Section 28 (e) of RA 1161 or the Social Security Law provides for penal sanctions against employers who file to remit their monthly contribution to the SSS. Under the said provision, “(e) Whoever fails or refuses to comply with the provisions of this Act or with the rules and regulations promulgated by the Commission, shall be punished by a fine of not less than five hundred pesos nor more than five thousand pesos, imprisonment for not less than six months nor more than one year, or both, at the discretion of the court: Provided, That where the violation consists in failure or refusal to register employees or himself, in case of the covered self-employed or to deduct contributions from employee’s compensation and remit the same to the SSS, the penalty shall be a fine of not less than five hundred pesos nor more than five thousand pesos and imprisonment for not less than six months nor more than one year. (As amended by Sec. 19, R.A. 1792; Sec. 16, R.A. 2658, Sec. 8, P.D. No. 177, S-1973; and Sec. 20, P.D. No. 1636, S-1979)
Despite this provision, there are still employers who fail to remit monthly contributions to SSS. As a result, these employers may be caught for violation of the provisions of RA 1161 and be imposed criminal penalty. The question is may an employer escape criminal liability by offering property to SSS as payment for their failure to remit monthly contribution.
In the case of Social Security System vs. Department of Justice, Martel and Systems Encoding Corporation (GR No. 158131), one of the issue raised was may an employer which has admitted its failure to remit monthly contributions to SSS and offered in lieu of the payment of the contributions a property as payment for its liability be cleared from its criminal liability provided under Section 28 (e) of RA 1161 or the Social Security Law?
In the case of Social Security System vs. Department of Justice, Martel and Systems Encoding Corporation (GR No. 158131), Petitioner SSS filed with the Pasay City Prosecutor’s Office a complaint against respondent Martels and the five co-accused for SENCOR’s non-payment of contributions amounting to P6,936,435.80 for the period January 1991 to May 1997. The respondents admitted their failure to remit monthly contributions to the SSS and offered a parcel of land in Tagaytay City covered by TCT No. 26340 registered under Martel’s name. Petitioner accepted the offer on the condition that they will settle their obligation by way of dacion en pago or through cash settlement within a reasonable time.
After three years, the respondent offered to the petitioner instead of the Tagaytay City property computer related services. On December 2001, the petitioner filed with the Pasay City Prosecutor’s Office another complaint against respondent Martels and the five co-accused for non-remittance of contributions from February 1991 to October 2000 amounting to P21,148,258.30.
The respondents argue that the petitioner could no longer hold them criminally liable under the SSS Law for their failure to remit their monthly contribution after they accepted the offer to assign the Tagaytay City property. They also argued that the relationship between SENCOR and the petitioner was converted into an ordinary debtor-creditor relationship via novation.
The Supreme Court ruled that SENCOR’s criminal liability was not extinguished. It cited the case of People v. Perry which ruled that “It may be observed in this regard that novation is not one of the means recognized by the Penal Code whereby criminal liability can be extinguished; hence, the role of novation may only be to either prevent the rise of criminal liability or to cast doubt on the true nature of the original basic transaction, whether or not it was such that its breach would not give rise to penal responsibility…”
The Supreme Court argued that for novation to apply there must be an original contract to speak of. In this case, the novation does not apply because there was no original contract that can be replaced by a new contract changing the object or principal condition of the original contract, substituting the person of the debtor, or subrogating a third person in the rights of the creditor.
“The original relationship between SENCOR and petitioner is defined by law – RA 1161, as amended – which requires employers like SENCOR to make periodic contributions to petitioner under pain of criminal prosecution. Unless Congress enacts a law further amending RA 1161 to give employers a chance to settle their overdue contributions to prevent prosecution, no amount of agreements between petitioner and SENCOR (represented by respondent Martels) can change the nature of their relationship and the consequence of SENCOR’s non-payment of contributions.”
Secondly, the agreement between the Petitioner and the respondent did not materialize. “Petitioner’s acceptance of respondent Martels’ offer was subject to a suspensive condition that “x x x [private] respondents will x x x settle their obligation either by way of dacion en pago or through cash settlement within a reasonable time x x x.” This condition was not met because three years after respondent Martels’ offer, petitioner did not receive any payment. In fact, respondent Jose Martel, at that point, changed the terms of the supposed settlement by offering computer-related services instead of assigning the Tagaytay City realty.
