Szturm v. HUNTINGTON BLIZZARD HOCKEY, 25196.

• Citation: 205 W.Va. 56,516 S.E.2d 267
• Decision Date: 17 May 1999
• Docket Number: No. 25196.,25196.
• Court: Supreme Court of West Virginia
• Parties: Richard SZTURM, Individually, on Behalf of Huntington Blizzard Hockey, Plaintiff Below, v. HUNTINGTON BLIZZARD HOCKEY ASSOCIATES LIMITED PARTNERSHIP, et al., Defendant Below, Appellee. Robert D. Henry, Defendant Below, Appellant.

516 S.E.2d 267

205 W.Va. 56

Richard SZTURM, Individually, on Behalf of Huntington Blizzard Hockey, Plaintiff Below, v. HUNTINGTON BLIZZARD HOCKEY ASSOCIATES LIMITED PARTNERSHIP, et al., Defendant Below, Appellee.

Robert D. Henry, Defendant Below, Appellant.

No. 25196.

Supreme Court of Appeals of West Virginia.

Submitted February 16, 1999.

Decided May 17, 1999.

F.T. Graff, Jr., Esq., Elizabeth D. Harter, Esq., Bowles Rice McDavid Graff and Love, PLLC, Charleston, West Virginia, Attorneys for Appellant.

James A. Dodrill, Esq., Huntington, West Virginia, Attorney for Appellee Special Receiver.

McGRAW, Justice:

This case concerns whether an individual who is both a limited partner and management employee of a limited partnership is, by virtue of such status, presumptively prohibited from asserting a priority claim for wages upon dissolution of the partnership. Because the Revised Uniform Limited Partnership Act ("RULPA"), W. Va.Code §§ 47-9-1 to -63, expressly permits a partner of a limited partnership to transact business with the partnership and enjoy the same rights as a person who is not a partner, W. Va.Code § 47-9-7 (1981), we conclude that, as a general rule, a limited partner is not per se prohibited from obtaining a lien superior to the claims of the partnership's general creditors.

I.

Huntington Blizzard Hockey Associates Limited Partnership ("Huntington Blizzard"), a West Virginia limited partnership governed by the provisions of the RULPA, was engaged in the business of owning and operating a professional hockey team. The partnership was dissolved in September 1995 by the Circuit Court of Cabell County pursuant to W. Va.Code § 47-9-45 (1981). The circuit court simultaneously appointed a special receiver under W. Va.Code § 53-6-1 (1923), for the purpose of winding up the affairs of the partnership. An accounting report subsequently tendered by the special receiver to the circuit court indicated that, after the sale of the partnership's assets, Huntington Blizzard had approximately $291,893 to satisfy creditor and partner-contribution claims totaling $1,912,780.

Appellant Robert D. Henry was a limited partner and employee of Huntington Blizzard, as well as a shareholder in the limited partnership's general partner, Huntington Hockey, Inc. The sparse record in this case does not shed light on Henry's specific function within the partnership, although Henry himself concedes in his brief that he was "a management employee." Following dissolution, Henry submitted a wage claim of $44,426, which included a demand for liquidated damages in the amount of $4,153. Henry's salary went unpaid between some unspecified point-in-time in 1994, and the dissolution of the limited partnership in September 1995.

The special receiver, in its report to the circuit court submitted on May 1, 1996, recommended that Henry's wage claim (together with similar claims submitted by two other former employees) be relegated to the status of an unsecured obligation, with the exception of $250 that was given priority status under the purported authority of W. Va.Code § 21A-5-18(1) (1945).¹ (Unsecured creditors were paid on a pro rata basis from the assets of the limited partnership remaining after the payment of secured and judgment creditors, which amounted to approximately 21% of their claims).

Henry filed timely objections to the special receiver's recommendation on May 28, 1996. Following a June 13, 1996 hearing on the matter, the circuit court denied these objections and adopted the special receiver's recommendation pertaining to Henry's claim by an order entered December 18, 1997.² It is from this order that Henry now appeals.

II.

Henry challenges the circuit court's denial of his priority wage claim, asserting that the various conclusions of law set forth in the report of the special receiver (which were adopted by the lower court) are erroneous. Appellee, the substitute special receiver³ of the partnership, acknowledges error with respect to the circuit court's ruling, although he limits the concession to perceived defects in the order entered by the lower court. We reverse, concluding that there was no valid legal basis upon which to differentiate Henry from other employees based simply upon his status as a limited partner and management employee of the partnership.⁴

We note at the outset that the parties to this litigation have proceeded upon the unchallenged assumption that an employee has a priority lien for the payment of wages upon the dissolution of a partnership. The Court assumes, without necessarily deciding, that this premise is correct. Consequently, after initially discussing and rejecting certain legal conclusions reached by the circuit court relative to Henry's underlying right to collect wages and liquidated damages, we focus on the more central question of whether his status as a limited partner and manager of the Huntington Blizzard necessarily bars him from asserting a lien superior to the claims of other general creditors.

The following is a summary of the legal justifications advanced by the special receiver (and embraced by the circuit court) for subordinating Henry's wage claim: (1) the rights normally afforded employees under W. Va.Code § 21-5-4 (1975)⁵ do not extend to Henry's claim because he was a management employee; (2) given Henry's management position, and the fact that he was not paid for over a year prior to the partnership's dissolution in 1995, it must be presumed that he agreed not to be paid; (3) W. Va.Code § 21A-5-18 limits all priority wage claims to $250; and (4) Lowther v. Riggleman, 189 W.Va. 68, 428 S.E.2d 49 (1993), precludes Henry from obtaining a lien superior to unsecured creditors because he was a limited partner of the partnership.⁶ The first three of these four conclusions of law are clearly without merit, while the fourth requires a slightly more detailed analysis involving a comparison of this Court's rationale for its holding in Lowther with the relevant statutory language of the RULPA.

"This Court reviews the circuit court's final order and ultimate disposition under an abuse of discretion standard. We review challenges to findings of fact under a clearly erroneous standard; conclusions of law are reviewed de novo." Syl. pt. 4, Burgess v. Porterfield, 196 W.Va. 178, 469 S.E.2d 114 (1996).

The special receiver's initial conclusion that W. Va.Code § 21-5-4,⁷ which delineates an employee's right to payment of wages following separation from employment, does not apply to management employees finds absolutely no support in the Wage Payment and Collection Act (the "Act"), W. Va.Code §§ 21-5-1 to -18. The Act defines "employee" to "include[] any person suffered or permitted to work by a person, firm or corporation." W. Va.Code § 21-5-1(b) (1987). The statute's broad definition of employee thus defeats any contention that the protections afforded by § 21-5-4 do not extend to management employees. Therefore, whatever its relevance to the special receiver's ultimate recommendation regarding Henry's claim, we find that this interpretation of § 21-5-4 was erroneous.⁸

The second legal conclusion, that Henry's position within the limited partnership and the fact that he had not been paid his wages for a long period of time mandates a presumption that he assented not to be paid, likewise finds no basis in law. We have not been directed to any authority that would presumptively bar a limited partner or management employee of a limited partnership from receiving wages. While the Revised Uniform Partnership Act provides that "[a] partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership," W. Va.Code § 47B-4-1(h) (1996),⁹ this default rule, although it applies to a general partner of a limited partnership, see W. Va.Code § 47-9-24(a) (1984), does not extend to limited partners or management employees. There is thus no legal presumption that a limited partner who provides services to a partnership does so without expectation of remuneration.

Nor is there any basis for the special receiver's oblique suggestion that Henry waived his right to the payment of wages by continuing to work notwithstanding the non-payment of wages, and the partnership's violation of W. Va.Code § 21-5-3 (1979), which, in relevant part, requires that an employer "shall settle with its employees at least once every two weeks, unless otherwise provided by special agreement." This Court has previously rejected such an argument. In Britner v. Medical Sec. Card, Inc., 200 W.Va. 352, 354-55, 489 S.E.2d 734, 736-37 (1997) (per curiam), three employees brought suit alleging that their employer had failed, over a four-year period, to pay them wages due under a provision in their written employment contracts requiring 15% annual pay increases. The employer argued that the employees were estopped from bringing such a claim based upon their acquiescence in the non-payment of the annual raises. We rejected this argument, citing W. Va.Code § 21-5-10 (1975)¹⁰ and stating that [t]he legislature has attempted to prevent employers from abusing their positions by compromising the wages of employees. The language of W. Va.Code § 21-5-10 is mandatory. An employer must pay earned wages to its employees. Any other reading would seriously compromise and undermine the legislative intent of W. Va. Code § 21-5-10.

200 W.Va. at 355, 489 S.E.2d at 737.

The recognition of a waiver in such situations would, moreover, effectively require an employee to immediately seek relief under W. Va.Code § 21-5-12 (1975), or else risk losing the right to payment of wages as afforded by the Act. The effect of such an implicit requirement could obviously have a serious disruptive impact on employee-employer relations. Thus, the mere fact that Henry worked without pay for a lengthy period of time prior to the...