Naguiat vs.

NLRC
13 March 1997
Facts:
Clark Field Taxi, Inc. held a concessionaires contract with the Army Air Force Exchange
Services (AAFES) for the operation of taxi services within Clark Air Base. Sergio
Naguiat was the president of Clark Field Taxi, Inc. (CFTI) while Antolin Naguiat was its
vice president. Like Naguiat Enterprises, Inc. which was a trading firm, it was also a
family-owned corporation.
Respondents were employed by the CFTI as taxicab drivers.

They were required to pay a daily boundary fee of US$26.50 (for those on duty
from 1AM-12N) or US$27 (for those on duty from 12N to 12 MN)

Incidental expenses were maintained by the drivers (including gasoline

expenses).

Drivers worked 3-4 times a week depending on the availability of vehicles and
earned no less than US$15.00 a day. In excess of that amount, they had to make cash
deposits to the company which they could withdraw every fifteen days.
AAFES was dissolved because of the phase-out of the military bases in Clark and the
services of the respondents were officially terminated on November 26, 1991.
AAFES Taxi Drivers Association, the drivers union, and CFTI held negotiations as
regards separation benefits. They arrived at an agreement that the separated drivers
would be given P500 for ever year as severance pay. Most of the drivers accepted this
but some refused to do so.
Those who did not accept the initial severance pay disaffiliated themselves with drivers
union and through the National Organization of Workingmen, they filed a complaint
against Sergio Naguiat under the name and style Naguiat Enterprises, AAFES and
AAFES union.
The labor arbiter ordered the petitioner to pay the drivers P1,200.00 for every year of
service for humanitarian consideration, setting aside the earlier agreement between the
CFTI and the drivers union. It also rejected the idea that the CFTI was forced to close
its business due to great financial losses and lose opportunity since at the time of its
closure it was profitably earning. The labor arbiter however did not award separation
pay because to impose a monetary obligation to an employer whose profitable
business was abruptly shot (sic) shot down by force majeur would be unfair and unjust.
The NLRC modified the decision of the labor arbiter after respondents appealed by
granting separation pay to the private respondents. It said that half of the monthly
salary should be US$120 which should be paid in Philippine pesos. Naguiat
Enterprieses should be joined with Sergio and Antolin Naguiat as jointly and severally
liable.

Petitioners Claim:
1.
Petitioners claim that the cessation of the business was due to the great financial
losses and lost business opportunity when Clark Air Base was phased out due to the
expiration of the RP-US Military Bases Agreement and the eruption of Mt. Pinatubo.
2.
They admitted that CFTI had agreed with the drivers union to grant the taxi
drivers separation pay equivalent to P500 for every year of service.
3.
They allege that Sergio and Antolin Naguiat were denied due process because
the petitioners were not furnished copies of the appeal to the NLRC.
4.
They also allege that the National Organization of Working Men (NOWM) cannot
make legal representation in behalf of the respondents because the latter should be
bound by the decision of the drivers union.
Respondents Comments:
1.
The drivers alleged that they were employees of Naguiat Enterprises although
their individual applications were approved by CFTI. They claimed to have been
assigned to Naguiat Enterprises after having been hired by CFTO and that Naguia
Enterprises managed, controlled and supervised their employment.
2.
They averred that they should be entitled to separation pay based on their latest
daily earnings or US$15 for working 16 days a month.
Issues:
1.
WON the NLRC acted in excess of jurisdiction or with grave abuse of discretion
in granting separation pay
2.
WON NOWM was authorized to represent the private respondents
3.
WON Naguiat Enterprises, Sergio Naguiat and Antolin Naguiat were liable.
4.
WON Sergio and Antolin Naguiat were denied due process
HELD
1.
NO, the NLRC did not act in excess of jurisdiction or with abuse of
discretion.
Ratio: Findings of fact of administrative bodies and quasi-judicial bodies are afforded
great respect by the Court and are binding except when there is a showing of grave
abuse of discretion or the decision was arrived at arbitrarily.

Respondents showed that their monthly take home pay amounted to no less than
$240 and this was not disputed by petitioners.


There is no record or evidence which shows that the closure of the taxi business
was brought about by great financial losses no thanks to the Pinatubo eruption. It was
rather brought about by the closure of the military bases.

Art. 283 of the CC provides that separation pay shall be equivalent to 1 month
pay or at least month pay for every year of service, whichever is higher. The NLRC
ruling was correct in terms of US$120 as the computed separation pay.
2.
Petitioners can no longer question the authority of NOWM and are held in
estoppel.
NOWM was already representing the respondents before the labor arbiter and the
petitioners did not assail their juridical personality then.
Petitioners also acknowledged before the Court that the taxi drivers are themselves
parties in the case.
3.
Naguiat Enterprises is not liable, Antolin Naguiat is not personally liable
whereas Sergio Naguiat is solidarily liable.
Re: Naguiat Enterprises liability
The respondents were regular employees of CFTI who received wages on a boundary
basis. They offered no evidence that Naguiat Enterprises managed, supervised and
controlled their employment. They instead submitted documents which had to do with
CFTI, not Naguiat Enterprises.
Labor-only contractors are those where 1) the person supplying workers to the
employer does no have substantial capital or investment in the form of tools or
machinery and 2) the workers recruited and placed by such person are performing
activities which are directly related to the principal business of the employer.
Independent contractors are those who exercise independent employment, contracting
to do a piece of work according to their own methods without being subject to the
control of their employer except as to the result of their work.
Sergio Naguiat was a stockholder and director of Naguiat Enterprises but, in supervising
the taxi drivers and determining their employment terms, he was carrying out his
responsibility as president of CFTI.
Naguiat Enterprises was in the trading business while CFTI was in the taxi business.
The Constitution of the CFTI-AAFES Taxi Drivers Association states that the members
of the union are employees of CFTI and for collective and bargaining purposes, the
employer is also CFTI.

Re: Antolin Naguiats liability

Although he carried the title of general manager, it has not been shown that he had
acted in such capacity.
No evidence on the extent of his participation in the management or operation of the
business was proferred.
Re: Sergio Naguiats liability
Ratio:
A director or officer may be held solidarly liable with a corporation by a specific provision
of law because a corporation, being a juridical entity, may act only through its directors
and officers. Obligations incurred by them, acting as such corporation agents, are not
theirs but the direct accountabilities of the corporation they represent. In the absence of
definite proof of who clearly are the officers of the corporation, the assumption falls on
the President of the corporation.
Reasoning:
In his capacity as President, Sergio Naguiat cannot be exonerated.
An employer is defined to be any person acting in the interest of an employer, directly or
indirectly.
Case in point is A.C. Ransom Labor Union CCLU vs. NLRC held that the identified
employer A.C. Ransom Corporation, being an artificial person, must have an officer and
in the absence of proof, the president is assumed to be the head of the corporation.
Both CFTI and Naguiat Enterprises were close family corporations owned by the same
family. To the extent that stockholders are actively engaged in the management or
business affairs of a close corporation, the stockholders shall be held to strict fiduciary
duties to each other and among themselves. Said stockholders shall be liable for
corporate torts unless the corporation has obtained reasonably adequate liability
insurance.

Nothing in the records indicate that CFTI obtained reasonable adequate liability
insurance.

Jurisprudence is wanting in the definition of corporate tort. Tort

essentially consists in the violation of a right given or the omission of a duty
imposed by law. Tort is a breach of legal duty.

Art. 238 of the Labor Code mandates the employer to grant separation pay to
employees in case of cessation of operations or closure of the business not due to
serious business losses or financial reverses which is the condition on this case.

4.

There was no denial of due process.

Even if the individual Naguiats were not impleaded as parties of the complaint, they
could still be held liable because of jurisprudence (A.C. Ransom case).
Both also voluntarily submitted themselves to the jurisdiction of the labor arbiter when
they filed a position paper.
DISPOSITION The petition is partly granted. 1) CFTI and Sergio Naguiat are ordered to
pay jointly and severally the individual respondents of US$120 for every year of service
and 2) Naguiat Enterprises and Antolin Naguiat are absolved from liability.