Court Opinion

ID: 8262218
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:55:41.925161+00
Date Added: 2024-06-11T16:43:13.131000
License: Public Domain

BIGGS, J.
In May, 1891, the Sectional Dock Company, a corporation, made a general assignment under the statute for the benefit of creditors. At the time of the assignment the appellants herein held various “time checks” issued by the company to laborers performing work within three months nest preceding the assignment. It seems that the company was unable to pay its employees in cash, and instead issued to each of them a time check, showing the number of days that the holder had worked, where he worked, and the amount due him therefor. The appellants were grocerymen. They purchased some of these checks from the men, after receiving assurance from the officers of the company that the checks were genuine, and would be paid. In some instances they paid all cash and in others part cash, and the balance in groceries. In each case the checks were purchased at their face value, either in money or money’s worth. Soon after the purchase of the checks the company made the assignment. The appellants presented their demands to the assignee for allowance and they were duly allowed. The appellants demanded that the assignee should place the demands in the list of preferred creditors, which he declined to do. The preference was claimed under section 2538, Eevised Statutes 1889, as amended by the legislature in 1895 (Session Acts 1895, p. 101). Subsequently the appellants presented their petition to the circuit court, where the assignment is pending, setting forth therein the foregoing facts, and praying the court to declare a preference in favor of their claims, and that the assignee be ordered to so classify and pay them. The facts as above set forth were established by the evidence. There was no dispute as to the facts. The circuit court approved the allowance of the demands as made by the assignee, *60but refused to declare a preference. The appellants have brought the proceedings to this court by appeal.
The assignee concedes that if the claims in controversy-had remained in the hands of the laborers they would be entitled to preference under the statute, but he denies that the appellants as purchasers of the claims acquired any such right. The pith of the argument is that at the time of the purchase of the claims, which was prior to the assignment, the rights of the laborers to preferences were inchoate, were bare equities with no potential existence, and therefore were unassignable. If this premise is right, the conclusion is right.
The amended section (Session Acts 1895, supra) reads as follows:
“Section 2538. All corporations shall make payment to their employees and other operatives of wages due for all labor and services performed by them within three months next preceding a demand made therefor, not exceeding one hundred dollars, in preference to any other claim, debts or demands whatsoever, not secured by specific liens on property; and such priority of payment may be enforced by civil action. Payment of wages shall be made on or before the fifteenth day of each month for the full amount of all wages earned previous to the first day of that month, with interest at six per centum; if not paid, to be added to the amount of said wages when paid or recovered by suit. All debts due employees or operatives for wages of their labor shall have priority of payment from the money and assets of the corporations in the hands of officers or agents, or any receiver or assignee, over every other claim not specifically secured. Every corporation, officer, agent, receiver, assignee, or person holding money or assets, íefusing to recognize the priority of employees claims, shall be liable to such employees for the amount of all loss and damages occasioned by his unlawfully withholding the money.”
*61Construction of statute. *60The plain intention of the legislature, as indicated by the foregoing section, was to secure employees in the payment *61of their wages in preference to the ordinary creditors of the corporation. The law of its terms applies to both solvent and insolvent concerns. While the corporation is a going concern, that is prior'to an act of insolvency, the monthly wages of its employees are made payable no^. ja£er .j-fig fifteenth day of the next succeeding month, and if their wages (not exceeding $100) for one month or for three months next preceding a demand for payment are not paid, the laborers become preferred creditors as a matter of law, and the act expressly gives them the right to enforce their preferences by civil actions. Where the corporation assigns its property or its business goes into the hands of a receiver, the right of the employees to be preferred for unpaid wages earned within three months next preceding the date of the assignment becomes complete by the act of bankruptcy; therefore in administering the assets of an insolvent corporation the duty of the assignee as to such claims is unmistakable. There is no room to question the right of preference as to them. Neither is the right of preference questionable as to the past due wages whenever earned, provided the right of the laborer to the preference has been fixed or completed, for the assignee stands in the shoes of his assignor and he must administer the assigned property subject to all existing liens and equities. What is necessary for an employee to do to complete or perfect his inchoate right of preference under the statute ? And did the employees here observe the statutory requirements prior to the transfer of their claims? If they did then the judgment of the circuit court is wrong, for the conclusion is unavoidable that when the right of preference becomes fixed or is enforcible, it attaches itself to the debt and passes with the debt to the assignee thereof. This was the ruling of Judge Treat in the case of Bambria Iron Works v. Laclede Wire Co. (Turner Intervenor), 26 Fed. Rep. 420, where this statute (then section 761, Revised Statute 1879), was under comid*62eration. There is a similar statute iu California, which the supreme court of that state construed and applied in the case of Mohle v. Tschirch, 63 Cal. 381. There the laborers gave notice of their claims and their right of preference to the attaching creditor, the sheriff, and the debtor. They subsequently assigned their claims to the intervenor. Concerning the rights of the latter the court said: “We can see no legal reason why after liens in favor of the claims have attached by reason of the notice, an assignment of the claims should not carry the benefit of the liens.” In receivership proceedings as applied to insolvent railroad companies the United States courts have universally recognized and enforced preferences in the payment of labor claims in the hands of purchasers. The supreme court in Union Trust Co. v. Walker, 107 U. S. 596, after stating the equitable grounds for the preference of such claims over the mortgage debt says: “The right (of preference) is one that attaches to the debt and not the person of the original creditor; consequently his right passes with an assignment of the debt.” To the same effect is Burnham v. Bowen, 111 U. S. 776, and Kerr v. Moore, 54 Miss. 286. The cases cited and relied on by the assignee, which deny the assignability of such a right of preference, are based on statutes which only accord to employees priority of payment where the corporation assigns or its business is placed in the hands of a receiver. The purport of these decisions is that the inchoate lien or right of preference does not become a potential or expectant legal right until the corporation commits an act of bankruptcy and that an attempted assignment of it prior to that is nugatory. In other words, the priority or preferences is only available to employees holding unpaid claims for wages at the time of the bankruptcy or to their subsequent assignees. It is obvious that these cases are not applicable here, for under our statute such a preference may become fixed and may be enforced while the corporation is a going concern and such a right can not be impaired or affected *63by tbe subsequent bankruptcy of tbe corporation. Such a ease is presented by tbis record and tbe important inquiry is (as before stated) was tbe right of preference fixed or complete before tbe claims were sold ? It is undisputed tbat tbe claims were just and were due for wages of employees for three months next preceding tbe issuing of tbe time checks, and tbat tbe respective claims were less in amount than $100 wherefore if tbe employees demanded payment of their claims prior to their transfer to appellants, tbe right of preference became a fixed right attached to tbe debts, and it passed with tbe assignment of tbe debts. There is no direct or positive evidence in tbe record tbat such a demand was made, but we think tbat tbe circumstances tbat tbe wages were past due and tbat tbe employees held checks therefor, are sufficient to justify tbe inference tbat a demand of payment was made. It is not reasonable to suppose tbat tbe corporation would have issued tbe checks in tbe absence of some sort of request to pay tbe money. Our conclusion is tbat tbe judgment of tbe circuit court is wrong.
Jurisdiction of circuit court. But it is insisted tbat tbe judgment should not be disturbed for tbe reason tbat tbe circuit court bad no jurisdiction to bear and determine tbe question of preference in tbat tbe matter bad been previously determined by tbe assignee adversely to tbe appellants and no appeal bad been taken from bis judgment. Tbe judgments or actions of an assignee from which appeals are contemplated concern tbe allowance of demands rather than their classihcati0n. Any action of bis as to rights of preference or priority of payment is subject to a final review and control by tbe court where tbe assignment is pending, and as such to such questions either be or tbe creditors may apply to tbe court for directions. Burrill on Assignments, p. 531; Platt v. Adams, 7 Paige, 615. Hence it is obvious tbat tbis contention is without merit.
Tbe judgment of the circuit court will be reversed and tbe cause remanded.
All concur.