169 A. 860 | N.J. | 1934
The first question presented for consideration is whether payments on account of wages due to employes, made by an *214 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. Stat. 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 two-fold 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 and Navigation Co. v.Central Railroad Company of New Jersey,
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 RazorBlade Co., Inc.,
The wages earned by the claimants during the preference period were unpaid when insolvency intervened, and the statutory lien became fastened upon the assets of the corporation. The payments made during the lien period were, by agreement of the parties, applied to the satisfaction of unpaid wages earned prior to that period. And the parties, in this application of the wage payments, were clearly within their rights. Where there is a running account, payments may be applied to extinguish debts according to priority of time, so that the credits become payments pro tanto of the debts antecedently due. Jones v.United States,
The statute does not reveal a legislative purpose to abrogate, in such cases, this firmly established rule respecting the application of payments where there is a running account, or where two or more debts exist. And it therefore follows that it does not require the application of payments made during the lien period to wages earned during that period. Such a construction would thwart and defeat the obvious policy of the statute.
The federal courts have so construed a similar statute. Manly v. Hood, supra; In re Reliable Furniture Manufacturing Co.,32 Fed. Rep. 2d 805; In re Van Wert Mach. Co., supra.
But respondent insists that the payments made in the instant case, if applied to the wages earned prior to the lien period, constitute an unlawful preference, and as such are void as to creditors of the corporation by virtue of the provisions of section 64 of the General Corporation act (2 Comp. Stat. p.1638), and were, therefore, properly deducted from the wages earned during the preference period. This contention is without merit.
There is no proof that, at the time the payments were made, the corporation was insolvent in the legal sense, or had suspended its ordinary business for want of funds to carry on the same. Insolvency, under our law, denotes a general inability to meet pecuniary liabilities as they mature, by means of either available assets or honest use of credit. Tachna v. PressedSteel Car Co.,
But respondent insists that the failure of the corporation to pay the claimants' wages at the stipulated times constituted notice of its insolvency. This contention is obviously untenable. It is necessary, in disposing of it, to point out only that the irregular payment of wages due employes is not a conclusive test of insolvency.
Order reversed, with costs.
For affirmance — None.
For reversal — THE CHIEF-JUSTICE, TRENCHARD, PARKER, LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, VAN BUSKIRK, KAYS, HETFIELD, DEAR, WELLS, DILL, JJ. 15. *219