FIRST DIVISION

[G.R. No. 222730. November 7, 2016.]

BUENAFLOR CAR SERVICES, INC., petitioner, vs. CEZAR

DURUMPILI DAVID, JR., respondent.

DECISION

PERLAS-BERNABE, J : p

Assailed in this petition for review on certiorari 1 are the Decision 2

dated November 3, 2015 and the Resolution 3 dated February 9, 2016 of the
Court of Appeals (CA) in CA-G.R. SP No. 139652, which affirmed with
modification the Resolutions dated November 28, 2014 4 and February 9,
2015 5 of the National Labor Relations Commission (NLRC) in NLRC LAC No.
11-002727-14, finding respondent Cezar Durumpili David, Jr. (respondent) to
have been illegally dismissed, and holding petitioner Buenaflor Car Services,
Inc. (petitioner) solely liable for the monetary award.

The Facts
Respondent was employed as Service Manager by petitioner, doing
business under the trade name "Pronto! Auto Services." In such capacity, he
was in charge of the overall day-to-day operations of petitioner, including the
authority to sign checks, check vouchers, and purchase orders. 6
In the course of its business operations, petitioner implemented a
company policy with respect to the purchase and delivery of automotive
parts and products. The process begins with the preparation of a purchase
order by the Purchasing Officer, Sonny D. De Guzman (De Guzman), which is
thereafter, submitted to respondent for his review and approval. Once
approved and signed by respondent and De Guzman, the duplicate copy of
the said order is given to petitioner's supplier who would deliver the
goods/supplies. De Guzman was tasked to receive such goods and
thereafter, submit a copy of the purchase order to petitioner's Accounting
Assistant, Marilyn A. Del Rosario (Del Rosario), who, in turn, prepares the
request for payment to be reviewed by her immediate supervisor, 7 Finance
Manager and Chief Finance Officer Ruby Anne B. Vasay (Vasay). Once
approved, the check voucher and corresponding check are prepared to be
signed by any of the following officers: respondent, Vasay, or Vice President
for Operations Oliver S. Buenaflor (Buenaflor). 8 It was company policy that
all checks should be issued in the name of the specific supplier and not in
"cash," and that the said checks are to be picked up from Del Rosario at the
company's office in Muntinlupa City. 9 cHDAIS

On August 8, 2013, Chief Finance Officer Cristina S. David (David) of

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 petitioner's affiliate company, Diamond IGB, Inc., received a call from the
branch manager of ChinaBank, SM City Bicutan Branch, informing her that
the latter had cleared several checks issued by petitioner bearing the words
"OR CASH" indicated after the payee's name. Alarmed, David requested for
petitioner's Statement of Account with scanned copies of the cleared checks
bearing the words "OR CASH" after the payee's name. The matter was then
immediately brought to petitioner's attention through its President, Exequiel
T. Lampa (Lampa), and an investigation was conducted. 10
On August 22, 2013, Lampa and petitioner's Human Resource Manager,
Helen Lee (Lee), confronted Del Rosario on the questioned checks. Del
Rosario readily confessed that upon respondent's instruction, she inserted
the words "OR CASH" after the name of the payees when the same had been
signed by all the authorized signatories. She also implicated De Guzman,
who was under respondent's direct supervision, for preparing spurious
purchase orders that were used as basis in issuing the subject checks, as
well as petitioner's messenger/driver, Jayson G. Caranto (Caranto), who was
directed to encash some of the checks, with both persons also gaining from
the scheme. 11 Her confession was put into writing in two (2) separate letters
both of even date (extrajudicial confession). 12
As a result, respondent, together with Del Rosario, De Guzman, and
Caranto, were placed under preventive suspension 13 for a period of thirty
(30) days, and directed to submit their respective written explanations. The
ensuing investigation revealed that there were twenty-seven (27) checks
with the words "OR CASH" inserted after the payee's name, all signed by
respondent and either Vasay or Buenaflor, in the total amount of
P1,021,561.72. 14
For his part, 15 respondent vehemently denied the charges against
him. He claimed that he has no control over the company's finance and
billing operations, nor the authority to instruct Del Rosario to make any
check alterations, which changes, if any, must be made known to Vasay or
Buenaflor.
On September 20, 2013, respondent and his co-workers were served
their respective notices of termination 16 after having been found guilty of
violating Items B (2), (3) and/or G (3) of the company's Code of Conduct and
Behavior, particularly, serious misconduct and willful breach of trust.
Aggrieved, respondent, De Guzman, and Caranto filed a complaint 17 for
illegal dismissal with prayer for reinstatement and payment of damages and
attorney's fees against petitioner, Diamond IGB, Inc., and one Isagani
Buenaflor before the NLRC, docketed as NLRC RAB No. NCR-10-13915-13.
In the meantime, Lee, on behalf of petitioner, filed a criminal complaint
18 for twenty-seven (27) counts of Qualified Theft through Falsification of
Commercial Documents against respondent, De Guzman, Caranto, and Del
Rosario, before the Office of the Muntinlupa City Prosecutor, alleging that the
said employees conspired with one another in devising the afore-described
scheme. In support thereof, petitioner submitted the affidavits of Buenaflor
19 and Vasay, 20 which stated that at the time they signed the questioned

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 checks, the same did not bear the words "OR CASH," and that they did not
authorize its insertion after the payee's name. While the City Prosecutor
initially found probable cause only against Del Rosario in a Resolution 21
dated November 25, 2014, the same was reconsidered 22 and all the four (4)
employees were indicted in an Amended Information 23 filed before the
Regional Trial Court of Muntinlupa City, docketed as Criminal Case No. 14-
1065.

The LA Ruling
In a Decision dated September 29, 2014, the Labor Arbiter (LA) ruled
that respondent, De Guzman, and Caranto were illegally dismissed, and
consequently, awarded backwages, separation pay and attorney's fees. 24
The LA observed that petitioner failed to establish the existence of
conspiracy among respondent, De Guzman, Caranto, and Del Rosario in
altering the checks and that the latter's extrajudicial confession was
informally made and not supported by evidence. 25
Dissatisfied, petitioner appealed to the NLRC. ISHCcT

The NLRC Ruling

In a Resolution 26 dated November 28, 2014, the NLRC affirmed with
modification the LA's Decision, finding De Guzman and Caranto to have been
dismissed for cause, but sustained the illegality of respondent's termination
from work.
In so ruling, the NLRC held that since De Guzman prepared the
purchase orders that were the basis for the issuance of the questioned
checks, it could not be discounted that the latter may have participated in
the scheme, benefited therefrom, or had knowledge thereof. Similarly, it did
not give credence to Caranto's bare denial of the illegal scheme, noting that
he still encashed the questioned checks upon the instruction of Del Rosario
despite knowledge of the company's policy on the matter. On the other
hand, the NLRC found Del Rosario's extrajudicial confession against
respondent insufficient, holding that the records failed to show that the latter
had a hand in the preparation and encashment of the checks; hence, his
dismissal was without cause and therefore, illegal. 27
Unperturbed, petitioner filed a motion for partial reconsideration, 28
which the NLRC denied in a Resolution 29 dated February 9, 2015, prompting
the former to elevate the matter to the CA via a petition for certiorari. 30

The CA Ruling
In a Decision 31 dated November 3, 2015, the CA found no grave abuse
of discretion on the part of the NLRC in holding that respondent was illegally
dismissed. It ruled that Del Rosario's extrajudicial confession only bound her
as the confessant but constitutes hearsay with respect to respondent and the
other co-accused under the res inter alios acta rule. Moreover, while
respondent was a signatory to the checks in question, the CA noted that at
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 the time these checks were signed, the words "OR CASH" were not yet
written thereon. As such, the CA held that no substantial evidence existed to
establish that respondent had breached the trust reposed in him.
However, the CA absolved petitioner's corporate officer, Isagani
Buenaflor, from payment of the monetary awards for failure to show any
malicious act on his part, stating the general rule that obligations incurred
by the corporation, acting thru its directors, officers, and employees, are its
sole liabilities. In the same vein, Diamond IGB, Inc. was also absolved from
liability, considering that, as a subsidiary, it had a separate and distinct
juridical personality from petitioner. 32
Petitioner moved for partial reconsideration, 33 which the CA denied in
a Resolution 34 dated February 9, 2016; hence, the instant petition. CA

acTH

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the CA
committed reversible error in upholding the NLRC's ruling that respondent
was illegally dismissed.

The Court's Ruling

The petition is meritorious.
Fundamental is the rule that an employee can be dismissed from
employment only for a valid cause. The burden of proof rests on the
employer to prove that the dismissal was valid, failing in which, the law
considers the matter a case of illegal dismissal. 35
Article 297 of the Labor Code, as renumbered, 36 enumerates the just
causes for termination of an employment, to wit:
ART. 297. Termination by Employer. — An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his
duties;
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative; cEaSHC

(d) Commission of a crime or offense by the employee

against the person of his employer or any immediate member of his
family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing. (Emphases
supplied)
In the case at bar, respondent's termination was grounded on his
violation of petitioner's Code of Conduct and Behavior, which was
supposedly tantamount to (a) serious misconduct and/or (b) willful breach of
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 the trust reposed in him by his employer.
Misconduct is defined as an improper or wrong conduct. It is a
transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. 37 For serious
misconduct to be a just cause for dismissal, the concurrence of the following
elements is required: (a) the misconduct must be serious; (b) it must relate
to the performance of the employee's duties showing that the employee has
become unfit to continue working for the employer; and (c) it must have
been performed with wrongful intent. 38
On the other hand, for loss of trust to be a ground for dismissal, the
employee must be holding a position of trust and confidence, and there must
be an act that would justify the loss of trust and confidence. 39 While loss of
trust and confidence should be genuine, it does not require proof beyond
reasonable doubt, it being sufficient that there is some basis for the
misconduct and that the nature of the employee's participation
therein rendered him unworthy of the trust and confidence
demanded by his position. 40
Petitioner's claims of serious misconduct and/or willful breach of trust
against respondent was hinged on his alleged directive to petitioner's
Accounting Assistant, Del Rosario, to insert the word "OR CASH" in the
checks payable to petitioner's supplier/s after the same had been signed by
the authorized officers contrary to company policy. Accordingly, respondent
was accused of conspiring with his co-employees in the irregular issuance of
twenty-seven (27) checks which supposedly resulted in the defraudation of
the company in the total amount of P1,021,561.72. 41
While there is no denying that respondent holds a position of trust as
he was charged with the overall day-to-day operations of petitioner, and as
such, is authorized to sign checks, check vouchers, and purchase orders, he
argues, in defense, that he had no control over the company's finance and
billing operations, and hence, should not be held liable. Moreover, he asserts
that he had no power to instruct Del Rosario to make any check alterations,
which changes, if any, must be made known to Vasay or Buenaflor.
Although respondent's statements may be true, the Court,
nonetheless, observes that it is highly unlikely that respondent did not have
any participation in the above-mentioned scheme to defraud petitioner. It is
crucial to point out that the questioned checks would not have been issued if
there weren't any spurious purchase orders. As per company policy, the
procurement process of petitioner begins with the preparation of purchase
orders by the Purchasing Officer, De Guzman. These purchase orders
have to be approved by respondent himself before the delivery and
payment process can even commence. It is only after the issuance of the
approved purchase orders that petitioner's suppliers are directed to deliver
the ordered goods/supplies, and from there, requests for payment and the
issuance of checks (through Del Rosario) would be made. Thus, being the
approving authority of these spurious purchase orders, respondent cannot
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 disclaim any culpability in the resultant issuance of the questioned checks.
Clearly, without the approved purchase orders, there would be no delivery of
goods/supplies to petitioner, and consequently, the payment procedure
would not even begin. These purchase orders were, in fact, missing from the
records, and respondent, who had the primary authority for their approval,
did not, in any manner, account for them. CTIEac

Notably, the fact that respondent signed the checks prior to their
alterations does not discount his participation. To recall, the checks prepared
by Del Rosario were first reviewed by her immediate supervisor, Finance
Manager and Chief Finance Officer, Vasay, and once approved, the check
vouchers and corresponding checks were signed by respondent, followed by
either Vasay, or Vice President for Operations Buenaflor. To safeguard itself
against fraud, the company implemented the policy that all checks to its
suppliers should be issued in their name and not in "cash." Thus, if the
checks would be altered prior to the signing of all these corporate officers,
then they would obviously not pass petitioner's protocol. It is therefore
reasonable to conclude that the alterations were calculated to be made after
all the required signatures were obtained; otherwise, the scheme would not
come into fruition.
Respondent was directly implicated in the controversy through the
extrajudicial confession of his co-employee, Del Rosario, who had admitted
to be the author of the checks' alterations, although mentioned that she did
so only upon respondent's imprimatur. The NLRC, as affirmed by the CA,
however, deemed the same to be inadmissible in evidence on account of the
res inter alios acta rule, which, as per Section 30, 42 Rule 130 of the Rules of
Court, provides that the rights of a party cannot be prejudiced by an act,
declaration, or omission of another. Consequently, an extrajudicial
confession is binding only on the confessant and is not admissible against
his or her co-accused because it is considered as hearsay against
them. 43
However, the NLRC should not have bound itself by the technical rules
of procedure as it is allowed to be liberal in the application of its rules in
deciding labor cases. 44 The NLRC Rules of Procedure state that "[t]he rules
of procedure and evidence prevailing in courts of law and equity shall not be
controlling and the Commission shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure . . . ." 45
In any case, even if it is assumed that the rule on res inter alios acta
were to apply in this illegal dismissal case, the treatment of the extrajudicial
confession as hearsay is bound by the exception on independently relevant
statements. "Under the doctrine of independently relevant statements,
regardless of their truth or falsity, the fact that such statements have been
made is relevant. The hearsay rule does not apply, and the statements are
admissible as evidence. Evidence as to the making of such statement is not
secondary but primary, for the statement itself may constitute a fact in issue
or be circumstantially relevant as to the existence of such a fact." 46 Verily,
Del Rosario's extrajudicial confession is independently relevant to prove the
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 participation of respondent in the instant controversy considering his vital
role in petitioner's procurement process. The fact that such statement was
made by Del Rosario, who was the actual author of the alterations, should
have been given consideration by the NLRC as it is directly, if not
circumstantially, relevant to the issue at hand.
Case law states that "labor suits require only substantial evidence to
prove the validity of the dismissal." 47 Based on the foregoing, the Court is
convinced that enough substantial evidence exist to support petitioner's
claim that respondent was involved in the afore-discussed scheme to
defraud the company, and hence, guilty of serious misconduct and/or willful
breach of trust which are just causes for his termination. Substantial
evidence is defined as such amount of relevant evidence that a reasonable
mind might accept as adequate to justify a conclusion, 48 which evidentiary
threshold petitioner successfully hurdled in this case. As such, the NLRC
gravely abused its discretion in holding that respondent was illegally
dismissed. Perforce, the reversal of the CA's decision and the granting of the
instant petition are in order. Respondent is hereby declared to be validly
dismissed and thus, is not entitled to backwages, separation pay, as well as
attorney's fees.
WHEREFORE, the petition is GRANTED. The Decision dated
SaCIDT

November 3, 2015 and the Resolution dated February 9, 2016, of the Court
of Appeals in CA-G.R. SP No. 139652 are hereby REVERSED and SET ASIDE.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Bersamin and Caguioa, JJ., concur.

Footnotes
1. Rollo , pp. 20-61.

2. Id. at 64-71. Penned by Associate Justice Agnes Reyes-Carpio with Associate

Justices Romeo F. Barza and Elihu A. Ybañez concurring.
3. Id. at 72-73.

4. CA rollo, pp. 49-53. Penned by Commissioner Pablo C. Espiritu, Jr. with

Presiding Commissioner Alex A. Lopez concurring.

5. Id. at 54-55.
6. Id. at 6.
7. See id. at 103.
8. See id. at 133.
9. Id. at 7.

10. Id. at 8.
11. See id. at 8 and 51.
12. Id. at 56-57.
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 13. Id. at 60.
14. Id. at 10-11.

15. See Sinumpaang Salaysay dated January 15, 2014; id. at 132-138.
16. Id. at 96-99.
17. Id. at 378-379.
18. See Complaint-Affidavit dated October 11, 2013; id. at 246-260.
19. Id. at 124-125.

20. Id. at 126-128.

21. Id. at 339-345. Signed by Assistant City Prosecutor Donabelle V. Gonzalez,
Senior Assistant City Prosecutor Leopoldo B. Macinas, and City Prosecutor
Aileen Marie S. Gutierrez.

22. Resolution dated February 4, 2015; id. at 261-264. Signed by Senior Assistant
City Prosecutor Leopoldo B. Macinas and approved by City Prosecutor
Aileen Marie S. Gutierrez.
23. Id. at 265-267. Signed by Senior Assistant City Prosecutor Tomas Ken D.
Romaquin, Jr.
24. See rollo, p. 65.
25. See CA rollo, p. 51.

26. Id. at 49-53.

27. Id. at 51-53.
28. Dated December 17, 2014; id. at 301-314.
29. Id. at 54-55.
30. Id. at 3-48.

31. Rollo , pp. 64-71.

32. Id. at 67-71.
33. Dated March 20, 2015; CA rollo, pp. 449-456.
34. Rollo , pp. 72-73.
35. Surigao Del Norte Electric Cooperative, Inc. v. Gonzaga, 710 Phil. 676, 687
(2013).
36. See Department of Labor and Employment's Department Advisory No. 1,
Series of 2015, entitled "RENUMBERING OF THE LABOR CODE OF THE
PHILIPPINES, AS AMENDED," dated July 21, 2015.
37. Imasen Philippine Manufacturing Corporation v. Alcon , G.R. No. 194884,
October 22, 2014, 739 SCRA 186, 196.
38. See Universal Robina Sugar Milling Corporation v. Ablay , G.R. No. 218172,
March 16, 2016.
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 39. Jerusalem v. Keppel Monte Bank, 662 Phil. 676, 686 (2011).
40. P.J. Lhuillier, Inc. v. Velayo , G.R. No. 198620, November 12, 2014, 740 SCRA
147, 162.
41. Rollo , p. 27.
42. SEC. 30. Admission by conspirator. — The act or declaration of a conspirator
relating to the conspiracy and during its existence, may be given in
evidence against the co-conspirator after the conspiracy is shown by
evidence other than such act or declaration.

43. People v. Cachuela , 710 Phil. 728, 741 (2013).

44. Opinaldo v. Ravina , 719 Phil. 584, 598 (2013).
45. Id., citing Section 10, Rule VII of the 2011 NLRC Rules of Procedure.
46. People v. Estibal , G.R. No. 208749, November 26, 2014, 743 SCRA 215, 240.

47. Paulino v. NLRC, 687 Phil. 220, 226 (2012).

48. Travelaire & Tours Corp. v. NLRC , 355 Phil. 932, 936 (1998).

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