The Supreme Court has affirmed that a bank employee in a position of trust, who violates bank policies, resulting in financial losses, can be legally dismissed based on breach of trust. This ruling underscores the high standards of integrity required in the banking sector and serves as a reminder to employees about the importance of adhering to company policies and protecting their employer’s interests.

Second Chances or Second Endorsements: Did Rivera’s Branch Head Role Justify His Termination?

Modesto W. Rivera, formerly a Branch Head at Allied Banking Corporation, contested his dismissal, arguing that it was illegal. He claimed that the bank did not fully inform him of the charges against him and that the penalty of dismissal was too harsh, especially since he was only offering accommodation services to a bank client. However, the bank argued that Rivera’s repeated acceptance of second-endorsed foreign currency checks, a practice strictly prohibited under bank policies, constituted a breach of trust and caused significant financial losses. The central question before the Supreme Court was whether Allied Banking Corporation had validly dismissed Rivera.

The Supreme Court based its ruling on Article 282 of the Labor Code, which allows an employer to terminate employment for causes such as serious misconduct, gross neglect of duty, or fraud. Specifically, Article 282(c) addresses situations involving a breach of trust. The Court emphasized that employers have the right to dismiss employees, particularly those in supervisory or responsible positions, when there is a justified loss of trust and confidence. Citing precedent, the Court noted:

Proof beyond reasonable doubt is not required. It is sufficient that there must only be some basis for such loss of confidence or that there is reasonable ground to believe, if not to entertain, the moral conviction that the concerned employee is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of trust and confidence demanded by his position.

The Court recognized that Rivera’s position as a Branch Head required a high degree of trust and confidence. He was expected to strictly adhere to the bank’s standard operating procedures. The Court found that Rivera had indeed violated these procedures by repeatedly accepting second-endorsed US Dollar-denominated checks, a practice the bank explicitly prohibited.

The Court reviewed the Bank’s Operations Memorandum (OM) No. 03-367, which outlined the guidelines for handling second-endorsed US Dollar currency checks. This memorandum stated that while such checks may be accepted at the discretion of the Branch Head, they were only to be accepted from well-known, valued clients with strong financial standing. The Branch Head would be personally accountable for any losses incurred due to non-compliance. The memorandum underscores the bank’s serious stance on this matter:

Losses incurred due to non-compliance shall be charged to the erring Officer/Personnel.

The Court examined several specific instances where Rivera accepted questionable checks from a client named Nena Sta. Cruz. These checks later turned out to be fraudulent or had unauthorized endorsements, resulting in financial losses for the bank. The Court noted that Rivera was aware of Sta. Cruz’s risky rediscounting business but still allowed her to deposit these checks. The Supreme Court also found it concerning that Rivera even aided Sta. Cruz by helping her open joint accounts with the supposed payees. These actions, the Court reasoned, demonstrated a willful disregard for bank policies and a breach of the trust placed in him as a Branch Head. The Court underscored that Rivera’s own admissions in his letters to the bank revealed lapses in judgment and a plea for leniency, further solidifying the case against him.

The Court addressed Rivera’s claim that he was denied due process. The Court found that he had been informed of the charges against him and had the opportunity to respond to the findings of the investigating committee. The Court concluded that Rivera’s actions constituted gross misconduct, justifying the bank’s decision to dismiss him. Upholding the importance of preventing bank fraud, the Court cited Cadiz v. Court of Appeals:

The fiduciary nature of banking is enshrined in Republic Act No. 8791 or the General Banking Law of 2000. Section 2 of the law specifically says that the State recognizes the ‘fiduciary nature of banking that requires high standards of integrity and performance.’ The bank must not only exercise ‘high standards of integrity and performance,’ it must also ensure that its employees do likewise because this is the only way to ensure that the bank will comply with its fiduciary duty.

The forfeiture of Rivera’s vacation and sick leaves was deemed proper. The Employee Discipline Policies and Procedures (EDPP) of the bank stipulate that an employee terminated for cause forfeits all benefits, including leave credits. The Court also affirmed that Rivera was personally liable for the losses resulting from the fraudulent checks, as per OM 03-367.

FAQs

What was the key issue in this case?	The key issue was whether Allied Banking Corporation had valid grounds to dismiss Modesto Rivera, a Branch Head, for accepting second-endorsed foreign currency checks in violation of bank policies. The Court had to determine if Rivera’s actions constituted a breach of trust and justified his termination.
What is a second-endorsed check?	A second-endorsed check is a check that has been endorsed (signed on the back) by the original payee and then further endorsed by another party. Banks often have policies restricting or prohibiting the acceptance of such checks due to increased risk of fraud or other irregularities.
What does ‘breach of trust’ mean in this context?	In labor law, ‘breach of trust’ refers to a situation where an employee in a position of trust violates the confidence placed in them by the employer. This can include acts of dishonesty, negligence, or intentional disregard for company policies, especially when those actions harm the employer’s interests.
Why was Rivera’s position as Branch Head significant?	As a Branch Head, Rivera held a position of high trust and responsibility. He was entrusted with safeguarding the bank’s assets and ensuring compliance with its policies. His position required him to act with utmost prudence and protect the bank’s interests above all else.
What is Operations Memorandum (OM) 03-367?	Operations Memorandum 03-367 is a specific bank policy that outlines the guidelines for handling second-endorsed US Dollar currency checks. It allows for the acceptance of such checks only under certain conditions and places personal accountability on the Branch Head for any resulting losses.
What evidence did the bank present against Rivera?	The bank presented evidence of Rivera’s repeated acceptance of second-endorsed checks from a client, Nena Sta. Cruz, despite knowing about her risky rediscounting business. Several of these checks were returned due to fraud or unauthorized endorsements, resulting in financial losses for the bank.
Did the Supreme Court find that Rivera was denied due process?	No, the Supreme Court found that Rivera was given the opportunity to respond to the charges against him and present his side of the story. He submitted written replies and participated in hearings, indicating that he was fully aware of the allegations.
What was the final ruling of the Supreme Court?	The Supreme Court upheld the Court of Appeals’ decision, affirming that Allied Banking Corporation had validly dismissed Modesto Rivera for breach of trust. The Court also upheld the forfeiture of his vacation and sick leaves.

This case highlights the importance of adhering to company policies, especially in positions of trust within the banking industry. Bank employees who violate policies and engage in actions that could harm the bank’s interests may face serious consequences, including dismissal.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Modesto W. Rivera vs. Allied Banking Corporation, G.R. No. 196597, October 21, 2015