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CHINA BANKING CORPORATION v. MARIANO M. BORROMEO

FACTS:

The respondent, Mariano M. Borromeo, was employed by the petitioner, China Banking Corporation, as a Manager in their Regional Office in Cebu City and was later transferred to Cagayan de Oro City as Branch Manager. From 1989 to 1995, the respondent received favorable performance ratings and corresponding bonuses. He was also promoted multiple times during this period. However, it was later discovered that the respondent had approved several DAUD/BP accommodations without proper authority, resulting in unpaid checks amounting to P2,441,375. The petitioner only became aware of these accommodations when the respondent requested a loan to regularize and liquidate them. The petitioner sought clarification from the respondent regarding the unauthorized accommodations and the handling of the checks. The respondent provided explanations and stated that efforts were made to collect payment, but the checks remained unpaid.

The branch officer, respondent in this case, approved various BP/DAUD (Bank Purchase/Demandable Authority to Debit) accommodations in favor of clients Joel Maniwan and Edmundo Ramos. These accommodations were for amounts exceeding approved lines and were facilitated through out-of-town checks. However, these checks were returned unpaid by different banks. The respondent admitted to committing an error in judgment and lapses in control by relying solely on the word and assurance of Mr. Ramos, a friend and fellow bank officer. The respondent also signed as surety for Mr. Maniwan for a loan amounting to P2.5 million. The petitioner bank later discovered that the respondent's approval of these accommodations without authorization or approval from higher management violated the bank's Code of Ethics. The bank directed the respondent to restitute the amount of P1,507,736.79 representing 90% of the total loss incurred by the bank. The respondent tendered his irrevocable resignation and the bank withheld the amount from his separation pay. The bank also instructed the respondent to assist in the effort to collect the sums due to the bank from Maniwan and Ramos.

The respondent, an officer of the petitioner Bank, demanded the payment of his separation pay and other benefits from the bank. The petitioner maintained its position to withhold the amount of P836,637.08. The respondent filed a complaint with the NLRC against the bank for payment of separation pay, mid-year bonus, profit share, and damages. The parties submitted their position papers to the Labor Arbiter, who denied the respondent's motion to set the case for trial or hearing. The Labor Arbiter later issued an order submitting the case for resolution without further hearing. The Labor Arbiter dismissed the respondent's complaint, finding that the respondent had committed a serious infraction by approving accommodations without authorization. The Labor Arbiter also found that the bank's act of withholding the benefits due to the respondent was justified under its Code of Ethics. The respondent appealed to the NLRC, which affirmed the decision of the Labor Arbiter. The NLRC ruled that the Labor Arbiter did not commit grave abuse of discretion and that the bank was justified in withholding the benefits due to the respondent. The respondent's motion for reconsideration was denied by the NLRC. The respondent then filed a petition for certiorari with the Court of Appeals.

ISSUES:

  1. Whether the petitioner Bank deprived the respondent of his right to due process by unilaterally imposing the penalty of restitution on him.

  2. Whether the Labor Arbiter should have conducted a full-blown hearing instead of deciding the case based on the parties' position papers.

  3. Whether the Court of Appeals erred in remanding the case to the Labor Arbiter for further hearings

  4. Whether there was a denial of due process by the petitioner Bank

  5. Whether the petitioner Bank can impose the penalty of restitution without imposing the principal penalty of "Written Reprimand/Suspension"

  6. Whether the respondent violated the petitioner Bank's standard operating procedures.

  7. Whether the petitioner Bank can impose the penalty of restitution/forfeiture of benefits on the respondent.

  8. Whether the respondent's right to due process was violated by the petitioner Bank.

  9. Whether or not the respondent was denied due process.

  10. Whether or not the respondent is entitled to his separation benefits.

RULING:

  1. The Court of Appeals (CA) held that the petitioner Bank deprived the respondent of his right to due process by imposing the penalty of restitution without conducting an administrative investigation. This was contrary to both fundamental principles of due process and the petitioner Bank's own Code of Ethics.

  2. The CA ruled that the Labor Arbiter erred by deciding the case based solely on the parties' position papers. Factual issues, such as whether the respondent proposed the withholding of his benefits or pledged them to the petitioner Bank, necessitated a full-blown trial to afford the respondent due process.

  3. The Court ruled that the CA erred in remanding the case to the Labor Arbiter for further hearings. The Labor Arbiter has the discretion to decide the case based on position papers and supporting documents and is not bound by technical rules of evidence. Requiring the conduct of further hearings would be a negation of the summary nature of proceedings and the purpose of the rules. The CA's directive constituted undue interference with the Labor Arbiter's discretion.

  4. The Court did not directly address the issue of denial of due process by the petitioner Bank, but instead focused on the procedural issue regarding the remand of the case. However, the Court did mention that the respondent was given the opportunity to file a supplemental position paper and other supporting documents but chose not to do so.

  5. The Court did not directly address the issue of whether the petitioner Bank can impose the penalty of restitution without imposing the principal penalty of "Written Reprimand/Suspension."

  6. The respondent admitted that he violated the petitioner Bank's standard operating procedures in granting the DAUD/BP accommodations without higher management approval. His admission, together with the evidence on record, sufficiently established the violation.

  7. The petitioner Bank can impose the penalty of restitution/forfeiture of benefits on the respondent. The bank's Code of Ethics expressly sanctions the imposition of restitution/forfeiture of benefits as an independent penalty. The imposition of restitution was justified since the respondent voluntarily resigned from the bank, rendering the imposition of other penalties futile.

  8. No formal administrative investigation was necessary in this case. The respondent had the opportunity to be heard when he was furnished with a Memorandum containing clarificatory questions about the accommodations in question. His subsequent admission in his Letter constituted notice of the charge against him and served as sufficient opportunity to be heard.

  9. The respondent was not denied due process. He was given the opportunity to be heard, and his admissions made it unnecessary to hold a formal investigation.

  10. The respondent is entitled to his separation benefits, which were merely withheld pending the satisfaction of a judgment in another case.

PRINCIPLES:

  • The deprivation of the right to due process, including the right to a hearing or the right to defend oneself, is a violation of fundamental principles of fairness and is contrary to the requirements of due process.

  • Procedural due process has two main concerns: the prevention of unjustified or mistaken deprivation and the promotion of participation and dialogue by affected individuals in the decision-making process.

  • Factual issues that are material to the resolution of a case may necessitate a full-blown hearing to afford parties due process.

  • Factual findings of the Labor Arbiter or the National Labor Relations Commission (NLRC) should be accorded respect and finality if supported by substantial evidence.

  • Administrative bodies like the NLRC and the Labor Arbiter are not bound by technical rules of law and procedure and may decide cases based on position papers and supporting documents. Trial-type hearings are not required.

  • Factual findings of the NLRC and Labor Arbiter, when supported by evidence on record, are accorded respect and are considered binding on the Court.

  • The summary nature of proceedings in labor cases is intended to avoid undue delay and promote expeditious resolution of cases.

  • Company policies and regulations, unless shown to be grossly oppressive or contrary to law, are generally binding and valid on the parties and must be complied with until revised or amended. Management has the prerogative to discipline employees and impose penalties according to company rules and regulations. (Doctrine of Validity and Prerogative of Management)

  • Restitution/forfeiture of benefits may be imposed independently or together with other penalties in cases of loss or damage to company property or in cases where infractions or violations were incurred in connection with or arising from the application/availment of benefits/privileges. (Doctrine of Restitution/Forfeiture of Benefits)

  • Due process requires an opportunity to be heard. In certain circumstances, no formal administrative investigation may be necessary as long as the party is given notice of the charge against them and an opportunity to respond. (Doctrine of Due Process)

  • The right to due process includes the opportunity to be heard and present evidence.

  • Separation benefits cannot be wholly deprived from an employee, but may be withheld pending the satisfaction of a judgment.