confined to specific matters, are generally accorded not only

great respect but even finality; and are binding upon this
Court unless there is a showing of grave abuse of discretion,
or where it is clearly shown

_______________
564 SUPREME COURT REPORTS ANNOTATED
* THIRD DIVISION.
Naguiat vs. National Labor Relations Commission

*
G.R. No. 116123. March 13, 1997. 565

SERGIO F. NAGUIAT, doing business under the name

and style SERGIO F. NAGUIAT ENT., INC., &
CLARK FIELD TAXI, INC., petitioners, vs. VOL. 269, MARCH 13, 1997 565
NATIONAL LABOR RELATIONS COMMISSION Naguiat vs. National Labor Relations Commission
(THIRD DIVISION), NATIONAL ORGANIZATION
OF WORKINGMEN and its members, LEONARDO T.
GALANG, et al., respondents. that they were arrived at arbitrarily or in disregard of the
evidence on record.
Same; Evidence; Estoppel; A party is estopped from
Labor Law; Actions; Certiorari; In a petition for
questioning issues of alleged facts if he did not do so when he
certiorari filed pursuant to Rule 65 of the Rules of Court,
had all the opportunity in the proceedings below.—In their
which is the only way a labor case may reach the Supreme
amended complaint before the Regional Arbitration Branch
Court, the petitioner must clearly show that the NLRC acted
in San Fernando, Pampanga, herein private respondents set
without or in excess of jurisdiction or with grave abuse of
forth in detail the work schedule and financial arrangement
discretion.—Firmly, we reiterate the rule that in a petition
they had with their employer. Therefrom they inferred that
for certiorari filed pursuant to Rule 65 of the Rules of Court,
their monthly take-home pay amounted to not less than
which is the only way a labor case may reach the Supreme
$240.00. Herein petitioners did not bother to refute nor offer
Court, the petitioner/s must clearly show that the NLRC
any evidence to controvert said allegations. Remaining
acted without or in excess of jurisdiction or with grave abuse
undisputed, the labor arbiter adopted such facts in his
of discretion.
decision. Petitioners did not even appeal from the decision of
Same; Administrative Law; Findings of fact of the labor arbiter nor manifest any error in his findings and
administrative agencies and quasi-judicial bodies, which conclusions. Thus, petitioners are in estoppel for not having
have acquired expertise because their jurisdiction is confined questioned such facts when they had all opportunity to do so.
to specific matters, are generally accorded not only great Private respondents, like petitioners, are bound by the
respect but even finality.—Long-standing and well-settled in factual findings of Respondent Commission.
Philippine jurisprudence is the judicial dictum that findings
Same; Same; Business Losses; Separation Pay; Business
of fact of administrative agencies and quasi-judicial bodies,
losses or financial reverses, in order to sustain retrenchment
which have acquired expertise because their jurisdiction is
of personnel or closure of business and warrant exemption
from payment of separation pay, must be proved with clear clearly set forth the facts and law upon which they are based,
and satisfactory evidence.— Petitioners also claim that the a rule applicable as well to dispositions by quasi-judicial and
closure of their taxi business was due to great financial administrative bodies.— Unfortunately, the NLRC did not
losses brought about by the eruption of Mt. Pinatubo which discuss or give any explanation for holding Naguiat
made the roads practically impassable to their taxicabs. Enterprises and its officers jointly and severally liable in
Likewise well-settled is the rule that business losses or discharging CFTI’s liability for payment of separation pay.
financial reverses, in order to sustain retrenchment of We again remind those concerned that decisions, however
personnel or closure of business and warrant exemption from concisely written, must distinctly and clearly set forth the
payment of separation pay, must be proved with clear and facts and law upon which they are based. This rule applies as
satisfactory evidence. The records, however, are devoid of well to dispositions by quasi-judicial and administrative
such evidence. bodies.
Same; Parties; Estoppel; Where a party did not assail the Same; Words and Phrases; “Labor-Only Contracting”
juridical personality of a labor organization’s authority to and “In-dependent Contractors,” Explained.—We find no
represent the complainants before the quasi-judicial bodies, reason to make a contrary finding. Labor-only contracting
he is estopped from raising such question before the Supreme exists where: (1) the person supplying workers to an
Court.—On the question of NOWM’s authority to represent employer does not have substantial capital or investment in
private respondents, we hold petitioners in estoppel for not the form of tools, equipment, machinery, and work premises,
having seasonably raised this issue before the labor arbiter among others; and (2) the workers recruited and placed by
or the NLRC. NOWM was already a party-litigant as the such person are performing activities which are directly
organization representing the taxi driver-complainants related to the principal business of the employer.
before the labor arbiter. But petitioners who were party- Independent contractors, meanwhile, are those who exercise
respondents in said complaint did not assail the juridical independent employment, contracting to do a piece of work
personality of NOWM and the validity of its representations according to their own methods without being subject to
in behalf of the complaining taxi control of their employer except as to the result of their work.
Same; Same; Corporation Law; The President of a
566
corporation who actively manages the business falls within
the meaning of an “employer” as contemplated by the Labor
Code and may be held jointly and severally liable for the
566 SUPREME COURT REPORTS ANNOTATED obligations of the corporation to its dismissed employees.—
Sergio F. Naguiat, admittedly, was the president of CFTI
Naguiat vs. National Labor Relations Commission who actively managed the business. Thus, applying the
ruling in A.C. Ransom, he falls within the meaning of an
drivers before the quasi-judicial bodies. Therefore, they are “employer” as contemplated by the Labor Code, who may be
now estopped from raising such question before this Court. held jointly and severally liable for the obligations of the
In any event, petitioners acknowledged before this Court that corporation to its dismissed employees.
the taxi drivers allegedly represented by NOWM, are
567
themselves parties in this case.
Same; Courts; Administrative Law; Judgments;
Decisions, however concisely written, must distinctly and VOL. 269, MARCH 13, 1997 567
 Naguiat vs. National Labor Relations Commission cannot now claim to have been denied due process since they
availed of the opportunity to present their positions.

Same; Same; Same; “Close Family Corporations”; SPECIAL CIVIL ACTION in the Supreme Court.
Stockholders who are actively engaged in the management or Certiorari.
operation of the business and affairs of a close corporation
shall be personally liable for corporate torts unless the The facts are stated in the opinion of the Court.
corporation has obtained reasonably adequate liability
insurance.—Moreover, petitioners also conceded that both 568
CFTI and Naguiat Enterprises were “close family
corporations” owned by the Naguiat family. Section 100, 568 SUPREME COURT REPORTS ANNOTATED
paragraph 5, (under Title XII on Close Corporations) of the
Corporation Code, states: “(5) To the extent that the Naguiat vs. National Labor Relations Commission
stockholders are actively engage(d) in the management or
operation of the business and affairs of a close corporation,           Villanueva, De Leon, Hipolito and Associates Law
the stockholders shall be held to strict fiduciary duties to Offices for petitioners.
each other and among themselves. Said stockholders shall be
personally liable for corporate torts unless the corporation PANGANIBAN, J.:
has obtained reasonably adequate liability insurance.”
Are private respondent-employees of petitioner Clark
(italics supplied)
Field Taxi, Inc., who were separated from service due
Same; Same; Same; Torts; Corporate Torts; Our to the closure of Clark Air Base, entitled to separation
jurisprudence is wanting as to the definite scope of “corporate pay and, if so, in what amount? Are officers of
tort.”—Our jurisprudence is wanting as to the definite scope corporations ipso facto liable jointly and severally with
of “corporate tort.” Essentially, “tort” consists in the violation the companies they represent for the payment of
of a right given or the omission of a duty imposed by law. separation pay?
Simply stated, tort is a breach of a legal duty. Article 283 of These questions are answered by the Court in
the Labor Code mandates the employer to grant separation resolving this petition for certiorari under Rule 65 of
pay to employees in case of closure or cessation of operations the Rules of Court assailing the Resolutions of the1
of establishment or undertaking not due to serious business National Labor Relations Commission (Third Division)
2
losses or financial reverses, which is the condition obtaining promulgated on February 28, 1994, and May 31,
3
at bar. CFTI failed to comply with this law-imposed duty or 1994. The February 28, 1994 Resolution affirmed with
4
obligation. Consequently, its stockholder who was actively modifications the decision of Labor Arbiter Ariel C.
engaged in the management or operation of the business Santos in NLRC Case No. RAB-III-12-2477-91. The
should be held personally liable. second Resolution denied the motion for
Due Process; A party who has availed of the opportunity reconsideration of herein petitioners.
to present his position cannot claim to have been denied due The NLRC modified the decision of the labor arbiter
process.— Furthermore, Sergio and Antolin Naguiat by granting separation pay to herein individual
voluntarily submitted themselves to the jurisdiction of the respondents in the increased amount of US$120.00 for
labor arbiter when they, in their individual capacities, filed a every year of service or its peso equivalent, and holding
position paper together with CFTI, before the arbiter. They Sergio F. Naguiat Enterprises, Inc., Sergio F. Naguiat
and Antolin T. Naguiat, jointly and severally liable The drivers worked at least three to four times a
with Clark Field Taxi, Inc. (“CFTI”). week, depending on the availability of taxicabs. They
earned not less than US$15.00 daily. In excess of that
amount, however, they were required to make cash
The Facts deposits to the company, which they could later
The following facts are derived from the records of the withdraw every fifteen days.
case: Due to the phase-out of the US military bases in the
Philippines, from which Clark Air Base was not
spared, the AAFES was dissolved, and the services of
_______________
individual respondents were officially terminated on
1 Composed of Comm. Ireneo B. Bernardo, ponente, with Comms. November 26, 1991.
Lourdes C. Javier (presiding commissioner) and Joaquin A. Tanodra, The AAFES Taxi Drivers Association (“drivers’
concurring. union”), through its local president, Eduardo Castillo,
2 Rollo, pp. 69-73. and CFTI held negotiations as regards separation
3 Ibid., p. 82. benefits that should be awarded in favor of the drivers.
4 Promulgated on June 4, 1993; rollo, pp. 48-56. They arrived at an agreement that the separated
drivers will be given P500.00 for every year of service
569 as severance pay. Most of the drivers accepted said
amount in December 1991 and January 1992.
However, individual respondents herein refused to
VOL. 269, MARCH 13, 1997 569
accept theirs.
Naguiat vs. National Labor Relations Commission Instead, after disaffiliating themselves from the
drivers’ union, individual respondents, through the
Petitioner CFTI held a concessionaire’s contract with National Organization of Workingmen (“NOWM”), a
the Army Air Force Exchange Services (“AAFES”) for labor organization which
the operation of taxi services within Clark Air Base.
570
Sergio F. Naguiat was CFTI’s president, while Antolin
T. Naguiat was its vicepresident. Like Sergio F.
Naguiat Enterprises, Incorporated (“Naguiat 570 SUPREME COURT REPORTS ANNOTATED
Enterprises”), a trading firm, it was a family-owned Naguiat vs. National Labor Relations Commission
corporation.
Individual respondents were previously employed 5

by CFTI as taxicab drivers. During their employment, they subsequently joined, filed a complaint against
they were required to pay a daily “boundary fee” in the “Sergio F. Naguiat doing business under the name and
amount of US$26.50 for those working from 1:00 a.m. style Sergio F. Naguiat Enterprises, Inc., Army-Air
to 12:00 noon, and US$27.00 for those working from Force Exchange Services (AAFES) with Mark Hooper
12:00 noon to 12:00 midnight. All incidental expenses as Area Service Manager, Pacific Region, and AAFES
for the maintenance of the vehicles they were driving Taxi Drivers Association with Eduardo Castillo as
were accounted against them, including gasoline President,” for payment of separation pay due to
expenses. termination/phase-out.
6
Said complaint was later
amended to include additional taxi drivers who were
similarly situated as complainants, and CFTI with Naguiat vs. National Labor Relations Commission
Antolin T. Naguiat as vice president and general
manager, as party respondent. and the drivers’ union of P500.00 for every year of
In their complaint, herein private respondents service. The labor arbiter rejected the allegation of
alleged that they were regular employees of Naguiat CFTI that it was forced to close business due to “great
Enterprises, although their individual applications for financial losses and lost business opportunity” since, at
employment were approved by CFTI. They claimed to the time it ceased operations, CFTI was profitably
have been assigned to Naguiat Enterprises after earning and the cessation of its business was due to
having been hired by CFTI, and that the former thence the untimely closure of Clark Air Base. In not
managed, controlled and supervised their employment. awarding separation pay in accordance with the Labor
They averred further that they were entitled to Code, the labor arbiter explained:
separation pay based on their latest daily earnings of
US$15.00 for working sixteen (16) days a month. “To allow respondents exemption from its (sic) obligation to
In their position paper submitted to the labor pay separation pay would be inhuman to complainants but to
arbiter, herein petitioners claimed that the cessation of impose a monetary obligation to an employer whose
business of CFTI on November 26, 1991, was due to profitable business was abruptly shot (sic) down 7by force
“great financial losses and lost business opportunity” majeure would be unfair and unjust to say the least.”
resulting from the phase-out of Clark Air Base brought
about by the Mt. Pinatubo eruption and the expiration and thus, simply awarded an amount for
of the RP-US military bases agreement. They admitted “humanitarian con-sideration.”
that CFTI had agreed with the drivers’ union, through Herein individual private respondents appealed to
its President Eduardo Castillo who claimed to have the NLRC. In its Resolution, the NLRC modified the
had blanket authority to negotiate with CFTI in behalf decision of the labor arbiter by granting separation pay
of union members, to grant its taxi driver-employees to the private respondents. The concluding paragraphs
separation pay equivalent to P500.00 for every year of of the NLRC Resolution read:
service. “The contention of complainant is partly correct. One-half
The labor arbiter, finding the individual month salary should be US$120.00 but this amount can not
complainants to be regular workers of CFTI, ordered be paid to the complainant in U.S. Dollar which is not the
the latter to pay them P1,200.00 for every year of legal tender in the Philippines. Paras, in commenting on Art.
service “for humanitarian consideration,” setting aside 1249 of the New Civil Code, defines legal tender as ‘that
the earlier agreement between CFTI which a debtor may compel a creditor to accept in payment of
the debt. The complainants who are the creditors in this
_______________ instance can be compelled to accept the Philip-pine peso
which is the legal tender, in which case, the table of
5 Ibid., pp. 14-18.
conversion (exchange rate) at the time of payment or
6 Ibid., pp. 20-29.
satisfaction of the judgment should be used. However, since
571 the choice is left to the debtor, (respondents) they may choose
to pay in US dollar.’ (Phoenix Assurance Co. vs. Macondray
& Co., Inc., L-25048, May 13, 1975)
VOL. 269, MARCH 13, 1997 571
 In discharging the above obligations, Sergio F. Naguiat Petitioners also
11
submit two additional issues by way of
Enterprises, which is headed by Sergio F. Naguiat and a supplement to their petition, to wit: that Petitioners
Antolin Naguiat, father and son at the same time the Sergio F. Naguiat and Antolin Naguiat were denied
President and Vice-President due process; and that petitioners were not furnished
copies of private respondents’ appeal to the NLRC. As
_______________ to the procedural lapse of insufficient copies of the
appeal, the proper forum before which petitioners
7 Rollo, p. 56.
should have raised it is the NLRC. They, however,
failed to question this in their motion for
572
reconsideration. As a consequence, they are deemed to
have waived the same and
572 SUPREME COURT REPORTS ANNOTATED
Naguiat vs. National Labor Relations Commission _______________

and General Manager, respectively, should be joined as 8 Rollo, pp. 72-73.

indispensable party whose8 liability is joint and several. (Sec. 9 Rollo, pp. 131-132.
7, Rule 3, Rules of Court)” 10 Ibid., p. 6.
11 Ibid., pp. 97-102.
As mentioned earlier, the motion for reconsideration of
herein petitioners was denied by the NLRC. Hence, 573

this petition with prayer for issuance of a temporary

restraining order. Upon posting by the petitioners
9
of a VOL. 269, MARCH 13, 1997 573
surety bond, a temporary restraining order was issued
Naguiat vs. National Labor Relations Commission
by this Court enjoining execution of the assailed
Resolutions.
voluntarily submitted themselves to the jurisdiction of
the appellate body.
Issues Anent the first issue raised in their original
petition, petitioners contend that NLRC committed
The petitioners raise the following issues before this
grave abuse of discretion amounting to lack or excess
Court for resolution:
of jurisdiction in unilaterally increasing the amount of
“I. Whether or not public respondent NLRC (3rd severance pay granted by the labor arbiter. They claim
Div.) committed grave abuse of discretion that this was not supported by substantial evidence
amounting to lack of jurisdiction in issuing the since it was based simply on the self-serving allegation
appealed resolution; of respondents that their monthly take-home pay was
not lower than $240.00.
II. Whether or not Messrs. Teofilo Rafols and
On the second issue, petitioners aver that NOWM
Romeo N. Lopez could validly represent herein
cannot make legal representations in behalf of
private respondents; and,
individual respondents who should, instead, be bound
III. Whether or not the resolution 10issued by public by the decision of the union (AAFES Taxi Drivers
respondent is contrary to law.” Association) of which they were members.
 As to the third issue, petitioners incessantly insist
that Sergio F. Naguiat Enterprises, Inc. is a separate
The Court’s Ruling
and distinct juridical entity which cannot be held
jointly and severally liable for the obligations of CFTI. As will be discussed below, the petition is partially
And similarly, Sergio F. Naguiat and Antolin Naguiat meritorious.
were merely officers and stockholders of CFTI and,
thus, could not be held personally accountable for
corporate debts. First Issue: Amount of Separation Pay
Lastly, Sergio and Antolin Naguiat assail the
Resolution of NLRC holding them solidarily liable Firmly, we reiterate the rule that in a petition for
despite not having been impleaded as parties to the certiorari filed pursuant to Rule 65 of the Rules of
complaint. Court, which is the only way a labor case may reach
Individual respondents filed a comment separate the Supreme Court, the petitioner/s must clearly show
from that of NOWM. In sum, both aver that petitioners that the NLRC acted without or in excess 12
of
had the opportunity but failed to refute, the taxi jurisdiction or with grave abuse of discretion.
drivers’ claim of having an average monthly earning of Long-standing and well-settled in Philippine
$240.00; that individual respondents became members jurisprudence is the judicial dictum that findings of
of NOWM after disaffiliating themselves from the fact of administrative agencies and quasi-judicial
AAFES Taxi Drivers Association which, through the bodies, which have acquired expertise because their
manipulations of its President Eduardo Castillo, jurisdiction is confined to specific matters, are
unconscionably compromised their separation pay; and generally accorded not only great respect but even
that Naguiat Enterprises, being their indirect finality; and are binding upon this Court unless there
employer, is solidarily liable under the law for is a showing of grave abuse of discretion, or where it is
violation of the Labor Code, in this case, for clearly shown that they were arrived13at arbitrarily or
nonpayment of their separation pay. in disregard of the evidence on record.
The Solicitor General unqualifiedly supports the Nevertheless, this Court carefully perused the
allegations of private respondents. In addition, he records of the instant case if only to determine whether
submits that the public respondent committed grave abuse of discretion,
amounting to lack of jurisdiction, in granting the
574 clamor of private respondents that their separation
pay should be based on the amount of $240.00,
allegedly their minimum monthly earnings as taxi
574 SUPREME COURT REPORTS ANNOTATED
drivers of petitioners.
Naguiat vs. National Labor Relations Commission
_______________
separate personalities of respondent corporations and
their officers should be disregarded and considered one 12 Bordeos, et al. vs. NLRC, et al., G.R. Nos. 115314-23, Sep-
and the same as these were used to perpetrate tember 26, 1996.
injustice to their employees. 13 Maya Farms Employees Organization vs. NLRC, 239 SCRA 508,
December 28, 1994.
 575 provides:

“x x x In case of retrenchment to prevent losses and in cases

VOL. 269, MARCH 13, 1997 575 of closures or cessation of operations of establishment or
Naguiat vs. National Labor Relations Commission undertaking not due to serious business losses or financial
reverses, the separation

In their amended complaint before the Regional

_______________
Arbitration Branch in San Fernando, Pampanga,
herein private respondents set forth in detail the work 14 See Revidad vs. NLRC, 245 SCRA 356, June 27, 1995; St. Gothard
schedule and financial arrangement they had with Disco Pub vs. NLRC, 218 SCRA 321, 334, February 1, 1993.
their employer. Therefrom they inferred that their
monthly take-home pay amounted to not less than 576
$240.00. Herein petitioners did not bother to refute nor
offer any evidence to controvert said allegations.
576 SUPREME COURT REPORTS ANNOTATED
Remaining undisputed, the labor arbiter adopted such
facts in his decision. Petitioners did not even appeal Naguiat vs. National Labor Relations Commission
from the decision of the labor arbiter nor manifest any
error in his findings and conclusions. Thus, petitioners pay shall be equivalent to one (1) month pay or at least one-
are in estoppel for not having questioned such facts half (1/2) month pay for every year of service, whichever is
when they had all opportunity to do so. Private higher. A fraction of at least six (6) months shall be
respondents, like petitioners, are bound by the factual considered one (1) whole year.”
findings of Respondent Commission.
Considering the above, we find that NLRC did not
Petitioners also claim that the closure of their taxi
commit grave abuse of discretion in ruling that
business was due to great financial losses brought
individual respondents were entitled to separation
about by the eruption of Mt. Pinatubo which made the 15
pay in the amount $120.00 (one-half of $240.00
roads practically impassable to their taxicabs.
monthly pay) or its peso equivalent for every year of
Likewise well-settled is the rule that business losses or
service.
financial reverses, in order to sustain retrenchment of
personnel or closure of business and warrant
exemption from payment of separation pay, must 14
be Second Issue: NOWM’s Personality to
proved with clear and satisfactory evidence. The Represent Individual Respondents-Employees
records, however, are devoid of such evidence.
The labor arbiter, as affirmed by NLRC, correctly On the question of NOWM’s authority to represent
found that petitioners stopped their taxi business private respondents, we hold petitioners in estoppel for
within Clark Air Base because of the phase-out of U.S. not having seasonably raised this issue before the
military presence thereat. It was not due to any great labor arbiter or the NLRC. NOWM was already a
financial loss because petitioners’ taxi business was party-litigant as the organization representing the taxi
earning profitably at the time of its closure. driver-complainants before the labor arbiter. But
With respect to the amount of separation pay that petitioners who were party-respondents in said
should be granted, Article 283 of the Labor Code complaint did not assail the juridical personality of
NOWM and the validity of its representations in behalf rule applies as well to dispositions by quasi-judicial
of the complaining taxi drivers before the quasi-judicial and administrative bodies.
bodies. Therefore, they are now estopped from raising
such question before this Court. In any event, Naguiat Enterprises Not Liable
petitioners acknowledged before this Court that the In impleading Naguiat Enterprises as solidarily liable
taxi drivers allegedly represented
16
by NOWM, are for the obligations of CFTI, respondents rely on
18
themselves parties in this case. Articles 106,

Third Issue: Liability of Petitioner _______________

Corporations and Their Respective Officers 17 Del Mundo vs. Court of Appeals, 240 SCRA 348, January 20,

The resolution of this issue involves another factual 1995; Estoya vs. Abraham-Singson, 237 SCRA 1, September 26,

finding that Naguiat Enterprises actually managed, 1994.

supervised and controlled employment terms of the 18 “Art. 106. Contractor or subcontractor.—Whenever an employer
taxi drivers, making it their indirect employer. As enters into a contract with another person for the performance of the
adverted to earlier, factual find- former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions
of this Code.
_______________
In the event that the contractor or subcontractor fails to pay the
15 Mobil Employees Association vs. NLRC, 183 SCRA 737, March wages of his employees in accordance with this Code, the employer
28, 1990; See Catatista vs. NLRC, 247 SCRA 46, 1995; Shoppers shall be jointly and severally liable with his contractor or
Gain Supermart vs. NLRC, G.R. No. 110731, July 26, 1996. subcontractor to such employees to the extent of the work performed
16 Petition for Certiorari, p. 2; rollo, p. 3. under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
577 The Secretary of Labor may, by appropriate regulations, restrict
or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting,
VOL. 269, MARCH 13, 1997 577
he may make appropriate distinctions between labor-only
Naguiat vs. National Labor Relations Commission contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties
ings of quasi-judicial bodies are binding upon the court involved shall be considered as the employer for the purposes of this
in the absence of a showing of grave abuse of Code, to prevent any violation or circumvention of any provision of
discretion. this Code.
Unfortunately, the NLRC did not discuss or give
578
any explanation for holding Naguiat Enterprises and
its officers jointly and severally liable in discharging
CFTI’s liability for payment of separation pay. We 578 SUPREME COURT REPORTS ANNOTATED
again remind those concerned that decisions, however
Naguiat vs. National Labor Relations Commission
concisely written, must distinctly and clearly set17 forth
the facts and law upon which they are based. This
19 20
 19 20
107 and 109 of the Labor Code. 21 Neri vs. NLRC, 224 SCRA 717, July 23, 1993.
Based on factual submissions of the parties, the
579
labor arbiter, however, found that individual
respondents were regular employees of CFTI who
received wages on a boundary or commission basis. VOL. 269, MARCH 13, 1997 579
We find no reason to make a contrary finding.
Naguiat vs. National Labor Relations Commission
Labor-only contracting exists where: (1) the person
supplying workers to an employer does not have 22

substantial capital or investment in the form of tools, employer except as to the result of their work.
equipment, machinery, and work premises, among From the evidence proffered by both parties, there is
others; and (2) the workers recruited and placed by no substantial basis to hold that Naguiat Enterprises
such person are performing activities which are is an indirect employer of individual respondents much
directly related to the principal business of the less a labor only contractor. On the contrary,
21
employer. Independent contractors, meanwhile, are petitioners submitted documents such as23the drivers’
those who exercise independent employment, applications for employment
24
with CFTI,
25
and social
contracting to do a piece of work according to their own security remittances and payroll of Naguiat
methods without being subject to control of their Enterprises showing that none of the individual
respondents
26
were its employees. Moreover, in the
contract between CFTI and AAFES, the former, as
_______________
concessionaire, agreed to purchase from AAFES for a
There is ‘labor-only’ contracting where the person supplying certain amount within a specified period a fleet of
workers to an employer does not have substantial capital or vehicles to be “ke(pt) on the road” by CFTI, pursuant to
investment in the form of tools, equipment, machineries, work their concessionaire’s contract. This indicates that
premises, among others, and the workers recruited and placed by CFTI became the owner of the taxicabs which became
such persons are performing activities which are directly related to the principal investment and asset of the company.
the principal business of such employer. In such cases, the person or Private respondents failed to substantiate their
intermediary shall be considered as merely an agent of the employer claim that Naguiat Enterprises managed, supervised
who shall be responsible to the workers in the same manner and and controlled their employment. It appears that they
extent as if the latter were directly employed by him.” were confused on the personalities of Sergio F. Naguiat
19 “Art. 107. Indirect employer.—The provisions of the as an individual who was the president of CFTI, and
immediately preceding Article shall likewise apply to any person, Sergio F. Naguiat Enterprises, Inc., as a separate
partnership, association or corporation which, not being an corporate entity with a separate business. They
employer, contracts with an independent contractor for the presumed that Sergio F. Naguiat, 27
who was at the same
performance of any work, task, job or project.” time a stockholder and director of Sergio F. Naguiat
20 “Art. 109. Solidary liability.—The provisions of existing laws to Enterprises, Inc., was managing and controlling the
the contrary notwithstanding, every employer or indirect employer taxi business on behalf of the latter. A closer scrutiny
shall be held responsible with his contractor or subcontractor for any and analysis of the records, however, evince the truth
violation of any provision of this Code. For purposes of determining of the matter: that Sergio F. Naguiat, in supervising
the extent of their civil liability under this Chapter, they shall be the taxi drivers and determining their employment
considered as direct employers.” terms, was rather carrying out his responsibilities as
president of CFTI. Hence, Naguiat Enterprises as
_______________ Atty. Suarez
22 Villuga vs. NLRC, 225 SCRA 537, August 23, 1993.   What is exactly the position of Sergio F. Naguiat
23 Records, pp. 33-46.
with the Sergio F. Naguiat Enterprises?
24 Ibid., pp. 142-205. Witness
25 Ibid., 206-230.   He is the owner, sir.
26 Annex “C” to Respondent CFTI’s (petitioner herein) Appearance
Atty. Suarez
and Omnibus Motion; records, pp. 47-48.
27 Motion for Reconsideration, p. 6; rollo, p. 79.   How about with Clark Field Taxi Incorporated
what is the position of Mr. Naguiat?
580
Witness
  What I know is that he is a concessionaire.
580 SUPREME COURT REPORTS ANNOTATED
  x x x      x x x      x x x
Naguiat vs. National Labor Relations Commission
Atty. Suarez
a separate corporation does not appear to be involved   But do you also know that Sergio F. Naguiat is the
at all in the taxi business. President of Clark Field Taxi, Incorporated?
To illustrate further, we refer to the testimony of a Witness
driver-claimant on cross examination.
  Yes, sir.
“Atty. Suarez Atty. Suarez
      Is it not true that you applied not with Sergio F.   How about Mr. Antolin Naguiat what is his role in
Naguiat but with Clark Field Taxi? the taxi services, the operation of the Clark Field
Witness Taxi, Incorporated?

  I applied for (sic) Sergio F. Naguiat.

581
Atty. Suarez
  Sergio F. Naguiat as an individual or the VOL. 269, MARCH 13, 1997 581
corporation?
Naguiat vs. National Labor Relations Commission
Witness
  ‘Sergio F. Naguiat na tao.’ Witness
28
Atty. Suarez       He is the vice president.”
  Who is Sergio F. Naguiat?
Witness And, although the witness insisted that Naguiat
Enterprises was his employer, he could not deny that
  He is the one managing the Sergio F. Naguiat he received his salary from the office of CFTI inside
Enterprises and he is the one whom we believe as 29
the base.
our employer.
 Another driver-claimant admitted, upon the 582 SUPREME COURT REPORTS ANNOTATED
prodding of counsel for the corporations, that Naguiat Naguiat vs. National Labor Relations Commission
Enterprises was in 30the trading business while CFTI
was in taxi services. 33
31
A.C. Ransom Labor Union-CCLU vs. NLRC is the
In addition, the Constitution of CFTI-AAFES Taxi
case in point. A.C. Ransom Corporation was a family
Drivers Association which, admittedly, was the union
corporation, the stockholders of which were members
of individual respondents while still working at Clark
of the Hernandez family. In 1973, it filed an
Air Base, states that members thereof are the
application for clearance to close or cease operations,
employees of CFTI and “(f)or collective bargaining
which was duly granted by the Ministry of Labor and
purposes, the definite employer is the Clark Field Taxi,
Employment, without prejudice to the right of
Inc.”
employees to seek redress of grievance, if any.
From the foregoing, the ineludible conclusion is that
Backwages of 22 employees, who engaged in a strike
CFTI was the actual and direct employer of individual
prior to the closure, were subsequently computed at
respondents, and that Naguiat Enterprises was
P164,984.00. Up to September 1976, the union filed
neither their indirect employer nor labor-only
about ten (10) motions for execution against the
contractor. It was not involved at all in the taxi
corporation, but none could be implemented,
business.
presumably for failure to find leviable assets of said
CFTI president solidarily liable corporation. In its last motion for execution, the union
asked that officers and agents of the company be held
Petitioner-corporations would likewise want to avoid
personally liable for payment of the backwages. This
the solidary liability of their officers. To bolster their
was granted by the labor arbiter. In the corporation’s
position, Sergio F. Naguiat and Antolin T. Naguiat
appeal to the NLRC, one of the issues raised was: “Is
specifically aver that they were denied due process 32 the judgment against a corporation to reinstate its
since they were not parties to the complaint below. In
dismissed employees with backwages, enforceable
the broader interest of justice, we, however, hold that
against its officer and agents, in their individual,
Sergio F. Naguiat, in his capacity as president of CFTI,
private and personal capacities, who were not parties
cannot be exonerated from joint and several liability in
in the case where the judgment was rendered?” The
the payment of separation pay to individual
NLRC answered in the negative, on the ground that
respondents.
officers of a corporation are not liable personally for
official acts unless they exceeded the scope of their
_______________ authority.
On certiorari, this Court reversed the NLRC and
28 TSN, May 18, 1992, pp. 3-6.
upheld the labor arbiter. In imposing joint and several
29 Ibid., pp. 9-10.
liability upon the company president, the Court,
30 TSN, May 29, 1992, pp. 8-9.
speaking through Mme. Justice Ameurfina Melencio-
31 Records, pp. 235-246.
Herrera, ratiocinated this wise:
32 Rollo, p. 231.

582 “(b) How can the foregoing (Articles 265 and 273 of
the Labor Code) provisions be implemented
when the employer is a corporation? The
 answer is found in Article 212(c) of the Labor the person acting as such.’ In RANSOM, the President
Code which provides: appears to be the Manager.” (Italics supplied.)
‘(c) ‘Employer’ includes any person acting in the
interest of an employer, directly or indirectly. Sergio F. Naguiat, admittedly, was the president of
The term shall not include any labor CFTI who actively managed the business. Thus,
organization or any of its officers or agents applying the ruling in A.C. Ransom, he falls within the
except when acting as employer.’ meaning of an “employer” as contemplated by the
Labor Code, who may be held jointly and severally
liable for the obligations of the corporation to its
_______________ dismissed employees.
33 142 SCRA 269, June 10, 1986.
Moreover, petitioners also conceded that both CFTI
and Naguiat 34
Enterprises were “close family
583 corporations” owned by the Naguiat family. Section
100, paragraph 5, (under Title XII on Close
Corporations) of the Corporation Code, states:
VOL. 269, MARCH 13, 1997 583
Naguiat vs. National Labor Relations Commission “(5) To the extent that the stockholders are actively
engage(d) in the management or operation of the business
and affairs of a close corporation, the stockholders shall be
The foregoing was culled from Section 2 of RA 602, the
held to strict fiduciary duties to each other and among
Minimum Wage Law. Since RANSOM is an artificial person,
themselves. Said stockholders shall be personally liable for
it must have an officer who can be presumed to be the
corporate torts unless the corporation has obtained
employer, being the ‘person acting in the interest of (the)
reasonably adequate liability insurance.” (italics supplied)
employer’ RANSOM. The corporation, only in the technical
sense, is the employer.
The responsible officer of an employer corporation can be _______________
held personally, not to say even criminally, liable for
34 Motion for Reconsideration, p. 4; records, p. 436.
nonpayment of back wages. That is the policy of the law. x x
x 584

(c) If the policy of the law were otherwise, the

corporation employer can have devious ways for 584 SUPREME COURT REPORTS ANNOTATED
evading payment of back wages. x x x Naguiat vs. National Labor Relations Commission
(d) The record does not clearly identify ‘the officer or
officers’ of RANSOM directly responsible for failure to Nothing in the records show whether CFTI obtained
pay the back wages of the 22 strikers. In the absence “reasonably adequate liability insurance”; thus, what
of definite proof in that regard, we believe it should be remains is to determine whether there was corporate
presumed that the responsible officer is the President tort.
of the corporation who can be deemed the chief Our jurisprudence is wanting as to the definite
operation officer thereof. Thus, in RA 602, criminal scope of “corporate tort.” Essentially, “tort” consists in
responsibility is with the ‘Manager or in his default, the violation of a right given or the omission of a duty
35
 35
imposed by36 law. Simply stated, tort is a breach of a
legal duty. Article 283 of the Labor Code mandates VOL. 269, MARCH 13, 1997 585
the employer to grant separation pay to employees in
case of closure or cessation of operations of Naguiat vs. National Labor Relations Commission
establishment or undertaking not due to serious
business losses or financial reverses, which is the In fact, in posting the surety bond required by this
condition obtaining at bar. CFTI failed to comply with Court for the issuance of a temporary restraining order
this law-imposed duty or obligation. Consequently, its enjoining the execution of the assailed NLRC
stockholder who was actively engaged in the Resolutions, only Sergio F. Naguiat, in his individual
management or operation of the business should be and personal capacity, principally bound himself to
held personally liable. comply with the obligation thereunder, i.e., “to
Furthermore,
37
in MAM Realty Development vs. guarantee the payment to private respondents of any
NLRC, the Court recognized that a director or officer damages which they may incur by reason of the
may still be held solidarily liable with a corporation by issuance of a temporary restraining order sought, if it
specific provision of law. Thus: should be finally adjudged
38
that said principals were
not entitled thereto.”
“x x x A corporation, being a juridical entity, may act only The Court here finds no application to the rule that
through its directors, officers and employees. Obligations a corporate officer cannot be held solidarily liable with
incurred by them, acting as such corporate agents, are not a corporation in the absence of evidence that he had
theirs but the direct accountabilities of the corporation they 39
acted in bad faith or with malice. In the present case,
represent. True, solidary liabilities may at times be incurred Sergio Naguiat is held solidarily liable for corporate
but only when exceptional circumstances warrant such as, tort because he had actively engaged in the
generally, in the following cases: management and operation of CFTI, a close
x x x      x x x      x x x corporation.
4. When a director, trustee or officer is made, by specific
Antolin Naguiat not personally liable
provision of law, personally liable for his corporate action.”
(footnotes omitted) Antolin T. Naguiat was the vice president of the CFTI.
Although he carried the title of “general manager” as
As pointed out earlier, the fifth paragraph of Section well, it had not been shown that he had acted in such
100 of the Corporation Code specifically imposes capacity. Furthermore, no evidence on the extent of his
personal liability upon the stockholder actively participation in the management or operation of the
managing or operating the business and affairs of the business was proferred. In this light, he cannot be held
close corporation. solidarily liable for the obligations of CFTI and Sergio
Naguiat to the private respondents.
_______________

35 Words and Phrases, Permanent Edition, Vol. 41A, p. 503. Fourth Issue: No Denial of Due Process
36 Ibid., Bouvier’s Law Dictionary, Third Revision, Vol. 2.
Lastly, in petitioners’ Supplement to their original
37 244 SCRA 797, 802-803, June 2, 1995.
petition, they assail the NLRC Resolution holding
585 Sergio F. Naguiat and Antolin T. Naguiat jointly and
severally liable with petitioner-corporations in the thereof, are ORDERED to pay, jointly and
payment of separation pay, aver- severally, the individual respondents their
separation pay computed at US$120.00 for
_______________ every year of service, or its peso equivalent at
the time of payment or satisfaction of the
38 Surety bond; rollo, p. 105. judgment;
39 See, Sunio vs. NLRC, 127 SCRA 390, January 31, 1984; and
(2) Petitioner Sergio F. Naguiat Enterprises,
General Bank and Trust Co. vs. Court of Appeals, 135 SCRA 569, Incorporated, and Antolin T. Naguiat are
April 9, 1985. ABSOLVED from liability in the payment of
separation pay to individual respondents.
586

SO ORDERED.
586 SUPREME COURT REPORTS ANNOTATED
          Narvasa (C.J., Chairman), Davide, Jr., Melo
Naguiat vs. National Labor Relations Commission
and Francisco, JJ., concur.

ring denial of due process since the individual Petition partly granted, resolution modified.
Naguiats were not impleaded as parties to the
complaint. Note.—A party is estopped to challenge the
We advert to the case of A.C. Ransom once more. personality of a corporation after having acknowledged
The officers of the corporation were not parties to the the same by enter-
case when the judgment in favor of the employees was
rendered. The corporate officers raised this issue when _______________
the labor arbiter granted the motion of the employees
to enforce the judgment against them. In spite of this,
40 Annex “C” to Petition; rollo, pp. 31-36.

the Court held the corporation president solidarily 587

liable with the corporation.
Furthermore, Sergio and Antolin Naguiat
voluntarily submitted themselves to the jurisdiction of VOL. 269, MARCH 13, 1997 587
the labor arbiter when they,40 in their individual People vs. Gayon
capacities, filed a position paper together with CFTI,
before the arbiter. They cannot now claim to have been
ing into a contract with it. (George Grotjahn GMBH &
denied due process since they availed of the
Co. vs. Isnani, 235 SCRA 216 [1994])
opportunity to present their positions.
WHEREFORE, the foregoing premises considered, ——o0o——
the petition is PARTLY GRANTED. The assailed
February 28, 1994 Resolution of the NLRC is hereby
MODIFIED as follows:

(1) Petitioner Clark Field Taxi, Incorporated, and

Sergio F. Naguiat, president and co-owner
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