Crocker v. Weil

361 P.2d 1014, 227 Or. 260, 1961 Ore. LEXIS 323, 48 L.R.R.M. (BNA) 2177

Opinions

SLOAN, J.

The named parties appear in a representative capacity only. The real disputants are the Bakery and Confectionery Workers’ International Union of America and its formerly affiliated Portland Local No. 364. Plaintiff Crocker is the officially designated representative of the international union. Plaintiff Boster is alleged to be representative of any members who remained loyal to the former affiliation with the international union. When we use the word “plaintiff” we will refer to Crocker only. Defendants Weil and Van Cleve are officers of the local union. They appear as representatives of all of the members of the local and individually. The defendant bank and savings and loan organizations are in court as stake-holders only. They have no other interest in the ease and no further reference will be made to them.

On May 2, 1959, the local union, for reasons later explained, seceded from the international. This proceeding in equity challenges the right of the local to take with it the money and property it had accumulated prior to the secession. The problem presented by the case is generated by a provision of the constitution of the international union which required the assets of a seceding local to revert to the international union. Both sides accept the concept that the international constitution forms a contract between the local, and its members, and the international. Way v. Patton et al, 1952, 195 Or 36, 241 P2d 895, and many similar eases unnecessary to cite. Defendants, however, claim that the facts peculiar to this case should prevent the forfeiture decreed by the constitutional mandate. Defendants counterclaimed for money held by Crocker which had been paid to him in Ms representative capacity by an employer of members of the local union, the National Biscuit Company. The payments had been made as the result of individual agreements between members of the local and that employer providing for a check off of union dues. The trial court found for plaintiffs on all issues, defendants appeal.

There are three organizations to which frequent reference will be required. They are: Local No. 364. It will be called “local”. The Bakery and Confectionery Workers’ International Union, to be referred to as “international”; and the AFL-CIO confederation of unions to be referred to as “federation”. Other organizations and particular persons involved will be referred to by name as they appear in this exceptionally voluminous and complicated record.

The international, as its name implies, was an international labor organization first formed in 1886. In 1887 it was one of the unions which joined to form the American Federation of Labor. It retained that affiliation until 1955 when it participated in the merger of the AFL and CIO. The- international retained its affiliation in the federation until it was expelled from that organization in December, 1957.

The local was formed in Portland in 1937. Its jurisdiction was limited to “Candy, cracker, cookie, macaroni, ice cream and miscellaneous workers.” It was the bargaining agent in respect to each of the employers of the members of the local. We are not advised of its geographical jurisdiction. It had about 900 members.

The convention of the international, held every five years, was the governing body of the organization. The constitution was amended from time to time at these conventions. We are particularly concerned with the constitution as amended by the regular convention in 1956 and at a special convention in 1958. The pertinent provisions are not materially different in the two documents. The section of the 1958 constitution that provides the basis of this suit and which plaintiff contends requires the forfeiture of the local’s assets is found in Article XIV:

“Sec. 8. All funds and property of the local union shall be held by it in the name of the local union to be used only for the purpose of effectuating the objectives of this Constitution and in accordance with its provisions.

“Should a local union dissolve, secede, or have its charter revoked all its money and property shall revert to the ownership of the International Union, and the International Secretary-Treasurer may authorize, in writing a member of a nearby local or a representative to take charge of and turn same over to the International Union. The General Executive Board may prosecute any officer or member of any such local union who shall refuse to deliver to such authorized member or representative any of the said funds and/or property.

“If the defunct local is reorganized within one year then the funds and property taken over by tbe International Union shall become the funds and property of the reorganized local, except that any expenses of the International Union connected with the recovery of the funds and property or with the reorganization of the defunct local shall be charged against such funds and property.”

The constitution also specified certain obligations of the international. Because these particular obligations assume decisive importance we will copy them at a later part of this opinion when specific reference to the duties will be made.

In the five year intervals between conventions the international was governed by the executive board. The general executive board consisted of the international president, the international secretary-treasurer, and the international vice-presidents, about fifteen in number.

Amendments to the constitution made at the convention of 1956 are relevant to the facts later discussed. At that convention the constitution was amended in respect to the election of the members of the executive board and as to its powers, and as to the power of the president. Prior to 1956, twelve of the then eighteen members of the executive board were elected by referendum of all of the members of the union. The 1956 amendment changed this to election by the convention. The powers of the board were expanded. It was given the power to fix the salary of the president, which before was fixed by the convention. And the president was given the power to fix the salaries of several of the members of the executive board. The “judicial” power of the board to try any of its members for any charges of violation of duty was extended. Thus, power of the board to govern and to be the sole judge of the conduct of its government was complete. The only appeal from any action of the board was to the convention—held every five years.

In identifying the organizations whose powers and functions are material to this case it is necessary to emphasize the merger of the AFL and CIO in 1955. Equally important with the merger was the adoption of the Codes of Ethical Practices evolved by the new federation. There is no need to record any of the events which led to the merger. It is important, however, to state that the international was a strong advocate of the merger. At that time the international was equally ardent in support of the Codes of Ethical Practices. The Codes of Ethical Practices were developed as one effort of the federation to clean house in answer to public and governmental demands aroused by Congressional and other revelations of union corruption and racketeering. The international advised its members that the Codes afforded real protection against misuse of union funds.

The power of the federation to impose sanctions upon any international guilty of violation of the Codes, and the procedure adopted by the federation to try the guilt or innocence of any member union charged with violation was not questioned nor challenged by the international at any time.

The course of events which led to expulsion of the international began in March, 1957, when one Curtis Sims, then the secretary-treasurer of the international, filed charges with the executive board charging the president of the international, James Cross, with corruption and malfeasance in office. There is no need to relate in detail the hearings held by the executive board of the international on these charges. Suffice it to say that at the hearings before the executive board on the charges of misuse and embezzlement by Cross and one of the other international officers, the men charged were found innocent. The other man charged, Stuart, was later indicted and convicted in the courts of Illinois of the same embezzlement that had been charged by Sims. It is significant that, nonetheless, the international never took any action to recover from Stuart the amount embezzled or to punish him with the union rules of discipline. Sims was immediately relieved of his duties for his trouble. This is important. It demonstrated beyond the power of denial the futility of attempting to invoke the internal procedures provided by the international constitution. It also made it clear that anyone attempting to utilize union machinery would be subject to punishment.

Later hearings by the federation’s Ethical Practices Committee, by the McClellan Committee of the United States Senate, and the final consideration of the charges by the general convention of the federation in December, 1957, established to the satisfaction of those groups that the charges of misconduct were true.

The facts disclosed by these several hearings were sufficient to cause the convention of the federation to expel the international from the federation. The cause of the expulsion was the finding that the “Bakery and Confectionery Workers’ International Union of America is dominated, controlled or substantially influenced in the conduct of its affairs by corrupt influences in violation of the Constitution of the AFL-CIO.” Corruption is evil. But the real sin was the domination which permitted the corruption to go unattended and unremedied.

At the same convention the federation chartered a new international and named it American Bakery and Confectionery "Workers’ Union, AFL-CIO. We will refer to it as ABC.

When the federation expelled the international it imposed certain conditions to be met before the federation would permit the international to regain membership. One of these, and the most important, was that Cross be barred from office. The international executive board refused to take that action. Instead, the international called a convention to be held in March, 1958, in Cincinnati, Ohio. The announced purpose of this convention was to give the delegates a free and unhampered choice of retaining Cross or electing someone else as president and to also provide an opportunity to elect a different executive board. This action did not satisfy the governing body of the federation. That body announced that the international could not be reinstated until the dominating corrupt influence, Cross, was eliminated. The federation never deviated from that decision.

The proceedings of that convention reveal that the delegates had no choice. Cross, and the other members of the executive board, were the only persons nominated for the offices. On the balloting for president the delegates were only permitted to vote for Cross or abstain from voting. The election at the convention was remininscent of those “democratic elections” held in Germany under Hitler when the only vote permitted was “Ja.”

Both before and after this convention the members of the international were flooded with propaganda from the international officers. This propaganda, in the form of letters and the official magazine, which went to all of the individual members of the union, was adroitly fashioned to paint the international officers, particularly Cross, in heroic form and to castigate all who opposed them. The propaganda contained continuing promises that the international would again enter the “main stream of the labor movement” as it was expressed by Cross. In addition, there were coercive threats of loss of pensions and welfare benefits of the individual members as well as the loss of all local assets, such as are involved in this case.

Trusteeships were imposed on a number of locals that appeared ready to secede. The members of these locals thereby lost their right of self-government.

Footnotes

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①

The same propaganda was drilled into the delegates at the convention before any vote was taken. To one who impartially reads the proceedings of that convention, and other evidence in the record in respect thereto, it appears obvious that any attempted opposition to those in control would have been futile. It is asking a court to close its eyes to reality to ask it to consider this convention as a free and democratic ratification of the action, and failure to act, of the executive board.

It is now necessary to consider the impact of the preceding events upon the local union and the ultimate act of disaffiliation by the local.

After the expulsion of the international the members and the local officers, who are the parties defendant in this case, were uncertain and confused as to what course to follow. It must be remembered that at all times the officers of the international were making repeated promises that it would be able to re-affiliate with the federation. The local elected the two defendants here as delegates to the Cincinnati convention and instructed them to vote against Cross for president. These men testified that one of the responsible international officers promised them at the convention that if Cross were elected he would immediately resign and treat the election as a vindication. The defendants voted for Cross. Actually, there was no other choice.

In October, 1958, the local, after several previous efforts to meet with an international representative had failed, succeeded in having a meeting attended by an international vice-president and also a representative of the ABC. As a result of that meeting the local members voted to remain with the international. Later other, events caused the members concern— primarily the continued failure of the international to take any constructive steps to gain rapprochement with the federation. One of the international officers who testified in the trial of this case admitted that after the convention in March, 1958, until after this local seceded the international did not take any action to gain reaffiliation. The promises continued, but no action. When the international was expelled from the federation this local was also ousted from its membership in the Multnomah County Labor Council and from the Oregon AFL-CIO organization. The ostracism of the local was complete. Later mention will be made of the importance of this to the local. At a meeting, called for the purpose of making final decision held on May 2, 1959, the local voted to withdraw from the international and affiliate with ABC. This was done. The local adopted the name of Local No. 364 of ABC, AFL-CIO. The local was then able to gain the important reaffiliation with other local and state labor organizations.

The international immediately appointed plaintiff Crocker as trustee of the former local. The record is not convincing that there were any of the members that remained loyal to the former affiliation. Crocker made demand for the delivery to him of the money and assets of the local. This was refused and this suit then followed.

After the expulsion of the international, several locals throughout the United States immediately seceded. Others followed. By the time this case was tried a large number of the locals of the international had seceded. How many is not accurately disclosed by the record. Apparently about one-half of the former membership in the international had withdrawn.

We do not know if actions similar to this one were filed against each of the seceding locals. Our attention has been called to a number of court actions in other states similar or identical to this case. Some of the cases just mentioned involve this particular international and one of its locals. Other cases involve other internationals similarly situated. It appears that the lower court in this ease has been the only court that has sustained the right of this international to forfeit the assets of the local. In deciding this case the trial court relied on the theory that the provision of the constitution which allowed a forfeiture of the seceding local’s assets was a contract. The court enforced the contract. Before we proceed to discuss the facts and factors which govern our conclusions we think it would be helpful to mention some of the decisions in cases of this kind.

Few of the decided eases have been appealed to courts of highest appellate level. We can find only one case yet decided by such a court. This was in Pennsylvania where the Supreme Court of that state affirmed the right of a seceding local to retain its property. Alvino, Appellant, v. Carraccio, 1960, 400 Pa 477, 162 A2d 358, 40 CCH Lab Cas 66,685. There have been several cases in New York, and other cases have been decided in Illinois, Ohio and New Jersey. Many of the cases are collected and commented upon in Greenberg, Disposition of Union Assets Upon Disaffiliation, 33 Temp L Q 152, 1960, and in symposiums found in 45 Ya L Rev 203, 1955, and 22 Ohio St Law J (Winter, 1961).

The courts have relied on various theories in deciding these cases. In a similar case involving a local of the United Electrical Workers the Minnesota court held that the affiliation of the international union of electrical workers into the CIO was an implied condition of the local’s continued allegiance to the international. And that that condition was broken when the international was expelled from the CIO for communist activity by some of its international officers. It then held that this was a material breach by the international and permitted the local to withhold its funds. Local 1140 v. United Electrical, R. & M. Workers, 1950, 232 Minn 217, 45 NW2d 408, 23 ALR2d 1197. See note, on similar cases, 63 Harv L Rev 1413, 1950; Isaacson, The Local and the International, 5 N Y U Conf on Lab 413, 1952.

In Alvino, Appellant, v. Carraccio, supra, 400 Pa 477, the Pennsylvania court applied the doctrine of frustration. The case involved the same international bakers’ union as our case. The court held that the expulsion of the international from the federation and the corruption of its officers frustrated the intended purpose of the constitutional contract and relieved the local of adhering to it.

The Illinois Court of Appeals in Olson v. Carbonara, 1959, 21 Ill App2d 69, 157 NE2d 273, leave to appeal denied, 17 Ill2d 629, also relied on the frustration doctrine. The Ohio Court of Common Pleas in American Bakery Workers Local 253 v. Russelburg, 1959, 37 CCH Lab Cas 65, 522, 44 L R R M 2055, held that a local was not required to remain affiliated with an organization, this international, that had become so corrupt that it was a disgrace to the nation. The court also commented that the prime value of affiliation with the international was to be part of the labor movement as a whole, in other words, affiliation with the federation.

In Crawford v. Newman, 1958, 13 Misc2d 198, 175 NYS2d 903, 907, also involving this same union, the court held that it was “unconscionable to hold that, because a written contract does not expressly so provide, that a contracting party may not, without breaching the contract, disaffiliate from a corrupt and dishonest association. This is especially so when there is at stake the welfare of thousands of members of a union, together with public confidence so essential to maintain peaceful and friendly relations with businessmen, big and small.” The court also said that the “violation of a trust so reposed in labor leaders is in and of itself sufficient justification for a local union to call it quits.” This case was affirmed by the Appeals Division without opinion at 8 App Div2d 789, 188 NYS2d 943. However, leave to appeal 'has been granted by the Court of Appeals of New York. The opinion of that court has not been filed at the date of this writing.

One of the most comprehensive and well analyzed opinions we have found is in a ease decided by the Supreme Court, Appellate Division, First Department, of New York. Bradley v. O’Hare, 1960, 202 NYS2d 141, 11 App Div2d 15, 40 CCH Lab Cas 66,627. The opinion by Breitel, J., discusses the various theories that have been advanced in deciding these cases. It recognizes that there is a growing understanding of the “large and unique role played” by labor organizations and that the concept of simple contract can no longer apply to all of the ramifications involved. The court applied the obligation of a fiduciary.

“The labor union, in its stratification into local unions, internationals and federations, is a much more complicated structure than that usually found among other types of unincorporated associations. Moreover, it has a vital social purpose—the collective regulation and manipulation of the most significant material relationship of the workers in the economy. Among these several layers of organization the internal constitutions create extensive schemes of private government and purport to dispose of various contract and property rights among the constituent elements. The overriding and expressed purpose is that of advancing the welfare of the worker members, either in the provision of welfare benefits, or in conducting negotiations in collective bargaining, or for the purpose of waging economic war. Thus viewed, insulating language, expressed in terms of simple contract or property law, in the constitutions of the unions offers neither a proper description of the facts nor an effective obstacle to achieving the best interest of the ultimate beneficiaries.

“As the precedents are further examined a dominant thread is evidenced. In each case the court searches for the seat of the beneficial interest and how that interest may be best served. In this search, the court has never been limited by the descriptions of legal title to assets or property contained in the internal constitutions, any more than it has been limited in finding or executing a trust in the documents in which a fiduciary obligation is found.

“On this analysis, the entire union structure in its several layers is viewed as a fiduciary one. Each layer may retain assets held by it in accordance with the internal constitutional provisions, provided such retention does not violate but rather implements the fiduciary obligation and the trade-union function. On the same reasoning, the beneficial use of the assets is in the worker members, not in the organizational entity which exists solely for their benefit. A general breach of fiduciary obligations, such as widespread corruption or subversion, forfeits the right of the guilty entity to perform its fiduciary role. In that situation, the assets do not ‘revert’ to the wrongdoers, but to the beneficial owners. While all the cases may have not said as much, this is what their decisions do, virtually without exception, if not, indeed, without exception.” 202 NYS2d 153, 154.

Thus it can be summarized that the courts have applied four basic theories in deciding these cases: The theory of a breach of an implied condition; that the contract has been frustrated; the doctrine of unclean hands and the one just cited, the breach of a fiduciary obligation. All of these theories, except the last one, have been subject to some criticism by the writers② and courts.

Eegardless of the theory, however, every decision has been in favor of the local. No one has criticized that result.

Before we state our own conclusions we want to mention some of the considerations that have guided us to decision. We cannot say that each fact or factor to be itemized is of equal importance, nor that we have set them forth in any order of importance. Each is a reality that must be faced in deciding this particular case—and that is all we are doing. We think also that they are realities that are sometimes overlooked.

Until the moment that this local seceded it had performed every obligation it owed to the international. The funds in dispute were the property of the local and necessary to the performance of its duties. This is in part evidenced by the fact that because of the inability to use these funds, pending the outcome of this ease, it has been obliged to borrow money to carry on its necessary activities.

Unions exist for one purpose only: To improve the lot of the working members—to increase the wages, dignity and status of the man at the machine, the woman at the counter or bench, the unskilled who labor with their hands. It is the ultimate goal of legitimate unionism to gain for the worker every lawful advantage to be gained from an employer. When any union fails in that purpose it no longer has reason to exist. And, of more importance, when an officer of a union, at any level, devotes his energies and the members’ money to retaining his place of power and profit rather than performing this elemental duty, he must forfeit his right to this office. This duty is now codified into the Labor-Management Reporting and Disclosure Act of 1959 as reaching the status of a fiduciary obligation.③

The local union is the core and keystone of the entire union organization. It is the working organization that is responsible for success or failure in the representations between employee and employer. This is not limited to periodically negotiating the terms of a contract. As the established bargaining unit, as this local was, it must represent all employees in the numerous grievances and disputes that arise in the working shop. 29 USCA 159. It is the bargaining unit that is responsible for every direct contact with the employer necessary to improve the conditions and terms of employment.

Moreover, it is the local that the employer calls upon to compel performance of the terms of the contract bargained for and all working rules. It is these day-to-day relationships between the employer and the local that are the most important function of the bargaining unit. Conley v. Gibson, 1957, 355 US 41, 78 S Ct 99, 2 L Ed2d 80, 85; Bradley v. O’Hare, 1960, 202 NYS2d 141, 153, supra; Cohn, The International and the Local, 11 N Y U Conf on Lab 7,1958; Miller & Stockton, Local Union Officers, 8 Lab L J 28, 1957; Isaacson, The Local Union and the International, 3 NYU Conf on Lab 493, 1950. The authority and responsibility of this local as the bargaining agent gave it substantial autonomy and independence.

The ability of one bargaining agent to bring pressure to bear upon a given employer depends, in large measure, upon the strategic importance of the character of the employment involved. Thus, the teamsters’ union, which occupies the most strategic and powerful position of all, can successfully impose sanctions upon an employer without help of any related trade union. Not so a union like the one at hand, or the retail clerks, by example. It is difficult, if not impossible, for such a union to successfully impose economic sanction on an employer without the aid of other unions. This does not refer to strikes alone. And the most common and useful sanctions are those imposed at the local level. The evidence demonstrates that while the local was still a member of the council, threat by the local Multnomah County Labor Council to place an employer on the unfair list brought immediate favorable reaction by the employer for the benefit of this local. The coercive weight that an international office in Washington, D. C., can bring to bear upon a recalcitrant employer in Portland cannot be equal to the economic pressure available to the united laboring people within the area. It is argued that loss of membership in the Multnomah Council did not impair the bargaining power of the teamsters’ union. That may be true. For the reasons just stated loss of membership in the Council may have been of little consequence to the teamsters. To this local it was a substantial loss of bargaining effectiveness. This affiliation was denied the local, through no fault of its own, by the expulsion of the international from the federation. In this organization one of the real values of the international to the local, and its members, was affiliation with the federation of unions. This local is indeed representative of why “united action” by all labor unions has been the most often heard battle cry of the labor movement.

Membership in the local was compulsory to any person who wanted to work within this industry. The contracts between the local and the various employers, in evidence, all required union membership for every employee. This was permitted by Federal law. Labor-Management Relations Act, 1947, 29 USC 157.

<<# * * Finally, labor unions occupy their present position largely by force of law. Under the National Labor Relations Act a union which acts as the bargaining representative has power, in conjunction with the employer, to fix a man’s wages, hours, and other conditions of employment without his assent. The individual employee may not lawfully negotiate with his employer. He is bound by the union contract. As a matter of practice, if not in legal theory, the union also controls the grievance procedure through which a man’s contract rights are enforced. The government which gives unions this power has the concomitant obligation to provide safeguards against abuse. The most effective safeguard is legal assurance that unions will be responsive to the desires of the men and women whom they represent.” Cox, The Bole of Law in Preserving Union Democracy, 72 Harv L Rev 609, 610,1959. (Footnotes omitted).

This is pertinent to the argument that we should decide this case upon the law governing voluntary associations, to be later mentioned.

In Oregon Macaroni Co., 1959, 124 NLRB No. 138, p 1007, the National Labor Relations Board applied its schism doctrine to this particular disaffiliation and refused to apply the bar of contract as con tended for by tbe international in that proceeding before the board. See: A Result: Union Division, by Philip Ray Rodgers, a member of the NLRB, 45 Va L Rev 207, supra. Hershey Chocolate Corporation, 1958, 121 N L R B 901.

Cross and his conduct of the international was the subject of much attention by the McClellan Committee. The result of that investigation and the hearings held form a part of the report to the Congress of that Committee. We do not mention this as indication that we do or do not accept as true the report as made. We do mention it for this important reason. Devices used by Cross, and a few other labor leaders, by which they gained and maintained complete control of the machinery and money of international unions were the same devices which prompted Congress to enact the Labor-Management Disclosure Act of 1959. The Congress was not, nor are we, so much concerned with particular acts of thievery as with the domination that enabled them to happen without recourse or penalty from within. And it was to this aspect of the McClellan hearings that not only Congress and its committees and experts devoted themselves, but the executive department of the government as well. The Congressional debates and reports of the House and Senate Labor Committees tell us that at least one of the executive departments and the Congress devoted almost two years’ study and consideration to find and attempt to enact remedies designed, in part, to prevent such domination by international officers. The Senate Labor Committee reported that the matter of corruption and domination could not be cured or prevented without “coercive” government action; that the members of the dominated unions had neither the power or the tools to enforce any internal remedy. House and Senate Labor Committee Reports and excerpts from the Congressional debates found in The Labor Reform Law, Bureau of National Affairs, 1959, p 150, et seq. See also Katz and Friedman, Member Control, 1961, 22 Ohio St L J 97, (Winter, 1961). Despite this studied determination of the Congress we are told that this comparatively small local should have ousted the dominating officers rather than secede.

Reference to the Act is not intended to express judgment as to any provision of the Act. It has been referred to because the Congress did thereby express two important national policies: One, that union officials owe the duty of a fiduciary and, two, the coercive power of the Federal government is needed and will be used to preserve democratic processes within labor organizations.

Lastly, we refer to the aims and duties of the international as set forth in the constitution, Art I, § 2. We will copy § 2 as it was amended by the convention held in 1956. Item (5) in the section was added by the amendment.

“Sec. 2. The aim of the International Union shall be to promote the economic and social welfare of all workers in the baking, confectionery and kindred industries by (1) effective organizational action; (2) progressive improvement in living standards through the reduction of hours of labor, increased wages, decent working conditions, effective job security, establishment and expansion of retirement and welfare benefits, and the elimination of the hazards of unemployment and automation; (3) aid in securing and retaining employment; (4) promotion of the interests of labor unions generally and the Bakery and Confectionery Workers’ International Union in particular through continued effort in the State and Federal legislatures; (5) alliance with other labor organizations in matters of com mon concern toward the end of mutual protection and organization.”

Although we have set forth all of the international’s duties, it is item (5) to which we direct particular attention. Not only the amendment itself, but the significance of the date of this amendment must not be overlooked. It was adopted immediately after the merger of the AFL-CIO. We have here, therefore, not an implied condition of alliance with other labor organizations, but an express constitutional mandate. The materiality of the promise is vouched by the fact of the amendment itself. We can only assume that it was believed to be too important to be left unspecified. The prior constitution, when the international was affiliated with the AFL only, contained no similar requirement of affiliation. Needless to say, the promise was broken.

By referring only to obligation (5) we do not mean to infer that the international did or could perform all of the other aims set forth. It did not. It may be said that it performed some collective bargaining as required by obligation (2). There is no evidence that it performed, or attempted to perform, any of the others.

With these thoughts in mind we reach our own conclusions. It was most strongly argued that we should apply the contract theory. That is: that the constitutional requirement of forfeiture is a binding obligation and must be enforced. If we rely entirely on the concept that the constitution is a contract it will still not avail plaintiffs. For if it be a contract it is not a contract from which all of the benefits flow in one direction. It is that form of contract defined in Restatement, Contracts, § 266:

“(1) ‘Promises for an agreed exchange’ in the Bestatement of this Subject means mutual promises in a bilateral contract where the performance promised by one party is the agreed exchange for the performance promised by the other party.”

"We have just seen that this constitutional contract bound the international to maintain “alliance with other labor organizations * * And that this was an express obligation. The promise was material; it was violated by the international.

So then, if it be a contract “then any material failure of performance by one party not justified by the conduct of the other discharges the latter’s duty to give the agreed exchange even though his promise is not in terms conditional * * Bestatement, supra, § 274. The breach of a material, express obligation was sufficient to discharge the local from the demand of forfeiture.

No one has pointed to, nor can we find, any theory or concept of equity which will enforce a forfeiture in favor of one whose breach of the contract has caused the other party to withdraw therefrom.

It was also argued that we must apply the law evolved in the decisions in respect to voluntary associations. In these cases, involving churches and the like, it is said that the individual member has no right to any of the associations’ assets, beneficial or direct. That his membership is purely voluntary and when the member departs he forsakes any claim to any part of the assets. Hence, it is said when a local church, for example, withdraws from a parent organization the church has no right to retain its assets. See cases cited and analyzed, Chafee, The Internal Affairs of Associations not for Profit, 43 Harv L B 993, 1930; and Isaacson, The Local Union and the International, 3NTU Conf onLaibor,p 503, supra.

The only thing “voluntary” about this organization was that the local had the right to withdraw from membership at any time it chose. Eegardless of the outcome of this case the local is not and will not be affiliated with the international. Nor could it be compelled to do so. There was no requirement of any kind that it remain joined with the international. The only question is: When it seceded for the reasons before discussed must it be compelled to forfeit its assets to the international?

Otherwise, what we have already said dissolves this argument. In respect to the individual worker membership in this organization was not voluntary. In fact, there simply is no other form of organization, corporate or otherwise, in which membership therein is directly comparable to the organization we are examining here. There may be similarities in part or in certain relationships, but that is all. Nor has any other form of industrial organization been the subject of so much Congressional and other legislative action as labor unions. This is true not only in respect to their internal affairs but also in their relationships to government and employers. These legislative restrictions and grants of power find no counterpart in society. To repeat what was said differently before: “Unions, under the protection and authority of law, govern the lives of individual workers, controlling their jobs, regulating their conduct, and determining their economic welfare.” Summers, Union Powers and Workers’ Rights, 43 Mich L E 805, 837. He who would solve this case by comparison to some other forms of organization and the respective rights of its members and stockholders can only reach frustration. Isaacson, The Local and the International, supra; The Labor Reform Law, supra, p 260; Cox, Union Democracy, 72 Harv L R 609, supra; and materials cited at footnote (2), p 12.

We conclude that upon either of the two theories we have discussed plaintiffs are not entitled to prevail : One, that the international committed an express violation of a material promise of the constitution and thus deprived itself of the right to demand the only performance that could have been required of the local; that is, forfeiture. This is not a matter of frustration of a contract or a breach of an implied condition. It was a breach of a material promise that, as in any other contract of mutual obligation, excuses performance by the victim of the breach. Prime v. Prime, 1943, 172 Or 34, 61, 139 P2d 550.

Secondly, we are satisfied that the decision in Bradley v. O’Hare, 202 NYS2d 141, supra, correctly applies the duties of a fiduciary to union officers. This decision is buttressed with the substantial weight of the policy, before expressed, of the Labor-Management Reporting and Disclosure Act of 1959. And that material breach of that fiduciary duty can nullify the otherwise enforceable obligations of the intra-union compact. In this case we have not only material violation of the fiduciary relationship, but, and this is important, the use of the power vested in the fiduciaries to thwart any attempt to remove them. That power was used to render their position impregnable to any remedy, within the union procedures, of removal, accounting or other process normally available to oust a malfeasant fiduciary. It was actions and conduct of the fiduciaries which forced the local to reach the final conclusion that the only remedy remaining was the disaffiliation action taken. It had no other choice. We will not now reward the defaulting fiduciary with the gain sought as a result of that default.

The decree is reversed with instructions to enter a decree in favor of defendants and a judgment in favor of defendants upon their counterclaim.

The use of power to appoint a trustee of a recalcitrant local union was one of the devices used by the international officers to dominate local unions. It was one of the important acts of misconduct later condemned by the McClellan Committee. The abuse of the power was also one of the important aspects in consideration and enactment of the Labor-Management Disclosure Act of 1959, to be later mentioned. See reports of Congressional Committees in respect to this Act.

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33 Temp L Q 152, I960, supra.

Summers, Union Schism in Perspective: Flexible Doctrines, Double Standards, and Projected Answers, 45 Va L Rev 261, 1959.

Disposition of Union Assets on Disaffiliation, 45 Va L Rev 244, 1959.

Effects of a Union Split Upon Property Rights, 1952 Wis L Rev 139.

And see an excellent symposium discussion of many of the problems mentioned herein in 22 Ohio St L J, (Winter, 1961).

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"* * * Section 501(a) [Labor-Management Reporting and Disclosure Act] states in general terms the union agent’s obligation to act solely for the benefit of his principal, to be loyal, to refrain from competing with his principal or acquiring conflicting interests, and ‘to account . . . for any profits received by him in whatever capacity in connection with transactions conducted by him or under his direction.’ The principles stated in Section 501(a) were drawn from the Restatement of Agency in an effort to incorporate the whole body of common-law precedents defining the fiduciary obligations of agents and trustees with such adaptations as might be required to take into account ‘the special problems and functions of a labor organization.’

“Section 501(b) authorizes any union member to bring a suit in the federal court in the nature of a minority stockholder’s suit whenever his union refuses to sue an officer or employee alleged to be guilty of a breach of fiduciary obligations. The trial judge may allot part of any sums recoverable for counsel fees and expenses. All the usual remedies for breach of trust are available.

“These provisions are potentially among the most important in the LMRDA. * * *” Cox, Law and the National Labor Policy, p. 92.

The reports of the House and Senate Labor Committees, both majority and minority, also affirm this view. The reports are too long to effectively quote hut we believe the reports, the result of extensive hearings and study by the committee and many experts in the field, must be persuasive to a court in the consideration of the problem at hand.