Bernard v. Indemnity Ins. Co. of North America

• Citation: 162 Cal.App.2d 479,329 P.2d 57
• Court: California Court of Appeals
• Decision Date: 01 August 1958
• Parties: J. W. BERNARD, J. R. Camblano, Warren Driver, L. B. Gibbs, H. J. Harkleroad, J. W. Howard, K. Kenneth, V. W. Munn, E. M. Sills, and Earl E. Thomas, as Trustees of the Carpenters Health and Welfare Trust for Southern California, Plaintiffs, Appellants, and Cross-Respondents, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Hudson Construction Company, Defendants, Indemnity Insurance Company of North America, Respondent and Cross-Appellant. Civ. 22241.

Page 57

329 P.2d 57

162 Cal.App.2d 479

J. W. BERNARD, J. R. Camblano, Warren Driver, L. B. Gibbs, H. J. Harkleroad, J. W. Howard, K. Kenneth, V. W. Munn, E. M. Sills, and Earl E. Thomas, as Trustees of the Carpenters Health and Welfare Trust for Southern California, Plaintiffs, Appellants, and Cross-Respondents, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, Hudson Construction Company, Defendants Indemnity Insurance Company of North America, Respondent and Cross-Appellant.

Civ. 22241.

District Court of Appeal, Second District, Division 1, California.

Aug. 1, 1958.

Hearing Denied Sept. 24, 1958.

George M. Cox, Los Angeles, Charles P. Scully, San Francisco, for appellants and cross-respondents.

Johnson & Stanton, Gardiner Johnson, Thomas E. Stanton, Jr., San Francisco, amici curiae (for Carpenters Health & Welfare Trust Fund for California et al.)

Anderson, McPharlin & Conners, Los Angeles, for respondent.

FOURT, Justice.

This is an appeal from a judgment which ordered the dismissal of the action as against the respondent surety company after sustaining of a demurrer to the amemded complaint without leave to amend.

There appears to be no serious dispute as to the facts of the case. Appellants constitute the board of trustees of the Carpenters Health and Welfare Trust for Southern California (sometimes hereinafter referred to as the 'Trust Fund'), which Trust Fund was established pursuant to a collective bargaining agreement (sometimes hereinafter referred to as the 'Master Labor Agreement'). ¹

The Master Labor Agreement was executed in 1954 by and between the Associated General Contractors of America, Southern California Chapter, the Building, Contractors of California, Inc., the Excavating and Grading Contractors Association, Inc., and the Home Builders Institute, Inc., on behalf of their respective contractor-employer members engaged in construction work in eleven Southern California Counties, and the United Brotherhood of Carpenters and Joiners of America, on behalf of the carpenter-employees of said contractor-employer members. The Master Labor Agreement contains provisions relating to the wages, hours and working conditions of the carpenter-employees of said members in the Southern California area.

Article XXI of the Master Labor Agreement provides as follows:

'The parties agree to establish a joint Health and Welfare Trust Agreement between the Contractors and the Carpenters. Effective September 1, 1954, the Contractors shall make payments to the Health and Welfare Fund of 5cents per hour worked per employee under this Agreement. Effective May 1, 1955, payments to the Health and Welfare Fund by the Contractor shall be increased 5cents per hour. The establishment of the Joint Trust Fund and other terms and conditions of the Health and Welfare Plan shall be completed by a joint committee. Benefits to workmen shall commence not later than six months from September 1, 1954. This provision shall remain in full force and effect and not subject for re-opening through April 30, 1957.'

The Trust Fund was established by the same parties as those who negotiated the Master Labor Agreement.

About August 27, 1954, Hudson Construction Company (sometimes herein referred to as the 'Contractor') executed a collective bargaining agreement with the Building and Construction Trades Councils of the eleven Southern California counties (sometimes herein referred to as the 'Agreement'), which provided, in effect, that the Contractor would be bound by the Master Labor Agreement.

During the effective period of the Agreement, the Contractor employed construction carpenters on four construction projects of various school districts in Los Angeles county. The Contractor, pursuant to the provisions of Government Code sections 4200-4208, provided the school districts with four separate bonds (though not identical), each applicable to one of the four construction contracts. ²

It was claimed that the Contractor failed to make certain of the payments to the Welfare Fund. An action was filed by the Trustees of the Trust Fund against the Contractor and the surety company to collect the amounts due. The amended complaint incorporated, as exhibits, the bonds in question, the Agreement between the Contractor and the Council, the Master Labor Agreement and the Agreement and Declaration of Trust.

The surety company filed a demurrer which was sustained without leave to amend, and this appeal followed from the judgment which was thereafter entered.

Indemnity Insurance Company of North America filed a cross-appeal because the court refused to grant it attorney's fees as costs. In view of our decision on the plaintiffs' appeal, little, if anything, need be said with reference to the cross-appeal.

The issue is whether, under the provisions of the Government Code, the surety is liable to the appellants for the unpaid Health and Welfare contributions which the Contractor agreed to make to the Fund.

Counsel in this matter have been of the utmost assistance to the Court through the filing of their complete and comprehensive briefs.

The payment of the contributions to the Health and Welfare Fund is obviously in payment for labor. It would seem to be apparent that if the agreement between the Contractor and the Union provided that the Contractor pay the carpenter five or ten cents per hour above the prevailing wage rate, and the carpenter had, by contract with the Union, agreed to contribute that sum to the Health and Welfare Fund, the surety would have been obligated to make good any default in Contractor's payments of the extra five or ten cents per hour. The surety asserts, in substance, that when the amounts are paid directly to the Fund, then a different rule must prevail. We are of the opinion that under the circumstances no such fine legal distinction can be drawn.

The theory or philosophy of health and welfare plans is commendable. As stated in a United States Senate Committee report, 'The existence of welfare and pension programs is a tribute to the free enterprise system. They constitute an important underpinning of our economic security, broadening and supplementing the various governmental programs.' Under the plan, the Contractor, by contributing a fixed amount per hour of work to a trust fund, administered by representatives of labor and industry, can provide benefits for employees greater than could be purchased by the individual for the same amount of money. Also, the worker who, by the nature of his craft, is required to shift from one employer to another can pool his credits with the Fund and thereby secure continued protection. It was appropriately said in Coos Bay Lumber Company v. Local 7-116, International Woodworkers of America, (C.I.O.), 1955, 203 Or. 342, 279 P.2d 508, at page 512, 280 P.2d 412:

'* * * Since such plans are mandatory subjects for collective bargaining, a union has authority to obtain a wage increase for its members in the form of an employer-paid insurance plan. It follows therefore, that it also has the power to obtain a wage increase to be applied for the purchase of insurance as the union directs. Both situations involve substantially the same thing: a wage increase which takes the form of group insurance. As compared with the situation where a collective bargaining agreement provides for a so-called employer-paid plan, a contract between an employer and a union, such as the one before us, only indicates more specifically what such a group insurance plan really is when it provides that it is to be financed by a wage increase. Therefore, the distinction between employer-paid and employee-paid plans is at best one of form, not of substance, and the rights of the parties are the same in the two situations. International Woodworkers of America, Local 6-64, C.I.O. v. McCloud River Lumber Co., D.C., 119 F.Supp. 475, 486, in interpreting the provisions of a health and welfare insurance program substantially the same as the one before us, said:

"To this Court, the difference between 'a wage increase intended as the method of financing the health and welfare plan' and 'a wage increase to pay for a Health and Welfare Program for the employees' seems like the difference between tweedledum and tweedledee!'"

In United States, for Benefit and on Behalf of Sherman v. Carter, 1957, 353 U.S. 210, 77 S.Ct. 793, 1 L.Ed.2d 776, the Supreme Court had occasion to interpret the Miller Act, 40 U.S.C.A. § 270a et seq., a federal law, designed to protect those supplying labor for the construction of federal buildings. The agreement involved in the Carter case was a collective bargaining agreement and provided for the payment of seven and one-half cents an hour to trustees of the Health and Welfare Fund, the trustees to use the money to purchase various types of life, accident, hospitalization and surgical benefit insurance for the laborer, as in the instant case. In the Carter case, as here, the laborer had no rights to the contribution except as provided in the trust agreement, and it was provided that the contributions should not constitute or be deemed to be wages. In the Carter case the contractor became insolvent after completing the construction work and paying the laborers their wages. The contractor was unable to make the contribution to the trustees, who then brought an action against the contractor's surety who had issued a bond similar to the bonds in question in this case. While we are mindful that the opinion of the Supreme Court in the Carter case is not necessarily binding upon us in this matter, nevertheless what was said by the Court in that instance is very cogent. After stating, in effect, that the surety's liability on the bond must at least be co-extensive with the obligations imposed by the Act, and that the trustees' rights against the surety depend upon and are measured by the statutory provisions, the court said (353 U.S. at page 216, 77 S.Ct. at page 796, 1 L.Ed.2d at pages...