McGeehan, Donges and Colie. The opinion of the court was delivered by Colie, J.A.D.
Complainants, International Union of United Brewery, Flour, Cereal, Soft Drink and Distillery Workers of America, C.I.O. (hereinafter referred to as International); Brewers Union Local No. 2 (hereinafter referred to as Local No. 2) and Fred Sickles filed a bill of complaint in the former Court of Chancery against Carl Becherer and eleven other members of Local No. 2 of whom some were officers and others were members of the executive board of the Local. The primary relief sought was an order to compel the defendants to turn over to Sickles as trustee of Local No. 2, the property and funds of the Local and to restrain the defendants from using the property or disposing of it. The other prayers are secondary and incidental to the primary relief. The bill of complaint alleged that the defendants had conspired among themselves and with members of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, an American Federation of Labor Union (hereinafter referred to as Teamsters Union) to secede from the International, a C.I.O. organization and affiliate with A.F. of L. The answer denied the alleged conspiracy and by way of counterclaim prayed that the funds and property of Local No. 2 be decreed to be the property of the counterclaimants, free from any claim on the part of complainants.
On final hearing, the following facts were developed: The International was organized in 1887 and thereafter was affiliated with the A.F. of L. until 1941 when it was suspended from its affiliation with the A.F. of L. In July of 1946, it affiliated with the Congress of Industrial Organization, or C.I.O. At about that time there was considerable activity on the part of the Teamsters Union to win over the members of Local No. 2 from the C.I.O. to A.F. of L. The struggle of the Teamsters Union to take over Local No. 2 reached a point in February, 1947, which prompted the recording secretary of the International to come to Newark and attend a meeting of Local No. 2 at which meeting the recording secretary urged the members of the Local to remain loyal to the
International. The following month, the General Executive Board of the International passed a resolution that Local No. 2 be placed under the trusteeship of Sickles, a member of the General Executive Board of the International and that he be empowered to take charge of the affairs of the Local, to remove its officers and appoint temporary officers for the period of the trusteeship. There was no hearing before the Executive Board of the International prior to the passage of the resolution placing the Local under trusteeship. Upon his appointment as trustee, the complainant Sickles served notice upon the officers of the Local of his appointment and demanded possession of the property of the Local, which demand was refused. He also served notice upon the officers of the Local of their suspension from office. At some time in May, 1947, a meeting of Local No. 2 was held at which the members, by a practically unanimous vote, agreed to accept a charter from the A.F. of L. After obtaining an A.F. of L. charter, the members organized and elected officers as Local 24,251. All of the members of Local No. 2 with one exception, later joined Local 24,251 affiliated with A.F. of L.
The parent organization seeks the property and funds of Local No. 2 to the end that they may be held in trust until such time as the Local reorganizes. The defendants, on the other hand, assert that the property and funds of the Local constitute a trust fund, the beneficial interest in which is in the members of the Local, regardless of whether its affiliation is with the C.I.O. or the A.F. of L. A determination as to the rights in the property and funds of Local No. 2 after secession from the International and affiliation with a rival union, is largely dependent upon the nature of the relationship between the International and Local No. 2.
The relationship between a parent organization and a local union federated or affiliated with it is contractual and the terms of the contract are to be found in the constitution and by-laws of the parent organization. Harris v. Geier , 112 N.J. Eq. 99 (Ch. 1932): "The constitution and by-laws of the International Brotherhood constitute a contract between the * * * local and the joint council and other agencies
of the Brotherhood." To the same effect Cameron v. International Alliance, etc. , 119 Id. 577 (E. & A. 1936). The constitution of the parent organization in the instant case provides that "any local group * * * can affiliate * * * provided they * * * recognize the Constitution of the International Union and pay the regular dues and assessments * * * the per capita tax to be paid regularly every month to the International Union, shall be 50 cents per month for every member in good standing. If indications are that * * * the Local Union is about to secede * * * the General Executive Board may appoint a trustee to take charge and control of the affairs of the Local Union * * * the trustee shall take possession of all funds * * * and other property" which "shall be held in trust by the International Union until reorganization has been effected. It shall then be returned to the Local Union. * * * Reorganization shall be effected by and under the direction of the International Union * * * when the trustee recommends self-government * * * and such recommendation is approved by the General Executive Board."
The question for determination was stated in the opinion below thus: "Has a local union the right, by the will of its membership, to withdraw from its affiliation with an international labor organization, and if it has, what is the effect upon its funds and property?" The question is one of novel impression in this State with respect to labor unions but somewhat analogous situations have been considered in the case of benevolent associations. In Knights of Pythias v. Germania Lodge , 56 N.J. Eq. 63 (Ch. 1897), there was involved the question of an improper diversion of the funds of the subordinate lodge. In holding that there was an improper diversion, Pitney, V.C., said: "It is familiar law that funds accumulated as were those here in question become, as soon as paid in, impressed with a trust with all its consequences. In this case the terms of the trust are found in the constitutions of the supreme, grand and subordinate lodges, and the laws of the former and by-laws of the latter. The funds being impressed with such a trust cannot lawfully be
diverted therefrom." In the cited case the court was dealing with the distribution of funds among certain members of a subordinate lodge which had dissolved. The grand lodge had enacted a constitution for subordinate lodges which Germania had accepted and which provided that upon dissolution its property should be returned to the grand lodge. The court held that the distributees had lost their right to the fund by abandoning the organization and that the distribution was not in accordance with the by-laws. Indeed it was not in accordance with the constitution as quoted above and furthermore was directly at variance with a further provision of the subordinate's by-laws which had been approved by the grand lodge and which read: "Any brother * * * shall, if he fall sick * * * and (be) disabled for work * * * receive the sum of five dollars, weekly sick benefit money."
Reverting to the constitution of the International we find that Article IV provides that: "Sec. 9. The dues charged by Local Unions shall not be less than $1.50 per month. The per capita tax to the ...