Central Textile Mills, Inc. v. National Wages Commission

G.R. No. 104102 (August 7, 1996)

Facts:

On December 20, 1990, the Regional Tripartite Wages and Productivity Board - National Capital Region (the Board) issued Wage Order No. NCR-02, which mandated a P12.00 increase in the minimum daily wage for all employees in the private sector in the National Capital Region (NCR). However, the order provided an exemption for distressed employers whose capital had been impaired by at least 25% in the preceding year. The guidelines issued on February 25, 1991, defined "capital" as the paid-up capital at the end of the last full accounting period for corporations.

Central Textile Mills, Inc. (the petitioner) applied for an exemption from compliance with Wage Order No. NCR-02 on April 11, 1991, citing financial losses. The Board, in an order dated October 22, 1991, disapproved the application, concluding that the petitioner had only sustained a capital impairment of 22.41%. The Board's decision was based on the audited financial statements submitted by the petitioner, which indicated a total paid-up capital of P305,767,900.00 as of December 31, 1990.

The petitioner filed a motion for reconsideration, which was dismissed on February 4, 1992. The Board maintained that the total paid-up capital, rather than the authorized capital stock, should be used to determine capital impairment. The petitioner argued that its authorized capital stock of P128,000,000.00 should be the basis for the impairment calculation, citing SEC opinions that stated capital stock increases are only effective upon SEC approval.

The petitioner had incurred a net loss of P68,844,222.49 in 1990, and while it had a subscribed capital stock of P482,748,900.00, it had not received SEC approval for the increase in its authorized capital stock. The funds received for the proposed increase were considered deposits on future subscriptions and could not be deemed part of the paid-up capital until the SEC approved the increase.

Legal Issues:

1. Should the Board have used the authorized capital stock or the paid-up capital to determine the capital impairment for the purpose of exemption from Wage Order No. NCR-02?
2. Did the petitioner exhaust all administrative remedies before filing the petition for certiorari?

Arguments:

• Petitioner’s Arguments:

  • The petitioner contended that the authorized capital stock should be the basis for calculating capital impairment, as the increase in capital stock had been approved by the Board of Directors and stockholders, even though it had not been filed with the SEC.
  • The petitioner argued that the funds received for the proposed increase in capital stock were improperly included in the paid-up capital calculation, as they were merely deposits on future subscriptions and not legally recognized as paid-up capital.

• Respondents’ Arguments:

  • The Board maintained that the paid-up capital, as defined in the guidelines, was the correct basis for determining capital impairment. They argued that the petitioner’s financial statements indicated that the impairment was below the required 25%.
  • The respondents also raised the issue of non-exhaustion of administrative remedies, claiming that the petitioner should have appealed to the National Wages and Productivity Commission before seeking judicial relief.

Court’s Decision and Legal Reasoning:

The Supreme Court granted the petition, annulling the orders of the Regional Tripartite Wages and Productivity Board. The Court held that the guidelines on exemption specifically referred to paid-up capital, not authorized capital stock, as the basis for capital impairment. However, the Court found that the funds received for the proposed increase in capital stock were improperly included in the paid-up capital calculation, as they were not legally recognized until SEC approval was obtained.

The Court emphasized that the petitioner’s actual authorized capital stock was P128,000,000.00, which had been impaired by nearly 50% due to the losses incurred. The Court also ruled that the petitioner could not be faulted for not appealing to the Commission, as the guidelines in effect at the time of the application did not require such an appeal.

Significant Legal Principles or Doctrines Established:

1. The distinction between paid-up capital and authorized capital stock is crucial in determining capital impairment for the purpose of exemptions from wage orders.
2. Funds received for proposed increases in capital stock that have not been approved by the SEC cannot be considered part of the paid-up capital until such approval is obtained.
3. The exhaustion of administrative remedies must be assessed based on the guidelines in effect at the time of the application, and parties cannot be penalized for not following procedures that were not applicable at that time.