G.R. No. 194944 - Philippine National Bank vs. Gregorio

Case Summary (G.R. No. 194944)

Factual Background

Gregorio was hired by PNB in 1978 as an apprentice teller and rose to become Branch Manager, Senior Manager, of PNB Sucat, Parañaque. In December 2002 a depositor sought confirmation about a purported high-return investment offered at PNB Sucat. This prompted an internal review by PNB’s Internal Audit Group (IAG) conducted from January 8 to 24, 2003, and the submission of an IAG Memorandum on February 18, 2003 documenting alleged irregular loan-against-deposit hold-out transactions at the branch.

IAG Investigation and Findings

The IAG Memorandum reported that Gregorio, together with a customer relations specialist, allegedly induced depositors to avail of loans secured by their deposits so that loan proceeds could be lent to other borrowers who agreed to pay five percent monthly interest, of which three percent purportedly went to the depositors and two percent was allegedly payable as commission to PNB Sucat. The IAG identified multiple manager’s checks disbursed as loan proceeds credited to accounts of persons other than the borrowers, absence of borrowers’ written consent for such credits, dollar loans similarly credited without consent, and instances of manager’s checks encashed without proper endorsements or clear approval.

Depositors’ Affidavits and Retractions

Three depositors, Benita C. Rebollo, Maxima Villar, and Virginia Pollard, executed affidavits describing essentially similar transactions and alleging inducement by Gregorio. Subsequently Villar and Rebollo executed affidavits of retraction, with Villar stating that her original affidavit was the product of fear and misunderstanding and that the hold-out was done upon her instructions. The IAG and PNB nonetheless treated the original affidavits and the documentary bank trail as material to the investigation.

Administrative Charges and Answers

On May 30, 2003 and February 4, 2004, the PNB Administrative Adjudication Panel charged Gregorio with gross misconduct, gross dishonesty, willful breach of trust, and/or negligence. Gregorio filed answers on June 12, 2003 and February 16, 2004 denying inducement, asserting that borrowers’ transactions were private arrangements, and presenting affidavits of retraction and other denials. She also testified during the Panel’s meeting on March 22, 2004.

Panel Recommendation and Dismissal

The Panel convened and on March 29, 2004 recommended dismissal, rejecting the affidavits of retraction as unreliable and relying on the IAG findings and the depositors’ original affidavits. PNB issued a memorandum dismissing Gregorio on May 4, 2004. The Panel emphasized evidence such as manager’s checks credited to third parties, lack of bank commission records for the alleged two percent, and fund transfers suggesting coordination among branch personnel and third-party accounts.

Labor Arbiter Proceedings and Decision

Gregorio filed a complaint for illegal dismissal, damages, and attorney’s fees before the Labor Arbiter. The Labor Arbiter found Gregorio illegally dismissed. The Arbiter concluded that PNB’s case rested principally on Villar’s affidavit, which Villar had retracted, and that Pollard’s affidavit should not suffice because Gregorio was not afforded the opportunity to confront Pollard. The Arbiter also gave weight to Gregorio’s consistent high performance ratings and ordered reinstatement with backwages and monetary awards.

NLRC Proceedings and Decision

PNB appealed to the NLRC. The NLRC reversed the Labor Arbiter in a decision dated September 26, 2008 and dismissed the complaint for lack of merit. The NLRC held that PNB met the burden of proof by presenting the IAG Memorandum, the depositors’ affidavits, teller testimonies, and other documentary evidence. It regarded retractions as generally unreliable, found no constitutional or statutory requirement for confrontation of witnesses in company investigations, and characterized Gregorio’s submissions as mere denials insufficient to rebut the documentary trail.

Court of Appeals Proceedings and Rationale

Gregorio filed a petition for certiorari under Rule 65 before the Court of Appeals alleging grave abuse of discretion by the NLRC. The CA granted relief, reversed the NLRC, and reinstated the Labor Arbiter’s decision. The CA concluded that PNB relied primarily on three affidavits, two of which were recanted, that Pollard’s unrecanted affidavit was unsubstantiated and that Gregorio was denied the opportunity to confront Pollard. The CA also stressed absence of evidence that PNB suffered losses and cited Gregorio’s exemplary performance ratings.

Issues on Review and Standard of Review

PNB sought review under Rule 45, contending that the CA erred in finding that PNB acted solely on affidavits and that the NLRC properly considered the IAG Memorandum and other evidence. Gregorio countered that the dismissal lacked factual basis and that the argument that she “ran a bank within a bank” was a new allegation not aired below, raising due process concerns. The Supreme Court framed the legal question as whether the Court of Appeals correctly found that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in reversing the Labor Arbiter.

Supreme Court’s Analysis on Review Limits

The Court reiterated precedents, including St. Martin Funeral Home v. NLRC, that CA review of NLRC decisions via a petition under Rule 65 is limited to allegations of grave abuse of discretion and is not a substitute for an appeal. The Court explained that a petition under Rule 65 challenges jurisdictional error, not errors of judgment on the merits, and that a subsequent Rule 45 review before the Supreme Court is confined to questions of law—specifically whether the CA correctly determined the presence or absence of grave abuse of discretion in the NLRC decision.

Supreme Court’s Analysis on Evidence and Due Process

On the merits, the Supreme Court identified the corpus of evidence before the NLRC: the IAG Memorandum, the charges and answers, the depositors’ affidavits and affidavits of retraction, teller testimonies, and Gregorio’s own statements. The Court found that, viewed together, this evidence constituted substantial evidence to support the NLRC’s conclusion that Gregorio facilitated an unauthorized lending scheme at PNB Sucat. The Court sustained the NLRC’s assessment that affidavits of retraction may be unrel

Case Syllabus (G.R. No. 194944)

Parties and Procedural Posture

PHILIPPINE NATIONAL BANK (PNB) filed a petition for review on certiorari under Rule 45 of the Rules of Court seeking reversal of the Court of Appeals' decision.
TERESITA FE A. GREGORIO initiated an action for illegal dismissal, damages, attorney's fees, and reinstatement before the National Labor Relations Commission.
The Labor Arbiter rendered judgment declaring Gregorio illegally dismissed and awarded reinstatement with backwages.
The NLRC reversed the Labor Arbiter and dismissed Gregorio's complaint for lack of merit.
The Court of Appeals reversed the NLRC and reinstated the Labor Arbiter's decision by way of a petition under Rule 65.
The Supreme Court granted PNB's Rule 45 petition to decide whether the Court of Appeals correctly found grave abuse of discretion by the NLRC.

Key Factual Allegations

Gregorio was employed by PNB since 1978 and rose to Branch Manager of PNB Sucat.
The IAG conducted a credit review from January 8 to 24, 2003 into loan-against-deposit hold-out transactions at PNB Sucat.
Investigative findings and depositor affidavits alleged that depositors were induced to enter high-yield investments involving loans secured by their deposits.
The scheme allegedly paid depositors 3% monthly while 2% was purportedly the bank commission, and loan proceeds were credited to accounts of third persons.
Several depositors later executed affidavits claiming they never agreed to loans and that their deposits were on hold-out, while others later retracted their earlier affidavits.

Investigative Findings

The IAG Memorandum detailed a pattern of manager's checks issued as loan proceeds credited to accounts of persons other than the borrowers.
The IAG found manager's checks encashed without proper endorsements and instances of cash payments lacking clear approval documentation.
The IAG observed payment of the promised 3% interest either by credit to depositors' accounts or in cash allegedly routed through an account linked to an employee.
The IAG reported absence of records showing that PNB Sucat received the alleged 2% commission.

Administrative Proceedings

The PNB Administrative Adjudication Panel charged Gregorio with gross misconduct, gross dishonesty, willful breach of trust, and negligence and recommended dismissal.
The Panel considered affidavits from complainants, the IAG Memorandum, and responses from Gregorio, and it discounted affidavits of retraction as unreliable or unauthenticated.
PNB issued a memorandum dismissing Gregorio on the Panel's recommendation on May 4, 2004.

Labor Arbiter Ruling

The Labor Arbiter found Gregorio illegally dismissed and ordered reinstatement with backwages.
The Labor Arbiter gave credence to the affidavits of retraction and held that PNB relied principally on affidavits that had been rebutted or were untested.
The Labor Arbiter emphasized Gregorio's consistent high performance ratings as weighing against a finding of guilt.

NLRC Decision

The NLRC reversed the Labor Arbiter and dismissed the complaint in a September 26, 2008 Decision holding that PNB met its burden of proof.
The NLRC treated the IAG Memorandum, the original affidavits, teller testimonies, and Gregorio's statements as collectively constituting substantial evidence.
The NLRC held that affidavits of retraction are generally unreliable and that confrontation of complainants is not required in company investigations.
The NLRC found that