In the case of Lourdes School Quezon City, Inc. v. Garcia, the Supreme Court ruled that while an employer can terminate a managerial employee for a just cause, such as loss of trust and confidence, this prerogative must be exercised without abuse of discretion and tempered with compassion. The dismissal of an employee must be supported by substantial evidence proving dishonest, deceitful, or fraudulent acts; mere negligence or carelessness, without malicious intent, is not a justifiable ground for termination.

Oversupply of Notebooks and Missing Funds: Did the Chief Accountant’s Actions Warrant Dismissal?

Lourdes School Quezon City, Inc. (LSQC) conducted investigations into potential irregularities concerning notebook purchases and textbook sales. Luz V. Garcia, the Chief Accountant, was implicated in both issues. Committees formed by LSQC suggested Garcia’s dismissal based on breach of trust and gross negligence. The school alleged Garcia provided misleading information about notebook inventory, favoring a supplier, and knowingly allowed theft in textbook sales. Garcia was subsequently terminated, prompting her to file an illegal dismissal case.

The Labor Arbiter (LA) initially dismissed Garcia’s complaint, a decision later upheld by the National Labor Relations Commission (NLRC). The NLRC emphasized Garcia’s negligence in her role as Chief Accountant, particularly her failure to properly supervise inventory and safeguard unused official receipts, which facilitated fraudulent activities. However, the Court of Appeals (CA) reversed these rulings, finding that the NLRC’s conclusions lacked substantial evidence. The CA highlighted that Garcia’s actions did not demonstrate malicious intent or direct involvement in the alleged irregularities. The Supreme Court affirmed the CA’s decision, emphasizing that termination based on loss of trust and confidence requires proof of willful breach of duty, not mere negligence. This decision underscores the importance of substantial evidence in justifying employee dismissals, especially for those in positions of trust.

The Supreme Court’s decision hinged on the principle that **loss of trust and confidence** must be based on a *willful breach* of duty, not merely an ordinary breach. According to Article 282(c) of the Labor Code, a willful breach is one done intentionally, knowingly, and purposely, without justifiable excuse. In contrast, an act done carelessly, thoughtlessly, heedlessly, or inadvertently does not constitute a willful breach. The court emphasized that loss of trust and confidence should not be used as a subterfuge for illegal, improper, or unjustified causes; it must be genuine and based on substantial grounds.

In Garcia’s case, the evidence presented did not sufficiently demonstrate that she acted with malicious intent or fraudulent purpose. While the school argued that Garcia provided incorrect figures regarding notebook inventory and failed to adequately supervise the handling of official receipts, the court found these lapses to be, at most, negligence rather than a deliberate breach of trust. The court noted that the school’s claims relied heavily on connecting Garcia to the actions of other employees, such as Salas, without providing direct evidence of collusion or malicious intent.

Building on this principle, the Supreme Court scrutinized the evidence concerning the **oversupply of notebooks**. The court found no substantial evidence proving Garcia provided incorrect figures to Fr. Ala intentionally. The court observed the absence of evidence concerning the frequency of misinformation, the disproportion between the provided numbers and actual student needs, the preferential treatment of a specific supplier, and any personal benefit Garcia derived from the oversupply. Given these evidentiary gaps, the court deemed the school’s arguments insufficient to establish a willful breach of trust.

This approach contrasts with the NLRC’s view, which focused on Garcia’s failure to prevent the oversupply of notebooks by advising Fr. Ala of the existing stock. The CA and subsequently the Supreme Court, however, underscored that without a specific policy or job description mandating Garcia to advise on the correct number of books, the mere fact that Fr. Ala trusted her did not automatically vest her with such responsibility. The Supreme Court emphasized that employers must base decisions to terminate employment on clearly established facts, not on mere suspicions or speculation.

Regarding the **theft in textbook sales**, the Supreme Court again found a lack of evidence implicating Garcia. Although the school argued Garcia knew about the modus operandi of De Leon and Costales, the court highlighted there was no definitive proof that the receipts used were from the unused ORs under Garcia’s custody. The court further noted that De Leon’s confession did not implicate Garcia, and Garcia even confronted De Leon upon discovering discrepancies in the book sale. The court concluded that dismissing Garcia based on mere suspicion, surmises, and speculations was unjustified.

The concept of **gross negligence** was also central to the court’s analysis. The school argued that Garcia’s negligence, even if not habitual, was gross enough to warrant dismissal. However, the court clarified that gross negligence implies a want or absence of or failure to exercise slight care or diligence or the entire absence of care. The evidence did not demonstrate that Garcia’s actions met this high standard. The court pointed out that Garcia had no reason to distrust Salas, De Leon, or Costales, who had not previously engaged in misconduct. Therefore, her misplaced trust constituted an error of judgment but not gross negligence warranting dismissal.

Moreover, the court considered the unequal treatment of employees involved in the irregularities. De Leon, who admitted guilt in the textbook theft, was not dismissed but instead recommended for a position that did not involve handling money. Salas was completely exonerated from any involvement. This disparity raised suspicion of ill motive on the part of the school, further undermining the justification for Garcia’s termination.

In light of these considerations, the Supreme Court reinforced the principle that employers must exercise their prerogative to dismiss employees with compassion and understanding. The court stated that what is at stake is not only the employee’s position but also their livelihood. The court reaffirmed that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. Given the lack of clearly established facts supporting the breach of trust, the court ruled that Garcia’s dismissal could not be allowed.

FAQs

What was the key issue in this case?	The central issue was whether the dismissal of Luz V. Garcia, the Chief Accountant of Lourdes School Quezon City, Inc., was valid based on loss of trust and confidence due to alleged negligence and involvement in irregularities.
What did the Supreme Court rule regarding Garcia’s dismissal?	The Supreme Court ruled that Garcia’s dismissal was illegal, as the evidence presented by the school did not sufficiently demonstrate a willful breach of trust or gross negligence warranting termination. The court emphasized that dismissal must be based on substantial evidence of dishonest, deceitful, or fraudulent acts, not mere negligence.
What is the difference between ordinary breach and willful breach of duty?	An ordinary breach is a simple failure to fulfill a duty, while a willful breach is an intentional, knowing, and purposeful violation without justifiable excuse, as defined in Article 282(c) of the Labor Code. The Supreme Court emphasized that loss of trust and confidence must be based on willful breach to justify dismissal.
What was the school’s argument for dismissing Garcia?	The school argued that Garcia was negligent in her duties as Chief Accountant by providing incorrect information about notebook inventory and failing to adequately supervise the handling of official receipts, thereby contributing to an oversupply of notebooks and theft in textbook sales.
How did the Court assess the evidence regarding the oversupply of notebooks?	The Court found no substantial evidence proving Garcia intentionally provided incorrect figures or benefitted from the oversupply. The Court stated that the school’s claims lacked details regarding frequency, disproportion, and any personal gain Garcia received.
What was the Court’s view on the textbook sales irregularities?	The Court found no concrete evidence implicating Garcia in the theft of textbook sales. The Court noted that the confession of De Leon, one of the individuals involved in the theft, did not implicate Garcia, further undermining the school’s claims.
What constitutes gross negligence in the context of employment?	Gross negligence implies a want or absence of or failure to exercise slight care or diligence or the entire absence of care. The evidence in this case did not demonstrate that Garcia’s actions met this standard, as there was no indication she had reason to distrust her colleagues.
Why did the Court find the school’s actions to be suspicious?	The Court noted the unequal treatment of employees involved in the irregularities, as De Leon, who admitted guilt, was not dismissed, and Salas was completely exonerated. This disparity raised suspicion of ill motive on the part of the school in dismissing Garcia.
What broader principle did the Supreme Court reinforce in this case?	The Supreme Court reinforced the principle that employers must exercise their prerogative to dismiss employees with compassion and understanding, considering the employee’s livelihood at stake. The Court also reiterated that doubts between the employer’s and employee’s evidence must be resolved in favor of the employee.

In conclusion, the Supreme Court’s decision in Lourdes School Quezon City, Inc. v. Garcia underscores the necessity of substantial evidence and genuine cause when terminating an employee based on loss of trust and confidence. It serves as a reminder that employers must act fairly and reasonably, especially when the employee’s livelihood is at stake, and that mere negligence, without malicious intent, is typically insufficient grounds for dismissal.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Lourdes School Quezon City, Inc. v. Garcia, G.R. No. 213128, February 07, 2018