SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (PAFLU), PETITIONER, VS. THE HON. JUDGE E. SORIANO, ETC. ET AL., RESPONDENTS.

The Social Security System Employees Association (PAPLU), composed of
employees of the Social Security Commission, transmitted on October 20,
I960′ to the latter a set of demands containing terms and conditions of
employment including a request for recognition as a collective
bargaining agent. Instead of answering the demands, the Commission
filed on December 14, 1960 before the Court of First Instance of Manila
a petition for declaratory relief wherein it asked that the Social
Security System which was created by Republic Act No. 1161 be declared
as a governmental agency performing governmental functions so that its
employees may be prohibited from joining labor unions and from
compelling petitioner to enter into a collective bargaining agreement
with them as well as from declaring strikes detrimental to the System.

The union answered the petition with a counter-prayer that the SSS be
declared as an agency of the government exercising propietary
functions. In the meantime, a conference wag held between the union and
the SSC in connection with the demands submitted by the former and
sensing that the Commission was not disposed to enter into a collective
bargaining agreement with it, the union, filed before the Court of
Industrial Relations a charge for unfair labor practice against said
Commission pursuant to Section 14, paragraph (b),
of Republic Act 875. Two days later, or on February 16, 1961, the union
went on strike and picketed the premises of the Social Security
Commission.

Without losing time, the Commission filed on the very same date before
the Court of First Instance of Manila an urgent petition with
preliminary injunction praying that an order be immediately issued
requiring the union members to return to work and desist from,
picketing the premises of the Commission. The Court, presided over by
Judge B. Soriano, issued on the same date an ex parte
preliminary injunction ordering the union members not only to desist
from, picketing the above premises but also to refrain from, doing any
act of violence. As a consequence, the union filed before this Court a
petition ,for certiorari with preliminary injunction praying that
respondent judge be restrained from enforcing his writ of preliminary
injunction, on the ground that he. had no jurisdiction to issue it ex
yarte. This Court issued the injunction prayed for. Respondents filed
an urgent petition to dissolve the injunction, but the same was denied.
After respondents had filed their answer, hearing was held, and later
the case was submitted for decision.

The main issue to be determined is whether the SSS is a government
agency exercising governmental functions, as claimed by the
respondents, or whether it exercises proprietary functions, as
contended by petitioner, on which issue will necessarily hinge whether
respondent judge had acted in excess of his jurisdiction in issuing the
ex parte wit of * preliminary injunction subject, of the present petition for certioxari.

In Bacani vs. National Coconut Corporation, 100 Pihil., 468; 53 Off. Gaz., 2798, this Court said;

“* * * There are functions which our government is required to exercise
to promote its objectives as expressed in our Constitution and whiclh
are exercised by it as an attribute of sovereignty, and those which it
may exercise to promote merely the welfare, progress and prosperity of
the people To this latter class belongs the organization of these
corporations owned, or controlled by the government to promote certain
aspects of the economic life of our people such as the National Coconut
Corporation. These are what we may call government-owned or controlled
corporations which may take tin form of private enterprise or one
organized with powers arid formal characteristics of a private
corporation under the Corporation Law.

“The question that now arises is: Does the fact that thest corporations
perform certain functions of the government make f them a part of the
Government of the Philippines?

“The answer is simple: they do not acquire that status for the simple
reason that they do not come tinder the classification of municipal or
public corporations. Take for. Instaiict the National Coconut
Corporation. * * * it was given a corporate power separate anil
distinct from our government, for it was made subject to the provisions
of our Corporation. Law in so far as its corporate existence and the
powers it may exercise are concerned (sections 2 and 4, Commonwealth
Act No. 518). It may sue and be sued in the same mannei as any other
private corporations, and in this sense it is an entity different from
our Government.

* * * *

“To recapitulate, we may mention that the term
‘Government of the Republic of the Philippines’ * * * refers only to
that government entity through which the functions of the government
are exercised as an attribute of sovereignty, and in these are included
those arms through which political authority is made effective whether
they be provincial, municipal or other form of local government. These
are what we call municipal corporations. They do not include government
entities which are given corporate personality separate and distinct
from the government and which are governed by the Corporation Law.
Their powers, duties and liabilities have to be determined in the light
oú that law and of their corporate charters.”

It appears that the National Coconut Corporation was
declared to be an entity separate from the government or nor exercising
governmental functions because (1) it is not a municipal corporation,
(2) its powers are not exercised as an attribute of sovereignty, (3) it
was given a separate personality and powers separate and distinct from
the government, and (4) it may sue and be sued as any other private
corporations. As evidence of its having been endowed with powers
separate and distinct from those of the government is the fact that it
is made subject to the provisions of the Corporation Law. But to enjoy
such powers, it is not, however, necessary that it be declared
expressly that it is subject to the provisions of the Corporation Law,
because such may be inferred from the law creating it and its corporate
charter.

It may now be asked: Do these reasons hold true with regard to the Social Security System?

To begin with, the System is not a municipal corporation. In its strict
and proper sense, a municipal corporation is a body politic established
by law partly as an agency of the state to assist in the civil
government of the country, chiefly to regulate and administer the local
and internal affairs of the city, town or district which is
incorporated.^[1]
The Social Security Commission does not regulate or administer the
local affairs of a town, city, or district which is incorporated.

Again, the Social Security Commission or System has a personality of
its own, by virtue of which it can sue and be sued. This is clearly
inferred from Section 4(k)
of Republic Act No, 1161, as amended. In fact, it is endowed with
practically the same powers that are conferred by law upon any other
private corporations. Hence, we may say that there is a substantial
similarity between the Social Security Commission or System and the
National Coconut Corporation.

In this connection, it is
interesting to note the nature of the functions that the government may
exercise to accomplish its objectives. These functions are two-fold,
,constituent and ministrant: the former constitutes the very bonds of
society and are compulsory in nature; the latter are those that are
undertaken only by way of advancing the general interest of society,
and are merely optional. President Wilson enumerated the constituent
functions as follows:

“(1) The keeping of order and providing for the protection of persons and property from violence and robbery.

“(2) The flxing of the legal relations between man and wife and between parents and children.

“(3)
The regulation of the holding, transmission, and interchange of
property, and the determination of its liabilities for debt or crime. ‘

“(4)’ The determination of contract rights between individuals.

“(5) The definition and punishment of crimes.

“(6) The administration of justice in civil eases.

“(7) The determination of the political duties, privileges, and relations of citizens.

“(8)
Dealings of the state with foreign powers; the preservation of the
state from external danger or encroachment and the advancement of its
international interests. (Malcolm, The Government of the Philippine
Islands, p. 19)” (Bacani vs. National Coconut Corporation, supra)

The most important of the ministrant functions are: public works,
public education, public charity, health and safety regulations, and
regulations of trade and industry. The principles determining whether
or not a government shall exercise certain of these optional functions
are: (1) that a government should do for the public welfare those
things which private capital would not naturally undertake, and (2)
that a government should do those things which by their very nature it
is better equipped to administer for the public welfare than is any
private individual or group of individuals (Bacani vs. National Coconut Corporation, supra,).

It is noteworthy to state that the main objective of the SSS is
certainly not one of the constituent functions enumerated above but one
which merely aims at advancing the general interest of society which is
optional. In effect, its main, aim is to provide social security to a
large group of employees who are not in the government service because
as a rule private capital cannot undertake it while the government by
its very nature is better equipped to do so than any individual or
group of individuals. It may be true that social security is generally
handled by the government, but it does not follow that it cannot be
exercised or performed by a private entity or individual, for, as a
matter of fact, before the SSS was established there were already many
private systems adopted by private entities thru insurance companies
and mutual aid associations which served as forerunners of the SSS
(International Labor Office, Social Security, p. 5).

It is without doubt that the state created the SSS in the exercise
of its police power and that it was for a governmental purpose, or the
promotion of social justice, but it does not follow that the System
should necessarily be a government function or one in the exercise of
its sovereign powers. In fact, the System is not so essential and
indispensable that the government cannot exist without it. History
shows that our government, has existed for a long time before the
creation of the SSS. And this indicates that its creation is merely
optional or a means of promoting the welfare and general interest of
society.

It is true that the SSS is a creation of Congress (Republic Act No.
1161) and its existence and operation is financed by it. It is likewise
true that under said Act the insurance is made compulsory in order that
its coverage might be as universal as possible. We may even say that
the Commission is given by law quasi-judicial powers in order to have
an expeditious adjudication of the benefits of social insurance. But
these government functions are merely incidental in the sense that they
are necessary to implement and carry out the objective of the law. The
fact is that the main bulk of the operations of the SSS is proprietary
in nature judging from its main functions of investment and insurance, which are essentially proprietary, without which its main objective cannot be carried out.

A factor that is noteworthy are the similarities between the Social
Security System and the Government Service Insurance System. One is as
to their powers and duties. The Social Security Act gives to the System
the power to adopt, amend, and rescind such rules and regulations as
may be necessary to carry out the provisions and purposes of the Act.
The same power is given to the GSIS by the law of its creation
(Commonwealth Act No. 186, Section 17(a). The Commission has the
power to enter into agreements for such services and aid as may be
needed. The same power is given to the GSIS. The Commission has the
power to establish branches whenever and wherever it may be necessary.
Similar power is given to the GSIS. The Commission is given the power
to adopt a budget of its expenditures, including the salaries of its
personnel. Similar powers are given to the GSIS. The Commission has the
power to acquire property, real or personal, that may be necessary for
the attainment of its purpose. The GSIS may also exercise similar
powers. The Commission can sue and be sued in court, so with the GSIS.

As to investments, the SSS is required to invest its funds (1) in
interest-bearing bonds and securities of the Government of the
Philippines or bonds or securities for the payment of the interest and
principal of which the faith and credit of the Republic of the
Philippines is pledged; (2) in interest-bearing deposits in any
domestic bank doing business in the Philippines provided that said bank
shall have been designated as a depositary for this purpose by the
President; (3) in loans or advances to the national government for the
construction of permanent toll bridges in accordance with law; (4) in
housing loans to members up to a maximum of 60% of the appraised, value
of the properties; (5) in loans to members, and (6) in other projects
and investments subject to approval by the Insurance Commissioner.
Similar powers are given by law to the GSIS.

The appointment of the members of the governing bodies in both the
SSC and the GSIS are the same: they are appointed by the President of
the Philippines, with the consent of the Commission on Appointments.
Their tenure is the same-three years. Their compensation is also the
same-a per diem of P25.00 for each day actually attended by them.

Finally, the funds of the SSS are treated as special funds in the
same manner as those of the GSIS. They are distinct and separate from
those of the government such that the government cannot dispose of them
in any manner.

To recapitulate, all the above similarities as found in the charters
of both entities cannot but point to one significant fact: that it was
the intention of Congress to pattern the SSS after that of the GSIS.
Consequently, the two entities must exercise functions of the same
nature. These functions are proprietary as declared by this Court with
regard to the GSIS.^[2]

Wherefore, petition is granted. The writ of preliminary injunction issued ex parte by respondent judge is hereby set aside. The writ issued by this Court is made permanent. No costs.

Bengzon, C. J., Labrador, Concepcion, Barrera, Paredes, Regala, and Makalintal, JJ., concur.

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^[1] Dellon, Municipal Corporations, 5th Ed., Section 31.

^[2] Abad Santos vs. Auditor General, 79 Phil., 176; G.S.I.S. vs. Modesto Castillo, et al., 98 Phil., 876; 52 Off. Gaz., 4269.