Barker v. Stearns Coal & Lumber Co., Inc.

• Decision Date: 04 March 1941
• Citation: 287 Ky. 340,152 S.W.2d 953
• Parties: BARKER v. STEARNS COAL & LUMBER CO., Inc.
• Court: Kentucky Court of Appeals

152 S.W.2d 953

287 Ky. 340

BARKER v. STEARNS COAL & LUMBER CO., Inc.

Court of Appeals of Kentucky

March 4, 1941

As Extended on Rehearing June 20, 1941.

Appeal from Circuit Court, McCreary County; Flem D. Sampson, Judge.

Action by C. M. Barker doing business under the style and firm name of Citizens Milling Company against Stearns Coal & Lumber Company, Incorporated, to recover amount of scrip issued by defendant to its employees, and acquired by plaintiff. From the judgment dismissing the petition, plaintiff appeals.

Reversed.

THOMAS RATLIFF, and TILFORD, JJ., dissenting.

Kennedy & Kennedy, of Somerset, for appellant.

H. C Gillis, of Williamsburg, for appellee.

STANLEY Commissioner.

The trial court sustained a general demurrer to and dismissed the petition as amended of C. M. Barker, doing business as the Citizens Milling Company, seeking to recover judgment for $18,000 and interest of the Stearns Coal & Lumber Company.

The facts alleged are in substance: The appellee is engaged in the mining of coal and in connection therewith operates a wholesale and several retail merchandise stores. For several years it has been issuing to its employees metal discs bearing figures indicating various denominations from one cent up to $5. They also have stamped on them the name of the company and the words, "Payable in merchandise only" and "Not transferable." Appellant accepted and holds $18,000 of this scrip from various merchants in payment of his products sold them, they having accepted it for merchandise. On May 15, 1939, one of appellee's regular pay days, the appellant tendered the $18,000 in scrip to appellee and demanded cash therefor but it refused to redeem any of the scrip in cash. It was further alleged, in substance, that during the whole of the time appellee has been issuing the scrip it has been circulating in McCreary and adjoining counties as a medium of monetary exchange and that various persons have been acquiring and using the scrip in the general course of their business; that it was a universal and well-known custom to regard title to the scrip as having passed by delivery only; and that the appellee has been redeeming the scrip from its employees and from all other persons acquiring and presenting it for redemption. All of this, it is alleged, was with the knowledge and consent of the appellee.

We may accept appellee's description of the characteristics of its scrip to be: "(1) It is a medium of credit, issued only to employees at their own request, in payment of labor performed or to be performed; (2) It is not transferable; (3) It is redeemable in merchandise only by the employees to whom it is issued; (4) Any unused scrip may be redeemed by payment in cash to the employees to whom it was issued on a regular pay day. No one but such employees is entitled to enforce redemption in cash."

If the scrip is non-transferable under valid law, as it purports to be on its face, it is apparent that appellant stated no cause of action against appellee unless on the ground of estoppel. The scrip was issued pursuant to Section 4758b-2 of the Kentucky Statutes, an act of 1932. That section provides in substance that any employer may, upon the request of any employee, "issue, sell, give or deliver" to such employee as "a medium of credit, in payment for labor performed or to be performed, non-transferable scrip, tokens, drafts, orders or coupons, payable and redeemable in merchandise only by the employee to whom issued." There is a proviso that such scrip or instruments "shall be construed, taken and held in all courts and places to be a promise to pay *** to the employee to whom issued, in lawful money of the United States or check, upon demand and surrender by said employee of such scrip or any unused portion thereof, at such regular settlement day or pay day when the same would have been due in cash had not the said order, scrip or token been issued." Criminal penalties are prescribed for the refusal of the employer "to pay the employee to whom is issued such non-transferable scrip" on a regular pay day.

By the terms of this statute the appellee was plainly authorized to issue the non-transferable scrip described. Appellant contends that this statute is unconstitutional because it violates Section 244 of the Constitution in so far as it authorizes the giving of non-transferable scrip. That section of the Constitution provides: "All wage-earners in this state employed in factories, mines, workshops or by corporations shall be paid for their labor in lawful money. The general assembly shall prescribe adequate penalties for violations of this section."

The protection of wage earners whom compulsion of need requires advancement of wages before regular pay day has presented a vexing legislative problem for many years. There sometimes appears a collision between the protection of individual civil rights, such as the liberty to contract, and the general welfare of the entire social body involving the protection of the weak against the oppression of the strong. The power of the State to prescribe the time of payment, to establish restrictions and otherwise regulate the contractual relationship in this particular has progressively grown or, to speak more accurately, been recognized, and exercised. Cooley on Constitutional Limitations, page 748, Note 1; page 1329, Note 6; 31 Am.Jur., Labor, Section 495, et seq; Cf. Commonwealth v. Reinecke Coal Company, 117 Ky. 885, 79 S.W. 287, 25 Ky.Law Rep. 2027.

Concerning the medium of payment of wages, it is said in 31 Am.Jur., Labor, Section 515:

"As early as the fourteenth century, laws in England prohibited the payment of wages in certain trades, in anything but lawful money of the realm; and in 1831 all of these laws were consolidated into what is known as the Truck Act, embracing nearly all classes of trades. The purpose of this legislation was the abolition of what was known in that country as the 'Truck System,' that is to say, the payment of wages to laborers in goods or by truck.

"Similar legislation has been enacted from time to time in America. The United States Supreme Court has held that such statutes do not infringe the freedom to contract guaranteed by the Fourteenth Amendment to the Federal Constitution."

The foregoing section of the Kentucky Constitution is clear and explicit as to the medium of payment, but is not so as to advancements or extension of credit based upon wages earned and unearned. However, the test of a statute ought not to be by a meticulous adherence to the letter of the constitution when it is in conflict with the spirit or intent.

It is a familiar aid in the interpretation of a provision of a constitution to examine the proceedings of the convention. If they clearly reveal the purpose of the particular provision the debates will be accepted as an indication of the meaning; subject to the qualification, however, that if the words used naturally convey a different meaning, the language of the instrument controls, regardless of the purpose disclosed in the debates, since the constitution obtains its force from the people who adopted it and not from the convention which drafted and proposed it. The proceedings of the Convention of 1890, which framed the present organic law of the State, contains much discussion of the provision which became Section 244. The committee which considered it heard many interested citizens. One member of the Convention related the conditions found by a committee of the legislature, of which he had been a member, which had gone to different parts of the state where there was mining industry and inquired into the situation. Imposition by employers upon miners through the use of scrip was quite prevalent. There was practically unanimity of purpose to protect wage earners from such oppression. But the debates reflect a difference of opinion as to how the wage earners might be best protected without restricting basic rights of free men. The requirement that wages should be paid in money was accepted as being necessary to break up the prevailing system of giving tokens, scrip or orders payable only in merchandise at the store or commissary of the employer, which, it is said, had resulted in a species of serfdom. Basically, the condition resulted from the fact that those tokens were not transferable and could not be used at other than the employers' merchandise stores. On the other side was the matter of convenience of the laborer in having credit and of the simplification of bookkeeping and prevention of mistakes. It is significant that the Convention rejected amendments adding such qualifications as would expressly permit agreements to give and accept something other than money or the deduction of "legal and equitable off-sets, or orders agreed upon between the parties." The thought was expressed that scrip or tokens would not offend the purpose of the provision if they were transferable and if the holder was assured that they would be paid in money at the end of the month. Debates, Constitutional Convention, ranges 4689, 4807, 4867-4888, 5337-5345. If Section 244 of the Constitution is paternalistic or infringes upon the liberty of contract elsewhere vouchsafed in the Bill of Rights, it is not to be overlooked that the people deemed it better that it should be that way.

To make that constitutional provision operative as therein mandatorily required and to prohibit the evils it was intended to destroy, the legislature early enacted a statute embodying the language of the section and fixing substantial criminal penalties for its violation. Section 1350, Kentucky Statutes. Not long afterward it enacted a law specifically applicable to industries employing ten or more persons in mining which requires payment in...