Central Azucarera de Bais vs. Heirs of Zuelo Apostol

An employer may validly dismiss a supervisor occupying a position of trust and confidence for willful breach of trust under Article 297(c) of the Labor Code when the employee uses company equipment, materials, and premises for personal purposes, provided the twin notice requirement is observed and the violation is directly related to the employee's duties involving custody and care of employer property.

Zuelo Apostol was employed by Central Azucarera de Bais (CAB) on March 1, 1982 as Motor Pool Over-All Repairs Supervisor, a position that entailed assigning personnel and equipment for each repair job and taking custody of all repair equipment and materials owned by CAB. As a supervisor, he was accorded the privilege of residing in a company house so long as he remained a CAB employee. CAB maintained Rules of Discipline, including Rule 9, which prohibited the utilization of company material or equipment, including power, for doing private work without permission. The dispute centers on the intersection of management prerogative, loss of trust and confidence as a just cause for termination of a supervisory employee, and the procedural requirements for dismissal under the Labor Code.

Zuelo Apostol commenced his employment with Central Azucarera de Bais (CAB) on March 1, 1982, when he was hired as the company's Motor Pool Over-All Repairs Supervisor. In that capacity, he was responsible for repairing company vehicles, which included assigning personnel and equipment for each repair job and taking custody of all repair equipment and materials owned by CAB. As a supervisor, he was accorded the privilege of occupying a company house for so long as he remained a CAB employee.

The parties' harmonious working relationship of twenty years was disrupted on February 2, 2002, when CAB security guard Tomasito A. Rosel conducted an inspection and discovered that Apostol was using his company house and other company equipment to repair privately owned vehicles. Rosel reported seeing a white Lancer and a black pick-up undergoing body repairs at the premises of Apostol's company-assigned house in Paper Village. He observed Francisco Sabanal, a regular CAB motor pool automotive mechanic, cutting metal sheets on site, using flattening tools and an oxygen-acetylene outfit. An electrical extension line with a 100-watt bulb was strung from the house to the work area.

On February 4, 2002, CAB's resident manager, Roberto Y. Dela Rosa, issued a memorandum to Apostol charging him with violating Rule 9 of CAB's Rules of Discipline—utilizing company material or equipment, including power, for private work without permission. The memorandum required Apostol to submit a written explanation within 24 hours and placed him on preventive suspension effective immediately. Apostol submitted a handwritten explanation apologizing for undertaking the repair of his personal vehicle without permission, though he clarified that he did not use electric welding, a compressor, or a grinder, but only a trouble light and his personal acetylene and oxygen equipment.

On February 9, 2002, Apostol received a termination letter dated February 8, 2002, signed by CAB's president, Antonio Steven L. Chan. Apostol thereafter vacated the company house and, on February 12, 2002, filed a complaint before the Sub-Regional Arbitration Branch No. VII of Dumaguete City, charging constructive dismissal, illegal suspension, unfair labor practice, and various monetary claims including underpayment of overtime pay, premium pay for holiday, separation pay, holiday pay, service incentive leave, vacation/sick leave, and actual, moral, and exemplary damages, plus attorney's fees. The Labor Arbiter found that CAB had complied with the twin notice requirement and that Apostol had indeed violated company rules, and dismissed the complaint. The NLRC reversed, finding that while Apostol violated company rules, his contrite explanation belied willfulness and the penalty of dismissal was excessive. The CA affirmed the NLRC, holding that the violation could not be characterized as serious misconduct or a basis for loss of trust and confidence.

• Due Process Compliance: Petitioners argued that both substantive and procedural due process were duly complied with when Apostol was terminated, as CAB furnished the twin notices required by law.
• Management Prerogative: Petitioners contended that the CA usurped CAB's management prerogative to determine the penalty commensurate to the offense committed, which had been the subject of prior notice to Apostol, who knew the consequences of his violation.
• No Entitlement to Backwages and Separation Pay: Petitioners maintained that since Apostol was dismissed for just cause and in compliance with procedural due process, he was not entitled to backwages and separation pay, and that in any case, jurisprudence provides that in wrongful termination, good faith may mitigate or absolve the payment of backwages.

• Procedural Due Process: Whether procedural due process was observed in the termination of Apostol's employment with CAB.
• Substantive Due Process / Penalty Commensurability: Whether the penalty of dismissal was commensurate to the violation committed by Apostol.
• Entitlement to Backwages and Separation Pay: Whether Apostol is entitled to the payment of backwages and separation pay.

• Procedural Due Process: Yes. CAB complied with the twin notice requirement, and no formal hearing was required absent a written request by the employee or substantial evidentiary disputes, pursuant to the "ample opportunity to be heard" standard under Article 292(b) of the Labor Code.
• Substantive Due Process / Penalty Commensurability: Yes. The penalty of dismissal was valid, as Apostol occupied a position of trust and confidence and his admitted misuse of company resources constituted willful breach of trust under Article 297(c) of the Labor Code, satisfying all requisites for loss of trust and confidence.
• Entitlement to Backwages and Separation Pay: No. Having been validly dismissed for just cause, Apostol is not entitled to backwages or separation pay, social justice not being intended to countenance wrongdoing.

• Procedural Due Process: The Court found conflicting findings among the Labor Arbiter, NLRC, and CA, justifying its own factual determination under recognized exceptions to the finality of labor tribunal findings. The Labor Arbiter and CA correctly found that CAB complied with the twin notice requirement: the first notice (memorandum dated February 4, 2002) apprised Apostol of the charges and required his written explanation, and the second notice (termination letter dated February 8, 2002) communicated the decision to dismiss. The NLRC's insistence on an actual hearing was erroneous. Relying on Perez vs. Philippine Telegraph and Telephone Company (2009), the Court held that the "ample opportunity to be heard" standard is neither synonymous with nor similar to a formal hearing. The right to be heard is satisfied by any meaningful opportunity to answer charges and submit evidence, whether in a hearing, conference, or other fair and reasonable way. A formal hearing becomes mandatory only when requested by the employee in writing, when substantial evidentiary disputes exist, when company rules or practice require it, or when similar circumstances justify it. Apostol was given the opportunity to explain in writing, which he availed of, and he did not request a hearing. The "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or conference" requirement in the implementing rules.

• Substantive Due Process / Penalty Commensurability: All three lower tribunals uniformly found that Apostol violated company rules by using company equipment and materials for personal vehicle repairs, and Apostol himself admitted the violation in his handwritten explanation. The Court held that dismissal was warranted under Article 297(c) of the Labor Code (fraud or willful breach of trust). Citing Moya vs. First Solid Rubber Industries, Inc. and Alaska Milk Corporation vs. Ponce, the Court identified the requisites for loss of trust and confidence: (1) the employee must hold a position of trust and confidence, and (2) there must be an act justifying the loss of trust. Sta. Ana vs. Manila Jockey Club, Inc. added the third requirement that the loss of trust must relate to the employee's performance of duties. All three were satisfied: Apostol, as motor pool supervisor, held a position of trust involving custody, handling, and care of company equipment and materials; he admitted the violation; and the violation was directly enabled by and related to his supervisory position. The Court emphasized that a supervisor's violation carries greater impact on company operations, and that the employer's decision to terminate under these circumstances is a valid exercise of management prerogative that should be respected.

• Entitlement to Backwages and Separation Pay: Having ruled the dismissal valid, it necessarily follows that Apostol is not entitled to backwages or separation pay. The Court rejected the notion that social justice should countenance wrongdoing, stating that compassion for the poor is imperative only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be a refuge of scoundrels, and those who invoke it may do so only if their hands are clean and their motives blameless.

• Management Prerogative — The employer has the right to exercise judgment in conducting its business, including dismissing erring employees, so long as the exercise is in good faith to advance the company's interest and not to circumvent employee rights under the law or valid agreements. The Court upheld CAB's decision to terminate Apostol as a valid exercise of this prerogative, emphasizing that a company's decision to terminate an employee for violations committed from a supervisory position is one that should be respected.

• Loss of Trust and Confidence (Article 297(c), Labor Code) — For loss of trust and confidence to validly justify dismissal, three requisites must concur: (1) the employee holds a position of trust and confidence; (2) there is an act that would justify the loss of trust; and (3) the loss of trust relates to the employee's performance of duties. Loss of confidence as a just cause is premised on the employee holding a position of trust, such as one entrusted with custody, handling, or care and protection of the employer's property. All three requisites were satisfied because Apostol was a supervisor entrusted with custody of company equipment, he admitted using company resources for personal repairs, and the violation was directly related to his duty to safeguard company property.

• Procedural Due Process in Termination — "Ample Opportunity to Be Heard" Standard — The "ample opportunity to be heard" standard under Article 292(b) of the Labor Code does not require a formal or face-to-face hearing. It is satisfied by any meaningful opportunity (verbal or written) given to the employee to answer charges and submit evidence in support of his defense, whether in a hearing, conference, or some other fair, just, and reasonable way. A formal hearing or conference becomes mandatory only when: (a) requested by the employee in writing; (b) substantial evidentiary disputes exist; (c) a company rule or practice requires it; or (d) similar circumstances justify it. The "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or conference" requirement in the implementing rules and regulations.

• Social Justice in Labor Cases — Social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it will not condone the offense. Compassion for the poor is imperative only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be a refuge of scoundrels, and those who invoke it may do so only if their hands are clean and their motives blameless.

• "The test for the fair procedure guaranteed under Article 277(b) [now, Article 292(b)] cannot be whether there has been a formal pretermination confrontation between the employer and the employee. The 'ample opportunity to be heard' standard is neither synonymous nor similar to a formal hearing." — This passage, quoted from Perez vs. Philippine Telegraph and Telephone Company, articulates the controlling standard for procedural due process in termination cases and defines the ratio decidendi on the hearing requirement issue.

• "Loss of confidence as a just cause for termination of employment is premised on the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer's property." — Quoted from Moya vs. First Solid Rubber Industries, Inc., this passage defines the doctrinal basis for loss of trust and confidence as applied to supervisory employees entrusted with company property.

• "The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense." — This formulation articulates the Court's rejection of social justice as a shield for employee misconduct, frequently cited in subsequent labor jurisprudence to deny relief to employees dismissed for cause.

• Perez vs. Philippine Telegraph and Telephone Company, 602 Phil. 522 (2009) — Controlling precedent on procedural due process in termination cases. Established that the "ample opportunity to be heard" standard does not require a formal hearing and formulated the guiding principles on when a hearing becomes mandatory. The Court applied its framework to hold that CAB's twin notices and opportunity for written explanation satisfied procedural due process.

• Moya vs. First Solid Rubber Industries, Inc., 718 Phil. 77 (2013) — Followed for the proposition that loss of trust and confidence justifies termination of supervisors or personnel occupying positions of responsibility, particularly those entrusted with custody, handling, or care of the employer's property. Applied to characterize Apostol's supervisory role as a position of trust.

• Alaska Milk Corporation, and the Estate of Wilfred Uytengsu vs. Ernesto L. Ponce, G.R. No. 228412, July 26, 2017 — Cited for the two requisites of loss of trust and confidence: (1) the employee must hold a position of trust and confidence, and (2) there must be an act justifying the loss of trust. Both were found present.

• Sta. Ana vs. Manila Jockey Club, Inc., G.R. No. 208459, February 15, 2017 — Cited for the additional requirement that the loss of trust must relate to the employee's performance of duties, which the Court found satisfied because Apostol's violation was directly enabled by his supervisory position.

• Top Form Mfg. Co., Inc. vs. NLRC, 290-A Phil. 63 (1992) — Cited for the employer's distinct prerogative to dismiss an employee when there is ample reason to distrust the latter or sufficient evidence of breach of trust.

• Article 297(c) [formerly Article 282(c)], Labor Code — Provides that an employer may terminate employment for "fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative." Applied as the statutory basis for Apostol's dismissal, as his misuse of company resources while serving as motor pool supervisor constituted willful breach of trust.

• Article 292(b) [formerly Article 277(b)], Labor Code — Guarantees the employee's right to be heard in termination cases, requiring that the employer afford the worker ample opportunity to be heard and defend himself with the assistance of a representative if desired. Interpreted through Perez as requiring "ample opportunity to be heard" rather than a formal hearing, satisfying procedural due process through CAB's twin notices and written explanation opportunity.

• Rule 9, CAB's Rules of Discipline — Company rule prohibiting the utilization of company material or equipment, including power, for doing private work without permission. Apostol was charged with and admitted violating this rule, forming the factual basis for the finding of willful breach of trust.

Carpio, Acting C.J. (Chairperson), Peralta, Perlas-Bernabe, and Caguioa, JJ., concurred.