Confronting a witness is not a matter of right in company investigations. To meet the requirements of due process, it is sufficient that the employee had the opportunity to be heard and to refute the allegations of the adverse witness in his affidavit.
Learn the proper handling of administrative investigation in a book Guide to Valid Dismissal of Employees Second Edition.
Philippine National Bank vs. Gregorio
G.R. No. 194944, September 18, 2017
Teresita Fe A. Gregorio (Gregorio) was initially hired by PNB as an apprentice teller in 1978. She rose through the ranks and eventually became the Branch Manager, with a level of Senior Manager, of PNB ‘s Sucat, Parafiaque Branch (PNB Sucat).
Sometime in December 2002, a depositor requested confirmation that PNB Sucat offers a unique kind of high-return investment, as promised by branch officers and personnel. Thus, PNB’s Internal Audit Group (IAG) conducted a credit review at PNB Sucat regarding its activities connected with loan against deposit hold-out transactions.
A certain Benita C. Rebollo (Rebollo) also executed an affidavit detailing her transactions with Gregorio. The IAG submitted its evaluation, findings, and recommendation in a Memorandum (IAG Memorandum) which essentially detailed how Gregorio authorized the conduct of irregular transactions in PNB Sucat.
From its investigation and Rebollo’s affidavit, the IAG discovered Gregorio’s purported irregular lending activities: Gregorio, along with Gloria Miranda (Miranda), a customer relation specialist of PNB Sucat, allegedly convinced depositors to invest in a PNB product that had an above-market interest income yield. To avail of this product, Gregorio required depositors to avail of a loan secured by their deposits with PNB Sucat.
The loan proceeds are thereafter loaned to other borrowers who undertook to pay a 5% monthly interest. Of the 5%, 3% will be paid to them as income interest yield while the remaining 2% will go to PNB Sucat as commission. Parenthetically, the IAG found no records showing that PNB Sucat received any commission arising from these loan activities.
To facilitate the loans, Gregorio required the depositors to accomplish loan documents such as the Application/ Approval Form on Loans Against Deposit Hold-out, Promissory Notes, and Deposit Hold-out Agreements. The proceeds of the loans are then released through manager’s checks. These checks, in tum, are credited to the savings accounts of persons other than the borrowers.
The IAG Memorandum identified other irregular transactions within PNB Sucat to prove Gregorio’s supposed modus operandi: Gregorio approved the application of loan proceeds of 25 borrowers to settle the outstanding loans covered by 44 promissory notes and bank charges of other borrowers. Sampled bank transactions show that Gregorio approved 21 manager’s checks representing the proceeds of loans against deposit hold-outs. These were loan proceeds of 15 borrowers credited to the accounts of persons other than the borrowers. There were no documents showing the borrowers’ written consent to the crediting of their loan proceeds to other people’s accounts. Dollar loans against hold-out were granted to three borrowers which proceeds, however, were credited without written consent to the account of a third person.
The IAG’s investigation also revealed that there were two deposit hold-out borrowers who received the monthly 3% interest income yield through their savings accounts. This was paid either in cash or fund transfer from the account of a certain Grace de Guia Brozas (Brozas ). The IAG asserted that this is the dummy account of Miranda, who worked with Gregorio in the conduct of these irregular lending activities, on the basis of bank records showing several fund transfers of large amounts from Miranda’s account to Brozas’ account.
The IAG also noted in its Memorandum that tellers of PNB Sucat accepted for encashment eight managers’ checks representing loan proceeds without the proper endorsement of the loan borrowers. In other instances, the tellers paid managers’ checks in cash even when it was not clear if the proper bank officer approved the checks for encashment or deposit. Further, the IAG found that the 3% interest was paid to the depositors who availed of the loan against hold-out transactions either: (1) to their savings or checking accounts with PNB Sucat or (2) by Gregorio in cash.
Later on, two other depositors executed affidavits narrating their transactions with Gregorio, depicting essentially the same transaction that Rebollo stated in her affidavit. In sum, these depositors claimed in their affidavits that Gregorio convinced them to invest in a PNB product that had a high interest income yield. They were required to sign withdrawal slips and other loan documents.
Later on, they claimed that, upon inquiry with PNB Sucat, they were surprised to learn that they have outstanding loans with the bank and that their deposits were subject of a hold-out agreement. They were presented with bank documents concerning their loans and holdout agreements. They insisted in their affidavits that they never agreed to contract a loan with the bank.
The PNB Administrative Adjudication Panel (Panel) charged Gregorio with gross misconduct and dishonesty based on Villar’s affidavit. Gregorio was again charged with gross dishonesty and/or willful breach of trust and gross misconduct and/or negligence.
Gregorio filed separate answers to these charges. In her answer to the first charge, Gregorio submitted Villar’ s affidavit of retraction. According to Villar’s affidavit of retraction: (1) the loan against deposit hold-out transaction was a matter between PNB Sucat’s depositors and their respective borrowers; (2) these loans “are [the depositors-borrowers’] private concern. Employees of the [b ]ranch do not have to do anything with them (sic) and their business concerns;” (3) Villar executed the earlier affidavit “out of [her] sincere fear and anxiety that [she] may not be able to get [her] money from PNB Sucat with interest, for reasons which [she] was (sic) not able to verify the facts first before executing the affidavit; (4) Gregorio never induced Villar to enter into any illegal activity or to sign any blank bank documents; (5) the hold-out of Villar’s deposit was made upon her instructions. Notably, Rebollo also executed an affidavit of retraction of her earlier affidavit.
In her answer to the second charge, Gregorio denied Pollard’s claim that she made the latter sign blank bank documents. Instead, according to Gregorio, Pollard was made to sign “documents with blank spaces on them that [Pollard], like other depositors, have (sic) to fill out.” Gregorio also stated that she never borrowed money from Pollard nor induced her to invest money in high interest-yielding ventures. Rather, Pollard’s loan activities were between her and her borrowers. Gregorio asserts that Pollard only complained because her borrower had failed to pay her. Nevertheless, whatever losses she may have incurred is her concern. Gregorio, as well as the staff of PNB Sucat, has nothing to do with this.
The Panel conducted a meeting on the charges which Gregorio attended. The Panel recommended Gregorio’s dismissal after taking into consideration the affidavits executed by Rebollo, Villar, and Pollard, as well as the results of the IAG investigation. Although the Panel noted the affidavits of retraction from Villar and Rebollo, it did not give credence to these later affidavits. As to Villar’ s affidavit of retraction, the decision stated that the original of the affidavit was never presented before the Panel and thus its authenticity was never established. It also cited jurisprudence stating that affidavits of retraction are generally unreliable. As to Rebollo’ s affidavit of retraction, the decision emphasized that this second affidavit even revealed Gregorio’s active participation in the supposed irregular lending activities.
The LA held that Gregorio was illegally dismissed.
The LA found that PNB based its decision solely on Pollard’s affidavit, which Gregorio was again able to refute. Moreover, since Gregorio was never given the opportunity to confront Pollard, the LA concluded that Pollard’s affidavit simply cannot suffice to warrant a finding of Gregorio’s guilt on the second charge. It also found that the consistent high performance ratings previously given by PNB to Gregorio militate against PNB’s position.
PNB appealed to the NLRC.
The NLRC reversed the LA Decision.
The NLRC held that PNB met the required burden of proof. According to the NLRC, PNB used the affidavits of Rebollo, Villar, and Pollard as well as the result of the IAG’s investigation as bases for its findings. It agreed with PNB that Rebollo and Villar’s affidavits of retraction did not necessarily make their earlier statements false as recantations are generally looked upon with disfavor as they can be easily fabricated. It added that the LA erred in holding that Gregorio should have been given the opportunity to confront Pollard.
According to the NLRC, the confrontation of a witness is not required in company investigations for administrative liability of the employee. Further, the NLRC highlighted that Gregorio’s supposed evidence consisted of nothing more than mere denials. Finally, it held that Gregorio’s previous commendations did not necessarily mean that she could not have committed the charges against her.
Gregorio filed a motion for reconsideration of the NLRC’s Decision. This, however, was denied. Thus, Gregorio filed a special civil action for certiorari under Rule 65 of the Rules of Court before the CA, alleging that the NLRC, in reversing the LA, acted with grave abuse of discretion amounting to lack or excess of jurisdiction.
The CA granted Gregorio’s petition, reversed the NLRC, and reinstated the LA’s Decision.
Agreeing with Gregorio that PNB presented no sufficient evidence to warrant her dismissal, the CA found no factual or legal basis for the charges of gross misconduct and willful breach of trust and confidence. It found all the questioned bank transactions to be well documented and the loan against hold-out agreements to be regular transactions of PNB Sucat.
The CA added that while Villar and Pollard legitimately availed of this loan arrangement, they suffered losses because their borrowers failed to pay the promised interest. For the CA, this was neither Gregorio’s fault nor within her control. It also highlighted that PNB based its decision to terminate Gregorio on the three affidavits, two of which were recanted by Villar and Rebollo.
As to Pollard’s affidavit which was never recanted, the CA found that: (1) PNB never gave Gregorio the opportunity to confront Pollard; and (2) Pollard’s allegations were unsubstantiated. Aside from stressing that there was also no evidence that PNB incurred losses or damages because of Gregorio’s activities, the CA also found relevant the fact that Gregorio has consistently received high performance ratings.
Thus, the PNB’s petition with the Supreme Court.
Whether or not there just ground to dismiss an employee based on the three affidavits of witnesses, two of which were subsequently retracted
Whether or not it is a matter of right in an investigation that an employee being investigated should confront the witness to an incident
The SC found the petition meritorious.
Under the Labor Code, an employee may be dismissed for a just or authorized cause. Notably, the PNB invokes just cause in dismissing Gregorio from service. Article 297  enumerates the acts considered as just cause for the valid termination of an employee.
In this case, PNB charged Gregorio with gross dishonesty, gross misconduct, and willful breach of trust. All these qualify as just causes for termination. Hence, the next logical question is whether PNB presented sufficient evidence to prove that Gregorio indeed committed these acts. In cases filed before quasi-judicial bodies, the quantum of proof required is substantial evidence. This means that “amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.
The evidence available established that Gregorio indeed committed the acts which became the basis for her dismissal. The IAG Memorandum, which was the result of the investigation of the IAG, the charges against Gregorio, Gregorio’s answers to these charges, the three affidavits, the affidavits of retraction, the testimonies of the tellers of PNB Sucat, and Gregorio’s own testimony at the PNB meetings, taken together, are adequate to convince a reasonable mind that Gregorio engaged in an unauthorized lending business within PNB Sucat. The evidence presented before the NLRC painted a clear picture of Gregorio’s irregular loan activities.
there was no need for Gregorio to confront Pollard. Confronting a witness is not a matter of right in company investigations as in the one undertaken by PNB. To meet the requirements of due process, it is sufficient that Gregorio had the opportunity to be heard and to refute the allegations in Pollard’s affidavit.
The SC found that it was an error for the CA to harp on PNB’ s alleged refusal to take into consideration the affidavits of retraction subsequently executed by Rebollo and Villar. A reading of the PNB’ s decision to terminate Gregorio clearly shows that it took the affidavits into consideration but ultimately found them unreliable. The NLRC agreed with this appreciation of the affidavits of retraction. Retractions are generally unreliable and looked upon with considerable disfavor by the courts as they can easily be fabricated.
Just because one has executed an affidavit of retraction does not imply that what has been previously said is false or that the latter is true. The reliability of an affidavit of retraction is determined in the same manner that the reliability of any other documentary evidence is ascertained. In particular, it is necessary to examine the circumstances surrounding it. In the case of Villar’s affidavit of retraction, the SC noted that this has never been identified and authenticated. Thus, its weight as evidence is highly suspect.
As to Rebollo’s alleged affidavit of retraction, a reading of its contents, as correctly pointed out by the NLRC, reveals that Rebollo in fact affirmed Gregorio’s participation in the lending activities within PNB Sucat when she said in this affidavit that Gregorio introduced her to a certain Realina Ty who became her borrower.
Moreover, the NLRC ruled that even if it gave credence to the retraction, the IAG Memorandum nevertheless established that Gregorio enticed clients to loan money from PNB Sucat secured by their deposits to be lent out to other borrowers.