Farolan v. Court of Appeals
REITERATIONFacts
The Antecedents: Cecilio T. Saludar and Carlos Porquez, employees of Marinduque Mining and Industrial Corporation (MMIC), were dismissed in 1984. Saludar pursued a claim for illegal dismissal, while Porquez's widow filed for social security benefits. MMIC's assets were foreclosed and transferred to Maricalum Mining Corporation (Maricalum), with Maricalum assuming MMIC's liabilities to third parties. A prior Supreme Court ruling established Maricalum's liability for Saludar's backwages based on this assumption of liabilities. Procedural History: Following MMIC's cessation of operations and the foreclosure of its assets, the Social Security System (SSS) filed a petition to revive judgment against MMIC on December 11, 1991, after the initial judgment in favor of Mrs. Porquez became final and unexecuted within the five-year period. As MMIC could not be served, the SSS filed an amended petition on April 28, 1997, impleading responsible officers of MMIC, including petitioner Ramon J. Farolan. Farolan was served summons on December 11, 1997, and subsequently filed a motion to dismiss, which was denied by the Social Security Commission on June 9, 1998. Farolan then elevated the matter to the Court of Appeals via certiorari and prohibition, which affirmed the SSC's order on August 31, 1999. The Petition: Petitioner Ramon J. Farolan seeks review of the Court of Appeals' decision, arguing that the appellate court erred in holding him liable for the unremitted Social Security System premiums of Carlos Porquez. He contends that the liability had been judicially assumed by Maricalum Mining Corporation, citing the Supreme Court's ruling in the Saludar case. Farolan asserts that Maricalum's assumption of liabilities, made retroactive to October 1984, should encompass this claim, and that holding him personally liable contravenes the principle of contractual succession of employer interests. The respondents counter that the claim period predates the retroactivity of the Deed of Transfer and that Farolan is raising this issue for the first time on appeal.
Issue(s)
Whether the amended petition to revive judgment is barred by prescription and laches. Whether petitioner Ramon J. Farolan, as an officer of MMIC, can be held liable for the unremitted SSS contributions for the late Carlos Porquez, considering the Deed of Transfer between MMIC and Maricalum. Whether the Deed of Transfer between MMIC and Maricalum absolved petitioner of liability, and whether the issue of transfer of liabilities can be raised on appeal.
Ruling
The Supreme Court granted the petition, reversed and set aside the decision of the Court of Appeals, and discharged petitioner Ramon J. Farolan of any liability under SSC Case No. 12-13757-91. The Court noted that MMIC had already paid the sum representing the unpaid contributions, leading to the termination of the case.
Ratio Decidendi
On the issue of prescription and laches: The Court agreed with the Court of Appeals that the amended petition to revive judgment was not barred by prescription. While filed beyond the ten-year period, the delay was attributed to the cessation of MMIC's operations, a circumstance beyond the control of the SSS. The Court reiterated the principle that prescription does not set in against a prevailing party when the cause of the delay is beyond their control, citing Camacho vs. Court of Appeals. Furthermore, the Court noted that under the second paragraph of Section 22(b) of R.A. 1161, the employee's widow had 20 years to file the action, thus the period had not yet prescribed. On the liability of petitioner Ramon J. Farolan: The Supreme Court found that petitioner should not be held liable for the unremitted SSS contributions. The Court clarified that the liability to pay unpaid premiums lies with Maricalum, as Maricalum had already absorbed all assets and liabilities of MMIC pursuant to a Deed of Transfer that was made retroactive to October 1984. Therefore, the judgment against MMIC became part of the liabilities transferred to Maricalum. The Court disagreed with the Court of Appeals' reasoning that the period of the unpaid premiums (September 1980 to August 1981) determined the liability, stating that the liability did not accrue until MMIC was finally declared liable on October 6, 1986. On the effect of the Deed of Transfer: The Court held that the Deed of Transfer between MMIC and Maricalum did not exempt petitioner from liability in this specific instance because the liability for the SSS contributions, as determined by the SSC on October 6, 1986, arose after Maricalum had already absorbed MMIC's liabilities retroactively to October 1984. The Court emphasized that the liability did not accrue until the final determination by the SSC, which occurred after the retroactive effectivity of the Deed of Transfer. The Court also found that the issue of transfer of liabilities was a corollary issue vital to the determination of petitioner's liability and thus could be raised on appeal, as dismissing appeals on purely technical grounds is generally frowned upon.
Main Doctrine
A petition to revive a judgment for unpaid SSS contributions is not barred by prescription if the delay in its filing was due to circumstances beyond the control of the prevailing party, such as the cessation of the employer's operations. Furthermore, corporate officers may be held liable for such contributions if the employer corporation is no longer existing and unable to satisfy the judgment, provided the liability did not arise from obligations assumed by a successor corporation through a Deed of Transfer that was made retroactive to a date prior to the accrual of the liability.