G.R. No.

L-19124 November 18, 1967

INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES, petitioner-appellant,

vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.

MAKALINTAL, J.:

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

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

The issue submitted for decision here is whether petitioner's registered representatives are employees within the meaning of the Social
Security Act (R.A. No. 1161 as amended). Section 8 (d) thereof defines the term "employee" for purposes of the Act as "any person who
performs services for an 'employer' in which either or both mental and physical efforts are used and who receives compensation for such
services, where there is, employer-employee relationship." (As amended by Sec.4, R.A. No. 2658). These representatives are in reality Commented [D1]: Petitioner is a domestic corporation
commission agents. The uncontradicted testimony of petitioner's lone witness, who was its assistant sales director, is that these agents are engaged in business management and the sale of
recruited and trained by him particularly for the job of selling "'Filipinos Mutual Fund" shares, made to undergo a test after such training securities.
and, if successful, are given license to practice by the Securities and Exchange Commission. They then execute an agreement with petitioner Petitioner, applied to respondent Social Security
with respect to the sale of FMF shares to the general public. Among the features of said agreement which respondent Commission Commission for exemption of its so-called registered
considered pertinent to the issue are: (a) an agent is paid compensation for services in the form of commission; (b) in the event of death or representatives from the compulsory coverage of the
resignation he or his legal representative shall be paid the balance of the commission corresponding to him; (c) he is subject to a set of rules Social Security Act.
and regulations governing the performance of his duties under the agreement; (d) he is required to put up a performance bond; and (e) his The compensation they receive, however, is not
services may be terminated for certain causes. At the same time the Commission found from the evidence and so stated in its resolution that necessarily for those efforts but rather for the results
the agents "are not required to report (for work) at any time; they do not have to devote their time exclusively to or work solely for thereof, that is, for actual sales that they make. Petitioner
points out that in effect such compensation is paid not by
petitioner; the time and the effort they spend in their work depend entirely upon their own will and initiative; they are not required to
it but by the investor, as shown by the basis on which the
account for their time nor submit a record of their activities; they shoulder their own selling expenses as well as transportation; and they
amount of the commission is fixed and the manner in
are paid their commission based on a certain percentage of their sales." The record also reveals that the commission earned by an agent on which it is collected.
his sales is directly deducted by him from the amount he receives from the investor and turns over to the company the amount invested Petitioner further argues that the majority of the agents
after such deduction is made. The majority of the agents are regularly employed elsewhere either in the government or in private are regularly employed elsewhere either in the
enterprises. government or in private enterprises.

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

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

Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a
certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material.

We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly approximates that of an
independent contractor than that of an employee. The latter is paid for the labor he performs, that is, for the acts of which such labor
consists; the former is paid for the result thereof. This Court has recognized the distinction in Chartered Bank, et al. vs. Constantino, 56 Phil.
717, where it said:

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

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

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

The specific question of when there is "employer-employee relationship" for purposes of the Social Security Act has not yet been settled in
this jurisdiction by any decision of this Court. But in other connections wherein the term is used the test that has been generally applied is
the so-called control test, that is, whether the "employer" controls or has reserved the right to control the "employee" not only as to the
result of the work to be done but also as to the means and methods by which the same is to be accomplished.

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

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

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

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

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

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

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

The term "employee" includes an officer of a corporation, but such term does not include (1) any individual who, under the usual
common-law rules applicable in determining the employer-employee relationship, has the status of an independent contractor or (2) any
individual (except an officer of a corporation) who is not an employee under such common law rules.
While it is not necessary to explore the full effect of this enactment in the determination of the existence of employer-employee
relationships arising in the future, we think it can fairly be said that the intent of Congress was to say that in determining in a given case
whether under the Social Security Act such a relationship exists, the common-law elements of such a relationship, as recognized and applied
by the courts generally at the time of the passage of the Act, were the standard to be used . . . .

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

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

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

Plaintiff's only remuneration was her commission of 40%, plus $5 extra for every $250 of sales. Plaintiff was not guaranteed any minimum
compensation and she was not allowed a drawing account or advance of any kind against unearned commissions. Plaintiff paid all of her
traveling expenses and she even had to pay the postage for sending orders to Avon.

The only office which Avon maintained in Shreveport was an office for the city manager. Plaintiff worked from her own home and she was
never furnished any leads. The relationship between plaintiff and Avon was terminable at will . . .

xxx xxx xxx

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

Considering the similarity between the definition of "employee" in the Federal Social Security Act (U.S.) as amended and its definitions in
our own Social Security Act, and considering further that the local statute is admittedly patterned after that of the United States, the
decisions of American courts on the matter before us may well be accorded persuasive force. The logic of the situation indeed dictates that
where the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to
definite hours or conditions of work, and in turn is compensated according to the result of his efforts and not the amount thereof, we should
not find that the relationship of employer and employee exists.

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

In view of the foregoing considerations, the resolution of respondent Social Security Commission subject of this appeal is reversed and set
aside, without pronouncement as to costs.
G.R. No. L-55764 February 16, 1982

SOCIAL SECURITY SYSTEM, petitioner,

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

ABAD SANTOS, J:

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

In a petition filed with the Social Security Commission SSC the Social Security System (SSS) together with Jose Concepcion, Manuel Chan,
Manuel Ong, Roberto Lai, Arturo Gonzales, William Co, Federico Marcial, Santiago Mancuba, Jesus Crelencia, Alfredo So and Pedro Aquino,
the individual petitioners were sought to be declared employees of Manila Cosmos AerAted Water Factory, Inc. (Cosmos) and not
independent contractors under the following Agreement to Peddle Soft Drinks.

1. The MANUFACTURER shall provide the PEDDLER with a delivery truck to be used by the latter, under his own responsibility, exclusively
in the sales of the products of the former purchased by the PEDDLER from the MANUFACTURER;

2. The PEDDLER himself shall carefully and in strict observance to traffic regulations, drive the truck furnished him by the MANUFACTURER
or should he employ a driver or helpers, such driver or helpers shall be his employees under his direction and responsibility, and not that of
the MANUFACTURER, and their compensation including salaries, wages, overtime pay, separation pay, bonus or other remunerations and
privileges shall be for the PEDDLERS own account;

3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or damage to the truck used by him caused by
his own acts or that of his driver and helpers;

4. The PEDDLER shall secure at his own expense all necessary license and permits required by law or ordinance, and shall bear any and all
expenses which may be incurred by him in the sales of the MANUFACTURER'S products, covered by this contract;

5. All goods soft drinks) purchased by the PEDDLER shall be charged to him at a factory price of P0.86 per case of the 6.6 oz. size,
ex-warehouse; PROVIDED, However, that, if the PEDDLER purchases a total of not less than 200 cases of the 6.5 oz. size a day, he shall be
entitled to a dealer's discount of P7.30;

6. Upon the execution of this agreement, the PEDDLER shall give a cash bond in the amount of P500.00 against which the MANUFACTURER
shall charge the PEDDLER with any unpaid account at the end of the day or with any damage to the truck or other account which is properly
chargeable to the PEDDLER; within 30 days after termination of this agreement, the cash bond, after deducting proper charges, shall be
returned to the PEDDLER;

7. The PEDDLER shall liquidate and pay his account at the end of each day, and his failure to do so shall subject his cash bond or so much
thereof as may be necessary to such set offs and payments as shall be proper against the accounts in question;

8. This contract shall be effective only up to December 31, 1962 and supersedes any or all other previous contracts that may have been
entered into between the parties; However, either of the parties may terminate the same upon seven (7) days prior notice to the other;

9. Upon the termination of this agreement, unless the same is renewed, the delivery truck and such other equipment furnished by the
MANUFACTURER to the PEDDLER shall be returned by the latter in good order and workable condition, ordinary wear and tear excepted,
and shall promptly settle his outstanding account if any, with the manufacturer. (Rollo, pp. 24-25.)

The status of the individual petitioners was important because if they were employees of Cosmos and not independent contractors, then
Cosmos would have "to pay the employer's share of premium contributions (employer's and employees' share) for and in behalf of the
delivery helpers, as employees of respondent corporation, plus the penalties thereon for late remittance of premium contributions, covering
the period of delinquency from the respective dates of their coverage up to the present" as prayed for in the petition.

After hearing, the SSC rendered a resolution in favor of the SSS and the peddlers holding that an employer-employee relationship existed
between Cosmos and the peddlers. Cosmos appealed to the Court of Appeals and in a decision promulgated on October 16, 1979, that Court
affirmed the resolution of the SSC. However, upon a motion for reconsideration, the Court of Appeals on October 13, 1980, set aside its
previous decision and reversed the resolution of the SSC. Hence, the instant appeal where the petitioner is the SSS alone; the individual
peddlers have not seen fit to appeal.

We could have dismissed the instant petition by minute resolution because precedents warrant such an action. But to put an end to
litigations of this sort and arrest what Cosmos calls judicial harassment, a decision is in order.

In Mafinco Trading Corporation vs.Ople, et al. No. L-37790, March 25, 1976, 70 SCRA 139, the question was whether there was an employer-
employee relationship under the terms of a peddling contract in words almost Identical to the one quoted above. This Court, thru Mr. Justice
Aquino said:

A restatement of the provisions of the peddling contract is necessary in order to find out whether under that instrument Repomanta and
Moralde were independent contractors or mere employees of Mafinco.

Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be used in the distribution of Cosmos soft drinks
(Par. 1). Should the peddler employ a driver and helpers, he would be responsible for their compensation and social security contributions
and he should comply with applicable labor laws "in relation to his employees" (Par. 2).

The peddler would be responsible for any damage to persons or property or to the truck caused by his own acts or omissions or those of his
driver and helpers (Par. 3). Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The peddler would secure at his
own expense the necessary licenses and permits and bear the expenses to be incurred in the sale of Cosmos products (Par. 5).

The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-warehouse. Should he purchase at least 250 cases a day,
he would be entitled to a peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in the sum of P1,500 to answer for
his obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer for his obligations to his employees (Par. 11). He should
liquidate his accounts at the end of each day (Par. 8). The contract would be effective up to May 31, 1973. Either party might terminate it
upon five days prior notice to the other (Par. 9).

We hold that under their peddling contracts of Repomanta and Moralde were not employees of Mafinco but were independent contractors
as found by the NLRC and its fact-finder and by the committee appointed by the Secretary of labor to look into the status of Cosmos and
Mafinco peddlers. They were distributors of Cosmos soft drinks with their own capital and employees. Ordinarily, an employee or a mere
peddler does not execute a formal contract of employment. He is simply hired and he works under the direction and control of the
employer.

Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which indicate the manner in which they would sell
Cosmos soft drinks. That circumstance signifies that they were acting as independent businessmen. They were free to sign or not to sign
that contract. If they did not want to sell Cosmos products under the conditions defined in that contract; they were free to reject it.

But having signed it, they were bound by its stipulations and the consequences thereof under existing labor laws. One such stipulation is the
right of the parties to terminate the contract upon five days' prior notice (Par. 9). Whether the termination in this case was an unwarranted
dismissal of an employee, as contended by Repomanta and Moralde, is a point that cannot be resolved without submission of evidence.
Using the contract itself as the sole criterion, the termination should perforce be characterized as simply the exercise of a right freely
stipulated upon by the parties.

In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection
and engagement of the employee; (2) the payment of wages: (3) the power of dismissal: and (4) the power to control the employees'
conduct although the latter is flip, most important element (Viaa Al-Lagadan and Piga 99 Phil, 406, 411, Citing 35 Am. Jur. 445).

On the other hand, an independent contractor is "one who exercise independent employment and contracts to do a piece of work according
to his own methods and without being subject to control of his employer except as to the result of the work" (Mansal vs. P.P. Gocheco
Lumber Co., 96 Phil. 941).

Among the factors to be considered are whether the contractor is carrying on an independent business; whether the work is part of the
employer's general business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of the work to another; the power to terminate the relationship; the existence of a contract for the performance of a
specified piece of work; the control and supervision of the work; the employer's powers and duties with respect to the hiring, firing, and
payment of the contractor's servants; the control of the premises; the duty to supply the premises, tools, appliances, material and labor; and
the mode, manner, and terms of payment. (56 C.J.S. 46).
Those tests to determine the existence of an employer-employee relationship or whether the person doing a particular work for another is
an independent contractor cannot be satisfactorily applied in the instant case. It should be obvious by now that the instant case is a
penumbral, sui generis case lying on the shadowy borderline that separates an employee from an independent contractor.

In determining whether the relationship is that of employer and employee or whether one is an independent contractor, "each case must be
determined on its own facts and all the features of the relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of
the peddling contract, no employer-employee relationship was created. (At pp. 161-163, emphasis supplied.)

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

WHEREFORE, the judgment of the Court of Appeals is hereby affirmed. Costs against the petitioner.

SO ORDERED.
G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.

Bito, Misa & Lozada for petitioner.

Remberto Z. Evio for private respondent.

NARVASA, C.J.:

The question before the Court here is whether or not persons rendering caddying services for members of golf clubs and their guests in said
clubs' courses or premises are the employees of such clubs and therefore within the compulsory coverage of the Social Security System
(SSS).

That question appears to have been involved, either directly or peripherally, in three separate proceedings, all initiated by or on behalf of
herein private respondent and his fellow caddies. That which gave rise to the present petition for review was originally filed with the Social
Security Commission (SSC) via petition of seventeen (17) persons who styled themselves "Caddies of Manila Golf and Country
Club-PTCCEA" for coverage and availment of benefits under the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees Association," with which the petitioners
claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence that although the petitioners were employees of the
Manila Golf and Country Club, a domestic corporation, the latter had not registered them as such with the SSS.

At about the same time, two other proceedings bearing on the same question were filed or were pending; these were:

(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the PTCCEA on behalf of the same caddies
of the Manila Golf and Country Club, the case being titled "Philippine Technical, Clerical, Commercial Association vs. Manila Golf and Country
Club" and docketed as Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of the petitioners therein by Med-Arbiter
Orlando S. Rojo who was thereafter upheld by Director Carmelo S. Noriel, denying the Club's motion for reconsideration; 1

(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the same labor organization, titled
"Philippine Technical, Clerical, Commercial Employees Association (PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and
Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio T.
Linsangan, a decision later affirmed on appeal by the National Labor Relations Commission on the ground that there was no
employer-employee relationship between the petitioning caddies and the respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging in substance that the
petitioners, caddies by occupation, were allowed into the Club premises to render services as such to the individual members and guests
playing the Club's golf course and who themselves paid for such services; that as such caddies, the petitioners were not subject to the
direction and control of the Club as regards the manner in which they performed their work; and hence, they were not the Club's
employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security coverage, avowedly
coming to realize that indeed there was no employment relationship between them and the Club. The case continued, and was eventually
adjudicated by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The
Commission dismissed the petition for lack of merit, 3ruling:

. . . that the caddy's fees were paid by the golf players themselves and not by respondent club. For instance, petitioner Raymundo Jomok
averred that for their services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by a player who will in turn hand over to management
the other portion of the stub known as Caddy Ticket (Exh. "1") so that by this arrangement management will know how much a caddy will
be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy works on his own in accordance with the rules
and regulations (TSN, p. 24, February 26, 1980) but petitioner Jomok could not state any policy of respondent that directs the manner of
caddying (TSN, pp. 76-77, July 23, 1980). While respondent club promulgates rules and regulations on the assignment, deportment and
conduct of caddies (Exh. "C") the same are designed to impose personal discipline among the caddies but not to direct or conduct their
actual work. In fact, a golf player is at liberty to choose a caddy of his preference regardless of the respondent club's group rotation system
and has the discretion on whether or not to pay a caddy. As testified to by petitioner Llamar that their income depends on the number of
players engaging their services and liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that
the caddies are never their employees in the absence of two elements, namely, (1) payment of wages and (2) control or supervision over
them. In this connection, our Supreme Court ruled that in the determination of the existence of an employer-employee relationship, the
"control test" shall be considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco
Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment Planning Corporation Phil. vs. SSS 21 SCRA 925).

Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as bat unloader and helper, respectively,
including their ground men, house and administrative personnel, a situation indicative of the latter's concern with the rights and welfare of
its employees under the SS law, as amended. The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the
caddies merely intended to identify the holders as accredited caddies of the club and privilege(d) to ply their trade or occupation within its
premises which could be withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense posture of
respondent that petitioners were never its employees is well taken.4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and Jomok. After the appeal
was docketed 5 and some months before decision thereon was reached and promulgated, Raymundo Jomok's appeal was dismissed at his
instance, leaving Fermin Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National Capital Regional Office in the
certification election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the existence of employer-employee relationship between
the respondent club and the appellants, it being contended that said issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor Relations, which "has not only
become final but (has been) executed or (become) res adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance. Nor, it would appear,
did it find any greater merit in the second alleged error. Although said Court reserved the appealed SSC decision and declared Fermin
Llamar an employee of the Manila Gold and Country Club, ordering that he be reported as such for social security coverage and paid any
corresponding benefits, 8 it conspicuously ignored the issue of res adjudicata raised in said second assignment. Instead, it drew basis for the
reversal from this Court's ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra 9 and declared that
upon the evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-called "control
test," establishment in the case i.e., "whether the employer controls or has reserved the right to control the employee not only as to the
result of the work to be done but also as to the means and methods by which the same is to be accomplished," the Club's control over the
caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect of the conduct that the caddy must
observe, or avoid, when serving as such, any violation of any which could subject him to disciplinary action, which may include suspending
or cutting off his access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number which designates his turn to serve a
player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the Club, that they
observed no definite working hours and earned no fixed income. It quoted with approval from an American decision 10 to the effect that:
"whether the club paid the caddies and afterward collected in the first instance, the caddies were still employees of the club." This, no
matter that the case which produced this ruling had a slightly different factual cast, apparently having involved a claim for workmen's
compensation made by a caddy who, about to leave the premises of the club where he worked, was hit and injured by an automobile then
negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is now among the mainways of
the private respondent's defenses to the petition for review. Considered in the perspective of the incidents just recounted, it illustrates as
well as anything can, why the practice of forum-shopping justly merits censure and punitive sanction. Because the same question of
employer-employee relationship has been dragged into three different fora, willy-nilly and in quick succession, it has birthed controversy as
to which of the resulting adjudications must now be recognized as decisive. On the one hand, there is the certification case
[R4-LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the existence of employer-employee relationship between the
parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never thereafter appealed
according to the private respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by or for the
same respondent at about the same time, which was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed by the
NLRC itself on the ground that there existed no such relationship between the Club and the private respondent. And, as if matters were not
already complicated enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to
initiate still a third proceeding for compulsory social security coverage with the Social Security Commission (SSC Case No. 5443), with the
result already mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had never become final,
being in fact the subject of three pending and unresolved motions for reconsideration, as well as of a later motion for early
resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record before the Court. And, for his part, the
private respondent contends, not only that said decision had been appealed to and been affirmed by the Director of the BLR, but that a
certification election had in fact been held, which resulted in the PTCCEA being recognized as the sole bargaining agent of the caddies of the
Manila Golf and Country Club with respect to wages, hours of work, terms of employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not adequately disclose, the more controlling consideration would seem to be that,
however, final it may become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or non-existence, of
employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential requisites must concur: (1)
there must be a final judgment or order; (2) said judgment or order must be on the merits; (3) the court rendering the same must have
jurisdiction over the subject matter and the parties; and (4) there must be between the two cases identity of parties, identity of subject
matter and identity of cause of action. 13

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would operate in bar of a
subsequent action between the same parties for the same cause, be adversarial, or contentious, "one having opposing parties; (is) contested,
as distinguished from an ex parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to the other party and
afforded the latter an opportunity to contest it" 14 and a certification case is not such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but mere investigation of a
non-adversary, fact-finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to
ascertain the desires of the employees as to the matter of their representation. The court enjoys a wide discretion in determining the
procedure necessary to insure the fair and free choice of bargaining representatives by the employees.15

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employer-employee relationship between
present petitioner and the private respondent, it would logically be that rendered in the compulsory arbitration case (NCR Case No.
AB-4-771-79, supra), petitioner having asserted, without dispute from the private respondent, that said issue was there squarely raised and
litigated, resulting in a ruling of the Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist, and which ruling
was thereafter affirmed by the National Labor Relations Commission in an appeal taken by said respondent. 16

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting ruling just adverted
to should be accorded primacy, given the fact that it was he who actively sought them simultaneously, as it were, from separate fora, and
even if the graver sanctions more lately imposed by the Court for forum-shopping may not be applied to him retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on contrary, it acted correctly in
doing so.

Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and employee between petitioner and private
respondent is, however, another matter. The Court does not agree that said facts necessarily or logically point to such a relationship, and to
the exclusion of any form of arrangements, other than of employment, that would make the respondent's services available to the members
and guest of the petitioner.

As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc. covered by the
petitioner's regulations, does not, in the mind of the Court, so circumscribe the actions or judgment of the caddies concerned as to leave
them little or no freedom of choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies must
submit to some supervision of their conduct while enjoying the privilege of pursuing their occupation within the premises and grounds of
whatever club they do their work in. For all that is made to appear, they work for the club to which they attach themselves on sufference but,
on the other hand, also without having to observe any working hours, free to leave anytime they please, to stay away for as long they like. It
is not pretended that if found remiss in the observance of said rules, any discipline may be meted them beyond barring them from the
premises which, it may be supposed, the Club may do in any case even absent any breach of the rules, and without violating any right to
work on their part. All these considerations clash frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still another indication of the
latter's status as employees. It seems to the Court, however, that the intendment of such fact is to the contrary, showing that the Club has
not the measure of control over the incidents of the caddies' work and compensation that an employer would possess.

The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than an assurance that the
work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn to serve and being assigned instead
the last number for the day. 17

By and large, there appears nothing in the record to refute the petitioner's claim that:

(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise his occupation in the premises of
petitioner. He may work with any other golf club or he may seek employment a caddy or otherwise with any entity or individual without
restriction by petitioner. . . .

. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as they are not required to render a definite number
of hours of work on a single day. Even the group rotation of caddies is not absolute because a player is at liberty to choose a caddy of his
preference regardless of the caddy's order in the rotation.

It can happen that a caddy who has rendered services to a player on one day may still find sufficient time to work elsewhere. Under such
circumstances, he may then leave the premises of petitioner and go to such other place of work that he wishes (sic). Or a caddy who is on
call for a particular day may deliberately absent himself if he has more profitable caddying, or another, engagement in some other place.
These are things beyond petitioner's control and for which it imposes no direct sanctions on the caddies. . . . 18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set aside, it being hereby
declared that the private respondent, Fermin Llamar, is not an employee of petitioner Manila Golf and Country Club and that petitioner is
under no obligation to report him for compulsory coverage to the Social Security System. No pronouncement as to costs.

SO ORDERED.
REPUBLIC OF THE PHILIPPINES, represented by the G.R. No. 172101
SOCIAL SECURITY COMMISSION and SOCIAL Present:
SECURITY SYSTEM,
Petitioners, YNARES-SANTIAGO, J.,Chairperson,
AUSTRIA-MARTINEZ,
AZCUNA,
CHICO-NAZARIO, and
- versus - REYES, JJ.

Promulgated:
ASIAPRO COOPERATIVE,
Respondent. November 23, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul

and set aside the Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006,
respectively, which annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17
February 2004[3] and 16 September 2004,[4] respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein

petitioner Social Security System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve disputes arising
under Republic Act No. 1161, as amended by Republic Act No. 8282.[5] Petitioner SSS is a government corporation created by virtue of

Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative
created pursuant to Republic Act No. 6938[6] and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999

with Registration Certificate No. 0-623-2460.[7]

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories,
to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2) associate member, who has no right to

vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-laws.[8] Its primary objectives are to

provide savings and credit facilities and to develop other livelihood services for its owners-members. In the discharge of the aforesaid
primary objectives, respondent cooperative entered into several Service Contracts[9] with Stanfilco - a division of DOLE Philippines, Inc. and
a company based in Bukidnon. The owners-members do not receive compensation or wages from the respondent cooperative. Instead, they

receive a share in the service surplus[10] which the respondent cooperative earns from different areas of trade it engages in, such as the

income derived from the said Service Contracts with Stanfilco. The owners-members get their income from the service surplus generated by
the quality and amount of services they rendered, which is determined by the Board of Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative, who

were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as self-employed and to remit their
contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS

contributions of the said owners-members were equal to the share of both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a
letter[11] to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the

latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying

employees to Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco.Thus, respondent cooperative

should register itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions in
accordance with the Social Security Law of 1997. On 9 October 2002,[12] respondent cooperative, through its counsel, sent a reply to

petitioner SSSs letter asserting that it is not an employer because its owners-members are the cooperative itself; hence, it cannot be its own
employer. Again, on 21 October 2002,[13] petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an

employer and report its owners-members as employees for compulsory coverage with the petitioner SSS. Respondent cooperative

continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition[14] before petitioner SSC against the respondent cooperative and

Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register as an employer and to report

respondent cooperatives owners-members as covered employees under the compulsory coverage of SSS and to remit the necessary
contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent

cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee relationship exists between it and its
owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer

with Cross-claim against the respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The
respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in another Order issued by the SSC

dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for Review

before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no longer filing a Petition for
Review. In its place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 87236,
with the following assignment of errors:

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

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the
petition a quo, considering that it failed to first resolve the issue of the existence of an
employer-employee relationship between [respondent] cooperative and its
owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS
Law with respect to coverage, benefits, contributions, and related matters, it is respectfully
submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no
dispute as to the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee
relationship raised in [respondents] Motion to Dismiss can be preliminarily resolved through
summary hearings prior to the hearing on the merits. However, any inquiry beyond a
 preliminary determination, as what [petitioner SSC] wants to accomplish, would be to
encroach on the jurisdiction of the National Labor Relations Commission [NLRC], which is
the more competent body clothed with power to resolve issues relating to the existence of an
employment relationship.

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

A. [Respondent] is not an employer within the contemplation of the Labor Law but is a
multi-purpose cooperative created pursuant to Republic Act No. 6938 and composed of
owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are derived
from their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938,
and not from any contract of employment or from the Labor Laws. Moreover, said
owners-members enjoy rights that are not consistent with being mere employees of a
company, such as the right to participate and vote in decision-making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent]
cooperative are not paid any compensation income.[15] (Emphasis supplied.)

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

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

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

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has

jurisdiction over the subject matter and it has a valid basis in denying respondents Motion to Dismiss. The said issue is supported by
the following arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner
SSS] under R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after
invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.

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

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

evidence is necessary.

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

[owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of

whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as
amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on compulsory coverage, benefits,
contributions and penalties thereon or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS

coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent cooperative and
Stanfilco before the petitioner SSC for the compulsory coverage of respondent cooperatives owners-members as well as for collection of

unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid petition-complaint was within the expertise and
jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-employee

relationship between the respondent cooperative and its owners-members, said issue does not preclude petitioner SSC from taking
cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in the said petition-complaint has to be resolved

by reference to the Social Security Law and not to the Labor Code or other labor relations statutes, therefore, jurisdiction over the same
solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperatives Motion to Dismiss grounded on the alleged lack of
employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC because the latter has the
authority and power to deny the same. Moreover, the existence of an employer-employee relationship is a question of fact where

presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is already estopped from assailing the

jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus, respondent cooperative has already submitted itself
to the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its

owners-members. The respondent cooperative is the employer of its owners-members considering that it undertook to provide services to

Stanfilco, the performance of which is under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-employee

relationship can arise between them. The persons of the employer and the employee are merged in the owners-members
themselves. Likewise, respondent cooperatives owners-members even requested the respondent cooperative to register them with the

petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it by petitioner

SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of

discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an employer-employee

relationship between the respondent cooperative and its owners-members. Respondent cooperative claims that the question of whether an
employer-employee relationship exists between it and its owners-members is a legal and not a factual issue as the facts are undisputed and

need only to be interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC

simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first instance and

where the only relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.
 From the foregoing arguments of the parties, the issues may be summarized into:

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

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

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

Section 5 of Republic Act No. 8282 provides:

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

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

Section 1. Jurisdiction. Any dispute arising under the Social Security Act with respect to coverage, entitlement of
benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall
be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the

exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS Law is premised on the
existence of an employer-employee relationship[17] except in cases of compulsory coverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss,
determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely upon

the defendant.[18] Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with it until the full termination of
the case.[19] The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative and

Stanfilco alleges that the owners-members of the respondent cooperative are subject to the compulsory coverage of the SSS because they

are employees of the respondent cooperative. Consequently, the respondent cooperative being the employer of its owners-members must
register as employer and report its owners-members as covered members of the SSS and remit the necessary premium contributions in
accordance with the Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the

petitioner SSC, the case clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative

challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship between itself and its
owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus,

the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS.
 Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its

owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the existence of such
relationship, it behooves the petitioner SSC to determine if there is really an employer-employee relationship that exists between the

respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National Labor

Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.[20]

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the coverage thereof,
because claims are undeniably rooted in the coverage by the system. Hence, the question on the existence of an employer-employee

relationship for the purpose of determining the coverage of the Social Security System is explicitly excluded from the jurisdiction of the

NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the Social
Security Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage of the

owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it declared in its Order dated 17 February

2004 that as an incident to the issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee

relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for prior determination. Since both the
petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them,

petitioner SSC has the authority to inquire into the relationship existing between the worker and the person or entity to whom he renders
service to determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997 from compulsory coverage.[21]

Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however, the
respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a
Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for Certiorari pursuant to Section

5(b)[22] of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has

no jurisdiction over the petition-complaint filed before it because there was no employer-employee relationship between the respondent
cooperative and its owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition

for Review before this Court.

Although as a rule, in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and the findings of fact of

the Court of Appeals are conclusive and binding on the Court,[23] said rule is not without exceptions. There are several recognized

exceptions[24] in which factual issues may be resolved by this Court. One of these exceptions finds application in this present case which is,
when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner SSC and the appellate court

relative to the existence of employer-employee relationship between the respondent cooperative and its owners-members, which
necessitates a departure from the oft-repeated rule that factual issues may not be the subject of appeals to this Court.
 In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and
engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the

workers conduct, with the latter assuming primacy in the overall consideration.[25] The most important element is the employers
control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to

accomplish.[26] The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not

essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to

wield that power.[27] All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in
the selection and engagement of the owners-members as well as its team leaders who will be assigned at

Stanfilco.[28] Second. Wages are defined as remuneration or earnings, however designated, capable of being expressed in terms of

money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered.[29] In this case, the weekly stipends or the so-called shares in the service surplus given by the respondent

cooperative to its owners-members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by

existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same shall not be lower than
the prevailing rates of wages.[30] It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because

these are given to the owners-members as compensation in rendering services to respondent cooperatives client, Stanfilco. Third. It is also
stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate, discipline and

remove the owners-members and its team leaders who were rendering services at Stanfilco.[31]Fourth. As earlier opined, of the four

elements of the employer-employee relationship, the control test is the most important. In the case at bar, it is the respondent cooperative

which has the sole control over the manner and means of performing the services under the Service Contracts with Stanfilco as
well as the means and methods of work.[32] Also, the respondent cooperative is solely and entirely responsible for its owners-members,

team leaders and other representatives at Stanfilco.[33] All these clearly prove that, indeed, there is an employer-employee relationship
between the respondent cooperative and its owners-members.

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

As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative
and its owners-members. The four elements in the four-fold test for the existence of an employment relationship have been complied

with. The respondent cooperative must not be allowed to deny its employment relationship with its owners-members by invoking the
questionable Service Contracts provision, when in actuality, it does exist. The existence of an employer-employee relationship cannot

be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The

employment status of a person is defined and prescribed by law and not by what the parties say it should be.[35]
 It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their

agreement would have the force of law between them. However, the agreed terms and conditions must not be contrary to law, morals,
customs, public policy or public order.[36] The Service Contract provision in question must be struck down for being contrary to law and

public policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its
employees, who are also its owners-members, by the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja[37] wherein

it held that:

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

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

However, in so far as it involves cooperatives with employees who are not members or co-owners thereof,
certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining,
negotiations and others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the aforesaid

case was made in the context of whether an employee who is also an owner-member of a cooperative can exercise the right to bargain
collectively with the employer who is the cooperative wherein he is an owner-member. Obviously, an owner-member cannot bargain
collectively with the cooperative of which he is also the owner because an owner cannot bargain with himself. In the instant case, there is no

issue regarding an owner-members right to bargain collectively with the cooperative. The question involved here is whether an

employer-employee relationship can exist between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank
of Davao City, Inc. will show that it actually recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development

Authority.[38] It has its Board of Directors, which directs and supervises its business; meaning, its Board of Directors is the one in charge in

the conduct and management of its affairs.[39] With that, a cooperative can be likened to a corporation with a personality separate and

distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an
employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development

Authority, as evidenced by its Certificate of Registration No. 0-623-2460.[40] In its by-laws,[41] its Board of Directors directs, controls, and

supervises the business and manages the property of the respondent cooperative.Clearly then, the management of the affairs of the
respondent cooperative is vested in its Board of Directors and not in its owners-members as a whole. Therefore, it is completely logical that
the respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an employment with its

owners-members.
 In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its

owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This
being our conclusion, it is no longer necessary to discuss the issue of whether the respondent cooperative was estopped from assailing the

jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of

Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The

Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner SSC is
hereby DIRECTED to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory coverage of the

respondent cooperative and its owners-members. No costs.

SO ORDERED.
G.R. Nos. 98395-102449 June 19, 1995

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

vs.
CIVIL SERVICE COMMISSION and DR. MANUEL BARADERO, respondents.

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

vs.
CIVIL SERVICE COMMISSION and MATILDE S. BELO, respondents.

KAPUNAN, J.:

In our decision dated October 28, 1994 we held that government service rendered on a per diem basis is not creditable in computing the
length of service for retirement purposes. Thus, we reversed the questioned resolutions and orders of the Civil Service Commission (CSC)
requiring the Government Service Insurance System (GSIS) to consider creditable the services of private respondents on a per diem basis.

However, private respondent Matilde S. Belo in G.R. No 102449 filed a motion for reconsideration dated 17 November 1994, of this Court 's
decision of October 28, 1994. She insists that the services rendered by her as Vice Governor of Capiz, between December 31, 1975 to
January 1, 1979, be considered as creditable for purposes of retirement. The Government Service Insurance System likewise filed a motion
for reconsideration on November 22, 1984 in behalf of both private respondents Belo and Dr. Manuel Baradero on essentially the same
grounds. We shall deal with both motions together.

Central to the averments on the aforestated motions for reconsideration is the question of whether or not regular service in government on
a per diem basis, without any other form of compensation or emolument, is compensation within the contemplation of the term "service
with compensation" under the Government Service Insurance Act of 1987.

After a careful consideration of the arguments in both motions, we are compelled to reconsider our decision.

While what respondents Belo and Baradero received were denominated as "per diem," the amounts received were actually in the nature of a
compensation or pay. What should therefore be considered as controlling in both cases would be the nature of remuneration, not the label
attached to it.

Respondent Belo held the position of Vice-Governor of Capiz continuously between January 5, 1972 up to February 1, 1988. From January
25, 1972 up to December 31, 1979, she held office by virtue of an election and was paid a fixed salary. 1 From December 31, 1979 up to
February 1, 1988, she held the position of Vice Governor of Capiz in a holdover capacity, broken down into two periods: 2

1. A period in which she was paid on a per diem basis from December 31, 1976 to December 31, 1979; and

2. A period in which she was paid a fixed salary from January 1, 1980 to February 1,1988.

In its June 7, 1989 Resolution3 on the matter, CSC held that the services rendered for the first holdover period between January 31, 1976 to
January 1, 1979 was creditable for purposes of retirement. CSC noted that during the entire holdover period, respondent Belo actually
served on a full time basis as Vice Governor and was on call 24 hours a day. Disagreeing with the CSC's insistence that the period in which
respondent Belo was paid on a per diem basis should be credited in computing the number of years of creditable service to the government,
GSIS subsequently filed a petition for certiorari before this court, questioning the orders of the CSC. Agreeing that per diems were not
compensation within the meaning of Section 1(c) of R.A. 1573 which amended Section 1(c) of C.A. No. 186 (Government Service Insurance
Act), we granted the petitions in G.R. Nos. 98395 and 102449,4 and reversed the CSC Orders and Resolutions in question.

A review of the circumstances surrounding payment to respondent Belo of the per diems in question convinces us that her motion is
meritorious. We are convinced that the "per diem" she received was actually paid for in the performance of her duties as Vice-Governor of
Capiz in a holdover capacity not as the per diem referred to by section 1(c) of R.A. No 1573 which amended Section 1(c) of C.A. No. 186
(Government Insurance Service Act). A closer look at the aforecited provision, moreover, reveals a legislative intent to make a clear
distinction between salary, pay or compensation, on one hand, and other incidental allowances, including per diems on the other. Section 1(c)
provides:

(c) Salary, pay or compensation shall be construed as to exclude all bonuses, per diems, allowances and overtime pay, or salary, pay or
compensation given to the base pay of the position or rank as fixed by law or regulations. 5
Since it is generally held that an allowance for expenses incident to the discharge of an office is not a salary of office,6 it follows that if the
remuneration received by a public official in the performance of his duties does not constitute a mere "allowance for expenses" but appears
to be his actual base pay, then no amount of categorizing the salary as base pay, a "per diem" would take the allowances received by
petitioner from the term service with compensation for the purpose of computing the number of years of service in government.
Furthermore, it would grossly violate the law's intent to reward the public servant's years of dedicated service to government for us to gloss
over the circumstances surrounding the payment of the said remunerations to the petitioner in taking a purely mechanical approach to the
problem by accepting an attached label at face value.

In G.R. No. 98395, the period disputed was served by respondent Baradero as a member of the Sangguniang Bayan of the Municipality of La
Castellana, Negros Occidental between January 1, 1976 to October 10, 1978 where he was likewise paid on a per diem basis. It is not
disputed that during this period, respondent Baradero rendered full services to the government as a member of the Sangguniang Bayan. In
fact, on the basis of its earlier resolution on the case of respondent Belo, the Civil Service Commission recognized the period in which
respondent Baradero served as a member of the Sangguniang Bayan as creditable for retirement purposes instead of allowing his petition
for extension of service in order to complete the 15 year period of service required for the purpose of qualifying for retirement benefits.7

In the sense in which the phrase "per diem" is used under the Government Service Insurance Law, a per diem is a daily allowance given for
each day an officer or employee of government is away from his home base.8 This is its traditional meaning: its usual signification is as a
reimbursement for extra expenses incurred by the public official in the performance of his duties.9 Under this definition the per
diem intended to cover the cost of lodging and subsistence of officers and employees when the latter are on duty outside of their permanent
station. 10

On the other hand, a per diem could rightfully be considered a compensation or remuneration attached to an office. 11 Under the
circumstances obtaining in the case of respondent Belo the per diems received by her during the period that she acted in holdover capacity
obviously were in the nature of compensation or remuneration for her services as Vice Governor of the Province of Capiz, rather than as a
reimbursement for incidental expenses incurred while away from her home base. In connection with this, it is important to lay stress to the
following facts:

1. Petitioner rendered service to the government continuously from January 25, 1972 to February 1, 1988 as Vice Governor of the Province
of Capiz. During a portion of the holdover-period, i.e., from December 31, 1976 to January 11 1979, payment for her services to the
government was through per diems for every regular or special session of the Sangguniang Panlalawigan attended. 12

2. The CSC noted that: "[F]ormer Vice Governor Belo was on a full time basis when she served . . . on a hold-over capacity. . . As such
provincial official she is (sic) legally and factually on call by the provincial people and the province more than eight hours a day, or at any
time of the day beyond the prescribed working hours.

3. She received no other forms of remuneration during the disputed period. 13

The same could be said of the services rendered by respondent Baradero, who, before and after the period in question had an unblemished
record of service to the government as a member of the army and as a medical officer of the Philippine Medicare Commission. The disputed
period was served on a full-time basis regardless of the denomination given to the compensation received by him.

What ought to be controlling in the cases at bench therefore, should be the nature of the remuneration rather than the label attached to it.
While there is no dispute that the law excepting per diems from the definition of compensation is clear and requires no interpretation,
however, since the term per diem may be construed either as compensation or as allowance, it would be necessary for us to inquire whether
the term per diem in the GSIS Law refers to one or the other signification. As explained above, it is plainly obvious that per diem as
compensation, is not what the law contemplates. The clear intent of the Government Insurance Law was to exclude those extra incidental
expenses or incurred on a daily basis covered by the traditional definition of the term per diem. An important fact missed from our earlier
decision was that, while respondent Belo was paid on a per diem basis during her first holdover period as Vice Governor she was
subsequently paid a fixed salary, which apparently rectified an otherwise anomalous situation. The services rendered by respondent Belo
having been continuous, the disputed period should be credited for purposes of retirement.

On the other hand, respondent Baradero was willing to serve two additional years of service to government in order to complete the 15
year period required by our retirement laws. The Civil Service Commission felt this was unnecessary and denied the same on the ground
that the period served on a per diem basis, was, like the disputed period in the Belo case, creditable. 14

The distinctions between salary and per diem made hereinabove were in fact adverted to in our original decision dated October 28, 1994. In
explaining the allowance of service rendered on a per diem basis in the case of Inocencio vs. Ferrer of the Social Security System, we noted
with approval the Government Service Insurance System's explanation that the per diem service which was credited for purposes of
retirement was Commissioner Ferrer's full time service as Hearing Officer not his per diem service for attendance at Board Meetings. Even
then, we indirectly noted the difference between per diem paid as compensation for services rendered on a full time basis and per diem as
allowance for incidental expenses. Respondent Belo asserts, with reason, that the per diems paid to her, while reckoned on the basis of
attendance in Board Meetings, were for her full time services as Vice Governor of the Province of Capiz. In fact, the same service, albeit still
on a holdover basis, was eventually paid with a fixed salary.

Retirement benefits given to government employees in effect reward them for giving the best years of their lives to the service of their
country. This is especially true with those in government service occupying positions of leadership or positions requiring management
skills because the years they devote to government service could be spent more profitably in lucrative appointments in the private sector. In
exchange for their selfless dedication to government service, they enjoy security of tenure and are ensured of a reasonable amount of
support after they leave the government. The basis for the provision of retirement benefits is, therefore, service to government. While a
government insurance system rationalizes the management of funds necessary to keep this system of retirement support afloat and is
partly dependent on contributions made by the thousands of members of the system, the fact that these contributions are minimal when
compared to the amount of retirement benefits actually received shows that such contributions, while necessary, are not absolutely
determinative in drawing up criteria for those who would qualify as recipients of the retirement benefit system.

It cannot be convincingly asserted that petitioners could not avail themselves of the benefits of the policy because no deductions were made
from their salaries during the disputed periods when they were paid on a per diem basis. In respondent Belo's case, before and after that
short interregnum, she was paid a fixed salary. She was not duly informed that short period was not to be credited in computing the length
of her service for retirement purposes. She assumed in all good faith that she continued to be covered by the GSIS insurance benefits
considering that in fact and in practice the deductions are virtually mandatorily made from all government employees on an essentially
involuntary basis. Similarly, had respondent Baradero been informed of the need to pay the required deductions for the purpose of
qualifying for retirement benefits, he would have willingly paid the required sums. In a sense, the contract made between the GSIS and the
government employee is done on a take-it-or-leave-it basis, that is, it is a virtual contract of adhesion which gives the employee no choice
but to involuntarily accede to the deductions made from their oftentimes meager salaries. If the GSIS did not deduct, it was by its own choice:
contributions were exacted from petitioner before and after the disputed period. To assert that petitioners would have been entitled to
benefits had they opted for optional deductions at that point misses the principal fact in issue here, which is the question as to whether or
not the disputed periods should be credited as service with compensation for the purposes of retirement.

Moreover, the source of GSIS benefits is not in essence merely contractual; rather, it is a social legislation as clearly indicated in the
"whereas" of Presidential Decree No. 1146, to wit:

WHEREAS, provisions of existing laws that have prejudiced, rather than benefited, the government employee; restricted, rather than
broadened, his benefits, prolonged, rather than facilitated the payment of benefits, must now yield to his paramount welfare;

WHEREAS, the social security and insurance benefits of government employees must be continuously re-examined and improved to assure
comprehensive and integrated social security and insurance programs that will provide benefits responsive to their needs and those of their
dependents in the event of sickness, disability, death, retirement, and other contingencies; and to serve as a fitting reward for dedicated
public service;

WHEREAS, in the light existing economic conditions affecting the welfare of government employees there is a need to expand and improve
the social security and insurance programs administered by the Government Service Insurance Systems, specifically, among others, by
increasing pension benefits, expanding disability benefits, introducing survivorship benefits, introducing sickness income benefits, and
eventually extending the compulsory coverage of these programs to all government employees regardless of employment status.

The situation as far as private respondents and the GSIS are concerned could be rectified by deducting a reasonable amount corresponding
to the contributions which should have been deducted during the period from the amount of retirement benefits accruing to them. It would
be grossly inequitable as it would violate the spirit of the government retirement and insurance laws to permanently penalize both
respondents Belo and Baradero by ignoring the fact of actual period of service to government with compensation, and deny them the
retirement privileges that they, for their unselfish service to the government justly deserve. Under the peculiar circumstances of the case at
bench, the demand for equity prompts us to regard spirit not letter, and intent, not form, in according substantial justice to both
respondents, where the law, through its inflexible rules might prove inadequate.

WHEREFORE, the instant motion is hereby GRANTED, our decision dated October 28, 1994 RECONSIDERED and the questioned resolutions
and orders of the CSC requiring GSIS to consider creditable the services of private respondents on a per diem basis AFFIRMED.

SO ORDERED.

Narvasa, C.J., Feliciano, Padilla, Regalado, Puno, Vitug, Mendoza and Francisco, JJ., concur.

Davide, Jr., concurs in the result.

Bellosillo, J., took no part.

Separate Opinions

QUIASON, J., dissenting:

Respondents Civil Service Commission (CSC) and Matilde S. Belo moved for the reconsideration of our Decision dated October 28, 1994.

The CSC argued that services rendered on a per diem basis may be creditable for retirement purposes, for it is the nature of the service
rendered and not the manner of compensation which shall prevail in the determination of creditable government service. It also contended
that it has the power to determine creditable government service for retirement purposes, and that the function of petitioner Government
Service Insurance System (GSIS) is limited to computing the amount of retirement benefits due the government employee (G.R. No.
98395, Rollo, p. 111).

On her part, respondent Belo emphasized that as former Vice-Governor and Governor of Capiz, she rendered full time service to the
electorate but was paid per diem as compensation. She invoked that the case of Commissioner Inocencio V. Ferrer be similarly applied to her
case (G.R. No. 102449, Rollo, p. 109). In her supplemental motion for reconsideration, respondent Belo further alleged that in the Ferrer case,
the GSIS resolved to consider the period when Commissioner Ferrer was receiving per diem as compensation as creditable for retirement
purposes.

The issues raised in the motion for reconsideration are: (1) whether the GSIS is the proper government agency to determine what service is
creditable for retirement purposes; and (2) whether full time service rendered by a government employee receiving per diem as
compensation is creditable for retirement purposes.

We deem it wise to raise a third issue: whether said employee may avail of retirement benefits notwithstanding his failure to make
contributions to the GSIS for the duration he was receiving per diem as compensation.

We affirm our ruling that it is the GSIS which has the power to determine what service is creditable for retirement purposes. Presidential
Decree No. 1146 (Government Service Insurance Act of 1987) vests such power in the GSIS. It must be emphasized that P.D. No. 1146 is a
special law which prevails over Executive Order No. 292 (Administrative Code of 1987).

We can concede that the nomenclature given to the basic salary paid a government employee is not controlling in determining the service
that is creditable for retirement purpose and what is important is that the pay is given for full time work.

Petitioner Belo cannot invoke the case of Commissioner Ferrer because what the GSIS considered as creditable service was his full-time
work as hearing officer of the Social Security Commission, and not as Commissioner.

Prior to Republic Act No. 7160, otherwise known as the Local Government Code of 1991, local government units were not compulsorily
covered by the Government Insurance Act (R.A. No. 186). However, R.A. No. 1573 amending R.A. No. 186, allowed the optional coverage
under the government insurance system, provided that:

(1) the employee notifies the System in writing; (2) the employee complies with the requirements of the System and that he is in
government service when the insurance takes effect; and (3) after his admission, the employee shall be eligible to either life or retirement
insurance benefits, or to both, for which the rates of the premiums or contributions shall be paid by him, including the share otherwise
payable by his employer (Sec. 4[b]).

Anent the third issue, it must be borne in mind that the obligation to pay premiums is equally essential as the period of services rendered.

In the case of respondent Belo, she never became a member of the GSIS during her term as Vice-Governor and Governor of Capiz, nor did
she contribute to the System. It must be emphasized that she then had the option of continuing her membership when she started working
for the local government unit by complying with the requirements of Section 4(b) of R.A. No. 1573. However, she failed to exercise such
option.

The GSIS is only obligated to grant retirement benefits to its members. Such obligation exists where there is a contract of life or retirement
insurance between the GSIS and the government employee. This contract is evidenced by the GSIS policy issued when the government
employee's admission is approved. In certain cases, the contract of insurance between them is compulsory, for which reason both employer
and employee are required to make contributions to the GSIS. Contributions of the government employee are made possible through salary
deduction.

Premiums payable by the members are the lifeblood of the retirement scheme. These premiums are actuarially computed and any attempt
to do away with them has an unsettling effect on the entire system.

It would now be unjust for respondent Belo to compel the GSIS to grant her retirement benefits when she never remitted the employer's
and her share of contributions for the period December 31, 1976 to January 1, 1979. To countenance such argument would result in an
inequitable situation where the GSIS is exposed to a risk without the benefit of receiving any contribution or premium. The GSIS was never
intended to be a charitable institution for government retirees. It is only fair that the GSIS be entitled to the payment of premiums as soon as
it is exposed to the risk insured against, whether it be a life or annuity insurance (cf. The Insurance Code, Sec. 77).

The most liberal application that can be given to the ruling of the GSIS with respect to services paid on per diem basis is to limit it to cases
where the retiree has paid the corresponding retirement premiums during said period.

I vote to deny the motion for reconsideration.

Melo and Romero, JJ., concur.

Separate Opinions

QUIASON, J., dissenting:

Respondents Civil Service Commission (CSC) and Matilde S. Belo moved for the reconsideration of our Decision dated October 28, 1994.

The CSC argued that services rendered on a per diem basis may be creditable for retirement purposes, for it is the nature of the service
rendered and not the manner of compensation which shall prevail in the determination of creditable government service. It also contended
that it has the power to determine creditable government service for retirement purposes, and that the function of petitioner Government
Service Insurance System (GSIS) is limited to computing the amount of retirement benefits due the government employee (G.R. No.
98395, Rollo, p. 111).

On her part, respondent Belo emphasized that as former Vice-Governor and Governor of Capiz, she rendered full time service to the
electorate but was paid per diem as compensation. She invoked that the case of Commissioner Inocencio V. Ferrer be similarly applied to her
case (G.R. No. 102449, Rollo, p. 109). In her supplemental motion for reconsideration, respondent Belo further alleged that in the Ferrer case,
the GSIS resolved to consider the period when Commissioner Ferrer was receiving per diem as compensation as creditable for retirement
purposes.

The issues raised in the motion for reconsideration are: (1) whether the GSIS is the proper government agency to determine what service is
creditable for retirement purposes; and (2) whether full time service rendered by a government employee receiving per diem as
compensation is creditable for retirement purposes.

We deem it wise to raise a third issue: whether said employee may avail of retirement benefits notwithstanding his failure to make
contributions to the GSIS for the duration he was receiving per diem as compensation.

We affirm our ruling that it is the GSIS which has the power to determine what service is creditable for retirement purposes. Presidential
Decree No. 1146 (Government Service Insurance Act of 1987) vests such power in the GSIS. It must be emphasized that P.D. No. 1146 is a
special law which prevails over Executive Order No. 292 (Administrative Code of 1987).
We can concede that the nomenclature given to the basic salary paid a government employee is not controlling in determining the service
that is creditable for retirement purpose and what is important is that the pay is given for full time work.

Petitioner Belo cannot invoke the case of Commissioner Ferrer because what the GSIS considered as creditable service was his full-time
work as hearing officer of the Social Security Commission, and not as Commissioner.

Prior to Republic Act No. 7160, otherwise known as the Local Government Code of 1991, local government units were not compulsorily
covered by the Government Insurance Act (R.A. No. 186). However, R.A. No. 1573 amending R.A. No. 186, allowed the optional coverage
under the government insurance system, provided that:

(1) the employee notifies the System in writing; (2) the employee complies with the requirements of the System and that he is in
government service when the insurance takes effect; and (3) after his admission, the employee shall be eligible to either life or retirement
insurance benefits, or to both, for which the rates of the premiums or contributions shall be paid by him, including the share otherwise
payable by his employer (Sec. 4[b]).

Anent the third issue, it must be borne in mind that the obligation to pay premiums is equally essential as the period of services rendered.

In the case of respondent Belo, she never became a member of the GSIS during her term as Vice-Governor and Governor of Capiz, nor did
she contribute to the System. It must be emphasized that she then had the option of continuing her membership when she started working
for the local government unit by complying with the requirements of Section 4(b) of R.A. No. 1573. However, she failed to exercise such
option.

The GSIS is only obligated to grant retirement benefits to its members. Such obligation exists where there is a contract of life or retirement
insurance between the GSIS and the government employee. This contract is evidenced by the GSIS policy issued when the government
employee's admission is approved. In certain cases, the contract of insurance between them is compulsory, for which reason both employer
and employee are required to make contributions to the GSIS. Contributions of the government employee are made possible through salary
deduction.

Premiums payable by the members are the lifeblood of the retirement scheme. These premiums are actuarially computed and any attempt
to do away with them has an unsettling effect on the entire system.

It would now be unjust for respondent Belo to compel the GSIS to grant her retirement benefits when she never remitted the employer's
and her share of contributions for the period December 31, 1976 to January 1, 1979. To countenance such argument would result in an
inequitable situation where the GSIS is exposed to a risk without the benefit of receiving any contribution or premium. The GSIS was never
intended to be a charitable institution for government retirees. It is only fair that the GSIS be entitled to the payment of premiums as soon as
it is exposed to the risk insured against, whether it be a life or annuity insurance (cf. The Insurance Code, Sec. 77).

The most liberal application that can be given to the ruling of the GSIS with respect to services paid on per diem basis is to limit it to cases
where the retiree has paid the corresponding retirement premiums during said period.

I vote to deny the motion for reconsideration.