Co vs. People

The doctrine of conclusiveness of judgment applies to a criminal prosecution for violation of the Social Security Law when a prior final NLRC decision has already determined that no employer-employee relationship existed between the accused and the complainants.

Petitioner Nely T. Co was charged with violating the Social Security Law for allegedly failing to remit SSS contributions of respondent spouses Jose and Mercedes Lim, who claimed to be her employees. Prior to the filing of the Information, the spouses had filed an illegal dismissal case against Ever-Ready Phils., Inc. and its officers, including petitioner, which eventually resulted in a finding that the spouses were independent contractors, not employees.

On January 12, 2001, an Information was filed before the Regional Trial Court (RTC) of Quezon City, Branch 78, charging petitioner Nely T. Co with violation of Section 22(d) in relation to Section 28(e) of Republic Act No. 1161, as amended by Republic Act No. 8282 (the Social Security Law of 1997). The complaint was initiated by respondent spouses Jose and Mercedes Lim, who alleged that they were petitioner’s employees and accused petitioner of failing to remit their compulsory contributions to the Social Security System (SSS).

Prior to the filing of the Information, on March 27, 2000, the spouses had filed a labor case for illegal dismissal and nonpayment of various monetary claims against Ever-Ready Phils., Inc. and its officers, including petitioner. On September 29, 2000, Labor Arbiter Ernesto S. Dinopol dismissed the complaint for lack of merit, holding that the spouses had voluntarily left the company as evidenced by deeds of release and quitclaim, and that as field personnel, they were not entitled to the claimed monetary benefits. Both parties appealed to the National Labor Relations Commission (NLRC), which affirmed the labor arbiter's decision in a resolution dated May 31, 2001. The NLRC ruled that the spouses, being sales representatives, were independent contractors, thereby concluding that no employer-employee relationship existed between them and the company. This NLRC resolution became final on December 20, 2001.

On July 3, 2001, prior to the finality of the NLRC ruling, petitioner filed a motion to quash the Information in the RTC, arguing that the facts alleged did not constitute an offense because the spouses were not her employees, citing the then-pending labor case. Notwithstanding the subsequent final NLRC ruling, the RTC denied the motion to quash on November 12, 2001. Petitioner then filed a petition for certiorari and prohibition in the Court of Appeals (CA) to set aside the RTC resolution. On January 13, 2003, the CA required petitioner to implead the People of the Philippines, SSS, Office of the Solicitor General, and the spouses. Petitioner failed to comply, leading the CA to dismiss the petition on May 15, 2003, and deny reconsideration on October 6, 2003, holding that petitioner was bound by the negligence of her former counsel.

• Extrinsic Fraud: Petitioner argued that the CA should have granted her motion for reconsideration because the abandonment of her case by her former counsel amounted to extrinsic fraud, which she claimed was a meritorious ground under Rule 37, Section 1(a) of the Rules of Court.
• Conclusiveness of Judgment: Petitioner maintained that the factual finding in the illegal dismissal case that the respondent spouses were not her employees is binding in the criminal case, asserting that without an employer-employee relationship, the spouses were not entitled to SSS coverage and she should not be penalized under the law.

• Motion for Reconsideration: Whether the petitioner's motion for reconsideration of the CA's dismissal of the petition was correctly denied.
• Motion to Quash: Whether the petitioner's motion to quash the Information should have been granted by the RTC.

• Motion for Reconsideration: Yes. The CA properly denied the motion for reconsideration because extrinsic fraud is a valid ground for a motion for new trial, not a motion for reconsideration.
• Motion to Quash: Yes. The RTC committed grave abuse of discretion in denying the motion to quash because the final NLRC decision finding no employer-employee relationship was binding under the doctrine of conclusiveness of judgment.

• Motion for Reconsideration: Under Rule 37, Section 1 of the Rules of Court, extrinsic fraud is a ground for a motion for new trial, not a motion for reconsideration. A motion for reconsideration may only be based on excessive damages, insufficient evidence, or that the decision is contrary to law. Since petitioner asserted no other ground, the motion was properly denied. Nevertheless, the Court suspended the rules in the interest of justice to resolve the substantive issue, recognizing that the possibility of a person being unjustly deprived of liberty due to a procedural lapse warranted a relaxation of the rules.
• Motion to Quash: The mandatory coverage of the Social Security Law is premised on the existence of an employer-employee relationship. The NLRC had already ruled with finality that the respondent spouses were independent contractors and not employees of petitioner. Applying the doctrine of conclusiveness of judgment, an aspect of res judicata, this factual finding bars the re-litigation of the same issue in the criminal case. The Court distinguished Republic vs. Asiapro Cooperative, which concerned the SSC's jurisdiction, as inapplicable here because the employer-employee relationship had already been finally adjudged in the NLRC. Any conviction based on the erroneous premise of an existing employer-employee relationship would violate petitioner's constitutional rights.

• Conclusiveness of Judgment — Under Rule 39, Section 47(c) of the Rules of Court, a final judgment on the merits in a prior case bars the re-litigation of issues already determined, even in a subsequent action involving a different cause of action. The Court applied this doctrine to hold that the final NLRC ruling that no employer-employee relationship existed between the parties precluded the criminal prosecution for violation of the Social Security Law, which requires such a relationship.
• Res Judicata — Founded on the principle of estoppel and public policy against multiplicity of suits, it has two concepts: bar by prior judgment (Rule 39, Sec. 47(b)) and conclusiveness of judgment (Rule 39, Sec. 47(c)). Matters settled by a final judgment should not be litigated upon again to avoid burdening the courts and wasting valuable time and energy.

• "Well-settled is the rule that the mandatory coverage of RA 1161, as amended, is premised on the existence of an employer-employee relationship." — This establishes the foundational requirement for liability under the Social Security Law, which was absent in this case due to the NLRC ruling.
• "The present controversy, therefore, squarely falls under the umbrage of res judicata, particularly, under the rule on 'conclusiveness of judgment.' — This applies the doctrine to bar the criminal case based on the prior labor ruling.
• "Simply said, any conviction for violation of the SSS law based on the erroneous premise of the existence of an employer-employee relationship would be a transgression of petitioner’s constitutional rights." — This highlights the substantive justice rationale for applying the procedural bar.

• Smith Bell & Co., Inc. vs. Court of Appeals, G.R. No. 59692, 11 October 1990, 190 SCRA 362 — Applied the doctrine of conclusiveness of judgment to bar an SSS case based on a prior illegal dismissal ruling that found no employer-employee relationship.
• Constantino vs. Sandiganbayan (First Division), G.R. No. 140656, 13 September 2007, 533 SCRA 205 — Held that findings in an administrative case are binding in a subsequent criminal case involving the same facts and evidence.
• Republic vs. Asiapro Cooperative, G.R. No. 172101, 23 November 2007, 538 SCRA 659 — Distinguished; this case concerned the jurisdiction of the Social Security Commission, which was not the issue in the present case.

• Rule 37, Section 1, Rules of Court — Governs grounds for a motion for new trial or reconsideration. The Court used this to show that extrinsic fraud is not a valid ground for a motion for reconsideration.
• Rule 39, Section 47 (b) and (c), Rules of Court — Defines the concepts of res judicata: bar by prior judgment and conclusiveness of judgment.
• Section 22(a) and (b) in relation to Section 22(e), Republic Act No. 1161, as amended by RA 8282 (Social Security Law of 1997) — Imposes the obligation on employers to remit SSS contributions and prescribes penalties for non-remittance. The Court noted that coverage is premised on an employer-employee relationship.

Chief Justice Reynato S. Puno (Chairperson), Associate Justice Antonio T. Carpio, Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Lucas P. Bersamin.