Audit Services, Inc. v. Frontier-West, Inc.
| Decision Date | 03 March 1992 |
| Docket Number | INC,No. 91-330,FRONTIER-WES,91-330 |
| Citation | 252 Mont. 142,827 P.2d 1242 |
| Parties | AUDIT SERVICES, INC., a Montana corporation, Plaintiff and Respondent, v., a corporation, Defendant and Appellant. |
| Court | Montana Supreme Court |
Christopher B. Swartley, Datsopoulos, MacDonald & Lind, Missoula, for defendant and appellant.
Dennis Tighe, Cure, Borer & Davis, Great Falls, for plaintiff and respondent.
The appellant, Frontier-West, Inc., appeals from a judgment entered by the District Court of the Fourth Judicial District, Missoula County. The judgment awarded the respondent, Audit Services, Inc., $1,791.32, representing $3,534.90 in delinquent contributions, liquidated damages, interest and audit fees less an offset of $1,743.58, plus $14,266 in attorney's fees and $91.35 in costs. We affirm and remand for determination of reasonable attorney's fees on appeal.
The issues on appeal are:
1. Did the District Court err in determining that a contract existed between the parties?
2. Did the District Court err in awarding judgment to Audit Services for liquidated damages, interest and audit fees?
3. Did the District Court err in awarding attorney's fees to Audit Services?
4. Is Audit Services' claim estopped due to a failure to act upon constructive notice by Frontier-West?
The appellant, Frontier-West, is a construction contractor. The respondent, Audit Services, is the assignee of the Laborers-A.G.C. Pension Trust Fund, the Laborers-A.G.C. Training Trust Fund, the Laborers-A.G.C. Health and Welfare Trust Fund and the Southwest Montana Vacation--Savings Trust Fund (Trust Funds) for claims for fringe benefit contributions, liquidated damages, interest, audit fees and attorney's fees against Frontier-West.
From July 1987 through October 1987, Frontier-West was a subcontractor for American Asphalt, Inc. on a project at Malmstrom Air Force Base in Great Falls, Montana. On July 6, 1987, Frontier-West signed a project-only compliance agreement with the Montana District Council of Laborers. The compliance agreement obligated Frontier-West to abide by the terms and conditions of the collective bargaining agreement between American Asphalt and the Laborers and to be bound by and become a party to the trust agreements establishing the Trust Funds. After Frontier-West signed the compliance agreement, the Laborers unilaterally added a clarifying clause to that agreement. The clarification related solely to American Asphalt's obligations under the collective bargaining agreement.
The trust agreements establishing the Trust Funds obligate an employer delinquent in paying fringe benefit contributions to pay liquidated damages and interest. Under the trust agreements, an employer is delinquent if it does not pay contributions by the 20th day of the calendar month in which they are due. The trust agreements further provide that if an audit of an employer's payroll records discloses that the employer has a reporting error greater than five percent of the total hours to be reported, the employer must bear the costs of the audit.
Frontier-West employed a number of people to perform laborer work on the Malmstrom project and paid fringe benefit contributions to the Trust Funds based upon the number of labor hours worked. However, Frontier-West did not make fringe benefit contributions to the Trust Funds for 957 hours worked by the three sons of the principal owners of the corporation and for 546 hours worked by four other employees performing laborer work.
On February 22, 1988, H.G. "Gus" Sand, an independent accountant hired by the Trust Funds, completed an audit of Frontier-West's corporate payroll records covering the work on the Malmstrom project. The audit disclosed the unreported hours. Mr. Sand calculated that Frontier-West owed the Trust Funds $6,386.47 for contributions, liquidated damages, interest and audit fees. The results of the audit were sent to Frontier-West.
Frontier-West took the position that it was not required to pay fringe benefit contributions for the hours worked by the owners' sons. It requested a revised audit separating the 957 unreported hours for the owners' sons from the total unreported hours. Mr. Sand supplied the revision, which recalculated the total into contested and uncontested portions. The contested portion of the audit covered the 957 unreported hours for the owners' sons and totalled $4,161.41. The uncontested portion of the audit covered the remaining 546 unreported hours and totalled $2,476.87, of which $1,730.45 represented fringe benefit contributions due to the Trust Funds. The remainder represented liquidated damages, interest and audit fees.
In May 1988, after receiving the revised audit, Frontier-West mailed a check to Mr. Sand for $1,730.45. The check was unaccompanied by instructions, remittance reports or correspondence. Mr. Sand forwarded the check to counsel for Audit Services who informed Frontier-West that the partial payment check would not be deposited pending receipt of the remaining money owed for the contested and uncontested portions of the audit. Frontier-West did not pay or offer to pay the remaining balance of the uncontested portion of the audit. Audit Services did not deposit the check, which was returned to Frontier-West after this suit was filed.
On September 16, 1988, Audit Services filed suit against Frontier-West pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001, et seq. Audit Services' complaint alleged that Frontier-West breached its collective bargaining and trust agreement obligations to pay fringe benefit contributions. It sought payment of the delinquent contributions, together with liquidated damages, interest, audit fees and attorney's fees for both the contested and uncontested portions of the audit.
On February 16, 1990, the National Labor Relations Board issued a decision concerning American Asphalt's collective bargaining agreement. The NLRB clarified that the bargaining unit excluded children and spouses of owners or substantial shareholders. It further stated that its order was limited to clarification of the unit as related to the specific issues before it and that it had no authority to resolve the contract dispute over fringe benefit contributions involving Frontier-West.
On March 12, 1991, Audit Services voluntarily dismissed that portion of its complaint which sought contribution payments for work performed by the owners' sons. It continued to seek collection of the contributions, liquidated damages, interest, audit fees and attorney's fees related to the uncontested portion of the audit. That same day, Frontier-West unconditionally tendered $1,730.45, representing the delinquent contributions, in partial satisfaction of the sums alleged to be due. Audit Services accepted Frontier-West's tender.
The District Court held a hearing on Audit Services' remaining claims related to liquidated damages, interest, audit fees and attorney's fees and subsequently entered judgment in favor of Audit Services. The court concluded that an enforceable contract existed between the parties and that Frontier-West breached the contract by failing to pay fringe benefit contribution payments when due and liquidated damages, interest and audit fees when billed for those amounts. It concluded that Audit Services was entitled to recover $1,730.45 in delinquent contributions, $443.59 in liquidated damages, $724.29 in interest and $636.57 in audit fees. The total owing was offset by $1,743.58, representing Frontier-West's partial payment of $1,730.45 and an overpayment of $13.13 to the Trust Funds. The District Court further concluded that Audit Services was entitled to attorney's fees of $14,266. This appeal followed.
Did the District Court err in determining that a contract existed between the parties?
Initially, we note an issue of importance which has not been addressed by the parties or the District Court. From September 16, 1988, when the complaint was filed, until March 7, 1991, Frontier-West appeared in this action solely through its president, Edward P. Murphy. On March 7, 1991, the law firm of Datsopoulos, MacDonald & Lind gave notice of appearance on Frontier-West's behalf and continues to appear on its behalf on appeal. We take this opportunity to caution the district courts with respect to the propriety of allowing a corporate officer who is not an attorney to appear on behalf of a corporation. A corporation is a separate legal entity and cannot appear on its own behalf through an agent other than an attorney. Weaver v. Law Firm of Graybill, et al. (1990), 246 Mont. 175, 178, 803 P.2d 1089, 1091.
In a case brought to enforce a contract between an employer and a labor organization, state courts have concurrent jurisdiction with federal courts but, in exercising that jurisdiction, state courts must apply federal substantive law. Audit Services, Inc. v. Harvey Bros. Constr. (1983), 204 Mont. 484, 487, 665 P.2d 792, 794. A state court may rely on state contract law as long as it effectuates the policy underlying federal labor legislation. Kemmis v. McGoldrick (9th Cir.1983), 706 F.2d 993, 996.
Frontier-West contends that it never approved the contract modification made by the Laborers. It asserts that there was no valid contract upon which Audit Services could collect.
The District Court ruled that the compliance agreement signed by Frontier-West was a valid, enforceable contract because the modification did not materially alter Frontier-West's obligations under the agreement, Frontier-West ratified the agreement, and Frontier-West's expectation when it entered into the agreement was to be bound. A trial court's findings of fact in a non-jury trial will not be disturbed unless they are clearly erroneous. Rule 52(a), M.R.Civ.P. Conclusions of law will be upheld if they are correct. Steer, Inc. v. Department of Revenue (1990), 245...
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