G.R. No.

L-15045
1961

January 20,

IN RE: PETITION FOR EXEMPTION

FROM COVERAGE BY THE SOCIAL
SECURITY SYSTEM. ROMAN CATHOLIC
ARCHBISHOP OF MANILA, petitionerappellant,
vs.
SOCIAL SECURITY COMMISSION,
respondent-appellee.

Feria, Manglapus and Associates for

petitioner-appellant.
Legal Staff, Social Security System and
Solicitor General for respondentappellee.

GUTIERREZ DAVID, J.:

On September 1, 1958, the Roman

Catholic Archbishop of Manila, thru
counsel, filed with the Social Security
Commission a request that "Catholic
Charities, and all religious and
charitable institutions and/or
organizations, which are directly or
indirectly, wholly or partially, operated
by the Roman Catholic Archbishop of
Manila," be exempted from
compulsory coverage of Republic Act
No. 1161, as amended, otherwise
known as the Social Security Law of
1954. The request was based on the
claim that the said Act is a labor law
and does not cover religious and
charitable institutions but is limited to
businesses and activities organized for
profit. Acting upon the
recommendation of its Legal Staff, the

Social Security Commission in its

Resolution No. 572, series of 1958,
denied the request. The Roman
Catholic Archbishop of Manila,
reiterating its arguments and raising
constitutional objections, requested
for reconsideration of the resolution.
The request, however, was denied by
the Commission in its Resolution No.
767, series of 1958; hence, this appeal
taken in pursuance of section 5(c) of
Republic Act No. 1161, as amended.

Section 9 of the Social Security Law,

as amended, provides that coverage
"in the System shall be compulsory
upon all members between the age of
sixteen and sixty rears inclusive, if
they have been for at least six months
a the service of an employer who is a
member of the System, Provided, that
the Commission may not compel any
employer to become member of the
System unless he shall have been in
operation for at least two years and
has at the time of admission, if
admitted for membership during the
first year of the System's operation at
least fifty employees, and if admitted
for membership the following year of
operation and thereafter, at least six
employees x x x." The term employer"
as used in the law is defined as any
person, natural or juridical, domestic
or foreign, who carries in the
Philippines any trade, business,
industry, undertaking, or activity of
any kind and uses the services of
another person who is under his
orders as regards the employment,
except the Government and any of its
political subdivisions, branches or
instrumentalities, including
corporations owned or controlled by
the Government" (par. [c], see. 8),
1

while an "employee" refers to "any

person who performs services for an
'employer' in which either or both
mental and physical efforts are used
and who receives compensation for
such services" (par. [d], see. 8).
"Employment", according to paragraph
[i] of said section 8, covers any service
performed by an employer except
those expressly enumerated
thereunder, like employment under
the Government, or any of its political
subdivisions, branches or
instrumentalities including
corporations owned and controlled by
the Government, domestic service in a
private home, employment purely
casual, etc.

From the above legal provisions, it is

apparent that the coverage of the
Social Security Law is predicated on
the existence of an employeremployee relationship of more or less
permanent nature and extends to
employment of all kinds except those
expressly excluded.

Appellant contends that the term

"employer" as defined in the law
should following the principle of
ejusdem generis be limited to those
who carry on "undertakings or
activities which have the element of
profit or gain, or which are pursued for
profit or gain," because the phrase
,activity of any kind" in the definition
is preceded by the words "any trade,
business, industry, undertaking." The
contention cannot be sustained. The
rule ejusdem generis applies only
where there is uncertainty. It is not
controlling where the plain purpose
and intent of the Legislature would

thereby be hindered and defeated.

(Grosjean vs. American Paints Works
[La], 160 So. 449). In the case at bar,
the definition of the term "employer"
is, we think, sufficiently
comprehensive as to include religious
and charitable institutions or entities
not organized for profit, like herein
appellant, within its meaning. This is
made more evident by the fact that it
contains an exception in which said
institutions or entities are not
included. And, certainly, had the
Legislature really intended to limit the
operation of the law to entities
organized for profit or gain, it would
not have defined an "employer" in
such a way as to include the
Government and yet make an express
exception of it.

It is significant to note that when

Republic Act No. 1161 was enacted,
services performed in the employ of
institutions organized for religious or
charitable purposes were by express
provisions of said Act excluded from
coverage thereof (sec. 8, par. [j]
subpars. 7 and 8). That portion of the
law, however, has been deleted by
express provision of Republic Act No.
1792, which took effect in 1957. This
is clear indication that the Legislature
intended to include charitable and
religious institutions within the scope
of the law.

In support of its contention that the

Social Security Law was intended to
cover only employment for profit or
gain, appellant also cites the
discussions of the Senate, portions of
which were quoted in its brief. There
is, however, nothing whatsoever in
2

those discussions touching upon the

question of whether the law should be
limited to organizations for profit or
gain. Of course, the said discussions
dwelt at length upon the need of a law
to meet the problems of industrializing
society and upon the plight of an
employer who fails to make a profit.
But this is readily explained by the fact
that the majority of those to be
affected by the operation of the law
are corporations and industries which
are established primarily for profit or
gain.

Appellant further argues that the

Social Security Law is a labor law and,
consequently, following the rule laid
down in the case of Boy Scouts of the
Philippines vs. Araos (G.R. No. L10091, January 29, 1958) and other
cases1, applies only to industry and
occupation for purposes of profit and
gain. The cases cited, however, are
not in point, for the reason that the
law therein involved expressly limits
its application either to commercial,
industrial, or agricultural
establishments, or enterprises. .

Upon the other hand, the Social

Security Law was enacted pursuant to
the "policy of the Republic of the
Philippines to develop, establish
gradually and perfect a social security
system which shall be suitable to the
needs of the people throughout the
Philippines and shall provide
protection to employees against the
hazards of disability, sickness, old age
and death." (See. 2, Republic Act No.
1161, as amended.) Such enactment
is a legitimate exercise of the police
power. It affords protection to labor,

especially to working women and

minors, and is in full accord with the
constitutional provisions on the
"promotion of social justice to insure
the well-being and economic security
of all the people." Being in fact a social
legislation, compatible with the policy
of the Church to ameliorate living
conditions of the working class,
appellant cannot arbitrarily delimit the
extent of its provisions to relations
between capital and labor in industry
and agriculture.

There is no merit in the claim that the

inclusion of religious organizations
under the coverage of the Social
Security Law violates the
constitutional prohibition against the
application of public funds for the use,
benefit or support of any priest who
might be employed by appellant. The
funds contributed to the System
created by the law are not public
funds, but funds belonging to the
members which are merely held in
trust by the Government. At any rate,
assuming that said funds are
impressed with the character of public
funds, their payment as retirement
death or disability benefits would not
constitute a violation of the cited
provisions of the Constitution, since
such payment shall be made to the
priest not because he is a priest but
because he is an employee.

Neither may it be validly argued that

the enforcement of the Social Security
Law impairs appellant's right to
disseminate religious information. All
that is required of appellant is to make
monthly contributions to the System
for covered employees in its employ.
3

These contributions, contrary to

appellant's contention, are not in the
nature of taxes on employment."
Together with the contributions
imposed upon the employees and the
Government, they are intended for the
protection of said employees against
the hazards of disability, sickness, old
age and death in line with the
constitutional mandate to promote
social justice to insure the well-being
and economic security of all the
people.

IN VIEW OF THE FOREGOING,

Resolutions Nos. 572 kind 767, series
of 1958, of the Social Security
Commission are hereby affirmed. So
ordered with costs against appellant.

PHILIPPINE BLOOMING MILLS CO., INC.

(As Employer) and FRANCISCO TONG
(As Assistant General Manager) and
Attorney-in-Fact of SUSUMO SONODA,
SENJI TANAKA, TAKASHIKO
KUMAMOTO, HITOSHI NAKAMURA,
TETSUO KODU, (Employees),
petitioners and appellants,
vs.
SOCIAL SECURITY SYSTEM, respondent
and appellee.

Demetrio B. Salem for petitioners and

appellants.
Office of the Solicitor General Edilberto
Barot and Solicitor Camilo D. Quiason
for respondent and appellee.

Paras, C.J., Padilla, Bautista Angelo,

Paredes and Dizon, JJ., concur.

BARRERA, J.:

Concepcion, Reyes, J.B.L. and Barrera,

JJ., concur in the result.

The facts of this case are not disputed:

Bengzon, J., reserves his vote.

G.R. No. L-21223

1966

August 31,

The Philippine Blooming Mills Co., Inc.,

a domestic corporation since the start
of its operations in 1957, has been
employing Japanese technicians under
a pre-arranged contract of
employment, the minimum period of
which employment is 6 months and
the maximum is 24 months.

From April 28, 1957, to October 26,

1958, the corporation had in its
employ 6 Japanese technicians. In
connection with the employment of
these aliens, it sent an inquiry to the
Social Security System (SSS) whether
these employees are subject to
compulsory coverage under the
4

System, which inquiry was answered

by the First Deputy Administrator of
the SSS, under date of August 29,
1957, as follows:

SIR:

With reference to your letter of August

24, 1957, hereunder are our answers
to your queries:

Aliens employed in the Philippines:

Aliens who are employed in the

Philippines shall also be compulsorily
covered. But aliens who are employed
temporarily shall, upon their departure
from the Philippines, be entitled to a
rebate of a proportionate amount of
their contributions; their employers
shall be entitled to the same
proportionate rebate of their
contributions in behalf of said aliens
employed by them. (Rule I, Sec. 3[d],
Rules and Regulations.)

Starting September, 1957, and until

the aforementioned Japanese
employees left the Philippines on
October 26, 1958, the corresponding
premium contributions of the
employer and the employees on the
latter's memberships in the SSS were
as follows:

Name SS Number Monthly Salary

Amount of Premiums
Contributed

2.5%
(Employee) 3.5%
(Employer)

Total

Susumu Sonoda
P520.00
P245.00

03-075177
P175.00
P420.00

Senji Tanaka 03-075178 520.00

175.00
245.00
420.00
Kahei Tanaka
500.00
245.00

03-075179
175.00
420.00

Takashiko Kumamoto
03-075180
500.00
175.00
245.00
420.00
Hitoshi Nakamura 03-075181
500.00
175.00
245.00
420.00
Tetsuo Kudo 03-075182 500.00
175.00
245.00
420.00
Total
P1,050.00
P1,470.00
P2,520.00
On October 7, 1958, the Assistant
General Manager of the corporation,
on its behalf and as attorney-in-fact of
the Japanese technicians, filed a claim
with the SSS for the refund of the
premiums paid to the System, on the
ground of termination of the members'
employment. As this claim was
denied, they filed a petition with the
Social Security Commission for the
return or refund of the premiums, in
the total sum of P2,520.00, paid by
the employer corporation and the 6
Japanese employees, plus attorneys'
5

fees. This claim was controverted by

the SSS, alleging that Rule IX of the
Rules and Regulations of the System,
as amended, requires membership in
the System for at least 2 years before
a separated or resigned employee
may be allowed a return of his
personal contributions. Under the
same rule, the employer is not also
entitled to a refund of the premium
contributions it had paid.

After hearing, the Commission denied

the petition for the reason that,
although under the original provisions
of Section 3 (d) of Rule I of the Rules
and Regulations of the SSS, alienemployees (who are employed
temporarily) and their employers are
entitled to a rebate of a proportionate
amount of their respective
contributions upon the employees'
departure from the Philippines, said
rule was amended by eliminating that
portion granting a return of the
premium contributions. This
amendment became effective on
January 14, 1958, or before the
employment of the subject aliens
terminated. The rights of covered
employees who are separated from
employment, under the present Rules,
are covered by Rule IX which allows a
return of the premiums only if they
have been members for at least 2
years.

It is this resolution of the Commission

that is the subject of the present
appeal, appellants contending that the
amendment of the Rules and
Regulations of the SSS, insofar as it
eliminates the provision on the return
of premium contributions, originally

embodied in Section 3(d) of Rule I,

constituted an impairment of
obligations of contract. It is claimed, in
effect, that when appellantsemployees became members in
September, 1957, and paid the
corresponding premiums to the
System, it1 is subject to the condition
that upon their departure from the
Philippines, these employees, as well
as their employer, are entitled to a
rebate of a proportionate amount of
their respective contributions.

The contention cannot be sustained.

Appellants' argument is based on the
theory that the employees'
membership in the System established
contractual relationship between the
members and the System, in the
sense contemplated and protected by
the constitutional prohibition against
its impairment by law. But,
membership in this institution is not
the result of a bilateral, consensual
agreement where the rights and
obligations of the parties are defined
by and subject to their will. Republic
Act 1161 requires compulsory
coverage of employers and employees
under the System. It is actually a legal
imposition, on said employers and
employees, designed to provide social
security to the workingmen.
Membership in the SSS is, therefore, in
compliance with a lawful exercise of
the police power of the State, to which
the principle of non-impairment of the
obligation of contract is not a proper
defense.

As pointed out by the Solicitor

General, the issue that should be
determined in this case is whether, in
6

implementing the SSS law and

denying appellants' claim for refund of
their premium contributions, due
process was observed.

contributions in behalf of said aliens

employed by them.

XI
The Rules and Regulations
promulgated by the SSS, pursuant to
the rule-making authority granted in
Section 4(a) of Republic Act 1161, was
duly approved by the President on July
18, 1957, and published in the Official
Gazette on September 15, 1957.2
These rules and regulations, among
others, provide:

DETERMINATION OF COMPULSORY
COVERAGE

3. The determination of whether an

employer or an employee shall be
compulsorily covered shall be vested
in the Commission. The following
general principles shall guide the
Commission in deciding each case:

xxx

xxx

AMENDMENTS AND EFFECTIVITY

1. The Commission may, by

appropriate resolution, amend, repeal,
revise and/or modify all or any part or
parts of these Rules and Regulations,
as well as adopt any additional rule or
rules, whenever the need therefor
should arise. Any amendment and/or
additional rule, however, shall not take
effect until and after the
corresponding resolution of the
Commission has been submitted to
and approved by the President of the
Philippines.

2. These Rules and Regulations, any

amendment thereof, or any additional
rule or rules subsequently adopted by
the Commission, shall take effect on
the date they are approved by the
President of the Philippines.

xxx

(d) Aliens who are employed in the

Philippines shall also be compulsorily
covered. But aliens who ate employed
temporarily and whose visas are only
for fixed terms shall, upon their
departure from the Philippines, be
entitled to a rebate of a proportionate
amount of their contributions; their
employers shall be entitled to the
same proportionate rebate of their

Rule I Section 3 (d) and Rule IX,

however, were later amended, which
amendment was approved by the
President on January 14, 1958, to read
as follows:

(d) Aliens who are employed in the

Philippines shall also be compulsorily
covered (Sec. 3, Rule I)

EFFECT OF SEPARATION FROM

EMPLOYMENT

When an employee under compulsory

coverage is separated from
employment, his employer's
contribution on his account shall cease
at the end of the month of separation;
but such employee may continue his
membership in the System and
receive the benefits of the Act, as
amended, in accordance with these
rules. If he continues paying the 6 per
cent monthly premiums representing
his as well as the employer's
contribution, based on his monthly
salary at the time of his separation;
but if at the time of his separation the
covered employee has been a
member of the System for at least two
years, he shall have the option to
choose any one of the following
adjustments of his membership in the
System:

1. A refund of an amount equivalent to

his total contributions of two and onehalf per centum plus interests at the
rate of three per centum per annum,
compounded annually;

xxx

xxx

x x x (Rule IX)

These amended Rules were published

in the November 10, 1958 issue of the
Official Gazette.3

It is not here disputed that the Rules

and Regulations of the SSS, having
been promulgated in implementation
of a law, have the force and effect of a

statute;" that the amendment thereto,

although approved by the President on
January 14, 1958, was published in the
Official Gazette in November, 1958, or
after the employment of the Japanese
technicians had ceased and the
corresponding claim for the refund of
the premium contributions was filed
with the System. The question
pertinent to this case now is whether
or not appellants are bound by the
amended Rules requiring membership
for two years before refund of the
premium contributions may be
allowed.1wph1.t

These rules and regulations were

promulgated to provide guidelines to
be observed in the enforcement of the
law. As a matter of fact, Section 3 of
Rule I is merely an enumeration of the
"general principles to (shall) guide the
Commission" in the determination of
the extent or scope of the compulsory
coverage of the law. One of these
guiding principles is paragraph (d)
relied upon by appellants, on the
coverage of temporarily-employed
aliens. It is not here pretended, that
the amendment of this Section 3(d) of
Rule I, as to eliminate the provision
granting to these aliens the right to a
refund of part of their premium
contributions upon their departure
from the Philippines, is not in
implementation of the law or beyond
the authority of the Commission to do.

It may be argued, however, that while

the amendment to the Rules may have
been lawfully made by the
Commission and duly approved by the
President on January 14, 1958, such
amendment was only published in the
8

November 1958 issue of the Official

Gazette, and after appellants'
employment had already ceased.
Suffice it to say, in this regard, that
under Article 2 of the Civil Code,5 the
date of publication of laws in the
Official Gazette is material for the
purpose of determining their
effectivity, only if the statutes
themselves do not so provide.

In the present case, the original Rules

and Regulations of the SSS specifically
provide that any amendment thereto
subsequently adopted by the
Commission, shall take effect on the
date of its approval by the President.
Consequently, the delayed publication
of the amended rules in the Official
Gazette did not affect the date of their
effectivity, which is January 14, 1958,
when they were approved by the
President. It follows that when the
Japanese technicians were separated
from employment in October, 1958,
the rule governing refund of premiums
is Rule IX of the amended Rules and
Regulations, which requires
membership for 2 years before such
refund of premiums may be allowed.

Wherefore, finding no error in the

resolution of the Commission appealed
from, the same is hereby affirmed,
with costs against the appellants. So
ordered.

Concepcion, C.J., Dizon, Makalintal,

Bengzon, J.P., Zaldivar, Sanchez and
Castro, JJ., concur.
Reyes J.B.L., J., reserves his vote.
Regala, J., is on leave.
9

G.R. No. L-21930

1966

August 31,

AGAPITA PAJARILLO, ET AL.,

petitioners-appellants,

Rosario Relloso

Villa Florida

Teofila Campana

Salenian

Melicia Totanes

Nazareno

Melicia Totanes

San Pedro

Ireneo Racelis

Ricardo

Salvador Boral

Villa Rosario

Cesar King

Felipa

Ramon King Tacia

vs.
SOCIAL SECURITY SYSTEM,
respondent-appellee.

Jaime King

Aday

Amelia Reyes

Queen Mary

Amelia Reyes

Nanay

Paulino Manongdo for petitionersappellants.

Teofilo Nasis Teresita

Orlando L. Espinas for respondentappellee.

Rosario Reyes

Charing Uno

Rosario Reyes

Charing Dos

Aurora Sales Aurora

BARRERA, J.:

This is an appeal by Agapita Pajarillo,

et al., from the resolution of the Social
Security Commission, denying their
petition to be exempted from
coverage of the Social Security
System.

There is no controversy as to the facts

of this case. Appellants are owners of
fishing boats being used for fishing at
sea, namely:

OwnerName of Vessel
Agapita Pajarillo

Bagong Kalayaan

Basilio Medina

Stella Maris

As such property-owners, they enter

into agreement1 with the so-called
patrons or pilots, whereby the latter
take charge of appellants fishing
vessels, equipment, and gear used for
fishing. Once entrusted with the
equipment, the pilot "hires" the crew
to man the boat and secures their
provisions. This is usually financed
from loans obtained in the form of
advances from fish dealers, and
payable in kind when the boat returns
with catch from the fishing trip. (pp.
23-24, t.s.n.).

These fishing trips are not regular. The

fishermen go out to the sea only when
there is no moon or it is not yet very
bright. For this reason, even in months
of fine weather, the most that a boat
can make are 18 fishing days every
month. These men have no regular
10

income. If the trip yields a catch, the

proceeds thereof are divided into three
parts: one part goes to the owner of
the boat and equipment; one part is
set aside to cover expenses like crude
oil and for maintenance of the boat,
and the other one-third is divided
among the men, with the pilot getting
3 times the share of a crew-member;
and the "machinist", who tends or
operates the engine of the motorized
boat, receiving twice the share of a
crew-member. (pp. 9, 23, t.s.n.).

The men (usually 12 for every vessel,

including the pilot) are under no
obligation to stay in one outfit.
Sometimes, they join as members of
the crew for one night only;
sometimes two, or three days. Then,
they leave and join other outfits. (pp.
18-19, t.s.n.). Even the pilot himself is
not bound to retain his charge for any
definite duration. He can return the
boat to its owner anytime, if he does
not want to manage it anymore. (p.
11, t.s.n.). The vessel-owners,
appellants in the present case,
required to register as employers with
the Social Security System, filed a
joint petition with the Social Security
Commission, claiming that there exists
no employer-employee relationship
between them and the crew of their
fishing vessels, and praying that they
be exempted from the compulsory
coverage of the law. After hearing,
their petition was denied, the
Commission holding that while the
services of the crew-members are
engaged by the pilots, the latter are
mere employees or agents of the boatowners. Thus, it is contended, a boatowner can abolish the employment of
the crew-members by withdrawing

from the pilot the authority to take

charge of the vessel. Appellants,
consequently, were directed to report
their coverage and that of their
respective pilots and crew-members to
the Commission and to pay the
prescribed premiums pursuant to
Sections 18, 19 and 20 of the Republic
Act 1161, as amended. The boatowners filed the present appeal.

The only issue raised before the

Commission and presented in this
appeal is, as stated by the
Commission itself, "whether under the
facts set forth above, there exists an
employer-employee relationship
between the petitioners and the crewmembers of their respective fishing
boats within the meaning of Republic
Act 1161, as amended.

Under the law, an employer is a

"person, natural or juridical, domestic
or foreign, who carries on in the
Philippines any trade, business,
industry, undertaking, or activity of
any kind and uses the services of
another person who is under his
orders as regards the employment. "2
In the case at bar, the pilots are not
under the orders of the boat-owners
as regards their employment. They go
out to sea not upon direction of the
boat-owners, but upon their own
volition as to when, how long and
where to go fishing. Much less do the
boat-owners in any way control the
crew-members with whom the former
have no relationship whatsoever.
These crew-members simply join
every trip for which the pilots allow
them, without any reference to the
owners of the vessel.
11

On the other hand, an employee is

defined as a "person who performs
services for an 'employer' in which
either or both mental and physical
efforts are used and who receives
compensation for such services, where
there is an employer-employee
relationship."3 In the present case,
neither the pilots nor the crewmembers receive compensation from
the boat-owners. They only share in
their own catch produced by their own
efforts. There is no showing that
outside of their one-third share, the
boat-owners have anything to do with
the distribution of the rest of the catch
among the pilots and the crewmembers. The latter perform no
service for the boat-owners, but
mainly for their own
benefit.1wph1.t

In the undertaking in question, the

boat-owners obviously are not
responsible for the wage, salary, or fee
of the pilot and crew-members. Their
sole participation in the venture is the
furnishing or delivery of the
equipment used for fishing, after
which, they merely wait for the boat's
return and receive their share in the
catch, if there is any. For this part, a
person who joins the outfit is entitled
to a share or participation in the fruit
of the fishing trip. If it gives no return,
the men get nothing. It appears to us,
therefore, that the undertaking is in
the nature of a joint venture, with the
boat-owner supplying the boat and its
equipments, and the pilot and crewmembers contributing the necessary
labor, and the parties getting specific
shares for their respective
contributions.

But, even assuming arguendo that the

pilot and crew-members may be
treated as employees of the boatowners, they cannot also be made
subject to compulsory coverage under
the Social Security Act. As previously
stated, the men are under no
obligation to remain in the outfit for
any definite period. Thus, one can be
the crew-member of an outfit for one
day and be the member of the crew of
another vessel the next day. Also, a
fishing boat has no regular schedule of
fishing trips. It all depends on the
weather and other natural conditions,
and the volition of the pilots and crewmen themselves. And, even when a
fishing trip is completed, it is no
assurance of income for the fishermen
and the boat-owner as well. Clearly,
the services rendered by the
fishermen are no different from the
agricultural labor performed by a
share or leasehold tenant or worker,
which is specifically excluded from the
definition of "employment",4 and
exempted from the coverage of the
Social Security Act.

Add to this the extreme difficulty, if

not impossibility, of determining the
monthly wage of earning of these
fishermen for the purpose of fixing the
amount of their and the supposed
employer's contributions,5 and there
is even reason to exempt the parties
to this kind of undertaking from
compulsory registration with the Social
security System.

In view of the foregoing

considerations, the resolution of the
Social Security Commission appealed
12

from is hereby set aside, and

petitioners-appellants are declared
exempted from compulsory coverage
of the Social Security law. No costs. So
ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon,

Makalintal, Bengzon, J.P., Zaldivar
Sanchez and Castro, JJ., concur.
Regala, J., is on leave.

[G.R. No. L-7945. March 23, 1956.]

NATIONAL LABOR UNION, Petitioner,

vs. BENEDICTO DINGLASAN,
Respondent.

DECISION

PADILLA, J.:

The Petitioner seeks a review and the

setting aside of a resolution in banc of
the Court of Industrial Relations
adopted on 23 June 1954 which held
that there exists no employeremployee relationship between the
Respondent and the driver
complainants represented by the
Petitioner and for that reason the
Court of Industrial Relations dismissed
the complaint filed by the acting
prosecutor of the Court. The resolution
in banc complained of reversed an
order of an Associate Judge of the
Court which declared that there was
such relationship of employeremployee between the Respondent
and the complainants represented by
the Petitioner. The last mentioned
order of 16 February 1954 was just
interlocutory but it was set aside by
the resolution of 23 June 1954. The
National Labor Union in representation
of the complainants appealed from
said resolution dismissing its
complaint charging the Respondent
with the commission of unfair labor
practices.

In the resolution complained of there

are no findings of facts. It merely
states that

13

cralaw the Court, in banc, finds that

the said motion for reconsideration is
well-taken and, therefore, it hereby
reconsider the order of February 16,
1954, and thereby declares that there
is no employer- employee relation
between Respondent, Benedicto
Dinglasan, and the drivercomplainants in his case. As a
consequence, the motion to dismiss
the complaint dated October 31, 1953,
filed by the Acting Prosecutor of the
Court, is hereby granted. (Annex D.)

This resolution was adopted upon a

motion for reconsideration of the
previous order of 16 February 1954. As
there are no findings of fact in the
resolution those set forth in the
previous order must have been relied
upon by the Court. They are as
follows:chanroblesvirtuallawlibrary

(a) Respondent Dinglasan is the

owner and operator of TPU jeepneys
plying between Espaa-Quiapo-Pier
and vice versa.

(b) Petitioners are drivers who had

verbal contracts with Respondent for
the use of the latters jeepneys upon
payment of P7.50 for 10 hours use,
otherwise known as the boundary
system.

(c) Said drivers did not receive

salaries or wages from Mr. Dinglasan;
chan roblesvirtualawlibrarytheir days
earnings being the excess over the
P7.50 that they paid for the use of the
jeepneys. In the event that they did

not earn more, Respondent did not

have to pay them anything;

(d) Mr. Dinglasans supervision over

the drivers consisted in inspection of
the jeepneys that they took out when
they passed his gasoline station for
water, checking the route prescribed
by the Public Service Commission, or
whether any driver was driving
recklessly and washing and changing
the tires of jeepneys. (Annex C.)

The main question to determine is

whether there exists a relationship of
employer-employee between the
drivers of the jeeps and the owner
thereof. The findings contained in the
first order are not disputed by both
parties except the last to which the
Respondent took exception. But in the
resolution setting aside the order of 16
February 1954 the Court of Industrial
Relations in banc did not state that
such finding is not supported by
evidence. It merely declares that
there is no employer-employee
relation between Respondent,
Benedicto Dinglasan, and the drivercomplainants in this case. If the
findings to which the Respondent took
exception is unsupported by the
evidence, a pronouncement to that
effect would have been made by the
Court in banc. In the absence of such
pronouncement we are not at liberty
to ignore or disregard said finding. The
findings of the Court of Industrial
Relations with respect to question of
fact, if supported by substantial
evidence on the record shall be
14

conclusive. 1 Taking into

consideration the findings of fact
made by the Court of Industrial
Relations we find it difficult to uphold
the conclusion of the Court set forth in
its resolution of 23 June 1954. The
drivers did not invest a single centavo
in the business and the Respondent is
the exclusive owner of the jeeps. The
management of the business is in the
Respondents hands. For even if the
drivers of the jeeps take material
possession of the jeeps, still the
Respondent as owner thereof and
holder of a certificate of public
convenience is entitled to exercise, as
he does and under the law he must,
supervision over the drivers by seeing
to it that they follow the route
prescribed by the Public Service
Commission and the rules and
regulations promulgated by it as
regards their operation. And when
they pass by the gasoline station of
the Respondent checking by his
employees on the water tank, oil and
tire pressure is done. The only features
that would make the relationship of
lessor and lessee between the
Respondent and the drivers, members
of the union, as contended by the
Respondent, are the fact that he does
not pay them any fixed wage but their
compensation is the excess of the
total amount of fares earned or
collected by them over and above the
amount of P7.50 which they agreed to
pay to the Respondent, the owner of
the jeeps, and the fact that the
gasoline burned by the jeeps is for the
account of the drivers. These two
features are not, however, sufficient to
withdraw the relationship between
them from that of employer-employee,
because the estimated earnings for
fares must be over and above the
amount they agreed to pay to the

Respondent for a ten-hour shift or tenhour a day operation of the jeeps. Not
having any interest in the business
because they did not invest anything
in the acquisition of the jeeps and did
not participate in the management
thereof, their service as drivers of the
jeeps being their only contribution to
the business, the relationship of lessor
and lessee cannot be sustained. 1 In
the lease of chattels the lessor loses
complete control over the chattel
leased although the lessee cannot
make bad use thereof, for he would be
responsible for damages to the lessor
should he do so. In this case there is a
supervision and a sort of control that
the owner of the jeeps exercises over
the drivers. It is an attempt by
ingenious scheme to withdraw the
relationship between the owner of the
jeeps and the drivers thereof from the
operation of the labor laws enacted to
promote industrial peace.

As to the point that the National Labor

Union is not the real party in interest
to bring the complaint, suffice it to say
that representative includes a
legitimate labor organization or any
officer or agent of such organization,
whether or not employed by the
employer or employees whom he
represents. 2 And whenever it is
charged by an offended party or his
representative that any person has
engaged or is engaging in any unfair
labor practice, the Court of Industrial
Relations must investigate such
charge. 3 Therefore, the objection to
the institution of the charge for unfair
labor practice by the National Labor
Union is not well taken.

15

The order of 23 June 1904 is reversed

and set aside and the case remanded
to the Court of Industrial Relations for
such further proceedings as may be
required by law, with costs against the
Respondent.

Paras, C.J., Bengzon, Reyes, A.,

Bautista Angelo, Labrador,
Concepcion, Reyes, J. B. L. and
Endencia, JJ., concur.

G.R. No. L-26298

1984

September 28,

CMS ESTATE, INC., petitioner,

vs.
SOCIAL SECURITY SYSTEM and SOCIAL
SECURITY COMMISSION, respondents.

Sison Dominguez & Cervantes for

petitioner.

The Legal Counsel for respondent SSS.

CUEVAS, J.:
16

This appeal by the CMS Estate, Inc.

from the decision rendered by the
Social Security Commission in its Case
No. 12, entitled "CMS Estate, Inc. vs.
Social Security System, declaring CMS
subject to compulsory coverage as of
September 1, 1957 and "directing the
Social Security System to effect such
coverage of the petitioner's
employees in its logging and real
estate business conformably to the
provision of Republic Act No. 1161, as
amended was certified to Us by the
defunct Court of Appeals 1 for further
disposition considering that purely
questions of law are involved.

Petitioner is a domestic corporation

organized primarily for the purpose of
engaging in the real estate business.
On December 1, 1952, it started doing
business with only six (6) employees.
It's Articles of Incorporation was
amended on June 4, 1956 in order to
engage in the logging business. The
Securities and Exchange Commission
issued the certificate of filing of said
amended articles on June 18, 1956.
Petitioner likewise obtained an
ordinary license from the Bureau of
Forestry to operate a forest concession
of 13,000 hectares situated in the
municipality of Baganga, Province of
Davao.

On January 28, 1957, petitioner

entered into a contract of
management with one Eufracio D.
Rojas for the operation and
exploitation of the forest concession
The logging operation actually started
on April 1, 1957 with four monthly
salaried employees. As of September

1, 1957, petitioner had 89 employees

and laborers in the logging operation.
On December 26, 1957, petitioner
revoked its contract of management
with Mr. Rojas.

On August 1, 1958, petitioner became

a member of the Social Security
System with respect to its real estate
business. On September 6, 1958,
petitioner remitted to the System the
sum of P203.13 representing the initial
premium on the monthly salaries of
the employees in its logging business.
However, on October 9, 1958,
petitioner demanded the refund of the
said amount, claiming that it is not yet
subject to compulsory coverage with
respect to its logging business. The
request was denied by respondent
System on the ground that the logging
business was a mere expansion of
petitioner's activities and for purposes
of the Social Security Act, petitioner
should be considered a member of the
System since December 1, 1952 when
it commenced its real estate business.

On November 10, 1958, petitioner

filed a petition with the Social Security
Commission praying for the
determination of the effectivity date of
the compulsory coverage of
petitioner's logging business.

After both parties have submitted their

respective memoranda, the
Commission issued on January 14,
1960, Resolution No. 91, 2 the
dispositive portion of which reads as
follows:

17

Premises considered, the instant

petition is hereby denied and
petitioner is hereby adjudged to be
subject to compulsory coverage as of
Sept. 1, 1957 and the Social Security
System is hereby directed to effect
such coverage of petitioner's
employees in its logging and real
estate business conformably to the
provisions of Rep. Act No. 1161, as
amended.

SO ORDERED.

Petitioner's motion for reconsideration

was denied in Resolution No. 609 of
the Commission.

These two (2) resolutions are now the

subject of petitioner's appeal.
Petitioner submits that respondent
Commission erred in holding

(1)
that the contributions required
of employers and employees under
our Social Security Act of 1954 are not
in the nature of excise taxes because
the said Act was allegedly enacted by
Congress in the exercise of the police
power of the State, not of its taxing
power;

(2)
that no contractee
independent contractor relationship
existed between petitioner and
Eufracio D. Rojas during the time that
he was operating its forest concession
at Baganga, Davao;

(3)
that a corporation which has
been in operation for more than two
years in one business is immediately
covered with respect to any new and
independent business it may
subsequently engage in;

(4)
that a corporation should be
treated as a single employing unit for
purposes of coverage under the Social
Security Act, irrespective of its
separate, unrelated and independent
business established and operated at
different places and on different dates;
and

(5)
that Section 9 of the Social
Security Act on the question of
compulsory membership and
employers should be given a liberal
interpretation.

Respondent, on the other hand,

advances the following propositions,
inter alia:

(1)
that the Social Security Act
speaks of compulsory coverage of
employers and not of business;

(2)
that once an employer is
initially covered under the Social
Security Act, any other business
undertaken or established by the
same employer is likewise subject in
spite of the fact that the latter has not
been in operation for at least two
years;

18

(3)
that petitioner's logging
business while actually of a different,
distinct, separate and independent
nature from its real estate business
should be considered as an operation
under the same management;

(4)
that the amendment of
petitioner's articles of incorporation,
so as to enable it to engage in the
logging business did not alter the
juridical personality of petitioner; and

(5)
the petitioner's logging
operation is a mere expansion of its
business activities.

The Social Security Law was enacted

pursuant to the policy of the
government "to develop, establish
gradually and perfect a social security
system which shall be suitable to the
needs of the people throughout the
Philippines, and shall provide
protection against the hazards of
disability, sickness, old age and death"
(Sec. 2, RA 1161, as amended). It is
thus clear that said enactment
implements the general welfare
mandate of the Constitution and
constitutes a legitimate exercise of the
police power of the State. As held in
the case of Philippine Blooming Mills
Co., Inc., et al. vs. SSS 3

Membership in the SSS is not a result

of bilateral, concensual agreement
where the rights and obligations of the
parties are defined by and subject to
their will, RA 1161 requires
compulsory coverage of employees
and employers under the System. It is

actually a legal imposition on said

employers and employees, designed
to provide social security to the
workingmen. Membership in the SSS is
therefore, in compliance with the
lawful exercise of the police power of
the State, to which the principle of
non-impairment of the obligation of
contract is not a proper defense.

xxx

xxx

xxx

The taxing power of the State is

exercised for the purpose of raising
revenues. However, under our Social
Security Law, the emphasis is more on
the promotion of the general welfare.
The Act is not part of out Internal
Revenue Code nor are the
contributions and premiums therein
dealt with and provided for, collectible
by the Bureau of Internal Revenue.
The funds contributed to the System
belong to the members who will
receive benefits, as a matter of right,
whenever the hazards provided by the
law occur.

All that is required of appellant is to

make monthly contributions to the
System for covered employees in its
employ. These contributions, contrary
to appellant's contention, are not 'in
the nature of taxes on employment.'
Together with the contributions
imposed upon employees and the
Government, they are intended for the
protection of said employees against
the hazards of disability, sickness, old
age and death in line with the
constitutional mandate to promote
social justice to insure the well-being

19

and economic security of all the

people. 4

Because of the broad social purpose of

the Social Security Act, all doubts in
construing the Act should favor
coverage rather than exemption.

Prior to its amendment, Sec. 9 of the

Act provides that before an employer
could be compelled to become a
member of the System, he must have
been in operation for at least two
years and has at the time of admission
at least six employees. It should be
pointed out that it is the employer,
either natural, or judicial person, who
is subject to compulsory coverage and
not the business. If the intention of the
legislature was to consider every
venture of the employer as the basis
of a separate coverage, an express
provision to that effect could have
been made. Unfortunately, however,
none of that sort appeared provided
for in the said law.

Should each business venture of the

employer be considered as the basis
of the coverage, an employer with
more than one line of business but
with less than six employees in each,
would never be covered although he
has in his employ a total of more than
six employees which is sufficient to
bring him within the ambit of
compulsory coverage. This would
frustrate rather than foster the policy
of the Act. The legislative intent must
be respected. In the absence of an
express provision for a separate
coverage for each kind of business,
the reasonable interpretation is that

once an employer is covered in a

particular kind of business, he should
be automatically covered with respect
to any new name. Any interpretation
which would defeat rather than
promote the ends for which the Social
Security Act was enacted should be
eschewed. 5

Petitioner contends that the

Commission cannot indiscriminately
combine for purposes of coverage two
distinct and separate businesses when
one has not yet been in operation for
more than two years thus rendering
nugatory the period for more than two
years thus rendering nugatory the
period of stabilization fixed by the Act.
This contention lacks merit since the
amendatory law, RA 2658, which was
approved on June 18, 1960, eliminated
the two-year stabilization period as
employers now become automatically
covered immediately upon the start of
the business.

Section 10 (formerly Sec. 9) of RA

1161, as amended by RA 2658 now
provides:

Sec. 10.
Effective date of
coverage. Compulsory coverage of
the employer shall take effect on the
first day of his operation, and that of
the employee on the date of his
employment. (Emphasis supplied)

As We have previously mentioned, it is

the intention of the law to cover as
many persons as possible so as to
promote the constitutional objective of
social justice. It is axiomatic that a
20

later law prevails over a prior statute

and moreover the legislative in tent
must be given effect. 6

SO ORDERED.

Petitioner further submits that

Eufrancio Rojas is an independent
contractor who engages in an
independent business of his own
consisting of the operation of the
timber concession of the former. Rojas
was appointed as operations manager
of the logging consession; 7 he has no
power to appoint or hire employees;
as the term implies, he only manages
the employees and it is petitioner who
furnishes him the necessary
equipment for use in the logging
business; and he is not free from the
control and direction of his employer
in matter connected with the
performance of his work. These factors
clearly indicate that Rojas is not an
independent contractor but merely an
employee of petitioner; and should be
entitled to the compulsory coverage of
the Act.

The records indubitably show that

petitioner started its real estate
business on December 1, 1952 while
its logging operation was actually
commenced on April 1, 1957. Applying
the provision of Sec. 10 of the Act,
petitioner is subject to compulsory
coverage as of December 1, 1952 with
respect to the real estate business and
as of April 1, 1957 with respect to its
logging operation.

WHEREFORE, premises considered,

the appeal is hereby DISMISSED. With
costs against petitioner.

21

BARRERA, J.:

This is an appeal from the resolution of

the Social Security Commission
declaring respondent Candelaria
Davac as the person entitled to
receive the death benefits payable for
the death of Petronilo Davac.

G.R. No. L-21642

July 30, 1966

SOCIAL SECURITY SYSTEM, petitionerappellee,

vs.
CANDELARIA D. DAVAC, ET AL.,
respondents;
LOURDES Tuplano, respondentappellant.

J. Ma. Francisco and N. G. Bravo for

respondent-appellant.
Office of the Solicitor General Arturo A.
Alafriz, Solicitor Camilo D. Quiason and
E. T. Duran for petitioner-appellee.

The facts of the case as found by the

Social Security Commission, briefly
are: The late Petronilo Davac, a former
employee of Lianga Bay Logging Co.,
Inc. became a member of the Social
Security System (SSS for short) on
September 1, 1957. As such member,
he was assigned SS I.D. No. 08007137. In SSS form E-1 (Member's
Record) which he accomplished and
filed with the SSS on November 21,
1957, he designated respondent
Candelaria Davac as his beneficiary
and indicated his relationship to her as
that of "wife". He died on April 5, 1959
and, thereupon, each of the
respondents (Candelaria Davac and
Lourdes Tuplano) filed their claims for
death benefit with the SSS. It appears
from their respective claims and the
documents submitted in support
thereof, that the deceased contracted
two marriages, the first, with claimant
Lourdes Tuplano on August 29, 1946,
who bore him a child, Romeo Davac,
and the second, with Candelaria
Davac on January 18, 1949, with
whom he had a minor daughter
Elizabeth Davac. Due to their
conflicting claims, the processing
thereof was held in abeyance,
whereupon the SSS filed this petition
praying that respondents be required
to interpose and litigate between
22

themselves their conflicting claims

over the death benefits in
question.1wph1.t

vs. Social Security System, (L-15798,

December 28, 1961), this Court,
construing said Section 13, said:

On February 25, 1963, the Social

Security Commission issued the
resolution referred to above, Not
satisfied with the said resolution,
respondent Lourdes Tuplano brought
to us the present appeal.

It may be true that the purpose of the

coverage under the Social Security
System is protection of the employee
as well as of his family, but this
purpose or intention of the law cannot
be enforced to the extent of
contradicting the very provisions of
said law as contained in Section 13,
thereof, ... . When the provision of a
law are clear and explicit, the courts
can do nothing but apply its clear and
explicit provisions (Velasco vs. Lopez,
1 Phil, 270; Caminetti vs. U.S., 242
U.S. 470, 61 L. ed. 442).

The only question to be determined

herein is whether or not the Social
Security Commission acted correctly in
declaring respondent Candelaria
Davac as the person entitled to
receive the death benefits in question.

Section 13, Republic Act No. 1161, as

amended by Republic Act No. 1792, in
force at the time Petronilo Davac's
death on April 5, 1959, provides:

1. SEC. 13. Upon the covered

employee's death or total and
permanent disability under such
conditions as the Commission may
define, before becoming eligible for
retirement and if either such death or
disability is not compensable under
the Workmen's Compensation Act, he
or, in case of his death, his
beneficiaries, as recorded by his
employer shall be entitled to the
following benefit: ... . (emphasis
supplied.)

Under this provision, the beneficiary

"as recorded" by the employee's
employer is the one entitled to the
death benefits. In the case of Tecson

But appellant contends that the

designation herein made in the person
of the second and, therefore,
bigamous wife is null and void,
because (1) it contravenes the
provisions of the Civil Code, and (2) it
deprives the lawful wife of her share in
the conjugal property as well as of her
own and her child's legitime in the
inheritance.

As to the first point, appellant argues

that a beneficiary under the Social
Security System partakes of the
nature of a beneficiary in life
insurance policy and, therefore, the
same qualifications and
disqualifications should be applied.

Article 2012 of the New Civil Code

provides:

23

ART. 2012. Any person who is

forbidden from receiving any donation
under Article 739 cannot be named
beneficiary of a life insurance policy
by the person who cannot make any
donation to him according to said
article.

And Article 739 of the same Code

prescribes:

ART. 739. The following donations shall

be void:

(1) Those made between persons who

were guilty of adultery or concubinage
at the time of the donation;

xxx

xxx

xxx

Without deciding whether the naming

of a beneficiary of the benefits
accruing from membership in the
Social Security System is a donation,
or that it creates a situation analogous
to the relation of an insured and the
beneficiary under a life insurance
policy, it is enough, for the purpose of
the instant case, to state that the
disqualification mentioned in Article
739 is not applicable to herein
appellee Candelaria Davac because
she was not guilty of concubinage,
there being no proof that she had
knowledge of the previous marriage of
her husband Petronilo.1

Regarding the second point raised by

appellant, the benefits accruing from
membership in the Social Security

System do not form part of the

properties of the conjugal partnership
of the covered member. They are
disbursed from a public special fund
created by Congress in pursuance to
the declared policy of the Republic "to
develop, establish gradually and
perfect a social security system
which ... shall provide protection
against the hazards of disability,
sickness, old age and death."2

The sources of this special fund are

the covered employee's contribution
(equal to 2- per cent of the
employee's monthly compensation);3
the employer's contribution
(equivalent to 3- per cent of the
monthly compensation of the covered
employee);4 and the Government
contribution which consists in yearly
appropriation of public funds to assure
the maintenance of an adequate
working balance of the funds of the
System.5 Additionally, Section 21 of
the Social Security Act, as amended by
Republic Act 1792, provides:

SEC. 21. Government Guarantee.

The benefits prescribed in this Act
shall not be diminished and to
guarantee said benefits the
Government of the Republic of the
Philippines accepts general
responsibility for the solvency of the
System.

From the foregoing provisions, it

appears that the benefit receivable
under the Act is in the nature of a
special privilege or an arrangement
secured by the law, pursuant to the
policy of the State to provide social
24

security to the workingmen. The

amounts that may thus be received
cannot be considered as property
earned by the member during his
lifetime. His contribution to the fund, it
may be noted, constitutes only an
insignificant portion thereof. Then, the
benefits are specifically declared not
transferable,6 and exempted from tax
legal processes, and lien.7
Furthermore, in the settlement of
claims thereunder the procedure to be
observed is governed not by the
general provisions of law, but by rules
and regulations promulgated by the
Commission. Thus, if the money is
payable to the estate of a deceased
member, it is the Commission, not the
probate or regular court that
determines the person or persons to
whom it is payable.8 that the benefits
under the Social Security Act are not
intended by the lawmaking body to
form part of the estate of the covered
members may be gathered from the
subsequent amendment made to
Section 15 thereof, as follows:

SEC. 15. Non-transferability of benefit.

The system shall pay the benefits
provided for in this Act to such persons
as may be entitled thereto in
accordance with the provisions of this
Act. Such benefits are not
transferable, and no power of attorney
or other document executed by those
entitled thereto in favor of any agent,
attorney, or any other individual for
the collection thereof in their behalf
shall be recognized except when they
are physically and legally unable to
collect personally such benefits:
Provided, however, That in the case of
death benefits, if no beneficiary has
been designated or the designation

there of is void, said benefits shall be

paid to the legal heirs in accordance
with the laws of succession. (Rep. Act
2658, amending Rep. Act 1161.)

In short, if there is a named

beneficiary and the designation is not
invalid (as it is not so in this case), it is
not the heirs of the employee who are
entitled to receive the benefits (unless
they are the designated beneficiaries
themselves). It is only when there is
no designated beneficiaries or when
the designation is void, that the laws
of succession are applicable. And we
have already held that the Social
Security Act is not a law of
succession.9

Wherefore, in view of the foregoing

considerations, the resolution of the
Social Security Commission appealed
from is hereby affirmed, with costs
against the appellant.

So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon,

Makalintal, Bengzon, J.P., Zaldivar and
Sanchez, concur.

25

IMMACULADA L. GARCIA,
Petitioner,

versus -

SOCIAL SECURITY COMMISSION LEGAL

AND COLLECTION, SOCIAL SECURITY
SYSTEM,
Respondents.

G.R. No. 170735

Present:

26

Impact Corporation, petitioner herein,

liable for unremitted, albeit collected,
SSS contributions.

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:

December 17, 2007

x------------------------------------------------x

DECIS
ION

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

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

27

In brief, it is an on-going, viable, and

profitable enterprise.

in accordance with Article 264 (g) of

the Labor Code, as amended.

xxxx
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, 13th 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 nonremittance 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 nonpayment.

WHEREFORE, the dispute at

Impact Corporation is hereby certified
to the National Labor Relations
Commission for compulsory arbitration

The company is directed to pay

all the entitled workers unpaid wages,
unpaid 13th 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. 032745100-21.

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
28

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.

Social Security Law,[12] as amended,

in the amounts of P49,941.67 and
P2,474,662.82.

Period
Unremitted Amount
Penalties
(3% Interest Per Month)
TOTAL
August 1980 to December 1984

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

P 453,845.78
P49, 941.67
503,787.45
August 1981 to July 1984
P 10,856.85
P2, 474, 662.82
2,485,519.67

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
29

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]

30

Petitioner filed a Motion for

Reconsideration[19] of the aforequoted 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 partiesrespondents 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.

31

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
32

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
33

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 nonremittance 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
34

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 wellinformed 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:

35

(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
36

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:

37

(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.

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 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

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.
38

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 ongoing, viable, and profitable
enterprise which has sufficient
assets and actual and potential
income-generation capabilities.

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 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]

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.

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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]

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 ORDEREDv

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.
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