In re Elliott Wholesale Grocery Co.
| Decision Date | 18 July 1951 |
| Docket Number | No. 50151.,50151. |
| Citation | 98 F. Supp. 1017 |
| Court | U.S. District Court — Southern District of California |
| Parties | In re ELLIOTT WHOLESALE GROCERY CO. |
Pauline Nightingale, Edward M. Belasco, Leon H. Berger, Los Angeles, Cal., for the petitioner.
Craig, Weller & Laugharn, C. E. H. McDonnell, Los Angeles, Cal., for the trustee.
The petition to review the Order of the Referee, dated May 17, 1951, denying priority for severance pay due to certain employees of the bankrupt, heretofore heard, argued and submitted, is now decided as follows:
The Order of the Referee dated May 17, 1951, is hereby reversed and the Referee is directed to allow the rejected claims as a preferred claim for wages, as follows:
Alec W. Robinson $74.50
Leo P. Jensen 74.50
Ronald A. Grell 84.15
Elbert W. Whitney 70.50
James F. Bond 74.50
Mario Pezzati 68.50
Comment
An involuntary petition was filed against Elliott Wholesale Grocery Company of Santa Barbara, California on July 21, 1950. An adjudication was made on September 8, 1950. Prior to that time, however, on June 2, 1950, the bankrupt made a general assignment for the benefit of creditors. In the bankruptcy proceedings, six employees, represented by the Division of Law Enforcement, Department of Industrial Relations of the State of California, claimed severance pay. The discharge dates were within the ninety-day period from the date of the general assignment, the earliest date being May 19, 1950. The discharge resulted from the assignment, and not by reason of any misconduct of any of the employees.
In the contract between the bankrupt and the union to which the employees belonged, it was provided: No such notice was given to any of the employees.
A preferred claim status was claimed under the Bankruptcy Act, 11 U.S.C.A. §§ 104, sub. a(2), and 107, sub. b, which recognize all valid state liens and give priority to wages earned within a certain period, and Section 1204 of the Code of Civil Procedure of California, which gives a preferred status to wages earned within ninety days prior to assignment of creditors. The Referee disallowed the claim. He took the view, expressed in his certificate, that the contract provisions for severance pay did not come within the purview of Section 1204 of the California Code of Civil Procedure, which granted priority to "wages and salaries * * * for personal services rendered" within the ninety-day period, because they were "actually provisions for liquidated damages."
The Referee erred in this interpretation. The provision in the contract clearly indicates that the severance pay is in lieu of wages. In effect, it says that the employee shall be entitled to a week's notice of discharge. When such notice is not given, or cannot be given because, as happened here, the employer ceased business when it made the assignment for the benefit of its creditors, the employee is entitled to the week's wages corresponding to the week's notice. See, Gaspar v. United Milk Products of California, 1944, 62 Cal.App.2d 546, 144 P.2d 867. This provision is in line with the policy of the law of California, which assures to the employee immediate payment of wages upon discharge. California Labor Code, Section 201. Even an employee who quits must receive his wages not later than 72 hours after quitting. If he gives the 72 hours notice, then he is entitled to his wages at the time of the quitting. California Labor Code, Sec. 202.
Provisions of this character, whether they call for wages on discharge without notice, or for payment for earned vacation periods, are generally considered wages, — that is, compensation for services rendered, which, through no fault of the employee, he was not permitted to render. See, In re Dexter, 1 Cir., 1907, 158 F. 788; In re Collin, D.C.N.Y. 1937, 18 F.Supp. 848; In re Herbert Candy Company, D.C.Pa. 1942, 43 F.Supp. 588, which treat the commissions paid to traveling salesmen as wages entitled to priority under the Bankruptcy Act.
The vacation pay cases are very helpful. As Judge August N. Hand said: ...
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In re Capital Service
...the bankruptcy proceedings, McCloskey v. Division of Labor Law, etc., 9 Cir., 1952, 200 F.2d 402, affirming In re Elliott Wholesale Grocery Co., D.C. S.D.Cal.1951, 98 F.Supp. 1017. Proof of unsecured debt claiming priority as administrative costs was filed June 5, 1954, in behalf of the 46 ......
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...upon termination. In re Guardianship Trust and Home Program, Inc., 80 B.R. 268, 269-70 (Bankr.D.N.H.1987), In re Elliott Wholesale Grocery Co., 98 F.Supp. 1017, 1019 (S.D.Cal.1951). I do not find persuasive the trustee's argument that those employees employed continuously by Cargo after May......
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Hire v. EI DuPont De Nemours & Company, 15277.
...pay was wages for services rendered and entitled to priority under the bankruptcy act. In the case of In re Elliott Wholesale Grocery Co. (D.C.S.D.Cal., 1951), 98 F. Supp. 1017, affirmed under the style of McCloskey v. Division of Labor Law Enforcement (C.A. 9), 200 F.2d 402, it was held th......
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