G.R. Nos. 180849 and 187143. November 16, 2011.
PHILIPPINE NATIONAL BANK, Petitioner, vs. DAN PADAO, Respondent.

FACTS

The case involves two consolidated petitions. In G.R. No. 180849, PNB seeks to reverse the Court of Appeals (CA) Decision and Resolution which upheld the National Labor Relations Commission (NLRC) ruling that the dismissal of respondent Dan Padao was illegal. In G.R. No. 187143, PNB seeks to reverse the CA Decision and Resolution which allowed the execution of the NLRC’s ruling.
Padao was hired by PNB in 1981 and was eventually promoted to Loan and Credit Officer IV. In the mid-1990s, PNB’s Dipolog City Branch was involved in a scandal involving “behest loans.” Investigations by the Commission on Audit (COA) and PNB’s Internal Audit Department (IAD) confirmed that collaterals for numerous loans were grossly over-appraised and the credit standing of applicants was fabricated, causing PNB millions in losses. Several bank officers were administratively charged and dismissed.
On June 14, 1996, Padao was administratively charged with Dishonesty, Grave Misconduct, Gross Neglect of Duty, Conduct Prejudicial to the Best Interest of the Service, and violation of R.A. No. 3019. The charges were based on his alleged presentation of a deceptively positive credit standing for several loan applicants and over-appraisal of collaterals for others. On January 10, 1997, PNB found Padao guilty of gross and habitual neglect of duty and dismissed him.
Padao appealed to PNB’s Board of Directors. After almost three years of inaction by the Board, Padao filed a complaint for illegal dismissal with the NLRC on October 11, 1999. The Executive Labor Arbiter (ELA) found the dismissal valid on June 21, 2001, but awarded separation pay. On appeal, the NLRC reversed the ELA on October 30, 2002, declared the dismissal illegal, and ordered Padao’s reinstatement with full backwages and attorney’s fees. The NLRC’s denial of PNB’s motion for reconsideration became final and executory on February 28, 2003.
In G.R. No. 187143, during the pendency of PNB’s petition in G.R. No. 180849, Padao moved for execution of the final NLRC Resolution. The ELA granted the motion and issued a writ of execution. PNB’s various motions to challenge the execution were denied by the ELA and the NLRC. The CA subsequently dismissed PNB’s petition assailing these orders.

ISSUE

The core issue, as presented in the Assignment of Errors for G.R. No. 180849, is whether the Court of Appeals erred in: (A) not considering that the position of a credit investigator is one imbued with the trust and confidence of the employer; and (B) treating the act of falsifying credit and appraisal reports and that of merely following orders as one and the same. The consolidated case also involves the propriety of the execution of the NLRC’s final ruling.

RULING

The Supreme Court denied the petitions. The Court found that PNB failed to prove that Padao’s actions constituted willful breach of trust or gross and habitual neglect of duty justifying dismissal.
The Court held that for dismissal based on loss of trust and confidence to be valid, the employee must hold a position of trust, and the breach must be willful. A credit investigator’s position is indeed fiduciary, requiring trust and confidence. However, the evidence showed that Padao’s alleged misconduct—submitting reports with inaccurate positive credit findings and over-appraisals—was not proven to be willful or deliberate. The Court noted that other employees (Dagpin and Palomares) who committed similar acts were exonerated after PNB found they acted in good faith upon their superiors’ instructions. Velasco, who was similarly charged and dismissed, was later reinstated. The Court found no substantial evidence that Padao acted with fraudulent intent or conscious disregard of his duties. His actions, even if negligent, did not rise to the level of “gross and habitual neglect” warranting dismissal.
Furthermore, the Court upheld the CA’s rulings in both cases. Since the NLRC’s finding of illegal dismissal had become final and executory, the execution proceedings (subject of G.R. No. 187143) were proper. PNB’s defenses against execution were correctly rejected.