CITYTRUST FINANCE CORPORATION DOING BUSINESS AS FNCB FINANCE, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND MARCIAL A. VIDAL, RESPONDENTS.

Citytrust Finance Corporation versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by Citytrust Finance Corporation, doing business as FNCB Finance, against the National Labor Relations Commission and its dismissed managerial employee, Marcial Vidal. The employer asks the Supreme Court to annul the labor commission's resolutions affirming the Labor Arbiter's award of backwages, incentive leave pay, thirteenth month pay, moral damages, and attorney's fees, and ordering reinstatement. The case matters because it is a compact lesson on two things every labor lawyer must know: the standard of proof for dismissal on the ground of loss of confidence, and the remedy of separation pay in lieu of reinstatement when the employer-employee relationship has been so strained that reinstatement would serve no purpose.

Procedural History

Marcial Vidal filed a complaint for illegal dismissal and money claims before the labor office in Ilagan, Isabela, which was later certified for compulsory arbitration. The Executive Labor Arbiter rendered a decision dismissing the claim for housing allowance but ordering reinstatement without loss of seniority rights and payment of backwages, incentive leave pay, thirteenth month pay, moral damages, and attorney's fees. The employer appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision in full. The employer then came to the Supreme Court on a petition for certiorari with a prayer for a preliminary injunction or restraining order, alleging grave abuse of discretion amounting to lack of jurisdiction. The Court did not give due course to the petition at once; it required the respondents to comment and issued a temporary restraining order against enforcement of the questioned resolutions.

Facts

Marcial Vidal was hired by the finance company in February 1976 and rose from the ranks, serving as credit investigator and collector, dealer coordinator, assistant credit control officer, assistant manager of the Cabanatuan branch, credit officer, and finally officer-in-charge of the Santiago extension office. By January 1982 he was receiving a monthly salary of 2,531 pesos and had earlier received a reward bonus of 1,419 pesos in recognition of meritorious performance.

In July 1982 the company engaged Attorney Salome Canas as external legal counsel to assist in collection and foreclosure of delinquent accounts. Vidal's defense was that Canas misappropriated collections and, to cover up her own misbehavior, made baseless reports against him which management readily accepted without giving him a chance to be heard. On September 27, 1982, the company served on him a memorandum requiring him to explain within three days certain alleged irregularities: the appointment of a special sheriff and payment of cash vouchers to him, the alleged sharing in the attorney's fees collected by Canas, and the alleged sale of a Colt Galant for 25,000 pesos reflected in the books, with another 25,000 pesos supposedly delivered as down payment for a ten-wheeler Isuzu cargo truck that did not appear in the books. Vidal submitted his written explanation on September 30, 1982.

In a letter dated October 26, 1982, the company informed Vidal that it was not satisfied with his explanation and that, furthermore, he had released a real estate mortgage over a property in Cauayan, Isabela, in violation of company policy requiring prior approval of the credit committee at the head office. He was terminated effective immediately on the ground of loss of trust and confidence. At the arbitration, the company did not present Canas as a witness, did not present Doctor Rolando Dacuycuy to prove the anomalous sale, and did not produce Manager Jun Juanino, who had allegedly authorized the release of the mortgaged property. Doctor Dacuycuy, in fact, retracted his earlier affidavit. The hearings lasted over a year and were set about twenty times, and both parties were given full opportunity to present evidence.

Issues

• Whether or not the National Labor Relations Commission committed grave abuse of discretion in affirming the Labor Arbiter's finding that Marcial Vidal was illegally dismissed.
• Whether or not the employer was denied procedural due process when it was not allowed to cross-examine the witness Doctor Dacuycuy.
• Whether or not reinstatement is the proper remedy, or whether separation pay should be awarded instead because of the strained relations between the parties.

Applicable Provisions

The decision invokes Article 284 of the Labor Code, which governs the payment of separation pay where reinstatement is no longer feasible. It provides:

In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one month pay or to at least one month pay for every year of service, whichever is higher.

The Court cites this provision as the basis for awarding separation pay in lieu of reinstatement, even though the dismissal was illegal, because the relationship between the parties had become so strained.

Ruling

On the first issue, the Court held that the labor commission did not commit grave abuse of discretion. The imputation that Vidal shared in Attorney Canas's attorney's fees was never substantiated, because the company failed to present Canas during the investigation. Doctor Dacuycuy was never made to testify to establish the anomalous sale, and in fact he retracted his affidavit. Manager Juanino, who allegedly authorized the release of the mortgaged property, was never produced. The Court restated the standard for loss of confidence dismissals:

Loss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt of the employee's misconduct is not required to dismiss him on this charge. It is sufficient if there is some basis for such loss of confidence or if the employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position.

Applying that standard, the Court found that the company had not established sufficient basis for the dismissal, so the finding of illegal dismissal stood.

On the second issue, the Court held that the employer was not denied due process. It was given every opportunity to be heard and to adduce evidence. When it was allowed to submit sur-rebuttal evidence and failed to do so, the Labor Arbiter correctly found that it had waived the right to cross-examine Doctor Dacuycuy. Even without cross-examination, the labor arbiter could properly evaluate the evidentiary weight of the retraction.

On the third issue, the Court held that reinstatement was no longer appropriate because the relationship of employer and employee was so strained and ruptured as to preclude a harmonious working relationship. Instead, the private respondent should be afforded separation pay so that he would be spared the agony of working anew under an atmosphere of antipathy and antagonism, and the employer would not have to endure the continued services of an employee in whom it had lost confidence.

Doctrine

First, loss of confidence is a valid ground for dismissing an employee, and proof beyond reasonable doubt is not required; it is enough that there is some basis for the loss of confidence, or that the employer has reasonable ground to believe that the employee is responsible for the misconduct and that his participation renders him absolutely unworthy of the trust demanded by his position. Second, the employer bears the burden of establishing that basis; failure to present the key witnesses and the retraction of an affidavit leave the dismissal without sufficient support. Third, the right to cross-examine may be waived when the party is given the opportunity to present sur-rebuttal evidence and fails to do so. Fourth, where the employer-employee relationship is so strained as to preclude a harmonious working relationship, separation pay may be awarded in lieu of reinstatement, as authorized by Article 284 of the Labor Code.

Disposition

The Court modified the appealed resolution: private respondent Marcial Vidal is not to be reinstated but is entitled to backwages for three years, separation pay equivalent to one month for every year of service, and 5,000 pesos for moral damages, with costs against the petitioner.

Remember This

Memorize the line that loss of confidence requires only some basis, not proof beyond reasonable doubt, but the employer must actually establish that basis. Examiners use this case to test the separation-pay-in-lieu-of-reinstatement doctrine and the waiver of cross-examination in labor proceedings.