Foster Wheeler Corporation v. Social Security System
REITERATIONFacts
The Antecedents: Petitioner, Foster Wheeler Corporation, a foreign corporation licensed to do business in the Philippines since 1952, completed the construction of an oil refinery for Caltex (Phil.), Inc. in 1954. It had no actual construction work in the Philippines until March 1959, when it commenced the construction of a refinery for Standard Vacuum Oil Company (Stanvac) in Limay, Bataan. Following this resumption of operations, the respondent Social Security System (SSS) required petitioner to register as a compulsorily covered member. Procedural History: Petitioner disputed the SSS's requirement, arguing that its compulsory coverage should only commence two years from March 1959, and that the two-year period mentioned in Section 9 of the Social Security Act must be the period immediately preceding coverage. The Social Security Commission sustained the SSS's position, declaring petitioner compulsorily covered as of March 1959 and directing remittance of premiums with penalties. Petitioner appealed this resolution. The Appeal: Petitioner-appellant Foster Wheeler Corporation appealed the resolution of the Social Security Commission, primarily contending that its prior operation from 1952 to 1954 should not be counted for the purpose of determining compulsory coverage under Section 9 of the Social Security Act. It argued that the two-year period of operation must be immediately preceding the date of coverage. Petitioner also questioned the SSS's requirement for registration in March 1959, the retroactive effect of its membership, and the imposition of a 3% monthly penalty on back premiums.
Issue(s)
Whether the two-year period of operation required for compulsory coverage under Section 9 of the Social Security Act, as amended, must be one immediately preceding the firm's coverage. Whether the petitioner, a foreign corporation, ceased to "do business" in the Philippines during its period of operational inactivity from 1954 to March 1959 for the purpose of Social Security System (SSS) compulsory coverage. Whether the Social Security Commission erred in giving retroactive effect to petitioner's membership and in imposing interest at three percent (3%) per month on all back premiums.
Ruling
The Supreme Court affirmed the resolution of the Social Security Commission. The Court ruled that Foster Wheeler Corporation is compulsorily covered by the Social Security System. The two-year period of operation required by law does not need to be immediately preceding the coverage date, and the company's maintenance of its license and legal representative in the Philippines meant it was considered 'in operation'. The Court also held that employers are duty-bound to register once conditions for coverage are met, and penalties for non-compliance are applicable.
Ratio Decidendi
On Issue 1: The Supreme Court held that the interpretation proffered by the petitioner, Foster Wheeler Corporation, is without merit because the language of Section 9 of the Social Security Act, as amended, does not support it. The provision merely states that an employer must have been "in operation, for at least two years" prior to being compelled to become a member of the System. The law does not explicitly qualify this two-year period as one "immediately preceding" coverage. To impose such a qualification would amount to reading a substantial element into the law that is not present, an act beyond the Court's authority. The Court thus concluded that the petitioner's admitted operation from 1952 to 1954 in constructing the Caltex oil refinery sufficiently fulfilled the two-year operation condition, irrespective of subsequent periods of inactivity. On Issue 2: The Court determined that Foster Wheeler Corporation, despite its lack of actual construction work from 1954 to March 1959, did not cease to "do business" in the Philippines in legal contemplation; rather, it merely suspended operations. This conclusion is supported by the fact that its license from the Securities and Exchange Commission, obtained in 1952, was never cancelled and was utilized again in March 1959 for the Stanvac project. Furthermore, the petitioner's admission that it maintained a legal representative or an attorney-in-fact in the Philippines during that inactive period strongly indicates a corporate intent to remain amenable to legal processes and to avail itself of the privilege of doing business should opportunities arise. Adopting the petitioner's theory would enable mass evasion of social security coverage by allowing employers to nullify previous periods of operation through temporary suspensions, which would contravene the legislative intent of the Social Security Act. On Issue 3: The Supreme Court found the petitioner's third assignment of error to be without merit, affirming the Commission's actions. The Court ruled that an employer's compulsory coverage under the Social Security Act commences automatically when the conditions specified by law are met. Consequently, the employer incurs a duty to register at that moment, and any failure to do so subjects them to the penalties provided by law, including the three percent (3%) monthly interest on back premiums. The Court emphasized that the Social Security Commission is not required to issue a prior resolution declaring an employer covered, as imposing such a requirement would burden the Commission with an impractical and cumbersome duty to actively seek out firms for coverage. Instead, employers, upon meeting the statutory conditions, are expected to proactively submit themselves for coverage.
Main Doctrine
The Supreme Court affirmed the compulsory coverage of Foster Wheeler Corporation by the Social Security System (SSS). The Court held that the two-year period of operation required for an employer to be compulsorily covered under Section 9 of the Social Security Act need not be the two years immediately preceding the date of coverage. The Court reasoned that Foster Wheeler Corporation, by maintaining its license and a legal representative in the Philippines from 1952 to 1954 and again from March 1959 onwards, was considered to be 'in operation' for the required period, even if it had no actual construction work between 1954 and 1959. Furthermore, the Court ruled that employers are duty-bound to register with the SSS once the conditions for coverage are met, and failure to do so subjects them to penalties, without the need for a prior resolution from the Commission declaring them covered.