In the case last cited, involving the Saginaw County Farm Bureau, it was held that that organization was not liable for flour ordered in its name by a county agent who had not been authorized by the board of directors to order the flour.

Owing to the foregoing rule, officers of an association, its manager or any other employee should be authorized by the board of directors to act before attempting to enter into transactions; and persons dealing with an association should ascertain that its representatives are authorized to enter into contracts or transactions of the type under consideration.

A change, or changes, in the membership of a board of directors does not of itself abrogate authority previously conferred by the board of directors on officers of a corporation. Likewise, when a transaction has been approved by officers having authority so to do, the directors may not, by subsequently withdrawing the authority from the officers, relieve the corporation of liability and disaffirm the contract.*

The general rule is that if a corporation has received the benefit of an unauthorized contract, it is bound thereby.5

If any agent of an association enters into a contract that has not been authorized, but which is within the scope of the association's powers, the association may ratify the contract if it acts before the opposing party repudiates it. After such ratification, it becomes as binding as though previously authorized. However, if an association's agents enter into a contract which is in violation of the law, such contract is invalid and the cooperative cannot recover on it.?

Insofar as third persons are concerned, generally speaking, a manager or an officer of an association has just as much authority as the association has represented that he possesses. Under this principle associations have been held liable on account of the acts of managers and officers which were not specifically authorized. If a manager or an officer of an association is exercising more authority than its board of directors deems he should exercise, the board should prescribe the limits of his authority and persons who have previously dealt with the association, such as banks, should be specifically advised of the limits of his authority.10

An employee of an association used association funds to finance enterprises of his own in violation of the charter and bylaws of the association, but with the approval of some of the individual members of its board of directors. When the employee brought suit for his salary, the associa

3

Kidd v. New Hampshire Traction Company, 74 N. H. 160, 66 A. 127. Perryman & Company v. Farmers' Union Ginning and Manufacturing Company, 167 Ala. 414, 52 So. 644.

5 Hamaker v. Fulton Farmers' Association, 271 Pa. 465, 114 A. 627. Stone v. Walker, 201 Ala. 130, 77 So. 554, L. R. A. 1918C 839; Commissioners of Lewes v. Breakwater Fisheries Co., 13 Del. Ch. 234, 117 A. 823, affirmed in 14 Del. Ch. 433, 128 A. 920.

United States v. Dake, 42 F. Supp. 833.

8 Producers' Fruit Company of California v. Goddard, 75 Cal. App. 737, 243 P. 686.

9

Betts v. Southern California Fruit Exchange, 144 Cal. 402, 77 P. 993; Federal Chemical Company v. Farmers Produce Exchange, 123 S. W. 2d 612 (Mo. App.); Ely, Salyards & Co. v. Farmers' Elevator Company of Nohle, 69 Mont. 265, 221 P. 522; Cooperative Stores Company v. Marianna Hotel Company, 128 Ark. 196, 193 S. W. 529; Hopkins v. Paradise Heights Fruit Growers' Association, 58 Mont. 404, 193 P. 389.

10

Fidelity & Deposit Company of Maryland v. Merchants National Bank, 223 Iowa 446, 273 N. W. 141.

tion was able to maintain a defense to the extent of the funds so used.11

A manager of a corporation issued a corporation check to pay a private debt. The creditor of the manager was held to have been put on notice of the situation, and the corporation was allowed to recover from the creditor.12

Officers of an association should constantly bear in mind that money furnished for a specific purpose may not lawfully be used by them for other purposes.13

Where the bylaws of an association required written notice of a member's withdrawal to be given at a specified time, the manager of the association could not waive such bylaws unless authorized to do so by the association.14

Notice to officers of matters concerning the association or knowledge by them of facts affecting its interests will generally be deemed to be notice to, or knowledge of, the association, but this is ordinarily not true if the officer is dealing personally with the association.15

Officers usually may not enter into transactions with an association in which they attempt to act both for themselves and the association. Transactions entered into in this manner may ordinarily be repudiated by an association. The restrictions applicable to directors dealing with an association apply to officers, and for information on this subject the reader is referred to the section on "Conflicting Personal Interests."

16

The fidelity and good faith that the law demands every agent have toward his principal is illustrated in a Massachusetts case in which a farm manager made purchases of farm supplies from a cooperative in which he was a stockholder. By reason of such purchases he received "a commission of seven shares of stock from that corporation." He did not inform his employer of the receipt of these shares of stock. The court said:

They constituted a "secret" profit for which he never accounted to the defendant. As the plaintiff was guilty of taking a bonus in the form of shares of stock in a corporation in which he was a stockholder, by reason of his purchases from that corporation on behalf of his employer, he is barred from the recovery of salary or

wages.

A corporation, it has been held, cannot condone the fraud or wrongdoing of an officer or director except by unanimous consent of the stockholders or members.17

It should be borne in mind that an association may be estopped from denying the truth of statements made by one of its officers.18

"South Texas Cotton Cooperative Association v. Burgess, 103 S. W. 2d 1095 (Tex. Civ. App.).

14 Placentia Coop. Orange Growers' Association v. Henning, 118 Cal. App. 487, 5 P. 2d 444.

15 Bartlett v. McCallister, 316 Mo. 129, 289 S. W. 814: Knobley Mountain Orchard Co. v. People's Bank of Keyser, 99 W. Va. 438, 129 S. E. 474, 48 A. L. R. 459; York Livestock Commission Company v. Northwestern Livestock Commission Company, 136 Neb. 716, 287 N. W. 94.

16

Raymond v. Davies, 293 Mass. 117, 199 N. E. 321, 323, 102 A. L. R. 1112. See note in 102 A. L. R. 1115.

17

Ford v. Ford Roofing Products Co., 285 S. W. 538 (Mo. App.). See also Tenison v. Patton, 95 Tex. 284, 67 S .W. 92.

18 Seaman v. Big Horn Canal Association, 29 Wyo. 391, 213 P. 938. See also Pacific Wool Growers v. Draper & Co., 158 Ore. 1, 73 P. 2d 1391; Hill v. Associated Almond Growers of Paso Robles, 90 Cal. App. 291, 265 P. 873.

In the signing of contracts or other documents pertaining to the business of an association, an officer should sign them in such a way as to show that he is acting in his official rather than in his personal capacity. This is usually done by signing the name of the association "by" the officer in question, followed by his title. Of course, an association may not make an affidavit as this may be done only by a person acting on its behalf.19

Removal of Directors, Officers, and Agents

Many of the cooperative statutes contain provisions that deal with the matter of removing directors and officers before the expiration of their terms.20 Associations formed under these statutes should follow these provisions.

At common law the general rule permits the board of directors to remove officers and other agents elected or chosen by them or under their authority without a hearing, although it is advisable to hold a hearing. Liability on the part of the association on account of such action would depend on whether cause for removal existed.21 On the other hand, ordinarily, directors and officers elected by the members may be removed by the members before the expiration of their terms only for cause and after notice and a hearing.22

When a director is required to be a stockholder it has been held that he loses the office when he ceases to be a stockholder.23

In a case in which officers of an association were "elected" by votes cast by proxies, when the bylaws of the organization did not provide for proxy voting, members of the association enjoined the officers from acting

as such.24

In a case which resulted from the discharge of an agent by a cooperative organization, it was said: 25

Even though an agency is for a definite term, the principal has a right to revoke it before the expiration of the term, without incurring liability for damages, because of the agent's failure faithfully to perform his express or implied undertakings as

agent.

The default on the part of an agent which will justify the revocation of the contract is not confined to his dealings with the principal. This right of revocation for cause is held to extend to moral delinquencies, which are calculated to affect injuriously the agent's reputation.

If the period for which an employee is employed is not specified, the general rule is that the employment is terminable at the will of either party, but the usages prevailing in the particular business and all the facts and circumstances may justify a different conclusion.26

19

Agricultural Bond & Credit Corporation v. Courtenay Farmers' Cooperative Association, 64 N. D. 253, 251 N. W. 881.

20

See sec. 15 of the Bingham Cooperative Marketing Act of Kentucky, p. 305 of Appendix.

Brindley v. Walker, 221 Pa. 287, 70 A. 794, 23 L. R. A. (N. S.) 1293; 14a C. J. 74.

Alliance Coop. Ins. Co. v. Gasche, 93 Kan. 147, 142 P. 882; Brindley v. Walker, 221 Pa. 287, 70 A. 794, 23 L. R. A. (N. S.) 1293; State ex rel. Koski v. Kylmanen, 178 Minn. 164, 226 N. W. 401; 14a C. J. 74.

23 Chemical National Bank of New York v. Colwell, 132 N. Y. 250, 30 N. E. 644. Pohle v. Rhode Island Food Dealers Association, 63 R. I. 91, 7 A. 2d 267. 25 Coates v. Eastern States Farmers' Exchange, 99 Vt. 170, 130 A. 709, 712.

28 Putnam v. Producers' Live Stock Marketing Association, 256 Ky. 196, 75 S. W. 2d 1075.

Liability for Wrongs Done

If an officer, while acting within the apparent scope of the authority conferred upon him by the association, perpetrates a fraud on an innocent third party or otherwise violates the right of such party, the association probably would be liable although the officer was really acting for his own benefit.27

Also, the officers of an association are liable for wrongs committed by them through the instrumentality of an association, and they may be held liable for any damage which they cause to third persons through the violation of their legal rights.28

The question sometimes arises as to whether a particular individual is an employee of a cooperative or an independent contractor. An association will not, of course, be held liable for the acts of an independent contractor. In a Wisconsin case,29 the facts were found to warrant a conclusion that the individual involved was the association's employee and, accordingly, the association was held liable for injuries which he had caused. In a case involving the same question in relation to liability for unemployment taxes, the individual also was held to be an employee.30

The statutes of some States impose duties and responsibilities on officers of corporations or associations. For instance, in many States officers are required by statute to file certain reports. Associations should ascertain the duties and responsibilities placed on officers of cooperatives by the statutes or constitution of the State in which the organization is formed, and officers thereof should govern their actions accordingly.

MANY

Meetings of Associations

ANY of the statutes under which cooperatives are formed contain provisions with respect to the holding of meetings. Frequently such statutes require that one meeting be held each year and permit the holding of special meetings at any time. These statutory provisions should be followed. In the absence of a controlling provision in the statute or charter on the subject, an association may adopt bylaws to govern the calling of meetings and, of course, in any case the subject may be covered in bylaws that are consistent with the statute under which the association is formed and with its charter.

When the statute so provides, meetings of an association may be held outside of the State, but in the absence of a statutory or charter provision

27

Fidelity & Deposit Company of Maryland v. Merchants National Bank, 223 Iowa 446, 273 N. W. 141; Hill v. Associated Almond Growers of Paso Robles, 90 Cal. App. 291, 265 P. 873; Hamaker v. Fulton Farmers' Association, 271 Pa. 465, 114 A. 627; Engen v. Merchants' & Mfrs.' State Bank, 164 Minn. 293, 204 N. W. 963, 43 A. L. R. 610.

California Grape Control Board, Ltd. v. Boothe Fruit Company, 220 Cal. 279, 29 P. 2d 857; Scott v. Shook, 80 Colo. 40, 249 P. 259: Springman Paper Products Co. v. Detroit Ignition Co., 236 Mich. 90, 210 N. W. 222; Tyler v. Savage, 143 U. S. 79, 12 S. Ct. 340, 36 L. Ed. 82; Jamestown Iron & Metal Co., Inc. v. Knofsky, 291 Pa. 60, 139 A. 611; Hilgendorf v. Schuman, 232 Wis. 625, 288 N. W. 184.

Green Valley Cooperative Dairy Co. v. Industrial Commission, 250 Wis. 502, 27 N. W. 2d 454.

Rochester Dairy Co. v. Christgau, 217 Minn. 460, 14 N. W. 2d 780. See also Meredith Pub. Co. v. Iowa Employment Security Commission, 232 Iowa 666, 6 N. W. 2d 6.

authorizing this, it is safer to hold such meetings in the State of incorporation.31

It has been held that nonprofit nonstock corporations operating with a membership in different States may hold meetings of the members outside the State of incorporation even without a statutory provision authorizing the same.3

32

Unless a statute specifies how notices of meetings shall be given the bylaws may state the method to be followed, such as by publication in certain newspapers or by mailing notices a certain number of days prior to the meeting. "It is not within the province of the courts to declare any form of notice of a shareholders' meeting insufficient, if it complies with the charter and bylaws of the corporation, unless there is some specific statutory provision to the contrary.' But where neither the statute, charter, nor bylaws authorized the giving of a notice of a special meeting which did not state the business to be considered at the meeting, such a notice was held invalid.34

" 33

Generally, a bylaw providing for the giving of notices of meetings by mail should be so worded that the effectiveness of the notice will depend on its mailing rather than on its receipt.

With respect to the general conduct of meetings the fundamental rule is that the majority controls.35 A presiding officer, for instance, who refuses to allow the majority to express its will may be removed and another chosen in his stead.

Reasonable election rules may be set forth in the bylaws of an association and if the bylaws authorize its directors to determine the election rules, a rule adopted by the directors providing that if a man votes twice only the ballot first cast shall be counted, is valid.36

Where a bylaw provided that all nominations for the office of director were to be made by shareholders at the regular meeting of directors in the month preceding the annual meeting of shareholders, it was held that this did not prevent the stockholders from electing persons as directors who had not been so nominated.37

As a general rule, a meeting at which less than a quorum is present may not be lawfully adjourned to meet at a subsequent date unless the statute or the bylaws of an association so authorize.38 If a quorum is present at a meeting it may be adjourned to meet at a later date and the subsequent meeting is regarded simply as a continuation of the previous meeting.

Quorum for Meetings of Members

39

An association may adopt bylaws dealing with the procedure to be followed in the conduct of meetings and specifying the number of members.

Handley v. Stutz, 139 U. S. 417, 11 S. Ct. 530, 35 L. Ed. 227; Ballantine's MANUAL OF CORPORATION LAW AND PRACTICE, sec. 168; 5 Fletcher CYCLOPEDIA CORPORATIONS, Perm. Ed., sec. 2003.

In re George, 199 N. Y. S. 557, 205 App. Div. 234, affirmed in George v. HolsteinFriesian Association of America, 238 N. Y. 513, 144 N. E. 776.

Citrus Growers' Dev. Association v. Salt River V. W. Users' Association, 34 Ariz. 105, 268 P. 773, 777.

Noremac, Inc. v. Centre Hill Court, 164 Va. 151, 178 S. E. 877.

35 American Aberdeen-Angus Breeders' Association v. Fullerton, 325 Ill. 323, 156 N. E. 314.

Davis v. S. C. Cotton Growers' Coop. Association, 127 S. C. 353, 121 S. E. 260. Commonwealth ex rel. Grabert v. Markey, 325 Pa. 433, 190 Á. 892.

35 Noremac, Inc. v. Centre Hill Court, 164 Va. 151, 178 S. E. 877.

39

365.

Sagness v. Farmers' Cooperative Creamery Company, 67 S. D. 379, 293 N. W.