Breach of Trust Employee Dismissal Upheld for Unauthorized Sale of Company Assets

When may an employer validly dismiss a supervisor for disposing of company property without proper authority? The Supreme Court recently clarified this question in a case involving a Caltex depot superintendent who sold 190 LPG cylinders without following company procedures. The ruling affirms that employees holding positions of trust may be terminated for serious misconduct and breach of confidence, even when the property involved has been declared as scrap.

The Case: Caltex (Philippines), Inc. v. Agad

Hermie Agad worked for Caltex for over a decade, rising to the position of Bulk Depot Superintendent. He received commendations and bonuses. In 1994, Caltex dismissed him based on two audit findings: (1) a questionable reimbursement of P15,500 for crating expenses, and (2) the unauthorized withdrawal and sale of 190 pieces of LPG cylinders.

The Labor Arbiter ruled the dismissal was illegal, but the NLRC reversed, finding just causes existed. The Court of Appeals then sided with Agad, ruling the crating expense was legitimate and the dismissal penalty too harsh for a first offense. Caltex appealed to the Supreme Court.

The Legal Framework

Article 282 of the Labor Code allows an employer to terminate employment for several just causes, including:

• (a) Serious misconduct or willful disobedience of lawful orders
• (c) Fraud or willful breach of trust reposed in the employee

The burden of proof rests on the employer to show the dismissal was for a just cause. The required quantum of proof is substantial evidence—that amount of relevant evidence a reasonable mind might accept as adequate to support a conclusion.

The Crating Expense Issue

The Court found no reason to disturb the CA's finding that the crating expense was legitimate. The official receipt served as the best evidence of payment and was presumed regular on its face. Caltex approved the reimbursement without questioning its reasonableness at the time. The corroborating affidavits against Agad were rejected as hearsay since the witnesses were not presented for cross-examination.

The LPG Cylinders Issue

On the second charge, the Court sided with Caltex. The evidence established that:

1. The memorandum authorizing withdrawal of scrap materials covered 3,000 kilograms of black iron plates—not the 190 LPG cylinders
2. No Records of Materials Received/Delivered (RMRD) were issued as required by company rules
3. The cylinders were sold without bidding
4. No proceeds were remitted to the company
5. Periodic inventory reports were not submitted

Even if the cylinders were considered scrap, they still had monetary value. An employee cannot appropriate company property without the employer's consent, regardless of its condition.

The Court's Ruling

The Supreme Court held that Agad's acts constituted a "serious infraction amounting to theft of company property." This qualified as serious misconduct under Article 282(a) and willful breach of trust under Article 282(c).

The Court emphasized that Agad, as a superintendent, held a position of responsibility involving custody and protection of company property. He fell squarely within the "trust and confidence" rule. Where there is reasonable ground to believe an employee is responsible for misconduct, dismissal for loss of trust is justified.

The Court granted Caltex's petition, setting aside the CA decision and declaring the dismissal valid.

Practical Takeaways

• Positions of trust carry higher standards. Supervisors and managers entrusted with company property face stricter accountability. A single serious infraction involving company assets can justify dismissal.
• "Scrap" does not mean "free." Company property retains value even when declared as scrap. Employees cannot dispose of it without proper authorization, bidding, and accounting.
• Documentation matters. Failure to follow internal procedures—such as issuing required forms or submitting inventory reports—can convert an otherwise authorized act into grounds for dismissal.
• Employers must still prove their case. The employer bears the burden of showing just cause through substantial evidence. Uncorroborated affidavits without cross-examination may be rejected.
• First offense is not a shield. Length of service and prior commendations do not automatically protect an employee from dismissal when the misconduct involves breach of trust or theft of company property.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.