Merchants & Sav. Bank of Janesville v. Bort (In re Merrick Dairy Co. of Beloit)

• Decision Date: 22 October 1946
• Citation: 24 N.W.2d 679,249 Wis. 295
• Parties: In re MERRICK DAIRY CO. OF BELOIT. MERCHANTS & SAVINGS BANK OF JANESVILLE et al. v. BORT.
• Court: Wisconsin Supreme Court

249 Wis. 295

24 N.W.2d 679

In re MERRICK DAIRY CO. OF BELOIT.MERCHANTS & SAVINGS BANK OF JANESVILLE et al.

v.BORT.

Supreme Court of Wisconsin.

Oct. 22, 1946.

Appeal from an order on claims of the Circuit Court for Rock County; Jesse Earle, Judge. Affirmed in part and reversed in part.

In the matter of an assignment of and by the Merrick Dairy Company of Beloit for the benefit of its creditors. From an order allowing portions of claims presented to Lee D. Bort, receiver of the company, as preferred claims and the balance thereof as general claims, subordinating salary claims of the company's officers to other general claims, and disallowing a labor claim, the Merchants' & Savings Bank of Janesville, as executor of the estate of Roy L. Merrick, deceased, the Pure Milk Association, and others appeal. [By Editorial Staff.]

Affirmed in part, reversed in part, and remanded with directions.These proceedings arise out of an assignment for the benefit of creditors on January 19, 1944, of the Merrick Dairy Company, a Wisconsin Corporation. The assets are insufficient to pay all general claims in full. There are separate appeals.

The order to be reviewed allowed portions of claims for dairy products as preferred and the balance as general claims; subordinated salary claims of officers to other general claims and disallowed a labor claim.

The trial court allowed the Brook Hill Farm as a preferred claim $502.58 for milk delivered within three months of the assignment, and the balance of their claim, $526.52, which was the price of milk delivered more than three months before the assignment, was placed among the general claims.

The court allowed the Pure Milk Association (a cooperative marketing association organized under the laws of Illinois and authorized to transact business in Wisconsin) acting as the agent and guarantor of its members, $600 as preferred and the balance, amounting to $8,394.17 as a general claim.

Appellants Roy L., Fay L. and Earl Merrick, each of whom made claim for salary, were favored to the extent of allowing their claims as general claims but subordinating them to the claims of other creditors.

The claim of Louella Parrish for wages was disallowed.

Dougherty, Grubb & Ryan, of Janesville, for Fay Merrick et al., appellants.

Martin Burns, of Chicago, Ill., and McGowan & Geffs, of Janesville, for Brook Hill Farm et al., appellants.

Jeffris, Mouat, Oestreich, Wood & Cunningham, of Janesville, for respondent.

Ela, Christianshon & Ela, of Madison, and George M. St. Peter, of Fond du Lac, amici curiae.

FAIRCHILD, Justice.

The appellants Brook Hill Farm and the Pure Milk Association join in the contention that inasmuch as they are producers of dairy products delivered to the Merrick Dairy Company, each is entitled to a preference as to its whole claim along with limited labor claims allowed by statute (sec. 128.17) out of the estate after payment of necessary costs of preservation and administration.

The favorable position claimed for the producers of dairy products in the distribution of assets, to whatever extent it exists, results from an act of the legislature which provides for a preference in the following words:

‘The whole claim of any person against the owner or operator of any dairy plant * * * on account of milk, cream or any other dairy product, * * * sold or delivered to such owner, operator * * * shall be entitled to the same preference in bankruptcy or insolvency proceedings as is given by any law of this state * * * to claims for labor, * * *’ Sec. 100.06(8), Stats.1945.

Distribution out of the debtor's estate goes first for preserving the estate, subsequent to the commencement of the proceedings, then for costs of administration and then to labor for wages, not exceeding $600 for each labor claim and earned within three months before the commencement of the proceedings, together with the amount due producers of dairy products. The trial court was of the opinion that the words, ‘whole claim,’ as used in the statute were modified into a limitation by the words, ‘entitled to the same preference in insolvency proceedings as is given by any law of this state * * * to claims for labor.’ In his decision he limited amounts of preference to $600 and deliveries made within three months.

Before considering the meaning and purpose of sec. 100.06(8) as it may affect claims for dairy products, and because the deliveries were made within three months and each claim is for less than $600, it should be noted that by virtue of the merits of the claims presented by the Pure Milk Association the limitation phase of the question does not necessarily arise. This is because its agreement with its members was in the nature of a contract of agency. Although respondent recognizes this and the fact that preference goes with the assignment of a preferred claim, the contention is made that the Pure Milk Association did not enter its claim as the assignee of the claims of the forty-one individual milk producers involved, but that instead the association filed its claim for a single aggregate sum and in so doing placed the basis for the determination of preference in its own...