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. FACTS: The Roman Catholic Archbishop of Manila filed with the Social Security Commission a request that "Catholic Charities, and all religious and charitable institutions and/or organizations 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. The Social Security Commission denied the request. The Roman Catholic Archbishop of Manila, reiterating its arguments and raising constitutional objections, requested for reconsideration of the resolution. Again it was denied hence, this appeal taken in pursuance of section 5(c) of Republic Act No. 1161, as amended. ISSUE: WON religious and charitable institutions is covered by the SS LAW HELD: 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. 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. Social Security Commission are hereby affirmed. So ordered with costs against appellant.

G.R. No. L-21223

August 31, 1966

PHILIPPINE BLOOMING MILLS CO., INC. vs. SOCIAL SECURITY SYSTEM, FACTS: The Philippine Blooming Mills Co., Inc., has been employing Japanese technicians under a prearranged 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 affirmatively by the First Deputy Administrator of the SSS. Starting September, 1957, and until the aforementioned Japanese employees left the Philippines on October 26, 1958. The corporation filed a claim with the SSS for the refund of the premiums on the ground of termination of the members' employment. Denied. They filed a petition 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. Hearing. 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. ISSUE: whether or not appellants are bound by the amended Rules requiring membership for two years before refund of the premium contributions may be allowed. HELD: Tthe 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.

G.R. No. L-26298 September 28, 1984 CMS ESTATE, INC., vs. SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, 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. FACTS: CMS 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 our 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.

G.R. No. L-55764 February 16, 1982 SOCIAL SECURITY SYSTEM, FACTORY, INC., In a petition filed with the Social Security Commission SSC the Social Security System (SSS) together with Jose Concepcion, Manuel Chan, Manuel Ong, Roberto Lai, Arturo Gonzales, William Co, Federico Marcial, Santiago Mancuba, Jesus Crelencia, Alfredo So and Pedro Aquino, the individual petitioners were sought to be declared employees of Manila Cosmos AerAted Water Factory, Inc. (Cosmos) and not independent contractors under the following Agreement to Peddle Soft Drinks. 1. The MANUFACTURER shall provide the PEDDLER with a delivery truck to be used by the latter, under his own responsibility, exclusively in the sales of the products of the former purchased by the PEDDLER from the MANUFACTURER; vs. COURT OF APPEALS and MANILA COSMOS AERATED WATER

2. The PEDDLER himself shall carefully and in strict observance to traffic regulations, drive the truck furnished him by the MANUFACTURER or should he employ a driver or helpers, such driver or helpers shall be his employees under his direction and responsibility, and not that of the MANUFACTURER, and their compensation including salaries, wages, overtime pay, separation pay, bonus or other remunerations and privileges shall be for the PEDDLERS own account; 3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or damage to the truck used by him caused by his own acts or that of his driver and helpers; 4. The PEDDLER shall secure at his own expense all necessary license and permits required by law or ordinance, and shall bear any and all expenses which may be incurred by him in the sales of the MANUFACTURER'S products, covered by this contract; 5. All goods soft drinks) purchased by the PEDDLER shall be charged to him at a factory price of P0.86 per case of the 6.6 oz. size, ex-warehouse; PROVIDED, However, that, if the PEDDLER purchases a total of not less than 200 cases of the 6.5 oz. size a day, he shall be entitled to a dealer's discount of P7.30; 6. Upon the execution of this agreement, the PEDDLER shall give a cash bond in the amount of P500.00 against which the MANUFACTURER shall charge the PEDDLER with any unpaid account at the end of the day or with any damage to the truck or other account which is properly chargeable to the PEDDLER; within 30 days after termination of this agreement, the cash bond, after deducting proper charges, shall be returned to the PEDDLER; 7. The PEDDLER shall liquidate and pay his account at the end of each day, and his failure to do so shall subject his cash bond or so much thereof as may be necessary to such set offs and payments as shall be proper against the accounts in question; 8. This contract shall be effective only up to December 31, 1962 and supersedes any or all other previous contracts that may have been entered into between the parties; However, either of the parties may terminate the same upon seven (7) days prior notice to the other; 9. Upon the termination of this agreement, unless the same is renewed, the delivery truck and such other equipment furnished by the MANUFACTURER to the PEDDLER shall be returned by the latter in good order and workable condition, ordinary wear and tear excepted, and shall promptly settle his outstanding account if any, with the manufacturer. (Rollo, pp. 24-25.) The status of the individual petitioners was important because if they were employees of Cosmos and not independent contractors, then Cosmos would have "to pay the employer's share of premium contributions (employer's and employees' share) for and in behalf of the delivery helpers, as employees of respondent

corporation, plus the penalties thereon for late remittance of premium contributions, covering the period of delinquency from the respective dates of their coverage up to the present" as prayed for in the petition. After hearing, the SSC rendered a resolution in favor of the SSS and the peddlers holding that an employer-employee relationship existed between Cosmos and the peddlers. Cosmos appealed to the Court of Appeals and in a decision promulgated on October 16, 1979, that Court affirmed the resolution of the SSC. However, upon a motion for reconsideration, the Court of Appeals on October 13, 1980, set aside its previous decision and reversed the resolution of the SSC. Hence, the instant appeal where the petitioner is the SSS alone; the individual peddlers have not seen fit to appeal. We could have dismissed the instant petition by minute resolution because precedents warrant such an action. But to put an end to litigations of this sort and arrest what Cosmos calls judicial harassment, a decision is in order. In Mafinco Trading Corporation vs.Ople, et al. No. L-37790, March 25, 1976, 70 SCRA 139, the question was whether there was an employer- employee relationship under the terms of a peddling contract in words almost Identical to the one quoted above. This Court, thru Mr. Justice Aquino said: A restatement of the provisions of the peddling contract is necessary in order to find out whether under that instrument Repomanta and Moralde were independent contractors or mere employees of Mafinco. Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler employ a driver and helpers, he would be responsible for their compensation and social security contributions and he should comply with applicable labor laws "in relation to his employees" (Par. 2). The peddler would be responsible for any damage to persons or property or to the truck caused by his own acts or omissions or those of his driver and helpers (Par. 3). Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The peddler would secure at his own expense the necessary licenses and permits and bear the expenses to be incurred in the sale of Cosmos products (Par. 5). The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-warehouse. Should he purchase at least 250 cases a day, he would be entitled to a peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer for his obligations to his employees (Par. 11). He should liquidate his accounts at the end of each day (Par. 8). The contract would be effective up to May 31, 1973. Either party might terminate it upon five days prior notice to the other (Par. 9).

We hold that under their peddling contracts of Repomanta and Moralde were not employees of Mafinco but were independent contractors as found by the NLRC and its fact-finder and by the committee appointed by the Secretary of labor to look into the status of Cosmos and Mafinco peddlers. They were distributors of Cosmos soft drinks with their own capital and employees. Ordinarily, an employee or a mere peddler does not execute a formal contract of employment. He is simply hired and he works under the direction and control of the employer. Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which indicate the manner in which they would sell Cosmos soft drinks. That circumstance signifies that they were acting as independent businessmen. They were free to sign or not to sign that contract. If they did not want to sell Cosmos products under the conditions defined in that contract; they were free to reject it. But having signed it, they were bound by its stipulations and the consequences thereof under existing labor laws. One such stipulation is the right of the parties to terminate the contract upon five days' prior notice (Par. 9). Whether the termination in this case was an unwarranted dismissal of an employee, as contended by Repomanta and Moralde, is a point that cannot be resolved without submission of evidence. Using the contract itself as the sole criterion, the termination should perforce be characterized as simply the exercise of a right freely stipulated upon by the parties. In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages: (3) the power of dismissal: and (4) the power to control the employees' conduct although the latter is flip, most important element (Viaa Al-Lagadan and Piga 99 Phil, 406, 411, Citing 35 Am. Jur. 445). On the other hand, an independent contractor is "one who exercise independent employment and contracts to do a piece of work according to his own methods and without being subject to control of his employer except as to the result of the work" (Mansal vs. P.P. Gocheco Lumber Co., 96 Phil. 941). Among the factors to be considered are whether the contractor is carrying on an independent business; whether the work is part of the employer's general business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of the work to another; the power to terminate the relationship; the existence of a contract for the performance of a specified piece of work; the control and supervision of the work; the employer's powers and duties with respect to the hiring, firing, and payment of the contractor's servants; the control of the premises; the duty to supply the premises, tools, appliances, material and labor; and the mode, manner, and terms of payment. (56 C.J.S. 46).

Those tests to determine the existence of an employer-employee relationship or whether the person doing a particular work for another is an independent contractor cannot be satisfactorily applied in the instant case. It should be obvious by now that the instant case is a penumbral, sui generis case lying on the shadowy borderline that separates an employee from an independent contractor. In determining whether the relationship is that of employer and employee or whether one is an independent contractor, "each case must be determined on its own facts and all the features of the relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of the peddling contract, no employer-employee relationship was created. (At pp. 161-163, emphasis supplied.) WHEREFORE, the judgment of the Court of Appeals is hereby affirmed. Costs against the petitioner. SO ORDERED.

G.R. No. L-46058 December 14, 1987 SOCIAL SECURITY SYSTEM, vs. COURT OF APPEALS and the QUALITY TOBACCO CORPORATION The facts are found by the Court of Appeals are as follows: QTC, formerly U.S. Tobacco Corporation, is a firm engaged in the manufacture and sale of cigarettes. On August 12, 1972, QTC, as VENDOR, entered into an agreement with CARREON, as VENDEE, the salient provisions of which are as follows: 2. The VENDEE shall purchase one or more brands of cigarettes of the VENDOR on cash basis only, subject to the discretion of the VENDOR as to the brand and quantity thereof; xxx xxx xxx 3. The VENDEE shall sell the cigarettes herein mentioned only within Quezon Province and or such other places as may be designated and or limited thereafter by the VENDOR and only to residents of, or retailers or jobbers doing, and having their place of business in, said assigned territory, strictly, at such prices set by the VENDOR from time to time for the aforementioned respective brands of cigarettes in the sale thereof by the VENDEE in said assigned territory. The VENDEE is fully aware that a violation of this particular paragraph will cause grave and serious consequences to the VENDOR and that he shall be liable for all damages caused by said violation.

4. The VENDEE shall be solely responsible for the cigarettes delivered to him by the VENDOR as well as for the aforementioned proceeds from the sale thereof, and any loss thereof due to any cause shall be solely for his own risk and account. xxx xxx xxx 6. The VENDOR may loan a delivery truck or trucks to the VENDEE, which truck or trucks shall be used by the VENDEE exclusively in connection with this contract and at all time maintained by the said VENDEE in good condition; and for as long as the VENDEE may be allowed the use of the VENDOR's truck or trucks, the VENDEE shall pay all the expenses for gasoline, oil, repairs, operating costs, maintenance, tires, spare parts, etc., but the VENDOR may at its discretion assume the payment of major repair. xxx xxx xxx 9. This contract, may, however, be terminated upon one (1) week's notice of either party at any time. 10. In the event a court litigation should be necessary to recover from the VENDEE any amount due to the VENDOR, the VENDEE shall pay to the VENDOR all such damages that the VENDOR may suffer arising from the violation by the VENDEE of any of the terms and conditions of this contract and/or implementation and/or instructions mentioned in Paragraph 7 hereof plus the cost of suit and attorney's fees of at least 20% of the amount sought to be recovered, which in no case shall be less than Five Hundred Pesos (P500.00) for the purposes of this paragraph, venue of actions is hereby agreed to be in the City of Manila and the VENDEE hereby waives any other proper venue in any action which may be brought by or against him in connection with this contract or in connection with other actions which may be brought incident thereto. The contract with CARREON was terminated by QTC on December 18,1972. On April 29, 1974, CARREON filed a petition with the Social Security Commission alleging that he was an employee of QTC, and asking that QTC be ordered to report him for coverage under the Social Security Law QTC answered claiming that CARREON has not been an employee but was an 'Independent businessman.' The Social Security System intervened and, taking the side of CARREON, also asked that QTC be ordered to pay Social Security contributions in respect of CARREON. On January 21, 1976, the Social Security Commission resolved CARREON's petition, finding him to be an employee of QTC. The rulings in U.S. Tobacco Corporation vs. Benjamin Serna, et al., CA-G.R. No. 32041, September 5, 1967, and The Shell Co. Phil. Ltd. vs. Fireman's Insurance Co. of Newark, et al., 100 Phil. 757, were inter alia, relied upon.

Cognizant of the striking similarities obtaining in the case before it and the Mafinco vs. Ople case decided by this Court on March 25, 1976, and relying solely on the doctrine laid down in said case, the Court of Appeals issued the herein assailed decision dated March 16, 1977, the dispositive part of which reads: WHEREFORE, the Resolution of the Social Security Commission of January 21, 1976 in its Case No. 2543 is hereby REVERSED and the petition filed in said case by Romeo Carreon is dismissed. In a Motion for Reconsideration dated March 25, 1977, the Social Security System sought the reconsideration of the aforequoted decision (Rollo, pp. 43-49). However, finding no merit in said motion, the Court of Appeals denied the same in its resolution dated April 14, 1977 (Rollo, pp. 50-51). Hence this petition. The First Division of this Court without giving due course to said petition resolved to require the respondents to comment (Rollo, p. 64). Private respondent filed its Comment on August 9, 1977 (Rollo, p. 69). Thereafter, this Court resolved to give due course to the petition and required the parties to submit simultaneous memoranda (Rollo, p. 74). On September 23, 1977, private respondent and petitioner filed their respective memoranda (Rollo, pp. 80-118). The issue raised by the petitioner before this Court is the very same issue resolved by the Court of Appeals-that is, whether or not Romeo Carreon is an employee or an independent contractor under the contract aforequoted. Corollary thereto the question as to whether or not the Mafinco case is applicable to this case was raised by the parties. The Court took cognizance of the fact that the question of whether or not an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some businessmen with the aid of lawyers have tried to avoid the bringing about of an employer-employee relationship in some of their enterprises because that juridical relation spawns obligations connected with workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. For this reason, in order to put the issue at rest, this Court has laid down in a formidable line of decisions the elements to be generally considered in determining the existence of an employer-employee relationship, as follows: a) selection and engagement of the employee; b) the payment of wages; c) the power of dismissal; and d) the employer's power to control the employee with respect to the means and method by-which the work is to be accomplished. The last which is the so-called "control test" is the most important element (Brotherhood Labor Unity Movement of the Phils. vs. Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs. Court of Appeals, 37 SCRA 579 [1971]).

Applying the control test, that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and method by which the same is to be accomplished, the question of whether or not there is an employer-employee relationship for purposes of the Social Security Act has been settled in this jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the result of his effort, the relationship of employeremployee does not exist. (SSS vs. Court of Appeals, 30 SCRA 210 [1969]). It is the contention of petitioner that the Mafinco case which has been the sole basis of the Court of Appeals' finding that Romeo Carreon is an independent contractor is not applicable in the instant petition, there being no substantial parallelism between said contract and the contract of purchase and sale in this case. It pointed out that there are in the Mafinco contract provisions which by express implication point to the status of the peddler as an independent contractor such as: a) that should the peddler employ a driver or helpers, the latter shall be his employee/s and his/their compensation shall be for the peddler's account; that the peddler shall comply with the provisions of the Social Security Act and all applicable laws (par. 2); b) peddler is responsible for damage to property, death or injuries to persons covered by his own acts or omissions or those of his driver or helpers (par. 3); c) peddler is required to secure at his own expense all necessary licenses and permits and to bear all expenses which may be incurred in the sale of soft drinks (par. 5); d) the peddler is to furnish a performance bond of P l,000.00 in favor of Mafinco to assure performance by the peddler of his obligation to his employee under the Social Security Act (par. 11), which provisions are notably absent in the contract in the case at bar (Rollo, pp. 103104). It further contends that the Court of Appeals in an effort to justify its holding picked out only paragraphs 1, 2, 4, 6 and 9 of the Mafinco contract and thereafter concluded that the two contracts are similar. Private respondent on the other hand, avers that the Mafinco contract is applicable to the case at bar. The two contracts need not embody almost the same provisions in order that they may be considered similar. It is enough that the aspect of similarity arising from the terms and condition be considered because of their relevance to the issue, is relatively much stronger than the dissimilarity. Private respondent likewise maintains that the decision was correctly concluded not only on the similarity of the two contracts but also on factual evidence adduced at the trial and since respondent Court has already examined the facts and passed judgment on the basis thereof, its decision is no longer subject to review. Stated otherwise, the Court of Appeals "looked behind the contract" but found the evidence insufficient to justify a finding that the terms of the contract were not followed. That the evidence for Carreon and SSS failed to pierce" the contract (Rollo, p. 83). Private respondent's contention is untenable.

The distinction between a question of law and a question of fact is explained in our jurisprudence in Ramos vs. Pepsi Cola Bottling Co. (19 SCRA 289, 292 [1967]), to wit: For a question to be one of law it must involve no examination of the probative value of the evidence presented by the litigants or any of them and the distinction is well-known. There is a question of law in a given case when the doubt or difference arises as to what the law is in a certain state of facts; there is a question of fact when the doubt arises as to the truth or the falsehood of alleged facts. cited in G.R. No. L-39767, Lorenzo Hernandez vs. The Court of Appeals, March 31, 1987. In the case at bar, it is evident that the basic contention is what the law is in the given state of facts. More than that, the well-settled rule that the finding of facts of the Court of Appeals is conclusive on the parties, admits of exceptions among which are: (1) when the findings of fact of the Court of Appeals are contrary to those of the trial court and (2) when the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and are contradicted by evidence on record (Sacay vs. Sandiganbayan, 142 SCRA 609 [1986]; Manlapaz vs. Court of Appeals, 147 SCRA 239 [1987]). In this case, the Court of Appeals ruled that there is not enough evidence to show that the contract between Carreon and QTC was not reflective of their agreement to warrant reformation. As earlier pointed out, the Court of Appeals did not consider the entirety of the contract but only portions thereof which led to the conclusion that Carreon was an independent contractor. Thus, after a study of the records and applying the "control tests," there appears to be no question that the existence of an employer-employee relationship between Romeo Carreon and QTC has been established, based on the following "undisputed" facts as pointed out by the Solicitor General, to wit: (a) QTC assigned a definite sales territory for Romeo Carreon; (b) QTC provided Romeo Carreon with a delivery truck for the exclusive use of the latter in his sales activities; (c) QTC dictated the price of the cigarettes sold by Romeo Carreon; (d) QTC prescribed what brand of cigarettes Romeo Carreon could sell; (e) QTC determined the persons to whom Romeo Carreon could sell, (f) QTC issued circulars and memoranda relative to Romeo Carreon's sales activities; (g) QTC required Romeo Carreon to submit to it daily, weekly and monthly reports; (h) QTC grounded Romeo Carreon for six months in 1966; (i) Romeo Carreon was supervised by sales coordinators of QTC; (j) Romeo Carreon was subject to payment of damages and loss even of accrued rights for any violation of instructions made by QTC in relation to his sales activities; and (k) Romeo Carreon was paid an allowance by QTC. All these indicate control and supervision over Carreon's work. Moreover, it is elementary that findings of administrative agencies are generally accorded not only. respect but also of finality (Rosario Bros, Inc. vs. Ople, 131 SCRA 72 [1984]).

PREMISES CONSIDERED, the decision of the Court of Appeals dated March 16, 1987 and its resolution of April 14, 1977 are hereby REVERSED and SET ASIDE, and the resolution of the Social Security Commission dated January 21,1976 is AFFIRMED and REINSTATED. SO ORDERED.

G.R. No. L-21930

August 31, 1966

AGAPITA PAJARILLO, ET AL., vs. SOCIAL SECURITY SYSTEM, There is no controversy as to the facts of this case. Appellants are owners of fishing boats being used for fishing at sea, namely: As such property-owners, they enter into agreement1 with the so-called patrons or pilots, whereby the latter take charge of appellants fishing vessels, equipment, and gear used for fishing. Once entrusted with the equipment, the pilot "hires" the crew to man the boat and secures their provisions. This is usually financed from loans obtained in the form of advances from fish dealers, and payable in kind when the boat returns with catch from the fishing trip. (pp. 23-24, t.s.n.). These fishing trips are not regular. The fishermen go out to the sea only when there is no moon or it is not yet very bright. For this reason, even in months of fine weather, the most that a boat can make are 18 fishing days every month. These men have no regular income. If the trip yields a catch, the proceeds thereof are divided into three parts: one part goes to the owner of the boat and equipment; one part is set aside to cover expenses like crude oil and for maintenance of the boat, and the other one-third is divided among the men, with the pilot getting 3 times the share of a crew-member; and the "machinist", who tends or operates the engine of the motorized boat, receiving twice the share of a crew-member. (pp. 9, 23, t.s.n.). The men (usually 12 for every vessel, including the pilot) are under no obligation to stay in one outfit. Sometimes, they join as members of the crew for one night only; sometimes two, or three days. Then, they leave and join other outfits. (pp. 18-19, t.s.n.). Even the pilot himself is not bound to retain his charge for any definite duration. He can return the boat to its owner anytime, if he does not want to manage it anymore. (p. 11, t.s.n.). The vesselowners, appellants in the present case, required to register as employers with the Social Security System, filed a joint petition with the Social Security Commission, claiming that there exists no employer-employee relationship between them and the crew of their fishing vessels, and praying that they be exempted from the compulsory coverage of the law. After hearing, their petition was denied, the Commission holding that while the services of the crew-members are engaged by the pilots, the latter are mere employees or agents of the boat-owners. Thus, it is contended, a boat-owner can abolish the employment of the crew-members by withdrawing from the pilot the

authority to take charge of the vessel. Appellants, consequently, were directed to report their coverage and that of their respective pilots and crew-members to the Commission and to pay the prescribed premiums pursuant to Sections 18, 19 and 20 of the Republic Act 1161, as amended. The boat-owners filed the present appeal. The only issue raised before the Commission and presented in this appeal is, as stated by the Commission itself, "whether under the facts set forth above, there exists an employer-employee relationship between the petitioners and the crew-members of their respective fishing boats within the meaning of Republic Act 1161, as amended. Under the law, an employer is a "person, natural or juridical, domestic or foreign, who carries on in 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. "2 In the case at bar, the pilots are not under the orders of the boat-owners as regards their employment. They go out to sea not upon direction of the boat-owners, but upon their own volition as to when, how long and where to go fishing. Much less do the boat-owners in any way control the crew-members with whom the former have no relationship whatsoever. These crew-members simply join every trip for which the pilots allow them, without any reference to the owners of the vessel. On the other hand, an employee is defined as a "person who performs services for an 'employer' in which either or both mental and physical efforts are used and who receives compensation for such services, where there is an employer-employee relationship."3 In the present case, neither the pilots nor the crew-members receive compensation from the boat-owners. They only share in their own catch produced by their own efforts. There is no showing that outside of their one-third share, the boat-owners have anything to do with the distribution of the rest of the catch among the pilots and the crew-members. The latter perform no service for the boat-owners, but mainly for their own benefit. In the undertaking in question, the boat-owners obviously are not responsible for the wage, salary, or fee of the pilot and crew-members. Their sole participation in the venture is the furnishing or delivery of the equipment used for fishing, after which, they merely wait for the boat's return and receive their share in the catch, if there is any. For this part, a person who joins the outfit is entitled to a share or participation in the fruit of the fishing trip. If it gives no return, the men get nothing. It appears to us, therefore, that the undertaking is in the nature of a joint venture, with the boat-owner supplying the boat and its equipments, and the pilot and crew-members contributing the necessary labor, and the parties getting specific shares for their respective contributions. But, even assuming arguendo that the pilot and crew-members may be treated as employees of the boatowners, they cannot also be made subject to compulsory coverage under the Social Security Act. As previously stated, the men are under no obligation to remain in the outfit for any definite period. Thus, one can be the crew-member of an outfit for one day and be the member of the crew of another vessel the next day. Also, a fishing boat has no regular schedule of fishing trips. It all depends on the weather and other natural conditions, and the volition of the pilots and crew-men themselves. And, even when a fishing trip is completed, it is no assurance of income for the fishermen and the boat-owner as well. Clearly, the services rendered by the fishermen are no different from the agricultural labor performed by a share or leasehold tenant or worker,

which is specifically excluded from the definition of "employment",4 and exempted from the coverage of the Social Security Act. Add to this the extreme difficulty, if not impossibility, of determining the monthly wage of earning of these fishermen for the purpose of fixing the amount of their and the supposed employer's contributions, 5 and there is even reason to exempt the parties to this kind of undertaking from compulsory registration with the Social security System. In view of the foregoing considerations, the resolution of the Social Security Commission appealed from is hereby set aside, and petitioners-appellants are declared exempted from compulsory coverage of the Social Security law. No costs. So ordered.

G.R. No. 64948 September 27, 1994 MANILA GOLF & COUNTRY CLUB, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents. Bito, Misa & Lozada for petitioner. Remberto Z. Evio for private respondent.

NARVASA, C.J.: ISSUE: whether or not persons rendering caddying services for members of golf clubs and their guests in said clubs' courses or premises are the employees of such clubs and therefore within the compulsory coverage of the Social Security System (SSS). That question appears to have been involved, either directly or peripherally, in three separate proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies. That which gave rise to the present petition for review was originally filed with the Social Security Commission (SSC) via petition of seventeen (17) persons who styled themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of benefits under the Social Security Act as amended, "PTCCEA" being the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees Association," with which the petitioners claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence

that although the petitioners were employees of the Manila Golf and Country Club, a domestic corporation, the latter had not registered them as such with the SSS. At about the same time, two other proceedings bearing on the same question were filed or were pending; these were: (1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club, the case being titled "Philippine Technical, Clerical, Commercial Association vs. Manila Golf and Country Club" and docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director Carmelo S. Noriel, denying the Club's motion for reconsideration; 1 (2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the same labor organization, titled "Philippine Technical, Clerical, Commercial Employees Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by the National Labor Relations Commission on the ground that there was no employer-employee relationship between the petitioning caddies and the respondent Club. 2 In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging in substance that the petitioners, caddies by occupation, were allowed into the Club premises to render services as such to the individual members and guests playing the Club's golf course and who themselves paid for such services; that as such caddies, the petitioners were not subject to the direction and control of the Club as regards the manner in which they performed their work; and hence, they were not the Club's employees. Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security coverage, avowedly coming to realize that indeed there was no employment relationship between them and the Club. The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for lack of merit, 3 ruling: . . . that the caddy's fees were paid by the golf players themselves and not by respondent club. For instance, petitioner Raymundo Jomok averred that for their services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by a player who will in turn hand over to management the other portion of the stub known as Caddy Ticket (Exh. "1") so that by this arrangement management will know how much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his own in accordance with the rules and regulations (TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any policy of respondent that

directs the manner of caddying (TSN, pp. 76-77, July 23, 1980). While respondent club promulgates rules and regulations on the assignment, deportment and conduct of caddies (Exh. "C") the same are designed to impose personal discipline among the caddies but not to direct or conduct their actual work. In fact, a golf player is at liberty to choose a caddy of his preference regardless of the respondent club's group rotation system and has the discretion on whether or not to pay a caddy. As testified to by petitioner Llamar that their income depends on the number of players engaging their services and liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that the caddies are never their employees in the absence of two elements, namely, (1) payment of wages and (2) control or supervision over them. In this connection, our Supreme Court ruled that in the determination of the existence of an employer-employee relationship, the "control test" shall be considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96 Phil. 941; Viana vs. Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al., L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment Planning Corporation Phil. vs. SSS 21 SCRA 925). Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as bat unloader and helper, respectively, including their ground men, house and administrative personnel, a situation indicative of the latter's concern with the rights and welfare of its employees under the SS law, as amended. The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely intended to identify the holders as accredited caddies of the club and privilege(d) to ply their trade or occupation within its premises which could be withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense posture of respondent that petitioners were never its employees is well taken. 4 From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and Jomok. After the appeal was docketed appellant. 6 The appeal ascribed two errors to the SSC: (1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National Capital Regional Office in the certification election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the existence of employer-employee relationship between the respondent
5

and some months before decision thereon was reached and

promulgated, Raymundo Jomok's appeal was dismissed at his instance, leaving Fermin Llamar the lone

club and the appellants, it being contended that said issue was "a function of the proper labor office"; and (2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor Relations, which "has not only become final but (has been) executed or (become) res adjudicata." 7 The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance. Nor, it would appear, did it find any greater merit in the second alleged error. Although said Court reserved the appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold and Country Club, ordering that he be reported as such for social security coverage and paid any corresponding benefits,
8

it

conspicuously ignored the issue of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra
9

and declared that upon the evidence, the questioned employer-employee relationship between the Club

and Fermin Llamar passed the so-called "control test," establishment in the case i.e., "whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished," the Club's control over the caddies encompassing: (a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect of the conduct that the caddy must observe, or avoid, when serving as such, any violation of any which could subject him to disciplinary action, which may include suspending or cutting off his access to the club premises; (b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number which designates his turn to serve a player; (c) the club's "suggesting" the rate of fees payable to the caddies. Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the Club, that they observed no definite working hours and earned no fixed income. It quoted with approval from an American decision
10

to the effect that: "whether the club paid the caddies and afterward collected in the

first instance, the caddies were still employees of the club." This, no matter that the case which produced this ruling had a slightly different factual cast, apparently having involved a claim for workmen's compensation made by a caddy who, about to leave the premises of the club where he worked, was hit and injured by an automobile then negotiating the club's private driveway. That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is now among the mainways of the private respondent's defenses to the petition for review. Considered in the perspective of the incidents just recounted, it illustrates as well as anything can, why the practice of forum-

shopping justly merits censure and punitive sanction. Because the same question of employer-employee relationship has been dragged into three different fora, willy-nilly and in quick succession, it has birthed controversy as to which of the resulting adjudications must now be recognized as decisive. On the one hand, there is the certification case [R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the existence of employer-employee relationship between the parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never thereafter appealed according to the private respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by or for the same respondent at about the same time, which was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on the ground that there existed no such relationship between the Club and the private respondent. And, as if matters were not already complicated enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for compulsory social security coverage with the Social Security Commission (SSC Case No. 5443), with the result already mentioned. Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had never become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as of a later motion for early resolution.
11

Unfortunately, none of these motions is incorporated or reproduced

in the record before the Court. And, for his part, the private respondent contends, not only that said decision had been appealed to and been affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in the PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect to wages, hours of work, terms of employment, etc.
12

Whatever the truth

about these opposing contentions, which the record before the Court does not adequately disclose, the more controlling consideration would seem to be that, however, final it may become, the decision in a certification case, by the very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or non-existence, of employer-employee relationship between them. It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the merits; (3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4) there must be between the two cases identity of parties, identity of subject matter and identity of cause of action.
13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious, "one having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it" 14 and a certification case is not such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but mere investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by the employees. 15 Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employeremployee relationship between present petitioner and the private respondent, it would logically be that rendered in the compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner having asserted, without dispute from the private respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and which ruling was thereafter affirmed by the National Labor Relations Commission in an appeal taken by said respondent. 16 In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting ruling just adverted to should be accorded primacy, given the fact that it was he who actively sought them simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for forum-shopping may not be applied to him retroactively. Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on contrary, it acted correctly in doing so. Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and employee between petitioner and private respondent is, however, another matter. The Court does not agree that said facts necessarily or logically point to such a relationship, and to the exclusion of any form of arrangements, other than of employment, that would make the respondent's services available to the members and guest of the petitioner. As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation within the premises and grounds of whatever club they do their work in. For all that is made to appear, they work for the club to which they attach themselves on sufference but, on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long they like. It is not pretended that if found remiss in the observance of said rules, any discipline may be meted them beyond barring them from the premises which, it may be supposed, the Club may do in any case even absent any breach of the rules, and without violating any right to work on their part. All these considerations clash frontally with the concept of employment.

The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still another indication of the latter's status as employees. It seems to the Court, however, that the intendment of such fact is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies' work and compensation that an employer would possess. The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than an assurance that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn to serve and being assigned instead the last number for the day. 17 By and large, there appears nothing in the record to refute the petitioner's claim that: (Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise his occupation in the premises of petitioner. He may work with any other golf club or he may seek employment a caddy or otherwise with any entity or individual without restriction by petitioner. . . . . . . In the final analysis, petitioner has no was of compelling the presence of the caddies as they are not required to render a definite number of hours of work on a single day. Even the group rotation of caddies is not absolute because a player is at liberty to choose a caddy of his preference regardless of the caddy's order in the rotation. It can happen that a caddy who has rendered services to a player on one day may still find sufficient time to work elsewhere. Under such circumstances, he may then leave the premises of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on call for a particular day may deliberately absent himself if he has more profitable caddying, or another, engagement in some other place. These are things beyond petitioner's control and for which it imposes no direct sanctions on the caddies. . . . 18 WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set aside, it being hereby declared that the private respondent, Fermin Llamar, is not an employee of petitioner Manila Golf and Country Club and that petitioner is under no obligation to report him for compulsory coverage to the Social Security System. No pronouncement as to costs. SO ORDERED.

G.R. No. L-14606

April 28, 1960

LAGUNA TRANSPORTATION CO., INC., vs.SOCIAL SECURITY SYSTEM,

On January 24, 1958, petitioner Laguna Transportation Co., Inc. filed with the Court of First Instance of Laguna petition praying that an order be issued by the court declaring that it is not bound to register as a member of respondent Social Security System and, therefore, not obliged to pay to the latter the contributions required under the Social Security Act.1 To this petition, respondent filed its answer on February 11, 1958 praying for its dismissal due to petitioner's failure to exhaust administrative remedies, and for a declaration that petitioner is covered by said Act, since the latter's business has been in operation for at least 2 years prior to September 1, 1957. On February 11, 1958, respondent filed a motion for preliminary hearing on its defense that petitioner failed to exhaust administrative remedies. When the case was called for preliminary hearing, it was postponed by agreement of the parties. Subsequently, it was set for trial. On the date of the trial, the parties agreed to present, in lieu of any other evidence, a stipulation of facts, which they did on May 27, 1958, as follows: 1. That petitioner is a domestic corporation duly organized and existing under the laws of the Philippines, with principal place of business at Bian, Laguna; 2. That respondent is an agency created under Republic Act No. 1161, as amended by Republic Act No. 1792, with the principal place of business at the new GSIS Bldg., corner Arroceros and Concepcion Streets, Manila, where it may be served with summons; 3. That respondent has served notice upon the petitioner requiring it to register as member of the System and to remit the premiums due from all the employees of the petitioner and the contribution of the latter to the System beginning the month of September, 1957; 4. That sometime in 1949, the Bian Transportation Co., a corporation duly registered with the Securities and Exchange Commission, sold part of the lines and equipment it operates to Gonzalo Mercado, Artemio Mercado, Florentino Mata and Dominador Vera Cruz; 5. That after the sale, the said vendees formed an unregistered partnership under the name of Laguna Transportation Company which continued to operate the lines and equipment bought from the Bian Transportation Company, in addition to new lines which it was able to secure from the Public Service Commission; 6. That the original partners forming the Laguna Transportation Company, with the addition of two new members, organized a corporation known as the Laguna Transportation Company, Inc., which was registered with the Securities and Exchange Commission on June 20, 1956, and which corporation is the plaintiff now in this case; 7. That the incorporators of the Laguna Transportation Company, Inc., and their corresponding shares are as follows:

Name Dominador Cruz Maura Mendoza Gonzalo Mercado Artemio Mercado Florentino Mata Sabina Borja

No. Shares

of

Amount Subscribed P33,300.00 33,300.00 6,600.00 9,400.00 11,000.00 6,400.00 P100,000.00

Amount Paid P9,160.81 9,160.81 1,822.49 2,565.90 3,021.54 1,750.00 P27,481.55

333 shares 333 shares 66 shares 94 shares 110 shares 64 shares 1,000 shares

8. That the corporation continued the same transportation business of the unregistered partnership; 9. That the plaintiff filed on August 30, 1957 an Employee's Data Record . . . and a supplemental Information Sheet . . .; 10. That prior to November 11, 1957, plaintiff requested for exemption from coverage by the System on the ground that it started operation only on June 20, 1956, when it was registered with the Securities and Exchange Commission but on November 11, 1957, the Social Security System notified plaintiff that it was covered; 11. On November 14, 1957, plaintiff through counsel sent a letter to the Social Security System contesting the claim of the System that plaintiff was covered, . . . 12. On November 27, 1957, Carlos Sanchez, Manager of the Production Department of the respondent System for and in behalf of the Acting Administrator, informed plaintiff that plaintiff's business has been in actual operation for at least two years, . . . On the basis of the foregoing stipulation of facts, the court, on August 15, 1958, rendered a decision the dispositive part of which reads: Wherefore, the Court is of the opinion and so declares that the petitioner was an employer engaged in business as common carrier which had been in operation for at least two years prior to the enactment of Republic Act No. 1161, as amended by Republic Act 1792 and by virtue thereof, it was subject to compulsory coverage under said law. . . . From this decision, petitioner appealed directly to us, raising purely questions of law.

Petitioner claims that the lower court erred in holding that it is an employer engaged in business as a common carrier which had been in operation for at least 2 years prior to the enactment of the Social Security Act and, therefore, subject to compulsory coverage thereunder. Section 9 of the Social Security Act, in part, provides: 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 an employer who is a member of the System. Provided, That the Commission may not compel any employer to become a member of the System unless he shall have been in operation for at least two years . . . . (Italics supplied.). It is not disputed that the Laguna Transportation Company, an unregistered partnership composed of Gonzalo Mercado, Artemio Mercado, Florentina Mata, and Dominador Vera Cruz, commenced the operation of its business as a common carrier on April 1, 1949. These 4 original partners, with 2 others (Maura Mendoza and Sabina Borja) later converted the partnership into a corporate entity, by registering its articles of incorporation with the Securities and Exchange Commission on June 20, 1956. The firm name "Laguna Transportation Company" was not altered, except with the addition of the word "Inc." to indicate that petitioner was duly incorporated under existing laws. The corporation continued the same transportation business of the unregistered partnership, using the same lines and equipment. There was, in effect, only a change in the form of the organization of the entity engaged in the business of transportation of passengers. Hence, said entity as an employer engaged in business, was already in operation for at least 3 years prior to the enactment of the Social Security Act on June 18, 1954 and for at least two years prior to the passage of the amendatory act on June 21, 1957. Petitioner argues that, since it was registered as a corporation with the Securities and Exchange Commission only on June 20, 1956, it must be considered to have been in operation only on said date. While it is true that a corporation once formed is conferred a juridical personality separate and district from the persons composing it, it is but a legal fiction introduced for purposes of convenience and to subserve the ends of justice. The concept cannot be extended to a point beyond its reasons and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the courts. (13 Am. Jur. 160.) If any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but, when the motion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons. (1 Fletcher Cyclopedia Corporations [Perm. Ed.] 135-136; U.S. Milwaukee Refrigeration Transit Co., 142 Fed. 247, cited in Koppel Philippines, Inc. vs. Yatco, 43 Off. Gaz., 4604.) To adopt petitioner's argument would defeat, rather than promote, the ends for which the Social Security Act was enacted. An employer could easily circumvent the statute by simply changing his form of organization every other year, and then claim exemption from contribution to the System as required, on the theory that, as a new entity, it

has not been in operation for a period of at least 2 years. the door to fraudulent circumvention of the statute would, thereby, be opened. Moreover, petitioner admitted that as an employer engaged in the business of a common carrier, its operation commenced on April 1, 1949 while it was a partnership and continued by the corporation upon its formation on June 20, 1956. Unlike in the conveyance made by the Bian Transportation Company to the partners Gonzalo Mercado, Artemio Mercado, Florentino Mata, and Dominador Vera Cruz, no mention whatsoever is made either in the pleadings or in the stipulation of facts that the lines and equipment of the unregistered partnership had been sold and transferred to the corporation, petitioner herein. This omission, to our mind, clearly indicates that there was, in fact, no transfer of interest, but a mere change in the form of the organization of the employer engaged in the transportation business, i.e., from an unregistered partnership to that of a corporation. As a rule, courts will look to the substance and not to the form.(Colonial Trust Co. vs. Montolo Eric Works, 172 Fed. 310; Metropolitan Holding Co. vs. Snyder, 79 F. 2d 263, 103 A.L.R. 612; Arnold vs. Willits, et al., 44 Phil., 634; 1 Fletcher Cyclopedia Corporations [Perm. Ed.] 139-140.) Finally, the weight of authority supports the view that where a corporation was formed by, and consisted of members of a partnership whose business and property was conveyed and transferred to the corporation for the purpose of continuing its business, in payment for which corporate capital stock was issued, such corporation is presumed to have assumed partnership debts, and is prima facie liable therefor. (Stowell vs. Garden City News Corps., 57 P. 2d 12; Chicago Smelting & Refining Corp. vs. Sullivan, 246 IU, App. 538; Ball vs. Bross., 83 June 19, N.Y. Supp. 692.) The reason for the rule is that the members of the partnership may be said to have simply put on a new coat, or taken on a corporate cloak, and the corporation is a mere continuation of the partnership. (8 Fletcher Cyclopedia Corporations [Perm. Ed.] 402-411.) Wherefore, finding no error in the judgment of the court a quo, the same is hereby affirmed, with costs against petitioner-appellant. So ordered. [G.R. No. L-7945. March 23, 1956.] NATIONAL LABOR UNION, vs. BENEDICTO DINGLASAN,

PADILLA, J.: The Petitioner seeks a review and the setting aside of a resolution in banc of the Court of Industrial Relations adopted on 23 June 1954 which held that there exists no employer-employee relationship between the Respondent and the driver complainants represented by the Petitioner and for that reason the Court of Industrial Relations dismissed the complaint filed by the acting prosecutor of the Court. The resolution in banc complained of reversed an order of an Associate Judge of the Court which declared that there was such relationship of employer-employee between the Respondent and the complainants represented by the Petitioner. The last mentioned order of 16 February 1954 was just interlocutory but it was set aside by the resolution of 23 June 1954.

The National Labor Union in representation of the complainants appealed from said resolution dismissing its complaint charging the Respondent with the commission of unfair labor practices. In the resolution complained of there are no findings of facts. It merely states that cralaw the Court, in banc, finds that the said motion for reconsideration is well-taken and, therefore, it hereby reconsider the order of February 16, 1954, and thereby declares that there is no employer- employee relation between Respondent, Benedicto Dinglasan, and the driver-complainants in his case. As a consequence, the motion to dismiss the complaint dated October 31, 1953, filed by the Acting Prosecutor of the Court, is hereby granted. (Annex D.) This resolution was adopted upon a motion for reconsideration of the previous order of 16 February 1954. As there are no findings of fact in the resolution those set forth in the previous order must have been relied upon by the Court. They are as follows: (a) Respondent Dinglasan is the owner and operator of TPU jeepneys plying between Espaa-Quiapo-Pier and vice versa. (b) Petitioners are drivers who had verbal contracts with Respondent for the use of the latters jeepneys upon payment of P7.50 for 10 hours use, otherwise known as the boundary system. (c) Said drivers did not receive salaries or wages from Mr. Dinglasan; chan roblesvirtualawlibrarytheir days earnings being the excess over the P7.50 that they paid for the use of the jeepneys. In the event that they did not earn more, Respondent did not have to pay them anything;

(d) Mr. Dinglasans supervision over the drivers consisted in inspection of the jeepneys that they took out when they passed his gasoline station for water, checking the route prescribed by the Public Service Commission, or whether any driver was driving recklessly and washing and changing the tires of jeepneys. (Annex C.) The main question to determine is whether there exists a relationship of employer-employee between the drivers of the jeeps and the owner thereof. The findings contained in the first order are not disputed by both parties except the last to which the Respondent took exception. But in the resolution setting aside the order of 16 February 1954 the Court of Industrial Relations in banc did not state that such finding is not supported by evidence. It merely declares that there is no employer-employee relation between Respondent, Benedicto Dinglasan, and the driver-complainants in this case. If the findings to which the Respondent took exception is unsupported by the evidence, a pronouncement to that effect would have been made by the Court in banc. In the absence of such pronouncement we are not at liberty to ignore or disregard said finding. The findings of the Court of Industrial Relations with respect to question of fact, if supported by substantial evidence on the record shall be conclusive. 1 Taking into consideration the findings of fact made by the Court of Industrial Relations we find it difficult to uphold the conclusion of the Court set forth in its resolution of 23 June 1954. The drivers did not invest a single centavo in the business and the Respondent is the exclusive owner of the jeeps. The management of the business is in the Respondents hands. For even if the drivers of the jeeps take material possession of the jeeps, still the Respondent as owner thereof and holder of a certificate of public convenience is entitled to exercise, as

he does and under the law he must, supervision over the drivers by seeing to it that they follow the route prescribed by the Public Service Commission and the rules and regulations promulgated by it as regards their operation. And when they pass by the gasoline station of the Respondent checking by his employees on the water tank, oil and tire pressure is done. The only features that would make the relationship of lessor and lessee between the Respondent and the drivers, members of the union, as contended by the Respondent, are the fact that he does not pay them any fixed wage but their compensation is the excess of the total amount of fares earned or collected by them over and above the amount of P7.50 which they agreed to pay to the Respondent, the owner of the jeeps, and the fact that the gasoline burned by the jeeps is for the account of the drivers. These two features are not, however, sufficient to withdraw the relationship between them from that of employeremployee, because the estimated earnings for fares must be over and above the amount they agreed to pay to the Respondent for a ten-hour shift or ten-hour a day operation of the jeeps. Not having any interest in the business because they did not invest anything in the acquisition of the jeeps and did not participate in the management thereof, their service as drivers of the jeeps being their only contribution to the business, the relationship of lessor and lessee cannot be sustained. 1 In the lease of chattels the lessor loses complete control over the chattel leased although the lessee cannot make bad use thereof, for he would be responsible for damages to the lessor should he do so. In this case there is a supervision and a sort of control that the owner of the jeeps exercises over the drivers. It is an attempt by ingenious scheme to withdraw the relationship between the owner of the jeeps and the drivers thereof from the operation of the labor laws enacted to promote industrial peace. As to the point that the National Labor Union is not the real party in interest to bring the complaint, suffice it to say that representative includes a legitimate labor organization or any officer or agent of such organization, whether or not employed by the employer or employees whom he represents. 2 And whenever it is charged by an offended party or his representative that any person has engaged or is engaging in any unfair labor practice, the Court of Industrial Relations must investigate such charge. 3 Therefore, the objection to the institution of the charge for unfair labor practice by the National Labor Union is not well taken. The order of 23 June 1904 is reversed and set aside and the case remanded to the Court of Industrial Relations for such further proceedings as may be required by law, with costs against the Respondent.