Mullins v. Venable

• Decision Date: 18 November 1982
• Docket Number: No. 15557-A,15557-A
• Citation: 297 S.E.2d 866,171 W.Va. 92
• Parties: , 98 Lab.Cas. P 55,396 Cecil MULLINS, et al. v. James T. VENABLE.
• Court: West Virginia Supreme Court

Page 866

297 S.E.2d 866

171 W.Va. 92, 98 Lab.Cas. P 55,396

Cecil MULLINS, et al. v. James T. VENABLE.

No. 15557-A.

Supreme Court of Appeals of West Virginia.

Nov. 18, 1982.

Syllabus by the Court

1. An officer in the management of a corporation who knowingly permits the corporation to violate the provisions of the Wage Payment and Collection Act, W.Va.Code §§ 21-5-1 through 21-5-16 (1981 Replacement Vol.), may be held personally liable for unpaid wages, fringe benefits, and liquidated damages under W.Va.Code § 21-5-4.

2. As a general rule, where the liability of corporate officers is direct and absolute, it is not necessary that a judgment be recovered against the corporation before maintenance of an action seeking to hold the officer liable.

3. Corporate officers have a duty to see that their corporation obeys the law.

Bradley J. Pyles, Crandall, Pyles & Crandall, Logan, for appellants.

William W. Pepper, Charleston, for appellee.

McGRAW, Justice:

This is an appeal from an order of the Circuit Court of Boone County granting the appellee's motion to dismiss the appellants' complaint for failure to state a cause of action. The complaint was filed by thirteen former employees of Venable and Billups Corporation seeking to recover wages, fringe benefits, and liquidated damages from the appellee, James T. Venable, individually, as an officer of the corporation. The sole question raised by this appeal is whether the West Virginia Wage Payment and Collection Act, W.Va.Code §§ 21-5-1 through 21-5-16 (1981 Replacement Vol.), authorizes employees of a corporation to bring suit against an officer of the corporation, individually, to recover wages, fringe benefits, and liquidated damages, where the officer knowingly permits the corporation to violate the provisions of the Act. We find that the Act does authorize such a cause of action, and reverse the order of the lower court.

The facts alleged in the appellants' complaint indicate that Venable and Billups Corporation operated an underground coal mine at Perry Branch near Chapmanville in Logan County. The corporation ceased operations on or about January 26, 1979. At that time the appellants were owed approximately two weeks of actual wages plus various fringe benefits. The appellants were not paid on the next regular payday after Venable and Billups Corporation ceased operations, as required by W.Va.Code § 21-5-4. The complaint further alleged that the appellee was at all times pertinent to the cause of action an officer, stockholder, agent, or management personnel of Venable and Billups Corporation, who knowingly permitted the corporation to violate the provisions of the Wage Payment and Collection Act.

In response to the appellants' complaint, the appellee filed a motion to dismiss pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil Procedure, on the grounds that the facts alleged failed to state a claim upon which relief could be granted. The lower court granted the appellee's motion, ruling that the Wage Payment and Collection Act does not authorize an action against an individual officer of a corporation seeking to hold the officer personally liable for the failure of the corporation to pay its employees wages as required by the Act.

The West Virginia Wage Payment and Collection Act is remedial legislation designed to protect working people and assist them in the collection of compensation wrongly withheld. Farley v. Zapta Coal Corp., 167 W.Va. 630, 281 S.E.2d 238 (1981). The Act requires every "person, firm or corporation" doing business in West Virginia to pay their employees wages for work or services at least once every two weeks, unless otherwise provided by special agreement. W.Va.Code § 21-5-3. Whenever an employee quits or resigns the "person, firm or corporation" must pay the employee's wages and accrued fringe benefits no later than the next regular payday. W.Va. Code § 21-5-4(c); Farley v. Zapata Coal Corp., supra. If the employer fails in this duty, the "person, firm or corporation" is liable, in addition to wages and benefits, for liquidated damages. W.Va.Code § 21-5-4(e).

The phrase "person, firm or corporation" is used throughout the Wage Payment and Collection Act to designate those responsible for the payment of employee wages. The terms "person" and "corporation" are left by the Act to commonly understood definitions. See Webster's Third New International Dictionary (1970). The broader and more ambiguous term "firm" is defined as including "any partnership, association, joint-stock company, trust, division of a corporation, the administrator or executor of the estate of a deceased individual, or the receiver, trustee, or successor of any of the same, or officer thereof, employing any person." W.Va.Code § 21-5-1(a). The term "officer" is defined as including "officers or agents in the management of a corporation or firm, who knowingly permits [sic ] the corporation or firm to violate the provisions of this article." W.Va.Code § 21-5-1(h). That an officer of a corporation is a person is beyond controversy.

The appellee contends that these statutory provisions do not subject an officer of a corporation to liability for the unpaid wages of corporate employees. We disagree. Although the Wage Payment and Collection Act does not explicitly impose liability on corporate officers, it is clear from a reading of W.Va.Code § 21-5-1(h) that the Legislature intended to impose liability on officers in the management of a corporation who knowingly permit their corporation to act in violation of the provisions of the Act. The Act is comprehensive in its requirement that all employers, be they natural persons, associations of persons (firms), or juristic persons (corporations), must comply with its provisions. W.Va.Code § 21-5-1(h) further indicates the Legislature's recognition that corporations act through persons, and that persons must ultimately be responsible for corporate actions. Cf. James Talcott, Inc. v. Crown Industries, Inc., 323 So.2d 311, 315 (Fla.App.1975) ("Corporate officers must be held for the consequence of their acts.").

This Court stated in State ex rel. Haden v. Calco Awning and Window Corp., 153 W.Va. 524, 526-527, 170 S.E.2d 362 (1969):

The position of an officer of a corporation, relative to his individual liability for the debts of the corporation, is not sacrosanct. While officers ordinarily are not held responsible for corporate debts, it is well established that where a statute so provides directors or officers may be required to account personally for certain obligations of the corporation ... and so long as the statute is afforded a fair and reasonable interpretation so as to give effect to the legislative intent as indicated by the language used, it is valid.

The language of the Wage Payment and Collection Act indicates that the Legislature intended to impose personal liability on corporate officers who knowingly permit violations of the Act. Any other interpretation of the language used by the Legislature would render W.Va.Code § 21-5-1(h) meaningless.

The Legislature's intent to subject corporate officers to personal liability under the Wage Payment and Collection Act is also evident from the provisions of W.Va.Code § 21-5-15, which imposes criminal penalties, including imprisonment, upon any "person, firm or corporation" who willfully violates the bonding provisions of the Act. This section of the Act clearly envisions personal liability on the part of corporate officers since imprisonment of the corporation, it having no body, is impossible. ¹ Thus, through the Wage Payment and Collection Act it is contemplated that corporate officers may not hide behind the corporate skirt to escape liability for their unlawful mischief. We therefore hold that an officer in the management of a corporation who knowingly permits the corporation to violate the provisions of the Wage Payment and Collection Act may be held personally liable for unpaid wages, fringe benefits, and liquidated damages under W.Va.Code § 21-5-4. ² Cf. State ex rel. McCain v. Erdman, 4 Kan.App.2d 375, 607 P.2d 78 (1980) (unpaid wages and additional damages may be collected from corporate officer who knowingly permits the corporation to violate the Kansas wage payment act); Courtney v. Brooklyn & Queens Allied Oil Burner Corp., 112 Misc.2d 89, 446 N.Y.S.2d 157 (N.Y.City Civ.Ct.1981) (under New York Law, corporate officer is personally liable for corporation's obligations to its employees).

The appellee further argues that before the appellants can maintain an action seeking to hold him personally liable for unpaid wages, fringe benefits and liquidated damages, they must first obtain a judgment against the corporate entity and show that the execution thereon has been returned unsatisfied. We find no merit in this argument. As a general rule, where the liability of corporate officers is direct and absolute, it is not necessary that a judgment be recovered against the corporation before maintenance of an action seeking to hold the officer liable. See generally Henry F. Michell Co. v. Fitzgerald, 353 Mass. 318, 231 N.E.2d 373 (1967); Snyder Elec. Co. v. Fleming, 305 N.W.2d 863 (Minn.1981); Patterson v. Minnesota Manufacturing Co., 41 Minn. 84, 42 N.W. 926 (1889). Only where the liability of the officer is in the nature of a suretyship which does not attach unless payment cannot be recovered from the corporation will judgment against the corporation and the exhaustion of other remedies constitute a condition precedent to proceeding against corporate officers. See 19 Am.Jur.2d, Corporations § 1373 (1965).

The Wage Payment and Collection Act, however, does not create a suretyship relationship between the corporation and its officers with respect to unsatisfied wage claims. Rather, the Act places liability directly upon a corporate officer who knowingly permits the corporation to violate the Act. The Act, in effect, creates in corporate...