THIRD DIVISION

G. R. No. 149416 - March 14, 2003

CARMELITA V. SANTOS, Petitioner, vs. SAN MIGUEL CORPORATION, Respondent.

SANDOVAL-GUTIERREZ, J.:

This petition for review on certiorari1 filed by Carmelita V. Santos challenges the Decision of the

Court of Appeals in CA-G.R. SP 64223 dated July 4, 2001 and its Resolution dated August 9,

2002.2

The factual milieu is as follows:

On September 15, 1987, respondent San Miguel Corporation (SMC) appointed petitioner

Carmelita V. Santos as Finance Director of its Beer Division for Luzon Operations.

On September 6, 1989, respondent's Cash Department issued a Memorandum prohibiting the

encashment of personal checks at respondent's Plants and Sales Offices. 3 The Memorandum

reads:

"TO : ALL DIVISION FINANCE OFFICERS

FROM : E. E. NOEL

SUBJECT: CHECK ENCASHMENTS AT PLANTS/SALES OFFICES

Sales Offices. The following are the only items accepted for such accommodation:

SMC checks payable to SMC employees;

RDBP checks payable to SMC employees;

Uncrossed dividend checks.

"Encashments must be made by the payees themselves. The check must be

endorsed by the payee by affixing his/her signature at the back of the same.

"Other items such as SMCESALA, SSS, personal checks are not accepted. x x x"

(emphasis ours)

On January 10, 1991, respondent SMC, through its Cash Management Department, noticed

that petitioner encashed her three (3) personal checks in various Metro Manila Sales Offices,

thus:

1. On December 17, 1990, petitioner Carmelita Santos encashed at respondent's

Makati Sales Office her personal check (UCPB Check No. 036716 dated December

15, 1990) payable to respondent in the amount of P150,000.00. The check was

returned by the bank because it was drawn against insufficient funds. Three days

later, or on December 20, 1990, petitioner paid respondent in cash for the

dishonored check.

2. On January 2, 1991, petitioner encashed at respondent's Pasig Sales Office

another personal check (UCPB Check No. 036718 dated December 20, 1990)

payable to cash in the amount of P140,045.00. When presented for payment, the
 check was dishonored by the drawee bank due to insufficient funds. Petitioner

redeemed the check only on January 19, 1991.

3. On January 19, 1991, petitioner encashed at respondent's Diliman Sales Office

another personal check (UCPB Check No. 036737 dated January 19, 1990) in the

amount of P150,000.00. This check was accepted for payment.

On January 24, 1991, respondent commenced an audit investigation of the personal checks

encashed by petitioner at its sales offices. Pending the audit investigation, petitioner agreed to

take a fifteen-day vacation leave from January 25 to February 14, 1991.

On January 29, 1991, petitioner received from respondent an inter-office memorandum

requiring her to explain in writing why no disciplinary action should be taken against her in view

of her unauthorized encashment of her three personal checks at respondent's sales offices.4

In a reply-memorandum dated January 31, 1991, petitioner admitted that she encashed three

personal checks at respondent's sales offices but claimed that such act was not irregular since

all personnel in respondent's Beer Division were allowed to encash their personal checks at any

sales office upon clearance from the region management concerned. She stated that her

encashment of personal checks had prior clearance. She further clarified that only two of the

three checks she encashed were dishonored for insufficiency of funds, but she promptly funded

the checks upon receipt of notice of such dishonor, thereby causing no damage to respondent.5

Meanwhile, respondent obtained a copy of the audit results and learned that aside from

petitioner's reported encashment of three personal checks, she had previously encashed fifty

(50) personal checks from June 13, 1989 to January 19, 1991 in varying amounts, from

P1,500.00 to P20,000.00, which were not endorsed by the Sales Operations Manager or the
Region Finance Officer. Additionally, petitioner encashed two other personal checks in the

amounts of P150,000.00 on December 12, 1990, and P100,000.00 on December 27, 1990.6

After receiving such report, respondent SMC formed an Investigating Panel to conduct a full-

blown investigation of petitioner's encashment of personal checks and to determine: (1) whether

the region management gave prior consent to the transactions; (2) whether the person or

persons who accepted or encashed the personal checks were in fact authorized to do so; (3) if

there is any policy, procedure and/or accommodation for the encashment of personal checks

and the extent/amount and frequency of such; and (4) the loss or damage accruing to

respondent, if any.7 The Investigating Panel was composed of Ernesto S. Escalante, SMC

Director of Human Resources and Administration, as Chairman, and Jesus Domingo and Jo

Christie Punsalang, as members.

In the meantime, on or February 15, 1991, petitioner returned from her vacation leave and

reported for work. To her surprise, she found that she had been transferred from her room on

the 16th Floor of the Pacific Star Building to a cubicle on the 19th Floor of the same building.

There, she shared a space with the secretary of respondent's Quality Service Manager and

spent each day doing nothing for no assignment was given to her.

Subsequently, petitioner received two inter-office memoranda8 informing her of the

commencement of an administrative investigation pertaining to her encashment of her personal

checks and that she was relieved of her present assignment/position until the conclusion of the

investigation.9

At the first investigative hearing on February 27, 1991, petitioner appeared but requested a

postponement of five days to enable her to submit a supplemental letter to the Investigating

Panel.
On March 5, 1991, petitioner submitted a letter-explanation accusing respondent of prejudging

her case. She claimed to have been unceremoniously relieved of her duties and forced to go on

vacation leave effective January 25, 1991. She demanded that she be re-assigned to her former

position as Finance Director within three (3) days from notice.10

At the next scheduled hearing on March 6, 1991, petitioner appeared without her counsel.

Considering her desire to be assisted by counsel during the investigation, the hearing was reset

to March 15, 1991.

On March 15, 1991, petitioner called the Investigating Panel by phone, expressing her doubts

on its impartiality. Despite notice, she refused to attend subsequent hearings. The Investigating

Panel considered her refusal as a waiver of her right to be heard and thus continued the

investigation in her absence.

On March 21, 1991, the Investigating Panel reported its findings as follows:

"xxx the Investigating Panel finds the encashment by Ms. Santos of her personal

checks with the region/sales offices as highly irregular transactions to the detriment

of the Company.

"The audit made on the personal check encashments by Ms. Santos at the Makati,

Cubao and Diliman Sales Offices show that she has been encashing personal

checks as early as June 1989 which were not endorsed by the sales operations

manager or the region finance officer. Four (4) of these checks were dishonored for

having been drawn against insufficient funds but all were subsequently paid by Ms.

Santos in cash. Further, in addition to the December 15, 1990 and December 20,

1990 bouncing checks of Ms. Santos, she encashed on December 12, 1990 a
personal check for P150,000.00, on December 27, 1990, for P100,000.00, and on

January 19, 1991, yet another personal check for P150,000.00. In all, her personal

check encashments for that short period from December 12, 1990 to January 19,

1991 totalled P670,045.00.

"These encashments from December 12, 1990 to January 19, 1991 not only

violated the policy reiterated in the Cash Management Department Memo dated

September 6, 1989, but even the alleged practice permitting Payroll 2 personnel to

encash their personal checks. The Investigating Panel does not think that the

approval of the region finance officer and the sales operations manager, who

respectively allowed the encashments of the December 15, 1990 and December

20, 1990 bouncing checks, would cure the irregularity of said encashments. These

managerial personnel are not only lower in rank in relation to Ms. Santos in her

capacity as Finance Director, but their authority is limited by the alleged practice

itself: they cannot permit Ms. Santos' check encashments beyond her monthly

salary.

"At the worst, the council of the Investigating Panel finds the facts to sustain prima

facie that the personal check encashments by Ms. Santos constitute estafa through

misappropriation or with abuse of confidence under Article 315, Paragraph 1(b) of

the Revised Penal Code.

"xxx the Investigating Panel finds that Ms. Santos abused her position thereby

giving ground for the Company's loss of trust and confidence upon her and her

dismissal from the Company. Ms. Santos is a managerial employee. As Finance

Director, Ms. Santos holds a position of trust and confidence. She is entrusted with
 the custody, handling, care and protection of Company funds. She is the highest

ranking managerial employee for the finance function of the Luzon Beer Operations

third level from the Division Manager. She has functional control over all the plant

and region finance officers, including cashiers within Luzon operations. As Finance

Director, prudence should have dictated upon Ms. Santos caution and

circumspection particularly as she performs the delicate and sensitive task of

handling the finances of the Company. But this she did not do.

"Except for the two instances where the region finance manager and sales

operations manager separately allowed the encashment by Ms. Santos of her

personal checks, all the other checks were encashed by Ms. Santos without

permission from the region management. In the two instances where clearance was

given, the regional finance manager said that Ms. Santos is her superior that he just

complied with her request, while the manager for sales operations said that he

trusted Ms. Santos, she being a Finance Director. Even then, these managers

acted beyond their authority in giving the permission to Ms. Santos in view of the

amounts involved."11

The Investigating Panel recommended that petitioner Santos be terminated from employment.

The Panel further advised the management to reprimand the regional finance officer and sales

operations manager who permitted the encashment of petitioner's personal checks.

In a memorandum dated April 5, 1991, respondent adopted the findings of the Investigating

Panel and informed petitioner of her termination from employment for abuse of position as

Finance Director, engaging in highly irregular transactions to the detriment of the company and

employer's loss of trust and confidence. 12

filed with the Labor Arbiter a complaint for constructive dismissal against respondent SMC and

Ernesto S. Escalante, Chairman of the Investigating Panel. The complaint was later amended to

illegal dismissal.13

On April 24, 1996, Labor Arbiter Dominador M. Cruz rendered judgment dismissing the

complaint for lack of merit,14 thus:

"WHEREFORE, judgment is hereby rendered, dismissing the instant case for lack

of merit.

"However, for humanitarian considerations, respondent is directed to give

complainant financial assistance equivalent to one month pay.

"SO ORDERED."15

On June 10, 1996, petitioner interposed an appeal to the National Labor Relations Commission

(NLRC).16 Respondent, for its part, filed a partial appeal.

On June 30, 1999, the NLRC promulgated a decision reversing that of the Labor Arbiter. 17 The

NLRC held that respondent SMC was estopped from questioning petitioner's encashment of

personal checks, having allowed such practice for several years prior to the present case.

Further, respondent deprived petitioner of due process by belatedly including her prior

encashments in the administrative complaint, upgrading the charge to abuse of position. This

effectively deprived her of her right to be notified of a clear statement of the cause for

termination and prevented her from refuting a more serious charge. The NLRC likewise doubted

the impartiality of the Investigating Panel considering that it was formed after she had been

constructively dismissed by demotion. The NLRC disposed of the case in this manner:
 "WHEREFORE, in the light of the foregoing, the Decision of the Labor Arbiter dated

24 April 1996 is hereby REVERSED and in view hereof, another judgment is

entered:

1. Ordering respondents to pay complainant's severance pay of one (1)

month per year of service, computed from date of hire on 1 January

1985 until finality of this Decision;

2. Ordering respondents to pay complainant's full backwages based on

her last basic monthly salary of P34,000.00 per month, including

allowances and other benefits of their monetary equivalent from date of

her constructive dismissal on 24 January 1991 until finality of this

Decision;

3. Ordering respondents to pay moral damages of P500,000.00 and

exemplary damages of P500,000.00 and attorney's fees of 10% of the

total monetary award;

4. Dismissing respondents' appeal for utter lack of merit.

"The Research and Examination Division of this Commission is required to compute

the foregoing for purposes of execution.

"SO ORDERED."18

On September 8, 1999, respondent SMC filed with the NLRC a motion for reconsideration 19 but

it was denied in a resolution dated December 29, 2000.20

65 of the Revised Rules of Court, with prayer for a temporary restraining order and/or

preliminary injunction, docketed as CA-G.R. SP No. 64223.21

On July 4, 2001, the Court of Appeals rendered its Decision annulling and setting aside that of

the NLRC,22 thus:

"WHEREFORE, premises considered, the present petition is hereby GIVEN DUE

COURSE and the writ prayed for, accordingly GRANTED. The Decision dated June

30, 1999 and Resolution dated December 29, 2000 of public respondent National

Labor Relations Commission in NLRC NCR CA Case No. 010929-96 (NLRC Case

No. 00-03-01688-91) are hereby both ANNULLED and SET ASIDE and a new one

is hereby entered DISMISSING the Complaint for utter lack of merit."

Petitioner filed with the Court of Appeals a motion for reconsideration, 23 but the same was

denied on August 9, 2001.24

Hence, this recourse.

Petitioner basically raises the issue that respondent SMC dismissed her from employment

without just cause and violated her right to due process.

The petition is bereft of merit.

Under the Labor Code, a valid dismissal from employment requires that: (1) the dismissal must

be for any of the causes expressed in Article 282 of the Labor Code and (2) the employee must

be given an opportunity to be heard and to defend himself. 25 Article 282(c) of the same Code

provides that "willful breach by the employee of the trust reposed in him by his employer" is a
cause for the termination of employment by an employer. 26 This ground should be duly

established.27 Substantial evidence is sufficient as long as such loss of confidence is well-

founded or if the employer has reasonable ground to believe that the employee concerned is

responsible for the misconduct and her act rendered her unworthy of the trust and confidence

demanded of her position.28 It must be shown, though, that the employee concerned holds a

position of trust.29 The betrayal of this trust is the essence of the offense for which an employee

is penalized.30

Petitioner argues that her position as Finance Director of respondent's Beer Division is not one

of trust but one that is merely functional and advisory in nature. She possesses no

administrative control over the plants and region finance officers, including cashiers. She reports

to two superiors.

Petitioner's argument is misplaced. As Finance Director, she is in charge of the custody,

handling, care and protection of respondent's funds. The encashment of her personal checks

and her private use of such funds, albeit for short periods of time, are contrary to the fiduciary

nature of her duties.

Moreover, petitioner has functional control over all the plant and region finance officers,

including cashiers, within the Luzon Operations Area. In fact, she is the highest ranking

managerial employee for the finance section of the Luzon Beer Division Operations. Obviously,

her position is a factor in abetting the encashment of her personal checks.

Indeed, we find substantial ground for respondent's loss of confidence in petitioner. She does

not deny encashing her personal checks at respondent's sales offices and diverting for her own

private use the latter's resources. The audit investigation accounted for all the checks she

encashed, some of which were dishonored for insufficiency of funds. The Investigating Panel
concluded that petitioner not only encashed her personal checks at respondent's sales offices,

but also used company funds to temporarily satisfy her insufficient accounts. This Court has

held that misappropriation of company funds, although the shortages had been fully restituted,

is a valid ground to terminate the services of an employee of the company for loss of trust and

confidence.31

Petitioner contends that she was "singled out in this case" for refusing to accede to the sexual

advances of her superior, Francisco Gomez de Liano. She also cites the prolonged practice of

other payroll personnel, including persons in managerial levels, who encashed personal checks

but remained unpunished by respondent. She asserts that her administrative superiors even

encouraged her to encash her checks at the nearest sales office since her appearance at the

bank for encashment would entail undue digression from her daily work routine.

Prolonged practice of encashing personal checks among respondent's payroll personnel does

not excuse or justify petitioner's misdeeds. Her willful and deliberate acts were in gross violation

of respondent's policy against encashment of personal checks of its personnel, embodied in its

Cash Department Memorandum dated September 6, 1989. She cannot feign ignorance of such

memorandum as she is duty-bound to keep abreast of company policies related to financial

matters within the corporation. Equally unmeritorious are her claims that the acts complained of

are regular, being with the knowledge and consent of her superiors, Francisco Gomez de Liano

and Ben Jarmalala, and that she is being charged because she resisted the sexual advances of

her superior. Suffice it to state that she could have proved these matters during the investigation

had she attended the proceedings.

On petitioner's contention that she was denied due process - To be sure, an employee cannot

be dismissed from employment without according to him the constitutional right to due process
whether he be a rank and file or a managerial employee. 32 Failure to comply with the procedural

requirements for terminating one's employment taints the dismissal with illegality. This

procedure is mandatory and any judgment reached by management without that compliance

can be considered void and inexistent.33

In this case, petitioner was required to explain in writing why no disciplinary action should be

taken against her. She was also notified that a full-blown administrative investigation will be

conducted and was advised that she should be represented by counsel. She submitted to the

Investigating Panel a letter-explanation and a supplemental response to the administrative

complaint against her. At her request, the investigation was postponed twice to enable her to

procure the services of counsel. Yet, she vehemently refused to participate in the administrative

investigation. She cannot now claim denial of due process considering that she was afforded

the opportunity to be present (with counsel) during the investigation and to present her

evidence. The essence of due process is that a party be afforded a reasonable opportunity to be

heard and to submit any evidence he may have in support of his defense.34

The Labor Code provides the following procedure to be observed in terminating the services of

an employee based on just causes as defined in Article 282 of the Code:

(a) A written notice must be served on the employee specifying the ground or

grounds for termination and giving him reasonable opportunity within which to

explain his side;

(b) A hearing or conference shall be conducted during which the employee

concerned, with the assistance of counsel if he so desires, is given an opportunity

to respond to the charge, present his evidence or rebut the evidence presented

against him; and

upon due consideration of all the circumstances, grounds have been established to

justify his termination.

Procedural due process requires the employer to give the employee two notices. First is the

notice apprising him of the particular acts or omissions for which his dismissal is sought. Second

is the subsequent notice informing him of the employer's decision to dismiss him.35

Records show that the petitioner received the required twin notices. The first notice states:

"TO: MS. CARMELITA V. SANTOS - - DATE: 01 Feb 1991

FROM: A.O. VILLA-ABRILLE, JR.

SUBJECT: LETTER/MEMO Jan. 31, 1991

xxx - xxx - xxx

"What can be readily seen and as accepted by you is the fact that your personal

checks were encashed in the region/sales office which were returned by the bank

concerned to SAN MIGUEL CORPORATION due to "DAIF".

"Since all other circumstances mitigating or aggravating are not yet established and

there are conflicting statements as to "authorized or unauthorized encashments", I

have requested for a formal investigation to be undertaken so as due process is

allowed.

xxx - xxx - xxx"36

The above notice was followed by a more detailed supplemental notice, thus:
 "TO: MS. CARMELITA V. SANTOS - - DATE: Feb. 22, 1991

FROM: E. S. Escalante

SUBJECT:

"Further to the memo dated February 1, 1991 of Mr. Alberto O. Villa-Abrille, Jr.,

please be informed that an administrative investigation will be conducted on

February 27, 2:00 p.m. at the Workshop Room I, 5th Floor, Hanston Building.

"As discussed, we hereby confirm our agreement that while the administrative

investigation is pending, you will be holding office at the 19th Floor, PSB (SMQMS

staff unit).

"You will be investigated for 'abuse of position by engaging in highly irregular

transactions to the detriment of the company tantamount to loss of trust and

confidence'. In view of the nature of the offense, we agreed that you shall be given

duties and assignments as circumstances warrant.

xxx - xxx - xxx"37

The second notice, given after the conclusion of the administrative investigation, enumerates

the administrative offenses committed by petitioner and informs her that her employment is

terminated "for just and valid cause," thus:

"TO: MS. CARMELITA V. SANTOS - - DATE: APR. 5, 1991

FROM: A.O. VILLA-ABRILLE, JR.

SUBJECT:
"Please be informed that based on its investigation, the Investigating Panel found

that you abused your position as Finance Director by engaging in highly irregular

transactions to the detriment of the Company, giving ground for the Company to

lose its trust and confidence in you, which constitutes just cause for your dismissal

pursuant to our Policies and Procedures on Employee Conduct in relation to Article

282 of the Labor Code, as follows:

1. You encashed, without prior approval from proper Management

authority, your following personal checks:

C D Amo

h a

ec t

k e

o. o

m
 e

U D P150,

C e 000.0

P c

B e

#0 m

36 b

70 e

8 r

U D 100,0
C e 00.00

P c

B e

#0 m

36 b

72 e

6 r

U J 150,0

C a 00.00

P n

B u

#0 a

36 r

73 y
 7

xxx - xxx - xxx

"Your personal check encashments are in clear violation of Company policy as

reiterated in the Cash Management Memorandum dated September 6, 1989 which

prohibits such encashments.

"The investigating panel, therefore, found that your check encashments are highly

irregular transactions to the detriment of the Company and which you perpetrated in

grave abuse of your position as Finance Director. It is the recommendation of the

Investigating Panel that you should be dismissed from the service or terminated for

just and valid cause, with forfeiture of any and all benefits, including, but not limited

to, separation benefits.

"Conformably with the foregoing findings and recommendations of the Investigating

Panel, please be informed that you are hereby terminated for just and valid cause

effective immediately, with forfeiture of any and all benefits, including, but not
 limited to, separation benefits, without prejudice to our right of filing criminal

charges against you.

(Sgd.)

A. O. VILLA-ABRILLE, JR."38

In sum, in dismissing petitioner, respondent SMC did not deprive her of her right to due process.

Her dismissal is with just cause. Her encashment of her three personal checks at respondent's

sales offices violated respondent's trust and confidence reposed in her, even without

considering her other fifty personal checks she encashed at respondent's sales offices. An

employer cannot be compelled to retain an employee who is guilty of acts inimical to the

interests of the employer.39 A company has the right to dismiss its employees as a measure of

protection, more so in the case of supervisors or personnel occupying positions of responsibility.

40

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals in CA-

G.R. SP 64223 dated July 4, 2001 and its Resolution dated August 9, 2002 are AFFIRMED.

SO ORDERED.

Puno, (Chairman), Panganiban, Corona and Carpio-Morales, JJ., concur.

1
Filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended.

2
Petition, Rollo at 3-28.

3
Record at 115.

4
Id. at 176.

5
Id. at 177-179.

6
Id. at 95-99.

7
Id. at 103.

8
Dated February 1, 1991 and February 22, 1991.

9
Record at 104-105.

10
Id. at 106-107.

11
Id. at 108-114.

12
Id. at 116-117.

13
Docketed as NLRC NCR Case No. 00-03-01688-91.

14
Rollo at 30-42.

15
Id. at 42.

16
Id. at 43-61.

17
Penned by Presiding Commissioner Rogelio I. Rayala, and concurred

in by Commissioners Vicente S.E. Veloso and Alberto R. Quimpo, id. at

63-83.
18
Rollo at 82-83.

19
Id. at 84-109.

20
Id. at 121-122.

21
Id. at 124-167.

22
Decision penned by Associate Justice Martin S. Villarama, Jr.,

concurred in by Associate Justices Conrado M. Vasquez, Jr. and Sergio

L. Pestaño, id. at 192-205.

23
Id. at 206.

24
Id. at 210.

25
Arboleda vs. NLRC, 303 SCRA 38, 45 (1999); Mapalo vs. NLRC, 233

SCRA 266, 270 (1994).

26
Equitable Banking Corporation vs. NLRC, 273 SCRA 352, 376 (1997).

27
Vergara vs. NLRC, 282 SCRA 486, 497 (1997).

28
Auxilio, Jr. vs. NLRC, 188 SCRA 263, 267 (1990).

29
Villanueva vs. NLRC, 293 SCRA 258, 262 (1998); National Sugar

Refineries Corporation, Inc. vs. NLRC, 286 SCRA 478, 485 (1998).

30
Central Pangasinan Electric Cooperative, Inc. vs. Macaraeg, G.R. No.

145800, January 22, 2003.

31
San Miguel Corporation vs. Deputy Minister of Labor and Employment,

145 SCRA 196, 203-204 (1986).

32
Midas Touch Food Corporation vs. NLRC, 259 SCRA 652, 658 (1996).
33
Equitable Banking Corporation vs. NLRC, 273 SCRA 352, 378 (1997).

34
Cañete vs. NLRC, 315 SCRA 660, 668 (1999); Manila Electric Company

vs. NLRC, 263 SCRA 531, 542 (1996).

35
Manuel vs. NC Construction, 282 SCRA 326, 335 (1997); Wallem

Maritime Services, Inc. vs. NLRC, 263 SCRA 174, 186 (1996) citing

Jones vs. NLRC, 250 SCRA 668, 674 (1995).

36
Record at 104.

37
Id. at 105.

38
Id. at 116-117.

39
Better Buildings, Inc. vs. NLRC, 283 SCRA 242, 250 (1997).

40
MGG Marine Services, Inc. vs. NLRC, 259 SCRA 664, 676 (1996).