Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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.

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."   This is the
1

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. 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 of 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. 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 attorney's fees
to Complainants equivalent to 10% of the monetary awards herein.  3

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 xxx xxx

c. "Employer" includes any person acting in the interest of an employer, directly or indirectly. . . .

In the leading case of A.C. Ransom Labor Union-CCLU vs. NLRC,   as affirmed in the subsequent cases of Gudez
4

vs. NLRC,   and Maglutac vs.

5

NLRC,   this Court treated the president of the employer corporation as an "employer" and held him solidarily liable
6

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. —

xxx xxx 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. . . .

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.

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 plant 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. . . .

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 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. (Emphasis 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 AMAL's
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 just
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.  9

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 one's 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
Osmeña & Associates vs. Court of Appeals,   we held that "fraud and bad faith having been established, the award of
11

moral damages is in order." And in Pan Pacific Company (Phil.) vs. Phil. Advertising Corp.,   moral damages were
12

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.   In the case at bar, while the private respondents did not categorically pray for damages,
13

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.   Exemplary damages are imposed
15

by the way of example or correction for the public good, in additional to moral, temperate, liquidated or compensatory
damages.   According to the Code Commission, "exemplary damages are required by public policy, for wanton acts
16

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.
17

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 Citizen Bank, et al. vs. Judge Japson,   this Court held:

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 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 the 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 is 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.

. . . 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 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 the 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.

As this Court has consistently declared:

. . . 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 tot the Indeterminate 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 characteristics of our judicial set-up is that
where the dictates of justice so demand . . . 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 petitioner's 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 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 prejudice of the private respondents, the petitioner is
ordered: 1) to pay the private respondents moral damages in the sum of P20,00.00 and exemplary damages in the
sum of P20,00.00; and 2) to return the assets of AMAL that he has appropriated, or the value thereof, with legal
interests 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.

Footnotes

1 Article 19, Civil Code of the Philippines.

2 Rollo, p. 56.

3 Rollo p. 32.

4 142 SCRA 269.

5 183 SCRA 644.

6 189 SCRA 767.

7 182 SCRA 353.

8 100 Phil. 186.

9 Tolentino, Civil Code of the Philippines, 1990 Ed., Vol, 1, p. 61.

10 Ibid.

11 120 SCRA 395.

12 23 SCRA 977.

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.