Judicious Admission of Evidence on Appeal

Sheila was a sales clerk at Marivin’s Boutique and Merchandise outlet in La Union.

Sheila claimed that on February 6, 2007, she was summarily dismissed from employment without just cause and due process. Hence, she filed a complaint for illegal dismissal against Marivin.

Marivin denied illegally dismissing Sheila. She contended that despite infractions amounting to breach of trust and confidence, Sheila was never terminated from the service and had instead abandoned her work.

The Office of the Executive Labor Arbiter declared that Sheila was illegally dismissed from employment and that she did not abandon her work since she even reported for work on February 6, 2007 despite the fact that her notice of termination was already posted in the premises of the outlet. Said Office also found that Sheila was not accorded procedural due process, as Marivin did not conduct any notice or investigation and did not allow her to explain her side. Thus, the Office of the Executive Labor Arbiter awarded Sheila backwages and separation pay.

Marivin appealed to the National Labor Relations Commission and mentioned the following infractions committed by Sheila:

• Failure to issue receipts for payments made by the clients of the boutique;
• Listing of certain fully-paid customers as having uncollected payments;
• Borrowing of money from business clients and offsetting her loan against the receivables of the business from said clients;
• Failure to reflect in the inventory a total of 3,945 items amounting to P396,728.00;
• Failure to remit cash paid by customers totalling P62,875.00; and
• Failure to explain missing items amounting to P224,699.00.

Marivin added that Sheila simply left the key to the outlet and never came back.

Marivin stated that she initiated a complaint with the local police authorities wherein Sheila was invited to explain. Sheila appeared but failed to identify the customers whom she reported to have availed of items on credit.

Marivin contended that there was no illegal dismissal to speak of. Marivin argued that there was sufficient evidence that Sheila committed serious misconduct resulting in loss of trust and confidence. According to Marivin, the Office of the Executive Labor Arbiter failed to appreciate affidavits of customers, Sheila’s promissory note, and inventory ledgers duly signed by Sheila, which all established her serious misconduct warranting her dismissal from employment on the ground of loss of trust and confidence.

The National Labor Relations Commission dismissed Marivin’s appeal for lack of merit.

The Commission pointed out that it could not entertain Marivin’s allegations that Sheila committed acts of serious misconduct since Marivin was not allowed to change her theory on appeal, i.e., from abandonment of work to a valid dismissal.

The Commission noted that no inventory ledgers allegedly signed by Sheila were presented for the Office of the Executive Labor Arbiter’s consideration. Also, the Commission found no proof that Sheila was responsible for the missing stocks.

The Commission also noted discrepancies between the alleged amount lost as presented by Marivin. It even found that Sheila was on leave during the period when Marivin supposedly incurred losses, which cast doubt on the veracity of the audit report.

In addition, the Commission noticed that the copies of order receipts allegedly issued by Sheila to fictitious persons did not bear her signature while some bore only her printed name.

Finally, the Commission disregarded the itemized list of lost stocks with the first page bearing Sheila’s signature because it was belatedly submitted only in Marivin’s motion for reconsideration.

The Court of Appeals ruled that Marivin did not change her theory on appeal and that the allegation of “loss of trust and confidence” as a ground for Sheila’s termination was raised as an issue before the Office of the Executive Labor Arbiter.

The Court of Appeals found that in Marivin’s Position Paper, the theory of “loss of trust and confidence” was alluded to when Marivin presented the inventory conducted by the bookkeeper showing that various stocks were missing under Sheila’s custody. The Court of Appeals further found that Marivin did not confine her arguments to “abandonment” and that she emphasized Sheila’s violation of business policies.

Moreover, the Court of Appeals held that the National Labor Relations Commission is not precluded from receiving evidence on appeal as technical rules of evidence are not binding in labor cases. Thus, the Court of Appeals stated that even if the evidence was not submitted before the Office of the Executive Labor Arbiter, due introduction of evidence before the Commission should merit its admission in keeping with fairness and equity.

The Court of Appeals then ruled that there was just cause for Sheila’s dismissal, i.e., loss of trust and confidence. It noted that Marivin established by substantial evidence the following infractions committed by Sheila:

• appropriation for her personal use daily sales amounting to P6,025.00;
• losing various stocks under her care; and
• issuing items to fictitious customers.

The Court of Appeals explained that as a sales clerk, Sheila occupied a position of trust and confidence since she was tasked to handle the stocks/inventory and funds of the business.

Nonetheless, the Court of Appeals highlighted the failure of Marivin to notify Sheila of her infractions and give her a chance to explain. Sheila was awarded nominal damages in the amount of P30,000.00.

Incidentally, record showed that Sheila died during the pendency of the case and was substituted by her parents, Florentino R. Maynes, Sr. and Shirley M. Maynes (Spouses Maynes) when the case reached the Supreme Court.

Was Sheila validly dismissed from employment?

The Supreme Court ruled in the affirmative.

The Court began by recognizing that the validity of Sheila’s dismissal from employment entailed a determination of whether Marivin’s evidence submitted before the National Labor Relations Commission should be considered.

The Court highlighted the well-settled rule that the National Labor Relations Commission is not precluded from receiving evidence, even for the first time on appeal, because technical rules of procedure are not binding in labor cases. The Court stated that labor officials are mandated by the Labor Code of the Philippines to use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. The Court added that even if the evidence was not submitted to the Office of the Labor Arbiter, the fact that it was duly introduced on appeal to the National Labor Relations Commission is enough basis for the latter to be more judicious in admitting the same, instead of falling back on the mere technicality that said evidence can no longer be considered on appeal. Certainly, the Court said, the first course of action would be more consistent with equity and the basic notions of fairness.

Here, the Court held that Marivin could present evidence during the proceedings before the National Labor Relations Commission. It clarified that Sheila was likewise allowed to present controverting evidence thereto. However, the Court found that Sheila did not do so.

The Court stressed that the pieces of documentary evidence submitted by Marivin before the National Labor Relations Commission are material to establish her contention that Sheila committed infractions which led to the loss of trust and confidence reposed upon her. The Court specifically considered the signatures or handwritten notations of Sheila in certain documents as relevant since these rebutted Sheila’s denial. In fine, the Court stated that justice and equity calls for the admission and appreciation of such evidence.

The Supreme Court then agreed with the pronouncement of the Court of Appeals that Marivin did not change her theory on appeal. The Supreme Court found that in her Position Paper, Marivin already put forth the argument of breach of trust being a ground for Sheila’s dismissal from employment and was able to attach affidavits and copies of the inventory in order to substantiate her claim of loss of trust and confidence. Although the Court noticed that Marivin was unable to adequately discuss the reasons for the loss of trust and confidence, the fact remained that she argued her position before the Office of the Executive Labor Arbiter and elaborated the same on appeal with the National Labor Relations Commission by appending additional relevant documents.

With regard to employment termination, the Supreme Court mentioned the settled rule that two requisites must concur to constitute a valid dismissal from employment:

• the dismissal must be for any of the causes expressed in Article 297 of the Labor Code of the Philippines; and
• the employee must be given an opportunity to be heard and to defend himself.

On valid causes for dismissal, the Court centered on Article 297 (c) of the Labor Code of the Philippines, which refers to “fraud or willful breach by the employee of the trust reposed in [him/her] by [his/her] employer” or simply termed as “loss of trust and confidence.”

According to the Court, the requisites for dismissal on the ground of loss of trust and confidence are:

• the employee concerned must be holding a position of trust and confidence; and
• there must be an act that would justify the loss of trust and confidence.

In addition to these requisites, such loss of trust relates to the employee’s performance of duties.

In the present case, the Court found that the position of Sheila was clearly imbued with trust and confidence in that she was tasked to:

• perform overall supervision and control of the outlet including receipt of different items from the main office of the business;
• safekeep and remit daily sales of the business;
• prepare inventory;
• record items released on credit and issue receipts for payments made;
• give items on account or credit to recognized local dealers; and
• exercise discretion on the quantity and manner of payment of items released on credit to local dealers or retailers.

On the other hand, the Court found that Marivin submitted certain documents:

• a “Stocks Lost List” which bore Sheila’s signature and indicated that certain stocks were lost while Sheila was the sales clerk managing the outlet;
• a list signed by Shiela relating to lost payments or products (totalling P88,423.00) which she could not locate or explain; and
• inventory/ledgers and order slips which contained fictitious or non-existent customers.

The Court noted that Sheila neither offered any justification for the uncovered anomalies nor denied the authenticity of her signature in a promissory note wherein she acknowledged taking cash for certain sales and losing stocks.

The Court reiterated that Article 297 of the Labor Code of the Philippines lists loss of trust and confidence in an employee, who is entrusted with fiducial matters, or with the custody, handling, or care and protection of the employer’s property, as a just cause for an employee’s dismissal. The right to terminate employment based on just and authorized causes stems from a similarly protected constitutional guarantee to employers of reasonable return on investments.

Based on the circumstances, the Court concluded that Marivin dismissed Sheila with just cause.

However, the Court discovered that Sheila was denied procedural due process.

The Court explained that procedural due process consists of the twin requirements of notice and hearing. The employer must furnish the employee with two (2) written notices before the termination of employment can be effected:

• the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and
• the second informs the employee of the employer’s decision to dismiss him.

In the present case, the Court found no evidence that Sheila was given any notice to explain or the opportunity to be heard before her dismissal. On the other hand, the Court found that Sheila only learned about her dismissal from service when notices stating her termination from work were posted in the premises of the outlet.

The Court accordingly affirmed the award of nominal damages in Sheila’s favor.

The Court clarified that where the dismissal is for a just cause, the lack of statutory due process should not nullify the dismissal, or render it illegal or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of “dismiss now, pay later.” The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

Further reading:

• Spouses Maynes v. Oreiro, G.R. No. 206109, November 25, 2020.