Social Security System Employees Association (PAFLU) vs. The Hon. Judge E. Soriano, etc., et al.

The Social Security System is a government-owned or controlled corporation exercising proprietary, not governmental, functions, and its employees are therefore not prohibited from joining labor unions, compelling the System to enter into collective bargaining agreements, or declaring strikes. Because the SSS exercises proprietary functions, labor disputes involving its employees fall within the jurisdiction of the Court of Industrial Relations, and a court of first instance acts in excess of its jurisdiction in issuing an ex parte preliminary injunction against a strike by SSS employees.

The Social Security System Employees Association (PAFLU) is composed of employees of the Social Security Commission, which administers the Social Security System created by Republic Act No. 1161. The SSS was established to provide social security to a large group of employees not in the government service, a function that private capital could not readily undertake. The case arose against the backdrop of Republic Act 875, which governs labor relations and defines unfair labor practices, and the question of whether employees of government-owned or controlled corporations enjoy the right to organize, collectively bargain, and strike.

The Social Security System Employees Association (PAFLU), composed of employees of the Social Security Commission, transmitted on October 20, 1960 to the Commission 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, asking that the Social Security System, created by Republic Act No. 1161, be declared a governmental agency performing governmental functions so that its employees may be prohibited from joining labor unions, from compelling the Commission to enter into a collective bargaining agreement with them, and from declaring strikes detrimental to the System.

The union answered the petition with a counter-prayer that the SSS be declared an agency of the government exercising proprietary functions. In the meantime, a conference was held between the union and the Commission in connection with the demands submitted by the former, and sensing that the Commission was not disposed to enter into a collective bargaining agreement, the union filed before the Court of Industrial Relations a charge for unfair labor practice against the 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 E. Soriano, issued on the same date an ex parte preliminary injunction ordering the union members not only to desist from picketing the premises but also to refrain from doing any act of violence. As a consequence, the union filed before the Supreme Court a petition for certiorari with preliminary injunction praying that the respondent judge be restrained from enforcing his writ of preliminary injunction on the ground that he had no jurisdiction to issue it ex parte. The Supreme 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.

• Proprietary Functions of the SSS: Petitioner contended that the SSS is an agency of the government exercising proprietary functions, and therefore the respondent judge had no jurisdiction to issue the ex parte preliminary injunction against the union's strike and picket.
• Jurisdiction over Labor Disputes: Petitioner argued that the labor dispute between the union and the Commission properly fell within the jurisdiction of the Court of Industrial Relations, not the Court of First Instance, and that the respondent judge acted in excess of his jurisdiction in issuing the injunction.

• Governmental Functions of the SSS: Respondents claimed that the SSS is a government agency exercising governmental functions, and that its employees may therefore be prohibited from joining labor unions, from compelling the Commission to enter into a collective bargaining agreement, and from declaring strikes detrimental to the System.
• Validity of the Injunction: Respondents argued that the respondent judge had jurisdiction to issue the ex parte preliminary injunction ordering the union members to return to work and desist from picketing the premises of the Commission.

• Nature of the SSS: Whether the Social Security System is a government agency exercising governmental functions, as claimed by respondents, or whether it exercises proprietary functions, as contended by petitioner.
• Jurisdiction of the Court of First Instance: Whether respondent judge acted in excess of his jurisdiction in issuing the ex parte writ of preliminary injunction subject of the petition for certiorari.

• Nature of the SSS: The SSS exercises proprietary functions. It is not a municipal corporation, it has a personality of its own by virtue of which it can sue and be sued, and it is endowed with practically the same powers conferred by law upon any other private corporation. The main objective of the SSS is not one of the constituent functions of government but one that merely aims at advancing the general interest of society, which is optional.
• Jurisdiction of the Court of First Instance: Yes, the respondent judge acted in excess of his jurisdiction. Because the SSS exercises proprietary functions, the labor dispute between the union and the Commission fell within the exclusive jurisdiction of the Court of Industrial Relations, and the Court of First Instance had no authority to issue the ex parte preliminary injunction.

• Nature of the SSS: The Court applied the test articulated in Bacani vs. National Coconut Corporation, which held that a government entity is not part of the Government of the Philippines if (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 corporation. The Court found that the SSS is not a municipal corporation, as it does not regulate or administer the local affairs of a town, city, or district. The SSS has a personality of its own, can sue and be sued as inferred from Section 4(k) of Republic Act No. 1161, as amended, and is endowed with practically the same powers conferred by law upon any other private corporation. The Court further distinguished between constituent and ministrant functions of government, citing President Wilson's enumeration of constituent functions — those that constitute the very bonds of society and are compulsory in nature — and noting that the main objective of the SSS is not among them. The SSS's main aim is to provide social security to a large group of employees not in the government service, which is a ministrant function that private capital could not undertake and the government is better equipped to administer. The Court noted that before the SSS was established, private systems through insurance companies and mutual aid associations served as forerunners, demonstrating that the function is not exclusively governmental. While the state created the SSS in the exercise of its police power for a governmental purpose — the promotion of social justice — it does not follow that the System necessarily exercises a governmental function; the government existed long before the creation of the SSS, indicating that its creation is merely optional. The Court also found that the main bulk of the SSS's operations is proprietary in nature, judging from its main functions of investment and insurance. Finally, the Court compared the SSS with the Government Service Insurance System (GSIS), finding substantial similarities in their powers, duties, investment authority, appointment and tenure of governing body members, compensation, and treatment of funds as special funds distinct from those of the government. Because the GSIS had been declared by the Court to exercise proprietary functions, the SSS must exercise functions of the same nature.
• Jurisdiction of the Court of First Instance: Because the SSS exercises proprietary functions, the labor dispute between the union and the Commission properly fell within the jurisdiction of the Court of Industrial Relations under Republic Act 875. The respondent judge of the Court of First Instance had no jurisdiction to issue the ex parte preliminary injunction against the union's strike and picket, and therefore acted in excess of his jurisdiction.

• Constituent vs. Ministrant Functions — Government functions are two-fold: constituent functions constitute the very bonds of society and are compulsory in nature, while ministrant functions are undertaken only by way of advancing the general interest of society and are merely optional. The Court applied this distinction to determine that the SSS's main objective — providing social security — is a ministrant function, not a constituent one, and therefore the SSS exercises proprietary functions.
• Test for Determining Whether a Government Entity Exercises Governmental Functions — A government entity does not acquire the status of part of the Government of the Philippines if (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 corporation. The Court applied this test, derived from Bacani vs. National Coconut Corporation, to conclude that the SSS is not a governmental agency.
• Substantial Similarity Doctrine — Where two government entities are patterned after each other, as shown by substantial similarities in their charters, powers, and functions, they must exercise functions of the same nature. The Court applied this doctrine by comparing the SSS with the GSIS and concluding that because the GSIS exercises proprietary functions, the SSS must also exercise proprietary functions.

• "There are functions which our government is required to exercise to promote its objective as expressed in our Constitution and which 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." — This passage from Bacani vs. National Coconut Corporation, quoted by the Court, establishes the distinction between governmental and proprietary functions and provides the framework for classifying government-owned or controlled corporations.
• "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." — This passage articulates the Court's core reasoning that a governmental purpose behind the creation of an entity does not necessarily render its functions governmental.
• "The fact is that the main bulk of the questions of the SSS is proprietary in nature judging from its main functions of investment and insurance, which were essentially proprietary, without which its main objective cannot be carried out." — This passage identifies the proprietary character of the SSS's primary operations as the basis for classifying the entity as exercising proprietary functions.

• Bacani vs. National Coconut Corporation, 53 O.G., 2798 — Controlling precedent. The Court relied on this case for the test determining whether a government-owned or controlled corporation exercises governmental or proprietary functions, and for the distinction between constituent and ministrant functions of government.
• Abad Santos vs. Auditor General, 79 Phil. 176 — Followed. Cited as authority for the proposition that the GSIS exercises proprietary functions, which the Court used to conclude that the SSS, being substantially similar to the GSIS, also exercises proprietary functions.
• GSIS vs. Hon. Modesto Castillo, et al., 52 O.G., 4269 — Followed. Cited as additional authority for the proposition that the GSIS exercises proprietary functions.

• Section 4(k), Republic Act No. 1161 — The provision from which the Court inferred that the SSS has a personality of its own by virtue of which it can sue and be sued, supporting the conclusion that the SSS is not part of the Government of the Philippines.
• Section 14, paragraph (b), Republic Act 875 — The provision pursuant to which the union filed its charge for unfair labor practice against the Commission before the Court of Industrial Relations, which the Court implicitly recognized as the proper forum for the labor dispute.
• Section 17(a), Commonwealth Act No. 186 — The provision granting the GSIS the power to adopt, amend, and rescind rules and regulations, which the Court cited to demonstrate the substantial similarity between the SSS and the GSIS.

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

N/A — Padilla, Reyes, J.B.L., and Dizon, JJ., took no part in the case; no dissenting opinions are recorded in the text.