G.R. No.

L-19124 November 18, 1967

INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES, petitioner-appellant,

vs.

SOCIAL SECURITY SYSTEM, respondent-appellee.

MAKALINTAL, J.:

Petitioner is a domestic corporation engaged in business management and the sale of securities.
It has two classes of agents who sell its investment plans: (1) salaried employees who keep
definite hours and work under the control and supervision of the company; and (2) registered
representatives who work on commission basis.

On August 27, 1960 petitioner, through counsel, applied to respondent Social Security
Commission for exemption of its so-called registered representatives from the compulsory
coverage of the Social Security Act. The application was denied in a letter signed by the
Secretary to the Commission on January 16, 1961. A motion to reconsider was filed and also
denied, after hearing, by the Commission itself in its resolution dated September 8, 1961. The
matter was thereafter elevated to this Court for review.

The issue submitted for decision here is whether petitioner's registered representatives are
employees within the meaning of the Social Security Act (R.A. No. 1161 as amended). Section 8
(d) thereof defines the term "employee" — for purposes of the Act — as "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, where there is, employer-employee
relationship." (As amended by Sec.4, R.A. No. 2658). These representatives are in reality
commission agents. The uncontradicted testimony of petitioner's lone witness, who was its
assistant sales director, is that these agents are recruited and trained by him particularly for the
job of selling "'Filipinos Mutual Fund" shares, made to undergo a test after such training and, if
successful, are given license to practice by the Securities and Exchange Commission. They then
execute an agreement with petitioner with respect to the sale of FMF shares to the general
public. Among the features of said agreement which respondent Commission considered
pertinent to the issue are: (a) an agent is paid compensation for services in the form of
commission; (b) in the event of death or resignation he or his legal representative shall be paid
the balance of the commission corresponding to him; (c) he is subject to a set of rules and
regulations governing the performance of his duties under the agreement; (d) he is required to
put up a performance bond; and (e) his services may be terminated for certain causes. At the
same time the Commission found from the evidence and so stated in its resolution that the
agents "are not required to report (for work) at any time; they do not have to devote their time
exclusively to or work solely for petitioner; the time and the effort they spend in their work
depend entirely upon their own will and initiative; they are not required to account for their
time nor submit a record of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain percentage of their
sales." The record also reveals that the commission earned by an agent on his sales is directly
deducted by him from the amount he receives from the investor and turns over to the company
the amount invested after such deduction is made. The majority of the agents are regularly
employed elsewhere — either in the government or in private enterprises.

Of the three requirements under Section 8 (d) of the Social Security Act it is admitted that the
first is present in respect of the agents whose status is in question. They exert both mental and
physical efforts in the performance of their services. The compensation they receive, however,
is not necessarily for those efforts but rather for the results thereof, that is, for actual sales that
they make. This point is relevant in the determination of whether or not the third requisite is
also present, namely, the existence of employer-employee relationship. Petitioner points out
that in effect such compensation is paid not by it but by the investor, as shown by the basis on
which the amount of the commission is fixed and the manner in which it is collected.

Petitioner submits that its commission agents, engaged under the terms and conditions already
enumerated, are not employees but independent contractors, as defined in Article 1713 of the
Civil Code, which provides:

Art. 1713. By the contract for a piece of work the contractor binds himself to execute a
piece of work for the employer, in consideration of a certain price or compensation. The
contractor may either employ only his labor or skill, or also furnish the material.
We are convinced from the facts that the work of petitioner's agents or registered
representatives more nearly approximates that of an independent contractor than that of an
employee. The latter is paid for the labor he performs, that is, for the acts of which such labor
consists; the former is paid for the result thereof. This Court has recognized the distinction in
Chartered Bank, et al. vs. Constantino, 56 Phil. 717, where it said:

On this point, the distinguished commentator Manresa in referring to Article 1588 of the
(Spanish) Civil Code has the following to say. . . .

The code does not begin by giving a general idea of the subject matter, but by fixing its two
distinguishing characteristics.

But such an idea was not absolutely necessary because the difference between the lease of
work by contract or for a fixed price and the lease of services of hired servants or laborers is
sufficiently clear. In the latter, the direct object of the contract is the lessor's labor; the acts in
which such labor consists, performed for the benefit of the lessee, are taken into account
immediately. In work done by contract or for a fixed price, the lessor's labor is indeed an
important, a most important factor; but it is not the direct object of the contract, nor is it
immediately taken into account. The object which the parties consider, which they bear in mind
in order to determine the cause of the contract, and upon which they really give their consent,
is not the labor but its result, the complete and finished work, the aggregate of the lessor's acts
embodied in something material, which is the useful object of the contract. . . . (Manresa
Commentarios al Codigo Civil, Vol. X, ed., pp. 774-775.)

Even if an agent of petitioner should devote all of his time and effort trying to sell its
investment plans would not necessarily be entitled to compensation therefor. His right to
compensation depends upon and is measured by the tangible results he produces.

The specific question of when there is "employer-employee relationship" for purposes of the
Social Security Act has not yet been settled in this jurisdiction by any decision of this Court. But
in other connections wherein the term is used the test that has been generally applied is the so-
called 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
methods by which the same is to be accomplished.

Thus in Philippine Manufacturing Company vs. Geronimo, et al., L-6968, November 29, 1954,
involving the Workmen's Compensation Act, we read:

. . . Garcia, a painting contractor, had a contract undertaken to paint a water tank belonging to
the Company "in accordance with specifications and price stipulated," and with "the actual
supervision of the work (being) taken care of by" himself. Clearly, this made Garcia an
independent contractor, for while the company prescribed what should be done, the doing of it
and the supervision thereof was left entirely to him, all of which meant that he was free to do
the job according to his own method without being subject to the control of the company
except as to the result.

Cruz, et al. vs. The Manila Hotel Company, L-9110, April 30, 1957, presented the issue of who
were to be considered employees of the defendant firm for purposes of separation gratuity.
LVN Pictures, Inc. vs. Phil. Musicians Guild, et al., L-12582, January 28, 1961, involved the status
of certain musicians for purposes of determining the appropriate bargaining representative of
the employees. In both instances the "control" test was followed. (See also Mansal vs. P.P.
Gocheco Lumber Co., L-8017, April 30, 1955; and Viana vs. Allagadan, et al., L-8967, May 31,
1956.)

In the United States, the Federal Social Security Act of 1935 set forth no definition of the term
'employee' other than that it 'includes an officer of a corporation.' Under that Act the U.S.
Supreme Court adopted for a time and in several cases the so-called 'economic-reality' test
instead of the 'control' test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs. Birmingham,
Ibid, 1947, both decided in June 1947). In the Bartels case the Court said:

In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 SCt 1463, supra, we held that the
relationship of employer-employee, which determines the liability for employment taxes under
the Social Security Act was not to be determined solely by the idea of control which an alleged
employer may or could exercise over the details of the service rendered to his business by the
worker or workers. Obviously control is characteristically associated with the employer-
employee relationship, but in the application of social legislation employees are those who as a
matter of economic reality are dependent upon the business to which they render service. In
Silk, we pointed out that permanency of the relation, the skill required, the investment in the
facilities for work and opportunities for profit or less from the activities were also factors that
should enter into judicial determination as to the coverage of the Social Security Act. It is the
total situation that controls. The standards are as important in the entertainment field as we
have just said, in Silk, that they were in that of distribution and transportation. (91 Law, Ed.
1947, 1953;)

However, the 'economic-reality' test was subsequently abandoned as not reflective of the
intention of Congress in the enactment of the original Security Act of 1935. The change was
accomplished by means of an amendatory Act passed in 1948, which was construed and
applied in later cases. In Benson vs. Social Security Board, 172 F. 2d. 682, the U.S. Supreme
Court said:

After the decision by the Supreme Court in the Silk case, the Treasury Department revamped its
Regulation, 12 Fed. Reg. 7966, using the test set out in the Silk case for determining the
existence of an employer-employee relationship. Apparently this was not the concept of such a
relationship that Congress had in mind in the passage of such remedial acts as the one involved
here because thereafter on June 14, 1948, Congress enacted Public Law 642, 42 U.S C.A. Sec.
1301 (a) (6). Section 1101(a) (6) of the Social Security Act was amended to read as follows:

The term "employee" includes an officer of a corporation, but such term does not include (1)
any individual who, under the usual common-law rules applicable in determining the employer-
employee relationship, has the status of an independent contractor or (2) any individual (except
an officer of a corporation) who is not an employee under such common law rules.

While it is not necessary to explore the full effect of this enactment in the determination of the
existence of employer-employee relationships arising in the future, we think it can fairly be said
that the intent of Congress was to say that in determining in a given case whether under the
Social Security Act such a relationship exists, the common-law elements of such a relationship,
as recognized and applied by the courts generally at the time of the passage of the Act, were
the standard to be used . . . .

The common-law principles expressly adopted by the United States Congress are summarized
in Corpus Juris Secundum as follows:

Under the common-law principles as to tests of the independent contractor relationship,

discussed in Master and Servant, and applicable in determining coverage under the Social
Security Act and related taxing provisions, the significant factor in determining the relationship
of the parties is the presence or absence of a supervisory power to control the method and
detail of performance of the service, and the degree to which the principal may intervene to
exercise such control, the presence of such power of control being indicative of an employment
relationship and the absence of such power being indicative of the relationship of independent
contractor. In other words, the test of existence of the relationship of independent contractor,
which relationship is not taxable under the Social Security Act and related provisions, is
whether the one who is claimed to be an independent contractor has contracted to do the
work according to his own methods and without being subject to the control of the employer
except as to the result of the work. (81 C.J.S. Sec. 5, pp. 24-25); See also Millard's Inc. vs. United
States, 46 F. Supp. 385; Schmidt vs. Ewing, 108 F. Supp. 505; Ramblin vs. Ewing, 106 F. Supp.
268.

In the case last cited (Rambin v. Ewing) the question presented was whether the plaintiff there,
who was a sales representative of a cosmetics firm working on a commission basis, was to be
considered an employee. Said the Court:

Plaintiff's only remuneration was her commission of 40%, plus $5 extra for every $250 of sales.
Plaintiff was not guaranteed any minimum compensation and she was not allowed a drawing
account or advance of any kind against unearned commissions. Plaintiff paid all of her traveling
expenses and she even had to pay the postage for sending orders to Avon.
The only office which Avon maintained in Shreveport was an office for the city manager.
Plaintiff worked from her own home and she was never furnished any leads. The relationship
between plaintiff and Avon was terminable at will . . .

xxx xxx xxx

. . . A long line of decisions holds that commission sales representatives are not employees
within the coverage of the Social Security Act. The underlying circumstances of the relationship
between the sales representatives and company often vary widely from case to case, but
commission sales representatives have uniformly been held to be outside the Social Security
Act.

Considering the similarity between the definition of "employee" in the Federal Social Security
Act (U.S.) as amended and its definitions in our own Social Security Act, and considering further
that the local statute is admittedly patterned after that of the United States, the decisions of
American courts on the matter before us may well be accorded persuasive force. The logic of
the situation indeed dictates that 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 efforts and not
the amount thereof, we should not find that the relationship of employer and employee exists.

We have examined the contract form between petitioner and its registered representatives and
found nothing therein which would indicate that the latter are under the control of the former
in respect of the means and methods they employ in the performance of their work. The fact
that for certain specified causes the relationship may be terminated (e.g., failure to meet the
annual quota of sales, inability to make any sales production during a six-month period,
conduct detrimental to petitioner, etc.) does not mean that such control exists, for the causes
of termination thus specified have no relation to the means and methods of work that are
ordinarily required of or imposed upon employees.

In view of the foregoing considerations, the resolution of respondent Social Security

Commission subject of this appeal is reversed and set aside, without pronouncement as to costs.
G.R. No. L-55764 February 16, 1982

SOCIAL SECURITY SYSTEM, petitioner,

vs.

COURT OF APPEALS and MANILA COSMOS AERATED WATER FACTORY, INC., respondents.

ABAD SANTOS, J:

This is a petition to review a decision of the Court of Appeals in Social Security System, et al. vs.
Manila Cosmos Aerated Water Factory, Inc., CA-G.R. No. SP 03296-R, adverse to the petitioner.
The antecedent facts consist of the following:

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;

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 (Viaña 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.)

We hold that conformably to Mafinco, the peddling contract involved in the instant petition
makes the peddler an independent contractor. Additionally, We have taken into account the
fact that the individual petitioners before the SSC who were the principal beneficiaries of the
petition have become indifferent to their cause.

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, petitioner,

vs.

COURT OF APPEALS and the QUALITY TOBACCO CORPORATION, respondents.

PARAS, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals * dated March
16, 1977 in CA-G.R. No. 05087-SP entitled Romeo Carreon, petitioner-appellee vs. Quality
Tobacco Corporation, respondent-appellant and Social Security System, intervenor-appellee,
reversing the Resolution dated January 21, 1976 of the Social Security System and dismissing
the petition filed by Romeo Carreon.

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 employer-
employee 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. 103-104).

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. 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.:

The question before the Court here is 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 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 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 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 employer-employee 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 Court’s 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. 172101 November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL
SECURITY SYSTEM, Petitioners,

vs.

ASIAPRO COOPERATIVE, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules
of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of
Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which
annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-
15507-03, dated 17 February 20043 and 16 September 2004,4 respectively, thereby dismissing
the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS)
against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body
authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by
Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of
Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative
(Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 69386 and duly
registered with the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460.7

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws,

owners-members are of two categories, to wit: (1) regular member, who is entitled to all the
rights and privileges of membership; and (2) associate member, who has no right to vote and
be voted upon and shall be entitled only to such rights and privileges provided in its by-laws.8
Its primary objectives are to provide savings and credit facilities and to develop other livelihood
services for its owners-members. In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service Contracts9 with Stanfilco - a division of
DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do not receive
compensation or wages from the respondent cooperative. Instead, they receive a share in the
service surplus10 which the respondent cooperative earns from different areas of trade it
engages in, such as the income derived from the said Service Contracts with Stanfilco. The
owners-members get their income from the service surplus generated by the quality and
amount of services they rendered, which is determined by the Board of Directors of the
respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of
the respondent cooperative, who were assigned to Stanfilco requested the services of the latter
to register them with petitioner SSS as self-employed and to remit their contributions as such.
Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No.
8282, the SSS contributions of the said owners-members were equal to the share of both the
employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao
Division, Atty. Eddie A. Jara, sent a letter11 to the respondent cooperative, addressed to its
Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that
based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually a
manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of
its owners-members working with Stanfilco. Thus, respondent cooperative should register itself
with petitioner SSS as an employer and make the corresponding report and remittance of
premium contributions in accordance with the Social Security Law of 1997. On 9 October
2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter
asserting that it is not an employer because its owners-members are the cooperative itself;
hence, it cannot be its own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter
to respondent cooperative ordering the latter to register as an employer and report its owners-
members as employees for compulsory coverage with the petitioner SSS. Respondent
cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the
respondent cooperative and Stanfilco praying that the respondent cooperative or, in the
alternative, Stanfilco be directed to register as an employer and to report respondent
cooperative’s owners-members as covered employees under the compulsory coverage of SSS
and to remit the necessary contributions in accordance with the Social Security Law of 1997.
The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer
with Motion to Dismiss alleging that no employer-employee relationship exists between it and
its owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative.
Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent
cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the
respondent cooperative. The respondent cooperative moved for the reconsideration of the said
Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of
Time to File a Petition for Review before the Court of Appeals. Subsequently, respondent
cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its
place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 87236, with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were
issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a
quo, considering that it failed to first resolve the issue of the existence of an employer-
employee relationship between [respondent] cooperative and its owners-members.

B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law
with respect to coverage, benefits, contributions, and related matters, it is respectfully
submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no dispute
as to the existence of an employer-employee relationship.

C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee
relationship raised in [respondent’s] Motion to Dismiss can be preliminarily resolved through
summary hearings prior to the hearing on the merits. However, any inquiry beyond a
preliminary determination, as what [petitioner SSC] wants to accomplish, would be to encroach
on the jurisdiction of the National Labor Relations Commission [NLRC], which is the more
competent body clothed with power to resolve issues relating to the existence of an
employment relationship.

II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-
purpose cooperative created pursuant to Republic Act No. 6938 and composed of owners-
members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are derived
from their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and
not from any contract of employment or from the Labor Laws. Moreover, said owners-
members enjoy rights that are not consistent with being mere employees of a company, such as
the right to participate and vote in decision-making for the cooperative.

C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent]

cooperative are not paid any compensation income.15 (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the
respondent cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16
September 2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING the
petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.16

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was
denied by the appellate court in its Resolution dated 20 March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in
not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in
denying respondent’s Motion to Dismiss. The said issue is supported by the following
arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the
[petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC
after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.

III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent
[cooperative’s] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question of fact where

presentation of evidence is necessary.

V. There is an employer-employee relationship between [respondent cooperative] and its

[owners-members].

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

Petitioners similarly assert that granting arguendo that there is a prior need to determine the
existence of an employer-employee relationship between the respondent cooperative and its
owners-members, said issue does not preclude petitioner SSC from taking cognizance of the
aforesaid petition-complaint. Considering that the principal relief sought in the said petition-
complaint has to be resolved by reference to the Social Security Law and not to the Labor Code
or other labor relations statutes, therefore, jurisdiction over the same solely belongs to
petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss
grounded on the alleged lack of employer-employee relationship does not constitute grave
abuse of discretion on the part of petitioner SSC because the latter has the authority and power
to deny the same. Moreover, the existence of an employer-employee relationship is a question
of fact where presentation of evidence is necessary. Petitioners also maintain that the
respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC
because it has already filed its Answer before it, thus, respondent cooperative has already
submitted itself to the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship between the

respondent cooperative and its owners-members. The respondent cooperative is the employer
of its owners-members considering that it undertook to provide services to Stanfilco, the
performance of which is under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the
cooperative, thus, no employer-employee relationship can arise between them. The persons of
the employer and the employee are merged in the owners-members themselves. Likewise,
respondent cooperative’s owners-members even requested the respondent cooperative to
register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no
jurisdiction over the petition-complaint filed before it by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner
SSC acted with grave abuse of discretion when it assumed jurisdiction over the petition-
complaint without determining first if there was an employer-employee relationship between
the respondent cooperative and its owners-members. Respondent cooperative claims that the
question of whether an employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the
jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss,
especially where the issue of jurisdiction is raised at the very first instance and where the only
relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by
petitioner SSS against the respondent cooperative.

II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner
SSC since it had already filed an Answer with Motion to Dismiss before the said body.

Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in
Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage,
benefits, contributions and penalties thereon or any other matter related thereto, shall be
cognizable by the Commission, x x x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to
coverage, entitlement of benefits, collection and settlement of contributions and penalties
thereon, or any other matter related thereto, shall be cognizable by the Commission after the
SSS through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken action thereon in writing.
(Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage
of the SSS is well within the exclusive domain of the petitioner SSC. It is important to note,
though, that the mandatory coverage under the SSS Law is premised on the existence of an
employer-employee relationship17 except in cases of compulsory coverage of the self-
employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in
the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the
question of jurisdiction would depend almost entirely upon the defendant.18 Moreover, it is
well-settled that once jurisdiction is acquired by the court, it remains with it until the full
termination of the case.19 The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against
the respondent cooperative and Stanfilco alleges that the owners-members of the respondent
cooperative are subject to the compulsory coverage of the SSS because they are employees of
the respondent cooperative. Consequently, the respondent cooperative being the employer of
its owners-members must register as employer and report its owners-members as covered
members of the SSS and remit the necessary premium contributions in accordance with the
Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-
complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction. Although
the Answer with Motion to Dismiss filed by the respondent cooperative challenged the
jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship
between itself and its owners-members, the same is not enough to deprive the petitioner SSC
of its jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be
faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the

respondent cooperative and its owners-members was put in issue and considering that the
compulsory coverage of the SSS Law is predicated on the existence of such relationship, it
behooves the petitioner SSC to determine if there is really an employer-employee relationship
that exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive
jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor Code
enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

xxxx

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits,
all other claims, arising from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.20

Although the aforesaid provision speaks merely of claims for Social Security, it would
necessarily include issues on the coverage thereof, because claims are undeniably rooted in the
coverage by the system. Hence, the question on the existence of an employer-employee
relationship for the purpose of determining the coverage of the Social Security System is
explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC
which is primarily charged with the duty of settling disputes arising under the Social Security
Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the
issue of compulsory coverage of the owners-members of the respondent cooperative, this
Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that
as an incident to the issue of compulsory coverage, it may inquire into the presence or absence
of an employer-employee relationship without need of waiting for a prior pronouncement or
submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the
NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes
creating them, petitioner SSC has the authority to inquire into the relationship existing between
the worker and the person or entity to whom he renders service to determine if the
employment, indeed, is one that is excepted by the Social Security Law of 1997 from
compulsory coverage.21
Even before the petitioner SSC could make a determination of the existence of an employer-
employee relationship, however, the respondent cooperative already elevated the Order of the
petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for
Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for
Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court ruled in
favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction
over the petition-complaint filed before it because there was no employer-employee
relationship between the respondent cooperative and its owners-members. Resultantly, the
petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review
before this Court.

Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a
trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the
Court,23 said rule is not without exceptions. There are several recognized exceptions24 in
which factual issues may be resolved by this Court. One of these exceptions finds application in
this present case which is, when the findings of fact are conflicting. There are, indeed,
conflicting findings espoused by the petitioner SSC and the appellate court relative to the
existence of employer-employee relationship between the respondent cooperative and its
owners-members, which necessitates a departure from the oft-repeated rule that factual issues
may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are

considered: (1) the selection and engagement of the workers; (2) the payment of wages by
whatever means; (3) the power of dismissal; and (4) the power to control the worker’s conduct,
with the latter assuming primacy in the overall consideration.25 The most important element is
the employer’s control of the employee’s conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish.26 The power of control refers to
the existence of the power and not necessarily to the actual exercise thereof. It is not essential
for the employer to actually supervise the performance of duties of the employee; it is enough
that the employer has the right to wield that power.27 All the aforesaid elements are present in
this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative
which has the exclusive discretion in the selection and engagement of the owners-members as
well as its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as
"remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained, on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for service rendered or to
be rendered."29 In this case, the weekly stipends or the so-called shares in the service surplus
given by the respondent cooperative to its owners-members were in reality wages, as the same
were equivalent to an amount not lower than that prescribed by existing labor laws, rules and
regulations, including the wage order applicable to the area and industry; or the same shall not
be lower than the prevailing rates of wages.30 It cannot be doubted then that those stipends or
shares in the service surplus are indeed wages, because these are given to the owners-
members as compensation in rendering services to respondent cooperative’s client, Stanfilco.
Third. It is also stated in the above-mentioned Service Contracts that it is the respondent
cooperative which has the power to investigate, discipline and remove the owners-members
and its team leaders who were rendering services at Stanfilco.31 Fourth. As earlier opined, of
the four elements of the employer-employee relationship, the "control test" is the most
important. In the case at bar, it is the respondent cooperative which has the sole control over
the manner and means of performing the services under the Service Contracts with Stanfilco as
well as the means and methods of work.32 Also, the respondent cooperative is solely and
entirely responsible for its owners-members, team leaders and other representatives at
Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee relationship
between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco
expressly provide that there shall be no employer-employee relationship between the
respondent cooperative and its owners-members.34 This Court, however, cannot give the said
provision force and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists

between the respondent cooperative and its owners-members. The four elements in the four-
fold test for the existence of an employment relationship have been complied with. The
respondent cooperative must not be allowed to deny its employment relationship with its
owners-members by invoking the questionable Service Contracts provision, when in actuality, it
does exist. The existence of an employer-employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding circumstances show otherwise.
The employment status of a person is defined and prescribed by law and not by what the
parties say it should be.35

It is settled that the contracting parties may establish such stipulations, clauses, terms and
conditions as they want, and their agreement would have the force of law between them.
However, the agreed terms and conditions must not be contrary to law, morals, customs, public
policy or public order.36 The Service Contract provision in question must be struck down for
being contrary to law and public policy since it is apparently being used by the respondent
cooperative merely to circumvent the compulsory coverage of its employees, who are also its
owners-members, by the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao
City, Inc. v. Ferrer-Calleja37 wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary business concern, being run
either by persons, partnerships, or corporations. Its owners and/or members are the ones who
run and operate the business while the others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot
invoke the right to collective bargaining for certainly an owner cannot bargain with himself or
his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined
that employees of cooperatives who are themselves members of the cooperative have no right
to form or join labor organizations for purposes of collective bargaining for being themselves
co-owners of the cooperative.1awp++i1

However, in so far as it involves cooperatives with employees who are not members or co-
owners thereof, certainly such employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as are enshrined in the Constitution
and existing laws of the country.
The situation in the aforesaid case is very much different from the present case. The declaration
made by the Court in the aforesaid case was made in the context of whether an employee who
is also an owner-member of a cooperative can exercise the right to bargain collectively with the
employer who is the cooperative wherein he is an owner-member. Obviously, an owner-
member cannot bargain collectively with the cooperative of which he is also the owner because
an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-
member’s right to bargain collectively with the cooperative. The question involved here is
whether an employer-employee relationship can exist between the cooperative and an owner-
member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it
actually recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration
with the Cooperative Development Authority.38 It has its Board of Directors, which directs and
supervises its business; meaning, its Board of Directors is the one in charge in the conduct and
management of its affairs.39 With that, a cooperative can be likened to a corporation with a
personality separate and distinct from its owners-members. Consequently, an owner-member
of a cooperative can be an employee of the latter and an employer-employee relationship can
exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with
the Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-
623-2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the
business and manages the property of the respondent cooperative. Clearly then, the
management of the affairs of the respondent cooperative is vested in its Board of Directors and
not in its owners-members as a whole. Therefore, it is completely logical that the respondent
cooperative, as a juridical person represented by its Board of Directors, can enter into an
employment with its owners-members.

In sum, having declared that there is an employer-employee relationship between the

respondent cooperative and its owners-member, we conclude that the petitioner SSC has
jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our
conclusion, it is no longer necessary to discuss the issue of whether the respondent cooperative
was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with
Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and
the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20
March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the petitioner
SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner
SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by the
petitioner SSS as regards the compulsory coverage of the respondent cooperative and its
owners-members. No costs.

SO ORDERED.

G.R. No. 119891 August 21, 1995

BEN STA. RITA, petitioner,

vs.

THE COURT OF APPEALS, THE PEOPLE OF THE PHILIPPINES and THE SOCIAL SECURITY SYSTEM,
respondents.

RESOLUTION

FELICIANO, J.:
This is a Petition for Review an Certiorari of the Decision of the Court of Appeals ("CA") in CA-
G.R. SP. No. 34384 which ordered the Regional Trial Court ("RTC"), Branch 92, Quezon City, to
reinstate Criminal Case No. Q-92-35426 filed against petitioner Ben Sta. Rita.

Petitioner Sta. Rita was charged in the RTC with violating Section 2(a) in relation to Sections
22(d) and 28(e) of Republic Act No. 1161, as amended, otherwise known as the Social Security
Law. The Information alleged that petitioner, "as President/General Manager of B. Sta. Rita Co.,
Inc. a compulsorily (sic) covered employer under the Social Security Law, as amended, did then
and there willfully and unlawfully fail, neglect and refuse and still fails, neglects and refuses to
remit to the Social Security System contributions for SSS, Medicare and Employees
Compensation for its covered employees." 1

Petitioner Sta. Rita moved to dismiss said criminal case on the following grounds:

1. That the facts charged do not constitute an offense, and;

2. That the RTC has no jurisdiction over this case. 2

The RTC sustained petitioner's motion and dismissed the criminal case filed against him. It ruled
that the Memorandum of Agreement entered into between the Department of Labor and
Employment ("DOLE") and the Social Security System ("SSS") extending the coverage of Social
Security, Medical Care and Employment Compensation laws to Filipino seafarers on board
foreign vessels was null and void as it was entered into by the Administrator of the SSS without
the sanction of the Commission and approval of the President of the Philippines, in
contravention of Section 4 (a) of R.A. No. 1161, as amended. 3

The People, through the Solicitor General, filed in the Court of Appeals a petition for certiorari,
prohibition and mandamus assailing the order of dismissal issued by the trial court. Respondent
appellate court granted the petition and ordered the Presiding Judge of the trial court to
reinstate the criminal case against petitioner. A motion for reconsideration thereof was denied
by the CA in a Resolution dated 17 April 1995.
Thereafter, petitioner filed in this Court a motion for extension of thirty (30) days from the
expiration of reglementary period within which to file a petition for review on certiorari. The
Court granted the motion and gave petitioner until 9 June 1995 to file the petition with warning
that no further extension will be given. Despite the warning, the petition was filed only on 13
June 1995 or four (4) days after the due date. Moreover, it failed to comply with requirement
no. 2 of Circular No. 1-88, as amended and Circular No. 19-91 of the Court as it did not contain
an affidavit of service of copies thereof to respondents. It was only on 14 July 1995, through an
ex-parte manifestation, that the affidavit of service was belatedly submitted to this Court.

In the Petition for Review, petitioner Sta. Rita contends that the Filipino seafarers recruited by B.
Sta. Rita Co. and deployed on board foreign vessels outside the Philippines are exempt from the
coverage of R.A. No. 1161 under Section 8 (j) (5) thereof:

Terms Defined

EMPLOYMENT — Any service performed by an employee for his employer, except —

xxx xxx xxx

(5) Service performed on or in connection with an alien vessel by an employee if he is

employed when such vessel is outside the Philippines.

xxx xxx xxx

According to petitioner, the Memorandum of Agreement entered into by the DOLE and the SSS
is null and void as it has the effect of amending the aforequoted provision of R.A. No. 1161 by
expanding its coverage. This allegedly cannot be done as only Congress may validly amend
legislative enactments.
Petitioner prays that the Court set aside the decision of the Court of Appeals ordering the
reinstatement of Criminal Case No. Q-92-35426 and that the Order of the RTC dismissing the
same be upheld.

It is well-settled in our jurisdiction that the right to appeal is a statutory right and a party who
seeks to avail of the right must comply with the rules. 4 These rules, particularly the statutory
requirement for perfecting an appeal within the reglementary period laid down by law, must be
strictly followed as they are considered indispensable interdictions against needless delays and
for orderly discharge of judicial business. 5 Petitioner's failure to seasonably file the Petition
and its failure to comply with the aforequoted Circulars of the Court necessitate the denial of
the Petition.

Besides, even if the Petition had been filed on time and had complied with the Circulars, it
would still have to be denied as petitioner has failed to show that respondent appellate court
committed any reversible error in rendering the assailed decision.

The Court agrees with the CA that the Information filed against petitioner was sufficient as it
clearly stated the designation of the offense by the statute, i.e. violation of the Social Security
Law, and the acts or omissions complained of as constituting the offense, i.e., petitioner's
failure to remit his contributions to the SSS. The CA found that there is prima facie evidence to
support the allegations in the Information and to warrant the prosecution of petitioner.

Respondent appellate court correctly upheld the validity of the Memorandum of Agreement
entered into between the DOLE and the SSS. Upon the one hand, contrary to the trial court's
finding, the Memorandum of Agreement was approved by the Social Security Commission per
the Commission's Resolution No. 437, dated 14 July 1988. 6 Upon the other hand, the
Memorandum of Agreement is not a rule or regulation enacted by the Commission in the
exercise of the latter's quasi-legislative authority Under Section 4 (a) of R.A. No. 1161, as
amended, which reads as follows:
Sec. 4. Powers and Duties of the Commission. — For the attainment of its main objectives as
set forth in section two hereof, the Commission shall have the following powers and duties:

(a) To adopt, amend and rescind, subject to the approval of the President, such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act.

xxx xxx xxx

What the Memorandum of Agreement did was to record the understanding between the SSS
on the one hand and the DOLE on the other hand that the latter would include among the
provisions of the Standard Contract of Employment required in case of overseas employment, a
stipulation providing for coverage of the Filipino seafarer by the SSS. The Memorandum of
Agreement is not an implementing rule or regulation of the Social Security Commission which,
under Section 4 (a) abovequoted, is subject to the approval of the President. Indeed, as a
matter of strict law, the participation of the SSS in the establishment by the DOLE of a uniform
stipulation in the Standard Contract of Employment for Filipino seafarers was not necessary;
the Memorandum of Agreement related simply to the administrative convenience of the two (2)
agencies of government.

Moreover, the Court finds no merit in petitioner's contention that Section 8 (j) (5) of R.A. No.
1161, as amended, absolutely exempts Filipino seafarers on board foreign vessels from the
coverage of the SSS statute. Section 8 (j) (5) simply defines the term "employment" and does
not in any way relate to the scope of coverage of the Social Security System. That coverage is,
upon the other hand, set out in Section 9 of R.A. No. 1161 as amended, which defines the scope
of SSS coverage in the following terms:

Sec. 9 Compulsory Coverage. — (a) Coverage in the SSS shall be compulsory upon all
employees not over sixty years of age and their employers; Provided, . . . .
(b) Fillpinos recruited in the Philippines by foreign employers for employment abroad may
be covered by the SSS on a voluntary basis. (As amended by Sec. 2, P.D. No. 177, S-1973 and
Sec. 6, P.D. No. 735-S-1975) (Emphasis supplied)

It will be seen that the Memorandum of Agreement is in line with paragraph 9 (b) of the Social
Security statute quoted above. The Memorandum of Agreement provides, inter alia, that:

xxx xxx xxx

NOW THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree
and stipulate that one of the conditions that will be imposed by the Department of Labor and
Employment is the contract for overseas employment is the registration for coverage of
seafarers with the Social Security System, through the manning agencies as the authorized
representatives of the foreign employers in conformity with Section 9, paragraph (b) of the
Social Security Law (R.A. No. 1161, as amended), subject to the following terms and conditions:

xxx xxx xxx 7

(Emphasis supplied)

Thus, the Standard Contract of Employment to be entered into between foreign shipowners
and Filipino seafarers is the instrument by which the former express their assent to the
inclusion of the latter in the coverage of the Social Security Act. In other words, the extension of
the coverage of the Social Security System to Filipino seafarers arises by virtue of the assent
given in the contract of employment signed by employer and seafarer; that same contract binds
petitioner Sta. Rita or B. Sta. Rita Company, who is solidarily liable with the foreign
shipowners/employers.

It may be noted that foreign shipowners and manning agencies had generally expressed their
conformity to the inclusion of Filipino seafarers within the coverage of the Social Security Act
even prior to the signing of the DOLE-SSS Memorandum of Agreement. Thus, the Whereas
clauses of the Memorandum of Agreement state that:

WHEREAS, in the 74th Maritime Session (ILO) held from September 24 to October 9, 1987 in
Geneva, it was agreed that as an internationally accepted principle, seafarers shall have the
right to social security protection;

xxx xxx xxx

WHEREAS, after a series of consultations with seafaring unions and manning agencies, it was
the consensus that Philippine social security coverage be extended to seafarers under the
employ of vessels flying foreign flags;

xxx xxx xxx 8

(Emphasis supplied)

It is, finally, worthy of special note that by extending the benefits of the Social Security Act to
Filipino seafarers on board foreign vessels, the individual employment agreements entered into
with the stipulation for such coverage contemplated in the DOLE-SSS Memorandum of
Agreement, merely give effect to the constitutional mandate to the State to afford protection
to labor whether "local or overseas." 9 Nullification of the SSS stipulation in those individual
employment contracts, through nullification of the Memorandum of Agreement, constituted
serious reversible error on the part of the trial court. That petitioner should seek to deprive his
countrymen of social security protection after his foreign principal had agreed to such
protection, is cause for dismay and is to be deplored.

The Court of Appeals properly held that the reinstatement of the criminal case against
petitioner did not violate his right against double jeopardy since the dismissal of the
information by the trial court had been effected at his own instance. 10 There are only two (2)
instances where double jeopardy will attach notwithstanding the fact that the case was
dismissed with the express consent of the accused. The first is where the ground for dismissal is
insufficiency of evidence for the prosecution; and the second is where the criminal proceedings
have been unreasonably prolonged in violation of the accused's right to speedy trial. 11 Neither
situation exists in the case at bar. There is no legal impediment to the reinstatement of Criminal
Case No. Q-92-35426 against petitioner Sta. Rita.

WHEREFORE, the Court Resolved to DENY the Petition for having been filed late, for failure to
comply with applicable Court Circulars and for lack of merit. The assailed Decision of the Court
of Appeals is hereby AFFIRMED. Cost against petitioner.