Case Summary (G.R. No. 185122)
Relevant Procedural History
- Labor Arbiter: Dismissed Loreta’s complaint, finding loss of trust and confidence as the more probable ground for termination.
- National Labor Relations Commission (NLRC): Affirmed the Labor Arbiter’s decision via December 29, 2006 Resolution.
- Court of Appeals (CA): Reversed the NLRC and Labor Arbiter, concluding grave abuse of discretion in the factual appreciation; ordered payment of backwages, damages (moral and exemplary), and attorney’s fees.
- Supreme Court review: Petition for review on certiorari under Rule 45 by Wensha and Xu challenging the CA decision.
Essential Facts Established in the Record
- Loreta’s contributions: Introduced changes that allegedly increased business and morale, prompting promotion.
- Employer’s stated basis for action: Complaints by employees against Loreta led to an alleged investigation and claimed termination for loss of trust and confidence. Wensha’s pleadings also asserted accusations such as sowing intrigues, dishonesty, habitual tardiness, and abuse of authority.
- Chronological inconsistencies and documentary irregularities: Affidavits supporting the employer’s case were photocopies, some not sworn or executed contemporaneously; time records lacked signatures; a rejoinder contained dates inconsistent with the filing record; a September 10, 2004 bulletin posted by management announced Loreta was no longer connected with the company.
Issue Presented on Review
- Whether the CA gravely erred in reversing factual findings of the Labor Arbiter and NLRC that had found dismissal for loss of trust and confidence to be more probable, and whether the CA correctly ordered damages and held solidary liability against Xu.
Governing Legal Principles on Security of Tenure and Burden of Proof
- Constitutional guarantee: Security of tenure is protected (Article II, Section 18; Article XIII, Section 3 of the 1987 Constitution).
- Statutory corollary: Article 3 of the Labor Code mandates assurance of security of tenure; lawful termination requires a valid cause under Articles 282–284 and observance of due process.
- Burden of proof: Employer bears the burden to prove that dismissal was for a valid cause and was supported by substantial evidence; failure to prove renders dismissal illegal (as reiterated citing Royal Crown Internationale v. NLRC and other authorities).
Court’s Assessment of Evidence and Credibility
- The Supreme Court found the employer’s evidence riddled with inconsistencies and irregularities—unsworn photocopies, after-the-fact affidavits dated well after the claimed investigation period, unsigned daily time records, and anomalies in pleading dates—diminishing their probative weight.
- Loreta’s account was considered consistent and credible: she provided a detailed narrative of being ordered off the administrative office during a Feng Shui consultation, placed on paid leave, then told upon return she must resign because her “aura” allegedly did not match the employer’s, and she immediately filed the complaint.
- On credibility, the Court agreed with the CA that the employer’s affidavits appeared prepared as an afterthought and could not overcome Loreta’s consistent testimony and the absence of contemporaneous investigative records.
Due Process Requirement and Its Noncompliance
- Due process for termination requires two notices: (1) notice of specific charges with a warning and opportunity to explain, and (2) notice of termination after consideration. The employer must also keep investigation records.
- The Court found no evidence that Loreta was served with the statutorily required notices or given a meaningful opportunity to answer specific charges; Wensha did not produce records of any contemporaneous investigation while Loreta was on leave. This failure extinguished the asserted justification of dismissal and violated due process requirements.
Standard for Loss of Trust and Confidence
- Loss of trust and confidence may justify termination only when supported by clearly established facts showing intentional, knowing, or purposeful breach of trust. Petitioner’s allegations of petty or unsubstantiated infractions were insufficient. The Court emphasized the employer’s duty to substantiate such a ground with substantial and credible evidence.
Remedies: Reinstatement vs. Separation Pay; Damages and Attorney’s Fees
- General rule: Illegally dismissed employee is entitled to reinstatement and backwages.
- Doctrine of strained relations: Where reinstatement is no longer feasible—especially where relations are irreparably strained and the employee occupies a managerial or key position—separation pay in lieu of reinstatement is an acceptable alternative (citing Quijano and Golden Ace Builders v. Talde decisions referenced in the record).
- Application here: The CA—endorsed by the Supreme Court—found strained relations and Loreta did not insist on reinstatement, rendering separation pay appropriate. The CA had ordered backwages, other benefits, moral damages (P50,000), exemplary damages (P25,000), and attorney’s fees (P20,000). The Supreme Court modified the dispositive portion to order backwages, other privileges and benefits or monetary equivalent, and separation pay reckoned from the date of dismissal (September 1, 2004) up to finality, plus the specified damages and attorney’s fees.
Solidary Liability of Corporate Officer (Xu) versus Corporate Entity
- Corporate separateness: A corporation has a legal personality distinct from its officers and stockholders; mere ownership does not justify disregarding corporate personality.
- Labor law exception: Corporate officers and directors can be held solidarily liable with the corporation for wrongful termination only upon a showing of malice or bad faith—defined as dishonesty, conscious wrongdoing, or breach of duty motivated by ill will or interest (citing Petron Corporation and Elcee Farms authorities included in the record).
- Application here: The Supreme Court found no specific finding or record evidence demonstrating malice or bad faith by Xu in Wensha’s termination of Loret
Case Syllabus (G.R. No. 185122)
Parties and Nature of the Case
- Petitioner-corporation: Wensha Spa Center, Inc. (Wensha), a business in Quezon City engaged in sauna bath and massage services.
- Petitioner-individual: Xu Zhi Jie, a.k.a. Pobby Co (Xu), president of Wensha.
- Respondent-employee: Loreta T. Yung (Loreta), formerly Administrative Manager of Wensha.
- Nature of action: Petition for review on certiorari under Rule 45 of the Rules of Court by employer-petitioners assailing Court of Appeals decisions reversing labor tribunal findings and ordering relief for employee alleged to have been illegally dismissed.
Relevant Factual Background
- Loreta was formerly employed by Manmen Services Co., Ltd.; she transferred to Wensha to work for Xu and commenced employment on April 21, 2004 as Xu’s personal assistant and interpreter at a monthly salary of P12,000.00.
- On May 18, 2004 Loreta was promoted to Administrative Manager after introducing changes that increased business and uplifted employee morale and efficiency.
- On August 10, 2004 Loreta was asked to leave her office while Xu and a Feng Shui master inspected the premises; that same day she was instructed by Xu to go on leave with pay for one month (until September 10, 2004), and she complied.
- Upon returning on September 10, 2004, Loreta was told by Xu and his wife (Jiang Xue Qin a.k.a. Annie Co) that, according to the Feng Shui master, her aura or Chinese Zodiac sign was a “mismatch” with Xu and that she should not continue working; she was urged to resign but refused.
- On September 10, 2004 Loreta filed a case for illegal dismissal before the National Labor Relations Commission (NLRC).
- Wensha and Xu denied illegal dismissal, asserting that their action was investigative in nature and that Loreta was ultimately terminated for loss of trust and confidence on August 31, 2004 after alleged complaints and an investigation; allegations included sowing intrigues, causing resignation of an employee, dishonesty, serious breach of trust, habitual tardiness, and abuse of authority.
- Wensha later changed its position in pleadings, disclaiming that Loreta was terminated on August 31, 2004 and even sending a notice asking Loreta to report back to work on September 10, which Loreta declined because she had filed the complaint.
- A notice posted on Wensha’s bulletin board on September 10, 2004 read that Loreta “is no longer connected to this company starting today September 10, 2004” and that “any transaction made by her is no longer a liability of the company.”
Procedural History
- Labor Arbiter (LA) Francisco Robles dismissed Loreta’s complaint for lack of merit, finding it “more probable that the complainant was dismissed due to loss of trust and confidence.”
- The NLRC affirmed the LA’s dismissal in a Resolution dated December 29, 2006, observing that Wensha was still considering proper action when Loreta left and noting Wensha’s September 10 letter asking her to return, which Loreta declined because she had filed a case. A Delos Reyes affidavit and employee affidavits were part of the record considered by the NLRC.
- Loreta filed a petition for certiorari with the Court of Appeals (CA). The CA reversed the NLRC, finding grave abuse of discretion in the appreciation of factual bases for dismissal and detailed irregularities and weaknesses in Wensha’s evidentiary showing.
- The CA ordered Wensha and Xu, jointly and severally, to pay Loreta full backwages and other benefits from September 1, 2004 to finality, moral damages of P50,000.00, exemplary damages of P25,000.00, and attorney’s fees of P20,000.00; no costs.
- Wensha and Xu petitioned the Supreme Court by certiorari (Rule 45), raising among others the alleged erroneous reversal of factual findings, improper assessment of substantial evidence, erroneous awards (separation pay in lieu of reinstatement and damages), and the imposition of solidary liability on Xu.
Issues Presented and Framed by the Petitioners
- Whether the CA gravely erred in reversing factual findings of the LA and the NLRC concerning the dismissal.
- Whether the CA gravely abused discretion in ruling that the LA’s and NLRC’s findings were not supported by substantial evidence when the record, according to petitioners, showed that Loreta was under investigation and guilty of serious infractions warranting termination.
- Whether the CA erred in ordering separation pay, full backwages, damages and attorney’s fees in lieu of reinstatement.
- Whether the CA committed grave abuse of discretion in holding Xu solidarily liable with Wensha, assuming illegal dismissal.
Labor Arbiter’s Findings (as reflected in the record)
- LA found dubious Loreta’s account that she was dismissed “on the sole ground that she is a ‘mismatch’” as advised by a Feng Shui master, since Loreta’s position paper recounted positive contributions and offers of promotion.
- LA concluded that “absent any proof submitted by the complainant, this office finds it more probable that the complainant was dismissed due to loss of trust and confidence.”
- The LA’s decision discounted the account that dismissal was based solely on Feng Shui advice and relied on an inference of loss of trust and confidence.
NLRC Resolution and Rationale
- NLRC affirmed the LA, observing that the complainant left the respondents’ premises when confronted with infractions imputed against her and noting that Wensha was still considering proper action on the day Loreta left.
- NLRC cited Delos Reyes’ affidavit and Wensha’s request for Loreta to return on September 10, 2004, which bolstered the NLRC’s view that an investigatory process was underway and that Loreta’s departure occurred during such process.
Court of Appeals Findings and Conclusions
- The CA found that the NLRC and LA gravely abused discretion in appreciating factual bases for dismissal and that Wensha’s evidence was irregular, inconsistent, and insufficient.
- Specific CA findings on evidentiary shortcomings:
- Affidavits submitted were mer