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DEBRA ANN P. GAITE v. FILIPINO SOCIETY OF COMPOSERS

FACTS:

The respondent, Filipino Society of Composers, Authors, and Publishers, Inc. (FILSCAP), employed the petitioner, Debra Ann P. Gaite, as its General Manager. In 2012, FILSCAP discovered several issues pertaining to Gaite's conduct and performance, including her non-disclosure of certain information and her delay in action for the collection of proxy forms. FILSCAP discussed a separation package with Gaite, but discovered that Gaite had been misappropriating funds without the knowledge of the Board. FILSCAP commenced an inquiry and found that Gaite misappropriated funds amounting to P17,720,455.77. FILSCAP issued a Show Cause Notice to Gaite, who denied any misappropriation and filed a case for constructive dismissal.

The petitioner, Liza C. Gaite, was the General Manager of FILSCAP. Gaite claimed that her termination was premeditated and that she was faced with certain issues as early as 2010. She denied any wrongdoing and argued that the alleged reallocation from Special Accounts to Operating Expenses was done in accordance with FILSCAP's Distribution Rules. The Labor Arbiter ordered FILSCAP to pay Gaite, but the NLRC partially set aside the decision and declared Gaite to be constructively dismissed. However, the CA reversed the NLRC decision and ruled that Gaite was validly dismissed for serious misconduct and loss of trust and confidence. Gaite filed a petition to challenge the CA's ruling.

The case involves the dismissal of Marivic Gaite by FILSCAP based on allegations of misappropriation and fiduciary breaches. Gaite argued that the documents presented by FILSCAP to support the dismissal were not properly authenticated or sworn to, rendering them hearsay and self-serving. She also pointed out an email she sent explaining that the alleged "reallocation" of funds was based on approved budgets and distribution rules. Gaite claimed that the CA erred in ruling that her dismissal was valid, as it allegedly took the email out of context. She insisted that the "reallocation" was a collegial decision based on accounting reports and sound principles.

ISSUES:

  1. Whether Gaite's act of reallocating funds without the knowledge, consent, or authorization of the Board constitutes serious misconduct

  2. Whether Gaite's act of reallocating funds violates the company's Distribution Rules

  3. Whether Gaite's acts amounted to serious misconduct warranting her dismissal.

  4. Whether Gaite's termination on the ground of loss of trust and confidence is valid.

  5. Whether or not the dismissal of Gaite is valid based on serious misconduct and loss of trust and confidence.

  6. Whether or not Gaite's dismissal on the grounds of serious misconduct and loss of trust and confidence was valid.

RULING:

  1. Yes, Gaite's act of reallocating funds without the knowledge, consent, or authorization of the Board constitutes serious misconduct. The amount involved is significant, and the act violated an express provision of the company's Distribution Rules. Gaite, as the General Manager of FILSCAP, is responsible for the overall operations of the company, including the regular review and updating of distribution rules. Her act of reallocating funds without proper authorization demonstrates a grave breach of her duties and loss of trust and confidence.

  2. Yes, Gaite's act of reallocating funds violates the company's Distribution Rules. Section 3.1 of the Distribution Rules provides that all expenses arising from and incidental to the conduct, management, and operation of the company, including operating expenses, are first to be deducted from the company's gross revenue. Gaite's action of reallocating funds without following the proper procedures and without the knowledge and approval of the Board goes against this provision.

  3. Gaite's acts amounted to serious misconduct warranting her dismissal.

    • Gaite's unauthorized transfer of a staggering amount from the company's Special Accounts to cover the company's Operating Expenses, without the knowledge and consent of the Board of Directors and in direct contravention of FILSCAP's Distribution Rules, is a grave infraction that caused the depletion of the company's Special Accounts held in trust for the rightful copyright owners. This seriously puts Gaite's ability to duly perform and accomplish her duties and responsibilities as General Manager into question. Therefore, her acts amount to serious misconduct warranting her dismissal.

  5. Gaite's termination on the ground of loss of trust and confidence is valid.

    • Gaite, as the General Manager of FILSCAP, held a position of trust and confidence. The act of transferring the aforementioned staggering amount without authorization was sufficient reason for the loss of trust and confidence in Gaite. As a managerial employee, Gaite could be terminated on the ground of loss of confidence by mere existence of a basis for believing that she had breached the trust of her employer, which in this case is FILSCAP. It is not necessary to prove involvement in the alleged events beyond reasonable doubt; it is sufficient that there is some basis for such loss of confidence. FILSCAP has sufficiently proven Gaite's unauthorized reallocation or transfer of funds, which was corroborated by Gaite's email admitting to the reallocation. Therefore, FILSCAP's termination of Gaite on the ground of loss of trust and confidence is valid.

  7. The dismissal of Gaite is valid based on serious misconduct and loss of trust and confidence.

  8. The Court held that Gaite's dismissal on the grounds of serious misconduct and loss of trust and confidence was valid. The unauthorized reallocation of funds from FILSCAP's Special Accounts without the knowledge, consent, or authorization of the company's Board of Directors constituted serious misconduct. Additionally, Gaite's actions resulted in the loss of trust and confidence of the company. The employer has the right to exercise its management prerogative, including the right to dismiss employees. As long as the company's exercise of judgment is in good faith and not for the purpose of defeating or circumventing the rights of employees, such exercise will be upheld by the court.

PRINCIPLES:

  • Misconduct is an improper or wrong conduct that transgresses established rules and implies wrongful intent. It must be serious, relate to the employee's duties, and render the employee unfit to continue working for the employer.

  • An employer may validly terminate the services of an employee for serious misconduct, among other just causes enumerated in the Labor Code.

  • Distribution rules and provisions must be followed in the conduct, management, and operation of a company. Failure to comply with these rules may result in a violation, which can be grounds for dismissal.

  • Loss of trust and confidence will validate an employee's dismissal when (a) the employee holds a position of trust and confidence, and (b) the employee performs an act that justifies such loss of trust and confidence. Certain guidelines must be observed for the employer to cite loss of trust and confidence as a ground for termination. It should not be used as a subterfuge for causes that are improper, illegal, or unjustified.

  • As a managerial employee, termination on the ground of loss of trust and confidence does not require proof beyond reasonable doubt. It is sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the concerned employee is responsible for the alleged misconduct and the nature of their participation therein. This distinguishes a managerial employee from a fiduciary rank-and-file employee, where loss of trust and confidence requires proof of involvement in the alleged events and mere uncorroborated assertion by the employer is not sufficient.

  • Technical rules of evidence are not binding in labor cases. Objections to evidence must be raised before the labor tribunals, failure to do so results in the waiver of said objections.

  • The Distribution Rules of a company dictate the allocation and appropriation of its revenues. The Board has the sole authority to allocate or appropriate the company's revenues.

  • The authorized transfer of funds without knowledge or consent of the Board and in contravention of the company's Distribution Rules constitutes valid and legal ground for dismissal, regardless of personal gain or benefit.

  • The mere existence of a basis for believing that an employee breached the employer's trust and confidence is sufficient grounds for dismissal, regardless of actual damage or personal benefit.

  • The nature of an employee's participation in misconduct can render them unworthy of the trust and confidence demanded by the position. The employee's act or misconduct must be willfully made, but intent for wrongful consequences may not be necessary.

  • An employer has the right to exercise its management prerogative, including the right to dismiss employees.

  • The employer's exercise of judgment will be upheld as long as it is in good faith and not for the purpose of defeating or circumventing the rights of employees.