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IN RE BRASSEL

June 8, 1955

In the Matter of Walter E. BRASSEL and Lillian I. Brassel, Individually and as co-partners, trading under the firm name of Brassels; and Walter E. Brassel, under firm name of Elgin Restaurant and Diner, Bankrupts


The opinion of the court was delivered by: BRENNAN

The sole question raised in this review involves the priority status in bankruptcy of a claim made against the bankrupt estates by the Trustees of a welfare fund.

The facts are not in dispute and are set forth in the decisions of the Referee of Oct. 1, 1954 and Mar. 29, 1955 and in his findings of Oct. 22, 1954 and Apr. 11, 1955. The two decisions and the two separate findings of the Referee are accounted for by the fact that the claim, as originally filed, embodied several items and on a previous review of the Referee's decision, this Court remanded the proceeding to the Referee for further action, especially as to the form of the claim and to receive any additional evidence that might be offered.

 The underlying facts will be briefly referred to as a background for this decision.

 On Jan. 22, 1954 the bankrupts filed a voluntary petition in bankruptcy in which they sought the relief afforded by the Act as to their individual and partnership liabilities. It is sufficient to say that they had been engaged in the conduct of two or more restaurants at the City of Utica, New York and for the purpose of the consideration of the claim, the liability of each of the bankrupt estates was not separately considered.

 About October 1953 the bankrupts entered into collective bargaining agreements with Hotel and Restaurant Employees and Bartenders' Local No. 136 A.F. of L. of Utica, N.Y. which agreements were in effect on the date of the bankruptcy. Article IV, paragraph 6 is particularly pertinent to the present controversy and is quoted below:

 'The Employer will contribute each and every week, commencing the first full week after the effective date of this agreement, 5% of the gross payroll for all employees covered by this agreement and transmit this sum to the Union Welfare Trust Fund no later than the 10th day of the following month, together with the names and Social Security numbers of the employees for whom the payments were made. These sums shall be held for insurance, medical and similar benefits, including reasonable administration charges, by the Trustees of the Trust Fund. Such Trustees shall be solely responsible for the administration of the Trust Fund. The Employer shall not be responsible in any way for the expenditure of this fund, nor shall any individual employee have any claim thereto, or to any part thereof. The discretion of the Trustees as to administration and use of the Trust Fund shall be final and conclusive'.

 It would appear without dispute that the bankrupts failed to make payment to the Union Welfare Trust Fund, as required in the above paragraph for the months of November and December 1953 and January 1954 in the total amount of $ 679.49.

 An agreement and declaration of trust was received as an exhibit on the hearing before the Referee. Same bears the signature of the president, secretary-treasurer of Local No. 136 and of the three 'trustees'. Same in effect provides that the trustees shall collect and hold all contributions received from employers in accordance with the provisions of the bargaining agreement above quoted and all other similar agreements; that same shall be used to pay the expenses of administering the affairs of the trust and to provide and pay for premiums upon policies of accident, health and group life insurance or for direct payment of medical and hospitalization expenses of members of the Union' -- whether or not they are covered by collective bargaining agreements between certain employers and the Union -- '. It further provided that neither the employer nor the employee of an employer shall have any right, title or interest in or to any part of the trust estate except such rights which might accrue to him under an insurance policy or other welfare benefits. No employee shall have the option to receive any part of the contribution of the employer in lieu of the benefits provided by the trustees. Such rights are not assignable.

 No question is raised as to the form or sufficiency of the claim, above referred to, which was signed individually by one of the trustees of the Union and Welfare Fund.

 Claimant asserts that the debt of the bankrupts is entitled to priority in payment from the bankrupt estates by reason of the provisions of Section 64, sub. a(2) of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a(2). Such provision grants priority to (2) 'wages not to exceed $ 600 to each claimant, which have been earned within three months before the date of the commencement of the proceeding, due to workmen, servants, clerks, or traveling or city salesmen on salary or commission basis'.

 The Trustee disputes the priority status of the claim contending that the amounts claimed are not 'wages' as the term is used in the section above quoted.

 The parties agree that they are unable to find a reported case which would serve as a precedent for the problem involved. Cases involving the consideration of provisions for vacation and severance pay are not helpful since such items generally are considered under a contract which makes provision for same as the result of the actual services performed by the employee and are payable direct to him. This is not the situation here. Neither are the cases involving the requirement of the National Labor Relations Act, 29 U.S.C.A. § 151 et seq. to bargain collectively of controlling importance here. The problem must be met and decided in accordance with the intent and language of Section 64, sub. a(2) of the Bankruptcy Act.

 The history of the section indicates clearly that the intention thereof was to give a special protection in a limited amount to workmen who by reason of the amount of their remuneration would ordinarily be expected to depend upon their daily, weekly or monthly wage for their support and the support of their families. Collier on Bankruptcy, 14th Ed., Vol. 3, Par. 64,201; In re Paradise Catering Corporation, D.C., 36 F.Supp. 974.

 Turning now to the language of the section, it seems clear that same has a direct reference to the individual workman. The 'wages' must be 'due' to workmen and 'each claimant' is limited in his claim to $ 600 earned within three months of the bankruptcy of his employer. The language of the section contemplates a claim by a workman or his assignee ...


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