A supervisor who took and used the company’s supplies and materials may be validly dismissed for loss of trust and confidence having knowingly violated the company rules.

Thus, the Supreme Court held in the following case:

Cadavas vs. Court of Appeals, et al.
G.R. No. 228765, March 20, 2019

Willful breach of trust; Loss of trust and confidence; Position of trust; Two classes of positions of trust; Managerial employee; Relaxation of employer’s rule; Dishonesty; Petition for certiorari; Petition for review on certiorari; Wrong remedy; Technicality; Separation pay based on social justice; PLDT Doctrine; Toyota Ruling


Petitioner Minda Cadavas (Cadavas) was hired as a Staff Nurse by respondent Davao Doctors Hospital (DDH) on January 16, 1989. She was promoted to Nurse Supervisor in the course of her employment until her dismissal on May 11, 2012.

Sometime in February 2012, Cadavas’ aunt was confined at DDH for breast cancer, stage four. To help lessen the hospital expenses of her aunt, Cadavas, with the help of some hospital staff, was able to obtain supplies and medicines used in her aunt’s operation from the Emergency Department and Operating Room Central Supply Service without being entered in the records so that the said supplies and medicines would not be charged to her aunt’s bill, but Cadavas would replace these items (purchased at a lower price outside the hospital). The items taken were valued at P6,000.00, more or less, and were eventually replaced by Cadavas.

Thereafter, DDH, through the Director of Nursing Service, sent Cadavas a notice to explain the incident when she allegedly got supplies and drugs from the Emergency Department and Operating Room Central Supply Service and why no disciplinary action would be taken against her for the grave offense of willful abuse of hospital property.

ln her letter-explanation, Cadavas stated that after the STAT chest tube insertion procedure of her aunt, she asked Nursing Aide Madellen Afiasco if the supplies and medicines used by her aunt could be replaced, and Afiasco agreed; hence, the items were not charged to her aunt.

Moreover, after the VATS operation of her aunt the staff clerk of the Operating Room Central Supply Service did not charge to her aunt’s account the Thoraset used because they had an agreement that it would be replaced. The said supplies and medicines were eventually replaced. Cadavas said that there was no intention on her part to abuse the hospital’s property or supplies, as she merely intended to help her aunt lessen her hospital expenses that reached P254,000.00. She stated that she may have committed some mistakes, but they were not done secretly on her own to evade detection, but with the consent and knowledge of some hospital staff.

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Subsequently, an administrative hearing was conducted regarding the complaint. In the said hearing, Cadavas reiterated that she asked Nursing Aide Afiasco if the supplies used on her aunt could be replaced, with the intention to help lessen the hospital expenses of her aunt. Cadavas admitted that she was aware of the hospital policy that they are not allowed to purchase medicines outside the hospital and that employees are not allowed to borrow supplies for personal use, but it has long been a practice that employees are allowed to replace supplies or medicines from the emergency room, instead of charging them to the patient.

Cadavas admitted that she violated the rules because she was only thinking of helping her aunt at that time. She was not able to ask approval from her director, but the people around the emergency room were aware of the borrowed items. She stated that she had already replaced the items.

Thereafter, Cadavas received a Memorandum informing her that her employment was being terminated for dishonesty and loss of trust and confidence. This prompted Cadavas to file a complaint for illegal dismissal and other monetary claims against DDH with the Regional Arbitration Branch No. XI, NLRC in Davao City. Cadavas claimed that her dismissal from service was too harsh for her act of violating company rules, considering that it was her first offense in her 23 years of service to the hospital. She also alleged that she was denied due process as she was not assisted by counsel during the administrative hearing conducted by DDH.

In its defense, DDH claimed that complainant Cadavas was dismissed for just cause. It argued that Cadavas’ dismissal was justified because she violated a hospital policy, thereby breaching the trust and confidence it reposed in her. DDH stated that Cadavas admitted having withdrawn items for a procedure performed on her aunt, who was a patient in the hospital, and the said items were not charged to the patient upon her request and assurance that they would be replaced. She also admitted that the said act is in violation of DDH’s policy, although she insisted that it is being practiced in the hospital.

Further, DDH argues that even assuming that replacement of items withdrawn from the Central Supply Service is being practiced, it does not justify Cadavas’ admitted violation of existing policy. Cadavas is a supervisor, which is a position of responsibility; hence, she is expected to enforce DDH’s policies and rules and regulations. Moreover, DDH said that the policy requiring recording of all withdrawals of supplies and medicines was established in order to prevent pilferage and dishonesty. If enforcement of the said policy would be relaxed, it would encourage the evil being sought to be prevented. Further, DDH stated that Cadavas was afforded due process because she was given a notice to explain, informing her of the offense charged against her; a hearing was conducted to give her an opportunity to explain and to present her defense; and a notice of termination was served on her.

LA Ruling:

The Labor Arbiter rendered a Decision in favor of Cadavas.

Although the Labor Arbiter agreed with DDH that Cadavas committed some lapses in participating in the open practice of borrowing and replacing later the hospital supplies and medicines used during the operation/treatment of a hospital staff or the staffs relative, the Labor Arbiter held that the penalty of dismissal is not commensurate to the offense committed.

According to the Labor Arbiter, Cadavas’ 23 years of service, wherein she received merit, recognition, commendation and loyalty awards from DDH, should not be obliterated by a single lapse of judgment. The Labor Arbiter cited Conti v. National Labor Relations Commission, which held that violation of a rule or policy, which in its implementation has oftentimes been relaxed may not lawfully give rise to termination of employment of the violator.

DDH appealed the Labor Arbiter’s Decision before the NLRC, Cagayan de Oro City.

NLRC Ruling:

The NLRC rendered a Resolution in favor of DDH.

The NLRC stated that Cadavas was the Nurse Supervisor in the Nursing Service Department of DDH and, thus, held a position of trust and confidence. Hence, the betrayal of this trust is the essence of the offense for which the employee is penalized.

The NLRC said that the records showed that Cadavas admitted that she withdrew hospital supplies and medicines for her aunt and she asked Nursing Aide Afiasco if she could replace the items withdrawn to which Afiasco agreed. In effect, as a Nurse Supervisor, she was directing the latter not to record the transaction, thereby prejudicing DDH. Cadavas knew all along that there was a policy against the purchase of hospital supplies and medicines outside of DDH’s pharmacy even if such items were replaced, but she insisted in doing so.

While the NLRC commiserated with Cadavas regarding her intention to help alleviate her aunt’s misery, nonetheless, it stated that as a supervisory employee, Cadavas was expected to exercise her judgment and discretion with utmost care and concern for her employer’s business. She was tasked to perform key functions and, unlike ordinary rank and file employees, she was bound by a more exacting work ethics. The NLRC said that in doing what she did, Cadavas rendered herself absolutely unworthy of the trust and confidence demanded by her position. Hence, DDH could not be faulted for losing trust and confidence in Cadavas and in refusing to retain her as its employee.

Cadavas’ motion for reconsideration was denied by the NLRC. Cadavas filed a petition for certiorari with the Court of Appeals, alleging that the NLRC gravely abused its discretion in (1) reversing and setting aside the Decision of the Labor Arbiter and in dismissing her complaint; and (2) ignoring that she was denied due process.

CA Ruling:

The Court of Appeals denied the petition.

The appellate court stated that loss of trust and confidence will validate an employee’s dismissal only upon compliance with certain requirements, namely: (1) the employee concerned must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence. And in order to constitute a just cause for dismissal, the act complained of must be work-related such as would show the employee concerned to be unfit to continue working for the employer.

In this case, the Court of Appeals found the above requirements for dismissal on the ground of loss of trust and confidence present holding that Cadavas was DDH’s Nurse Supervisor, which position is imbued with trust and confidence as she is charged with the delicate task of overseeing the staff nurses in the Nursing Service Department of DDH. Cadavas, as Nurse Supervisor, requested another hospital staff member, a subordinate employee, not to record the supplies and medicines she took from the Emergency Department and Operating Room Central Supply Service so that these items would not be reflected in her aunt’s hospital bill.

This act was plainly dishonest and it was admitted by Cadavas herself. Evidently, Cadavas, by her act, breached the trust and confidence reposed in her by DDH. Holding a supervisory position, Cadavas was expected to set an example for other hospital employees to be faithful to the hospital rules and policies. Instead, Cadavas committed a dishonest, if not illegal, act and, to achieve her goal, even directed a subordinate employee to participate in the dishonesty. Even if the items taken were replaced by Cadavas, this did not exempt her from liability for her offense.

Further, the Court of Appeals held that Cadavas was not denied due process. Cadavas’ motion for reconsideration was denied by the Court of Appeals.

Hence, Cadavas filed a petition for certiorari before the Supreme Court. (Note: Wrong remedy)


Whether or not a supervisor who took and used the company supplies and medicines and replaced them with ones purchased outside may be validly dismissed for loss of trust and confidence

Whether or not a petition for certiorari may be deemed petition for review in the interest of justice

Whether or not the relaxation of the rule in Conti applies in this case

Whether or the separation pay can be awarded in this case based on social justice principle

SC Ruling:

The SC, as regards the legal remedy taken by Cadavas held that she availed of the wrong remedy in assailing the decision of the Court of Appeals by filing this petition for certiorari under Rule 65 of the Rules of Court. The proper recourse of the aggrieved party from the decision of the Court of Appeals is a petition for review on certiorari under Rule 45 of the Rules of Court.

However, this petition should not be dismissed on a mere technicality. Citing People’s Security, Inc. vs. NLRC, the SC held that the dismissal of an appeal purely on technical grounds is frowned upon where the policy of the courts is to encourage hearings of appeal on its merits. The rules of procedure ought not to be applied in a very rigid technical sense; rules of procedure are used only to help secure, not override substantial justice. If a technical and rigid enforcement of the rules is made, their aim would be defeated. Hence, in the interest of justice, the SC treated the petition for certiorari as a petition for review on certiorari.

Guide to Valid Dismissal of Employees, 2nd Edition

Under Article 282 of the Labor Code, an employer may terminate an employment for “[f]raud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.” The requisites for dismissal on the ground of loss of trust and confidence are: 1) the employee concerned must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence. In addition to these, such loss of trust relates to the employee’s performance of duties.

Bristol Myers Squibb (Phils.), Inc. vs. Baban explained the two classes of positions of trust. The first class consists of managerial employees. They are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. The second class consists of cashiers, auditors, property custodians, etc. They are defined as those who in the normal and routine exercise of their functions, regularly handle significant amounts of money or property.

Managerial employees refer to those whose primary duty consists of the management of the establishment in which they are employed, or of a department or a subdivision thereof, and to other officers or members of the managerial staff.

In this case, Cadavas was a managerial employee. She was the Nurse Supervisor of the OR-DR, Neonatal ICU, and Hemodialysis Departments at the time of the incident; hence, she held a position of trust and confidence as she managed the said departments, having been tasked with the scheduling of the staff nurses within her departments and overseeing the quality of bedside care being delivered by her staff.

Loss of trust and confidence to be a valid cause for dismissal must be based on a willful breach of trust and founded on clearly established facts. Such breach is willful if it is done intentionally, knowingly, and purposely, without justifiable excuse as distinguished from an act done thoughtlessly, heedlessly or inadvertently. The basis for the dismissal must be clearly and convincingly established, but proof beyond reasonable doubt is not necessary.

In the Minutes of the Administrative Hearing conducted by DDH, Cadavas admitted that there is no policy that employees can borrow supplies for personal use. She also admitted that she was aware of the hospital’s policy against the purchase of medicines outside the hospital. She apologized for buying medicines and supplies outside the hospital (to replace the ones used by her aunt).

Thus, it is clear that despite knowing that there is a policy against the purchase of supplies and medicines outside the hospital, Cadavas chose to violate the policy by asking Nursing Aide Afiasco if she could replace the supplies and medicines used by her aunt. As Afiasco acceded to Cadavas’ request, the medicines and supplies used by her aunt were not recorded and charged to her per the agreement that she would replace the said medicines and supplies. In effect, Cadavas caused the transaction not to be recorded.

Although Cadavas was not then performing her duties and functions as Nurse Supervisor in her departments; nevertheless, as an employee and Nurse Supervisor of DDH, she was covered by the policy against the use of hospital medicines and supplies without recording such use, and purchasing medicines and supplies outside of DDH hospital to replace hospital medicines and supplies already used. Notably, Cadavas was aware of such hospital policy, but she still violated it. As a Nurse Supervisor holding a position of trust, Cadavas was expected to enforce and observe hospital policies. Clearly, she breached the trust and confidence reposed in her by DDH by her willful violation of the said hospital policy, causing loss of income to DDH.

As a general rule, employers are allowed wider latitude of discretion in terminating the services of employees who perform functions by which their nature requires the employer’s full trust and confidence. Mere existence of basis for believing that the employee has breached the trust and confidence of the employer is sufficient and does not require proof beyond reasonable doubt. Since the requisites for dismissal due to loss of trust and confidence have been met, DDH validly dismissed Cadavas. While the State can regulate the right of an employer to select and discharge his employees, an employer cannot be compelled to continue the employment of an employee in whom there has been a legitimate loss of trust and confidence.

Cadavas was not denied due process since DDH complied with the twin requirements of notice and hearing.

Further, the SC held that the case of Conti is not applicable in this case. In contrast to the lack of a written policy and the approval of the questioned purchase orders by therein the immediate superiors in Conti, in the instant case, Cadavas was well aware of the policy she admittedly violated and she also admitted that she did not ask for approval from her superior/director if she could replace the medicines and supplies used by her aunt.

The replacement of the medicines and supplies obtained in violation of a policy by Cadavas cannot erase the betrayal of the trust and confidence reposed in her by her employer, DDH. Contrary to the allegation of Cadavas, DDH suffered loss of income for the medicines and supplies merely replaced by her.

In Bristol Myers Squibb (Phils.) Inc. vs. Baban, the employee therein, who held a position of trust and confidence, gave out therein the company’s medical samples as a token of gratitude to the supporters of his father who lost in the elections. He was held validly dismissed on the ground of loss of trust and confidence, but the Court granted him separation pay as an equitable relief in consideration of past services rendered, since his dismissal was for a cause other than serious misconduct or those that negatively reflected on his moral character, citing Philippine Long Distance Telephone Company (PLDT) v. NLRC.

In PLDT vs. NLRC, the Court disallowed the grant of separation pay to the employee therein, a traffic operator of PLDT, who was held validly dismissed for dishonesty because she demanded and received P3,800.00 in consideration of her promise to facilitate approval of therein complainants’ applications for telephone installation. The Court declared therein that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.

The ruling in PLDT has to be taken together with the later ruling of the Court in Central Philippines Bandag Retreaders, Inc. vs. Diasnes in that in addition to serious misconduct, in dismissals based on other grounds under Art. 282, like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his family, separation pay should not be conceded to the dismissed employee.

Reiterating the ruling in Toyota, the SC held that labor adjudicatory officials and the CA must demur the award of separation pay based on social ,justice when an employee’s dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a crime against the person of the employer or his immediate family -grounds under Art. 282 of the Labor Code that sanction dismissals of employees.

Based on the foregoing, as Cadavas was validly dismissed for willful breach of trust under Article 282 of the Labor Code, she cannot be granted separation pay.

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