MADRIGAL & CO VS ZAMORA

 G.R. No. L-48237
MADRIGAL & COMPANY, INC., petitioner,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, THE HON. SECRETARY OF LABOR, and MADRIGAL CENTRAL OFFICE EMPLOYEES UNION, respondents.

CORPORATION LAW; CAPITAL STOCK

FACTS:

• The petitioner and Rizal Cement Co., Inc. are sister companies. Both are owned by the same or practically the same stockholders. The respondent, the Madrigal Central Office Employees Union, sought for the renewal of its collective bargaining agreement with the petitioner. It proposed a wage increase, an allowance and other economic benefits.

• By an alleged resolution of its stockholders, the petitioner reduced its capital stock.

• Yet another alleged stockholders' action, the petitioner reduced its authorized capitalization from through the same scheme.

• After the petitioner's failure to sit down with the respondent union, the latter commenced  with the NLRC a complaint for unfair labor practice. In due time, the petitioner filed its position paper, alleging operational losses. "In addition, "because of the desire of the stockholders to phase out the operations of the Madrigal & Co., Inc. due to lack of business incentives and prospects, and in order to prevent further losses," it had to reduce its capital stock on two occasions "As the situation, therefore, now stands, the Madrigal & Co., Inc. is without substantial income to speak of, necessitating a reorganization, by way of retrenchment, of its employees and operations."

• The petitioner applied for clearance to terminate the services of a number of employees pursuant supposedly to its retrenchment program. On the same date, the respondent union went to the Regional Office of DOLE to complain of illegal lockout against the petitioner.

• Acting on this complaint, the Secretary of Labor, found the dismissals "to be contrary to law" 

• NLRC rendered a decision affirming the labor arbiter's judgment. The petitioner appealed to the Secretary of Labor. The Secretary of Labor dismissed the appeal. Following these successive reversals, the petitioner came anew to this court. 

ISSUE:

Whether or not the reduction in capital stock creating an apparent need for retrenchment, was a way to justify the mass layoff on it employee ranks especially of union members.

HELD:

• YES. What clearly emerges from the recorded facts is that the petitioner, awash with profits from its business operations but confronted with the demand of the union for wage increases, decided to evade its responsibility towards the employees by a devised capital reduction. While the reduction in capital stock created an apparent need for retrenchment, it was, by all indications, just a mask for the purge of union members, who, by then, had agitated for wage increases. In the face of the petitioner company's piling profits, the unionists had the right to demand for such salary adjustments.

• This court is convinced that the petitioner's capital reduction efforts were, to begin with, a subterfuge, a deception as it were, to camouflage the fact that it had been making profits, and consequently, to justify the mass layoff in its employee ranks, especially of union members. They were nothing but a premature and plain distribution of corporate assets to obviate a just sharing to labor of the vast profits obtained by its joint efforts with capital through the years. Surely, we can neither countenance nor condone this. It is an unfair labor practice.

• WHEREFORE, the petitions are hereby DISMISSED. Subject to the modification as to the amount of backwages hereby awarded, the challenged decisions are AFFIRMED. The temporary restraining orders are LIFTED. With costs against the petitioner.