G.R. No.

L-24883            October 31, 1969

MACHUCA TILE CO., INC., petitioner,

vs.
SOCIAL SECURITY SYSTEM, respondent.

Ramon J. Dizon for petitioner.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres,
Solicitor Camito D. Quiason, Social Security System Legal Counsel Filemon Q. Almazan and Social
Security System Trial Attorney Gelacio L. Bayani for respondent.

TEEHANKEE, J.:

We affirm, in this appeal, the Resolution of the Social Security Commission holding petitioner-
appellant Machuca Tiles Company, Inc. liable under Section 24(a) of the Social Security Act for the
payment of damages in the form of death benefits to the legal heirs of its deceased employee,
Eduardo Jungay, in the sum of P810.00 by virtue of its failure to make a timely report to the System
during the lifetime of said deceased that the latter was in its employ and had qualified for compulsory
coverage in the System.

The undisputed facts of the case are thus related in the appealed Resolution: "The deceased,
Eduardo Jungay, was a former employee of the petitioner and as such, qualified for compulsory
coverage in December 1961. He died on June 17, 1962, whereupon a claim for death benefits was
filed with the System by Prudencio Jungay, a brother of the deceased, as one of the legal heirs. The
claim was duly processed by the System's Claims Department, and in the course thereof, it
discovered that the deceased was reported by the petitioner for coverage in the System only on
September 5, 1962, when the premiums on this account were remitted to the System. After
processing of the claim, the Claims Department adjudicated the sum of P810.00 as death benefits
payable to the deceased's legal heirs, namely: Prudencio, Rogelio, Tranquilino and Patricio, all
surnamed Jungay, but in view of the failure of the petitioner to report his coverage prior to his death
on June 17, 1962, the Acting Administrator of the Social Security System declared the petitioner
liable to pay to the said heirs the amount of P810.00 as adjudicated by the Claims Department.
Taking exception to this ruling, the petitioner filed the instant petition."1

The Social Security Commission, after due hearing rendered its Resolution of May 18, 1965
affirming the Administrator's ruling declaring the petitioner, rather than the System, legally liable for
the payment of death benefits to the deceased employee's legal heirs, as follows:

WHEREFORE, PREMISES CONSIDERED, the petition should be, as it is hereby, denied.

Within fifteen (15) days from its receipt hereof, the petitioner is directed to pay to the legal
heirs of the deceased, Eduardo Jungay, whose names are set out hereinabove, the sum of
EIGHT HUNDRED TEN PESOS (P810.00) as damages equivalent to the death benefits
which the legal heirs would have received had the name of the deceased been reported to
the System on time, pursuant to Section 24 (a) of the law, conformably with the
Administrator's ruling which is hereby affirmed, and to submit to the System proof of such
payment.2

On appeal, petitioner in its lone assignment of error contends that since some months after the
death on June 17, 1962 of its employee, Eduardo Jungay, it had submitted on September 5, 1962 to
the System its report on its Employees and remitted the corresponding premiums, including the sum
of P28.80 representing the deceased Jungay's premiums from December, 1961 to June, 1962, it
would not be just for respondent-appellee to receive and keep the premiums paid for the deceased
Jungay and still hold petitioner liable for payment of the death benefits. Petitioner further contends
that since respondent was aware that Jungay's premiums were paid only after his death but did not
return nor even offer to return the same, respondent should be held in estoppel and liable for the
payment of the death benefits.

The fallacy of petitioner's contentions lies in its failure to realize that it has two distinct obligations
under the Social Security Act, to wit, the obligation of making a timely remittance of premiums under
Section 22 (a) and the obligation of making a timely report of its employees' names and other
personal data, including the social security number assigned to each employee, for coverage, under
Section 24 (a).

Section 22 (a) thus requires the employer to make a timely remittance of the premium contributions
of both employer and employee, under pain of being subject to payment of a 3% monthly penalty:

Sec. 22. Remittance of Premiums. — (a) The contributions imposed in the preceding

sections shall be remitted to the System within the first seven days of each calendar month
following the month for which they are applicable to within such time as the Commission may
prescribe. Every employer required to deduct and to remit such contributions shall be liable
for their payment, and if any contribution is not paid to the System, as herein prescribed, he
shall pay beside the contribution a penalty thereon of three per centum per month from the
date the contribution falls due until paid. If deemed expedient and advisable by the
Commission, the collection and remittance of contributions shall be made quarterly or semi-
annually in advance, the contributions payable by the employees to be advanced by their
respective employers: Provided, That upon separation of an employee, any premium so paid
in advance but not due shall be credited or refunded to his employer.3

On the other hand, Section 24 (a) requires the timely report of employees' names and personal data
for coverage under the System, under penalty of being liable for damages equivalent to the benefits
the employee or his heirs would have been entitled to receive from the System had his name been
reported on time by the employer:

SEC. 24. Employment records and reports. — (a) Each employer shall report immediately to
the System the names, ages, civil status, occupations, salaries and dependents of all his
employees, who are in his employ and who are or may, later be subject to compulsory
coverage: Provided, That if an employee subject to compulsory coverage should die or
become sick or disabled without the System having previously received a report about him
from his employer, the said employer shall pay to the employee or his legal heirs damages
equivalent to the benefits to which said employee would have been entitled had his name
been reported on time by the employer to the System.4

The posthumous remittance of the deceased employee's premiums served but to extinguish
petitioner's liability therefor and to free it from the imposition of the 3% monthly penalty from the date
the contribution falls due until actually paid. These accrued premiums were legally due to the System
as the contribution of both employer and employee under Sections 18 and 19 of the Act and the
death of the employee did not extinguish petitioner's liability to remit the same. There is no
justification, consequently, for petitioner's claim that respondent should be held in estoppel for
having retained them. As this Court has held in upholding the amendment on January 14, 1958 of
the System's Rules, eliminating the provision for rebate of a proportionate amount of the premiums
paid on behalf of temporarily employed alien technicians upon their departure from the Philippines
and allowing such rebate only if they have been members for at least two years, "membership in this
institution is not the result of a bilateral, consensual agreement where the rights and obligations of
the parties are defined by and subject to their will. Republic Act 1161 requires compulsory coverage
of employers and employees 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 a 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."5

Petitioner's separate mandatory liability under Section 24 (a) of the Act for failure to make a timely
report of the employee's name and personal data for coverage under the system therefore remains
and must be enforced. It is obvious that the Act attaches greater importance to this requirement and
obligation of the employer than that of timely remittance of the premiums. For failure to make such
report in fact excludes the employee from the System's coverage and the Act therefore shifts to the
erring employer the responsibility of paying the social security benefits "to which the employee or his
heirs would have been entitled had his name been reported on time by the employer to the System."
Where the employer has, however, timely and properly reported the employee's name for coverage
but has failed or refused to pay or remit the premiums, such failure or refusal, by express provision
of the Act in Section 22 (b) "shall not prejudice the right of the covered employee to the benefits of
the coverage." The Act, in such cases as above stated, exacts the lesser liability of payment of the
delinquent premiums with a 3% monthly penalty. Thus, in a similar case,6 this Court brushed aside
the employer's contention that its failure to make such a report was due to the deceased employee's
refusal to have his share of the monthly premiums deducted from his salary and upheld the Social
Security Commission's jurisdiction to enforce the mandatory provisions of Section 24 (a) against the
employer.

Petitioner's invoking of the ruling of this Court in a commercial insurance case7 that acceptance by
the insurer of insurance premiums with full knowledge of the facts entitling it to treat the policy as no
longer in force estops it from claiming forfeiture, has no application to the case at bar. In said case,
liability of the insurer had not yet attached when it collected premiums for a policy that it had issued
under circumstances which it knew rendered the policy void, and therefore it could not invoke in bad
faith the policy's nullity against a subsequent claim of loss under the policy. Here, the mandatory
liability of the employer in place of the System for the social security benefits due to the deceased
employee had already been incurred, and its posthumous payment of the accrued premiums was
but in discharge of a separate and distinct liability therefor. Petitioner's solace lies in that its
contributions to the System and its discharging of its liabilities under the Act, will have helped
subsidize the cause of social security to protect not only its own employees but the general
membership of the System against the hazards of disability, sickness, old age and death in line with
the Constitutional mandate to promote social justice and to insure the well-being and economic
security of all the people.8

One last item. Payment by petitioner of the death benefits in the sum of P810.00 awarded to the
legal heirs of the deceased employee under the Social Security Commission's Resolution of May 18,
1965 has been delayed pending this unjustified appeal. It is only just and in accordance with
law9 that the sum due said heirs bear legal interest of six (6%) per cent per annum from June 4,
1965, date of receipt of said Resolution by petitioner.10

ACCORDINGLY, the Resolution appealed from is hereby affirmed, with the modification that
petitioner shall pay the legal heirs of the deceased Eduardo Jungay six (6%) per cent interest per
annum on the sum of P810.00 from June 4, 1965 until the date of actual payment.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro and Fernando, JJ., concur.
Zaldivar and Barredo, JJ., took no part.