Gargoles vs. Del Rosario

Dishonesty by an employee entrusted with the employer's money and property is a willful breach of trust and a just cause for dismissal under Article 282 of the Labor Code; the two-notice rule is complied with when the employer shows the notice to explain and the termination notice, even if the employee refuses to acknowledge them.

Rosalie L. Gargoles was employed at Jay-Anne's One Hour Photo Shop, a business owned by Reylita S. Del Rosario. The dispute is governed by Article 282 of the Labor Code, which lists just causes for termination, and by the two-notice requirement of procedural due process.

On February 20, 1992, Rosalie L. Gargoles began working as an “all-around employee” at Jay-Anne's One Hour Photo Shop, acting as cashier, sales clerk, xerox operator, janitress, photo printer, and messenger/delivery person; the shop was owned by Reylita S. Del Rosario.

In the second week of March 1998, Del Rosario's records inspection and investigation discovered that Gargoles had tampered with the daily printer's production reports/sales by making double entries of the same job envelope and using one twin check number for every fresh roll of film for photo-developing and printing or recopying; according to Del Rosario, Gargoles pocketed the cash value of the excessive or padded daily total of prints, causing losses of ₱11,305.00 computed at 2,207 prints at ₱5.00 per print for the period December 1, 1997 to March 25, 1998.

On March 25, 1998, Del Rosario sent Gargoles a letter requiring her to submit her explanation within seventy-two (72) hours from receipt; the letter stated the alleged double entries and losses and warned that failure or refusal to answer would waive her right to contest the dishonesty charge. The bottom of the letter contained the handwritten annotation “refused to sign,” indicating that Gargoles refused to receive and sign for the letter. Gargoles did not submit an explanation within the time given. On March 28, 1998, Del Rosario sent another letter informing Gargoles of the termination of her services; Gargoles again refused to sign in acknowledgment of the letter.

Gargoles then lodged a complaint for illegal dismissal, seeking reinstatement and backwages. In her position paper, Del Rosario alleged the dishonesty and attached as Annex 2 the March 25, 1998 letter; the production reports containing the double entries were presented as evidence, and the double entries were confirmed in the affidavit executed by Redelito Caranay, Jr., Gargoles's co-employee. Gargoles cast doubt on Caranay's affidavit by stating that he was only forced to execute it because he was under Del Rosario's control and moral domination, but she presented no evidence to discredit the affidavit or to show his ill will or malice toward her. Gargoles also argued that she did not need to dispute the charge of dishonesty or theft because she had the presumption of innocence in her favor.

The Labor Arbiter found the evidence adduced by Del Rosario reasonably sufficient to conclude that Gargoles was guilty of the dishonesty imputed to her, and the NLRC affirmed. The CA observed that Del Rosario did not present in evidence the March 25, 1998 letter and that there was nothing on record to substantially prove Gargoles was informed of the accusation against her.

• Just Cause: Petitioner argued that the CA erred in finding her dismissal from employment to have been upon just cause and that there was no substantial evidence showing the existence of just cause for her dismissal.
• Due Process Finding and Just Cause: Petitioner argued that because the CA held that she had been deprived of her right to due process, the CA's finding of just cause was based not on facts but on speculation and assumption.
• Caranay Affidavit: Petitioner cast doubt on Redelito Caranay, Jr.'s affidavit by stating that he was only forced to execute it because he was under the control and moral domination of Del Rosario.
• Presumption of Innocence: Petitioner argued that she did not need to dispute the charge of dishonesty or theft of her employer's funds because she had the presumption of innocence in her favor.
• Serrano vs. Wenphil: Petitioner posited that the CA should have applied Serrano vs. National Labor Relations Commission instead of Wenphil Corporation vs. National Labor Relations Commission.

• Dishonesty as Just Cause: Respondent maintained that Gargoles tampered with the daily printer's production reports/sales through double entries of the same job envelope and two twin check numbers, and pocketed the cash value of the excessive or padded daily total of prints, causing losses of ₱11,305.00 for December 1, 1997 to March 25, 1998.

• Just Cause: Whether the CA erred in finding that Gargoles was dismissed from employment upon just cause.
• Substantial Evidence: Whether there was substantial evidence showing the existence of just cause for Gargoles's dismissal.
• Due Process and Just Cause: Whether the CA's finding of just cause was based on speculation and assumption because the CA also held that Gargoles had been deprived of due process.
• Procedural Due Process: Whether Del Rosario complied with the requirements of procedural due process for dismissal.
• Serrano vs. Wenphil: Whether the CA should have applied Serrano vs. National Labor Relations Commission instead of Wenphil Corporation vs. National Labor Relations Commission.
• Grave Abuse of Discretion: Whether the NLRC committed grave abuse of discretion in upholding the Labor Arbiter's decision dismissing Gargoles's complaint for illegal dismissal.

• Just Cause: No. The dismissal was for just cause because Gargoles's dishonesty amounted to willful breach of trust under Article 282 of the Labor Code.
• Substantial Evidence: Yes. The production reports containing double entries and the affidavit of Redelito Caranay, Jr. confirmed the double entries; Gargoles did not discredit the affidavit.
• Due Process and Just Cause: No. The finding of just cause did not rest on speculation, suspicion, or assumption because it was supported by the production reports and Caranay's affidavit.
• Procedural Due Process: Yes. The March 25, 1998 letter required explanation within 72 hours, and the March 28, 1998 letter informed Gargoles of termination; her refusal to sign and failure to explain waived her right to contest.
• Serrano vs. Wenphil: No. Serrano was abandoned in Agabon, and both Wenphil and Serrano apply only when termination is valid but due process is not followed; here dismissal was valid and due process was complied with.
• Grave Abuse of Discretion: No. The NLRC did not commit grave abuse of discretion in upholding the Labor Arbiter's dismissal; grave abuse means arbitrary or despotic exercise of power or capricious and whimsical action equivalent to lack of jurisdiction.

• Just Cause: Article 282 of the Labor Code lists as just causes serious misconduct or willful disobedience, gross and habitual neglect, fraud or willful breach of trust, commission of a crime against the employer or family, and analogous causes. The SC affirmed the Labor Arbiter's conclusion, affirmed by the NLRC, that Gargoles was guilty of dishonesty. The dishonesty consisted of double entries in production reports and pocketing the extra cash. An employee in charge of the employer's money and property who commits dishonesty breaches the trust reposed and normally loses confidence; this falls under Article 282. Therefore dismissal was for just cause.
• Substantial Evidence: Gargoles claimed no substantial evidence. The SC found the production reports containing double entries were presented as evidence, and the double entries were confirmed by the affidavit of Redelito Caranay, Jr., her co-employee. Gargoles attacked the affidavit as forced under Del Rosario's control and moral domination, but she presented no evidence to discredit its execution or show ill will or malice. Her presumption of innocence argument did not excuse her from answering: the presumption is disputable and lays the burden on the alleger, but once overcome, the employee must rebut; failure to rebut establishes the charge. Especially in loss of confidence, the employer may dismiss once morally convinced of breach of trust. She did not sufficiently contradict or rebut. Thus substantial evidence existed.
• Due Process and Just Cause: The CA's finding of just cause was not based on speculation or assumption. The SC pointed to the production reports with double entries and Caranay's affidavit as evidence. The CA's due process finding did not convert the just cause finding into speculation; the evidence supported the dishonesty charge.
• Procedural Due Process: The CA erred in finding no proof of notice. Del Rosario presented as Annex 2 of her position paper the March 25, 1998 letter requiring Gargoles to explain within 72 hours. The letter was quoted verbatim in the NLRC's August 31, 2000 resolution. The bottom had the handwritten annotation “refused to sign,” showing Gargoles refused to receive and sign. Her refusal plus failure to submit explanation within the period implied waiver of her right to contest and forfeited her right to respond and rebut. On March 28, 1998, Del Rosario sent another letter informing termination; Gargoles again refused to sign. The two-notice rule was complied with, negating denial of due process.
• Serrano vs. Wenphil: Wenphil held that the employer should indemnify a dismissed employee despite a for-cause termination if due process was not observed. Serrano modified this to full backwages as the penalty. Agabon abandoned Serrano and ruled that if termination was valid but due process was not followed, the employee remains dismissed but the employer pays indemnity heavier than Wenphil but lighter than full backwages. Both Wenphil and Serrano apply only when termination is valid but due process is not followed. Here dismissal was valid and legal, and Del Rosario complied with due process. Thus neither applies; the CA's indemnity should be deleted.
• Grave Abuse of Discretion: The SC concluded the NLRC did not commit any abuse, least of all grave. Grave abuse of discretion, per De las Santos vs. Metropolitan Bank and Trust Corporation, must be grave: judicial or quasi-judicial power exercised arbitrarily or despotically by reason of passion or personal hostility, or respondent evaded a positive duty or virtually refused to perform the duty enjoined, or acted capriciously or whimsically equivalent to lack of jurisdiction. The NLRC upheld the Labor Arbiter's dismissal based on the evidence; no grave abuse.

• Just cause — dishonesty and willful breach of trust — Under Article 282 of the Labor Code, fraud or willful breach of trust is a just cause for dismissal. An employee entrusted with the employer's money and property who commits dishonesty breaches that trust and normally loses the employer's confidence. The SC applied this to Gargoles's double entries and pocketing of cash, making her dismissal valid.
• Substantial evidence and presumption of innocence in dismissal cases — The presumption of innocence is disputable and lays the burden of proof on the alleger; once the presumption is overcome by a showing of wrongdoing, the employee must answer and defend herself, and failure to rebut establishes the charge. The SC applied this because Gargoles did not discredit the production reports or Caranay's affidavit.
• Two-notice rule and waiver by refusal — Procedural due process requires a notice apprising the employee of the acts or omissions charged and a subsequent notice of the employer's decision to dismiss, with an opportunity to answer between them. Refusal to receive the notice to explain, coupled with failure to submit an explanation within the period, waives the right to contest the charge. The SC applied this to the March 25 and March 28, 1998 letters.
• Wenphil–Serrano–Agabon rule on due process violations — Wenphil required indemnity despite a for-cause dismissal if due process was not observed; Serrano modified it to full backwages; Agabon abandoned Serrano and required indemnity heavier than Wenphil but lighter than full backwages. These apply only when termination is valid but due process is not followed. The SC applied this to delete the indemnity because due process was complied with.
• Grave abuse of discretion — Grave abuse of discretion means the judicial or quasi-judicial power was exercised arbitrarily or despotically by reason of passion or personal hostility, or the tribunal evaded a positive duty or acted capriciously or whimsically equivalent to lack of jurisdiction. The SC applied this to find no grave abuse by the NLRC.

• "An act of dishonesty by an employee who has been put in charge of the employer's money and property amounts to breach of the trust reposed by the employer, and normally leads to loss of confidence in her. Such dishonesty comes within the just and valid causes for the termination of her employment under Article 282 of the Labor Code." — States the ratio on just cause for dismissal based on dishonesty and breach of trust.
• "But the presumption, which is disputable, by no means excuses the employee charged with wrongdoing from answering and defending herself once the presumption has been overcome by a showing to the contrary. The failure of the employee to rebut or disprove the proof of wrongdoing then establishes the charge against her." — Rejects Gargoles's reliance on the presumption of innocence as a substitute for rebutting the evidence.
• "Such refusal to receive the letter containing the notice for her to explain, coupled with her failure to submit her explanation within the time given in the letter, implied that she waived her right to contest the contents of the letter, thereby forfeiting her right to respond to the charge against her and to rebut the evidence thereon." — Explains why the two-notice rule was complied with despite Gargoles's refusal to acknowledge the notice.
• "Serrano has been abandoned in Agabon v. National Labor Relations Commission, in which the Court ruled that if the termination was valid but due process was not followed, the employee remains dismissed but the employer must pay an indemnity heavier than that imposed in Wenphil Corporation but lighter than full backwages." — Clarifies the controlling penalty rule and why the CA's indemnity was deleted.

• Wenphil Corporation vs. National Labor Relations Commission, G.R. No. 80587, February 8, 1989, 170 SCRA 69 — Held that an employer should indemnify a dismissed employee despite a for-cause termination if due process was not observed; modified by Serrano and partly restored by Agabon; distinguished as inapplicable because dismissal was valid and due process was complied with.
• Serrano vs. National Labor Relations Commission, G.R. No. 117040, January 27, 2000, 323 SCRA 445 — Modified Wenphil by requiring full backwages where due process was not observed; abandoned in Agabon; held inapplicable because dismissal was valid and due process was complied with.
• Agabon vs. National Labor Relations Commission, G.R. No. 158693, November 17, 2004, 442 SCRA 573, 613-614 — Abandoned Serrano and ruled that a valid termination without due process requires indemnity heavier than Wenphil but lighter than full backwages; controlling on the penalty issue.
• House of Sara Lee vs. Rey, G.R. No. 149013, August 31, 2006, 500 SCRA 419, 437 — Cited for the rule that in loss-of-confidence cases the employer may dismiss once morally convinced of the employee's breach of trust.
• Reyes vs. Minister of Labor, G.R. No. 48705, February 9, 1989, 170 SCRA 134, 140 — Cited for the same loss-of-confidence rule that the employer may dismiss once morally convinced of breach of trust.
• Leonardo vs. National Labor Relations Commission, G.R. No. 125303 & G.R. No. 126937, June 16, 2000, 333 SCRA 589, 601 — Cited on compliance with the two-notice rule and the conclusion that no denial of due process occurred.
• De las Santos vs. Metropolitan Bank and Trust Corporation, G.R. No. 153852, October 24, 2012, 684 SCRA 410 — Cited for the definition of grave abuse of discretion; applied to conclude the NLRC did not commit grave abuse.

• Article 282, Labor Code — Enumerates just causes for termination, including fraud or willful breach of trust; applied to Gargoles's dishonesty in handling the employer's money and property, making dismissal for just cause.
• Two-notice rule, labor law — Requires a notice apprising the employee of the acts or omissions charged and a subsequent notice of the employer's decision to dismiss, with opportunity to answer between; applied through the March 25, 1998 letter and March 28, 1998 termination letter, both refused by Gargoles.