BALIWAG TRANSIT, INC., PETITIONER, VS. THE HON. COURT OF APPEALS AND ROMAN MARTINEZ, RESPONDENTS.

Baliwag Transit versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Baliwag Transit, Inc. against the Court of Appeals and Roman Martinez. The petitioner asks the Supreme Court to reverse the appellate court's decision, which had ordered the bus company to remit to the Social Security Commission the premium contributions of Martinez for certain years, plus penalties. The case matters because it settles a recurring question in social legislation and labor law: whether the issuance of a single Social Security System identification number to two bus lines proves that one of them operates under the so-called kabit system, and whether that arrangement can make one bus operator the employer of another operator's employees for purposes of premium contributions.

Procedural History

Roman Martinez filed a petition with the Social Security Commission on August 14, 1975, docketed as SSC Case Number 3272, to compel Baliwag Transit, Inc. to remit his premium contributions for the years 1958 to March 1963 and from 1967 to March 1971. After trial on the merits, the Social Security Commission issued a resolution on September 12, 1979, finding that no employer-employee relationship existed between Martinez and the respondent company, and dismissing the petition for lack of merit.

Martinez appealed to the Court of Appeals. The appellate court reversed and set aside the Commission's resolution, finding that the late Pascual Tuazon had operated his buses under the kabit system, and ordered Baliwag Transit, Inc. to remit the premium contributions for the stated periods plus penalties at the rate of three percent per month of delinquency. The petitioner's motion for reconsideration was denied. The company then came to the Supreme Court by petition for review on certiorari. The petition was given due course, and the case was submitted for deliberation.

Facts

Two passenger bus lines with similar buses and similar routes were being operated under the firm names Baliwag Transit and Baliwag Transit, Inc. The first was owned by the late Pascual Tuazon, who operated it until his death on January 26, 1972. The second was owned by the petitioner corporation, incorporated in 1968 and existing since then. Both bus lines operated under different grants of franchises from the Public Service Commission, but the Social Security System issued only one identification number, Number 03-22151, for both.

Roman Martinez claimed to be an employee of both bus lines under that single identification number. He alleged that he was employed by the petitioner from 1947 to 1971 as conductor and later as inspector, with corresponding salary increases, and that the petitioner deducted premium contributions from his salaries but remitted only a much lesser amount covering June 1963 to 1966.

Baliwag Transit, Inc. denied employing Martinez. It insisted that he was employed by Pascual Tuazon, who since 1948 owned and operated buses under the trade name Baliwag Transit, separate and distinct from the buses operated by the corporation owned by Victoria Vda. de Tengco. The two bus lines had different offices, maintenance and repair shops, garages, books of account, and managers. Martinez's employment lasted until 1971, when his employer Pascual Tuazon became bankrupt. It was Tuazon who deducted the contributions but allegedly did not remit them. The petitioner also noted that Martinez allowed seventeen years to elapse, and filed his petition only after Pascual Tuazon had already died.

Issues

• Whether or not the issuance by the Social Security System of one identification number to two bus lines necessarily indicates that one of them operates its buses under the kabit system.
• Whether or not the Court of Appeals erred in finding that the late Pascual Tuazon operated his buses under the kabit system with the petitioner.
• Whether or not the employer-employee relationship between Pascual Tuazon and Martinez makes the petitioner liable to remit the latter's premium contributions.
• Whether or not Martinez's cause of action had already prescribed.

Applicable Provisions

Article 1144 of the Civil Code provides:

Those founded upon a written contract; those upon an obligation created by law; and those upon a judgment shall be brought within ten years from the time the right of action accrues.

The Court applied this provision by analogy to hold that Martinez's cause of action, filed seventeen years after it accrued, had already prescribed.

Ruling

On the first issue, the Court answered in the negative. The kabit system is an arrangement whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. The determining factor is the possession of a franchise to operate, which negates the existence of the kabit system, and not the issuance of one identification number for both bus lines, from which the existence of the system was inferred.

On the second issue, the Court held that the appellate court's finding of a kabit system was not supported by the records. It was undisputed, as testified to by seven witnesses for the petitioner and by a witness from the Board of Transportation who had access to the records on applications and grants of franchises, that Victoria Vda. de Tengco and Pascual Tuazon were granted separate franchises to operate public utility buses on the Manila to Baliuag routes. Tuazon's franchises were later cancelled when he terminated his operations. Both bus lines therefore operated under their own franchises but opted to retain the firm name Baliwag Transit, with the word Inc. added in the petitioner's case, evidently to take advantage of the goodwill the name enjoyed with the riding public.

On the third issue, the Court held that the employer-employee relationship between Pascual Tuazon and Martinez had been established, and that the remittance of the latter's contributions was the responsibility of his employer Tuazon, regardless of the existence or non-existence of the kabit system. The Court stressed that administrative findings of fact must be respected so long as they are supported by substantial evidence, even if not overwhelming or preponderant, and that the reviewing court cannot re-examine the sufficiency of the evidence as if the case were originally instituted before it.

On the fourth issue, the Court held that Martinez, having allowed seventeen years to elapse before filing his petition, had slept on his rights, and his cause of action had already prescribed under Article 1144 of the Civil Code.

Doctrine

The kabit system is an arrangement whereby a person granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee. The determining factor is the possession of a franchise to operate, which negates the existence of the kabit system, and not the issuance of a single Social Security System identification number to two bus lines.

The employer-employee relationship determines who is bound to remit premium contributions. Where the employee was hired by, worked for, and took orders from one operator, that operator is the employer responsible for the remittances, regardless of any kabit arrangement.

Administrative findings of fact must be respected so long as they are supported by substantial evidence, even if not overwhelming or preponderant.

A cause of action founded upon an obligation created by law prescribes in ten years under Article 1144 of the Civil Code, and a delay of seventeen years amounts to sleeping on one's rights.

Disposition

The Court reversed and set aside the decision of the Court of Appeals and reinstated the resolution of the Social Security Commission dismissing the petition, so the petitioner Baliwag Transit, Inc. won.

Remember This

The single line worth memorizing is that the determining factor in the kabit system is the possession of a franchise to operate, not the issuance of one Social Security System identification number. Examiners like to use this case on the definition of the kabit system, on the substantial evidence standard for administrative findings, and on the ten-year prescriptive period for obligations created by law.