003, the appellate court denied her motion. Hence, the petitioner's recourse to this Court. STcHDC

The petitioner points out that the term "primary beneficiaries" as used in Section 12-B(d) of Rep. Act No.
8282 does not have any qualification. She thus theorizes that regardless of whether the primary beneficiary
designated by the member as such is legitimate or not, he or she is entitled to the survivor's pension. Reliance by
the appellate court and the SSC on the definitions of "primary beneficiaries" and "dependents" in Section 8
of Rep. Act No. 8282 is allegedly unwarranted because these definitions cannot modify Section 12-B(d) thereof.
The petitioner maintains that when she and Bonifacio got married in January 1997, a few months before he
passed away, they merely intended to legalize their relationship and had no intention to commit any fraud.
Further, since Rep. Act No. 8282 is a social legislation, it should be construed liberally in favor of claimants like
the petitioner. She cites the Court's pronouncement that "the sympathy of the law on social security is toward its
beneficiaries, and the law, by its own terms, requires a construction of utmost liberality in their favor." 5
The SSS, on the other hand, contends that Section 12-B(d) of Rep. Act No. 8282 should be read in conjunction
with the definition of the terms "dependents" and "primary beneficiaries" in Section 8 thereof. Since the petitioner
was not as yet the legal spouse of Bonifacio at the time of his retirement in 1989, she is not entitled to claim the
survivor's pension accruing at the time of his death. The SSS insists that the designation by Bonifacio of the
petitioner and their illegitimate children in his SSS Form RS-1 is void.
According to the SSS, there is nothing in Rep. Act No. 8282 which provides that "should there be no primary or
secondary beneficiaries, the benefit accruing from the death of a member should go to his designated commonlaw spouse" and that "to rule otherwise would be to condone the designation of common-law spouses as
beneficiaries, a clear case of circumventing the SS Law and a violation of public policy and morals." 6 Finally, the
SSS is of the opinion that Section 12-B(d) of Rep. Act No. 8282 is clear and explicit; hence, there is no room for
its interpretation, only for application.
In the Resolution dated July 19, 2005, the Court required the parties, as well as the Office of the Solicitor General,
to file their respective comments on the issue of whether or not the proviso "as of the date of his retirement" in
Section 12-B(d) of Rep. Act No. 8282 violates the equal protection and due process clauses of the Constitution.
The Court believes that this issue is intertwined with and indispensable to the resolution of the merits of the
petition.
In compliance therewith, in its comment, the SSC argues that the proviso "as of the date of his retirement" in
Section 12-B(d) of Rep. Act No. 8282 does not run afoul of the equal protection clause of the Constitution as it
merely determines the reckoning date of qualification and entitlement of beneficiaries to the survivorship pension.
It asserts that this classification of beneficiaries is based on valid and substantial distinctions that are germane to
the legislative purpose of Rep. Act No. 8282.
The SSC also impugns the marriage of the petitioner to Bonifacio after his retirement stating that it was contracted
as an afterthought to enable her to qualify for the survivorship pension upon the latter's death. It further alleges
that there is no violation of the due process clause as the petitioner was given her day in court and was able to
present her side.

The SSS filed its separate comment and therein insists that the petitioner was not the legitimate spouse of the
deceased member at the time when the contingency occurred (his retirement) and, therefore, she could not be
considered a primary beneficiary within the contemplation of Rep. Act No. 8282. The SSS posits that the statute's
intent is to give survivorship pension only to primary beneficiaries at the time of the retirement of the deceased
member. Rep. Act No. 8282 itself ordains the persons entitled thereto and cannot be subject of change by the
SSS.

The Solicitor General agrees with the stance taken by the SSS that the proviso "as of the date of his retirement"
merely marks the period when the primary beneficiary must be so to be entitled to the benefits. It does not violate
the equal protection clause because the classification resulting therefrom rests on substantial distinctions.
Moreover, the condition as to the period for entitlement, i.e., as of the date of the member's retirement, is relevant
as it set the parameters for those availing of the benefits and it applies to all those similarly situated. The Solicitor
General is also of the view that the said proviso does not offend the due process clause because claimants are
given the opportunity to file their claims and to prove their case before the Commission. IESTcD
For clarity, Section 12-B(d) of Rep. Act No. 8282 is quoted anew below:
Sec. 12-B. Retirement Benefits.
xxx xxx xxx
(d) Upon the death of the retired member, his primary beneficiaries as of the date of his
retirement shall be entitled to receive the monthly pension. . . .
Under Section 8(k) of the same law, the "primary beneficiaries" are:
1. The dependent spouse until he or she remarries; and
2. The dependent legitimate, legitimated or legally adopted, and illegitimate children.
Further, the "dependent spouse" and "dependent children" are qualified under paragraph (e) of the same section
as follows:
1. The legal spouse entitled by law to receive support until he or she remarries; and
2. The dependent legitimate, legitimated or legally adopted, and illegitimate child who is
unmarried, not gainfully employed and has not reached twenty-one (21) years of age,
or if over twenty-one years of age, he is congenitally or while still a minor has been
permanently incapacitated and incapable of self-support, physically or mentally.
The SSS denied the petitioner's application for survivor's pension on the sole ground that she was not the legal
spouse of Bonifacio "as of the date of his retirement;" hence, she could not be considered as his primary
beneficiary under Section 12-B(d) of Rep. Act No. 8282.
The Court holds that the proviso "as of the date of his retirement" in Section 12-B(d) of Rep. Act No. 8282, which
qualifies the term "primary beneficiaries," is unconstitutional for it violates the due process and equal protection
clauses of the Constitution. 7
In an analogous case, Government Service Insurance System v. Montesclaros, 8 the Court invalidated the
proviso in Presidential Decree (P.D.) No. 1146 9 which stated that "the dependent spouse shall not be entitled to
said pension if his marriage with the pensioner is contracted within three years before the pensioner qualified for
the pension." In the said case, the Court characterized retirement benefits as property interest of the pensioner as
well as his or her surviving spouse. The proviso, which denied a dependent spouse's claim for survivorship
pension if the dependent spouse contracted marriage to the pensioner within the three-year prohibited period,
was declared offensive to the due process clause. There was outright confiscation of benefits due the surviving
spouse without giving him or her an opportunity to be heard. The proviso was also held to infringe the equal
protection clause as it discriminated against dependent spouses who contracted their respective marriages to
pensioners within three years before they qualified for their pension.
For reasons which shall be discussed shortly, the proviso "as of the date of his retirement" in Section 12-B(d)
of Rep. Act No. 8282 similarly violates the due process and equal protection clauses of the Constitution.

The proviso infringes the equal protection clause

As illustrated by the petitioner's case, the proviso "as of the date of his retirement" in Section 12-B(d) of Rep. Act
No. 8282 which qualifies the term "primary beneficiaries" results in the classification of dependent spouses as
primary beneficiaries into two groups:
(1) Those dependent spouses whose respective marriages to SSS members were
contracted prior to the latter's retirement; and cDAISC
(2) Those dependent spouses whose respective marriages to SSS members were
contracted after the latter's retirement.
Underlying these two classifications of dependent spouses is that their respective marriages are valid. In other
words, both groups are legitimate or legal spouses. The distinction between them lies solely on the date the
marriage was contracted. The petitioner belongs to the second group of dependent spouses, i.e., her marriage to
Bonifacio was contracted after his retirement. As such, she and those similarly situated do not qualify as "primary
beneficiaries" under Section 12-B(d) of Rep. Act No. 8282 and, therefore, are not entitled to survivor's pension
under the same provision by reason of the subject proviso.
It is noted that the eligibility of "dependent children" who are biological offsprings of a retired SSS member to be
considered as his primary beneficiaries under Section 12-B(d) of Rep. Act No. 8282 is not substantially affected
by the proviso "as of the date of his retirement." A biological child, whether legitimate, legitimated or illegitimate, is
entitled to survivor's pension upon the death of a retired SSS member so long as the said child is unmarried, not
gainfully employed and has not reached twenty-one (21) years of age, or if over twenty-one (21) years of age, he
or she is congenitally or while still a minor has been permanently incapacitated and incapable of self-support,
physically or mentally.
On the other hand, the eligibility of legally adopted children to be considered "primary beneficiaries" under Section
12-B(d) of Rep. Act No. 8282 is affected by the proviso "as of the date of his retirement" in the same manner as
the dependent spouses. A legally adopted child who satisfies the requirements in Section 8(e)(2) 10thereof is
considered a primary beneficiary of a retired SSS member upon the latter's death only if the said child had been
legally adopted prior to the member's retirement. One who was legally adopted by the SSS member after his or
her retirement does not qualify as a primary beneficiary for the purpose of entitlement to survivor's pension under
Section 12-B(d) of Rep. Act No. 8282.
In any case, the issue that now confronts the Court involves a dependent spouse who claims to have been
unjustly deprived of her survivor's pension under Section 12-B(d) of Rep. Act No. 8282. Hence, the subsequent
discussion will focus on the resultant classification of the dependent spouses as primary beneficiaries under the
said provision.
As earlier stated, the petitioner belongs to the second group of dependent spouses, i.e., her marriage to Bonifacio
was contracted after his retirement. She and those similarly situated are undoubtedly discriminated against as the
proviso "as of the date of his retirement" disqualifies them from being considered "primary beneficiaries" for the
purpose of entitlement to survivor's pension.
Generally, a statute based on reasonable classification does not violate the constitutional guaranty of the equal
protection clause of the law. 11 With respect to Rep. Act No. 8282, in particular, as a social security law, it is
recognized that it "is permeated with provisions that draw lines in classifying those who are to receive benefits.
Congressional decisions in this regard are entitled to deference as those of the institution charged under our
scheme of government with the primary responsibility for making such judgments in light of competing policies
and interests." 12

However, as in other statutes, the classification in Rep. Act No. 8282 with respect to entitlement to benefits, to be
valid and reasonable, must satisfy the following requirements: (1) it must rest on substantial distinctions; (2) it
must be germane to the purpose of the law; (3) it must not be limited to existing conditions only; and (4) it must
apply equally to all members of the same class. 13
The legislative history of Rep. Act No. 8282 does not bear out the purpose of Congress in inserting the proviso
"as of the date of his retirement" to qualify the term "primary beneficiaries" in Section 12-B(d) thereof. To the
Court's mind, however, it reflects congressional concern with the possibility of relationships entered after
retirement for the purpose of obtaining benefits. In particular, the proviso was apparently intended to prevent
sham marriages or those contracted by persons solely to enable one spouse to claim benefits upon the
anticipated death of the other spouse. aACEID
This concern is concededly valid. However, classifying dependent spouses and determining their entitlement to
survivor's pension based on whether the marriage was contracted before or after the retirement of the other
spouse, regardless of the duration of the said marriage, bears no relation to the achievement of the policy
objective of the law, i.e., "provide meaningful protection to members and their beneficiaries against the hazard of
disability, sickness, maternity, old age, death and other contingencies resulting in loss of income or financial
burden." 14 The nexus of the classification to the policy objective is vague and flimsy. Put differently, such
classification of dependent spouses is not germane to the aforesaid policy objective.

For if it were the intention of Congress to prevent sham marriages or those entered in contemplation of imminent
death, then it should have prescribed a definite "duration-of-relationship" or durational period of relationship as
one of the requirements for entitlement to survivor's pension. For example, in the United States, a provision in
their social security law which excludes from social security benefits the surviving wife and stepchild of a
deceased wage earner who had their respective relationships to the wage earner for less than nine months prior
to his death, was declared valid. 15 Thus, nine months is recognized in the United States as the minimum
duration of a marriage to consider it as having been contracted in good faith for the purpose of entitlement to
survivorship pension.
In contrast, the proviso "as of the date of his retirement" in Section 12-B(d) in Rep. Act No. 8282 effectively
disqualifies from entitlement to survivor's pension all those dependent spouses whose respective marriages to
retired SSS members were contracted after the latter's retirement. The duration of the marriage is not even
considered. It is observed that, in certain instances, the retirement age under Rep. Act No. 8282 is sixty (60)
years old. 16 A marriage contracted by a retired SSS member after the said age may still last for more than ten
years, assuming the member lives up to over seventy (70) years old. In such a case, it cannot be said that the
marriage was a sham or was entered into solely for the purpose of enabling one spouse to obtain the financial
benefits due upon the death of the other spouse. Nonetheless, the said surviving spouse is not entitled to
survivor's pension because he or she is not a primary beneficiary as of the date of retirement of the SSS member
following Section 12-B(d) of Rep. Act No. 8282.
Further, the classification of dependent spouses on the basis of whether their respective marriages to the SSS
member were contracted prior to or after the latter's retirement for the purpose of entitlement to survivor's pension
does not rest on real and substantial distinctions. It is arbitrary and discriminatory. It is too sweeping because the
proviso "as of the date of his retirement," which effectively disqualifies the dependent spouses whose respective
marriages to the retired SSS member were contracted after the latter's retirement as primary beneficiaries,
unfairly lumps all these marriages as sham relationships or were contracted solely for the purpose of acquiring
benefits accruing upon the death of the other spouse. The proviso thus unduly prejudices the rights of the legal
surviving spouse, like the petitioner, and defeats the avowed policy of the law "to provide meaningful protection to

members and their beneficiaries against the hazards of disability, sickness, maternity, old age, death, and other
contingencies resulting in loss of income or financial burden." 17
The proviso infringes the due process clause
As earlier opined, in Government Service Insurance System v. Montesclaros, 18 the Court characterized
retirement benefits as a property interest of a retiree. We held therein that "[i]n a pension plan where employee
participation is mandatory, the prevailing view is that employees have contractual or vested rights in the pension
where the pension is part of the terms of employment." 19 Thus, it was ruled that, "where the employee retires
and meets the eligibility requirements, he acquires a vested right to benefits that is protected by the due process
clause" and "[r]etirees enjoy a protected property interest whenever they acquire a right to immediate payment
under pre-existing law." 20 Further, since pursuant to the pertinent law therein, the dependent spouse is entitled
to survivorship pension, "a widow's right to receive pension following the demise of her husband is also part of the
husband's contractual compensation." 21
Although the subject matter in the above-cited case involved the retirement benefits under P.D. No. 1146 or
the Revised Government Service Insurance Act of 1977 22covering government employees, the pronouncement
therein that retirees enjoy a protected property interest in their retirement benefits applies squarely to those in the
private sector under Rep. Act No. 8282. This is so because the mandatory contributions of both the
employers 23 and the employees 24 to the SSS do not, likewise, make the retirement benefits under Rep. Act No.
8282 mere gratuity but form part of the latter's compensation. Even the retirement benefits of self-employed
individuals, like Bonifacio, who have been included in the compulsory coverage of Rep. Act No. 8282 25 are not
mere gratuity because they are required to pay both the employer and employee contributions. 26 Further,
under Rep. Act No. 8282, the surviving spouse is entitled to survivor's pension accruing on the death of the
member; hence, the surviving spouse's right to receive such benefit following the demise of the wife or husband,
as the case may be, is also part of the latter's contractual compensation. cCSDaI
The proviso "as of the date of his retirement" in Section 12-B(d) of Rep. Act No. 8282 runs afoul of the due
process clause as it outrightly deprives the surviving spouses whose respective marriages to the retired SSS
members were contracted after the latter's retirement of their survivor's benefits. There is outright confiscation of
benefits due such surviving spouses without giving them an opportunity to be heard.
By this outright disqualification of the surviving spouses whose respective marriages to SSS members were
contracted after the latter's retirement, the proviso "as of the date of his retirement" qualifying the term "primary
beneficiaries" for the purpose of entitlement to survivor's pension has created the presumption that marriages
contracted after the retirement date of SSS members were entered into for the purpose of securing the benefits
under Rep. Act No. 8282. This presumption, moreover, is conclusive because the said surviving spouses are not
afforded any opportunity to disprove the presence of the illicit purpose. The proviso, as it creates this conclusive
presumption, is unconstitutional because it presumes a fact which is not necessarily or universally true. In the
United States, this kind of presumption is characterized as an "irrebuttable presumption" and statutes creating
permanent and irrebutable presumptions have long been disfavored under the due process clause. 27
In the petitioner's case, for example, she asserted that when she and Bonifacio got married in 1997, it was merely
to legalize their relationship and not to commit fraud. This claim is quite believable. After all, they had been living
together since 1980 and, in fact, during that time their eldest child was already twenty-four (24) years old.
However, the petitioner was not given any opportunity to prove her claim that she was Bonifacio's bona fide legal
spouse as she was automatically disqualified from being considered as his primary beneficiary. In effect, the
petitioner was deprived of the survivor's benefits, a property interest, accruing from the death of Bonifacio without
any opportunity to be heard. Standards of due process require that the petitioner be allowed to present evidence
to prove that her marriage to Bonifacio was contracted in good faith and as his bona fide spouse she is entitled to
the survivor's pension accruing upon his death. 28 Hence, the proviso "as of the date of his retirement" in Section

12-B(d) which deprives the petitioner and those similarly situated dependent spouses of retired SSS members
this opportunity to be heard must be struck down.
Conclusion
Even as the proviso "as of the date of his retirement" in Section 12-B(d) is nullified, the enumeration of primary
beneficiaries for the purpose of entitlement to survivor's pension is not substantially affected since the following
persons are considered as such under Section 8(k) of Rep. Act No. 8282:
(1) The dependent spouse until he or she remarries; and
(2) The dependent legitimate, legitimated or legally adopted, and illegitimate children.
In relation thereto, Section 8(e) thereof qualifies the dependent spouse and dependent children as follows:
(1) The legal spouse entitled by law to receive support from the member;
(2) The legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not
gainfully employed and has not reached twenty-one years (21) of age, or if over twentyone (21) years of age, he is congenitally or while still a minor has been permanently
incapacitated and incapable of self-support, physically or mentally.
Finally, the Court concedes that the petitioner did not raise the issue of the validity of the proviso "as of the date of
his retirement" in Section 12-B(d) of Rep. Act No. 8282. The rule is that the Court does not decide questions of a
constitutional nature unless absolutely necessary to a decision of the case. 29 However, the question of the
constitutionality of the proviso is absolutely necessary for the proper resolution of the present case. Accordingly,
the Court required the parties to present their arguments on this issue and proceeded to pass upon the same in
the exercise of its equity jurisdiction and in order to render substantial justice to the petitioner who, presumably in
her advanced age by now, deserves to receive forthwith the survivor's pension accruing upon the death of her
husband.
WHEREFORE, the petition is GRANTED. The Decision dated April 15, 2003 and Resolution dated December 15,
2003 of the Court of Appeals in CA-G.R. SP No. 69632 are REVERSED and SET ASIDE. The proviso "as of the
date of his retirement" in Section 12-B(d) of Rep. Act No. 8282 is declared VOID for being contrary to the due
process and equal protection clauses of the Constitution. The Social Security System cannot deny the claim of
petitioner Elena P. Dycaico for survivor's pension on the basis of this invalid proviso. DAHCaI

SO ORDERED.
||| (Dycaico v. Social Security System, G.R. No. 161357, [November 30, 2005], 513 PHIL 23-42)

EN BANC
[G.R. No. L-21642. July 30, 1966.]
SOCIAL SECURITY SYSTEM, petitioner-appellee, vs. CANDELARIA
AL., respondents, LOURDES TUPLANO, respondent-appellant.

D.

DAVAC,

ET

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

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

SYLLABUS
1. SOCIAL SECURITY SYSTEM; NATURE OF BENEFITS UNDER THE SOCIAL SECURITY ACT; VALIDLY
DESIGNATED BENEFICIARY ENTITLED TO BENEFITS. The benefit receivable under the Social Security Act
is in the nature of a special privilege or an arrangement secured by the law, pursuant to the policy of the State to
provide social security to the workingmen. The amounts that may thus be received cannot be considered as
property earned by the member during his lifetime, and, hence, do not form part of the properties of the conjugal
partnership or of the estate of the said member. They are disbursed from a public special fund created by
Congress pursuant to the declared policy 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."
(Section 1, Republic Act No. 1792.) Consequently, if there is a named beneficiary and the designation is not
invalid, it is not the heirs of the employee who are entitled to receive the benefits, unless they are the designated
beneficiaries themselves. It is only when there is no designated beneficiary or when the designation is void that
the laws of succession become applicable. The Social Security Act is not a law of succession. (See Tecson vs.
Social Security System, G. R. No. L-15798, December 23, 1961.)

DECISION

BARRERA, J p:
This is an appeal from the resolution of the Social Security Commission declaring respondent Candelaria Davac
as the person entitled to receive the death benefits payable for the death of Petronilo Davac.
The facts of the case as found by the Social Security Commission, briefly are: The late Petronilo Davac, a former
employee of Lianga Bay Logging Co. Inc. became a member of the Social Security System (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 on November 21, 1957, he designated respondent
Candelaria Davac as his beneficiary and indicated his relationship 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 appears from their respective claims and the documents submitted in support
thereof, that the deceased contracted two marriages, the first, with claimant Lourdes Tuplano on August 29, 1946,
who bore him a child, Romeo Davac? and the second, with claimant Candelaria Davac on January 18, 1949, with
whom he had a minor daughter, Elizabeth Davac. Due to their conflicting claims, the processing thereof was held

in abeyance, whereupon the SSS filed this petition praying that respondents be required to interplead and litigate
between themselves their conflicting claims over the death benefits in question.
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 acted correctly 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 of Petronilo
Davac's death on April 5, 1959, provides:
"SEC. 13. Upon the covered employee's death or total and permanent disability under such
conditions as the Commission may define, before becoming eligible for retirement and if either
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 to the
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 protection
of the employee as well as of his family, but this purpose or intention of the law cannot be
enforced to the extent of contradicting the very provisions of said law as contained in Section
13, thereof, . . . When the provisions of a law are clear and explicit, the courts can do nothing
but apply its clear and explicit provisions (Velasco vs. Lopez, 1 Phil. 720; 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) it deprives 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 a life insurance policy and, therefore, the same qualifications and disqualifications should be
applied.
Article 2012 of the New Civil Code provides:
"ART. 2012. Any person who is forbidden from receiving any donation under Article 739 cannot
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;
xxx xxx xxx
Without deciding whether the naming of a beneficiary of the benefits accruing from membership in the Social
Security System is a donation, or that it creates a situation analogous to the relation of an insured and the

beneficiary under a life insurance policy, it is enough, for the purpose of the instant case, to state that the
disqualification mentioned in Article 739 is not applicable to herein appellee Candelaria 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 Social Security
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 declared policy 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 2-1/2 per cent of the
employee's monthly compensation); 3 the employer's contribution (equivalent to 3-1/2 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 be diminished
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 a special
privilege or an arrangement secured by the law pursuant to the policy of the State to provide social security to the
workingmen. The amounts that may thus be received cannot be considered as property 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. 7 Furthermore, 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 estate of 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 person 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 executed by
those entitled thereto in favor of any agent, attorney, or any other individual for the collection
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 of death benefits, if no
beneficiary has been designated or the designation thereof is void, said benefits 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 the designated
beneficiaries themselves). It is only when there is no designated beneficiaries or when the designation 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

THIRD DIVISION
[G.R. No. 192686. November 23, 2011.]
FIL-STAR MARITIME CORPORATION, CAPTAIN VICTORIO S. MIGALLOS and
GRANDSLAM ENTERPRISE CORPORATION, petitioners, vs. HANZIEL O.
ROSETE, respondent.

DECISION

MENDOZA, J p:
This is a petition for review on certiorari 1 under Rule 45 of the 1997 Rules of Civil Procedure assailing the March
23, 2010 Decision 2 and the June 8, 2010 Resolution 3 of the Court of Appeals (CA), in CA-G.R. SP No. 103256,
which reversed the October 17, 2007 Resolution 4 of the National Labor Relations Commission (NLRC) and
ordered the reinstatement of the May 21, 2007 Decision 5 of the Labor Arbiter (LA), awarding disability benefits to
respondent Hanziel Rosete (respondent).
In 2005, petitioner Fil-Star Maritime Corporation (Fil-Star), the local manning agency of co-petitioner Grandslam
Enterprise Corporation (Grandslam), hired respondent as third officer on board the ocean-going vessel "M/V
Ansac Asia." He was in charge of the loading and unloading operations of the vessel's cargo primarily consisting
of soda ash in bulk. Respondent stated that the nature of his work exposed him to minute particles of soda ash
during the loading and unloading operations. On November 22, 2005, respondent finished his contract and
returned to the Philippines.
Thereafter, the petitioners re-hired respondent to work as second officer on their vessel for a period of nine (9)
months. On January 5, 2006, respondent underwent a pre-employment medical examination (PEME) with First
Medical Team Health Care Specialist Group, 6 the company accredited physician, and was pronounced "fit to
work." On board the vessel, he was tasked to make an inventory of the vessel's property for annual inspection.
According to respondent, he worked diligently and oftentimes worked odd hours just to familiarize himself with his
new job. He averred that overtime work and the violent motions of the vessel due to weather inclemency caused
undue strain to his eyes and his physical well-being.
On February 14, 2006 or a little over a month from his embarkation, respondent experienced an abrupt blurring of
his left eye. He reported it to his captain and was advised to do an eye wash to relieve his pain until they reached
Chiba, Japan. After the vessel arrived in Chiba, respondent was not able to seek medical advice because he was
tasked to man the ship's navigation equipment. Five days later, respondent was able to receive medical attention
in Kawasaki, Japan. Respondent was diagnosed with Central Retinal Vein Occlusion and immediately underwent
three rounds of laser surgery on February 28, 2006, March 2, 2006 and March 4, 2006. aScITE
On March 9, 2006, respondent was declared fit for travel and was subsequently repatriated to the Philippines.
Upon arrival in Manila, respondent went to the Metropolitan Hospital but could not get immediate treatment. On
March 19, 2006, he experienced severe pain in his left eye so he insisted that he be admitted to the hospital.
Respondent underwent another series of laser surgery on March 22 and 25, April 6, 18, and 25, 2006.
On August 11, 2006, Dr. Antonio Say declared respondent's left eye to be legally blind with poor possibility of
recovery. Relevant portions of the medical certificate read:

A.Left eye is legally blind

B.Partial permanent disability
Partial because the visual activity of the right eye is 20/20.
It is permanent because the poor visual activity of the left eye, hand movement, has
poor prognosis for visual recovery. 7
The petitioners denied his claim for permanent total disability and only rated his incapacity as Grade 7.
Respondent stressed that, under their Collective Bargaining Agreement (CBA), he should be considered legally
blind meriting entitlement to permanent total disability benefits in the sum of US$105,000.00 for being unable to
perform his job for more than 120 days from his repatriation.
Thus, on August 29, 2006, respondent filed a complaint against Fil-Star, Capt. Victorio S. Migallos and Grandslam
for disability benefits, damages and attorney's fees.
The petitioners averred that after almost a month aboard the vessel, respondent complained of a sudden blurring
of his left eye. They referred him to the Honmoku Hospital where a Dr. Yasuhiko Tomita diagnosed him with
Central Retinal Vein Occlusion, left eye and Neo-Vascular Glaucoma, left eye, suspicion. After his repatriation,
they immediately referred him to the Metropolitan Medical Center where he was treated and underwent a series of
Panretinal Photocoagulation Session to prevent further neovascular formation. They shouldered the expenses for
all these procedures. They, however, argued that respondent was not qualified for disability benefits, damages
and attorney's fees because his illness was not an occupational disease or work-related.
On May 21, 2007, Labor Arbiter Pablo C. Espiritu, Jr. (the LA) ruled in favor of respondent. 8 The decretal portion
reads: ScAIaT
WHEREFORE, premises considered, respondents Filstar Maritime Corporation and Grandslam
Enterprise Corp. are jointly and severally liable to pay complainant full total and permanent
disability benefits in the amount of US$105,000.00 or its equivalent amount in Philippine
currency at the time of payment.
Respondents are further ordered to pay 10% attorney's fees based on the total judgment
award.
All monetary claims are hereby dismissed.
SO ORDERED. 9
The LA reasoned out that respondent left the Philippines in good condition, thus, it could be logically inferred that
he contracted the illness while on board the vessel. As respondent was not able to perform his job for more than
120 days since his repatriation, he became entitled to permanent disability benefits. Based on their CBA,
respondent should be awarded US$105,000.00. 10
Not in conformity with the ruling, the petitioners appealed to the NLRC which, in its October 17, 2007 Resolution,
modified the L.A. Decision by reducing respondent's disability benefits from US$105,000.00 to
US$20,900.00. 11 As modified, the decretal portion reads:
WHEREFORE, the assailed Decision dated 21 May 2007 is hereby MODIFIED by ordering the
respondents to pay jointly and severally complainant Hanziel O. Rosete a disability benefit of
US$20,900, the amount equivalent to Grade 7 under POEA Standard Employment Contract.

The payment of ten percent (10%) attorney's fees based on the judgment award is hereby
AFFIRMED.
SO ORDERED. 12
The NLRC ruled that the grant of US$105,000.00 based on the provisions of the CBA had no legal basis because
disability benefits under Article 28 thereon would refer only to permanent disability resulting from accident while in
employment. 13 The NLRC held respondent was entitled to disability benefits but only up to Grade 7 as
recommended by his own physician, Dr. George Pile. 14
Both parties moved for reconsideration of said decision, but their respective motions were denied by the NLRC in
its Resolution dated January 15, 2008. 15
Respondent elevated the case to the CA via petition for certiorari under Rule 65 of the Rules of Court. 16 On
March 23, 2010, the CA reversed the NLRC's decision. Thefallo reads:
WHEREFORE, the petition is GRANTED. The Resolutions dated October 17, 2007 and
January 15, 2008 of the National Labor Relations Commission (NLRC), Quezon City, in NLRCLAC (OFW-M) No. 07-000018-07(3) NLRC-OFW Case No. 06-08-02629-00 are ANNULLED
and SET ASIDE. The Labor Arbiter's Decision dated May 21, 2007 is REINSTATED in full.
SO ORDERED. 17
The CA held that there was no doubt that respondent was unable to work for more than one hundred twenty days
(120) the requisite period for a grant of total disability benefits. Although the petitioners claimed that their CBA
provision should be controlling, the CA clarified that "the relevant provisions of the POEA-SEC pertaining to
permanent total disability remain essential parts of the parties' valid and binding contract." 18 The CA further
stated that although respondent's Central Retinal Vein Occlusion was not listed as an occupational disease, he
successfully established a causal connection from his work as a seaman to his illness. It stressed that
compensability of a non-occupational disease, reasonable proof and not direct proof of a causal connection
between the work and the ailment is required. 19
Petitioners' Motion for Reconsideration 20 was likewise denied by the CA in its June 8, 2010 Resolution. ESCTaA
Hence, this petition. 21
Petitioners submit the following issues for resolution:
I
WHETHER OR NOT THE COURT OF APPEALS COMMITTED PATENT AND REVERSIBLE
ERROR IN RULING THAT PRIVATE RESPONDENT HANZIEL O. ROSETE IS ENTITLED TO
TOTAL PERMANENT DISABILITY BENEFITS
II
WHETHER OR NOT THE COURT OF APPEALS COMMITTED PATENT AND REVERSIBLE
ERROR RULING THAT PRIVATE RESPONDENT HANZIEL O. ROSETE IS ENTITLED TO
DISABILITY BENEFITS UNDER THE COLLECTIVE BARGAINING AGREEMENT
III

WHETHER OR NOT THE COURT OF APPEALS COMMITTED PATENT AND REVERSIBLE

ERROR IN RULING THAT PRIVATE RESPONDENT HANZIEL O. ROSETE IS ENTITLED TO
ATTORNEY'S FEES. 22
The petitioners contend that the CA erred in ruling that respondent was entitled to permanent and total disability
benefits and for applying the provision of their CBA to award respondent US$105,000.00. They aver that Article
28 of their CBA only pertains to permanent disability suffered as a result of an accident. 23
The petition is partly meritorious.
The first issue is whether respondent is entitled to claim disability benefits from the petitioners.
There is no quibble that respondent is entitled to disability benefits. The Standard Employment Contract (SEC) for
seafarers was created by the Philippine Overseas Employment Administration (POEA) pursuant to its mandate
under Executive Order (E.O.) No. 247 24 dated July 21, 1987 to "secure the best terms and conditions of
employment of Filipino contract workers and ensure compliance therewith" and to "promote and protect the wellbeing of Filipino workers overseas." 25
In this case, respondent was diagnosed with Central Retinal Vein Occlusion of his left eye. Central retinal vein
occlusion is medically defined as the blockage of the central retinal vein by a thrombus. It causes painless vision
loss which is usually sudden, but it can also occur gradually over a period of days to weeks. 26 This condition,
despite numerous medical procedures undertaken, eventually led to a total loss of sight of respondent's left eye.
Loss of one bodily function falls within the definition of disability which is essentially "loss or impairment of a
physical or mental function resulting from injury or sickness." 27
Although Central Retinal Vein Occlusion is not listed as one of the occupational diseases under Section 32-A of
the 2000 Amended Terms of POEA-SEC, 28 the resulting disability which is loss of sight of one eye, is specifically
mentioned in Section 32 thereof (Schedule of Disability or Impediment for Injuries Suffered and Diseases
Including Occupational Diseases or Illness Contracted). More importantly, Section 20 (B), paragraph (4) states
that "those illnesses not listed in Section 32 of this Contract are disputably presumed as work-related." 29
The disputable presumption that a particular injury or illness that results in disability, or in some cases death, is
work-related stands in the absence of contrary evidence. In the case at bench, the said presumption was not
overturned by the petitioners. Although, the employer is not the insurer of the health of his employees, he takes
them as he finds them and assumes the risk of liability. 30 Consequently, the Court concurs with the finding of the
courts below that respondent's disability is compensable. TSHEIc
Now, the Court shall determine whether respondent is entitled to be awarded permanent total or permanent
partial disability benefits.
It should be noted that the company-designated physician assessed the loss of respondent's left eye as a
permanent partial disability while respondent's own physician indicated his disability as Grade 7.
The Court is more inclined to rule, however, that respondent is suffering from a permanent total disability as he
was unable to return to his job that he was trained to do for more than one hundred twenty days already. The
recent case of Valenzona v. Fair Shipping Corporation, et al., 31 citing Quitoriano v. Jebsens Maritime,
Inc., 32elucidated the concept of permanent total disability, in this wise:
Thus, Court has applied the Labor Code concept of permanent total disability to the case of
seafarers. . . .
xxx xxx xxx

There are three kinds of disability benefits under the Labor Code, as amended by P.D. No. 626:
(1) temporary total disability, (2) permanent total disability, and (3) permanent partial disability.
Section 2, Rule VII of the Implementing Rules of Book V of the Labor Code differentiates the
disabilities as follows:
Sec. 2.Disability. (a) A total disability is temporary if as a result of the injury or
sickness the employee is unable to perform any gainful occupation for a continuous
period not exceeding 120 days, except as otherwise provided for in Rule X of these
Rules.
(b)A disability is total and permanent if as a result of the injury or sickness the
employee is unable to perform any gainful occupation for a continuous period
exceeding 120 days, except as otherwise provided for in Rule X of these Rules.
(c)A disability is partial and permanent if as a result of the injury or sickness the
employee suffers a permanent partial loss of the use of any part of his body.
In Vicente v. ECC (G.R. No. 85024, January 23, 1991, 193 SCRA 190, 195):
. . . the test of whether or not an employee suffers from 'permanent total disability' is a
showing of the capacity of the employee to continue performing his work
notwithstanding the disability he incurred. Thus, if by reason of the injury or sickness he
sustained, the employee is unable to perform his customary job for more than 120 days
and he does not come within the coverage of Rule X of the Amended Rules on
Employees Compensability (which, in more detailed manner, describes what
constitutes temporary total disability), then the said employee undoubtedly suffers from
'permanent total disability' regardless of whether or not he loses the use of any part of
his body. HDTcEI
A total disability does not require that the employee be absolutely disabled or totally paralyzed.
What is necessary is that the injury must be such that the employee cannot pursue his usual
work and earn therefrom (Austria v. Court of Appeals, G.R. No. 146636, Aug. 12, 2002, 387
SCRA 216, 221). On the other hand, a total disability is considered permanent if it lasts
continuously for more than 120 days. Thus, in the very recent case of Crystal Shipping, Inc. v.
Natividad (G.R. No. 134028, December 17, 1999, 321 SCRA 268, 270-271), we held:
Permanent disability is inability of a worker to perform his job for more than 120 days,
regardless of whether or not he lose s the use of any part of his body. . . .
Total disability, on the other hand, means the disablement of an employee to earn wages in the
same kind of work of similar nature that he was trained for, or accustomed to perform, or any
kind of work which a person of his mentality and attainments could do. It does not mean
absolute helplessness. In disability compensation, it is not the injury which is compensated, but
rather it is the incapacity to work resulting in the impairment of one's earning
capacity. 33 [Emphasis and underscoring supplied]
A total disability does not require that the employee be completely disabled, or totally paralyzed. What is
necessary is that the injury must be such that the employee cannot pursue his or her usual work and earn from
it. 34 On the other hand, a total disability is considered permanent if it lasts continuously for more than 120
days. 35What is crucial is whether the employee who suffers from disability could still perform his work
notwithstanding the disability he incurred. Evidently, respondent was not able to return to his job as a seafarer
after his left eye was declared legally blind. Records show that the petitioners did not give him a new overseas

assignment after his disability. This only shows that his disability effectively barred his chances to be deployed
abroad as an officer of an ocean-going vessel.
Therefore, it is fitting that respondent be entitled to permanent total disability benefits considering that he would
not able to resume his position as a maritime officer and the probability that he would be hired by other maritime
employers would be close to impossible. Indeed, a sight-impaired maritime applicant cannot stand in the same
footing as his healthy co-applicant.
The next issue to be resolved is whether respondent's entitlement to permanent total disability benefits should be
based on the CBA or his POEA-SEC which integrated the 2000 Amended Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels. cDACST
The Court holds that respondent is entitled to claim permanent total disability benefits based on his POEA-SEC
and not based on their CBA as earlier ruled by the L.A. and later affirmed by the CA.
The CBA provisions on disability are not applicable to respondent's case because Article 28 thereon specifically
refers to disability sustained after an accident. Article 28 of the ITF-JSU/AMOSUP CBA specifically states that:
Article 28: Disability
28.1A seafarer who suffers permanent disability as a result of an accident whilst in the
employment of the Company regardless of fault, including accidents occurring while travelling
to or from the ship, and whose ability to work as a seafarer as a result thereof, but excluding
permanent disability due to wilful acts, shall be in addition to sick pay, be entitled to
compensation according to the provisions of this Agreement. [Emphasis supplied]
Respondent failed to show that the blurring of his left eye was caused by an accident on board the ship. Thus,
Article 28 of the CBA cannot be used to compute his disability benefits. aTCAcI
Accordingly, what should govern the computation of his disability benefits is the POEA-SEC incorporating the
2000 POEA Amended Standard Terms and Conditions. Under Section 20 (B), paragraph 6, of the 2000 POEA
Amended Standard Terms and Conditions, to wit:
SECTION 20.COMPENSATION AND BENEFITS
xxx xxx xxx
B.COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during
the term of his contract are as follows:
xxx xxx xxx
6.In case of permanent total or partial disability of the seafarer caused by either injury
or illness the seafarer shall be compensated in accordance with the schedule
of benefits enumerated in Section 32 of this Contract. Computation of his
benefits arising from an illness or disease shall be governed by the rates and
the rules of compensation applicable at the time the illness or disease was
contracted. [Emphases and underscoring supplied]
Based on the schedule of disability under Section 32 of the 2000 POEA Amended Standard Terms and
Conditions, permanent total disability is classified as Grade 1. Thus, respondent's disability benefit should be
computed as follows:

Grade 1:US$50,000.00 x 120% = US$60,000.00

As to the award of attorney's fees, the Court likewise affirms the ruling that respondent is entitled to it as provided
under Article 2208 of the Civil Code:
Art. 2208.In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:
xxx xxx xxx
(8)In actions for indemnity under workmen's compensation and employer's liability laws;
xxx xxx xxx

In the case at bench, respondent was compelled to litigate in order to claim disability benefits from the petitioners.
Thus, the award of attorney's fees is justified pursuant to Article 2208 (8) of the Civil Code. aEACcS
WHEREFORE, the petition is PARTIALLY GRANTED. The March 23, 2010 Decision of the Court of Appeals is
hereby MODIFIED in the sense that petitioners Fil-star Maritime Corporation and Grandslam Enterprise Corp. are
jointly and severally liable to pay respondent Hanziel O. Rosete full total and permanent disability benefits in the
amount of US$60,000.00 or its equivalent amount in Philippine currency at the time of payment. All other aspects
of the CA Decision stand.
SO ORDERED.
||| (Fil-Star Maritime Corp. v. Rosete, G.R. No. 192686, [November 23, 2011], 677 PHIL 262-277)

SECOND DIVISION
[G.R. No. 158131. August 8, 2007.]
SOCIAL SECURITY SYSTEM, petitioner, vs. DEPARTMENT OF JUSTICE, JOSE V.
MARTEL,
OLGA
S.
MARTEL,
and
SYSTEMS
AND
ENCODING
CORPORATION, respondents.

DECISION

CARPIO, J p:
The Case
This is a petition for review 1 filed by the Social Security System (petitioner) of the Decision 2 dated 17 October
2002 and Resolution dated 5 May 2003 of the Court of Appeals. The Decision of 17 October 2002 affirmed the
ruling of the Department of Justice (DOJ) dismissing petitioner's complaint against respondents Jose V. Martel,
Olga S. Martel and five other individuals 3 for violation of Section 22 (a) and (b) in relation to Section 28 (e)
of Republic Act No. 1161 (RA 1161), 4 as amended by Republic Act No. 8282 (RA 8282), 5 for non-remittance of
contributions to petitioner. The 5 May 2003 Resolution denied petitioner's motion for reconsideration.
The Facts
Respondents Jose V. Martel and Olga S. Martel (respondent Martels) are directors of respondent Systems and
Encoding Corporation (SENCOR), an information technology firm, with respondent Jose V. Martel serving as
Chairman of the Board of Directors. Petitioner is a government-owned and controlled corporation mandated by its
charter, RA 1161, to provide financial benefits to private sector employees. SENCOR is covered by RA 1161, as
amended by RA 8282, Section 22 of which requires employers like SENCOR to remit monthly contributions to
petitioner representing the share of the employer and its employees.
In 1998, petitioner filed with the Pasay City Prosecutor's Office a complaint against respondent Martels and their
five co-accused (docketed as I.S. No. 98-L-1534) for SENCOR's non-payment of contributions amounting to
P6,936,435.80 covering the period January 1991 to May 1997. To pay this amount, respondent Martels offered to
assign to petitioner a parcel of land in Tagaytay City covered by Transfer Certificate of Title No. 26340 issued
under respondent Martels' name. Petitioner accepted the offer "subject to the condition that . . . [respondent
Martels] will . . . settle their obligation either by way of dacion en pago or through cash settlement within a
reasonable time . . . ." 6 Thus, petitioner withdrew its complaint from the Pasay City Prosecutor's Office but
reserved its right to revive the same "in the event that no settlement is arrived at." Accordingly, the Pasay City
Prosecutor's Office dismissed I.S. No. 98-L-1534.
In December 2001, respondent Jose V. Martel wrote petitioner offering, in lieu of the Tagaytay City property,
computer-related services. The record does not disclose petitioner's response to this new offer but on 7
December 2001, petitioner filed with the Pasay City Prosecutor's Office another complaint against respondent
Martels and their five co-accused (docketed as I.S. No. 00-L-7142) for SENCOR's non-remittance of
contributions, this time from February 1991 to October 2000 amounting to P21,148,258.30.
In their counter-affidavit, respondent Martels and their co-accused alleged that petitioner is estopped from holding
them criminally liable since petitioner had accepted their offer to assign the Tagaytay City property as payment of

SENCOR's liability. Thus, according to the accused, the relationship between SENCOR and petitioner was
"converted" into an ordinary debtor-creditor relationship through novation.
The Ruling of the Pasay City Prosecutor's Office
In the Resolution of 28 February 2001, Pasay City Assistant Prosecutor Artemio Puti (Prosecutor Puti) found
probable cause to indict respondent Martels for violation of Section 22 (a) and (b) in relation to Section 28 (e) of
RA 1161, as amended by RA 8282. 7 Prosecutor Puti rejected respondent Martels' claim of "negation" of criminal
liability by novation, holding that (1) SENCOR's criminal liability was already "consummated" before respondent
Martels offered to pay SENCOR's liability and (2) thedacion en pago involving the Tagaytay City property did not
materialize. Prosecutor Puti noted that respondent Martels did not dispute petitioner's claim on SENCOR's nonremittance of contributions. 8 Accordingly, the Pasay City Prosecutor's Office filed with the Regional Trial Court of
Pasay City the corresponding Information against respondent Martels, docketed as Criminal Case No. 01-0517.
Respondent Martels appealed to the DOJ.
The Ruling of the Department of Justice
In the Resolution dated 18 May 2001 signed by DOJ Undersecretary Manuel A.J. Teehankee, the DOJ granted
respondent Martels' appeal, set aside Prosecutor Puti's Resolution of 28 February 2001, and ordered the
withdrawal of the Information filed in Criminal Case No. 01-0517. The DOJ found that respondent Martels and
petitioner entered into a compromise agreement before the filing of the Information in Criminal Case No. 01-0517
and that such "negated" any criminal liability on respondent Martels' part. The DOJ Resolution pertinently reads:
From the facts obtaining, it cannot be denied that the dismissal of the first complaint docketed
as I.S. No. 98-L-1534 constituted the compromise agreement between the parties whereby
complainant SSS agreed to respondents' mode of settling their liability through a "dacion en
pago". Consequently, the original relation between the parties was converted to that of an
ordinary creditor-debtor relationship thereby extinguishing the original obligation by a new one.
Complainant, therefore, cannot insist on the original trust it had with respondents existing prior
to the dismissal of the former complaint (I.S. No. 98-L-1534) by filling [sic] the present complaint
(I.S. No. 00-L-7142 now subject of this appeal). Incidentally, this Office considers the latter
complaint as a mere refilling [sic] of the former already compromised and dismissed
[complaint], because of the similarity of the parties and causes of action.
After the dismissal of the complaint in I.S. No. 98-L-1534 and prior to the filing of the complaint
at bar docketed as 00-L-7142, respondents have exerted great effort towards complying with
the terms and conditions of the compromise by way of "dacion en pago". For example,
respondents cite their arrangement for ocular inspection of the Tagaytay land by the
Presidential Commission on Tagaytay-Taal and with the Municipal Engineer of Laurel,
Batangas. The approval of the said commission to build a 12-storey building had been
complied with. This is not disputed by complainant. Access roads were acquired by
respondents from adjacent owners, ready to be titled in complainant's name. Papers and
permits like ecological impact certification, site resurvey, soil test and site appraisal were
secured from various offices like the Municipality of Laurel, the Municipal Engineer, the
Presidential Commission on Tagaytay-Taal, the Philippine Volcanology Commission, the
Bureau of Lands and the Department of Agriculture, among others.
On the part of complainant, it equally shows [sic] adherence to the agreement to compromise.
Records show that on October 1999, one of its officers, Atty. Mariano Pablo S. Tolentino,
assistant vice-president, had expressed in writing his finding to the effect that "(they) are
satisfied to see the lot that (respondents) have negotiated with Congressman Dumpit that

(respondents) offered as access road to (respondents[']) property" (Annex "8" of Petition for
Review). And, as borne by the records, a Dacion En Pago Committee had been created by
complainant SSS precisely to set the mechanism of the settlement in motion. Further,
respondents proposed an alternative mode of settlement through computer-related services,
which proposal was submitted to complainant as late as December 1, 2000.
Verily, the foregoing facts indelibly show that the parties had acted with an obvious intention to
compromise. Hence, respondents' reliance on the doctrine of incipient criminal liability had [sic]
factual and legal bases. While the rule provides that novation does not extinguish criminal
liability, this rule, however holds true only if a criminal information is already filed in court.
Before that bench mark point, the criminal liability is only at its incipient stage and the new
relation between the parties forged at such stage had the effect of negating the criminal liability
of the offender (People vs. Galsim, People vs. Trinidad, 53 OG 731). . . . .
In fine, the compromise agreement between the parties whereby respondents' obligation will be
settled through a "dacion en pago" and the dismissal of the complaint in I.S. No. 98-L-1534 has
[sic] all the earmarks of novation negating respondents' criminal liability. Ergo, complainant is
precluded from filing the present criminal complaint against respondents. 9
Petitioner sought reconsideration but the DOJ denied its motion in the Resolution of 20 September 2001.
Petitioner appealed to the Court of Appeals in a petition for certiorari.
The Ruling of the Court of Appeals
In its Decision of 17 October 2002, the Court of Appeals affirmed the DOJ's rulings and dismissed petitioner's
petition. The appellate court deferred to the DOJ's power to review rulings of prosecutors and held that in
reversing Prosecutor Puti's findings, the DOJ did not act with grave abuse of discretion. 10
Petitioner sought reconsideration but the appellate court denied its motion in the Resolution of 5 May 2003.
Hence, this petition. Petitioner contends that the Court of Appeals erred in affirming the DOJ's rulings because (1)
respondent Martels were charged not with Estafa but with violation of Section 22 (a) and (b) in relation to Section
28 (e) of RA 1161, as amended, a special law impressed with public interest; (2) petitioner did not agree to settle
respondent Martels' criminal liability; and (3) novation serves only to negate civil, but not criminal, liability.
In their Comment, respondent Martels countered that the DOJ correctly applied the concept of novation as they
had settled SENCOR's liability. Respondent Martels added that as of the filing of their Comment, they had already
paid P17,887,442.54 of SENCOR's liability.

In its Reply, petitioner contended that although respondent Martels attempted to pay SENCOR's overdue
contributions through dacion en pago, no payment took place, as evidenced by respondent Martels' alternative
offer to provide computer related services to petitioner instead of assigning the Tagaytay City realty. On
respondent Martels' partial payment of SENCOR's liability, petitioner contended that such does not preclude the
resolution of this petition.
The Issue
The issue is whether the concept of novation serves to abate the prosecution of respondent Martels for violation
of Section 22 (a) and (b) in relation to Section 28 (e) of RA 1161, as amended.
The Ruling of the Court

We rule in the negative and accordingly grant the petition.

The Concept of Novation Finds No Application Here
Novation, a civil law concept relating to the modification of obligations, 11 takes place when the parties to an
existing contract execute a new contract which either changes the object or principal condition of the original
contract, substitutes the person of the debtor, or subrogates a third person in the rights of the creditor. 12 The
effect is either to modify or extinguish the original contract. In its extinctive form, the new obligation replaces the
original, extinguishing the obligor's obligations under the old contract. 13
This Court first recognized the possibility of applying the concept of novation to criminal cases in People v.
Nery, 14 involving a case for Estafa. In that case, the Court observed that although novation is not one of the
means recognized by the Revised Penal Code to extinguish criminal liability, 15 it may "prevent the rise of
criminal liability or to cast doubt on the true nature of the original basic transaction," provided the novation takes
place before the filing of the Information with the trial court. We held:
The novation theory may perhaps apply prior to the filing of the criminal information in court by
the state prosecutors because up to that time the original trust relation may be converted by the
parties into an ordinary creditor-debtor situation, thereby placing the complainant in estoppel to
insist on the original trust. But after the justice authorities have taken cognizance of the crime
and instituted action in court, the offended party may no longer divest the prosecution of its
power to exact the criminal liability, as distinguished from the civil. The crime being an offense
against the state, only the latter can renounce it . . . .
It may be observed in this regard that novation is not one of the means recognized by
the Penal Code whereby criminal liability can be extinguished; hence,the role of
novation may only be to either prevent the rise of criminal liability or to cast doubt on
the true nature of the original basic transaction, whether or not it was such that its
breach would not give rise to penal responsibility, as when money loaned is made to
appear as a deposit, or other similar disguise is resorted to . . . . 16 (Emphasis supplied)
Thus, novation has been invoked to reverse convictions in cases where an underlying contract initially defined the
relation of the parties such as the contract in sale on commission in Estafa cases 17 or the contract in sale of
goods in cases of violation of the Trust Receipts Law. 18 Further, the party invoking novation must prove that the
new contract did indeed take effect. 19
The facts of this case negate the application of novation. In the first place, there is, between SENCOR and
petitioner, no original contract that can be replaced by a new contract changing the object or principal condition of
the original contract, substituting the person of the debtor, or subrogating a third person in the rights of the
creditor. The original relationship between SENCOR and petitioner is defined by law RA 1161, as amended
which requires employers like SENCOR to make periodic contributions to petitioner under pain of criminal
prosecution. Unless Congress enacts a law further amending RA 1161 to give employers a chance to settle their
overdue contributions to prevent prosecution, no amount of agreements between petitioner and SENCOR
(represented by respondent Martels) can change the nature of their relationship and the consequence of
SENCOR's non-payment of contributions.
The indispensability of a prior contractual relation between the complainant and the accused as requisite for the
application of novation in criminal cases was underscored in People v. Tanjutco. 20 In that case, the accused,
who was charged with Qualified Theft, invoked People v. Nery to support his claim that the complainant's
acceptance of partial payment of the stolen funds before the filing of the Information with the trial court converted
his liability into a civil obligation thus rendering baseless his prosecution. The Court rejected this claim and held

that unlike in Nery, there was, in that case, no prior "contractual relationship or bilateral agreement, which can be
modified or altered by the parties," thus:
Reliance on the aforecited Nery case, in support of the contention that the acceptance by
complainant of payment converted the liability of the accused-appellant into a civil obligation or
else that it estopped said complainant from proceeding with the prosecution of the case, is
misplaced and unwarranted.
[I]n the Nery case, which is an action for estafa, there was contractual relationship between
the parties that can be validly novated by the settlement of the obligation of the
offender. Whatever was said in that case, therefore, cannot be invoked in the present
case where no contractual relationship or bilateral agreement, which can be modified or
altered by the parties, is involved. There is here merely a taking of the complainant's
property by one who never acquired juridical possession thereof, qualified by grave
abuse of confidence. 21 (Italicization in the original; boldfacing and underscoring supplied)
Similarly, there is here merely an employer's failure to pay its contributions to a government corporation as
mandated by that corporation's charter.
Secondly, as Prosecutor Puti correctly noted, the agreement between petitioner and respondent Martels for the
latter to pay SENCOR's overdue contributions through the assignment to petitioner of a piece of realty never
materialized. Petitioner's acceptance of respondent Martels' offer was subject to a suspensive condition that ". . .
[private] respondents will . . . settle their obligation either by way of dacion en pago or through cash settlement
within a reasonable time . . . ." This condition was not met because three years after respondent Martels' offer,
petitioner did not receive any payment. In fact, respondent Jose Martel, at that point, changed the terms of the
supposed settlement by offering computer-related services instead of assigning the Tagaytay City realty. In their
Comment to the petition, respondent Martels explained that they made such alternative offer because "the
processing of the papers for the Tagaytay property met with some delay." 22 In short, respondent Martels failed to
make good on their promise in 1998 to settle SENCOR's liability through dacion en pago. The circumstances the
DOJ cited as proof of the compromise agreement's alleged implementation were nothing but steps preparatory to
the actual payment of SENCOR's overdue contributions.
In sum, we hold that any payment respondent Martels would have made to petitioner (and it appears that pending
this petition, respondent Martels partially paid SENCOR's liability) only affects their civil, if any, but not their
criminal liability for violation of Section 22 (a) and (b) in relation to Section 28 (e) of RA 1161, as amended. As
noted in the Resolution dated 28 February 2001 of the Pasay City Prosecutor's Office, respondent Martels do not
dispute SENCOR's non-remittance of contributions from February 1991 to October 2000. Thus, the existence of
probable cause against respondent Martels, SENCOR's directors, 23 is beyond doubt.
Prosecutors' Findings Not Conclusive
In dismissing petitioner's petition, the Court of Appeals held:
[T]his Court has no power to determine whether probable cause to warrant prosecution exist or
not. . . . [T]he determination of whether or not probable cause exists to warrant the prosecution
in court of [respondent Martels] should be consigned and entrusted to the Department of
Justice as reviewer of the findings of the public prosecutor . . . .
In this Petition, We are being asked to assume the function of Public Prosecutor by determining
whether probable cause exists or not. Such is a function that this Court should not be called
upon to perform . . . . 24

This is a misstatement of the law. This Court and the Court of Appeals possess the power to review findings of
prosecutors in preliminary investigations. 25 Although policy considerations call for the widest latitude of
deference to the prosecutor's findings, 26 courts should never shirk from exercising their power, when the
circumstances warrant, to determine whether the prosecutor's findings are supported by the facts, or as in this
case, by the law. In so doing, courts do not act as prosecutors but as organs of the judiciary, exercising their
mandate under the Constitution, relevant statutes, and remedial rules to settle cases and controversies. Indeed,
the exercise of this Court's review power ensures that, on the one hand, probable criminals are
prosecuted 27 and, on the other hand, the innocent are spared from baseless prosecution. 28
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 17 October 2002 and Resolution
dated 5 May 2003 of the Court of Appeals. We REINSTATE the Resolution dated 28 February 2001 of the Pasay
City Prosecutor's Office.
SO ORDERED.
||| (Social Security System v. Department of Justice, G.R. No. 158131, [August 8, 2007], 556 PHIL 263-277)

EN BANC
[G.R. No. L-24883. October 31, 1969.]
MACHUCA TILE CO., INC., petitioner, vs. SOCIAL SECURITY SYSTEM, respondent.

Ramon J. Dizon for petitioner.

Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres, Solicitor Camilo D. Quiason,
Social Security System Legal Counsel Filemon Q. Almazanand Social Security System Trial Attorney Gelacio L.
Bayani for respondent.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; SOCIAL SECURITY ACT; LIABILITY OF EMPLOYER FOR DEATH
BENEFITS WHERE THERE IS FAILURE TO MAKE TIMELY REPORT TO SSS DURING LIFETIME OF
EMPLOYEE. Under Section 24 (a) of the Social Security Act, the employer is liable for the payment of death
benefits to the legal heirs of its deceased employee by virtue of its failure to make a timely report to the SSS
during the lifetime of said deceased that the latter was in its employ and had qualified for compulsory coverage in
the System.
2. ID.; ID.; COVERAGE OF ACT; OBLIGATIONS OF EMPLOYER. An employer has two distinct obligations
under the Social Security Act, to wit, the obligation of making a timely remittance of premiums under Section 22(a)
and the obligation of making a timely report of its employees' names and other personal data, including the Social
Security number assigned to each employee, for coverage under Section 24(a).
3. ID.; ID.; ID.; EFFECT OF POSTHUMOUS REMITTANCE OF DECEASED EMPLOYEE'S PREMIUMS. The
posthumous remittance of the deceased employee's premium served but to extinguish the employer's liability
therefor and to free it from the imposition of the 3% monthly penalty from the date the contribution falls due until
actually paid. These accrued premiums were legally due to the System as the contribution of both employer and
employee under Sections 18 and 19 of the Act and the death of the employee did not extinguish employer's
liability to remit the same. There is no justification for employer's claim that respondent should be held in estoppel
for having retained them.
4. ID.; ID.; ID.; ID.; EFFECT OF FAILURE TO MAKE TIMELY REPORT OF EMPLOYEE'S DATA. For failure to
make a timely report of the employee's name and personal data excludes the employee from the System's
coverage and the Act therefore shifts to the erring employer the responsibility of paying the Social Security
benefits "to which the employee or his heirs would have been entitled had his name been reported on time by the
employer to the System."
5. ID.; ID.; ID.; EFFECT OF TIMELY REPORT BUT PREMIUMS NOT REMITTED. Where the employer has,
however, timely and properly reported the employee's name for coverage but has failed or refused to pay or remit
the premiums, such failure or refusal, by express provision of the Act in Section 22(b) "shall not prejudice the right
of the covered employee to the benefits of the coverage." The Act, in such cases as above stated, exacts the
lesser liability of payment of the delinquent premiums with a 3% monthly penalty.
6. ID.; ID.; ID.; INTEREST ON DEATH BENEFITS. Payment by petitioner of the death benefits in the sum of
P810.00 awarded to the legal heirs of the deceased employee under the Social Security Commission's Resolution

of May 18, 1965 has been delayed pending this unjustified appeal. It is only just and in accordance with law that
the sum due said heirs bear legal interest of six (6%) per cent per annum from June 4, 1965, date of receipt of
said Resolution by petitioner.

DECISION

TEEHANKEE, J p:
We affirm, in this appeal, the Resolution of the Social Security Commission holding petitionerappellant Machuca Tiles Company, Inc. liable under Section 24 (a) of the Social Security Act for the payment
of damages in the form of death benefits to the legal heirs of its deceased employee, Eduardo Jungay, in the
sum of P810.00 by virtue of its failure to make a timely report to the System during the lifetime of said
deceased that the latter was in its employ and had qualified for compulsory coverage in the System.
The undisputed facts of the case are thus related in the appealed Resolution: "The deceased, Eduardo Jungay,
was a former employee of the petitioner and as such, qualified for compulsory coverage in December 1961. He
died on June 17, 1962, whereupon a claim for death benefits was filed with the System by Prudencio Jungay, a
brother of the deceased, as one of the legal heirs. The claim was duly processed by the System's Claims
Department, and in the course thereof, it discovered that the deceased was reported by the petitioner for
coverage in the System only on September 5, 1962, when the premiums on this account were remitted to the
System. After processing of the claim, the Claims Department adjudicated the sum of P810.00 as death benefits
payable to the deceased's legal heirs, namely: Prudencio, Rogelio, Tranquilino, and Patricio, all surnamed
Jungay, but in view of the failure of the petitioner to report his coverage prior to his death on June 17, 1962, the
Acting Administrator of the Social Security System declared the petitioner liable to pay to the said heirs the
amount of P810.00 as adjudicated by the Claims Department. Taking exception to this ruling, the petitioner filed
the instant petition." 1
The Social Security Commission, after due hearing rendered its Resolution of May 18, 1965 affirming the
Administrator's ruling declaring the petitioner, rather than the System, legally liable for the payment of death
benefits to the deceased employee's legal heirs, as follows:
"WHEREFORE, PREMISES CONSIDERED, the petition should be, as it is
hereby, denied. Within fifteen (15) days from its receipt hereof, the petitioner is directed
to pay to the legal heirs of the deceased, Eduardo Jungay, whose names are set out
hereinabove, the sum of EIGHT HUNDRED TEN PESOS (P810.00) as damages
equivalent to the death benefits which the legal heirs would have received had the name
of the deceased been reported to the System on time, pursuant to Section 24(a) of the
law, conformably with the Administrator's ruling which is hereby affirmed, and to submit
to the System proof of such payment." 2
On appeal, petitioner in its lone assignment of error contends that since some months after the death on June 17,
1962 of its employee, Eduardo Jungay, it had submitted on September 5, 1962 to the System its report on its
Employees and remitted the corresponding premiums, including the sum of P28.80 representing the deceased
Jungay's premiums from December, 1961 to June, 1962, it would not be just for respondent-appellee to receive
and keep the premiums paid for the deceased Jungay and still hold petitioner liable for payment of the death
benefits.

The fallacy of petitioner's contentions lies in its failure to realize that it has two distinct obligations under the Social
Security Act, to wit, the obligation of making a timelyremittance of premiums under Section 22(a) and the
obligation of making a timely report of its employees' names and other personal data, including the social security
number assigned to each employee, for coverage, under Section 24(a).
Section 22 (a) thus requires the employer to make a timely remittance of the premium contributions of both
employer and employee, under pain of being subject to payment of a 3% monthly penalty:
"SEC. 22. Remittance of Premiums. (a) The contributions imposed in the
preceding sections shall be remitted to the System within the first seven days of each
calendar month following the month for which they are applicable to within such time as
the Commission may prescribe. Every employer required to deduct and to remit such
contributions shall be liable for their payment and if any contribution is not paid to the
System, as herein prescribed, he shall pay beside the contribution a penalty thereon of
three per centum per month from the date the contribution falls due until paid. If deemed
expedient and advisable by the Commission, the collection and remittance of
contributions shall be made quarterly or semi-annually in advance, the contributions
payable by the employees to be advanced by their respective employers: Provided, That
upon separation of an employee any premium so paid in advance but not due shall be
credited or refunded to his employer." 3
On the other hand, Section 24(a) requires the timely report of employees' names and personal data for
coverage under the System, under penalty of being liable for damages equivalent to the benefits the
employee or his heirs would have been entitled to receive from the System had his name been reported on
time by the employer:
"SEC. 24. Employment records reports. (a) Each employer shall report
immediately to the System the names, ages, civil status, occupations, salaries and
dependents of all his employees, who are in his employ and who are or may later be
subject to compulsory coverage: Provided, That if an employee subject to compulsory
coverage should die or become sick or disabled without the System having previously
received a report about him from his employer, the said employer shall pay to the
employee or his legal heirs damages equivalent to the benefits to which said employee
would have been entitled had his name been reported on time by the employer to the
System." 4
The posthumous remittance of the deceased employee's premiums served but to extinguish petitioner's liability
therefor and to free it from the imposition of the 3% monthly penalty from the date the contribution falls due until
actually paid. These accrued premiums were legally due to the System as the contribution of both employer and
employee under Sections 18 and 19 of the Act and the death of the employee did not extinguish petitioner's
liability to remit the same. There is no justification, consequently, for petitioner's claim that respondent should be
held in estoppel for having retained them. As this Court has held in upholding the amendment on January 14,
1958 of the System's Rules, eliminating the provision for rebate of a proportionate amount of the premiums paid
on behalf of temporarily employed alien technicians upon their departure from the Philippines and allowing such
rebate only if they have been members for at least two years, "membership in this institution is not the result of a
bilateral, consensual agreement where the rights and obligations of the parties are defined by and subject to their
will. Republic Act 1161 requires compulsory coverage of employers and employees under the System. It is
actually a legal imposition, on said employers and employees, designed to provide social security to the
workingmen. Membership in the SSS is, therefore, in compliance with a lawful exercise of the police power of the
State, to which the principle of non-impairment of the obligation of contract is not a proper defense." 5

Petitioner's separate mandatory liability under Section 24(a) of the Act for failure to make a timely report of the
employee's name and personal data for coverage under the system therefore remains and must be enforced. It is
obvious that the Act attaches greater importance to this requirement and obligation of the employer than that of
timely remittance of the premiums. For failure to make such report in fact excludes the employee from the
System's coverage and the Act therefore shifts to the erring employer the responsibility of paying the social
security benefits "to which the employee or his heirs would have been entitled had his name been reported on
time by the employer to the System." Where the employer has, however, timely and properly reported the
employee's name for coverage but has failed or refused to pay or remit the premiums, such failure or refusal, by
express provision of the Act in Section 22(b) "shall not prejudice the right of the covered employee to the benefits
of the coverage." The Act, in such cases as above stated, exacts the lesser liability of payment of the delinquent
premiums with a 3% monthly penalty. Thus, in a similar case, 6 this Court brushed aside the employer's
contention that its failure to make such a report was due to the deceased employee's refusal to have his share of
the monthly premiums deducted from his salary and upheld the Social Security Commission's jurisdiction to
enforce the mandatory provisions of Section 24(a) against the employer.
Petitioner's invoking of the ruling of this Court in a commercial insurance case 7 that acceptance by the insurer of
insurance premiums with full knowledge of the facts entitling it to treat the policy as no longer in force estops it
from claiming forfeiture, has no application to the case at bar. In said case, liability of the insurer had not yet
attached when it collected premiums for a policy that it had issued under circumstances which it knew rendered
the policy void, and therefore it could not invoke in bad faith the policy's nullity against a subsequent claim of loss
under the policy. Here, the mandatory liability of the employer in place of the System for the social security
benefits due to the deceased employee had already been incurred, and its posthumous payment of the accrued
premiums was but in discharge of a separate and distinct liability therefor. Petitioner's solace lies in that its
contributions to the System and its discharging of its liabilities under the Act, will have helped subsidize the cause
of social security to protect not only its own employees but the general membership of the System against the
hazards of disability, sickness, old age and death in line with the Constitutional mandate to promote social justice
and to insure the well-being and economic security of all the people. 8
One last item. Payment by petitioner of the death benefits in the sum of P810.00 awarded to the legal heirs of the
deceased employee under the Social Security Commission's Resolution of May 18, 1965 has been delayed
pending this unjustified appeal. It is only just and in accordance with law 9 that the sum due said heirs bear legal
interest of six (6%) per cent per annum from June 4, 1965, date of receipt of said Resolution by petitioner. 10
ACCORDINGLY, the Resolution appealed from is hereby affirmed, with the modification that petitioner shall pay
the legal heirs of the deceased Eduardo Jungay six (6%) per cent interest per annum on the sum of P810.00 from
June 4, 1965 until the date of actual payment.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro and Fernando, JJ., concur.
Zaldivar and Barredo, JJ., did not take part.
||| (Machuca Tile Co., Inc. v. SSS, G.R. No. L-24883, [October 31, 1969], 140 PHIL 477-484)

SECOND DIVISION
[G.R. No. 178055. July 2, 2014.]
AMECOS INNOVATIONS, INC. and ANTONIO F. MATEO, petitioners, vs. ELIZA R.
LOPEZ, respondent.

DECISION

DEL CASTILLO, J p:
Assailed in this Petition for Review on Certiorari 1 are the March 22, 2007 Resolution 2 of the Court of Appeals
(CA) in CA-G.R. SP No. 96959 which affirmed the June 30, 2006 Decision 3 of the Regional Trial Court (RTC) of
Caloocan City, Branch 121, dismissing the Complaint 4 for lack of jurisdiction, and its May 23, 2007
Resolution 5denying petitioners' Motion for Reconsideration. 6
Factual Antecedents
Petitioner Amecos Innovations, Inc. (Amecos) is a corporation duly incorporated under Philippine laws engaged in
the business of selling assorted products created by its President and herein co-petitioner, Antonio F. Mateo
(Mateo). On May 30, 2003, Amecos received a Subpoena 7 from the Office of the City Prosecutor of Quezon City
in connection with a complaint filed by the Social Security System (SSS) for alleged delinquency in the remittance
of SSS contributions and penalty liabilities in violation of Section 22 (a) and 22 (d) in relation to Section 28 (e) of
the SSS law, as amended.
By way of explanation, Amecos attributed its failure to remit the SSS contributions to herein respondent Eliza R.
Lopez (respondent). Amecos claimed that it hired respondent on January 15, 2001 as Marketing Assistant to
promote its products; that upon hiring, respondent refused to provide Amecos with her SSS Number and to be
deducted her contributions; that on the basis of the foregoing, Amecos no longer enrolled respondent with the
SSS and did not deduct her corresponding contributions up to the time of her termination in February 2002.
Amecos eventually settled its obligations with the SSS; consequently, SSS filed a Motion to Withdraw
Complaint 8 which was approved by the Office of the City Prosecutor. 9
Thereafter, petitioners sent a demand letter 10 to respondent for P27,791.65 representing her share in the SSS
contributions and expenses for processing, but to no avail. Thus, petitioners filed the instant Complaint for sum of
money and damages against respondent docketed as Civil Case No. 04-27802 and raffled to Branch 51 of the
Metropolitan Trial Court (MeTC) of Caloocan City. Petitioners claimed that because of respondent's
misrepresentation, they suffered actual damages in the amount of P27,791.65 allegedly incurred by Amecos by
way of settlement and payment of its obligations with the SSS. 11 Mateo also allegedly suffered extreme
embarrassment and besmirched reputation as a result of the filing of the complaint by the SSS. Hence they
prayed for P50,000.00 as moral damages, P50,000.00 as exemplary damages, P50,000.00 as attorney's fees,
and costs of the suit. CIHTac
Respondent filed her Answer with Motion to Dismiss 12 claiming that she was formerly an employee of Amecos
until her illegal dismissal in February 2002; that Amecos deliberately failed to deduct and remit her SSS
contributions; and that petitioners filed the instant Complaint in retaliation to her filing of an illegal dismissal case.

Respondent also averred that the regular courts do not have jurisdiction over the instant case as it arose out of
their employer-employee relationship.
The parties then submitted their respective Position Papers. 13
Ruling of the Metropolitan Trial Court
On March 24, 2006, the MeTC issued its Decision, 14 which decreed as follows:
All viewed from the foregoing, the court hereby dismisses the complaint for lack of jurisdiction.
SO ORDERED. 15
Ruling of the Regional Trial Court
Petitioners appealed to the RTC. On June 30, 2006, the RTC rendered its Decision 16 disposing as follows:
WHEREFORE, premises considered, the instant appeal is accordingly DISMISSED for lack of
merit.
SO ORDERED. 17
The RTC affirmed the view taken by the MeTC that under Article 217 (a) (4) of the Labor Code,18 claims for
actual, moral, exemplary and other forms of damages arising from employer-employee relationship are under the
jurisdiction of the Labor Arbiters or the National Labor Relations Commission (NLRC); that since petitioners and
respondent were in an employer-employee relationship at the time, the matter of SSS contributions was thus an
integral part of that relationship; and as a result, petitioners' cause of action for recovery of damages from
respondent falls under the jurisdiction of the Labor Arbiters, pursuant to Article 217 (a) (4) of the Labor Code.
Petitioners filed a Motion for Reconsideration 19 which the RTC denied. 20
Ruling of the Court of Appeals
Petitioners thus instituted a Petition for Review 21 with the CA claiming that the RTC seriously erred in sustaining
the dismissal of the Complaint by the MeTC on the ground of lack of jurisdiction. On March 22, 2007, the CA
rendered the assailed Resolution, viz.: SCaITA
ACCORDINGLY, the petition for review is DENIED DUE COURSE and this case is
DISMISSED.
SO ORDERED. 22
Finding no error in the Decision of the RTC, the CA held that:
. . . The matter of whether the SSS employer's contributive shares required of the petitioners
to be paid due to the complaint of the respondent necessarily flowed from the employeremployee relationship between the parties. As such, the lower courts were correct in ruling
that jurisdiction over the claim pertained to the Labor Arbiter and the National Labor Relations
Commission, not to the regular courts, even if the claim was initiated by the employer against
the employee. 23
Petitioners moved to reconsider, but in the second assailed Resolution 24 dated May 23, 2007, the CA denied
petitioners' Motion for Reconsideration. 25 Hence, the instant Petition.
Issues
The issues raised in this Petition are:

WHETHER THE REGULAR CIVIL COURT AND NOT THE LABOR ARBITER OR . . . THE
NATIONAL LABOR RELATIONS COMMISSION HAS JURISDICTION OVER CLAIM[S] FOR
REIMBURSEMENT ARISING FROM EMPLOYER-EMPLOYEE RELATIONS.
WHETHER THE REGULAR CIVIL COURT AND NOT THE LABOR ARBITER OR . . . THE
NATIONAL LABOR RELATIONS COMMISSION HAS JURISDICTION OVER CLAIM[S] FOR
DAMAGES FOR MISREPRESENTATION ARISING FROM EMPLOYER-EMPLOYEE
RELATIONS. 26
Petitioners' Arguments
In praying that the assailed CA Resolutions be set aside, petitioners argue that their Complaint is one for recovery
of a sum of money and damages based on Articles 19,27 22, 28 and 2154 29 of the Civil Code; that their cause of
action is based on solutio indebiti or unjust enrichment, which arose from respondent's misrepresentation that
there was no need to enroll her with the SSS as she was concurrently employed by another outfit, Triple A Glass
and Aluminum Company, and that she was self-employed as well. They argue that the employer-employee
relationship between Amecos and respondent is merely incidental, and does not necessarily place their dispute
within the exclusive jurisdiction of the labor tribunals; the true source of respondent's obligation is derived from
Articles 19, 22, and 2154 of the Civil Code.They add that by reason of their payment of respondent's counterpart
or share in the SSS premiums even as it was not their legal obligation to do so, respondent was unjustly enriched,
for which reason she must return what petitioners paid to the SSS. IDSETA
Petitioners cite the pronouncements of the Court to the effect that where the employer-employee relationship is
merely incidental and the cause of action proceeds from a different source of obligation, such as tort, malicious
prosecution or breach of contract, the regular courts have jurisdiction; 30 that when the cause of action is based
on Articles 19 and 21 of the Civil Code,the case is not cognizable by the labor tribunals; 31 that money claims of
workers which fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which
have some reasonable causal connection with the employer-employee relationship; 32 and that when a person
unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience, a case of solutio indebiti arises. 33
Respondent's Arguments
Respondent, on the other hand, maintains that jurisdiction over petitioners' case lies with the Labor Arbiter, as
their cause of action remains necessarily connected to and arose from their employer-employee relationship. At
any rate, respondent insists that petitioners, as employers, have the legal duty to enroll her with the SSS as their
employee and to pay or remit the necessary contributions.
Our Ruling
The Court denies the Petition.
This Court holds that as between the parties, Article 217 (a) (4) of the Labor Code is applicable. Said provision
bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employeremployee relations. The observation that the matter of SSS contributions necessarily flowed from the employeremployee relationship between the parties shared by the lower courts and the CA is correct; thus,
petitioners' claims should have been referred to the labor tribunals. In this connection, it is noteworthy to state that
"the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages governed
by the Civil Code." 34
At the same time, it cannot be assumed that since the dispute concerns the payment of SSS premiums,
petitioners' claim should be referred to the Social Security Commission (SSC) pursuant to Republic Act No. 1161,
as amended by Republic Act No. 8282. 35 As far as SSS is concerned, there is no longer a dispute with respect

to petitioners' accountability to the System; petitioners already settled their pecuniary obligations to it. Since there
is no longer any dispute regarding coverage, benefits, contributions and penalties to speak of, the SSC need not
be unnecessarily dragged into the picture. 36 Besides, it cannot be made to act as a collecting agency for
petitioners' claims against the respondent; the Social Security Law should not be so interpreted, lest the SSC be
swamped with cases of this sort.
At any rate, it appears that petitioners do not have a cause of action against respondent. The Complaint in Civil
Case No. 04-27802 reads in part:
STATEMENT OF FACTS AND CAUSES OF ACTION
4. On or about 15 January 2001, [petitioners] hired [respondent] as a Marketing Assistant to
promote the products of [petitioners].
5. Immediately, [respondent] represented that she had other gainful work and that she was also
self-employed for which reason, she refused to divulge her [SSS] Number and refused
to be deducted her share in the [SSS] contributions. In her bio-data submitted to
[petitioners], she did not even indicate her SSS [N]umber. . . . [These] representations
were later found out to be untrue and [respondent] knew that.
6. Misled by such misrepresentation, [petitioners'] employees no longer deducted her
corresponding SSS contributions up to the time of her termination from employment on
or about 18 February 2002.
7. On or about 30 May 2003, to the unpleasant surprise and consternation of [petitioner] Mateo,
he received a Subpoena . . . pursuant to a criminal complaint against [petitioner] Dr.
Antonio Mateo for alleged un-remitted SSS Contributions including that corresponding
to the [respondent]. Upon subsequent clarification with the Social Security System, only
that portion corresponding to the [respondent's] supposed unremitted contribution
remained as the demandable amount. The total amount demanded was P18,149.95. . .
.
8. On or about 24 July 2003, [petitioner] Mateo had to explain to the Social Security System the
circumstances as to why no contributions reflected for [respondent]. . . .
9. On or about 31 July 2003, [petitioners] had to pay the Social Security System the amount of
P18,149.95 including the share which should have been deducted from [respondent] in
the amount of P12,291.62. . . .
10. With this development, some of [petitioners'] employees felt troubled and started to doubt . .
. whether or not their SSS contributions were being remitted or paid by the [petitioners].
[Petitioner] Mateo had to explain to them why there was an alleged deficiency in SSS
contributions and had to assure them that their contributions were properly remitted.
11. As a result of these events, [petitioner] Mateo, for days, felt deep worry and fear leading to
sleepless nights that the Social Security System might prosecute him for a possible
criminal offense.
12. [Petitioner] Mateo also felt extreme embarrassment and besmirched reputation as he, being
a recognized inventor, a dean of a reputable university and a dedicated teacher, was
made the butt of ridicule and viewed as a shrewd businessman capitalizing on even the
SSS contributions of his employees. . . .

13. On or about 15 January 2004, in order to [recover] what is due [petitioners], they sent a
demand letter to [respondent] for her to pay the amount of P27,791.65 as her share in
the SSS contributions and other expenses for processing. . . .
14. This demand, however, fell on deaf ears as [respondent] did not pay and has not paid to
date the amount of her share in the SSS contributions and other amounts demanded.
15. For such malicious acts and the suffering befalling [petitioner] Mateo, [respondent] is liable
for moral damages in the amount of FIFTY THOUSAND PESOS (P50,000.00).
16. For having made gross misrepresentation, she is liable for exemplary damages in the
amount of FIFTY THOUSAND PESOS (P50,000.00) to serve as a warning for the
public not to follow her evil example.
17. As [petitioners] were compelled to file the instant suit to protect and vindicate [their] right
and reputation, [respondent] should also be held liable for attorney's fees in the amount
of FIFTY THOUSAND PESOS (P50,000.00) in addition to the costs of this suit.
PRAYER
[Petitioners] respectfully [pray] that a judgment, in [their] favor and against [respondent], be
rendered by this Honorable Court, ordering [respondent]: ADEacC
1. To pay the amount due of TWENTY SEVEN THOUSAND SEVEN HUNDRED NINETY ONE
AND 65/100 (P27,791.65) representing her share in the SSS contributions and
processing costs, with interest, at legal rate, from the time of the filing of this Complaint;
2. To pay FIFTY THOUSAND PESOS (P50,000.00) for moral damages;
3. To pay FIFTY THOUSAND PESOS (P50,000.00) for exemplary damages;
4. To pay FIFTY THOUSAND PESOS (P50,000.00) as attorney's fees;
5. To pay the costs of this suit.
[Petitioners] further [pray] for such other relief as are just and equitable under the
circumstances. 37
In fine, petitioners alleged that respondent misrepresented that she was simultaneously employed by another
company; consequently, they did not enroll her with the SSS or pay her SSS contributions. Likewise, when
petitioners eventually paid respondent's SSS contributions as a result of the filing of a complaint by the SSS,
respondent was unjustly enriched because the amount was not deducted from her wages in Amecos.
The evidence, however, indicates that while respondent was employed, Amecos did not remit premium
contributions both employer and employees' shares to the SSS; the SSS demand letter 38 sent to it covers
non-payment of SSS premium contributions from January 2001 up to April 2002, amounting to
P85,687.84. 39 The Amecos payroll 40 covering the period from January 30 to November 29, 2001 likewise
shows that no deductions for SSS contributions were being made from respondent's salaries. This can only mean
that during the period, Amecos was not remitting SSS contributions whether the employer or employees'
shares pertaining to respondent. As such, during her employment with Amecos, respondent was never
covered under the System as SSS did not know in the first instance that petitioners employed her, since the
petitioners were not remitting her contributions. Petitioners were forced to remit monthly SSS contributions only
when SSS filed I.S. No. 03-6068 with the Quezon City Prosecutor's Office. By that time, however, respondent was
no longer with Amecos, as her employment was terminated sometime in mid-February of 2002.

Given the above facts, it is thus clear that petitioners have no cause of action against the respondent in Civil Case
No. 04-27802. Since Amecos did not remit respondent's full SSS contributions, the latter was never covered by
and protected under the System. If she was never covered by the System, certainly there is no sense in making
her answerable for the required contributions during the period of her employment. And it follows as a matter of
consequence that claims for other damages founded on the foregoing non-existent cause of action should
likewise fail.
WHEREFORE, premises considered, the Petition is DENIED. The assailed March 22, 2007 and the May 23, 2007
Resolutions of the Court of Appeals in CA-G.R. SP No. 96959 are AFFIRMED.
SO ORDERED.
||| (Amecos Innovations, Inc. v. Lopez, G.R. No. 178055, [July 2, 2014])