Addicott v. Upton

182 N.W.2d 790, 26 Mich. App. 523, 1970 Mich. App. LEXIS 1480
CourtMichigan Court of Appeals
DecidedSeptember 29, 1970
DocketDocket 6,807
StatusPublished
Cited by1 cases

This text of 182 N.W.2d 790 (Addicott v. Upton) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Addicott v. Upton, 182 N.W.2d 790, 26 Mich. App. 523, 1970 Mich. App. LEXIS 1480 (Mich. Ct. App. 1970).

Opinions

Danhof, J.

Plaintiffs are former employees and defendants are stockholders of Knoppel, Inc. a now [526]*526defunct corporation. Prior to this action, plaintiffs had recovered judgments against Knoppel for unpaid wages.

Executions were issued pursuant to these judgments and were returned nulla bona. Plaintiffs then instituted this action against the stockholders for the payment of wages authorized by BJA § 2908.1 The statute authorizes a civil action against any or all the stockholders of a corporation for labor performed where an execution has been returned nulla bona.

James Jolman, a janitor, and John Yonkers, a night watchman, were also plaintiffs below. They prevailed, but the court denied plaintiffs’ claims being of the opinion that they were skilled artisans and did not belong to that class of employees which the statute sought to protect. Plaintiffs have appealed and defendants have cross-appealed.

Plaintiff Blacklock was originally hired as a common laborer but was elevated to the position of junior draftsman before the financial difficulties arose. Plaintiffs Marceau and Addicott were hired as draftsmen at monthly salaries. Steinke was hired as a jig designer with most of his work being on the drafting board. Cooper was hired as a pattern and jig cutter and maintenance man; Schmidt was a welder and “foreman.” All these men worked at their respective jobs until the corporation became unable to meet its payroll.

The hourly employees were dismissed, but plaintiffs met with the corporation’s president to discuss the matter. They were told that new financing was being sought and was more apt to be forthcoming if production were maintained. They agreed to continue working for the corporation, performing whatever work was available, until the company got out of the woods. It never did.

[527]*527In Michigan, proceedings by creditors of corporations to enforce secondary liability against stockholders have traditionally been divided between labor and nonlabor claims. Const 1908, art 12, § 4 gave constitutional status to such labor claims. The 1963 Constitution does not perpetuate this constitutional status, but it has been perpetuated by EJA § 2908. The Revised Judicature Act became effective in 1963, and considering the traditional preferred and constitutional status of labor claims, it cannot be argued that this provision is repugnant to our present constitution. Const 1963, art 3, § 7.

Defendants argue that since they purchased stock in violation of the Blue Sky Law,2 they cannot be held secondarily liable to these plaintiffs. Defendants, having been sold securities in violation of the Blue Sky Law, are afforded a remedy by MCLA § 451.810 [Stat Ann 1970 Cum Supp § 19.776(410)]. This section makes it optional with the purchaser of such stock to retain the stock or tender it back and be entitled to recover what has been paid. Moore v. Manufacturers Sales Company (1953), 335 Mich 606 (construing former CL 1948, § 451.120).

This provision of the Blue Sky Law was enacted for the protection of purchasers of securities and to penalize the sellers thereof. Farm Products Co. v. Jordan (1924), 229 Mich 235. It cannot be read to insulate the shareholders from the labor claims of the corporation’s employees. In any event, this is not the proper proceeding for such a determination.

The main issue for determination is whether or not plaintiffs were laborers within the contemplation of EJA § 2908. They urge that if the work for which they were originally hired was not of the character protected, the manual labor they subsequently per[528]*528formed brought them within the statute’s protection. We reject that position because the work was temporary in character and plaintiffs were at all times ready and willing to perform their customary duties. For the same reasons, plaintiffs’ damages are to be calculated at their original rates of pay and not on a laborer’s pay scale. As stated by the court in In re B. H. Gladding Company (D RI, 1903), 120 F 709, 711:3

“Wages are ‘earned’, in the sense that term is used in the Bankruptcy Act, so long as a bona fide contract of hiring exists, and the clerk or servant continues in the master’s employment and does all that he is required to do.”

The status of plaintiffs’ claims, then, must be determined in light of the employment for which they were originally hired.

It is the object and purpose of the statute that the corporation should be primarily liable for labor debts and that the stockholders stand in the position of sureties to insure payment thereof. Jorgensen v. Mickle (1932), 259 Mich 573. By its language, the statute gives this right to those who perform labor for the corporation; it is not all employees who are so protected. Because of our reluctance to increase the liability of a surety and because no such right existed at common law, the statute and its predecessors have been traditionally given a strict construction by our courts.

Plaintiffs are all skilled workers. None of them fall into the “class of men not well qualified to protect themselves,” who “labor for small compensation” and are “in the power of their employers.”4

The above characterization may have been apt for the nineteenth-century laborer whom these acts were [529]*529designed to protect, but it can hardly be applied literally today. It it were, no one would qualify under the statute. A common laborer of 1970 may not have a great deal of skill, but he also may have a good wage, seniority, pension plan, grievance procedures, unemployment insurance, tax sheltered annuities, etc. Just as the above-depicted laborer is out of date, so are most of the cases interpreting our statute.

The problem remains, however, of where the line should be drawn. Even with a more enlightened construction, clearly all types of employees are not to be afforded the statute’s protection. Even in the 19th century, our courts gave the term “laborer” its (then) ordinary meaning in common use. Brockway v. Innes (1878), 39 Mich 47. And even applying a strict construction, the Supreme Court in 1890 was unwilling to exclude from this definition an experienced miller whose work required the exercise of judgment and skill. Nor did the fact that he also received more money than did an unskilled worker exclude him. Black’s Appeal (1890), 83 Mich 513.

There appears to be even less reason for now holding that only the wage claims of unskilled laborers are protected by RJA § 2908. A more realistic approach would be to exclude those who are corporate officers, exercise a degree of discretion, have the power to delegate some authority, and have some personal stake in the success or failure of the enterprise.

Looking to statutes from other jurisdictions, we find that employees such as these plaintiffs may or may not be included, depending on the language of the statute. Most statutes, however, speak in terms of “laborers and clerks”5 and could be distinguished in that respect. Section 64(a) (2) of the Bankruptcy [530]*530Act6

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Related

Addicott v. Upton
182 N.W.2d 790 (Michigan Court of Appeals, 1970)

Cite This Page — Counsel Stack

Bluebook (online)
182 N.W.2d 790, 26 Mich. App. 523, 1970 Mich. App. LEXIS 1480, Counsel Stack Legal Research, https://law.counselstack.com/opinion/addicott-v-upton-michctapp-1970.