Republic of the Philippines

SUPREME COURT
Manila
EN BANC

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

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

Feria, Manglapus and Associates for petitioner-appellant.

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

GUTIERREZ DAVID, J.:

On September 1, 1958, the Roman Catholic Archbishop of Manila, thru counsel, filed with the 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 members between the age of sixteen and sixty rears
inclusive, if they have been for at least six months a the service of an employer who is a member of the System, Provided, that the Commission may not compel any employer to
become 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 x x x." 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], see. 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], see. 8). "Employment", according to paragraph [i] 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 cases1, 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." (See. 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 provisions of the Constitution, since such payment shall be made to the priest not
because he is a priest but because he is an employee.

Neither may it be validly argued that the enforcement of the Social Security Law impairs appellant'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 kind 767, series of 1958, of the Social Security Commission are hereby affirmed. So ordered with costs against appellant.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-26298 ​September 28, 1984

CMS ESTATE, INC., petitioner,
vs.
SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.

Sison Dominguez & Cervantes for petitioner.

The Legal Counsel for respondent SSS.

CUEVAS, J.:

This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System,
declaring CMS subject to compulsory coverage as of September 1, 1957 and "directing the Social Security System to effect such coverage of the petitioner's employees in its
logging and real estate business conformably to the provision of Republic Act No. 1161, as amended was certified to Us by the defunct Court of Appeals 1 for further disposition
considering that purely questions of law are involved.

Petitioner is a domestic corporation organized primarily for the purpose of engaging in the real estate business. On December 1, 1952, it started doing business with only six (6)
employees. It's Articles of Incorporation was amended on June 4, 1956 in order to engage in the logging business. The Securities and Exchange Commission issued the certificate
of filing of said amended articles on June 18, 1956. Petitioner likewise obtained an ordinary license from the Bureau of Forestry to operate a forest concession of 13,000 hectares
situated in the municipality of Baganga, Province of Davao.

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

On August 1, 1958, petitioner became a member of the Social Security System with respect to its real estate business. On September 6, 1958, petitioner remitted to the System the
sum of P203.13 representing the initial premium on the monthly salaries of the employees in its logging business. However, on October 9, 1958, petitioner demanded the refund of
the said amount, claiming that it is not yet subject to compulsory coverage with respect to its logging business. The request was denied by respondent System on the ground that the
logging business was a mere expansion of petitioner's activities and for purposes of the Social Security Act, petitioner should be considered a member of the System since
December 1, 1952 when it commenced its real estate business.

On November 10, 1958, petitioner filed a petition with the Social Security Commission praying for the determination of the effectivity date of the compulsory coverage of petitioner's
logging business.

After both parties have submitted their respective memoranda, the Commission issued on January 14, 1960, Resolution No. 91, 2 the dispositive portion of which reads as follows:

Premises considered, the instant petition is hereby denied and petitioner is hereby adjudged to be subject to compulsory coverage as of Sept. 1, 1957 and the Social Security
System is hereby directed to effect such coverage of petitioner's employees in its logging and real estate business conformably to the provisions of Rep. Act No. 1161, as amended.

SO ORDERED.

Petitioner's motion for reconsideration was denied in Resolution No. 609 of the Commission.
These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits that respondent Commission erred in holding —

(1) ​
that the contributions required of employers and employees under our Social Security Act of 1954 are not in the nature of excise taxes because the said Act was
allegedly enacted by Congress in the exercise of the police power of the State, not of its taxing power;

(2) ​
that no contractee — independent contractor relationship existed between petitioner and Eufracio D. Rojas during the time that he was operating its forest concession at
Baganga, Davao;

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

(4) ​
that a corporation should be treated as a single employing unit for purposes of coverage under the Social Security Act, irrespective of its separate, unrelated and
independent business established and operated at different places and on different dates; and

(5) ​that Section 9 of the Social Security Act on the question of compulsory membership and employers should be given a liberal interpretation.
Respondent, on the other hand, advances the following propositions, inter alia:

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

(2) ​that once an employer is initially covered under the Social Security Act, any other business undertaken or established by the same employer is likewise subject in spite of
the fact that the latter has not been in operation for at least two years;

(3) ​
that petitioner's logging business while actually of a different, distinct, separate and independent nature from its real estate business should be considered as an
operation under the same management;

(4) ​that the amendment of petitioner's articles of incorporation, so as to enable it to engage in the logging business did not alter the juridical personality of petitioner; and

(5) ​the petitioner's logging operation is a mere expansion of its business activities.
The Social Security Law was enacted pursuant to the policy of the government "to develop, 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 against the hazards of disability, sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus
clear that said enactment implements the general welfare mandate of the Constitution and constitutes a legitimate exercise of the police power of the State. As held in the case of
Philippine Blooming Mills Co., Inc., et al. vs. SSS 3 —

Membership in the SSS is not a result of bilateral, concensual agreement where the rights and obligations of the parties are defined by and subject to their will, RA 1161 requires
compulsory coverage of employees and employers under the System. It 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 the lawful exercise of the police power of the State, to which the principle of non-impairment of the obligation of
contract is not a proper defense.

xxx ​xxx ​xxx

The taxing power of the State is exercised for the purpose of raising revenues. However, under our Social Security Law, the emphasis is more on the promotion of the general
welfare. The Act is not part of out Internal Revenue Code nor are the contributions and premiums therein dealt with and provided for, collectible by the Bureau of Internal Revenue.
The funds contributed to the System belong to the members who will receive benefits, as a matter of right, whenever the hazards provided by the law occur.

All that is required of appellant is to make monthly contributions to the System 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 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.4

Because of the broad social purpose of the Social Security Act, all doubts in construing the Act should favor coverage rather than exemption.

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

Should each business venture of the employer be considered as the basis of the coverage, an employer with more than one line of business but with less than six employees in
each, would never be covered although he has in his employ a total of more than six employees which is sufficient to bring him within the ambit of compulsory coverage. This would
frustrate rather than foster the policy of the Act. The legislative intent must be respected. In the absence of an express provision for a separate coverage for each kind of business,
the reasonable interpretation is that once an employer is covered in a particular kind of business, he should be automatically covered with respect to any new name. Any
interpretation which would defeat rather than promote the ends for which the Social Security Act was enacted should be eschewed. 5
Petitioner contends that the Commission cannot indiscriminately combine for purposes of coverage two distinct and separate businesses when one has not yet been in operation for
more than two years thus rendering nugatory the period for more than two years thus rendering nugatory the period of stabilization fixed by the Act. This contention lacks merit since
the amendatory law, RA 2658, which was approved on June 18, 1960, eliminated the two-year stabilization period as employers now become automatically covered immediately
upon the start of the business.

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

Sec. 10. ​
Effective date of coverage. — Compulsory coverage of the employer shall take effect on the first day of his operation, and that of the employee on the date of his
employment. (Emphasis supplied)

As We have previously mentioned, it is the intention of the law to cover as many persons as possible so as to promote the constitutional objective of social justice. It is axiomatic that
a later law prevails over a prior statute and moreover the legislative in tent must be given effect. 6

Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in an independent business of his own consisting of the operation of the timber concession
of the former. Rojas was appointed as operations manager of the logging consession; 7 he has no power to appoint or hire employees; as the term implies, he only manages the
employees and it is petitioner who furnishes him the necessary equipment for use in the logging business; and he is not free from the control and direction of his employer in matter
connected with the performance of his work. These factors clearly indicate that Rojas is not an independent contractor but merely an employee of petitioner; and should be entitled
to the compulsory coverage of the Act.

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

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

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17361 April 29, 1968

FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner-appellant,

vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.

Ross, Selph and Carrascoso, for petitioner-appellant.

Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.

MAKALINTAL, J.:

Appeal from the ruling of the Social Security Commission dismissing petition for reconsideration of an order of respondent Social Security System.

Petitioner-appellant Franklin Baker Company of the Philippines is engaged in the manufacture of dessicated coconut in San Pablo City. The deceased Tomas Zamora was one of its
employees. Both were compulsory members of the Social Security System.

Due to the annual overhauling of its machinery and also to lack of production orders from its mother company in the United States petitioner temporarily ceased its operations from
December 22, 1957 to February 18, 1958. Zamora rendered no actual services during that period. He then went on sick leave without pay from March 9, 1958, up to the day of his
death, June 13, 1958.

On July 10, 1958 the System received a death claim application from petitioner for and in behalf of the designated beneficiaries of the deceased employee. After processing the
claim the System found that no premium remittances had been made for him for the months of February, March, and June, 1958. Of the unpaid premiums, P5.85 was chargeable to
the employee while P8.18 was due from the employer-petitioner. The employee's share of the unpaid premiums was subsequently deducted from the death benefits awarded to his
beneficiaries and the System billed petitioner for its share.

Under Resolution No. 139, Series of 1958, the Social Security Commission adopted the rule that "employers are liable to the 3-1/2% company's share during the months when there
are no premiums remitted, if there is existing employer-employee relationship between them during those months." Petitioner excepted to the System's demand for payment by filing
a petition for reconsideration with the Commission. On April 28, 1960 the Commission resolved to dismiss said petition, and the case is now before us on appeal from the resolution
of dismissal.

Petitioner raises two issues: (1) that the employer is not liable for its share of the premiums during the period when the employee is on leave without pay since he receives no
compensation; and (2) that the adoption of a "theoretical salary" basis upon which the employer's liability of 3-1/2% is computed during the time that the employee receives no
compensation is erroneous.

The first issue has already been resolved by us in several cases. Insular Lumber Co. vs. SSS, G.R. No. L-17623, Jan. 31, 1963; Roman Archbishop of Manila vs. SSS, G.R. No. L-
15045, Jan. 20, 1961; Insular Life Assurance Co., Ltd., et al. vs. SSS, G.R. No. L-16359, Dec. 28, 1961. In those cases we held:

... payment of contributions by an employer is compulsory during its coverage, and in accordance with the provisions of Section 9 of the Social Security Act, coverage is determined
solely by the existence of an employer-employee relationship. While an employee is on leave, even without pay, he is still an employee of his employer, their contract of employment
has not yet terminated. So much so that the employee may still return to work and the employer is still bound to accept him. His responsibility as an employee still exists. He is still
entitled to the benefits of the System when he returns. Consequently, his employer is still liable to pay his contributions to the Commission on account of its employee who is on
leave without pay.
The ruling of the Commission adopting the "theoretical salary" basis assailed by petitioner under the second issue raised by it in this appeal reads as follows:

Neither does the absence of compensation for the employee for a particular month militate against the adoption of a theoretical salary upon which the premium contributions are to
be based. In such cases, this Commission has adopted the policy that where an employee does not earn any compensation for a particular month, the basis for his premium
contributions shall be the salary for the month immediately preceding the wageless month or, in case of a variable wage earner, then, it shall be his daily rate of compensation
multiplied by the number of days in which he would have worked for that wageless month (Circulars Nos. 21 and 24). The adoption of such a theoretical salary is justified on the
ground that during the period when the employer-employee relationship subsists, there is a legal obligation to remit premium contributions to the System for the benefit of the
employee.

Petitioner contends that the adoption of the so-called "theoretical salary" basis is beyond the authority and competence of the Social Security Commission, as it is not justified by the
Social Security Act (R. A. 1161, as amended by Act 1792), particularly section 19 thereof which defines the employer's obligation to contribute to the System. This section provides:
SEC. 19. Employer's contribution.— Beginning as of the last day of the month immediately preceding the month when an employee's compulsory coverage takes effect and every
month thereafter during his employment, his employer shall pay, with respect to such covered employee in his employ, a monthly contribution equal to three and a half per centum of
the monthly compensation of said covered employee. Notwithstanding any contract to the contrary, an employer shall not deduct, directly or indirectly, from the compensation of his
employees covered by the System or otherwise recover from them the employer's contribution with respect to such employees. (As amended by Section 11, R.A. 1792)

Since the deceased employee, Tomas Zamora, received no compensation for the period in question, petitioner maintains that the imposition of a 3-1/2% monthly contribution upon
the employer on the basis of the monthly "theoretical" compensation is in effect a deviation from or an amendment of the statute, which only Congress can make, We do not think
this view is correct. The obligation of the employer to contribute its share to the System is effective during the existence of the employer-employee relationship. This is already
settled in several cases (supra), and implicit in the provision aforequoted which says that the employer shall pay the 3-1/2% contribution "beginning as of the last day of the month
immediately preceding the month when an employee's compulsory coverage takes effect and every month thereafter during his employment ...." The time when an employee may
not be actual receiving compensation, as when he is on sick leave without pay, is not excepted. Obviously, inasmuch as the obligation to contribute does not cease during that
period, a reasonable basis for computing the amount of the contribution must be adopted; and the one prescribed by the Commission in its circulars Nos. 21 and 24 and applied in
the case at bar is reasonable, both on legal and actuarial considerations. It does not amount to legislation, but merely implementation of the existing statute. The provisions of the
Social Security Act should be liberally construed in favor of those seeking its benefits. "Any interpretation which would defeat rather than promote the ends for which the Social
Security Act was enacted should be eschewed. 1

The resolution appealed from, passed by the Social Security Commission on April 28, 1960, is affirmed, with costs against petitioner-appellant.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-15798 December 28, 1961

JOSE P. TECSON, Petitioner-Appellant, vs. SOCIAL SECURITY SYSTEM, Respondent-Appellee.

Sycip, Quisumbing, Salazar and Associates for petitioner-appellant.

Office of the Solicitor General and Teodoro R. Banzon for respondent-appellee.

LABRADOR, J.

This is an appeal from a decision or ruling of the Social Security Commission denying payment of death benefits to Jose P. Tecson, the beneficiary of an employee of Yuyitung
Publishing Company, by the name of Lim Hoc.

The facts as found by the Social Security Commission are as follows:

The facts attendant are as follows: The late Lim Hoc, a former employee of the Yuyitung Publishing Company, was, at the time of his death on November 3, 1957, a member of the
System, having qualified as such on September 1, 1957. In the SSS-Form E-1 accomplished and filed by him with the System, he gave his civil status as married, but made no
mention of the members of his family or other relatives. Instead, he designated therein the petitioner Jose P. Tecson, reportedly a friend and co-worker of his, as his beneficiary. After
the death of Lim Hoc, petitioner, in his capacity as the designated beneficiary, filed with the System a claim for death benefits. (ROA, p. 31).

In denying the petition of Tecson the Social Security Commission states that the legislative policy underlying the system is to grant and afford protection to the covered employee as
well as his family; that while Section 13 of the law (Rep. Act No. 1161 as amended) makes mention of the beneficiary as recorded by his employer, it is not just anyone that the
employee designates who may be appointed his beneficiary because Section 24 (a) of the law clearly provides that the employer shall report to the system the names, ages, civil
status, salaries and dependents of employees, and paragraph (a) of the same section provides 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, etc.

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, as follows:

Section 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: ... (R.A. 1161 as amended.)

When the provisions of a law are clear and explicit, the courts can do nothing but apply its clear and explicit provisions. (Velasco v. Lopez, 1 Phil. 720; Caminetti vs. U.S., 242 U.S.
470, 61 L. ed. 442).

It should be remembered that the benefits or compensation allowed an employee or his beneficiary under the provisions of the Social Security Act are paid out of funds which are
contributed in part by the employees and in part by the employers' (commercial or industrial companies members of the System). Sections 18 and 19 of the Social Security Act
(Republic Act No. 1161 as amended) provide that 2% of the salary of an employee subject to compulsory coverage, shall be deducted and withheld from his monthly compensation
and paid over to the System, while the employer for his part contributes another amount of 3% of the salary of said employee. The contributions are collected by the System, which
acts as the trustee of such funds. It is provided also in the Act that of the total yearly collection not more than 12% during the first two year of the operation of the System and not
more than 10% during any year thereafter shall be disbursed for salaries and wages of the employees of the System (Sec. 24). A certain percentage of the funds of the System may
be invested in interest-bearing bonds and deposits and in loans or advances to the National Government (Sec. 25). As these funds are obtained from the employees and the
employers, without the Government having contributed any portion thereof, it would be unjust for the System to refuse to pay the benefits to those whom the employee has
designated as his beneficiaries. The contribution of the employee is his money; the contribution of the employer is for the benefit of the employee. Hence the beneficiary should
primarily be the one to profit by such contributions. This is what is expressly provided in above-quoted Section 13 of the law.

It should also be noted that the Social Security System is not a law of succession. Its purpose is to provide social security, which means funds for the beneficiary, if the employee
dies, or for the employee himself and his dependents if he is unable to perform his task because of illness or disability, or is laid off by reason of the termination of the employment,
or because of temporary lay-off due to strike, etc. It should also be remembered that the beneficiaries of the System are those who dependent upon the employee for support.
Section 23 of the law (before its amendment by Republic Act No. 2658, which took effect on June 18, 1960) requires the employer to report and transmit to the System such record
of the names, ages, civil status, occupations, salaries and dependents of all his employees. It is not the heirs of the employee who are to receive the benefits or compensation. It is
only in case the beneficiary is the estate, or if there is none designated, or if the designation is void, that the System is required to pay the employee's heirs. Such is the express
provision of Section 15 of the same Act, as amended.

The Commission held that under its regulations, which are quoted below, the employee must choose the beneficiaries from anyone of the persons enumerated therein:

(a) ​The following persons may be designated as beneficiaries entitled to receive death benefits provided they have been registered as such in the records of the System
prior to said employee's death, to wit:

(1) ​The legitimate widow or widower if not legally separated from the deceased;

(2) ​Legitimate and/or legitimated children;

(3) ​Grandchildren;

(4) ​Parents;

(5) ​Grandparents;

(6) ​Natural children duly acknowledged;

(7) ​Brothers and/or sisters;

(8) ​In the absence of any of the foregoing relatives, any other person designated by the employee. (Rule 7, [3], of the Rules and Regulations of the Social Security System).
The above rule indicates the persons that may be designated as beneficiaries. The deceased Lim Hoc must have designated Jose P. Tecson as his beneficiary under the provisions
of Section 23 of the Act. The employer must have received no information from the deceased employee Lim Hoc about the existence of Lim Hoc's wife and children, their names,
ages, civil status, occupations, salaries, etc. It was subsequently known that Lim Hoc had a wife and children in Communist China; the omission by him of their existence and names
in the records of the employer must have been due to the fact that they were not at the time, at least, dependent upon him. If they were actually dependents, their names would have
appeared in the record of the employer. The absence in the record of his employee of their existence and names must have been due to the lack of communication, of which We can
take judicial notice, between Communist China and the Philippines, or to the express desire of Lim Hoc to extend the benefits of his contributions to the system to his "friend and co-
worker", to the exclusion of his wife. It is to be noted also that the funeral expenses of Lim Hoc are to be paid from the benefits, so that what is to be paid to Tecson would be greatly
reduced.
FOR ALL THE FOREGOING CONSIDERATIONS, the resolution should be, as it is hereby, set aside and annulled, and the respondent System is hereby ordered to pay the
monetary claim of Jose P. Tecson. Without costs.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

SOCIAL SECURITY SYSTEM, petitioner-appellee,

vs.
CANDELARIA D. DAVAC, ET AL., respondents;
LOURDES Tuplano, respondent-appellant.

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

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

BARRERA, J.:

This is an appeal from the resolution of the Social Security Commission declaring 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 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 interpose and litigate between themselves their
conflicting claims over the death benefits in question.1äwphï1.ñët

On February 25, 1963, the Social Security Commission issued the resolution referred to above, Not satisfied with the said resolution, respondent Lourdes Tuplano brought to us the
present appeal.

The only question to be determined herein is whether or not the Social Security Commission 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 Petronilo Davac's death on April 5, 1959, provides:

1. 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 provision of a law are clear and explicit, the courts can do
nothing but apply its clear and explicit provisions (Velasco vs. Lopez, 1 Phil, 270; Caminetti vs. U.S., 242 U.S. 470, 61 L. ed. 442).

But appellant contends that the designation herein made in the person of the second and, therefore, bigamous wife is null and void, because (1) it contravenes the provisions of the
Civil Code, and (2) 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 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 2-½ per cent of the employee's monthly compensation);3 the employer's contribution (equivalent
to 3-½ 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 persons as may be entitled thereto in accordance with the provisions of
this Act. Such benefits are not transferable, and no power of attorney or other document 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 there of 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

Wherefore, in view of the foregoing considerations, the resolution of the Social Security Commission appealed from is hereby affirmed, with costs against the appellant.

So ordered.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-20088 January 22, 1966

LUZON STEVEDORING CORPORATION, petitioner-appellant, vs.

SOCIAL SECURITY SYSTEM, respondent-appellee.

C.R. Tiongson and B.L. Rillo for the petitioner-appellant.

Office of the Solicitor General and Solicitor Camilo D. Quiason for the
respondent-appellee.

BENGZON, J.P., J.:

Luzon Stevedoring Corporation (Lusteveco for short), a domestic corporation with principal office in Manila, is engaged in the business of stevedoring, lightering and towering in the
cities of Iloilo and Bacolod under the trade name of Visayan Stevedore Transportation Company. It owns, maintains and operates towboats, barges and a drydock. In 1959 it carried
in its payrolls temporary employees assigned as follows:

(1) 1,752 and 2,552 stevedores in the cities of Iloilo and Bacolod, respectively, who were hired on rotation and on vessel-by-vessel basis. They were paid daily with the
understanding of being laid off at the end of each day. On the average, each stevedore worked for 14 days during the year.

(2) Drydock workers temporarily drafted in the repair and maintenance of towboats and barges during the peak season, i.e., September to December. They were paid on daily basis
and the duration of their employment depended upon the number of vessels or barges drydocked. Average number of working days for each laborer in 1959 amounted to only 20
days.1äwphï1.ñët

(3) Sailors, patrons, officers and crew members of towboats and barges who were hired in place of regular sailors, patrons, officers and crew members who were absent or on leave.
They were laid off upon return of the regular employees. Each relief worker averaged 36 working days in 1959.
The labor unions to which said temporary workers belong control the rotation of employment.

On September 28, 1960 the Consolidated Union of the Philippines, Trade Union of Central Philippines, Union de Marinos de Iloilo and Vistranco Employees Association requested
the Social Security Commission for the exemption of the aforementioned temporary employees from compulsory coverage of the Social Security Act (R.A. 1161) on the ground that
they "work only intermittently and are not in a position to maintain membership in the Social Security System long enough to be fully entitled to the law's sickness, disability, death
and retirement benefits". Later, on October 19, 1960 Lusteveco lodged a similar request with the Social Security Commission. On April 16, 1962, however, the Social Security
Commission denied the request for exemption and ordered Lusteveco to "pay all back premiums due and unpaid from the respective dates of coverage of the employees concerned,
to be determined from the records of the System." Its motion for reconsideration having been denied, Lusteveco instituted the instant appeal.

The question is, do said temporary and casual employees come within the compulsory coverage of the Social Security Act?

Lusteveco's plea for exemption rests on the contention that compulsory coverage under the Social Security Act, as amended extends primarily to permanent employees and
secondarily to temporary employees whose tenure of employment is merely indefinite but not with respect to the duration of the work to be performed. Such a contention would
accordingly place beyond the ambit of the law the employees in question who were allegedly hired by the day with uncertain chance of working the following day even if the same
work were still available.

Formerly, the pertinent provision on compulsory coverage of the Social Security Act, as amended by Republic Act 1792, stated:

SEC. 9. Compulsory coverage.—Coverage in the system shall be compulsory upon all employees between the ages of sixteen and sixty years, inclusive, if they have been for at
least six months in the service of the employer who is a member of the System: x x x (Emphasis supplied).

Coverage required at least six months' service with the employer. Hence, the effectivity of the coverage on the first day of the calendar month following the month when the employer
qualified as a member of the System, provided the employee has rendered at least six months' service.1 In this light, this Court was prompted to state 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.2

The Social Security Act was however amended by Republic Act 2658 which took effect on June 18, 1960.3 The amendment broadened the coverage of the Social Security System,
increased its benefits and liberalized the terms and conditions for their enjoyment.4 Thus, Sections 9 and 10 were made to read as follows:

SEC. 9. Compulsory coverage.—Coverage in the System shall be compulsory upon all employees between the ages of sixteen and sixty, inclusive, and their employers: ...

SEC. 10. Effective date of coverage.—Compulsory coverage of the employer shall take effect on the first day of his operation, and that of the employee on the date of his
employment. (Emphasis supplied)

Eliminated was the six months' service requirement. Sans such requirement, all employees regardless of tenure, such as the employees in question, would qualify for compulsory
membership in the Social Security System; except of course those classes of employees contemplated in Section 8(j) of the Social Security Act.

Section 8(j) defines employment covered by the Social Security Act and provides exception therefrom. Among the exceptions mentioned — paragraph (10) — are services
performed by temporary employees which may be excluded by regulation of the Social Security Commission. It is pursuant to this exception that Lusteveco seeks to persuade the
Social Security Commission and this Court to exempt the employees in question from social security coverage. Suffice it to state in this instance that Congress has delegated to the
Social Security Commission the issuance of regulations bearing on the exemption of services performed by temporary employees from social security coverage. No such regulation
has been cited to buttress the claim for exemption. Perforce, no exemption could be granted as there is no way of telling whether or not the employees in question belong to a group
or class designated by regulation of the Social Security Commission as exempt.

Lusteveco further argues that since the employees in question are hired intermittently in short durations, it would be impossible for them to accumulate the requisite number of
monthly contributions to the Social Security System before they can be entitled to benefits afforded by the Social Security Act. Consequently, as to them, exemption from
membership in the Social Security System ought to be granted because the law could not have intended them to be covered without enjoying the benefits provided for therein.

It is not entirely correct to say that the employees in question cannot possibly be entitled to social security benefits by reason of their temporary employment. From the moment an
employee is reported for membership, he is entitled to death and disability benefits pursuant to Section 13 of Republic Act 1161, as amended. The number of monthly contributions
mentioned in said section is not a prerequisite to the enjoyment of death or disability benefits but is merely a basis in determining the amount of benefit to be paid.

In the case of sickness and retirement benefits, an employee member may enjoy said benefits provided he accumulates to his credit twelve and one-hundred twenty months
contributions, respectively. It is not an impossibility for the employees in question to reach the minimum number of monthly contributions simply because their employment is
temporary and intermittent. For nowhere in the law is it required that the monthly contributions be in the same amount, consecutive or derived from the same employer. Moreover,
Sections 12 and 13 of the law specifically provide that a covered employee shall receive a lump sum which should not be less than the total contributions paid by him and his
employer in his behalf. The employee therefore loses not a single centavo of his investment. On the contrary, he gains by the amount paid by his employer in his behalf.
The coverage in the Social Security System of the employees in question, temporary though their employment may be, is in line with the declared policy of Congress 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. Adherence to such policy would strongly militate in favor of the coverage of such temporary employees for, more than their
brothers who are regularly and permanently employed, they are exposed to the hazards of disability, sickness, old age and death. More often than not, they are hapless and
defenseless victims of these hazards. Social justice demands that "they who have less in life should be given more in law". The elimination of the six months service requirement
aforementioned is a clear indication of such congressional policy.

Wherefore, the resolutions of the Social Security Commission appealed from are hereby affirmed. No costs. So ordered.

SECOND DIVISION

[G.R. No. 129315. October 2, 2000]

OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA FLORES, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO ONG, respondents.

DECISION
QUISUMBING, J.:

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National Labor Relations Commission (First Division),[1] in
NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The aforecited October 17th Resolution affirmed the
Decision dated September 28, 1996 of Labor Arbiter Potenciano S. Caizares dismissing the petitioners' complaint for illegal dismissal and declaring that petitioners are not regular
employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos worked as
barbers, while the two female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street, Quiapo, Manila owned
by private respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.

Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned and managed by Mr. Vicente Lao. In or about January
1982, the children of Vicente Lao organized a corporation which was registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with Trinidad Ong as
President of the said corporation. Upon its incorporation, the respondent company took over the assets, equipment, and properties of the New Look Barber Shop and continued the
business. All the petitioners were allowed to continue working with the new company until April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the
New Look Barber Shop was located had been sold and that their services were no longer needed.[2]

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction, separation pay, non-payment of 13th month pay, and
salary differentials. Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a daily wage of P25.00 throughout her period of employment. The
petitioners also sought the refund of the P1.00 that the respondent company collected from each of them daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty percent commission of the amount charged to customers.
Thus, there was no employer-employee relationship between them and petitioners. And assuming arguendo, that there was an employer-employee relationship, still petitioners are
not entitled to separation pay because the cessation of operations of the barber shop was due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated September 06, 1995 that Lao Enteng Company, Inc. did not
take over the management of the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and again that the partnership may fold up anytime
because nobody in the family had the time to be at the barber shop to look after their interest; that New Look Barber Shop had always been a joint venture partnership and the
operation and management of the barber shop was left entirely to petitioners; that her father's contribution to the joint venture included the place of business, payment for utilities
including electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the barber shop was allowed to remain open up to April 1995 by the children
because they wanted to give the partners a chance at making it work. Eventually, they were forced to close the barber shop because they continued to lose money while petitioners
earned from it. Trinidad also added that private respondents had no control over petitioners who were free to come and go as they wished. Admittedly too by petitioners they
received fifty percent to sixty percent of the gross paid by customers. Trinidad explained that some of the petitioners were allowed to register with the Social Security System as
employees of Lao Enteng Company, Inc. only as an act of accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and
Teresita Flores were not among those registered with the Social Security System. Lastly, Trinidad avers that without any employee-employer relationship petitioners claim for 13th
month pay and separation pay have no basis in fact and in law.[3]

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the complaint on the basis of his findings that the complainants and the
respondents were engaged in a joint venture and that there existed no employer-employee relation between them. The Labor Arbiter also found that the barber shop was closed due
to serious business losses or financial reverses and consequently declared that the law does not compel the establishment to pay separation pay to whoever were its employees.[4]

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating thus:

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test established by the Supreme Court. It is a common practice in the
Barber Shop industry that barbers supply their own scissors and razors and they split their earnings with the owner of the barber shop. The only capital of the owner is the place of
work whereas the barbers provide the skill and expertise in servicing customers. The only control exercised by the owner of the barber shop is to ascertain the number of customers
serviced by the barber in order to determine the sharing of profits. The barbers maybe characterized as independent contractors because they are under the control of the barber
shop owner only with respect to the result of the work, but not with respect to the details or manner of performance. The barbers are engaged in an independent calling requiring
special skills available to the public at large.[5]

Its motion for reconsideration denied in the Resolution[6] dated March 5, 1997, petitioners filed the instant petition assigning that the NLRC committed grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT
PETITIONERS WERE INDEPENDENT CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS.[7]

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent contractors. They contend that they were employees of the
respondent company and cannot be considered as independent contractors because they did not carry on an independent business. They did not cut hair, manicure, and do their
work in their own manner and method. They insist they were not free from the control and direction of private respondents in all matters, and their services were engaged by the
respondent company to attend to its customers in its barber shop. Petitioners also stated that, individually or collectively, they do not have substantial capital nor investments in tools,
equipments, work premises and other materials necessary in the conduct of the barber shop. What the barbers owned were merely combs, scissors, and razors, while the
manicurists owned only nail cutters, nail polishes, nippers and cuticle removers. By no standard can these be considered "substantial capital" necessary to operate a barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and
Patricia Nas were registered with the Social Security System as regular employees of the respondent company. The SSS employment records in common show that the employer's
ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing entries in the SSS employment records
were painstakingly detailed by the petitioners in their position paper and in their memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the
respondent NLRC which did not even mention said employment records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and finality on appeal. We have long settled that this Court will
not uphold erroneous conclusions unsupported by substantial evidence.[8] We must also stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in
the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.[9]

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners and private respondent Lao Enteng Company, Inc. The
Labor Arbiter has concluded that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that the petitioners were independent contractors.
The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It should be noted that aside from the self-serving affidavit
of Trinidad Lao Ong, there were no other evidentiary documents, nor written partnership agreements presented. We have ruled that even the sharing of proceeds for every job of
petitioners in the barber shop does not mean they were not employees of the respondent company.[10]

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they supplied their own working implements, shared in the
earnings of the barber shop with the owner and chose the manner of performing their work. They stressed that as far as the result of their work was concerned the barber shop
owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance
of the work except as to the results thereof, and (b) has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are
necessary in the conduct of the business.[11]

Juxtaposing this provision vis--vis the facts of this case, we are convinced that petitioners are not "independent contractors". They did not carry on an independent business. Neither
did they undertake cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and method. The services of the petitioners were engaged by the
respondent company to attend to the needs of its customers in its barber shop. More importantly, the petitioners, individually or collectively, did not have a substantial capital or
investment in the form of tools, equipment, work premises and other materials which are necessary in the conduct of the business of the respondent company. What the petitioners
owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By no standard can these be considered substantial capital necessary to operate a
barber shop. From the records, it can be gleaned that petitioners were not given work assignments in any place other than at the work premises of the New Look Barber Shop
owned by the respondent company. Also, petitioners were required to observe rules and regulations of the respondent company pertaining, among other things, observance of daily
attendance, job performance, and regularity of job output. The nature of work performed by were clearly directly related to private respondent's business of operating barber shops.
Respondent company did not dispute that it owned and operated three (3) barber shops. Hence, petitioners were not independent contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be present for an employer-employee relationship to exist:
(1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the
latter assuming primacy in the overall consideration. Records of the case show that the late Vicente Lao engaged the services of the petitioners to work as barbers and manicurists
in the New Look Barber Shop, then a single proprietorship owned by him; that in January 1982, his children organized a corporation which they registered with the Securities and
Exchange Commission as Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop and continued the
business; that the respondent company retained the services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in petitioners' and private
respondent's working arrangements.

Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it
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.[12] As to the "control
test", the following facts indubitably reveal that respondent company wielded control over the work performance of petitioners, in that: (1) they worked in the barber shop owned and
operated by the respondents; (2) they were required to report daily and observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted
their full time working in the New Look Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with respondents as early as in the
1960's; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly, respondent company was clothed with the
power to dismiss any or all of them for just and valid cause. Petitioners were unarguably performing work necessary and desirable in the business of the respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since the policy is now to encourage even the self-employed
dressmakers, manicurists and jeepney drivers to become SSS members, we could not agree with private respondents that petitioners were registered with the Social Security
System as their employees only as an accommodation. As we have earlier mentioned private respondent showed no proof to their claim that petitioners were the ones who solely
paid all SSS contributions. It is unlikely that respondents would report certain persons as their workers, pay their SSS premium as well as their wages if it were not true that they
were indeed their employees.[13]

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious business losses and respondent company closed its barber
shop because the building where the barber shop was located was sold. An employer may adopt policies or changes or adjustments in its operations to insure profit to itself or
protect investment of its stockholders. In the exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or
substantially all of its assets and properties which may bring about the dismissal or termination of its employees in the process.[14]

Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such, they are to be accorded the benefits provided under the
Labor Code, specifically Article 283 which mandates the grant of separation pay in case of closure or cessation of employer's business which is equivalent to one (1) month pay for
every year of service.[15] Likewise, they are entitled to the protection of minimum wage statutes. Hence, the separation pay due them may be computed on the basis of the minimum
wage prevailing at the time their services were terminated by the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines on the
Implementation of the 13th Month Pay Law states that "all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in
a month. Such employees are entitled to the benefit regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided
that they have worked for at least one (1) month during a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be paid accordingly.[16]

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural process; P10,000.00 as moral damages; refund of P1.00 per day
paid to the sweeper; salary differentials for petitioner Nas; attorney's fees), we find them without basis.

IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution dated March 05, 1997 are SET ASIDE. Private
respondents are hereby ordered to pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay equivalent to one month pay for every year of
service, to be computed at the then prevailing minimum wage at the time of their actual termination which was April 15, 1995.

Costs against private respondents.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21223 August 31, 1966
PHILIPPINE BLOOMING MILLS CO., INC. (As Employer) and FRANCISCO TONG (As Assistant General Manager) and Attorney-in-Fact of SUSUMO SONODA, SENJI
TANAKA, TAKASHIKO KUMAMOTO, HITOSHI NAKAMURA, TETSUO KODU, (Employees), petitioners and appellants,
 vs.
SOCIAL SECURITY SYSTEM, respondent and appellee.
Demetrio B. Salem for petitioners and appellants.
Office of the Solicitor General Edilberto Barot and Solicitor Camilo D. Quiason for respondent and appellee.
BARRERA, J.:
The facts of this case are not disputed:
The Philippine Blooming Mills Co., Inc., a domestic corporation since the start of its operations in 1957, has been employing Japanese technicians under a pre-arranged contract of
employment, the minimum period of which employment is 6 months and the maximum is 24 months.
From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese technicians. In connection with the employment of these aliens, it sent an inquiry to the
Social Security System (SSS) whether these employees are subject to compulsory coverage under the System, which inquiry was answered by the First Deputy Administrator of the
SSS, under date of August 29, 1957, as follows:
SIR:
With reference to your letter of August 24, 1957, hereunder are our answers to your queries:
Aliens employed in the Philippines:
Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who are employed temporarily shall, upon their departure from the
Philippines, be entitled to a rebate of a proportionate amount of their contributions; their employers shall be entitled to the same proportionate rebate of their
contributions in behalf of said aliens employed by them. (Rule I, Sec. 3[d], Rules and Regulations.)
Starting September, 1957, and until the aforementioned Japanese employees left the Philippines on October 26, 1958, the corresponding premium contributions of the employer and
the employees on the latter's memberships in the SSS were as follows:
Amount of Premiums
Name SS Number Monthly Salary
Contributed
2.5% 3.5% Total
(Employee) (Employer)
Susumu Sonoda 03-075177 P520.00 P175.00 P245.00 P420.00
Senji Tanaka 03-075178 520.00 175.00 245.00 420.00
Kahei Tanaka 03-075179 500.00 175.00 245.00 420.00
Takashiko
03-075180 500.00 175.00 245.00 420.00
Kumamoto
Hitoshi Nakamura 03-075181 500.00 175.00 245.00 420.00
Tetsuo Kudo 03-075182 500.00 175.00 245.00 420.00

Total— P1,050.00 P1,470.00 P2,520.00

On October 7, 1958, the Assistant General Manager of the corporation, on its behalf and as attorney-in-fact of the Japanese technicians, filed a claim with the SSS for the refund of
the premiums paid to the System, on the ground of termination of the members' employment. As this claim was denied, they filed a petition with the Social Security Commission for
the return or refund of the premiums, in the total sum of P2,520.00, paid by the employer corporation and the 6 Japanese employees, plus attorneys' fees. This claim was
controverted by the SSS, alleging that Rule IX of the Rules and Regulations of the System, as amended, requires membership in the System for at least 2 years before a separated
or resigned employee may be allowed a return of his personal contributions. Under the same rule, the employer is not also entitled to a refund of the premium contributions it had
paid.
After hearing, the Commission denied the petition for the reason that, although under the original provisions of Section 3 (d) of Rule I of the Rules and Regulations of the SSS, alien-
employees (who are employed temporarily) and their employers are entitled to a rebate of a proportionate amount of their respective contributions upon the employees' departure
from the Philippines, said rule was amended by eliminating that portion granting a return of the premium contributions. This amendment became effective on January 14, 1958, or
before the employment of the subject aliens terminated. The rights of covered employees who are separated from employment, under the present Rules, are covered by Rule IX
which allows a return of the premiums only if they have been members for at least 2 years.
It is this resolution of the Commission that is the subject of the present appeal, appellants contending that the amendment of the Rules and Regulations of the SSS, insofar as it
eliminates the provision on the return of premium contributions, originally embodied in Section 3(d) of Rule I, constituted an impairment of obligations of contract. It is claimed, in
1
effect, that when appellants-employees became members in September, 1957, and paid the corresponding premiums to the System, it is subject to the condition that upon their
departure from the Philippines, these employees, as well as their employer, are entitled to a rebate of a proportionate amount of their respective contributions.
The contention cannot be sustained. Appellants' argument is based on the theory that the employees' membership in the System established contractual relationship between the
members and the System, in the sense contemplated and protected by the constitutional prohibition against its impairment by law. But, 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.
As pointed out by the Solicitor General, the issue that should be determined in this case is whether, in implementing the SSS law and denying appellants' claim for refund of their
premium contributions, due process was observed.
The Rules and Regulations promulgated by the SSS, pursuant to the rule-making authority granted in Section 4(a) of Republic Act 1161, was duly approved by the President on July
2
18, 1957, and published in the Official Gazette on September 15, 1957. These rules and regulations, among others, provide:
I
DETERMINATION OF COMPULSORY COVERAGE
3. The determination of whether an employer or an employee shall be compulsorily covered shall be vested in the Commission. The following general principles shall guide the
Commission in deciding each case:
xxx xxx xxx
(d) Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who ate employed temporarily and whose visas are only for fixed terms shall, upon
their departure from the Philippines, be entitled to a rebate of a proportionate amount of their contributions; their employers shall be entitled to the same proportionate rebate of their
contributions in behalf of said aliens employed by them.
XI
AMENDMENTS AND EFFECTIVITY
1. The Commission may, by appropriate resolution, amend, repeal, revise and/or modify all or any part or parts of these Rules and Regulations, as well as adopt any
additional rule or rules, whenever the need therefor should arise. Any amendment and/or additional rule, however, shall not take effect until and after the corresponding
resolution of the Commission has been submitted to and approved by the President of the Philippines.
2. These Rules and Regulations, any amendment thereof, or any additional rule or rules subsequently adopted by the Commission, shall take effect on the date they are
approved by the President of the Philippines.
Rule I Section 3 (d) and Rule IX, however, were later amended, which amendment was approved by the President on January 14, 1958, to read as follows:
(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec. 3, Rule I)
EFFECT OF SEPARATION FROM EMPLOYMENT
When an employee under compulsory coverage is separated from employment, his employer's contribution on his account shall cease at the end of the month of
separation; but such employee may continue his membership in the System and receive the benefits of the Act, as amended, in accordance with these rules. If he
continues paying the 6 per cent monthly premiums representing his as well as the employer's contribution, based on his monthly salary at the time of his separation; but if at
the time of his separation the covered employee has been a member of the System for at least two years, he shall have the option to choose any one of the following
adjustments of his membership in the System:
1. A refund of an amount equivalent to his total contributions of two and one-half per centum plus interests at the rate of three per centum per annum, compounded
annually;
 xxx xxx x x x (Rule IX)
3
These amended Rules were published in the November 10, 1958 issue of the Official Gazette.
It is not here disputed that the Rules and Regulations of the SSS, having been promulgated in implementation of a law, have the force and effect of a statute;" that the amendment
thereto, although approved by the President on January 14, 1958, was published in the Official Gazette in November, 1958, or after the employment of the Japanese technicians had
ceased and the corresponding claim for the refund of the premium contributions was filed with the System. The question pertinent to this case now is whether or not appellants are
bound by the amended Rules requiring membership for two years before refund of the premium contributions may be allowed.1äwphï1.ñët
These rules and regulations were promulgated to provide guidelines to be observed in the enforcement of the law. As a matter of fact, Section 3 of Rule I is merely an enumeration
of the "general principles to (shall) guide the Commission" in the determination of the extent or scope of the compulsory coverage of the law. One of these guiding principles is
paragraph (d) relied upon by appellants, on the coverage of temporarily-employed aliens. It is not here pretended, that the amendment of this Section 3(d) of Rule I, as to eliminate
the provision granting to these aliens the right to a refund of part of their premium contributions upon their departure from the Philippines, is not in implementation of the law or
beyond the authority of the Commission to do.
It may be argued, however, that while the amendment to the Rules may have been lawfully made by the Commission and duly approved by the President on January 14, 1958, such
amendment was only published in the November 1958 issue of the Official Gazette, and after appellants' employment had already ceased. Suffice it to say, in this regard, that under
5
Article 2 of the Civil Code, the date of publication of laws in the Official Gazette is material for the purpose of determining their effectivity, only if the statutes themselves do not so
provide.
In the present case, the original Rules and Regulations of the SSS specifically provide that any amendment thereto subsequently adopted by the Commission, shall take effect on
the date of its approval by the President. Consequently, the delayed publication of the amended rules in the Official Gazette did not affect the date of their effectivity, which is
January 14, 1958, when they were approved by the President. It follows that when the Japanese technicians were separated from employment in October, 1958, the rule governing
refund of premiums is Rule IX of the amended Rules and Regulations, which requires membership for 2 years before such refund of premiums may be allowed.
Wherefore, finding no error in the resolution of the Commission appealed from, the same is hereby affirmed, with costs against the appellants. So ordered

THIRD DIVISION
SOCIAL SECURITY SYSTEM, Petitioner,
-versus-
TERESITA JARQUE VDA. DE BAILON, Respondent.
G.R. No. 165545

TINGA, JJ.

Promulgated:
March 24, 2006

x----------------------------------------------x

DECISION

CARPIO MORALES, J.:

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 Bailons medical and funeral expenses; and all the documents submitted by respondent to the SSS in support of her claims are
spurious.

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
Bailons death,[17] he further attesting in a sworn statement[18] that it was Norma who defrayed Bailons funeral expenses.

Elisa and seven of her children[19] subsequently filed claims for death benefits as Bailons 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 Bailons 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.
xxxx
x x x 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.
xxxx
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.
xxxx
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 Bailons 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 latters 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.

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 Bailons wake.[28]

After the SSS filed its Answer[29] to respondents 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.
xxxx
There is x x x 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,[32] revealing that
Alice (a.k.a. Aliz) Diaz never left Barcelona, Sorsogon, after her separation from Clemente Bailon x x x.

As the declaration of presumptive death was extracted by the deceased member using artifice and by exerting fraud upon the unsuspecting court of law, x x x it never had the effect
of giving the deceased member the right to marry anew. x x x [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. x x x as determined through the investigation conducted by the SSS,
Clemente Bailon was the abandoning spouse, not Alice Diaz Bailon.
xxxx

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 latters death benefit. x x x
xxxx

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 x x x

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 P12,000.00 which was
earlier given to her by the SSS as funeral benefit.[33] (Underscoring supplied)
Respondents 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:

x x x [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 latters 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?

x x x x x x x 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. x x x

x x x [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.

xxxx
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 latters 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 SSCs 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 Alices marriage on the one hand and the invalidity of Bailon and respondents

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.

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 absentees 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 spouses 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:

x x x [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)

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, Bailons and respondents marriage prior to the formers 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.

WHEREFORE, the petition is DENIED.

No costs.
SO ORDERED.

16