G.R. No. L-57493. January 7, 1987.
Baliwag Transit, Inc., petitioner, vs. The Hon. Court of Appeals and Roman Martinez, respondents.

FACTS

Private respondent Roman Martinez filed a petition with the Social Security Commission (SSC) to compel petitioner Baliwag Transit, Inc. (BTI) to remit his SSS premium contributions for specified periods from 1958 to 1971. Martinez alleged he was employed by BTI from 1947 to 1971, with salary deductions for SSS contributions, but only remittances for 1963-1966 were made. BTI denied being Martinez’s employer, asserting he was employed by the late Pascual Tuazon, who owned and operated a separate bus line under the trade name “Baliwag Transit.” BTI, a corporation incorporated in 1968, argued the two entities had distinct franchises, offices, accounts, and management. The SSC dismissed Martinez’s petition, finding no employer-employee relationship with BTI.
The Court of Appeals reversed the SSC’s decision. It inferred that Tuazon operated his buses under the “kabit system” with BTI, primarily because the Social Security System issued only one ID number (03-22151) for both bus lines. Consequently, the appellate court held BTI liable for the unremitted contributions as the franchise holder.

ISSUE

Whether the Court of Appeals erred in holding Baliwag Transit, Inc. liable for the SSS contributions of Roman Martinez based on a finding that the “kabit system” existed and that BTI was his employer.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the SSC resolution. The legal logic is twofold. First, the appellate court’s inference of a “kabit system” from the mere issuance of a single SSS ID number was erroneous. The “kabit system” is defined as an arrangement where a franchise holder allows another to operate vehicles under that franchise for a fee. The determinative factor is the legal possession and use of a franchise, not an administrative numbering practice by the SSS. The SSC’s factual finding, supported by evidence, was that two separate bus lines operated under different franchises owned by distinct entities (Tuazon and BTI). Administrative findings of fact, if supported by substantial evidence, must be respected. The SSC correctly found Martinez was employed by Tuazon, not BTI.
Second, even assuming a “kabit system” existed, the employer-employee relationship is determined by the “four-fold test” (selection, payment of wages, power of dismissal, control). The established facts showed Martinez was hired, paid, and controlled by Tuazon. The franchise holder (BTI) is not automatically the employer of the actual vehicle owner’s (Tuazon’s) employees. Liability for SSS contributions rests with the actual employer, which was Tuazon. Furthermore, Martinez allowed 17 years to lapse before filing his claim, causing his cause of action to prescribe by analogy under Article 1144(2) of the Civil Code. Therefore, BTI could not be held liable.