G.R. No. L-16518. May 31, 1961.
BOARD OF DIRECTORS OF THE PHILIPPINE NATIONAL BANK, petitioner, vs. THE COURT OF APPEALS and OSCAR C. MELLA, respondents.

FACTS

Oscar C. Mella, a paying teller of the Philippine National Bank (PNB), was implicated in a 1949 fraud involving fictitious withdrawals. Following interrogations by bank officials and the NBI, the PNB Board initially reinstated him in June 1949 via Resolution No. 758, finding no grounds for his earlier suspension and noting the NBI report made no charges against him. He was later reassigned as a paying teller. However, on April 15, 1952, Mella was suspended anew in connection with the same fraud case, then pending with the City Fiscal. Despite his written requests for the specific charges against him to enable a defense, the Bank President replied the matter was already with the Fiscal. On May 28, 1953, Mella was notified of his dismissal effective April 1952, pursuant to a Board resolution based on an alleged NBI agent’s report impugning his honesty. This report was never presented. Mella repeatedly requested a hearing to no avail.
On April 12, 1955, Mella filed a mandamus action in the Court of First Instance seeking reinstatement, arguing his dismissal was arbitrary and without due process. The trial court ruled in his favor, ordering reinstatement with back wages, which the Court of Appeals affirmed but eliminated awards for moral damages and attorney’s fees. The PNB Board appealed to the Supreme Court via certiorari.

ISSUE

Whether the dismissal of Oscar C. Mella from the PNB was valid despite the absence of formal charges and a hearing.

RULING

The Supreme Court affirmed the Court of Appeals’ decision, ruling Mella’s dismissal was invalid for lack of due process. The Court held that the various interrogations conducted by bank officials and the NBI were mere fact-finding inquiries about the fraudulent withdrawals and could not substitute for a formal investigation where the employee is informed of specific charges and given an opportunity to defend himself. The PNB argued that under its charter, it possessed plenary power to dismiss employees without cause or hearing. The Court rejected this, clarifying that while the PNB charter grants administrative discretion, such power must be exercised within legal bounds and with justice, not arbitrarily. The dismissal, based on an undisclosed NBI report, violated fundamental fairness.
The Court also rejected the PNB’s claim that Mella’s action was barred by laches for being filed over a year after his dismissal. The doctrine of laches applied in Unabia v. City Mayor, requiring action within one year, was held inapplicable as it governs public officers under civil service law. Employment at the PNB was not considered a public office in that context. Furthermore, Mella was not guilty of laches, as the record showed he persistently sought a hearing through letters after his dismissal and only resorted to court when the Bank ignored his pleas. Consequently, the Court ordered Mella’s reinstatement to the PNB service, though not necessarily to his former position, with back salaries. The legality of any potential disciplinary action based on substantive grounds was left undecided, as the core issue litigated was the procedural invalidity of his dismissal.