361 U.S. 459 (1960), 18, Lewis v. Benedict Coal Corp.

Docket Nº:No. 18
Citation:361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442
Party Name:Lewis v. Benedict Coal Corp.
Case Date:February 23, 1960
Court:United States Supreme Court
 
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361 U.S. 459 (1960)

80 S.Ct. 489, 4 L.Ed.2d 442

Lewis

v.

Benedict Coal Corp.

No. 18

United States Supreme Court

Feb. 23, 1960

Argued October 21, 1959

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

Respondent is a party to a collective bargaining agreement between coal operators and the United Mine Workers providing for a union welfare fund meeting the requirements of § 302(c)(5) of the Taft-Hartley Act and requiring each coal operator to pay into a trust fund "for the sole and exclusive benefit" of the employees, their families, and dependents a stipulated royalty on each ton of coal produced. Respondent withheld royalties in an amount claimed to equal damages which it had sustained as a result of strikes alleged to be in violation of the same agreement, and the trustees sued to recover such royalties. Respondent defended on the ground that performance of its duty to pay the royalties to the trustees, as third-party beneficiaries of the agreement, was excused when the union violated the agreement, and it cross-claimed against the union for damages resulting from the strikes. The District Court awarded respondent a judgment on its claim against the union and awarded the trustees a judgment for the unpaid royalties, but provided that the trustees' judgment should be paid only out of the proceeds of respondent's judgment. The Court of Appeals affirmed except as to the amount of the damages awarded respondent.

Held:

1. So far as it sustains the holding of the District Court that the union violated the collective bargaining agreement, the judgment of the Court of Appeals is affirmed by an equally divided Court. P. 464.

2. The judgment of the Court of Appeals is modified to provide that the District Court shall amend the judgment in favor of the trustees to allow immediate and unconditional execution, and interest, on the full amount of the trustees' judgment against respondent. Pp. 464-471.

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(a) The collective bargaining agreement here involved is not to be construed as making performance by the union of its promises a condition precedent to respondent's promise to pay royalties to the trustees, notwithstanding a provision to the effect that the agreement "is an integrated instrument and its provisions are interdependent." Pp. 464-466.

(b) Regardless of the inferences which may be drawn from other third-party beneficiary contracts, the parties to a collective bargaining agreement must express their meaning in unequivocal words before they can be said to have agreed that the union's breaches of its promises should give rise to a defense against the duty assumed by an employer to contribute to a welfare fund meeting the requirements of § 302(c)(5), and the agreement here involved contains no such words. Pp. 466-471.

259 F.2d 346, judgment modified.

BRENNAN, J., lead opinion

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The National Bituminous Coal Wage Agreement of 1950, a collective bargaining agreement between coal operators and the United Mine Workers of America, provides for a union welfare fund meeting the requirements of § 302(c)(5) of the Taft-Hartley Act.1 The

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fund is the "United Mine Workers of America Welfare and Retirement Fund of 1950." Each signatory coal operator agreed to pay into the fund a royalty of 30¢, later increased to 40¢, for each ton of coal produced for use or for sale.

Benedict Coal Corporation, the respondent in both No. 18 and No. 19, is a signatory coal operator. From

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March 5, 1950, through July, 1953, Benedict produced coal upon which the amount of royalty was calculated to be $177,762.92. Benedict paid $101,258.68 of this amount, but withheld $76,504.24. The petitioners in No, 18, who are the trustees of the fund, brought this action to recover that balance in the District Court for the eastern District of Tennessee.2 Benedict's main defense was that the performance of the duty to pay royalty to the trustees, regarding them as third-party beneficiaries of the collective bargaining agreement, was excused when the promisee contracting party, the union and its [80 S.Ct. 492] District 28 -- who are the petitioners in No. 19 and who will be referred to as the union -- violated the agreement by strikes and stoppages of work. Benedict also cross-claimed against the union for damages sustained from the strikes and stoppages. By its answer to the cross-claim, the union denied that its conduct violated the agreement.

The jury, using a verdict form provided by the trial judge, found that the trustees were entitled to recover the full amount of the unpaid royalty, but that Benedict was entitled to a setoff of $81,017.68; the jury also gave a verdict to Benedict for that sum on its cross-claim against the union. In a single entry, two judgments were entered on this verdict. One was a judgment in favor of Benedict on its cross-claim on which immediate execution was ordered, but with direction that the sum collected from the union be paid into the registry of the court. The other was a judgment in favor of the trustees for the unpaid balance of the royalty. However, effect was given to Benedict's defense in the trustees' suit by refusing immediate execution, and interest, on the trustees' judgment, and ordering instead that that judgment be

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satisfied only out of the proceeds collected by Benedict on its judgment and paid into the registry of the court.3

The union and the trustees prosecuted separate appeals to the Court of Appeals for the Sixth Circuit. The union alleged that the District Court erred in holding that the strikes and stoppages violated the collective bargaining agreement, contending that, properly construed, the agreement did not forbid the strikes and stoppages; in the alternative, the union urged that the damages awarded were excessive. The trustees alleged as error primarily the refusal of the trial court to allow them immediate and unconditional execution, and interest, on their judgment against Benedict.

The Court of Appeals affirmed the District Court except as to the amount of damages awarded to Benedict

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on its cross-claim, which the court adjudged was excessive. The court held that, under the evidence, Benedict's damages would not equal the amount of the trustees' judgment of $76,504.26. The case was remanded for a redetermination of Benedict's damages, with instructions that

[t]he judgment in favor of the Trustees will then be amended by the district court to allow execution and interest on that part of the said judgment which is in excess of the set-off in favor of Benedict as so redetermined.

259 F.2d 346, 355. This left unaffected so much of the District Court's order as predicated the trustees' recovery, to the extent of the amount of Benedict's judgment as finally determined, upon Benedict's recovery of that judgment. The trustees and the union filed separate [80 S.Ct. 493] petitions for certiorari. We granted the trustee's petition, No. 18, and also the union's petition, No. 19, except that we limited the latter grant to the question whether the strikes and stoppages complained of by Benedict violated the collective bargaining agreement. 359 U.S. 905.

In No. 19, the Court is equally divided. The judgment of the Court of Appeals, so far as it sustains the holding of the District Court that the union violated the collective bargaining agreement, is therefore affirmed.

We turn to the question presented in No. 18, whether the lower courts were correct in holding in effect that Benedict might assert the union's breaches as a defense to the trustees' suit, for to the extent Benedict (the promisor) does not collect from the union (the promisee) the union's liability is set off against Benedict's liability to the third-party beneficiary. The answer to that question requires, we think, our consideration of the nature of the interests of the union, the company, and the trustees in the fund under the collective bargaining agreement.

The provisions of the collective bargaining agreement creating the fund include the express provision that "this

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Fund is an irrevocable trust created pursuant to Section 302(c) of the `Labor-Management Relations Act, 1947.'" Another provision specifies that the purposes of the fund shall be all purposes "provided for or permitted in Section 302(c)."4 In this way, the agreement plainly declares what the statute requires, namely, that the fund shall be used "for the sole and exclusive benefit" of the employees, their families and dependents. Thus, the fund is in no way an asset or property of the union.

Benedict does not, however, base its claim of setoff on any contention that the royalty was owing to the union and might because of this be applied to the payment of its damages. Benedict's position is that, in an amount equal to the amount of the damages sustained from the union's...

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