PNB v. Padao

PNB vs.
PADAO
G.R. Nos. 180849 and 187143
November 16, 2011

FACTS:

G.R. No. 180849
On August 21, 1981, Padao was hired by PNB as a clerk at its Dipolog City Branch. He
was later designated as a credit investigator in an acting capacity on November 9,
1993. On March 23, 1995, he was appointed regular Credit Investigator III, and was
ultimately promoted to the position of Loan and Credit Officer IV.

Sometime in 1994, PNB became embroiled in a scandal involving "behest loans."
There was a complaint that questionable loans were reportedly being extended to
select bank clients. Separate investigations were conducted by the COA and PNBs
Internal Audit Department (IAD) from January to August 1995 and both
investigations confirmed that the collateral provided in numerous loan
accommodations were grossly over-appraised. The credit standing of the loan
applicants was also fabricated, allowing them to obtain larger loan portfolios from
PNB. These borrowers eventually defaulted on the payment of their loans, causing
PNB to suffer millions in losses.

In 1995, two Credit investigators and three AVPS were dismissed due to
administrative charges for Grave Misconduct, Gross Neglect of Duty and Gross
Violations of Bank Rules and Regulations and criminal cases for violation of R.A. No.
3019.

On June 14, 1996, Padao and Division Chief Wilma Velasco were administratively
charged with Dishonesty, Grave Misconduct, Gross Neglect of Duty, Conduct
Prejudicial to the Best Interest of the Service, and violation of R.A. No. 3019. Padao
was held guilty and later on dismissed. Velasco was also held guilty of the offenses
charged against her, and was similarly meted the penalty of dismissal. Her motion for
reconsideration, however, was later granted by the bank, and she was reinstated.

The case against Padao was grounded on his having allegedly presented a deceptively
positive status of the business, credit standing/rating and financial capability of 13
loan applicants. It was later found that either said borrowers businesses were
inadequate to meet their loan obligations, or that the projects they sought to be
financed did not exist. Padao was also accused of having over-appraised the collateral
of two other spouses.

After due investigation, PNB found Padao guilty of gross and habitual neglect of duty
and ordered him dismissed from the bank. Padao appealed to the banks Board of
Directors, but after almost 3 years of inaction Padao instituted a complaint against
PNB with the NLRC.

The Executive Labor Arbiter (ELA) found the dismissal to be VALID, but the NLRC
REVERSED the decision and ordered Padao to be reinstated.

G.R. No. 187143
During the pendency of G.R. No. 180849 before the Court, the NLRC issued an entry of
judgment on September 22, 2003, certifying that on February 28, 2003, its October
30, 2002 Resolution had become final and executory.

Padao sought to execute the decision which was granted by the ELA. PNB sought the
reconsideration of the ELA which was denied. The NLRC and the CA also denied PNBs
appeals.

ISSUE:

1. Was the dismissal of Padao valid?

VALID DISMISSAL. Padao was dismissed by PNB for gross and habitual neglect of
duties under Article 282 (b) of the Labor Code.

The 3 over-appraisals and 7 falsified credit investigation reports 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. It may have been allowable or justifiable
for him to give in to one anomalous loan transaction report, but definitely not for 10
loan accounts. It is axiomatic that obedience to ones superiors extends only to lawful
orders, not to unlawful orders calling for unauthorized, prohibited or immoral acts to be
done.

That there is no proof that Padao derived any benefit from the scheme is immaterial.
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.

Padaos 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. 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.

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. 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.

Note: as to the case of his superior, Wilma Velasco, 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. PNB cannot be faulted for freeing her
from liability and punishment, while dismissing the complainant from service.

2. Was Padao entitled to financial assistance?

NO. In Toyota Motor Phils. Corp. Workers Association v. NLRC, the Court reaffirmed the
general rule that separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes OTHER than
serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud
or willful breach of trust, commission of a crime against the employer or his
family, or those reflecting on his moral character. These five grounds are just causes
for dismissal as provided in Article 282 of the Labor Code.

PNB v. Padao

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