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 socalled 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 socalled '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 employeremployee 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 employeremployee 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 sixmonth 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 (Viaa Al-Lagadan and Piga 99 Phil, 406, 411,
Citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one who exercise
independent employment and contracts to do a piece of work
according to his own methods and without being subject to
control of his employer except as to the result of the work"
(Mansal vs. P.P. Gocheco Lumber Co., 96 Phil. 941).
Among the factors to be considered are whether the contractor is
carrying on an independent business; whether the work is part of
the employer's general business; the nature and extent of the
work; the skill required; the term and duration of the relationship;
the right to assign the performance of the work to another; the
power to terminate the relationship; the existence of a contract for
the performance of a specified piece of work; the control and
supervision of the work; the employer's powers and duties with
respect to the hiring, firing, and payment of the contractor's
servants; the control of the premises; the duty to supply the
premises, tools, appliances, material and labor; and the mode,
manner, and terms of payment. (56 C.J.S. 46).
Those tests to determine the existence of an employer-employee
relationship or whether the person doing a particular work for
another is an independent contractor cannot be satisfactorily
applied in the instant case. It should be obvious by now that the
instant case is a penumbral, sui generis case lying on the shadowy
borderline that separates an employee from an independent
contractor.
In determining whether the relationship is that of employer and
employee or whether one is an independent contractor, "each case
must be determined on its own facts and all the features of the
relationship are to be considered" (56 C.J.S. 45). We are
convinced that on the basis of the peddling contract, no employeremployee 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.

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. 05087SP 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.

SO ORDERED.
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 employeremployee 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 employeremployee 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 socalled "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 nonexistence, 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:

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

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

By and large, there appears nothing in the record to refute the

petitioner's claim that:

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 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.

In any case, this Court is not inclined to allow private respondent

the benefit of any doubt as to which of the conflicting ruling just
adverted to should be accorded primacy, given the fact that it was
he who actively sought them simultaneously, as it were, from
separate fora, and even if the graver sanctions more lately
imposed by the Court for forum-shopping may not be applied to
him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private
respondent's invocation of res adjudicata; on contrary, it acted
correctly in doing so.
Said Courts holding that upon the facts, there exists (or existed) a
relationship of employer and employee between petitioner and
private respondent is, however, another matter. The Court does
not agree that said facts necessarily or logically point to such a
relationship, and to the exclusion of any form of arrangements,
other than of employment, that would make the respondent's
services available to the members and guest of the petitioner.
As long as it is, the list made in the appealed decision detailing
the various matters of conduct, dress, language, etc. covered by
the petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as
to leave them little or no freedom of choice whatsoever in the
manner of carrying out their services. In the very nature of things,
caddies must submit to some supervision of their conduct while
enjoying the privilege of pursuing their occupation within the
premises and grounds of whatever club they do their work in. For
all that is made to appear, they work for the club to which they
attach themselves on sufference but, on the other hand, also
without having to observe any working hours, free to leave
anytime they please, to stay away for as long they like. It is not
pretended that if found remiss in the observance of said rules, any
discipline may be meted them beyond barring them from the
premises which, it may be supposed, the Club may do in any case
even absent any breach of the rules, and without violating any
right to work on their part. All these considerations clash frontally
with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of
fees payable by the players to the caddies as still another
indication of the latter's status as employees. It seems to the Court,

(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. . . .

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. 615507-03, 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 multipurpose 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 ownersmembers. 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 VicePresident 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 SSSs
letter asserting that it is not an employer because its ownersmembers 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 cooperatives 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. 6-1550703. 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 ownersmembers.
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 employeremployee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue
of employer-employee relationship raised in [respondents]
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 ownersmembers 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 respondents Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petitioncomplaint 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 [cooperatives] [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 petitioncomplaint 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 petitioncomplaint against the respondent cooperative and Stanfilco before
the petitioner SSC for the compulsory coverage of respondent
cooperatives 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 ownersmembers, 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
cooperatives 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 ownersmembers. 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 ownersmembers 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 cooperatives 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 petitioncomplaint without determining first if there was an employeremployee 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 petitioncomplaint 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 SSCs 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 selfemployed.
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 quasijudicial 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 ownersmembers 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 employeremployee 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 Courts 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 employeremployee relationship between the respondent cooperative and its
owners-members, which necessitates a departure from the oftrepeated 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 workers conduct, with the latter assuming
primacy in the overall consideration.25 The most important
element is the employers control of the employees 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 socalled 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 cooperatives
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 ownersmembers 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

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 ownersmembers.

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 ownersmembers, by the Social Security Law.

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

relationship between the respondent cooperative and its ownersmember, 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.

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-members
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 employeremployee relationship can exist between them.

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 petitioncomplaint 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.
2.

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

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-9235426 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-9235426 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.