G.R. No.
L-48237 Petitioner proceeded with the retrenchment program and
terminated the services of a number of employees.
Respondent union filed a complaint for illegal lockout. The
MADRIGAL & COMPANY, INC., petitioner,
Secretary of Labor found the dismissal to be contrary to law
vs.
and ordered the petitioner to reinstate the employees.
HON. RONALDO B. ZAMORA, PRESIDENTIAL
ASSISTANT FOR LEGAL AFFAIRS, THE HON.
SECRETARY OF LABOR, and MADRIGAL CENTRAL The petitioner then moved for reconsideration, which the
OFFICE EMPLOYEES UNION, respondents. Acting Labor Secretary, Amado Inciong, denied.
FACTS: On appeal, petitoner insists that it is incurring losses; that as
such, it has to reduce its capitalization; that the profits it is
earning are cash dividends from Rizal Cement Co.; that
The petitioner was engaged in the management of Rizal
under the law, dividends are the absolute property of a
Cement Co., Inc. The petitioner and Rizal Cement Co., Inc.
stockholder like the petitioner and cannot be compelled to
are sister companies. Both are owned by the same or
share it with creditors (like the employees).
practically the same stockholders.
RULING:
On December 28, 1973, the Madrigal Central Office
Employees Union, sought for the renewal of its collective
bargaining agreement with the petitioner, which was due to What clearly emerges from the recorded facts is that the
expire on February 28, 1974. 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
Specifically, it proposed a wage increase of P200.00 a
employees by a devised capital reduction. While the
month, an allowance of P100.00 a month, and other
reduction in capital stock created an apparent need for
economic benefits. The petitioner, however, requested for a
retrenchment, it was, by all indications, just a mask for the
deferment in the negotiations.
purge of union members, who, by then, had agitated for
wage increases. In the face of the petitioner company's piling
On July 29, 1974, by an alleged resolution of its profits, the unionists had the right to demand for such salary
stockholders, the petitioner reduced its capital stock from adjustments.
765,000 shares to 267,366 shares. This was effected
through the distribution of the marketable securities owned
That the petitioner made quite handsome profits is clear from
by the petitioner to its stockholders in exchange for their
the records
shares in an equivalent amount in the corporation.
The petitioner would, however, have us believe that it in fact
On August 22, 1975, by yet another alleged stockholders'
sustained losses. Whatever profits it earned, so it claims
action, the petitioner reduced its authorized capitalization
were in the nature of dividends "declared on its
from 267,366 shares to 110,085 shares, again, through the
shareholdings in other companies in the earning of which the
same scheme.
employees had no participation whatsoever."
After the petitioner's failure to sit down with the respondent
"Cash dividends," according to it, "are the absolute property
union, the latter, on August 28, 1974, filed a complaint for
of the stockholders and cannot be made available for
unfair labor practice.
disposition if only to meet the employees' economic
demands."
The petitioner alleged operational losses. Pending the
resolution of the case the petitioner informed the Secretary
Dividends received by the company are corporate earnings
of Labor that "Rizal Cement Co., Inc. had ceased operating
arising from corporate investment." Indeed, as found by the
temporarily. Due to lack of business incentives and
Commission, the petitioner had entered such earnings in its
prospects and in order to prevent further losses it had to
financial statements as profits, which it would not have done
reduce its capital stock on two occasions. As the
if they were not in fact profits.
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 Moreover, it is incorrect to say that such profits — in the form
and operations." of dividends — are beyond the reach of the petitioner's
creditors since the petitioner had received them as
compensation for its management services in favor of the
The letter, however, was not verified and neither was it
companies it managed as a shareholder thereof. As such
accompanied by the proper supporting papers. For this
shareholder, the dividends paid to it were its own money,
reason, the Department of Labor took no action on the
which may then be available for wage increments. It is not a
petitioner's request.
case of a corporation distributing dividends in favor of its
stockholders, in which case, such dividends would be the
On January 19, 1976, the labor arbiter rendered a decision absolute property of the stockholders and hence, out of
against the petitioner. The arbiter specifically found that the reach by creditors of the corporation. Here, the petitioner
petitioner "had been making substantial profits in its was acting as stockholder itself, and in that case, the right to
operation" since 1972 through 1975. The petitioner a share in such dividends, by way of salary increases, may
appealed. not be denied its employees.
Accordingly, 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.
