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G.R. No. L-26298 September 28, 1984 CMS ESTATE, INC., Petitioner, Social Security System and Social Security Commission, Respondents

(1) The Social Security Law was enacted pursuant to the Philippine constitution to promote social welfare and justice. Contributions required under the law are a valid exercise of police power, not a tax. (2) A corporation engaged in one business for over two years must immediately provide compulsory coverage for employees in any new businesses, as the law no longer provides a two-year grace period. (3) A contract between the corporation and Eufracio Rojas to manage the logging concession did not create an independent contractor relationship as Rojas was under the control and direction of the corporation.

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84 views5 pages

G.R. No. L-26298 September 28, 1984 CMS ESTATE, INC., Petitioner, Social Security System and Social Security Commission, Respondents

(1) The Social Security Law was enacted pursuant to the Philippine constitution to promote social welfare and justice. Contributions required under the law are a valid exercise of police power, not a tax. (2) A corporation engaged in one business for over two years must immediately provide compulsory coverage for employees in any new businesses, as the law no longer provides a two-year grace period. (3) A contract between the corporation and Eufracio Rojas to manage the logging concession did not create an independent contractor relationship as Rojas was under the control and direction of the corporation.

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G.R. No.

L-26298 September 28, 1984

CMS ESTATE, INC., petitioner,


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

Sison Dominguez & Cervantes for petitioner.

The Legal Counsel for respondent SSS.

CUEVAS, J.:

Petitioner is a domestic corporation primarily engaged in the real estate business. On


December 1, 1952, it started doing business with only 6 employees. Its Articles of
Incorporation was amended on June 4, 1956 in order to engage in the logging business.
On January 28, 1957, it entered into a contract of management with one Eufracio D.
Rojas for the operation and exploitation of a forest concession (of 13,000 hectares
situated in the municipality of Baganga, Province of Davao).

The logging operation actually started on April 1, 1957 with 4 monthly salaried
employees. As of September 1, 1957, petitioner had 89 employees and laborers in the
logging operation. On December 26, 1957, petitioner revoked its contract of
management with Mr. Rojas. On August 1, 1958, petitioner became a member of the
Social Security System as to its real estate business. On September 6, 1958, petitioner
remitted to the System the sum of P203.13 representing the initial premium on the
monthly salaries of the employees in its logging business. However, on October 9,
1958, petitioner demanded the refund of the said amount, claiming that it is not yet
subject to compulsory coverage with respect to its logging business.

The request was denied by respondent System on the ground that the logging business
was a mere expansion of petitioner's activities and for purposes of the Social Security
Act, petitioner should be considered a member of the System since December 1, 1952
when it commenced its real estate business.
Petitioner filed a petition with the Social Security Commission praying for the
determination of the effectivity date of the compulsory coverage of petitioner's logging
business. Commission ruled in favor of SSS, thus directing the same to effect such
coverage of petitioner's employees in its logging and real estate business. Petitioner's
motion for reconsideration was denied. Hence, this appeal.

Issues:

Held:

(1)W/N contributions required of employers under RA 1161 are in the nature of excise
taxes or police power measure—Police power measure

The Social Security Law was enacted pursuant to the policy of the government
"to develop, establish gradually and perfect a social security system which shall
be suitable to the needs of the people throughout the Philippines, and shall
provide protection against the hazards of disability, sickness, old age and death"
(Sec. 2, RA 1161, as amended). It is thus clear that said enactment implements
the general welfare mandate of the Constitution and constitutes a legitimate
exercise of the police power of the State.

Philippine Blooming Mills Co., Inc., et al. vs. SSS : Membership in the SSS is not
a result of bilateral, concensual agreement where the rights and obligations of
the parties are defined by and subject to their will, RA 1161 requires compulsory
coverage of employees and employers under the System. It is actually a legal
imposition on said employers and employees, designed to provide social security
to the workingmen. Membership in the SSS is therefore, in compliance with the
lawful exercise of the police power of the State, to which the principle of non-
impairment of the obligation of contract is not a proper defense.

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

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

(2) W/N a corporation which has been in operation for more than two years in one
business is immediately covered with respect to any new and independent business it
may subsequently engage in-YES

Petitioner contends that the Commission cannot indiscriminately combine for


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

Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:

Sec. 10. Effective date of coverage. — Compulsory coverage of the


employer shall take effect on the first day of his operation, and that of the
employee on the date of his employment. (Emphasis supplied)
As We have previously mentioned, it is the intention of the law to cover as many
persons as possible so as to promote the constitutional objective of social justice.
It is axiomatic that a later law prevails over a prior statute and moreover the
legislative in tent must be given effect.

(3) W/N contractee — independent contractor relationship existed between petitioner


and Eufracio D. Rojas during the time that he was operating its forest concession-NO

Rojas was appointed as operations manager of the logging consession; 7 he has


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

(4) W/N corporation should be treated as a single employing unit for purposes of
coverage under the Social Security Act, irrespective of its separate, unrelated and
independent business established and operated at different places and on different
dates-NO

Prior to its amendment, Sec. 9 of the Act provides that before an employer could
be compelled to become a member of the System, he must have been in
operation for at least two years and has at the time of admission at least six
employees. It should be pointed out that it is the employer, either natural, or
judicial person, who is subject to compulsory coverage and not the business. If
the intention of the legislature was to consider every venture of the employer as
the basis of a separate coverage, an express provision to that effect could have
been made. Unfortunately, however, none of that sort appeared provided for in
the said law.
Should each business venture of the employer be considered as the basis of the
coverage, an employer with more than one line of business but with less than six
employees in each, would never be covered although he has in his employ a
total of more than six employees which is sufficient to bring him within the ambit
of compulsory coverage. This would frustrate rather than foster the policy of the
Act. The legislative intent must be respected. In the absence of an express
provision for a separate coverage for each kind of business, the reasonable
interpretation is that once an employer is covered in a particular kind of business,
he should be automatically covered with respect to any new name.

(5) W/N Section 9 of the Social Security Act on the question of compulsory membership
and employers should be given a liberal interpretation-NO

Because of the broad social purpose of the Social Security Act, all doubts in
construing the Act should favor coverage rather than exemption. Any
interpretation which would defeat rather than promote the ends for which the
Social Security Act was enacted should be eschewed.

WHEREFORE, premises considered, the appeal is hereby DISMISSED. With costs


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

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