Social Security System vs. Atlantic Gulf and Pacific Company of Manila, Inc., et al.

A complaint to enforce an approved dacion en pago is an action for specific performance incapable of pecuniary estimation and falls within the jurisdiction of the Regional Trial Court, not the Social Security Commission under Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, because the parties no longer dispute the employers' accountability for contributions and penalties but seek implementation of the agreed settlement.

The Social Security System (SSS) is the petitioner, while Atlantic Gulf and Pacific Company of Manila, Inc. (AG&P) and Semirara Coal Corporation (Semirara) are the private respondents and employers with social security obligations to SSS. Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, otherwise known as the Social Security Act of 1997, vests in the Social Security Commission jurisdiction over disputes arising under the Act with respect to coverage, benefits, contributions, penalties, or any matter related thereto. The case required distinguishing that administrative jurisdiction from the Regional Trial Court's jurisdiction over actions incapable of pecuniary estimation.

Atlantic Gulf and Pacific Company of Manila, Inc. (AG&P) and Semirara Coal Corporation (Semirara) were employers with social security obligations to the Social Security System (SSS). Sometime in 2000, AG&P informed SSS in writing of its premiums and loan amortization delinquencies covering the period from January 2000 to May 2000 amounting to P7.3 Million. AG&P proposed to pay its arrears by the end of 2000 but requested condonation of all penalties. SSS suggested two options: payment by installment or through dacion en pago. AG&P initially chose dacion en pago of its 5,999-square-meter property in Baguio City covered by TCT No. 3941 with an appraised value of about P80.0 Million. Because SSS proposed to carve out from the property an area sufficient to cover the delinquencies, AG&P was not amenable to subdividing its Baguio property.

AG&P then made another proposal, offering as payment a portion of its 58,153-square-meter lot situated in F.S. Sebastian, Sto. Niño, San Pascual, Batangas. SSS also informed AG&P of its decision to include other companies within the umbrella of the DMCI group with arrearages with SSS. In the process of eliminating the companies belonging to the DMCI group with possible outstanding obligations, only Semirara was left with outstanding delinquencies, and thus Semirara was included in the proposed settlement through dacion en pago. AG&P was thereafter directed by SSS to submit documents such as the Transfer Certificate of Title, Tax Declaration covering the subject lot, and the proposed subdivision plan, which AG&P immediately complied with.

On April 4, 2001, SSS, in Resolution No. 270, approved AG&P's proposal to settle its and Semirara's delinquencies through dacion en pago, which as of March 31, 2001 amounted to P29,261,902.45. Approval of the proposal was communicated to AG&P by Ms. Aurora E.L. Ortega, Vice-President, NCR-Group of SSS, in a letter dated April 23, 2001. As a result of the approval, posting of contributions and loan amortization to individual member accounts, both for AG&P and Semirara employees, was effected immediately thereafter, and the benefits of the member-employees of both companies were restored. From the time of approval up to the present, AG&P religiously remitted the premium contributions and loan amortization of its member-employees to SSS.

To effect the property transfer, a Deed of Assignment had to be executed between the plaintiffs and SSS. Because of SSS's failure to come up with the required Deed of Assignment, AG&P prepared the draft and submitted it to the Office of the Vice-President-NCR through the SSS Baclaran Branch in July 2001. SSS failed to take any action on the Deed of Assignment, causing AG&P to re-submit it to the same office in December 2001. From its original submission in July 2001 to its re-submission in December 2001, and until SSS returned the revised draft on February 28, 2003, AG&P was consistent in its regular follow-ups with SSS as to the status of the submitted Deed of Assignment.

On February 28, 2003, or more than a year after approval of AG&P's proposal, SSS sent the revised copy of the Deed of Assignment to AG&P. However, the amount of the plaintiffs' obligation appearing in the approved Deed of Assignment had ballooned from P29,261,902.45 to P40,846,610.64, allegedly because of additional interests and penalty charges assessed on the outstanding obligation from April 2001, the date of approval of the proposal, up to January 2003. AG&P demanded the waiver and deletion of the additional interests on the ground that the delay in the approval of the deed and the subsequent delay in conveyance of the property in SSS's name was solely attributable to SSS; charging plaintiffs with additional interests and penalties amounting to more than P10,000,000.00 would be unreasonable. AG&P and Semirara maintained their willingness to settle their alleged obligation of P29,261,902.45 to SSS, but SSS refused to accept payment through dacion en pago unless plaintiffs also paid the additional interests and penalties being charged.

Because SSS refused to accept payment through dacion en pago unless the additional interests and penalties were paid, AG&P and Semirara filed a complaint for specific performance and damages against SSS before the Regional Trial Court of Batangas City, Branch 3, docketed as Civil Case No. 7441. The complaint alleged that SSS failed to act on the Deed of Assignment and later demanded additional interests and penalties despite the approved settlement.

• Social Security Commission Jurisdiction: Petitioner argued that under Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, the Social Security Commission has jurisdiction over all disputes arising under the Social Security Act with respect to coverage, benefits, contributions, penalties, or any matter related thereto, to the exclusion of trial courts.
• Nature of the Controversy: Petitioner maintained that the dispute involved the payment of premium and loan amortization delinquencies and the penalties appurtenant thereto, and therefore fell within the Commission's jurisdiction.
• Non-Exhaustion of Administrative Remedies: Petitioner moved for dismissal on the ground of non-exhaustion of administrative remedies.

• RTC Jurisdiction: Private respondents argued before the Court of Appeals that the trial court erred in its pronouncement that it had no jurisdiction over the subject matter of the complaint and in granting the motion to dismiss.
• Enforcement of Approved Dacion en Pago: Private respondents maintained that SSS had approved the dacion en pago in Resolution No. 270 and the April 23, 2001 letter, that they were willing to settle the obligation of P29,261,902.45, and that the additional interests and penalties should be waived because the delay was attributable to SSS.

• Jurisdiction over Enforcement of Dacion en Pago: Whether the Social Security Commission or the Regional Trial Court has jurisdiction over a controversy arising from the non-implementation of a dacion en pago agreed upon by the parties as a means of settlement of private respondents' liabilities.
• Nature of the Action: Whether the complaint to enforce the approved dacion en pago is an action for specific performance incapable of pecuniary estimation, falling within the jurisdiction of the Regional Trial Court.

• Jurisdiction over Enforcement of Dacion en Pago: The Regional Trial Court has jurisdiction. The Social Security Commission's jurisdiction under Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, covers disputes over coverage, benefits, contributions, penalties, or related matters, not the enforcement of an approved dacion en pago.
• Nature of the Action: The action is one for specific performance incapable of pecuniary estimation. The complaint seeks enforcement of the dacion en pago, and any money claim is merely incidental to that principal relief.

• Jurisdiction over Enforcement of Dacion en Pago: As held in Domalsin vs. Valenciano, the nature of the action and the tribunal or body with jurisdiction are determined by the allegations in the complaint. Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, vests the Commission with jurisdiction over "disputes arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto." A dispute is defined as "a conflict or controversy." From the allegations of the complaint, there was no longer any dispute as to respondents' accountability to SSS; respondents had admitted their delinquency and offered to settle by dacion en pago, which SSS approved in Resolution No. 270-s. 2001. SSS stated in that resolution that the dacion en pago proposal to pay liabilities in the total amount of P30,652,710.71 as of 31 March 2001 by offering their 5.8 ha. property located in San Pascual, Batangas was approved. The controversy instead lay in the non-implementation of the approved and agreed dacion en pago on the part of SSS. Because the suit sought to obtain enforcement of that settlement, it was not a dispute over contributions or penalties within the Commission's jurisdiction.
• Nature of the Action: As held in Vda. de Jayme vs. Court of Appeals, dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of performance of the obligation; it is a special mode of payment and, in modern concept, an objective novation where the thing offered is the object of a contract of sale and the debt is the purchase price. Common consent is essential, and SSS's Resolution No. 270-s. 2001 unequivocally evinced its consent. The complaint to enforce the approved dacion en pago was therefore a suit for specific performance. Under Singson vs. Isabela Sawmill, where the basic issue is something other than the right to recover a sum of money and the money claim is purely incidental to or a consequence of the principal relief sought, the action is incapable of pecuniary estimation and cognizable by the Regional Trial Court. Thus, the Court of Appeals correctly held that the trial court had jurisdiction.

• Jurisdiction Determined by Allegations of the Complaint — The nature of the action and the tribunal or body with jurisdiction are determined by the allegations in the complaint. The Court applied this rule by looking to the complaint's principal relief—enforcement of the approved dacion en pago—rather than SSS's characterization of the dispute as one over contributions and penalties.
• Dacion en Pago — As defined in Vda. de Jayme vs. Court of Appeals, dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing and the creditor accepts it as equivalent payment of an outstanding debt. It partakes of the nature of a sale, requiring consent, object certain, and cause or consideration; in its modern concept, it is an objective novation where the thing offered is the object of the contract of sale and the debt is the purchase price. Common consent is essential to extinguish the obligation. The Court found SSS's approval in Resolution No. 270-s. 2001 to be consent to the dacion en pago, and the dispute concerned its non-implementation.
• Specific Performance as Incapable of Pecuniary Estimation — Under Singson vs. Isabela Sawmill, the criterion is to ascertain the nature of the principal action or remedy sought. If the action is primarily for recovery of a sum of money, it is capable of pecuniary estimation; if the basic issue is something other than the right to recover a sum of money, and the money claim is purely incidental to or a consequence of the principal relief, the action is incapable of pecuniary estimation and cognizable by the Regional Trial Court. The Court applied this to hold that a suit to enforce an approved dacion en pago is one for specific performance beyond the Commission's competence.
• Social Security Commission Jurisdiction under Section 5(a) — The Commission has jurisdiction over disputes arising under the Social Security Act with respect to coverage, benefits, contributions, penalties, or any matter related thereto. The Court held that this jurisdiction did not attach where the parties no longer disputed the employers' accountability but sought enforcement of an approved dacion en pago.

• "Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt." — This passage defines dacion en pago and supports the Court's characterization of the settlement as a consensual mode of extinguishing the obligation.
• "The controversy, instead, lies in the non-implementation of the approved and agreed dacion en pago on the part of the SSS. As such, respondents filed a suit to obtain its enforcement which is, doubtless, a suit for specific performance and one incapable of pecuniary estimation beyond the competence of the Commission." — This is the ratio decidendi on jurisdiction: the suit is not a dispute over contributions but an action to enforce the approved dacion en pago.
• "In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought." — This states the canonical test for determining whether an action is incapable of pecuniary estimation, applied through Singson vs. Isabela Sawmill.

• Vda. de Jayme vs. Court of Appeals, G.R. No. 128669, 4 October 2002, 390 SCRA 380 — Cited for the definition and nature of dacion en pago, its essential elements, and the requirement of common consent to extinguish the obligation.
• Singson vs. Isabela Sawmill, No. L-27343, 28 February 1979, 88 SCRA 623 — Cited for the criterion governing actions incapable of pecuniary estimation, which the Court used to classify the suit as one for specific performance cognizable by the Regional Trial Court.
• Domalsin vs. Valenciano, G.R. No. 158687, 25 January 2006, 480 SCRA 114 — Cited for the rule that the allegations in the complaint determine the nature of the action and the tribunal or body with jurisdiction.
• Russell vs. Vestil, G.R. No. 119347, 17 March 1999, 304 SCRA 738 — Cited in support of the conclusion that the suit to enforce the dacion en pago is one for specific performance beyond the competence of the Commission.

• Section 5(a), R.A. No. 1161, as amended by R.A. No. 8282 (Social Security Act of 1997) — Vests the Social Security Commission with jurisdiction over disputes arising under the Act with respect to coverage, benefits, contributions, penalties, or any matter related thereto. The Court held that this provision did not confer jurisdiction over the complaint because the parties no longer disputed the employers' accountability but sought enforcement of the approved dacion en pago.
• Rule 45, 1997 Rules of Civil Procedure — The procedural rule under which SSS filed its Petition for Review on Certiorari. It governed the mode of review of the Court of Appeals decision and resolution.

Justice Quisumbing (Chairperson), Justice Carpio-Morales, Justice Chico-Nazaio, and Justice Velasco, Jr., concurred. Justice Velasco sat as replacement of Justice Arturo D. Brion, who inhibited himself per Administrative Circular No. 84-2007.