Title
Better Buildings, Inc. vs. National Labor Relations Commission
Case
G.R. No. 109714
Decision Date
Dec 15, 1997
Employees terminated for competing business; dismissal valid but procedurally flawed, awarding nominal damages for due process violation.
unlawful termination
lack of due process
petition

Case Summary (G.R. No. 109714)

Factual Background: The Termination and Its Manner

BBI hired Ysmael on March 16, 1985 as Sales Manager. Besides a monthly salary, Ysmael received free use of a company car, free gasoline, and commissions from sales. BBI employed Feliciano as Chief Supervisor since January 1966. On May 3, 1988, BBI, through its Assistant General Manager Leda A. Beverford, issued a memorandum to a guard on duty instructing that Ysmael and Feliciano had been terminated from employment as of the end of office hours that day and were not allowed to enter the premises. The memorandum was the immediate instrument by which BBI implemented the dismissals.

On May 6, 1988, the private respondents filed a complaint against BBI for illegal dismissal.

NLRC Proceedings and Decisions

A Labor Arbiter rendered a decision on March 3, 1989 declaring the dismissals illegal. The dispositive portion ordered reinstatement of the complainants to their former positions with full backwages and without loss of seniority rights and other benefits, and ordered salary differentials from November 1, 1986 up to actual reinstatement. The Labor Arbiter also awarded moral and exemplary damages to Ysmael and attorney’s fees.

BBI appealed. The NLRC affirmed the Labor Arbiter’s decision in all respects except for reducing the moral and exemplary damages. The NLRC’s resolution thus maintained the core remedy of reinstatement with backwages and related benefits for Feliciano, subject only to reductions in damages.

Petition in the Supreme Court and Scope After Compromise

BBI filed a petition for certiorari alleging that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it rendered its decision on March 3, 1989 and its resolution on December 18, 1992.

During the pendency of the petition, the Supreme Court resolved on September 4, 1996 to dismiss the case as to Ysmael due to a compromise agreement entered into between him and BBI. Consequently, the Supreme Court’s resolution addressed only the claim of Feliciano.

Petitioner’s Position: Just Cause Based on Loss of Trust and Competition

BBI argued that Feliciano was validly dismissed because he engaged in business in direct competition with BBI’s line of service. BBI contended that such competitive activity amounted to disloyalty and, more specifically, a willful breach of trust and confidence, thus constituting just cause under Art. 282 of the Labor Code.

The Court’s Assessment of Substantive Just Cause

The Supreme Court reiterated that for a valid dismissal, two requisites must concur: first, the dismissal must be for a cause expressed in Art. 282 of the Labor Code; and second, the employee must be accorded due process, consisting of the opportunity to be heard and to defend himself. The employer bears the burden of proving both.

On the substantive aspect, the Court held that BBI established Feliciano’s culpability by convincing evidence. The Court found that it was undisputed that Feliciano established another corporation, Reachout General Services, engaged in maintenance/janitorial services, a line of business similar to BBI’s. The Court further found that as Chief Supervisor, Feliciano’s duty included promoting and offering BBI’s services to prospective clients. Instead, the Court held that Feliciano offered Reachout General Services’ services to various clients to BBI’s detriment. The Court noted that Feliciano induced prominent clients—the United States Embassy and San Miguel Corporation—to transfer their service contracts to Reachout General Services.

The Court also found Feliciano’s disloyalty more conspicuous because he hired for Reachout General Services former employees of BBI, thereby undermining BBI’s business. The Court additionally considered that Feliciano, in his pleadings, did not meaningfully discuss or refute the charge against him. The Court treated Feliciano’s lack of refutation as strengthening BBI’s claims and noted that the records contained no evidence controverting the proof presented by BBI regarding disloyalty. Thus, while the Court ultimately overturned the manner of dismissal as procedurally defective, it held that Feliciano’s dismissal was for a just and valid cause.

Procedural Due Process: Absence of Notice and Hearing

The Court nonetheless ruled that the dismissal failed the procedural requirement of due process. It emphasized that termination required the twin requisites of notice and hearing. Written notice should apprise the employee of the specific acts or omissions for which dismissal is sought and should inform him of the employer’s decision to dismiss. In the case, the Court held that the record showed no evidence that Feliciano was given notice of the charge against him. The Court further held that Feliciano was not afforded any opportunity to answer the charge because his termination was immediate, swift, and sudden.

When the issue was raised, BBI’s reply asserted that even if notice to explain and notice of termination had been given, BBI was already convinced that Feliciano had engaged in disloyal acts and the result would have been the same. The Court viewed this as evidence that BBI’s decision had already been made, and that dismissal proceeded without the procedural safeguards due process requires.

Because the lack of notice and hearing tainted the dismissal with illegality, the Court ruled that although BBI could dismiss Feliciano for just cause due to loss of trust and confidence, it could not do so without observing due process.

Legal Consequence of Illegal Procedure: Damages for Denial of Due Process

Although the Court held that loss of trust and confidence was established and that proof beyond reasonable doubt was not required (substantial evidence sufficed), it treated the procedural defect as a violation of a constitutionally protected property right. It invoked Article 32 of the Civil Code, which makes liable any private individual who impedes or impairs the right against deprivation of property without due process of law.

The Court characterized the award as nominal damages rather than backwages or reinstatement, explaining that the award served to vindicate the right to procedural due process that BBI violated. It rejected reinstatement and backwages in favor of a monetary remedy tied to the procedural lapse, and it computed the sanction as nominal damages in the amount of P5,000.00 for failure to observe procedural due process.

Disposition of the Majority

The Supreme Court set aside and annulled the NLRC decision and resolution insofar as they had ordered reinstatement and backwages, because the dismissal, though based on a just and valid cause, was effectuated without due process. The Court ordered BBI to pay Feliciano P5,000.00 as nominal damages for the procedural violation, and it ruled that there were no costs.

Concurring and Dissenting Opinion of Justice Panganiban

Justice Panganiban concurred in the finding that there was valid just cause to dismiss Feliciano for willful breach of trust under Art. 282 (c) and in the conclusion that BBI violated Feliciano’s constitutional right to due process. He dissented only from the majority’s remedy, which limited the consequence of due process violation to a nominal sum.

Justice Panganiban explained that the Court, in earlier jurisprudence beginning with Wenphil Corporation vs. NLRC, had generally awarded indemnity (or damages) ranging from P1,000 to as much as P10,000 when just cause existed but procedural due process was absent. He argued that the indemnity-only approach had been applied too mechanically in later cases without regard to factual milieu. He stressed that in Wenphil, immediate action was allegedly necessary due to circumstances that made observance of procedure impractical. He contrasted this with Feliciano’s case, where BBI could have provided notice and hearing but allegedly disregarded the right in a manner he described as blatant. Justice Panganiban emphasized that Feliciano had been in BBI’s service for more than twenty years and had received only a memorandum to a guard on duty, without a basic notice of discharge and without any opportunity to present a defense.

He urged modification of the doctrine that due process violation automatically limits the relief to indemnity or nominal damages. He proposed a rule under which the dismissal would remain illegal despite just cause, and the employer should pay not only indemnity or nominal damages but also separation pay, while denying reinstatement and backwages because Feliciano’s proven misconduct and loss of trust would make retention unconscionable and would forfeit entitlement to wages during the period after separation. Justice Panganiban relied on considerations he articulated as reinforcing the constitutional character of due process and argued that separation pay could operate as an additional sanction for the employer’s deprivation of a sacred right

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