People v. E. Remington & Sons

Chapter 376 of the Laws of 1885 provides:

“Where a receiver of a corporation created or organized under the laws of this state and doing business therein, other than insurance and moneyed corporations, shall be appointed, the wages of the employees, operatives and laborers thereof shall be preferred to every other debt or claim against such corporation, and shall be paid by the receiver from the moneys of such corporations which shall first come to his hands.”

The defendant, from time to time, became indebted to its laborers in divers sums for wages earned after the passage of said act, and before the appointment of said receivers, against which sums so due to the laborers, they were accustomed to draw orders on defendant due on demand, payable to the order of merchants and dealers, for small sums, which orders were delivered to the payees by the laborers in payment for goods then, or previously purchased. Upon the presentation of such orders the defendant charged them to the accounts of the drawers, and in the cases embraced within class number one, credited the payees with the amounts of their orders upon open accounts; upon which accounts the defendant was indebted to the claimants embraced in this class when the receivers were appointed.

In the cases embraced within class two, the orders so drawn by the laborers and charged to them by the defendant, were aggregated from time to time by the payees and the defendant; and thereupon the payees received the defendant’s promissory notes due three months after date, for the amounts so aggregated; which notes were unpaid when the receivers were appointed.

In the cases embraced within class three, the orders so drawn by the laborers and charged to them by the defendant, were credited by the defendant to the payees, who from time to time, drew their orders on defendant to the order of other persons, by whom such second orders were presented to the defendant, the amounts aggregated from time to time, and thereupon, the payees received the defendant’s promissory notes due three months after date, for the amounts aggregated; which notes were unpaid when the receivers were appointed.

In the cases embraced within class five, the payees of defendant’s notes taken in exchange for the orders of laborers, received from defendant part payment of said notes, and defendant’s new notes for the remainder, due three months after date; which new notes were unpaid when the receivers were appointed.

In the cases embraced within class six, the of

In the cases embraced within class seven, the payee of defendant’s promissory notes given in exchange for the orders of laborers, drawn in favor of said payees, had indorsed and negotiated said notes before due, to indorsees for value received, who purchased the same in good faith; which notes were unpaid when the receivers were appointed, have been dishonored, duly protested and are now held by said indorsees.

In the cases embraced within class eight, the indorsees of notes which were received in exchange for the orders of laborers, at the maturity of said notes, accepted of defendant new notes on time, in lieu of the original notes, and thereby releasing the indorsers upon the original notes; which new, or substituted notes, were unpaid when the receivers were appointed, have been dishonored, duly protested and are now held by said payees.

In the cases embraced within class sixteen, the defendant’s promissory notes drawn on time, partly in payment for goods sold by the payees to the defendant, and partly in exchange for the orders of laborers drawn to the order of said payees on said defendant, were unpaid when the receivers were appointed and have been dishonored.

Class 17 embraces claims which arose by payees of laborers orders, surrendering them to defendant and receiving credit therefor in an open account containing credits for goods sold to defendant by said payees, against which said creditors under said account so created drew orders on said defendant against said accounts to the order of various drawees, who afterwards surrendered their orders to defendant and received credit therefor on defendant’s books, upon which accounts so last created the defendant was indebted when the receivers were appointed.

Class 18 embraces claims which arose by the payees of laborers orders, surrendering them to defendant and receiving credit therefor in an open account, against which said creditors, under said account so created, drew orders on defendants against said accounts to the order of various drawees, who afterwards surrendered their orders to defendant and received credit therefor on defendant’s books, upon which accounts so last created the defendant was indebted when the receivers were appointed.

These orders are payable generally, and not out of a particular fund. Orders for the payment of money on demand do not affect an assignment of funds in the drawee’s hands

So far as these claimants are concerned, it is unnecessary to determine whether the preference given by this statute is assignable before receivers are appointed; but all of the claims cannot be determined without meeting this question.

The preference secured by this statute is not a lien upon the property of the corporation, and does not become a vested, potential or expectant legal right until a receiver is appointed. Beaston v. Farmers' Bank, 12 Peters, 102; Brent v. The Bank of Washington, 10 id., 596; Anderson v. The State, 23 Miss., 459 . Before the appointment of a receiver, laborers have no right or interest capable of assignment. The cases arising under the manufacturer’s act are not authorities for the position that the preference under consideration is assignable before a receiver is appointed. The tenth, twelfth, fifteenth and eighteenth sections of the manufacturer’s act impose liabilities upon stockholders and trustees in favor of creditors and laborers. Under the tenth and eighteenth sections, the liability arises with the

Did the transaction amount to a payment of the wages of the laborers ? When the payees surrendered these orders to the defendant, and received in lieu thereof its promise to pay the sums (which promises were evidenced by its promissory notes, or by credit upon its books), three things were accomplished : (1) The laborers’ debts were wholly or partly paid; (2) the laborers’ wages were, to the amount represented by the surrendered orders, paid and discharged ; (3) the defendant, by its new promises, became indebted to third persons. This is payment by delegation, which is a. kind of novation. 2 Par. Gon., 129; 2 Chit. Con. (11th Am. ed.), 1376; Dom. Civ. Law, Book 4; title 4, arts. 1 and 7; vol 1 (Gush, ed), 919,' 921. Domat and Parsons treat of delegation and novation under the head of payment. When a debt is paid, no matter how, all collateral obligations held by the creditor for the security of the debt, whether imposed by law or given by the obligor, are released or cease to exist. Dom. Civ. Law, book 4, title 1, § 1, art. 8; book 4, title 3, § 1, art. 5; 1 Gush, ed., 894, 916. The preference given by chapter 376, Laws of 1885, is impressed by the statute upon the avails of the property of the corporation in the receiver’s hands for the payment of the debts due for wages, and whenever the wages are paid, the preference is extinguished. These principles are elementary, and their statement seems to be a sufficient discussion of whether the claims embraced within classes, one, two, three, five, six, seven, eight, sixteen, seventeen and eighteen are paid.

Glass four embraces the claims of persons who received orders from defendant’s superintendent (employed at an annual salary), and afterwards surrendered such orders to. defendant and received in exchange its promissory notes.

Class nine embraces the claims of persons who received orders from an attorney to whom defendant was indebted for professional services, and afterwards surrendered such orders to defendant and received in exchange its promissory notes due three months after date; which notes were unpaid when the receivers were appointed.

These claimants are not preferred under the statute, because: (1) The superintendent and attorney were not “employees, operatives or laborers,” or their earnings, “wages” within the meaning of the statute. (See discussion of classes ten, nineteen and twenty.) (2) Their earnings were not assigned to the claimants, but paid by the defendant, as before shown. (3) Prior to the appointment of the receivers, the superintendent and attorney had no preference which was assignable.

Class ten embraces the claims of attorneys for professional services rendered, some of which have been liquidated and others unliquidated. The liquidated claims are evidenced by defendant’s promissory notes or by credits on its books. The burden is upon persons claiming preferences to bring themselves, by evidence, within the statute. It does not appear that the attorneys were employed for any particular period, or at a price agreed upon, and the sums due them for professional services rendered upon occasional retainers are not “wages,” within the meaning of this statute. The word “wages” has a less extensive meaning, and embraces a smaller class of credits than “earnings.” Jenks v. Dyer, 102 Mass., 235 ; Somers v. Keliher, 115 id., 165.

By a statute of the state of Alabama, the “wages of laborers and employees” are not subject to garnishment or attachment except for public dues. It was held (S. and N. A. R. R. Co. v. Falkner, 49 Ala., 115 ) that the salary of the president of a railroad company was not exempt from garnishment. It was said: “The president of a railroad company cannot be said to be a laborer or employee, within the meaning of this law. The term “wages” indicates inconsiderable pay, without excluding ‘salary,’ which is suggestive of larger compensation for personal services. But its application to laborers and employees conveys the idea of a subordinate occupation which is not very remunerative; one of not much independent responsibility, but rather subject to immediate supervision.” The difference between salaries and wages is discussed in Cowdin v. Huff ( 10 Ind., 83 ) and McLellan v. Young ( 54 Ga., 399 ).

Class thirteen embraces the claims of laborers for wages earned and due prior to the passage of this act (May 29,

Class fourteen embraces the claims of creditors holding the orders of laborers drawn in their favor which have never been presented to defendant. These orders not amounting to an assignment of the whole, or of any part, of the sums due from defendant to the drawers (laborers), and the preference given by the statute not being assignable, these creditors are not entitled to a preference, under the statute.

Class fifteen embraces the claims of the holders of promissory notes given by defendant to its laborers for wages and afterwards endorsed by the laborers to the claimants. The preference created by the statute not being assignable, these claimants are not entitled to a preference under the act.

Class nineteen embraces the claims of persons to whom defendant furnished stock from which, rooms in which, power and machinery with which to manufacture parts of machines and implements, for which manufactured articles defendant agreed to pay a fixed price. Said persons employed, discharged and paid their own laborers. On such contracts considerable sums were due when the receivers were appointed.

A person who contracts to do a specific portion of work in constructing a railroad and employs others to do, or aid in doing the work, is not a laborer or servant within the tenth section of chapter 140, Laws 1850 (the railroad act), Aikin v. Wasson, 24 N. Y., 482 .

Section 12 of the railroad act provides that if contractors fail to pay their laborers, the corporation shall be liable to pay for thirty days labor. A laborer working with his team and his hired man at an agreed price per day can not. recover, under this section, for the labor of the team or hired man. Atcherson v. Troy and Boston R. R. Co., 1 Abb

Chapter 37, 1 and 2, Will., 4 (the truck act), made it unlawful for employers engaged in certain trades to pay “ the wages of artificers" in anything except the current coin of the realm. By the 25th section of the act: “All workmen, laborers and other persons in any manner engaged in the performance of any work, employment, or operation of what nature soever, in or about the several trades or occupations aforesaid, shall be and be deemed artificers." Miners of coal and clay, iron-workers, knitters and weavers were within the act. A person contracted to take clay out of a cut for a certain sum per cubic yard, and employed eight or nine men to work with him. After being partly paid in coin and partly in goods, the plaintiff sought to recover in coin the part of his wages paid in goods, but it was held Riley v. Warden, 2 Exch., 59) that he was not an artificer, or at work for wages, within the act.

Park, B., said: “Now it appears to me that, upon the true construction of this act, it is to be taken as applicable to those persons only who strictly contract as laborers, that is, to such as enter into a contract to employ their personal services, and to receive payment for that service in wages."

It seems to me that this act was intended to be applied to those who engage to do a work by their own personal labor, and that the object of it is to protect such men as “ earn their bread by the sweat of their brow, and who are, for the most part, an improvident class, and that it was not intended to have any application whatever to persons who take work upon a great scale."

Rolfe, B., said: “It appears to me to be clear, upon looking at this act of parliament, that it applies only to those persons who are to receive wages as the price of their labor, and that the term ‘wages' is to be understood in its popular sense, and does not include wages which are the price of a contract. The plaintiff here employed several persons under him, and in that respect differs from what is popularly understood by a laborer. This act was in- . tended to protect persons who earn their bread by their daily labor from receiving goods as a payment for their wages instead of money. It would be difficult to know where to draw the line if we were to hold that the plaintiff falls within the n leaning of the act, for it would be difficult to say that it did not apply in a case where a party had undertaken a contract to complete twenty miles of railway. The nineteenth section seems to me to have reference to workmen and laborers who earn wages by their own per

In Sharman v. Sanders ( 13 C. B., 166 ) the plaintiff sought to recover wages earned in iron works. The plaintiff was employed to load, unload and burn iron stone at a certain price per ton, payable at the end of each month, the defendant finding carts and horses. The plaintiff worked personally and employed assistants, paying them weekly. The plaintiff received four-fifths of his pay in goods, and afterwards sued for coin. It was held that the plaintiff was not an artificer, and not at work for wages.

Maulé, J., said: “The persons the act was meant to benefit, are those who hire themselves to labor with their hands for daily or weekly wages. More people, no doubt, “ are comprehended within it than that; but it is that sort of people to whom the act was intended to apply. I do not think it was at all designed for the protection of persons taking contracts for labor to be done by others—persons who speculate upon the state of the labor market. The letter of the act also, in my opinion, falls short of comprehending persons of that description. I do not think the plaintiff falls within the definition of an artificer given by the interpretation clause; he not being a workman, laborer or other person engaged in the performance of any work, employment or operation contemplated by the statute; for the whole context shows that it was only intended to apply to those who are actually or personally engaged or employed to do the work. And when the procuring work to be done by the hands of others comprehends the whole of what a man contracts for, the circumstance of his doing some portion of the work himself, does not bring him within the statute.”

In Bowers v. Lovekin (6 E. & B., 584), a contrary rule was held; but this case was expressly overruled in Sleeman v. Barrett (2 H. & C., 934), where the rule laid down in Riley v. Warden, and in Sharman v. Sanders, supra, was followed, and the language of those judgments quoted with approbation. In Ingram v. Barnes (7 E. & B., 115), affirmed in the exchequer chamber, 132; Riley v. Warden and Sharman v. Sanders, were followed, and Bowers v. Lovekin, was distinguished.

Class twenty embraces the claim of Mr. Comstock, who was employed upon an annual salary of two thousand dollars, with a commission of two per cent., to sell goods in China, the defendant paying all necessary traveling expenses. There is due Comstock, for commissions earned prior to the passage of the act, $12,160, and for commissions earned since the passage of the act, $1,440, for which defendant hac? given him two promissory notes, dated December 15, 1885;

A superintendent, general manager; or a general manager and book-keeper is not a “laborer, servant or apprentice,” within the eighteenth section of the manufacturing act. Hill v. Spencer, 61 N. Y., 274 ; Dean v. DeWolf, 16 Hun, 186 ; aff’d 82 N. Y., 626 ; Krauser v. Ruckel, 17 Hun, 463 ; Wakefield v. Fargo, 90 N. Y., 213 . In considering whether a general manager fell within the term “servants,” Lott, Ch. C., said: “The context in which it is used, in the section referred to, being associated with ‘laborers’ and ‘apprentice’ indicates that it was intended to apply to a person employed to devote his time, and render service in the performance of work, similar- in its general character to that done by its employees.” Hill v Spencer, 61 N. Y., 279 .

Chapter 755, Laws 1873, conferred upon the board of police the power to fix the salaries of afi clerks and employees whom they were authorized to appoint. The question arose whether the board had power to fix the salary of a police surgeon. Miller, J„, in defining the word “employee” said (People v. Board of Police, 75 N. Y., 41 ): “Certainly they (surgeons) are not ‘clerks,’ and as ‘ employees ’ are usually considered as embracing laborers and servants, and those occupying inferior positions, they •can scarcely be included in that class of persons.”

In Wakefield v. Fargo (supra), the question was whether a general manager and clerk was within the term, “laborers, servants and apprentices,” as used in the eighteenth section of the manufacturing act.

It was said by Danforth, J. ( 90 N. Y., 218 ): “He (Blackstone), also speaks of stewards, factors and bailiffs, as perhaps, constituting a fourth class of servants. But this doubtingly, because they serve in a superior ministerial capacity, and in view of the declarations already made by this court as to the object of the statute. Coffin v. Reynolds, 37 N. Y., 640 ; Gurney et al. v. Atlantic and Great Western Railway Co. et al., 58 id 367; Aikin, Administra

Applying the rule declared in the last three cases to the phrase, “the wages of employees, operatives and laborers,” it is not broad enough to prefer the sum due Mr. Comstock for salary and commissions. This, like many similar statutes in this and other countries, was designed to secure the prompt payment of the wages of persons, who as a class, are dependent upon their earnings for the support of themselves and their families, and it. was not designed to give a preference to the salaries* and compensation due to the officers and employees of corporations occupying superior positions of trust and profit. The construction contended for in this case would give a preference to all employees, without regard to rank, compensation, mode of employment, mode of payment, or the length of time during which they had allowed their compensation to remain in arrear. The assignees, transferees and indorsees of all employees, no matter how remote, or how great the accumulation, if it could be shown that the original consideration of the claim was “wages,” “salary,” “commissions,” or “earnings,” of persons employed, would be preferred. In this way, as illustrated by this case, the wages and compensation due employees might become a large and constantly increasing debt, to be preferred, in case of failure, equally with the class of laborers who must, from necessity, rely upon the prompt payment of their earnings. This might defeat the beneficial object of the statute, by depriving the laborers of their hire for the benefit of those who had purchased, from time to time, their wages. This would work a wrong to the laborers and would endanger the claims of all the other creditors of the corporation.

• The order should be modified by reversing that part of it

Boardman, J.. concurs.

Merwin, J., dissents as to classes fourteen and fifteen in an opinion.

I differ from Brother Follett as to classes' fourteen and fifteen.

In the case, class fifteen is described as follows: “ That the corporation was indebted to employees and laborers for wages accruing subsequent to the passage of the act before mentioned, for which wages the corporation had executed and delivered to such employees or laborers its promissory notes on time, which employees or laborers duly transferred said notes to third parties, who now hold the notes for value, and which have not been paid. ”

The giving of the note did not operate as payment of the debt for wages. Jagger Iron Co. v. Walker, 76 N. Y., 521 . The transfer of the note operated to transfer the debt. The Oneida Bank v. The Ontario Bank, 21 N. Y., 490 . So that the debt for wages is still in existence and is owned by the claimant, and if the statute under consideration operates to prefer the debt as such, then the present holder is entitled to the benefit of the preference. The statute provides that, where a receiver of certain corporations shall be appointed, “the wages' of the employees, operatives and laborers thereof, shall be preferred to every other debt or claim against such corporation.”

By this form of expression, it is the wages that is preferred; it is one kind of debt over every other debt. It is not one kind of debtor over every other debtor; it is not personal The case of Rollin v. Cross ( 45 N. Y., 766 ) is not applicable. That case was under the Mechanic Lien Law (chap. 513, Laws 1851), which gave a personal privilege, and required certainacts to be done by the person himself before his lien was perfected. The cases of Pilcher v. Brayton ( 17 Hun, 429 ), Bolen v. Crosby ( 49 N. Y., 183 ) and several other kindred cases are more analagous, but they do not, I think, reach the present question. I find no authority exactly in point. The test, it seems to me, is, whether the debt or the person is preferred; I think it is the debt. That is the fair construction of the statute, and is consonant with the object of the statute, which is to benefit the laborer. It adds value to the claim, for anything that detracts from the assignability of a claim lessens its value. It is to be presumed that credit was given for the wages in reliance on this provision of law, so that the benefit of the law to a certain extent attached before the appointment of a receiver.

Class fourteen is illustrated as a case where the laborer, in payment for merchandise, then sold and delivered to him by a merchant, draws and delivers to the merchant a written order on the corporation for a portion of the wages , then due him and earned after the passage of the act, but “the merchant, the payee in the instrument, has never presented the same to the corporation, but has continued to hold and now holds and owns the same, the amount thereof appearing on the books of the corporation to the credit of the employee or laborer.” The order, after specifying the amount, says, “and charge to my account.”

If this order operated to assign to the merchant so much of the debt for wages, then the case is similar to class fifteen. So that the question is whether, under the circumstances, this order operated as an assignment. Dealing in orders in this way had prevailed for a number of years, and it may fairly be inferred from the case, as presented, that the corporation was accustomed to treat such orders as transfers pro tanto. Story, J., in Mandeville v. Welch, 5 Wheat., 277 . It was undoubtedly so designedly the drawer or laborer, and so understood by the merchant. In effect it was drawn on a particular fund. That was the effect of the transaction, though not put in so many words. Coates v. First National Bank, etc., 91 N. Y., 20 . It was delivered to the merchant for a full value.

Ooncededly the corporation is indebted to some one for the amount, and it so appears on its books. By the statute, if my construction of it is correct, the debt is preferred whether owned by the laborer or the merchant. As between these two, the latter is certainly entitled to it. In Risley v. Phenix Bank ( 83 N. Y., 318 ), it was held that there may be an oral assignment for a valid consideration of a portion of a debt. Under the Coates and Risley cases I think it should be held in the present case that there was an equitable assignment from the laborer to the merchant of so much of the debt for wages as was represented by the order,, and that, therefore, the merchant is entitled to the preference.