Title
China City Restaurant Corp. vs. National Labor Relations Commission
Case
G.R. No. 97196
Decision Date
Jan 22, 1993
Employees terminated for alleged theft, linked to union activities, were illegally dismissed due to lack of evidence; awarded separation pay and limited backwages.
china city restaurant corp
national labor relations commission
dismissal

Case Summary (G.R. No. 97196)

Factual Background

Sometime in 1988, the China City Employees Union, with Monico Dieto as its president, was organized and then demanded recognition from petitioner. On October 17, 1988, petitioner’s steamer helper, Abe Fuentes, was detained at the Makati Municipal Jail for allegedly stealing dried scallops worth P2,000.00 belonging to petitioner.

After posting bail at petitioner’s instance, Fuentes gave a statement on January 20, 1989 before the Intelligence and Special Operations Group, SPD, implicating the private respondents. Fuentes alleged that as early as April 1988, he conspired with private respondents to take dried scallops from the restaurant by wrapping them in plastic after mixing them with leftovers thrown into the trash can, selling them at Ongpin, Binondo, Manila, and then dividing the proceeds, with the private respondents receiving the larger share.

A criminal charge for qualified theft followed against the private respondents. On March 27, 1989, an amended information was filed to include the private respondents as co-accused in the theft case initially filed against Fuentes. Later, Fuentes turned state witness. On May 22, 1989, petitioner terminated the services of the private respondents through a memorandum on the ground of loss of trust and confidence.

The private respondents then filed a complaint for illegal dismissal with the Department of Labor and Employment. They stated they were ignorant of the theft exposed by Fuentes. They claimed that when they visited Fuentes while he was detained, Fuentes allegedly told them that Jose Polotan, the restaurant administrator, was pressuring him to name them as co-conspirators, and that they allegedly refused to be implicated. They later asserted that Fuentes was released on bail at petitioner’s instance and insisted that their implication was linked to their status as union members.

Labor Arbiter’s Decision and NLRC Proceedings

After investigation and the submission of evidence and position papers, the Labor Arbiter promulgated his decision on January 17, 1990. He declared the dismissal of private respondents illegal, ordered their immediate reinstatement without loss of seniority rights with full backwages from May 20, 1989 until reinstatement, and awarded attorney’s fees equivalent to 10% of the amount recoverable. He dismissed the claims for moral and exemplary damages for lack of factual and legal basis.

Petitioner appealed to the NLRC. In its Resolution dated November 29, 1990, the NLRC affirmed the illegality of the dismissal but modified the remedy by granting private respondents the alternative relief of separation pay plus backwages instead of reinstatement.

Petitioner filed a motion for reconsideration on January 4, 1991. The NLRC denied it on January 22, 1991, which prompted the petition to the Supreme Court.

Issue Raised in the Petition

The Supreme Court identified the core issue as whether the NLRC committed grave abuse of discretion in holding the dismissal illegal for lack of due process of law, and in ordering petitioner to pay separation pay plus backwages.

Petitioner’s position rested on the assertion that the preliminary investigation conducted by the City Fiscal in the qualified theft case satisfied due process requirements. It invoked Batangas Laguna Tayabas Bus Co. (BLTBCo.) vs. NLRC, 166 SCRA 721 (1988) to argue that an employee may be dismissed on the basis of the fiscal’s findings after preliminary investigation, and that a separate employer investigation would only duplicate the fiscal’s work.

The NLRC rejected that theory. It maintained that private respondents were not afforded the formal investigation required, and that the fiscal’s investigation could not legally replace the employer’s obligation to comply with due process in labor cases.

Supreme Court’s Discussion on Due Process and Evidence

The Court reiterated that due process of law in employment matters means an opportunity to be heard before judgment. It emphasized that there is no due process violation where a party had a chance to explain his side, and that what the law disapproves is denial of the opportunity to be heard.

The Court acknowledged that, as a general rule, the preliminary investigation conducted by the City Fiscal may be sufficient compliance with procedural due process because the accused is given ample opportunity to be heard. It quoted the BLTBCo doctrine that the criminal charges initiated by the company and the finding after preliminary investigation of prima facie guilt can constitute substantial evidence adequate for a labor tribunal to find just cause for termination based on loss of trust and confidence, and that a company investigation would duplicate the fiscal’s inquiry.

However, the Court held that petitioner could not rely on BLTBCo in the present case because the factual basis differed materially. It contrasted BLTBCo, where mass fraud involved a period of ten months, thirty-six employees, and voluminous documentary evidence. In that setting, the fiscal’s finding of prima facie guilt rested on affidavits and extensive records, thus providing an adequate basis for dismissal without a separate employer investigation.

In contrast, the Court found that here the fiscal’s prima facie case of qualified theft against private respondents was based solely on Fuentes’s affidavit, in which Fuentes implicated private respondents because of alleged conspiracy. The Court stressed that the only connection of the private respondents to the theft was Fuentes’s implication.

The Court relied on the Regional Trial Court’s later acquittal of private respondents of qualified theft on the ground of reasonable doubt, noting the trial court’s doubts regarding Fuentes’s veracity against them. The Court recounted that the trial court found: (a) the implication was made more than three months after Fuentes’s arrest and after conferences with petitioner’s representatives; (b) petitioner put up the bond for Fuentes’s temporary release upon Fuentes’s assurance he would cooperate with petitioner; (c) Fuentes’s implicatory testimony was not substantiated by other evidence and therefore lacked probative value; and (d) private respondents were union officers whom petitioner opposed.

The Court further noted that beyond Fuentes’s affidavit and the criminal complaint/information, petitioner showed no other evidence positively linking the private respondents to the alleged theft. It applied the standard in administrative proceedings that evidence must be substantial, meaning evidence that a reasonable mind might accept as adequate to support a conclusion. It held that the information for qualified theft, based only on Fuentes’s affidavit implicating private respondents, did not constitute substantial evidence adequate to conclude that private respondents were untrustworthy and legally dismissible for loss of trust.

The Court also observed that the circumstances found by the trial court and the findings of the Labor Arbiter tended to indicate that petitioner’s dismissal was not genuinely grounded on loss of trust and confidence. The Court underscored that the Labor Arbiter himself found that scrutiny of the record showed the implication by Fuentes was not enough basis for petitioner to terminate the private respondents because petitioner failed to establish sufficient basis for concluding that private respondents were truly in connivance in the qualified theft.

Conclusive Findings and the Two-Fold Due Process Requirement

The Court treated the lower court’s factual findings and the Labor Arbiter’s determination on the lack of sufficient basis to justify dismissal as conclusive. It also clarified that even where preliminary investigation may sometimes satisfy procedural due process, the requirements for a lawful dismissal are still two-fold: a substantive valid cause and compliance with rudimentary due process, specifically notice and hearing, under Art. 277(b). The Court cited San Miguel Corporation vs. NLRC, 173 SCRA 314 (1989), reiterating that one cannot go without the other, because failure in either aspect renders the termination illegal.

Thus, the Court held that in the case at hand there was no sufficient basis to believe a just and lawful cause existed. It reasoned that the substantive aspect of due process—the presence of a valid or authorized cause—was wanting. It explained that while a criminal prosecution dismissal or acquittal does not automatically bar an employer’s dismissal for misconduct and proof beyond reasonable doubt is not required, the basis for dismissal must still be clearly and convincingly established.

Loss of Confidence Doctrine and Absence of Substantial Basis

The Court stressed that the employer’s right to dismiss on the ground of loss of trust and confidence must not be exercised arbitrarily and without just cause. It invoked General Bank and Trust Co. vs. Court of Appeals, 135 SCRA 569, 578 (1985), which cautions that loss of confidence should not be simulated, used as a subterfuge, or asserted arbitrarily in the face of overwhelming contrary evidence; it must be genuine and not an afterthought.

Applying that doctrine, the Court held that petitioner’s sole basis for charging qualified theft was Fuentes’s affidavit. It found no other evidence on record supporting any connection of private respondents to the theft. It also considered that, as found below, Fuentes implicated the private respondents after conferences with petitioner’s representatives and after petitioner facilitated Fuentes’s release through its undertaking for the bail bond. The Court concluded that for loss of trust and confidence to be valid, it must be substantial and not arbitrary, whimsical, capricious, or concocted. It further held that irregularities should not escape scrutiny and that courts must be vigilant against management ploys designed to remove employees perceived as undesirable.

Remedy: Separation Pay and Backwages

Petitioner argued that even if the dismissal

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