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IN RE SLEEP PRODS.

March 15, 1956

In the Matter of SLEEP PRODUCTS, Inc., Bankrupt


The opinion of the court was delivered by: HERLANDS

I.

The fundamental question raised on this proceeding involves the scope of the word 'wages' as used in section 64, sub. a(2) of the Bankruptcy Act, Title 11 U.S.C.A. § 104, sub. a(2) *fn1" which grants priority to wage claims against a bankrupt. Do contributions required to be made by an employer to a union welfare fund pursuant to a collective bargaining agreement constitute 'wages' within the meaning of that statutory provision, entitling a claim for such unpaid contributions to priority as a wage claim when the employer becomes bankrupt?

 That question must be answered in the negative, for the reasons set forth in this opinion.

 The claim involved is that of a union welfare fund known as the Local 140 Security Fund (referred to in this opinion as 'the Fund'). The bankrupt-employer is Sleep Products, Inc. A collective bargaining agreement, dated August 15, 1952, had been signed by the employer and the Bedding, Curtain and Drapery Workers' Union, Local 140, of the United Furniture Workers of America, C.I.O. (referred to in this opinion as 'Local 140').

 Pursuant to this agreement, the employer was required to make monthly payments computed at six percent (later six and one-half percent) of the gross monthly payroll of the employees in the bargaining unit. These payments were to be made to the Fund. For the three-month period immediately preceding the filing of the bankruptcy petition, the employer failed to pay $ 993.75 to the Fund; and that is the amount of the claim, as amended.

 The trustee in bankruptcy moved before the referee to expunge and disallow the claim of the Fund as a priority claim for wages. The referee, by order dated November 16, 1955, granted the trustee's motion. The Fund is now appealing, seeking to review the order of the referee which disallowed priority to the Fund's claim. The United States of America and The City of New York, as tax creditors of the bankrupt employer, have appeared in support of the referee's order.

 II.

 In order to obtain priority status as a claim for 'wages,' a claim must comply with the following explicit statutory requirements:

 1. It must be a claim for 'wages.'

 2. It may not exceed $ 600 'to each claimant'.

 3. It must have been 'earned' within three months before the date of the commencement of the bankruptcy proceeding.

 4. It must be due to certain specified classes of employees -- 'workmen, servants, clerks, or traveling or city salesmen on salary or commission basis.'

 'Wages' for which a prior claim may be made under the statute 'are closely circumscribed by express provisions of the Act,' and each one of the statutory 'qualifications must be satisfied before priority entails.' Collier on Bankruptcy (14th Ed. 1941) p. 2083.

 III.

 To determine whether the claim in this case satisfies the statutory definition, it is necessary to consider its origin and nature. *fn2"

 The Fund was organized on August 1, 1950 under a trust agreement. By the terms of that agreement, the Fund undertook to finance various types of social insurance for employees in the bedding industry, including but not limited to life insurance, accident and health insurance, insurance for medical care and hospitalization, and disability benefit insurance.

 Since the date of the Fund's organization, various employers have entered into collective bargaining agreements with Local 140. Such employers have been required to make contributions to the Fund, based on the gross monthly payroll of ...


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