2/9/25, 11:43 AM G.R. No. 116123 - Naguiat vs.

National Labor Relations Commission

Title
Naguiat vs. National Labor Relations Commission

Case Decision Date

G.R. No. 116123 Mar 13, 1997

Taxi drivers employed by CFTI sought higher separation pay after Clark Air Base closure. NLRC
ruled US$120/year separation pay, holding CFTI and its president liable, absolving Naguiat
Enterprises and vice president.

336 Phil. 545

THIRD DIVISION

[ G.R. No. 116123, March 13, 1997 ]

SERGIO F. NAGUIAT, DOING BUSINESS UNDER THE NAME AND STYLE SERGIO F.
NAGUIAT ENT., INC., & CLARK FIELD TAXI, INC., PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION (THIRD DIVISION), NATIONAL ORGANIZATION OF
WORKINGMEN AND ITS MEMBERS, LEONARDO T. GALANG, ET AL., RESPONDENTS.

DECISION

PANGANIBAN, J.:

Are private respondent-employees of petitioner Clark Field Taxi, Inc., who were separated
from service due to the closure of Clark Air Base, entitled to separation pay and, if so, in what
amount? Are officers of corporations ipso facto liable jointly and severally with the
companies they represent for the payment of separation pay?

These questions are answered by the Court in resolving this petition for certiorari under Rule
65 of the Rules of Court assailing the Resolutions of the National Labor Relations
Commission (Third Division)1 promulgated on February 28, 1994,2 and May 31, 1994.3] The
February 28, 1994 Resolution affirmed with modifications the decision4 of Labor Arbiter Ariel
C. Santos in NLRC Case No. RAB-III-12-2477-91. The second Resolution denied the motion for
reconsideration of herein petitioners.

The NLRC modified the decision of the labor arbiter by granting separation pay to herein
individual respondents in the increased amount of US$120.00 for every year of service or its
peso equivalent, and holding Sergio F. Naguiat Enterprises, Inc., Sergio F. Naguiat and Antolin
T. Naguiat, jointly and severally liable with Clark Field Taxi, Inc. ("CFTI").

The Facts

The following facts are derived from the records of the case:
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Petitioner CFTI held a concessionaire's contract with the Army Air Force Exchange Services
("AAFES") for the operation of taxi services within Clark Air Base. Sergio F. Naguiat was
CFTI's president, while Antolin T. Naguiat was its vice-president. Like Sergio F. Naguiat
Enterprises, Incorporated ("Naguiat Enterprises"), a trading firm, it was a family-owned
corporation.

Individual respondents were previously employed by CFTI as taxicab drivers. During their
employment, they were required to pay a daily "boundary fee" in the amount of US$26.50 for
those working from 1:00 a.m. to 12:00 noon, and US$27.00 for those working from 12:00
noon to 12:00 midnight. All incidental expenses for the maintenance of the vehicles they
were driving were accounted against them, including gasoline expenses.

The drivers worked at least three to four times a 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 deposits to the company, which they could later withdraw every
fifteen days.

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 November 26, 1991.

The AAFES Taxi Drivers Association ("drivers' union"), through its local president, Eduardo
Castillo, and CFTI held negotiations as regards separation benefits that should be awarded in
favor of the drivers. They arrived at an agreement that the separated drivers will be given
P500.00 for every year of service as severance pay. Most of the drivers accepted said amount
in December 1991 and January 1992. However, individual respondents herein refused to
accept theirs.

Instead, after disaffiliating themselves from the drivers' union, individual respondents,
through the National Organization of Workingmen ("NOWM"), a labor organization which
they subsequently joined, filed a complaint5 against "Sergio F. Naguiat doing business under
the name and style Sergio F. Naguiat Enterprises, Inc., Army-Air Force Exchange Services
(AAFES) with Mark Hooper as Area Service Manager, Pacific Region, and AAFES Taxi Drivers
Association with Eduardo Castillo as President," for payment of separation pay due to
termination/phase-out. Said complaint was later amended[6] to include additional taxi
drivers who were similarly situated as complainants, and CFTI with Antolin T. Naguiat as
vice president and general manager, as party respondent.In their complaint, herein private
respondents alleged that they were regular employees of Naguiat Enterprises, although their
individual applications for employment were approved by CFTI. They claimed to have been
assigned to Naguiat Enterprises after having been hired by CFTI, and that the former thence
managed, controlled and supervised their employment. They averred further that they were
entitled to separation pay based on their latest daily earnings of US$15.00 for working sixteen
(16) days a month.

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In their position paper submitted to the labor arbiter, herein petitioners claimed that the
cessation of business of CFTI on November 26, 1991, was due to "great financial losses and
lost business opportunity" resulting from the phase-out of Clark Air Base brought about by
the Mt. Pinatubo eruption and the expiration of the RP-US military bases agreement. They
admitted that CFTI had agreed with the drivers' union, through its President Eduardo Castillo
who claimed to have had blanket authority to negotiate with CFTI in behalf of union
members, to grant its taxi driver-employees separation pay equivalent to P500.00 for every
year of service.

The labor arbiter, finding the individual complainants to be regular workers of CFTI, ordered
the latter to pay them P1,200.00 for every year of service "for humanitarian consideration,"
setting aside the earlier agreement between CFTI and the drivers' union of P500.00 for every
year of service. The labor arbiter rejected the allegation of CFTI that it was forced to close
business due to "great financial losses and lost business opportunity" since, at the time it
ceased operations, CFTI was profitably earning and the cessation of its business was due to
the untimely closure of Clark Air Base. In not awarding separation pay in accordance with
the Labor Code, the labor-arbiter explained:
"To allow respondents exemption from its (sic) obligation to pay separation pay would be
inhuman to complainants but to impose a monetary obligation to an employer whose
profitable business was abruptly shot (sic) down by force majeure would be unfair and unjust
to say the least."7and thus, simply awarded an amount for "humanitarian consideration."

Herein individual private respondents appealed to the NLRC. In its Resolution, the NLRC
modified the decision of the labor arbiter by granting separation pay to the private
respondents. The concluding paragraphs of the NLRC Resolution read:
"The contention of complainant is partly correct. One-half month salary should be US$120.00
but this amount can not be paid to the complainant in U.S. Dollar which is not the legal
tender in the Philippines. Paras, in commenting on Art. 1249 of the New Civil Code, defines
legal tender as 'that 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
Philippine peso which is the legal tender, in which case, the table of conversion (exchange
rate) at the time of payment or satisfaction of the judgment should be used. However, since
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)

In discharging the above obligations, Sergio F. Naguiat Enterprises, which is headed by

Sergio F. Naguiat and Antolin Naguiat, father and son at the same time the President and
Vice-President and General Manager, respectively, should be joined as indispensable party
whose liability is joint and several. (Sec. 7, Rule 3, Rules of Court)"8As mentioned earlier, the
motion for reconsideration of herein petitioners was denied by the NLRC. Hence, this
petition with prayer for issuance of a temporary restraining order. Upon posting by the
petitioners of a surety bond, a temporary restraining order9 was issued by this Court

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enjoining execution of the assailed Resolutions.

Issues

The petitioners raise the following issues before this Court for resolution:

"I. Whether or not public respondent NLRC (3rd Div.) committed grave abuse of discretion
amounting to lack of jurisdiction in issuing the appealed resolution;

II. Whether or not Messrs. Teofilo Rafols and Romeo N. Lopez could validly represent herein
private respondents; and,

III. Whether or not the resolution issued by public respondent is contrary to

law."10Petitioners also submit two additional issues by way of a supplement11 to their petition,
to Wit: that Petitioners Sergio F. Naguiat and Antolin Naguiat were denied 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 should have raised it is the NLRC. They, however, failed to question this in their
motion for reconsideration. As a consequence, they are deemed to have waived the same and
voluntarily submitted themselves to the jurisdiction of the appellate body.

Anent the first issue raised in their original petition, petitioners contend that NLRC
committed grave abuse of discretion amounting to lack or excess of jurisdiction in
unilaterally increasing the amount of severance pay granted by the labor arbiter. They claim
that this was not supported by substantial evidence since it was based simply on the self-
serving allegation of respondents that their monthly take-home pay was not lower than
$240.00.

On the second issue, petitioners aver that NOWM cannot make legal representations in
behalf of individual respondents who should, instead, be bound by the decision of the union
(AAFES Taxi Drivers Association) of which they were members.

As to the third issue, petitioners incessantly insist that Sergio F. Naguiat Enterprises, Inc. is a
separate and distinct juridical entity which cannot be held jointly and severally liable for the
obligations of CFTI. And similarly, Sergio F. Naguiat and Antolin Naguiat were merely officers
and stockholders of CFTI and, thus, could not be held personally accountable for corporate
debts.

Lastly, Sergio and Antolin Naguiat assail the Resolution of NLRC holding them solidarily
liable despite not having been impleaded as parties to the complaint.

Individual respondents filed a comment separate from that of NOWM. In sum, both aver that
petitioners had the opportunity but failed to refute, the taxi drivers' claim of having an
average monthly earning of $240.00; that individual respondents became members of

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NOWM after disaffiliating themselves from the AAFES Taxi Drivers Association which,
through the manipulations of its President Eduardo Castillo, unconscionably compromised
their separation pay; and that Naguiat Enterprises, being their indirect employer, is solidarily
liable under the law for violation of the Labor Code, in this case, for nonpayment of their
separation pay.

The Solicitor General unqualifiedly supports the allegations of private respondents. In

addition, he submits that the separate personalities of respondent corporations and their
officers should be disregarded and considered one and the same as these were used to
perpetrate injustice to their employees.

The Court's Ruling

As will be discussed below, the petition is partially meritorious.

First Issue: Amount of Separation Pay

Firmly, we reiterate the rule that in a petition for certiorari filed pursuant to Rule 65 of the
Rules of Court, which is the only way a labor case may reach the Supreme Court, the
petitioner/s must clearly show that the NLRC acted without or in excess of jurisdiction or
with grave abuse of discretion.12

Long-standing and well-settled in Philippine jurisprudence is the judicial dictum that

findings of fact of administrative agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is 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 that they were arrived at
arbitrarily or in disregard of the evidence on record.13

Nevertheless, this Court carefully perused the records of the instant case if only to determine
whether public respondent committed grave abuse of discretion, amounting to lack of
jurisdiction, in granting the clamor of private respondents that their separation pay should
be based on the amount of $240.00, allegedly their minimum monthly earnings as taxi
drivers of petitioners.

In their amended complaint before the Regional Arbitration Branch in San Fernando,
Pampanga, herein private respondents set forth in detail the work schedule and financial
arrangement they had with their employer. Therefrom they inferred that their monthly take-
home pay amounted to not less than $240.00. Herein petitioners did not bother to refute nor
offer any evidence to controvert said allegations. Remaining undisputed, the labor arbiter
adopted such facts in his decision. Petitioners did not even appeal from the decision of the
labor arbiter nor manifest any error in his findings and conclusions. Thus, petitioners are in
estoppel for not having questioned such facts when they had all opportunity to do so. Private
respondents, like petitioners, are bound by the factual findings of Respondent Commission.

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Petitioners also claim that the closure of their taxi business was due to great financial losses
brought about by the eruption of Mt. Pinatubo which made the roads practically impassable
to their taxicabs. Likewise well-settled is the rule that business losses or financial reverses, in
order to sustain retrenchment of personnel or closure of business and warrant exemption
from payment of separation pay, must be proved with clear and satisfactory evidence.14 The
records, however, are devoid of such evidence.

The labor arbiter; as affirmed by NLRC, correctly found that petitioners stopped their taxi
business within Clark Air Base because of the phase-out of U.S. military presence thereat. It
was not due to any great financial loss because petitioners' taxi business was earning
profitably at the time of its closure.

With respect to the amount of separation pay that should be granted, Article 283 of the Labor
Code provides:

"x x x In case of retrenchment to prevent losses and in cases of closures or cessation of

operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (A12)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1 ) whole year."

Considering the above, we find that NLRC did not commit grave abuse of discretion in ruling
that individual respondents were entitled to separation pay15 in the amount $120.00 (one-half
of $240.00 monthly pay) or its peso equivalent for every year of service.

Second Issue: NOWM's Personality to

Represent Individual Respondents-Employees

On the question of NOWM's authority to represent private respondents, we hold petitioners

in estoppel for not having seasonably raised this issue before the labor arbiter or the NLRC.
NOWM was already a party-litigant as the organization representing the taxi driver-
complainants before the labor arbiter. But petitioners who were party-respondents in said
complaint did not assail the juridical personality of NOWM and the validity of its
representations in behalf of the complaining taxi drivers before the quasi-judicial bodies.
Therefore, they are now estopped from raising such question before this Court. In any event,
petitioners acknowledged before this Court that the taxi drivers allegedly represented by
NOWM, are themselves parties in this case.16

Third Issue: Liability of Petitioner-

Corporations and Their Respective Officers

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The resolution of this issue involves another factual finding that Naguiat Enterprises actually
managed, supervised and controlled employment terms of the taxi drivers, making it their
indirect employer. As adverted to earlier, factual findings of quasi-judicial bodies are binding
upon the court in the absence of a showing of grave abuse of discretion.

Unfortunately, the NLRC did not discuss or give any explanation for holding Naguiat
Enterprises and its officers jointly and severally liable in discharging CFTI's liability for
payment of separation pay. We again remind those concerned that decisions, however
concisely written, must distinctly and clearly set forth the facts and law upon which they are
based.17 This rule applies as well to dispositions by quasi-judicial and administrative bodies.

Naguiat Enterprises Not Liable

In impleading Naguiat Enterprises as solidarily liable for the obligations of CFTI,

respondents rely on Articles 106,18 10719 and 10920] of the Labor Code.

Based on factual submissions of the parties, the labor arbiter, however, found that individual
respondents were regular employees of CFTI who received wages on a boundary or
commission basis.

We find no reason to make a contrary finding. Labor-only contracting exists where: (1) the
person supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machinery, and work premises, among others; and (2) the
workers recruited and placed by such person are performing activities which are directly
related to the principal business of the employer.21 Independent contractors, meanwhile, are
those who exercise independent employment, contracting to do a piece of work according to
their own methods without being subject to control of their employer except as to the result
of their work.22

From the evidence proffered by both parties, there is no substantial basis to hold that Naguiat
Enterprises is an indirect employer of individual respondents much less a labor only
contractor. On the contrary, petitioners submitted documents such as the drivers'
applications for employment with CFTI,23 and social security remittances24 and payroll25 of
Naguiat Enterprises showing that none of the individual respondents were its employees.
Moreover, in the contract26between CFTI and AAFES, the former, as concessionaire, agreed
to purchase from AAFES for a certain amount within a specified period a fleet of vehicles to
be "ke(pt) on the road" by CFTI, pursuant to their concessionaire's contract. This indicates
that CFTI became the owner of the taxicabs which became the principal investment and
asset of the company.

Private respondents failed to substantiate their claim that Naguiat Enterprises managed,
supervised and controlled their employment. It appears that they were confused on the
personalities of Sergio F. Naguiat as an individual who was the president of CFTI, and Sergio
F. Naguiat Enterprises, Inc., as a separate corporate entity with a separate business. They

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presumed that Sergio F. Naguiat, who was at the same time a stockholder and director27 of
Sergio F. Naguiat Enterprises, Inc., was managing and controlling the taxi business on behalf
of the latter. A closer scrutiny and analysis of the records, however, evince the truth of the
matter: that Sergio F. Naguiat, in supervising the-taxi drivers and determining their
employment terms, was rather carrying out his responsibilities as president of CFTI. Hence,
Naguiat Enterprises as a separate corporation does not appear to be involved at all in the taxi
business.

To illustrate further, we refer to the testimony of a driver-claimant on cross examination.

"Atty. Suarez

Is it not true that you applied not with Sergio F. Naguiat but with Clark Field Taxi?

Witness

I applied for (sic) Sergio F. Naguiat

Atty. Suarez

Sergio F. Naguiat as an individual or the corporation?

Witness

'Sergio F. Naguiat na tao.'

Atty. Suarez

Who is Sergio F. Naguiat?

Witness

He is the one managing the Sergio F. Naguiat Enterprises and he is the one whom we believe
as our employer.

Atty. Suarez

What is exactly the position of Sergio F. Naguiat with the Sergio F. Naguiat Enterprises?

Witness

He is the owner, sir.

Atty. Suarez

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How about with Clark Field Taxi Incorporated what is the position of Mr. Naguiat?

Witness

What I know is that he is a concessionaire.

...

Atty. Suarez

But do you also know that Sergio F. Naguiat is the President of Clark Field Taxi, Incorporated?

Witness

Yes. sir.

Atty. Suarez

How about Mr. Antolin Naguiat what is his role in the taxi services, the operation of the Clark
Field Taxi, Incorporated?

Witness

He is the vice president."28

And, although the witness insisted that Naguiat Enterprises was his employer, he could not
deny that he received his salary from the office of CFTI inside the base.29

Another driver-claimant admitted, upon the prodding of counsel for the corporations, that
Naguiat Enterprises was in the trading business while CFTI was in taxi services.30

In addition, the Constitution31 of CFTI-AAFES Taxi Drivers Association which, admittedly,

was the union of individual respondents while still working at Clark Air Base, states that
members thereof are the employees of CFTI and "(f)or collective bargaining purposes, the
definite employer is the Clark Field Taxi Inc."

From the foregoing, the ineludible conclusion is that CFTI was the actual and direct
employer of individual respondents, and that Naguiat Enterprises was neither their indirect
employer nor labor-only contractor. It was not involved at all in the taxi business.

CFTI president solidarily liable

Petitioner-corporations would likewise want to avoid the solidary liability of their officers. To

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bolster their position, Sergio F. Naguiat and Antolin T. Naguiat specifically aver that they were
denied due process since they were not parties to the complaint below.32 In the broader
interest of justice, we, however, hold that Sergio F. Naguiat, in his capacity as president of
CFTI, cannot be exonerated from joint and several liability in the payment of separation pay
to individual respondents.

A.C. Ransom Labor Union-CCLU vs. NLRC33 is the case in point. A.C. Ransom Corporation
was a family corporation, the stockholders of which were members of the Hernandez family.
In 1973, it filed an application for clearance to close or cease operations, which was duly
granted by the Ministry of Labor and Employment, without prejudice to the right of
employees to seek redress of grievance, if any. Backwages of 22 employees, who engaged in
a strike prior to the closure, were subsequently computed at P164,984.00. Up to September
1976, the union filed about ten (10) motions for execution against the corporation, but none
could be implemented, presumably for failure to find leviable assets of said corporation. In
its last motion for execution, the union asked that officers and agents of the company be held
personally liable for payment of the backwages. This was granted by the labor arbiter. In the
corporation's appeal to the NLRC, one of the issues raised was: "Is the judgment against a
corporation to reinstate its dismissed employees with backwages, enforceable against its
officer and agents, in their individual, private and personal capacities, who were not parties
in the case where the judgment was rendered?" The NLRC answered in the negative, on the
ground that 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 upheld the labor arbiter. In imposing joint
and several liability upon the company president, the Court, speaking through Mme. Justice
Ameurfina Melencio-Herrera, ratiocinated this wise:

"(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 Code which provides:
'(c) 'Employer' includes any person acting in the interest of an employer, directly or
indirectly. The term shall not include any labor organization or any of its officers or agents
except when acting as employer.'

The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM
is an artificial person, it must have an officer who can be presumed to be the employer, being
the 'person acting in the interest of (the) 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 nonpayment of back wages. That is the policy of the law. x x x
(c) If the policy of the law were otherwise, the corporation employer can have devious ways
for evading payment of back wages. x x x

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(d) The record does not clearly identify 'the officer or officers' of RANSOM directly
responsible for failure to pay the back wages of the 22 strikers. In the absence of definite
proof in that regard, we believe it should be presumed that the responsible officer is the
President of the corporation who can be deemed the chief operation officer thereof. Thus, in
RA 602, criminal responsibility is with the 'Manager or in his default, the person acting as
such.' In RANSOM, the President appears to be the Manager." (Underscoring supplied.)

Sergio F. Naguiat, admittedly, was the president of CFTI who actively managed the business.
Thus, applying the ruling in A. C. Ransom, he falls within the 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.

Moreover, petitioners also conceded that both CFTI and Naguiat Enterprises were "close
family corporations"34 owned by the Naguiat family. Section 100, paragraph 5, (under Title
XII on Close Corporations) of the Corporation Code, states:

"(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 held to
strict fiduciary duties to each other and among themselves. Said stockholders shall be
personally liable for corporate torts unless the corporation has obtained reasonably adequate
liability insurance." (underscoring supplied)
Nothing in the records show whether CFTI obtained "reasonably adequate liability
insurance;" thus, what remains is to determine whether there was corporate tort.

Our jurisprudence is wanting as to the definite scope of "corporate tort." Essentially, "tort"
consists in the violation of a right given or the omission of a duty imposed by law.35 Simply
stated, tort is a breach of a legal duty.36 Article 283 of the Labor Code mandates the employer
to grant separation pay to employees in case of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, which
is the condition obtaining at bar. CFTI failed to comply with this law-imposed duty or
obligation. Consequently, its stockholder who was actively engaged in the management or
operation of the business should be held personally liable.

Furthermore, in MAM Realty Development vs. NLRC,37 the Court recognized that a director
or officer may still be held solidarily liable with a corporation by specific provision of law.
Thus:

"x x x A corporation, being a juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them, acting as such corporate agents, are not theirs but
the direct accountabilities of the corporation they represent. True, solidary liabilities may at
times be incurred but only when exceptional circumstances warrant such as, generally, in
the following cases: Scl-aw

...

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4. When a director, trustee or officer is made, by specific provision of law, personally liable
for his corporate action." (footnotes omitted)

As pointed out earlier, the fifth paragraph of Section 100 of the Corporation Code specifically
imposes personal liability upon the stockholder actively managing or operating the business
and affairs of the close corporation.

In fact, in posting the surety bond required by this Court for the issuance of a temporary
restraining order enjoining the execution of the assailed NLRC Resolutions, only Sergio F.
Naguiat, in his individual and personal capacity, principally bound himself to comply with
the obligation thereunder, i.e., "to guarantee the payment to private respondents of any
damages which they may incur by reason of the issuance of a temporary restraining order
sought, if it should be finally adjudged that said principals were not entitled thereto."38

The Court here finds no application to the rule that a corporate officer cannot be held
solidarily liable with a corporation in the absence of evidence that he had acted in bad faith
or with malice.39 In the present case, Sergio Naguiat is held solidarily liable for corporate tort
because he had actively engaged in the management and operation of CFTI, a close
corporation.

Antolin Naguiat not personally liable

Antolin T. Naguiat was the vice president of the CFTI. Although he carried the title of "general
manager" as well, it had not been shown that he had acted in such capacity. Furthermore, no
evidence on the extent of his participation in the management or operation of the business
was proffered. In this light, he cannot be held solidarily liable for the obligations of CFTI and
Sergio Naguiat to the private respondents.

Fourth Issue: No Denial of Due Process

Lastly, in petitioners' Supplement to their original petition, they assail the NLRC Resolution
holding Sergio F. Naguiat and Antolin T. Naguiat jointly and severally liable with petitioner-
corporations in the payment of separation pay, averring denial of due process since the
individual Naguiats were not impleaded as parties to the complaint.

We advert to the case of A.C. Ransom once more. The officers of the corporation were not
parties to the 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, the Court held the corporation president
solidarily liable with the corporation.

Furthermore, Sergio and Antolin Naguiat voluntarily submitted themselves to the

jurisdiction of the labor arbiter when they, in their individual capacities, filed a position
paper40 together with CFTI, before the arbiter. They cannot now claim to have been denied

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due process since they availed of the opportunity to present their positions.

WHEREFORE, the foregoing premises considered, 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
thereof, are ORDERED to pay, jointly and 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 judgment;

(2) Petitioner Sergio F. Naguiat Enterprises, Incorporated, and Antolin T. Naguiat are
ABSOLVED from liability in the payment of separation pay to individual respondents.

SO ORDERED.

Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

1 Composed of Comm. Ireneo B. Bernardo, ponente, with Comms. Lourdes C. Javier

(presiding commissioner) and Joaquin A. Tanodra, concurring.

2 Rollo, pp. 69-73.

3 Ibid., p. 82.

4 Promulgated on June 4, 1993; rollo, pp. 48-56.

5 Ibid., pp. 14-18.

6 Ibid., pp. 14-18.

7Rollo, p. 56.

8 Rollo, pp. 72-73.

9 Rollo, pp. 131-132.

10 Ibid., p. 6.

11 Ibid., pp. 97-102.

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12 Bordeos, et al. vs. NLRC, et al., G.R. Nos. 115314-23, September 26, 1996.

13 Maya Farms Employees Organization vs. NLRC, 239 SCRA 508, December 28, 1994.

14See Revidad vs. NLRC, 245 SCRA 356, June 27, 1995; St. Gothard Disco Pub vs. NLRC, 218
SCRA 321, 334, February 1, 1993.

15Mobil Employees Association vs. NLRC, 183 SCRA 737, March 28, 1990; See Catatista vs.
NLRC, 247 SCRA 46, 1995; Shoppers Gain Supermart vs. NLRC G.R. No. 110731, July 26, 1996.

16 Petition for Certiorari, p. 2; rollo, p. 3.

17Del Mundo vs. Court of Appeals, 240 SCRA 348, January 20, 1995; Estoya vs. Abraham-
Singson, 237 SCRA 1, September 26, 1994.

18 "Art. 106. Contractor or subcontractor. -- Whenever an employer enters into a contract with

another person for the performance of the 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 wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under the
contract, in the same manner and extent that he is liable to employees directly employed by
him.

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, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who
among the parties involved shall be considered as the employer for the purposes of this
Code, to prevent any violation or circumvention of any provision of this Code.

There is 'labor-only' contracting where the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of such employer.
In such cases, the person or intermediary shall be considered as merely an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him."

19 "Art. 107. Indirect employer. -- The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an

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employer, contracts with an independent contractor for the performance of any work, task,
job or project."

20 "Art. 109. Solidary liability. -- The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision of this Code. For purposes of
determining the extent of their civil liability under this Chapter, they shall be considered as
direct employers."

21 Neri vs. NLRC, 224 SCRA 717, July 23, 1993.

22 Villuga vs. NLRC, 225 SCRA 537, August 23, 1993.

23Records, pp. 33-46.

24 Ibid., pp. 142-205.

25 Ibid., 206-230.

26 Annex "C" to Respondent CFTI's (petitioner herein) Appearance and Omnibus Motion;
records, pp. 47-48.

27 Motion for Reconsideration, p. 6; rollo, p. 79.

28 TSN, May 18, 1992, pp. 3-6.

29 Ibid., pp. 9-10.

30TSN, May 29, 1992, pp. 8-9.

31 Records, pp. 235-246.

32 Rollo, p. 231.

33 142 SCRA 269, June 10, 1986.

34 Motion for Reconsideration, p. 4; records, p. 436.

35 Words and Phrases, Permanent Edition, v. 41A, p. 503.

36 Ibid.; Bouvier's Law Dictionary, Third Revision, v. 2.

37 244 SCRA 797, 802-803, June 2, 1995.

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38 Surety bond; rollo, p. 105.

39See, Sunio vs. NLRC, 127 SCRA 390, January 31, 1984; and General Bank and Trust Co. vs.
Court of Appeals, 135 SCRA 569, April 9, 1985.

40Annex "C" to Petition; rollo, pp. 31-36.

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