25 China Banking Corporation v.

Borromeo AUTHOR: Castro

[G.R. No. 156515. October 19, 2004] NOTES: This is a Petition for review on Certiorari
TOPIC: Company Policy
PONENTE: Callejo, Sr., J.
CASE LAW/ DOCTRINE:
It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or contrary to law, generally binding and valid on the parties and must be
complied with until finally revised or amended unilaterally or preferably through negotiation or by competent authority.
FACTS:
 Mariano Borromeo joined China Banking Corporation (China Bank) on June 1, 1989 as Manager assigned at the Regional Office in Cebu City.
 From 1989 to 1996, Borromeo received several promotions for having “very good and highly satisfactory” performance ratings. [Manager Level I → Manager Level II → Senior
Manager Level I → Senior Manager Level II → Assistant Vice-President, Branch Banking Group for the Mindanao area]
 Prior to his last promotion and unknown to China Bank, Borromeo, without authority from the Executive Committee or Board of Directors, approved several Drawn
Against Uncollected Deposits/Bills Purchased (DAUD/BP) accommodations amounting to P2,441,375 in favor of Joel Maniwan, with Edmundo Ramos as surety. [Note:
DAUD/BP checks, which are not sufficiently funded by cash, are generally not honored by banks. DAUD/BP accommodation is a credit accommodation granted to a few and select bank
clients through the withdrawal of uncollected or uncleared check deposits from their current account.]
 Under China Bank’s standard operating procedures, DAUD/BP accommodations may be granted only by a bank officer upon express authority from its Executive
Committee or Board of Directors.
 As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town checks (7 PCIB checks and 3 UCPB checks) of various dates amounting to
P2,441,375 were returned unpaid.
 It is only when Borromeo wrote a Memorandum to China Bank’s Senior Management requesting for the grant of a P2.4 million loan to “regularize/liquidate Maniwan’s
DAUD availments” that China Bank was informed of the accommodations. China Bank also learned that the accommodations exceeded the limit granted to clients, were
granted without prior approval, and were already past due.
 After accepting full responsibility for his action and stating that he is willing to face its consequence, Borromeo formally tendered his irrevocable resignation on April 30,
1997.
 Since his action violated China Bank’s Code of Ethics, he was directed to restitute the amount of P1,507,736.79 representing 90% of the total loss of P1,675,263.10
incurred by the bank. However, in view of his resignation and considering his years of service, the management would only withhold the sum of P836,637.08 from his
separation pay, mid-year bonus and profit sharing. The amount would be released upon recovery of the sums demanded from Maniwan in a civil case.
 Borromeo demanded from China Bank the payment of his separation pay and other benefits, but the bank maintained its position to withhold P836,637.08
 Thus, Borromeo filed with the NLRC a complaint for payment of separation pay, mid- year bonus, profit share and damages against China Bank.

Labor Arbiter: dismissed Borromeo’s complaint on the basis of the position papers submitted by the parties.

NLRC: dismissed his appeal and concurred with the LA that the bank was justified in withholding the benefits since being a responsible bank officer, Borromeo ought to know
that restitution may be imposed on erring employees apart from any other penalty for acts resulting in loss or damage.

Court of Appeals: set aside the decision of the NLRC and ordered that the records of the case be remanded to the Labor Arbiter for further hearings on the factual issues
involved. CA found that Borromeo was was deprived of his right to due process because he was not informed of any charge against him in connection with the Maniwan
DAUD/BP accommodations nor afforded the right to a hearing or to defend himself before the penalty of restitution was imposed on him by the bank.

ISSUE:
Whether the bank may withhold the benefits owing to Borromeo as restitution for violating its standard operating procedures
HELD:
Yes. Restitution was an appropriate penalty under the bank’s company rules and regulations.
RATIO:
China Bank’s Code of Ethics provides:
“7.2.5. Restitution/Forfeiture of Benefits- Restitution may be imposed independently or together with any other penalty in case of loss or damage to the property of the Bank, its employees,
clients or other parties doing business with the Bank. The Bank may recover the amount involved by means of salary deduction or whatever legal means that will prompt offenders to pay the
amount involved. But restitution shall in no way mitigate the penalties attached to the violation or infraction. Forfeiture of benefits/privileges may also be effected in cases where infractions or
violations were incurred in connection with or arising from the application/availment thereof.”

It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or contrary to law, generally binding and valid on the parties and
must be complied with until finally revised or amended unilaterally or preferably through negotiation or by competent authority.

The management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations. With more
reason should these truisms apply to the respondent, who, by reason of his position, was required to act judiciously and to exercise his authority in harmony with company
policies.

Contrary to the respondent’s contention that the petitioner Bank could not properly impose the accessory penalty of restitution on him without imposing the principal penalty
of “Written Reprimand/Suspension,” the Code of Ethics expressly sanctions the imposition of restitution/forfeiture of benefits apart from or independent of the other
penalties. It was certainly within the bank’s prerogative to impose on Borromeo what it considered the appropriate penalty under the circumstances pursuant to its company
rules and regulations.

In addition, the bank’s business is essentially imbued with public interest and owes great fidelity to the public it deals with. It is expected to exercise the highest degree of
diligence in the selection and supervision of their employees. As a corollary, its prerogative to discipline its employees and to impose appropriate penalties on erring workers
pursuant to company rules and regulations must be respected. The law, in protecting the rights of labor, authorized neither oppression nor self-destruction of an employer
company which itself is possessed of rights that must be entitled to recognition and respect.

Regarding the issue that Borromeo’s right to due process was violated by the bank since no administrative investigation was conducted prior to the withholding of his
separation benefits, the Court rules that, under the circumstances obtaining in this case, no formal administrative investigation was necessary. Due process simply demands an
opportunity to be heard and this opportunity was not denied the respondent. In his letter, Borromeo even stated that he “accepts full responsibility for committing an error in
judgment, lapses in control and abuse of discretion” and that he is “ready to face the consequence of his action.”