Alaska Milk Corporation vs. Ponce

A managerial employee's willful solicitation of official receipts from colleagues — offering a cash rebate in exchange for receipts naming the employer as purchaser — constitutes a willful breach of trust justifying dismissal under Article 297(c) of the Labor Code, even if the employee never actually submitted the solicited receipts for reimbursement, as the act itself discloses a dishonest motive unbecoming of a managerial employee and provides sufficient basis for the employer's loss of trust and confidence.

Alaska Milk Corporation (AMC) is a corporate employer engaged in the manufacture of milk commodities. Ernesto L. Ponce, a licensed mechanical engineer, was hired by AMC on April 1, 2008 as Manager for Engineering Services of its Milk Powder Plant and Ultra High Temperature Plant, and was promoted on May 1, 2009 to Director for Engineering Services with a monthly salary of ₱200,000.00. Wilfredo Uytengsu, Sr. was AMC's erstwhile Chairman of the Board, and Wilfred Steven Uytengsu, Jr. served as President and Chief Executive Officer. The Alaska Milk Workers Union (AMWU) was the organized labor union within AMC. Ponce's employment was governed by the Labor Code provisions on just causes for termination, particularly Article 297 (formerly Article 282) on gross and habitual neglect of duties and loss of trust and confidence.

On April 1, 2008, Alaska Milk Corporation (AMC) hired Ernesto L. Ponce, a licensed mechanical engineer, as Manager for Engineering Services of its Milk Powder Plant (MPP) and Ultra High Temperature Plant (UHT) with a monthly compensation of ₱120,000.00. On May 1, 2009, he was promoted to Director for Engineering Services with a monthly salary of ₱200,000.00. He held this position until his termination from employment on February 25, 2010.

According to Ponce, the controversy originated from his investigation of AMC's surge in overtime costs for the years 2006 to 2008, which reached ₱34.1 million despite no substantial increase in milk production. AMC's Chairman of the Board, Wilfredo Uytengsu, Sr., allegedly directed Ponce to investigate the matter, and on May 4, 2009, Ponce submitted a report identifying a scheme involving the Alaska Milk Workers Union (AMWU) and some AMC managers who directed unnecessary overtime work to encourage workers to obtain loans at usurious rates, with automatic payroll deductions benefiting the union. Ponce recommended a gradual phase-in of limits on salary deductions, but Uytengsu, Sr. instead abruptly ordered the cessation of automatic payroll deductions. Ponce claimed this provoked death threats from AMWU and that the union petitioned for his dismissal, to which Uytengsu, Sr. yielded, issuing the First Performance Evaluation Memorandum on February 16, 2010.

AMC and Uytengsu, Sr. presented a different account. They averred that in April 2009, AMC's President and CEO, Wilfred Steven Uytengsu, Jr., witnessed Ponce's abrasive behavior and reminded him to be courteous to colleagues. On January 21, 2010, Uytengsu, Sr. sent Ponce an e-mail calling attention to his failure to provide updates on several engineering works. In February 2010, Uytengsu, Sr. received a copy of an e-mail Ponce had sent to twelve colleagues soliciting official receipts in exchange for a 5% cash rebate on the value of receipts submitted. The e-mail, signed "Estoy Ponce," set out detailed rules requiring BIR-registered official receipts indicating "Alaska Milk Corporation" as purchaser, with a monthly cut-off date on the 18th, and submissions to be made to Ponce's wife at the staff housing.

On February 16, 2010, Uytengsu, Sr. issued the First Performance Evaluation Memorandum directing Ponce to explain why his services should not be terminated for gross and habitual neglect of duties and other analogous causes under Article 282 of the Labor Code. After finding Ponce's explanation unsatisfactory, AMC issued the Second Performance Evaluation Memorandum and terminated his employment effective February 25, 2010, on five grounds: failure to provide updates and obtain approval on engineering works; the RIA e-mail soliciting receipts for fraudulent reimbursement; disrespectful conduct toward AMC's President and CEO; continued abrasive attitude toward fellow officers, subordinates, and rank-and-file workers resulting in death threats and complaints; and repeated failure to implement several engineering projects, including installation of PVC pipes, a water-tight metal door, floor area increase, purchase of overpriced stainless steel sheets, and incorrect information on billboard dimensions.

On April 14, 2010, Ponce filed a complaint for illegal dismissal with prayer for reinstatement, backwages, and damages against AMC, the estate of Uytengsu, Sr., AMWU, and its president Ferdinand Bautista. AMWU and Bautista were later dropped as respondents. The Labor Arbiter found that the instances of neglect cited by AMC were not gross enough to warrant dismissal, noting that satisfactory completion of tasks was subject to factors beyond Ponce's sole control, and that AMC had condoned the RIA e-mail act by waiting more than nine months before raising it. The NLRC reversed, finding the RIA e-mail constituted dishonesty inimical to AMC's interests and sufficient to sustain dismissal on loss of trust and confidence. The Court of Appeals in turn reversed the NLRC, holding that loss of trust and confidence was a mere afterthought not mentioned in the First Performance Evaluation Memorandum and that the penalty of dismissal was too harsh given Ponce's clean record and prior promotion.

• Applicability of Managerial Standards: AMC and Uytengsu, Sr. argued that ordinary standards for imposing disciplinary penalties on rank-and-file employees do not apply to Ponce, a managerial employee, and that the mere existence of a basis for believing a managerial employee breached the employer's trust is sufficient for dismissal.
• Loss of Trust and Confidence: AMC and Uytengsu, Sr. maintained that soliciting receipts for payment of expenses Ponce did not personally incur constituted a valid and just cause for loss of trust and confidence, and that the First Performance Evaluation Memorandum categorically enumerated the infractions causing such loss.
• Gross and Habitual Neglect: AMC and Uytengsu, Sr. emphasized Ponce's admission of being purposely remiss in his duties, the complaints filed by AMC employees against him, and argued that the totality of infractions committed during employment should be considered rather than taken singly and separately.
• Illegality of R/A Scheme (Ponce, as petitioner in G.R. No. 228439): Ponce contended that the R/A scheme was illegal and a form of tax evasion, constituting a "poisonous tree" that cannot be the source of any legal right for termination. He alleged the R/A was part of his compensation and that solicitation was not done intentionally, knowingly, and purposely so as to constitute a breach of trust.
• Monetary Awards (Ponce, as petitioner in G.R. No. 228439): Ponce prayed for backwages of ₱20,657,500.00 or, alternatively, ₱97,037,100.00 representing compensation until retirement age; actual damages of ₱1,695,600.00; moral damages of ₱7,000,000.00; temperate damages of ₱18,000.00; exemplary damages of ₱2,400,000.00; and attorney's fees of ₱500,000.00.

• Condonation: Ponce argued that AMC condoned the RIA e-mail act because it never issued any warning or admonition from May 5, 2009 up to February 15, 2010, and never proved that he presented receipts from co-employees for reimbursement.
• Loss of Trust as Afterthought: Ponce contended that loss of trust and confidence was an afterthought, as AMC was unable to prove that solicitation of official receipts was against company policy, and that the First Performance Evaluation Memorandum did not mention loss of trust and confidence.
• Retaliatory Dismissal: Ponce insisted he was dismissed to forestall a threatened concerted action by the union, not for any valid cause.

• Just Cause for Termination: Whether there is just cause to terminate Ponce's employment.
• Gross and Habitual Neglect of Duties: Whether AMC established by substantial evidence that Ponce was guilty of gross and habitual neglect of duties.
• Loss of Trust and Confidence: Whether Ponce's sending of the RIA e-mail soliciting official receipts constituted a willful breach of trust justifying dismissal under Article 297(c) of the Labor Code.
• Propriety of Penalty: Whether the penalty of dismissal was too harsh given Ponce's clean record and prior promotion.

• Just Cause for Termination: Yes. A just cause existed for Ponce's termination on the ground of loss of trust and confidence, although the charge of gross and habitual neglect of duties was not supported by substantial evidence.
• Gross and Habitual Neglect of Duties: No. AMC failed to show by substantial evidence that Ponce was guilty of gross and habitual neglect, as the cited delays were subject to factors beyond his sole control and AMC adduced no evidence beyond bare allegations.
• Loss of Trust and Confidence: Yes. The RIA e-mail constituted a willful breach of trust, having been done intentionally and with premeditation by a managerial employee, and the act of soliciting receipts from colleagues for fraudulent reimbursement was dishonesty inimical to AMC's interests.
• Propriety of Penalty: No, the penalty was not too harsh. The RIA e-mail was discovered only in February 2010, after Ponce's promotion, and a belated discovery of misconduct does not sanitize the period between commission and discovery.

• Just Cause for Termination: The Court reviewed the factual findings of the labor tribunals because the LA and CA findings contradicted those of the NLRC, an exception to the rule that only questions of law are reviewable under Rule 45. After thorough examination, the Court found that while gross and habitual neglect was not established, the RIA e-mail provided sufficient basis for dismissal on loss of trust and confidence.

• Gross and Habitual Neglect of Duties: Under Article 297(b) of the Labor Code, neglect of duty must be both gross and habitual to justify dismissal. Gross negligence implies the entire absence of care and a thoughtless disregard of consequences; habitual neglect implies repeated failure over a period of time. The Court agreed with the LA and CA that the charge was unwarranted. The LA demonstrated that satisfactory completion of assigned tasks was subject to an interplay of factors beyond Ponce's sole control, involving shared responsibility and collective decision-making. AMC adduced no evidence beyond bare allegations to prove that the failure to implement projects was occasioned by gross neglect. Ponce's admission of delay referred to specific works whose plans were approved only in December 2009 after several revisions, and upon his promotion he was laden with both engineering and non-engineering assignments. The LA noted AMC's own admission that at least four to six concrete columns of the subject projects were already erected, disproving culpable refusal.

• Loss of Trust and Confidence: Article 297(c) of the Labor Code allows termination for fraud or willful breach of trust. Two requisites must be satisfied: the employee must hold a position of trust and confidence, and there must be an act justifying the loss of trust. Ponce, as Director for Engineering Services managing AMC's Engineering Department, belonged to the first class of managerial employees occupying positions of trust. For managerial employees, the mere existence of a basis for believing the employee breached the employer's trust suffices; proof beyond reasonable doubt is not required. The Court found the RIA e-mail constituted a willful breach. First, the opening sentence — "Do you want to earn extra from your own expenses?" — exposed the attendant willfulness, and the detailed "rules" evinced premeditation and a conscious design. Second, soliciting receipts from colleagues constituted dishonesty inimical to AMC's interests, as Ponce would collect reimbursement for expenses he did not incur. Third, the e-mail betrayed a sinister, well-calculated methodology by which AMC would be misled, and the fact that it was the brainwork of a director made it all the more disconcerting. The Court applied The Coca-Cola Export Corporation vs. Gacayan, where willful submission of tampered receipts by a senior financial accountant justified dismissal. Whether Ponce actually gathered and submitted receipts was immaterial; the sending of the e-mail itself disclosed a dishonest motive. The LA erred in faulting AMC for not presenting receipts from other individuals, as the instruction to indicate "Alaska Milk Corporation" as purchaser made it impossible for AMC to sort out receipts not reflecting Ponce's personal reimbursements.

• Propriety of Penalty: The CA erred in ruling that dismissal was too harsh. The CA premised its analysis on a misapprehension of facts: the RIA e-mail came to Uytengsu, Sr.'s knowledge only in February 2010, after Ponce's May 1, 2009 promotion. Thus, the promotion did not negate loss of trust and confidence, as AMC was unaware of the e-mail during the intervening period. Likewise, the lack of a previous disciplinary record for nearly two years could not lessen the severity of the penalty, because belated discovery of the misdeed does not sanitize the period from commission to discovery.

• Loss of Trust and Confidence — Requisites — For loss of trust and confidence to be properly invoked as a just cause for termination under Article 297(c) of the Labor Code, two requirements must be complied with: (1) the employee concerned must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence. The Court applied this by finding that Ponce, as Director for Engineering Services, occupied a managerial position of trust, and that the RIA e-mail constituted the requisite act.

• Two Classes of Positions of Trust — There are two classes of positions of trust: (1) managerial employees whose primary duty consists of the management of the establishment or a department or subdivision thereof, and other officers or members of the managerial staff; and (2) fiduciary rank-and-file employees, such as cashiers, auditors, property custodians, or those who regularly handle significant amounts of money or property. Ponce was classified under the first class.

• Standard of Proof for Managerial Employees — As regards a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer suffices for dismissal. Proof beyond reasonable doubt is not required; it is sufficient that there is some basis for the loss of confidence, such as when the employer has reasonable ground to believe the employee is responsible for the misconduct and the nature of his participation renders him unworthy of the trust demanded by his position.

• Willful Breach of Trust — A breach of trust is willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly, or inadvertently. The Court found the RIA e-mail to be a product of conscious design, not inadvertence, based on its inciting opening statement and intelligently crafted rules.

• Gross and Habitual Neglect of Duties — Neglect of duty, to be a ground for dismissal, must be both gross and habitual. Gross negligence implies a want or absence of or failure to exercise even slight care or diligence, or the entire absence of care, evincing a thoughtless disregard of consequences. Habitual neglect implies repeated failure to perform one's duties for a period of time, depending on the circumstances. The Court found AMC failed to prove both elements.

• Substantial Evidence in Labor Cases — A party alleging a critical fact must support the allegation with substantial evidence, construed to mean such relevant evidence as a reasonable mind will accept as adequate to support a conclusion. AMC's bare allegations without corroborating evidence were insufficient.

• Review of Facts in Labor Appeals — While the Court generally does not review questions of fact in appeals by certiorari under Rule 45, it may do so in labor cases where the findings of the CA and the labor tribunals are contradictory.

• "The opening sentence of Ponce's RIA e-mail readily exposes the attendant willfulness in his act. It reads: 'Dear Neighbors and Friends, Do you want to earn extra from your own expenses?'" — The Court used this passage to establish the willful and intentional character of Ponce's act, satisfying the "willful breach" requirement of Article 297(c).

• "Whether Ponce was actually able to gather and submit receipts to AMC for reimbursement is immaterial. The sending of the RIA e-mail already discloses a dishonest motive unbecoming of a director for engineering services, and the existence of that e-mail in the records is sufficient basis to justify Ponce's dismissal on the ground of loss of trust and confidence." — This passage articulates the ratio decidendi that the act of solicitation itself, not the consummation of the fraudulent scheme, suffices to justify dismissal of a managerial employee for loss of trust and confidence.

• "There is really no premium for a clean record of almost two (2) years to speak of, for a belated discovery of the misdeed does not serve to sanitize the intervening period from its commission up to its eventual discovery." — This passage rejects the CA's reasoning that Ponce's clean record and prior promotion mitigated the penalty, establishing that delayed discovery of misconduct does not diminish its gravity.

• The Coca-Cola Export Corporation vs. Gacayan, 667 Phil. 594 (2011) — Applied as controlling precedent. The Court held that willful submission of tampered or altered receipts by a senior financial accountant justified dismissal, as fraudulent expense claims adversely reflected on the employee's integrity and provided ample basis for loss of trust and confidence. The Court found this applicable to Ponce's case, as the receipts he sought to utilize belonged to other persons with AMC indicated as purchaser, constituting an act of alteration or tampering.

• Philippine Plaza Holdings, Inc. vs. Ma Flora M. Episcope, 705 Phil. 210 (2013) — Followed for the doctrine on the two requisites for loss of trust and confidence and the definition of willful breach of trust as done intentionally, knowingly, and purposely.

• Zenaida D. Mendoza vs. HMS Credit Corporation, 709 Phil. 756 (2013) — Followed for the principle that for managerial employees, the mere existence of a basis for believing the employee breached the employer's trust suffices for dismissal, without requiring proof beyond reasonable doubt.

• St. Lukes Medical Center, Inc. vs. Estrelito Notario, 648 Phil. 285 (2010) — Followed for the definitions of gross negligence (want or absence of or failure to exercise even slight care or diligence) and habitual neglect (repeated failure to perform duties for a period of time).

• Cavite Apparel, Inc. vs. Michelle Marquez, 703 Phil. 46 (2013) — Followed for the exception allowing the Court to review factual findings in labor cases where the CA and labor tribunals reach contradictory conclusions.

• Tan Brothers Corporation of Basilan City vs. Edna R. Escudero, 713 Phil. 392 (2013) — Followed for the standard of substantial evidence in labor cases, defined as such relevant evidence as a reasonable mind will accept as adequate to support a conclusion.

• Article 297(b) [formerly Article 282(b)], Labor Code — Authorizes termination for gross and habitual neglect of duties. The Court found AMC failed to prove both grossness and habitualness, as the cited delays were attributable to factors beyond Ponce's sole control and were supported only by bare allegations.

• Article 297(c) [formerly Article 282(c)], Labor Code — Authorizes termination for fraud or willful breach of the trust reposed in the employee. The Court applied this provision to uphold Ponce's dismissal, finding that the RIA e-mail constituted a willful breach of trust by a managerial employee occupying a position of trust and confidence.

• Rule 45, Rules of Court — Governs petitions for review on certiorari to the Supreme Court. The Court noted its general policy of reviewing only questions of law, but invoked the exception for labor cases where the findings of the CA and labor tribunals are contradictory.

Antonio T. Carpio (Chairperson), Diosdado M. Peralta, Marvic M.V.F. Leonen, and Samuel R. Martires concurred.