Philippine National Bank vs. Gregorio

The Court of Appeals' review of a National Labor Relations Commission (NLRC) decision through a special civil action for certiorari under Rule 65 is strictly limited to determining whether the NLRC committed grave abuse of discretion amounting to a lack or excess of jurisdiction, and does not extend to correcting mere errors of judgment in the appreciation of evidence.

The dispute originated when a depositor of PNB's Sucat Branch inquired about a unique high-return investment product supposedly offered by branch personnel. This prompted PNB's Internal Audit Group (IAG) to conduct a credit review, which uncovered irregular loan activities allegedly orchestrated by the branch manager, Teresita Fe A. Gregorio. The investigation, supported by affidavits from other depositors, suggested Gregorio was running an unauthorized lending scheme where depositors were convinced to take out loans against their deposits, with the proceeds being re-loaned to other borrowers at a high interest rate, all under Gregorio's supervision but without any official benefit to the bank.

• Teresita Fe A. Gregorio was the Branch Manager of PNB Sucat, having risen through the ranks since 1978.
• Following a depositor's inquiry in December 2002, PNB's Internal Audit Group (IAG) investigated loan transactions at the PNB Sucat branch.
• The IAG investigation and affidavits from depositors Benita Rebello, Maxima Villar, and Virginia Pollard detailed a scheme where Gregorio allegedly convinced them to invest in a high-yield product.
• The scheme required depositors to take out loans secured by their deposits; the loan proceeds were then re-loaned to other borrowers who promised to pay 5% monthly interest.
• Of the 5% interest, 3% was to be paid to the depositor-lenders as income, while 2% was supposedly for PNB Sucat as commission.
• The IAG found no records indicating that PNB Sucat ever received any commission from these transactions.
• PNB's Administrative Adjudication Panel charged Gregorio with gross misconduct and dishonesty.
• In her defense, Gregorio denied inducing depositors, claimed the transactions were private matters between depositors and their borrowers, and submitted affidavits of retraction from Rebello and Villar.
• The PNB Panel found the retractions unreliable and, based on the IAG report and the original affidavits, recommended Gregorio's dismissal.
• On May 4, 2004, PNB issued a memorandum dismissing Gregorio from service.

• The Court of Appeals erred in finding that the NLRC committed grave abuse of discretion, as the NLRC's decision was based on substantial evidence.
• The CA incorrectly concluded that PNB's decision to dismiss Gregorio was based solely on three affidavits, two of which were recanted.
• PNB's decision was founded on the totality of evidence, including the comprehensive IAG Memorandum, the original affidavits of depositors, the affidavits of retraction, and Gregorio's own answers to the charges.
• The collection of evidence sufficiently established Gregorio's participation in irregular transactions amounting to gross misconduct, gross dishonesty, and willful breach of trust.
• The CA improperly substituted its own judgment for that of the NLRC by re-evaluating the evidence, which is beyond the scope of a Rule 65 certiorari review.

• There was no factual or legal basis for her dismissal, as PNB failed to present sufficient evidence.
• The affidavits used against her were unreliable, with two having been recanted and the third coming from a witness she was never given the opportunity to confront.
• The questioned loan-against-holdout agreements were regular and well-documented bank transactions.
• Any losses suffered by the depositors were due to the failure of their own borrowers to pay, a matter outside her control or fault.
• Her consistent high-performance ratings and commendations from PNB contradict the allegations of misconduct.
• PNB's claim that she ran "a bank within a bank" was a new allegation raised for the first time before the Supreme Court, violating her right to due process.

• Procedural Issues:
  • Whether the Court of Appeals correctly determined that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in reversing the Labor Arbiter's decision and upholding Gregorio's dismissal.
• Substantive Issues:
  • Whether PNB presented substantial evidence to prove that Gregorio's dismissal was for a just cause, specifically for gross misconduct, dishonesty, and willful breach of trust.

• Procedural:
  • The Supreme Court ruled that the Court of Appeals erred. A petition for certiorari under Rule 65 is not an appeal where the appellate court reviews errors of judgment. Its purpose is to correct errors of jurisdiction. The CA overstepped its authority by re-examining the factual findings and re-appreciating the evidence presented before the NLRC. The NLRC's alleged error in weighing the evidence constitutes an error of judgment, not the grave abuse of discretion required for a certiorari writ to issue.
• Substantive:
  • The Supreme Court held that the NLRC's decision was supported by substantial evidence. The combination of the IAG Memorandum, the depositors' affidavits, the testimonies of bank tellers, and the paper trail of the irregular transactions was sufficient to convince a reasonable mind that Gregorio engaged in an unauthorized lending business. The NLRC correctly found the affidavits of retraction unreliable, consistent with jurisprudence. Furthermore, the right to confront a witness is not an absolute requirement in company administrative investigations; it is sufficient that the employee was given the opportunity to be heard and to refute the allegations, which Gregorio was afforded. Therefore, PNB had a valid and just cause to terminate her employment.

• Judicial Review of NLRC Decisions — Citing St. Martin Funeral Home v. NLRC, the Court reiterated that NLRC decisions are not subject to appeal but may be reviewed by the Court of Appeals through a special civil action for certiorari under Rule 65. This review is not a re-evaluation of the merits but is confined to determining whether the NLRC acted with grave abuse of discretion.
• Grave Abuse of Discretion — Defined as a capricious and whimsical exercise of judgment equivalent to a lack of jurisdiction. The Court explained that for a petition for certiorari to prosper, it must be shown that the tribunal exercised its power in an arbitrary or despotic manner. The Supreme Court found that the NLRC did not act in such a manner; its decision was based on a rational assessment of the evidence.
• Substantial Evidence in Administrative Proceedings — This is the quantum of proof required in cases before quasi-judicial bodies like the NLRC, defined as that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The Court held that the totality of evidence presented by PNB met this standard.
• Unreliability of Affidavits of Retraction — The Court affirmed the legal principle that affidavits of retraction are generally viewed with disfavor by the courts as they can be easily fabricated. The NLRC's decision not to give full credence to the recantations was upheld as a valid exercise of its judgment, especially since one retraction was unauthenticated and the other, upon closer reading, actually affirmed Gregorio's participation in the scheme.

• "In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the case was correct."

• St. Martin Funeral Home v. NLRC — Referenced to establish that the proper remedy to challenge an NLRC decision is a special civil action for certiorari under Rule 65 filed with the Court of Appeals, and to define the limited scope of such a review.
• Leonis Navigation Co., Inc. v. Villamater — Cited to distinguish between errors of judgment, which are not correctible by certiorari, and errors of jurisdiction, which are the proper subject of a Rule 65 petition.
• Career Philippines Shipmanagement, Inc. v. Serna — Cited to articulate the specific role of the Supreme Court in a Rule 45 petition that reviews a CA's Rule 65 decision concerning an NLRC ruling: the focus is on whether the CA correctly identified the presence or absence of grave abuse of discretion by the NLRC.

• Rules of Court, Rule 45 (Petition for Review on Certiorari) — This rule was the basis for PNB's appeal to the Supreme Court, which is limited to resolving questions of law.
• Rules of Court, Rule 65 (Certiorari, Prohibition and Mandamus) — This rule provided the procedural vehicle for Gregorio to challenge the NLRC decision before the Court of Appeals on the ground of grave abuse of discretion.
• Labor Code, Article 297 [282] (Termination by Employer) — This article lists the just causes for terminating an employee, which PNB invoked as the legal basis for Gregorio's dismissal, specifically citing serious misconduct, fraud, and willful breach of trust.