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Claim of Berson

Supreme Court of New York, Appellate Division

December 22, 1953

EDWARD CORSI, as Industrial Commissioner, Appellant.

APPEAL from a decision of the Unemployment Insurance Appeal Board, filed March 26, 1953, which determined in a proceeding under article 18 of the Labor Law, that respondent was eligible for unemployment insurance benefits.

COUNSEL

Page 191

Nathaniel L. Goldstein, Attorney-General (Francis R. Curran and Wendell P. Brown of counsel), for appellant.

Seymour B. Berson, respondent in person.

HALPERN, J.

The question here presented is the construction of paragraph (d) of subdivision 2 of section 517 of the Labor Law as added by chapter 792 of the Laws of 1951.

Subdivision 2 of section 517 deals with exclusions from the coverage of the Unemployment Insurance Law (Labor Law, art. 18). The exclusions are accomplished in an indirect fashion by excluding certain types of payments from the definition of the term 'remuneration'. 'Remuneration' is one of the key words in the determination of the claimant's right to unemployment insurance benefits (Labor Law, § 517) and in the determination of the employer's duty to make contributions (§ 518, subd. 1; § 570, subd. 1).

Subdivision 2 of section 517 was amended by chapter 792 of the Laws of 1951 to read in part as follows:

'2. Exclusions. Remuneration does not include: * * * (d) Compensation paid by a corporation to an employee who is a principal stockholder in that corporation. Principal stockholder means one who owns twenty-five percentum or more of the capital stock of the corporation.'

We are called upon to determine the meaning of this amendment, in its application to an undisputed set of facts. The claimant was the vice-president and sales manager of the Technicraft Optical Products, Inc., from March, 1951, to July 18, 1952. On the latter date, the corporation went out of business. Shortly thereafter, the claimant filed a claim for unemployment insurance benefits.

The corporation was authorized to issue both preferred and common stock. At the time the claimant entered the employ of the corporation, he became the owner of 12.4% of the outstanding common stock and 25.1% of the preferred stock, thus being the owner of 17.5% of the combined outstanding common and preferred stock. On October 15, 1951, the claimant gave up part of his preferred stock and acquired additional common stock; as a result, he became the owner of 25% of the common stock and 19.5% of the preferred stock, owning 22.8% of the combined outstanding common and preferred stock.

Under the terms of the certificate of incorporation, the preferred stock had no voting rights; the voting rights were vested ...


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