The Supreme Court’s decision in Social Security System v. Atlantic Gulf and Pacific Company clarifies that disputes arising from an already-approved dacion en pago agreement (payment through transfer of property) fall outside the jurisdiction of the Social Security Commission (SSC). Once the SSS approves the acceptance of property to settle a debt, any subsequent disagreement about implementing the agreement is a matter for the regular courts, specifically the Regional Trial Court, to resolve through an action for specific performance, and no longer under the purview of the SSC. This means companies can pursue court action to compel the SSS to honor such agreements.

Broken Promises: Can Courts Enforce an SSS-Approved Property for Debt Swap?

This case revolves around Atlantic Gulf and Pacific Company of Manila, Inc. (AG & P) and Semirara Coal Corporation (SEMIRARA) who sought to settle their outstanding debts with the Social Security System (SSS) through a dacion en pago arrangement. The core issue arose when, after the SSS Board had officially approved the acceptance of a property from the companies as payment for their obligations, a dispute arose concerning the implementation of the dacion en pago agreement. At its heart, the legal question became whether the Social Security Commission (SSC) retained jurisdiction over disputes relating to the implementation of the approved settlement, or whether the regular courts had the authority to resolve such disputes.

AG&P and SEMIRARA had previously notified the SSS of their outstanding premium and loan amortization delinquencies. As an alternative to direct payment, the companies proposed a dacion en pago, offering a parcel of land in Batangas as settlement. The SSS initially proposed including other companies within the DMCI group with arrearages. Eventually, only SEMIRARA was determined to have outstanding delinquencies. This led to SEMIRARA’s inclusion in the proposed settlement. Following this, the SSS requested specific documents pertaining to the property, such as the Transfer Certificate of Title, Tax Declaration, and a proposed subdivision plan, which AG&P promptly submitted.

On April 4, 2001, the SSS issued Resolution No. 270, formally approving AG&P’s proposal to settle its and SEMIRARA’s outstanding delinquencies through the dacion en pago. The approval was communicated to AG&P via a letter dated April 23, 2001. Following the approval, contributions and loan amortizations were posted to the individual accounts of both AG&P and SEMIRARA employees. This had the immediate effect of restoring benefits for the employees of both companies. While AG&P consistently remitted the premium contributions and loan amortizations of its member-employees to the SSS thereafter, difficulties arose in the formal transfer of the Batangas property to the SSS.

To facilitate the property transfer, AG&P drafted a Deed of Assignment and submitted it to the SSS in July 2001, but the SSS failed to take any action. After resubmitting the deed in December 2001, AG&P continued to follow up with the SSS regarding its status. On February 28, 2003, the SSS returned a revised copy of the Deed of Assignment, but the amount of the companies’ obligation had increased substantially, from ₱29,261,902.45 to ₱40,846,610.64. This increase was allegedly due to additional interests and penalty charges assessed on the outstanding obligation from April 2001 to January 2003. AG&P contested the imposition of the additional interests and penalties, arguing that the delay in the approval of the deed and the subsequent conveyance of the property was solely attributable to the SSS.

AG&P and SEMIRARA remained willing to settle their original obligation of ₱29,261,902.45. However, the SSS refused to accept payment through dacion en pago unless the additional interests and penalties were also paid. This impasse led AG&P and SEMIRARA to file a complaint for specific performance and damages against the SSS in the Regional Trial Court (RTC) of Batangas City. The SSS, in response, filed a motion to dismiss, arguing that the RTC lacked jurisdiction and that the companies had failed to exhaust administrative remedies. The RTC granted the SSS’s motion and dismissed the complaint. However, the Court of Appeals (CA) reversed the RTC’s decision. The CA held that the RTC did indeed have jurisdiction over the case because the subject of the complaint was the enforcement of the dacion en pago, which is an action for specific performance, rather than a dispute over contributions or benefits, which would fall under the jurisdiction of the SSC. The SSS then elevated the case to the Supreme Court.

The Supreme Court emphasized that the jurisdiction of a tribunal is determined by the allegations in the complaint. The pertinent law is Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, also known as the Social Security Act of 1997. The court agreed with the Court of Appeals. There was no longer any dispute concerning the respondents’ accountability to the SSS because respondents admitted the delinquency, and then proposed a settlement that the SSS approved via Resolution No. 270-s. 2001. This established a contract. According to Vda. de Jayme v. Court of Appeals, a dacion en pago is the transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation.

Because there was consent to the dacion en pago, the suit became one for enforcement and specific performance. It was no longer a matter within the Commission’s competence. Citing Singson v. Isabela Sawmill, the Court emphasized the distinction between actions primarily aimed at recovering sums of money, and those where the monetary claim is merely incidental to the principal relief sought. The latter, the Court noted, are actions where the subject of the litigation is not easily estimated in terms of money and fall under the exclusive jurisdiction of the Regional Trial Courts. Consequently, the Supreme Court affirmed the decision of the Court of Appeals, upholding the RTC’s jurisdiction over the case and remanding it for further proceedings.

FAQs

What was the main legal issue in this case?	The key issue was whether the Regional Trial Court (RTC) or the Social Security Commission (SSC) had jurisdiction over a dispute concerning the implementation of a dacion en pago agreement already approved by the SSS.
What is dacion en pago?	Dacion en pago is a special form of payment where a debtor offers a thing or property to a creditor, who accepts it as equivalent to the payment of an outstanding debt. It is essentially a sale where the debt serves as the purchase price.
When did the SSS approve the dacion en pago in this case?	The SSS approved the dacion en pago on April 4, 2001, via Resolution No. 270, accepting AG&P and SEMIRARA’s proposal to settle their delinquencies with their property in Batangas.
Why did the RTC initially dismiss the case?	The RTC initially dismissed the case because it believed the dispute fell under the jurisdiction of the SSC, as it pertained to unpaid contributions and penalties.
How did the Court of Appeals rule on the RTC’s dismissal?	The Court of Appeals reversed the RTC’s dismissal, ruling that the RTC had jurisdiction because the case was for specific performance of the dacion en pago, not merely a collection of contributions.
What was the Supreme Court’s basis for its decision?	The Supreme Court based its decision on the principle that jurisdiction is determined by the nature of the action as indicated in the complaint and that once a dacion en pago is approved, its enforcement falls under the RTC’s jurisdiction.
What does the Supreme Court’s ruling mean for similar cases?	The ruling clarifies that once a dacion en pago is agreed upon and approved by the SSS, any dispute regarding its implementation is a matter for the regular courts, not the SSC.
What was the final order of the Supreme Court?	The Supreme Court denied the petition, affirmed the Court of Appeals’ decision, and remanded the case to the trial court for further proceedings.

This decision underscores the importance of honoring contractual agreements, even when dealing with government entities. It reinforces that disputes arising from the non-implementation of such agreements fall within the purview of the regular courts. This allows businesses a recourse to seek enforcement of their agreements through specific performance. The final result allows businesses to enforce agreements regarding property used as payment of debts to SSS.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Social Security System vs. Atlantic Gulf and Pacific Company of Manila, Inc., G.R. No. 175952, April 30, 2008