Bance vs. University of St. Anthony

An employee's voluntary resignation prior to the effectivity of a threatened termination renders a subsequent complaint for illegal dismissal without basis, and where dismissal for just cause is valid but procedural due process is not observed—specifically, where no first written notice was served—the employee is entitled to P30,000 in nominal damages.

Petitioners were regular employees of respondent University of St. Anthony, an educational institution in Iriga City, holding positions in its Accounting Office and academic department. Atty. Santiago D. Ortega, Jr. served as the University's President and Chairman of the Board of Trustees, while his wife, Mrs. Victoria SD. Ortega, served as Vice-President for Finance. The University maintained a group enrollment incentive program granting discounts or free tuition to qualified dependents of employees. Petitioners' employment tenure ranged from as early as 1980 to as late as 1988, and their positions included accounting, collection, and teaching roles that involved varying degrees of fiduciary responsibility.

Petitioners Susan M. Bance, Arlene C. Dimaiwat, Jean O. Velasco, Nancy M. Aguirre, and Hazel A. Lobetania were regular employees of the University of St. Anthony, an educational institution in Iriga City headed by Atty. Santiago D. Ortega, Jr. as President and Chairman of the Board of Trustees. Bance served as Senior Accounts Officer, Dimaiwat as Accounting Clerk, Velasco as Classroom Teacher, Aguirre as Accounting Officer, and Lobetania as Credit and Collection Officer. Their tenures ranged from 1980 to 1988, and their monthly salaries varied from P1,850.00 to P21,591.12.

In June 2006, several irregular and anomalous transactions were noted in the University's Accounting Office, prompting Atty. Ortega to hire an external auditor in January 2007. The audit report dated March 13, 2007 revealed a cash shortage of P1,239,856.25 representing the net collection of book remittances—funds that should have been kept inside the cash vault under Lobetania's custody but were missing. Lobetania was asked to go on leave and, during a conference with Atty. Ortega, admitted she failed to deposit the amount in the University's bank account. Upon demand, she paid the shortage in installments from her personal funds, as evidenced by official receipts issued by the University under her name. A subsequent audit report dated May 15, 2007 surfaced additional anomalous transactions in prior years, including tellers accommodating the encashment of checks not in the name of the University. Lobetania eventually tendered her resignation on July 27, 2007, to take effect on August 1, 2007, and it was approved on August 9, 2007. Criminal cases for Estafa were filed against her, and the prosecutor later found probable cause to charge her with Qualified Theft before the Regional Trial Court of Iriga City.

At around the same period, Bance, Dimaiwat, and Aguirre were found to have taken advantage of their positions in the Accounting Office by enrolling their children and relatives—including Velasco's—under the University's group enrollment incentive program despite knowing that they were unqualified. Upon discovery of the fraudulent scheme in November 2007, Atty. Ortega ordered an investigation and called a conference with the alleged perpetrators. During the December 2007 conference, the four were apprised of the infractions and admitted that their children and relatives had benefitted from the unauthorized discounts. Atty. Ortega verbally informed them that their employment would be terminated. On December 22, 2007, he issued Office Memo No. 007-026, informing them that their employment would be terminated effective January 1, 2008 on grounds of dishonesty amounting to malversation of school funds. The office memo was not preceded by any written notice except for the two conferences and a verbal announcement during the second conference. Dimaiwat, Velasco, and Aguirre opted to resign, tendering their resignations on December 22, 2007, to take effect on January 2, 2008, with approval on December 26, 2007. Bance did not resign. The University subsequently filed criminal cases for Estafa against all four before the Municipal Trial Court in Iriga City.

On April 1, 2008, Bance, Dimaiwat, Velasco, and Aguirre filed complaints for illegal dismissal with money claims; Lobetania filed hers on April 22, 2008. They amended their complaints to include claims for unpaid salaries and 13th month pay and to implead Mrs. Ortega. The Labor Arbiter found petitioners to have been illegally dismissed, ruling that respondents failed to prove just or authorized cause and did not afford procedural due process, and ordered reinstatement, backwages, damages, and reimbursement to Lobetania. The NLRC reversed, finding voluntary resignation by all except Bance and just cause for Bance's dismissal, though it awarded her P5,000 in nominal damages for procedural lapse. The CA affirmed the NLRC but deleted the nominal damages award, holding that procedural due process was observed in Bance's dismissal.

• No Just Cause: Petitioners maintained that there was no just cause for their dismissal, alleging that Lobetania was terminated because Atty. Ortega discovered she was more loyal to Mrs. Ortega than to him, and that there were no missing funds. They further alleged that the claims against Bance, Dimaiwat, Velasco, and Aguirre regarding the group enrollment incentive program were unsubstantiated.
• Criminal Probable Cause Not Dispositive: Petitioners argued that the finding of probable cause in the criminal cases filed against them does not constitute just cause for their dismissal from employment.
• Procedural Due Process Violation: Petitioners contended that respondents did not issue a written notice informing them of the charges, and that an award of nominal damages is proper based on existing case law.
• Reimbursement Claim: Petitioners contended that the financial accommodation extended by Lobetania to Mrs. Ortega arose from the employer-employee relationship, as the money belonged to the University, the accommodation was made because Mrs. Ortega was Lobetania's employer, and the alleged embezzlement was the cause of the termination of Lobetania's employment.

• Voluntary Resignation: Respondents argued that petitioners, except Bance, voluntarily resigned, rendering their complaints for illegal dismissal without basis.
• Just Cause for Bance: Respondents contended that Bance's dismissal was for just cause because the audit results showed she committed anomalous transactions by extending group enrollment incentives and discounts to unqualified beneficiaries, including her children and relatives, constituting fraud and willful breach of trust and confidence.
• Just Cause for Others: Respondents maintained that, notwithstanding their voluntary resignation, the other petitioners were also dismissed for just cause—namely, fraud and willful breach of trust and confidence.
• Procedural Due Process Observed: Respondents pointed to the CA's pronouncement that procedural due process was observed in Bance's dismissal.
• Personal Transaction: Respondents reiterated the CA's ruling that Lobetania's reimbursement claim was entirely a personal transaction between Lobetania and Mrs. Ortega, not arising from the employer-employee relationship.

• Voluntary Resignation: Whether the voluntary resignation of Lobetania, Dimaiwat, Velasco, and Aguirre rendered their complaints for illegal dismissal without basis.
• Validity of Bance's Dismissal: Whether Bance was illegally dismissed.
• Jurisdiction over Reimbursement: Whether the labor tribunal has jurisdiction to resolve the issue of reimbursement to Lobetania.

• Voluntary Resignation: Yes. The voluntary resignations of Lobetania, Dimaiwat, Velasco, and Aguirre prior to the effectivity of their termination rendered their complaints for illegal dismissal without basis. Even absent resignation, just causes existed—willful breach of trust for Lobetania, and fraud and dishonesty for the others.
• Validity of Bance's Dismissal: No, Bance was not illegally dismissed. Her dismissal was for just cause (willful breach of trust), but procedural due process was not observed because no first written notice was served, entitling her to P30,000 in nominal damages under the Agabon doctrine.
• Jurisdiction over Reimbursement: The issue is moot. The amount Lobetania paid represented the cash shortage she was obligated to return; the University is not obligated to reimburse it. Any claim of personal accommodation with Mrs. Ortega should be litigated before the regular courts.

• Voluntary Resignation: Resignation is the formal pronouncement or relinquishment of a position, requiring both the intent to relinquish and an overt act of relinquishment. Where the employer interposes the defense of resignation, the burden rests on the employer to prove voluntariness. Here, the fact of resignation was undisputed: Lobetania tendered hers on July 27, 2007, and Dimaiwat, Velasco, and Aguirre on December 22, 2007—all before the effectivity date of their termination. The totality of circumstances demonstrated voluntariness: ongoing investigations placed petitioners in a difficult position, the wording of their resignation letters implied voluntariness, and petitioners did not present countervailing evidence of involuntariness. The Court noted that an employer may permissibly grant an employee the chance to resign and save face rather than smear the employment record. Even disregarding resignation, just causes were established. For Lobetania, her failure to remit and deposit University funds constituted willful breach of trust, as her position as Credit and Collection Officer—regularly handling significant amounts of money—was a position of trust, and the audit report proved unaccounted-for amounts. For Dimaiwat, Velasco, and Aguirre, their collective act of enrolling unqualified beneficiaries in the group enrollment incentive program amounted to fraud and dishonesty, a ground separate and distinct from willful breach of trust under Article 297 of the Labor Code; their admissions during the conference with Atty. Ortega confirmed the willful nature of the acts. Procedural due process need not be discussed for these petitioners because their voluntary resignation severed the employment relationship.

• Validity of Bance's Dismissal: Bance did not resign and insisted she was illegally dismissed for lack of substantive and procedural due process. The Court found just cause: Bance's position as Senior Accounts Officer was supervisory in nature and thus a position of trust, requiring a high degree of honesty and responsibility. Her act of accommodating unqualified beneficiaries into the group enrollment incentive program, which she admitted during the December 2007 conference, constituted willful breach of trust. Having been dismissed for just cause, Bance was not entitled to backwages or other money claims arising from illegal dismissal. However, the Court disagreed with the CA's finding that procedural due process was observed. Under the King of Kings Transport standard, two written notices are required: the first containing the specific causes or grounds for termination and a directive to submit a written explanation, and the second conveying the decision to terminate after considering all circumstances. Records showed that only the second written notice—Office Memo No. 007-026—was served on Bance. No first written notice was given. Conferences and verbal announcements do not suffice as substitutes for the requisite first written notice. Applying Agabon vs. NLRC, Bance was entitled to nominal damages of P30,000, the amount applicable where dismissal is based on just cause but procedural due process is not observed.

• Jurisdiction over Reimbursement: The Court ruled that respondents are not liable to reimburse the P1,239,856.25 to Lobetania. The amount pertained to the cash shortage that was unaccounted for, and Lobetania subsequently paid it to the University as evidenced by official receipts issued under her name, indicating the purpose was to return the shortage. The University was therefore not obligated to return the amount. If Lobetania insisted on a personal accommodation with Mrs. Ortega, the NLRC and CA were correct that the matter should be litigated before the regular courts, as the employer-employee relationship is merely incidental and the cause of action proceeds from a different source of obligation. The Court also upheld the CA and NLRC's findings that respondents were liable for holiday pay for three years and Lobetania's prorated 13th month pay for 2007, respondents having failed to present proof of payment.

• Two-Notice Rule in Termination for Just Cause — Under the King of Kings Transport standard, termination for just cause requires: (1) a first written notice containing the specific causes or grounds for termination, a detailed narration of facts and circumstances, and a directive giving the employee a reasonable period (at least five calendar days) to submit a written explanation; (2) a hearing or conference where the employee may explain, present evidence, and rebut management's evidence—mandatory only when requested in writing, substantial evidentiary disputes exist, or company rules require it; and (3) a second written notice of termination indicating that all circumstances have been considered and grounds established. In this case, only the second written notice (Office Memo No. 007-026) was served on Bance; no first written notice was issued, and conferences and verbal announcements cannot substitute for it.

• Nominal Damages for Procedural Due Process Lapse (_Agabon Doctrine)_ — Where dismissal is based on just cause but procedural due process is not observed, the employee is entitled to nominal damages of P30,000. Where dismissal is based on authorized cause with procedural lapse, the amount is P50,000. The Court applied this doctrine to Bance, awarding P30,000, thereby modifying the CA's deletion of the nominal damages award.

• Willful Breach of Trust — To constitute willful breach of trust as a just cause for dismissal under Article 297(c) of the Labor Code, two requisites must concur: (1) the employee must be holding a position of trust and confidence, and (2) there must be a willful act justifying the loss of trust and confidence. Cashiers, auditors, property custodians, and those who regularly handle significant amounts of money or property are considered positions of trust. Supervisory positions are also positions of trust due to the high degree of honesty and responsibility required. The Court applied this to Lobetania (Credit and Collection Officer safeguarding the cash vault) and Bance (Senior Accounts Officer, a supervisory position).

• Voluntariness of Resignation — Resignation is the formal pronouncement or relinquishment of an office, requiring the intent to relinquish to concur with the overt act of relinquishment. When the employer interposes the defense of resignation, the burden rests on the employer to prove voluntariness. The wording of resignation letters, though not the sole test, may be considered together with surrounding circumstances. There is nothing illegal when an employer grants an employee the chance to resign and save face rather than be fired.

• "Conferences and verbal announcements do not suffice as substitute for the requisite first written notice." — This passage states the ratio decidendi on procedural due process: that the statutory two-notice requirement cannot be satisfied by informal conferences or verbal announcements, a point central to the modification of the CA decision.

• "It is settled that there is nothing reprehensible or illegal when the employer grants the employee a chance to resign and save face rather than smear the latter's employment record." — This formulation is frequently cited in labor jurisprudence to validate the common practice of allowing employees under investigation to resign instead of being formally terminated.

• "To constitute willful breach of trust, the employee concerned must be holding a position of trust and confidence, and there must be an act, that is willful, that would justify the loss of trust and confidence." — This states the two-part test for willful breach of trust under Article 297(c) of the Labor Code, applied here to both Lobetania and Bance.

• King of Kings Transport, Inc. vs. Mamac, 553 Phil 108 (2007) — Controlling precedent on the procedural due process requirements for termination based on just cause. The Court applied its three-step framework (first written notice, hearing or conference, second written notice of termination) and found that only the second notice was served on Bance.

• Agabon vs. National Labor Relations Commission, 485 Phil 248 (2004) — Controlling precedent on the award of nominal damages where dismissal is for just cause but procedural due process is lacking. Applied to award Bance P30,000 in nominal damages.

• Central Azucarera De Bais, Inc. vs. Siason, 765 Phil 399 (2015) — Followed for the definition and requisites of voluntary resignation, and for the proposition that an employer may permissibly offer an employee the option to resign and save face.

• Telus International Philippines, Inc. vs. De Guzman, G.R. No. 202676, December 4, 2019 — Cited for the principle that management prerogative, including the right to discipline and dismiss, is limited only by labor laws and principles of equity and substantial justice.

• Alvarez vs. Golden Tri Bloc, Inc., 718 Phil 415 (2013) — Followed for the proposition that supervisory positions are positions of trust due to the high degree of honesty and responsibility required, applied to Bance's role as Senior Accounts Officer.

• The Peninsula Manila vs. Jara, G.R. No. 225586, July 29, 2019 — Cited for the two requisites of willful breach of trust and for the classification of positions regularly handling significant amounts of money as positions of trust.

• Perez vs. Philippine Telegraph and Telephone Company, 602 Phil 522 (2009) — Followed for the rule that a hearing or conference is mandatory only when requested by the employee in writing, when substantial evidentiary disputes exist, or when company rules or similar circumstances require it.

• Article 297 (formerly Article 282), Labor Code — Enumerates the just causes for termination by employer, including serious misconduct, gross and habitual neglect of duties, fraud or willful breach of trust, commission of a crime or offense, and analogous causes. Applied to sustain Bance's dismissal for willful breach of trust and the dismissals of Dimaiwat, Velasco, and Aguirre for fraud and dishonesty.

• Article 292 (formerly Article 277), Labor Code — Governs the manner of termination of employment based on just cause, requiring compliance with procedural due process standards as elaborated in the implementing rules and jurisprudence. Applied to determine that the first written notice was lacking in Bance's dismissal.

• Article 3, Labor Code — Declaration of basic policy affording protection to labor and regulating relations between workers and employers. Cited as the statutory backdrop for the constitutional policy of labor protection, balanced against management prerogative.

• Article XIII, Section 3, 1987 Constitution — The State shall afford full protection to labor and promote full employment and equality of employment opportunities. Cited as the constitutional foundation for labor protection, without overriding valid exercises of management prerogative.

Justices Leonen (Chairperson), Lazaro-Javier, Delos Santos, and J. Lopez concurred.