San Beda College v. Social Security System
REITERATIONFacts
The Antecedents: On August 30, 1957, the lay faculty club of San Beda College, along with the faculty club of the University of Sto. Tomas, filed a petition for declaratory relief to determine the applicability of the Social Security Act to their members. On the same day, a writ of preliminary injunction was issued, enjoining the Social Security Commission (SSC) from compelling the integration of San Beda College's private benefits plan into the Social Security System (SSS). The SSC sought reconsideration, which was denied, leading to a certiorari action before the Supreme Court. On May 30, 1962, the Supreme Court dissolved the injunction and remanded the case. San Beda College subsequently paid the unremitted premiums amounting to P121,111.07 in installments. The Court of First Instance dismissed the declaratory relief case on November 2, 1964, for lack of prosecution. Procedural History: On August 13, 1964, and February 18, 1965, the SSS demanded payment of penalties for late remittances from September 1957 to August 1962, amounting to P120,785.45. When San Beda College refused, the SSS filed a petition with the SSC for collection. San Beda College raised defenses including lack of jurisdiction, laches, unconstitutionality of Section 22 of the Social Security Act, and waiver. On December 1, 1966, the SSC issued a resolution sustaining the SSS's demand and ordering San Beda College to pay the penalties. This resolution is the subject of the present petition for review. The Petition: San Beda College filed a petition for review of the SSC resolution, seeking to reverse the order to pay penalties for late remittances.
Issue(s)
Whether San Beda College is liable for penalties for the late remittance of premium contributions from September 1957 to August 1962. Whether the Social Security Commission has jurisdiction to collect penalties from San Beda College.
Ruling
The Supreme Court reversed and set aside the resolution of the Social Security Commission. The temporary restraining order against the collection of the amount involved by distraint and levy was made permanent. No costs were awarded.
Ratio Decidendi
On the liability for penalties: The Court found San Beda College's disavowal of liability meritorious. The records showed that on August 30, 1957, before the period for payment of contributions expired, a restraining order was issued by the Court of First Instance of Manila, enjoining the SSS from compelling the integration of the private benefit plan. This injunction was only dissolved by the Supreme Court on May 30, 1962. While San Beda College eventually paid the unremitted premiums, the SSS contended that the obligation to remit was not suspended and that San Beda College could have voluntarily made the remittances. However, the Court noted that payment necessarily involves two parties, a payor and a payee. The SSS itself admitted that during the injunction's existence, it "could not validly collect or demand from herein petitioner (San Beda College) the payment of its premium contributions." Thus, the Court reasoned that the SSS could not have received payment if it was prohibited from demanding it. Furthermore, the employer could not ascertain the exact amount to be paid if the SSS was prohibited from making demands. Consequently, the delay in remittance could not be attributed to any fault or negligence of San Beda College but was a direct result of the injunction order. The imposition of penalties under such circumstances was deemed unjustified and improper. The Court also clarified that the statement in Social Security Commission vs. Bayona (L-13555) regarding payment of back contributions including interests was an obiter dictum and not necessary for the resolution of that case. Moreover, penalties accruing due to the delay caused by an injunction should have been ascertained and adjudged against the injunction bond or the plaintiff who procured the writ before the finality of the decree dissolving the writ. Since the SSS did not do so, it was precluded from recovering these damages from the faculty clubs, and a fortiori, from San Beda College, which did not procure the writ. On the jurisdiction of the Social Security Commission: The Court found it unnecessary to examine the issue of jurisdiction, given its conclusion that San Beda College was not liable for penalties. This was further supported by the enactment of Republic Act No. 4857 in 1966, which amended Section 5 of Republic Act No. 1161. The amendment explicitly stated that any dispute arising under the Act, including the collection and settlement of premium contributions and penalties thereon, shall be cognizable by the Commission. This amendment rendered obsolete the provision in Section 22(c)(1) of the Social Security Law that allowed for collection by an action in court, removing doubts that the merits of claims for contributions and penalties should first be passed upon by the Commission, subject to judicial review.
Main Doctrine
Penalties for late remittance of social security contributions cannot be imposed when the delay was caused by a court-issued injunction, as the employer cannot be faulted for non-payment when the System itself was prohibited from collecting.