United States v. Embassy Restaurant, Inc./Dissent Black

by Hugo Black

United States Supreme Court

359 U.S. 29

United States  v.  Embassy Restaurant, Inc.

 Argued: Jan. 22, 1959. --- Decided: March 9, 1959

Mr. Justice BLACK, with whom The CHIEF JUSTICE and Mr. Justice DOUGLAS concur, dissenting.

I believe payments made by employers to union welfare funds are 'wages * * * due to workmen * * *,' under the Bankruptcy Act's priority section. ^[1] The history of the section is one of continuous congressional expansion. Priority for the 'full amount of the wages due' on account of 'any labor as an operative in the service of any bankrupt' was first granted in the 1841 Bankruptcy Act; it was limited to $25. ^[2] The Bankruptcy Acts of 1867 and 1898 increased the sum available to each claimant and broadened the coverage of the priority beyond 'operatives' or 'workmen' to 'workmen, clerks, or servants.' ^[3] In 1906 Congress brought still more workers into the protected category by defining the group as 'workmen, clerks, traveling or city salesmen, or servants.' ^[4] The priority was once again increased, now to $600, in 1926. ^[5]

The Chandler Act passed in 1938 raised the workers' priority to second behind expenses of administration and ahead of federal and local taxes. At the same time its scope was further broadened to cover 'workmen, servants, clerks, or traveling or city salesmen on a salary or commission basis, whole or part time, whether or not selling exclusively for the bankrupt.' ^[6] Finally, in 1956, Congress took occasion to guard against narrow interpretation of the class of workers covered by adding to the priority section of the Chandler Act the words 'and for the purposes of this clause, the term 'traveling or city salesmen' shall include all such salesmen, whether or not they are independent contractors selling the products or services of the bankrupt on a commission basis, with or without a drawing account or formal contract.' ^[7]

This last change in the priority section was the sole subject of a very short Act passed by Congress. Like most of the earlier changes, it was enacted after court decisions barring some workers from the protected class or indicating that others might be barred. ^[8] We should, I think, be warned by the foregoing history of the wage priority section against niggardly interpretations of the language used in that section.

The Court argues however, that payments to welfare funds are neither 'wages' nor 'due to workmen.' It is hard for me to see how they could not be 'wages.' The payments are certainly not gifts. As was stated less than a year ago by a Senate Committee, which had made an extended study of plans such as those here involved, 'regardless of the form they take, the employers' share of the costs of these plans or the benefits the employers provide are a form of compensation.' ^[9] Courts have long held that compensation for services rendered is a valid definition of 'wages' both in the priority section of the Bankruptcy Act and in other contexts. ^[10] This is certainly in accord with the customary meaning of the word. It appears, moreover, that unions and employees consider such payments as the equivalent of wages and that they have been treated as wages in other statutes. ^[11] In fact, where such treatment has seemed undesirable, Congress has expressly excluded them from the category. ^[12] Of course, a word need not mean the same thing in different statutes, but the meaning attributed in one Act is far from irrelevant to the interpretation of another.

It cannot be argued that a sum paid by an employer for a worker's services loses its status as wages merely because it is used to purchase insurance benefits. ^[13] For the Bankruptcy Act has as yet authorized no investigation of how a worker spends his money to determine if he is entitled to a priority for it. And in all events insurance payments would not seem to be the type of expenditure which Congress would discourage.

It is also hard for me to imagine how the fact that the moneys are paid to parties other than the workmen is in any way connected with the question of whether the payments are wages, whatever its relevance might be to whether the sums are 'due to workmen.' This is especially true in the light of Shropshire, Woodliff & Co. v. Bush, 204 U.S. 186, 27 S.Ct. 178, 51 L.Ed. 436, which held that moneys due an assignee of the worker were entitled to priority as wages. The Government admits that if a formal assignment had been made here, wage status might be granted. It does not explain, however, how the lack of a formal assignment can change payments from 'wages' to something else or make granting a priority less in line with congressional policy. ^[14]

The question of whether the payments are 'due to workmen' is on its face somewhat more difficult. But to my way of thinking, the correct answer has been made easy by prior cases in this Court. In the Shropshire case, the Court said, 'The priority is attached to the debt, and not to the person of the creditor; to the claim, and not to the claimant. The act does not enumerate classes of creditors and confer upon them the privilege of priority in payment, but, on the other hand, enumerates classes of debts as 'the debts to have priority." 204 U.S., at page 189, 27 S.Ct. at page 179. It then held that an assignee of a worker had priority since the debt was wages due to workmen.

Even if it could be meaningfully argued that in Shropshire the money was at one time due to workmen, and therefore remained so after assignment, while here it never was due to them, we are, I think, precluded from that position unless we depart from the reasoning of United States for Benefit and On Behalf of Sherman v. Carter, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776. That case construed § 2(a) of the Miller Act, 49 Stat. 794, 40 U.S.C. § 270b(a), 40 U.S.C.A. § 270b(a), which provides that 'Every person who has furnished labor * * * and who has not been paid in full * * * shall have the right to sue on (a) payment bond * * * for the sum or sums justly due him.' The Court held that, for the purposes of the Miller Act, payments to welfare funds are, 'as much 'justly due' to the employees who have earned them as are the wages payable directly to them in cash.' 353 U.S., at page 220, 77 S.Ct. at page 798. In fact, the Court stated that trustees of the welfare fund have an even better right to sue then most assignees since the trustees, unlike the usual assignee, sue for the benefit of the workers. Ibid. I cannot see why the Bankruptcy Act should be construed differently from the Miller Act on the question of whether welfare fund contributions are due to workmen. This is especially true since the polices of the relevant provisions of the two Acts are quite similar.

Finally it seems to me undesirable to make a distinction in this area between payments on assignment and payments in trust. At best it would let the carrying out of congressional policy depend on the skill with which unions prepare legal documents, and on the various state laws covering the validity of wage assignments. At worst it would give priorities to assignees of the workmen, usually creditors, while denying them to insurance funds for their benefit. Unless we are prepared to repudiate what we said in the Carter and Shropshire cases, I think § 64, sub. a(2) of the Bankruptcy Act means that the sums which Embassy contracted to pay to these employees for their labor by making payments to welfare funds are wages due to workers. If the provision granting priority to wages is to be narrowed, It should be done by Congress-not by this Court.

I would affirm.

Notes

1. 64, 30 Stat. 563, as amended, 11 U.S.C. § 104, 11 U.S.C.A. § 104. The question has caused considerable difficulty in the federal courts. Compare, e.g., the opinions below in this case, 3 Cir., 254 F.2d 475, D.C., 154 F.Supp. 141 and In re Otto, D.C., 146 F.Supp. 786, with Local 140 Security Fund v. Hack, 2 Cir., 242 F.2d 375; In re Brassel, D.C., 135 F.Supp. 827; In re Victory Apparel Mfg. Corp., D.C., 154 F.Supp. 819. Similarly commentators have split. Compare, e.g., Notes, 19 Ga.B.J. 107; 66 Yale L.J. 449; 44 Va.L.Rev. 995; 57 Mich.L.Rev. 403, with Notes, 34 Chi.-Kent L.Rev. 235; 42 Minn.L.Rev. 295.
2. Act of August 19, 1841, 5 Stat. 445.
3. Act of March 2, 1867, 14 Stat. 529; Act of July 1, 1898, 30 Stat. 563.
4. Act of June 15, 1906, 34 Stat. 267.
5. Act of May 27, 1926, 44 Stat. 667.
6. Act of June 22, 1938, 52 Stat. 874.
7. 70 Stat. 725, 11 U.S.C. (Supp. V) § 104, 11 U.S.C.A. § 104.
8. See, e.g., In re Scanlan, D.C., 97 F. 26; In re Greenewald, D.C., 99 F. 705; In re Kominers, 2 Cir., 252 F. 183; In re Collin, D.C., 18 F.Supp. 848; In re Clover Dairies, Inc., D.C., 42 F.Supp. 1006; In re Herbert Candy Co., D.C., 43 F.Supp. 588. In recommending the latest change the House Judiciary Committee stated '* * * language in some court cases has been confusing * * *. (T)here is language from which one might infer that a salesman who was a 'separate contractor' could not qualify.' H.R.Rep. No. 921, 84th Cong., 1st Sess. 2.
9. S.Rep. No. 1440, 85th Cong., 2d Sess. 4. The Committee also called attention to the fact that 'In little more than a decade private employee welfare and pension plans have grown from relatively small significance to a position where approximately 84 million persons are depending in some manner upon the benefits which they promise.' Id., at 3.
10. E.g., In re Gurewitz, 2 Cir., 121 F. 982; Glandzis v. Callinicos, 2 Cir., 140 F.2d 111; National Labor Relations Board v. Bemis Bro. Bag. Co., 5 Cir., 206 F.2d 33, 37. See also Note, 19 Ga.B.J. 107.
11. See, e.g., Inland Steel Co. v. National Labor Relations Board, 7 Cir., 170 F.2d 247, 251, 12 A.L.R.2d 240. See also Note, 66 Yale L.J. 449, 458, 460.
12. 68A Stat. 32, 26 U.S.C. (Supp. IV) § 106, 26 U.S.C.A § 106; 68A Stat. 417, 26 U.S.C. (Supp. IV) § 3121(a), 26 U.S.C.A. § 3121(a); 68A Stat. 447, 26 U.S.C. (Supp. IV) § 3306(b)(2), 26 U.S.C.A. § 3306(b)(2). Cf. Brown v. State of Maryland, 12 Wheat. 419, 438, 6 L.Ed. 678, '* * * the exception of a particular thing from general words, proves that, in the opinion of the lawgiver, the thing excepted would be within the general clause had the exception not been made * * *.'
13. See In re Otto, D.C., 146 F.Supp. 786, 790; In re Ross, D.C., 117 F.Supp. 346.
14. The Court notes that workmen's compensation claims were at one time given priority by Congress and were subsequently removed. As compensation rights are not contracted for in exchange for labor I do not see how their disposition is relevant to the problem in this case.