Guzman then asked both to leave.
The unidentified male smashed a beer glass, went to the bar, and was aggressive when he returned.
After the glass was broken, Guzman told the male to wait until police arrived, but both he and the female left.
Footage captured by Queenstown Lakes District Council CCTV cameras in Searle Lane showed Guzman followed a male patron, grabbed him and placed him in a headlock. At one point he pushed the woman away.
The Cowboys manager and another staff member intervened, allowing the duo to leave the scene.
Guzman was called to the police station the next day.
According to the written decision, Sergeant Blair Duffy asked Guzman if he thought putting the male in a headlock was "necessary and appropriate".
Guzman conceded he could have acted differently and was subsequently charged.
Giving evidence last month, Guzman admitted being angry, but said he considered he used reasonable force to detain the male and believed from the training he had received he was entitled to effect a citizen's arrest to keep the bar safe for all customers.
Judge Brandts-Giesen said it was not unnatural for a person to feel "righteous anger" if racist remarks were directed at them.
He determined the male's actions in the bar, by breaking the glass, could justify a citizen's arrest and Guzman was entitled to pursue the man, a headlock could be reasonable force, and pushing the woman away was, in his view, justified.
The charge alleged Guzman had acted in a disorderly manner likely to lead to violence against persons to continue, while the unidentified male appeared to have committed an offence — possibly assault with a weapon, "definitely wilful damage", the judge said.
"A prudent security guard cannot be expected to simply allow that to happen and to let the patron leave, with the bar staff having to clean up the broken glass.
"I do not consider it was a show of unreasonable force for the defendant to go in hot pursuit.
"I consider the defendant was entitled to detain him, which he did briefly ... that the defendant let the patron go does not mean he was legally obliged to.
"Discretion is sometimes the better part of valour."
It was not a "vigilante exercise" by Guzman, and there was nothing to suggest violence escalated as a result of his actions.
In dismissing the charge, Judge Brandts-Giesen said, while Guzman might have handled the situation better, "hindsight is a wonderful thing" and he did not consider any force used to be egregious.
