Title
SM Development Corp. vs. Ang
Case
G.R. No. 220434
Decision Date
Jul 22, 2019
Employee dismissed for mismanagement; SC upheld loss of trust, citing managerial role, but awarded nominal damages for procedural lapses.
dismissal
employee
procedural due process
A

Case Summary (G.R. No. 220434)

Factual Background

Respondent alleged that in January 2012 he applied for a two-week vacation leave from March 30, 2012 to April 15, 2012, which Qua approved. On March 7, 2012, Atty. Ojeda, Jr. issued him a Notice to Explain concerning the cost status of one of his assigned projects, the Field Residences. Respondent submitted an explanation on March 13, 2012, disputing a claimed cost overrun and presenting data and documents intended to negate the accusation, including a joint response letter of the project engineers.

On March 20, 2012, Atty. Ojeda, Jr. and Hizon met with him and informed him that management, without stating specific reasons, wanted him to resign. Respondent received text messages on March 26 and March 28, 2012 suggesting an “imminent resignation” and requiring him to turn over functions to Ms. Imee Landicho upon Henry Sy, Jr.’s request. Respondent then proceeded on the scheduled vacation and reported back to work on April 16, 2012. After office hours at around 3:30 p.m., Hizon had him receive a Memorandum with subject Show Cause Notice directing him to explain enumerated accusations within five working days, to turn over work to Landicho, and informing him of a 30-day preventive suspension without pay.

In the Show Cause Notice dated April 16, 2012, respondent was charged with gross and habitual neglect of duties and loss of trust and confidence, based on several enumerated infractions and omissions. These included: SM Synergy’s non-collection of P4.5M cost of repainting of Clusters 1 and 2 in Chateau Elysee; violation of Chateau’s Master Deed and Presidential Decree No. 957 in connection with discrepancies in residential and parking slots at the Field Residences; sale of non-existing parking slots; sale of storage areas not covered by a license to sell; failure to clear with the COO the P52,000.00 expense for holding the 2010 Chateau Elysee Basketball League; SMDC subsidy of P21M OpEx for Field Residences in 2010–11 due to delay in amending the MDDR; and low sales generated from Chateau.

Respondent later claimed that although he informed HR on May 17, 2012 that his suspension had ended and he would report back to work, HR called him and advised him he did not need to report because he had already been dismissed. He then sought explanation from Hizon and was served with a termination letter dated May 15, 2012. Respondent stated he was surprised because the termination letter referenced alleged administrative hearings on May 7 and May 9, 2012, while he had not been given notice nor informed of those hearings. He accordingly filed a complaint for illegal dismissal with money claims.

Petitioners’ Position and Administrative Basis for Termination

For their part, the petitioners averred that in 2012 SMDC management received reports of incidents and negligent acts involving respondent as Project Director, resulting in pecuniary loss or exposing the corporation and its officers to potential criminal, administrative, and civil sanctions. They described multiple meetings with respondent to discuss the incidents. The reports were consolidated and attached to the Memorandum dated April 16, 2012 with the subject “Show-[C]ause Notice.” They alleged that respondent failed to submit any explanation and failed to attend administrative hearings despite due notice. They concluded that a decision to dismiss him effective May 16, 2012 was thus warranted.

Labor Arbiter Ruling

In a Decision dated October 29, 2012, the Labor Arbiter dismissed respondent’s complaint. The LA found that substantial documentary evidence showed that there was a just and valid cause for respondent’s dismissal on the grounds of incompetence and gross and habitual neglect of duties.

NLRC Ruling on Appeal

Respondent appealed to the NLRC, which, in a Decision dated April 26, 2013, dismissed the appeal for lack of merit and affirmed the LA. The NLRC treated respondent’s position as a Project Director as imbued with trust and confidence. It held that the charges and violations were inadequately met by respondent’s explanations. It accordingly upheld the dismissal based on loss of trust and confidence.

Respondent sought reconsideration, but the NLRC denied it. He then filed a Petition for Certiorari with the CA.

CA Proceedings and Findings

On October 2, 2014, the CA granted respondent’s petition. It reversed and set aside the labor tribunals’ rulings and held that respondent had been illegally dismissed. The CA ordered reinstatement without loss of seniority rights and other privileges, payment of full backwages inclusive of allowances and other benefits or their monetary equivalent from the time his compensation was withheld up to actual reinstatement, and attorney’s fees equivalent to 10% of the total monetary award.

The CA reasoned that the allegation of gross and habitual neglect of duty lacked support by substantial evidence. It observed that aside from inter-office memorandums dated March 27, 2012, March 30, 2012, and April 16, 2012 listing alleged infractions, there were no other documentary evidence, such as audit reports or affidavits, showing respondent’s responsibility for the alleged infractions.

The CA also noted that respondent had served SMDC since December 2006 and, for the preceding six years, had no previous record of inefficiency, infractions, or violations of company rules. It further held that the basis for loss of trust and confidence was not clearly established because there was no evidence showing that respondent abused the trust reposed in him regarding his responsibility as Project Director.

Finally, the CA found due process requirements defective. It stated that there was no showing that a hearing or conference had been conducted on May 7 and May 9, 2012 to explain respondent’s side. It also noted that a computer printout of a shipment tracking form allegedly notifying respondent of those hearings stated only that “shipment delivered to Gersally Sambrano/landlady.” Thus, the CA found that the petitioners failed to discharge the burden of proving just cause and compliance with due process.

Issues Before the Supreme Court

The Supreme Court framed the fundamental issue as whether respondent could be dismissed on the ground of loss of trust and confidence.

Ruling of the Supreme Court

The Supreme Court granted the petition. It held that the labor tribunals correctly found respondent validly dismissed on the substantive ground of loss of trust and confidence, while recognizing that dismissal was attended by a denial of procedural due process. It therefore reversed and set aside the CA decision and reinstated the NLRC decision. For the procedural due process violation, it ordered the petitioners to pay respondent nominal damages of P30,000.00. It also clarified that petitioners could not be held liable for backwages or separation pay.

Legal Basis and Reasoning

The Court reiterated that it may review factual issues in labor cases when the CA’s findings are contrary to those of the labor tribunals. It then undertook a re-examination of the records and agreed with the labor tribunals’ conclusion.

The Court emphasized that an employer cannot be compelled to retain an employee who is guilty of acts inimical to its interests, especially where the employee holds a managerial position or a position of responsibility. It found that respondent, as SMDC’s Project Director for Chateau Elysee and Field Residences in Paranaque City, was a managerial employee. His role required him to be the overall head of the project responsible for implementing and achieving management expectations across business planning, sales and marketing, construction permits and licenses, finance, sales documentation, property management, customer service, inventory management, and legal concerns. Given the nature of the position, respondent’s employment could be terminated for a willful breach of trust under Article 297(c) of the Labor Code.

The Court held that termination for loss of trust and confidence requires the concurrence of two conditions: first, the employee must hold a position of trust and confidence; and second, there must be an act that justifies the loss of trust and confidence. It found both requisites present. The first requirement was satisfied because respondent, as Project Director, occupied a position of trust and confidence.

As to the second requirement, the Court recognized that the degree of proof differs between managerial employees and rank-and-file employees. It restated the rule that for managerial employees, proof beyond reasonable doubt is not required; rather, the mere existence of a basis for believing the employee had breached the trust of the employer suffices. It also distinguished the more stringent requirement for rank-and-file employees, where mere uncorroborated assertions and accusations by the employer are insufficient.

Applying these standards, the Court held that respondent’s failure to properly manage complex project accounts—accounts dependent on the accuracy of his classifications and involving the company’s finances as well as the welfare of other employees and clients—constituted acts inimical to the company’s interests sufficient to erode trust and confidence. It observed that respondent should have kept intact the trust bestowed upon him. Thus, the Court concluded that petitioners had a valid reason to lose confidence in him and justify termination. It also stated that while the employer’s right to discharge employees is subject to regulation by the State, the employer is not compelled to retain an employee guilty of acts inimical to its interests that justify loss of confidence.

The C

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