Title
De Guzman vs. National Labor Relations Commission
Case
G.R. No. 90856
Decision Date
Jul 23, 1992
AMAL's Manila office closed; employees sought unpaid wages. De Guzman, AMAL's manager, sold assets for personal gain, forming a new company. Court ruled De Guzman not jointly liable with AMAL but liable for moral/exemplary damages due to bad faith.
illegal dismissal
unpaid wages
general manager

Case Summary (G.R. No. 90856)

Factual Background

On June 30, 1986, petitioner received a telex from Leo A. Fialla, managing director of AMAL, advising that AMAL would close due to financial reverses. Petitioner, then general manager of AMAL’s Manila office, notified Manila personnel of the closure. The employees accepted the closure conditionally, demanding current salaries, separation pay, and statutory benefits; petitioner joined those representations. When AMAL failed to heed those demands, the employees filed a complaint with the NLRC for illegal dismissal and various monetary claims. Petitioner thereafter sold AMAL’s assets in the Philippines, applied the proceeds and remaining assets to satisfy his own claims against AMAL, and organized Susarco, Inc., a competing concern with substantially the same clients.

Trial Proceedings and Parallel Filings

The private respondents’ complaint proceeded before Labor Arbiter Ma. Lourdes A. Sales, while petitioner filed his own complaint against AMAL before Labor Arbiter Eduardo G. Magno on November 7, 1986. Labor Arbiter Magno rendered a decision on May 29, 1987 ordering AMAL to pay petitioner P371,469.59 as separation pay and unpaid salary and commissions, after deducting the value of assets appropriated by petitioner. The case before Labor Arbiter Sales continued independently and was decided thereafter.

Decision of Labor Arbiter Ma. Lourdes A. Sales

On September 30, 1987 Labor Arbiter Ma. Lourdes A. Sales ordered AMAL and Arturo de Guzman jointly and severally to pay 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. The arbiter dismissed the complaint as to Leo Fialla, William Quasha, Susarco, Inc., and certain Susarco directors for lack of basis, dismissed claims for damages for lack of basis, and granted attorney’s fees equivalent to ten percent of the monetary awards.

NLRC Action and Petition for Certiorari

The NLRC affirmed the arbiter’s decision in toto. Petitioner then filed this petition for certiorari alleging grave abuse of discretion by the NLRC and the labor arbiter, principally contesting personal liability on the ground that he was not the employer of the private respondents.

Issue Presented

The principal questions were (one) whether petitioner could be held jointly and severally liable with AMAL for the private respondents’ monetary claims despite not being a stockholder or corporate officer and (two) whether petitioner incurred direct liability for bad faith in appropriating AMAL’s assets to the prejudice of AMAL’s employees and other creditors, and whether the labor tribunals had jurisdiction to adjudicate such claims for moral and exemplary damages.

Parties’ Contentions

Petitioner conceded the NLRC’s jurisdiction over the employees’ claims against AMAL but maintained that he was not an employer and could not be held solidarily liable with AMAL. The Solicitor General and the private respondents countered that under Art. 212 (c) of the Labor Code the term “employer” includes any person acting in the interest of an employer, and they invoked prior decisions treating corporate presidents and vice-presidents as employers and personally liable for employee claims. The private respondents also alleged that petitioner had acted in bad faith in appropriating AMAL’s properties and had intentionally deprived them of their share in the assets.

Court’s Analysis on Employer Status

The Court noted that the cited precedents imposing solidary liability had involved stockholder-officers of the employing corporation. The Court distinguished those authorities and emphasized that petitioner was not a stockholder, director, or corporate officer of AMAL but a managerial employee as defined by Art. 212 (m) of the Labor Code. The Court held that, as a managerial employee, petitioner could not be made solidarily liable with AMAL for the employees’ monetary claims simply by virtue of his position, because the decision to close the business emanated from AMAL and its principal officers.

Court’s Analysis on Bad Faith and Abuse of Rights

The Court examined petitioner’s appropriation of AMAL’s Philippine assets to satisfy his own claims and found that his conduct exhibited bad faith and an abuse of rights contrary to Article 19 and Article 21 of the Civil Code. The Court applied the principle that every person must act with justice, honesty, and good faith, and invoked the doctrine that abuse of rights may give rise to civil liability even when the actor asserts a legal claim. The Court also found persuasive the labor arbiter’s observation that petitioner failed to timely disclose his separate complaint before another labor arbiter and thus frustrated possible consolidation under Rule V, Sec. 4 of the revised NLRC rules, which further evidenced bad faith.

Jurisdiction of the Labor Tribunal Over Damages

Addressing petitioner’s contention that civil courts should decide claims for moral and exemplary damages, the Court relied on its prior rulings that the labor tribunal’s jurisdiction under the Labor Code is broad enough to include incidental claims for moral and exemplary damages arising out of labor disputes, citing Article 217 jurisprudence and related authorities. The Court held that the issue of petitioner’s bad faith was incidental to the main action for illegal dismissal and therefore properly cognizable by the Labor Arbiter and the NLRC.

Relief, Damages, and Disposition

The Court affirmed the NLRC decision but modified it. The Court held that petitioner was not jointly and severally liable with AMAL for the private respondents’ monetary claims against the company. The Court, however, imposed direct liability on petitioner for his bad faith appro

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