SOCIAL SECURITY SYSTEM, PETITIONER, VS. COURT OF APPEALS AND THE QUALITY TOBACCO CORPORATION, RESPONDENTS.

This is a petition for review on certiorari of the decision
of the Court of Appeals*
dated March 16, 1977 in CA-G.R. No. 05087-SP entitled Romeo Carreon,
petitioner-appellee vs. Quality Tobacco Corporation,
respondent-appellant and Social Security System, intervenor-appellee,
reversing the Resolution dated January
21, 1976 of the Social Security System and dismissing the petition filed by
Romeo Carreon.

The facts as found by the
Court of Appeals are as follows:

“QTC, formerly U.S. Tobacco Corporation, is a firm engaged in
the manufacture and sale of cigarettes. 
On August 12, 1972,
QTC, as VENDOR, entered into an agreement with CARREON, as VENDEE, the salient
provisions of which are as follows:

‘2.   The VENDEE shall purchase one or more brands
of cigarettes of the VENDOR on cash basis only, subject to the discretion of
the VENDOR as to the brand and quantity thereof;

xxx                   xxx                   xxx

‘3.   The VENDEE shall sell the cigarettes herein
mentioned only within Quezon Province and or such
other places as may be designated and or limited thereafter by the VENDOR and
only to residents of, or retailers or jobbers doing, and having their place of
business in, said assigned territory, strictly, at such prices set by the
VENDOR from time to time for the aforementioned respective brands of cigarettes
in the sale thereof by the VENDEE in said assigned territory.  The VENDEE is fully aware that a violation of
this particular paragraph will cause grave and serious consequences to the
VENDOR and that he shall be liable for all damages caused by said violation.

‘4.   The VENDEE shall be solely responsible for
the cigarettes delivered to him by the VENDOR as well as for the aforementioned
proceeds from the sale thereof, and any loss thereof due to any cause shall be
solely for his own risk and account.

xxx                   xxx                   xxx

‘6.   The VENDOR may loan a delivery truck or
trucks to the VENDEE, which truck or trucks shall be used by the VENDEE
exclusively in connection with this contract and at all time maintained by the
said VENDEE in good condition; and for as long as the VENDEE may be allowed the
use of the VENOR’s truck or trucks, the VENDEE shall
pay all the expenses for gasoline, oil, repairs, operating costs, maintenance,
tires, spare parts, etc., but the VENDOR may at its discretion assume the
payment of major repair.

xxx                   xxx                   xxx

‘9.   This contract, may, however, be terminated upon one (1)
week’s notice of either party at any time.

’10. In the event a
court litigation should be necessary to recover from the VENDEE any amount due
to the VENDOR, the VENDEE shall pay to the VENDOR all such damages that the
VENDOR may suffer arising from the violation by the VENDEE of any of the terms
and conditions of this contract and/or implementation and/or instructions
mentioned in Paragraph 7 hereof plus the cost of suit and attorney’s fees of at
least 20% of the amount sought to be recovered, which in no case shall be less
than Five Hundred Pesos (P500.00) for the purposes of this paragraph, venue of
actions is hereby agreed to be in the City of Manila and the VENDEE hereby
waives any other proper venue in any action which may be brought by or against
him in connection with this contract or in connection with other actions which
may be brought incident thereto.’

“The contract with CARREON was terminated by QTC on December 18, 1973.

“On April 29, 1974,
CARREON filed a petition with the Social Security Commission alleging that he
was an employee of QTC, and asking that QTC be ordered to report him for
coverage under the Social Security Law. 
QTC answered claiming that CARREON has not been an employee but was an
‘Independent businessman’.  The Social
Security System intervened and, taking the side of CARREON, also asked that QTC
be ordered to pay Social Security contributions in respect of CARREON.  On January
21, 1976, the Social Security Commission resolved CARREON’s petition, finding him to be an employee of
QTC.  The rulings in U.S. Tobacco
Corporation vs. Benjamin Serna, et al., CA-G.R. No. 32041, September 5, 1967,
and The Shell Co. Phil. Ltd. vs. Fireman’s Insurance Co. of Newark, et al., 100
Phil. 757, were inter alia, relied
upon.”

Cognizant of the striking
similarities obtaining in the case before it and the Mafinco
vs. Ople case decided by this Court on March 25,
1976, and relying solely on the doctrine laid down in said case, the Court of
Appeals issued the herein assailed decision dated March 16, 1977, the dispositive part of which reads:

“WHEREFORE, the Resolution of the Social Security Commission
of January 21, 1976 in its
Case No. 2543 is hereby REVERSED and the petition filed in said case by Romeo Carreon is dismissed.”

In a Motion for
Reconsideration dated March 25, 1977, the Social Security System sought the
reconsideration of the aforequoted decision (Rollo, pp. 43-49). 
However, finding no merit in said motion, the Court of Appeals denied
the same in its resolution dated April 14, 1977 (Rollo, pp.
50-51).

Hence
this petition.

The First Division of this Court without giving
due course to said petition resolved to require the respondents to comment (Rollo, p. 64). 
Private respondent filed its Comment on August 9, 1977 (Rollo, p. 69).

Thereafter, this Court resolved to give due course to the
petition and required the parties to submit simultaneous memoranda (Rollo, p. 74).  On September 23, 1977, private
respondent and petitioner filed their respective memoranda (Rollo,
pp. 80-118).

The issue raised by the petitioner before this Court is the very
same issue resolved by the Court of Appeals – that is, whether or not Romeo Carreon is an employee or an independent contractor under
the contract aforequoted.  Corollary thereto the question as to whether
or not the Mafinco case is applicable to this case
was raised by the parties.

The Court took cognizance of the fact that the question of
whether or not an employer-employee relationship exists in a certain situation
continues to bedevil the courts.  Some
businessmen with the aid of lawyers have tried to avoid the bringing about of
an employer-employee relationship in some of their enterprises because that
juridical relation spawns obligations connected with workmen’s compensation,
social security, medicare, minimum wage, termination
pay and unionism.

For this reason, in order to put the issue at rest, this Court
has laid down in a formidable line of decisions the elements to be generally
considered in determining the existence of an employer-employee relationship,
as follows:  a) selection and engagement
of the employee; b) the payment of wages; c) the power of dismissal; and d) the
employer’s power to control the employee with respect to the means and method
by which the work is to be accomplished. 
The last which is the so-called “control test” is the most
important element (Brotherhood Labor vs. Labor Unity Movement of the Phils., 147 SCRA 49 [1987]; Dy Ke Beng vs. International Labor
and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco
Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social
Security System vs. Court of Appeals, 37 SCRA 579 [1971]).

Applying the 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 method by which the same is to
be accomplished, the question of whether or not there is an employer-employee
relationship for purposes of the Social Security Act has been settled in this
jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA 924
(1967).  In other words, 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 effort, the
relationship of employer-employee does not exist.  (SSS vs. Court of Appeals,
30 SCRA 210 [1969]).

It is the contention of petitioner that the Mafinco
case which has been the sole basis of the Court of Appeals’ finding that Romeo Carreon is an independent contractor is not applicable in
the instant petition, there being no substantial parallelism between said
contract and the contract of purchase and sale in this case.  It pointed out that there are in the Mafinco contract provisions which by express implication
point to the status of the peddler as an independent contractor such as:  a) that should the peddler employ a driver or
helpers, the latter shall be his employee/s and his/their compensation shall be
for the peddler’s account; that the peddler shall comply with the provisions of
the Social Security Act and all applicable laws (par. 2); b) peddler is
responsible for damage to property, death or injuries to persons covered by his
own acts or omissions or those of his driver or helpers (par. 3); c) peddler is
required to secure at his own expense all necessary licenses and permits and to
bear all expenses which may be incurred in the sale of soft drinks (par. 5); d)
the peddler is to furnish a performance bond of P1,000.00 in favor of Mafinco to assure performance by the peddler of his
obligation to his employee under the Social Security Act (par. 11), which
provisions are notably absent in the contract in the case at bar (Rollo, pp. 103-104).

It further contends that the Court of Appeals in an effort to
justify its holding picked out only paragraphs 1, 2, 4, 6 and 9 of the Mafinco contract and thereafter concluded that the two
contracts are similar.

Private respondent on the other hand, avers that the Mafinco contract is applicable to the case at bar.  The two contracts need not embody almost the
same provisions in order that they may be considered similar.  It is enough that the aspect of similarity
arising from the terms and conditions to be considered because of their
relevance to the issue, is relatively much stronger
than the dissimilarity.

Private respondent likewise maintains that the decision was
correctly concluded not only on the similarity of the two contracts but also on
factual evidence adduced at the trial and since respondent Court has already
examined the facts and passed judgment on the basis thereof, its decision is no
longer subject to review.  Stated
otherwise, the Court of Appeals “looked behind the contract” but
found the evidence insufficient to justify a finding that the terms of the
contract were not followed.  That the evidence for Carreon and SSS
failed to “pierce” the contract (Rollo, p.
83).

Private respondent’s contention is untenable.

The distinction between a question of law and a question of fact
is explained in our jurisprudence in Ramos vs. Pepsi Cola Bottling Co. (19 SCRA
289, 292 [1967]), to wit:

“For a question to be one of law it must involve no
examination of the probative value of the evidence presented by the litigants
or any of them and the distinction is well-known.  There is a question of law in a given case
when the doubt or difference arises as to what the law is in a certain state of
facts; there is a question of fact when the doubt arises as to the truth or the
falsehood of alleged facts.”

cited in G.R.
No. L-39767, Lorenzo Hernandez vs. The Court of
Appeals, March 31, 1987.

In the case at bar, it is evident that the basic contention is
what the law is in the given state of facts. 
More than that, the well-settled rule that the finding of facts of the
Court of Appeals is conclusive on the parties, admits of exceptions among which
are:  (1) when the findings of fact of
the Court of Appeals are contrary to those of the trial court and (2) when the
findings of fact of the Court of Appeals are premised on the supposed absence
of evidence and are contradicted by evidence on record (Sacay
vs. Sandiganbayan, 142 SCRA 609 [1986]; Manlapaz vs. Court of Appeals, 147 SCRA 239 [1987]).

In this case, the Court of Appeals ruled that there is not enough
evidence to show that the contract between Carreon
and QTC was not reflective of their agreement to warrant reformation.  As earlier pointed out, the Court of Appeals
did not consider the entirety of the contract but only portions thereof which
led to the conclusion that Carreon was an independent
contractor.

Thus, after a study of the records and applying the “control
test”, there appears to be no question that the existence of an employer-employee
relationship between Romeo Carreon and QTC has been
established, based on the following “undisputed” facts as pointed out
by the Solicitor General, to wit:  (a)
QTC assigned a definite sales territory for Romeo Carreon;
(b) QTC provided Romeo Carreon with a delivery truck
for the exclusive use of the latter in his sales activities; (c) QTC dictated
the price of the cigarettes sold by Romeo Carreon;
(d) QTC prescribed what brand of cigarette Romeo Carreon
could sell; (e) QTC determined
the persons to whom Romeo Carreon could sell; (f) QTC issued circulars and memoranda
relative to Romeo Carreon’s sales activities; (g) QTC required Romeo Carreon
to submit to it daily, weekly and monthly reports; (h) QTC grounded Romeo Carreon for six
months in 1966; (i) Romeo Carreon
was supervised by sales coordinators of QTC;
(j) Romeo Carreon was subject to payment of damages and loss even of
accrued rights for any violation of instructions made by QTC in relation
to his sales activities; and (k) Romeo Carreon was
paid an allowance by QTC.  All these
indicate control and supervision over Carreon’s work.

Moreover, it is elementary that findings of administrative
agencies are generally accorded not only respect but also of finality (Rosario
Bros, Inc. vs. Ople, 131 SCRA 72 [1984]).

PREMISES CONSIDERED, the decision of the Court of Appeals
dated March 16, 1987 and
its resolution of April 14, 1977
are hereby REVERSED and SET ASIDE, and the resolution of the Social Security
Commission dated January 21, 1976
is AFFIRMED and REINSTATED.

SO ORDERED.

Teehankee, C.J., Narvasa,
Cruz, and Gancayco,
JJ., concur.

*
Penned by Justice Corazon Juliano Agrava, concurred in by Justices Lourdes P. San Diego &
Mama D. Busran.