ARTURO DE GUZMAN, petitioner, vs.
NATIONAL LABOR reserving a portion to pay the claims of other employees acts in
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 petitioner’s 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
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
AMAL’s
_________________
*
FIRST DIVISION.
724
724 SUPREME COURT REPORTS ANNOTATED
De Guzman vs. National Labor Relations Commission
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 petitioner’s 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.
725
VOL. 211,JULY23,1992 725
De Guzman vs. National Labor Relations Commission
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 petitioner’s
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 AMAL’s
assets and applied the proceeds thereof, as well as the
remaining assets, to the payment of his claims against the
company.
__________________
1
Article 19, Civil Code of the Philippines.
726
726 SUPREME COURT REPORTS ANNOTATED
De Guzman vs. National Labor Relations Commission
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 petitioner’s 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. 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. 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. 3. Dismissing the claims for damages for lack of basis;
 4. 4. Ordering respondents AMAL and Arturo de Guzman
to pay jointly and severally attorney’s fees to
Complainants equivalent to 10% of the monetary
awards herein.3
_______________
2
Rollo, p. 56.
3
Rollo, p. 32.
727
VOL. 211,JULY23,1992 727
De Guzman vs. National Labor Relations Commission
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 AMAL’s 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.—
xxx
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
_______________
4
142 SCRA 269.
5
183 SCRA 644.
6
189 SCRA 767.
7
182 SCRA 353.
728
728 SUPREME COURT REPORTS ANNOTATED
De Guzman vs. National Labor Relations Commission
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.—
xxx
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 petitioner’s 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
AMAL’s 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.
729
VOL. 211,JULY23,1992 729
De Guzman vs. National Labor Relations Commission
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 Guzman’s 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,
________________
8
100 Phil. 186.
730
730 SUPREME COURT REPORTS ANNOTATED
De Guzman vs. National Labor Relations Commission
it is provided that:
“Sec.4. CONSOLIDATION OF CASES—where 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 VOL. 211,JULY23,1992 731
Complainants’ claims herein. De Guzman vs. National Labor Relations Commission
It is not disputed that the petitioner in the case at bar had his
The modern tendency, he continues, is to depart from the
own claims against AMAL and consequently had some
classical and traditional theory, and to grant indemnity for
proportionate right over its assets. However, this right ceased to
damages in cases where there is an abuse of rights, even when
exist when, knowing fully well that the private respondents had
the act is not illicit. Law cannot be given an anti-social effect.
similarly valid claims, he took advantage of his position as
If mere fault or negligence in one’s acts can make him liable
general manager and applied AMAL’s assets in payment
for damages for injury caused thereby, with more reason
exclusively of his own claims.
should abuse or bad faith make him liable. A person should be
protected only when he acts in the legitimate exercise of his
According to Tolentino in his distinguished work on the Civil
right, that is, when he acts with prudence and in good faith; but
Code:
not when he acts with negligence or abuse.10
The exercise of a right ends when the right disappears, and it
The above-mentioned principles are contained in Article 19 of
disappears when it is abused, especially to the prejudice of
the Civil Code which provides:
others. The mask of a right without the spirit of justice which
gives it life, is repugnant to the modern concept of social law.
Art.19. Every person must, in the exercise of his rights and in
It cannot be said that a person exercises a right when he
the performance of his duties, act with justice, give everyone
unnecessarily prejudices another or offends morals or good
his due, and observe honesty and good faith.
customs. Over and above the specific precepts of positive law
are the supreme norms of justice which the law develops and
This is supplemented by Article 21 of the same Code, thus:
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 Art.21. Any person who willfully causes loss or injury to
abuse our rights to prejudice others.9 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
9 cannot be made solidarily liable with AMAL for the monetary
Tolentino, Civil Code of the Philippines, 1990 Ed., Vol. 1, p.
demand of its employees, he is nevertheless directly liable to
61.
them for his questionable conduct in attempting to deprive
them of their just share in the assets of AMAL.
731
Under Art. 2219, (10) of the Civil Code, moral damages may
be recovered for the acts referred to in Art. 21. In Bert Osmeña
& 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.
_________________
10
Ibid.
11
120 SCRA 395.
12
23 SCRA 977.
732
732 SUPREME COURT REPORTS ANNOTATED
De Guzman vs. National Labor Relations Commission
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
petitioner’s 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:
_________________
13
Ras vs. Sua, 25 SCRA 153; Northern Cement Corp. vs. IAC,
158 SCRA 408; Heirs of Celso Amarante vs. CA, 185 SCRA
585.
14
Patricio vs. Leviste, 172 SCRA 774.
15
Bert Osmeña and Associates vs. CA, 120 SCRA 395.
16
Art. 2229, Civil Code of the Philippines.
17
Report of the Code Commission, pp. 75-76.
18
196 SCRA 404.
733
VOL. 211,JULY23,1992 733
De Guzman vs. National Labor Relations Commission
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 petitioner’s
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
petitioner’s act in arrogating to himself all of AMAL’s 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.
734
734 SUPREME COURT REPORTS ANNOTATED
De Guzman vs. National Labor Relations Commission
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 AMAL’s properties to the
preju-
735
VOL. 211,JULY23,1992 735
Aranas vs. Court of Appeals
dice 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.
 Griño-Aquino, Medialdea and Bellosillo, JJ., concur.

Decision affirmed with modification.