De Guzman v. National Labor Relations Commission
REITERATIONFacts
1. The Antecedents: Arturo de Guzman, the general manager of the Manila office of Affiliated Machineries Agency, Ltd. (AMAL), a company based in Hongkong, notified all personnel of the office's closure due to financial reverses on June 30, 1986. The employees accepted the closure subject to payment of their salaries and benefits. When these were not heeded, the employees filed a complaint with the National Labor Relations Commission (NLRC) against AMAL, its managing director, and De Guzman for illegal dismissal and unpaid benefits. De Guzman subsequently appropriated AMAL's assets to satisfy his own claims against the company and organized a new company, Susarco, Inc., engaged in the same business with the same clients, leading to his and Susarco's impleader in the employees' complaint. 2. Procedural History: The employees' complaint was filed with the NLRC. Labor Arbiter Ma. Lourdes A. Sales rendered a decision on September 30, 1987, ordering AMAL and Arturo de Guzman to jointly and severally pay the employees their separation pay, backwages, unpaid salaries, 13th month pay, and incentive leave pay, while dismissing the complaint against other respondents. This decision was affirmed in toto by the NLRC. Meanwhile, De Guzman had filed his own complaint against AMAL for his unsatisfied claims, which was decided by Labor Arbiter Eduardo G. Magno on May 29, 1987, ordering AMAL to pay De Guzman a certain amount after deducting the value of assets he had appropriated. The NLRC's affirmation of Labor Arbiter Sales' decision is now being questioned by De Guzman. 3. The Petition: The petitioner, Arturo de Guzman, filed a petition for certiorari with the Supreme Court, faulting the NLRC for grave abuse of discretion. He argues that the NLRC 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 but merely a managerial employee. The Supreme Court, however, found that while De Guzman could not be held solidarily liable with AMAL for the employees' monetary claims, his act of appropriating AMAL's assets to satisfy his own claims to the prejudice of the other employees constituted bad faith and an abuse of his rights under Articles 19 and 21 of the Civil Code. Consequently, the Court modified the NLRC decision, holding De Guzman directly liable to the private respondents for moral and exemplary damages and ordering him to return the appropriated assets or their value.
Issue(s)
Whether petitioner Arturo de Guzman, as a managerial employee, can be held jointly and severally liable with AMAL for the monetary claims of the private respondents. Whether the Labor Arbiter has jurisdiction over claims for moral and exemplary damages arising from the petitioner's alleged bad faith in appropriating company assets. Whether the petitioner's conduct in appropriating AMAL's assets to satisfy his own claims, to the prejudice of other employees, constitutes an abuse of rights under Articles 19 and 21 of the Civil Code, making him liable for damages.
Ruling
The Supreme Court affirmed the NLRC decision but modified it. It ruled that petitioner Arturo de Guzman cannot be held jointly and severally liable with AMAL for the private respondents' monetary claims. However, it held him directly liable to the private respondents for moral and exemplary damages due to his bad faith in appropriating AMAL's assets to the prejudice of the employees. The Court ordered him to pay moral damages of P20,000.00 and exemplary damages of P20,000.00, and to return the appropriated assets or their value with legal interest, to be proportionately distributed among the private respondents.
Ratio Decidendi
On the issue of joint and several liability: The Court held that petitioner De Guzman, as a managerial employee, could not be held jointly and severally liable with AMAL for the employees' monetary claims. The definition of "employer" under Article 212(c) of the Labor Code, which includes "any person acting in the interest of an employer, directly or indirectly," was distinguished from the petitioner's status. Unlike previous cases where corporate officers who were also stockholders were held liable, De Guzman was not a stockholder or a member of the board of directors. His role as general manager was limited to enforcing AMAL's decision to close the business, not making the decision itself. Therefore, his liability should not extend to the direct monetary obligations of AMAL to its employees. On the jurisdiction of the Labor Arbiter over damages: The Court affirmed the jurisdiction of the Labor Arbiter over claims for moral and exemplary damages arising from or connected with the labor dispute. Citing Primero v. Intermediate Appellate Court, the Court reiterated that the Labor Arbiter's jurisdiction under Article 217 of the Labor Code is broad enough to include such claims. The petitioner's act of appropriating AMAL's assets, while not directly an act of illegal dismissal, was intertwined with the labor dispute and aggravated the employees' predicament. Therefore, the issue of bad faith and the resulting damages were properly cognizable by the labor tribunal. On the abuse of rights and liability for damages: The Court found that petitioner De Guzman acted in bad faith and abused his rights under Articles 19 and 21 of the Civil Code. Although his claims against AMAL were legitimate, the manner in which he satisfied them was characterized by bad faith. He took advantage of his position as general manager to retain possession and ownership of all AMAL's properties, knowing that the employees also had valid claims. This act prejudiced the other employees and deprived them of their just share in the company's assets. The Court cited Velayo v. Shell Co. of the Philippines as analogous, where a creditor was found to have acted in bad faith by taking advantage of information to the prejudice of other creditors. The Court concluded that De Guzman's conduct was contrary to morals, good customs, and public policy, warranting the award of moral and exemplary damages.
Main Doctrine
While a managerial employee cannot be held solidarily liable with the employer for the latter's monetary obligations to other employees, such managerial employee may be held directly liable for moral and exemplary damages if they acted in bad faith by appropriating company assets to satisfy their own claims to the prejudice of other creditors, including employees, thereby abusing their rights under Article 19 and Article 21 of the Civil Code.