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.80

It should be borne in mind that an association may be estopped to deny the truth of statements made by one of its officers.81

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.82

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.83 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.84

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

81

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

82

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

83

See sec. 15 of the Bingham Cooperative Marketing Act of Kentucky, p. 380 of Appendix.

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

On the other hand, generally speaking, 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.85 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.86

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.87

In a case which resulted from the discharge of an agent by a cooperative organization, it was said: 88

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.89

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 is liable, generally speaking, although the officer was really acting for his own benefit.90

Also, the officers of an association are liable for wrongs committed by them through the instrumentality of an association, and they may

85

Alliance Co-op. 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.

86 Chemical National Bank of New York v. Colwell, 132 N. Y. 250, 30 N. E. 644. ST Pohle v. Rhode Island Food Dealers Association, 63 R. I. 91, 7 A. 2d 267. 88 Coates v. Eastern States Farmers' Exchange, 99 Vt. 170, 130 A. 709, 712.

S9 Putnam v. Producers' Live Stock Marketing Association, 256 Ky. 196, 75 S. W. 2d 1075.

90

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' Ass'n, 271 Pa. 465, 114 A. 627; Engen v. Merchants' & Mfrs.' State Bank, 164 Minn. 293, 204 N. W. 963, 43 A. L. R. 610.

be held liable for any damage which they cause to third persons through the violation of their legal rights."1

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.

Meetings of Associations

ANY of the statutes under which cooperative associations 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 authorizing this it is safer to hold such meetings in the State of incorporation.92

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.93

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

91

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.

92

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.

93 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.

402026°-42- -8

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." 94 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.95

Generally speaking, 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.

96

With respect to the general conduct of meetings the fundamental rule is that the majority controls. 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."7 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.98

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.99 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.1

Quorum for Meetings of Members

An association may adopt bylaws dealing with the procedure to be followed in the conduct of meetings and specifying the number of members required for a quorum. When the bylaws specify the number of members necessary to constitute a quorum, a valid meeting can

94

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

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

96

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

Davis v. 8. C. Cotton Growers' Co-op. Ass'n, 127 S. C. 353, 121 S. E. 260.

98 Commonwealth ex rel. Grabert v. Markey, 325 Pa. 433, 190 A. 892. Noremac, Inc. v. Centre Hill Court, 164 Va. 151, 178 S. E. 877.

1

Sagness v. Farmers' Co-operative Creamery Company, 67 S. D. 379, 293 N. W.

not be held unless the number of members specified is present at the time each proposition is voted upon.2

If the law of the State in which an association is formed specifies the number of members that must attend a meeting in order that there may be a quorum, this is controiling, and a bylaw in conflict therewith is void.3

At common law and in the absence of a statutory, charter, or bylaw provision changing the rule, the members who attend a meeting of an association constitute a quorum for the conduct of business. In other words, at common law those who come constitute a valid meeting for the transaction of business."

If the bylaws require, say a two-thirds vote of members present to carry a proposition, members present but not voting cannot be counted as voting for either side."

Voting Unit

At common law a stockholder or member of an association has but one vote on questions coming before meetings of stockholders or members irrespective of the number of shares. In a case decided by the Supreme Court of the United States it was said:

Usually a stockholder is a member of the company and as such has a right to vote, but it does not necessarily follow that the right increases with the increase in stock, or that the right is lessened in case the number of shares owned by the stockholder should be diminished.8

Statutes providing for, the formation of cooperative associations in many cases specify that members shall be entitled to only one vote on any question affecting the association. Unless each share of stock is given a vote by statute, those interested in forming an association may, if the incorporation statute authorizes, include a suitable pro vision in the articles of incorporation establishing what the voting unit at meetings of the stockholders shall be. Unless in conflict with the law of the State or with a provision in its charter the members

2 Everts v. Kansas Wheat Growers' Ass'n, 119 Kan. 276, 237 P. 1030; Beale v. Columbia Securities Co., 256 Mass. 326, 152 N. E. 703.

3 Gentry-Futch Co. v. Gentry, 90 Fla. 595, 106 So. 473.

Morrill v. Little Falls Manufacturing Co., 53 Minn. 371, 55 N. W. 547; 21 L. R. A. 174; Alliance Co-op. Ins. Co., v. Gasche, 93 Kan. 147, 142 P. 882; Gilchrist v. Collopy, 119 Ky. 110, 82 S. W. 1018; Green River Manufacturing Co. v. Bell, 193 N. C. 367, 137 S. E. 132.

6

James R. Kirby Post No. 50 v. American Legion, 258 Mass. 434, 155 N. E. 462. 7 Taylor v. Griswold, 14 N. J. Law 222, 27 Am. Dec. 33; Simon Borg & Co.

v. New Orleans City R. Co., 244 F. 617; In re Rochester District Telephone Co., (N. Y.), 40 Hun. 172; 7 R. C. L. 339.

8

Bailey v. Railroad Co., 89 U. S. 604, 635, 22 L. Ed. 840.