No. 84-466 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1986 

LOCAL UNION NO. 400 OF THE 

INTERNATIONAL UNION OF OPERATING 

ENGINEERS, 

Plaintiffs and Respondents. 

VINCENT J. BOSH, ROBERT VOYTOSKI, 

JOHN C. FALL, ROB F. DAVIS, and 

JAMES KRUSE and FIDELITY & DEPOSIT 

COMPANY OF MARYLAND, 

Defendants and Appellants. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis & Clark, 

The Honorable Gord-on Bennett, Judge presiding. 

COUNSEL OF RECORD: 

For Appel lant: 

Cannon & Sheehy; Edmund F. Sheehy, Jr. argued, 

Helena, Montana 

For Respondent: 

Gough, Shanahan, Johnson & Johnson; Ronald F. Waterman 

argued, Helena, Montana 

Goetz, Madden & Dunn; James Goetz, Bozeman, Montana 

Filed: 

Submitted: December 5, 1985 

Decided: February 27, 1986 
Mr. Justice L. C. Gulbrandson delivered the Opinion of the 

Court. 

The defendants appeal from a jury verdict and jud.gment 

in favor of plaintiffs and respondents, Local Union No. 400 

of the International Union of Operating Engineers 

(hereinafter Local 400), in Lewis and Clark County District 

Court. Defendants question Local 400's standing to file the 

action; whether Local 400 failed to establish it was entitled 

to an accounting, thus barring recovery; whether Local 400 

should have been required to answer certain interrogatories; 

whether jury instructions on defendants' fiduciary duty to 

the Union, constructive fraud and the burden of proof, among 

others, were improper; and whether substantial evidence 

supported the verdict. We affirm. 

Vincent J. Bosh held the position of business manager 

for Local 400 from 1976 until August. 1981. Robert Voytoski 

and Bob F. Davis sat on Local 400's executive board and both 

were assistant business managers as well. 

In April 1981, Bosh announced. he would not run for 

reelection in the upc~ming August 1981 elections for health 

reasons. He then wer~t on sick leave but continued to make 

all of the major decisions pertaining to Local 400 and drew 

his regular salary. Voytoski and Davis handled Local 400's 

day to day affairs. Neither Voytoski nor Davis were 

candidates for business manager. After William Burli-ngame 

won the August election, a number of candidates filed 

protests. As a result, he was not installed into office as 

scheduled. Local 400's executive board installed Voytoski as 

business manager pro tem. Davis continued as an assistant 

business manager. Jack Ball, not a party on appeal, also 
acted as an assistant business manager pro tem following the 

August election. Burlingame's supporters filed protests to 

the International President of the Union who ordered that the 

pro tem administration vacate office and install the newly 

elected officers. This occurred on September 30, 1981. 

After the new officers assumed their duties, Burlingame 

hired an accountant to conduct a special audit for January 

through September 30, 1981. The audit report criticized 

Bosh's administration. The results demonstrated an increase 

in expenditures, a large decline in value of assets and a 

large increase in liabilities, despite a steady income from 

dues. 

In June 1982, Local 400 filed suit against Bosh, 

Voytoski, Davis and the other defendants. The complaint 

requested an accounting, reimbursement of misappropriated 

funds, production of Union files and indemnification to the 

Union from the bonding company joined in the suit. Some 

allegations in the action relied on 29 U.S.C. S401, et. seq. 

of the Labor Management Reporting and Disclosure Act (LMRDA). 

Defendants removed the litigation to federal court and then 

moved to dismiss the complaint arguing Local 400 had no 

standing to raise the issues. The federal district court 

dismissed the claims and remanded the action back to state 

district court. The defendants then made another motion to 

dismiss and Local 400 requested reinstatement of the claims 

under federal law. The state district court denied both 

requests. 

In May 1984, six weeks before trial, the District Court 

allowed Local 400 to amend its compl-aint to assert theories 

of constructive fraud and wrongful conversion of property. 
On the day of trial, the claim against the bonding company 

was severed from the claims against Bosh and the other 

defendants. At the close of all the evidence, the defendants 

moved for a directed verdict. As a result, the District 

Court dismissed all claims against defendant James Kruse and 

some of the claims a-gainst the four remaining defendants. 

The jury found in favor of defendant John C. Ball; assessed 

damages against Bosh, Voytoski and Davis for $3,000; and 

assessed damages against Bosh individually for $46,404. 

Bosh, Voytoski and Davis appeal from the jury verdict 

and subsequent judgment entered thereon by the District 

Court. They present five issues on appeal: 

(1) Did the District Court correctly deny defendants' 

motion for summary judgment claiminq Local 400 lacked 

standing or the capacity to file the action? 

(2) Did the District Court correctly deny defendants1 

motion for a directed verdict claiming Local 400 failed to 

establish it was entitled to an accounting? 

(3) Did the District Court correctly deny defendants1 

motion to dismiss claiming Local 400 should have been 

required to answer interrogatories submitted by defendants? 

(4) Did the District Court properly instruct the jury? 

(5) Was the jury verdict supported by sufficient 

evidence? 

In the first issue, appellants contend that Local 400 

failed to exhaust the internal remedies prior to taking 

action in district court. They urge this Court to adopt the 

position that a union lacks standing to sue whenever it fails 

to exhaust administrative remedies available under the 

union's constitution. Montana has not yet addressed the 
question of whether an action for breach of fiduciary duty 

will stand prior to an exhaustion of internal remedies. 

Other state courts have required the pursuit of internal 

remedies when the dispute concerns internal matters such as 

union policy, doctrine or discipline of members. See, e.g. 

Williams v. Vickers (Nev. 1958), 321 P.2d 586 (union members' 

action to enjoin union officers from acting contrary to 

international union's constitution denied for failure to 

exhaust internal remedies). In De Monbrun v. Sheet Metal 

Workers Internat'l Ass'n. (Cal. 19561, 295 P.2d 8811 the 

California court held that the plaintiffs' actions for 

misappropriation and mismana.gement of funds against a union 

officer could be pursued in state court despite their failure 

to exhaust internal remedies because the actions concerned 

protection of property rights. 

". . . [I] f property rights are involved 

in the absence of an express agreement to 

exhaust the remedies provided within the 

association, the member may resort to the 

courts without using the within-the-Union 

remedies. And where property rights are 

involved the member need not first pursue 

the remedies within the association, if 

they would be futile, illusory, or vain." 

Nissen v. International Brotherhood, Etc. (Ia. 1941) , 295 

N.W. 858, 866, cited in De Monbrun, 295 P.2d at 894. 

The case at bar concerns protection of union property 

and does not deal with internal matters. Local 400 pursued 

their action in District Court to recover money and property 

lost through defendants' brea.ch of fiduciary duty owed to the 

Union and its members. This is not a controversy over 

discipline, doctrine or policy. The remedy available through 

intra-union procedures provides for discipline to and 

possible expulsion of a member who violates his obligation 
with respect to Union monies, but does not provide for any 

recovery of the misappropriated ful~ds. Since Local 400's 

cause of action requested recovery of Union money and 

property, a remedy not available through union procedures, 

exhaustion of Union remedies would not afford the desired 

result and would be futile. We hold that the District Court 

correctly determined Local 400 need not exhaust internal 

remedies and therefore could pursue this action in District 

Court. Defendants' motion for summary judgment was properly 

denied. 

Defendants urge, in the second issue, that because 

Local 400 failed to prove it had made a demand for and had 

been refused an accounting, the District Court should have 

granted them a directed verdict. Generally the demand for an 

accounting need not be in any particular form, so long as it 

is sufficiently explicit to leave no room for doubt in a 

defendant's mind that the plaintiff intended to demand an 

accounting. Johnston v. Silver (1921), 59 Mont. 195, 196 P. 

515. Local 400 relied on a letter sent to each of the Union 

officers asking for "answers and/or comments" to a list of 

questioned costs and remarks, as a sufficient demand for an 

accounting and defendantsVack of response as a refusal. 

When defendants made their motion for a directed verdict at 

the close of Local 400's case, the District Court ruled that 

the question was one of fact for the jury and denied the 

motion. The jury could have found, on this evidence, that 

there had been both a demand and refusal. Since there was 

substantial evidence on both sides of this dispute, the 

District Court correctl-y refused to grant a directed verdict. 

Gunnels v. Hoyt (Mont. 1981), 633 P.2d 1187, 38 St.Rep. 1492. 
We note that the jury d-id not award an accounting but 

instead independently calculated the money due from 

defendants. Defendants assert, in this appeal, that any 

verdict in favor of Local 400 depends on their entitlement to 

an accounting. We disagree. The action for an accounting 

was separate from the causes of action for constructive 

fraud, breach of fiduciary duty and conversion of property. 

As such, even if a directed verdict had been appropriate on 

this issue, the District Court's refusal to so order is 

harmless error, given the jury verdict. 

In their third issue defendants argue that this action 

should have been dismissed prior to trial when Local 400 

failed to answer certain interrogatories. Local 400 had 

objected to the interrogatories seeking discovery of the 

legal theories of its complaint. While the District Court's 

order does not specify why it denied defendants' motion to 

dismiss, it appears from the record that the legal theories 

were readily avails-ble in earlier documents and briefs. Ry 

the time the hearing on this motion was held in January 1984, 

the parties had briefed and argued the grounds for removal to 

federal court, a motion to dismiss in federal court, the 

grounds for the return to state court, and another motion to 

dismiss in state court which resulted in dismissal of claimed 

violations of 29 U.S.C. 5401, et seq., of the LMRDA. Local 

400 fully set forth their reasons why mismanagement and 

misappropriation of funds gave rise to a cause of action 

under Montana law when replying to these motions. The 

District Court did not abuse its discretion when it sustained 

Local 400's objections to these interrogatories and refused 

to dismiss the claims. 
Defendants claim error in a number of jury instructions 

in the fourth issue. They claim that the instructions on 

(1) the duty owed by defendants to Local 400, (2) the 

burden of proof and (3) constructive fraud confused the 

jury; that the District Court erred in refusing their 

proposed instruction No. 10; and that the instructions were 

slanted in favor of Local 400. 

The argument on the nature of the fiduciary duty owed 

by the defendants, as union officers, to Local 400 goes to 

the heart of the Union's case. Defendants argue that the 

care required to satisfy any fiduciary duty of an officer to 

a union should be minimal; i.e., if the officer complies with 

the union's constitution and by-laws, the fiduciary duty is 

satisfied. To so rule could leave predatory actions of 

officers insulated from suit. We agree with the Pennsylvania 

Supreme Court that: 

[I]t would be anomalous if, in handling 

the funds of a lahor organization, its 

officers and similar agents were not held 

to standards of good faith similar to 

those imposed upon the officers and 

directors of a corporation. 

Local No. 163, International Union of United Brewery, Flour, 

Cereal, Soft Drink and Distillery Workers of America v. 

Watkins (Pa. 1965), 207 A.2d 776, 781. The better rule 

considers the duties, powers and obligations of the 

constitution and by-laws and imposes on an officer the 

requirement to act reasonably and prudently, a.s any trustee 

of funds and property belonqing to another person or entity 

would act. 

Federa.1 law offers additional authority on the 

fiduciary nature of defendants1 positions as union officers. 
Congress, when enacting 29 U.S.C. S501 of the LMRDA, accorded 

federal protection to rights existing under state law and 

intended to hold union officers responsible as fiduciaries 

for funds entrusted to them. Some of that section's 

legislative history illustrates the applicable fiduciary 

principles: 

The general principles stated in the hill 

are familiar to the courts, both State 

and Federal, and therefore incorporate a 

large body of existing law applicable to 

trustees, and a wide variety of agents ... 

H.R. Rep. No. 741, 86th Cong., 1st Sess. 

81 (1959). 

The bill imposes upon labor union 

officials the responsibilities of a 

fiduciary. The exact application of 

general fiduciary principles always takes 

into account the nature of the 

enterprise. A corporate director is not 

judged in exactly the same fashion as a 

family trustee, but both are subject to 

the highest duty of fiduciary 

responsibility. The bill establishes 

exactly the same test for union 

officials. 

105 Cong. Rec. A6573 (1959), Leg ~ist. 

1051. 

The Fiduciary Duties of Union Officials Under Section 501 of 

the LMRDA, 52 Minn.L.Rev. 437, 446 (1967). 

In this case, the District Court instructed the jury on 

the duty of fiduciary responsibility by comparing it to a 

trust relationship; by stating that, as fiduciaries, the 

officers were reqired to act prudently; and by allowing the 

jury to consider the duties, powers and obligations in the 

Union constitution and by-laws. These instructions were 

consistent rather than confusing, and accurately set forth 

the nature of defendants' responsibilities, as Union 

officers, to Local 400. 
The defendants also claim that the instructions on the 

burden of proof confused the jury. The court gave a general 

instruction that the party who asserts the affirmative of an 

issue, has the burden of proving that issue by a 

preponderance of the evidence. Following the instructions on 

the fiduciary nature of the defendants' position, the 

District Court instructed that if a fiduciary profits 

personally from the use or receipt of union funds, the burden 

shifts to the fiduciary to show he acted reasonably. 

Finally, in an instruction which referred to the defendants' 

duty to keep proper accounts, the District Court instructed 

that the person with the duty has the burden of proving that 

he is entitled to the credits he claims. Shifting the burden 

to defendants - if Local 400 proved that they profited 

personally from union funds is nothing more than moving the 

burden to the party "who would suffer a finding against him," 

if no additional evidence were produced. Section 26-1-401, 

MCA. This instruction did not contradict the general 

instructions and was not inaccurate. The instruction 

referring to keeping proper accounts and the burden of proof 

followed a common rule in an action for an accounting, that 

the agent or person who has the funds in his control has the 

burden of proving a proper disposition of those funds. See, 

e.g., 3 Arn.Jur.2d S348, Agency, p. 706 and 90 C.J.S. S 414, 

Trusts, p. 782. This instruction specifically referred to 

the keeping of proper accounts. As such, it accurately 

stated the law, was not improperly slanted toward Local 400 

and did not contradict the general instruction. 

Defendants contend that the instructions on 

constructive fraud should not have been given because this 
case did not involve a contract and constructive fraud is not 

applicable to an action ?or an accounting or for breach of a 

fiduciary duty. This contention inaccurately characterizes 

the requirements for an action for constructive fraud. 

Dealings or transactions between parties who have a fiduciary 

relationship provide a sufficient contract to support such an 

action. Here, the questioned transactions involving Union 

money and property changing hands, combined with the duties 

and obligations between the officers and Local 400, 

established the necessary relationship between the parties. 

This relationship, along with the other elements established 

at trial, supported the District Court's giving of 

instructions on constructive fraud. 

Defendants' instruction No. 10, refused by the District 

Court, stated that money paid by one to another was due to 

the other, taken from S 26-1-602(7), MCA. The District Court 

refused it as confusing and incorrect as it applied to this 

case. The instructions, as a whole, adequately describe the 

applicable law. Under the circumstances, the District Court 

did not err by refusing this instruction. 

In the last part of the fourth issue, the defendants 

contend that a number of instructions were biased in Local 

400's favor. Most of these challenged instructions are 

discussed above. Of the two remaining instructions to be 

discussed, we note first that defendants made no objection to 

court ' s instruction No. 14. Even if the giving of this 

instruction had been error, an instruction not objected to 

cannot be the basis for a reversal on appeal. 

The last challenged instruction, No. 34, defined 

damages and stated generally the measure of damages. Other 
subsequent instructions elaborated on the measure of damages 

and were given without objection from defendants. Court's 

instruction No. 34, along with the other damage instructions, 

adequately reflects the definition of damages and their 

measure. The evidence and testimony given by Local 400's 

witnesses at trial could have supported a larger verdict. 

These instructions do not indicate any bias in favor of Local 

400. 

We hold that the Dj-strict Court properly instructed the 

jury. 

The final issue raised by defendants questions the 

sufficiency of the evidence to support the jury verdict. A 

jury's verdict, if supported by substantial evidence, will 

not be overturned on appeal. Gibson v. Western Fire Ins. Co. 

(Mont. 1984), 682 P.2d 725, 41 St.Rep. 1048. The evidence 

may be weak or conflict with other evidence hut still 

adequately support the verdict. Gunnels, 633 P.2d 1187, 38 

St.Rep. 1492. Defendants contend that because no one 

testified as to the specific amount of money they might owe 

the Union, the verdict awarding money damages should be 

reversed. The jury heard evidence on mismanagement and 

self-dealing with regard to Union funds and property. The 

financial losses of the Union during Bosh's administration 

were part of the evidence. According to Local 400, 

defendants failed to make or maintain adequate records of 

financial transactions in many instances. This evidence 

supported a jury's finding a loss of funds attributable to 

the mismanagement and breach of duty of the defendants. The 

evidence may have contained contradictions, but it was 
substantial and therefore adequate to support the iury's 

verdict. 

The jury verdict and judgment entered thereon are 

affirmed. 

/ 

We concur: / 

-- 

hief ~ustsce 

Honorable Thomas A. Olson, 

District Judge, sitting in 

place of Mr. Justice John 

C. Sheehy