Facts:

This case involves Bank of Lubao, Inc. (the petitioner) and Rommel J. Manabat (the respondent), with the legal matter originating from events that unfolded in 2001. Rommel J. Manabat was employed as a Market Collector at Bank of Lubao, a rural banking institution. Later, he was promoted to the position of an encoder at the bank's Sta. Cruz Extension Office, where he worked alongside two other employees, including a teller named Susan P. Lingad. The primary responsibility of Manabat as an encoder was to input customer deposits into the bank’s computer system after they were processed by Lindad.

In November 2004, an audit of the Sta. Cruz Extension Office led to the discovery of a significant misappropriation of funds, estimated at about ₱3,000,000.00. The audit revealed discrepancies such as transactions recorded in client passbooks that were not documented in the bank's official books. Further investigations identified various deposits that appeared in the bank's re

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Facts:

Employment and Job Assignment

• In 2001, Rommel J. Manabat was hired by Bank of Lubao, Inc. as a Market Collector.
• He was later reassigned as an encoder at the bank’s Sta. Cruz Extension Office, where he worked alongside teller Susan P. Lingad and employee May O. Manasan.
• His primary duty was to encode deposit transactions received from clients which were initially handled by Lingad.

Discovery of Discrepancies and Alleged Misappropriation

• In November 2004, an audit of the Sta. Cruz Extension Office uncovered discrepancies, including the misappropriation of approximately P3,000,000.00.
• The audit revealed instances where client transactions appeared in the passbooks but were omitted from the bank’s book of accounts.
• Additional findings showed various deposits were entered on the bank’s computer, then reversed and marked as an “error in posting.”

Request for Explanation and Administrative Proceedings

• On November 17, 2004, Bank of Lubao sent a memorandum demanding a written explanation from the respondent regarding the audit irregularities.
• Rommel J. Manabat responded on November 19, 2004, attributing the errors in posting to instances when Lingad used the bank’s computer while he was out on errands.
• An administrative hearing on December 11, 2004, led the bank’s investigating committee to conclude that the respondent had conspired with Lingad to commit fraud by disguising fraudulent entries as error corrections.

Filing of Criminal Complaints and Termination of Employment

• On August 9, 2005, following the committee’s findings, the bank filed criminal complaints for qualified theft against both Lingad and the respondent before the Municipal Trial Court of Lubao, Pampanga.
• The petitioner terminated the respondent’s employment on September 1, 2005, citing serious misconduct tantamount to a willful breach of trust.

Respondent’s Filing for Illegal Dismissal and Subsequent Labor Proceedings

• On September 26, 2005, the respondent filed a complaint for illegal dismissal with the Regional Arbitration Branch of the National Labor Relations Commission (NLRC) in San Fernando City, Pampanga.
• He argued that the dismissal was unjust, highlighting that the charge of qualified theft had been dismissed due to insufficient evidence of conspiracy with Lingad.
• The respondent sought separation pay, full backwages, 13th month pay for 2004, and moral and exemplary damages.

Labor Arbiter and NLRC Decisions

• On February 28, 2007, the Labor Arbiter ruled in favor of the respondent, declaring the dismissal illegal and ordering his reinstatement along with awarding him backwages (P111,960.00) and 13th month pay (P6,220.00).
• The LA disregarded the petitioner’s February 14, 2006 audit report due to the absence of a signature.
• The petitioner raised an appeal with the NLRC, presenting a new audit report dated April 30, 2007, but the NLRC, in its July 21, 2008 decision, upheld the LA’s ruling, emphasizing that the petitioner’s audit reports lacked evidentiary weight as they were produced post-dismissal.

Court of Appeals (CA) Proceedings and Modifications

• The petitioner sought certiorari before the CA, contesting the NLRC and LA findings on the grounds that:
• The CA erred in awarding separation pay instead of restoring the respondent to his former position.
• The respondent did not originally pray for separation pay in his complaint, only reinstatement.
• The petitioner had acted in good faith during the termination.
• On April 24, 2009, the CA denied the petition for certiorari but modified the remedy by awarding the respondent separation pay (equivalent to one month’s salary for every year of service) in lieu of reinstatement and ordering backwages to be computed only from the time of illegal dismissal up to finality of the decision.
• The CA emphasized that the strained relations between the parties made reinstatement impractical.

Subsequent Motions and Petitions for Reconsideration

• The petitioner’s motion for reconsideration was denied on July 7, 2009, affirming the CA’s resolution.
• The respondent consistently defended that reinstatement was not viable due to ongoing antagonism stemming from criminal charges filed against him, thereby supporting the award of separation pay.

Issue:

• Whether the Court of Appeals erred in ordering the petitioner to pay the respondent separation pay in lieu of reinstatement given that the initial issue was solely the legality of the respondent’s dismissal.
• Whether the respondent is entitled to payment of backwages, and if so, the correct computation period for such backwages.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)