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District Court of Appeal, First District, Division 2, California.


Civ. 11768.

Decided: March 25, 1942

Milton Marks, of San Francisco, for appellants. Belli & Leahy and Melvin M. Belli, all of San Francisco, for respondent.

The plaintiff alleged in his complaint a cause of action for a balance due for wages earned under a contract evidenced by three written instruments. The defendants filed an answer denying there was any balance due the plaintiff for wages earned and denying there was any written instrument executed by the parties. After a trial before the court sitting without a jury the court made findings in favor of the plaintiff and from the judgment based on said findings the defendants have appealed.

In his complaint the plaintiff, among other things, alleged: “That on or about the first day of February, 1936, defendants and each of them, by written instruments, contracted and agreed with said Waiters' and Dairy Lunchmen's Union, Local No. 30, for the benefit of the members of said Waiters' and Dairy Lunchmen's Union, Local No. 30, and particularly for the benefit of said Raymond Sublett, plaintiff, and in consideration of said Waiters' and Dairy Lunchmen's Union, Local No. 30, leasing and renting to defendants, and each of them, for the purpose of their display, a Union House card, said card by common practice, custom and usage signifying to the public that said defendants, and each of them, conformed to Union Wages, hours and practices and held themselves out to the general public as so doing, to pay plaintiff as an employee * * *” The trial court among others made a finding as follows: “That on or about the first day of February, 1936, defendants, and each of them, by written instruments, contracted and agreed with said Waiters' and Dairy Lunchmen's Union, Local No. 30, in consideration of said Waiters' and Dairy Lunchmen's Union, Local No. 30, leasing and renting to defendants, and each of them, for the purpose of their display a union house card, to pay the union scale of wages as provided in said written instruments; * * *” Said allegation in the complaint was, in short, that defendants promised to pay the union wage. The finding in response was to the same effect. The plaintiff supported his complaint by his own testimony. The defendants offered no evidence. Clearly the finding, except regarding a lease, may not be disturbed on appeal. But that conclusion does not dispose of all the points presented.

In his complaint the plaintiff alleged that the defendants paid him union wages and at the same time required him to return a part of each payment. He repaid certain sums and the judgment appealed from was for said sums together with interest. Such repayments in labor disputes are called (and will hereinafter be called) “kick–backs.” The defendants assert they paid union wages. To that assertion the plaintiff replies that the defendants made such payments but required a “kick–back” of a part of the payment; that the “kick–back” was against public policy; that the “kick–back” was induced by duress and menace; and that the “kick–back” was in violation of the terms of a “collective bargaining agreement.” That reply brings us to the real issues presented by the record.

The “kick-back” was not against public policy. Civ.Code, sec. 1667, subd. 2; Jones v. Hanna, 81 Cal. 507, 22 P. 883. As the employer was entitled to say what net sum he would pay as a wage and to refuse to pay more even though the employee refused to accept it and quit and although the employer knew such would be the result the determination of the employer was within his legal rights and was not duress or menace. Santa Ana Sugar Co. v. Smith, 116 Cal.App. 422, 427, 2 P.2d 866. As to the claim that the “kick–back” was in violation of the express provisions of a “collective bargaining agreement” executed between employers and employees, the defendants assert there is no evidence that such an agreement was ever executed. That assertion we think must be sustained. The plaintiff makes no claim that there was direct evidence of the existence of a “collective bargaining agreement.” However, he relies on the recitals contained in certain written instruments which he introduced in evidence as his exhibits 1, 2, and 3. The first was a union house card, or union sign as it is sometimes called in the record. The defendants had one posted in their restaurant. It was signed by no one. Among others it contained the following provisions:

“This card is the property of the hotel and restaurant employees' International Alliance and Bartenders' International League of America and cannot be bought, sold or transferred.

“The person or persons displaying this card do so in accordance with the contract entered into with a subordinate Local Union, located in the city where card is displayed, and it is agreed that he or they will give peaceable possession of same to the local union in whose jurisdiction it is displayed, or to a duly appointed or elected representative, thereof, also, that the same will be given to the president or secretary–treasurer of the H. & R. E. I. A. & B. I. L. O. A., or a duly appointed representative, on demand.

“The holder of this card agrees to comply at all times with the laws, rules, and regulations of the local union which issued said card to him.”

The second exhibit was a list of union wages. The heading of the list was “Joint Wage Scale for Dairy Lunches, Cafeterias, Class B Restaurants and Class B Taverns. Waiters' and Dairy Lunchmen's Union Local No. 30 * * * Approved by Local Joint Executive Board San Francisco Labor Council and International Union * * * 6. House Managers or men in charge of establishments 7 * * * 24. No more than eight hours shall constitute a day's work * * *” It was signed by no one. There was no evidence the defendants ever saw it until it was produced at the time of the trial.

The third instrument was a licensing agreement. It was signed by no one. In form it was drawn to be signed by the employer only but there was no evidence these defendants ever signed one except the testimony of the witness who said such a document, under union rules, is required to be signed and delivered before a house card is delivered. That document, in part, was as follows:

“No. 1652

“Union Label License Agreement H. & R. E. I. A. and B. I. L. of A.

“Received of the Local Joint Executive Board of Culinary Workers, of San Francisco, Calif., International Union House Card No. 20. Said card is delivered to, received and held by the undersigned at No. 25 Street, San Francisco, Calif., subject to the following conditions: * * *

“2. All employees shall receive not less than the rate of wages, and shall work within the hours and time specified by the respective wage scales adopted and approved by the said Local Joint Executive Board, and it is expressly understood that the said Board reserved the right to alter or modify or change the said scales from time to time. * * *”

The plaintiff was a member of Waiters' and Dairy Lunchmen's Union Local No. 30. Exhibits 1 and 3 are concerned with Hotel and Restaurant Employees' International Alliance and Bartenders' International League of America. There was no evidence that Local No. 30 was in any way connected with the league. There was no evidence of any kind that defendants executed a lease of any kind or nature. Looking at one and all of said exhibits it is clear that at most it may be said they contain admissions of a promise to pay union wages. But they contain nothing showing or tending to show that a “collective bargaining agreement” as to wages was ever executed. On the contrary said instruments suggest that the agreement, if any, was one between these employers only and the Waiters' and Dairy Lunchmen's Union of which plaintiff was a member. When such contract was made, what its terms were, who were covered by it when it was made, who were to be covered by it, are all matters not disclosed by any evidence whatever. Summing up the evidence there was not introduced in evidence the original or a copy of a “collective bargaining agreement,” nor a bilateral agreement between these employers and the Waiters' and Dairy Lunchmen's Union Local No. 30.

Section 1559 of the Civil Code provides: “When contract for benefit of third person may be enforced. A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” Other states have a similar statute. 17 C.J.S., Contracts, § 519, p. 1124. However, there are certain well defined limitations to the rule. In 17 C.J.S., Contracts, § 519, p. 1137 the author states: “The rights of a third person to sue on a contract made for his benefit depend on the terms of the agreement and are no greater than those granted by the contract as intended by the parties thereto. To recover the beneficiary must bring himself within its terms, and construction of the contract is involved. Since recovery on a third person beneficiary contract is a recovery on the contract itself, the right of the beneficiary is no greater than if the contract were enforced between the nominal parties, the beneficiary being in no better position than the promisee.” (Italics ours.) The text is abundantly supported by authority. See Dayton v. White, Sup., 182 N.Y.S. 902; Fidelity & Casualty Co. of New York v. Plumbing Department Store, 117 Fla. 119, 157 So. 506; Marianna Lime Products Co. v. McKay, 109 Fla. 275, 147 So. 264. In the case last cited, at page 266 of 147 So., the Supreme Court of Florida said: “The real party in interest statute, supra, is permissive, not mandatory. Its effect is not to change the contract, but to allow it to be enforced by a benefited party who is a stranger to its execution. The real party in interest would not be entitled to sue on a contract to which he is a nominal stranger but for the permissive effect of the statute. So a recovery by the real party in interest is a recovery on the contract itself. The right to such recovery is no greater under the statute than the contract would warrant if enforced in a suit at law between the nominal parties.” (Italics ours.)

However, as we have shown above there was no evidence that the contract, between plaintiff's employers and plaintiff's union, contained any covenant on the subject of wages and in particular on the subject of “kick–backs.” The burden was at all times on the plaintiff. In the absence of such evidence he has not shown that the wages paid him were in violation of the terms of any contract between his employers and his union. Therefore he was not entitled to recover.

Moreover, whether a contract between his employers and his union was in existence he waived any right by the oral contract he made with his employers when accepting the employment. The sole evidence on that subject was given by the plaintiff. He was employed by Mr. Torlkerson to work for defendants. He testified in substance as follows: “I walked up one afternoon, he happened to be standing on the sidewalk, he told me to come to work. That was in February of 1936. He told me he had a relief manager's job open and asked me how I would like to have it. I said I would like to have it very much. He said, ‘The scale calls for $27.50 but I will only pay you $25.’ When he said he would only pay me $25 I understood by that it was the firm would pay the $25. I told him I would take the job. At that time I knew what the union scale was. I knew that the amount being offered to me was less than the union scale was. I knew that the amount being offered to me was less than the union scale. I told him I would come to work. I did not agree how long I would work. The job which Mr. Torlkerson offered me was a better job than I had previously had. It called for more pay. The amount $25 then offered to me was $2.70 more per week than I had been receiving. He said if I took the job I would have to kick–back $2.50 a week. I understood what the words ‘kick–back’ mean. I told him I would take the job.” During the term of the plaintiff his position was changed at different times. In each position he received a wage which he now claims was less than the union scale. However, down to the date when he left the employment of the defendants, he accepted and now retains the reduced amount. Obviously the parties by their oral contract modified the amount of the wage prescribed by the union scale. The plaintiff is bound by the terms of the contract as so modified. Yazoo & M. V. R. Co. v. Sideboard, 161 Miss. 4, 133 So. 669, 672; Yazoo & M. V. R. Co. v. Webb, 5 Cir., 64 F.2d 902, 905.

The judgment appealed from is reversed.


NOURSE, P. J., and SPENCE, J., concurred.

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