The Court’s Ruling
In the 1987 Constitution, provisions on social justice and the protection of labor underscore the importance and economic significance of labor. Article II, Section 18 characterizes labor as a “primary social economic force,” and as such, the State is bound to “protect the rights of workers and promote their welfare.” Moreover, workers are “entitled to security of tenure, humane conditions of work, and a living wage.”[35]
The Labor Code declares as policy that the State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work.[36]
While it is an employer’s basic right to freely select or discharge its employees, if only as a measure of self-protection against acts inimical to its interest,[37] the law sets the valid grounds for termination as well as the proper procedure to be followed when terminating the services of an employee.[38]
Thus, in cases of regular employment, the employer is prohibited from terminating the services of an employee except for a just or authorized cause.[39] Such just causes for which an employer may terminate an employee are enumerated in Article 282 of the Labor Code:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate family member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Further, due process requires that employers follow the procedure set by the Labor Code:
Art. 277. Miscellaneous provisions.
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b. Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. The Secretary of the Department of Labor and Employment may suspend the effects of the termination pending resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off. (As amended by Section 33, Republic Act No. 6715, March 21, 1989)
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In this case, Padao was dismissed by PNB for gross and habitual neglect of duties under Article 282 (b) of the Labor Code.
Gross negligence connotes want of care in the performance of one’s duties, while habitual neglect implies repeated failure to perform one’s duties for a period of time, depending on the circumstances.[40] Gross negligence has been defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.[41]
In the case at bench, Padao was accused of having presented a fraudulently positive evaluation of the business, credit standing/rating and financial capability of Reynaldo and Luzvilla Baluma and eleven other loan applicants.[42] Some businesses were eventually found not to exist at all, while in other transactions, the financial status of the borrowers simply could not support the grant of loans in the approved amounts.[43] Moreover, Padao over-appraised the collateral of spouses Gardito and Alma Ajero, and that of spouses Ihaba and Rolly Pango.[44]
The role that a credit investigator plays in the conduct of a bank’s business cannot be overestimated. The amount of loans to be extended by a bank depends upon the report of the credit investigator on the collateral being offered. If a loan is not fairly secured, the bank is at the mercy of the borrower who may just opt to have the collateral foreclosed. If the scheme is repeated a hundredfold, it may lead to the collapse of the bank. In the case of Sawadjaan v. Court of Appeals,[45] the Court stressed the crucial role that a credit investigator or an appraiser plays. Thus:
Petitioner himself admits that the position of appraiser/inspector is "one of the most serious [and] sensitive job[s] in the banking operations." He should have been aware that accepting such a designation, he is obliged to perform the task at hand by the exercise of more than ordinary prudence. As appraiser/investigator, the petitioner was expected to conduct an ocular inspection of the properties offered by CAMEC as collaterals and check the copies of the certificates of title against those on file with the Registry of Deeds. Not only did he fail to conduct these routine checks, but he also deliberately misrepresented in his appraisal report that after reviewing the documents and conducting a site inspection, he found the CAMEC loan application to be in order. Despite the number of pleadings he has filed, he has failed to offer an alternative explanation for his actions. [Emphasis supplied]
In fact, banks are mandated to exercise more care and prudence in dealing with registered lands:
[B]anks are cautioned to exercise more care and prudence in dealing even with registered lands, than private individuals, "for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of the land registration statute Act 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. It is for this reason that banks before approving a loan send representatives to the premises of the land offered as collateral and investigate who are the true owners thereof.[46]
Padao’s repeated failure to discharge his duties as a credit investigator of the bank amounted to gross and habitual neglect of duties under Article 282 (b) of the Labor Code. He not only failed to perform what he was employed to do, but also did so repetitively and habitually, causing millions of pesos in damage to PNB. Thus, PNB acted within the bounds of the law by meting out the penalty of dismissal, which it deemed appropriate given the circumstances.
The CA was correct in stating that when the violation of company policy or breach of company rules and regulations is tolerated by management, it cannot serve as a basis for termination.[47] Such ruling, however, does not apply here. The principle only applies when the breach or violation is one which neither amounts to nor involves fraud or illegal activities. In such a case, one cannot evade liability or culpability based on obedience to the corporate chain of command.
Padao cited Llosa-Tan v. Silahis International Hotel,[48] where the “violation” of corporate policy was held not per se fraudulent or illegal. Moreover, the said “violation” was done in compliance with the apparent lawful orders of the concerned employee’s superiors. Management-sanctioned deviations in the said case did not amount to fraud or illegal activities. If anything, it merely represented flawed policy implementation.
In sharp contrast, Padao, in affixing his signature on the fraudulent reports, attested to the falsehoods contained therein. Moreover, by doing so, he repeatedly failed to perform his duties as a credit investigator.
Further, even Article 11(6) of the Revised Penal Code requires that any person, who acts in obedience to an order issued by a superior does so for some lawful purpose in order for such person not to incur criminal liability. The succeeding article exempts from criminal liability any person who acts under the compulsion of an irresistible force(Article 12, paragraph 6) or under the impulse of an uncontrollable fear of an equal or greater injury (Article 12, paragraph 7).
Assuming solely for the sake of argument that these principles apply by analogy, even an extremely liberal interpretation of these justifying or exempting circumstances will not allow Padao to escape liability.
Also, had Padao wanted immunity in exchange for his testimony as a prosecution witness, he should have demanded that there be a written agreement. Without it, his claim is self-serving and unreliable.
That there is no proof that Padao derived any benefit from the scheme is immaterial.[49] What is crucial is that his gross and habitual negligence caused great damage to his employer. Padao was aware that there was something irregular about the practices being implemented by his superiors, but he went along with, became part of, and participated in the scheme.
It does not speak well for a person to apparently blindly follow his superiors, particularly when, with the exercise of ordinary diligence, one would be able to determine that what he or she was being ordered to do was highly irregular, if not illegal, and would, and did, work to the great disadvantage of his or her employer.
PNB, as an employer, has the basic right to freely select and discharge employees (subject to the Labor Code requirements on substantive and procedural due process), if only as a measure of self-protection against acts
inimical to its interests.[50] It has the authority to impose what penalty it deems sufficient or commensurate to an employee’s offense. Having satisfied the requirements of procedural and substantive due process, it is thus left to the discretion of the employer to impose such sanction as it sees befitting based on the circumstances.
Finally, Padao claims that he should be accorded the same treatment as his co-employees.[51] As the ELA, however, correctly observed:
[A]s pointed out by the respondents, the case of the complainant was different, and his culpability, much more than his aforementioned co-employees. In the case of Palomares and Dagpin, they were involved in only one case of over-appraisal of collateral in the loan account of the spouses Jaime Lim and Allyn Tan (Respondents’ Comments, p. 1), but in the case of complainant, his over-appraisals involved three (3) loan accounts and amounting to ₱9,537,759.00 (Ibid.), not to mention that he also submitted falsified Credit Investigation Reports for the loan accounts of seven (7) other borrowers of PNB (Ibid., pp. 1-2).
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The number of over-appraisals (3) and falsified credit investigation reports (7) or countersigned by the complainant indicates habituality, or the propensity to do the same. The best that can be said of his acts is the lack of moral strength to resist the repeated commission of illegal or prohibited acts in loan transactions. He thus cannot interpose undue pressure or coercion exerted upon [him] by his superiors, to absolve himself of liability for his signing or countersigning the aforementioned falsified reports. It may have been allowable or justifiable for him to give in to one anomalous loan transaction report, but definitely not for ten (10) loan accounts. It is axiomatic that obedience to one’s superiors extends only to lawful orders, not to unlawful orders calling for unauthorized, prohibited or immoral acts to be done.
In the case of Wilma Velasco, PNB did not pursue legal action and even discontinued the administrative case filed against her because, according to PNB, she appeared to have been the victim of the misrepresentations and falsifications of the credit investigation and appraisal reports of the complainant upon which she had to reply in acting on loan applications filed with the PNB and for which such reports were made. She was not obliged to conduct a separate or personal appraisal of the properties offered as collaterals, or separate credit investigations of the borrowers of PNB. These functions pertained to PNB inspectors/credit investigators, like the complainant. Unfortunately, the latter was derelict in the performance of those duties, if he did not deliberately misuse or abuse such duties.
As can be seen, therefore, the complainant and Wilma Velasco did not stand on the same footing relative to their involvement or participation in the anomalous loan transactions earlier mentioned. Therefore, PNB cannot be faulted for freeing her from liability and punishment, while dismissing the complainant from service. [Emphases supplied]
Given the above ruling of the Court in G.R. No. 180849, the ruling of the CA in CA-G.R. SP No. 00945, an action stemming from the execution of the decision in said case, must perforce be reversed.
However, Padao is not entitled to financial assistance. In
In Central Philippine Bandag Retreaders, Inc. v. Diasnes,[53] cited in Quiambao v. Manila Electric Company,[54] we discussed the parameters of awarding separation pay to dismissed employees as a measure of financial assistance:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of separation pay based on social justice when an employee’s dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willfull breach of trust; or commission of a crime against the person of the employer or his immediate family – grounds under Art. 282 of the Labor Code that sanction dismissal of employees. They must be judicious and circumspect in awarding separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the employers. The commitment of the Court to the cause of labor should not embarrass us from sustaining the employers when they are right, as here. In fine, we should be more cautions in awarding financial assistance to the undeserving and those who are unworthy of the liberality of the law.[55][Emphasis original. Underscoring supplied]
Clearly, given the Court’s findings, Padao is not entitled to financial assistance.
