Audit Services, Inc. v. Elmo Road Corp.

                                            No.    13749

                        I N THE SUPREME COURT O THE STATE O M N A A
                                               F           F O T N

                                                     1978



    AUDIT SERVICES I I N C I            .
    a Montana c o r p o r a t i o n ,

                                  P l a i n t i f f and A p p e l l a n t ,



    E M ROAD CORPORATION,
     L O
    a corporation,

                                  D e f e n d a n t and R e s p o n d e n t .



Appeal from :                  D i s t r i c t Court d t h e Fourth J u d i c i a l D i s t r i c t ,

                               H o n o r a b l e J a c k L.   Green, Judge p r e s i d i n g .

    C o u n s e l o f Record:

                  For Appellant:

                       George, W i l l i a m s a n d Benn, M i s s o u l a , Montana
                       R i c hard Ranney a r p u e d , M i s s o u l a , Montana

                  For Respondent:

                       P o o r e , PIcKenzie, Roth, R o b i s c h o n and R o b i n s o n ,
                        B u t t e , Montana
                       David Wing a r g u e d , B u t t e , Montana

                  F o r Amicus C u r i a e :

                       H i l l e y and L o r i n g , Great F a l l s , Nontana
;    ,   ;<=.,.        E m i l i e Loring a r g u e d , G r e a t F a l l s , Montana
                       M c K i t t r i c k and D u f f y , G r e a t F a l l s , Plontana
                       D . P a t r i c k M c K i t t r i c k a r c p e d , G r e a t F a l l s , FIontana



                                                                      S u b m i t t e d : J a n u a r y 31, 1978

                                                                          Decided : FEB     2 2 1n
                                                                                                 9
Filed:               FEB 2 2 1E
                              9
M r . J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of t h e Court:


       A c o l l e c t i o n agency, on t h e behalf of t h r e e union t r u s t

funds, sued a corporation f o r an accounting and judgment f o r

a l l sums owing pursuant t o c e r t a i n c o l l e c t i v e bargaining agree-

ments and d e c l a r a t i o n s of t r u s t .   Following a nonjury t r i a l ,

t h e D i s t r i c t Court, Lake County, denied r e l i e f t o t h e c o l l e c t i o n

agency.      The c o l l e c t i o n agency appeals.

       P l a i n t i f f Audit S e r v i c e s , Inc. i s a c o l l e c t i o n agency f o r

t h r e e union t r u s t funds.       The t r u s t funds a r e :     Laborer's A.G.C.,

Health and Welfare, Pension and Training; Operating Engineers

T r u s t of Montana, Health and Welfare, Pension, Apprenticeship

and Vacation;         ~ e a m s t e r ' sT r u s t of Montana, Health and Welfare.

P l a i n t i f f i s attempting t o r e q u i r e defendant Elmo Road Corporation

t o s a t i s f y i t s o b l i g a t i o n s under c o l l e c t i v e bargaining compliance

agreements t o make c o n t r i b u t i o n s t o t h e s e t r u s t funds.

       During t h e s p r i n g 1972, r e p r e s e n t a t i v e s of t h e Operating

Engineers, Teamsters and Laborers Unions contacted t h e Elmo Road

Corporation and requested t h a t i t become a p a r t i c i p a n t i n t h e

t r u s t s involved.      The union r e p r e s e n t a t i v e s t a l k e d t o Roy Winslow,

t h e g e n e r a l manager of t h e defendant corporation.                Winslow duly

executed c o l l e c t i v e bargaining compliance agreements w i t h t h e

union r e p r e s e n t a t i v e s . The compliance agreements provide t h a t

defendant agrees t o be bound by the e x i s t i n g c o l l e c t i v e bargaining

agreement i n e f f e c t between t h e union and t h e employer's a s s o c i a -

t i o n , t h a t defendant agrees t o comply with t h e various a r t i c l e s

of t r u s t which have been s e t up by c o l l e c t i v e bargaining agreement,

and t h a t compliance w i l l continue u n t i l such time a s e i t h e r p a r t y
n o t i f i e s t h e o t h e r i n w r i t i n g a t l e a s t s i x t y days before t h e

e x p i r a t i o n of t h e then e x i s t i n g c o l l e c t i v e bargaining agreement

of i t s i n t e n t i o n t o withdraw.      The d e c l a r a t i o n s of t r u s t , which

t h e defendant agreed t o comply with, s e t f o r t h a schedule f o r

c o n t r i b u t i o n s t o t h e t r u s t funds by t h e employers bound t o t h e

agreements.

       When t h e compliance agreements were signed, defendant was

working a s a subcontractor on a Polson school job f o r S l e t t e n

Construction Company.              S l e t t e n Construction was a s i g n a t o r y t o

c o l l e c t i v e bargaining agreements with each of t h e t h r e e unions

involved here.          These agreements contained c l a u s e s r e q u i r i n g t h e

signatory employer t o r e q u i r e a l l of h i s subcontractors t o comply

with t h e conditions of t h e agreements.

       From A p r i l 1972 t o October 1972, t h e period of t h e S l e t t e n

Construction subcontract, defendant paid t h e required c o n t r i -

butions t o t h e t r u s t funds.         When defendant stopped c o n t r i b u t i n g ,

t h e t r u s t s s e n t delinquency n o t i c e s .    N payments were made by
                                                          o

defendant.        The t r u s t s , t h e r e f o r e , assigned t h e i r causes of a c t i o n

to plaintiff.         P r i o r t o t r i a l p l a i n t i f f had t h e records of defendant

audited.        This a u d i t i n d i c a t e d an amount owing t o t h e t h r e e

t r u s t funds of $31,842.53, which includes c o n t r i b u t i o n s , l i q u i d a t e d

damages, i n t e r e s t and a u d i t f e e s .     I n a d d i t i o n , under t h e terms of

t h e t r u s t documents, a t t o r n e y f e e s a r e recoverable.           Prior t o

t r i a l , p l a i n t i f f incurred a t t o r n e y f e e s i n t h e amount of $1,802.02.

       The case was t r i e d i n t h e D i s t r i c t Court on September 29, 1976.

T h e r e a f t e r judgment was rendered f o r defendant.                Findings of

f a c t and conclusions of law were entered on December 7 , 1976.                                The

c o u r t found t h a t Roy Winslow d i d n o t have a u t h o r i t y t o s i g n t h e

compliance agreements on behalf of Elmo Road Corporation; t h a t he
did not believe the compliance agreements would bind the corpora-

tion to a long term collective bargaining agreement; that the

unions had not been certified as the exclusive bargaining repre-

sentatives of defendant's employees; and, that the collective

bargaining agreements, which the compliance agreements purported

to bind defendant, were not such contracts which were usual, proper

or necessary to be made in the ordinary transaction of defendant's
business.   From these findings, the court concluded that Roy Winslow

had no actual, implied, or ostensible authority to bind defendant
to the collective bargaining agreements; that because he had no

authority to bind the defendant to the agreements, the defendant

has no obligation to contribute to the trust funds; and, that

because the unions were not certified by the National Labor Rela-
tions Board as the exclusive bargaining representative of defendant' s
employees and did not represent a majority of the employees, the
compliance agreements are invalid and unenforceable.   Plaintiff

now appeals from this judgment.

     Three issues are before this Court:

     1) Whether the District Court erred in finding, concluding,

and decreeing that the agreements entered into between the

defendant and the unions were invalid because the employer's

general manager had no authority to bind the defendant to the

agreements?
     2 Whether the defendant by making the contributions to the
      )
trust funds for a period of time in 1972, ratified the collective
bargaining compliance agreements?
     3 Whether the District Court erred in invalidating the
      )
agreements between the employer and the unions which required the

employer to make contributions to the trust funds on behalf of

its employees?
        The g e n e r a l manager of a corporation can have e i t h e r a c t u a l ,

 implied, o r o s t e n s i b l e a u t h o r i t y t o e n t e r i n t o c o n t r a c t s on behalf

 of t h e corporation.          The g e n e r a l r u l e i s s t a t e d i n t h i s language:

              "Unless h i s a u t h o r i t y i s s p e c i a l l y r e s t r i c t e d , a
        g e n e r a l o r managing o f f i c e r o r agent may e n t e r i n t o
        any c o n t r a c t which i s u s u a l , proper o r necessary t o
        be made, i n t h e ordinary t r a n s a c t i o n of t h e company's
        b u s i n e s s , o r which he i s held o u t t o t h e public a s
        having a u t h o r i t y t o make, o r which, although beyond
        h i s g e n e r a l powers, he i s expressly authorized t o make;
        and a t h i r d person who d e a l s w i t h such manager i s n o t
        a f f e c t e d by s e c r e t l i m i t a t i o n s upon such a u t h o r i t y .
        * * *"          19 C.J.S. Corporation, §1043(f).

This r u l e has been adopted i n Montana.                   E l e c t r i c a l Products

 Consolidated v. E l Campo, I n c . ,            (1937), 105 Mont. 386, 73 P.2d

 199.

        I n t h i s case t h e t r i a l c o u r t concluded Winslow, a s t h e

 g e n e r a l manager of Elmo Road Corporation, had no a c t u a l , implied,

. o r o s t e n s i b l e a u t h o r i t y t o s i g n t h e compliance agreements on

behalf of t h e corporation.               P l a i n t i f f contends t h e evidence does

n o t support t h i s conclusion.

        I n reviewing t h e f i n d i n g s and judgment of t h e D i s t r i c t

Court, w e w i l l n o t d i s t u r b those f i n d i n g s i f they a r e supported

by s u b s t a n t i a l evidence,      Johnson v. J a r r e t t , (1976), 169 Mont.

408, 548 P.2d 144; Fautsch v. Fautsch, (1975), 166 Mont. 98,

530 P.2d 1172.          The evidence must be viewed i n t h e l i g h t most

 favorable t o t h e p r e v a i l i n g party.        Johnson v. J a r r e t t , supra;

Luppold v.Lewis,          (1977),             Mont ,           , 563    P.2d 538, 34 S t . Rep.



        Applying t h a t standard t o t h i s c a s e , t h e D i s t r i c t Court's

f i n d i n g t h a t Roy Winslow had no a c t u a l a u t h o r i t y t o bind t h e c o r -

p o r a t i o n t o t h e compliance agreements i s supported by s u b s t a n t i a l

evidence.        The evidence supporting t h i s f i n d i n g i s t h a t : (1)

Roy winslow's employment c o n t r a c t l i m i t e d h i s a u t h o r i t y t o a c t
on behalf of the corporation; (2) t h e a u t h o r i t y of t h e g e n e r a l

manager i s s e t f o r t h i n t h e by-laws and r e g u l a t i o n s of t h e cor-

p o r a t i o n ; and ( 3 ) t h e testimony of t h e p r e s i d e n t of t h e corpora-

t i o n , A 1 Hewankorn, a s t o t h e a u t h o r i t y of t h e g e n e r a l manager.

       The employment c o n t r a c t o u t l i n e d t h e g e n e r a l manager's

d u t i e s t o be: (1) procurement of c o n t r a c t s , obtaining financing

and necessary equipment; (2) o v e r a l l supervision of f i e l d work,

o f f i c e work, and equipment maintenance; and ( 3 ) h i r i n g , f i r i n g ,

d i s c i p l i n i n g and a s s i g n i n g jobs t o a l l employees.       The c o n t r a c t

provided t h e defendant agreed t o h i r e Winslow a s i t s g e n e r a l

manager i n accordance w i t h t h e a u t h o r i t y and r e s p o n s i b i l i t i e s

o u t l i n e d i n i t s r e g u l a t i o n s and by-laws.     The r e g u l a t i o n s and

by-laws s t a t e g e n e r a l l y t h a t t h e manager w i l l c o n s u l t with t h e

Board of D i r e c t o r s on a l l major q u e s t i o n s of p o l i c y and be pre-

pared t o submit such questions t o t h e shareholders f o r f i n a l

decision.       I n h i s testimony A 1 Hewankorn s t a t e d t h a t Winslow had

no a u t h o r i t y t o bind t h e corporation t o any c o l l e c t i v e bargaining

agreement and t h e corporation considered any r e l a t i o n s h i p with

a l a b o r union t o be a major question of policy t h a t would have

t o be decided by t h e shareholders and n o t t h e general manager.

       A g e n e r a l manager can have implied a u t h o r i t y t o e n t e r

c o n t r a c t s on behalf of a corporation.                  Implied a u t h o r i t y has

been defined i n t h i s manner:

            "Implied a u t h o r i t y i s a form of a c t u a l a u t h o r i t y
       derived by i m p l i c a t i o n from t h e p r i n c i p a l ' s words o r
       deeds. It i s sometimes s a i d t h a t implied a u t h o r i t y
       i s a c t u a l a u t h o r i t y c i r c u m s t a n t i a l l y proved. I n
       g e n e r a l , an agent has implied a u t h o r i t y t o do those
       a c t s which a r e u s u a l and i n c i d e n t a l t o t h e authorized
       t r a n s a c t i o n and those which a r e reasonably
       necessary t o accomplish t h e p r i n c i p a l ' s
       purposes, including t h e making of whatever
       c o n t r a c t s a r e needed."  S e l l , Agency, 540 (1975).

       The r u l e i n Montana on implied a u t h o r i t y has been s t a t e d a s

follows :

            "No p r i n c i p l e of law i s more c l e a r l y s e t t l e d than
       t h a t an agent t o whom i s i n t r u s t e d by a corporation
       t h e management of i t s l o c a l a f f a i r s , whether such
       agent be designated a s p r e s i d e n t , general manager,
       o r superintendent, may bind h i s p r i n c i p a l by c o n t r a c t s
       which a r e necessary, proper, o r usual- t o be made i n
       t h e ordinary prosecution of i t s business.                  ***      The
       f a c t t h a t he occupies, by t h e consent of t h e board
       of d i r e c t o r s , t h e p o s i t i o n of such an a g e n t , implies,
       without f u r t h e r proof, t h e a u t h o r i t y t o do anything
       which t h e corporation i t s e l f may do, s o long a s t h e
       a c t done p e r t a i n s t o t h e ordinary business of t h e
       company." Trent v. Sherlock, (1900), 24 Mont. 255,
       263, 6 1 P. 650.

       I n t h i s c a s e , t h e D i s t r i c t Court found t h a t Roy Winslow

d i d n o t have implied a u t h o r i t y t o s i g n t h e compliance agreements

on behalf of Elmo Road Corporation.                    Specifically, the court

found i n i t s f i n d i n g of f a c t X V I :

             "The c o l l e c t i v e bargaining agreements, t o which t h e
       v a r i o u s compliance o r p a r t i c i p a t i n g agreements executed
       by Roy Winslow purport t o bind t h e Elmo Road Corpora-
       t i o n , were n o t such c o n t r a c t s which were u s u a l , proper
       o r necessary t o be made i n t h e ordinary t r a n s a c t i o n
       of t h e Elmo Road Company' s business              ."
P l a i n t i f f contends t h e evidence does n o t support t h i s finding.

W agree.
 e

       The evidence i n d i c a t e s Roy Winslow signed the compliance

agreements t o o b t a i n t h e Polson school job subcontract from

S l e t t e n Construction.       He t e s t i f i e d t h a t i f he had n o t signed

t h e agreements, Elmo Road Corporation would n o t have obtained

the contract.         A t t h e t r i a l of t h i s c a s e , i n i t s b r i e f , and

i n o r a l argument, defendant admits Winslow signed t h e agreements

s o t h e corporation could o b t a i n t h e subcontract.                However,
defendant contends the signing of the agreements was not usual,

proper or necessary for Winslow to do in the ordinary transaction
of defendant's business.
     We believe Winslow did have implied authority to sign the

compliance agreements and the finding of the District Court on this

issue cannot be upheld.    The court found that one of Winslow's

responsibilities was to procure work for the corporation. This

finding is supported by the evidence. In order to procure work

on the Polson school job, the evidence shows that he had to sign
the compliance agreements. Thus, his signing of those agreements

was proper, usual and necessary in the transaction of defendant's

business. Winslow had the implied authority to sign the agreements.
     Plaintiff also contends Winslow had ostensible authority

to sign the agreements. As stated earlier, ostensible authority

is another form of authority a general manager can have to act on

behalf of a corporation.    Ostensible authority is defined in section

2-124, R.C.M.   1947:

        "Ostensible authority is such as a principal,
     intentionally or by want of ordinary care, causes
     or allows a third person to believe the agent to
     possess. 1
              '



     The District Court concluded Roy Winslow did not have

ostensible authority to sign the compliance agreements.    Plaintiff

argues the evidence does not support this conclusion.

     Plaintiff's argument is that the evidence showed Winslow
was, as general manager of the corporation, the official representa-
tive of defendant's company; that the restrictions on his authority
were in regulations and by-laws, which were not recorded or filed
 nor available to be viewed by the union representatives; that
 A1 Hewankorn, president of Elmo Road Corporation, was on the

 job site when the union representatives came to get the agree-
 ments signed and he made no effort to tell the union agents

 they should talk to him and not Roy Winslow; that both Winslow
 and Hewankorn testified they knew of no facts that would have

 put the union representatives on notice of the restrictions in
 Winslow's authority; and that general managers usually sign such
 agreements on behalf of their companies.

     On the other hand, defendant argues the evidence shows

that Winslow did not have ostensible authority.   It again argues
the agreements were signed to obtain the subcontract and this

is not evidence of ostensible authority. Further, it argues
that A1 Hewankorn testified the by-laws and regulations of the

corporation were free to be examined by the union representatives

if they chose to examine them; and Winslow testified he did not

consider himself the official representative of the corporation
for all purposes.

    This Court has previously held that ostensible authority

arises from the facts of the particular case and the test is
found in a determination of the exact extent to which the principal

held the agent out or permitted him to hold himself out as
authorized, and what a prudent person acting in good faith under

the circumstances would reasonably believe the agent's authority
to be.   Butler Mfg. Co. v. J & L Imp. Co., (1975), 167 Mont.
519, 540 P.2d 962. Applying that standard here, we find Roy
Winslow had ostensible authority to sign the compliance agree-
ments and bind the defendant to them. He was held out to be the

general manager of the corporation and the union representatives,


                         - 9 -
unaware of any restrictions in his authority, could reasonably

believe Winslow had the authority to sign the agreements.
     In concluding as a matter of law that Roy Winslow did not

have ostensible authority, the District Court made no finding

of fact that he lacked such authority. The defendant, in its

brief and at oral argument, states the finding which says the
compliance agreements were "not such contracts which were usual,
proper or necessary to be made in the ordinary transaction of

Elmo Road Company's business", is a finding of a lack of ostensible

authority in Winslow to execute the agreements. As pointed out

earlier, this finding deals with implied authority and not

ostensible authority.   Implied authority and ostensible authority

are not one and the same.

    We believe the District Court misapplied the law in

concluding, as a matter of law, that Winslow did not have osten-

sible authority to sign the compliance agreements. Ostensible
authority can be implied from the words and conduct of the

parties and circumstances of the particular case notwithstanding

a denial by the alleged principal.   Ludwig v. Montana Bank and

Trust Co., (1939), 109 Mont. 477, 98 P.2d         Applying that

rule to this case, we find defendant, by making Roy Winslow its
general managr and authorizing him to procure work for defendant,
implied to third parties that he had the ostensible authority to
sign agreements such as those in question here.
     In discussing the effect of limitations on an agent's
authority on third parties, the Restatement on Agency 2d, 4167,
states:
        " I f a person d e a l i n g with an agent has n o t i c e t h a t
        t h e a g e n t ' s a u t h o r i t y i s c r e a t e d o r described i n a
        w r i t i n g , which i s intended f o r h i s i n s p e c t i o n , he i s
        a f f e c t e d by l i m i t a t i o n s upon t h e a u t h o r i t y contained
        i n t h e w r i t i n g , unless misled by conduct of t h e
        principal       ."
Comment b. t o 5167 s t a t e s :

        "*   **      O r d i n a r i l y , by-laws of a corporation o r t h e
        records of t h e employer's business a r e n o t intended f o r t h e
        i n s p e c t i o n of t h i r d persons within t h e t h e meaning of t h i s
        Section     ."
Thus, under t h i s r u l e , t h e l i m i t a t i o n s on t h e g e n e r a l manager's

a u t h o r i t y contained i n t h e r e g u l a t i o n s and by-laws can have no

e f f e c t a s n o t i c e t o t h i r d persons dealing with t h e manager,

r e g a r d l e s s of t h e i r being open f o r i n s p e c t i o n o r n o t .     The

l i m i t a t i o n s i n those documents cannot l i m i t t h e g e n e r a l manager's

ostensible authority.

        Therefore, we hold Roy Winslow had both implied and o s t e n s i b l e

a u t h o r i t y a s g e n e r a l manager of Elmo Road Corporation t o a c t on

behalf of t h e corporation and t h e D i s t r i c t Court's conclusions

t o the contrary are i n e r r o r ,

        I n i t s second i s s u e p l a i n t i f f r a i s e d t h e i s s u e of r a t i f i -

c a t i o n a t t r i a l and on appeal.             Defendant a t t r i a l and on appeal

argues t h a t t h e d o c t r i n e of r a t i f i c a t i o n has no a p p l i c a t i o n t o

t h i s case,       The D i s t r i c t Court made no f i n d i n g s of f a c t o r con-

c l u s i o n s of law on t h e i s s u e of r a t i f i c a t i o n .   Nor d i d t h e c o u r t

make a f i n d i n g of f a c t o r conclusion                  of law on why Elmo Road

Corporation made t h e c o n t r i b u t i o n s t o t h e t r u s t funds i n 1972,

o r what e f f e c t those c o n t r i b u t i o n s had regarding t h e r i g h t s and

o b l i g a t i o n s of t h e p a r t i e s t o t h i s a c t i o n .

        The proper r e s o l u t i o n of t h e i s s u e of r a t i f i c a t i o n i s t h e

r u l e s e t f o r t h i n Freeman v. Withers, (1937), 104 Mont. 166, 65

P.2d 601.         There, t h i s Court s t a t e d t h a t where t h e p r i n c i p a l , with

knowledge of a l l t h e m a t e r i a l f a c t s , v o l u n t a r i l y makes p a r t i a l
 payment on an unauthorized c o n t r a c t , t h e r e i s s t r o n g evidence

of r a t i f i c a t i o n .     Applying t h a t r u l e h e r e , we f i n d t h a t Elmo

Road's voluntary                   c o n t r i b u t i o n s t o t h e t r u s t funds during t h e

months of A p r i l through October, 1972, r a t i f i e d insl low's a c t of

signing t h e agreements r e q u i r i n g the c o n t r i b u t i o n s .

        The t h i r d i s s u e , whether t h e D i s t r i c t Court e r r e d i n i n v a l i -

d a t i n g t h e compliance agreement, i s a d i s p u t e involving a c o l l e c t i v e

bargaining agreement.                   P l a i n t i f f claims t h e compliance agreements

are valid.           Defendant claims they a r e i l l e g a l and i n v a l i d .                To

resolve t h i s disagreement, 5 301 of t h e Taft-Hartley Act, 29

U.S.C.      5 185(a) must be invoked.                   That s e c t i o n reads:

        " S u i t s f o r v i o l a t i o n of c o n t r a c t s between an
        employer and a l a b o r organization representing
        employees i n an industry a f f e c t i n g commerce a s
        defined i n t h i s c h a p t e r , o r between any such labor
        o r g a n i z a t i o n s , may be brought i n any d i s t r i c t c o u r t
        of t h e United S t a t e s having j u r i s d i c t i o n of t h e
        p a r t i e s , without r e s p e c t t o the amount i n controversy
        o r without regard t o t h e c i t i z e n s h i p of t h e p a r t i e s . I I

This s e c t i o n has been construed t o mean t h a t t h e r e i s concurrent

j u r i s d i c t i o n i n t h e s t a t e c o u r t s t o hear such d i s p u t e s , b u t , i n

e x e r c i s i n g t h i s j u r i s d i c t i o n , s t a t e c o u r t s must apply f e d e r a l l a b c r

law.      Dowd Box Co. v. Courtney, (1962), 368 U.S.                            502, 82 S.Ct. 519,

7 L ed 2d 483.                 Montana has recognized t h i s p r i n c i p l e .          Lowe v.

O'Connor,         (1973), 163 Mont. 100, 515 P.2d 677.

        I n i t s findings of f a c t and conclusions of law, t h e D i s t r i c t

Court held t h a t t h e compliance agreements were i n v a l i d and unen-

forceable by t h e union t r u s t funds.                    S p e c i f i c a l l y , t h e c o u r t found

t h e unions were not c e r t i f i e d by the National Labor Relations Board

a s t h e exclusive bargaining r e p r e s e n t a t i v e of defendant's employees;

t h a t t h e unions never represented a majority of t h e employees of

any bargaining u n i t of defendant's employees; and t h a t t h e unions

had no a u t h o r i t y t o r e p r e s e n t t h e employees.            These f i n d i n g s and
conclusions were based on t h e National Labor Relations Act, 29 U.S.C.
         and
5 158(a) / ( b ) , which d e a l s with u n f a i r l a b o r p r a c t i c e s .

     The United S t a t e s Supreme Court, i n construing 29 U.S.C.
           and
5 158(a) / ( b ) , has held t h a t t h e determina t i o n of an u n f a i r labor

p r a c t i c e i s e x c l u s i v e l y a function of t h e f e d e r a l system.       San Diego

Building Trades Council v. Garmon, (1959), 359 U.S. 236, 79 S.Ct. 773,

3 L ed 2d 775.            Thus, although a s t a t e c o u r t has t h e a u t h o r i t y t o

construe and enforce c o l l e c t i v e bargaining agreements, i t does not

have t h e a u t h o r i t y t o i n v a l i d a t e a l a b o r c o n t r a c t , proper on i t s

f a c e , because one of t h e p a r t i e s has a l l e g e d l y engaged i n an u n f a i r

labor p r a c t i c e .    I n t h i s c a s e , we hold t h e D i s t r i c t Court e r r e d i n

i n v a l i d a t i n g t h e compliance agreements which were proper on t h e i r

face because t h e s t a t e c o u r t s lack t h e a u t h o r i t y t o do so.

       A case i n p o i n t on t h i s i s s u e i s T r u s t Fund Services v. Hey-

man, (1977), 88 Wash.2d 698, 565 P.2d 805.                         I n that case, a collec-

t i o n agency was attempting t o c o l l e c t c o n t r i b u t i o n s from an employer

who was o b l i g a t e d t o c o n t r i b u t e t o union t r u s t funds and had

f a i l e d t o do so. The employer's defense was an a l l e g a t i o n of

u n f a i r labor p r a c t i c e s on t h e p a r t of t h e union.        H f u r t h e r argued
                                                                             e

t h e i s s u e of u n f a i r l a b o r p r a c t i c e was r e s j u d i c a t a because t h e

9th c i r c u i t   and t h e Federal D i s t r i c t Court had rescinded t h e

c o n t r a c t between t h e employer and t h e union, when t h e employer sued

t h e union i n f e d e r a l c o u r t f o r r e c i s s i o n of t h e c o n t r a c t on a

claim of u n f a i r labor p r a c t i c e .      The Washington Supreme Court held

t h e claim of u n f a i r l a b o r p r a c t i c e was no defense t o t h e a c t i o n

by t h e c o l l e c t i o n agency f o r t h e unions.         F u r t h e r t h e Washington

Court held t h a t i t was n o t bound by t h e d e c i s i o n of t h e f e d e r a l

courts.      C i t i n g San Diego Building Trades v. Garmon, supra, t h e

Washington Court s t a t e d t h e National Labor Relations Board has
exclusive j u r i s d i c t i o n t o determine u n f a i r l a b o r p r a c t i c e s and

s t a t e c o u r t s a s w e l l a s f e d e r a l c o u r t s must d e f e r t o t h e e x c l u s i v e

competence of t h e F.L.R.B.                Thus, i n t h i s c a s e , t h e defendant can

only r a i s e t h e question of u n f a i r labor p r a c t i c e s on t h e p a r t

of t h e unions before t h e N.L.R.B.                  This Court cannot decide t h a t

issue.

       Therefore, t h e judgment of t h e D i s t r i c t Court i s vacated.

The cause i s remanded t o t h e D i s t r i c t Court f o r e n t r y of judgment

i n accord with t h i s opinion, and f o r determination of reasonable

a t t o r n e y f e e s t o be awarded t o p l a i n t i f f f o r t h e s e r v i c e s of i t s

a t t o r n e y s a t t r i a l i n t h e D i s t r i c t Court.    That award s h a l l be

added t o our award of $1,250 a t t o r n e y f e e s f o r t h e s e r v i c e s of

i t s a t t o r n e y s on appeal and both s u m s h a l l be incorporated i n t o

t h e judgment     .

                                                                      V
                                                        Justice



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