G.R. No. 172101 - Republic vs. Asiapro Cooperative

Case Summary (G.R. No. 172101)

Petitioner

The petitioners are the Republic of the Philippines, represented by the SSC (the quasi‑judicial body authorized to resolve disputes under the Social Security law) and the SSS, a government corporation created under R.A. No. 1161, as amended.

Respondent

Asiapro Cooperative is a registered multi‑purpose cooperative organized under R.A. No. 6938 (the Cooperative Code); its by‑laws distinguish regular members (with voting rights) from associate members (without voting rights). The cooperative entered into Service Contracts with Stanfilco under which owners‑members rendered services and received shares in a “service surplus” rather than conventional wages.

Key Dates and Procedural Posture

Relevant administrative and procedural milestones include SSS letters to Asiapro in September–October 2002 demanding employer registration and remittance, Asiapro’s reply denying employer status, the filing by SSS of an administrative petition before the SSC on 12 June 2003 (SSC Case No. 6‑15507‑03), SSC Orders denying Asiapro’s Motion to Dismiss dated 17 February 2004 and 16 September 2004, a Petition for Certiorari by Asiapro to the Court of Appeals (CA) which resulted in CA decisions annulling the SSC Orders, and subsequent elevation to the Supreme Court by SSS/SSC for review.

Applicable Law and Governing Framework

Primary statutory authorities: R.A. No. 1161 (SSS law) as amended and R.A. No. 8282 (Social Security Act of 1997) which vests the SSC with authority to resolve disputes relating to coverage, benefits, contributions and penalties; R.A. No. 6938 (Cooperative Code) governing cooperative registration and governance; the SSS Revised Rules of Procedure (1997). The Labor Code and Article 217 (jurisdictional provision for Labor Arbiters and NLRC) are relevant to the scope of labor adjudication. The 1987 Constitution is the controlling constitutional framework for judicial review and the powers of courts and quasi‑judicial bodies.

Core Legal Questions

Whether the SSC had jurisdiction over the petition‑complaint filed by SSS to determine compulsory coverage and contributions of Asiapro’s owners‑members. 2. Whether Asiapro was estopped from assailing SSC jurisdiction after filing an Answer with Motion to Dismiss. 3. Whether an employer‑employee relationship existed between the cooperative and its owners‑members for purposes of compulsory SSS coverage.

Statutory Allocation of Jurisdiction and SSC Authority

Section 5 of R.A. No. 8282 and Section 1, Rule III of the SSS Revised Rules confer upon the SSC cognizance over disputes “arising under” the Social Security Act with respect to coverage, entitlement to benefits, collection and settlement of contributions and related matters. The mandatory nature of SSS coverage depends, generally, on the existence of an employer‑employee relationship (except for self‑employed persons expressly covered). The Supreme Court emphasized that allegations in the petition determine the tribunal with initial jurisdiction; defenses in the Answer do not divest the tribunal of jurisdiction once properly invoked.

SSC’s Power to Inquire into Employer‑Employee Relationship

The Supreme Court held that the SSC may inquire into the existence of an employer‑employee relationship as an incident to its power to determine compulsory coverage under the Social Security Act. Because Article 217 of the Labor Code excludes social security claims from the NLRC’s jurisdiction, coverage issues (including determination of whether an employment relationship exists for SSS purposes) are not within the exclusive domain of the NLRC. The SSC and NLRC are independent bodies with separate statutory jurisdictions; the SSC need not await a prior NLRC determination before exercising its power to decide coverage.

Effect of the Petition‑Complaint and the Answer on Jurisdiction

The Court reiterated the principle that the complaint’s allegations govern which tribunal has jurisdiction. The petition‑complaint by SSS alleged that Asiapro’s owners‑members were employees of the cooperative and thus subject to compulsory SSS coverage; that allegation placed the controversy squarely within SSC jurisdiction. Asiapro’s Answer and Motion to Dismiss contesting the existence of an employer‑employee relationship did not strip the SSC of its jurisdiction to proceed; the SSC was entitled to entertain the petition and determine the factual and legal issues.

Standard for Supreme Court Review of Factual Findings

Although the Supreme Court ordinarily defers to the Court of Appeals’ factual findings, it recognizes exceptions—one being when findings of fact are conflicting. Here, the SSC and CA reached conflicting conclusions on the existence of an employer‑employee relationship, justifying the Supreme Court’s review of factual issues to resolve the conflict.

Four‑Fold Test for Employer‑Employee Relationship and Its Primacy

The Court applied the established four‑fold test to determine employer‑employee status: (1) selection and engagement of workers; (2) payment of wages; (3) power of dismissal; and (4) the employer’s power of control over the worker’s conduct (the control test being paramount). The power of control is satisfied by the existence of the employer’s right to direct the manner and means of work; it is not necessary that the power be actually exercised.

Application of the Four‑Fold Test to Asiapro

Applying the four‑fold test, the Court found all elements present: (1) the Service Contracts granted Asiapro exclusive discretion to select, engage, investigate, discipline and remove owner‑members and team leaders assigned to Stanfilco; (2) the weekly stipends or “shares in the service surplus” were equivalent to wages because they were monetary remuneration not lower than prevailing wage standards and were given as compensation for services rendered; (3) Asiapro retained the power to discipline and remove members; and (4) Asiapro had sole control over the manner and means of performing the services under the Service Contracts and bore full responsibility for its owner‑members. These findings established an employer‑employee relationship for SSS coverage purposes.

Validity of Contractual Denial of Employment Relationship

The Court rejected the Service Contract clause expressly disclaiming an employer‑employee relationship between th

Case Syllabus (G.R. No. 172101)

Procedural Posture

Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure contesting the Court of Appeals Decision (CA-G.R. SP No. 87236, 5 January 2006) and Resolution (20 March 2006) that annulled and set aside SSC Orders dated 17 February 2004 and 16 September 2004, thereby dismissing the petition-complaint dated 12 June 2003 filed by petitioner Social Security System (SSS).
Petitioners are the Republic of the Philippines represented by the Social Security Commission (SSC) and the Social Security System (SSS). Respondent is Asiapro Cooperative (Asiapro).
The SSC Orders denied Asiapro’s Motion to Dismiss in SSC Case No. 6-15507-03; Asiapro elevated those denials to the Court of Appeals via a Petition for Certiorari (CA-G.R. SP No. 87236).
After the Court of Appeals granted Asiapro’s petition and annulled the SSC Orders, SSS and SSC filed the instant Petition for Review with the Supreme Court.

Parties

Petitioners:
- Republic of the Philippines, represented by the Social Security Commission (SSC), a quasi-judicial body empowered to resolve disputes under Republic Act No. 1161, as amended by Republic Act No. 8282 (Social Security Act of 1997).
- Social Security System (SSS), a government corporation created under Republic Act No. 1161, as amended.
Respondent:
- Asiapro Cooperative (Asiapro), a multi-purpose cooperative organized under the Cooperative Code of the Philippines (Republic Act No. 6938), registered with the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.
Other party of record:
- Stanfilco, a division of DOLE Philippines, Inc., and client of Asiapro under multiple Service Contracts.

Core Facts

Asiapro is a cooperative composed of owner-members, classified under its by-laws as:
- Regular members: entitled to all rights and privileges of membership.
- Associate members: not entitled to vote or be voted upon, entitled to by-law-provided rights only.
Primary objectives of Asiapro: provide savings and credit facilities and develop livelihood services for owner-members.
Asiapro entered into Service Contracts with Stanfilco to provide services; owner-members were assigned to Stanfilco and did not receive compensation/wages but received shares in the “service surplus” generated by the cooperative’s activities (including income from the Stanfilco contracts).
Service surplus payments to owner-members were based on quality and amount of services rendered and determined by Asiapro’s Board of Directors; such shares are required by the Service Contracts to be in amounts not lower than prevailing wages and related labor standards.
Owner-members requested Asiapro to register them with SSS as self-employed and for Asiapro to remit contributions as such; contributions were computed equal to the share of employer and employee to comply with Section 19-A of R.A. No. 1161, as amended by R.A. No. 8282.

Correspondence and Administrative Steps Prior to SSC Filing

26 September 2002: SSS (Vice-President for Mindanao Division Atty. Eddie A. Jara) sent a letter to Asiapro’s CEO/General Manager Leo G. Parma stating that based on the Service Contracts with Stanfilco, Asiapro is a manpower contractor supplying employees to Stanfilco and is therefore the employer of its owner-members; Asiapro should register as an employer and remit SSS contributions accordingly.
9 October 2002: Asiapro, through counsel, replied asserting it is not an employer because its owner-members are the cooperative itself and cannot be its own employer.
21 October 2002: SSS again sent a letter ordering Asiapro to register as an employer and report its owner-members as employees for compulsory SSS coverage.
Asiapro ignored SSS’s demands, prompting SSS to file the petition-complaint.

Administrative Filing and Pleadings

12 June 2003: SSS filed the petition-complaint before SSC, docketed SSC Case No. 6-15507-03, seeking an order directing either Asiapro or, alternatively, Stanfilco to register as employer and report Asiapro’s owner-members as covered employees and to remit required contributions under the Social Security Law of 1997.
Asiapro filed an Answer with Motion to Dismiss alleging absence of an employer-employee relationship between it and its owner-members and contesting SSC jurisdiction.
Stanfilco filed an Answer with Cross-claim against Asiapro.
17 February 2004: SSC issued an Order denying Asiapro’s Motion to Dismiss.
16 September 2004: SSC denied Asiapro’s Motion for Reconsideration of the 17 February 2004 Order.
Asiapro sought extension to appeal to the Court of Appeals but later filed a Petition for Certiorari (CA-G.R. SP No. 87236), asserting SSC lacked jurisdiction and that SSC acted with grave abuse of discretion.

Court of Appeals Disposition

5 January 2006: Court of Appeals granted Asiapro’s petition for certiorari, annulled and set aside SSC Orders dated 17 February 2004 and 16 September 2004, and ordered dismissal of the petition-complaint dated 12 June 2003 filed by SSS.
20 March 2006: Court of Appeals denied SSS’s motion for reconsideration via Resolution.
The appellate court’s decision held that SSC had no jurisdiction because there was no employer-employee relationship between Asiapro and its owner-members.

Issues Presented to the Supreme Court (as summarized)

Whether SSC has jurisdiction over the petition-complaint filed by SSS against Asiapro.
Whether Asiapro is estopped from assailing SSC jurisdiction because it filed an Answer with Motion to Dismiss before SSC.

Petitioners’ (SSS/SSC) Contentions

SSC has jurisdiction under R.A. No. 8282 (Section 5) and Section 1, Rule III of the 1997 SSS Revised Rules of Procedure to settle disputes on compulsory coverage, benefits, contributions and related matters.
The petition-complaint specifically raises the compulsory coverage issue, squarely within SSC expertise and jurisdiction.
Even if prima facie the employment relationship must be determined, SSC may inquire into the existence of employer-employee relationship as an incident to determining compulsory coverage; resolution of that issue does not require prior determination by the NLRC.
Denial of Asiapro’s Motion to Dismiss was within SSC’s authority and not grave abuse of discretion because the existence of employer-employee relationship is a factual question requiring evidence.
Asiapro is estopped from contesting SSC jurisdiction after filing its Answer with Motion to Dismiss, thereby submitting to SSC’s jurisdiction.
There exists an employer-employee r