WESLEYAN UNIVERSITY-PHILIPPINES, PETITIONER, VS. NOWELLA REYES, RESPONDENT.

Wesleyan University-Philippines versus Reyes

The Case

This is a petition for review brought by Wesleyan University-Philippines against its former University Treasurer, Nowella Reyes, arising from her dismissal on the ground of loss of trust and confidence. The University asks the Supreme Court to reverse the Court of Appeals, which had declared the dismissal illegal and reinstated the ruling of the Labor Arbiter. The case matters because it gathers into one decision the whole architecture of dismissal for loss of trust and confidence: who may be dismissed on that ground, what must be proven, and how differently the law treats a managerial or fiduciary employee from an ordinary rank-and-file worker. It also settles a procedural point that examiners favor, namely the breadth of the Court of Appeals' factual review under a petition for certiorari.

Procedural History

Reyes filed a complaint for illegal dismissal with the Arbitration Branch of the National Labor Relations Commission. The Labor Arbiter ruled in her favor, declaring her illegally dismissed and ordering reinstatement, backwages, other monetary claims, moral and exemplary damages, and attorney's fees. The University appealed to the National Labor Relations Commission, which reversed the Labor Arbiter and held that Reyes had been legally dismissed on the ground of loss of trust and confidence, while ordering payment of her proportionate thirteenth month pay, the monetary value of her vacation leave, and attorney's fees. Reyes moved for reconsideration, which was denied. She then went to the Court of Appeals on certiorari. The Court of Appeals found grave abuse of discretion on the part of the National Labor Relations Commission, set aside its decision and resolution, and reinstated the Labor Arbiter's decision, with the modification that if reinstatement were no longer feasible, separation pay equivalent to one month salary for every year of service would be awarded. The University then elevated the matter to the Supreme Court by petition for review.

Facts

In March 2004, Nowella Reyes was appointed University Treasurer of Wesleyan University-Philippines on a probationary basis, and a little over a year later she was appointed full-time University Treasurer. In April 2009, a new Board of Trustees was constituted, and among its first acts was to engage an external accounting firm to investigate rumors of anomalies in the University's contracts and finances.

The audit surfaced irregularities in the handling of the University's funds. Checks payable to teachers, staff, and other third parties had been encashed directly with the Treasury Department under Reyes's stewardship, a practice the auditors called a clear violation of the imprest system of cash management. Various checks payable to the University Treasurer had been negotiated for encashment directly with the bank although management intended only a transfer of funds between the University's accounts, and the related check vouchers could not be found. A crossed check for 300,000 pesos payable to the Treasurer had likewise been encashed despite the restriction on its face, and the used check was no longer on file.

The University served Reyes a Show Cause Order and placed her under preventive suspension. She submitted her explanation, the Human Resources Development Office conducted an investigation, and finding her explanation unsatisfactory it recommended dismissal. She received her notice of termination and promptly filed a complaint for illegal dismissal, contending that her sixty-day preventive suspension amounted to constructive dismissal, that her right to substantive and procedural due process was violated, and that the charges rested on suspicion and speculation. The University defended on the ground that she was a highly confidential employee who handled significant amounts of money, and that the irregularities justified dismissal for loss of trust and confidence.

Issues

• Whether or not the Court of Appeals overreached its power of review under Rule 65 when it reversed the judgment of the National Labor Relations Commission.
• Whether or not the Court of Appeals erred in finding that Reyes was illegally dismissed on the ground of loss of trust and confidence.

Applicable Provisions

Article 282 of the Labor Code of the Philippines provides:

Article 282. Termination by employer. An employer may terminate an employment for any of the following causes: x x x x c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

This is the statutory ground invoked by the University, and the whole case turns on whether the breach of trust was willful and founded on clearly established facts.

Section 9 of Batas Pambansa Blg. 129, as amended, defines the factual power of the Court of Appeals:

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings. x x x

This provision answers the procedural objection, because it expressly authorizes the appellate court to pass upon the evidence when necessary to resolve factual issues in a certiorari petition.

Ruling

On the first issue, the Court held that the Court of Appeals did not overreach its power of review. The province of certiorari is not confined to errors of jurisdiction, because Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, specifically gives the Court of Appeals the power to pass upon the evidence, if and when necessary, to resolve factual issues. The appellate court therefore acted within its sound discretion when it re-evaluated the factual findings of the National Labor Relations Commission and substituted its own judgment.

On the second issue, the Court ruled that the petition is impressed with merit and that the Court of Appeals erred in reinstating the Labor Arbiter's decision. The Court laid down two requisites for a valid dismissal based on loss of trust and confidence. The first is that the employee must hold a position of trust and confidence, either as a managerial employee or as a fiduciary rank-and-file employee who, in the normal exercise of his or her functions, regularly handles significant amounts of money or property of the employer. The second is that the loss of confidence must be based on a willful breach of trust and founded on clearly established facts. The Court stressed that loss of confidence should not be simulated, must not be used as a subterfuge for improper, illegal, or unjustified causes, and must be genuine and not a mere afterthought.

The Court then distinguished the treatment of managerial employees from that of rank-and-file personnel, quoting its earlier ruling:

Thus, with respect to rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal, requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be sufficient. But as regards a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal.

Applying these rules, the Court found that Reyes undoubtedly held a position of trust. She was not an ordinary rank-and-file employee but occupied a very sensitive position; as University Treasurer she handled and supervised all monetary transactions and was the highest custodian of the University's funds. The Court found the first requisite certain, and found the second requisite equally satisfied, because the University adequately proved that her dismissal was for a just cause.

Doctrine

Dismissal for loss of trust and confidence under Article 282 of the Labor Code requires two things: the employee must hold a position of trust and confidence, and the loss of confidence must rest on a willful breach of trust founded on clearly established facts. Positions of trust come in two classes, managerial employees and fiduciary rank-and-file employees such as cashiers, auditors, and property custodians who regularly handle significant amounts of money or property. For rank-and-file personnel, proof of involvement in the alleged events is required and uncorroborated assertions will not suffice; for managerial employees, the mere existence of a basis for believing that the employee breached the employer's trust is enough, and proof beyond reasonable doubt is not required. Loss of confidence must never be simulated, arbitrary, or a mere afterthought, because what is at stake is the employee's livelihood, name, and reputation, and to countenance its arbitrary exercise would negate the constitutional right to security of tenure. Finally, under Section 9 of Batas Pambansa Blg. 129, the Court of Appeals may receive evidence and resolve factual issues in cases within its original and appellate jurisdiction, including petitions for certiorari.

Disposition

The Supreme Court granted the petition, reversed the Court of Appeals, and upheld the dismissal of Reyes as valid on the ground of loss of trust and confidence, the University having won.

Remember This

Memorize the two requisites and the dividing line: a position of trust plus a willful breach founded on clearly established facts, with only some basis needed for a managerial employee but proof of involvement required for rank-and-file personnel. Examiners use this case to test the managerial versus fiduciary rank-and-file distinction and the scope of the Court of Appeals' factual review under Rule 65.