SAN BEDA COLLEGE, PETITIONER, VS. SOCIAL SECURITY SYSTEM, RESPONDENT.

Petition filed by San Beda College for
review of the resolution of the Social Security Commission (in SSC Case No.
475), dated 1 December 1966, finding herein petitioner subject to penalties for
late remit­tances of the premium contributions corresponding to the period of
from September, 1957 to August, 1962, and ordering it to pay to the Social
security System the said penalties in the amount of P120,785.45.

Insofar as may be pertinent to the controversy in this
proceeding, the facts of the case, according to the Stipulation by the parties,
may be stated as follows:

The Social Security System is a government agency created by Re­public
Act 1161, as amended, while San Bade College is a duly organized domestic
corporation.  On 30 August 1957, the lay faculty club of the San Beda College, together with the faculty club of the University
of Sto.
Tomas, filed a petition for declaratory relief in the Court of First Instance
of Manila (Civil Case No. 33578)^[1]
to determine the applicability to them of the provisions of the Social Security
Act on compulsory coverage of their Members. 
On the same day, 30 August 1957,
the court issued a writ of preliminary injunction, enjoining the Social
Security Commission, its representatives and agents from compelling the
integration into the System of the private benefits plan of the San Beda College Lay Faculty Gratuity and retirement Fund.  The Social Security Commission sought
reconsidera­tion of the injunction-order, and when it was denied the Commission
came to this Court in an action for certiorari, questioning the propriety of
the issuance of the said writ.^[2]
On 30 May 1962, judgment
was rendered in the case in favor of the petitioning Commission, the writ of
injunction issued by the lower court was dissolved, and the case was remanded
to it for further proceedings.

San Beda College thereafter paid the unremitted premiums amounting to P121,111.07, on
installments – on 2 October 1962
(P10,000.00), 21 February 1963
(P40,000.00), and 7 June 1961
(P71,111.07).  On 2 November 1964, the Court of First Instance of
Manila dismissed Case No. 33578 for lack of initiative of therein petitioners
to prosecute the case.

On 13 August 1964,
and again on 18 January 1965,
the Social Security System demanded by letter from the San Beda
College the payment of penalties for late remittance of the premiums corresponding
to the period September, 1957 to August, 1962 in the sum of P120,785.45.  And when San Beda
College refused to comply with the demand, the System filed with the Social
Security Commission a petition against San Beda or
collection of the aforesaid amount (Case No. 475).  Answering the petition, respondent college
set up the defenses of alleged lack of Jun diction of the Commission; laches or prescription; unconstitutionality the provisions
of Section 22 of the Social Security Act relied upon; anti waiver and
abandonment of the petitioner’s claim. 
On 1 December 1966, based on the parties’ stipulation of facts, the
Commission issued a re­solution sustaining the demand of the Social Security
System and ordering San Beda College to pay to the
former the sum of P120,785.45 as penal­ties, with provision that in case of
respondent’s failure to make such payment a warrant of distraint
and levy shall be issued to the Sheriff of to satisfy the obligation.  This is the resolution subject of the present
petition for review.

Section 22 of Republic Act 1161,^[3]
applicable to the herein case, reads as follows:

“SEC. 22.  Collection
and payment of con­tributions.  —
(a) The contributions imposed in the preceding sections^[4]
shall be collected and remitted to the System at the end of each calendar month
under such rules and regulations as the System may prescribe.  Every employer required to deduct and to
remit such contributions shall be liable for their payment, and if any
contribution is not paid to the System within thirty day from its due date or
the date prescribed for its remittance, he shall pay besides the contribution a
penalty thereon of three per centum per month from the date the contribution
falls due until paid.  If deemed
expedient and advisable by the Commission, the collection and remittance of
contributions shall be quarterly or semi-annually in advance, the contributions
payable by the employees to be advanced by their respective employers:  Provided, That upon separation of an
employee, any premium so paid in advance but not due shall be credited or
refunded to his employer.

(b) The
contributions payable under this Act in cases where an employer refuses or
neglects to pay the same shall be collected by the System in the same manner as
taxes are made collectible under the National Internal Revenue Code, as
amended.  Failure or refusal of the
employer to pay or remit the contributions herein prescribed shall not
prejudice the right of the covered employee to the benefits of the coverage.

(c) Should any
person, natural or juridical, default in any payment of contributions, the
Commission may also collect the same in either of the following ways:

(1)  
By an action in court, which shall hear and
dispose of the case in preference to any other civil action, or

(2)  
By issuing a warrant to the Sheriff of any
province or city commanding him to levy upon and sell any real and per­sonal
property of the debtor.  The Sheriff’s
sale by virtue of said warrant shall be governed by the same procedure
prescribed for executions against pro­perty upon judgments by a court of
record.” (Underlining supplied.)

Thus, the law did not only make it the
employer’s obligation to remit to the System the corresponding employee and
employee’s premiums:  it even prescribed
a penalty in case he should find too so. 
The dispute here, however, revolves around the imposi­tion of such
penalties on San Beda College by the Social            Security Commission upon petition of
the Social Security System.

Justifying its order directing the San Beda
College to pay penalties for the late Payment of the contributions for
September, 1957 to August, 1962, the Social Security Commission points to
Section 5 of the Social Security Act 83 source of its authority:

SEC. 5.  (a) Settlement of
claims.  — The filing, determination
and settlement of claims shall be governed by the rules and regulations
promulgated by the Commission.  – – – – –
– -.

(b)  Appeal to the courts.  — Any decision of the Commission in the
absence of an appeal there­from as herein provided,
shall become final fifteen days after the date of notification, and judicial
review thereof shall be permitted only after any party claiming to be aggrieved
thereby has exhausted his remedies before the Commission.  The Commission shall b deemed to be a party
to any judicial action involving any such decision, and may be represented by
an attorney employed by the Commission, or when requested by the Commission, by
the Solicitor General or any fiscal.

(c)  Court review.  — The decision of Com­mission upon any
disputed matter may be reviewed both upon the law and the facts by the Court of
Appeals. For the purpose of such review the pro­cedure concerning appeals from
the Court of First Instance shall be followed as Ear practicable and consistent
with the purposes of this Act.  Appeals
from a decision of the Commission must be taken within fifteen days from
notification of such decision.  If the
decision of the Commission involves only questions of law, the same shall he
reviewed by Supreme Court.  – – – – – – –
– – -.”

Coming first to the question of petitioner’s liability for
payment of penalties, we find its disavowal of such liability to be
meritorious.

The records show that on 3C August 1957, or before the period for
payment of contributions or premiums by the employer had expired, the Court of
First Instance of Manila (in Civil Case No. 33578), at the instance of the San Beda and Sto. Tomas Faculty
Clubs, issued a res­training order enjoining the Social Security Commission,
its representatives and agents from compelling the integration into the System
of the private benefit plans of the San Beda College
lay faculty Organization; and that after the injunction was ordered dissolved
by this Court on 30 May 1962 (in G.R. No. L-13555) the employer school duly
paid the outstanding unpaid premiums then amounting to P121,111.07.

In saddling San Beda College with the
penalties for the delayed remittance of contributions corresponding to the
period of from September, 1957 to August 1962, the Social Security System
contend that the employer’s obligation to remit the necessary premium to the
System was not suspended by the issuance of the writ of injunction by the
Manila Court of First Instance; that since the injunction order in directed
only against the compulsory integration into the System of the private benefit
plan of the San Beda College lay faculty club, the
San Beda College itself was under no restraint to
voluntarily make the remittances required by law.  The flaw in this argument lies in its
ignoring, that any kind of payment necessarily involves two parties – the payor and the payee. 
As respondent System admits that during the existence of the injunction
it “could not validly collect or demand from herein petitioner (San Beda College) the payment of its premium
contributions” (Answer, page 73, Record), how could it have received
payment from petitioner?  The act of
collecting contributions is no different from the act of receiving said
amounts. Furthermore, the employer can not know the exact amount to be paid if
thin System itself is prohibited from making any demand for payment of the
contributions. Clearly, the delay in the remittance of premiums cannot be
attributed to any fault or negligence on the part of the employer; it was
brought about by the existence of the injunction order with which the employer
had nothing to do at all.  The imposition
of penalties upon the employer for such delay consequently, unjustified and
improper.

Likewise, responded incorrectly maintains that the employer’s lia­bility
for payment of penalties was already adjudged in the previous case of Social
Security Commission vs. Bayona (G.R. No. L-13555),
decided by this Court on 30 May 1962
(5 SCRA 126), and wherein we said:

‘The same thing may not be said if the enforcement of the law is
restrained, for then respondents would be more harassed and prejudiced in case
the constitutionality of the law is upheld, since they will have to say all
the back contributions from September 1957, including interests, up to the
time the preliminary injunc­tion is dissolved. 
Restoration would then be Much more difficult in view of the
contingencies that may arise with regard to the members of their private
system.  There are, to be sure, more
weighty reasons favoring the lifting of the injunc­tion issued by respondent
judge.” (Underlining supplied.)

The statement relied upon was only an obiter pronouncement
which was unnecessary to the resolution of the controversy in the case cited,
that revolved on the question whether petitioner faculty clubs, in the Court of
First Instance, were threatened with irreparable damages justifying the
issuance of a writ of preliminary injunction. Not only this, but under the
established rule on injunctions, the penalties accruing by reason of the delay
in the payment of contribu­tions caused by the issuance of the writ should have
been demanded, ascertained and adjudged as damages against the injunction bond
or the plaintiff that procured its issuance before the finality of the decree
dissolving the writ.  By permitting the
judgment in the Bayona case to be finally entered
without praying for ascertainment of the damages flowing from the issuance of
the preliminary injunction, the Social Security System and Commission are now
precluded from recovering them from the party who obtained the writ.^[5]

“The defendant failed to file its application for damages against
the bond prior to the termina­tion of the case against it.  It is barred to do so now.” (Jao vs. Royal Financing Corp., G.R. No. L-13716, 28 April 1962)

And if the Social Security System is barred from recovering such
damages from the faculty clubs which obtained the injunction, a fortiori
system may not now recover the same damages from the San Beda
College, which was not the on one that procured the writ.

Turning now to the issue of jurisdiction of the respondent Social
Security Commission to take cognizance of the claim of the System against
petitioner San Beda College for penalties allegedly
accruing from the delayed remittance of its contributions, suffice it to say
that the conclusion we have previously reached that petitioner San Beda College is not liable for penalties in failing to
remit its contributions prior to 1962 makes it unnecessary for us to examine
this issue.  This is especially true in
view of the enactment in 1966 of Act No. 4857, amending the original Section 5
of Republic Act No. 1161 (Social Security Act) to read as follows:

“SEC. 5.  Settlement
of Claims.  — (a) Any dispute
arising under this Act with respect to coverage, entitlement to benefits, collection
and settlement of premium contributions and penalties thereon, or any other
matter related thereto, shall be cognizable by the commission, and any case
filed with the Commission with respect there­to shall be heard by the
Commission, or any of its members, or by hearing officers duly author­ized by
the Commission, and decided within twenty days after submission of the
dance.  The filing, determination and
merit of claims shall be governed by the rules and regulations promulgated by
the Commission.” (As amended by Republic Act 4857).  (Emphasis supplied)

The amendment thus practically renders obsolete the prescription
of Section 22, paragraph (c), subparagraph (1), of the Social Security Law,
providing for collection of defaulted contributions –

“(1) By an
action in court, which shall hear and dispose of the case in preference to any
other civil action; “

and removes all doubts that the merits of
the System’s claims for contributions and penalties should he first passed upon
by the Commission, subject to the judicial review provided in paragraph of
Section 5 of the Social Security Act.

The foregoing rulings render it unnecessary to pas upon the other
issues posed by petitioner-appellant.

WHEREFORE, the resolution of the Social security
Commission under consideration is hereby and set aside. The temporary
restraining order against the collection of the amount involved herein by dis­traint and levy, heretofore issued, is made
permanent.  No costs.

Concepcion, C.J., Dizon,
Makalintal, Zaldivar,
Fernando, Teehankee, and
Villamor, JJ., concur.

Castro, J., on leave.

Barredo, J., did not take part.

^[1]
The action was filed before the gratuity and retirement plan of the San Beda College faculty club could be integrated into the
Social Security System, pursuant to Republic Act 1792, amending the Social
Security Act.

^[2]
Social Security Commission vs. Bayona, G. R.
No. L-13555.

^[3]
After its amendment by Republic Act 1792, on 21 June 1957, and by Republic Act 2658, on 18 June 1960.

^[4]
Sections 19 and 20, on employee’s and employer’s contributions.

^[5] Japco vs. City of Manila, 48 Phil. 851; Abelow vs. De la Riva, 105 Phil. 159; Del Rosario vs.
Nava, 95 Phil. 542; Jao vs. Royal Financing
Corporation, G.R. No. L-46716, 28
April 1962, 4 SCRA 1210; Sy, et al. vs.
Ceniza, G.R. No. L-16961, 29 June 1962, 5 SORA 401. See Ed. Note, 17 SCRA
404-406.