6/20/2017 G.R.No.

172101

THIRDDIVISION


REPUBLIC OF THE PHILIPPINES, G.R.No.172101
represented by the SOCIAL Present:
SECURITY COMMISSION and
SOCIALSECURITYSYSTEM, YNARESSANTIAGO,J.,
Petitioners, Chairperson,
AUSTRIAMARTINEZ,
AZCUNA,
CHICONAZARIO,and
versus REYES,JJ.


Promulgated:
ASIAPROCOOPERATIVE,
Respondent. November23,2007
xx

DECISION


CHICONAZARIO,J.:


BeforethisCourtisaPetitionforReviewonCertiorariunderRule45ofthe1997Revised
[1] [2]
Rules of Civil Procedure seeking to annul and set aside the Decision and Resolution of the
Court of Appeals in CAG.R. SP No. 87236, dated 5 January 2006 and 20 March 2006,
respectively,whichannulledandsetasidetheOrdersoftheSocialSecurityCommission(SSC)in
[3] [4]
SSC Case No. 61550703, dated 17 February 2004 and 16 September 2004, respectively,
thereby dismissing the petitioncomplaint dated 12 June 2003 filed by herein petitioner Social
SecuritySystem(SSS)againsthereinrespondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasijudicial body
authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by
[5]
Republic Act No. 8282. Petitioner SSS is a government corporation created by virtue of

Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm [6] 1/15
6/20/2017 G.R.No.172101

[6]
(Asiapro) is a multipurpose cooperative created pursuant to Republic Act No. 6938 and duly
registered with the Cooperative Development Authority (CDA) on 23 November 1999 with
[7]
RegistrationCertificateNo.06232460.

Theantecedentsofthiscaseareasfollows:

RespondentAsiapro,asacooperative,iscomposedofownersmembers.Under its bylaws,
ownersmembersareoftwocategories,towit:(1)regularmember,whoisentitledtoalltherights
and privileges of membership and (2) associate member, who has no right to vote and be voted
[8]
uponandshallbeentitledonlytosuchrightsandprivilegesprovidedinitsbylaws. Itsprimary
objectivesaretoprovidesavingsandcreditfacilitiesandtodevelopotherlivelihoodservicesforits
ownersmembers. In the discharge of the aforesaid primary objectives, respondent cooperative
[9]
enteredintoseveralServiceContracts withStanfilcoadivisionofDOLEPhilippines,Inc.anda
companybasedinBukidnon.Theownersmembersdonotreceivecompensationorwagesfromthe
[10]
respondent cooperative. Instead, they receive a share in the service surplus which the
respondentcooperativeearnsfromdifferentareasoftradeitengagesin,suchastheincomederived
from the said Service Contracts with Stanfilco. The ownersmembers get their income from the
servicesurplusgeneratedbythequalityandamountofservicestheyrendered,whichisdetermined
bytheBoardofDirectorsoftherespondentcooperative.

InordertoenjoythebenefitsundertheSocialSecurityLawof1997,theownersmembersof
the respondent cooperative, who were assigned to Stanfilco requested the services of the latter to
registerthemwithpetitionerSSSasselfemployedandtoremittheircontributionsassuch.Also,to
complywithSection19AofRepublicActNo.1161,asamendedbyRepublicActNo.8282,the
SSScontributionsofthesaidownersmemberswereequaltotheshareofboththeemployerandthe
employee.

On 26 September 2002, however, petitioner SSS through its VicePresident for Mindanao
[11]
Division,Atty.EddieA.Jara,sentaletter totherespondentcooperative,addressedtoitsChief
ExecutiveOfficer(CEO)andGeneralManagerLeoG.Parma,informingthelatterthatbasedonthe
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
membersworkingwithStanfilco.Thus,respondentcooperativeshouldregisteritselfwithpetitioner
SSSasanemployerandmakethecorrespondingreportandremittanceofpremiumcontributionsin
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm
[12] 2/15
6/20/2017 G.R.No.172101
[12]
accordancewiththeSocialSecurityLawof1997.On9October2002, respondentcooperative,
throughitscounsel,sentareplytopetitionerSSSsletterassertingthatitisnotanemployerbecause
itsownersmembersarethecooperativeitselfhence,itcannotbeitsownemployer.Again,on21
[13]
October 2002, petitioner SSS sent a letter to respondent cooperative ordering the latter to
registerasanemployerandreportitsownersmembersasemployeesforcompulsorycoveragewith
thepetitionerSSS.RespondentcooperativecontinuouslyignoredthedemandofpetitionerSSS.

[14]
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition before petitioner SSC
againsttherespondentcooperativeandStanfilcoprayingthattherespondentcooperativeor,inthe
alternative,Stanfilcobedirectedtoregisterasanemployerandtoreportrespondentcooperatives
ownersmembers 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. 61550703. Respondent cooperative filed its Answer with Motion to
Dismissallegingthatnoemployeremployeerelationshipexistsbetweenitanditsownersmembers,
thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other
hand,filedanAnswerwithCrossclaimagainsttherespondentcooperative.

On17February2004,petitionerSSCissuedanOrderdenyingtheMotiontoDismissfiledby
therespondentcooperative.Therespondentcooperativemovedforthereconsiderationofthesaid
Order,butitwaslikewisedeniedinanotherOrderissuedbytheSSCdated16September2004.

IntendingtoappealtheaboveOrders,respondentcooperativefiledaMotionforExtensionof
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,respondentcooperativefiledaPetitionforCertioraribeforetheCourtofAppeals,docketed
asCAG.R.SPNo.87236,withthefollowingassignmentoferrors:

I. TheOrdersdated17February2004and16September2004of[hereinpetitioner]SSCwere

issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in
that:

A. [Petitioner]SSCarbitrarilyproceededwiththecaseasifithasjurisdiction
overthepetitionaquo,consideringthatitfailedtofirstresolvetheissueofthe
existence of an employeremployee relationship between [respondent]
cooperativeanditsownersmembers.

B. Whileindeed,the[petitioner]SSChasjurisdictionoveralldisputesarising
under the SSS Law with respect to coverage, benefits, contributions, and
related matters, it is respectfully submitted that [petitioner] SSC may only
assumejurisdictionincaseswherethereisnodisputeastotheexistenceofan
employeremployeerelationship.
C.Contrarytotheholdingofthe[petitioner]SSC,thelegalissueofemployer
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 3/15
6/20/2017 G.R.No.172101
C.Contrarytotheholdingofthe[petitioner]SSC,thelegalissueofemployer
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
[petitionerSSC]wantstoaccomplish,wouldbetoencroachonthejurisdiction
of the National Labor Relations Commission [NLRC], which is the more
competentbodyclothedwithpowertoresolveissuesrelatingtotheexistence
ofanemploymentrelationship.

II. Atanyrate,the[petitioner]SSChasnojurisdictiontotakecognizanceofthe
petitionaquo.

A.[Respondent]isnotanemployerwithinthecontemplationoftheLaborLaw
butisamultipurposecooperativecreatedpursuanttoRepublicActNo.6938
andcomposedofownersmembers,notemployees.
B.Therightsandobligationsoftheownersmembersof[respondent]cooperative
are derived from their Membership Agreements, the Cooperatives ByLaws,
andRepublicActNo.6938,andnotfromanycontractofemploymentorfrom
the Labor Laws. Moreover, said ownersmembers enjoy rights that are not
consistent with being mere employees of a company, such as the right to
participateandvoteindecisionmakingforthecooperative.
C. AsfoundbytheBureauofInternalRevenue[BIR],theownersmembersof
[15]
[respondent] cooperative are not paid any compensation income.
(Emphasissupplied.)


On5January2006,theCourtofAppealsrenderedaDecisiongrantingthepetitionfiledby
therespondentcooperative.ThedecretalportionoftheDecisionreads:

WHEREFORE,thepetitionisGRANTED.TheassailedOrdersdated[17February2004]and[16
September2004],areANNULLEDandSETASIDE and a new one is entered DISMISSING the
[16]
petitioncomplaintdated[12June2003]of[hereinpetitioner]SocialSecuritySystem.
AggrievedbytheaforesaidDecision,petitionerSSSmovedforareconsideration,butitwas
deniedbytheappellatecourtinitsResolutiondated20March2006.

Hence,thisPetition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals
erredinnotfindingthattheSSChasjurisdictionoverthesubjectmatterandithasavalid
basis in denying respondents Motion to Dismiss. The said issue is supported by the following
arguments:

I.The[petitionerSSC]hasjurisdictionoverthepetitioncomplaintfiledbeforeitbythe
[petitionerSSS]underR.A.No.8282.

II.Respondent[cooperative]isestoppedfromquestioningthejurisdictionofpetitionerSSC
afterinvokingitsjurisdictionbyfilingan[A]nswerwith[M]otionto[D]ismissbeforeit.

III.The[petitionerSSC]didnotactwithgraveabuseofdiscretionindenyingrespondent
[cooperatives][M]otionto[D]ismiss.
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 4/15
6/20/2017 G.R.No.172101
[cooperatives][M]otionto[D]ismiss.

IV. Theexistenceofanemployeremployeerelationshipisaquestionoffactwhere
presentationofevidenceisnecessary.

V.Thereisanemployeremployeerelationshipbetween[respondentcooperative]andits
[ownersmembers].


Petitioners claim that SSC has jurisdiction over the petitioncomplaint filed before it by
petitionerSSSasitinvolvedanissueofwhetherornotaworkerisentitledtocompulsorycoverage
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,Section9ofthesamelawclearlyprovidesthatSSScoverageiscompulsoryupon
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 ownersmembers as well as for collection of unpaid SSS contributions, it was very
obvious that the subject matter of the aforesaid petitioncomplaint was within the expertise and
jurisdictionoftheSSC.

Petitionerssimilarlyassertthatgrantingarguendothatthereisapriorneedtodeterminethe
existence of an employeremployee relationship between the respondent cooperative and its
ownersmembers, said issue does not preclude petitioner SSC from taking cognizance of the
aforesaid petitioncomplaint. Considering that the principal relief sought in the said petition
complainthastoberesolvedbyreferencetotheSocialSecurityLawandnottotheLaborCodeor
otherlaborrelationsstatutes,therefore,jurisdictionoverthesamesolelybelongstopetitionerSSC.

Petitioners further claim that the denial of the respondent cooperatives Motion to Dismiss
groundedontheallegedlackofemployeremployeerelationshipdoesnotconstitutegraveabuseof
discretiononthepartofpetitionerSSCbecausethelatterhastheauthorityandpowertodenythe
same. Moreover, the existence of an employeremployee relationship is a question of fact where
presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is
alreadyestoppedfromassailingthejurisdictionofthepetitionerSSCbecauseithasalreadyfiledits

Answerbeforeit,thus,respondentcooperativehasalreadysubmitteditselftothejurisdictionofthe
petitionerSSC.

Finally, petitioners contend that there is an employeremployee relationship between the
respondentcooperativeanditsownersmembers.Therespondentcooperativeistheemployerofits
ownersmembersconsideringthatitundertooktoprovideservicestoStanfilco,theperformanceof
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 5/15
6/20/2017 G.R.No.172101

whichisunderthefullandsolecontroloftherespondentcooperative.

On the other hand, respondent cooperative alleges that its ownersmembers own the
cooperative,thus,noemployeremployeerelationshipcanarisebetweenthem.The persons of the
employerandtheemployeearemergedintheownersmembersthemselves. Likewise, respondent
cooperativesownersmembersevenrequestedtherespondentcooperativetoregisterthemwiththe
petitioner SSS as selfemployed individuals. Hence, petitioner SSC has no jurisdiction over the
petitioncomplaintfiledbeforeitbypetitionerSSS.

RespondentcooperativefurtheraversthattheCourtofAppealscorrectlyruledthatpetitioner
SSCactedwithgraveabuseofdiscretionwhenitassumedjurisdictionoverthepetitioncomplaint
without determining first if there was an employeremployee relationship between the respondent
cooperativeanditsownersmembers.Respondentcooperativeclaimsthatthequestionofwhether
anemployeremployeerelationshipexistsbetweenitanditsownersmembersisalegalandnota
factualissueasthefactsareundisputedandneedonlytobeinterpretedbytheapplicablelawand
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,
especiallywheretheissueofjurisdictionisraisedattheveryfirstinstanceandwheretheonlyrelief
beingsoughtisthedismissalofthepetitioncomplaintforlackofjurisdiction.

Fromtheforegoingargumentsoftheparties,theissuesmaybesummarizedinto:

I.WhetherthepetitionerSSChasjurisdictionoverthepetitioncomplaintfiledbeforeit

bypetitionerSSSagainsttherespondentcooperative.

II. Whethertherespondentcooperativeisestoppedfromassailingthejurisdictionof
petitionerSSCsinceithadalreadyfiledanAnswerwithMotiontoDismissbeforethe
saidbody.

PetitionerSSCsjurisdictionisclearlystatedinSection5ofRepublicActNo.8282aswellas
inSection1,RuleIIIofthe1997SSSRevisedRulesofProcedure.

Section5ofRepublicActNo.8282provides:

SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to
coverage,benefits,contributionsandpenaltiesthereonoranyothermatterrelatedthereto,shall
becognizablebytheCommission,xxx.(Emphasissupplied.)

http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 6/15
6/20/2017 G.R.No.172101


Similarly,Section1,RuleIIIofthe1997SSSRevisedRulesofProcedurestates:

Section1.Jurisdiction.AnydisputearisingundertheSocialSecurityActwithrespecttocoverage,
entitlementofbenefits,collectionandsettlementofcontributionsandpenaltiesthereon,oranyother
matterrelatedthereto,shallbecognizablebytheCommissionaftertheSSSthroughitsPresident,
Manager or Officerincharge of the Department/Branch/Representative Office concerned had first
takenactionthereoninwriting.(Emphasissupplied.)


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,thatthemandatorycoverageundertheSSSLawispremisedontheexistenceofan
[17]
employeremployeerelationship exceptincasesofcompulsorycoverageoftheselfemployed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the
AnswerorintheMotiontoDismiss,determinewhichcourthasjurisdictionoveranaction
[18]
otherwise,thequestionofjurisdictionwoulddependalmostentirelyuponthedefendant.
Moreover,itiswellsettledthatoncejurisdictionisacquiredbythecourt,itremainswithituntilthe
[19]
fullterminationofthecase. Thesaidprinciplemaybeappliedeventoquasijudicialbodies.

In this case, the petitioncomplaint filed by the petitioner SSS before the petitioner SSC
againsttherespondentcooperativeandStanfilcoallegesthattheownersmembersoftherespondent
cooperativearesubjecttothecompulsorycoverageoftheSSSbecausetheyareemployeesofthe
respondent cooperative. Consequently, the respondent cooperative being the employer of its
ownersmembersmustregisterasemployerandreportitsownersmembersascoveredmembersof
theSSSandremitthenecessarypremiumcontributionsinaccordancewiththeSocialSecurityLaw
of1997.Accordingly,basedontheaforesaidallegationsinthepetitioncomplaintfiledbeforethe
petitioner SSC, the case clearly falls within its jurisdiction. Although theAnswer with Motion to
DismissfiledbytherespondentcooperativechallengedthejurisdictionofthepetitionerSSConthe

allegedlackofemployeremployeerelationshipbetweenitselfanditsownersmembers,thesameis
notenoughtodeprivethepetitionerSSCofitsjurisdictionoverthepetitioncomplaintfiledbefore
it.Thus,thepetitionerSSCcannotbefaultedforinitiallyassumingjurisdictionoverthepetition
complaintofthepetitionerSSS.

Nonetheless, since the existence of an employeremployee 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
behoovesthepetitionerSSCtodetermineifthereisreallyanemployeremployeerelationshipthat
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 7/15
6/20/2017 G.R.No.172101
behoovesthepetitionerSSCtodetermineifthereisreallyanemployeremployeerelationshipthat
existsbetweentherespondentcooperativeanditsownersmembers.
The question on the existence of an employeremployee relationship is not within the
exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the
LaborCodeenumeratingthejurisdictionoftheLaborArbitersandtheNLRCprovidesthat:
ART.217.JURISDICTIONOFLABORARBITERSANDTHECOMMISSION.(a)xxx.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employeremployee relations, including those of
personsindomesticorhouseholdservice,involvinganamountexceedingfivethousandpesos
[20]
(P5,000.00)regardlessofwhetheraccompaniedwithaclaimforreinstatement.


AlthoughtheaforesaidprovisionspeaksmerelyofclaimsforSocialSecurity,itwouldnecessarily
includeissuesonthecoveragethereof,becauseclaimsareundeniablyrootedinthecoveragebythe
system. Hence, the question on the existence of an employeremployee relationship for the
purposeofdeterminingthecoverageoftheSocialSecuritySystemisexplicitlyexcludedfrom
thejurisdictionoftheNLRCandfallswithinthejurisdictionoftheSSCwhichisprimarilycharged
withthedutyofsettlingdisputesarisingundertheSocialSecurityLawof1997.

Onthebasisthereof,consideringthatthepetitioncomplaintofthepetitionerSSSinvolved
theissueofcompulsorycoverageoftheownersmembersoftherespondentcooperative,thisCourt
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
employeremployeerelationshipwithoutneedofwaitingforapriorpronouncementorsubmitting
the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC are
independent bodies and their jurisdiction are welldefined by the separate statutes creating them,
petitionerSSChastheauthoritytoinquireintotherelationshipexistingbetweentheworkerandthe
personorentitytowhomherendersservicetodetermineiftheemployment,indeed,isonethatis
[21]
exceptedbytheSocialSecurityLawof1997fromcompulsorycoverage.

EvenbeforethepetitionerSSCcouldmakeadeterminationoftheexistenceofanemployer
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
[22]
Certiorari pursuant to Section 5(b) of Republic Act No. 8282. The appellate court ruled in
favoroftherespondentcooperativebydeclaringthatthepetitionerSSChasnojurisdictionoverthe
petitioncomplaintfiledbeforeitbecausetherewasnoemployeremployeerelationshipbetweenthe
respondent cooperative and its ownersmembers. Resultantly, the petitioners SSS and SSC,
representingtheRepublicofthePhilippines,filedaPetitionforReviewbeforethisCourt.
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 8/15
6/20/2017 G.R.No.172101

representingtheRepublicofthePhilippines,filedaPetitionforReviewbeforethisCourt.

Althoughasarule,intheexerciseoftheSupremeCourtspowerofreview,theCourtisnota
trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the
[23] [24]
Court, saidruleisnotwithoutexceptions.Thereareseveralrecognizedexceptions inwhich
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 ownersmembers,
whichnecessitatesadeparturefromtheoftrepeatedrulethatfactualissuesmaynotbethesubject
ofappealstothisCourt.

In determining the existence of an employeremployee relationship, the following elements
are considered: (1) the selection and engagement of the workers (2) the payment of wages by
whatevermeans(3)thepowerofdismissaland(4)thepowertocontroltheworkersconduct,with
[25]
thelatterassumingprimacyintheoverallconsideration. Themostimportantelementisthe
employerscontroloftheemployeesconduct,notonlyastotheresultoftheworktobedone,
[26]
but also as to the means and methods to accomplish. The power of control refers to the
existenceofthepowerandnotnecessarilytotheactualexercisethereof.Itisnotessentialforthe
employer to actually supervise the performance of duties of the employee it is enough that the
[27]
employerhastherighttowieldthatpower. Alltheaforesaidelementsarepresentinthiscase.

First.It is expressly provided in the Service Contracts that it is the respondent cooperative
whichhastheexclusivediscretionintheselectionandengagementoftheownersmembersas

[28]
well as its team leaders who will be assigned at Stanfilco. Second. Wages are defined as
remunerationorearnings,howeverdesignated, 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
unwrittencontractofemploymentforworkdoneortobedone,orforservicerenderedorto
[29]
be rendered. In this case, the weekly stipends or the socalled shares in the service surplus
givenbytherespondentcooperativetoitsownersmemberswereinrealitywages,asthesamewere
equivalenttoanamountnotlowerthanthatprescribedbyexistinglaborlaws,rulesandregulations,
includingthewageorderapplicabletotheareaandindustryorthesameshallnotbelowerthanthe
[30]
prevailingratesofwages. Itcannotbedoubtedthenthatthosestipendsorsharesintheservice
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 9/15
6/20/2017 G.R.No.172101
prevailingratesofwages. Itcannotbedoubtedthenthatthosestipendsorsharesintheservice
surplus are indeed wages, because these are given to the ownersmembers as compensation in
renderingservicestorespondentcooperativesclient,Stanfilco.Third.Itisalsostatedintheabove
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
[31]
renderingservicesatStanfilco. Fourth.Asearlieropined,ofthefourelementsoftheemployer
employeerelationship,thecontroltestisthemostimportant.Inthecaseatbar,itistherespondent
cooperativewhichhasthesolecontroloverthemannerandmeansofperformingtheservices
[32]
under the Service Contracts with Stanfilco as well as the means and methods of work.
Also, the respondent cooperative is solely and entirely responsible for its ownersmembers, team
[33]
leadersandotherrepresentativesatStanfilco. All these clearly prove that, indeed, there is an
employeremployeerelationshipbetweentherespondentcooperativeanditsownersmembers.

It is true that the Service Contracts executed between the respondent cooperative and
Stanfilco expressly provide that there shall be no employeremployee relationship between the
[34]
respondent cooperative and its ownersmembers. This Court, however, cannot give the said
provisionforceandeffect.

As previously pointed out by this Court, an employeeemployer relationship actually exists
betweentherespondentcooperativeanditsownersmembers.Thefourelementsinthefourfoldtest
for the existence of an employment relationship have been complied with. The respondent
cooperativemustnotbeallowedtodenyitsemploymentrelationshipwithitsownersmembersby
invoking the questionable Service Contracts provision, when in actuality, it does exist. The

existenceofanemployeremployeerelationshipcannotbenegatedbyexpresslyrepudiatingit
in a contract, when the terms and surrounding circumstances show otherwise. The
employmentstatusofapersonisdefinedandprescribedbylawandnotbywhattheparties
[35]
sayitshouldbe.

It is settled that the contracting parties may establish such stipulations, clauses, terms and
conditionsastheywant,andtheiragreementwouldhavetheforceoflawbetweenthem.However,
theagreedtermsandconditionsmustnotbecontrarytolaw,morals,customs,publicpolicy
[36]
or public order. 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
merelytocircumventthecompulsorycoverageofitsemployees,whoarealsoitsownersmembers,
bytheSocialSecurityLaw.
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 10/15
6/20/2017 G.R.No.172101

bytheSocialSecurityLaw.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of
[37]
DavaoCity,Inc.v.FerrerCalleja whereinitheldthat:

Acooperative,therefore,isbyitsnaturedifferentfromanordinarybusinessconcern,being
runeitherbypersons,partnerships,orcorporations.Itsownersand/ormembersaretheoneswhorun
andoperatethebusinesswhiletheothersareitsemployeesxxx.

An employee therefore of such a cooperative who is a member and coowner thereof
cannot invoke the right to collective bargaining for certainly an owner cannot bargain with
himself or his coowners.In the opinion of August14,1981 of the Solicitor General he correctly
opinedthatemployeesofcooperativeswhoarethemselvesmembersofthecooperativehavenoright
to form or join labor organizations for purposes of collective bargaining for being themselves co
ownersofthecooperative.

However,insofaras it involves cooperatives with employees who are not membersorco
owners thereof, certainly such employees are entitled to exercise the rights of all workers to
organization,collectivebargaining,negotiationsandothersasareenshrinedintheConstitutionand
existinglawsofthecountry.


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 ownermember of a cooperative can exercise the right to bargain
collectivelywiththeemployerwhoisthecooperativewhereinheisanownermember.Obviously,
anownermembercannotbargaincollectivelywiththecooperativeofwhichheisalsotheowner
because an owner cannot bargain with himself. In the instant case, there is no issue regarding an
ownermembers right to bargain collectively with the cooperative. The question involved here is

whether an employeremployee 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
actuallyrecognizedthatanownermemberofacooperativecanbeitsownemployee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration
[38]
withtheCooperativeDevelopmentAuthority. 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
[39]
management of its affairs. With that, a cooperative can be likened to a corporation with a
personality separate and distinct from its ownersmembers. Consequently, an ownermember of a
cooperative can be an employee of the latter and an employeremployee relationship can exist
betweenthem.

Inthepresentcase,itisnotdisputedthattherespondentcooperativehadregistereditselfwith
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 11/15
6/20/2017 G.R.No.172101
Inthepresentcase,itisnotdisputedthattherespondentcooperativehadregistereditselfwith
theCooperativeDevelopmentAuthority,asevidencedbyitsCertificateofRegistrationNo.0623
[40] [41]
2460. In its bylaws, 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.

In sum, having declared that there is an employeremployee relationship between the
respondent cooperative and its ownersmember, we conclude that the petitioner SSC has
jurisdiction over the petitioncomplaint filed before it by the petitioner SSS. This being our
conclusion,itisnolongernecessarytodiscusstheissueofwhethertherespondentcooperativewas
estoppedfromassailingthejurisdictionofthepetitionerSSCwhenitfileditsAnswerwithMotion
toDismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The
Decision and the Resolution of the Court of Appeals inCAG.R.SPNo.87236,dated5 January
2006and20March2006,respectively,areherebyREVERSEDandSETASIDE.The Orders of
thepetitionerSSCdated17February2004and16September2004areherebyREINSTATED.The
petitionerSSCisherebyDIRECTEDtocontinuehearingthepetitioncomplaintfiledbeforeitby

the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its
ownersmembers.Nocosts.


SOORDERED.



MINITAV.CHICONAZARIO
AssociateJustice



WECONCUR:



CONSUELOYNARESSANTIAGO
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 12/15
6/20/2017 G.R.No.172101
CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson



MA.ALICIAAUSTRIAMARTINEZADOLFOS.AZCUNA
AssociateJusticeAssociateJustice



RUBENT.REYES
AssociateJustice




ATTESTATION

IattestthattheconclusionsintheaboveDecisionwerereachedinconsultationbeforethecasewas
assignedtothewriteroftheopinionoftheCourtsDivision.



CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson,ThirdDivision

CERTIFICATION

PursuanttoSection13,ArticleVIIIoftheConstitution,andtheDivisionChairpersonsAttestation,
itisherebycertifiedthattheconclusionsintheaboveDecisionwerereachedinconsultationbefore
thecasewasassignedtothewriteroftheopinionoftheCourtsDivision.



REYNATOS.PUNO
ChiefJustice

[1]
PennedbyAssociateJusticeJuanQ.Enriquez,Jr.withAssociateJusticesGodardoA.JacintoandVicenteQ.Roxas,concurringrollo,
pp.6374.
[2]
Id.at6162.
[3]
PennedbyCommissionerSergioR.OrtizLuis,Jr.id.at116119.
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 13/15
6/20/2017 G.R.No.172101

[4]
Id.at146149.
[5]
OtherwiseknownasSocialSecurityActof1997,whichwasapprovedon1May1997.
[6]
OtherwiseknownasCooperativeCodeofthePhilippines,whichwasenactedon10March1990.
[7]
CArollo,p.63.
[8]
Section2,AsiaproCooperativeAmendedByLaws,CArollo,p.68.
[9]
Id.at126130,444449.
[10]
It represents the amount given to respondent cooperatives ownersmembers for rendering services to the client of respondent
cooperative,likeStanfilco.Suchamountshallnotbelowerthantheprevailingratesofwages.
[11]
Rollo,pp.7576.
[12]
Id.at8286.
[13]
Id.at8788.
[14]
Id.at8997.
[15]
Rollo,pp.6668.
[16]
Id.at74.
[17]
SocialSecuritySystemv.CourtofAppeals,401Phil.132,141(2000).
[18]
AbacusSecuritiesCorporationv.Ampil,G.R.No.160016,27February2006,483SCRA315,339.
[19]
Philrock,Inc.v.ConstructionIndustryArbitrationCommission,412Phil.236,246(2001).
[20]
Article217(a)(6)oftheLaborCodeofthePhilippines.
[21]
Rollo,p.117.
[22]
SEC.5.SettlementofDisputes.(a)xxx.
(b)xxx.TheCommissionshallbedeemedtobeapartytoanyjudicialactioninvolvinganysuchdecision,andmayberepresentedbyan
attorneyemployedbytheCommission,bytheSolicitorGeneraloranypublicprosecutor.
[23]
Almendralav.Ngo,G.R.No.142408,30September2005,471SCRA311,322.
[24]
Recognizedexceptionstothisruleare:(1)whenthefindingsaregroundedentirelyonspeculation,surmisesorconjectures(2)when
the inference made is manifestly mistaken, absurd or impossible (3) when there is grave abuse of discretion (4) when the
judgmentisbasedonmisapprehensionoffacts(5)whenthefindingsoffactareconflicting(6)wheninmakingitsfindingsthe
CourtofAppealswentbeyondtheissuesofthecase,oritsfindingsarecontrarytotheadmissionsofboththeappelleeandthe
appellant(7)whenthefindingsarecontrarytothetrialcourt(8)whenthefindingsareconclusionswithoutcitationofspecific
evidenceonwhichtheyarebased(9)whenthefactssetforthinthepetitionaswellasinthepetitionersmainandreplybriefsare
not disputed by the respondent (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record or (11) when the Court of Appeals manifestly overlooked certain relevant facts not
disputedbytheparties,which,ifproperlyconsidered,wouldjustifyadifferentconclusion(LangkaanRealtyDevelopment,Inc.v.
UnitedCoconutPlantersBank,400Phil.1349,1356(2000)Nokomv.NationalLaborRelationsCommissions,390Phil.1228,
1243(2000)CommissionerofInternalRevenuev.EmbroideryandGarmentsIndustries(Phils.),Inc.,364Phil.541,546547
(1999)Sta.Mariav.CourtofAppeals,349Phil.275,282283(1998)Almendralav.Ngo,G.R.No.142408,30September2005,
471SCRA311,322.)
[25]
Jov.NationalLaborRelationsCommission,381Phil.428,435(2000).
[26]
Chavezv.NationalLaborRelationsCommission,G.R.No.146530,17January2005,448SCRA478,490.
[27]
Jov.NationalLaborRelationsCommission,supranote25.
[28]
7. SELECTION, ENGAGEMENT, DISCHARGE. The Cooperative shall have the exclusive discretion in the acceptance,
engagement,investigationanddisciplineandremovalofitsownermembersandteamleaders.(Service Contract, CA rollo,p.
458).
[29]
ART.97(f)oftheLaborCode.
[30]
4.COOPERATIVESRESPONSIBILITIES.TheCooperativeshallhavethefollowingresponsibilities:
xxxx.
4.3.TheCooperativeshallpaytheshareoftheservicesurplusduetoitsownermembersassignedtotheClientxxx.However,theamount
oftheshareoftheservicesurplusoftheownermembersxxxshallbeinanamountnotlowerthanexistinglaborlaws,rulesand
regulations,includingthewageorderapplicabletotheareaandindustry.xxx.(CArollo,pp.457458).
[31]
http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 14/15
6/20/2017 G.R.No.172101
[31]
Id.
[32]
1.SCOPEOFSERVICE.xxx.
xxx.TheCooperativeshallhavesolecontroloverthemannerandmeansofperformingthesubjectservicesunderthisContractandshall
completetheservicesinaccordancewithitsownmeansandmethodsofwork,inkeepingwiththeClientsstandards.(Id.at456).
[33]
3.RELATIONSHIPOFTHEPARTIES.xxx.The Cooperative shall be solely and entirely responsible for its ownermembers,
teamleadersandotherrepresentatives.(Id.at457).
[34]
3.RELATIONSHIP OF THE PARTIES.It is hereby agreed that there shall be no employeremployee relationship between the
Cooperativeanditsownersmembersxxx.(Id).
[35]
Chavezv.NationalLaborRelationsCommission,supranote26at493Lopezv.MetropolitanWaterworksandSewerageSystem,
G.R.No.154472,30June2005,462SCRA428,445446.
[36]
Art.1306,CivilCodeofthePhilippinesPhilippineNationalBankv.Cabansag,G.R.No.157010,21June2005,460SCRA514,
533.
[37]
G.R.No.L77951,26September1988,165SCRA725,732733.
[38]
ART. 16. Registration. A cooperative formed or organized under this Code acquires juridical personality from the date the
CooperativeDevelopmentAuthorityissuesacertificateofregistrationunderitsofficialseal.xxx.(RepublicActNo.6938).
[39]
ART.38.CompositionoftheBoardofDirectors.Theconductandmanagementoftheaffairsofacooperativeshallbevestedina
boardofdirectorsxxx.
ART.39.PowersoftheBoardofDirectors.Theboardofdirectorsshalldirectandsupervisethebusiness,managethepropertyofthe
cooperativeandmay,byresolution,exerciseallsuchpowersofthecooperativeasarenotreservedforthegeneralassemblyunder
thisCodeandthebylaws.(Id.).
[40]
CArollo,p.63.
[41]
Id.at6878.

http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/172101.htm 15/15