Ambassador Hotel, Inc. vs. Social Security System

Jurisdiction over a corporation in a criminal case for non-remittance of SSS contributions is acquired through the arrest of its managing head, directors, or partners, and the acquittal of the officer does not extinguish the corporation's civil liability where the court has not declared that the fact giving rise to civil liability does not exist.

Ambassador Hotel, Inc. is a juridical entity covered by the Social Security System (SSS) laws, obligated to remit contributions on behalf of its employees. Yolanda Chan was elected President of the hotel on April 25, 1998, but was prevented from assuming office by her predecessor, Simeon Nicolas Chan, until an RTC order dated April 10, 2001 allowed her to assume the position. The SSS, as a government agency tasked with administering a sound and viable social security system, is dependent on the prompt remittance of employer contributions to deliver benefits to its members.

Ambassador Hotel, Inc. is a corporation covered by the Social Security System. In September 2001, the SSS filed a complaint with the Quezon City Prosecutor's Office against the hotel and its officers for non-remittance of SSS contributions and penalty liabilities covering the period June 1999 to March 2001, amounting to P769,575.48. After preliminary investigation, an Information dated January 28, 2004 was filed before the RTC, charging Yolanda Chan, as President and Chairman of the Board, and Alvin Louie Rivera, as Treasurer and Head of the Finance Department, with violation of Section 22(a), in relation to Sections 22(d) and 28(e) of R.A. No. 1161, as amended by R.A. No. 8282. Only Yolanda was arrested; she pleaded not guilty upon arraignment.

The prosecution presented Maria Rezell C. De Ocampo, an SSS Accounts Officer, who investigated the hotel's account and discovered that its last contribution payment was made in May 1999. On April 17, 2001, she visited the hotel, informed a representative named Guillermo Ciriaco of the delinquency, and requested previous SSS payment records, which could not be produced. After referring the matter to the Cluster Legal Unit, De Ocampo sent a final demand letter by registered mail and personally served it, with receipt acknowledged by Norman Cordon, the hotel's Chief Operating Officer. On July 4, 2001, a hotel representative submitted a list of unpaid contributions. On September 14, 2001, hotel representatives proposed installment payment but never tendered postdated checks. De Ocampo concluded that unpaid contributions from June 1999 to March 2001 amounted to P303,459.00, with penalties reaching P531,341.44 as of January 2, 2005. The prosecution also presented Simeon Nicolas Chan, former hotel president, who testified that Yolanda became president on April 25, 1998 pursuant to Board Resolution No. 7, series of 1998.

For the defense, Yolanda testified that although she was elected president on April 25, 1998, Simeon prevented her from assuming office, prompting her to file charges for grave coercion and grave threats against him. Simeon, in turn, filed an injunction case, which was raffled to RTC Branch 46 and decided in Yolanda's favor. She assumed the presidency without impediment only on April 10, 2001, pursuant to the RTC Branch 46 order. She argued that because she was not performing presidential functions from April 25, 1998 until April 10, 2001, she could not be held criminally liable for non-payment of SSS contributions from June 1999 to March 2001. Cordon corroborated that the SSS conducted an investigation, that he attempted to locate SSS contribution records but could not find them, and that the SSS did not respond to his communications before filing the case.

The RTC acquitted Yolanda, finding she was not the managing head of the hotel during the delinquency period under Section 28(f) of R.A. No. 8282, but held Ambassador Hotel civilly liable for P584,804.00 in contributions for SSS Medicare and Employee Compensation, including 3% penalties. The CA affirmed this ruling in toto, holding that the civil action was deemed instituted in the criminal case and that the hotel was not deprived of due process.

• Separate Corporate Personality: Petitioner argued that it has a separate and distinct personality from its officers, including Yolanda, and that it was neither a party to the criminal case nor was summons issued against it.
• Lack of Jurisdiction: Petitioner maintained that the RTC did not acquire jurisdiction over its person because it was not impleaded as a party and no summons was served upon it.
• Denial of Due Process: Petitioner contended that it was deprived of due process when the RTC declared it civilly liable for unpaid SSS contributions despite having no jurisdiction over its person.
• Invalidity of the Decision: Petitioner argued that the RTC had no right to render an adverse decision against it because it was not a party in the criminal action.

• Corporate Liability under R.A. No. 8282: Respondent countered that under R.A. No. 8282, employers including juridical entities that violate their obligation to remit SSS contributions are criminally liable, and in cases of corporations, the managing head is the one criminally responsible.
• Jurisdiction via Arrest of Managing Head: Respondent argued that since Yolanda, as President of Ambassador Hotel, was properly arrested, the RTC acquired jurisdiction over the hotel.
• Civil Liability Deemed Instituted: Respondent maintained that the acquittal of Yolanda did not extinguish the civil liability of the hotel because the civil action was deemed instituted in the criminal action.
• Sufficient Notice: Respondent highlighted that Ambassador Hotel was given sufficient notice of its delinquency and the pending case against it.

• Jurisdiction over the Corporation: Whether the lower court acquired jurisdiction over the person of the petitioner.
• Due Process: Whether petitioner was deprived of due process when the lower court declared it liable to respondent SSS even though it is not a party to the case.
• Validity of the Decision: Whether the decision rendered by the lower court declaring petitioner liable to respondent SSS for alleged unremitted SSS contribution is valid.

• Jurisdiction over the Corporation: Yes. Jurisdiction over a corporation in a criminal case under R.A. No. 8282 is acquired through the arrest of its managing head, directors, or partners, who are deemed the corporation's representatives. No separate service of summons or impleading of the corporation is required.
• Due Process: No. Petitioner was not deprived of due process. Its directors and officers were repeatedly notified of the delinquency and the pending case, and its own lawyer testified on its behalf during trial.
• Validity of the Decision: Yes. The decision is valid. The acquittal of Yolanda did not extinguish the hotel's civil liability because the RTC did not declare that the fact from which civil liability might arise did not exist, and preponderance of evidence established non-remittance.

• Jurisdiction over the Corporation: Under Section 28(f) of R.A. No. 8282, if the penalized act is committed by a corporation, its managing head, directors, or partners shall be liable to the penalties. The law specifically disregards the separate personality between the corporation and its officers for violations of R.A. No. 8282. Since a juridical entity cannot be physically arrested, arrest of its representative is sufficient to acquire jurisdiction over it. In this case, Yolanda, as President, was arrested and brought before the RTC. The Information alleged she was President, supported by affidavits and exhibits, justifying the issuance of a warrant of arrest. Jurisdiction once attached is not ousted by subsequent events. The fact that trial evidence showed Yolanda was not performing presidential functions during the delinquency period negated her criminal responsibility but did not divest the RTC of jurisdiction over the hotel. Jurisdiction is determined by the allegations in the Information, not by the result of evidence at trial.

• Due Process: Ambassador Hotel was well informed of its delinquency by SSS even before the case was filed. When the case was filed, its directors and officers were notified. Its own lawyer, Atty. Galon, testified during trial on its behalf. The hotel was given the opportunity to present its defense and controvert the prosecution's evidence. Cordon admitted the hotel was informed of its delinquency and attempted to locate its SSS records but failed. The hotel never proved it had already paid its contributions or identified who should have been accountable for non-payment. Having been given sufficient leeway to explain its obligations but failing to do so, the hotel had only itself to blame.

• Validity of the Decision: When a criminal action is instituted, the civil action for recovery of civil liability arising from the offense is deemed instituted unless waived, reserved, or separately instituted. Extinction of the penal action does not carry with it extinction of the civil action unless the extinction proceeds from a declaration in a final judgment that the fact from which civil liability might arise did not exist. Yolanda's acquittal did not result in dismissal of the civil case against the hotel because the RTC did not declare that the fact giving rise to civil liability did not exist. The prosecution established through De Ocampo that the hotel's last remittance was in May 1999, that the hotel was notified of its delinquency, and that it failed to settle its obligations. Preponderance of evidence showed the hotel failed to remit contributions from June 1999 to March 2001 in the amount of P584,804.00.

• Jurisdiction over Corporations in Criminal Cases — Jurisdiction over a corporation in a criminal case is acquired through the arrest of its managing head, directors, or partners, who serve as the corporation's representatives. A juridical entity cannot be physically arrested; thus, arrest of its agent is sufficient. Under Section 28(f) of R.A. No. 8282, the law specifically disregards the separate personality between the corporation and its officers for SSS law violations, so an arrest on the corporation's officers binds the corporation. No separate service of summons is required, nor is it necessary to implead the corporation as a party.

• Once Jurisdiction Attaches, It Is Not Ousted by Subsequent Events — Jurisdiction of a court depends upon the state of facts existing at the time it is invoked. Once jurisdiction attaches to the person and subject matter of litigation, subsequent events—even those that would have prevented jurisdiction from attaching initially—will not operate to oust jurisdiction already attached. Jurisdiction in criminal cases is determined by the allegations of the Information or criminal complaint and not by the result of evidence at trial.

• Civil Liability Deemed Instituted in Criminal Actions — When a criminal action is instituted, the civil action for recovery of civil liability arising from the offense charged is deemed instituted with the criminal action unless the offended party waives the civil action, reserves the right to institute it separately, or institutes the civil action prior to the criminal action. Extinction of the penal action does not carry with it extinction of the civil action, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil liability might arise did not exist.

• Piercing the Corporate Veil by Specific Provision of Law — Although a corporation has a personality separate and distinct from that of the persons composing it, the corporate veil is pierced when a director, trustee, or officer is made personally liable by specific provision of law. Under R.A. No. 8282, a corporation cannot invoke its separate juridical entity to escape liability for non-payment of SSS contributions.

• "To acquire jurisdiction over the corporation in a criminal case, its head, directors or partners must be served with a warrant of arrest. Naturally, a juridical entity cannot be the subject of an arrest because it is a mere fiction of law; thus, an arrest on its representative is sufficient to acquire jurisdiction over it." — This passage articulates the controlling rule on how jurisdiction is acquired over a corporation in a criminal case, which is central to the resolution of the first issue.

• "The jurisdiction of a court depends upon the state of facts existing at the time it is invoked, and if the jurisdiction once attaches to the person and subject matter of the litigation, the subsequent happening of events, although they are of such a character as would have prevented jurisdiction from attaching in the first instance, will not operate to oust jurisdiction already attached." — This formulation of the doctrine on permanence of jurisdiction is the ratio for rejecting the argument that Yolanda's acquittal divested the RTC of jurisdiction over the hotel.

• "Further, extinction of the penal action does not carry with it the extinction of the civil action, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil liability might arise did not exist." — This statement of the rule on survival of civil liability after acquittal is the basis for sustaining the hotel's civil liability notwithstanding Yolanda's acquittal.

• Garcia vs. Social Security Commission Legal and Collection, SSS, 565 Phil. 193 (2007) — Cited to describe the SSS's salutary purpose and the adverse effect of non-remittance on the soundness and viability of SSS funds and member benefits.
• Navarra vs. People, G.R. No. 224943, March 20, 2017 — Cited for the proposition that failure to register employees, deduct contributions, or remit SSS contributions subjects the employer to both monetary sanctions and criminal prosecution.
• Kukan International Corporation vs. Reyes, 646 Phil. 210 (2010) — Cited for the principle that a corporation is invested by law with a personality separate and distinct from that of the persons composing it.
• Aratea vs. Suico, 547 Phil. 407 (2007) — Cited for the doctrine that the corporate veil is pierced when a director, trustee, or officer is made personally liable by specific provision of law.
• Abellana vs. People, 671 Phil. 444 (2011) — Cited for the rule that extinction of the penal action does not carry with it the extinction of the civil action unless the extinction proceeds from a declaration that the fact from which civil liability might arise did not exist.
• Dioquino vs. Cruz, 202 Phil. 35 (1982) — Cited for the doctrine that jurisdiction once attached is not ousted by subsequent events.
• People vs. Ocaya, 172 Phil. 576 (1978) — Cited for the principle that jurisdiction in criminal cases is determined by the allegations of the Information and not by the result of evidence at trial.

• Section 8(c), R.A. No. 8282 (Social Security Act of 1997) — Defines "employer" as any person, natural or juridical, who carries on any trade, business, or industry in the Philippines and uses the services of another person. Applied to classify Ambassador Hotel as an employer bound by the SSS law.
• Section 22(a), R.A. No. 8282 — Mandates remittance of contributions within the first ten days of each calendar month following the applicable month and imposes a penalty of 3% per month for late payment. Applied to establish the hotel's obligation to remit and the penalty for non-remittance.
• Section 28(f), R.A. No. 8282 — Provides that if the penalized act is committed by an association, partnership, corporation, or other institution, its managing head, directors, or partners shall be liable to the penalties. Applied to justify the arrest of Yolanda as the hotel's managing head to acquire jurisdiction over the corporation and to disregard the separate corporate personality.
• Section 1, Rule 111, Rules of Court — Provides that when a criminal action is instituted, the civil action for recovery of civil liability arising from the offense is deemed instituted unless waived, reserved, or separately instituted. Applied to hold that the civil action against Ambassador Hotel was deemed included in the criminal case.

Peralta, J. (Acting Chairperson), and Martires, J., concurred. Carpio, J., was on official leave. Leonen, J., was on leave.