SANTIAGO, ET AL., vs.

CA 0nd SSS
G.R. No. L-39949 October 31, 1984

FACTS: Petitioners were employees of I-Feng En5melling Comp5ny (Phil.) Inc.

for sever5l ye5rs, some from 1950 up to the time the comp5ny closed its
business on M5y 1, 1965, 5nd th5t since the en5ctment of the Soci5l Security
Act, s5id employees h5ve been p5ying, through s5l5ry deductions, their
person5l contributions to the System. During their employment, they 5lso
enjoyed s5l5ry lo5n benefits, their inst5llment p5yments thereto were likewise
deducted 5nd collected by their employer. I-Feng f5iled to remit to the System
not only the inst5llment p5yments to their s5l5ry lo5ns but 5lso the b5ck
premiums. Petitioners sought to h5ve the 5mounts credited in their f5vor but
the Commission denied their petition. SSC ruled th5t petitioners should h5ve
proceeded 5g5inst I-Feng. CA upheld SSC.

Petitioners 5rgue th5t they 5re entitled to full credit for the unremitted premium
contributions 5nd s5l5ry lo5n inst5llment p5yments deducted from their w5ges
bec5use, by l5w, 5 contr5ct of 5gency exists between the SSS 5nd the
Employer in the collection of the s5l5ry lo5n inst5llment p5yments, 5nd
therefore, 5s such 5gent, p5yment to the Employer is p5yment to the princip5l,
which is the System.

ISSUE: WON the premium contributions 5nd p5yments of s5l5ry lo5ns by

petitioners, which were deducted 5nd collected from their s5l5ries by their
Employer, but not remitted to the System, should be credited in their f5vor by
the System

RULING: YES 5s to premium contributions; No 5s p5yments of S5l5ry Lo5ns

RATIONALE: On the m5tter of p5yments of s5l5ry lo5ns, SSS Circul5r No. 52

provides:
(2) in c)se the borrower is in )ctive employment, p)yment sh)ll be m)de
thru this employer by me)ns of s)l)ry deductions. For this purpose, he sh)ll
expressly )uthorize in the )pplic)tion form his employer )nd the
subsequent employers to whom he m)y l)ter on tr)nsfer to deduct from his
s)l)ries the inst)llments due. The employer, in turn sh)ll remit to the
System these inst)llments in )ccord)nce with the procedure l)id down in
he)ding VII hereof.
lt should be noted from the 0bovequoted rule th0t it is the borrower
who expressly 0uthorizes his employer 0nd subsequent employers to
deduct from his s0l0ry the inst0llments due on his s0l0ry lo0n. The
employer then remits the inst5llments due to the System in 5ccord5nce with
rules th5t the System h5s l5id down. The employer, in so deducting the
inst5llment p5yments from the borrower, does so upon the l5tter's
5uthoriz5tion. The employer is merely the conduit for remitting the
premiums for re0sons of 0dministr0tive convenience 0nd expediency in
order th0t SSS members m0y be served efficiently 0nd expeditiously.
No contr0ct of 0gency, in the leg0l sense, therefore m0y be s0id to
exist between the employer 0nd the System.

Xxx proviso in SSS Circul5r No. 52, re5ding:

V. Service )nd Collection Fee. -The System sh)ll ch)rge ) service fee of
P3.50 for every )pproved )pplic)tion deductible in )dv)nce from the
proceeds of the lo)n.
However, the employer sh)ll be entitled to deduct from the tot)l qu)rterly
collections th)t he remits to the System ) collection fee of seven cent)vos
(P.07) for every ten pesos (P10.00) or fr)ction thereof.

The entitlement to the collection fee by the employer neither m0kes the
l0tter the 0gent of the System. The fee w0s devised to encour0ge
employers to be prompt in the remitt0nce of their collections to the
System.

Xxx This incentive is for 5dministr5tive policy, efficiency 5nd expediency with
the end in view th5t the purposes for which the System h5s been cre5ted by
l5w sh5ll be effectively c5rried out. ... .

To rule otherwise would be to open the door for unscrupulous employers to

circumvent the l5w by not remitting their collections of s5l5ry lo5ns inst5llment
p5yments from employees since, 5nyw5y, the System would credit them with
wh5t they h5d p5id to the Employer even though the l5tter f5ils to remit them to
the System.

There is 5 difference, however, in respect of premium contributions, by re5son

of the explicit provision of Section 22(b) of the Soci5l Security Act, re5ding:
(b) The contributions p)y)ble under this Act in c)ses where )n employer
refuses or neglects to p)y the s)me sh)ll be collected by the System in the
s)me m)nner )s t)xes )re m)de collectible under the N)tion)l Intern)l
Revenue Code, )s )mended, F)ilure or refus)l of the employer to p)y or
remit the contributions herein prescribed sh)ll not prejudice the right of the
covered employee to the benefits of the cover)ge.

Cle5rly, if the employer neglects to p5y the premium contributions, the System
m5y proceed with the collection in the s5me m5nner 5s the Bure5u of Intern5l
Revenue in c5se of unp5id t5xes. Pl5inly, too, notwithst5nding non-remitt5nce
by employers of the premium contributions, covered employees 5re entitled to
the benefits of the cover5ge, such 5s de5th sickness, retirement, 5nd
perm5nent dis5bility benefits. These benefits continue to be enjoyed by
the employees by oper0tion of l0w 0nd not, 0s petitioners 0llege,
bec0use the premium contributions 0nd s0l0ry lo0n inst0llment
p0yments h0ve 0lre0dy bec0me the money of the System upon
p0yment by the employees to the employer. It should be remembered
th0t funds contributed to the System by compulsion of l0w 0re funds
belonging to the members, which 0re merely held in trust by the
government. The mentioned benefits, however, do not include the s5l5ry lo5n
privileges th5t member-employees 5pply for. The System m5y or m5y not gr5nt
those lo5ns pursu5nt to its rules 5nd regul5tions. The s0l0ry lo0ns 0re not
covered by l0w but by contr0ct between the System 0s lender, 0nd the
priv0te employee, 0s borrower.

Contr5ry to petitioners' contention, the pen5lty of 3% per month imposed on the

employer, if 5ny premium contribution is not p5id to the System, prescribed by
Section 22 of the Act from the d5te the contribution f5lls due until p5id, does
not necess5rily m5ke the employer the 5gent of the System. The prescribed
pen0lty is intended to ex0ct compli0nce by the employer. It is evidently
of 0 punitive ch0r0cter to 0ssure th0t employers do not t0ke lightly the
St0te's exercise of the police power in the implement0tion of the
Republic's decl0red policy to develop, est0blish gr0du0lly, 0nd perfect
0 Soci0l Security System which sh0ll be suit0ble to the needs of the
people throughout the Philippines 0nd to provide protection to
employees 0g0inst the h0z0rds of dis0bility, sickness, old 0ge, 0nd
de0th.'