Long v. Republic Varnish Enamel & Lacquer Co.

• Decision Date: 05 January 1934
• Docket Number: No. 11.,11.
• Citation: 169 A. 860
• Parties: LONG et al. v. REPUBLIC VARNISH ENAMEL & LACQUER CO.
• Court: New Jersey Supreme Court

169 A. 860

LONG et al.

v. REPUBLIC VARNISH ENAMEL & LACQUER CO.

No. 11.

Court of Errors and Appeals of New Jersey.

Jan. 5, 1934.

Appeal from Court of Chancery.

Suit by Samuel S. Long and others against the Republic Varnish Enamel & Lacquer Company, wherein Joseph Steiner was appointed receiver for defendant corporation. The receiver disallowed the claims of Carl Fichandler and others as prior claims for the full amount, the determination of the receiver was sustained by the Court of Chancery (112 N. J. Eq. 321, 164 A. 8), and the claimants appeal.

Reversed.

Aaron A. Melniker, of Jersey City, for appellants.

Joseph Steiner, and Receiver Herbert M. Ellend, both of Newark, for respondent.

HEHER, Justice.

The first question presented for consideration is whether payments on account of wages due to employees, made by an insolvent corporation during the statutory preference period of two months next preceding the institution of insolvency proceedings, must be credited on the wages earned during that period, even though there are wages due for an antecedent period. In the instant case, the payments were made and accepted in satisfaction of wages earned prior to the preference period. They were so entered on the books of the corporation. The learned Vice Chancellor directed that the payments be credited on wages earned during the lien period, and the wage claimants appealed.

Section 83 of the General Corporation Act (2 Comp. St 1910, p. 1650) creates the lien. It provides that: "In case of the insolvency of any corporation the laborers and workmen, and all persons doing labor or service of whatever character, in the regular employ of such corporation, shall have a first and prior lien upon the assets thereof for the amount of wages due to them respectively for all labor, work and services done, performed or rendered within two months next preceding the date when proceedings in insolvency shall be actually instituted and begun against such insolvent corporation."

The legislative purpose is evident There was a twofold object: First to prevent those persons whose labor was indispensable to the continuance of the business of the corporation from abandoning it, and thus suspending its operations, whenever they became alarmed by a fear of losing their wages; and, second, to give protection to a class of persons who generally work for small compensation, to whom the product of their daily labor is the sole means of support, and who are unable to protect themselves against the misfortune or fraud of their employers. Lehigh Coal & Navigation Co. v. Central R. R. Co. of N. J., 29 N. J. Eq. 252, 254; Watson v. Watson Manufacturing Co., 30 N. J. Eq. 588; Latta v. Lonsdale (C. C. A.) 107 F. 585, 52 L. R. A. 479; People v. Remington, 45 Hun, 329, 10 N. Y. St. Rep. 310, affirmed 109 N. Y. 631, 16 N. E. 680; James v. Greenville Lumber Co., 122 N. C. 157, 29 S. E. 358. In Delaware, Lackawanna & Western R. Co. v. Oxford Iron Co., 33 N. J. Eq. 192, at page 196, Vice Chancellor Van Fleet said: "The purpose of the statute is obvious. It is sometimes a matter of the utmost importance to the public that the business of an insolvent corporation should be kept in operation, and it is almost always true that the property of such bodies cannot be preserved unless they are kept up as going concerns. The statute was designed to accomplish both of these purposes. And to this end it was clearly necessary that the employees of a corporation in an insolvent condition, whose skill and labor are indispensable to the continuance of its operations, should be made secure for their wages. To enable an insolvent corporation to retain its employees is the primary object of the statute." And in Campbell v. Taylor Manufacturing Co., 64 N. J. Eq. 622, 56 A. 1132, Vice Chancellor Grey observed: "It is a purely statutory right, and it was probably created for the purpose of preventing a general exodus of the workmen employed by corporations, in anticipation of the failure of the company. It is intended to induce employees to remain at their work, even if financial disaster be threatened, by assuring them that they shall not lose their wages. A company which has a large number of employees may be in some financial straits, and may yet, if it can continue its business, regain its prosperity. But if its employees, anticipating that their wages will not be paid, leave its employ in a panic, absolute disorganization and destruction of the business may follow. The statute here intervenes, and assures them that they, at all events, shall be paid."

In the instant case, the Vice Chancellor held that the preference given by the statute is in derogation of the common right of equality among creditors of the same rank, and that the scope of the statute should not be extended by construction. But the inquiry here, as always, is to ascertain and give effect to the legislative intent. The Legislature, by this provision, has declared a beneficent policy, and the act should be liberally construed to effectuate it. Compare Sigley v. Marathon Razor Blade Co., Inc., 111 N. J. Law, 25, 166 A. 518. It has long been regarded as a proper function of the state to foster the welfare and safeguard the interests of wage-earners. Economic and other considerations underlay this long-established state policy. The amelioration of the condition of labor is recognized by enlightened government as a duty of paramount importance. And this solicitude for the wage-earners is not alone for the members of the favored class, but for the common good. It is conducive, if not, indeed, essential, to the well-being of society that the economic security and contentment of the class that contributes so largely to the furnishing of its material needs be effected and sedulously maintained. An enactment such as this should be construed in the light of this sound and firmly established policy. It should be reasonably interpreted to effectuate the plainly expressed legislative purpose to aid and assist, in the public interest, corporations and their employees in times of financial embarrassment and need. Such statutes are liberally construed in our federal...