Audit Services, Inc. v. Houseman , 227 Mont. 57 ( 1987 )

No. 86-509
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
AUDIT SERVICES, INC.,
Plaintiff and Respondent,
-vs-
GARY HOUSEMAN and GARY INGRAM,
d/b/a G & G HOUSING,
Defendants and Appellants.
APPEAL FROM: The District Court of the Fifth Judicial District,
In and for the County of Jefferson,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Cok & Wheat; Michael E. Wheat, Bozeman, Montana
For Respondent:
Cure, Borer & Davis; Dennis Tighe, Great Falls,
Montana
Submitted on Briefs: Feb. 13, 1987
Decided: May 151 1987
Filed: #&y 1 5 1987
Mr. Chief Justice J.A. Turnage delivered the Opinion of the
Court.
Defendants appeal the August 15, 1986, order entered by
the Fifth Judicial District Court, County of Jefferson,
granting summary judgment in favor of plaintiff. We affirm.
Defendants Gary Houseman and Gary Ingram are partners in
G & G Housing, a small general contracting business located
in Whitehall, Montana. Plaintiff Audit Services, Inc. is the
assignee of claims allegedly owed to Montana Carpenters Trust
and Montana Laborers A.G.C. Trust by G & G Housing.
In early 1982, plans were underway for the construction
of the Golden Sunlight Mine project near Whitehall. Common-
wealth Construction Company was hired as general contractor
for the project. Commonwealth entered into an agreement with
the Southwest Montana Building Trades Council which required
union benefits to be paid for all subcontractors1 employees
working on the project. In April, 1982, Houseman attended a
preconstruction meeting and discussed the various labor
agreements with local union representatives.
G & G Housing was hired as a subcontractor on the pro-
ject. On April 19, 1982, G & G Housing sent a letter of
assent to Commonwealth agreeing to be bound by the terms of
the project agreement. Houseman believed G & G Housing would
be obligated to pay union benefits only for those G & G
employees working on the Sunlight project. On behalf of G &
G Housing, Ingram signed a compliance agreement with Carpen-
ters Local Union No. 153 on April 27, 1982, and with Laborers
Local Union No. 1334 on May 1, 1982. The compliance agree-
ments provided that the employer agreed to be bound by the
current and successive labor agreements including the union
trust fund agreements. The carpenters1 union compliance
agreement provided in bold print: "THIS IS NOT A ONE JOB
AGREEMENT."
G & G Housing worked on the Sunlight project from April,
1982, until February, 1983. G & G Housing paid union bene-
fits for all of its employees working on the Sunlight project
for the duration of the job. Following completion of the
project, an audit of G & G Housing's payroll records was
conducted. Based on the audit results, the carpenters' and
laborers' union trust fund auditor asserted a claim of $8,029
against G & G Housing for delinquent trust fund
contributions.
G & G Housing's trust fund contributions were based upon
its understanding that such contributions were necessary only
for hours worked by its employees on the Sunlight project.
However, the compliance agreements and the applicable union
collective bargaining and trust fund agreements required
contributions by the employer for all employee hours worked
statewide. G & G Housing and the two unions were unable to
resolve their differences. The unions assigned their claim
to Audit Services, Inc. which filed suit concerning the
matter.
G & G Housing attempted to introduce parol evidence to
show that it intended to be bound by the compliance agree-
ments only for work done at the Sunlight Mine. Audit Servic-
es filed a motion for summary judgment contending case law
and 29 U. S.C. S 186 (c) (5)(B) prohibited oral modification of
written compliance agreements. Following briefing and oral
argument, the District Court granted summary judgment in
favor of Audit Services. G & G Housing appeals and raises
the following issue:
1) Whether parol evidence is admissible to determine an
employer's intent in entering a union compliance agreement?
Audit Services filed this action pursuant to the Labor
Management Relations Act, 29 U.S.C. § 185, et seq. In a case
between an employer and a labor organization filed under the
Labor Management Relations Act state courts have concurrent
jurisdiction with federal courts but must apply federal
substantive law. Audit Services, Inc. v. Clark Brothers
Contractors (Mont. 1982), 645 P.2d 953, 39 St.Rep. 928.
The District Court in its memorandum supporting summary
judgment found federal and Montana case law to be clearly in
opposition to G & G Housing's contention that par01 evidence
is admissible in this case. We agree.
The compliance agreements signed by G & G Housing incor-
porated the current collective bargaining and union trust
fund agreements which require union trust fund contributions
from an employer for all employee hours worked statewide. G
& G Housing seeks to introduce evidence that it intended to
be bound by the compliance agreements only in relation to the
Sunlight project.
The applicable federal law is 29 U.S.C. $ 186(c) (5)(B),
which requires the detailed basis on which payments are to be
made to a trust to be specified in a written agreement with
the employer. The leading case in the Ninth Circuit inter-
preting this provision is Waggoner v. Dallaire (9th Cir.
1981), 649 F.2d 1362.
In Waggoner, the defendant signed a short form collec-
tive bargaining agreement with the local union which incorpo-
rated by reference the terms of the master labor agreement
including four employee benefit trusts. Defendant asserted
he entered the collective bargaining agreement only upon the
oral understanding that its trust benefit terms would not be
enforced. The Ninth Circuit interpreted 29 U.S.C. S
186 (c)(5) (B), to prohibit oral modification of written trust
fund contribution obligations.
The Waggoner court outlined the policy considerations
underlying its decision:
Section 302 of the LMRA, 29 U.S.C. $ 186 (1976),
was enacted in response to serious Congressional
concern over union corruption and alleged
"shake-down" and "kickback" schemes involving union
welfare funds. ... a rule permitting oral modi-
fication of written trust arrangements would defeat
the elaborate protection section 302 provides trust
beneficiaries. Employees, basing their futures on
the promise of an old-age pension provided in a
union contract, may discover in later years to
their surprise that an oral side-agreement had
eroded the worth of their pension rights.
This Court relied on Waqgoner in Audit Services, Inc. v.
Harvey Bros. Construction (Mont. 1983), 665 P.2d 792, 40
St.Rep. 1019. In Harvey Bros., we addressed the same issue
that is presently before the Court. Defendant Harvey Bros.
Construction signed compliance agreements with local carpen-
ter and labor unions which incorporated collective bargaining
agreements requiring trust fund contributions. Defendant
attempted to argue that the agreements were orally limited in
scope to two construction projects. This Court held the
parties to the terms of the agreements and stated: "To allow
such oral modifications to stand would defeat the protections
provided the trust beneficiaries by 29 U.S.C. 186(c) (5). "
The case law cited by G & G Housing as favoring intro-
duction of parol evidence is not persuasive. In Cappa v.
Wiseman (N.D. Cal. 1979), 469 F. Supp. 437, the court permit-
ted parol evidence to aid in interpretation of an ambiguous
collective bargaining agreement. However, the court also
noted that national labor policy requires some form of writ-
ing in some circumstances; "Moreover, agreements which
provide for pension fund contributions by an employer must be
committed to writing. 29 U.S.C. S 186(c)(5) (B)." 469 F. Supp.
442, n.8.
In Operating Engineers Pension Trust v. Gilliam (9th
Cir. 1984) , 737 F.2d 1501, the Ninth Circuit permitted oral
evidence concerning whether the employer intended to enter a
collective bargaining agreement. However, the court distin-
guished Gilliam from cases such as Waggoner where the employ-
er recognized he had entered into a collective bargaining
agreement but later argued oral modification of the agree-
ment. 737 F.2d 1505.
The cases decided by the Ninth Circuit under 29 U.S.C.
§ 186(c) (5)(B), clearly hold that par01 evidence is not
admissible to modify benefit trust provisions in collective
bargaining agreements. See also Operating Engineers Pension
Trust v. Beck Engineering and Surveying (9th Cir. 1984) , 746
F.2d 557; Maxwell v. Lucky Construction Company, Inc. (9th
Cir. 1983), 710 F.2d 1395. In the present case, plaintiff
Audit Services, Inc. is entitled to judgment as a matter of
law.
The District Court is affirmed.