Lewis v. Mearns, 541-F.

• Decision Date: 05 December 1958
• Docket Number: No. 541-F.,541-F.
• Citation: 168 F. Supp. 134
• Court: U.S. District Court — Northern District of West Virginia
• Parties: John L. LEWIS, Henry G. Schmidt and Josephine Roche, as Trustees of the United Mine Workers of America Welfare and Retirement Fund, Plaintiffs, v. Harold A. MEARNS, Individually and Doing Business as Mearns Mining Company, Defendant.

168 F. Supp. 134

John L. LEWIS, Henry G. Schmidt and Josephine Roche, as Trustees of the United Mine Workers of America Welfare and Retirement Fund, Plaintiffs, v. Harold A. MEARNS, Individually and Doing Business as Mearns Mining Company, Defendant.

No. 541-F.

United States District Court N. D. West Virginia, at Fairmont.

December 5, 1958.

COPYRIGHT MATERIAL OMITTED

Harold H. Bacon and Charles L. Widman, Washington, D. C. (Val. J. Mitch, Washington, D. C., on the brief), and Louis D. Meisel, Fairmont, W. Va., for plaintiffs.

Howard Caplan and Stotler, McReynolds & Caplan, Clarksburg, W. Va., for defendant.

HARRY E. WATKINS, Chief Judge.

This is an action by the trustees of the United Mine Workers of America Welfare and Retirement Fund seeking 40¢ per ton royalties on 70,208.32 tons of coal mined by defendant, an operator of a small coal mining operation, between January 1, 1954, and November 6, 1956, or a total of $28,083.33, under a provision of the National Bituminous Coal Wage Agreement of 1950 as Amended September 29, 1952. This agreement is a collective bargaining contract entered into by the International Union, United Mine Workers of America (hereafter shortened to UMWA) and certain signatory coal operators and associations, including the defendant. The Fund of which plaintiffs are trustees is an irrevocable trust created by the 1950 Agreement pursuant to Section 302(c) of the Labor-Management Relations Act, 1947, commonly known as the Taft-Hartley Act, 29 U.S.C.A. § 186(c). Although the name of the Fund is similar to the name of the union, the Fund is actually a separate entity (in effect, a third-party beneficiary to the collective bargaining contract, see Lewis v. Benedict Coal Corporation, 6 Cir., 1958, 259 F.2d 346) with one trustee named by the union, one by the coal operators, and the third trustee a neutral party. Defendant admits having signed the contract in question here while aware of its contents, but denies liability on the ground that the agreement was void from the beginning because of fraud, and further urges that even if the contract were effective as to him that it was terminated September 1, 1955, when the UMWA and other coal operators entered into a new contract. This Court has jursidiction because of a diversity of citizenship between the parties.

1. The Defense of Fraud.

Having raised an affirmative defense, the burden of proof rests upon the defendant to show the fraud in the factum which he claims. I find that defendant has failed to carry the burden of proof on this matter. Taking into consideration all of the evidence and further considering the credibility of the witnesses, including their demeanor on the stand, their interest in the outcome of the case, if any, their ability to know the things about which they testified, and the reasonableness of their testimony, I find that there were no fraudulent representations made to, or relied upon by, defendant at the time of the execution of this collective bargaining agreement.

Defendant urges that there was fraud in the factum here in that he signed the contract only after a representation was made to him by the UMWA agents, upon which representation he relied, that the written contract was only a "formality" for the union's office records, whereas actually the contract between himself and the UMWA was an oral one including a provision that he need not necessarily pay the 40¢ per ton royalty. Defendant avers that he was told he could "pay what he could," that is, what he was financially able to pay; and since high operating costs in defendant's coal mining activities have made his business unprofitable, he alleges that he owes plaintiffs nothing. I must reject defendant's contention in this regard, however, under the overwhelming evidence to the contrary.

The representatives of the UMWA who dealt with the defendant with respect to his signing an agreement flatly deny ever telling the defendant that he need not pay the 40¢ per ton royalty called for in the written contract. There is a direct conflict in the evidence in that respect, and I find the testimony of the UMWA representatives to be the more reasonable and credible evidence. The UMWA agents state that after being told by defendant that he felt unable to take on the added burden of 40¢ per ton royalty, they told defendant that the Welfare and Retirement Fund had in the past been very lenient with small coal operators in collecting the royalty, in not always demanding immediate payment when market or operating conditions were causing the operator to have "hard times." This leniency of the Fund is borne out in this case where, despite letters having been sent to the defendant almost monthly demanding payment, no legal action was taken against him until this suit was instituted August 2, 1957, for coal produced as far back as January, 1954. Some of defendant's testimony, and that of McCauley, his employee, can be reconciled with that of the UMWA representatives when considered in this light; but defendant was not told that he could pay what he could, or that he need never pay the full 40¢ per ton.

The welfare and retirement benefits provided by plaintiffs' Fund, including hospital and medical services, unemployment, retirement, death, and disaster benefits, are a vital part of the "fringe benefits" enjoyed by workers in the coal industry in this state. One cannot accept lightly a claim such as that made by the defendant here that the union agents negotiating a collective bargaining agreement would so casually waive payments to the Fund. The benefits to be received by miners from this Fund ranks, along with the scale of wages and amount of vacation pay, as one of the most important parts of the contract so far as the UMWA is concerned, and defendant's version of the statements made to him during contract negotiations is just unreasonable, under the circumstances. I find that the defendant has failed to show by a preponderance of the evidence that he was not to pay the 40¢ per ton royalty payments to plaintiffs' Fund as called for in the written agreement.

Defendant's conduct subsequent to the signing of the contract is inconsistent with any other hypothesis except that he considered himself bound by the contract. The contract is dated January 1, 1954. Letters were sent by the Comptroller of the Welfare and Retirement Fund to the defendant on April 2, and May 6, 1954, demanding payment of royalty on coal produced since January 1, 1954. When no payment was forthcoming, the account was turned over to the Counsel to the Trustees of the Fund, who wrote defendant letters in June, August, September, October, November, and December, 1954, January and February, 1955, and April, 1956, urging him to liquidate his indebtedness incurred as a signatory to the National Bituminous Coal Wage Agreement of 1950 as Amended September 29, 1952. Defendant admits that these letters were received, that they worried him, that he was unable to pay his debt at that time, that he did not make any protest, but says that he thought the letters were only further formality.

On May 10, 1957, a representative of the Welfare and Retirement Fund visited the defendant and presented figures to indicate that defendant owed the Fund almost $10,000. That figure was apparently low because the Fund did not have knowledge of all of defendant's production until tonnage figures were provided by defendant in answer to interrogatories served upon him after the institution of this action. Defendant admitted liability to the Fund representative for the sum of almost $10,000, and proposed a plan of settlement if the Fund would wait a few months until defendant resumed mining operations in a new location. That proposal was reported to the Counsel to the Trustees, who found it unacceptable and so informed the defendant by letter of May 17, 1957, again reiterating the demand for payment of royalty on all coal produced. At no point during this entire period did the defendant make the slightest indication to the Fund that he denied liability for 40¢ per ton royalty. It would seem that any reasonable person who did not consider himself bound by a written agreement would have protested vigorously to such demands.

Defendant, as well as all of his employees, became a member of UMWA on January 1, 1954, and made application to the Fund for a card entitling him, his wife and his son to free hospital and medical care to be paid for by the Fund. This card was issued by the Fund, and although no actual hospital or medical services were obtained by defendant or his family by reason of his holding this card, the mere possession of a valid card over a period of time is a valuable right, not unlike similar benefits offered by various insurance companies which are so popular today. Just how defendant can say that he was to pay the Fund no money, yet he and his employees were recipients of this valuable benefit from the Fund, is unexplained. At any rate, on August 4, 1954, defendant was notified by the Fund that because of his nonpayment of royalties this card was being cancelled. Again defendant made no protest, but mailed the card back to the Fund, even though (he now contends) he owed the Fund nothing.

Defendant availed himself of some of the provisions of the...