Angelo v. McCormick Bros., Inc.
| Decision Date | 12 June 1933 |
| Citation | 19 Del.Ch. 307,168 A. 79 |
| Court | Court of Chancery of Delaware |
| Parties | VINCENT DI ANGELO, v. MCCORMICK BROS., INC., a corporation of the State of Delaware. In the Matter of the Petition of Wage Claimants for Priority of Payment Ahead of Lien Creditors from Proceeds of Sale of Personal Property |
STATEMENT OF THE CASE. The defendant was adjudged to be insolvent and a receiver of and for it was appointed under Section 3883 of the Revised Code of 1915. Certain employees of the insolvent have filed claims for wages and they claim a preference for not exceeding one month and for not over fifty dollars in the case of any one employee. Revised Code 1915 § 4332. The funds in the hands of the receiver were derived from the sale of personal property which was subject to the liens of a chattel mortgage and execution levies, all of which attached to the property before the bill under which the receiver was appointed was filed. The employees contended before the Chancellor that the preference given them by the statute is superior to the liens held by the chattel mortgagee and the execution creditors. The chattel mortgagee and the execution creditors took issue on the question of the claimed priority and the Chancellor filed the ensuing opinion in disposing of the question.
Earlier act, in its application to insolvent corporations remains unrepealed and that the preference claimed should be allowed.
Victor J. Colombo, for wage claimants.
Caleb S. Layton, of the firm of Richards, Layton & Finger, for chattel mortgagee and lien creditors.
James R. Morford, of the firm of Marvel, Morford, Ward & Logan, for receiver.
The statute upon which the employees rely in support of their claim that wages for not over one month and in no case for over fifty dollars must be paid ahead of the claims of the chattel mortgagee and the execution creditors, is found in Section 4332 of the Revised Code of 1915. It is as follows:
There is an intimation on the brief of the solicitor representing the chattel mortgagee and the lien creditors, that as the statute in its terms applies only where there is an execution sale, it should not be stretched to cover sales made by a receiver appointed under the insolvency statute. This intimation is sufficiently answered by the principle of the cases in this State which hold that a landlord's statutory preference for a year's rent over execution creditors will be allowed to him out of the proceeds realized by a receiver of an insolvent corporation from the sale of chattels of the insolvent located on the demised premises. The statute giving the landlord his preference (Revised Code 1915, § 4595), like the statute here in question, applies in terms only where there is an execution sale; but the instances are innumerable in which the rent preference, notwithstanding the statute which affords it contemplates its assertion only where there is an execution sale, has been repeatedly allowed in receivership causes of the instant type. In Bailey v. Lightwell Steel Sash Co., 12 Del.Ch. 60, 105 A. 376, 377, Chancellor Curtis categorically stated that "preference is given to the payment of rent in administering the estate of an insolvent corporation," and in Conover v. Sterling Stores Co., 14 Del.Ch. 26, 120 A. 740, I took occasion to point out the reason why in my judgment any other rule would be highly inequitable. The same reason which allows the statutory rent preference to be asserted in corporate receiverships based on insolvency, inescapably allows the statutory wage preference to be similarly asserted.
Where Section 4332 of the code is applicable, the preference given by it to a wage claimant takes precedence ahead even of the claim in satisfaction of which the property is sold in execution. The statute is very explicit in that regard, and it was so applied in Clough v. Superior Equipment Corp. 18 Del.Ch. 65, 156 A. 249.
But the solicitor for the lien creditors contends that Section 4332, in so far as the wage preference of employees of an insolvent corporation is concerned, has been repealed by Section 57 of the General Corporation Law of this State (Revised Code 1915, § 1971). That section in its present form, as amended by 36 Del. Laws, c. 137, is as follows:
"Whenever any corporation formed under the provisions of this Chapter, or any foreign corporation doing business in this State, shall become insolvent, the employees doing labor or service of whatever character in the regular employ of such corporation, shall have a lien upon the assets thereof for the amount of the wages due to them, not exceeding two months' wages respectively, which shall be paid prior to any other debt or debts of said corporation; but the word employee' shall not be construed to include any of the officers of such corporation."
This section prior to its amendment in 1929 (the amendment is of no significance in the instant case) appears in the Revised Code of 1915 as Section 1971. In its unamended form it was known as Section 52 of the General Corporation Law in the year 1900 when the case arose of Lupton v. Hughes, 18 Del. 515, 2 Penne. 515, 47 A. 624.
I refer to Lupton v. Hughes, supra, because in Clough v Superior Equipment Co., supra, I stated that Lupton v. Hughes had decided that Section 4332 of the code, under which the present...
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