G.R. No. L-14606; April 28, 1960
Laguna Transportation Co., Inc., petitioner-appellant, vs. Social Security System, respondent-appellee.

FACTS

Petitioner Laguna Transportation Co., Inc. filed a petition seeking a declaration that it is not bound to register as a member of the Social Security System (SSS) or pay contributions under the Social Security Act. The SSS contended that petitioner was covered by the Act as its business had been in operation for at least two years prior to September 1, 1957. The parties submitted a stipulation of facts. It was established that an unregistered partnership named Laguna Transportation Company, composed of four individuals, commenced operating a transportation business on April 1, 1949. On June 20, 1956, the original partners, along with two new members, organized and registered a corporation named Laguna Transportation Company, Inc. (the petitioner). The corporation continued the same transportation business of the unregistered partnership, using the same lines and equipment. The SSS required petitioner to register and remit contributions starting September 1957. Petitioner argued it only started operation upon its corporate registration on June 20, 1956, and thus had not been in operation for the required two-year period for compulsory coverage.

ISSUE

Whether the petitioner corporation, which succeeded the business of an unregistered partnership, is considered an employer that had been in operation for at least two years prior to the relevant dates under the Social Security Act, thereby subjecting it to compulsory coverage.

RULING

The Supreme Court affirmed the lower court’s decision, holding that the petitioner was subject to compulsory coverage under the Social Security Act. The Court ruled that the entity engaged in the transportation business had been in operation since April 1, 1949, when the unregistered partnership began. The mere change in the form of organization from an unregistered partnership to a corporation on June 20, 1956, did not create a new employer entity for the purpose of the Social Security Act’s coverage requirements. The corporation was a mere continuation of the partnership business. To adopt the petitioner’s argument would allow employers to easily circumvent the statute by periodically changing their form of organization. The law will disregard the separate juridical personality of a corporation when it is used to defeat public convenience or the policy of a statute. Since the business operation commenced in 1949, it had been in operation for more than two years prior to the enactment of the Social Security Act in 1954 and its amendatory act in 1957. Therefore, the petitioner was compulsorily covered.