In Central Pangasinan Electric Cooperative, Inc. v. Macaraeg, the Supreme Court ruled that an employer was justified in terminating employees who had committed a willful breach of trust. The Court emphasized that employees in positions of trust, such as tellers and cashiers, must maintain a high degree of fidelity, and their betrayal of that trust is a valid ground for dismissal. This case underscores the importance of upholding ethical standards and protecting company assets, especially in sensitive financial roles.

Fidelity Betrayed: Can a Cooperative Dismiss Employees for Encashing Bad Checks?

Central Pangasinan Electric Cooperative, Inc. (CENPELCO) found itself grappling with a serious breach of trust involving two of its employees: Geronima Macaraeg, a cashier, and Maribeth de Vera, a teller. From January 1998 to January 1999, de Vera had been accommodating her sister, Evelyn Joy Estrada, by encashing crossed checks payable to CENPELCO, even though Estrada had no legitimate transactions with the cooperative. These checks, totaling P6,945,128.95, were then covered by the cash collections of CENPELCO, with the knowledge and consent of Macaraeg. When some of these checks bounced due to insufficient funds, the Finance Department of CENPELCO launched an investigation, leading to the discovery of the scheme.

Both Macaraeg and de Vera admitted to their actions, with de Vera explaining that she wanted to help her sister’s business. CENPELCO, however, viewed their actions as a serious violation of company policy and a breach of the trust reposed in them. Consequently, the cooperative terminated their employment. The employees contested their dismissal, arguing that there was no actual loss to the cooperative and that they had not violated any policies. This dispute eventually landed before the Supreme Court, which had to determine whether the dismissal was justified.

The core legal issue before the Supreme Court was whether CENPELCO had just cause to terminate Macaraeg and de Vera’s employment. This involved examining whether their actions constituted a willful breach of trust, a valid ground for dismissal under Article 282(c) of the Labor Code. Additionally, the Court had to consider whether the employees were afforded due process during the termination proceedings.

The Supreme Court emphasized that to constitute a valid dismissal, two requisites must be met: just cause and due process. The Court found that just cause existed in this case, citing Article 282(c) of the Labor Code, which allows an employer to terminate an employee for fraud or willful breach of trust. The Court stated:

“Art. 282. Termination by the Employer.—An employer may terminate an employee for any of the following causes: … (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative…”

The Court elaborated that proof beyond reasonable doubt of misconduct is not required; it is sufficient that there is some basis for the employer to believe that the employees are responsible for the misconduct and that their participation rendered them unworthy of the trust and confidence demanded of their positions. In this context, the Supreme Court had to determine whether the actions of Macaraeg and De Vera amounted to a breach of trust that warranted their termination.

Building on this principle, the Supreme Court highlighted that the actions of Macaraeg and de Vera were indeed inimical to CENPELCO’s financial interests. They had admitted to accommodating Estrada by encashing her checks from the cooperative’s funds without CENPELCO’s knowledge or permission. These actions persisted for over a year and would have likely continued if not discovered. The Court further noted that the employees were aware that their actions violated the Coop Checks Policy. This, according to the Court, clearly demonstrated a willful breach of trust.

The Court addressed the argument that the employees did not misappropriate any money or cause any shortage, stating that this was not material. The critical factor was that they held positions of trust, and their betrayal of that trust was the essence of the offense. The Court emphasized that as a teller and cashier, Macaraeg and de Vera were expected to possess a high degree of fidelity, entrusted with a considerable amount of cash and the responsibility of handling payments and deposits. Their actions, therefore, were a grave violation of their duties and obligations.

Moreover, the Court was keen to note that the Coop suffered damages. Finance Manager Josefina Mandapat’s memorandum clearly presented the prejudice the company suffered due to the illegal encashment of checks:

“Though the checks were funded, it constitutes a violation of Coop Policy. Checks that are covered even by local clearing only take three days to be converted to cash and when returned another three (3) days to retry clearing. The cooperative is deprived of the privilege to maximize use of its collections primarily in servicing its debts considering the state of calamity and even at the moment wherein we worry every time if we can payoff (sic) our NAPOCOR power bill.”

Addressing the issue of due process, the Supreme Court found that CENPELCO had observed procedural due process in dismissing the employees. Macaraeg and de Vera were informed of the charges against them in separate memoranda, given the opportunity to answer the charges, participated in an investigation with the assistance of counsel, and were notified of the basis for their termination. The Court reiterated that due process simply requires an opportunity to be heard.

The fact that Macaraeg and de Vera had been employed with CENPELCO for 22 and 19 years, respectively, and had no prior administrative charges, was also considered by the Court. However, the Court concluded that their dismissal was justified given the breach of trust they had committed. The Court also said that the longer an employee stays in the service of the company, the greater is his responsibility for knowledge and compliance with the norms of conduct and the code of discipline in the company. Considering the mishandling of funds and the danger they posed to the cooperative, their reinstatement was deemed unjust.

In conclusion, the Supreme Court ruled in favor of CENPELCO, reversing the Court of Appeals’ decision and upholding the dismissal of Macaraeg and de Vera. The Court’s decision reinforced the principle that employees in positions of trust must uphold their duties and obligations with utmost fidelity, and that a breach of that trust is a valid ground for termination.

FAQs

What was the key issue in this case?	The key issue was whether the termination of employees for encashing crossed checks, without authorization, constituted a valid dismissal based on a breach of trust. The Supreme Court ultimately ruled that it did, given the sensitive nature of their positions.
What is a “willful breach of trust” under the Labor Code?	A “willful breach of trust” refers to an employee’s intentional violation of the confidence reposed in them by their employer, making them unworthy of continued employment. This is a valid ground for termination under Article 282(c) of the Labor Code.
What is the significance of the employees’ positions in this case?	The employees, as a cashier and teller, held positions of trust, making their breach particularly serious. The Court emphasized that such roles require a high degree of fidelity due to their handling of company funds.
Did the fact that the checks were eventually funded affect the Court’s decision?	No, the fact that the checks were eventually funded did not negate the breach of trust. The Court emphasized that the violation of company policy and the unauthorized encashment were sufficient grounds for dismissal.
What constitutes “due process” in termination cases?	Due process requires that employees be informed of the charges against them, given an opportunity to respond, and allowed to participate in an investigation. The Court found that CENPELCO had satisfied these requirements.
Can length of service mitigate a breach of trust?	While length of service is a factor, it does not automatically excuse a serious breach of trust. In this case, the Court ruled that the employees’ actions were severe enough to warrant dismissal, despite their long tenure.
What is the Coop Checks Policy mentioned in the case?	The Coop Checks Policy likely refers to an internal regulation prohibiting the encashment of checks without proper authorization. Violating such a policy can be grounds for disciplinary action, including termination.
What was the role of the Collective Bargaining Agreement (CBA) in this case?	The CBA initially raised concerns about grievance procedures, but the Court considered the parties’ participation in voluntary arbitration as a waiver of strict adherence to CBA steps.
How did the Court weigh the violation versus the penalties?	The Supreme Court gives management prerogative the discretion to weigh the gravity of infractions. The penalties depend on the business’s code of conduct and the breach’s effects on the business.

The Central Pangasinan Electric Cooperative, Inc. v. Macaraeg case serves as a reminder of the importance of trust and fidelity in the workplace, particularly in positions that involve handling company funds. Employers have a right to protect their assets and ensure that their employees act in accordance with established policies and ethical standards. The courts uphold the right of businesses to determine suitable measures for violations that impact trust and faith in business operations.

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: CENTRAL PANGASINAN ELECTRIC COOPERATIVE, INC. VS. GERONIMA MACARAEG AND MARIBETH DE VERA, G.R. No. 145800, January 22, 2003