ALPHA BETA FOOD MARKETS v. Food Employers Council, Inc., et al., Cross-Defendants, Appellants.

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

ALPHA BETA FOOD MARKETS, Inc., a corporation et al., Plaintiffs, Cross-Defendants and Appellants, v. RETAIL CLERKS INTERNATIONAL ASSOCIATION, an unincorporated voluntary association et al., Defendants, Respondents, and Joseph T. DeSilva, individually and in a representative capacity for and on behalf of Retail Clerks Union, Local No. 770, its officers and members, Cross-Complainant, and Food Employers Council, Inc., et al., Cross-Defendants, Appellants.

Civ. 20715.

Decided: April 28, 1955

Musick, Peeler & Garrett, Harold F. Collins, McLaughlin & Casey, James A. McLaughlin, Los Angeles, for appellants. Bodle & Landye, George E. Bodle, Daniel Fogel, Leo Geffner, Los Angeles, for respondents and cross-appellant. Gibson, Dunn & Crutcher, Los Angeles, William French Smith, Los Angeles, amicus curiae.

Appeal from a judgment of declaratory relief.

After a long history of collective bargaining, on January 1, 1950, the parties executed a ‘Retail Food Agreement.’ It was to be effective for 15 months but could be reopened prior to July 1, 1950 on the request of either party on 30 days' notice for the purpose of negotiating changes in hourly rates. As a result of the Union's notice, on September 22, 1950, the parties executed a ‘Modification Agreement,’ extending and modifying the Food Agreement. The terms of the new agreement extended the Retail Food Agreement to December 31, 1955, provided it might be opened annually for negotiating changes only in straight time hourly rates of pay. Before the Modification Agreement had been executed the Korean conflict began and to meet the emergencies that might arise, the Defense Production Act of 1950, 50 U.S.C.A.Appendix, § 2061 et seq., was enacted. It provided for the stabilization of wages. Thereupon the parties made provision in the Modification Agreement, section 8b, to the effect that in the event wages should be controlled by the federal government and such controls should nullify the wage increase effective January 1, 1951, the parties will be entitled to reopen negotiations for premium payments. In other words, there could be no negotiations for premium payments unless the national government should impose a system of wage controls and only for the period. But because no final agreement was ever made for an increase of wages, not permissible under wage controls, it is readily apparent that no increase was ever agreed upon to be effective upon the abolition of coutrols.

After wages had been stabilized pursuant to the Defense Production Act, the Union gave notice October 1, 1951, to appellants of its desire to negotiate modifications of their agreement with respect to changes of provisions for vacations, guarantee of callin pay, overtime and sixth day, part time clerks, defining work week, apprenticeships, rates of pay for department heads, sick leave, wage increases, increased premium pay for Sundays, night work and holidays. Under date of January 1, 1952, an agreement was executed whereby certain changes and conditions were mutually made, no part of which is involved in this controversy. A second agreement provided for a submission to the board of arbitration created by the agreement of the following: (1) What, if any, change should be made in the Modification Agreement with respect to premium pay for (a) night work, (b) for work on Sundays, (c) for work on holidays. That contract was designated as the ‘submission agreement.’ On May 12, 1952, the board decided the issue of premium pay in favor of the Union and its members. The award of the arbitration board was submitted to the 12th Regional Wage Stabilization Board. It did not approve premium pay for night and holiday work, and on a rehearing, its decision was reaffirmed at Los Angeles on July 11, 1952. Thereafter, pursuant to the rules, the matter was automatically transferred to the Wage Stabilization Board at Washington, D. C. It was there pending at the time President Eisenhower on February 6, 1953, issued his order by which (1) all regulations and orders stabilizing wages were suspended; (2) but as a part of such order it was provided that it should ‘not operate to defeat any suit, action, prosecution, or administrative enforcement proceeding, whether heretofore or hereafter commenced, with respect to any right, liability or offense possessed, incurred, or committed prior to this date.’

In their complaint, appellants alleged that a dispute concerning the meaning of the submission agreement exists; that respondents contend that if and when the controls of wages are terminated, the premium pay for night and holiday work shall automatically become payable for all such work performed by appellants' retail food clerk employees immediately following the termination of such wage controls, regardless of whether or not the Wage Stabilization Board shall have approved or disallowed the award of such premium pay. The pleading alleges the contentions of appellants as follows: ‘Plaintiffs dispute the above-described contention of the defendants and contend that there shall never be any duty on the part of plaintiffs to pay any such permium pay for night and holiday work unless and until such premium pay is specifically allowed and approved by the Wage Stabilization Board in accordance with the statutes of the United States governing wages, and that under the terms of the Submission Agreement, approval of such premium pay by the Wage Stabilization Board is a condition precedent to any liability and duty on the part of plaintiffs to pay such night and holiday premium pay.’

The court found on such allegations as follows: ‘The provisions of the Submission Agreement with respect to approval of the award by the Wage Stabilization Board did not create or constitute a condition precedent to the finality of the award with respect to the said premium pay. Such provisions expressed the legal requirment of federal government approval, only; that such government approval was a continuing legal requirement until February 6, 1953; that with the termination of wage controls on that date, pursuant to said Executive Order 10434, such legal requirement was eliminated.’

The conclusion of the court was: ‘The provisions of said Submission Agreement with respect to approval of the said arbitration award by the Wage Stabilization Board, did not create or constitute a condition precedent to the finality of said award with respect to the said premium pay; that such provisions expressed only the legal requirement of federal government approval.’ In accordance with such finding and conclusion, the court adjudged the defendants to be entitled to their premium pay for night and holiday work.

Appellants now demand a reversal of such judgment on the grounds that (1) Wage Board approval of any award of premium pay was a condition precedent to the accrual of any obligation to pay such premium rates; (2) the President's decontrol order was not equivalent to wage board approval. Other matters are urged but they are not pertinent to a decision.

Without section 8b1 of the modification agreement, the respondents could not for five years have negotiated for anything but straight time hourly rates of pay. Section 8b anticipated wage control. By that section they broadened the scope of demands that might be made, but such demands could not exceed the increases permissible under wage stabilization regulations. The Defense Production Act of 1950 authorized wage freeze. Respondents were willing to limit their negotiations for five years to straight time hourly rates of pay. But if wage controls were imposed, they demanded the right to broaden their demands to include other matters. They demanded everything that was available under wage regulations. This they could do under the provisions of 8b if straight time pay were limited. That section contemplated a wage ceiling on straight time hourly pay and on fringe benefits as well. In all reason, the parties could not have intended straight time hourly pay and not have included also all other benefits. Both parties knew that whatever the result was, it would have to be authorized by law.

After their negotiations had been completed, the parties executed the agreement of January 1, 1952,2 which provided that the wage scales attached to such agreement shall be paid to all employees ‘covered by the aforesaid agreements; provided’ that certain amounts shall be withheld until it has been determined that such wage rates are permissible under Wage Stabilization regulations; such amounts so withheld to be paid retroactively to the first Monday of 1952, if it be determined by the Union and the Food Employers Council Inc.3 that such amount is permissible under existing Wage Stabilization regulations. That contract was the first by these parties under their Modification Agreement and the laws governing wage stabilization. It is a fair interpretation of section 8b that the amount determined to be permissible would be in effect during the entire period of the modification agreement, even if the controls should be subsequently abolished. This conclusion is justified by the facts that straight time hourly rates, Sunday premium pay and other increases, not in dispute, continued in force according to valid agreements of the parties, notwithstanding the abolition of wage controls. Section 8b contemplated only such increases as were valid under wage controls.

Section 8b was mutually added to the modification agreement to cover the contingency of wage controls. It is not disputed that 8b could not be effectuated if such controls had never come into existence, because that section applied to fringe benefits only, in the event of wage controls. Section 8b means that such controls must either nullify or alter the modification agreement in regard to straight time pay in order for the Union to reopen negotiations in regard to any benefits other than straight time pay.

Wage controls were in fact established January 24, 1951. In October of that year, the Union opened negotiations for added benefits under section 8b contending that because of wage controls, they were now entitled to negotiate for the added benefits. This negotiation was opened under the modification agreement which allowed yearly reopenings. As a matter of fact, the most the wage control regulations ever did was to specify certain limits beyond which increases could not go without specific board approval.

Appellants' agreement to a wage increase under the January 1, 1952 agreement resulted from the Union's demands and was in accordance with the modification agreement. It was not an admission that 8b was in effect. The fact that a cost of living increase was also granted was in accordance with the times and again, appellants waived no rights as to the modification agreement. Section 8b specified only that the agreement must be nullified and straight time increases disallowed before respondents might negotiate for fringe benefits.

The modification agreement called for a submission of any disputes to a three-man arbitration board. The first question submitted to this board was ‘what, if any, change should there be?’ in the modification agreement in regard to premium pay. The Board of Arbitration ignored the ‘if any’; failed to rule on this question and granted all of the Union's demands as to fringe benefits.

However, this ruling was only an interim decision. It could not stand by itself and was subject to Wage Stabilization approval. That approval was not forth-coming and after the Union had sustained two adverse decisions by the Regional Wage Stabilization Board, the case was still pending with the National Stabilization Board when controls were abolished. Obviously, the abolition of controls could not suddenly make the Board of Arbitration's award a final judgment, after such award had been twice reversed by the regional Wage Stabilization Board.

Respondents could never have negotiated without wage controls and upon the abolition of such controls, in the absence of a final judgment, the disputed issues (night and holiday pay) should have been abandoned, and the controversies that had arisen in war time should have been consigned to limbo. This means, of course, that all final judgments entered during such period are still in effect.

Respondents never contemplated negotiating for future benefits, and affirmance of the instant judgment would be contrary to their intentions. The modification agreement allowed them to negotiate every year in order that their wage demands would be kept current.

As respondents were never limited by wage controls in their bargaining for straight time pay, even though wage stabilization approval was necessary, and as appellants never waived their right to refuse frings benefits, since there was no final judgment, this court must hold that as to the disputed questions, respondents never had the right to negotiate under 8b for fringe benefits, and certainly not benefits for the future. It is the law that during a period of wage stabilization controls, any contracts between the parties must have been approved by the wage stabilization board. If any part of the wage contract has not been approved by the wage stabilization board, it was not a part of the agreement of the parties. There was nothing to enforce after controls had been abandoned. In re Pringle Engineering & Manufacturing Co., 7 Cir., 164 F.2d 299, 301. The validity of the terms of a contract must be determined by the law in effect when the contract is made. (Ibid.)

It was not the abandonment of the controls that might have authorized premium payments but it was the wage controls that had been authorized by the Defense Production Act of September 8, 1950. (Ibid.) In Mitchell v. Texas Housing Co., Tex.Civ.App., 265 S.W.2d 157, 162, it was held that ‘as part and parcel of any agreement for compensation made during period of controls was the Defense Production Act of 1950 whereby all claims for compensation not permitted by its regulations, whether in quantum meruit or otherwise, would be manifestly without legal basis and unenforceable.’ The effect of such holding is that unless respondents established their rights to the premium payments by an order of the Wage Stabilization Board, during controls, they had none when the controls were lifted.

The parties entered into negotiation in October 1951 to increase the current wage scale; yet the award of the disputed premium payments could not take place until the lifting of wage controls, which occurred February 6, 1953. The only two possible theories to sustain respondents' position that there should be a future award are (1) that the parties illegally contracted to circumvent the wage stabilization board or (2) that payments were deferred until the future which is not the intent of section 8b under which negotiations were opened. Neither theory is tenable.

Having shown that respondents left the period of wage stabilization without an approval of their premium payments, it must be readily discernible that they are in a hopeless situation. They are in no better position than they were before wage controls allowed them to negotiate under 8b. Therefore, they obtained their judgment for their alleged premium payments without legal authority. It is as though their incomplete proceedings had never been initiated or as though they had never negotiated for an allowance of the premium wage payments.

Despite the imposition of wage controls on hourly wage rates the parties agreed that the scope of reopening negotiation was to be broadened; but such was to continue only ‘during any period in which such board or agency exercises controls.’ From such language, it must be apparent that the parties contemplated that any agreement arrived at would be effective only during the period of wage controls. If not so restricted, such agreement would be illegal. Neither in section 8b nor in any other contract does it appear that the parties, in making such contract, contemplated the abandonment of controls. Neither is there evidence that increases were to be effective at a future date. But all negotiations for premium pay items, as well as others, were to occur ‘only during any period in which such Board or agency controls.’

Neither does it appear from any contract that the abolition of controls was to signify the immediate effectiveness of pay increases. Indeed the thesis of respondents on this appeal is that the increases should date from the arbitration award. Now, the court made no finding that the date of lifting controls was to be the date on which increases agreed upon by the parties were to go into effect. In the absence of such finding or of proof that would justify it, how can it be maintained to the contrary? Despite the importance respondents now attach to such date, they made no allusion to it in any contract. If they had had such thought in mind at the times of the contracts they surely would have insisted upon the mention of abolition of controls at least as forcefully as they insisted upon the adoption of section 8b and the imposition of controls. Lifting controls did not alter the terms of the contract which had determined that the amount of any increase was to date from the time it was fixed and that it had to be authorized by national regulations.

Respondents do not place themselves in an enviable position. While they concede that both contracts of 1952 were drawn within the purview of section 8b and claim all benefits conferred by that section, yet they deny the limitations imposed thereby. Not only were the 1952 agreements drawn pursuant to section 8b, but the documents both disclose that the increases resulting therefrom were to be limited to those authorized by wage regulations. Not only were hourly wage increases, but other wage items were negotiated to the ceilings warranted by the regulations. In no instance did respondents, in negotiating for an increase, attempt to evade the dominance of wage controls. Amicus curiae pertinently observes: ‘It the Union had thought that it was also obtaining increases the total amount of which was sooner or later to be effective irrespective of whether permitted by controls, it is not likely that it would have had such respect for wage ceilings in its negotiations, a respect clearly shown by the 1952 agreements.’ In their Submission Agreement as in all others, they provided that if any award of the Board ‘provides for any change in premium pay, such award shall be submitted for approval to the Wage Stabilization Board by joint petition of the parties hereto if then so required. The effective date of the award shall be the date upon which it is approved by the Board, if such approval is necessary.’ Such phraseology as the foregoing quotation emphasizes the fact that in agreeing to widen the scope of the reopening during controls, the parties intended only such increases as might be obtained under existing regulations.

With their agreement to such requirements for obtaining increases in pay, how can respondents now maintain that since controls have been lifted, they may disregard the fact that no Wage Stabilization Board ever approved the increases which they now contend are theirs merely because controls were abolished? Inasmuch as the agreement provided that such premium pay should not be allowed until approved by the Wage Stabilization Board, and since the controls and the Stabilization Boards are abolished, does not the new status require either that the issue be submitted to such National Board, even though without official status, or require the parties to reopen negotiations for the purpose of adjusting respondents' claims for premium pay? When the agreement, made during the national emergency, provided that their contest should be finally decided by a national tribunal, there is not decision merely because the national government has abolished such tribunal. The parties had, in good faith, a problem requiring solution. They agreed to have such tribunal resolve their differences. The destruction, decadence or abolition of the tribunal could not, in reason, be deemed tantamount to a judicious consideration of a substantial controversy that pertained to the welfare of either or of both contenders.

If respondents contend that an increase during wage controls might not have been permissible under wage regulations, yet such increase must go into effect when controls were abolished, they not only demand an increase contrary to statute, but also, they reject their own agreement. They must show that although an increase was not permissible under wage regulations yet it must be deemed established when the wage stabilization boards cease to enjoy official status. By the contract of January 1, 1952, it was agreed that if the entire amount of hourly wage increases permissible under existing regulations cannot be paid ‘then there shall be paid the highest portion of the sum so withheld, that is permitted to be paid under such regulations and such payment shall fully discharge the employers from further liability.’ Although respondents accepted Sunday premium pay and hourly wage rates upon the theory that it was proper under the national regulations, and although they deny that premium pay increases for nights and holidays are authorized by the same statutes, they now maintain that the latter increases should now be deemed effective by virtue of the abolition of wage controls. Such was not in any agreement of the parties, neither in 8b nor in the 1952 agreements.

Since no agreement was ever made that the disputed premium pay should become effective upon the lifting of controls, respondents are in unfortunate plight. To make such agreement while wage controls were effective would have been unlawful as violative of federal statutes. Wage controls could easily be evaded if employers might promise additional inducements payable after the passing of the national emergency. Such an agreement would be illegal. De La Rama S. S. Co. v. Pierson, 9 Cir., 174 F.2d 84; Morford v. Bellanca Aircraft Corporation, 6 Terry 129, 45 Del. 129, 67 A.2d 542, 545. Wages could not be stabilized if such tricks were perpetrated by industry. The only way to effect the purpose of respondents and to make the premium pay effective now, is to make an agreement to such effect. In the absence thereof, respondents cannot by their ipse dixit, reverse a judgment that went against them during the emergency.

In re Pringle Engineering & Manufacturing Co., 7 Cir., 164 F.2d 299, holds that the terms of a contract must be determined by the law in effect when the contract is made. Therefore, it is the law in force at the time of the agreement of the parties that determines whether it is valid. 12 Am.Jur. 659, sec. 164; Northern Pac. R. Co. v. Wall, 241 U.S. 87, 36 S.Ct. 493, 66 L.Ed. 905; Willcox v. Edwards, 162 Cal. 455, 461, 123 P. 276.

If any contract subsists for the premium wages, it was executed during the period of wage controls and is therefore illegal and inoperative. No rights grew out of it and none inhere in it. When the President's order was issued, it terminated the controls, and the regulations no longer interfered with industry's contracting with labor. But since contracts made during the period of controls contrary to statute are void, no rights may be asserted as having originated with such contract. The asserted increases are without substance.

The Second Section of the Presidential Proclamation, which stated that all pending petitions before wage boards may now be placed in effect without the approval of such agencies, was interpreted by the respondents to mean the president's order either eliminated the requirement of wage board approval, or in the alternative that the alleged condition precedent of wage board approval was fulfilled.

Section 2, however, was held subject to section 3 which said, ‘This order shall not operate to defeat any suit, action, prosecution, or administrative enforcement proceeding, whether heretofore or hereafter commenced, with respect to any right, liability, or offense possessed, incurred or committed, prior to this date.’

The president's order did not constitute blanket approval of all pending cases but stated that the employers were then free to make changes in compensation if their petitions were merely up for approval, or if up for review or reconsideration, the employers were free to renegotiate.

The rights of appellants, if the petition were automatically approved, would definitely have been effected under section 3 of the presidential proclamation. No such approval can be deemed to have been granted under section 1.

Appellants are entitled to due process of law and their day in court. They cannot be deprived of a decision on the automatic appeal to the National Wage Stabilization Board merely by reason of the presidential order lifting controls. Section 3 of the President's order preserves the rights of all parties with petitions or appeals pending. The appellants expressed disapproval of premium payments at all stages of the proceeding. No section of the President's order can be reasonably interpreted as having deprived appellants of their closely guarded and carefully preserved rights. Appellants prevailed before the 12th Regional Wage Stabilization Board at both hearings on the matter of premium pay. Because the law made the automatic appeal to the National Board at Washington is no reason why appellants should be deemed to have lost the ground so gained. In fact, the President's order distinctly declares that it ‘shall not operate to defeat any suit, action, prosecution, or administrative enforcement proceeding’ with respect to any right possessed ‘prior to this date.’ The order was permissive. It did not purport to approve all pending actions.

It follows that respondents cannot contend that the presidential order constituted an automatic reversal. If it should be so decided, it would operate to enter a judgment as to which the Regional Board had firmly held to be contrary to law. Such a result would be contrary to the constitutional doctrine of due process of law.

The question as to the proper joinder of Joseph De Silva and the Food Employers' Council Inc. is not germane to the issues of this action.

It is ordered that the judgment is reversed; that the trial court is directed to make and enter findings of fact and conclusions of law to the effect that no valid agreement has ever existed between defendants and plaintiffs with respect to night and holiday premium pay and to enter judgment that no sums are due and payable to defendants by plaintiffs and that plaintiffs recover their costs.

FOOTNOTES

1.  ‘(b) It is agreed that in the event any duly authorized and empowered government board or agency establishes controls over wages and/or working conditions as a result of a national emergency, and only in the event such controls nullify, invalidate, alter or in any way render inoperative or illegal the wage increase effective January 1, 1951, as provided herein, or subsequent wage reopenings in accordance with Paragraph 6(b) of this Agreement, or the employee medical and hospital benefits herein provided, the restrictions set forth in Paragraphs 6(b) and 8(a) limiting the reopening rights of each of the parties to negotiate changes only in the straight time hourly rates of pay, shall be declared inoperative and shall cease to be in effect during any period in which such board or agency exercises controls, provided, however, that neither party shall be obligated at any time during the term of this agreement to bargain collectively with respect to pensions or annuities.’

2.  ‘1. Effective as of January 1, 1952, the wage scales attached hereto as Exhibit ‘A’, and incorporated herein, shall be paid to all employees covered by the aforesaid agreements. [Retail Food Agreement, January 1, 1950; Modification, January 1, 1952.]‘2. Effective as of July 1, 1952, a cost of living adjustment shall be made and paid to all employees coming under the provisions of this contract amounting to the percentage of increase in the Bureau of Labor Statistics Consumers Price Index, U. S. Average, (new series) for the latest date available over the same index as of October 15, 1951. Thereafter, each half year, the cost of living allowance shall be increased or decreased in proportion to the increase or decrease of the latest Bureau of Labor Statistics Consumers Price Index over the index for October 15, 1951. It is agreed and understood that at no time shall such cost of living adjustment result in any decrease of the base rates provided herein and attached hereto as Exhibit ‘A’, and as modified by the improvement factor in Section 3 hereof.‘3. On January 1, 1953, an increase of four cents ($.04) per hour shall be added to the base rates provided herein as an improvement factor. Another increase shall be made in the same amount as of January 1, 1954, and another as of January 1, 1955.‘The above increase shall be subject to Wage Stabilization Board approval upon joint petition of the Council and the Union, unless or until such approval becomes unnecessary.‘4. It is agreed by the parties hereto that subject to the approval of the Wage Stabilization Board, there shall be contributed to the Retail Clerks Benefit Fund—Local 770—an additional 1/4¢ per hour per employee during the life of the Agreement. Such payment shall commence upon approval by the Wage Stabilization Board, or shall be retroactive to April 1, 1952, whichever is the earlier.‘5. It is further agreed and understood that except as herein amended and except for such changes as may result from the Arbitration Award under the Submission Agreement executed by the parties as of even date hereof, the provisions of the Retail Food Agreement and the Extension and Modification thereof shall remain in full force and effect until December 31, 1955.‘There shall be no reopenings until January 1, 1956 for any purpose. Until such date, wages and working conditions shall be adjusted only as herein provided. Either party may give notice in writing of its intention to amend, alter or terminate this agreement sixty days prior to December 31, 1955.‘It is further agreed and understood that the parties signatory hereto shall incorporate the provisions hereof as well as any changes resulting from the Arbitration Awary under the Submission Agreement as of even date hereof, in a new agreement embodying the old provisions reaffirmed herein, as well as the amendments hereinabove provided or referred to, and shall execute such new agreement as soon as can be prepared.’

3.  Agent of appellants.

MOORE, Presiding Justice.

McCOMB and FOX, JJ., concur.

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