JARDINE DAVIES, INC., PETITIONER, VS. THE NATIONAL LABOR RELATIONS COMMISSION, JARDINE DAVIES EMPLOYEES UNION (FFW) AND VIRGILIO REYES, RESPONDENTS.

Jardine Davies versus National Labor Relations Commission

The Case

This is a special civil action for certiorari brought by Jardine Davies, a domestic corporation engaged in general trading and the exclusive distributor of Union 76 lubricating oil, against the National Labor Relations Commission, the Jardine Davies Employees Union, and Virgilio Reyes, a former sales representative of the company. Jardine Davies asks the Supreme Court to set aside the labor commission's ruling that Reyes was illegally dismissed and to restore the labor arbiter's finding that he was validly terminated for loss of trust and confidence. The case matters because it is the Court's cleanest statement of how loss of trust and confidence must be proved: not by suspicion or a detective's deduction, but by clearly and convincingly established facts.

Procedural History

Reyes sued Jardine Davies for illegal dismissal. Labor Arbiter Manuel Caday dismissed the complaint, holding that Reyes had committed serious misconduct, fraud, and willful breach of trust, which are just causes for termination. Reyes appealed to the National Labor Relations Commission, which reversed the labor arbiter in a decision dated March 17, 1986, ordered his reinstatement with full backwages, and later denied the company's motions for reconsideration. Jardine Davies then filed this special civil action for certiorari in the Supreme Court, invoking grave abuse of discretion.

Facts

Jardine Davies received reports that counterfeit Union 76 lubricating oil was being manufactured, blended, packed, and distributed. It hired a private investigation agency, whose investigator confirmed that fake Union 76 oil was in the market and reported that Reyes was behind the illegal operation. The company secured a search warrant, and fake items were seized from an apartment complex said to be occupied by Reyes. A criminal complaint for unfair competition under the Revised Penal Code followed, and Reyes was also charged administratively with serious misconduct. He was placed on indefinite leave and eventually terminated on February 23, 1983.

The seized materials were later released by court order on the petition of Reyes's younger brother, Donato Reyes. Donato convinced the court that he was the lawful tenant of the apartment, that the goods belonged to him, and that he ran a licensed general merchandising business under the trade name Lubrix Conglomerate. He showed receipts proving he had bought the Unoco products from authorized dealers and repacked them in small containers for resale.

Relying on these developments, Reyes sued for illegal dismissal. The labor arbiter dismissed the complaint, but the labor commission reversed, finding no shadow of serious misconduct, fraud, or breach of trust on his part.

Issues

• Whether or not the appeal of Reyes to the labor commission was filed out of time.
• Whether or not the labor commission committed grave abuse of discretion in reversing the labor arbiter's finding of a just cause for dismissal.
• Whether or not the dismissal of Reyes on the ground of loss of trust and confidence was valid.
• Whether or not Reyes is entitled to backwages and reinstatement, or to separation pay in lieu of reinstatement.

Applicable Provisions

Article 282 of the Labor Code, as quoted in the decision, provides:

ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes: xxx (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.

This is the provision invoked by Jardine Davies, and the entire case turns on whether the facts proved fall within it.

Ruling

On the first issue, the Court held that the appeal was seasonably filed. The last day, November 2, 1985, was a Saturday and a non-working day at the labor commission; November 3 was a Sunday. The appeal could therefore be filed on the next working day, Monday, November 4, 1985, which is exactly when it was received.

On the second issue, the Court held that certiorari under Rule 65 reaches only want or excess of jurisdiction and grave abuse of discretion. It does not permit an inquiry into the correctness of the evaluation of evidence, nor does it allow the Court to re-examine conflicting evidence, re-evaluate the credibility of witnesses, or substitute its findings for those of an administrative body with expertise in its field. An error in judgment, even if arguable, is not within the ambit of the extraordinary remedy.

On the third issue, the Court accepted that loss of trust and confidence is a valid ground for dismissal, but held that it must rest on particular proven facts. The employer must clearly and convincingly prove by substantial evidence the facts on which the loss of confidence is fairly made to rest; otherwise the dismissal is illegal. Proof beyond reasonable doubt is not required, but the basis must still be clearly and convincingly established. Here the surveillance report was unreliable, its conclusions being mere deductions without substantial corroborating evidence. The company never submitted the seized goods to laboratory testing to determine their genuineness, and its unexplained failure to do so was a virtual affirmation that the articles were genuine. The court order releasing the seized goods further confirmed that the company lacked factual basis for its distrust, since the court found Donato Reyes to be the lessee and owner of the goods, with no proof that they belonged to Reyes. The labor commission therefore did not gravely abuse its discretion.

On the fourth issue, the Court held that backwages are proper, but because Reyes was dismissed on February 23, 1983, before the effectivity of Republic Act Number 6715 on March 21, 1989, he is entitled to backwages of up to three years only, computed on his last monthly salary. Reinstatement was not warranted given the antagonism, the imputations of a criminal act, and the length of time he had been out of work. Separation pay of one month's pay for every year of service was awarded instead, a fraction of at least six months counting as one whole year, and the three-year backwage period is included in the computation.

Doctrine

Loss of trust and confidence is a just cause for dismissal under Article 282 of the Labor Code, but only where the employee holds a position of trust and confidence, and only where the act complained of is work-related, showing the employee unfit to continue working for the employer. Proof beyond reasonable doubt is not required; some basis for the loss of confidence suffices, such as a reasonable ground to believe the employee is responsible for the misconduct. Yet the employer must clearly and convincingly prove by substantial evidence the particular facts on which the loss of confidence rests. The right to dismiss on this ground cannot be exercised arbitrarily, lest the employee's constitutional right to security of tenure be rendered nugatory. On remedy, employees illegally dismissed before March 21, 1989 are entitled to backwages of up to three years without deduction or qualification, while those dismissed after that date receive full backwages inclusive of allowances and other benefits.

Disposition

The petition was denied for lack of merit, the labor commission's decision was affirmed, and Jardine Davies was ordered to pay Reyes backwages of up to three years and separation pay in lieu of reinstatement of one month's pay for every year of service, with costs against the company.

Remember This

Memorize the line: loss of confidence must arise from particular proven facts, clearly and convincingly established by substantial evidence, or the dismissal is illegal. Examiners use this case to test the quantum of proof in loss of confidence dismissals and the cut-off rule on backwages before and after Republic Act Number 6715.