Case ID: nj-eq_55/html/0463-01.html
Source: Caselaw Access Project
Author: {"author": "Grey, V. C.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Whitall E. Mingin v. The Alva Glass Manufacturing Company et al.
    1. The right to a preference in payment of their'wages, given to workmen of an insolvent corporation, is wholly statutory, and does not vest until the happening of the statutory requirements.
    2. It is created only when insolvency proceedings are begun, and then arises in favor of those persons, and for such amounts and under such conditions as the legislation on the subject then in force may prescribe.
    
      3. Apprentice workmen, who have allowed their wages to accumulate upon an agreement that they should be paid at the end of their apprenticeship, have no more extensive right to a preference than have any other unpaid workmen in the regular employ of the insolvent corporation.
    On petition of receiver &c.
    The bill of complaint was filed on the 27th day of November, 1895, and has resulted in a decree that the defendant corporation is insolvent. A receiver has been appointed, he has realized upon all the assets of the corporation, and reports that he now has in hand the sum of $4,423.09, from proceeds of sales &c. Claims have been filed with the receiver as follows:
    By workmen, for wages.......................................§10,146 89
    By apprentices, for wages held back....................... 358 20
    By C. W. Shoemakex-, for salax-y........................... 2,068 39
    By B. Elmer Shoemaker', salary............................ 2,234 08
    By Cumberland Mfg. Co., for services of C. W. Shoemaker and B. Elmer Shoemaker........................ 629 76
    By other creditors............................................... 17,326 83
    Total of all claims filed with receiver............§32,764 15
    The receiver is now ready to state his final account and to distribute to those claimants who are entitled to it the balance which may be found to be in his hands. The balance which will remain for distribution is already indicated to be insuflScient to meet the claims of those who assert preferences under the statute for wages as employes in the service of the corporation, if these claims are admitted as entitled to payment to the full amount named therein as preferences. Under this situation the counsel representing the different classes of claims appear before the court and enter into a stipulation declaring the facts in the case applicable for the ascertainment of the rightfulness of their several claims; and to this stipulation they append a schedule showing the names of the several workmen and apprentices, the amount of their schedule claims for wages, when their work began and ended.
    The apprentices claim that their wages were retained in trust for them by the insolvent company, upon an understanding that they should be returned to them on the completion of their full term of apprenticeship; that the intervention of the insolvency proceedings before the completion of their term of apprenticeship was occasioned by no fault or action of theirs; that this alone prevented the full service of their term of apprenticeship, and that their money, retained as above stated, ought properly to be payable to them in full out of the assets in the hands of the receiver. They also assert a right to a preference for wages under the Corporation acts.
    The other workmen claim that the amounts respectively due them for wages are preferred claims under the provision of section 639 of the General Corporation act of 1875 (Rev. 1877 p, 188), as enlarged by the act of March 31st, 1887 (P. L. of 1887 p. 99), and that they hold this preference as a vested interest and should be first paid in full, or if the total of their claims exceed the balance in hand, that they alone should participate in the division of it. They insist that the act of 1892 (P. L. of 1892 p. substantially re-enacted in the General Corporation act of 1896 (P. L. of 1896 p. 808 § 88), which limits the preference of employes to wages earned during the last two months preceding the assumption of jurisdiction in insolvency,, cannot be used to affect their vested right to their preference, and they declare they are controlled by the above-cited preceding acts of 1875 and 1887, and have an unlimited preference for all wages due them.
    On the part of the general creditors, it is claimed that no preference should be allowed to any of the workmen to whom wages are due from the corporation by reason of the statutory provisions above referred to, or because of the retention of a-portion of the wages of the apprentices until the completion of their term, but that an equal dividend should be declared to all1 claimants. The general creditors insist, however, that if any preference is given to the laborers, the act of April 8th, 1892,. has superseded all previous legislation giving wages preference in case of the insolvency of a corporation, and that the provisions of the Corporation act of 1896 (P. L. of 1896 p. 808) are identical with those of the act of 1892.
    
      All parties join with the receiver in the application to the court for direction as to the mode in which the surplus remaining in the hands of the receiver shall be distributed.
    
      Mr. Austin H. Swackhamer, for the complainant and workmen claimants.
    
      Mr. William T. Hilliard, for the defendant, and for C. W. Shoemaker and R. Elmer Shoemaker and Cumberland Glass Manufacturing Company.
    
      Mr. Jonathan W. Acton, for the apprentice claimants.
   Grey, V. C.

As to the claims of the apprentices. The portion of their wages earned but held back has no greater equity than the unpaid portion of any other class of workmen’s wages. There is no assertion that the amount so held back exists in any specific and separate form held in custody for them; no trust fund has been created or held for these unpaid wages. They stand merely as a credit in favor of the apprentices, for which they have a right of action on breach of the contract by the company, as any other workmen may have under like circumstances.

I am referred to the case of Bedford v. Newark Machine Co., 1 C. E. Gr. 121, as declaring that the apprentices have some equity superior to that of other workmen in the employ of an insolvent company. That case arose like this, on an application for direction to a receiver as to disposition of funds in his hands. The right of the workmen to a lien on the assets of the company in the hands of the receiver, was asserted under section 42 of the act'of 1849, authorizing the establishment of manufacturing companies. That act gave a lien for their wages, in case of insolvency of the company, to laborers in its employ. There were wages due to laborers who had left the employ of the company previous to the act of insolvency, and also to others who were at that time still in its employ. The question in dispute was whether both these classes of laborers were entitled under the statute to a preference; and only those laborers were held to have a preference who were actually in the employ of the company at the time of the suspension of its business operations, which was, under the statute, the act of insolvency. There were also apprentices in the employ of the company, and these were held to be entitled to their wages without regard to the time they were last’ actually laboring for the company, because there was no evidence that they had been discharged from their indentures prior to the act of insolvency, and the refusal or inability of the •company to furnish them with employment did not affect the ■continuance of their employment. For this reason they were ■declared to be within the class of laborers who were in the employ of the company at the time of the suspension of its business, whether actually engaged in the doing of labor or not. 'The apprentices were not given any different or more favorable position than other laborers in the employ of the company, but because of the continuity of their contract under their indentures they were deemed to be within the class of laborers who were in ■the employ of the company at the time of the act of insolvency, within the meaning of the statute.

The act of 1887 (P. L. of 1887 p. 99) changed the law, as -defined by the case of Bedford v. Newark Machine Co., and provided that the lien upon the assets of the insolvent company for wages should extend to all the laborers for services rendered in behalf of the corporation before the date which the court -adjudged to be the time when the insolvency occurred, whether such laborers were in the actual employ of the corporation at that time or not.” "Whatever rights the apprentices have to a preference are secured to them not because they are ■apprentices, but because they are employes, and those rights are in no way superior to those of any other employes of the insolvent company.

It being ascertained that the apprentices and all other laborers are alike in their rights of preferential payment, it remains to be ascertained what those rights are under the facts .of this case.

It may be premised that the privilege of preferential payment is wholly statutory and is always dealt with in statutes-which direct the disposition of the assets of insolvent corporations. These acts prescribe the conditions and characteristics which will entitle a certain class of claimants to preferential payment over other creditors whose claims may be equally meritorious. The privilege conferred is in derogation of the general equity of all creditors to share equally in the distribution of the assets of an insolvent debtor.

The laborers who, in this case, claim a preference, began working for the insolvent company in the year 1890 and while section 63 of the Corporation act of April 7th, 1875 (Rev. p. 188 § 63), as modified by the act of March 31st, 1887 (P. L. of 1887 p. 99), was in force. The provisions of these statutes gave to the-laborers who had been in the employ of an insolvent corporation a lien upon the assets of the company for the whole of the-amount of wages which might be due them, respectively, for all services rendered before the date which the court adjudged to be-the time when the insolvency occurred.

The act of 1892 (P. L. of 1892 p. 426) directed that the workmen should have a first lien upon the assets of the insolvent company, but prescribed that this lien should be limited to the amount of wages owing for services rendered within two months next preceding the date when the proceedings in insolvency were-actually instituted.

This statute has been, in all its material elements, re-enacted' in the Corporation act of 1896. P. L. of 1896 p. 303 § 83... These workmen in this case, who earned wages as above stated, prior to 1892, insist that they should be given a preferential payment, under the acts of 1875 and 1877, for the full amount of those wages, and that the limitation of their preference, under the act of 1892, to wages earned two months next before the assumption of jurisdiction in insolvency, ought not to be applied to them, because they say they took their employment before-the passage of that act, at a time when the acts of 1875 and 1887 were in operation, and they insist that they acquired a vested right to this preference, which cannot be taken from them by subsequent legislation. This argument is based upon the-.assumption that the preference given by the statute of 1875 became a part of this workman’s contract as soon as he accepted •employment, and that, during its continuance, he has always been entitled to the same preference, which could not be taken away by subsequent legislation.

An examination of the several statutes will show that the •employes’ lien has its origin in the taking of jurisdiction by a ■court to administer the assets of the insolvent company. The lien which the laborer has upon the assets of the employing ■company does not. attach coincidently with nor as attendant upon the making of the contract of employment, but only when all the prescribed statutory conditions which create that lien have come into being.

By section 63 of the act of 1875, it was only in case of the insolvency of the corporation that the workmen were given a lien on the assets of the corporation. The time when the lien attached was defined in the Bedford v. Newark Machine Co. Case, ubi supra, to have been the period when the insolvency •occurred.

The act of 1887 enlarged the class of workmen who might have the lien, and extended its benefits to include all claims for ¡services rendered before the date which the court adjudged to be .the time when insolvency occurred. The workmen had no lien under these acts against the assets of a solvent corporation engaged in the conduct of its ordinary business. They acquired none by their contract; it came as a pure gift, and only when insolvency occurred. There is nothing submitted to me which in any way indicates that this company has become insolvent or suspended its ordinary business, whereby the workmen acquired a lien on its assets, before the act of April 8th, 1892 (P. L. of 189%, p. JjBS), was passed, which limited the workmen’s lien to the .amount of wages for services rendered within two months next before the insolvency proceedings were begun. The bill in this ■case was filed on the 25th day of November, 1895; the earliest act of insolvency set out in the bill was the permanent closing of the works, which is stated to have been “about two years ago;” that is, about November 25th, 1893, more than eighteen months after the act of 1892 had on its .passage gone into effect. As the workmen had acquired no lien under the acts of 1875' aud 1887, they had no vested interest' which the. act of 1892-.either could or did impair. The mere chance that they might continue to work for the corporation, until at some indefinite-time in the future, when it might become insolvent and might be indebted to them,, and they might, if. insolvency proceedings-were taken against it, claim a lien on.its assets, is quite too re-r mote a possibility to be recognized as a vested right protected against legislative action by the modification of the statute giving them a preference. .There is no basis for the application of the-principle that vested rights cannot be impaired by subsequent legislation, because there were no rights vested at the time when the subsequent legislation was enacted.

The insolvency proceedings in this case are controlled by the-legislation in force at the time they were begun. This was the-act of 1892, re-enacted in its substance in 1896. ,P. L. of 1896 p. 277. It is under this legislation that the receiver holds-these assets, and it is under it that the lien of the workmen became fixed on the assets of the insolvent company. Their right to a preference was therefore given them by the same act which must guide and control the distribution, and no question-arises as to the taking away of vested rights by subsequent legisr lation. Under this act of 1892 the workman acquires no lien on the assets of an insolvent company until the court has assumed jurisdiction to administer those assets. And even if the company be insolvent, and the court has assumed control of its-assets, the workman, under that act, has no lien upon them, unless it has become indebted to him for wages earned during the-two months next preceding the beginning of the insolvency proceedings. His preferential privilege is therefore created by the-statute which authorizes the insolvent suit, and is wholly dependent upon the institution of the insolvency proceedings. He can reach the assets only through the receiver, who is appointed by the court to administer them. Hinkle v. Camden Safe Deposit and Trust Co., 2 Dick. Ch. Rep. 334.

The statutory provision for laborers’ preference in the act off 1892 differs so radically from the previous legislation on the same subject, as to the extent of the lien and the conditions under which the preference will be given, that it must be construed to stand as a substitute for the earlier statutes on the subject. It is true that there are no words in the statute of 1892 in terms repealing the previous acts of 1875 and 1887, but no repealer is needed where the preceding statute, treating of subjects in pari materia, cannot stand and be enforced with the succeeding statute on the same subject. The act of 1892 is clearly repugnant to the former one in its limitation of the time within which the wages must have been earned for which a preference is given, and being the later statute the act of 1892 must stand as a repealer by construction of the previous acts of 1875 and 1887 as to the extent of the preference.

This question was raised, on somewhat different lines, in Mersereau v. Mersereau Co., 6 Dick. Ch. Rep. 382, and the act of 1892 was in that case held to have superseded section 63 of the act of 1875, and that no words of repealer were necessary where the repugnancy between the several statutes was so manifest.

I will advise an order instructing the receiver to distribute the balance of the assets shown by his account in satisfaction of a prior and first lien for all wages of workmen due for labor done within two months next preceding the date when this insolvency suit was begun, if there are any claims for wages earned during that period. The residue of the balance of assets must be divided pro rata among the general creditors. If wages were not earned during the period named, they are not entitled to a preference and come in with the claims of the general creditors.