G.R. No. L-25151, October 4, 1926
F. W. MAAGE and SARANGANI CATTLE CO., INC., plaintiffs-appellants, vs. W. H. ANDERSON, defendant-appellant.

FACTS

The Sarangani Cattle Co., Inc. employed W. H. Anderson as its general manager under a five-year contract. F. W. Maage, a principal stockholder, later purchased Anderson’s stock in the company, and it was allegedly agreed that Anderson’s employment contract would be cancelled. Anderson temporarily remained employed pending his trial for murder. After his acquittal, the company terminated his services on September 1, 1923, alleging various violations of his contract. Anderson refused to leave.

The company sued Anderson for damages and cancellation of his contract. Anderson counterclaimed for unpaid earned salary (P4,631.14) and damages for wrongful dismissal covering the unexpired term of his contract.

The trial court ruled that the dismissal was justified and that the company failed to prove its damages. It awarded Anderson his unpaid earned salary of P4,631.14 but dismissed his claim for future salary damages. Both parties appealed.

ISSUE

1. Was Anderson’s dismissal justified, thereby negating his claim for damages for the unexpired term of his contract?
2. Was Anderson entitled to collect his unpaid earned salary (P4,631.14) despite his breaches of contract?
3. Was the company entitled to set off its claims against Anderson’s unpaid salary?

RULING

1. Yes, the dismissal was justified. The Supreme Court found the evidence “clear and convincing” that Anderson breached his contract. Specific breaches included: (a) maltreating a Moro who later died, leading to Anderson’s murder trial; (b) charging the company for his criminal defense expenses (witness fees and attorney’s fees totaling P3,855.20) without clear corporate authority; (c) charging an unauthorized trip to Manila (P295.75); and (d) keeping an assistant manager on the payroll against instructions. These breaches warranted termination. Therefore, Anderson’s counterclaim for damages representing his salary for the unexpired term was properly dismissed.

2. No, Anderson was not entitled to his unpaid earned salary. The Court held that Anderson’s breaches of duty and the unauthorized charges he made against the company must be considered. The company had valid claims against Anderson for: the unauthorized criminal defense expenses (P3,855.20), the unauthorized Manila trip (P295.75), and money advanced to his wife (P681.07), totaling P4,832.02.

3. The company’s claims could be set off against Anderson’s salary claim. Since the company’s valid claims (P4,832.02) exceeded the amount of Anderson’s unpaid earned salary (P4,631.14), Anderson was not entitled to any net payment. The trial court’s judgment awarding him P4,631.14 was reversed.

DISPOSITIVE PORTION:
The appealed judgment was MODIFIED. The award of P4,631.14 to Anderson was REVERSED. The dismissal of Anderson’s second counterclaim (for future damages) and the finding that his dismissal was justified were AFFIRMED. Costs were awarded against Anderson.