NO. 89-140

IN THE SUPREME COURT OF THE STATE OF MONTANA
1989

JOHN C. HUGHES, as administrative manager of theWestern Conference of Teamsterspension Trust Fund, plaintiff and Appellant,-vsJIM BLANKENSHIP,d/b/a BLANKENSHIP CONSTRUCTION, f/k/aBLANKENSHIP PAVING, Defendantand Respondent.

APPEAL FROM: ~istrict Court of the Second ~udicial ~istrict, In and for the County of Silver Bow, The HonorableMark ~ullivan, Judgepresiding.

COUNSELOF RECORD:

ForAppellant: Michael C. coil,Bozeman, Montana

For Respondent:
John F. Lynch,GreatFalls,Montana

Filed: submitted on ~riefs:Sept. 21, 1989 Decided: November 7,1989Justice John Conway Harrison delivered the Opinion of the Court.

The plaintiff, John Hughes, in his capacity as administrator of theWestern 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 collectivebargaining agreementhe enteredwith the Teamsters Union was to be applicable only to employees working on non-residential patching and paving jobs and that the collectivebargaining 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 reverseand remand. The issuespresented by the appellantare: 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 DistrictCourt'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 additionalaudit? 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. Followingnegotiationswith union representative Jim Roberts,

on July 8, 1976, Blankenshipbecame signatory to the Highway and Heavy Construction Labor Contract then in force. Aspart 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 accordancewith the terms of the contract, conducted an audit. Through the audit the Fund discovered that Rlankenship was in arrears onhispension contributions. When the Fund demanded back payment Blankenship refused, citing an agreementwhich he and Jim Robertsmade 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.ustfund 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 shopwork from the coverage of the collective bargaining agreement. Only after his deposition in July of 1988, did Blankenship realize the agreement between himself and Robertswas oral rather thanwritten. 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 experiencedunion contractnegotiatorhad eitherknowingly 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 agreementas towhen and where it applied,theDistrict Court ruled thematerialmistake of factmandated rescission of the July 8, 1976 compliance agreement and all subsequent compliance agreements, the collective bargaining agreements, and the trustagreements. The District Court further ordered

an accounting of 

### all contributions paid to 

### the Fund byBlankenship on behalf of his employees and that the Fund return such contributionsdirectly to those employees. Because we find that the parol evidence ruleprohibits 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 dealtwith tangentially, as they relate to theparol 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 agreementsbetween respondentand 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),227Mont. 57, 737P.2d 71. At trial appellant objected to the introduction of evidenceof an oral modification to the collectivebargaining agreement,namely the oral side agreementbetween 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 thatby admitting such evidence the District Courtviolated the parol evidencerule. 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 orally. Waggoner v. Dallaire (9th Cir. 1981), 649 F.2d 1362, 1366. CitingWaggoner, this Court has previously held that par01 evidence of oral modi.fications to contracts subject to the LMRA is inadmissible. Audit Services, Inc. v. Houseman, 737 P.2d at. 72; Audit Services, Inc. v. Harvey Rros. Construction, 665 P.211 at 796. We sohold once again and reverse and remand for a hearing consistent with thisopinion.