IN RE NORTH ATLANTIC AND GULF STEAMSHIP COMPANY

• Decision Date: 27 February 1961
• Citation: 192 F. Supp. 107
• Parties: In the Matter of NORTH ATLANTIC AND GULF STEAMSHIP COMPANY, Incorporated, Nortropic Shipping Company, Incorporated, Debtors.
• Court: U.S. District Court — Southern District of New York

192 F. Supp. 107

In the Matter of NORTH ATLANTIC AND GULF STEAMSHIP COMPANY, Incorporated, Nortropic Shipping Company, Incorporated, Debtors.

United States District Court S. D. New York.

February 27, 1961.

Bergerman & Hourwich, New York City, for Trustee. Milton M. Bergerman, New York City, William Baranoff, Edward Schilling, New York City, of counsel.

John K. Keegan, New York City, for Consolidated Edison Co., of New York, Inc. Samuel Levine, New York City, of counsel.

Barr, Robbins & Palmer, New York City, for New York Sandy Hook Pilots Assn. and New Jersey Sandy Hook Pilots Assn. Francis P. Waters, New York City, of counsel.

Sidney Gottlieb, New York City, for George B. Mason.

E. Newton Wilmington, New York City, for New York Telephone Co.

Abberley, Kooiman & Amon, New York City, for McRoberts Protective Agency, Inc. D. C. Johnson, New York City, of counsel.

FREDERICK van PELT BRYAN, District Judge.

The trustee has moved to classify a number of alleged priority claims as general unsecured claims against the estate. Most of these claims were disposed of upon the argument of the trustee's motion. Several, however, remain for disposition.

1. Claims of Sandy Hook Pilots.

Priority claims have been filed on behalf of a number of Sandy Hook pilots as follows:

Ralph Ferd, as agent of 21 pilots, for a total of $2,112.58,—now reduced to $1,412.53; T. A. McGoldrick, as agent of 9 pilots, for a total of $825.01, now reduced to $578.13; George B. Mason, pilot, on his own behalf in the sum of $702, now reduced to $620.

Ferd and McGoldrick, as agents, have cross-moved to classify these claims as entitled to priority of payment as wages earned within the three months of the filing of the petition not exceeding $600 as to each claimant, under Section 64, sub. a(2) of the Bankruptcy Act, 11 U.S. C.A. § 104, sub. a(2). Claimant Mason takes the same position. All of the claims are for services rendered in piloting vessels operated by the debtor in or out of New York Harbor.

The trustee asserts that these claimants are not "workmen, servants, clerks, or traveling or city salesmen on salary or commission basis" but are independent contractors and hence are not covered by the priority granted by Section 64, sub. a(2).

The pilots represented by Ferd and McGoldrick as agents are respectively members of the New York Pilots Benevolent Association and the New Jersey Pilots Benevolent Association. Mason is also a member of the New York Association. The situation of the New York pilots may be taken as typical. Under Article VI of the New York Navigation Law, McKinney's Consol. Laws, c. 37, all vessels entering or departing from the Port of New York by way of Sandy Hook are required to take a Sandy Hook pilot licensed either by New York or New Jersey. New York Navigation Law, § 88. The pilot is entitled to fees fixed by law for such services at the rate of $7 per foot for each foot of water the vessel is drawing at the time of her entrance or departure. New York Navigation Law, § 96. The pilotage fees are payable to and may be sued for and recovered by the first Sandy Hook pilot who tenders his services whether such services are accepted or refused. New York Navigation Law, § 89-a.

Pilots are licensed by the Board of Commissioners of Pilots. They must first serve at least four years apprenticeship under instruction by the Sandy Hook Pilots Benevolent Association. They then are examined and licensed by the Board if qualified. The Commissioners are entitled to license as many pilots as they deem necessary to pilot ships to and from the Port of New York by way of Sandy Hook. New York Navigation Law, § 90.

Practically speaking, when a ship approaches Sandy Hook it engages a pilot by calling one of the Pilot Associations which then sends a licensed pilot to the ship. The fees of each pilot are paid separately by the shipowner at the rates prescribed by law. The Pilots Association is not the employer of the pilots but merely performs administrative functions for them by way of bookkeeping and billing, and also, as previously noted, controls and instructs apprentices in their duties. Rarely, if ever, does the vessel specify any particular pilot and pilots are used on a rotation basis set up by the Association.

Statutes granting priorities are strictly construed and the burden of establishing a right to statutory priority rests upon the claimant. In re American Anthracite & Bituminous Coal Corp., D.C.S.D.N.Y., 171 F.Supp. 377; In re Paradise Catering Corp., D.C.S.D.N.Y., 36 F.Supp. 974.

There is no rule of thumb by which persons may be classified as wage earners for purposes of Section 64, sub. a(2). "The classification of any particular employment in a given case as within, or without, the scope of Section 64a(2) must rest however upon a careful calculation of the circumstances as a whole". 3 Collier, Bankruptcy, 2095 (14th ed.).

The circumstances here make it plain that these claimants are not "workmen, servants, clerks, or traveling or city salesmen on salary or commission basis" within the meaning of Section 64, sub. a(2).

The pilots are persons with special skill and competence who are performing professional services for the incoming vessels on a fee basis. They are specially licensed by the state to perform such services and the compensation which is required to be paid them therefor is specifically denominated as a fee by the statute. The fee is predicated on the draft of a vessel. For example, on a vessel drawing 10 feet the fee at the rate of $7 per foot would be $70; on a vessel drawing 25 feet the fee at the same rate would be $175.

The pilot does not work regularly for any one shipowner or any one vessel. He is engaged by one vessel after another as she enters or leaves the port and it is only by the accident of rotation that the pilot works for the same vessel or shipowner again.

The claimants here rendered pilotage services on specific dates to various incoming and outgoing vessels operated by the debtor, each one apparently having piloted one vessel either entering or departing from the port. They were not treated as employees by the debtor or other shipowners or operators. Income taxes are not withheld from their fees. The vessels do not engage specific pilots but simply take them as they come. The pilots exercise their independent judgment and neither the master nor the owner exercises any appreciable supervision or control over them.

These facts make it plain that the ordinary relationship of employer-employee which is contemplated by Section 64, sub. a(2) does not exist here. 3 Collier, Bankruptcy, 2090 (14th ed.) and cases there cited. The pilots are in the nature of independent contractors for professional services on a fee basis.

The priority established by Section 64, sub. a(2) was designed for persons likely to be solely dependent for their livelihood on the wages received from their employer and who will therefore suffer serious hardship because of their employer's bankruptcy if their wage claims are not given priority. Blessing v. Blanchard, 9 Cir., 223 F. 35. The livelihood of these claimants is not dependent upon the solvency of the debtor here,...