Merseread v. Mersereau Co.

• Decision Date: 16 May 1893
• Citation: 51 N.J.E. 382,26 A. 682
• Parties: MERSEREAD et al. v. MERSEREAU CO.
• Court: New Jersey Court of Chancery

26 A. 682

51 N.J.E. 382

MERSEREAD et al.

v. MERSEREAU CO.

Court of Chancery of New Jersey.

May 16, 1893.

(Syllabus by the Court.)

Bill by William T. Mersereau and others against the Mersereau Company to have defendant corporation declared an insolvent and for other relief. From a decision of the receiver appointed therein on a claim, Horace E. Cobb, a creditor, appeals. Affirmed.

Frank C. Wilcox, for appellant.

John A. Miller, for receiver.

VAN FLEET, V. C. This is an appeal from the decision of the receiver of the Mersereau Company, disallowing, as a preferred debt, that part of the appellant's claim which accrued more than two months prior to the date when the proceeding was instituted to have the corporation declared insolvent. The bill under which the receiver was appointed was filed October 31, 1892. At that time the appellant's wages were in arrear for a little over three months,—from about July 20, 1892. The receiver decided that the appellant was entitled to two months' wages as a preferred debt, under the statute giving workmen who have been in the employ of on insolvent corporation a lien for their wages; but that as to the residue of his claim he had no lien or right of preference, but stood in the same position that other unsecured creditors occupied. The question presented for decision is whether the lien given by statute to workmen who have been in the employ of a corporation that has become insolvent for wages embraces all the wages that may have been earned, and which shall remain unpaid, or is limited to such wages as shall have been earned within two months next preceding the date when the proceeding is instituted to have the corporation declared insolvent. The lien which the sixty-third section of the corporation act (Revision, p. 188) gave was unlimited both as to time and amount. Any amount due as wages to a workman, no matter how long a period they covered, nor how great the amount, became a lien on the assets of the corporation on its insolvency. This was so held in Delaware, L.& W. R. Co. v. Oxford Iron Co., 33 N. J. Eq. 192, 200, and in Wright v. Iron Co., 48 N. J. Eq. 29, 31, 21 Atl. Rep. 862. As this section originally stood, all that was required to entitle a workman to the lien given by it was that he should have been in the employ of the corporation when it became insolvent, and have wages due to him. But as the two cases just cited held, it was only workmen in the employ of the corporation at the time of its insolvency that were entitled to the lien. This section was changed, in this, respect, by a supplement passed in 1887, amending it so that the lien given by it should embrace not only wages due to workmen in the employ of a corporation at the time of its insolvency, but also wages due to workmen who had theretofore been in its employ, but were not at the time of its insolvency. P. L. 1887, p. 99. The lien created by these statutes was subordinate to liens created by the corporation and existing upon its property at the time of its insolvency. In the language of Chancellor McGill in Wright v. Iron Co., supra: "The priority secured to laborers is priority over the debts which are payable out of the corporation's property after the liens existing upon it at the adjudication of insolvency shall have been discharged. It was not intended that a lien fairly and in good faith obtained by a vigilant and active creditor, before the adjudication of insolvency, should thereafter become second to the claims of laborers." Vice Chancellor Pitney had previously given expression to substantially the same view in Hinkle v. Trust Co., and the decree advised by him in that case was affirmed by the court of errors and appeals. 47 N. J. Eq. 333, 21 Atl. Rep. 861. In 1892, while the law stood in the condition above described, a new and independent statute was enacted under the title of "An act to secure to laborers and workmen in the employ of corporations a prior lion for wages in cases of insolvency." P. L. 1892, p. 426...