Case Name: William Farnum, Respondent, v. William H. Harrison, Appellant, Impleaded with Spencer E. Wishart and Others, Defendants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-04-16
Citations: 167 A.D. 704
Docket Number: 
Parties: William Farnum, Respondent, v. William H. Harrison, Appellant, Impleaded with Spencer E. Wishart and Others, Defendants.
Judges: 
Reporter: Appellate Division Reports
Volume: 167
Pages: 704–711

Head Matter:
William Farnum, Respondent, v. William H. Harrison, Appellant, Impleaded with Spencer E. Wishart and Others, Defendants.
First Department,
April 16, 1915.
Corporation — master and servant—liability of stockholder for wages due employee — statute construed — bookkeeper within protection of statute.
The word “employee” as used in section 57 of the Stock Corporation Law, making stockholders personally liable for moneys due to laborers, servants or employees of a corporation after a judgment against the corporation itself has been returned unsatisfied, includes a bookkeeper employed at a weekly salary who, in addition to the usual duties of such position, attended to the banking business of the corporation and answered inquiries in the absence of officers.
It seems, that such employee is within the terms of the statute although he should receive an annual salary.
Ingraham, P. J., and McLaughlin, J., dissented, with opinion.
Appeal by the defendant, William H. Harrison, from a determination and order, of the Appellate Term of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 4th day of December, 1914, affirming a judgment of the City Court of the City of New York in plaintiff’s favor, and also affirming an order of said court denying appellant’s motion for a new trial, and also an appeal from the order of the City Court of the City of New York making the order of the Appellate Term the order of the City Court and from the judgment of affirmance of said City Court entered in the office of the clerk of said court on the 14th day of December, 1914.
Hartwell Cabell, for the appellant.
Louis Boehm, for the respondent.

Opinion:
Dowling, J.:
Plaintiff has recovered a judgment against the defendant, one of the stockholders of the Wishart-Dayton Auto Truck Company, for the amount of unpaid salary due him for services rendered to the company as a bookkeeper. The plaintiff originally sued the company itself for his services and recovered judgment therefor. An execution issued thereon having been returned wholly unsatisfied, he commenced this action within thirty days thereafter against the defendant. The action is .brought pursuant to section 57 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), reading as follows: "Liabilities of stockholders to laborers, servants or employees. The stockholders of every stock corporation shall jointly and severally be personally liable for all debts due and owing to any of its laborers, servants or employees other than contractors, for services performed by them for such corporation. Before such laborer, servant or employee shall charge such stockholder for such services, he shall give him notice in writing, within thirty days after the termination of such services, that he intends to hold him liable, and shall commence an action therefor within thirty days after the return of an execution unsatisfied against the corporation upon a judgment recovered against it for services." All the requirements of this section have been complied with. The sole question presented by this appeal is whether the plaintiff, who was a bookkeeper in the employ of said company, and who was to be paid for his services at the rate of fifty dollars a week, is within the scope of the statute. His services consisted of keeping the books of the company, attending to the banking business thereof and discharging the usual duties of a bookkeeper in a business. In addition thereto, in the absence of Mr. Wishart, president of the company (under whose orders he acted), and one Peix (who was in charge of the office in Wishart's absence), the plaintiff answered the inquiries of persons who might call at the office. It is the defendant's contention that a bookkeeper is not a "laborer, servant or employee" within the meaning of the statute, and that, therefore, plaintiff cannot recover against a stockholder of the corporation by which he was employed. The original source of this legislation is to be found in chapter 40 of the Laws of 1848, entitled "An act to authorise the formation of corporations for manufacturing, mining, mechanical or chemical purposes," section 18 of which read as follows: "The stockholders of any company organized under the provisions of fhiq act, shall be jointly and severally individually liable for all debts that may be due and owing to all their laborers, servants and apprentices, for services performed for such corporation." This provision was construed in Wakefield v. Fargo (90 N. Y. 213) where it was held that one employed at a yearly salary as a bookkeeper and general manager was not a laborer, servant or apprentice within the meaning of the provision in question, and that the services referred to were manual or menial services performed by one of the class whose members usually look to the reward for a day's services for immediate or present support. The court reached this conclusion by a consideration of the meaning of the terms " laborers, servants and'apprentices," and quoted the definition of Blackstone (Book I, chap. 14) as follows: " The first sort of servant acknowledged by the law of England are menial servants. Another species of servants are called apprentices. A third species of servants are laborers, who are only hired by the day or week." The court said that although the word "servant " was general, it was limited by the more specific ones " laborer " and " apprentice " with which it was associated, and comprehended only persons performing the same kind of service. It held that a general manager was not ejusdem generis with an apprentice or laborer, and would not, in popular language, be deemed a servant. "Laborer" and "apprentice," the court further said, were words of limited meaning, and referred to a particular class of persons employed for a defined and low grade of service performed without responsibility for the acts of others, and necessarily excluded persons of higher dignity, as a statute which treats of persons of inferior rank could not by any general word be so extended as to embrace a superior. Thereafter, by section 57 of the former Stock Corporation Law (Hen. Laws, chap. 36; Laws of 1890, chap. 564), which act was entitled "An act in relation to stock corporations," etc., the liability of stockholders for debts owing to any of its ' ' laborers, servants, or employes, other than contractors, for services performed by them for such corporation," was created in the identical language with that used in the statute now under consideration. It will be seen that this changed the former condition of the law by removing as one of the classes entitled to relief against stockholders "apprentices," and inserted in place thereof an entirely new class, "employes, other than contractors. " (See, also, Stock Corp. Law [Gen. Laws, chap. 36; Laws of 1892, chap. 688], § 64, as amd. by Laws of 1901, chap. 354.) In Palmer v. Van Santvoord (153 N. Y. 612), which involved the construction to be placed upon the word " employees " under chapter 376 of the Laws of 1885, whereby wages were given a preference against the assets of domestic corporations in the hands of a receiver, Andrews, Oh. J., said: " The case of bookkeepers or persons employed to make sales of merchandise, or of property manufactured by the corporation, are 'employees ' within the meaning of the act, and their compensation earned is 'wages,' whether such persons are employed by the day, or month, or year, and whether the compensation is denominated ' salary ' or ' wages ' in the contract of employment. " In Matter of Stryker (158 N. Y. 526) the court distinguished the case of Palmer v. Van Santvoord (supra) on the ground that in that case the services performed by the claimant were those of a mechanic or laborer, and held in the case before it that the statute for preference was not intended to secure a preference for claims due to the clerical forces engaged in transacting the business, nor to the superintendent, foremen or officers of the corporation who are compensated by a fixed yearly salary. The court based its opinion, however, largely on the proposition that the most important word in the statute was "wages," and held that the Legislature by the use of such word intended to prefer in the distribution of the assets of the insolvent corporation, not salaries, nor earnings, nor compensation, and that it was not intended to prefer the claims of all employees, but it was manifestly intended to limit the preference to the particular class whose claims would be properly expressed by the use of the word "wages;" that such word was commonly applied to the payment made for manual labor, or other labor of a menial or mechanical kind, as distinguished from a salary or fee, which denotes compensation paid to professional men. In concurring Judge Gray called attention to the decision in Palmer v. Van Santvoord and to the language used by Andrews, Oh. J., therein, including the holding by the latter that the statute preferring wages proceeded upon a broader legislative policy than the provisions of the act of 1848, heretofore quoted, imposing a liability upon stockholders of corporations for debts due to employees. The statute which we are now considering is a penal statute, and, of course, must be strictly construed. But starting with this proposition, I am unable to find any reason why the words " employees other than contractors," should be so limited in their meaning as to exclude a bookkeeper from their protection. It is no longer a question of using a word like " apprentices," which had a definite, settled meaning, and which was recognized as designating a class of labor akin to and connected with servants and laborers. It is not a question of protecting a class of people whose earnings are limited by the use of the word "wages" as in the decisions under the law granting a preference. When the Legislature substituted for the word "apprentices," which had a certain, limited meaning, the words "employes, other than contractors," it seems to me that their purpose could only have been to extend the protection given by the statute beyond the class of what the Court of Appeals has called "menial labor " to all the classes of labor beneath the grade of a vice-principal or direct representative of the employer. A bookkeeper engaged in keeping the books of a corporation, and attending to its banking affairs, and whose time is spent in the office of his employer,' is, it seems to me, an employee whether he is paid an annual salary or a weekly wage, although, as a matter of fact, the plaintiff herein was to be paid his compensation weekly. Nor does the fact that, as an incident to his ordinary subordinate position, he is at times called upon, in the absence of several superiors, to answer inquiries in the ordidinary course of business, remove him from the class of employees and promote him to that of an official. Conceding that an officer of a corporation would not be entitled to the protection of the statute, the plaintiff has never come within that category. The only case in which the Court of Appeals has directly passed upon this statute is Bristor v. Smith (158 N. Y. 157). In that case the court held that an attorney for a corporation regularly employed at a fixed salary to perform legal services in connection with its business was not an employee within the meaning of the statute now under consideration. It is quite true that in its opinion the court said: " To the ordinary reader of the language of this statutory provision, I doubt that it would ever occur that the word ' employees ' had any wider significance than to define, in a general way, such classes of persons as were engaged in serving the corporation in subordinate capacities; but, when we apply the rules of construction to the case, any other definition of the word becomes unreasonable, if not impossible, than that it means persons sustaining such relations to the corporation as do laborers and servants. The statute was a continuation of previous legislation, which had for its object the protection of those who earned their living by manual labor, and not by professional services, and who were supposed to be the least able to protect themselves. To such persons, and to all who become employed in subordinate and humble capacities and to whom the hardship would be great, if their wages or salaries were not promptly paid, the legislative policy is to afford the protection of a recourse to the stockholders of a company, upon the latter's default. (Coffin v. Reynolds, 37 N. Y. 640; Gurney v. Atl. & Gt. W. Railway Co., 58 ib. 358; Wakefield v. Fargo, 90 ib. 213.) When, in section 54 of the Stock Corporation Law, the general word 'employees' was added after the words 'laborers' and. 'servants,' it could not have been intended, from the collocation of words and for the want of reason in the thing, to include persons performing services to the corporation of a higher dignity, such as its legal adviser. Indeed, the appellant would be utterly without any reason in claiming the protection of the statute, if he could not pretend that his agreement with the company made him its employee. But the only effect of that agreement, so far as it bore upon their relations, was to secure to each permanency in the relation of attorney and client, and certainty as to the measure of compensation. The lawyer does not lessen the dignity and independence of his position towards his client, or in the community, by making such an agreement. He does not, thereby, descend into that inferior and subordinate class of persons who, being continuously employed in the corporate business for a compensation paid in wages, or in salaries, and being under the orders of the managers of the corporation, are usually regarded as its servants or employees." I do not think anything in that opinion contravenes the right of the plaintiff to recover herein for he, performing services as a bookkeeper, comes directly within the classification just referred to by the court of those who, " being continuously employed in the corporate business for a compensation paid in wages, or in salaries, and being under the orders of the managers of the corporation, are usually regarded as its servants or employees." For these reasons I believe the judgment appealed from is right and should be affirmed, with costs.
Laughlin and Hotchkiss, JJ., concurred; Ingraham, P. J., and McLaughlin, J., dissented.