PACIFIC CEMENT COMPANY, INC., BRUNO GRUENDER, ALBRECHT BAKE, CARMELO V. VILLALOBOS, RAMON C. YBUD AND NOEL R. TAN, PETITIONERS, VS. THE NATIONAL LABOR RELATIONS COMMISSION, FERM…

The instant petition seeks to annul on the ground of grave abuse
of discretion the public respondent’s decision dated August 19, 1986 ordering the reinstatement of the private respondents and the payment
of backwages and damages.

The antecedent facts of the case are as follows:

Before their termination, private respondents Norberto S. Merto, Jr. and Fermin T. Baure worked as manager and assistant manager,
respectively, in petitioner-company’s port department in Surigao City.

Sometime in January 1983, an investigation was conducted by
petitioner Carmelo V. Villalobos,
petitioner-company’s internal auditor, regarding the operations at the private respondents’ department.

The investigation uncovered certain irregularities for which the
private respondents together with their Port Section Head, Luisito
Borja, were made responsible.  The irregularities basically pertained to
alterations and discrepancies in the port operations logbook concerning the
utilization of and rental payment for the Uraga
Lorain crane being leased from one Alfredo S. Chua for port operations in the
private respondents’ department.

On February 7, 1983,
the private respondents through separate memoranda issued by petitioners
Albrecht Bake and Noel R. Tan were made to explain their involvement in the
reported irregularities.  In the case of
private respondent Merto, he was made to account for
the representation he made that “the crane was at stand-by time despite
(his) knowledge and consent of the fact that said crane was being utilized by
the Philippine Ports Authority (PPA) for the removal and driving of fender
piles at the government pier” for which rental payments were made to Chua in the 28th and 29th of November and on the 16th up to the 21st of December 1982.  With respect to private respondent Baure, he was made to clarify the alterations in the port
operations logbook relating to the incidents of August 1st up to the 6th and
August 12th, 1982 where “the original entries of either ‘breakdown’ or
‘out-of-order’ were clearly superimposed with the words ‘standby’ in bigger and
bolder letters” and where,
as in Merto’s case, rental payments were given to
Chua.  In the said memoranda, a provision
for the preventive suspension of the private respondents was further
included.  Petitioner Ramon C. Ybud was assigned to handle the duties of the private
respondents while they were on preventive suspension.

On February 8, 1983,
both the private respondents wrote separate explanation letters.  Merto stated that
his actions were in accordance with the provisions of the crane contract.  His letter reads as follows:

0 38-83-034 I

February
8, 1983

TO                :           Dr. Albrecht H. Bake

FROM           :           N.S.
Merto Jr.

CC                :           JLC, GM, AAI, RCY, file

Re                 :           Explanation

Hereunder is my
explanation to your Feb. 7 memo.  The
actions I took were in accordance with the provisions of the crane contract
(attached) executed by the Company on October
28, 1982, as follows:

1.  Paragraph 5 of said contract guarantees the
crane owner a minimum 7 hours daily rental irrespective of whether the unit is
used or not.

I do not think it is the
intention of the company to deprive the crane owner that right if the latter
was able to make use equal number of crane time in his performing a private work contract, i.e. PPA work,
which he is expressly allowed to do.

2.  Paragraph 4 of the same
contract, all crane owner to perform private
contractual work using the same contract unit.

Because of this tolerance
granted by the company to the crane owner, the stand by location station of the
contract unit has to be made silent (unspecified) in the contract.  The contracting parties understood from the
very beginning that the standby location station of the crane may at any time
be at the owner’s place, or any other place where it can be conveniently called
upon and immediately for use but never envisioned to be always at Portsite to enable the crane owner to qualify to have
earned the stipulated guaranteed minimum daily rental.

3.  Pertaining FTB and LDB, my investigation
disclosed that the superimpositions were done to rectify some deficiencies of
the log book entries.  As to why
company’s option to utilize rented crane during its standby hours was not
exercised, I have gathered the facts that our crane was then perfectly working
well and use of option was considered not necessary.

(Sgd.) NS MERTO JR.

(Exh.
“4”-respondent and Exh.
“B”-complainants).” (Rollo, pp. 83-84)

On the other hand, Baure disclaimed any
direct participation in the irregularities and justified the erasures in the
logbook in the following manner:

“Surigao, February 8, 1983

“Mr. Albrecht H. Bake

Vice President-Operation

Pacific Cement Co., Inc.

Surigao City

Sir:

This has reference to
your letter of February 7, 1983
requesting explanation why no proper disciplinary and/or appropriate action
should be taken against me for apparent involvement on the matters mentioned
therein.

With respect to case No.
1 of your letter, I wish to state that I have no knowledge whatsoever nor did I
participate in allowing the use of the crane by the Philippine Ports Authority
during the periods comprising November 28 and 29 and December 16-21, inclusive.  Mr. N. S. Merto
whose signatures appear on the statements is in the best position to explain
this matter.

In case No. 2 the
original entry of either ‘breakdown’ or ‘out-of-order’ during the period August
1-6 and 12, 1982 as appearing in the Port Operations Logbook is not entirely
accurate as the crane was at standby time at the portsite.  Of course, during the period there were
instances when the crane was checked up for minor mechanical defect to keep it
always in a very good running condition but those brief instances of mechanical
check-up might have occurred in the mind of Mr. Luisito
D. Borja when he amended the original entries in the
Port Operations Logbook to conform to the truth and the fact that the crane was
neither ‘out-of-order’ or ‘broken down’ but on standby time and in good working
condition at the portsite.

As regards case No. 3, I feel that Mr. Borja is competent to explain the
entries attributed to him in the Port Operations Logbook.

May I include in this
explanation that I have served this company for 18 years.  As one of the
pioneers, I have always treasured my position the way I treasure my life.  Now that I am nearing the period of my
retirement, it would be the highest of irresponsibility for me to exchange my
position for anything that would stain my clean record and leave a stigma upon
my honor and that of family.

I trust, therefore, that the foregoing explanation rests with your
satisfaction.

Very truly yours,

(Sgd.) FERMIN T. BAURE, JR.

cc: 
JCC; GM; AAI; RCY; NRT

(Exh.
‘5’-respondent).” (Rollo,
pp. 84-85)

A plant-level
investigation ensued after which Borja was reinstated
to his former position on February 16, 1983 after serving a 15-day suspension from
work.  Pending official action on their
cases, Merto and Baure, on
February 21 and 22, 1983, respectively filed with the public respondent’s
Arbitration Branch in Region X a complaint for illegal suspension/dismissal,
oppression and damages against the petitioners.

On January
31, 1984, after a
joint hearing, the Labor Arbiter rendered a decision against the petitioners
with the following dispositive portion:

“WHEREFORE, IN VIEW OF THE FOREGOING, judgment is hereby
rendered ordering Pacific Cement Co., Inc. to reinstate Norberto S. Merto, Jr. and Fermin T. Baure to their former position without loss of seniority
rights and to pay them the following:

“I.  NORBERTO S. MERTO, JR.

1.  P89,850.00   – as backwages and other benefits appurtenant to the position

2.  P200,000.00 – as
moral damages

3.  P100,000.00 – as
exemplary damages

4.  P15,000.00   – reimbursement of actual expenses

——————-

P404,850.00  – Total

“II.  FERMIN T. BAURE

1.  P63,396.00   – as backwages and
other benefits appurtenant to the position

2.  P200,000.00 – as
moral damages

3.  
P100,000.00 – as exemplary damages

4.   P15,000.00
  –
reimbursement of actual expenses

——————-

P378,396.00  – Total

and

“III.  P78,324.60 – representing ten percent
(10%) of the total award as attorney’s fee.”

(Rollo, pp.
29-30)

On appeal, the National
Labor Relations Commission (NLRC) on August 19, 1986, affirmed the Labor Arbiter’s finding that
the private respondents were illegally dismissed and entitled to reinstatement
with backwages. 
However, as regards the award of damages, the public respondent deleted
the sum of P15,000.00 representing the reimbursable
amount of actual expenses considering that the award of backwages partakes the nature of actual damages.  Moreover, the award of moral damages was
reduced to P30,000.00 to each of the private
respondents and that of exemplary damages to P20,000.00 each.  The award of 10% attorney’s fees was further
made on the basis of the aforementioned modifications.

On September
11, 1986, a motion
for reconsideration was filed by the petitioners.  The public respondent denied the said motion
in its resolution dated May 15, 1987. 
Hence, the petitioners elevated the present case relying on the following grounds:

THE HONORABLE COMMISSION COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION:

I. 
WHEN IT AFFIRMED THE FINDING OF THE HONORABLE LABOR ARBITER THAT THE
RESPONDENTS WERE ILLEGALLY DISMISSED DESPITE A CLEAR ABSENCE OF LEGAL AND/OR
FACTUAL BASIS AND IN ORDERING THE REINSTATEMENT OF PRIVATE RESPONDENTS WITH
FULL BACKWAGES.

II.  WHEN IT AFFIRMED, WITH SLIGHT
MODIFICATION, THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES TO
PRIVATE RESPONDENTS BY THE HONORABLE LABOR ARBITER.

(Rollo, pp.
16-17)

The petitioners argued that the private respondents were never
dismissed.  They were still under
preventive suspension when they brought their case before the Labor Arbiter.  In connection therewith, the petitioners
invoked Sec. 3, Rule XIV of the Implementing Rules of the Labor Code, as
amended, which states that:

“SEC. 3.  Preventive Suspension.  – The employer may place the worker concerned
under preventive suspension of his continued employment poses a serious and
imminent threat to the life or property of the employer or of his
co-workers.”

There is no question that pending investigation on the alleged
irregularities committed by the private respondents the petitioners can order
that the latter be placed under preventive suspension.  However, the petitioners failed to comply
with the succeeding section of the aforecited
provision which mandates that:

“SEC. 4.  Period of Suspension.  – No preventive suspension
shall last longer than 30 days.  The employer shall thereafter reinstate the
worker in his former or in a substantially equivalent position or the employer
may extend the period of suspension provided that during the period of
extension, he pays the wages and other
benefits due to the worker.  In such
case, the worker shall not be bound to reimburse the amount paid to him during
the extension if the employer decides, after completion of the hearing, to
dismiss the worker.” (Underlining ours)

It is true that when the private respondents filed complaints
with the NLRC Arbitration Branch, the company investigation was still going on and no official decision to
terminate them had been issued. 
Contrary, however, to the petitioners’ claim that the private
respondents were merely preventively suspended the evidence shows that an
advertisement for applicants to the position of Port Manager (Merto’s designation) appeared in the January-February 1983
issue of the Pacific Cement Perspective, a bi-monthly publication of the
petitioner-company.  The Company had made
up its mind to dismiss them.  The records
further establish the fact that the person directly responsible for the alterations
in the port operations logbook, Luisito Borja, was reinstated to his former position after serving
a 15-day suspension.  Up to the time that
the Labor Arbiter handed down its decision in 1984 the petitioners had not been
able to take any official action concerning the cases of Merto
and Baure. 
Hence, there is no doubt that the
private respondents are deemed dismissed. 
The issue is – was the dismissal illegal.  It is an oft-repeated pronouncement in Labor
cases with respect to the termination of employment that:

“x x x (w)hile the right to dismiss or lay-off an employee is
management’s prerogative, it must be done without abuse of discretion, for what
is at stake is not only private respondents’ position but also their means of
livelihood.” (Unitran/Bachelor Expres, Inc., et al. v. Jose Olvis,
et al., G.R. Nos. 76724-6, August 31, 1988 citing Bachiller
v. NLRC, 98 SCRA 393; see also International Harvest Macleod, Inc. v.
Intermediate Appellate Court, 149 SCRA 641).

There is an element of unfairness in the actions taken by the
petitioners.  Mr. Luisito
Borja, the immediate
boss of the private respondents, who had caused the alterations in
question was made to report back to work
after a 15-day suspension while the respondents were dismissed.  This taints the presumably impartial
character of the petitioner-company’s plant-level investigation.

We stated in Mary
Johnston Hospital, et al.
v. National Labor Relations Commission, et al. (G.R. No. 73839, August 30, 1988) that
“the determination of the existence and sufficiency of just cause must be
exercised with fairness and in good faith and after observing due
process”.

Moreover, the test of our review authority is grave abuse of
discretion.  The facts ascertained by the
public respondent and, the arguments raised by the petitioners do not show
manifestly reversible error on the part of the NLRC which is clearly equivalent
to grave abuse of discretion.

Whether or not the crane was on company stand-by time or working for the Philippine
Ports Authority on a private contract of the owner, Pacific Cement would still
pay the minimum seven hours daily rentals. 
There is nothing in this petition to show that the private respondents
made any money or otherwise profited from the alterations in the company’s
operations’ logbook.  The prejudice to
Pacific Cement is likewise not clear because the crane of Mr. Chua
could be pulled out of the PPA project area and brought to the company’s port
area anytime there was a need to use it for port operations.  The penalty of dismissal is unduly harsh
under the circumstances and to that extent the termination of employment
becomes illegal.

It was error,
however, for the NLRC to order reinstatement.

Messrs. Merto and Baure are the manager and assistant manager respectively of
Pacific Cement’s port department in Surigao City.  A company which no longer trusts its
managers, especially those assigned to regional or branch operations, cannot operate freely in a
competitive and profitable manner.  The
NLRC should know the difference between managers and ordinary workingmen.  It cannot imprudently order the reinstatement
of managers with the same ease and liberality as if it were dealing with
laborers or rank and file workers who have been terminated in their employment.

The records show that there is some basis for the petitioners to
be mistrustful of the loyalty and dedication of the private respondents to
Pacific Cement.  Even then, the relations
between the respondents and the Makati
top brass were no longer in the same category as those with Mr. Borja
who was pardoned and accepted back. 
There can be no question about
the relations now.

No prejudice may have been caused the petitioners by the altered entries in the company
logbooks but it still does not speak
well of a manager to state that a leased
equipment is on company stand-by when the truth is it was being used elsewhere by somebody else.  A manager worth his title and position should
not carelessly place “break-down” or “out-of-order” for a
crane which is on company stand-by.  Even
the need for mechanical check-ups does not warrant an entry of breakdown or out-of-order.  The company has a right to expect precision
and accuracy in entries on company records from its managers.

For the above reasons, we find the awards of damages and
attorneys’ fees unwarranted because the private respondents are not completely
without fault.  The fact that Mr. Borja, the manager primarily
responsible for the alterations, was meted out only 15 days suspension does not
clear the respondents completely.  It is
a company prerogative to choose who to appoint or reappoint as its managers as long as arbitrary prejudice is
not thereby caused, without reason, to those who are not so chosen.  No damages or attorney’s fee should be paid.

We, therefore, affirm the grant of backpay
for a period not exceeding three years, without qualification or deduction, to
the private respondents.  (Far East Bank
& Trust Co. v. Intermediate Appellate Court, et al., G.R. Nos. 73131-32,
[1988]; D.M. Consunji, Inc. v. Pucan, 159 SCRA 107 [1988]; Flores v. Nuestro, G.R. NO. 66890,
April 15, 1988).  However, in lieu of reinstatement,
the petitioners shall pay separation pay to
the private respondents in accordance with the agreement or company policy or,
in the absence thereof, the applicable law (Manila Midtown Commercial Corp. v. Nuwhrain (Ramada Chapter), 159 SCRA 212 [1988]; Bautista v. Inciong, 158 SCRA 665 [1988]).

WHEREFORE, the questioned decision of the National
Labor Relations Commission is hereby MODIFIED.  The petitioners are ordered to pay the
private respondents backpay equivalent to a three
year period, without qualifications or deductions and, in lieu of
reinstatement, separation benefits as outlined above.

SO ORDERED.

Fernan, C.J., (Chairman), Bidin, and Cortes, JJ., concur.

Feliciano, J., no part.