G.R. No. 102467 June 13, 1997
EQUITABLE BANKING CORPORATION, Chairman MANUEL L. MORALES, President & Director GEORGE L. GO, Vice-Chairman & Director RICARDO J. ROMULO, Vice-Chairman & Director JOHN C.B. GO, Director HERMINIO B. BANICO, Director FRANCISCO C. CHUA, Director PETER GO PAILIAN, Director RICARDO C. LEONG, Director JULIUS T. LIMPE and Director PEDRO A. ORTIZ, petitioners, vs. HON. NATIONAL LABOR RELATIONS COMMISSION, First Division, and RICARDO L. SADAC, respondents.

FACTS

Private respondent Ricardo L. Sadac was appointed Vice-President for the Legal Department of petitioner Equitable Banking Corporation effective August 1, 1981, and later designated as its General Counsel on December 8, 1981. His duties included providing legal advice to the Board and Management, handling bank cases, directing the Legal Department staff, and performing other duties assigned by the President and Board. On June 26, 1989, nine lawyers under Sadac submitted a “letter-petition” to the Board Chairman accusing him of abusive conduct, inefficiency, mismanagement, ineffectiveness, and indecisiveness. After a failed reconciliation meeting, the Board directed Director Herminio B. Banico to investigate. Banico’s report, dated August 8, 1989, found the charges against Sadac to be true. On August 10, 1989, Board Chairman Manuel L. Morales issued a memorandum to Sadac stating the Board had lost confidence in him, was awaiting his voluntary resignation to avoid a formal hearing, and instructed him to turn over all case files to Atty. William R. Veto, who would substitute for him. Sadac requested a formal hearing to clear his name, but the Board, through Vice-Chairman Ricardo J. Romulo, denied the request, reiterated the loss of confidence, and emphasized it was not dismissing him but awaiting his resignation. Sadac filed a complaint for illegal dismissal with the NLRC.

ISSUE

Whether the National Labor Relations Commission acted without or in excess of jurisdiction or with grave abuse of discretion in holding that private respondent Ricardo L. Sadac was a regular employee of Equitable Banking Corporation whose services could only be terminated in accordance with the Labor Code, as opposed to the bank’s claim that his services as legal counsel could be terminated at any time pursuant to the rules on lawyer-client relationship.

RULING

The Supreme Court dismissed the petition and affirmed the NLRC’s decision. The Court held that Sadac was a regular employee, not merely a retained counsel. His appointment as Vice-President for the Legal Department and General Counsel, with a fixed monthly salary, allowance, bonus, and comprehensive duties involving managerial and supervisory functions over bank personnel, established an employer-employee relationship. The power to dismiss is a statutory prerogative of the employer that must be exercised within the bounds of law and pursuant to the basic rules of due process. The bank’s loss of confidence, while a valid ground for dismissal of a managerial employee, must be based on willful breach of trust and substantiated by substantial evidence. The Court found the bank’s investigation inadequate and the denial of Sadac’s request for a formal hearing a violation of due process. The bank’s act of stripping Sadac of his functions and effectively rendering him idle constituted constructive dismissal. The lawyer-client relationship argument was deemed inapplicable as Sadac’s role was that of a corporate executive, not just a legal practitioner. The NLRC did not commit grave abuse of discretion in its ruling.