THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, PTITIONER-APPELLEE, VS. SOCIAL SECURITY COMMISSION, RESPONDENT-APPELLANT.

Appeal, taken by the Social Security Commission, from a decision of
the Court of First Instance of Manila, the dispositive
part of which reads:

“IN VIEW OF THE FOREGOING, judgment is hereby rendered (1)
holding that plaintiff’s agents, solicitors or underwriters are not employees
of plaintiff The Philippine American Life Insurance Company and that plaintiff
is not their employer so that plaintiff’s said insurance agents, solicitors or
underwriters do not fall under the compulsory coverage of the Social Security
System; (2) commanding defendant Social Security Commission to desist
absolutely from taking criminal action against plaintiff’s officers under the
provisions of Section 28(e) and (f) of the Social Security, and from requiring
plaintiff to remit contributions to the defendant Social Security Commission or
its administrative arm, the Social Security System, to be applied to the
coverage of plaintiff’s said agents, solicitors or underwriters under the
Social Security ,Act, without pronouncement as to costs.”

On November 6, 1960, the Social Security System — hereinafter
referred to as the System — issued, with the approval of the Chairman of the
Social Security Commission — hereinafter referred to as the Commission —
Circular No. 34 (Ex­hibit A), requiring all insurance firms to submit
immediately the names of their agents, solicitors or underwriters, who,
pursuant to the Social Security Act^[1]
— hereinafter referred to as the Act — are employees of said firms, subject
to compulsory coverage of the System, and to pay the corresponding premiums,
based on the actual commissions received by each agent during each month.

Sometime later, the System, through the manager of its Production
Department, sent to the Philippine American Life Insurance Company —
hereinafter referred to as the plaintiff — the communication Exhibit B, dated
February 11, 1961, enclosing therewith SSS Form R-1-Ail, advising plaintiff
that, pursuant to said Circular No. 34, the insurance agents there­of are
considered its employees, subject to compulsory coverage under said Act, and
urging plaintiff to accomplish said SSS Form (for the purpose of supplying the
necessary data concerning said agents, solicitors and underwriters) and to
submit the same, within ten (10) days, to avoid the penalties provided for by
law.  This “advice” was
reiterated in another letter (Exhibit B-1) of the same officer, dated March 3, 1961.  Plaintiff replied to these letters with a
communication (Exhibit C), dated March 7, 1961, objecting to the aforementioned
compulsory coverage upon the ground that plaintiff’s insurance agents,
solicitors or underwriters are not its employees.  Still, on May 14, 1961, the System sent to plaintiff another letter
(Exhibit D), with several copies of SSS Form R-1-A.1, with the request that
these forms be accomplished and submitted, as soon as possible, to facilitate
early adjudication of the coverage of its insurance agents under the System.

Instead of complying with this request, on May 30, 1961,
plaintiff commenced, in the Court of First Instance of Manila, the present action, for prohibition
with preliminary injunction, against the Commission — to restrain the latter
1) from compelling plaintiff to remit contributions to the administrative
branch of the System, as an incident of the alleged inclusion of plaintiff‘s agents, solicitors or underwriters
in the compulsory coverage of the System, and 2) from prosecuting plaintiff and
its officers for their refusal to make the aforementioned contributions — upon
the theory that said agents of the plaintiff are not employees thereof.

After appropriate proceedings, the lower court rendered the
aforementioned decision.  Hence, the
present appeal to this Court, since questions purely of law are involved there­in,
namely: 1) whether or not the trial court had jurisdiction to hear and decide
this case; 2) whether plaintiff has a cause of action against the Commission;
and 3) whether insurance agents of a life insurance company, like plaintiff
herein, are its employees, for purposes of the compulsory coverage under the
System.

The System maintains that the
first two issues should be resolved in the negative, upon the ground, inter
alia, that decisions of the Commission may not
be reviewed by courts of first instance, not only because the two have the same
rank, but, also, because said decisions are, pursuant to the Act^[2]
reviewable by the Court of Appeals, on questions of
law and fact, or by the Supreme Court, on questions purely of law; that
plaintiff has no cause of action against the Commission, inasmuch as the former
has not appealed to the latter from the action taken by the System upon the
question of coverage, under the Act; and that plaintiff has not exhausted the
administrative remedies available thereto under the same.^[3]

Upon the other hand, plaintiff urges an affirmative answer, upon the
theory that the Commission is, at least, a board within the meaning of Rule 67
of the Rules of Court of 1940;^[4]
that being empowered by law to sue and be sued, the Commission may sue and be
sued in any court of the Philippines; that Section 5 of Republic Act No. 1161
is inapplicable to the case at bar, because the question of coverage, herein
involved, is not a “claim” within the purview of said section; that
the issue whether a given person is employee of a particular firm and subject to coverage under said Act, is
not one that plaintiff is bound to submit to the Commission in the first
instance; that where the employer-employee relationship is contested, the
ruling of the Commission to the effect that such relationship exists presents a
legal dispute, which may not be
decided unilaterally by the Com­mission; that the theory of the Commission to
the effect that it has the same rank as courts of first instance may be true
insofar only as the settlement of “claims,” but not as regards the
question of compulsory coverage; that an appeal from the System to the
Commission would have been an empty gesture, for all actions of and proceedings
in the System are under the direction and control of the Commission, and
Circular No. 34 (Exhibit A) bears
the approval of the Commission, through
its chairman, apart from the fact that the Commission was
poised to take criminal action against the plaintiff and its officers to compel
them to obey the ruling complained of; and that the insistence of the Commission on enforcing
its ruling re­garding said coverage amounts to an act performed without
or in excess of jurisdiction or
with grave abuse of discretion.

We find that the appeal taken by the Commission is well-founded
for the present action is one for a writ of prohibition, which may be issued only by a superior,
court to an inferior court, corporation, board or person, to prevent the
latter from usurping or exercising a jurisdiction
or power it does not have (3 Moran on Rules of Court, 193 ed., p.
157).  Section 5(a) of the Act
acknowledges in the Commission the power to determine and settle claims, which
partakes of a quasi-judicial function, in the exercise of which, the Commission
is not inferior to courts of first instance, in much the same way as the Public
Service Commission, as a board performing quasi-judicial functions, is not
inferior to said courts.^[5]
The quasi-judicial nature of the functions of the Commission is emphasized by
its authority, expressly granted by said Section 5(a), to promulgate rules and
regulations governing “the filing, determination and settlement of
claims.” Hence, the lower court had no jurisdiction to issue the writ of
prohibition prayed for.

Besides, the Commission performs administrative, as well as
quasi-judicial, functions.  Although it
can sue and be sued in courts of first instance, either as regards its
administrative functions, or in the enforcement and protection of its private rights, the rule is otherwise when the
act complained of forms part of its quasi-judicial functions.  For this reason, Section 5(c) of said Act,
explicitly provides, in connection with “decisions” of the
Commission, or the determinations thereof in the exercise of said functions,
that the same “may be reviewed both upon the law and the facts by the
Court of Appeals,” or, “if the decision of the Com­mission
involves only questions of law, x x x by the Supreme Court.”

What is more,
pursuant to Section 5(b) of said Act, the judicial review of “any decision
of the Commission x x x
shall be permitted only after any party claiming to be aggrieved thereby
has exhausted his remedies before the Com­mission.” In the case at
bar, plaintiff has not exhausted its remedies before the Commission.  The Commission has not even been given a
chance to render a decision on the issue raised by plaintiff herein,
because the latter has not ap­pealed to the Commission from the action taken
by the System in insisting upon the enforcement of Circular No. 34 (Exh. A).

It is true that the same
bears the approval of the Chairman of the Commission.  Even if this fact were construed as an
approval of the Circular by the Commission itself, such approval would not
constitute a “decision” thereof, as the term is used in said section
5, which regulates the judicial review of such decision.  Indeed, a “decision” connotes the
adjudication or settlement of a controversy, and the same did not exist
between the System and the plaintiff when the Chairman of the Commission
affixed his signature to said Circular No. 34, on or before November
6, 1960.  The issue did not arise until March 7,
1961, when plaintiff
expressed its objection to the circular upon the ground that the agents,
solicitors and underwriters thereof are not its employees.  It is only fair and just, therefore, as
well as administratively expedient,
that before a judicial review could be sought, said issue be previously
submitted to and passed upon by the Commission, on appeal from the action taken
or contemplated to be taken by the System, since, prior to such submission to
and-determination by the Commission, the same had no occasion to consider the specific reasons adduced by the
plaintiff in support of its objection to said Circular No. 34.

But, even if the approval of the circular by the Chairman of the
Commission were hypothetically regarded as a decision or proof of a decision of
the Commission itself, still section 5(b) ordains positively that a judicial
review of said decision “shall be
permitted only after any party claiming to be aggrieved thereby
has exhausted his remedies before the Commission.” In
other words, he must first seek therefrom a
reconsideration of the decision complained of. This, by the way, is the general
rule applicable to actions for certiorari and prohibition against a tribunal,
board or officer, who must first be given, through a motion for
reconsideration, an opportunity to correct the error or mistake complained
of.  No such reconsideration has been
asked by plaintiff herein.  Hence, it has
no cause of action for prohibition, which does not lie except in the absence of
appeal or any other plain, speedy and adequate remedy in the ordinary course of
law.

It is urged that
the Commission had already made clear its intention to prosecute criminally the
plaintiff and its officers.  This is not true.  The one which no more than intimated such
intention was not the Commission, but the System.  Precisely, an appeal from the latter to the
former, which admittedly has control over the System, would have been a plain,
speedy and adequate remedy in the ordinary course of law.  Moreover, it appeared from the acts of the
System that the danger of prosecution was not imminent or even proximate.  Indeed, the letter Exhibit B, urging
plaintiff to “please accomplish and submit the enclosed SSS Form R-1-A.1 x x
x within ten (10) days x x x to avoid the penalties provided by law,” was written
by the Manager, Production Department” of the System, which is not in
charge of the prosecution of violators of the Act. Then, again, over two (2)
months after plaintiff had objected to the compulsory coverage of its
agents, solicitors and underwriters, or on May 14, 1961, the System wrote to
the plaintiff the letter Exhibit D, enclosing therewith several copies of SSS Form R-1-A.1, with the en-treatment
that the same be “please” accomplished and sub­mitted to “facilitate
early adjudication of the compulsory coverage” of its agents “under
the system,” and winding up with the “hope” of
receiving the “form properly accomplished as soon as possible.” The System thus implied that plaintiff
could then seek an adjudication or decision on said coverage by the Commission.  At any rate, had plaintiff appealed to the
Commission, the latter could have restrained the System from causing the
plaintiff and its officers from being prosecuted criminally, during the pendency of the appeal. 
In short, once again, the same was a plain, speedy and adequate remedy
in the ordinary course of law.

Inasmuch as the lower
court had no jurisdiction to hear and decide this case, and, at any rate,
plaintiff has no cause of action against the Commission, it is unnecessary to
pass upon the third issue raised by plaintiff herein.  In fact, said issue has become moot on
account of the approval of Republic Act No. 4857, on September 1, 1966, section 2 of which amended
section 5(a) of Republic Act No. 1161, to read as follows:

“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 the submission of the
evidence.  The filing, determination and
settlement of claims shall be governed by the rules and regulations promulgated
by the Commission.” (Underscoring supplied.)

Hence, there can be no question now that any dispute with respect
to coverage is cognizable by the Commission.

WHEREFORE, the decision appealed from is hereby reversed
and another one shall be entered, dismissing the complaint herein, with costs
against plaintiff-appellee the Philippine American
Life Insurance Company.

SO ORDERED.

Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez,
and Castro, JJ., concur.

^[1]
Republic Act No. 1161, as amended.

^[2]
Section 5(c) of Republic Act No. 1161, as amended.

^[3]
Sec. 5(b), Republic Act No. 1161, as amended, and Rule X, No. 10, of the Rules
and Regulations of the System.

^[4]
Now Rule 65 of the Rules of Court of 1964.

^[5]
Poblete Construction Co. vs. Social Security
Commission L-17605, January 22, 1964; Iloilo Commercial & Ice Co. vs. Public
Service Commission, 56 Phil. 238, and Regalado vs. Provincial
Constabulary, L-15674, November 29, 1961.