G.R. No.

100749 April 24, 1992

GT PRINTERS and/or TRINIDAD G. BARBA, petitioners, 

vs.
NATIONAL LABOR RELATIONS COMMISSION (4TH DIVISION) and
EDWIN RICARDO, respondents.

GRIÑO-AQUINO, J.:

The private respondent, Edwin Ricardo, was employed in 1968 as an

apprentice of GT Printers, a single proprietorship owned by Mrs. Trinidad
Barba of East Capitol Site, Cebu City. Having gained enough experience and
expertise in the printing business and after undergoing special schooling in
Manila at company expense, Ricardo was promoted to the position of
production manager of GT Printers. In 1978, he became general manager
after the untimely demise of the owner's husband, who held that position.
Ricardo earned a monthly basic salary of P1,680, an ECOLA of P485,
representation allowance of P1,000 and or top of these, a three (3%) per cent
share in the gross receipts of the business.

In February, 1985, Ricardo's wife established Insta Printers, a rival printing

press, with Edwin Ricardo himself as consultant and owner. Since the
establishment of Insta Printers, Ricardo became a habitual absentee from his
job at GT Printers. He neglected his duties and responsibilities, and became
lax in directing and supervising the work force, resulting in numerous major
printing errors and failure to meet printing specifications leading to the
rejection of several job orders from regular customers.
Mrs. Barba noticed that Ricardo not only used GT Printers' bookcloth and
other printing materials for his Insta Printers, but he also gave specific
instructions to the production staff to give priority to book and magazine job
orders for Insta Printers. Eventually, the regular customers of GT Printers
were pirated by Insta Printers. Ricardo also manipulated price quotations
during the canvassing of bids to favor his own outfit instead of GT Printers.

Because of those irregularities, GT Printers suspended Ricardo as general

manager for 30 days. Effective June 18, 1986, Richard Barba was designated
to take his place. Contracts concluded by respondent Ricardo thereafter were
no longer honored. However, he continued to be a sales agent for GT
Printers, hence, he continued to receive commissions. Notices of his
investigation scheduled on July 24, 1986 and August 13, 1986 were sent to
him but he did not appear at the investigation. He stopped reporting for work
and soon after filed a complaint for illegal dismissal in the Regional Arbitration
Branch No. VII, of the Department of Labor and Employment in Cebu City,
entitled "Edwin Ricardo vs. GT Printers and/or Trinidad G. Barba." (NLRC
Case No. RAB-VII-0398-86)

The case was heard by Labor Arbiter Bonifacio Tumanak who rendered a
decision on January 4, 1990 finding that Ricardo was lawfully dismissed from
employment. Nevertheless, the Labor Arbiter ordered the payment to him of
separation pay equivalent to one-half month pay for every year of service (pp.
28-42, Rollo).

Ricardo appealed that decision to the NLRC which on April 18, 1991 (pp. 43-
51, Rollo), set aside the labor arbiter's decision and entered a new one,
finding Ricardo's dismissal illegal and ordering his reinstatement with
backwages. However, aware that strained relations had developed between
the parties, the Commission ordered GT Printers to pay Ricardo backwages
for three (3) years and separation pay of one month for every year of service
in lieu of reinstatement.

GT Printers filed a motion for reconsideration but it was denied. Hence, this
petition for review on certiorari, with a prayer for the issuance of a writ of
preliminary injunction or temporary restraining order. On July 29, 1991, the
Court issued a temporary restraining order upon petitioner's filing a P100,000
bond enjoining the respondents to desist from enforcing the NLRC decision
during the pendency of this action.

The petition for review is premised on the petitioner's contention that grave
abuse of discretion was committed by the NLRC —

1. in disregarding the labor arbiter's findings of fact;

2. in finding that Ricardo was denied due process before being

dismissed on July 18, 1986;

3. in finding that Ricardo was dismissed without just cause; and

4. in reversing the decision of the labor arbiter and ordering

Ricardo's reinstatement with payment of back wages and
separation pay.

The petition has merit.

The twin requirements of a valid termination: due process and just cause —
were met substantially for Ricardo was given ample opportunity to appear at
the two scheduled investigations in order to present his side, but he chose to
boycott the investigation. Even at the hearing before the Labor Arbiter, he
waived, through counsel, the presentation and cross-examination of
witnesses.

Due process does not necessarily mean or require a hearing, but simply an
opportunity or right to be heard (Hian vs. CTA, 59 SCRA 110; Azul vs. Castro,
133 SCRA 271). The affidavits, testimonies and other documentary evidence
presented by the petitioner stand uncontroverted and are therefore entitled to
full credit. It is well-settled that this Court is not a trier of facts, so we defer to
the superior opportunity of the lower courts or administrative bodies to test the
credibility of the witnesses and to examine the authenticity of the documentary
evidence directly before them (Mapa vs. Arroyo, 175 SCRA 76; Dagupan Bus
Co., Inc. vs. NLRC, 191 SCRA 328).

The security of tenure accorded to labor under the Constitution does not
embrace infractions of accepted company rules amounting to breach of trust
and loss of confidence (Rosello, Jr. vs. NLRC, 190 SCRA 779). The right of
an employer to dismiss a managerial employee for breach of trust and loss of
confidence, as in this case, cannot be doubted. As a measure of self-
preservation against acts inimical to its interests, an employer has the right to
dismiss an employee found committing acts of dishonesty and disloyalty. The
employer may not be compelled to continue to employ such a person whose
continuance in the service would patently be inimical to his employer's interest
(Colgate Palmolive Phils. Inc. vs. Ople, 163 SCRA 323). The dismissal of a
dishonest employee is in the best interest not only of management but also of
labor for the law never intended to impose an unjust situation on either labor
or management (Coca-Cola Bottlers Phils. Inc. vs. NLRC, 172 SCRA 751).

Reinstatement would be ill-advised and incompatible with the labor arbiter's

finding that "from those documentary evidences presented by respondent, it
can be safely conclude[d] that . . . there exist visible conflict of interest
amounting to willful breach of trust and confidence repose (sic) upon him by
his employer, . . . as well as (b) habitual neglect of his duties . . ." (pp. 216-
217, Rollo). The reinstatement of erring managers may not be ordered with
the same ease and liberality as rank and file workers (Pacific Cement Co., Inc.
vs. NLRC, 173 SCRA 192).

WHEREFORE, the assailed decision of the NLRC is hereby reversed and set
aside. As the complainant (herein private respondent), Edwin Ricardo, was
lawfully dismissed for dishonesty and serious misconduct, his complaint for
illegal dismissal is DISMISSED for lack of merit.

G.R. No. 88268 June 2, 1992

SAN MIGUEL CORPORATION, petitioner, 

vs.
NATIONAL LABOR RELATIONS COMMISSION and FRANCISCO
DIVINAGRACIA, respondents.

NARVASA, C.J.:

The basic facts from which the controversy at bar has arisen are not in
dispute. They are summarized in the challenged decision of the respondent
National Labor Relations Commission (NLRC) of November 25, 1988 as
follows.
 1. Francisco Divinagracia "started working with . . . (San Miguel
Corporation) on November 16, 1977 as accounting clerk. On July
24, 1982 he held the position of Regional Cashier of Bacolod Beer
Region with basic monthly salary of P2,200. His job entailed the
receiving of cash remittances from route salesmen, preparing
vouchers for disbursement and keeping funds inside the vault."

2. On January 31, 1985 at 5:00 in the afternoon, complainant

sought and was granted permission by the Regional Accountant
(Remus Banogon) to leave the office to attend to personal matter
(to buy some milk for his infant child). When he returned to the
office after an hour, he proceeded to work and discovered a
shortage of P10,004.56. He relayed the matter to the security
guard and to his supervisor, the Regional Accountant, the
following morning. Together with the General Accounting Clerk,
complainant and the Regional Accountant counted and reviewed
the transactions of the previous day but could not account for the
shortage. This matter was reported to the Operations Manager.

3. Due to this incident complainant was grounded and an

investigation ensued. After the investigation, . . . (the employer,
San Miguel Corporation) demanded payment of the shortage from
. . . (Divinagracia). On May 31, 1985 . . . (the latter) was
dismissed. . . . (He later) instituted.
. . . an action on December 23, 1985 for illegal dismissal.

Divinagracia's action resulted in a judgment by the Labor Arbiter dated March

29, 1980. The Arbiter concluded that Divinagracia had indeed been illegally
dismissed and directed his reinstatement with full back wages. The Arbiter
believed Divinagracia's claim that "he formally turned over the funds to the
Regional Accountant (Remus Banogon) before he took a temporary leave of
absence on January 31, 1985;" that when he returned an hour or so later, "
the Accountant had (already) left the office;" and that since "the latter had
duplicate keys to the cashier's (Divinagracia's) booth and knew the
combination of the vault safe," Banogon was as likely a suspect as he
(Divinagracia) himself was, yet Banogon was never investigated, much less
disciplined.

On appeal by San Miguel Corporation, the NLRC sustained the Arbiter's

conclusion that Divinagracia's employment had in truth been unlawfully
terminated. It however modified the Arbiter's judgment by directing that the
reinstatement of Divinagracia thereby decreed be "without backwages for he
is not totally blameless."

Nullification of this decision of the NLRC, rendered on November 25, 1988, is

what is sought in this special civil action initiated in this Court by San Miguel
Corporation (SMC). SMC contends that the following findings in that decision
were arrived at with grave abuse of discretion, to wit:

1) there had been a formal turn-over of funds from Divinagracia to

his immediate superior — Regional Accountant Remus Banogon
— at the time that, with the latter's permission, Divinagracia went
out of his office on a personal errand;

2) Banogon might have taken some of the money left by

Divinagracia in the vault inside his booth, since Banogon had
duplicate keys to that booth and knew the combination of the
vault; and
 3) the testimony of Accounting Clerk Jocelyn B. Longno is
undeserving of credit.

At the administrative investigation conducted by SMC respecting

Divinagracia's shortage, as well as in the proceedings before the Labor
Arbiter, evidence was given by the persons who were with Divinagracia at the
time of the incident: Remus Banogon and Jocelyn Longno.

Banogon pertinently deposed that —

1) although he really did have a key to the Cashier's office and

knew the combination of the vault lock, he never entered the
cashier's booth on January 31, 1985, when the shortage
supposedly happened; moreover, he did not have a key to the
drawer of the Cashier's table where some of the remittances were
supposedly placed; and

2) It is not true that there was a turn-over of the Cashier's funds,

booth or vault to him; such a turn-over not being "done in
absences of short duration like Divinagracia's absence from 5:30
p.m. to 6:45 p.m.

Jocelyn B. Longno testified that —

1) as shown in two (2) sketches of the Accounting Office in which

she was at the time working together with Remus Banogon,
Francisco Divinagracia and others, Divinagracia's Cashier's booth
"is situated in such a way that I would be able to see if someone
should enter it . . . (and) Remus Banogon's table was just next to
my table . . . (such that). I would surely notice if he left his table;"
 2) she did not leave her table inside the Accounting Office from
the time that Divinagracia left at about 5:30 P.M. until she went
home at about 6:45 P.M.; "(n)either Remus Banogon nor anybody
else entered the Cashier's Booth on that period that Francisco
Divinagracia III was out . . . (and in fact) Remus Banogon did not
leave his table until 6:30 P.M. when he was already going home;"
and

3) she herself left the Accounting Office at about 6:45 P.M. and
locked its door; and as she was going out of the gate, she met
Divinagracia coming back.

From the foregoing evidence, the NLRC drew the conclusion that
Divinagracia's "failure to account could not be solely attributable to him since
other persons have similar access to the company funds," and his
complainant's function is lodged, was likewise in the performance of his duty."

What in effect the NLRC is saying is that since both Divinagracia and
Banogon had no access to the former's office and the vault therein, it is not
possible to hold only Divinagracia liable for the shortage in his funds, since
Banogon might himself have surreptitiously gone inside Divinagracia's booth,
opened the vault and made off with some of the money lying there. The
evidence, however, is that while Banogon indeed had access to Divinagracia's
office and its vault, Banogon had not gone into that office at all at any time
during the hour that Divinagracia was away. What the NLRC has done is to
make a selective acceptance of Banogon's testimony, according credit to such
part thereof as was consistent with obscuration of Divinagracia's liability for
the shortage, and conveniently ignoring so much of it as was inconsistent. It
accorded credit to Banogon's statement that he had a key to Divinagracia's
office and knew the combination to the vault, but it rejected his declaration,
forming part of the same testimony, that he had never entered Divinagracia's
booth on the day in question. That rejection cannot in the circumstances be
regarded as otherwise than whimsical, capricious, even irrational. No reason
whatsoever has been given by NLRC for that rejection, or why Banogon is
deemed a credible witness in part and branded as undeserving of belief in
another, specially when Banogon's statements are corroborated in their
entirety by the other evidence on record, Jocelyn B. Longno's testimony and
the unchallenged sketches of Divinagracia's Cashier's Booth in relation to the
adjacent or surrounding working areas.

Neither does the NLRC cite any cause to disbelieve the evidence given by
Longno, basically to the effect that Banogon had never entered the office of
Divinagracia while the latter was out on personal business. This lack of
justification is attempted to be cured by the NLRC's counsel by such
arguments as —

1) . . . (while it) may be true that she had no ill-motive as to falsely

testify against . . . (Divinagracia), (h)owever, she had to protect
her employment with petitioner (SMC); and

2) . . . while Longno was rendering overtime work, her concern

and attention were focused on her work. It was unnatural for her
to have noticed that Banogon never left his desk while she was
concentrating on her work. Longno then biased and cannot be
relied upon on this point.

The first argument is unintelligible. Its import is that while Longno had "no ill-
motive" to testify falsely against Divinagracia, she nevertheless did so "to
protect her employment with petitioner." Why her employment would be
imperilled by her testifying otherwise than she actually did (e.g., that
Divinagracia was faultless, or it was some other employee who had taken the
money, etc.) is not explained. The second argument is cut from the same bolt.
It insists that Longno could not have noticed what Banogon was doing at all
since she was concentrated on her work, despite Longno's positive
declaration that she would surely have noticed if Bagonon had entered the
booth of Divinagracia while the later was out for an hour and fifteen minutes
because her desk was right beside Bagonon's and she was so situated that
Divinagracia's booth was within her view at any given moment. Why stark
speculation or plain guessing should be preferred to affirmative testimony is
also not explained.

In any event, it is clear that the NLRC's conclusions regarding the evidence
have nothing to support them and hence must be struck down, as already
stated, for being whimsical and capricious, arrived at with grave abuse of
discretion.

WHEREFORE, the petition is GRANTED. The Decision of the respondent

National Labor Relations Commission of November 25, 1988 is NULLIFIED
AND SET ASIDE, and the complaint of illegal dismissal is DISMISSED,
without pronouncement as to costs.

G.R. No. L-65706 December 11, 1992

TOP FORM MFG. CO., INC., petitioner, 

vs.
NATIONAL LABOR RELATIONS COMMISSION and JULIANA
MALUBAY, respondents.

MELO, J.:

Before Us is a petition for certiorari under Rule 65 of the Rules of Court

seeking the annulment of the decision of respondent National Labor Relations
Commission (NLRC), in its NCR Case No. AB-1-9943-81 entitled, "Juliana
Malubay vs. Top Form Manufacturing (Phils.), Incorporated" which ordered
wherein petitioner to reinstate private respondent Juliana Malubay to her
former position, without loss of seniority rights and other privileges
appertaining thereto with one (1) year backwages without deduction.

The antecedent facts of this case are as follows:

Private respondent Jualiana Malubay began her employment with the

petitioner Top Form Manufacturing (Phils.), Incorporated in March, 1979, as
Plant Supervisor, with a starting salary of P1,200.00 per month. She was
initially assigned to supervise a factory line of sixty machine operators. One
month thereafter, she was given one more factory line, also with sixty workers,
to supervise. Sometime in August, 1979, she was given a salary adjustment of
P300.00 a month and in February of the following year, another increment in
salary was received by her in the amount of P150.00 per month. Moreover, in
October, 1980 she was promoted to the position of Over-All Quality
Supervisor in the first shift, from 5:45 a.m. to 1:45 p.m. with a corresponding
increase in salary of P350.00 a month. As such Head Supervisor, she had
control and supervision over the entire first shift consisting of 120 machine
operators and some six line-in-charge. She was also responsible not only for
the production and output but also for the quality of products. In addition to her
functions, she was likewise given the task of training newly-hired factory
workers and of supervising the repair group composed of several employees.

On January 10, 1981, a Saturday, at about 2:00 o'clock in the afternoon,

private respondent and her co-supervisors were called to a meeting at the
conference room by Dickson Chan, Production Manager. During the
conference, Dickson Chan reviewed and examined as usual the production
report for the day and he declared the he was not satisfied with the production
output, berating private respondent and the other supervisors, thus:

You Filipinos are lazy people, and your Philippine laws are no
good, even your government is no good. In Hongkong, factory
workers can buy the most expensive foods and clothes in the
world, but, here, you Filipinos are like beggars, it is just because
you are all lazy.

Thereafter, he crumpled the production report and again threw invectives at

private respondent and her co-supervisors, to wit:

You are bullshits, you Filipinos, get out, you are all lazy, you are
like pigs, all of you go home. I do not want to see your face again.

Not satisfied and contended with what he had said. Dickson Chan picked up
the stapler on his desk and, but for some better impulse, would have thrown
the same at private respondent and her companions who, frightened, as they
were, dispersed.

As a result of this unfortunate incident, private respondent told and instructed

her co-supervisors, "Huwag pumasok sa lunes para matauhan si Dickson."
Thus, on the next working day, January 12, 1981, a Monday, they absented
themselves from work. However, on January 13, 1981, she and her
companions reported for work.

On January 16, 1981, petitioner filed an application for clearance to terminate

the services of private respondent on the ground of "Loss of Management
Confidence". Meanwhile, private respondent was placed under preventive
suspension leading to her termination effective January 13, 1981.

Thereafter, on January 19, 1981, private respondent filed a complaint for

illegal dismissal against herein petitioner before the Ministry of Labor and
Employment, National Capital Region, Arbitration Branch in Manila.

On May 29, 1981, Labor Arbiter Conrado O. Lasquite rendered a decision

dismissing private respondent's complaint. However, upon elevation of the
matter to the NLRC, said body, in a decision dated December 29, 1982,
reversed the Arbiter and accordingly disposed:

WHEREFORE. in view of the foregoing considerations, the

Decision appealed from is hereby set aside and another one
entered, directing the respondent company, thru its responsible
officials, to reinstate complainant to her former position, without
loss of seniority rights and other privileges appertaining thereto
with one (1) year backwages without deduction considering that
complainant is not entirely blameless.

SO ORDERED. (p. 8. NLRC's Decision; p. 23, Rollo.)

On March 2, 1983, petitioner filed a motion for reconsideration of the
aforementioned decision of the NLRC but the same was denied on October
12, 1983, for lack of merit.

Hence, the instant petition.

Very simply, the crux of the matter to be resolved in the petition is whether or
not private respondent's services may be terminated for loss of trust and
confidence.

Petitioner argues that respondent Malubay committed willfull breach of trust

and confidence reposed upon her when she agitated and led the boycott
against petitioner. It is further averred that private respondent was not merely
a participant in the drama but the leader of the maverick group of supervisors
who staged the boycott; that Malubay, as a managerial employee, being Head
Supervisor of the entire first shift consisting of 120 machine operators, her
powers and functions are central to the effective operation of the company
which entails the conferment of the highest degree of trust and confidence,
but because of what she did, she had shown her unworthiness to continue in
the employ of the company.

On the other hand, private respondent submits that the contentions of the
petitioner are devoid of merit. Private respondent claims that she cannot be
dismissed for loss of trust and confidence if said prerogative of the employer
is abusively and whimsically exercised. As a matter of fact, according to
private respondent, it was Dickson Chan who was at fault when the latter
vituperated against private respondent and the other supervisors present at
the conference. Private respondent further asserts that Chan maligned not
only the employees but also the entire Filipino people, the laws and the
government of this Republic, so that the company should have understood her
feelings and actions.

The petition is well-taken.

The employer has a distinct prerogative to dismiss an employee if the former

has ample reason to distrust the latter or if there is sufficient evidence to show
that the employee has been guilty of breach of trust. This authority of the
employer to dismiss an employee cannot be denied whenever acts of violation
are noted by the employer. The law does not require proof beyond reasonable
doubt of the employee's misconduct before the employer can invoke such
justification. It is sufficient that there is some basis for the loss of trust or that
the employer has reasonable grounds to believe that the employee is
responsible for the misconduct and that the nature of the employee's action
renders the employee unworthy of the trust and confidence demanded of the
position (Valladolid vs. Inciong. 121 SCRA 205 [1983]; DOLE Philippines, Inc.
vs. NLRC, 123 SCRA 673 [1983]; Ocean Terminal Services, Inc. vs. NLRC,
197 SCRA 491 [1991]; Baguio Country Club Corporation vs. NLRC and
GENOVE, G.R. No. 102397, September 4, 1992).

It is an inherent right of the employer to dismiss an employee for loss of

confidence. We have a plethora of decisions that supports and recognizes this
authority of the employer to cut its relationship with the employee. In the case
at bar, it is an admitted fact that private respondent is an employee occupying
a high managerial position which entails great responsibility. Thus, petitioner
was justified in terminating the employment of the private respondent when
she committed acts inimical to her employer's interest. We shall not belabor
the time-honored tenet that while the law protects the rights of the employee,
it cannot authorize the oppression or self-destruction of the employer. As We
ruled in Almira vs. B.F. Goodrich Philippines, Inc.(58 SCRA 120 [1974]),
through then Chief Justice Enrique Fernando:

. . . The basic doctrine underlying the provisions of the

Constitution so solicitous of labor as well as the applicable
statutory norms is that both the working force and the
management are necessary components of the economy. The
right of labor has been expanded. Concern is evident for its
welfare. The advantages thus conferred, however, call for
attendant responsibilities. The ways of the law are not to be
ignored. Those who seek comfort from the shelter that it affords
should be the last to engage in activities which negate the very
concept of a legal order as antithetical to force and coercion . . . It
is even more important that reason and not violence should be its
milieu. (at pp. 131-132.)

In the present petition. We cannot condone the act of private respondent in

inciting her co-supervisors and leading them in the boycott and wildcat strike.
As aptly observed by the Labor Arbiter:

Even assuming that complainant was berrated by the Production

Manager due to under par production output, her remedy is not to
sabotage or boycott company operations; she should have gone
to higher management levels in order to redress her grievances
against her abusive immediate supervisor. Getting even with the
company for the misdeed of only one person, the Production
Manager, is totally uncalled for. (p. 4, Labor Arbiter's Decision; p.
14, Rollo.)
Further, We have laws to protect her and her co-supervisors from oppressive
foreigners. She should not have taken the laws in her own hands. Private
respondent should have viewed the incident between her and the Production
Manager from a professional point of view. However, due to her precipitate
and irrational action, she hurt the company instead.

The Labor Code, specifically Article 283, acknowledges the right of the
employer to put an end to the covenant with the employee, thus:

Termination by employer. — An employer may terminate an

employee for any of the following just causes:

a. x x x

b. x x x

c. Fraud and willfull breach by the employee of the trust reposed

in him by his employer or his duly authorized agent.

It cannot be gainsaid, in this regard, that the act of private respondent in

initiating and leading the boycott, thereby disrupting and impairing company
operations, is sufficient reason for petitioner to lose its trust and confidence on
private respondent, considering that the latter is a managerial employee of the
company whose position carries the corresponding highest degree of
responsibility in improving and upholding the interests of the employer and in
exemplifying the utmost standard of discipline and good conduct among her
co-employees. Withal, the termination of her employment is justified.

In the light of the foregoing, We are of the opinion, and so hold, that
respondent NLRC acted with grave abuse of discretion in ordering the
reinstatement of Malubay because Top Form Mfg. (Phil.). Inc. had just cause
to dispense with services of private respondent. Nonetheless, considering that
Juliana Malubay had worked with the company, as the record shows, with
zeal, competence and dedication with no known previous bad record, the
ends of social and compassionate justice would be well served if she is paid
full separation pay (National Steel Corporation vs. Leogardo, Jr., 130 SCRA
502 [1984]: Engineering Equipment, Inc. vs. NLRC, 133 SCRA 752 [1984];
Firestone Tire and Rubber Co. of the Phils. vs. Lariosa, 148 SCRA 187
[1987]).

ACCORDINGLY, the petition is GRANTED. The decision of the National

Labor Relations Commission dated December 29, 1982 is REVERSED and
SET ASIDE. Petitioner Top Form Manufacturing (Phils.), Incoporated is
directed to pay private respondent Juliana Malubay separation pay to which
she may be entitled under the law, or any collective bargaining agreement or
company rules or practice, whichever is higher.

SO ORDERED.

[G.R. No. 111639. July 29, 1996]

MIDAS TOUCH FOOD CORPORATION, WILSON CHU & RAMON T.

LUY, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
and IRIS FE ISAAC, respondents.

DECISION
HERMOSISIMA, JR., J.:

This is a petition seeking the reversal of the decision of the National Labor
Relations Commission which declared the dismissal of private respondent Iris
Fe B. Isaac illegal.

Petitioner Midas Touch Foods Corp. (Midas) is a company which owns

and operates the chain of West Villa Restaurants and other mini outlets in
various department stores throughout Metro Manila,[1] while petitioner Wilson
Chu is its Chairman of the Board of Directors and Ramon Luy its President
and Chief Executive Officer.

On September 16, 1986, private respondent Iris Fe B. Isaac was hired by

petitioner Midas as its Operations Manager, next in rank to the President. As
such, her task was to establish an efficient management scheme for the fast-
food chain of West Villa Dimsum and Noodles, and the formulation of
company policies on recruitment and training of personnel, planning and
expansion of business, purchasing of goods and other related activities. She
was given a free hand in all aspects of the operation and was allowed to bring
in Alice Te to act as the Commissary Manager, and part of the management
team, since the company has a centralized commissary.

Respondent Isaac continued her functions as Operations Manager until

she received a letter, dated June 15, 1987, terminating her services as
decided by the Executive Committee for alleged lack of confidence. On July 7,
1987, she was informed by petitioner Luy that the Executive Committee had
decided to recall the termination letter. She was allowed thereby to continue to
act as the Operations Manager.

Sometime in October, 1987, Alice Te was investigated for allegedly

stealing food supplies which were supposedly delivered to another restaurant,
named Food Center, located at the Port Area. This led to the eventual
resignation of Alice Te on November 3, 1987. On the same day, petitioner Luy
claims that respondent Isaac admitted to him in one conversation they had
that she owns the Food Center. In view of this admission, petitioner Luy,
through a letter, dated November 6, 1987, terminated the services of
respondent Isaac on the ground of loss of confidence. A portion of the said
letter reads:[2]

"Among other considerations, you have admitted last Tuesday (November 3,

1987) in my presence, to owning the 'canteen' located near the Port Area and
spending two days operating it.Further, your commissary Manager,
MS. ALICE TE, admitted Wednesday (Nov. 4, 1987) in my presence and in
the presence of other witnesses that she uses company premises and
facilities in purchasing and transporting for your 'canteen' (Records, p. 34)."

On March 9, 1988, respondent Isaac filed a complaint with the Labor

Arbiter for illegal dismissal against petitioners.

On November 23, 1990, the Labor Arbiter rendered judgment, the

dispositive portion of which we quote hereinbelow:[3]

"WHEREFORE, finding the dismissal of complainant Iris Fe B. Isaac to be

valid and justified, this case, impugning the legality of the same, should be, as
it is hereby DISMISSED.However, respondent Midas Touch Foods
Corporation and its chairman of the Board, Wilson Chu and President Ramon
T. Luy, for reason afore-discussed, are hereby ordered to pay said
complainant the total amount of P52,682.10, comprising her one (1) month
separation pay, proportionate 13th month pay, unpaid wages from November
1 to 6, 1987 and her sick and vacation leave."
 Petitioners and respondent Isaac appealed the aforequoted decision to the
NLRC. Petitioners questioned the award of separation pay. Wilson Chu and
Ramon Luy asked that they be relieved of personal liabilities. Respondent
Isaac, on the other hand, argued that the Labor Arbiter committed an error in
relying on the undocumented, self-serving and hearsay evidence which were
gathered only after she was terminated. She further stressed that there was
lack of investigation prior to her termination.Petitioners failed to present their
witnesses during the hearing of the case.[4]

In its decision, rendered on July 20, 1993, the NLRC reversed the Labor
Arbiter and decided:[5]

"WHEREFORE, premises considered, the appealed decision is modified by

declaring the complainant as having been illegally dismissed. Consequently,
respondents are ordered to pay complainant the following amounts: 1)
backwages for three years from November 7, 1987; 2) separation pay in lieu
of reinstatement equivalent to one month pay for every year of service, which
is to be computed as to include the period of three years she was awarded
backwages; 3) proportionate 13th month pay for 1987; and 4) unpaid wages
from November 1 to 6, 1987.All other claims of the complainant are dismissed
for lack of merit."

Petitioners now come before us assailing the decision of the NLRC,

without filing any motion for reconsideration. While a motion for
reconsideration under the Rules of Court is required before a petition for
certiorari is filed, the rules admit of certain exceptions, among which is the
finding that under the circumstances of the case, a motion for reconsideration
would be useless.[6]
 In this case, the NLRC had reversed the decision of the Labor Arbiter and
no new issues were raised in this appeal. We find it quite impossible for the
NLRC to reverse itself under the foregoing facts and so, a motion for
reconsideration will be deemed useless. Hence, by reason of justice and
equity, we resolve to settle the issues on the merits in order to avoid further
delay.

We believe that the contrariety of views between the Labor Arbiter and the
NLRC mandates us to consider the legality of the dismissal of respondent
Isaac as the primary issue to be resolved. In doing so, it is but appropriate that
we lay the legal basis for the conclusions we are to espouse in respect to the
petition at hand.

The requisites of a valid dismissal are (1) the dismissal must be for any of
the causes expressed in Article 282 of the Labor Code, and (2) the employee
must be given an opportunity to be heard and to defend himself. [7] Among the
valid causes specified in Article 282 of the Labor Code is loss of trust and
confidence of an employee, which is the basis of the termination of the
respondent. Nevertheless the substantive and procedural laws must be strictly
complied with before a worker can be dismissed from his
employment[8] because what is at stake is not only the employee's position but
his livelihood.[9]

The acts committed by respondent Isaac, which resulted in her employer's

loss of confidence were enumerated by petitioners as follows:[10]

(a) Respondent Isaac and her partner in crime, Alice Te, used their highly
confidential positions to occasionally convert the company's stockroom as
their personal supermarket to stuff their canteen, for free.
(b) Because of an apparent conflict in interest, Respondent Isaac who had a
full and free control of the company's operations, never expanded the
company's operations to the Ermita portion of Manila, as she even admitted
spending two days operating her canteen.

(c) Company properties were used by the partnership of respondent Isaac and

Alice Te, not for the company's use, but for their own Food Center:

(1) The company's service jeep, reported to have made deliveries to their

Food Center, was used for more than the time ordinarily consumed for official
company use, with the permission of Alice Te and concurrence of respondent
Isaac.

(2) Respondent Isaac, as the Operations Manager of petitioner company,

signed a contract for lighted signboard whose size and color specification
(brown) correspond with that of her Food Center, which is irreconciliably
different from respondent company's color specification of white and green, at
the expense of the company, who never benefited therefrom.

These accusations were not established by evidence in a fair and impartial

hearing.

Indeed, an employee cannot be separated from his employment without

according to him his constitutional right of due process, consisting of proper
notice and hearing, whether he be a rank and file or a managerial
employee. Due process is wanting in the case at bench. Respondent Isaac
was not given notice of her impending dismissal, not even the chance to
explain her side. The essence of due process is that a party be afforded a
reasonable opportunity to be heard and to submit any evidence he may have
in support of his defense.[11] The notice required actually consist of two parts to
be separately served on the employee, to wit; 1) notice to apprise the
employee of the particular acts or omission for which his dismissal is sought;
and 2) subsequent notice to inform him of the employer's decision to dismiss
him.[12] The letter given by petitioner Luy, dated November 6, 1987,
terminating respondent Isaac's services was made effective
immediately. Even if no hearing is conducted, the requirement of due process
would have been met where a chance to explain a party's side of the
controversy had been accorded him.[13] Failure to observe this procedure is
fatal for this could raise doubt to the petitioner's claim that the termination was
for just cause. The want of due process may be clearly construed based on
the termination letter given to respondent Isaac, to quote:

"Acting in my capacity as President, I am hereby terminating your services as

Operations Manager effective immediately on the ground of loss of
confidence."[14] (Italics Supplied)

Considering the foregoing facts, we hold that respondent Isaac was

denied procedural due process.

The right of security of tenure cannot be eroded, let alone forfeited except
upon a clear and convincing showing of a just and lawful cause.[15] No less
than the Constitution itself has guaranteed the State's protection to labor and
its assurance to workers of security of tenure in their employment. [16] The
application of this rule encompasses both the rank and file as well as the
managerial employees. It is in this light that we are inclined to examine the
validity of respondent Isaac's dismissal from employment, loss of confidence
being the rationale therefor.

While Art. 282 of the Labor Code enumerates loss of confidence as one of
the just causes for termination of an employee, it must nonetheless rest on an
actual breach of duty committed by the employee and not on the employer's
caprices.[17] The guidelines for the doctrine of loss of confidence to apply are:
[18]

"(1) loss of confidence should not be simulated;

(2) it should not be used as a subterfuge for causes which are

improper, illegal, or unjustified;

(3) it may not be arbitrarily asserted in the face of overwhelming

evidence to the contrary; and

(4) it must be genuine, not a mere afterthought to justify earlier action

taken in bad faith."

While proof beyond reasonable doubt is not required, still substantial

evidence is vital and the burden rests on the employer to establish it.

In reversing the decision of the Labor Arbiter, the NLRC ruled, thus:[19]

"In the instant case, respondent Ramon T. Luy allegedly personally

confronted the complainant about the ownership of a canteen and her use of
company personnel and facilities in operating the same. According to
respondent Luy, complainant admitted to him about her ownership of the
canteen and the use of certain employees, among them Alice Te, in the
purchasing of supplies for the said canteen.

But complainant denies this and explained that the truth of the matter is that
the canteen is owned by her cousin and her sister and that respondent Luy
knew that she was helping her sister operate. Had there been an investigation
made, the truth could have come out.
Assuming that complainant indeed owned the canteen, it has not been shown
however, that because of this, she neglected her work as Operations
Manager of the respondent corporation, the same has not been
established. As to the fact that complainant was engaged in a business in
competition with that of the respondents. We also noted that respondents'
restaurants were located in Makati, Quezon City and in San Juan, Metro
Manila. The canteen being referred to as owned by the complainant is located
in Port Area, Manila. We can not see our way clear how the canteen can
compete with the business of the respondents, considering their different
locations. For this reason, we believe that there was no sufficient basis for the
respondents to lose their trust and confidence on the complainant. As to the
use of the corporation's personnel in delivering supplies to the canteen, this
has not been sufficiently established either."

We agree with the NLRC.

The written statements of witnesses Tierry G. Jaymalin[20] and Marcial

Manacop[21] in support of all the allegations of the petitioners against
respondents Isaac were unverified. These witnesses were not presented
before the Labor Arbiter to testify in order to give respondent a chance to
cross-examine them. Those exhibits therefore, were hearsay and of no
probative value. At any rate, allegations in the affidavit[22] executed by
petitioner Luy were unsubstantiated. Neither was petitioner Luy presented
before the Labor Arbiter to testify on the truth of the allegations written
therein. Furthermore, those so called statements and affidavit were executed
only after the termination of respondent in an obvious attempt to circumvent
the law, depriving her of the opportunity to defend herself and present
evidence in her defense. It has to be emphasized that this Court has held in
innumerable cases, the case of People's Bank and Trust
Company v. Leonidas[23] in particular, that, where the adverse party is
deprived of the opportunity to cross-examine the affiants, affidavits are
generally rejected for being hearsay, unless the affiant themselves are placed
on the witness stand to testify thereon.

With respect to the alleged involvement of respondent Isaac in the

purported pilferage of goods in the company, the same has not likewise been
established by petitioners. If, indeed, this be true, it is but proper for the
petitioners to conduct a thorough investigation in order to determine the
persons actually liable therefor, instead of wantonly dismissing employees out
of mere suspicion.

Anent the personal liabilities of petitioners Ramon Luy and Wilson Chu, it
is their contention that they cannot be held jointly or solidarily liable for the
simple reason that they are not respondent's employers.

Indeed, no less than the public respondent, NLRC, in its

Comment[24] admitted that petitioners are correct by stating that:

"The present petition disputes the fact that petitioners Chu and Luy were held
jointly and severally liable with petitioner corporation in the payment of the
monetary awards to private respondent on the ground that said individual
petitioners, being only the president (Luy) and chairman of the board of
directors (Chu) of petitioner corporation, are not the employers of the private
respondent.

It is submitted that petitioners' contention is correct. The individual petitioners

cannot be held to be personally liable since they are not the employers of
private respondent."
 As we have held in the case of Tramat Mercantile, Inc. vs. Court of
Appeals,[25] personal liability of a corporate director, trustee or officer along
(although not necessarily) with the corporation may so validly attach, as a
rule, only when 1. He assents (a) to a patently unlawful act of the corporation,
or (b) for bad faith or gross negligence in directing its affairs, or (c) for conflict
of interest, resulting in damages to the corporation, its stockholders or other
persons; x x x.

Moreover, Section 31 of the Corporation Code provides that:

"SEC. 31. Liability of directors, trustees or officers. Directors or trustees who

willfully and knowingly vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in
conflict with their duty as such directors, or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons." (Italics supplied)

A corporate officer is not personally liable for the money claims of

discharged corporate employees unless he acted with evident malice and bad
faith in terminating their employment.[26] No bad faith can be attributed to both
petitioners Luy and Chu. Neither were they employers of respondent
Isaac. Hence, they should not be made liable for the payment of damages to
respondent.

WHEREFORE, the Decision of the National Labor Relations Commission

is AFFIRMED, BUT WITH THE MODIFICATION that only petitioner
corporation should be made solely liable for all the monetary awards
considering that petitioners Luy and Chu were not the employers but merely
the President and Chairman of the Board respectively.
 Costs against petitioner corporation.

SO ORDERED.

G.R. No. 97196 January 22, 1993

CHINA CITY RESTAURANT CORPORATION, petitioner, 

vs.
NATIONAL LABOR RELATIONS COMMISSION, MONICO DIETO and
JUNILITO CABLAY, respondents.

Federico C. Leynes for petitioner.

Corazon Agustin-Ongbueco for private respondent.

CAMPOS, JR., J.:

Petitioner seeks to annul the Resolutions ** of the National Labor Relations

Commission (NLRC) dated November 29, 1990 in NLRC NCR AC No. 00057
(NLRC NCR CASE No. 00-06-02857-69) entitled "Monico T. Dieto and Junilito
Cablay vs. China City Restaurant" which affirmed the decision rendered by
Labor Arbiter Eduardo Magno declaring the dismissal of private respondents
illegal, but with the modification that instead of reinstatement private
respondents be granted separation pay with full backwages.

The antecedent facts are as follows:

Petitioner China City Restaurant (petitioner, for brevity) employed private

respondents Monico Dieto and Julinito Cablay (private respondents, for
brevity) as chief steamer and roasting helper, respectively.
Sometime in 1988, the China City Employees Union, with Monico Dieto as
President, was organized and thereafter demanded recognition from
petitioner.

On October 17, 1988, Abe Fuentes, a steamer helper at petitioner's

restaurant, was detained at the Makati Municipal Jail for allegedly stealing
dried scallops worth two thousand pesos (P2,000.00) belonging to the
petitioner. On January 20, 1989, after posting bail paid by the petitioner, Abe
Fuentes gave a statement at the Intelligence and Special Operations Group,
SPD, implicating the private respondents.

Abe Fuentes alleged that as early as April 1988, he, in conspiracy with private
respondents, had been bringing out from the restaurant dried scallops
wrapped in plastic, by mixing them with leftovers thrown into the thrash can.
They were sold at Ongpin, Binondo, Manila. They would then divide the
proceeds among themselves, with the private respondents getting the lion's
share. A criminal charge for qualified theft was thereafter filed against the
private respondents.

On March 27, 1989, an amended information was filed to include private

respondents as co-accused in the qualified theft case filed against Abe
Fuentes. Later, Abe Fuentes turned state witness.

On March 22, 1989, petitioner, through a memorandum, terminated the

services of the private respondents on the ground of loss of trust and
confidence.

Thereafter a complaint for illegal dismissal was filed by the private

respondents against the petitioner with the Department of Labor and
Employment.
Private respondents professed ignorance of the crime exposed by Abe
Fuentes. They claimed that when they visited Abe Fuentes at his detention
cell, the latter allegedly told them that Jose Polotan, the restaurant
administrator, was forcing him to name the private respondents as his co-
conspirators but that he allegedly refused. Later, however, private
respondents were surprised to learn that Abe Fuentes was released on bail at
the instance of the petitioner. They vigorously claimed that they were
implicated in the theft incident because of their being union members.

On January 17, 1990, after investigation and submission by the parties of their
respective evidence and position papers, the Labor Arbiter promulgated his
decision, the dispositive portion of which is quoted hereunder as follows:

Wherefore, judgment is hereby rendered declaring the dismissal

of the complainants as illegal. Respondent is hereby ordered to
immediately reinstate complainants to their former positions
without loss of seniority rights with full backwages from May 20,
1989 until reinstatement plus attorney's fees equivalent to 10% of
the amount recoverable by the complainants.

The claim for moral and exemplary damages are (sic) hereby
dismissed for lack of factual and legal basis.

SO ORDERED.1

Dissatisfied with the decision, petitioner appealed to the NLRC.

In its Resolution dated November 29, 1990, the NLRC affirmed the decision of
the Labor Arbiter with the modification of granting private respondents the
alternative relief of separation pay plus backwages instead of reinstatement.
Petitioner filed a motion for reconsideration of the NLRC resolution on January
4, 1991, but the same was denied on January 22, 1991.2

Hence, this petition.

The grounds relied upon by the petitioner for the issuance of the writ are the
following:

THE RESPONDENT COMMISSION ACTED WITH GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN HOLDING THAT THE PETITIONER FAILED
TO OBSERVE DUE PROCESS IN DISMISSING THE PRIVATE
RESPONDENTS WHEN, IN TRUTH AND IN FACT, AND AS
ENUNCIATED IN BLTBCo vs. NLRC, 166 SCRA 721, THEY
WERE FULLY ACCORDED THEIR RIGHT TO DUE PROCESS
OF LAW BECAUSE THEIR DISMISSAL WAS EFFECTED ON
THE BASIS OF THE PRELIMINARY INVESTIGATION FINDINGS
OF THE CITY FISCAL WHICH FOUND THEM TO BE
CO-CONSPIRATORS IN THE CRIME QUALIFIED THEFT.

THE RESPONDENT COMMISSION ACTED WITH GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DECLARING THE DISMISSAL OF PRIVATE
RESPONDENTS ILLEGAL ON THE PREMISE THAT THEY
WERE NOT ACCORDED DUE PROCESS AND IN
CONSEQUENTLY AWARDING THE UNDULY HARSH RELIEF
 OF SEPARATION PAY WITH BACKWAGES IN COMPLETE
DISREGARD OF THE CASE OF WENPHIL CORPORATION vs.
NLRC, 170 SCRA 69, WHICH MERELY GRANTED A P1,000.00
SANCTION TO AN EMPLOYEE DISMISSED WITHOUT DUE
PROCESS.3

Meanwhile, on March 25, 1991, private respondents were acquitted by the

Regional Trial Court of the charge of qualified theft on the ground of
reasonable doubt.4

The issue in this petition is whether or not public respondent committed grave
abuse of discretion in holding the dismissal of private respondents illegal for
lack of due process of the law, and in ordering petitioner to pay them
separation pay plus backwages.

It is the petitioner's contention that the preliminary investigation conducted by

the City Fiscal on the qualified theft charge against private respondents were
sufficient compliance with the due process requirement of the law.
Invoking Batangas Laguna Tayabas Bus Co. (BLTBCo.) vs. NLRC,5 it
contends that an employee can be dismissed on the basis of the findings of
the City Fiscal during the preliminary investigation of the criminal complaint.
Petitioner claims that in such case due process does not require the employer
to conduct a separate investigation as this would only be a duplication of the
City Fiscal's investigation upon which the employer has a right to rely on.6

The NLRC maintains otherwise, stating that they were not afforded the formal
investigation required and that the fiscal's investigation could not legally take
its place.7
Due process of law simply means giving opportunity to be heard before
judgment is rendered. "Due process of law is a law which hears before it
condemns, which proceeds upon inquiry and renders judgment only after
trial".8 In fact, this Court has held that there is no violation of due process even
if no hearing was conducted, where the party was given a chance to explain
his side of the controversy. What is frowned upon is the denial of the
opportunity to be heard.9 As a general rule, the preliminary investigation
conducted by the City Fiscal is sufficient compliance with procedural due
process because the accused is given ample opportunity to be heard.

As stated in the BLTBCo case:10

. . . the criminal charges initiated by the company against private

respondents and the finding after preliminary investigation
of prima facie guilt of the offense charged constitute substantial
evidence sufficient to warrant a finding by the Labor Tribunal of
the existence of a just cause for their termination based on loss of
trust and confidence. . . .

. . . For the company to conduct its own investigation would only

be a duplication of the JAGO's and later, the city fiscal's
investigation, . . . said officials being the persons charged with this
special function.

However, the petitioner cannot seek refuge in the BLTBCo case to support its
petition. As correctly observed by the Solicitor General, in that case there was
a mass fraud covering a period of ten months involving thirty-six (36)
employees and volumes of documentary evidence. The City Fiscal's finding of
a prima facie case of estafa against the employees was based on the
affidavits of witnesses and on the voluminous documentary evidence. There
was, therefore, basis for the company to dismiss the employees for loss of
confidence without necessarily conducting a formal investigation separate
from the preliminary investigation. 11

In the present case, however, the fiscal's finding of prima facie case of

qualified theft against private respondents was based solely on the affidavit
executed by the original accused-turned state witness, Abe Fuentes, to the
effect that he conspired with the private respondents in the theft of dried
scallops. The only connection of the private respondents to the charge is the
implication made by Abe Fuentes. It is therefore necessary to scrutinize this
implication. The Regional Trial Court which acquitted the private respondents
of the crime of qualified theft doubted the veracity of Abe Fuentes' testimony
against them because: (a) the implication was made more than three (3)
months after Abe Fuentes' arrest and after a series of talks with petitioner's
representatives; (b) the bond for his (Abe Fuentes') temporary release was put
up by petitioner upon his assurance that he would cooperate with petitioner;
(c) the implicatory testimony of Abe Fuentes was not substantiated by some
other evidence, thus rendering it of no provative value; (d) the private
respondents are officers of the union with whom petitioner is at odds. 12

Aside from Abe Fuentes' affidavit and the criminal complaint/information, there
is no other evidence shown by petitioner positively linking private respondents
to the alleged theft committed.

Due process in administrative proceedings requires that "evidence must be

substantial, and substantial evidence means evidence that a reasonable mind
might accept as adequate to support a conclusion".13
The information for qualified theft, based solely on the affidavit of Abe
Fuentes, implicating the private respondents is not the substantial evidence
which a reasonable mind would as sufficient to conclude that private
respondents are not trustworthy, and thus can be legally dismissed for loss of
trust. Moreover, the circumstances found by the trial court as leading to Abe
Fuentes' implication of the private respondents tend to show that the basis for
the latter's dismissal was not petitioner's loss of trust and confidence but
rather its retaliation against them for their union activities.

Furthermore, even the Labor Arbiter found that "A close scrutiny of the facts
and evidences attached to the record will reveal that the implication of the
complainants by Abe Fuentes in the commission of the crime of qualified theft
is not enough basis for the respondent to terminate them. . . . Since they failed
to establish sufficient basis for concluding that the complainants were really in
connivance with Abe Fuentes in the commission of the qualified theft, the
dismissal becomes illegal".14

The findings of the lower court in the theft case and the decision of the Labor
Arbiter that no sufficient basis exists to justify a dismissal on the ground of
loss of confidence deserves Our consideration. The factual findings of the
lower court and the Labor Arbiter with respect to this point are conclusive
upon this Court.

Although the BLTBCo. case held that the preliminary investigation is sufficient
compliance with due process without needing separate formal investigation to
be conducted by the company for dismissal of erring employees, We do not
find the ruling in said case as all embracing because as held in San Miguel
Corporation vs. NLRC, 15 the requirements for due process are two-fold: and
We quote:
 Under the Labor Code, as amended, the requirements for the
lawful dismissal of an employee by his employer are two-fold: the
substantive and the procedural. Not only must the dismissal be for
a valid or authorized cause as provided by law [Arts. 279, 281,
282-284], but the rudimentary requirements of due process —
notice and hearing — must also be observed before an employee
may be dismissed [Art. 277(b)]. One cannot go without the other,
for otherwise the termination would, in the eyes of the law, be
illegal.

In this case, there is no sufficient basis to support the belief that a just and
lawful cause exists. The just and lawful cause constitutes the substantive
aspect of due process. Lack of just causes render the dismissal illegal.

In a long line of cases, this Court stressed that the right of an employer to
dismiss employees on the ground that it has lost its trust and confidence in
them must not be exercised arbitrarily and without just cause; that although
the dropping of a criminal prosecution for an employee's alleged misconduct
does not bar his dismissal and proof beyond reasonable doubt is not
necessary to justify the same, still the basis thereof must be clearly and
convincingly established.16 Although the power to dismiss is a normal
prerogative of the employer, the same is not without limitations. The right of
the employer must not be exercised arbitrarily and without just cause.
Otherwise, the constitutional mandate of security of tenure of the workers
would be rendered nugatory.17

In General Bank and Trust Co. vs. Court of Appeals, 18 this Court set forth the
guidelines for the doctrine of loss of confidence to apply, to wit:
 . . . However, loss of confidence should not be simulated. It
should not be used as a subterfuge for causes which are
improper, illegal, or unjustified. Loss of confidence may not be
arbitrarily asserted in the face of overwhelming evidence to the
contrary. It must be genuine, not a mere afterthought to justify
earlier action taken in bad faith.

In this case, the only basis for charging the private respondents with qualified
theft is the affidavit of Abe Fuentes implicating them. There is no evidence on
record to support or show any connection of the private respondents to the
charge of qualified theft. As found by the trial court, Abe Fuentes implicated
the private respondents only after a series of conferences with petitioner's
representatives, and after petitioner facilitated his release from jail through the
former's answering for his bail bond.

For loss of trust and confidence to be a valid ground for the dismissal of
employees, it must be substantial and not arbitrary, whimsical, capricious or
concocted.

Irregularities or malpractice should not be allowed to escape the scrunity of

this Court. Solicitude for the protection of the rights of the working class are of
prime importance. Although this is not license to disregard the rights of
management, still the Court must be wary of the ploys of management to get
rid of employees it considers as undesirable.

Petitioner goes on to contend that even if private respondents were dismissed

without due process the award of separation pay with backwages is unduly
harsh. It cites the case of Wenphil, 19 where an indemnity of only P1,000.00
was awarded to the private respondent as compensation for the failure of
petitioner to give formal notice and to conduct investigation. We find the
Wenphil case not applicable to the case at bar because in the former case
(Wenphil case) the company was able to conclusively show that the dismissed
employee was guilty of grave misconduct and insubordination which We do
not find in this case.

Employees who are illegally dismissed from work shall be entitled to

reinstatement without loss of seniority rights and other privileges and to their
full backwages.20

However, when reinstatement to their former positions is not possible under

the circumstances, an award equivalent to three years backwages plus
separation pay to compensate for their illegal separation is thus proper. 21

The circumstances prevailing in this case do not warrant the reinstatement of

the illegally dismissed private respondents. Antagonism and imputations of
bad faith caused a severe strain in the relationship between petitioner and
private respondents, that a more equitable disposition would be an award of
separation pay, in lieu of reinstatement, plus backwages for not more than
three years without qualification and deduction.

IN VIEW OF THE FOREGOING, the petition is DISMISSED. The Resolution

of the National Labor Relations Commission dated November 29, 1990 is
hereby AFFIRMED in toto with the modification that the amount of backwages
be reckoned from the actual date of dismissal up to the date of this decision
which in no case should exceed three (3) years. With costs.

SO ORDERED.

Narvasa, C.J., Feliciano, Regalado and Nocon, JJ., concur.