Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act for omission. (Art. 2217, Civil Code)

The deprivation of economic compensation caused mental anguish, fright, serious anxiety, besmirched reputation, and wounded feelings. All these are grounds for an award of moral damages under the Civil Code. (Montinola vs. PAL, G.R. No. 198656, September 8, 2014)

Guide to Valid Dismissal of Employees Second Edition

The employee is entitled to moral damages when the employer acted a) in bad faith or fraud; b) in a manner oppressive to labor; or c) in a manner contrary to morals, good customs, or public policy. (Ibid.)

Leo’s Restaurant and Bar Cafe, et al. vs. Laarne C. Densing
G.R. No. 208535, October 19, 2016


Kimwa Construction & Development Corporation employed Densing as Liaison Officer operated Leo’s Restaurant and Bar Cafe (LRBC), and the Mountain Suite Business Apartelle (Apartelle). It appointed Densing as Administrative Officer/Human Resource (HR) Head of these establishments which took effect when the establishments became fully operational.

Thereafter, Leo Y Lua (Leo), the Manager of the Restobar and the Apartelle, issued upon Densing a Memorandum requesting her to temporarily report at Kimwa’s Main Office. Densing received another Memorandum from Leo requiring her to explain the circumstances surrounding the agreement between the Restobar and Pepsi Products Inc. (Pepsi), and the benefits she derived therefrom. Leo accused her of having signed said contract without authority from him and of not informing him of the benefits arising from the contract. The Memorandum also indicated that Pepsi gave the Restobar 10 cases of soft drinks during its opening night, and additional 67 cases for but its records reflected receiving only 20 out of said 67 cases.

In her Explanation, Densing stated that, in the presence of Jovenali Ablanque (Ablanque), Sales Manager of Pepsi, Leo verbally authorized her to sign the contract with Pepsi on behalf of the Restobar. The following day, Ablanque returned to the Restobar, and Densing signed the contract pursuant to Leo’s verbal instruction. She gave no explanation anent the benefits arising from the contract as she purportedly did not intervene in Leo and Ablanque’s discussion on the matter. She added that the Restobar received only 10 and additional 20 cases of Pepsi drinks, and she did not receive personal benefits arising from the contract.

Leo issued another Memorandum requiring Densing to answer why she signed the Pepsi contract even without authority to do so, and to explain whether her apology addressed to Leo was an acceptance of her fault on the charges against her. In her Answer, Densing remained firm that she did not receive any personal benefits from Pepsi. Also, she stated that she apologized to Leo because she knew that the latter had feelings of doubt about her but it was not because she accepted the accusations against her.

In another Memorandum, Densing was required to answer the following charges: 1) dishonesty when she charged to the Restobar’s account 50% of the food she ordered therefrom without approval of its Owner or Manager; 2) violation of her duties when she did not inform Leo of the signing of the Pepsi contract; and, 3) failure to account for 47 soft drinks cases that Pepsi gave the Restobar.

In her Explanation, Densing asserted that the charge of dishonesty was not related to the Pepsi contract such that she opted not to answer said accusation. With regard to the alleged missing Pepsi drinks, she affirmed that Pepsi clarified the matter already, particularly to where these soft drinks were placed or given. Pepsi, through its Settlement and Credit Manager, certified that Pepsi gave the Restobar 10 cases of Pepsi products on its opening day, and 20 cases of Pepsi 12 oz. It stressed that it did not give cash assistance or cash equivalent to any staff of the Restobar. It also asked Leo to disregard the erroneous volume of documents it inadvertently gave him, and assured him that Pepsi already adjusted his records to reflect the correct figures.

On the ground of loss of trust and confidence, Leo terminated Densing. Thus she filed an Amended Complaint for illegal dismissal, illegal suspension, non-payment of 13th month pay, separation pay in lieu of reinstatement, moral and exemplary damages, and attorney’s fees against Kimwa, and herein LRBC, et al., the Restobar, the Apartelle, Leo, and/or Amelia Y Lua (Amelia).

LA Ruling:

The Executive Labor Arbiter (LA) rendered a Decision dismissing the Complaint for lack of merit. The LA decreed that LRBC, et al. and Kimwa validly dismissed Densing on the ground of loss of trust and confidence. He pointed out that employers cannot be compelled to retain the services of their employees who were guilty of acts inimical to the interests of the employer and the dismissal of an erring employee, was a measure of self-protection. The LA also declared that Densing committed acts contrary to the interest of her employer when she charged personal food consumption to the Restobar, entered into an exclusive contract with Pepsi, and failed to account for the Pepsi products donated to the Restobar. He further stated that LRBC, et al. and Kimwa complied with the required procedural due process when they issued memoranda informing Densing of the charges against her and giving her notice of her dismissal.

Densing appealed the LA Decision.

NLRC Ruling:

The NLRC issued its Resolution finding Densing’s dismissal illegal. It set aside the LA Decision and ordered LRBC, et al. to pay Densing backwages, separation pay, moral and exemplary damages, 13th month pay differential,.and attorney’s fees. According to the NLRC, Densing’s claim that she had the authority to enter the contract with Pepsi was supported by evidence, which included the Sworn Statement of the Sales Manager of Pepsi, and a Certification from concerned Pepsi Managers that Pepsi donated only 10 cases of softdrinks and additional 20 cases of Pepsi 12 oz. to the Restobar.

The NLRC added that even assuming that Densing was without explicit authority from the owner of the Restobar, she still validly entered the contract with Pepsi as the signing thereof was within her duty as the one in charge of the operations of the Restobar. It also noted that there was no showing that Densing was ill-motivated in signing the Pepsi contract; and she signed it to the best interest of the Restobar. The NLRC ruled that the imputation that Densing charged food to the Restobar was related to her representation privilege granted her by the Restobar; and, there was no evidence that she abused this privilege. LRBC, et al. and Kimwa moved for reconsideration.

The NLRC granted the Motion for Reconsideration. It set aside its Resolution, and dismissed the Complaint for lack of merit. In reversing itself, the NLRC held that Densing’s functions did not include any authority to sign or execute contracts for and in behalf of the Restobar. It added that even assuming that Leo verbally authorized her to sign the Pepsi agreement, Densing signed the same in her name, as if she was the Restobar’s owner. It also held that if not for the fact that Densing was suspended and later dismissed, the whereabouts of the donated Pepsi products would not have been traced. It likewise faulted Densing for charging 50% of her meals to the Restobar without approval from its Owner or Chief Officer. It added that Densing was given opportunity to be heard when various memoranda were issued to her. The NLRC denied Densing’s Motion for Reconsideration.

CA Ruling:

The CA rendered the assailed Decision setting aside the Resolutions of the NLRC, and reinstating the November 28, 2008 NLRC Resolution finding the illegal dismissal.

The CA reasoned that as Administrative Officer/HR Head, Densing held a position of trust and confidence. Nevertheless, it explained that LRBC, et al. failed to prove that Densing committed any of the following acts imputed against her. The CA stressed that the grounds had been adequately passed upon in the NLRC November 28, 2008 Resolution before it reversed itself and issued the June 4, 2009 and July 31, 2009 Resolutions. It added that even if Densing had no express authority to sign the agreement with Pepsi, her having entered it was not sufficient to dismiss her from work, especially in the absence of malicious intent or fraud on her part. It pointed out that the Restobar did not suffer damage because of Densing’s act.

According to the CA, Densing even acted in good faith when she signed the contract with Pepsi on the impression that it was part of her duties and responsibilities. It also quoted with approval the November 28, 2008 NLRC Resolution declaring that there was no evidence that Densing abused her representation privilege, which included the charging of food expense when entertaining guests of the Restobar. Finally, it held that Densing did not deserve the penalty of dismissal especially so since she committed no prior infractions in her more than three years of service. The CA denied LRBC, et al.’ Motion for Reconsideration. LRBC, et al. thus filed the Petition before the SC.


Whether or not the dismissal was valid

Whether or not moral and exemplary damages should be awarded

SC Ruling

The SC denied the petition.

An employer has the right to dismiss an employee for just causes, which include willful breach of trust and confidence reposed on him or her by the employer. To temper such right to and to reconcile it with the employee’s security of tenure, it is the employer who has the burden to show that the dismissal of the employee is for a just cause. Such determination of just cause must also be made with fairness, in good faith, and only after observance of due process of law.

Moreover, to dismiss an employee on the ground of loss of trust and confidence, two requisites must concur: (a) the concerned employee must be holding a position of trust; and, (b) the loss of trust must be based on willful breach of trust based on clearly established facts. Loss of trust and confidence as a ground for dismissal is never intended for abuse by reason of its subjective nature.

It must be pursuant to a breach done willfully, knowingly and purposely without any valid excuse. It must rest on substantial grounds and not on mere suspicion, whims, or caprices of the employer. Loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.

As far as the first requisite is concerned, Densing is shown to occupy a position of trust as her managerial work was directly related to management policies, and generally required exercise of discretion and independent judgment. Nonetheless, the second requirement is wanting since LRBC, et al. failed to prove that their loss of trust on Densing was founded on clearly established facts. Leo required Densing to explain her supposed infractions when she signed, without the approval of the owner, the contract between the Restobar and Pepsi; and her failure to account the items Pepsi donated to the Restobar.

Densing aptly explained these matters to Leo. According to her, Leo verbally authorized her to sign the agreement with Pepsi. This verbal instruction was given in the presence of Ablanque, Sales Manager of Pepsi. In his Affidavit dated, Ablanque corroborated Densing’s assertion. He certified that during his visits in the Restobar, he discussed with Leo his proposal of an exclusivity contract between Pepsi and the Restobar.

In the course of their negotiation, Leo agreed to the contract and authorized Densing to sign the same. Also, as declared by the CA, even granting for the sake of argument that Densing signed the Pepsi contract the express authority from Leo, act was well within her functions. Densing had the authority in all operational, administrative and functional matters of the Restobar and the Apartelle; and, 2) had the duty to oversee the entire operations of the business, including the over-all property/furniture, maintenance and expenditures. Therefore, having entered the Pepsi contract is not sufficient basis for LRBC, et al. to lose their trust in Densing. Leo authorized her to enter said agreement. Even assuming that there was no explicit order for her to do so, Densing still acted within her authority as in-charge of all operation, administrative and functional matters of the establishments.

The Labor Code of the Philippines 2018 Edition by Atty. Elvin B. Villanueva

LRBC, et al. primarily charged Densing of having entered the contract with Pepsi without authority from the Owner or the Manager of the Restobar. Nevertheless, as also established, Leo was well aware of this contract, as Pepsi itself attested. The Restobar also directly received the Pepsi products. Moreover, despite Densing having explained herself, and Pepsi having fully and timely clarified the matters surrounding the contract, LRBC, et al. still dismissed Densing. It thus appears that such dismissal was pre-determined by LRBC, et al. even before Densing explained herself regarding the charges against her. For having shown bad faith or such “conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity,” LRBC, et al. are liable to pay Densing moral damages.

Related: Mere existence of the basis is sufficient to dismiss managerial employee

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