SSS Employees Association v.

Soriano
G.R. No. L-18081
Oct 31, 1993

Social Security System Employees Association (PAFLU) v. Hon. Judge E. Soriano,

etc. et al.
Justice Felix Bautista Angelo

Facts
Oct 20, 1960 PAFLU sent demands to the Social Security Commission (SSC) regarding its
employment terms and conditions, with a request that PAFLU be recognized as a collective
bargaining (CB) agent. Instead of answering, SSC filed a petition for declaratory relief at
CFI Manila, asking SSS1 to be declared as a governmental agency performing
governmental functions so as to prohibit employees from joining labor unions and
prevent PAFLU from entering into CB agreements with SSC.

PAFLU filed a counter-prayer that SSS be declared as a performing proprietary2

functions. Meanwhile, PAFLU filed at the Court of Industrial Relations (CIR) a charge for
unfair labor practice3 against SSC.

On Feb 16, 1961, PAFLU went on strike and picketed the SSC. SSC asked CFI Judge Soriano
to issue ex parte4 a writ of preliminary junction ordering the workers to go back to work
and refrain from picketing and doing acts of violence.

PAFLU appealed to SC also for injunction to restrain Judge Soriano from issuing the writ ex
parte since he had no jurisdiction to do so. SC issued the injunction requested by PAFLU. A
hearing was then eventually conducted for both parties.

Issue
Whether SSC is a government agency exercising governmental or proprietary functions?

Ratio
Bacani vs. National Coconut Corporation (NCC):
Do corporations (like NCC) performing governmental functions make them a part of
the Government of the Philippines? No
1. They are not municipal corporations
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 5
2. Their powers6 are not exercised as an attribute of sovereignty
3. They were given a separate personality and powers separate and
distinct from government; and
4. May sue and be sued as any other private corporation

Government may exercise the following functions to accomplish its objectives

1 Created by RA 1161 (Social Security Act)

2 Relating to ownership (in this case, relating to investment and insurance)
3 Pursuant to Sec 14 (b) of RA 875
4 Without needing the other party to be heard by court
5 Dellon, Municipal Corporations, 5th Ed., Section 31
6 Powers may just be inferred from (not as expressly declared by) the Corporation Law
 1. Constituent constitutes bonds of society, compulsory
a. Keep order and provide protection of persons and property from
violence and robbery
b. Fix legal relations between man and wife and between parents and
children
c. Regulate holding, transmission, and interchange of property, and the
determination of its liabilities for debt or crime
d. Determine contract rights between individuals
e. Define and punish of crimes
f. Administer justice in civil cases
g. Determine political duties, privileges, and relations of citizens
h. Deal with foreign powers; preserve the State from external danger or
encroachment and advance its international interests 7
2. Ministrant undertaken by advancing the general interest of society,
optional
a. Public works
b. Public education
c. Public charity, health, and safety regulations
d. Trade and industry regulations

Government will perform ministrant functions:

1. For the public welfare, those which private capital would not naturally
undertake
2. For those which by their very nature it is better equipped to administer for
the public welfare than is any private individual or group of individuals

RA 1161 Sec 4 (k): To sue and be sued in court

Discussion
In relation to Bacani v. NCC:
1. SSS is not a municipal corporation since it does not regulate or administer the local
affairs of a town, city, or district
2. SSS is not essential in the exercise of sovereign powers, despite that it seeks to
promote social justice (its creation being optional, and the State can exist without it)
3. SSS has a personality of its own and its powers are separate and distinct from
government as it is made subject to the Corporation Law
4. SSS can be sued and be sued in court (RA 1161 Sec 4 (k)

The main objective of the SSS aims at advancing the general interest of society which is
optional 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 is 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. Since before the
SSS was established, there were already many private systems adopted by private entities
through insurance companies and mutual aid associations which served as forerunners of
the SSS.

7 President Woodrow Wilson (Malcolm, The Government of the Philippine Islands, p. 19)
It is true that SSS is created and funded by Congress, that insurance is made compulsory,
and that SSC is given quasi-judicial powers. 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.

Addendum: SSS similarities with GSIS based on their charters

1. Power to adopt, amend, and rescind such rules and regulations as may be
necessary to carry out the provisions and purposes of their respective charters (RA
1161 and Commonwealth Act 186, respectively)
2. Power to establish branches whenever and wherever it may be necessary
3. Power to adopt a budget of its expenditures, including the salaries of its personnel
4. Power to acquire property, real or personal, that may be necessary for the
attainment of its purpose
5. Can sue and be sued
6. Requirement to invest its funds in:
a. 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;
b. 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;
c. Loans or advances to the national government for the construction of
permanent toll bridges in accordance with law;
d. Housing loans to members up to a maximum of 60% of the appraised, value
of the properties;
e. Loans to members, and
f. Other projects and investments subject to approval by the Insurance
Commissioner.
7. Appointment, tenure, and compensation of members of governing bodies
a. Appointment by the President of the Philippines, with the consent of the
Commission on Appointments
b. Tenure for three years
c. Compensation is per diem of P25.00 for each day actually attended by them
8. Funds treated as special funds distinct and separate from those of the government
such that government cannot dispose of them in any manner

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 in
Abad Santos v. Auditor General.

Conclusion
Hence, SSS is a government agency exercising proprietary functions.

Decision
Granted. Writ of Preliminary Injunction issued ex parte by Judge Soriano set aside. Writ
issued by SC is made permanent.