Respondent is a party to a collective bargaining agreement
between coal operators and the United Mine Workers providing for a
union welfare fund meeting the requirements of § 302(c)(5) of the
Taft-Hartley Act and requiring each coal operator to pay into a
trust fund "for the sole and exclusive benefit" of the employees,
their families, and dependents a stipulated royalty on each ton of
coal produced. Respondent withheld royalties in an amount claimed
to equal damages which it had sustained as a result of strikes
alleged to be in violation of the same agreement, and the trustees
sued to recover such royalties. Respondent defended on the ground
that performance of its duty to pay the royalties to the trustees,
as third-party beneficiaries of the agreement, was excused when the
union violated the agreement, and it cross-claimed against the
union for damages resulting from the strikes. The District Court
awarded respondent a judgment on its claim against the union and
awarded the trustees a judgment for the unpaid royalties, but
provided that the trustees' judgment should be paid only out of the
proceeds of respondent's judgment. The Court of Appeals affirmed
except as to the amount of the damages awarded respondent.
Held:
1. So far as it sustains the holding of the District Court that
the union violated the collective bargaining agreement, the
judgment of the Court of Appeals is affirmed by an equally divided
Court. P.
361 U. S.
464.
2. The judgment of the Court of Appeals is modified to provide
that the District Court shall amend the judgment in favor of the
trustees to allow immediate and unconditional execution, and
interest, on the full amount of the trustees' judgment against
respondent. Pp.
361 U. S.
464-471.
Page 361 U. S. 460
(a) The collective bargaining agreement here involved is not to
be construed as making performance by the union of its promises a
condition precedent to respondent's promise to pay royalties to the
trustees, notwithstanding a provision to the effect that the
agreement "is an integrated instrument and its provisions are
interdependent." Pp.
361 U. S.
464-466.
(b) Regardless of the inferences which may be drawn from other
third-party beneficiary contracts, the parties to a collective
bargaining agreement must express their meaning in unequivocal
words before they can be said to have agreed that the union's
breaches of its promises should give rise to a defense against the
duty assumed by an employer to contribute to a welfare fund meeting
the requirements of § 302(c)(5), and the agreement here involved
contains no such words. Pp.
361 U. S.
466-471.
259 F.2d 346, judgment modified.
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The National Bituminous Coal Wage Agreement of 1950, a
collective bargaining agreement between coal operators and the
United Mine Workers of America, provides for a union welfare fund
meeting the requirements of § 302(c)(5) of the Taft-Hartley Act.
[
Footnote 1] The
Page 361 U. S. 461
fund is the "United Mine Workers of America Welfare and
Retirement Fund of 1950." Each signatory coal operator agreed to
pay into the fund a royalty of 30�, later increased to 40�, for
each ton of coal produced for use or for sale.
Benedict Coal Corporation, the respondent in both No. 18 and No.
19, is a signatory coal operator. From
Page 361 U. S. 462
March 5, 1950, through July, 1953, Benedict produced coal upon
which the amount of royalty was calculated to be $177,762.92.
Benedict paid $101,258.68 of this amount, but withheld $76,504.24.
The petitioners in No, 18, who are the trustees of the fund,
brought this action to recover that balance in the District Court
for the eastern District of Tennessee. [
Footnote 2] Benedict's main defense was that the
performance of the duty to pay royalty to the trustees, regarding
them as third-party beneficiaries of the collective bargaining
agreement, was excused when the promisee contracting party, the
union and its District 28 -- who are the petitioners in No. 19 and
who will be referred to as the union -- violated the agreement by
strikes and stoppages of work. Benedict also cross-claimed against
the union for damages sustained from the strikes and stoppages. By
its answer to the cross-claim, the union denied that its conduct
violated the agreement.
The jury, using a verdict form provided by the trial judge,
found that the trustees were entitled to recover the full amount of
the unpaid royalty, but that Benedict was entitled to a setoff of
$81,017.68; the jury also gave a verdict to Benedict for that sum
on its cross-claim against the union. In a single entry, two
judgments were entered on this verdict. One was a judgment in favor
of Benedict on its cross-claim on which immediate execution was
ordered, but with direction that the sum collected from the union
be paid into the registry of the court. The other was a judgment in
favor of the trustees for the unpaid balance of the royalty.
However, effect was given to Benedict's defense in the trustees'
suit by refusing immediate execution, and interest, on the
trustees' judgment, and ordering instead that that judgment be
Page 361 U. S. 463
satisfied only out of the proceeds collected by Benedict on its
judgment and paid into the registry of the court. [
Footnote 3]
The union and the trustees prosecuted separate appeals to the
Court of Appeals for the Sixth Circuit. The union alleged that the
District Court erred in holding that the strikes and stoppages
violated the collective bargaining agreement, contending that,
properly construed, the agreement did not forbid the strikes and
stoppages; in the alternative, the union urged that the damages
awarded were excessive. The trustees alleged as error primarily the
refusal of the trial court to allow them immediate and
unconditional execution, and interest, on their judgment against
Benedict.
The Court of Appeals affirmed the District Court except as to
the amount of damages awarded to Benedict
Page 361 U. S. 464
on its cross-claim, which the court adjudged was excessive. The
court held that, under the evidence, Benedict's damages would not
equal the amount of the trustees' judgment of $76,504.26. The case
was remanded for a redetermination of Benedict's damages, with
instructions that
"[t]he judgment in favor of the Trustees will then be amended by
the district court to allow execution and interest on that part of
the said judgment which is in excess of the set-off in favor of
Benedict as so redetermined."
259 F.2d 346, 355. This left unaffected so much of the District
Court's order as predicated the trustees' recovery, to the extent
of the amount of Benedict's judgment as finally determined, upon
Benedict's recovery of that judgment. The trustees and the union
filed separate petitions for certiorari. We granted the trustee's
petition, No. 18, and also the union's petition, No. 19, except
that we limited the latter grant to the question whether the
strikes and stoppages complained of by Benedict violated the
collective bargaining agreement.
359 U. S. 905.
In No. 19, the Court is equally divided. The judgment of the
Court of Appeals, so far as it sustains the holding of the District
Court that the union violated the collective bargaining agreement,
is therefore affirmed.
We turn to the question presented in No. 18, whether the lower
courts were correct in holding in effect that Benedict might assert
the union's breaches as a defense to the trustees' suit, for to the
extent Benedict (the promisor) does not collect from the union (the
promisee) the union's liability is set off against Benedict's
liability to the third-party beneficiary. The answer to that
question requires, we think, our consideration of the nature of the
interests of the union, the company, and the trustees in the fund
under the collective bargaining agreement.
The provisions of the collective bargaining agreement creating
the fund include the express provision that "this
Page 361 U. S. 465
Fund is an irrevocable trust created pursuant to Section 302(c)
of the
Labor-Management Relations Act, 1947.'" Another
provision specifies that the purposes of the fund shall be all
purposes "provided for or permitted in Section 302(c)." [Footnote 4] In this way, the agreement
plainly declares what the statute requires, namely, that the fund
shall be used "for the sole and exclusive benefit" of the
employees, their families and dependents. Thus, the fund is in no
way an asset or property of the union.
Benedict does not, however, base its claim of setoff on any
contention that the royalty was owing to the union and might
because of this be applied to the payment of its damages.
Benedict's position is that, in an amount equal to the amount of
the damages sustained from the union's breaches, no fund property
came into existence under the terms of the collective bargaining
agreement. This depends upon whether the agreement is to be
construed as making performance by the union of its promises a
condition precedent to Benedict's promise to pay royalty to the
trustees. Benedict argues that the contracting parties expressed
this meaning in an article at the close of the agreement -- "This
Agreement is an integrated instrument, and its respective
provisions are interdependent" -- and in the provision in another
article that the no-strike clauses are "part of the consideration
of this contract." However, the specific provisions of the article
creating the fund provide: (1) "During the life of this [collective
bargaining] Agreement, there shall be paid into such Fund by each
operator signatory . . . [a royalty] on each ton of coal
produced for use or for sale." (2) The operator is
required to make payment "on the 10th day of each . . . calendar
month covering
the production of all coal for use or sale
during the preceding month." (3) "This obligation of each Operator
signatory
Page 361 U. S. 466
hereto, which is several and not joint, to so pay such sums
shall be a
direct and continuing obligation of said
Operator during the life of this Agreement. . . ." (4) "Title to
all the moneys paid into and or
due and owing said Fund
shall be vested in and remain exclusively in the Trustees of the
Fund. . . ." [
Footnote 5]
(Emphasis added.) These provisions, rather than the stipulations of
general application, are controlling. Their clear import is that
the parties meant that the duty to pay royalty should arise on the
production of coal independent of the union's performance. Indeed,
Benedict's conduct was not consistent with the interpretation which
it is now urging. Benedict continued despite the breaches to
perform all of its several promises under the contract, including
the promise to pay royalty, paying over $100,000 on coal produced
during the period in dispute and withholding only the portion in
suit.
But our conclusion that the union's performance of its promises
is not a condition precedent to Benedict's duty to pay royalty does
not fully answer the question we are to decide. For it may
reasonably be argued that the damages sustained by Benedict may
nevertheless affect the amount of the trustees' recovery. Professor
Corbin, while acknowledging that "No case of the sort has been
discovered," [
Footnote 6]
states:
"It may perhaps be regarded as just to make the right of the
beneficiary not only subject to the conditions precedent, but also
subject (as in the case of an assignee) to counterclaims against
the promisee -- at least if they arise out of a breach by the
promisee of
Page 361 U. S. 467
his duties created by the very same contract on which the
beneficiary sues. [
Footnote
7]"
Using terms like "counterclaim" or "setoff" in a third-party
beneficiary context may be confusing. In a two-party contract
situation, when a promisor's duty to perform is absolute, the
promisee's breaches will not excuse performance of that duty; the
promisor has an independent claim against the promisee in damages.
Formerly, the promisor was required to bring a separate action to
recover his damages. Under modern practice, when the promises are
to pay money, or are reducible to a money amount, the promisor,
when sued by the promisee, offsets the damages which he has
sustained against the amount he owes, and usually obtains a
judgment for any excess. [
Footnote
8]
However, a third-party beneficiary has made no promises, and
therefore has breached no duty to the promisor. Accordingly, to
hold, as the lower courts in this case did, that a promisor may
"set off" the damages caused by the promisee's breach is actually
to read the contract, which is the measure of the third party's
rights, as so providing. In other words, although the promisor's
duty to perform has become fixed by the occurrence of applicable
conditions precedent, the parties may be taken to have agreed that
the extent of the promisor's duty to the third party will be
affected by the promisee's breach of contract. When it is said that
"it may be just" to make the third party subject to the
counterclaim, what must be meant is that a court should infer an
intention of the promisor and promisee that the third party's
rights be so limited.
This may be a desirable rule of construction to apply to
third-party beneficiary contract where the promisor's interest in
or connection with the third party, in
Page 361 U. S. 468
contrast with the promisee's, begins with the promise and ends
with its performance. Of course, in entering into such a contract,
the promisor may be held to have given up some defense against the
third party's claim to performance of the promise -- for example,
the right to defeat that claim by rescinding the contract at any
time he and the promisee agree. Nevertheless it may be fair to
assume that, had the parties anticipated the possibility of a
breach by the promisee, they would have provided that the promisor
might protect himself by such means as would be available against
the promisee under a two-party contract. [
Footnote 9] This suggestion has not been crystallized
into a rule of construction. Our problem is whether we should infer
such an intention in this contract because there may be reasons
making it appropriate to do so in the generality of third-party
beneficiary contracts.
This collective bargaining agreement, however, is not a typical
third-party beneficiary contract. The promisor's interest in the
third party here goes far beyond the mere performance of its
promise to that third party,
i.e., beyond the payment of
royalty. It is a commonplace of modern industrial relations for
employers to provide security for employees and their families to
enable them to meet problems arising from unemployment, illness,
old age or death. While employers in may other industries assume
this burden directly, this welfare fund was jointly created by the
coal industry and the union for that purpose. Not only has Benedict
entered into a long-term relationship with the union in this
regard, but, in compliance with § 302(c)(5)(B), it has assumed
equal responsibility with the union for the management of the fund.
In a very real sense, Benedict's interest in the soundness of the
fund and its management is in no way
Page 361 U. S. 469
less than that of the promisee union. This, of itself, cautions
against reliance upon language which does not explicitly provide
that the parties contracted to protect Benedict by allowing the
company to set off its damages against its royalty obligation.
Moreover, unlike the usual third-party beneficiary contract,
this is an industrywide agreement involving many promisors. If
Benedict and other coal operators having damage claims against the
union for its breaches may curtail royalty payments, the burden
will fall in the first instance upon the employees and their
families across the country. Ultimately this might result in
pressures upon the other coal operators to increase their royalty
payments to maintain the planned schedule of benefits. The
application of the suggested rule of construction to this contract
would require us to assume that the other coal operators who are
parties to the agreement were willing to risk the threat of
diminution of the fund in order to protect those of their number
who might have become involved in local labor difficulties.
Furthermore, Benedict promised in the collective bargaining
agreement to pay a specified scale of wages to the employees. It
would not be contended that Benedict might recoup its damages by
decreasing these wages. This could be rationalized by saying that
the covenant to pay wages is included in separate contracts of hire
entered into with each employee. The royalty payments are really
another form of compensation to the employees, [
Footnote 10] and, as such, the obligation
to pay royalty might be thought to be incorporated into the
individual employment contracts. This is not to say that the same
treatment should necessarily be accorded to royalty payments as is
accorded to wages, but the similarity militates against the
inference
Page 361 U. S. 470
that the parties intended that the trustees' claim be subject to
offset.
Finally a consideration which is not present in the case of
other third-party beneficiary contracts is the impact of the
national labor policy. Section 301(b) of the Taft-Hartley Act,
provides that
"[a]ny money judgment against a labor organization in a district
court of the United States shall be enforceable only against the
organization as an entity and against its assets, and shall not be
enforceable against any individual member or his assets."
At the least, this evidences a congressional intention that the
union as an entity, like a corporation, should, in the absence of
agreement, be the sole source of recovery for injury inflicted by
it. [
Footnote 11] Although
this policy was prompted by a solicitude for the union members,
because they might have little opportunity to prevent the union
from committing actionable wrongs, [
Footnote 12] it seems to us to apply with even greater
force to protecting the interests of beneficiaries of the welfare
fund, many of whom may be retired, or may be dependents, and
therefore without any direct voice in the conduct of union affairs.
Thus, the national labor policy becomes an important consideration
in determining whether the same inferences which might be drawn as
to other third-party agreements should be drawn here.
Section 301 authorizes federal courts to fashion a body of
federal law for the enforcement of collective bargaining
agreements.
Textile Workers Union v. Lincoln Mills,
353 U. S. 448. In
the discharge of this function, having appropriate regard for the
several considerations we have discussed, including the national
labor policy, we hold that the parties to a collective
bargaining
Page 361 U. S. 471
agreement must express their meaning in unequivocal words before
they can be said to have agreed that the union's breaches of its
promises should give rise to a defense against the duty assumed by
an employer to contribute to a welfare fund meeting the
requirements of § 302(c)(5). We are unable to find such words in
the general provisions already mentioned -- "This Agreement is an
integrated instrument and its respective provisions are
interdependent," and "The contracting parties agree that [the
no-strike clauses are] . . . part of the consideration of this
contract" -- or elsewhere in the agreement. The judgment of the
Court of Appeals is therefore modified to provide that the District
Court shall amend the judgment in favor of the trustees to allow
immediate and unconditional execution, and interest, on the full
amount of the trustees' judgment for $76,504.26 against
Benedict.
It is so ordered.
MR. JUSTICE STEWART took no part in the consideration or
decision of this case.
* Together with No. 19,
United Mine Workers of America et
al. v. Benedict Coal Corp., also on certiorari to the same
Court.
[
Footnote 1]
Section 302(c)(5) is as follows:
"The provisions of this section [making it unlawful for the
employer to deliver and a representative of the employees to
receive anything of value] shall not be applicable . . . with
respect to money or other thing of value paid to a trust fund
established by such representative for the sole and exclusive
benefit of the employees of such employer, and their families and
dependents (or of such employees, families, and dependents jointly
with the employees of other employers making similar payments, and
their families and dependents):
Provided, That (A) such
payments are held in trust for the purpose of paying, either from
principal or income or both, for the benefit of employees, their
families and dependents, for medical or hospital care, pensions on
retirement or death of employees, compensation for injuries or
illness resulting from occupational activity or insurance to
provide any of the foregoing, or unemployment benefits or life
insurance, disability and sickness insurance, or accident
insurance; (B) the detailed basis on which such payments are to be
made is specified in a written agreement with the employer, and
employees and employers are equally represented in the
administration of such fund, together with such neutral persons as
the representatives of the employers and the representatives of the
employees may agree upon and in the event the employer and employee
groups deadlock on the administration of such fund and there are no
neutral persons empowered to break such deadlock, such agreement
provides that the two groups shall agree on an impartial umpire to
decide such dispute, or in event of their failure to agree within a
reasonable length of time, an impartial umpire to decide such
dispute shall, on petition of either group, be appointed by the
district court of the United States for the district where the
trust fund has its principal office, and shall also contain
provisions for an annual audit of the trust fund, a statement of
the results of which shall be available for inspection by
interested persons at the principal office of the trust fund and at
such other places as may be designated in such written agreement;
and (C) such payments as are intended to be used for the purpose of
providing pensions or annuities for employees are made to a
separate trust which provides that the funds held therein cannot be
used for any purpose other than paying such pensions or
annuities."
Act of June 23, 1947, § 302, 61 Stat. 157, 29 U.S.C. §
186(c)(5).
[
Footnote 2]
The article creating the fund provides that "Title to all the
moneys paid into and or due and owing said Fund shall be vested in
and remain exclusively in the Trustees of the Fund. . . ."
[
Footnote 3]
The District Court's entry reads in pertinent part as
follows:
"Thereupon this action came on to be heard on a former day
before the Court and a verdict was rendered by the jury in favor of
Benedict Coal Corporation in the sum of $81,017.68 and in favor of
John L. Lewis, Charles A. Owen and Josephine Roche (trustees of the
fund) in the sum of $76,504.26, the verdict containing an offset
provision."
"In accordance with the Court's interpretation of the offset
provision in the jury's verdict and as a means of carrying out the
intended effect of the verdict, it is ordered that the Benedict
Coal Corporation have and recover the sum of $81,017.68 from United
Mine Workers of America and United Mine Workers of America District
29, for which execution may issue."
"It is further ordered that said sum of $81,017.68 be paid into
the registry of the Court to be disbursed by the clerk in
accordance with instructions appearing below."
"It is further ordered that said Trustees, in accordance with
the verdict rendered in their favor, have and recover of Benedict
Coal Corporation the sum of $76,504.26, said recovery to be had in
the manner following: from the aforesaid $81,017.68 ordered paid
into the registry of the Court, that the sum of $76,504.26 be paid
to said Trustees. That the difference between $76,504.26 and
$81,017.68 be paid to Benedict Coal Corporation."
[
Footnote 4]
See note 1
supra.
[
Footnote 5]
In an earlier agreement, the last clause read "moneys
paid
into said Fund," and was amended to read "moneys
paid into
and or due and owing said Fund" (emphasis added) after the
decision in
Lewis v. Jackson & Squire,
Inc., 86 F. Supp.
354,
appeal dismissed, 181 F.2d 1011, holding, among
other things, that under the agreement, no trust arose as to
royalty not paid into the fund.
[
Footnote 6]
But cf. Fulmer v. Goldfarb, 171 Tenn. 218, 101 S.W.2d
1108;
Depuy v. Loomis, 74 Pa.Super. 497.
[
Footnote 7]
4 Corbin, Contracts, § 819.
[
Footnote 8]
See 3 Corbin, Contracts, § 709.
Cf. 3
Williston, Contracts, § 883 (Rev. ed. 1936).
Compare
25 U. S. Wynn,
12 Wheat. 183;
Withers v.
Greene, 9 How. 213.
[
Footnote 9]
To some degree, the third-party beneficiary may be thought of as
being "substituted" for the promisee.
See Dunning v.
Leavitt, 85 N.Y. 30, 35.
[
Footnote 10]
See 93 Cong.Rec. 4746-4747.
See also S.Rep.
No. 105, 80th Cong., 1st Sess. 52 (supplemental views).
[
Footnote 11]
See 93 Cong.Rec. 5014;
id. at 3839.
Cf. Hearings before House Committee on Education and Labor
on H.R. 8, H.R. 725, H.R. 880, H.R. 1095, and H.R. 1096, 80th
Cong., 1st Sess. 135-136.
[
Footnote 12]
See 93 Cong.Rec. 6283.
MR. JUSTICE FRANKFURTER, dissenting.
This litigation arose out of an agreement entered into on March
5, 1950, between coal operators, including respondent, and United
Mine Workers. It was the outcome of collective bargaining between
the parties to fix the terms of industrial relations, wages, and
other conditions of employment, between the coal operators and
their employees as represented by the union. It is an elaborate
document of twenty pages, formulating the rights and obligations of
the union, on the one side, and the rights and obligations of the
operators, on the other. Part of the agreement called for the
establishment of a welfare and retirement fund for the benefit of
employees and their families. This obligated the respondent, as
one
Page 361 U. S. 472
of the operators bound by the agreement, to pay the Fund a fixed
amount per ton of coal that it produced during the period in
controversy. The narrow question before the Court is whether the
respondent operator may withhold from the amount it is obligated,
as a matter of arithmetic, to pay into the Fund, the amount of
assessable damage owing it from the union in discharge of the
union's liability for violation of its obligation under the
agreement.
The suit was by the Trustees of the Fund, who claimed the
payment in full of the scheduled amounts to be paid into the Fund.
This liability is conceded, subject however to deduction for the
amount owing from the union to Benedict on the basis of judicially
determined liability. The Court of Appeals sustained the right of
respondent to set off against its obligation to pay the defined
amount into the Fund the amount arising out of liability by the
union for breach of the union's obligation under the same
agreement.
A considered reading of the Court's opinion compels the
conclusion that if the agreement, which it is the Court's duty to
construe, were "a typical third-party beneficiary contract," the
respondent would not have to pay over the full amount payable to
the Fund, but could withhold the amount which is owing it for
breach of the union's undertaking. The Court holds that this is not
such a contract, although the agreement was not merely a single
document with obviously interrelated sections, but specifically
provided,
"This agreement is an integrated instrument, and its respective
provisions are interdependent and shall be effective from and after
March 5, 1950."
The Court justifies rejecting what is assumed to be applicable
to "a typical third-party beneficiary contract," partly by devising
a policy distilled from two provisions of the Taft-Hartley Act, §§
301(b) and 302(c)(5), and partly by its assumptions about the
community of interest
Page 361 U. S. 473
between the employer and the trust fund in the assertedly
special context of labor relations.
I have no doubt that legislation may be a source for reasoning
in court-made law. But when legislation is thus drawn upon, there
should be a close relation between the terms of an enactment and
what the courts deduce therefrom as a direction for adjudication. I
find none such here. The two provisions drawn upon do not afford
the radiations attributed to them. The relevant language of §
301(b) of the Taft-Hartley Act provides that
"Any money judgment against a labor organization . . . shall be
enforceable only against the organization as an entity and against
its assets, and shall not be enforceable against any individual
member or his assets."
The text deals expressly only with the enforcement of a money
judgment rendered against a labor organization. No such judgment is
involved in this case. The undoubted concern of Congress behind
this provision was to avoid the liability of union members solely
by virtue of their union membership, a liability notoriously
imposed by the laws of several of the States in 1947 and vividly
remembered by labor unions by reason of the
Danbury
Hatters' case in federal courts.
See Loewe v. Lawlor,
208 U. S. 274
(1908);
Lawlor v. Loewe, 235 U. S. 522;
Loewe v. Savings Bank of Danbury, 236 F. 444 (1916).* The
intent and scope of § 301(b) were accurately described in the
Senate Report on what became the Taft-Hartley Act as affording
members of a union "all the advantages of limited liability without
incorporation of the union." S.Rep.No.105, 80th Cong., 1st Sess. at
16.
Page 361 U. S. 474
Nor does any emanation from § 302(c)(5) of the Taft-Hartley Act
negate what would otherwise dictate the right of setoff -- setoff,
be it remembered, not a condition on Benedict's duty to pay into
the Fund -- of what is owing to Benedict for breach of the contract
by the union under the same contract by which Benedict promised the
union to pay into the Fund for its mined coal. The function of §
302(c)(5) is to define the conditions set by Congress for permitted
industrial welfare funds. It was not an implied qualification of
just principles relevant to the enforcement of contracts generally.
Only the other day, the Court stated the purpose of the Congress in
enacting § 302(c)(5):
"Congress believed that if welfare funds were established which
did not define with specificity the benefits payable thereunder, a
substantial danger existed that such funds might be employed to
perpetuate control of union officers, for political purposes, or
even for personal gain.
See 92 Cong.Rec. 4892-4894, 4899,
5181, 5345-5346; S.Rep. No.105, 80th Cong., 1st Sess. at 52; 93
Cong.Rec. 4678, 4746-4747. To remove these dangers, specific
standards were established to assure that welfare funds would be
established only for purposes which Congress considered proper and
expended only for the purposes for which they were
established."
Arroyo v. United States, 359 U.
S. 419,
359 U. S.
426.
Congress was concerned with abuses by union officers,
e.g.,
United States v. Ryan, 350 U. S. 299. It
gave not a thought to withdrawing the enforcement of an agreement
such as the one before us from rules relevant to the fair
administration of justice.
The Court quotes one of the twin leading authorities on the law
of contracts:
"It may perhaps, be regarded as
Page 361 U. S. 475
just to make the right of the beneficiary not only subject to
the conditions precedent but also subject (as in the case of an
assignee) to counterclaims against the promisee -- at least if they
arise out of a breach by the promisee of his duties created by the
very same contract on which the beneficiary sues."
4 Corbin, Contracts, § 819. As I understand it, apart from the
effects attributed to §§ 301(b) and 302(c)(5), the Court rejects
this "just" view as simply not applicable to this kind of a
collective bargaining agreement. But the rule stated by Professor
Corbin is not a technical rule narrowly limited to particular kinds
of contracts. It reflects the broader generalization that under a
civilized system of law all just presuppositions of an agreement
are to be deemed part of it, and that courts, whose duty it is to
determine the legal consequences of agreements, should attribute to
an agreement such just presuppositions.
Underlying the Court's view is the assumption that the law of
contracts is a rigorously closed system applicable to a limited
class of arrangements between parties acting at arm's length, and
that collective bargaining agreements are a very special class of
voluntary agreements to which the general law pertaining to the
construction and enforcement of contracts is not relevant. As a
matter of fact, the governing rules pertaining to contracts
recognize the diversity of situations in relation to which
contracts are made, and duly allow for these variant factors in
construing and enforcing contracts. And so, of course, in
construing agreements for the reciprocal rights and obligations of
employers and employees, account must be taken of the many
implications relevant to construing a document that governs
industrial relations. There is no reason for jettisoning principles
of fairness and justice that are as relevant to the law's attitude
in the enforcement
Page 361 U. S. 476
of collective bargaining agreements as they are to contracts
dealing with other affairs, even giving due regard to the
circumstances of industrial life and to the libretto that this
furnishes in construing collective bargaining agreements.
One of the most experienced students of labor law has warned
against the dangers of such an approach:
"The ease with which one can show that collective bargaining
agreements have characteristics which preclude the application of
some of the familiar principles of contracts and agency creates the
danger that those who are knowledgeable about collective bargaining
will demand that we discard all the precepts of contract law and
create a new law of collective bargaining agreements. I have
already expressed the view that the courts would ignore the plea,
but surely it is unwise even if they would sustain it. Many legal
rules have hardened into conceptual doctrines which lawyers invoke
with little thought for the underlying reasons, but the doctrines
themselves represent an accumulation of tested wisdom, they are
bottomed upon notions of fairness and sound public policy, and it
would be a foolish waste to climb the ladder all over again just
because the suggested principles were developed in other contexts
and some of them are demonstrably inapposite. . . ."
Cox, The Legal Nature of Collective Bargaining Agreements, in
Collective Bargaining and the Law (Univ. of Mich. Law School), pp.
121-122.
Judges will do well to heed this admonition. Their experience
makes them much more sure-footed in applying principles pertinent
to the enforcement of contracts than they are likely to be in
discerning the needs of wise industrial relations.
I would affirm the judgment.
* The result of this litigation was a judgment for $250,000
against the goods and estate of over 150 named defendants and
attachment was issued against them.