Facts:

The case involves Baguio Central University (BCU) as the petitioner and Ignacio Gallente as the respondent. Gallente was hired by BCU in October 1991 as an instructor and later promoted to Dean of the Colleges of Arts and Sciences and Public Administration. On February 5, 2005, Gallente, under the name "Genesis Gallente," co-founded the GRC Review and Language Center, Inc. (GRC), which aimed to conduct review classes for various professional examinations. The Articles of Incorporation of GRC listed BCU as its primary address. BCU's President, Dr. Margarita Fernandez, raised concerns regarding Gallente's establishment of GRC, particularly regarding the use of BCU's resources and address. Following grievance meetings, Gallente submitted his resignation on September 30, 2005. Subsequently, on December 8, 2005, he filed a complaint for illegal (constructive) dismissal, claiming non-payment of benefits and attorney's fees.

The Labor Arbiter (LA) ruled ...

Facts:

Employment and Promotion

• Ignacio Gallente was hired by Baguio Central University (BCU) as an instructor in October 1991. He was later promoted to Dean of the Colleges of Arts and Sciences and Public Administration.

Incorporation of GRC Review and Language Center, Inc.

• On February 5, 2005, Gallente, using the name "Genesis Gallente," along with six other incorporators, organized the GRC Review and Language Center, Inc. (GRC). The GRC's Articles of Incorporation listed its primary purpose as conducting review classes for various professional and technical board licensure examinations, including the Civil Service Professional Examination. The secondary purpose was to conduct tutorial and proficiency training for foreign languages. The BCU was listed as the GRC's primary address.

BCU's Reaction and Grievance Meetings

• BCU's President, Dr. Margarita Fernandez, called Gallente's attention regarding the establishment of the GRC and his use of BCU's resources. Grievance meetings were held, and on September 30, 2005, Gallente tendered his resignation.

Complaint for Illegal Dismissal

• On December 8, 2005, Gallente filed a complaint for illegal (constructive) dismissal, non-payment of vacation and sick leave pay for 2005, tax refund for the same year, and attorney's fees.

Labor Arbiter's Decision

• On June 30, 2006, the Labor Arbiter (LA) ruled that Gallente was illegally dismissed. The LA found that Gallente's resignation was not voluntary and that the BCU had constructively dismissed him. The LA also held that the BCU's loss-of-trust-and-confidence charge was insufficient to justify dismissal.

NLRC's Ruling

• On November 28, 2007, the National Labor Relations Commission (NLRC) partially granted BCU's appeal, finding justifiable grounds for the loss of trust and confidence. The NLRC ruled that Gallente's actions constituted a conflict of interest and disloyalty, rendering his dismissal valid.

Court of Appeals' Decision

• On March 12, 2009, the Court of Appeals (CA) reversed the NLRC's ruling and reinstated the LA's decision. The CA found that the BCU failed to prove willful breach of trust and confidence, and thus, Gallente's dismissal was invalid.

Issue:

• (Unlock)

Ruling:

• (Unlock)

Ratio:

1. Loss of Trust and Confidence as a Valid Ground for Dismissal:

   • Loss of trust and confidence is a valid ground for dismissal under Article 282(c) of the Labor Code. For this ground to apply, the employee must hold a position of trust and confidence, and the employer must establish a willful breach of that trust.
   • Gallente, as Dean, held a position of trust and confidence. His actions in organizing the GRC, which offered services that directly competed with BCU, constituted a willful breach of trust.

2. Substantive Aspect of Dismissal:

   • The Court found that Gallente's actions, including organizing the GRC and using BCU's resources without permission, were sufficient to justify his dismissal. The absence of actual damage to BCU was irrelevant; the breach of trust itself was enough to warrant dismissal.

3. Procedural Aspect of Dismissal:

   • The Court agreed with the lower tribunals that BCU failed to observe due process in terminating Gallente's employment. However, the Court awarded nominal damages instead of reinstating Gallente, as the substantive grounds for dismissal were valid.

4. Conflict of Interest:

   • Gallente's involvement in the GRC created a conflict of interest with his duties as Dean. His actions were inconsistent with the fidelity and loyalty expected of a managerial employee.

5. Good Faith and Intentions:

   • The Court rejected Gallente's claim of good faith, finding that his actions were deliberate and intended to benefit the GRC at the expense of BCU's interests.

6. Nominal Damages:

   • The Court awarded nominal damages to Gallente for BCU's failure to observe due process, in accordance with the ruling in Agabon v. NLRC.

Conclusion:

The Supreme Court held that Gallente's dismissal was valid due to loss of trust and confidence, but BCU's failure to observe due process warranted the award of nominal damages. The CA's decision was reversed, and the NLRC's ruling was reinstated.