APPLICATION OF THE RES INTER ALIOS ACTA RULE AND ITS EXCEPTION IN LABOR CASES

Buenaflor Car Services, Inc. vs. David, Jr.
G.R. No. 222730, November 7, 2016

Facts:

Cezar David was employed as Service Manager by Buenaflor Car Services, Inc., doing business under the trade name “Pronto! Auto Services.” In such capacity, he was in charge of the overall day-to-day operations of Buenaflor Car Services, Inc. Buenaflor, including the authority to sign checks, check vouchers, and purchase orders.

In the course of its business operations, Buenaflor Car Services, Inc. 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 David for his review and approval.

Once approved and signed by David and De Guzman, the duplicate copy of the said order is given to Buenaflor Car Services, Inc.’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 Buenaflor Car Services, Inc.’s Accounting Assistant, (Del Rosario), who, in turn, prepares the request for payment to be reviewed by her immediate supervisor, Finance Manager and Chief Finance Officer (Vasay). Once approved, the check voucher and corresponding check are prepared to be signed by any of the following officers: David, Vasay, or Vice President for Operations Oliver S. Buenaflor (Buenaflor).

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. On August 8, 2013, Chief Finance Officer Cristina S. David (David) of Buenaflor Car Services, Inc.’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 Buenaflor Car Services, Inc. bearing the words “OR CASH” indicated after the payee’s name.

Alarmed, David requested for Buenaflor Car Services, Inc.’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 Buenaflor Car Services, Inc.’s attention through its President, Exequiel T. Lampa (Lampa), and an investigation was conducted. Lampa and Buenaflor Car Services, Inc.’s Human Resource Manager, Helen Lee (Lee), confronted Del Rosario on the questioned checks.

Del Rosario readily confessed that upon David’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 David’s direct supervision, for preparing spurious purchase orders that were used as basis in issuing the subject checks, as well as Buenaflor Car Services, Inc.’s messenger/driver, Jayson G. Caranto (Caranto), who was directed to encash some of the checks, with both persons also gaining from the scheme.

Del Rosario’s confession was put into writing in two (2) separate letters both of even date (extrajudicial confession). As a result, David, together with Del Rosario, De Guzman, and Caranto, were placed under preventive suspension 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 David and either Vasay or Buenaflor, in the total amount of P1,021,561.72.

For his part, David 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. David and his co-workers were served their respective notices of termination after having been found guilty of violating the company’s Code of Conduct and Behavior, particularly, serious misconduct and willful breach of trust.

Aggrieved, David, De Guzman, and Caranto filed a complaint for illegal dismissal with prayer for reinstatement and payment of damages and attorney’s fees against Buenaflor Car Services, Inc., Diamond IGB, Inc., and one Isagani Buenaflor before the NLRC.

LA Ruling:

The Labor Arbiter (LA) ruled that David, De Guzman, and Caranto were illegally dismissed, and consequently, awarded backwages, separation pay and attorney’s fees.

The LA observed that Buenaflor Car Services, Inc. failed to establish the existence of conspiracy among David, De Guzman, Caranto, and Del Rosario in altering the checks and that the latter’s extra judicial confession was informally made and not supported by evidence.

Dissatisfied, Buenaflor Car Services, Inc. appealed to the NLRC

NLRC Ruling:

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 David’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 extra judicial confession against David 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.

Unperturbed, Buenaflor Car Services, Inc. filed a motion for partial reconsideration, which the NLRC denied, prompting the former to elevate the matter to the CA via a petition for certiorari.

CA Ruling:

The CA found no grave abuse of discretion on the part of the NLRC in holding that David was illegally dismissed.

It ruled that Del Rosario’s extra judicial confession only bound her as the confessant but constitutes hearsay with respect to David and the other co-accused under the res inter alios acta rule. Moreover, while David was a signatory to the checks in question, the CA noted that at 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 David had breached the trust reposed in him. Buenaflor Car Services, Inc. moved for partial reconsideration, which the CA denied; hence, the instant petition.

Issue/s:

1. Whether or not the employee was validly dismissed for serious misconduct and loss of trust and confidence.

2. Whether or not res inter alios acta rule applies in this case.

SC Ruling:

The SC found the petition meritorious.

The SC held that David’s termination was grounded on his violation of Buenaflor Car Services, Inc.’s Code of Conduct and Behavior, which was supposedly tantamount to (a) serious misconduct and/or (b) willful breach of 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. 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.

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Buenaflor Car Services, Inc.’s claims of serious misconduct and/or willful breach of trust against David was hinged on his alleged directive to Buenaflor Car Services, Inc.’s Accounting Assistant, Del Rosario, to insert the word “OR CASH” in the checks payable to Buenaflor Car Services, Inc.’s supplier/s after the same had been signed by the authorized officers contrary to company policy. Accordingly, David 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.

Moreover, David 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 David’s statements may be true, the Court, nonetheless, observes that it is highly unlikely that David did not have any participation in the above-mentioned scheme to defraud Buenaflor Car Services, Inc. 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 Buenaflor Car Services, Inc. begins with the preparation of purchase orders by the Purchasing Officer, De Guzman. These purchase orders have to be approved by David himself before the delivery and payment process can even commence.

Notably, the fact that David signed the checks prior to their alterations does not discount his participation. David was directly implicated in the controversy through the extra judicial 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 David’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.

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. 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 xx x.”

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 extra judicial 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.

Verily, Del Rosario’s extrajudicial confession is independently relevant to prove the participation of David in the instant controversy considering his vital role in Buenaflor Car Services, Inc.’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.” Based on the foregoing, the Court is convinced that enough substantial evidence exists to support Buenaflor Car Services, Inc.’s claim that David 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, which evidentiary threshold Buenaflor Car Services, Inc. successfully hurdled in this case.

Guide to Valid Dismissal of Employees