No. 14425
I N THE S P E E CT)UHT OF THE STATE OF MXJTANA
UR M
1979
AUDIT SEE7VICFS, INC., a
Mntana Corporation,
P l a i n t i f f and Appellant,
F A CS TllmALL r n S T H U C r I O N ,
R NI
a Corporation,
Defendant and Respondent.
Appeal from: D i s t r i c t Court of the Tenth Judicial District,
Honorable Charles B. Sande, Judge presiding.
Counsel of Record:
For Appellant:
Cure and Borer, Great Falls, Montana
For Respondent:
Bradley B. Parrish, Iewistuwn, IJbntana
Subknitted on hriefs: M y 15, 1979
a-
Decided:
SEF 26 1979
Filed :
Mr. Justice John C.. Sheehy delivered the Opinion of the Court.
Audit Services appeals from a statement of the Fergus
County District Court, entered on behalf of the respondent
denying recovery of alleged delinquent contributions, liquidated
damages, interest, audit fees and attorney fees assessed as
owing to appellant's assignors, the Montana Laborers,
Operating Engineers and Teamsters Trust Funds for the period
of January 1, 1971 through March 31, 1974.
Francis Tindall is the owner of Francis Tindall
Construction, an unincorporated sole proprietorship located
in Lewistown, Montana. Tindall Construction is primarily
a road and highway construction firm but also does other
construction work.
Tindall executed a "compliance agreement" with the
Montana Laborers Union and the Montana Teamsters Union
in June 1966 and with the Montana Operating Engineers Union
in September 1967, binding the construction company to the
terms of the collective bargaining agreements between the
three unions and the Montana Contractors Association. Audit
Services, a nonprofit corporation, is the assignee of the
trustees of eight Montana employee benefit trust funds
belonging to the three unions.
The trusts are jointly managed funds established
pursuant to the National Labor Management Relations Act,
29 U.S.C., §186(c) (5) and the 1974 Pension Reform Act, 29
U.S.C., 81001, et seq., and are funded by employer con-
tributions based on hours worked by employees within a
particular craft. These funds provide health and welfare,
pension, apprenticeship and vacation benefits to
Montana laborers, operating engineers and teamsters,
both union and nonunion. Contribution rates for each
of the trust funds are set forth in the collective bargaining
agreements negotiated between the unions and employers.
In order to contribute to these trust funds on behalf
of his employees, an employer completes remittance report
forms each month which are sent to the administrative office
of the trusts. The employer lists on the forms each of
his employees who has worked within the particular craft
classification in the preceding month, lists the number of
hours worked by each employee and then multiplies the total
number of hours so listed against the contribution rates set
forth, in the applicable collective bargaining agreement.
The employer then sends his check for the full amount
computed as owing along with the remittance report.
A representative of the trust funds contacted Tindall
and requested an audit of his payroll records pursuant to
the provisions of the individual trust agreements. No
objection was voiced and an audit was conducted in May 1974,
by Howard G. Sand, an accountant retained by Audit Services.
The audit revealed that during the period from January 1,
1971 through March 31, 1974, Tindall's contributions to
the trust funds covered only 84.8% of his total payroll (i.e.
11,151 1/2 or 15.2% of the hours were not reported).
Using the collective bargaining agreements in effect
during the period of time covered by his audit, Sand
computed that an amount of $8,479.68 was owing to the
respective trust funds for delinquent contributions. An
additional amount consisting of $415.08 in liquidated
damages, $60.79 in interest and $327.04 for auditor fees
was assessed as owing, also based on the trust agreement
provisions.
-3-
After receiving no response to several requests
for payment, claims for the liability were assigned to
Audit Services and suit commenced on November 26, 1974.
During the pendency of the litigation and up until the
trial, Tindall continued to file regular monthly remittance
reports and to make contributions to the trust funds at the
rates specified by the union contracts in effect at the
time.
As of the date of trial, Tindall's audited liability
totaled $11,028.12. Additionally, Audit Services requested
$3,000 as attorney fees under the terms of the trust
agreements. A nonjury trial was held on February 16, 1978.
On May 17, 1978, the decision of the court was rendered
with findings of fact and conclusions of law dismissing the
complaint.
The sole issue presented on this appeal is whether
the District Court erred in deciding that as a matter of
law, Francis Tindall has no obligation to make fringe benefit
contributions to the Montana Laborers, Operating Engineers
and Teamsters Trust Funds between January 1, 1971 and March
31, 1974.
A careful review of all the circumstances of the
case and the matters on record requires as a matter of
law, a holding that the respondent ratified the collective
bargaining agreements that were in force during this period
and the respondent is thereby estopped from denying the
effect of this ratification.
Section 28-2-304, MCA, states:
"Ratification of contract void for want of
consent. A contract which is voidable solely
for want of consent may be ratified by a
subsequent consent."
Ratification may occur in either an express oral manner
or solely by means of personal conduct.
-4-
Ratification is a form of equitable estoppel and
ordinarily is applied strictly in an agency context,
whereby a principal approves the unauthorized act of an
agent. See Larson v. Marcy (19211, 61 Mont. 1, 201 P.
685. However, it is also applied in varying classes of
cases including contracts. Generally, contract ratification
is the adoption of a previously formed contract, notwith-
standing a quality that rendered it relatively void and
by the very act of ratification the party affirming becomes
bound by it and entitled to all the proper benefits from
it. Shagun v. Scott Mfg. Co. (8th Cir. 1908), 162 F. 209,
219. The contract is obligatory from its inception and
may be signified from the commission or omission of acts.
East Cent. Okl. Elec. Coop., Inc. v. Oklahoma G. & E. Co.
(Okl. 1977), 505 P.2d 1324, 1329.
Montana case law also has held that the subsequent
recognition of a contract is the equivalent of ratification.
This Court has stated:
"'Ratification' is defined to be the con-
firmation of a previous act done either
by the party himself or by another. (Citing
authority.) And a confirmation necessarily
supposes knowledge of the thing ratified.
(Citing authority.) It follows that to
constitute a ratification there must be
an acceptance of the results of the act
with an intent to ratify and with full
knowledge of all the material circumstances."
Koerner v. Northern Pac. Ry. Co. (1919),
56 Mont. 511, 520,,'$$q. 337, 340.
It is the manifestation of the ratifying party which
controls. The respondent's outward expressions and actions
judge of his intentdon and his intent in the case sub
judice is clear. No doubt exists that the respondent had
full knowledge of the existence and content of the collective
bargaining agreements. Respondent's conduct in making
contributions to the trust funds for the admitted purpose
of obtaining benefits thereunder for his employees,
results in the ratification of the collective bargaining
agreements providing for those contributions. At no
time during the eight years since the original inception
of the payment of contributions to the trust funds, including
the three years involved in this action, did the respondent
by an affirmative act attempt to rescind the contracts.
His actions manifest the opposite conclusion.
Respondent vigorously asserts that these collective
bargaining agreements were not ratified but this Court
believes there is sufficient evidence of ratification and
acquiescence and that in the absence of any reasonable
explanation, such factors constitute indisputable evidence
of ratification.
It must be held therefore, that the respondent having
ratified the collective bargaining agreements by his actions
and inactions, is now estopped from denying the validity
of the contracts. For the reasons indicated, the judgment
of the District Court is reversed and the matter shall be
remanded for further proceedings in accordance with this
Opinion.
Justice
We Concur: