[ G.R. No. 230597.

March 23, 2022 ]

ARIEL M. REYES, PETITIONER, VS. RURAL BANK OF SAN RAFAEL (BULACAN) INC.,
FLORANTE VENERACION, CELERINA SABARIAGA, ALICIA FLOR KABILING, FIDELA
MANAGO, CEFERINO DE GUZMAN, AND RIZALINO QUINTOS, RESPONDENTS.

DECISION

HERNANDO, J.:*

This is a Petition for Review on Certiorari1 assailing the July 22, 2016 Decision2 and March 8,
2017 Resolution3 both issued by the Court of Appeals (CA). The CA Decision affirmed the
September 30, 2014 Decision4 issued by the National Labor Relations Commission (NLRC),
denying petitioner Ariel M. Reyes' (Reyes) appeal, and reversing the February 24, 2014 Labor
Arbiter's Decision,5 which found him illegally dismissed and entitled to money claims. Meanwhile,
the CA Resolution denied Reyes' Motion for Reconsideration.

The Factual Antecedents:

Respondent Rural Bank of San Rafael (Bulacan) Inc. (RBSR) is a domestic banking corporation
while respondents Florante Veneracion (Veneracion), Celerina Sabariaga (Sabariaga), Alicia Flor
Kabiling (Kabiling), Fidela Manago (Manago), Ceferino De Guzman (De Guzman), and Rizalino
Quintos (Quintos) (collectively, respondents), are members of RBSR's Board of Directors.

Sometime in 2012, several stockholders of RBSR complained about the discrepancies in the
amounts of the purchase price of stock subscriptions appearing in the original receipts as against the
duplicate copies issued by the bank. The anomaly involved several millions of pesos collected from
stockholders of RBSR which, if not corrected, will certainly tarnish the image and integrity of the
latter.

Acting on this anomaly, RBSR conducted an investigation and confirmed the irregularities. It was
discovered that in the original receipts given to the stockholders, the stated price of shares ranged
from P250.00 to P275.00, but in the duplicate copies retained by RBSR, only P100.00 was indicated.
Moreover, the original receipts were signed by Flordeliza Cruz, then President of RBSR, while the
duplicate copies were signed either by its then Treasury Head Emilline C. Bognot (Bognot), or
Branch Manager Reynaldo Eusebio, Jr. (Eusebio).

Thus, in compliance with the Manual of Regulations for Banks mandating the prompt report of
anomalies to the Bangko Sentral ng Pilipinas (BSP), RBSR's Board of Directors approved a Report
on Crimes and Losses and directed Reyes – as Compliance Officer – to certify the same. However,
Reyes refused to certify the report, reasoning that no independent investigation was conducted, and
that he cannot completely validate the same for lack of material data and evidence, and that he was
being pressured to certify the report.

Thereafter, Reyes claimed that instead of furnishing him the hard copies of the reports and its
original attachments to enable him to verify and certify the same, RBSR issued him two show cause
orders and put him on preventive suspension for neglect of duty. Meanwhile, RBSR contended that
several administrative hearings were scheduled to hear Reyes' side, but all were ignored.

On March 25, 2013, Reyes, together with Bognot and Eusebio (complainants) – who were
principally accused of theft/misappropriation of funds in connection with the anomaly – filed a
Complaint6 against respondents for illegal suspension and money claims. An Amended
Complaint7 was subsequently filed to include illegal dismissal, in view of their eventual dismissal
from work.

Ruling of the Labor Arbiter:

In a Decision8 dated February 24, 2014, Labor Arbiter Reynaldo V. Abdon found RBSR guilty of
illegally dismissing Reyes, Bognot, and Eusebio. The arbiter's ruling was mainly based on RBSR's
failure to file its Position Paper and submit its evidence during the proceedings, which constrained
the arbiter to rule on the matter based solely on the complainants' evidence.

Based on the complainants' evidence and submissions, the arbiter found that complainants'
dismissal was without a valid cause, and that they were denied due process for having been
summarily dismissed. Further, it is incumbent upon the employer to show proof that the employee
was dismissed for a just or authorized cause, which the bank failed to establish since it did not file its
Position Paper and submit its evidence.

The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby declared that

complainants were illegally terminated by respondents. Consequently, respondent
Rural Bank of San Rafael Bulacan and individual respondents Florante Veneracion,
Celerina Sabariaga, Alicia Flor C. Kabiling, Fidela Manago, Fabian Cordero,
Ceferino De Guzman and Rizalino Quintos III are jointly and severally DIRECTED to
PAY complainants to (sic) their backwages and separation pay, accrued leave
benefits and proportionate 13th month pay as follows:

Name Back wages Separation Pay 13th Month Pay

Ariel M. Reyes P399,960.00 P180,000.00 P8,400.00
Emilline C. Bognot 333,300.00 150,000.00 7,000.00
Reynaldo M. Eusebio Jr. 447,055.29 442,629.00 9,389.10

Additionally, respondents are ordered to pay complainants' attorney's fee in the

sum of P197,773.33.

Other claims are denied for lack of basis.

SO ORDERED.9

Thus, respondents elevated the case to the NLRC.

Ruling of the National Labor Relations Commission:

In its Decision10 promulgated on September 30, 2014, the NLRC reversed the arbiter's ruling.
Notably, the NLRC applied a liberal interpretation and relaxed procedural rules, and held that
substantial justice must prevail over technicalities. Thus, the NLRC allowed respondents to submit
countervailing evidence even on appeal.
 On the substantial issue, the NLRC found that complainants were not illegally dismissed.
Respondents were able to discharge the burden of proving that they had a just cause to terminate
complainants' employment.

The dispositive portion of the NLRC Decision reads:

WHEREFORE, the appeal is GRANTED. The decision of the labor arbiter is

hereby reversed and set-aside. The complaint is dismissed for lack of merit.

SO ORDERED.11

Aggrieved, Reyes and Bognot filed a Petition for Certiorari12 before the CA. They imputed grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC in relaxing
procedural rules and allowing respondents to submit their evidence for the first time, even if the case
was already on appeal.

Meanwhile, Eusebio no longer pursued his case.

Ruling of the Court of Appeals:

In its Decision13 dated July 22, 2016, the CA affirmed the NLRC Decision and found no grave
abuse of discretion on the part of the latter in relaxing its procedural rules. The CA held that the
respondents' failure to file their Position Paper and submit their evidence was justified and
satisfactorily explained, "since they were not given summons, nor notified of the scheduled
preliminary conference and further hearings after the amended complaint was filed."14 After having
settled the procedural issue, the CA proceeded to rule that "petitioners were validly dismissed for a
just and valid cause x x x."15

The dispositive portion of the CA Decision reads:

WHEREFORE, the foregoing considered, the Petition for Certiorari is DENIED.

The assailed Decision and Resolution of public respondent NLRC are AFFIRMED in
toto.

SO ORDERED.16

Reyes and Bognot filed a Motion for Reconsideration, but it was denied in a Resolution17 dated
March 8, 2017.

Unyielding, Reyes elevated the case before this Court via a Petition for Review on Certiorari. On
the other hand, Bognot yielded and no longer joined Reyes' petition.

Issues

1. Whether the CA erred in affirming the NLRC Decision which reversed the ruling of
the Labor Arbiter; and

2. Whether Reyes was illegally dismissed.

Our Ruling
 The appeal is meritorious.

The CA erred in affirming

the NLRC Decision.

a. Respondents were not

denied due process. A
liberal interpretation of the
procedural rules was not
warranted.

On this point, Reyes mainly argues that –

The Court of Appeals abused its discretion amounting to lack or excess of

jurisdiction in affirming the Decision of the NLRC which in effect declared that the
NLRC did not abuse its discretion in applying the principle of liberal application of
the procedural rules notwithstanding that it was not made an issue in the
proceedings before the Labor Arbiter, and ruling that respondent's Appeal is
meritorious even though the appeal does not fall to (sic) any of the grounds for filing
of appeal before the Commission.18

Meanwhile, respondents assert that the NLRC and CA were correct in allowing them to present
evidence, albeit belatedly; otherwise, their right to due process would have been denied. Further,
they claim that "there was no summons sent to any of the private respondents after the filing of the
amended complaint."19

Respondents are wrong.

Due process has been described as a "malleable concept anchored on fairness and
equity."20 Indeed, at its core is simply the reasonable opportunity for every party to be heard. The
late constitutionalist Father Joaquin G. Bernas, S.J., further expounds on this concept:

Whether in judicial or administrative proceedings, therefore, the heart of

procedural due process is the need for notice and an opportunity to be
heard. Moreover, what is required is not actual hearing but a real opportunity
to be heard. Thus, one who refuses to appear at a hearing is not thereby
denied due process if a decision is reached without waiting for him. Likewise,
the requirement of due process can be satisfied by subsequent due
hearing.21 (Emphasis supplied).

Applying this principle, a review of the records will reveal that during the proceedings before the
arbiter, respondents have been accorded ample opportunity to present their side. The arbiter made
the following observations:

On June 4, 2013, after complainants filed their amended complaint, they filed
their Position Paper. The respondents failed to appear but their counsel and
representative appeared much earlier than the scheduled date of hearing and
secured a photocopy of amended complaint. Thus, this Office directed the parties to
appear [in] another conference on June 19, 2013 at 10:30 am to give respondents
the opportunity to submit their position paper. Complainants manifested that if
 respondents would still fail to file their position paper on the next setting, this case
should be deemed submitted their (sic) decision ex-parte.

On June 19, 2013, only complainants appeared and moved to submit this case
for decision in view of the failure of the respondents to appear and submit their
position paper despite ample time to (sic) given to them.22

Based on this undisputed finding, it appears that respondents have unjustifiably missed at least
two settings: that on June 4, 2013, and that on June 19, 2013. To stress, respondents missed the
hearing on June 19, 2013 despite having been directed prior by the arbiter to attend. Moreover, it
must be noted that respondents, at this point in time, have already obtained a copy of the amended
complaint which would have enabled them to intelligently respond.

Respondents further explained in their Memorandum23 filed before the CA:

16. x x x Here, there was no summons sent to any of the private respondents
after the filing of the amended complaint. There was also no mandatory conciliation
and mediation conference in two settings. As the Decision of the Honorable Labor
Arbiter states, "On June 4, 2013, after the complainants filed their amended
complaint, they filed their Position Paper." There was no mention of any issuance of
summons to the private respondents and setting of mandatory conciliation and
mediation conference. Further, no copy of the Position Paper was ever sent or
received by the respondents.24

Ruling for the Respondents, the CA held:

In this case, it is conceded that private respondents lost the case before the
Labor Arbiter as they were not able to submit a position paper and adduce evidence
in their behalf, nor to attend the scheduled preliminary conference. As found by
public respondent NLRC, their failure to do so was satisfactorily explained, since
they were not given summons, nor notified of the scheduled preliminary conference
and further hearings after the amended complaint was filed. For this reason, public
respondent NLRC ruled that such procedural oversights were not deliberate, dilatory
or obstructive omissions on the part of private respondents. In short, their failure to
present evidence and to attend the hearings can be justified due to lack of notice. x
x x25

We do not agree.

While it may be true that the arbiter failed to issue summons, such circumstance cannot operate
as a denial of respondents' right to due process because the fact remains that respondents have
already obtained a copy of the amended complaint, and have been duly notified of the June
19, 2013 hearing. Section 3 of the 2011 NLRC Rules of Procedure (2011 NLRC Rules) provide:

SECTION 3. Issuance of Summons. – Within two (2) days from receipt of a

complaint or amended complaint, the Labor Arbiter shall issue the required
summons, attaching thereto a copy of the complaint or amended complaint and its
annexes, if any. The summons shall specify the date, time and place of the
mandatory conciliation and mediation conference in two (2) settings.
 Clear from the foregoing that the issuance of summons is done in order to apprise the
respondent of the case filed and as a means to furnish them a copy of the complaint so they can
intelligently respond. Given the circumstances in the present case, the issuance of the summons
would have been a mere superfluity since again, respondents have already obtained a copy of the
amended complaint and notified of the upcoming hearing date.

To add, respondents' absence during the June 4, 2013 hearing is likewise unexplained, as
confirmed by the NLRC in its Decision, to wit:

It appears that the same day that the parties met in an attempt to settle, which
failed, the complainants filed an amended complaint in Regional Arbitration
Branch III. No summons was issued after the amendment of the complaint.
Thereafter, the complainants filed their position paper which was received by RAB
III on June 4, 2013, during a hearing at which respondents were not
present. The labor arbiter sent a notice of hearing dated June 6, 2013, informing
respondents to appear for a conference on June 19, 2013 at 10:30 a.m. However,
the registry return card on record, issued by the bureau of posts shows, that the
respondents did not receive this notice of hearing until June 20, 2013. x x
x26 (Citations omitted.) (Emphases supplied.)

Thus, a closer examination at the findings of facts of both the Labor Arbiter and NLRC will reveal
that there is no incongruence; in fact, they are in accord with and complement each other on the
following points: first, that respondents were able to earlier secure a copy of the amended complaint;
second, that respondents were absent during the June 4, 2013 and June 19, 2013 hearings; and
third, that respondents' absences are unexplained.

Furthermore, we take note of the fact that from the date the respondents obtained a copy of the
amended complaint in early June 2013, up to the promulgation of the arbiter's Decision on February
24, 2014, there was no initiative made by them to demand their day in court, so to speak. The
records are simply bereft of even the slightest hint of participation from the respondents during the
proceedings before the Labor Arbiter. If respondents truly hold sacred their right to due process as
they so fervently contend before the NLRC and the CA, they would have wasted no time nor missed
no opportunity to assert such right as early as during the initial stages of the proceedings. They
could have at least pleaded for the arbiter to reopen the proceedings and admit their Position Paper,
if there ever was one. At the very least, respondents were well-aware that a complaint was filed
against them and this should have prompted them to be more proactive in the proceedings.
Unfortunately, they failed to come through even in these simplest of tasks. In the Court's view, this
cavalier attitude exhibited by respondents reeks of negligence and disrespect to duly instituted
authorities and rules of procedures, either of which this Court can never tolerate.

While the Court commends the NLRC and the CA in upholding substantial justice, such principle
must always be balanced with respect and honest efforts to comply with procedural rules. It cannot
always be about substantial justice, especially to the point of disrespect and utter disregard to
procedural rules. In Tible & Tible Company, Inc. v. Royal Savings and Loan Association,27 an
eloquent explanation regarding this balance was made:

Much reliance is placed on the rule that "Courts are not slaves or robots of
technical rules, shorn of judicial discretion. In rendering justice, courts have always
been, as they ought to be, conscientiously guided by the norm that on balance,
technicalities take a backseat against substantive rights, and not the other way
around." This rule must always be used in the right context, lest injustice, rather than
justice would be its end result.
 It must never be forgotten that, generally, the application of the rules must be
upheld, and the suspension or even mere relaxation of its application, is the
exception. This court previously explained:

The Court is not impervious to the frustration that litigants and

lawyers alike would at times encounter in procedural bureaucracy
but imperative justice requires correct observance of
indispensable technicalities precisely designed to ensure its
proper dispensation. It has long been recognized that strict
compliance with the Rules of Court is indispensable for the
prevention of needless delays and for the orderly and expeditious
dispatch of judicial business.

Procedural rules are not to be disdained as mere

technicalities that may be ignored at will to suit the
convenience of a party. Adjective law is important in ensuring the
effective enforcement of substantive rights through the orderly and
speedy administration of justice. These rules are not intended to
hamper litigants or complicate litigation but, indeed to provide for a
system under which a suitor may be heard in the correct form and
manner and at the prescribed time in a peaceful confrontation
before a judge whose authority they acknowledge.

It cannot be overemphasized that procedural rules have

their own wholesome rationale in the orderly administration of
justice. Justice has to be administered according to the Rules
in order to obviate arbitrariness, caprice, or whimsicality. x x
x28

In Loon v. Power Master, Inc.,29 the Court laid down the following pronouncement:

In labor cases, strict adherence to the technical rules of procedure is not

required. Time and again, we have allowed evidence to be submitted for the first
time on appeal with the NLRC in the interest of substantial justice. Thus, we have
consistently supported the rule that labor officials should use all reasonable means
to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, in the interest of due process.

However, this liberal policy should still be subject to rules of reason and
fairplay. The liberality of procedural rules is qualified by two requirements: (1)
a party should adequately explain any delay in the submission of evidence;
and (2) a party should sufficiently prove the allegations sought to be
proven. The reason for these requirements is that the liberal application of the rules
before quasi-judicial agencies cannot be used to perpetuate injustice and hamper
the just resolution of the case. Neither is the rule on liberal construction a license to
disregard the rules of procedure.30

In the present case, we have already extensively discussed how respondents failed to
adequately explain and justify their non-participation in the proceedings before the arbiter. Thus, the
application of a more liberal policy is unwarranted, contrary to the rulings of the NLRC and the CA.
Besides, the policy of relaxed procedural rules in labor proceedings is mainly for the benefit of the
employee, and not the employer, as will be discussed below.
b. Relaxed and liberal
interpretation of labor
procedures – mainly for the
benefit of employee, and not
the employer.

Preliminarily, the Court wishes to address respondents' argument that there were several
procedural lapses committed by the arbiter in conducting the proceedings. Respondents repeatedly
assert:

Section 3 of the 2011 NLRC Rules of Procedure states that "Within two (2) days
from the receipt of a complaint or amended complaint, the Labor Arbiter shall issue
the required summons, attaching thereto a copy of the complaint or amended
complaint and its annexes, if any. The summons shall specify the date, time and
place of the mandatory conciliation and mediation conference in two (2) settings x x
x." Here, there was no summons sent to any of the private respondents after the
filing of the amended complaint. There was also no mandatory conciliation and
mediation conference in two settings. As the Decision of the Honorable Labor Arbiter
states, "On June 4, 2013, after complainants filed their amended complaint, they
filed their Position Paper." There was no mention of any issuance of summons to the
private respondents and setting of mandatory conciliation and mediation conference.
Further, no copy of the Position Paper was ever sent or received by the private
respondents.31 (Underscoring in the original)

In citing the 2011 NLRC Rules, respondents intimate that such should have been strictly
followed; that the arbiter must be faulted for not doing so. However, respondents quickly backtracked
and asserted before the NLRC that the rules – the very same one they demand to be strictly
enforced – must be relaxed, obviously when it suited their favor. In the Court's view, this flip- flopping
stand by the respondents betrays fairness in their position.

In any case, respondents in the present case are not entitled to be accorded a liberal
interpretation of the rules; the same being primarily granted for the employee's favor, and not the
employer.

The principles embodied by all prevailing labor rules, legislations, and regulations are derived
from the Constitution, which intensely protects the working individual and deeply promotes social
justice. Article II, Section 18 of the 1987 Constitution provides:

SECTION 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.

Meanwhile, Article XIII, Section 3 state:

SECTION 3. The State shall afford full protection to labor. local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.

Lastly, Article 4 of PD 44232 or the Labor Code, provides:

 Article 4. Construction in favor of labor. - All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.

The measures embedded in our legal system which accord specific protection to labor stems
from the reality that normally, the laborer stands on unequal footing as opposed to an employer.
Indeed, the labor force is a special class that is constitutionally protected because of the inequality
between capital and labor.33 In fact, labor proceedings are so informally and, as much as possible,
amicably conducted and without a real need for counsel, perhaps in recognition of the sad fact that a
common employee does not or have extremely limited means to secure legal services nor the mettle
to endure the extremely antagonizing and adversarial atmosphere of a formal legal battle. Thus, in
the common scenario of an unaided worker, who does not possess the necessary knowledge to
protect his rights, pitted against his employer in a labor proceeding, We cannot expect the former to
be perfectly compliant at all times with every single twist and turn of legal technicality. The same,
however, cannot be said for the latter, who more often than not, has the capacity to hire the services
of a counsel. As an additional aid therefore, a liberal interpretation of the technical rules of procedure
may be allowed if only to further bridge the gap between an employee and an employer.

Relevant to this is Section 2 of the 2011 NLRC Rules which stipulates:

SECTION 2. CONSTRUCTION. – These Rules shall be liberally construed to

carry out the objectives of the Constitution, the Labor Code of the Philippines
and other relevant legislations, and to assist the parties in obtaining just,
expeditious and inexpensive resolution and settlement of labor disputes. (Emphasis
supplied.)

As can be gleaned above, the 2011 NLRC Rules shall be liberally construed in order to attain
two purposes: to carry out the objectives of the Constitution and relevant labor laws, and to assist
the parties in obtaining a just, expeditious and inexpensive resolution and settlement of labor
disputes. Focusing on the first purpose, We recall that one of the objectives of the Constitution is to
accord special protection to labor. With this, it would therefore be fitting to say that the rules shall be
liberally interpreted in order to accord special protection to labor. Truly, those who have less in life,
should have more in law.

In Vicente v. Employees' Compensation Commission,34 the Court held:

The court takes this occasion to stress once more its abiding concern for the
welfare of government workers, especially the humble rank and file, whose patience,
industry, and dedication to duty have often gone unheralded, but who, in spite of
very little recognition, plod on dutifully to perform their appointed tasks. It is for this
reason that the sympathy of the law on social security is toward its beneficiaries, and
the law, by its own terms, requires a construction of utmost liberality in their favor. It
is likewise for this reason that the Court disposes of this case and ends a
workingman's struggle for his just dues.35 (Citation omitted)

Further, as explained by Prof. Azucena:

In carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the working man's welfare should be the primordial and
paramount consideration. This kind of interpretation gives meaning and substance to
the liberal and compassionate spirit of the law as provided for in Article 4 of the New
Labor Code. The policy is to extend the decree's applicability to a greater number of
 employees to enable them to avail of the benefits under the law, in consonance with
the State's avowed policy to give maximum aid and protection to labor.36

This is not to say however that the rules may never be relaxed in favor of the employer, and that
every labor dispute will be automatically decided in favor of labor, thus:

Protection to labor and resolution of doubts in favor of labor cannot be pursued

to the point of deliberately committing a miscarriage of justice. The right to obtain
justice is enjoyed by all members of society, rich or poor, worker or manager, alien
or citizen. Justice belongs to everyone. It is not to be blinded or immobilized by the
fact of one's being economically underprivileged. x x x37

In certain cases, of course, a liberal approach to the rules may be had even if it favors the
employer. Such allowance, however, must be measured against standards stricter than that imposed
against the worker, and only in compelling and justified cases where the employer will definitely
suffer injustice should such liberal interpretation be disallowed. Unfortunately for respondents, this is
not the situation in the present case.

Reyes was illegally dismissed by RBSR.

Going now to the substantial issue, contrary to the findings of both the NLRC and the CA, we
find that Reyes was illegally dismissed.

In dismissing Reyes, the records bare that RBSR sent him the following: first, a document with
the subject "Show Cause Order and Preventive Suspension"38 dated March 22, 2013 part of which
reads:

Last 12 February 2013, during the Regular Board Meeting, the Corporate
Secretary sent to you SES Form 6G, Report on Crimes and Losses for the
discrepancy of the purchase price of the stocks brought by some stockholders. You
refused to receive said document up until the last day for reporting which is 22
February 2013 for the reason that the same was sent via electronic mail.

xxxx

Your refusal to do your duty shows that you have failed to observe your principal
function to oversee and coordinate the implementation of the Compliance System.
Your delays in transaction and inaction despite repeated reminders to do your job
have caused significant prejudice and damage to the Bank.

xxxx

Please explain in writing within five (5) days from receipt of this Memorandum
why you should not be held administratively accountable and liable for your failure or
refusal to fulfill your duties as a Compliance Officer. Considering the gravity of the
charge and in order to safeguard the integrity of the bank records and operations,
you are hereby preventively suspended for a period of thirty (30) days without pay
effective immediately. You are however allowed access to bank records to help
explain your side.39
 Based on this document, it would appear that Reyes was being charged with either willful
disobedience or insubordination, or gross and habitual neglect of duty, both of which are just causes
for termination of employment under the Labor Code.

Second, a document with the subject "Administrative Case"40 dated April 4, 2013 which notified
Reyes of a hearing scheduled on April 10, 2013.

Third, a document with the subject "Show Cause Order"41 dated April 19, 2013 which partly
states:

Please explain within five (5) days from receipt of this order why you should not
be held administratively accountable and liable for your participation in the
theft/misappropriation of the funds invested by and due to Mrs. Fidela M. Mañago
with the Rural Bank of San Rafael and for covering up such anomaly/offense.42

Interestingly, based on this show cause order, it would appear that the charges against Reyes
changed from either disobedience or neglect, to commission of a crime or offense.

Lastly, Reyes was issued a "Notice of Termination"43 dated April 26, 2013 which provides:

Please be informed that after due consideration of the documents, records,

testimonies, and admissions regarding your administrative case, the gravity and
number of offenses that you committed, the magnitude of the loss and damage to
the Bank and its clients, and the nature and sensitivity of your position, management
has decided that there is sufficient and just cause for your termination.

You were duly informed of the charges against you and given sufficient time
within which to explain your side with access to records and documents of the Bank,
yet you failed or refused to submit any explanation. Neither did you appear during
the scheduled hearing. These omissions were also considered in deciding the
administrative case/s against you.44

Book Five, Rule XXIII, Section 2 of the Omnibus Rules Implementing the Labor Code provides:

SECTION 2. Standards of due process; requirements of notice. – In all cases of

termination of employment, the following standards of due process shall be
substantially observed:

I. For termination of employment based on just causes as defined in Article 282

of the Code:

(a) A written notice served on the employee specifying the

ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee

concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
 (c) A written notice of termination served on the employee
indicating that upon due consideration of all the circumstances,
grounds have been substantially established to justify his
termination.

xxxx

In King of Kings Transport, Inc. v. Mamac,45 this concept of procedural due process in labor
proceedings is further expounded:

To clarify, the following should be considered in terminating the services of

employees:

(1) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that the
employees are given the opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the Omnibus Rules means
every kind of assistance that management must accord to the employees to enable
them to prepare adequately for their defense. This should be construed as a period
of at least five (5) calendar days from receipt of the notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of facts and
circumstances that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which among
the grounds under Art. 282 is being charged against the employees. 1âшphi1

(2) After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence in
support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the
chance to defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be used by the
parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers

shall serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been considered:
and (2) grounds have been established to justify the severance of their
employment.46 (Citations omitted.)

In the present case, while it is true that Reyes was given sufficient opportunity to explain his side
during the investigation, the Court cannot help but notice the muddled and vague charges against
him. Specifically, it cannot be determined with reasonable certainty on what grounds the charges
pressed against Reyes were based on, and which ones were proven. While it would appear that
Reyes was initially charged with insubordination or neglect of duty, the show cause order
surprisingly accused him of participation in the alleged theft/misappropriation, and neither is there
any showing that the same has been established nor is it specifically mentioned as the reason for his
dismissal. Instead, the termination letter sent to Reyes, which is a mirror copy of the ones sent to
Bognot and Eusebio, merely employed general and loose statements. Neither is there any mention
of which specific rule or policy Reyes allegedly violated. Surely, this is not the kind of notice
contemplated by the Labor Code and its implementing rules. In view of all the foregoing, the Court
finds that respondents failed to comply with the due process requirements in dismissing Reyes.

Moving forward, We likewise find that there was no valid cause to dismiss Reyes.

The CA held:

With respect to petitioner Reyes – the Compliance Officer, it was his bounden
duty to promptly certify the Report on Crimes and Losses detailing the irregularities;
hence, for unjustifiably refusing to act on the report, as he should, he was validly
terminated. x x x

x x x It is obvious that petitioner Reyes was foot-lagging on account of his

complicity in the anomaly. As heretofore stated, an in-depth and independent
investigation may still be made after the filing of the initial report. As We see it, there
is no valid justification for petitioner Reyes' refusal to certify the report which,
incidentally, is for the paramount interest of the bank. Thus, his act constitutes willful
disobedience of a lawful order of his employer. x x x47

In affirming the NLRC Decision which held Reyes' dismissal as valid, the CA considered Reyes'
acts as willful disobedience, a just cause for the termination of an employee based on Article 297
(formerly Article 282) of the Labor Code.

We do not agree.

In Dongon v. Rapid Movers and Forwarders Co., Inc.48 this Court held:

For willful disobedience to be a ground, it is required that: (a) the conduct of the
employee must be willful or intentional and (b) the order the employee violated must
have been reasonable, lawful, made known to the employee, and must pertain to the
duties that he had been engaged to discharge. Willfulness must be attended by a
wrongful and perverse mental attitude rendering the employee's act inconsistent
with proper subordination. In any case, the conduct of the employee that is a valid
ground for dismissal under the Labor Code constitutes harmful behavior against the
business interest or person of his employer. It is implied that in every act of willful
disobedience, the erring employee obtains undue advantage detrimental to the
business interest of the employer.49

In the present case, there is no question that Reyes' refusal to certify the Report on Crimes and
Losses was intentional. This is clearly disobedience. However, we find that the same is not attended
by a wrongful and perverse mental attitude which warrants the ultimate penalty of dismissal.

A review of the findings below will reveal that Reyes refused to certify said report based on his
honest assessment that the report cannot be completely validated for lack of material data and
evidence. Indeed, as found by the CA:

As a consequence, in compliance with the Manual of Regulations for Banks

(MORB) mandating the prompt report of the anomaly to the Bangko Sentral ng
Pilipinas (BSP), the Board of Directors of respondent RBSR approved a Report on
 Crimes and Losses describing the manner of the irregularities committed, and
directed petitioner Reyes – as Compliance Officer – to certify the same as part of the
requirement. However, Reyes refused to make the attestation on the reasoning
that no independent investigation was conducted and that he cannot
completely validate the report for lack of material data and
evidence.50 (Citations omitted.) (Emphasis supplied).

This assertion finds support in Memorandum No. 2013-02051 dated February 14, 2013, and
Memorandum No. 2013-02252 dated February 22, 2013, both sent by Reyes to no less than the
officers and directors of RBSR. In these Memoranda, Reyes noted several deficiencies in the report
and even made recommendations in order to make the same compliant with BSP regulations. In the
Court's view, this betrays respondents' claim that Reyes was involved in the theft/misappropriation
allegedly committed by Bognot and Eusebio.

Respondents counter Reyes' defense by saying:

Petitioner Reyes alleged that there was no personal investigation and judgment
independent from the Audit Committee or from the Management, and that the data
and evidence were lacking to satisfy a conclusion for the reporting of the
discrepancy, so he refused to file the Crimes and Losses Report. However, in
Circular No. 587, Series of 2007, x x x Subsection X162.4 (d.2) states that "where a
thorough investigation and evaluation is necessary to complete the report, an initial
report submitted within the deadline may be accepted: Provided that a complete
report is submitted not later than twenty (20) calendar days from termination of
investigation." Thus, his refusal is a gross negligence of his duties and obligations.
Otherwise, he could have submitted an initial report and made his personal
investigation and judgment independent from the Audit Committee or from the
Management and submitted the same within the period mentioned.53

The Court recognizes that there is reason for respondents' disappointment, even infuriation, over
Reyes and his actions. Surely, no employer would find pleasure in a disobedient employee. Be that
as it may, imposing the ultimate penalty of dismissal for such action – which, as already mentioned,
obtains justification – and for such single instance, is simply too harsh and downright unlawful.
Besides, what is the penalty for the late submission of the report? A miniscule monetary fine of
P150.00 to P450.00 per day of delay.54 Of course, this is not to encourage non-compliance with
bank regulations, but is only mentioned to further highlight the point that the penalty of dismissal
imposed upon Reyes was terribly disproportionate to his alleged infraction.

As a final note, it may be well to reiterate Justice Bellosillo's insightful observation in Alhambra
Industries, Inc. v. National Labor Relations Commission:55

TODAY employment is no longer just an ordinary human

activity. For most families the main source of their livelihood,
employment has now leveled off with property rights which no one
may be deprived of without due process of law.

Termination of employment is not anymore a mere cessation or

severance of contractual relationship but an economic phenomenon
affecting members of the family. This explains why under the broad
principles of social justice the dismissal of employees is adequately
protected by the laws of the state. x x x56
 WHEREFORE, the Petition is hereby GRANTED. The July 22, 2016 Decision of
the Court of Appeals and March 8, 2017 Resolution in CA-G.R. SP No. 139099,
are REVERSED and SET ASIDE. The February 24, 2014 Decision of the Labor
Arbiter in NLRC Case No. RAB-III-03-19924-13, is REINSTATED with
a MODIFICATION in that petitioner Ariel M. Reyes' backwages shall be computed
from the time of dismissal up to the finality of this Decision. All other matters not
otherwise modified stand.

SO ORDERED.

Zalameda, Rosario, and Marquez, JJ., concur.

Perlas-Bernabe, S.A.J., on official leave.

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