G.R. No. 90856. July 23, 1992.*

ARTURO DE GUZMAN, petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, LABOR ARBITER MA. LOURDES A.

SALES, AVELINO D. VALLESTEROL, ALEJANDRO Q. FRIAS, LINDA

DE LA CRUZ, CORAZON M. DE LA FUENTE, LILIA F. FLORO, and

MARIO F. JAYME, respondents.

Labor Law; Damages; Allegations; Corporation Law; A mere general

manager cannot be held solidarily liable with the corporation for

unpaid labor claims.

The aforecited cases will not apply to the instant case, however,

because the persons who were there made personally liable for the

employees claims were stockholders-officers of the respondent

corporation. In the case at bar, the petitioner, while admittedly the

highest ranking local representative of AMAL in the Philippines, is

nevertheless not a stockholder and much less a member of the board of

directors or an officer thereof.

Same; Same; Same; Same; Same.

As such, the petitioner cannot be held directly responsible for the

decision to close the business that resulted in his separation and that of

the private respondents. That decision came directly and exclusively

from AMAL. The petitioners participation was limited to the enforcement

of this decision in line with his duties as general manager of the

company. Even in a normal situation, in fact, he would not be liable, as a

managerial employee of AMAL, for the monetary claims of its

employees. There should be no question that the private respondents

recourse for such claims cannot be against the petitioner but against

AMAL and AMAL alone.

Same; Same; Same; Same; A general manager who appropriated to

himself the assets of his employer-corporation to pay his claims

against the latter after it folded-up without reserving a portion to

pay the claims of other employees acts in bad faith and liable for

damages.

It is not disputed that the petitioner in the case at bar had his own

claims against AMAL and consequently had some proportionate right

over its assets. However, this right ceased to exist when, knowing fully

well that the private respondents had similarly valid claims, he took

advantage of his position as general manager and applied AMALs

assets in payment exclusively of his own claims.

Same; Same; Same; Same.Applying these provisions, we hold that

although the petitioner cannot be made solidarily liable with AMAL for

the monetary demand of its employees, he is nevertheless directly liable

to them for his questionable conduct in attempting to deprive them of

their just share in the assets of AMAL.

Damages; Obligations; Judgment; Pleading and Practice; Moral

damages can be awarded even if not prayed for and even where no

actual damages are established where a party acted in bad faith.It is

settled that the court can grant the relief warranted by the allegation and

the proof even if it is not specifically sought by the injured party. In the

case at bar, while the private respondents did not categorically pray for

damages, they did allege that the petitioner, taking advantage of his

position as general manager, had appropriated the properties of AMAL

in payment of his own claims against the company. That was averment

enough of the injury they suffered as a result of the petitioners bad faith.

The fact that no actual or compensatory damages was proven before the

trial court does not adversely affect the private respondents right to

recover moral damages. We have held that moral damages may be

awarded in the cases referred to in the chapter on Human Relations of

the Civil Code (Articles 19-36) without need of proof that the wrongful act

complained of had caused any physical injury upon the complainant.

Same; Same; Same; Same; Award of exemplary damages when moral

damages awarded.When moral damages are awarded, exemplary

damages may also be decreed. Exemplary damages are imposed by

way of example or correction for the public good, in addition to moral,

temperate, liquidated or compensatory damages. According to the Code

Commission, exemplary damages are required by public policy, for

wanton acts must be suppressed. They are an antidote so that the

poison of wickedness may not run through the body politic. These

damages are legally assessible against him.

Same; Same; Same; Same; Appeal; Supreme Court may fix damages

without remand of case to labor arbiter.We agree that, strictly

speaking, the determination of the amount thereof would require a

remand to the Labor Arbiter. However, inasmuch as the private

respondents were separated in 1986 and this case has been pending

since then, the interests of justice demand the direct resolution of this

motion in this proceeding.

PETITION for certiorari to review the decision of the National Labor

Relations Commission.

The facts are stated in the opinion of the Court.

Benjamin C. Santos Law Offices for petitioner.

Urbina & Associates Law Office for private respondents.

CRUZ, J.:

It is a fundamental principle of law and human conduct that a person

must, in the exercise of his rights and in the performance of his duties,

act with justice, give every one his due, and observe honesty and good

faith.1 This is the principle we shall apply in the case at bar to gauge

the petitioners motives in his dealings with the private respondents.

Arturo de Guzman was the general manager of the Manila office of the

Affiliated Machineries Agency, Ltd., which was based in Hongkong. On

June 30, 1986, he received a telex message from Leo A. Fialla,

managing director of AMAL in its main office, advising him of the closure

of the company due to financial reverses. This message triggered the

series of events that are the subject of this litigation.

Immediately upon receipt of the advise, De Guzman notified all the

personnel of the Manila office. The employees then sent a letter to

AMAL accepting its decision to close, subject to the payment to them of

their current salaries, severance pay, and other statutory benefits. De

Guzman joined them in these representations.

These requests were, however, not heeded. Consequently, the

employees, now herein private respondents, lodged a complaint with the

NLRC against AMAL, through Leo A. Fialla and Arturo de Guzman, for

illegal dismissal, unpaid wages or commissions, separation pay, sick and

vacation leave benefits, 13th month pay, and bonus.

For his part, the petitioner began selling some of AMALs assets and

applied the proceeds thereof, as well as the remaining assets, to the

payment of his claims against the company.

He also organized Susarco, Inc., with himself as its president and his

wife as one of the incorporators and a member of the board of directors.

This company is engaged in the same line of business and has the

same clients as that of the dissolved AMAL.

With this development, Susarco and its officers were impleaded in the

amended complaint of the private respondents. Later, William Quasha

and/or Cirilo Asperilla were also included in the suit as the resident

agents of AMAL in the Philippines.

On November 7, 1986, the petitioner filed his own complaint with the

NLRC against AMAL for his remaining unsatisfied claims.

On May 29, 1987, Labor Arbiter Eduardo G. Magno, to whom the

petitioners complaint was assigned, rendered a decision ordering AMAL

to pay the petitioner the amount of P371,469.59 as separation pay,

unpaid salary and commissions, after deducting the value of the assets

earlier appropriated by the petitioner.2

On September 30, 1987, Labor Arbiter Ma. Lourdes A. Sales, who tried

the private respondents complaint, rendered a decision

1. Ordering Respondents AMAL and Arturo de Guzman to pay jointly

and severally to each Complainant separation pay computed at one-half

month pay for every year of service, backwages for one month, unpaid

salaries for June 16-30, 1986, 13th month pay from January to June 30,

1986 and incentive leave pay equivalent to two and-a-half days pay;

2. Dismissing the complaint against respondents Leo Fialla, William

Quasha, Susarco, Inc. and its directors Susan de Guzman, Pacita

Castaneda, George Estomata and Cynthia Serrano for lack of basis

and/or merit;

3. Dismissing the claims for damages for lack of basis;

4. Ordering respondents AMAL and Arturo de Guzman to pay jointly and

severally attorneys fees to Complainants equivalent to 10% of the

monetary awards herein.

This decision was on appeal affirmed in toto by the NLRC, which is now

faulted for grave abuse of discretion in this petition for certiorari.

The petitioner does not dispute the jurisdiction of the Labor Arbiter and

NLRC over the complaint of the private respondents against AMAL in

view of their previous employment relationship. He argues, however, that

the public respondents acted without or in excess of jurisdiction in

holding him jointly and severally liable with AMAL as he was not an

employer of the private respondents.

The Solicitor General and the private respondents disagree. They

maintain that the petitioner, being AMALs highest local representative in

the Philippines, may be held personally answerable for the private

respondents claims because he is included in the term employer under

Art. 212 (c), (now e) of the Labor Code which provides:

Art.212. Definitions.

x x x

c. Employer includes any person acting in the interest of an employer,

directly or indirectly. x x x.

In the leading case of A.C. Ransom Labor Union-CCLU vs. NLRC,4 as

affirmed in the subsequent cases of Gudez vs. NLRC,5 and Maglutac vs.

NLRC,6 this Court treated the president of the employer corporation as

an employer and held him solidarily liable with the said corporation for

the payment of the employees money claims. So was the vice-president

of the employer corporation in the case of Chua vs. NLRC.7

The aforecited cases will not apply to the instant case, however,

because the persons who were there made personally liable for the

employees claims were stockholders-officers of the respondent

corporation. In the case at bar, the petitioner, while admittedly the

highest ranking local representative of AMAL in the Philippines, is

nevertheless not a stockholder and much less a member of the board of

directors or an officer thereof. He is at most only a managerial employee

under Art. 212 (m) of the Labor Code, which reads in relevant part as

follows:

Art.212. Definitions.

x x x

m. Managerial employee is one who is vested with powers and

prerogatives to lay down and execute management policies and/or to

hire, transfer, suspend, lay off, recall, discharge, assign or discipline

employees. x x x .

As such, the petitioner cannot be held directly responsible for the

decision to close the business that resulted in his separation and that of

the private respondents. That decision came directly and exclusively

from AMAL. The petitioners participation was limited to the enforcement

of this decision in line with his duties as general manager of the

company. Even in a normal situation, in fact, he would not be liable, as a

managerial employee of AMAL, for the monetary claims of its

employees. There should be no question that the private respondents

recourse for such claims cannot be against the petitioner but against

AMAL and AMAL alone.

The judgment in favor of the private respondents could have been

enforced against the properties of AMAL located in this country except

for one difficulty. The problem is that these properties have already been

appropriated by the petitioner to satisfy his own claims against the

company.

By so doing, has the petitioner incurred liability to the private

respondents?

The Labor Arbiter believed he had because of his bad faith and ruled as

follows:

Considering that Respondent A. de Guzman is guilty of bad faith in

appropriating for himself the properties of Respondent AMAL to the

prejudice of Complainants herein whose claims are known to

Respondent at the time he made the disposition of AMALs properties,

he is held jointly and severally liable with Respondent AMAL for the

award of unpaid wages, separation pay, backwages for one month, 13th

month pay and cash value of unused vacation leave.

In Velayo v. Shell Co. of the Philippines,8 Commercial Air Lines, Inc.

(CALI), knowing that it did not have enough assets to pay off its

liabilities, called a meeting of its creditors where it announced that in

case of non-agreement on a pro-rata distribution of its assets, including

the C-54 plane in California, it would file insolvency proceedings. Shell

Company of the Philippines, one of its creditors, took advantage of this

information and immediately made a telegraphic assignment of its

credits in favor of its sister corporation in the United States. The latter

thereupon promptly attached the plane in California and disposed of the

same, thus depriving the other creditors of their proportionate share in its

value. The Court declared that Shell had acted in bad faith and betrayed

the trust of the other creditors of CALI. The said company was ordered

to pay them compensatory damages in a sum equal to the value of the

C-54 plane at the time it assigned its credit and exemplary damages in

the sum of P25,000.00.

We quote with approval the following observations of Labor Arbiter Sales

in her decision:

While the legitimacy of Respondent A. de Guzmans claims against

AMAL is not questioned, it must be stated that the manner and the

means by which he satisfied such claims are evidently characterized by

bad faith on his part. For one, Respondent A. de Guzman took

advantage of his position as General Manager and arrogated to himself

the right to retain possession and ownership of all properties owned and

left by AMAL in the Philippines, even if he knew that Complainants

herein have similar valid claims for unpaid wages and other employee

benefits from the Respondent AMAL. x x x

Another strong indication of bad faith on the part of Respondent A. de

Guzman is his filing of a separate complaint against AMAL before the

NLRC Arbitration Branch about four (4) months after the filing of the

instant case without informing this Office about the existence of said

case during the proceedings in the instant case. This case was deemed

submitted for decision on May 18, 1987 but it was only on June 2, 1987

that Respondent A. de Guzman formally notified this Office through his

Supplemental Position Paper of his pending complaint before Arbiter

Eduardo Magno docketed as NLRC Case No. 11-4441-86. Under Rule

V, Section 4 of the revised rules of the NLRC, it is provided that:

Sec.4. CONSOLIDATION OF CASESwhere there are two or more

cases pending before different Labor Arbiters in the same Regional

Arbitration Branch involving the same employer and issues or the same

parties with different issues, the case which was filed last shall be

consolidated with the first to avoid unnecessary costs or delay. Such

cases shall be disposed of by the Labor Arbiter to whom the first case

was assigned. (Italics supplied).

Had Respondent A. de Guzman given timely notice of his complaint, his

case could have been consolidated with this case and the issues in both

cases could have been resolved in a manner that would give due

consideration to the rights and liabilities of all parties in interest at the

least, in case consolidation is objected to or no longer possible, the

Complainants herein could have been given a chance to intervene in the

other case so that whatever disposition might be rendered by Arbiter

Magno would include consideration of Complainants claims herein.

It is not disputed that the petitioner in the case at bar had his own claims

against AMAL and consequently had some proportionate right over its

assets. However, this right ceased to exist when, knowing fully well that

the private respondents had similarly valid claims, he took advantage of

his position as general manager and applied AMALs assets in payment

exclusively of his own claims.

According to Tolentino in his distinguished work on the Civil Code:

The exercise of a right ends when the right disappears, and it

disappears when it is abused, especially to the prejudice of others. The

mask of a right without the spirit of justice which gives it life, is repugnant

to the modern concept of social law. It cannot be said that a person

exercises a right when he unnecessarily prejudices another or offends

morals or good customs. Over and above the specific precepts of

positive law are the supreme norms of justice which the law develops

and which are expressed in three principles: honeste vivere, alterum non

laedre and jus suum quique tribuere; and he who violates them violates

the law. For this reason, it is not permissible to abuse our rights to

prejudice others.

The modern tendency, he continues, is to depart from the classical and

traditional theory, and to grant indemnity for damages in cases where

there is an abuse of rights, even when the act is not illicit. Law cannot be

given an anti-social effect. If mere fault or negligence in ones acts can

make him liable for damages for injury caused thereby, with more reason

should abuse or bad faith make him liable. A person should be protected

only when he acts in the legitimate exercise of his right, that is, when he

acts with prudence and in good faith; but not when he acts with

negligence or abuse.10

The above-mentioned principles are contained in Article 19 of the Civil

Code which provides:

Art.19. Every person must, in the exercise of his rights and in the

performance of his duties, act with justice, give everyone his due, and

observe honesty and good faith.

This is supplemented by Article 21 of the same Code, thus:

Art.21. Any person who willfully causes loss or injury to another in a

manner that is contrary to morals, good customs or public policy shall

compensate the latter for the damage.

Applying these provisions, we hold that although the petitioner cannot be

made solidarily liable with AMAL for the monetary demand of its

employees, he is nevertheless directly liable to them for his questionable

conduct in attempting to deprive them of their just share in the assets of

AMAL.

Under Art. 2219, (10) of the Civil Code, moral damages may be

recovered for the acts referred to in Art. 21. In Bert Osmea &

Associates vs. Court of Appeals,11 we held that fraud and bad faith

having been established, the award of moral damages is in order. And

in Pan Pacific Company (Phil.) vs. Phil. Advertising Corp.,12 moral

damages were awarded against the defendant for its wanton and

deliberate refusal to pay the just debt due the plaintiff.

It is settled that the court can grant the relief warranted by the allegation

and the proof even if it is not specifically sought by the injured party.13

In the case at bar, while the private respondents did not categorically

pray for damages, they did allege that the petitioner, taking advantage of

his position as general manager, had appropriated the properties of

AMAL in payment of his own claims against the company. That was

averment enough of the injury they suffered as a result of the petitioners

bad faith.

The fact that no actual or compensatory damages was proven before the

trial court does not adversely affect the private respondents right to

recover moral damages. We have held that moral damages may be

awarded in the cases referred to in the chapter on Human Relations of

the Civil Code (Articles 19-36) without need of proof that the wrongful act

complained of had caused any physical injury upon the complainant.14

When moral damages are awarded, exemplary damages may also be

decreed.15 Exemplary damages are imposed by way of example or

correction for the public good, in addition to moral, temperate, liquidated

or compensatory damages.16 According to the Code Commission,

exemplary damages are required by public policy, for wanton acts must

be suppressed. They are an antidote so that the poison of wickedness

may not run through the body politic.17 These damages are legally

assessible against him.

The petitioner asserts that, assuming the private respondents to have a

cause of action against him for his alleged bad faith, the civil courts and

not the Labor Arbiter have jurisdiction over the case.

In Associated Citizens Bank, et al. vs. Judge Japson,18 this Court held:

Primarily, the issue to be resolved is whether or not the respondent court

has jurisdiction to hear and decide an action for damages based on the

dismissal of an employee.

On all fours to the above issue is the ruling of this Court in Primero v.

Intermediate Appellate Court (156 SCRA 435 [1987]) which once again

reiterated the doctrine that the jurisdiction of the Labor Arbiter under

Article 217 of the Labor Code is broad and comprehensive enough to

include claims for moral and exemplary damages sought to be recovered

by an employee whose services has been illegally terminated by his

employer (Ebon v. De Guzman, 113 SCRA 55 [1982]; Aguda v. Vallejos,

113 SCRA 69 [1982]; Getz Corporation v. Court of Appeals, 116 SCRA

86 [1982]).

For the unlawful termination of employment, this Court in Primero v.

Intermediate Appellate Court, supra, ruled that the Labor Arbiter had the

exclusive and original jurisdiction over claims for moral and other forms

of damages, so that the employee in the proceedings before the Labor

Arbiter should prosecute his claims not only for reliefs specified under

the Labor Code but also for damages under the Civil Code.

x x x Question of damages which arose out of or connected with the

labor dispute should be determined by the labor tribunal to the exclusion

of the regular courts of justice (Limquiaco, Jr. v. Ramolete, 156 SCRA

162 [1987]). The regular courts have no jurisdiction over claims for moral

and exemplary damages arising from the illegal dismissal of an

employee (Vargas v. Akai Philippines, Inc., 156 SCRA 531 [1987]).

Although the question of damages arising from the petitioners bad faith

has not directly sprung from the illegal dismissal, it is clearly intertwined

therewith. The predicament of the private respondents caused by their

dismissal was aggravated by the petitioners act in arrogating to himself

all of AMALs assets to the exclusion of its other creditors, including its

employees. The issue of bad faith is incidental to the main action for

illegal dismissal and is thus properly cognizable by the Labor Arbiter.

We agree that, strictly speaking, the determination of the amount thereof

would require a remand to the Labor Arbiter. However, inasmuch as the

private respondents were separated in 1986 and this case has been

pending since then, the interests of justice demand the direct resolution

of this motion in this proceeding.

As this Court has consistently declared:

x x x it is a cherished rule of procedure for this Court to always strive to

settle the entire controversy in a single proceeding leaving no root or

branch to bear the seeds of future litigation. No useful purpose will be

served if this case is remanded to the trial court only to have its decision

raised again to the Intermediate Appellate Court and from there to this

Court. (Alger Electric, Inc. v. Court of Appeals, 135 SCRA 37)

Remand of the case to the lower court for further reception of evidence

is not necessary where the court is in a position to resolve the dispute

based on the records before it. On many occasions, the Court, in the

public interest and the expeditious administration of justice, has resolved

actions on the merits instead of remanding them to the trial court for

further proceedings, such as where the ends of justice would not be

subserved by the remand of the case or when public interest demands

an early disposition of the case. (Lianga Bay Logging Co., Inc. v. CA,

157 SCRA 357)

Sound practice seeks to accommodate the theory which avoids waste of

time, effort and expense, both to the parties and the government, not to

speak of delay in the disposal of the case (cf. Fernandez v. Garcia, 92

Phil. 592, 597). A marked characteristic of our judicial setup is that

where the dictates of justice so demand x x x the Supreme Court should

act, and act with finality. (Li Siu Liat v. Republic, 21 SCRA 1039, 1046,

citing Samal v. CA, 99 Phil. 230 and U.S. v. Gimenez, 34 Phil. 74). In

this case, the dictates of justice do demand that this Court act, and act

with finality. (Beautifont, Inc. v. CA, 157 SCRA 481)

It is stressed that the petitioners liability to the private respondents is a

direct liability in the form of moral and exemplary damages and not a

solidary liability with AMAL for the claims of its employees against the

company. He is being held liable not because he is the general manager

of AMAL but because he took advantage of his position by applying the

properties of AMAL to the payment exclusively of his own claims to the

detriment of the other employees.

WHEREFORE, the questioned decision is AFFIRMED but with the

modification that the petitioner shall not be held jointly and severally

liable with AMAL for the private respondents money claims against the

latter. However, for his bad faith in arrogating to himself AMALs

properties to the prejudice of the private respondents, the petitioner is

ordered: 1) to pay the private respondents moral damages in the sum of

P20,000.00 and exemplary damages in the sum of P20,000.00; and 2)

to return the assets of AMAL that he has appropriated, or the value

thereof, with legal interest thereon from the date of the appropriation

until they are actually restored, these amounts to be proportionately

distributed among the private respondents in satisfaction of the judgment

rendered in their favor against AMAL.

SO ORDERED.

Grio-Aquino, Medialdea and Bellosillo, JJ., concur.

Decision affirmed with modification.

Note.For moral damages to be awarded, it is essential that the

claimant must have satisfactorily proved during the trial the existence of

the factual basis of the damages and its casual connection with adverse

partys act (Pagsuyuin vs. Intermediate Appellate Court, 193 SCRA 547).