JEAN C. AURELIO, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, NORTHWESTERN COLLEGE, BEN A. NICOLAS, ERNESTO B. ASUNCION, JOFFREY AURELIO, JOSE G. CASTRO, FRANCISCO SANTE…

The appeal before us has reference to the decision of the
National Labor Relations Commission (NLRC) dated March 27, 1991 which modified
the decision of the Labor Arbiter involving petitioner’s charge of illegal
dismissal. The reviewing authority
merely awarded separation pay equivalent to one-half month pay for every year
of service and denied petitioner’s
prayer for reinstatement, backwages, moral and exemplary damages, including
attorney’s fees (p. 89, Rollo).

Petitioner started as
clinical instructor of the College of Nursing of Northwestern College (NWC) in
June 1977 with a basic salary of P600.00 a month. In October 1979, petitioner was appointed Dean of the College of
Nursing with a starting salary of P3,000.00 a month. In September 1981, petitioner was promoted to College
Administrator or Vice-President for Administration, retaining concurrently her
position of Dean of the College of Nursing, with an increased salary of
P3,500.00 per month. She was later
promoted to Executive Vice-President with the corresponding salary of
P7,500.00.

On April 10, 1988, petitioner’s husband, Oscar
Aurelio, a stockholder of respondent NWC, was elected Auditor. On May 1, 1988, the individual respondents,
as Board of Directors, took over the management of respondent NWC. This new management unleashed a series of
reorganization affecting the petitioner and her husband, Oscar Aurelio, to wit:

(a) On May 30, 1988,
petitioner’s husband, then in the United States, was removed as Auditor of the
college;

(b) Without prior notice,
petitioner’s office was stripped of its facilities. First, the airconditioner, then the refrigerator;

(c) Respondents asked petitioner, “to
justify,” the continued use of the conference room which was used for team
teaching; the librarian of the College of Nursing was removed and assigned as
secretary of the Chairman of Academic Matters and all the facilities of the College
of Nursing were taken over by the individual respondents;

(d) Petitioner’s salary
was reduced from P7,500.00 to P5,000.00 then to P2,500.00 a month:

(e) While petitioner was absent because of
influenza, respondents assigned her office room to the Chairman on Management
and Planning; the Nursing conference room was assigned as the lounge room of
the members of the Board of Directors;

Because
of the indignities and humiliation suffered by the petitioner, she wrote a
letter on September 20, 1988 informing the President of Northwestern College
that she was going on an indefinite leave, thus:

Dear Sir:

This is to inform your office that I am taking an indefinite leave
of absence effective immediately due to the following reasons:

1. My having been demoted
in rank from Executive Vice-President to Vice-President for Administration to
Dean of the College of Nursing without prior notice and without any dialogue
whatsoever with management. This
mote(s) of the administration was coupled with innuendos perpetuated by some
people close to management giving rise to speculations that besmirched my
reputation and character.

2. Since the new
management took over on May 1, 1988, my office has been stripped of its
facilities one after the other, again without prior notice. First, the air-conditioner was removed, then
the refrigerator.

3. My efforts and that of
my staff to complete and improve our physical plant and facilities such as the
conference room, library, team teaching requirements and nutrition laboratory
did not get any support from management. In fact, our efforts were even seen as mere exercises to satisfy our
personal whims. Imagine being asked to
“justify” the continued use of our conference room which is a basic
requirement for team teaching? To make
matters worse, our librarian was assigned as secretary to the Chairman of
Academic Matters and our facilities were taken over by same officers of the
college.

4. My salary was reduced
from P7,500.00 per month to P5,000.00, and then finally to P2,500.00 per month
since May 1, 1980. This defies logic
because in 1979, I had the starting salary of P3,000.00. Nine years later, I am to be paid P2,500.00
per month.

5. To cap all these, while
I was absent because of influenza, management decided to assign my office to
the Chairman on Management Planning, and the
Nursing conference room to the members of the board to be used as their lounging room. This singular act has caused me extreme
anguish and embarrassment which I feel don’t deserve and it has caused much damage
to my integrity.

Because of the above-cited development, I feel that I have been
inflicted with an injustice that has caused irreparable damage to my
reputation, and has rendered me ineffective in discharging my duties as member
of administration and as Dean of the College of Nursing.

Yours truly,

(SGD) Jean C. Aurelio.

(pp. 6-7, Rollo.)

On September 21, 1988,
petitioner sent a copy of the above letter to the Secretary of Education,
Culture and Sports praying for assistance. On October 26, 1988, the Secretary of Education, Culture and Sports
referred the letter to the DECS Director of Region I. On October 28, 1988, the Director of the Bureau of Higher
Education ordered the DECS Regional Director of Region I through
telegram “to investigate NWC College of Nursing, Laoag City immediately
PRC recommends suspension of the operation of College of Nursing due to lack of
Dean and faculty to supervise students.” On November 3, 1988, the Regional
Director informed respondent Northwestern College of the order of investigation
and that pursuant thereto, the Director was sending her representatives
“to look into the problem stated thereon which is apparently facing the
College of Nursing.” On November 7, 1988, the representatives of the Regional
Director submitted their official findings and recommendations confirming the
truth of the allegations of petitioner in her September 20, 1988 letter. The DECS also confirmed the willingness of
petitioner to withdraw her indefinite leave of absence. The matter of petitioner’s resumption of her
position as Dean of the College of Nursing was addressed by the DECS to the
attention of respondents who were given up to November 13, 1988 to make their
decision. On November 7, 1988, the
Regional Director sent a telegram stating: “Please submit written decision status position dean college of
nursing not later than November 14, 1988 pd.”

Private respondents did not answer. They refused to accept petitioner. On November 16, 1988, petitioner filed her complaint for illegal dismissal against private respondents and
prayed for reinstatement plus backwages, moral and exemplary damages, and
attorney’s fees. At the arbitration
level, petitioner and private respondents submitted their respective position
papers. On December 29, 1989, the labor arbiter
issued a decision dismissing the complaint.

It appears that Private
respondent Northwestern College is managed by its Board of Directors elected annually by the
stockholders and who serve as such for the ensuing year until their successors
shall have been duly elected and qualified.

The individual
respondents Ben Nicolas, Ernesto Asuncion, Joffrey Aurelio, Alva B. Caday, Lilia Paz, Wilfredo Santillan,
and Glen Aquino, are members of the Board of Directors of Northwestern College
of which Jean C. Aurelio is a
stockholder.

On April 30, 1988, the
annual regular meeting of stockholders was held at the principal office of the
corporation in Laoag City. Elected
Directors were the following: Alva Caday, Lucidia Flores, Nicolas Nicolas, Oscar Aurelio, Cherry
Caday, Lilia Paz, Ben Nicolas, Joffrey Aurelio, Francisco Santella, Glenn Aquino, and Wilfredo Nicolas. The following members were elected as officers of the Northwestern
College: Alva Caday, Chairman of the
Board; Ben Nicolas, Vice-Chairman and President; Joffrey Aurelio, Treasurer;
Oscar Aurelio, Corporate Auditor and Lucidia Flores, Corporate Secretary. Nicolas Nicolas, Oscar Aurelio, and Cherry
Caday later resigned and in their stead, Atty. Ernesto Asuncion, Atty. Jose
Castro, and Dr. Juanito Chan were elected by the stockholders.

Since their election into
office, the Board members have taken effective control of the management of the college and have regularly exercised their
corporate powers. The new Board conducted
a preliminary audit which revealed that
the college was financially distressed, unable to meet its maturing obligations
with its creditor bank. The new
management headed by its President, Ben Nicolas, embarked on a realignment of
positions and functions of the different department in order to minimize
expenditures.

As a result of the audit,
NWC was compelled to abolish the administrative positions held by petitioner,
which she did not contest, because of the following reasons:

a) In 1988, NWC realized
that it was violating the Administrative Manual for Private Schools. Thus, the position of Administrator/Vice
President had to be eliminated;

b) At that time, NWC was
reeling from the effects of its failure to meet its obligations with its
creditors and all efforts to minimize expenditures were being undertaken;

c)  NWC realized after a study of the realignment of the
positions that the functions and duties of Administrator/Vice President for
Administration were being performed by the President. Consequently, the former positions had become redundant.

During the first semester of the school year 1988-1989,
Northwestern College uncovered irregularities allegedly committed by the petitioner, to wit:

a) She personally exacted
without receipt P25.00 from every student in the College of Nursing for the
maintenance of the College Library.

b) She did not remit nor
liquidate the sum of P600.00 out of the P1,295.91 Related Learning Experience
(RLE) fee paid by all students in the College of Nursing. The total sum thereof in the amount of
P114,280.00 suspiciously remained unremitted and unliquidated for an
unreasonable length of time.

c)  She drew salaries for
teaching in the College of Nursing although she did not have a teaching
load. Before the investigation could be
concluded, petitioner sent a letter
to the President of the college on September 20, 1988 manifesting that she is
on an indefinite leave of absence.

On December 29, 1989, the
labor arbiter dismissed the complaint on the basis of these findings which were
adopted by the NLRC:

…Undoubtedly, complainant had occupied managerial positions, thus
the rule of loss of trust and confidence applies. This office is however aware that allegations of loss of trust
and confidence must have some basis and such is not lacking on record.

Respondent had alleged and submitted evidence of irregularities of
complainant during her tenure at the college. The complainant instead of refuting the charges cited alleged
irregularities committed by the respondents in their respective offices. Needless to state, the allegation does not
detract anything from the charges of irregularities against her by the records
respondent school. As the records of
this case stand, our complainant has not sufficiently explained the
substantiated charges of Northwestern College anent exaction of P25.00 from
every student of the College of nursing, receipt of salaries for alleged
teaching services for which she did not have any teaching load and failure to
remit nor liquidate a total amount of P120,000.00. (p. 29 and 94, Rollo.)

It must be emphasized
that the rules of dismissal for managerial employees are different from those
governing ordinary employees for it would be unjust and
inequitable to compel an employer to continue with the employment of a person
who occupies a managerial and sensitive position despite loss of trust and
confidence. At the very least, the
relationship must be considered seriously strained, foreclosing the remedy of
reinstatement. We find that the
allegations of irregularities were sufficiently substantiated thus justifying
petitioner’s separation.

Moreover, and still on
the issue of dismissal, the records disclose that in holding on to the two
positions, petitioner violated the Administrative Manual for Private
Schools. Thus, the respondent had no
other recourse but to take away one of the positions from her or abolish the
same. Undoubtedly, the College Board of
Directors has the authority to reorganize and streamline the operations of the
college with the end in view of minimizing expenditures.

We believe that the
instant case was an offshoot of
a corporate reorganization, a
prerogative reposed on the Board of Directors of the College.

The NLRC found that:

Admittedly, complainant was a managerial employee who has to have the
complete trust and confidence of respondents. While it may be true that complainant was not strictly an accountable
employee primarily responsible for disbursement of whatever funds, respondents
had some basis in losing its trust and confidence in complainant. Respondents’ evidence showed that under the
principle of command responsibility, complainant was in a sense responsible in
the monitoring of monetary transactions involving funds from library
collections and from Related Learning Science collection (pp. 29-32, 136). For it has been held that in case of
termination due to loss of trust and confidence proof beyond reasonable doubt
of misconduct is not necessary but some basis being sufficient (Villadolid vs.
Inciong, 121 SCRA 205).

However, we find that complainant was not accorded notice and
investigation prior to termination. Indeed, circumstances herein resulted in constructive dismissal. We lend credence to complainant’s allegation
that investigation was conducted after she tendered her indefinite leave. Law and jurisprudence mandate due process
prior to termination (Century Textile vs. NLRC, 161 SCRA 528). Considering the circumstances obtaining and
in the spirit of compassionate justice, we find complainant entitled to
separation pay, equivalent to one-half month per year of service based on her
salary of P7,500.00 or the total amount of P32,750.00.

Except for the allegation
on constructive dismissal, this petition is a repetition of what petitioner had
already alleged below and which the labor arbiter and the NLRC dismissed for
lack of merit.

Petitioner’s claim of
constructive dismissal stems from her alleged removal from the positions of
Administrator, Vice President for Administration and Executive Vice
President. From the time petitioner
assumed the position of Executive Vice President, she did not possess any legal
right to claim security of tenure concerning this position because she assumed
the same without authority from the Board of Directors. Petitioner cannot claim that she was dismissed
from the position of Administrator and Vice-President for Administration
because her continuous occupation of the positions is at the discretion or
pleasure of the Board of Directors.

In La Sallete of
Santiago, Inc. vs. NLRC (195 SCRA 80 [1991]), this Court explained:

The acquisition of security of tenure by the teacher in the manner
indicated signifies that he shall thenceforth have the right to remain in
employment as such teacher until he reaches the compulsory retirement age in
accordance with the rules of the school or the law. That tenure, once acquired, cannot be adversely affected or
defeated by requiring the teacher to execute contracts stipulating the
termination of his employment upon the expiration of a fixed period or
term. Contracts of that sort are
anathema and will be struck down as null and void.

Now, a teacher may also be appointed as a department head or administrative officer of the
school, e.g., as member of the school’s governing council, as college dean or
assistant dean, as high school principal, as college secretary. Except in the case of a clear and explicit agreement to the contrary, the
acceptance by a teacher of an administrative position offered to him or to
which he might have aspired, does not operate as a relinquishment or loss by
him of his security of tenure as a faculty member; he retains his tenure as a teacher during all the time that he
occupies the additional position of department head or administrative officer
of the school. Indeed, the agreement
between him and the school may very well include a provision for him to
continue teaching even on a part-time basis.

The teacher designated as administrative officer ordinarily serves
for a definite term or at the pleasure of the school head or board of trustees or
regents depending on the rules of the school and the agreement he may enter
into with the institution. This appears
to the Court to be the invariable practice in most private schools, the purpose
being, as the Court en banc has also had occasion to point out, to afford to as
many of the teaching staff as possible the opportunity to serve as dean or
principal or as administrative officer of one type or another. There is, to be sure, nothing whatever amiss
in said practice of having teachers serve as administrative officials for a
fixed term or in a non-permanent
capacity.

x x x

x x x

x x x

A distinction should thus be drawn between the teaching staff of private
educational institutions, on one hand–teachers, assistant instructors, assist­ant
professors, associate professors, full professors–and department or
administrative heads or officials on the other–college or department
secretaries, principals, directors, assistant deans, deans. The teaching staff, the faculty members, may
and should acquire tenure in accordance with the rules and regulations of the
Department of Education and Culture and the school’s own rules and
standards. On the other hand, teachers
appointed to serve as administrative officials do not normally and should not
expect to, acquire a second or additional tenure. The acquisition of
such an additional tenure is not normal, is the exception rather than the rule,
and should therefore be clearly and specifically provided by law or
contract. (at pp. 82-83, and 85.)

The management of NWC
rests on its Board of Directors including the selection of members of the
faculty who may be allowed to assume other positions in the college aside from
that of teacher or instructor. In 1988,
when the then new Board of Directors abolished the additional positions held by
the petitioner, it was merely exercising its right.

The Board abolished the
positions not because the petitioner was the occupant thereof but because the
positions had become redundant with functions overlapping those of the
President of the college. The Board
realized that the college was violating the Administrative Manual for Private
School which requires that all collegiate departments should have a full-time
head.

In Philippine School
of Business Administration et al. vs. Labor Arbiter Lacandola S. Leano and
Rufino R. Tan (127 SCRA 778 [1984]), this Court held:

This is not a case of dismissal. The situation is that of a corporate office having been declared vacant,
and of TAN’s not having been elected thereafter. The matter of whom to elect is
a prerogative that belongs to the Board, and involves the exercise of
deliberate choice and the
faculty of discriminative
selection. Generally speaking, the
relationship of a person to a corporation, whether as officer or agent or
employee, is not determined by the nature of the services performed, but by the
incidents of the relationship as they actually exist. (At p. 783.)

The Board of Directors of
NWC merely exercised rights vested in it by the Articles of Incorporation. Petitioner failed to refute the evidence
proffered by NWC before the labor
arbiter. In her appeal to the NLRC,
petitioner also failed to rebut the findings of the labor arbiter. In the instant petition, she has again
failed to overturn private respondents’ evidence as well as the findings of the labor arbiter which were affirmed by the NLRC.

Petitioner’s application
for an indefinite leave of
absence was not approved by the college authorities, but this notwithstanding, she failed to follow-up her
application and did not report for work. Believing she was dismissed, petitioner filed the complaint for illegal
dismissal, illegal deductions, underpayment, unpaid wages or commissions and
for moral damages and attorney’s fees on November 16, 1988.

As pointed out earlier, the rules on termination of employment,
penalties for infractions, and resort to concerted actions, insofar as
managerial employees are concerned, are not necessarily the same as those
applicable to termination of employment
of ordinary employees. Employers,
generally, are allowed a wider latitude of discretion in
terminating the employment of managerial personnel or those of similar rank
performing functions which by their nature require the employer’s trust and
confidence, than in the case of ordinary rank-and-file employees (Cruz vs. Medina, 177 SCRA 565 (1989]).

Article 282(c) of the Labor Code provides that an employer may
terminate an employment for “fraud or willful breach by the employee of
the trust reposed in him by his
employer or his duly authorized
representative.”

Under this provision, loss of trust and
confidence is a valid ground for dismissing an employee. Termination of employment on this ground
does not require proof beyond reasonable doubt. All that is needed is for the employer to
establish sufficient basis for the dismissal of the employee (Cruz vs. Medina, supra).

Both the labor arbiter and the public respondent NLRC found that
there is some basis for respondent NWC’s loss of trust and confidence on
petitioner.

The dismissal of the
petitioner was for a just and valid cause. However, public respondent gave credence to petitioner’s allegation that
she was not accorded notice and hearing prior to termination. It appears on record that the investigation
of petitioner’s alleged irregularities was conducted after the filing of the
complaint for illegal dismissal.

Under Section 1, Rule XIV
of the Implementing Rules and Regulations of the Labor Code, the dismissal of
an employee must be for a just or authorized cause and after due process.

The two requirements of
this legal provision are:

1.  The legality of the act
of dismissal, that is, dismissal under the ground provided under Article 283 of
the New Labor Code; and

2. The legality in the manner of dismissal, that is, with due
observance of the procedural requirements of Sections 2, 5, and 6 of Batas
Pambansa Blg. 130 (Shoemart vs. NLRC, 176 SCRA 385 [1989]).

While the Labor Code
treats of the nature and the remedies available with regard to the first, such
as: (a) reinstatement to his former
position without loss of seniority rights, and (b) payment of backwages
corresponding to the period from his illegal dismissal up to actual reinstatement,
said Code does not deal at all with the second, that is, the manner of
dismissal, which is therefore, governed exclusively by the Civil Code (Primero
vs. IAC, 156 SCRA 436 [1987]; Shoemart vs. NLRC, supra).

In cases where there was a valid ground to dismiss
an employee but there was non-observance of due process, this Court held that
only a sanction must be imposed upon the employer for failure to give formal
notice and to conduct an investigation required by law before
dismissing the employee in consonance with the ruling in Wenphil v. NLRC,
170 SCRA 69 (1989); Shoemart, Inc. vs. NLRC, supra; and in Pacific
Mills, Inc. vs. Zenaida Alonzo, 199 SCRA 617 (1991).

In Wenphil, we
held:

However, the petitioner must nevertheless be held to account for
failure to extend to private respondent his right to an investigation before
causing his dismissal. The rule is
explicit as discussed above. The
dismissal of an employee must be for just or authorized cause and after due
process (Emphasis in the original). Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner
from employment. Considering the
circumstance of this case petitioner must indemnify the private respondent the
amount of P1,000.00. The measure of
this award depends on the facts of each case and the gravity of the omission
committed by the employer. (at p. 76,
reiterated in Pacific Mills, supra, at p. 261.)

Public respondent’s
finding that petitioner was not afforded due process is correct but the
Commission erred when it awarded separation pay in the amount of
P32,750.00. In the Pacific Mills,
Inc. and Wenphil cases, this Court merely awarded P1,000.00 as
penalty for non-observance of due process.

The Board of Directors,
composed of the individual private respondents herein, has the power granted by
the Corporation Code to implement a reorganization of respondent college’s
offices, including the abolition of various positions, since it is implied or incidental to its power
to conduct the regular business affairs of the corporation.

The prerogative of
management to conduct its own business affairs to achieve its purposes cannot
be denied (San Miguel Brewery Sales Force Union [PTGHWO] vs. Ople, 110 SCRA
25 [1981]; Abbot Laboratories vs. NLRC, 154 SCRA 713 [1987]). Management is at liberty, absent any malice on its part, to abolish
positions which it deems no longer necessary (Great Pacific Life Assurance
Corp. vs. NLRC, 188 SCRA 139 [1990]).

When petitioner was
stripped by the Board of her positions as Executive Vice President and Vice
President for Administration, with a corresponding reduction in salary, the
Board did not act in a capricious, whimsical, and arbitrary manner, thus
negating malice and bad faith.

WHEREFORE, the decision under review is hereby
AFFIRMED with the MODIFICATION that the award of separation pay is DELETED and
that private respondents are ORDERED to pay petitioner the amount of One
Thousand Pesos (P1,000.00) as indemnity for non-observance of due process.

SO ORDERED.

Feliciano, (Acting Chairman), Bidin, Davide, Jr., and Romero, JJ., concur.