HUNTER v CITY OF BOZEMAN

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No. 94-381 IN THE SUPFtEPE COURT OF THE STATE OF MONTANA 1985 DAVID L. HUNTER, Commissioner, Dept. of Labor and Industry, State of Montana, et al., Plaintiff and Respondent, THE CITY OF BOZEMAN, a Flunicipal corporation; THE CITY OF BOZEMAN STREET DEPARTMENT, et al., Defendants and Appellants. PEAL FROM: District Court of the Eighteenth Judicial District, In and for The County of Gallatin, The Honorable Thomas Olson, Judge presiding. For Appellants: Landoe, Brown, Planalp, Kommers & Johnstone; J. Robert Planalp argued, Bozeinan, Montana For Respondent: William P. Richardson argued, Labor Standards Div., Helena, Montana Submitted: Decided: Filed: MAY 3 u 1985 Clerk April 16, 1985 May 30, 1985 Mr. Morrison, J r . , d e l i v e r e d t h e Opinion o f J u s t i c e F r a n k B. t h e Court. This i s an appeal from an award o f $ 1 7 , 5 5 4 . 7 6 , t h e C i t y o f Bozeman f o r u n p a i d wages mandated by e t seq., against 18-2-401, §§ MCA. David Hunter, L. complaint Commissioner o f against s e e k i n g t h e d i f f e r e n c e i n t h o s e wages p a i d and t h o s e wages which P r e v a i l i n g Wage Law, Act. referred paid pursuant on to June 3, 1982, been Bozeman Labor, a have City of of filed should the Department Montana's t o a s t h e L i t t l e Davis-Bacon The C i t y ' s motion t o d i s m i s s b a s e d on t h e u n c o n s t i t u - tionality of this Act was denied. t r i a l , t h e Honorable Thomas A. Following a non-jury Olson e n t e r e d f i n d i n g s o f f a c t and c o n c l u s i o n s o f law on November 21, 1 9 8 3 , a w a r d i n g damages i n t h e amount o f $17,554.76, against the City. D u r i n g t h e summer o f 1981, t h e C i t y o f Bozeman s u b m i t t e d specifications for the construction b u i l d i n g on l a n d owned by t h e C i t y . of a vehicle storage Advertisement f o r b i d s on t h e p r o j e c t r e s u l t e d i n o n l y one b i d , which was r e j e c t e d Thereafter, Pollard Finance, Inc., for being too costly. Idaho corpora t i o n , the lease of November 10, a p p r o a c h e d t h e C i t y o f Bozeman p r o p o s i n g a b u i l d i n g which P o l l a r d would c o n s t r u c t . 1981, an Pollard On and t h e C i t y o f Bozeman e n t e r e d i n t o a l e a s e f o r t h e proposed s t o r a g e b u i l d i n g . P o l l a r d n e g o t i a t e d a c o n t r a c t w i t h W. the construction of t h e building. c o n t r a c t o r s were h i r e d R. Henderson f o r A l l c o n t r a c t o r s and and p a i d by Henderson. sub- The C i t y o f Bozeman was n o t a p a r t y t o t h e c o n s t r u c t i o n c o n t r a c t . The l e a s e a g r e e m e n t between P o l l a r d and t h e C i t y o f Bozeman and t h e Pollard-Henderson independent c o n t r a c t s . c o n s t r u c t i o n c o n t r a c t were d i s t i n c t and I n sum, t h e C i t y o f Bozeman owned t h e land upon which Henderson constructed the storage warehouse, which Pollard owned and leased back to the City. The following issues are presented on appeal. 1. Is the Little Davis-Bacon Act, contained in S 5 18-2-401 through 18-2-405, MCA (1981), unconstitutional in that the method devised by the Montana Legislature to set the prevailing wage for public contracts constitutes an improper delegation of power to private groups? 2. Is there substantial credible evidence to support the finding of the trial court that the lease between the City of Bozeman and Pollard Finance, Inc., is a public works contract for the purposes of SS 18-2-401 through 18-2-405, MCA (1981)? 3. Did the trial court err in allowing proof of wages from hearsay letters compiled by persons not called to testify in the case? 4. Did the trial court err in assessing penalties against the appellant? Appellant contends that the prevailing wage rate scheme established by the Montana Legislature involves an unconstitutional delegation of authority private parties. from the Legislature to The crux of this argument is that, since the Little Davis-Bacon Act as it exists in Montana, mandates that the prevailing wage rate be determined by collective bargaining agreements, it is unconstitutional. Reliance is placed upon S 18-2-401(5) (b), MCA, which provides : "(b) When work of a similar character is not being performed in the county or locality, the standard prevailing rate of wages, including fringe benefits for health and welfare and pension contributions and travel allowance provisions, shall be those rates established by collective bargaining agreements in effect in the county or locality for each craft, classification, or type of worker needed to complete the contract." The section quoted above is not applicable to the facts at bar. This case is governed by S 18-2-401(5) (a), MCA, which provides: "(5) (a) 'Standard prevailing rate of wages, including fringe benefits for health and welfare and pension contributions and travel allowance provisions applicable to the county or locality in which the work is being performed,' means those wages, including fringe benefits for health and welfare and pension contributions and travel allowance provisions, which are paid in the county or locality by other contractors for work of a similar character performed in that county or locality by each craft, classification, or type of worker needed to complete a contract under this part." The following statute, $$ 18-2-402(1), MCA, provides guidelines for establishing the prevailing rate of wages. The section states: "Standard prevailing rate of wages. (1) The Montana commissioner of labor may determine the standard prevailing rate of wages in the county or locality in which the contract is to be performed. The commissioner shall undertake to keep and maintain copies of collective bargaining agre~mentsand other information from which rates and jurisdictional areas applicable to public works contracts under this part may be ascertained (emphasis supplied) " . Statutes which make the union scale absolutely determinative of prevailing wages have been held to be invalid. Bradley v. Casey (Ill. 1953), 114 N.E.2d 681; Wagner v. City of Milwaukee (Wisc. 1922), 188 NW 487; Industrial Commission v. C & D Pipeline, Inc. (Ariz.App. 1979), 607 ~ . 2 d 383. On the other hand, a prevailing wage law with a union scale provision has been held constitutional where the union rate of wages merely assists in ascertaining the prevailing wages and the public authorities are vested with the ultimate determination as Baughn v. Gorrell to & what constitutes prevailing Riley (Ky. 1949), 224 S.W.2d School District of Keene v. wages. 436; Union Commissioner of Labor (N.H. Montana's Little Davis-Bacon Act authorizes the Commissioner of Labor to establish standard prevailing rates using union contracts and "other information" as guidelines. Therefore, collective bargaining agreements are advisory, but not compulsory where there is other evidence of prevailing wage rates in the community as there was in the Bozeman area. No unconstitutional delegation of authority has occurred in § 18-2-401 (5)(a), MCA. We do not reach a decision with respect to the constitutionality of (b) of the same statute, as it is not applicable to the facts at bar. In its second issue, appellant attacks the trial court's finding that the lease was in fact a public works contract. This is a substantial credible evidence question. Robinson v. . Schrade (Mont 1985) , P. 2d - I - 42 St.Rep. 401, , We must view the evidence in a light most favorable to 403. respondent, Mountain West Farm Bureau Mutual Girton (Mont. 1985), P. 2d I -8 Ins. Co. v. 42 St.Rep. 500, 501, and determine whether or not a factual issue was presented to the trial court. At the end of twenty years, the City acquires absolute ownership of the "leased" building for $10 and retains ownership of the land. Pollard, at the end of the 20-year term, must transfer it to the City for $10. penalty provision for nonrenewal of the suggestive of a sale to the City. Furthermore, the lease is highly Provision 23 of the lease contains a provision for liquidated damages in the event that the City failed to exercise five-year renewal options running the full term of the lease to 20 years. That provision states: ". . . in the event the Tenant fails to renew the lease at the end of the original term of the lease or after the first and second renewal periods (five years each), the Tenant shall deposit with the escrow agent the sum of $175,000 cash as liquidated damages for the failure of the Tenant to renew said lease. 'I There is substantial credible evidence to support the finding by the trial court that the "lease" was in fact a sale of the building to the City and that this was in effect a public works project. Appellant claims error in the trial court's admission of certain documentary evidence. Of the total $8,777.39 damage award, only $1,365.27 was based upon oral testimony of witnesses. The balance was proven by evidence admitted under exceptions to the hearsay rule. unverified The Commissioner introduced letters of Henderson Construction, Lipka Door Company and McBride Construction pursuant to the "catch-all" exception M.R.Evid. to the hearsay rule found in Rule 803(24), These letters are not business records as they were not kept in the ordinary course of business, but were compiled for litigation purposes. Sufficient guarantees of trustworthiness do not exist when documents are compiled for litigation purposes. Respondent argues that the three letters in question were summaries of payroll records supplied by the appropriate personnel in response to administrative subpoenas issued by the Department of Labor. As such, it is contended the docu- ments possess the "comparable guarantees of trustworthiness" required by Rule 803 (24), M. R. Evid. , because a person responds truthfully and accurately to judicial requests knowing that an untruthful response results in penalty imposed by the court. This same argument could be made in support of other forms of inadmissible hearsay. Cross-examination serves a useful purpose in testing the credibility of evidence. should be sparingly denied. It We find as a matter of law that the letters a d m i t t e d w e r e h e a r s a y and s h o u l d n o t h a v e been here received in A s u b s t a n t i a l p a r t o f t h e damage award was b a s e d evidence. upon t h i s h e a r s a y e v i d e n c e and t h e r e f o r e t h e judgment must b e v a c a t e d and t h e m a t t e r remanded f o r t r i a l on t h e damage i s s u e only. Appellant a s s e r t s e r r o r i n t h e t r i a l c o u r t ' s assessment of a penalty. Section 39-3-206, provides MCA, that i f an employer on a p u b l i c works p r o j e c t i s d e l i n q u e n t , h i s o b l i g a tion to pay prevailing S e c t i o n 18-2-403, payment o f MCA, wages includes a civil penalty. provides t h a t i f a provision f o r t h e t h e p r e v a i l i n g wage r a t e i s n o t i n c l u d e d by t h e p u b l i c c o n t r a c t i n g body i n t h e c o n t r a c t w i t h t h e c o n t r a c t o r , t h e n t h e o b l i g a t i o n t o p a y t h e p r e v a i l i n g wage r a t e i s on t h e p u b l i c c o n t r a c t i n g a g e n c y and n o t on t h e p r i v a t e c o n t r a c t o r . However, t h i s s t a t u t e is s i l e n t a s t o the shifting of civil penalties. Penalties deterrent to are imposed discourage upon the repetition culpable of party unlawful as a practices. The p u r p o s e o f M o n t a n a ' s L i t t l e Davis-Bacon Act i s t o p r o t e c t laborers from wage cutting practices by public employers. I m p o s i t i o n o f a p e n a l t y upon t h e c u l p a b l e p a r t y who f a i l s t o compensate w i t h a s t a n d a r d p r e v a i l i n g wage r a t e d e t e r s o t h e r public contracting agencies similarly situated t i n g t h e same e r r o r . from commit- This tends t o f o r t i f y t h e underlying p o l i c y i n t e n d e d by t h e e n a c t m e n t o f t h e s t a t u t e . While penalties, allowing § 18-2-403, we civil find is s i l e n t a s t o t h e shifting of MCA, that penalties an interpretation against the of the contracting accords with t h e underlying purpose of t h e s t a t u t e . statute agency W e v a c a t e t h e judgment and remand f o r a new t r i a l on t h e damage q u e s t i o n o n l y . I n a l l other respects t h e rulings of t h e t r i a l court a r e affirmed. W e concur:

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