injuring a milk distributor in the operation of his business,72 in another case the court held that a milk distributor had no cause of action against a milk association for diverting milk from the milk distributor, unless the milk distributor could show that but for the acts of the association he would have obtained a sufficient supply of milk to meet his needs.73

Where a member of an association assigned his claim against it on account of commodities delivered by him under his marketing contract, the member no longer had an interest in the claim which was subject to attachment.74 A cooperative as a debtor can assert against an assignee of the debt a counterclaim based on the obligation of his assignor maturing subsequent to the assignment but before notice thereof to the association.75 An association which is not a member of another cooperative may by contract become liable for obligations incurred by the other cooperative.76 As illustrating the flexibility of the law of contracts a Minnesota case is of interest. In this case certain persons sold a stock of merchandise to a cooperative and agreed to look for payment only to the proceeds derived from sale of such stock, which was to be sold “as rapidly as possible.” The contract of sale was held valid.

77

Inasmuch as the jury found that a chick association had agreed to bear all losses which might arise from the purchase of chicks in case they developed a disease, the purchaser had the right to recover not only the purchase price of the chicks after their return, but also all other losses arising from their purchase.78

Hedging

Inasmuch as hedging is so widely practiced by cooperatives which handle agricultural commodities that are dealt in on future markets or exchanges, a brief explanation of hedging appears in order. Hedging is regarded as a type of insurance.79 When an association or a producer 80 of grain, for instance, desires to effect a hedge with respect to spot grain, or with respect to grain which is being produced, a sale is made of substantially a corresponding amount on a grain futures market or exchange. The spot grain, or the grain that is being produced, might be used for the making of delivery of the grain sold in the futures market, but this is seldom done. Ordinarily, on the sale of the actual grain the seller buys an amount of grain in the futures market equal to that previously sold in that market and thus the transaction in futures is closed. Normally, it is expected that if the price of grain declines the "profits" made on the grain sold in the futures market will approximate the "loss" taken on the actual grain, so that the transaction in theory results in the seller obtaining a net price for his actual grain approximating the price at which the grain was sold in the

72 Pure Milk Producers' Association of Greater Kansas City Territory v. Bridges, 146 Kan. 15, 68 P. 2d 658.

73

Hy-Grade Dairies v. Falls City Milk Producers' Association, 261 Ky. 25, 86 S. W. 2d 1046.

74

Stivers v. Steele (Burley Tobacco Growers Association), 230 Ky. 700, 20 S. W. 2d 717.

15 Maryland Cooperative Milk Producers v. Bell, 206 Md. 168, 110 A. 2d 661.

76

New York Canning Crops Coop. Association, Inc. v. Slocum, 126 Misc. Rep. 30, 212 N. Y. S. 534.

"In re Blue Earth County Cooperative Company, 139 Minn. 231, 166 N. W. 178. 78 Letres v. Washington Cooperative Chick Association, 8 Wash. 2d 64, 111 P. 2d 594.

19 Fraser v. Farmers' Cooperative Company, 167 Minn. 369, 209 N. W. 33, reargument denied 167 Minn. 369, 209 N. W. 913; Benson-Stabeck Company v. Reservation Farmers' Grain Co., 62 Mont. 254, 205 P. 651.

80

Edgeley Cooperative Grain Company v. Spitzer, 48 N. D. 406, 184 N. W. 880, 20 A. L. R. 1417.

futures market. When a handler of grain has contracted to deliver actual grain at a given time which he expects to acquire in the meantime, he may purchase a like amount of grain on a futures market and then on the purchase of the actual grain by him he sells the grain which he purchased in the futures market. In general, hedging contracts are valid.81

Unincorporated Associations

NASMUCH as some cooperatives are unincorporated, a discussion of their

members is in order. An unincorporated association may be defined as a body of persons acting together without a charter, but employing to a greater or less extent the forms and methods used by incorporated bodies for the prosecution of the purposes for which the body is formed.82

Characteristics

83

The liability of members of an unincorporated business association to third persons is the same as that of partners. In a Vermont case it was said: "Here a voluntary association, composed of many members, adopting bylaws, having an associate name, and providing for certain officers and prescribing their duty, was but a partnership in the eyes of the law." In the absence of a statutory or contractual provision on the subject, the death or withdrawal of a member does not dissolve the association.84 A partnership, on the contrary, under such circumstances is dissolved by the death or withdrawal of a member.85

Again, a corporation may sue or be sued in its own name, while at common law, and in the absence of a statute, an unincorporated association cannot maintain an action in its own name but must sue in the names of all the members composing it, however numerous they may be.8 86 Likewise, such an association in the absence of a statute cannot be sued in its society name but the individual members must be sued.87 A corporation may take title to property in its own name, but an unincorporated association, in the absence of a statute, is ordinarily incapable as an organization of taking or holding either real or personal property in its name.88

81 Annotation "Nature and validity of 'hedging' transactions on the commodity market," 20 A. L. R. 1422. See also Makeever v. Barker, 85 Ind. App. 418, 154 N. E. 692; Clark v. Murphy, 142 Kan. 426, 49 P. 2d 973; South Carolina Cotton Growers' Coop. Association v. Weil, 220 Ala. 568, 126 So. 637; Fagerberg v. Phoenix Flour Mills Co., 50 Ariz. 227, 71 P. 2d 1022.

82

7 C. J. S. Associations, sec. 1.

83

Houghton v. Grimes, 100 Vt. 99, 135 A. 15, 18.

84 Burke v. Roper, 79 Ala. 138; Lindemann & Hoverson Co. v. Advance Stove Works, 170 Ill. App. 423; Hossack v. Ottawa Dev. Association, 244 Ill. 274, 91 N. E. 439.

85

86

Scholefield and Taylor v. Eichelberger, 7 Pet. 586, 32 U. S. 586, 8 L. Ed. 793. St. Paul Typothetae v. St. Paul Bookbinders' Union No. 37, 94 Minn. 351, 102 N. W. 725; Newton County Farmers' & Fruit Growers Exchange v. Kansas City Southern Railway Co., 326 Mo. 617, 31 S. W. 2d 803; Old River Farms Company v. Roscoe Haegelin Company, 98 Cal. App. 331, 276 P. 1047. If an unincorporated association fails to comply with statutory requirements for bringing suit under the association name, it lacks capacity to sue in this form. Kadota Fig Association of Producers v. Case-Swayne Co., 73 Cal. App. 2d 815, 167 P. 2d 518. Nor can it file a cross complaint in an action filed against it. Case v. Kadota Fig Association of Producers, 207 P. 2d 86 (Cal. D. C. of App.).

87 Allis-Chalmers Co. v. Iron Molders' Union No. 125, 150 F. 155; Board of Railroad Commissioners v. Reed, 102 Mont. 382, 58 P. 2d 271.

88

Philadelphia Baptist Association v. Hart's Executors, 4 Wheat. 1, 4 L. Ed. 499; Idaho Apple Growers Association v. Brown, 50 Idaho 34, 293 P. 320, 51 Idaho 540, 7 P. 2d 591.

How Formed

Statutes have been passed in some States expressly authorizing individuals to unite as a voluntary association under a distinctive name, but as a rule, the organization of unincorporated or voluntary associations is done independent of statutes. They are generally formed under the common law right of contract. Just as A and B may enter into a contract with reference to doing some lawful act, so a larger number may associate for the accomplishment of a lawful objective.

Provision may be made for any matter that is a legitimate subject of contract. The qualifications of members may be prescribed, and causes for expulsion may be specified. A constitution is usually adopted which states the purposes of the association and other fundamental propositions relative to the organization. Bylaws are also usually adopted which prescribe the manner in which the objectives of the association are to be attained. The constitution and the bylaws, or either of them, constitute a contract binding all those who agree to them.

90

In a Michigan case 89 it was said: "The articles of agreement of such an association, whether called a 'constitution,' 'charter,' 'bylaws,' or any other name, constitute a contract between the members which the courts will enforce if not immoral, or contrary to public policy or the law of the land." The foregoing was quoted approvingly in a Kansas case involving an antihorse-thief association, and it is believed it states the general rule.91 It follows that, inasmuch as a voluntary association rests on a contract or contracts, the rights or liabilities of members among themselves are to be determined by the contracts involved in accordance with common law principles as modified or supplemented by statutes; and in the absence of a constitution or bylaws, the courts will apply the same legal rules for ascertaining the rights of the parties, weight being given to any usages or customs which may have been followed by the association.9%

92

It should be remembered that in order for a constitution and bylaws, or either of them, to constitute a contract between an association and one claiming or alleged to be a member, he must have agreed to them, either by signing papers containing the constitution and bylaws, or by assenting to them in some other way.9 93 If one, in joining an association, signs its constitution and bylaws or assents to them in some other way and thus agrees to be bound by them, he is in no position to complain because he is required to comply with the rules and regulations of the association to which he agreed or because he is expelled from the association in accordance with them.94

In a New York case 95 involving the New York Stock Exchange, in which it appeared that a former member had been expelled for cause, the court of appeals of that State said:

The interest of each member in the property of the association is equal, but it is subject to the constitution and bylaws, which are the basis on which is founded the association. They express the contract by which each member has consented to be bound, and which measures his duties, rights, and privileges as such. It seems most clear to me that this constitution and the bylaws derive a binding force from the fact that they are signed by all the members, and that they are conclusive upon each

89

Brown v. Stoerkel, 74 Mich. 269, 41 N. W. 921, 923, 3 L. R. A. 430.

90 McLaughlin v. Wall, 86 Kan. 45, 119 P. 541.

91 Kalbitzer v. Goodhue, 52 W. Va. 435, 44 S. E. 264.

92 Ostrom v. Greene, 161 N. Y. 353, 55 N. E. 919.

93 Austin v. Searing, 16 N. Y. 112, 69 Am. Dec. 665, and note.

94 State ex rel. Rowland v. Seattle Baseball Association, 61 Wash. 79, 111 P. 1055. 95 Belton v. Hatch, 109 N. Y. 593, 17 N. E. 225, 226, 4 Am. St. Rep. 495.

of them in respect to the regulations of the mode of transaction of his business, and of his right to continue to be a member.

In another case 96 it was said:

The San Francisco Stock and Exchange Board is a voluntary association. The members had a right to associate themselves upon such terms as they saw fit to prescribe, so long as there was nothing immoral or contrary to public policy or in contravention of the law of the land in the terms and conditions adopted. No man was under any obligation to become a member unless he saw fit to do so, and when he did and subscribed to the constitution and bylaws, thereby accepting and assenting to the conditions prescribed, he acquired just such rights, with such limitations and no others, as the articles of association provided for.

Admission of Members in Unincorporated Associations

It has been previously stated that an unincorporated association may prescribe the qualifications of members. It cannot be compelled to admit as members persons whom it chooses to exclude.97

In other words, the whole matter of the admission of members rests with the association. This is well illustrated in the case of farmers' telephone lines. The question of whether membership can be sold with the farm in such instances has arisen. It is held that an association has the right to control its membership, and a purchaser of a farm merely by virtue of his warranty deed does not become a member of such telephone company.98

Membership Nontransferable

Membership in an unincorporated association is not transferable unless the constitution or bylaws provide that it shall be.99 The interest of a member in such an association is not devisable or transmissible, and his estate receives nothing therefrom on his death 1 in the absence of a contractual or statutory provision to the contrary.

1

Control of an Unincorporated Association

In the absence of an agreement to the contrary, within the scope of the objects for which an association was formed, whether such objects are mentioned in the constitution or other paper defining the objects of the association or are necessarily implied therefrom, a majority of the members possess authority to control the action of the association. The majority controls, however, only while the cooperative is doing those things for which it was organized. If it is desired to have the association do something different from that for which it was formed, unanimous consent is necessary.

Notice of Meetings

If the constitution or bylaws provide how members shall be notified of meetings, they must be followed. In general, all members are entitled

97

Richardson v. Union Congregational Society of Francestown, 58 N. H. 187.

98 Cantril Telephone Co. v. Fisher, 157 Iowa 203, 138 N. W. 436, 42 L. R. A. (N. S.) 1021.

Moore v. Hillsdale County Telephone Co., 171 Mich. 388, 137 N. W. 241; McMahon v. Rauhr, 47 N. Y. 67.

1

Sommers v. Reynolds, 103 Mich. 307, 61 N. W. 501; Mason v. Atlanta Fire Co., 70 Ga. 604, 48 Am. Rep. 585.

24 Cyc. 310; Goller v. Stubenhaus, 134 N. Y. S. 1043, 77 Misc. 29; Ace Bus Transportation Company v. South Hudson County Boulevard Bus Owners' Association, 118 N. J. Eq. 31, 177 A. 360, affirmed in 119 N. J. Eq. 37, 180 A. 835. 3 Abels v. McKeen, 18 N. J. Eq. 462.

to notice of all meetings and of the matters to be considered at such meetings. If matters of an unusual character are to be considered at a meeting, it is particularly important that the nature of the business be brought to the attention of each member.5

Unincorporated Associations and Third Persons

6

The liability of the members of an association that is not engaged in business has been said to rest upon the principles of agency. An illustration will make this more clear. In a Massachusetts case 7 the constitution stated that the association was formed to stimulate interest in the breeding of pigeons and bantams. It gave the board of directors charge of all public exhibitions of the society and required each member to pay an initiation fee and an annual assessment. An exhibition was held, and premiums were offered. The expenses thereof were greater than the receipts. Certain of the members paid the bills. They then brought suit against other members of the association to compel them to contribute their respective proportions of the loss sustained. The court said:

Mere membership would not bind anybody for any further payment than the initiation fee and annual assessment; but such members as participated in a vote to incur further expenses for an exhibition with premiums, or as assented to be bound by such vote, would be bound thereby.

In other words, only those members were liable who authorized the exhibition with premiums or who later ratified the act of holding such an exhibition. The other members were not liable.

In a Michigan case the members of a building committee of an unincorporated religious society ordered lumber of a dealer for the building of a church. A dispute arose, and the dealer brought suit against the members of the building committee, and won. In holding the defendants. liable, the court said:

It could neither sue nor be sued.

The church organization had no legal existence. The members of the society were not partners. Those of the society who were actually instrumental in incurring the liabilities for it are liable as either principals or agents having no legal principal behind them. Members of the society who either authorized or ratified the transactions are liable, while those who did not are exempt from liability.

All the authorities apparently agree that, if a particular debt or obligation was necessarily incurred for the express purpose for which the association was formed, each member thereof is liable. In a South Dakota case the following language was used with reference to this situation:

9

* * * each member of an unincorporated or voluntary association is liable for the debts thereof incurred during his period of membership, and which had been necessarily contracted for the purpose of carrying out the objects for which the association was formed.

In another case those in charge of an association were expected to make advances on the delivery of commodities, and to make other disbursements. The association had no capital. It was held that those in charge of the

5 State ex rel Rowland v. Seattle Baseball Association, 61 Wash. 79, 111 P. 1055. 6 7 C. J. S. Associations, sec. 32.

7 Ray v. Powers, 134 Mass. 22.

8

9

Clark v. O'Rourke, 111 Mich. 108, 69 N. W. 147, 148, 66 Am. St. Rep. 389.

Lynn v. Commercial Club of Witten, 31 S. D. 401, 141 N. W. 471. See also Little Rock Furniture Mfg. Co. v. Kavanaugh, 111 Ark. 575, 164 S. W. 289, 51 L. R. A. (N. S.) 406, Ann. Cas. 1916A 848; Schumacher v. Sumner Tel. Co., 161 Iowa 326, 142 N. W. 1034, Ann. Cas. 1916A 201; Dinsmore v. J. H. Calvin Co., 214 Ala. 666, 108 So. 583.