G.R. No. L-23565 March 21, 1968
THE INSULAR LIFE ASSURANCE CO., LTD., petitioner-appellant, vs. SOCIAL SECURITY COMMISSION and RAMON GAVIOLA, JR., respondents-appellees.

FACTS

Petitioner Insular Life Assurance Co., Ltd. filed a petition for declaratory relief in the Court of First Instance of Manila against the Social Security Commission and its Administrator, Ramon Gaviola, Jr. The petition sought to declare null and void Circular No. 34 issued by the Social Security System Administrator on November 6, 1960. The circular stated that insurance agents, underwriters, and similarly situated individuals are considered employees of the insurance firms they work for and are subject to compulsory coverage under the Social Security Act. The petitioner contested this construction, claiming its insurance agents and underwriters are not its employees and therefore it is not bound to comply with the circular. The respondents filed a motion to dismiss on grounds of lack of cause of action and lack of jurisdiction. The lower court, after submission on a stipulation of facts and memoranda, dismissed the petition on the ground of lack of jurisdiction. It held that filing the petition for declaratory relief deprived the Social Security Commission of its statutory power to decide the matter and sought to circumvent the appeal procedure delineated by law.

ISSUE

Whether or not the Court of First Instance has jurisdiction over the petition for declaratory relief which prays for the annulment of Circular No. 34 issued by the administrator of the Social Security System.

RULING

The Supreme Court affirmed the decision of the lower court, dismissing the petition for declaratory relief. The Court held that the Court of First Instance had no jurisdiction because, under Section 5(b) of the Social Security Act (as amended by Republic Act 2658), any party aggrieved by a matter in dispute concerning the Social Security Commission must first exhaust all remedies before the Commission before seeking judicial review. The Court cited its ruling in Philippine American Life Insurance Co. vs. Social Security Commission, which involved the same circular, stating that the approval of the circular did not constitute a “decision” of the Commission on a controversy. The issue arose only when the petitioner expressed its objection, and it was administratively expedient and required by law that the issue be first submitted to and passed upon by the Commission on appeal. The Court further ruled that to allow a petition for declaratory relief in this instance would circumvent the statutory appeal procedure and strip the Commission of its semi-judicial powers. Declaratory relief is discretionary, and courts will not assume jurisdiction until administrative remedies have been exhausted. The declaratory judgment sought would also affect other insurance companies not parties to the case.