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Trustees of Local 478 Trucking and Allied Industries Pension Fund v. Pirozzi

Decided: December 22, 1983.

TRUSTEES OF THE LOCAL 478 TRUCKING AND ALLIED INDUSTRIES PENSION FUND AND TRUSTEES OF THE JOINT WELFARE OF EMPLOYERS AND LOCAL 478, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, PLAINTIFFS,
v.
FRANK PIROZZI, SR., JOSEPH PIROZZI, VICTOR PIROZZI AND JOHN PIROZZI, DEFENDANTS



Margolis, J.s.c.

Margolis

In this action, plaintiffs, Trustees of the Local 478 Trucking and Allied Industry Pension Fund and Trustees of the Joint Welfare Fund of Employers Local 478, International Brotherhood of Teamsters (Trustees) seek to impose personal liability upon the remaining defendant, Joseph Pirozzi (defendant), a former corporate officer and stockholder of Asbestos Transportation Co., Inc. (Asbestos). Asbestos had a collective bargaining agreement with Trustees which required contributions to the respective Pension and Welfare Funds and became in arrears on certain of these contributions resulting in a suit by, and ultimately a judgment in favor of, Trustees. Asbestos has since become insolvent and has made an assignment for the benefit of its creditors.

Trustees bring the instant action under the provisions of N.J.S.A. 2A:170-90.2 which, as pertinent, reads as follows:

In addition to any other penalty or punishment otherwise prescribed by law, any employer who is party to an agreement made with a collective bargaining agent or with an individual employee which requires the payment of (a) wages or of benefits or (b) contributions for the support of a fund out of which benefits may be paid including, without limitation upon the generality of the foregoing, any pension fund, welfare fund . . . and who knowingly and willfully fails or refuses to make such payments within 30 days after such payments are required by said agreement to be made . . . is a disorderly person. If such employer is a corporation, the officer or employee responsible for such willful failure or refusal is a disorderly person.

There is projected for determination by this court, two essential issues: (1) Did defendant, acting on behalf of Asbestos, knowingly and willfully fail and refuse to make payments for the time period in question (1977-1980) and if so (2) Does this statute, calling for the imposition of penal sanctions, create a civil personal liability upon the defendant.

The matter was tried before this court sitting without a jury and the court had an opportunity to observe the demeanor of the witnesses and determine their credibility. A review of the pertinent books and records of Asbestos and other related companies as well as the individual defendant's tax returns by Trustees' accountant disclosed that during the years 1977-80 Asbestos was paying its debts in the normal course of its business including officers' salaries, rents, taxes, interest on obligations, payments to Trustees (not in full) and other routine operating expenses. There was sufficient capital in all of those years to have paid Trustees in full, however to do so would have left many of the other obligations of Asbestos unpaid.

Asbestos had been in the trucking business with essentially one customer: to wit, Johns-Manville. The building industry in which Manville was involved was severely depressed during the years in question and Asbestos along with other entities serving that industry were hard pressed to meet expenses; operating costs had increased and Asbestos had a serious cash flow problem.

In order to attempt to continue Asbestos as a variable entity in the hope of surviving this drought, defendant and other

officers of the corporation attempted to make payments on the mounting obligations, ultimately without success. Asbestos sustained operating losses for all the years in question except 1978 which produced a small profit and, in fact, defendant, together with other officers of the corporation, advanced significant sums in loans to the corporation, a large portion of which have never been repaid. The amount due and owing to Trustees for the years in question is $30,463.00.

The proofs disclose that during this period defendant and other principals of Asbestos made a determination to pay certain obligations as opposed to others and attempted to continue to meet operating expenses for their vehicles and employees, occasionally using their own funds to do so. Asbestos essentially paid only those creditors necessary to keep the business afloat, including state and federal taxes.

It should be noted in passing that the books and records of Asbestos were kept in the ordinary course of business and disclosed no discrepancies. Officers' salaries were moderate and no unusual payments were made to defendant or any other principal of Asbestos.

It clearly appears that had defendant and the other principals of Asbestos paid Trustees in full for the years in question Asbestos would have been forced out of business long before its ultimate demise. Defendant and the other principals of Asbestos knew of the outstanding obligations to Trustees during the years in question and there was sufficient capital available in those years to have paid Trustees in full. Asbestos, through the defendant and its other principals, made a business judgment not to do so. In 1979 the principals of Asbestos knowingly chose to pay or repay certain officers' loans as opposed to making payments to Trustees and during this period, Asbestos, through the defendant, made optional payments to certain Trustees' funds for non-union employees while failing to make mandatory payments for union employees. Defendant was one of the non-union employees involved.

Defendant testified that he was at all times aware of the arrearages in the payments to the funds in question.

At the end of plaintiffs' case, Trustees voluntarily dismissed that portion of its complaint charging defendant with conversion. Defendant produced no witnesses, evidence or testimony.

The initial issue projected was whether defendant "knowingly and willfully failed or refused" to make payments for the years in question to the funds represented by Trustees.

Defendant concedes he knew of the arrearages to Trustees at all times relevant but contends, however, that he did not "willfully" fail or refuse to make the payments.

The descriptive word "willfully" imports the notion of conduct which is purposeful and knowledgeable. State v. Wein, 80 N.J. 491, 498 (1979).

In State v. Burden, 126 N.J. Super. 424, 427 (App.Div.1974), certif. den., 65 N.J. 282 (1974), the court construed the word "willfully" in the context of a child neglect charge pursuant to N.J.S.A. 9:6-1, to mean "intentionally and purposefully" as distinguished from "inadvertently or accidentally" and found that proof of evil intent and knowledge of resulting harm was not necessary. Accord, State v. Muniz, 150 N.J. Super. 436, 447 (App.Div.1977), certif. den., 77 N.J. 473 (1978).

This court is satisfied that defendant made a conscious decision as to which creditors were to be paid as opposed to making payment in full to Trustees. Defendant's failure to pay Trustees was not inadvertent nor accidental. His assertion that Asbestos could not afford to pay these funds, assuming its truth, is of no consequence since the existence of good faith would not make the defendant's failure or refusal to pay any less willful. The court does not question defendant's judgment. However, the exercise of that judgment was made with full knowledge of the unpaid obligation to Trustees and constituted a willful failure or refusal to make the payments in violation of N.J.S.A. 2A:170-90.2.

The remaining issue is whether or not N.J.S.A. 2A:170-90.2 creates or gives rise to an implied civil cause of action against defendant. The precise question appears to be one of novel impression in this state.

As pertinent, the statute provides:

In addition to any other penalty or punishment otherwise prescribed by law, any employer who is party to an agreement made with a collective bargaining agent or with an individual employee which requires the payment of (a) wages or of benefits or (b) contributions for the support of a fund out of which benefits may be paid including, without limitation upon the generality of the foregoing, any pension fund, welfare fund . . . and who knowingly and willfully fails or refuses to make such payments within 30 days after such payments are required by said agreement to be made . . . is a disorderly person. If such employer is a corporation, the officer or employee responsible for such willful failure or refusal is a disorderly person. [ N.J.S.A. 2A:170-90.2; emphasis supplied.]

In reliance upon Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975), Trustees contend that it is permissible to infer a private cause of action from a penal statute so long as the penal statute does not explicitly deny such cause of action. Id. at 82, 95 S. Ct. at 2089. Trustees recognize, however, that the search for a private cause of action within the confines of a penal statute must be guided by statutory construction and legislative intent. Middlesex Cty. Sewerage Auth. v. Sea Clammers, 453 U.S. 1, 13, 101 S. Ct. 2615, 2622, 69 L. Ed. 2d 435 (1981).

Employing what it perceives to be the test used by the court in Cort v. Ash, supra, Trustees urge that a civil remedy is appropriate in this case since: (1) N.J.S.A. 2A:170-90.2 was intended to benefit a particular class of people and to guard against a specific harm; (2) the statute imposes a legal duty upon corporate officers and employees that did not exist at common law; (3) the legislative purpose of protecting employees from the non-payment of benefits would not be adequately fulfilled by imposing criminal sanctions alone.

Trustees further argue that since the legislative statement accompanying the statute at issue makes it clear that N.J.S.A. 2A:170-90.2 was modeled ...


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