In Romarico J. Mendoza v. People of the Philippines, the Supreme Court addressed the liability of a corporate president for failing to remit Social Security System (SSS) contributions. The Court affirmed that managing heads of corporations can be held liable for violations of the Social Security Act, emphasizing the mandatory nature of SSS contributions and the irrelevance of good faith in such violations. However, the Court modified the imposed penalty, aligning it with the Revised Penal Code’s provisions on misappropriation, thereby illustrating the interplay between special laws and general penal laws.
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This case revolves around Romarico J. Mendoza, the president of Summa Alta Tierra Industries, Inc. (SATII), who was charged with violating the Social Security Act for failing to remit SSS premium contributions of his employees from August 1998 to July 1999. The central legal question is whether a corporate officer, specifically the president, can be held personally liable for the corporation’s failure to remit these contributions, especially when the company faces economic hardship.
The Social Security Act of 1997, or R.A. No. 8282, mandates employers to remit SSS contributions. Section 22(a) emphasizes this obligation, while Section 28 outlines the penalties for non-compliance. The Information filed against Mendoza accused him, as the ‘proprietor’ of SATII, of willfully failing to remit SSS premium contributions amounting to P421,151.09. Despite being granted extensions to settle the delinquency in installments, Mendoza failed to do so, leading to his indictment.
Mendoza attempted to defend himself by arguing that SATII had shut down due to economic decline during the period in question. He also contended that as merely a conduit of the corporation, he should not be personally liable for its debts. However, the Court of Appeals brushed aside this argument, stating that as President, Chairman, and Chief Executive Officer, Mendoza was the managing head and therefore liable under Section 28(f) of the Social Security Act.
The Supreme Court upheld the conviction, emphasizing the mandatory nature of SSS contributions. It cited United Christian Missionary Society v. Social Security Commission, which states:
No discretion or alternative is granted respondent Commission in the enforcement of the law’s mandate that the employer who fails to comply with his legal obligation to remit the premiums to the System within the prescribed period shall pay a penalty of three 3% per month. The prescribed penalty is evidently of a punitive character, provided by the legislature to assure that employers do not take lightly the State’s exercise of the police power.
The Court clarified that failure to comply with the law is malum prohibitum, meaning intent or good faith is irrelevant. Even if Mendoza’s company faced economic difficulties, the obligation to remit SSS contributions remained. The Court found no need for statutory construction regarding the term ‘proprietor’ because it connotes management, control, and power over a business entity. Therefore, Mendoza’s position as president placed him squarely within the ambit of ‘managing head’ as defined in Section 28(f) of the Social Security Act.
However, the Supreme Court modified the penalty imposed. While the lower courts relied on Sec. 28(e) of the Social Security Act, the Supreme Court held that Sec. 28(h) was the proper provision, which refers to Article 315 of the Revised Penal Code for penalties related to misappropriation. Section 28(h) states:
Any employer who after deducting the monthly contributions or loan amortizations from his employee’s compensation, fails to remit the said deductions to the SSS within thirty (30) days from the date they became due shall be presumed to have misappropriated such contributions or loan amortizations and shall suffer the penalties provided in Article Three hundred fifteen [Art. 315] of the Revised Penal Code.
Article 315 of the Revised Penal Code provides penalties based on the amount misappropriated. This led the Court to apply the Indeterminate Sentence Law. Drawing from People v. Gabres, the Court determined the appropriate penalty to range from four (4) years and two (2) months of prision correccional, as minimum, to twenty (20) years of reclusion temporal, as maximum.
FAQs
| What was the key issue in this case? | The key issue was whether the president of a corporation could be held personally liable for the corporation’s failure to remit SSS contributions, and what the appropriate penalty should be. |
| What does ‘malum prohibitum’ mean? | Malum prohibitum refers to acts that are illegal because they are prohibited by law, not because they are inherently immoral. In such cases, intent is not a necessary element for a conviction. |
| What is Section 28(f) of the Social Security Act? | Section 28(f) specifies that if an offense under the Act is committed by a corporation, its managing head, directors, or partners shall be liable for the penalties. |
| Why did the Supreme Court modify the penalty? | The Supreme Court modified the penalty because it found that Section 28(h) of the Social Security Act, in conjunction with Article 315 of the Revised Penal Code, was the correct basis for determining the penalty, not Section 28(e). |
| What is the Indeterminate Sentence Law? | The Indeterminate Sentence Law requires courts to impose a minimum and maximum term of imprisonment, rather than a fixed sentence, allowing for parole based on the prisoner’s behavior and rehabilitation. |
| What was the final ruling of the Supreme Court? | The Supreme Court affirmed the conviction of Romarico J. Mendoza but modified the penalty to an indeterminate prison term of four (4) years and two (2) months of prision correccional, as minimum, to twenty (20) years of reclusion temporal, as maximum. |
| Can economic hardship excuse non-remittance of SSS contributions? | No, economic hardship does not excuse the mandatory obligation to remit SSS contributions. The law makes no distinction based on the employer’s financial situation. |
| Who is considered a ‘managing head’ under the Social Security Act? | The term ‘managing head’ is broadly interpreted to include those with significant control and management responsibilities within a business entity, not limited to specific job titles. |
The Supreme Court’s decision underscores the strict liability imposed on employers, particularly managing heads of corporations, for failing to remit SSS contributions. It also highlights the importance of correctly applying the penal provisions of both special laws and the Revised Penal Code to ensure appropriate penalties. This case serves as a reminder to corporate officers of their responsibility to comply with social security obligations, regardless of economic challenges, and the potential for personal liability in cases of non-compliance.
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Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Romarico J. Mendoza v. People, G.R. No. 183891, August 03, 2010