G.R. No. 156283 ; May 6, 2005
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. ROLANDO MATIAS, respondent.

FACTS

Rolando Matias was employed by the Construction and Development Corporation of the Philippines (CDCP), later renamed Philippine National Construction Corporation (PNCC). In 1980, a parcel of land in Bukidnon was registered in his name as a trustee for the corporation, a common practice to hold land exceeding corporate ownership limits. Matias availed of a retrenchment program in 1984. In 1992, former CDCP employees approached him, stating the land was under agrarian reform; he reluctantly signed documents and later received Land Bank payments for the land’s transfer to the Republic. The title was cancelled in 1992.
Matias was rehired by PNCC in 1996. In 1997, PNCC’s Realty Management Group, unaware of the 1992 transfer, requested him to execute a Deed of Assignment for the same land to PNCC. Matias executed the deed, warranting the land was free from encumbrance, for a nominal consideration. Upon later discovering the prior transfer and payment, PNCC charged Matias with falsification, dishonesty, and breach of trust. After an explanation, he was terminated in June 1998 for loss of trust and confidence. Matias filed a complaint for illegal dismissal.

ISSUE

Whether the dismissal of Rolando Matias on the ground of loss of trust and confidence was valid.

RULING

No. The Supreme Court affirmed the Court of Appeals’ decision reinstating the Labor Arbiter’s ruling that the dismissal was illegal. For loss of trust and confidence to be a valid cause for termination, it must be proven by clear and convincing substantial evidence and must be directly related to the employee’s duties, demonstrating that the employee is unfit to continue in employment. The Court found PNCC failed to meet this burden.
The legal logic is that Matias’s act of executing the 1997 Deed of Assignment, while knowing of the 1992 transfer, did not constitute willful breach of trust integral to his duties as Project Controller and head of a Core Group. His role did not involve managing corporate properties or making representations about land titles. The assignment was initiated by PNCC management based on its own incomplete records, and Matias received only a nominal sum, indicating no fraudulent intent to cause corporate damage. The loss of confidence alleged was not founded on an act connected to his fiduciary responsibilities. The employer’s prerogative must not be exercised arbitrarily, and the evidence presented did not clearly and convincingly establish a breach justifying dismissal. Thus, the termination violated his security of tenure.