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SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS v.

NATIONAL COCONUT CORPORATION
G.R. No. L-3756; June 30, 1952
LABRADOR, J.:

Case: This is an action to recover the possession of a piece of real property (land and warehouses)
situated in Pandacan Manila, and the rentals (from August 1946 when the defendant began to occupy
the premises, to the date it vacated it) for its occupation and use.

FACTS: Sagrada Orden owns the land in whose name the title was registered before the war.
(January 1943) During the Japanese military occupation, the land was acquired by a Japanese
corporation Taiwan Tekkosho for P140,000 and title thereto issued in its name. In April 1946,
after liberation the Alien Property Custodian of the USA took possession, control, and
custody thereof under the Trading with the Enemy Act for the reason that it belonged to an enemy
national.

(1946) The property was occupied by the Copra Export Management Company under a
custodianship agreement with US Alien Property Custodian, and when it vacated the property it
was occupied by the defendant National Coconut Corp. The PH Government made
representations with the Office Alien Property Custodian for the use of property by the
Government. (March 1947) The National Coconut Corp was authorized to repair the
warehouse on the land and spent P26,898.27. (1948) The National Coconut Corp leased one-
third of the warehouse to Dioscoro Sarile at a monthly rental of P500 (later raised to
P1,000/month). Action was brought against Sarile for failure to pay rents.

Sagrada made claim to the property before the US Alien Property Custodian but as this was denied, it
brought an action in the CFI to annul the sale of property of Taiwan Tekkosho, and recover its
possession. The PH Republic was allowed to intervene in the action.

The case did not come for trial because the parties presented a joint petition in which it is claimed by
Sagrada that the sale in favor of the Taiwan Tekkosho was null and void because it was executed under
threats, duress, and intimidation, and it was agreed that the title issued in the name of the Taiwan
Tekkosho be cancelled and the original title of plaintiff re-issued.

Pursuant to the agreement the court rendered judgment releasing National Coconut Corp and the
intervenor from liability, but reversing to Sagrada the right to recover from the National Coconut Corp
reasonable rentals for the use and occupation of the premises.

The National Coconut Corp does not contest its liability for the rentals at the rate of P3,000/month
from February 1949, but resists the claim therefor prior to this date claiming that it occupied the
property in good faith, under no obligation whatsoever to pay rentals for the use and occupation of the
warehouse. Judgment was rendered for plaintiff Sagrada to recover from the defendant
National Coconut Corp the sum of P3,000/month, as reasonable rentals, from August 1946, to
the date the defendant vacates the premises. Against this judgment this appeal has been interposed.

ISSUE: Whether or not Sagrada can recover from the National Coconut Corporation payment of
rentals from August 1946 to February 1949.

HELD: No. The SC ruled that the defendant National Coconut Corp is not guilty of any offense at all,
because it entered the premises and occupied it with the permission of the entity which
had the legal control and administration thereof, the Allien Property Administration.
Neither was there any negligence on its part. There was also no privity (of contract or obligation)
between the Alien Property Custodian and the Taiwan Tekkosho, which had secured the possession of
the property from Sagrada by the use of duress, such that the Alien Property Custodian or its
permittee (National Coconut Corp) may be held responsible for the supposed illegality of the
occupation of the property by the said Taiwan Tekkosho.
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The Alien Property Administration had the control and administration of the property not as
successor to the interests of the enemy holder of the title (Taiwan Tekkosho) but by express provision
of law (Trading with the Enemy Act of the United States). Neither is it a trustee of the former owner
(Sagrada) but a trustee of then US Government, in its own right, to the exclusion of, and against the
claim or title of, the enemy owner.

From August 1946, when the National Coconut Corp took possession, to the date of judgment on
February 1948, Alien Property Administration had the absolute control of the property as trustee of
the US Government, with power to dispose of it by sale or otherwise, as though it were the absolute
owner. Therefore, even if the National Coconut Corp were liable to the Alien Property Administration
for rentals, these would not accrue to the benefit of Sagrada (the owner), but to the US Government.

But there is another ground why the claim or rentals cannot be made against the National Coconut
Corp. There was no agreement between the Alien Property Custodian and the National Coconut Cop
for the latter to pay rentals on the property. The existence of an implied agreement to that effect is
contrary to the circumstances. The Copra Export Management Company, which preceded the
defendant-appellant, in the possession and use of the property, does not appear to have paid rentals
therefor, as it occupied it by what the parties denominated a "custodianship agreement," and there is
no provision therein for the payment of rentals or of any compensation for its custody and or
occupation and the use.

The Trading with the Enemy Act, as originally enacted, was purely a measure of conversation, hence,
it is very unlikely that rentals were demanded for the use of the property. When the National Coconut
Corp succeeded the Copra Export Management Company in the possession and use of the property, it
must have been also free from payment of rentals, especially as it was Government corporation, and
steps were then being taken by the PH Government to secure the property for the National Coconut
Corp. So that the circumstances do not justify the finding that there was an implied agreement that
the National Coconut Corp was to pay for the use and occupation of the premises at all.

The above considerations show that Sagrada’s claim for rentals before it obtained the judgment
annulling the sale of the Taiwan Tekkosho may not be predicated on any negligence or offense of the
National Coconut Corp, or any contract, express or implied, because the Alien Property
Administration was neither a trustee of Sagrada, nor a privy to the obligations of the Taiwan
Tekkosho, its title being based by legal provision of the seizure of enemy property.

The SC also tried in vain to find a law or provision thereof, or any principle in quasi contracts or
equity, upon which the claim can be supported. On the contrary, as the National Coconut Corp
entered into possession without any expectation of liability for such use and occupation, it is only fair
and just that it may not be held liable therefor. And as to the rents it collected from its lessee, the same
should accrue to it as a possessor in good faith, as this Court has already expressly held.
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SERGIO F. NAGUIAT & CLARK FIELD TAXI, INC. v. NLRC et al.

G.R. No. 116123; March 13, 1997
PANGANIBAN, J.:

Case: Petition for Certiorari under Rule 65 of the Rules of Court assailing the Resolutions of the
NLRC

FACTS: 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 Naguiat was CFTI's
president, while Antolin 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. They were required to
pay a daily "boundary fee" in the amount of US$26.50 (for those working from 1:00a.m. to 12:00nn)
and US$27.00 (for those working from 12:00nn to 12:00mn). All incidental expenses for vehicle
maintenance were accounted against them, including gasoline expenses.
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The drivers worked at least 3 to 4x a week, depending on the availability of taxicabs. They earned not
less than US$15.00 daily; excess of which, they were required to make cash deposits to the company,
which they could later withdraw every 15 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 26 November 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 complaint
against Sergio F. Naguiat, AAFES with Mark Hooper as Area Service Manager, and AAFES Taxi
Drivers Association with Castillo, for payment of separation pay due to termination/phase-out.

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 16 days a month.

Petitioners claimed that the cessation of business of CFTI on 26 November 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 to grant its taxi driver-employees separation
pay equivalent to P500.00 for every year of service.

LA Decision: 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.

Herein individual private respondents appealed to the NLRC.

NLRC Decision: Modified the decision of the LA by granting separation pay to the private
respondents.

Motion for reconsideration of herein petitioners was denied by the NLRC. Hence, this petition with
prayer for issuance of a TRO. Upon posting by the petitioners of a surety bond, a TRO was issued by
this Court enjoining execution of the assailed Resolutions.

ISSUE: Whether or not there was a corporate tort.

HELD: Yes.

Discussion

Petitioners conceded that both CFTI and Naguiat Enterprises were "close family
corporations"  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.

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. Simply stated, tort is a
breach of a legal duty.
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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.

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 TRO 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
TRO sought, if it should be finally adjudged that said principals were not entitled thereto.

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.

As to Liabilities:
 CFTI president solidarily liable : 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.

 Naguiat Enterprise Not Liable : 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.

One witness stated that he received his salary from the office of CFTI inside the base and another admitted that
Naguiat Enterprises was in the trading business while CFTI was in taxi services. In addition, the Constitution 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 "for collective bargaining
purposes, the definite employer is the CFTI.”

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.

 Antolin Naguiat not personally liable: No evidence on the extent of his participation in the management or
operation of the business was preferred. Hence, he cannot be held solidarily liable for the obligations of CFTI and
Sergio Naguiat to the private respondents.

Other Issues:
1) The NLRC did NOT commit grave abuse of discretion amounting to lack of jurisdiction in unilaterally increasing
the amount of severance pay granted by the LA.
Article 283 of the Labor Code provides:
. . . 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 (1/2) 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.

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

2) Teofilo Rafols and Romeo Lopez of NOWM could validly represent herein private respondents since petitioners are
in estoppel for not having seasonably raised this issue before the LA or the NLRC. In any event, petitioners
acknowledged before this Court that the taxi drivers allegedly represented by NOWM, are themselves parties in this
case.

Ruling: Petition is PARTLY GRANTED. Resolution of the NLRC is MODIFIED as follows:

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