submitted: October 8, 1986.
LABORERS COMBINED FUNDS OF WESTERN PENNSYLVANIA, AS AGENT FOR PETER J. LIVOLSI, AND ALBERT W. BETLER, TRUSTEES AD LITEM, LABORERS DISTRICT COUNCIL OF WESTERN PENNSYLVANIA WELFARE AND PENSION FUNDS, THE CONSTRUCTION INDUSTRY ADVANCEMENT PROGRAM OF WESTERN PENNSYLVANIA FUND, AND THE LABORERS DISTRICT COUNCIL OF WESTERN PENNSYLVANIA AND ITS AFFILIATED LOCAL UNIONS
AMIDIO MATTEI, JOSEPH MATTEI AND DOMENIC J. MATTEI. APPEAL OF AMIDIO J. MATTEI AND DOMENIC J. MATTEI
Appeal from the Judgment entered on the Court of Common Pleas of Allegheny County, Civil at No. GD 84-3461.
Paris A. Diamond, Pittsburgh, for appellants.
Gary P. Hunt, Pittsburgh, for appellees.
Del Sole, Kelly and Popovich, JJ.
[ 359 Pa. Super. Page 401]
This is an appeal from the judgment of the Court of Common Pleas of Allegheny County entered against the appellants (Amidio and Domenic J. Mattei*fn1) in the amount of $44,247.65. We affirm in a case of first impression.
The undisputed facts reveal that the appellants are corporate officers of Mattei Bros., Inc., i.e., Domenic is secretary/treasurer with 49% of the stock and Amidio is president with 50% of the stock.
On October 27, 1982, Domenic, in his capacity as secretary/treasurer of the Corporation, entered into a collective bargaining agreement with the plaintiff/Laborers' District Council of Western Pennsylvania, an AFL-CIO affiliate representing eight (8) local unions. Pursuant to the agreement, the Corporation obligated itself to deduct a fixed percentage of monies from the employees' gross wages (for a Health and Welfare Fund, Pension Fund, Hourly Dues Deduction and Industry Advancement Funds) and remit the amount to a designated bank.
The plaintiff alleged in its complaint that the appellants failed to make the required payments from May through November of 1983. This failure to act, contended the plaintiff, constituted a violation of the collective bargaining agreement and entitled it to interest on the outstanding amount as a result thereof. Further, the plaintiff asserted that the appellants, as "officers and/or agents" of the Corporation, were considered an "employer" under the Pennsylvania Wage Payment and Collection Law (43 P.S. § 260.1 et seq.). Under this designation, urged the plaintiff, the appellants were automatically liable to pay liquidated damages for their default in the amount of 25% of the total remittance due.
The appellants' response was that their bookkeeper embezzled the Corporation's money, in the amount of $374,000, and, thus, the Corporation's ability to meet its obligations under the contract with the plaintiff was severely hampered.
[ 359 Pa. Super. Page 402]
In fact, the Corporation's efforts to satisfy the arrearages due the various funds, with money generated from accounts receivable (estimated at $25,000), proved to be no solution since the current amounts due these same funds, in turn, became delinquent and brought the Internal Revenue Service into the picture. The end result was the Corporation's filing Chapter XI bankruptcy in the Western District of Pennsylvania in an attempt to reorganize and salvage what it could of the business.*fn2
Following argument on the case, and the denial of post-trial exceptions, the court entered its order in favor of the plaintiff. The order was reduced to judgment and is questioned on appeal.
The sole issue raised by the appellants at page iv of their brief is, in essence, one of whether, absent any evidence of culpability, the mere retention of a corporate office at the time that wage and pension benefits fall delinquent because of embezzlement activities of a corporate employee is sufficient basis alone to impose personal liability upon any corporate officer under 43 P.S. §§ 260.9a, 260.10.
We begin by observing that Pennsylvania's Wage Payment and Collection Law was promulgated to afford additional means to "an employee, labor organization, or party to whom any type of wages is payable to recover unpaid wages and liquidated damages". See 43 P.S. § 260.9a(a), (b); Haft v. U.S. Steel Corp., 305 Pa. Super. 109, 451 A.2d 445 (1982); Todora v. Jones & Laughlin Steel Corp., 304 Pa. Super. 213, 450 A.2d 647 (1982). Further, as is relevant herein, the Act defines "wages" to include fringe benefits payable from amounts withheld from the employees' pay by an employer, which itself is defined to encompass a corporation or any agent or officer of a corporation employing any
[ 359 Pa. Super. Page 403]
person in this Commonwealth. 43 P.S. § 260.2a. Thus, there can be no dispute that Domenic and Amidio, as secretary/treasurer and president, respectively, of Mattei, Bros., Inc., would be considered an "employer" under the language of the Act.
As for an employer who obligates himself by agreement, as was the case here, to deduct monies from employees' pay for fringe benefit purposes, the Act requires that the employer must remit the deductions within a prescribed period. 43 P.S. § 260.3(b). Failure to do so, as recited earlier, entitles the employee(s) or the(ir) representative to activate the remedial measures provided for under the Act, i.e., the filing of suit in any court of competent jurisdiction or, in the alternative, have the Secretary of Labor and Industry proceed in his stead. 43 P.S. § 260.9a.
The question of liability under the Act is to be gleaned from a persual of the Act as a whole, and, in this effort, we seek to effectuate the intention and purpose of the Legislature by its passage (1 Pa.C.S. § 1921), e.g., to provide an employee with a statutory remedy for an employer's breach of its contractual obligation to remit wages. See Sendi v. NCR Comten, Inc., 619 F.Supp. 1577, 1579 (E.D.Pa.1985).
The appellants would have us embrace the argument that the bookkeeper's embezzlement of the Corporation's monies is the equivalent of a "good faith dispute", provided for under the Act, exonerating them from any liability for payment. It is true that in subsection (c) of Section 260.9a and Section 260.10, both provisions allow as a defense to the claim by an aggrieved party for wages the "good faith contest or dispute of any wage claim . . . accounting for such nonpayment".*fn3
[ 359 Pa. Super. Page 404]
Nowhere in the Act is the aforementioned verbiage defined. However, since the Act is a supplementation to and not a substitute for one's common law cause of action for breach of contract (see Sendi, supra), we see no reason why the defenses acknowledged in the law for similar contract claims should not guide us in determining the viability of the appellants' contention to discharge their contractual obligation, the impairment of which was caused by the criminal acts of another.
Generally, to constitute a good defense to an action based on contract, the matters relied upon must be germane to the cause of action pleaded and must present a legal reason why the plaintiff should not recover. 8 P.L.E. Contracts § 382. A primary example of the nexus necessary between the underlying basis for a suit that is filed and the legal justification in defense of the claim asserted is
[ 359 Pa. Super. Page 405]
accountability goes, to those best equipped to monitor its inner workings, i.e., the officers. A fortiori, a breach of contract, not an excuse for failure to perform, is the correct appellation. See generally Commonwealth ex rel. v. United States Fidelity & Guaranty Co., 314 Pa. 140, 146, 170 A. 686 (1934).
Further, as made mention of in the Restatement (Second) of the Law of Contracts § 261, Comment e, "[e]ven if a party contracts to render a performance that depends on some act by a third party, he is not ordinarily discharged because of a failure by that party because this is a . . . risk that is commonly understood to be on the obligor." Nor has the law permitted an obligor to skirt liability under its contract because of its financial condition (see Robert H. Fox Co. v. Keystone Driller Co., 232 F.2d 831, 836 (3rd Cir.1956)), or the negligence of a third party hired by the obligor. McLouth Steel Corp. v. Mesta Machine Co., 116 F.Supp. 689, 692 (E.D.Pa.1953), aff'd 214 F.2d 608 (3rd Cir.), cert. denied, Hartford Acc. & Indem. Co. v. Foster, 348 U.S. 873, 75 S.Ct. 109, 99 L.Ed. 687 (1954).
Thus, we see no logic in imposing the brunt of this financial fiasco on those so attenuated from the core of the fault as to be absolved from any wrongdoing, i.e., the union members, and place the obligation on the shoulders of those who make the decisions as to the manner in which the Corporation is managed. The Legislature, in its enactment of the Wage Payment and Collection Law, has not indicated otherwise.*fn4 See Ward v. Whalen, 18 Pa.D. & C.3d 710, 712
[ 359 Pa. Super. Page 407]
(C.P. Allegheny County 1981), wherein it was written, with regard to personal liability of corporate officers for default under the Act,
The Legislature had some purpose for including an agent or officer of a corporation employing persons in the Commonwealth within the definition of employer, and the only apparent purpose was to subject these persons to liability in the event that a corporation or similar entity failed to make wage payments. Its reason for doing so is obvious. Decisions dealing with personnel matters and the expenditure of corporate funds are made by corporate officers and it is far more likely that the limited funds of an insolvent corporation will be used to pay wages and that a work force will be reduced while the corporation is still capable of meeting its obligations to its employes if personal liability is imposed on the persons who make these decisions.
Accord Carpenters Health and Welfare Fund of Philadelphia and Vicinity v. Ambrose, Inc., 727 F.2d 279, 282-83 (3rd Cir.1983); Amalgamated Cotton Garment v. J.B.C. Co. of Media, 608 F.Supp. 158, 168 (W.D.Pa.1984); In re Johnston, 24 B.R. 685, 687 (1982).
We wish to make one last point. Of those courts which have had occasion to rule on the personal liability of corporate officers in the face of a corporation's failure to make its required contributions to various union funds, as provided for in their collective bargaining agreement, all have, without exception, held the officer(s) of the corporation personally liable, and they did so without reference to any proof of culpability or scienter as a sine qua non to establishing a contravention of the Act in a civil suit. See Ambrose supra; Amalgamated Cotton Garment, supra; In re Johnston, supra; Amalgamated Cotton Garment and Allied Industries Fund v. Dion, 341 Pa. Super. 12, 491 A.2d 123 (1985).
[ 359 Pa. Super. Page 408]
Therefore, having been presented with no reasons for meriting a reading of the element of "scienter" into the quantum of proof necessary to warrant a civil*fn5 redress of an aggrieved party's rights under the Act, we find that the
[ 359 Pa. Super. Page 409]
appellants' corporate positions exposed them to liability for the corporation's breach of contract with the appellee. We, likewise, refuse to embrace the appellants' contention that the embezzlement of funds should be equated to a "good faith contest" of the "wages" claimed so as to exonerate them from responsibility under Sections 260.9a and 260.10. The reason is evident from the fact that the appellants do not dispute the withholding of monies from the union members' pay due the various funds. Nor do the appellants argue that the appellee has done some act or failed to do an act violative of the collective bargaining agreement and justifying a holding in abeyance of the renumerations owed under the explicit contractual terms.
As a result, as we read the Act in toto, a "good faith contest" should be premised upon some impropriety on the part of the employee/obligee affecting his right to his "wages", in this case pension and other welfare benefits, due him from the obligor. Under the particular circumstances here, we fail to see how the actions of a third party (embezzler) affects a right owed a signator to a bilateral agreement which has been faithfully adhered to by the obligee.