IMMACULADA L. GARCIA, G.R . No .

1 7 0 73 5
Petitioner,
Present:

YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
SOCIAL SECURITY COMMISSION LEGAL AND
COLLECTION, SOCIAL SECURITY SYSTEM, Promulgated:
R es po n d e nts .
December 17, 2007
x-------------------------------------------------x

DECISION

CHICO-NAZARIO, J.:

This is petition for review on Certiorari under Rule 45 of the Rules of Court is assailing the 2 June
2005 Decision[1] and 8 December 2005 Resolution[2] both of the Court of Appeals in CA-G.R. SP No. 85923. the appellate court
affirmed the --- Order and --- Resolution both of the Social Security Commission (SSC) in SSC Case No. 10048,
finding Immaculada L. Garcia (Garcia), the sole surviving director of Impact Corporation, petitioner herein, liable
for unremitted, albeit collected, SSS contributions.
Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and Consuelo Villanueva were
directors[3] of Impact Corporation. The corporation was engaged in the business of manufacturing aluminum tube containers
and operated two factories. One was a slug foundry-factory located in Cuyapo, Nueva Ecija, while the other was an Extrusion
Plant in Cainta, Metro Manila, which processed the slugs into aluminum collapsible tubes and similar containers for toothpaste
and other related products.

Records show that around 1978, Impact Corporation started encountering financial problems. By 1980, labor unrest besieged
the corporation.

In March 1983, Impact Corporation filed with the Securities and Exchange Commission (SEC) a Petition for Suspension of
Payments,[4] docketed as SEC Case No. 02423, in which it stated that:

[Impact Corporation] has been and still is engaged in the business of manufacturing aluminum tube
containers x x x.

xxxx

In brief, it is an on-going, viable, and profitable enterprise.

On 8 May 1985, the union of Impact Corporation filed a Notice of Strike with the Ministry of Labor which was followed
by a declaration of strike on 28 July 1985. Subsequently, the Ministry of Labor certified the labor dispute for compulsory
arbitration to the National Labor Relations Commission (NLRC) in an Order [5] dated 25 August 1985. The Ministry of Labor, in
the same Order, noted the inability of Impact Corporation to pay wages, 13 th month pay, and SSS remittances due to cash
liquidity problems. A portion of the order reads:

On the claims of unpaid wages, unpaid 13th month pay and non-remittance of loan amortization and SSS
premiums, we are for directing the company to pay the same to the workers and to remit loan amortizations
and SSS premiums previously deducted from their wages to the Social Security System. Such claims were
 never contested by the company both during the hearing below and in our office. In fact, such claims were
admitted by the company although it alleged cash liquidity as the main reason for such non-payment.

WHEREFORE, the dispute at Impact Corporation is hereby certified to the National Labor Relations
Commission for compulsory arbitration in accordance with Article 264 (g) of the Labor Code, as amended.

xxxx

The company is directed to pay all the entitled workers unpaid wages, unpaid 13 th month pay and to remit to
the Social Security System loan amortizations and SSS premiums previously deducted from the wages of the
workers.[6]

On 3 July 1985, the Social Security System (SSS), through its Legal and Collection Division (LCD), filed a case before
the SSC for the collection of unremitted SSS premium contributions withheld by Impact Corporation from its employees. The
case which impleaded Impact Corporation as respondent was docketed as SSC Case No. 10048. [7]

Impact Corporation was compulsorily covered by the SSS as an employer effective 15 July 1963 and was assigned
Employer I.D. No. 03-2745100-21.

In answer to the allegations raised in SSC Case No. 10048, Impact Corporation, through its then Vice President Ricardo
de Leon, explained in a letter dated 18 July 1985 that it had been confronted with strikes in 1984 and layoffs were effected
thereafter. It further argued that the P402,988.93 is erroneous. It explained among other things, that its operations had been
suspended and that it was waiting for the resolution on its Petition for Suspension of Payments by the SEC under SEC Case No.
2423. Despite due notice, the corporation failed to appear at the hearings. The SSC ordered the investigating team of the SSS to
determine if it can still file its claim for unpaid premium contributions against the corporation under the Petition for
Suspension of Payments.

In the meantime, the Petition for Suspension of Payments was dismissed which was pending before the SEC in an
Order[8] dated 12 December 1985. Impact Corporation resumed operations but only for its winding up and dissolution. [9] Due
to Impact Corporations liability and cash flow problems, all of its assets, namely, its machineries, equipment, office furniture
and fixtures, were sold to scrap dealers to answer for its arrears in rentals.

On 1 December 1995, the SSS-LCD filed an amended Petition[10] in SSC Case No. 10048 wherein the directors of Impact
Corporation were directly impleaded as respondents, namely: Eduardo de Leon, Ricardo de Leon, [11]Pacita Fernandez,
Consuelo Villanueva, and petitioner. The amounts sought to be collected totaled P453,845.78 and P10,856.85 for the periods
August 1980 to December 1984 and August 1981 to July 1984, respectively, and the penalties for late remittance at the rate of
3% per month from the date the contributions fell due until fully paid pursuant to Section 22(a) of the Social Security
Law,[12] as amended, in the amounts of P49,941.67 and P2,474,662.82.

Period Unremitted Amount Penalties TOTAL

(3% Interest Per Month)
August 1980 to P 453,845.78 P49, 941.67 503,787.45
December 1984
August 1981 to July P 10,856.85 P2, 474, 662.82 2,485,519.67
1984

Summonses were not served upon Eduardo de Leon, Pacita Fernandez, and Consuelo Villanueva, their whereabouts
unknown. They were all later determined to be deceased. On the other hand, due to failure to file his responsive pleading,
Ricardo de Leon was declared in default.

Petitioner filed with the SSC a Motion to Dismiss[13] on grounds of prescription, lack of cause of action and cessation of
business, but the Motion was denied for lack of merit. [14] In her Answer with Counterclaim[15] dated 20 May 1999, petitioner
averred that Impact Corporation had ceased operations in 1980. In her defense, she insisted that she was a mere director
without managerial functions, and she ceased to be such in 1982. Even as a stockholder and director of Impact Corporation,
petitioner contended that she cannot be made personally liable for the corporate obligations of Impact Corporation since her
liability extended only up to the extent of her unpaid subscription, of which she had none since her subscription was already
fully paid. The petitioner raised the same arguments in her Position Paper. [16]

On 23 January 1998, Ricardo de Leon died following the death, too, of Pacita Fernandez died on 7 February 2000. In
an Order dated 11 April 2000, the SSC directed the System to check if Impact Corporation had leviable properties to which the
investigating team of respondent SSS manifested that the Impact Corporation had already been dissolved and its assets
disposed of.[17]

In a Resolution dated 28 May 2003, the Social Security Commission ruled in favor of SSS and declared petitioner liable
to pay the unremitted contributions and penalties, stating the following:

WHEREFORE, premises considered, this Commission finds, and so holds, that respondents Impact
Corporation and/or Immaculada L. Garcia, as director and responsible officer of the said corporation, is liable
to pay the SSS the amounts of P442,988.93, representing the unpaid SS contributions of their employees for
the period August 1980 to December 1984, not inclusive, and P10,856.85, representing the balance of the
unpaid SS contributions in favor of Donato Campos, Jaime Mascarenas, Bonifacio Franco and
Romeo Fullon for the period August 1980 to December 1984, not inclusive, as well as the 3% per month
penalty imposed thereon for late payment in the amounts of P3,194,548.63 and P78,441.33, respectively,
computed as of April 30, 2003. This is without prejudice to the right of the SSS to collect the penalties
accruing after April 30, 2003 and to institute other appropriate actions against the respondent corporation
and/or its responsible officers.

Should the respondents pay their liability for unpaid SSS contributions within sixty (60) days from receipt of
a copy of this Resolution, the 3% per month penalty for late payment thereof shall be deemed condoned
pursuant to SSC Res. No. 397-S.97, as amended by SSC Res. Nos. 112-S.98 and 982-S.99, implementing the
provision on condonation of penalty under Section 30 of R.A. No. 8282.

In the event the respondents fail to pay their liabilities within the aforestated period, let a writ of execution be
issued, pursuant to Section 22 (c) [2] of the SS Law, as amended, for the satisfaction of their liabilities to the
SSS.[18]

Petitioner filed a Motion for Reconsideration[19] of the afore-quoted Decision but it was denied for lack of merit in
an Order[20] dated 4 August 2004, thus:

Nowhere in the questioned Resolution dated May 28, 2003 is it stated that the other directors of the defunct
Impact Corporation are absolved from their contribution and penalty liabilities to the SSS. It is certainly
farthest from the intention of the petitioner SSS or this Commission to pin the entire liability of Impact
Corporation on movant Immaculada L. Garcia, to the exclusion of the directors of the corporation namely:
Eduardo de Leon, Ricardo de Leon, Pacita Fernandez and Conzuelo Villanueva, who were all impleaded as
parties-respondents in this case.

The case record shows that there was failure of service of summonses upon respondents Eduardo de
Leon, Pacita Fernandez and Conzuelo Villanueva, who are all deceased, for the reason that their whereabouts
are unknown. Moreover, neither the legal heirs nor the estate of the defaulted respondent Ricardo de Leon
were substituted as parties-respondents in this case when he died on January 23, 1998. Needless to state, the
Commission did not acquire jurisdiction over the persons or estates of the other directors of Impact
Corporation, hence, it could not validly render any pronouncement as to their liabilities in this case.

Furthermore, the movant cannot raise in a motion for reconsideration the defense that she was no longer a
director of Impact Corporation in 1982, when she was allegedly eased out by the managing directors of
Impact Corporation as purportedly shown in the Deed of Sale and Assignment of Shares of Stock
dated January 22, 1982. This defense was neither pleaded in her Motion to Dismiss dated January 17,
1996 nor in her Answer with Counterclaim dated May 18, 1999 and is, thus, deemed waived pursuant to
Section 1, Rule 9 of the 1997 Rules of Civil Procedure, which has suppletory application to the Revised Rules
of Procedure of the Commission.
 Finally, this Commission has already ruled in the Order dated April 27, 1999 that since the original Petition
was filed by the SSS on July 3, 1985, and was merely amended on December 1, 1995 to implead the
responsible officers of Impact Corporation, without changing its causes of action, the same was instituted well
within the 20-year prescriptive period provided under Section 22 (b) of the SS Law, as amended, considering
that the contribution delinquency assessment covered the period August 1980 to December 1984.

In view thereof, the instant Motion for Reconsideration is hereby denied for lack of merit.

Petitioner elevated her case to the Court of Appeals via a Petition for Review. Respondent SSS filed its Comment
dated 20 January 2005, and petitioner submitted her Reply thereto on 4 April 2005.

The Court of Appeals, applying Section 28(f) of the Social Security Law,[21] again ruled against petitioner. It dismissed
the petitioners Petition in a Decision dated 2 June 2005, the dispositive portion of which reads:

WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. The assailed Resolution
dated 28 May 2003 and the Order dated 4 August 2004 of the Social Security Commission are AFFIRMED
in toto.[22]

Aggrieved, petitioner filed a Motion for Reconsideration of the appellate courts Decision but her Motion was denied in
a Resolution dated 8 December 2005.

Hence, the instant Petition in which petitioner insists that the Court of Appeals committed grave error in holding her
solely liable for the collected but unremitted SSS premium contributions and the consequent late penalty payments due
thereon. Petitioner anchors her Petition on the following arguments:

I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A MANAGING HEAD, DIRECTOR OR PARTNER
IS LIABLE ONLY FOR THE PENALTIES OF THE EMPLOYER CORPORATION AND NOT FOR UNPAID
SSS CONTRIBUTIONS OF THE EMPLOYER CORPORATION.

II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS, DIRECTORS OR PARTNERS WHO SHALL BE
LIABLE TOGETHER WITH THE CORPORATION. IN THIS CASE, PETITIONER HAS CEASED TO BE A
STOCKHOLDER OF IMPACT CORPORATION IN 1982. EVEN WHILE SHE WAS A STOCKHOLDER, SHE
NEVER PARTICIPATED IN THE DAILY OPERATIONS OF IMPACT CORPORATION.

III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY DIRECTORS, TRUSTEES OR OFFICERS
WHO PARTICIPATE IN UNLAWFUL ACTS OR ARE GUILTY OF GROSS NEGLIGENCE AND BAD FAITH
SHALL BE PERSONALLY LIABLE. OTHERWISE, BEING A MERE STOCKHOLDER, SHE IS LIABLE ONLY
TO THE EXTENT OF HER SUBSCRIPTION.

IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE ECONOMIC LOSSES, EVENTS WHICH WERE
NEITHER DESIRED NOR CAUSED BY ANY ACT OF THE PETITIONER. THUS, BY REASON OF
FORTUITOUS EVENTS, THE PETITIONER SHOULD BE ABSOLVED FROM LIABILITY.

V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED MISERABLY IN EXERTING EFFORTS TO

ACQUIRE JURISDICTION OVER THE LEVIABLE ASSETS OF IMPACT CORPORATION, PERSON/S
AND/OR ESTATE/S OF THE OTHER DIRECTORS OR OFFICERS OF IMPACT CORPORATION.

VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN NOT RENDERING A JUDGMENT BY

DEFAULT AGAINST THE DIRECTORS UPON WHOM IT ACQUIRED JURISDICTION.

Based on the foregoing, petitioner prays that the Decision dated 2 June 2005 and the Resolution dated 8 December
2005 of the Court of Appeals be reversed and set aside, and a new one be rendered absolving her of any and all liabilities
under the Social Security Law.
 In sum, the core issue to be resolved in this case is whether or not petitioner, as the only surviving director of Impact
Corporation, can be made solely liable for the corporate obligations of Impact Corporation pertaining to unremitted SSS
premium contributions and penalties therefore.

As a covered employer under the Social Security Law, it is the obligation of Impact Corporation under the provisions
of Sections 18, 19 and 22 thereof, as amended, to deduct from its duly covered employees monthly salaries their shares as
premium contributions and remit the same to the SSS, together with the employers shares of the contributions to the
petitioner, for and in their behalf.

From all indications, the corporation has already been dissolved. Respondents are now going after petitioner who is
the only surviving director of Impact Corporation.

A cursory review of the alleged grave errors of law committed by the Court of Appeals above reveals there seems to be
no dispute as to the assessed liability of Impact Corporation for the unremitted SSS premiums of its employees for the period
January 1980 to December 1984.

There is also no dispute as to the fact that the employees SSS premium contributions have been deducted from their
salaries by Impact Corporation.

Petitioner in assailing the Court of Appeals Decision, distinguishes the penalties from the unremitted or unpaid SSS
premium contributions. She points out that although the appellate court is of the opinion that the concerned officers of an
employer corporation are liable for the penalties for non-remittance of premiums, it still affirmed the SSC Resolution holding
petitioner liable for the unpaid SSS premium contributions in addition to the penalties.

Petitioner avers that under the aforesaid provision, the liability does not include liability for the unremitted SSS
premium contributions.

Petitioners argument is ridiculous. The interpretation petitioner would like us to adopt finds no support in law or in
jurisprudence. While the Court of Appeals Decision provided that Section 28(f) refers to the liabilities pertaining to penalty for
the non-remittance of SSS employee contributions, holding that it is distinct from the amount of the supposed SSS remittances,
petitioner mistakenly concluded that Section 28(f) is applicable only to penalties and not to the liability of the employer for
the unremitted premium contributions. Clearly, a simplistic interpretation of the law is untenable. It is a rule in statutory
construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute
must be considered together with the other parts, and kept subservient to the general intent of the whole enactment. [23] The
liability imposed as contemplated under the foregoing Section 28(f) of the Social Security Law does not preclude the liability
for the unremitted amount. Relevant to Section 28(f) is Section 22 of the same law.

SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the preceding Section shall be
remitted to the SSS within the first ten (10) days of each calendar month following the month for which they
are applicable or within such time as the Commission may prescribe. Every employer required to deduct and
to remit such contributions shall be liable for their payment and if any contribution is not paid to the SSS as
herein prescribed, he shall pay besides the contribution a penalty thereon of three percent (3%) per month
from the date the contribution falls due until paid. If deemed expedient and advisable by the Commission, the
collection and remittance of contributions shall be made quarterly or semi-annually in advance, the
contributions payable by the employees to be advanced by their respective employers: Provided, That upon
separation of an employee, any contribution so paid in advance but not due shall be credited or refunded to
his employer.

Under Section 22(a), every employer is required to deduct and remit such contributions penalty refers to the 3% penalty
that automatically attaches to the delayed SSS premium contributions. The spirit, rather than the letter of a law determines
construction of a provision of law. It is a cardinal rule in statutory construction that in interpreting the meaning and scope of a
term used in the law, a careful review of the whole law involved, as well as the intendment of the law, must be
made.[24] Nowhere in the provision or in the Decision can it be inferred that the persons liable are absolved from paying
the unremitted premium contributions.

Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply them regardless of personal
belief or predilections - when the law is unambiguous and unequivocal, application not interpretation thereof is
imperative.[25] However, where the language of a statute is vague and ambiguous, an interpretation thereof is resorted to. An
interpretation thereof is necessary in instances where a literal interpretation would be either impossible or absurd or would
lead to an injustice. A law is deemed ambiguous when it is capable of being understood by reasonably well-informed persons
in either of two or more senses.[26] The fact that a law admits of different interpretations is the best evidence that it is vague
and ambiguous.[27] In the instant case, petitioner interprets Section 28(f) of the Social Security Law as applicable only to
penalties and not to the liability of the employer for the unremitted premium contributions. Respondents present a more
logical interpretation that is consistent with the provisions as a whole and with the legislative intent behind the Social Security
Law.

This Court cannot be made to accept an interpretation that would defeat the intent of the law and its legislators.[28]

Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the Social Security Law, a
mere director or officer of an employer corporation, and not necessarily a managing director or officer, can be held liable for
the unpaid SSS premium contributions.

Section 28(f) of the Social Security Law provides the following:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or
any other institution, its managing head, directors or partners shall be liable to the penalties provided in this
Act for the offense.
This Court agrees in petitioners observation that the SSS did not even deny nor rebut the claim that petitioner was not the
managing head of Impact Corporation. However, the Court of Appeals rightly held that petitioner, as a director of Impact
Corporation, is among those officers covered by Section 28(f) of the Social Security Law.

Petitioner invokes the rule in statutory construction called ejusdem generic; that is, where general words follow an
enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in
their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically
mentioned. According to petitioner, to be held liable under Section 28(f) of the Social Security Law, one must be the managing
head, managing director, or managing partner. This Court though finds no need to resort to statutory construction. Section
28(f) of the Social Security Law imposes penalty on:

(1) the managing head;

(2) directors; or

(3) partners, for offenses committed by a juridical person

The said provision does not qualify that the director or partner should likewise be a managing director or managing
partner.[29] The law is clear and unambiguous.

Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only directors, trustees or
officers who participate in unlawful acts or are guilty of gross negligence and bad faith shall be personally liable, and that
being a mere stockholder, she is liable only to the extent of her subscription.

Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers, provides:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for
or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their
duty as such directors, or trustees shall be liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its stockholders or members and other persons.
Basic is the rule that a corporation is invested by law with a personality separate and distinct from that of the persons
composing it as well as from that of any other legal entity to which it may be related. A corporation is a juridical entity with
legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising
it. Following this, the general rule applied is that obligations incurred by the corporation, acting through its directors, officers
and employees, are its sole liabilities.[30] A director, officer, and employee of a corporation are generally not held personally
liable for obligations incurred by the corporation.
 Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to warrant the
disregard of its independent being and the lifting of the corporate veil. This situation might arise when a corporation is used to
evade a just and due obligation or to justify a wrong, to shield or perpetrate fraud, to carry out other similar unjustifiable aims
or intentions, or as a subterfuge to commit injustice and so circumvent the law.[31] Thus, Section 31 of the Corporation Law
provides:

Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held solidarily liable with the
corporation in the following instances:

1. When directors and trustees or, in appropriate cases, the officers of

a corporation--
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members,
and other persons.

2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary his written objection thereto.

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally
and solidarily liable with the Corporation.

4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate
action. [32]

The aforesaid provision states:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for
or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their
duty as such directors, or trustees shall be liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its stockholders or members and other persons.

The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit the SSS premium
contributions falls exactly under the fourth situation. Section 28(f) of the Social Security Law imposes a civil liability for any
act or omission pertaining to the violation of the Social Security Law, to wit:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or
any other institution, its managing head, directors or partners shall be liable to the penalties provided in this
Act for the offense.

In fact, criminal actions for violations of the Social Security Law are also provided under the Revised Penal Code. The
Social Security Law provides, in Section 28 thereof, to wit:

(h) Any employer who, after deducting the monthly contributions or loan amortizations from his employees
compensation, fails to remit the said deductions to the SSS within thirty (30) days from the date they became
due shall be presumed to have misappropriated such contributions or loan amortizations and shall suffer the
penalties provided in Article Three hundred fifteen of the Revised Penal Code.

(i) Criminal action arising from a violation of the provisions of this Act may be commenced by the SSS or the
employee concerned either under this Act or in appropriate cases under the Revised Penal Code: x x x.

Respondents would like this Court to apply another exception to the rule that the persons comprising a corporation are not
personally liable for acts done in the performance of their duties.
 The Court of Appeals in the appealed Decision stated:

Anent the unpaid SSS contributions of Impact Corporations employees, the officers of a corporation are liable
in behalf of a corporation, which no longer exists or has ceased operations. Although as a rule, the officers and
members of a corporation are not personally liable for acts done in performance of their duties, this rule
admits of exception, one of which is when the employer corporation is no longer existing and is unable to
satisfy the judgment in favor of the employee, the officers should be held liable for acting on behalf of the
corporation. Following the foregoing pronouncement, petitioner, as one of the directors of Impact
Corporation, together with the other directors of the defunct corporation, are liable for the unpaid SSS
contributions of their employees.[33]

On the other hand, the SSC, in its Resolution, presented this discussion:

Although as a rule, the officers and members of a corporation are not personally liable for acts done in the
performance of their duties, this rule admits of exceptions, one of which is when the employer corporation is
no longer existing and is unable to satisfy the judgment in favor of the employee, the officers should be held
liable for acting on behalf of the corporation. x x x.[34]

The rationale cited by respondents in the two preceding paragraphs need not have been applied because the personal
liability for the unremitted SSS premium contributions and the late penalty thereof attaches to the petitioner as a director of
Impact Corporation during the period the amounts became due and demandable by virtue of a direct provision of law.
Petitioners defense that since Impact Corporation suffered irreversible economic losses, and by reason of fortuitous
events, she should be absolved from liability, is also untenable. The evidence adduced totally belies this claim. A reference to
the copy of the Petition for Suspension of Payments filed by Impact Corporation on 18 March 1983 before the SEC contained
an admission that:

[I]t has been and still is engaged in business and has been and still is engaged in the business of
manufacturing aluminum tube containers and in brief, it is an on-going, viable, and profitable enterprise
which has sufficient assets and actual and potential income-generation capabilities.

The foregoing document negates petitioners assertion and supports the contention that during the period involved
Impact Corporation was still engaged in business and was an ongoing, viable, profitable enterprise. In fact, the latest SSS form
RIA submitted by Impact Corporation is dated 7 May 1984. The assessed SSS premium contributions and penalty are
obligations imposed upon Impact Corporation by law, and should have been remitted to the SSS within the first 10 days of
each calendar month following the month for which they are applicable or within such time as the SSC prescribes. [35]

This Court also notes the evident failure on the part of SSS to issue a judgment in default against Ricardo de Leon, who
was the vice-president and officer of the corporation, upon his non-filing of a responsive pleading after summons was served
on him. As can be gleaned from Section 11 of the SSS Revised Rules of Procedure, the Commissioner is mandated to render a
decision either granting or denying the petition. Under the aforesaid provision, if respondent fails to answer within the time
prescribed, the Hearing Commissioner may, upon motion of petitioner, or motu proprio, declare respondent in default and
proceed to receive petitioners evidence ex parte and thereafter recommend to the Commission either the granting or denial of
the petition as the evidence may warrant.[36]

On a final note, this Court sees it proper to quote verbatim respondents prefatory statement in their Comment:

The Social Security System is a government agency imbued with a salutary purpose to carry out the policy of
the State to establish, develop, promote and perfect a sound and viable tax exempt social security system
suitable to the needs of the people throughout the Philippines which shall promote social justice and provide
meaningful protection to members and their beneficiaries against the hazards of disability, sickness,
maternity, old-age, death and other contingencies resulting in loss of income or financial burden.

The soundness and viability of the funds of the SSS in turn depends on the contributions of its covered
employee and employer members, which it invests in order to deliver the basic social benefits and privileges
to its members. The entitlement to and amount of benefits and privileges of the covered members are
 contribution-based. Both the soundness and viability of the funds of the SSS as well as the entitlement and
amount of benefits and privileges of its members are adversely affected to a great extent by the non-
remittance of the much-needed contributions.[37]

The sympathy of the law on social security is toward its beneficiaries. This Court will not turn a blind eye on the perpetration
of injustice. This Court cannot and will not allow itself to be made an instrument nor be privy to any attempt at the
perpetration of injustice.

Following the doctrine laid down in Laguna Transportation Co., Inc. v. Social Security System,[38] this Court rules that
although a corporation once formed is conferred a juridical personality separate and distinct from the persons comprising it, it
is but a legal fiction introduced for purposes of convenience and to subserve the ends of justice. The concept cannot be
extended to a point beyond its reasons and policy, and when invoked in support of an end subversive of this policy, will be
disregarded by the courts.

WHEREFORE, pursuant to the foregoing, the Decision of the Court of Appeals dated 2 June 2005 in CA-G.R. SP No.
85923 is hereby AFFIRMED WITH FINALITY. Petitioner Immaculada L. Garcia, as sole surviving director of Impact
Corporation is hereby ORDERED to pay for the collected and unremitted SSS contributions of Impact Corporation. The case
is REMANDED to the SSS for computation of the exact amount and collection thereof.

SO ORDERED

MI N IT A V . C HIC O - N AZ AR IO
Assoc ia t e Jus tic e

Immaculada L. Garcia v. Social Security Commission Legaland Collection & SSS

FACTS: Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and Consuelo Villanueva were directors of Impact
Corporation. The corporation was engaged in the business of manufacturing aluminum tube containers and operated two factories. One was a "slug"
foundry-factory located in Cuyapo, NuevaEcija, while the other was an Extrusion Plant in Cainta, Metro Manila, which processed the "slugs" into
aluminum collapsible tubes and similar containers for toothpaste and other related products. Records show that around 1978, Impact Corporation
started encountering financial problems. By 1980, arises a problem with the employees of the corporation due unremitted SSS contributions issues.

ISSUE: Whether or not the only surviving director of the corporation is liable for all the workers whole collected and unremitted SSS contributions, with
penalties.

HELD: The petition is DISMISSED for lack of merit. The surviving director of the Impact Corporation is solely liable for the unremitted
SSS premium contributions and penalties therefor. The petitioner avers that under the social security law provision, the
liability does not include liability for the unremitted SSS premium contributions. But accordingly, the sections must be
understood or interpreted as a whole and not by parts. The liability imposed as contemplated under the provisions of the
social security law does not preclude the liability for the unremitted amount.
NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional Director, NFA Regional Office
No. 1, San Juan, La Union, petitioners, vs. MASADA SECURITY AGENCY, INC., represented by its Acting President &
General Manager, COL. EDWIN S. ESPEJO (RET.), respondents.

DECISION
YNARES-SANTIAGO, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court is the February 12, 2004 decision[1] of the Court of
Appeals in CA-G.R. CV No. 76677, which dismissed the appeal filed by petitioner National Food Authority (NFA) and its April
30, 2004 resolution denying petitioners motion for reconsideration.
The antecedent facts show that on September 17, 1996, respondent MASADA Security Agency, Inc., entered into a one
year[2] contract[3] to provide security services to the various offices, warehouses and installations of NFA within the scope of
the NFA Region I, comprised of the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the expiration of
said contract, the parties extended the effectivity thereof on a monthly basis under same terms and condition. [4]
Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the
daily wage rate. Accordingly, respondent requested NFA for a corresponding upward adjustment in the monthly contract rate
consisting of the increases in the daily minimum wage of the security guards as well as the corresponding raise in their
overtime pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed increases in Social Security System (SSS)
and Pag-ibig premiums as well as in the administrative costs and margin. NFA, however, granted the request only with respect
to the increase in the daily wage by multiplying the amount of the mandated increase by 30 days and denied the same with
respect to the adjustments in the other benefits and remunerations computed on the basis of the daily wage.
Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I, La Union, as Chairman of
the Regional Tripartite Wages and Productivity Board and the DOLE Secretary through the Executive Director of the National
Wages and Productivity Commission. Despite the advisory[5] of said offices sustaining the claim of respondent that the increase
mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the daily pay, NFA
maintained its stance that it is not liable to pay the corresponding adjustments in the wage related benefits of respondents
security guards.
On May 4, 2001, respondent filed with the Regional Trial Court of Quezon, City, Branch 83, a case for recovery of sum of
money against NFA. Docketed as Civil Case No. Q-01-43988, the complaint[6] sought reimbursement of the following amounts
allegedly paid by respondent to the security guards, to wit: P2,949,302.84, for unpaid wage related benefits brought about by
the effectivity of Wage Order Nos. RB 1-05 and RB CAR-04;[7] RB 1-06 and RB CAR-05;[8] RB 1-07 and RB CAR-06;[9] and
P975,493.04 for additional cost and margin, plus interest. It also prayed for damages and litigation expenses. [10]
In its answer with counterclaim,[11] NFA denied that respondent paid the security guards their wage related benefits and
that it shouldered the additional costs and margin arising from the implementation of the wage orders. It admitted, however,
that it heeded respondents request for adjustment only with respect to increase in the minimum wage and not with respect to
the other wage related benefits. NFA argued that respondent cannot demand an adjustment on said salary related benefits
because it is bound by their contract expressly limiting NFAs obligation to pay only the increment in the daily wage.
At the pre-trial, the only issue raised was whether or not respondent is entitled to recover from NFA the wage related
benefits of the security guards.[12]
On September 19, 2002, the trial court rendered a decision[13] in favor of respondent holding that NFA is liable to pay the
security guards wage related benefits pursuant to RA 6727, because the basis of the computation of said benefits, like overtime
pay, holiday pay, SSS and Pag-ibig premium, is the increased minimum wage. It also found NFA liable for the consequential
adjustments in administrative costs and margin. The trial court absolved defendant Juanito M. David having been impleaded in
his official capacity as Regional Director of NFA Regional Office No. 1, San Juan, La Union. The dispositive portion thereof,
reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff MASADA Security Agency, Inc., and against defendant National
Food Authority ordering said defendant to make the corresponding adjustment in the contract price in accordance with the
increment mandated under the various wage orders, particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06, RBCAR-05, RBI-
07 and RBCAR-06 and to pay plaintiff the amounts representing the adjustments in the wage-related benefits of the security
guards and consequential increase in its administrative cost and margin upon presentment by plaintiff of the corresponding
voucher claims.

Plaintiffs claims for damages and attorneys fees and defendants counterclaim for damages are hereby DENIED.

Defendant Juanito M. David is hereby absolved from any liability.

SO ORDERED.[14]

NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004. The appellate court held that
the proper recourse of NFA is to file a petition for review under Rule 45 with this Court, considering that the appeal raised a
pure question of law. Nevertheless, it proceeded to discuss the merits of the case for purposes of academic discussion and
eventually sustained the ruling of the trial court that NFA is under obligation to pay the administrative costs and margin and
the wage related benefits of the respondents security guards.[15]
On April 30, 2004, the Court of Appeals denied NFAs motion for reconsideration. [16] Hence, the instant petition.
The issue for resolution is whether or not the liability of principals in service contracts under Section 6 of RA 6727 and
the wage orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in the
minimum wage.
At the outset, it should be noted that the proper remedy of NFA from the adverse decision of the trial court is a petition
for review under Rule 45 directly with this Court because the issue involved a question of law. However, in the interest of
justice we deem it wise to overlook the procedural technicalities if only to demonstrate that despite the procedural infirmity,
the instant petition is impressed with merit.[17]
RA 6727[18] (Wage Rationalization Act), which took effect on July 1, 1989,[19] declared it a policy of the State to rationalize
the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through industrial dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth. [20]
In line with its declared policy, RA 6727, created the National Wages and Productivity Commission
(NWPC),[21] vested, inter alia, with the power to prescribe rules and guidelines for the determination of appropriate minimum
wage and productivity measures at the regional, provincial or industry levels;[22] and the Regional Tripartite Wages and
Productivity Boards (RTWPB) which, among others, determine and fix the minimum wage rates applicable in their respective
region, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the
NWPC.[23] Pursuant to its wage fixing authority, the RTWPB issue wage orders which set the daily minimum wage rates. [24]
Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer. Section 6 of RA 6727,
however, expressly lodged said obligation to the principals or indirect employers in construction projects and establishments
providing security, janitorial and similar services. Substantially the same provision is incorporated in the wage orders issued
by the RTWPB.[25] Section 6 of RA 6727, provides:

SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the
prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service
contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client fails to
pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his principal or
client. (Emphasis supplied)

NFA claims that its additional liability under the aforecited provision is limited only to the payment of the increment in
the statutory minimum wage rate, i.e., the rate for a regular eight (8) hour work day.
The contention is meritorious.
In construing the word wage in Section 6 of RA 6727, reference must be had to Section 4 (a) of the same Act. It states:

SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers and employees in the private
sector, whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25) per day (Emphasis
supplied)
 The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory minimum wage which is defined
under the Rules Implementing RA 6727 as the lowest wage rate fixed by law that an employer can pay his worker. [26] The basis
thereof under Section 7 of the same Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the
prescribed increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or
amount added to the remuneration of an employee for an 8-hour work.
Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain matters, it may not, by
interpretation or construction, be extended to others.[27] Since the increase in wage referred to in Section 6 pertains to the
statutory minimum wage as defined herein, principals in service contracts cannot be made to pay the corresponding wage
increase in the overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits granted to
workers. While basis of said remuneration and benefits is the statutory minimum wage, the law cannot be unduly expanded as
to include those not stated in the subject provision.
The settled rule in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its
literal meaning and applied without interpretation. This plain meaning rule or verba legis derived from the maxim index animi
sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed
to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are
found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.[28]
The presumption therefore is that lawmakers are well aware that the word wage as used in Section 6 means the statutory
minimum wage. If their intention was to extend the obligation of principals in service contracts to the payment of the
increment in the other benefits and remuneration of workers, it would have so expressly specified. In not so doing, the only
logical conclusion is that the legislature intended to limit the additional obligation imposed on principals in service contracts
to the payment of the increment in the statutory minimum wage.
The general rule is that construction of a statute by an administrative agency charged with the task of interpreting or
applying the same is entitled to great weight and respect. The Court, however, is not bound to apply said rule where such
executive interpretation, is clearly erroneous, or when there is no ambiguity in the law interpreted, or when the language of
the words used is clear and plain, as in the case at bar. Besides, administrative interpretations are at best advisory for it is the
Court that finally determines what the law means. [29] Hence, the interpretation given by the labor agencies in the instant case
which went as far as supplementing what is otherwise not stated in the law cannot bind this Court.
It is not within the province of this Court to inquire into the wisdom of the law for indeed, we are bound by the words of
the statute.[30] The law is applied as it is. At any rate, the interest of the employees will not be adversely affected if the
obligation of principals under the subject provision will be limited to the increase in the statutory minimum wage. This is so
because all remuneration and benefits other than the increased statutory minimum wage would be shouldered and paid by the
employer or service contractor to the workers concerned. Thus, in the end, all allowances and benefits as computed under the
increased rate mandated by RA 6727 and the wage orders will be received by the workers.
Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals and the service
contractors. Under the second sentence of Section 6 of RA 6727, in the event that the principal or client fails to pay the
prescribed wage rates, the service contractor shall be held solidarily liable with the former. Likewise, Articles 106, 107 and
109 of the Labor Code provides:

ART. 106. Contractor or Subcontractor. Whenever an employer enters into contract with another person for the performance
of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with
the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

ART. 107. Indirect Employer. The provisions of the immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.
ART. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations increasing the
liability of the principal. So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum
wage is complied with, the Wage Rationalization Act is not violated.
In the instant case, Article IV.4 of the service contract provides:

IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in the PADPAO rate, the AGENCY may
negotiate for an adjustment in the contract price. Any adjustment shall be applicable only to the increment, based on published
and circulated rates and not on mere certification.[31]

In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:

3. For purposes of wage adjustments, consider only the rate based on the wage Order issued by the Regional
Tripartite Wage Productivity Board (RTWPB). Unless otherwise provided in the Wage Order issued by the
RTWPB, the wage adjustment shall be limited to the increment in the legislated minimum wage; [32]
The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant
to RA 6727. There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is
limited to the payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been
satisfied by NFA.[33] Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having
discharged its obligation to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent.
The latters complaint for collection of remuneration and benefits other than the increased minimum wage rate, should
therefore be dismissed for lack of cause of action.
The same goes for respondents claim for administrative cost and margin. Considering that respondent failed to establish
a clear obligation on the part of NFA to pay the same as well as to substantiate the amount thereof with documentary evidence,
the claim should be denied.
WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30, 2004 resolution of the Court of
Appeals which dismissed petitioner National Food Authoritys appeal and motion for reconsideration, respectively, in CA-G.R.
CV No. 76677, are REVERSED and SET ASIDE. The complaint filed by respondent MASADA Security Agency, Inc., docketed as
Civil Case No. Q-01-43988, before the Regional Trial Court of Quezon, City, Branch 83, is ordered DISMISSED.
SO ORDERED.
Davide Jr., C.J., (Chairman), Quisumbing, Carpio and Azcuna, JJ., concur.
National Food Authority (NFA) v. Masada Security Agency, Inc.
453 SCRA 70 (March 8, 2005)

Facts:
Masada entered into a 1 year contract to provide security services to NFA-REGION 1. Upon the expiration of the said contract, the
parties extended the effectivity thereof on a monthly basis under same terms and condition.

The Regional Tripartite Wages and Productivity Board (RTWPB) issued wage orders mandating increases in the daily wage rate.
Masada requested NFA to increase the of the monthly contract rate1. NFA only granted the request only with respect to the
increase in daily wage

Respondent filed a case for recovery of sum of money against NFA with the RTC.

NFA CONTENTION: Respondent cannot demand an adjustment on the said salary benefits because it is bound by their contract
expressly limiting NFAs obligation to pay only the increment in the daily wage.

Pre-trial Issue: WON respondent is entitled to recover from NFA wage related benefits of the security guards.

RTC Ruling: NFA is liable to pay the security guards wage related benefits pursuant to RA 6727, because the basis of the
computation of said benefits, like overtime pay, holiday pay, SSS and Pag-ibig premium, is the increased minimum wage. It also
found NFA liable for the consequential adjustments in administrative costs and margin.

NFA appealed to the Court of Appeals but was dismissed

ISSUE(Supreme Court): WON the liability of principals in service contracts under Section 6 of RA 6727 and the wage orders issued by
the RTWPB is limited only to the increment in the minimum wage.

HELD/ RULING:

Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer. Section 6 of RA 6727, however,
expressly lodged said obligation to the principals or indirect employers in construction projects and establishments providing
security, janitorial and similar services.
The court found merit in NFAs contention that its additional liability under the aforcited provision is only limited to the payment
of the increment in the statutory minimum wage rate i.e. the rate for a regular eight (8) hour work day.

Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain matters, it may not, by
interpretation or construction, be extended to others. Since the increase in wage referred to in Section 6 pertains to the statutory
minimum wage as defined herein, principals in service contracts cannot be made to pay the corresponding wage increase in the
overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits granted to workers. While basis of
said remuneration and benefits is the statutory minimum wage, the law cannot be unduly expanded as to include those not stated in
the subject provision.

Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals and the service
contractors. Under the second sentence of Section 6 of RA 6727, in the event that the principal or client fails to pay the prescribed
wage rates, the service contractor shall be held solidarily liable with the former.

The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant to RA
6727. There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is limited to
the payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.
Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having discharged its
obligation to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent. The latters

1 Consisting of: (1)daily minimum wage of the security guards; (2) overtime pay; (3) holiday pay (4)13 th month pay; (5) holiday and
rest day pay; (6) Social Security System [SSS]; (7) Pag-ibig premiums as well as administrative costs and margin.
complaint for collection of remuneration and benefits other than the increased minimum wage rate, should therefore be
dismissed for lack of cause of action.

WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30, 2004 resolution of the Court of Appeals
which dismissed petitioner National Food Authoritys appeal and motion for reconsideration, respectively, in CA-G.R. CV No. 76677,
are REVERSED and SET ASIDE. The complaint filed by respondent MASADA Security Agency, Inc., docketed as Civil Case No. Q-01-
43988, before the Regional Trial Court of Quezon, City, Branch 83, is ordered DISMISSED.

Art.1231. Obligations are extinguished:

1. By payment or performance;
2. By loss of the thing due;
3. By the condonation or remission
of the debt;
4. By confusion or merger of the
rights of the creditor and debtor;
5. By compensation
6. By novation
Other causes of extinguishment of
obligations, such as annulment, rescission,
fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this
Code.