Hughes v. Blankenship

NO. 89-140
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
JOHN C. HUGHES, as administrative
manager of the Western Conference of
Teamsters pension Trust Fund,
plaintiff and Appellant,
-vs-
JIM BLANKENSHIP, d/b/a BLANKENSHIP
CONSTRUCTION, f/k/a BLANKENSHIP PAVING,
Defendant and Respondent.
APPEAL FROM: ~istrictCourt of the Second ~udicial~istrict,
In and for the County of Silver Bow,
The Honorable Mark ~ullivan, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Michael C. coil, Bozeman, Montana
For Respondent:
John F. Lynch, Great Falls, Montana
submitted on ~riefs: Sept. 21, 1989
Decided: November 7, 1989
Filed:
Justice John Conway Harrison delivered the Opinion of the
Court.
The plaintiff, John Hughes, in his capacity as
administrator of the Western Conference of Teamsters' Pension
Fund, initiated this suit to recover $45,427.39 owed by the
defendant Jim Blankenship as a union contractor for unpaid
contributions to the Pension Fund (Fund), plus damages and
interest. Blankenship defends on the grounds that the
collective bargaining agreement he entered with the Teamsters
Union was to be applicable only to employees working on
non-residential patching and paving jobs and that the
collective bargaining agreement actually entered was entered
into by mistake. The Union is not a party to this lawsuit.
Following a non-jury trial, the District Court entered
judgment in favor of Blankenship, ordering the Fund to do an
accounting of Blankenship's contributions and to return all
funds paid by Blankenship to his employees. From this
decision the Fund now appeals. We reverse and remand.
The issues presented by the appellant are:
1. Is the District Court's judgment consistent with
the governing principles of federal labor law by which this
case is controlled?
2. Was the contract between the parties ratified by
the respondent's actions such that he is not entitled to
rescission?
3. Does the par01 evidence rule bar admission of
certain evidence herein, and if barred, does the remaining
evidence support the District Court's conclusions?
4. Can the District Court sua sponte order relief not
requested by either party?
5. Is the appellant entitled to gather financial data
from the respondent for the period of 1986 to 1988 for the
purposes of an additional audit?
Since 1972 the respondent, Jim Blankenship, has owned
and operated Blankenship Construction, formerly known as
Blankenship Paving, in Butte, Montana. Pickets went -up at
the sites where Blankenship's company was working in 1976.
Following negotiations with union representative Jim Roberts,
on July 8, 1976, Blankenship became signatory to the Highway
and Heavy Construction Labor Contract then in force. As part
of that document Rlankenship was also required to sign a
collective bargaining compliance agreement. Subsequent
compliance agreements were signed on November 9, 1977 and
July 31, 1981. In accordance with the original contract and
the compliance agreements, Blankenship also signed
employer - union pension certification documents, by which he
agreed to be bound by the declaration of trust and pension
plan of the Fund.
The Fund, in accordance with the terms of the contract,
conducted an audit. Through the audit the Fund discovered
that Rlankenship was in arrears on his pension contributions.
When the Fund demanded back payment Blankenship
refused, citing an agreement which he and Jim Roberts made at
the time Blankenship entered into the Highway and Heavy
Construction Labor Contract. The gist of the side agreement
was that employees working on residential and small,
commercial-type paving jobs would not be subject to the
Highway and Heavy Construction Labor Contract. Blankenship
believed these terms were written as part of the contract.
At trial Blankenship testified that he only signed the
contracts because union representative Roberts had assured
him that he had no obligation under the union contract to
make contributions to the pension tr.ust fund for employees
working on small commercial or residential paving iobs. An
earlier audit performed by a Montana Teamsters Health and
Welfare Trust Fund auditor gave credence to the agreement
between Blankenship and Roberts, excluding Blankenship
Construction employees engaged in residential, small
com~ercial,and shop work from the coverage of the collective
bargaining agreement. Only after his deposition in July of
1988, did Blankenship realize the agreement between himself
and Roberts was oral rather than written.
Following a bench trial the District Court concluded
that the contract between the parties should be rescinded
because the mutual mistake of fact concerning the side
agreement between union representative Roberts and
Blankenship was so substantial and fundamental as to defeat
the object of the parties. The court, in its findings of
fact and conclusions of law, ruled that Roberts as an
experienced union contract negotiator had either knowingly or
negligently misrepresented the conditions under which a
compliance agreement or a collective bargaining agreement
could legally be executed. The District Court found that
Roberts, in his deposition, admitted he made the
representation to Blankenship that only employees working on
"heavy" construction were subject to the contract and that
the representation was not set forth in the standard form
compliance agreement in contravention to federal labor law.
Because both parties shared the misconception that there
could be oral modification of the collective bargaining
agreement as to when and where it applied, the District Court
ruled the material mistake of fact mandated rescission of the
July 8, 1976 compliance agreement and all subsequent
compliance agreements, the collective bargaining agreements,
and the trust agreements. The District Court further ordered
an accounting of all contributions paid to the Fund by
Blankenship on behalf of his employees and that the Fund
return such contributions directly to those employees.
Because we find that the parol evidence rule prohibits
the introduction of evidence regarding any oral modification
of the labor contract, we will only specifically address
appellant's third issue. All remaining issues will only be
dealt with tangentially, as they relate to the parol evidence
rule in labor contracts.
Appellant brought this case to force the respondent to
make contributions to the Fund in accordance with the labor
contract and compliance agreements between respondent and the
union. As such, the Labor Management Relations Act (LMRA),
Section 302, 29 U.S.C. 55 185 et seq., applies.
This Court has often noted that State courts possess
concurrent jurisdiction with Federal courts but must apply
Federal substantive law where suit has been initiated under
the LMRA to enforce a contract between a labor organization
and an employer. Audit Services, Inc. v. Clark Brothers
Contractors (1982), 198 Mont. 274, 645 P.2d 953; Audit
Services, Inc. v. Harvey Bros. Construction (1983), 204 Mont.
484, 665 P.2d 792; and Audit Services, Inc. v. Houseman
(1987), 227 Mont. 57, 737 P.2d 71.
At trial appellant objected to the introduction of
evidence of an oral modification to the collective bargaining
agreement, namely the oral side agreement between Blankenship
and Roberts exempting certain employees from coverage under
the contract. The court heard testimony from both
Blankenship and Roberts concerning the oral modifications.
Appellant argues that by admitting such evidence the District
Court violated the parol evidence rule. We agree.
As noted above, the State court must apply Federal law
in labor contract disputes. In a leading case, the Ninth
Circuit Court interpreted Federal statute 29 U.S.C.
§ 185(c)(5) to mean that written trust fund contribution
obli.gations cannot be modified o r a l l y . Waggoner v . D a l l a i r e
(9th C i r . 1 9 8 1 ) , 649 F.2d 1362, 1366. C i t i n g Waggoner, t h i s
Court has previously held that par01 evidence of oral
modi.fications to contracts subject to the LMRA is
inadmissible. Audit S e r v i c e s , Inc. v. Houseman, 737 P.2d at.
72; Audit Services, Inc. v. Harvey R r o s . Construction, 665
P.211 a t 796. W e s o h o l d o n c e a g a i n and r e v e r s e and remand
f o r a hearing c o n s i s t e n t with t h i s opinion.