Title
De Guzman vs. National Labor Relations Commission
Case
G.R. No. 90856
Decision Date
Feb 1, 1996
A former manager, accused of selling company assets for personal gain, was held liable for moral and exemplary damages and ordered to return assets to satisfy employees' claims, despite no direct employer-employee relationship.
illegal dismissal
damages
assets
A

Case Summary (G.R. No. 90856)

Petitioner’s Motion and the Earlier Court Decision

Petitioner filed a motion seeking reconsideration of the Court’s July 23, 1992 decision, which had modified the Labor Arbiter and NLRC rulings in NLRC-NCR Case No. 7-2739-86. In the earlier decision, the Court affirmed the questioned decision but modified the holding that petitioner would not be held jointly and severally liable with AMAL for the private respondents’ monetary claims against AMAL. The Court nonetheless found petitioner directly liable for moral damages in the sum of P20,000.00, and exemplary damages in the sum of P20,000.00, based on his bad faith in allegedly arrogating to himself AMAL’s properties to the prejudice of the private respondents. The Court also ordered petitioner to return the assets of AMAL that he had appropriated, or the value thereof, with legal interest from the date of appropriation until actual restoration. The amounts were to be proportionately distributed among the private respondents in satisfaction of the judgment against AMAL.

Factual Background: AMAL’s Closure and the Alleged Misappropriation

The respondent employees filed their complaint after AMAL refused to pay their money claims following AMAL’s decision to cease operations in 1986. Petitioner was impleaded based on allegations that he sold part of AMAL’s assets and applied the proceeds and the remaining assets to satisfy his own claims against the company. The complaint further alleged that petitioner formed a new company, Susarco, Inc., and engaged in the same line of business with AMAL’s former clients. On September 30, 1987, the Labor Arbiter rendered judgment holding petitioner jointly and severally liable with AMAL for the respondent employees’ claims. Upon appeal, the NLRC affirmed the Labor Arbiter’s decision in toto.

The Court’s Initial Ruling on Certiorari

Dissatisfied, petitioner proceeded to the Court on certiorari and alleged grave abuse of discretion. The Court modified the NLRC decision and absolved petitioner of solidary liability for the employees’ monetary claims. The Court reasoned that as a mere managerial employee, petitioner had no participation in the decision to cease operations and terminate the services of the respondent employees, which the Court treated as the exclusive responsibility of AMAL. However, the Court sustained petitioner’s liability for damages because it found that petitioner acted in bad faith by appropriating AMAL’s assets to the prejudice of the respondent employees whose claims were pending. Accordingly, the Court applied provisions of the Civil Code, namely Articles 19, 21, 2219(10) and 2229, to support the award of moral and exemplary damages, and it ordered the return of the assets or their value with legal interest.

Issues Raised in the Motion for Reconsideration

In his motion, petitioner assailed the award of damages and the order to return the assets of AMAL that he allegedly appropriated. He argued that both were unwarranted and beyond the jurisdiction of the Court to grant in a complaint for illegal dismissal when no employer-employee relationship existed between petitioner and the respondent employees. He grounded this position on prior pronouncements that money claims within the original and exclusive jurisdiction of Labor Arbiters arise out of or in connection with the employer-employee relationship, and that where the principal relief sought is to be resolved by reference to the general civil law, jurisdiction belongs to regular courts because labor agencies lack expertise in the applicable civil law issues.

Respondent Employees’ Position and the Court’s Treatment of Jurisdiction

Although petitioner conceded that no employer-employee ties existed between him and the respondent employees, the Court rejected the premise that such absence precluded adjudication of petitioner’s liability for damages. The Court held that it was not required that the claim for relief should directly result from an employer-employee relationship, so long as a reasonable causal connection existed between the claim asserted and the employer-employee relations. The Court found that the respondent employees could have been afforded relief for illegal dismissal and non-payment of statutory benefits but for petitioner’s unscrupulous acts in appropriating AMAL’s assets, which rendered satisfaction of their claims impossible. The Court emphasized that, by taking undue advantage of his position as general manager, petitioner facilitated the consummation of the alleged acts because he had access to AMAL’s assets.

On that score, the Court treated petitioner’s bad faith as an offshoot of the termination of the employment relations with AMAL. It reasoned that AMAL’s decision to close down its business impelled petitioner to act precipitately in appropriating AMAL’s assets, allegedly because he feared the assets would prove insufficient to satisfy legitimate claims against the company.

Rejection of Set-off or Compensation as an Excuse

Petitioner argued that his use of AMAL’s assets to satisfy his own claims was merely a simple legal compensation or set-off. The Court accorded this contention scant consideration. It ruled that petitioner acted without deference to the legitimate claims of the respondent employees and other creditors of AMAL, contrary to the rules on concurrence and preference of credits under the Civil Code. The Court noted that petitioner’s claims were not disputed, but it declared that they were properly cognizable in proceedings for AMAL’s dissolution. It therefore affirmed the earlier conclusion that while the question of damages arising from petitioner’s bad faith may not have directly sprung from the illegal dismissal, it was intertwined with it.

Disposition and Considerations of Finality

The Court held that petitioner’s bad faith had been sufficiently established and that, accordingly, the award of damages and the order for petitioner to return the assets of AMAL he had appropriated, or their value, were in order. Finally, the Court underscored that the case had dragged on for the past nine years, and it stressed the urgency of resolving it with finality, without sanctioning further delay or efforts to frustrate the disposition of the respondent employees’ legitimate claims.

Legal Basis and Reasoning

The Court’s legal approach rested on the concept that the jurisdictional boundary tied to employer-employee relationships must be assessed in terms of reasonable causal connection in labor disputes. It applied this to petitioner’s conduct because his bad faith appropriation of AMAL’s assets directly affected the respondent employees’ ability to obtain the monetary relief arising from illegal dismissal and non-payment of statutory benefits. It further anchored petitioner’s civil liability on the Civil Code provisions invoked in the

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