or an officer, manager, or some other employee of the association has done something which should not have been done, or has failed to do something which should have been done, fails to take into consideration the obligation of the member in question to all the other members. Clearly, the contract among the members is not breached by the act of omission or commission, as the case may be, on the part of a delinquent officer or manager of the association.

The proposition becomes more transparent if the same situation arises with respect to an unincorporated association in which various producers are banded together by a contract which specifies that a certain party, or parties, is to act as marketing agent, and which vests in this agent certain stated powers. If the agent is delinquent or fails to abide by the terms of the contract, this would not release a producer from the contract or enable him to excuse nonperformance of his obligations under the contract. It would be obvious that the remedy lay in discharging the agent or in taking other appropriate action within the association for correcting the situation.

Does the fact that an association is incorporated change the essential character of the enterprise? The interdependent relation among the members is present in each case. The object sought to be accomplished is the same. The means employed are identical except for incorporation. At least one appellate court has given partial if not complete application to the doctrine under discussion, and in this connection said: "Appellants signed the 'marketing contract' with the other members of the association. Hence, appellants' agreements were made in consideration of like agreements of the other members and for their mutual advantage. If appellants could be absolved from the performance of the contract because the officers of the association had committed breaches of the contract in certain respects, it is certain that the other members of the association would suffer by this

In this case the court held that 118 members of the association, who had joined in a suit for the purpose of having the association placed in the hands of a receiver, would be required to carry out their marketing contracts in the future, but also held that the association should be enjoined from seeking to collect liquidated damages from the members on account of their failure to abide by their contracts in the past. As to the future, the court held that the members must specifically perform their contracts.

On the other hand, as will be shown in the following section, the failure of a cooperative to carry out the terms of its marketing con

McCauley v. Arkansas Rice Growers Co-op. Ass'n, 171 Ark. 1155, 287 S. W. 419, 423.

tract with a member has frequently been held to constitute a defense to a suit brought by the association against the member on the

contract.

Generally speaking, it is submitted that when members of an association believe that the directors they have elected to manage the association, or its officers or other agents, are not complying with its charter, bylaws, or marketing contract, they should be required to seek relief within the association through the election of new directors and officers, or the enjoining of them, or through other corrective measures. To use a figure of speech, the members of a cooperative association embark together for a common voyage and no member should be allowed to leave the ship except in accordance with specified conditions.

Defenses to Contracts

A member of a cooperative association may not question the constitutionality of the statute under which the association is incorporated, or the terms of the contract entered into with the association.91 Likewise, members are generally held to be estopped from setting up the invalidity of certificates of stock.92

Although the charter of a corporation did not disclose that it was intended to function on a cooperative basis, a stockholder who became such with knowledge of the fact that the corporation was so functioning could not successfully complain of this fact."

Before an association was incorporated, a producer signed a contract providing for the delivery of milk by him. It was found that the association was authorized to do business with members only and as neither the producer nor the association had complied with the bylaw provisions for making the producer a member, the association could not enforce its contract with the producer.94

Mismanagement or unwise conduct of the affairs of an association is no defense to a suit for breach of a marketing contract.95 The

21 Johnson v. Georgia-Carolina Retail Milk Producers Association, 182 Ga. 695, 186 S. E. 824; Owen County Burley Tobacco Society, v. Brumback, 128 Ky. 137, 149, 107 S. W. 710. See also Lennox v. Texas Cotton Co-op. Ass'n, (Tex. Com. App.) 55 S. W. 2d 543; Zander v. Schackel, 161 Minn. 116, 201 N. W. 308; Hancock v. Frederick Co-op. Mercantile Co., 48 S. D. 1, 201 N. W. 714; Berry v. Maywood Mutual Water Company Number 1, 13 Cal. 2d 185, 88 P. 2d 705; Vermont Farm Machinery Co. v. Sota Co-operative Creamery Co., 145 Iowa 491, 122 N. W. 930. Bliss v. California Cooperative Producers, 23 Cal. App. 2d 245, 72 P. 2d 885. 98 Allen v. Llano Del Rio Co. of Nevada, 166 La. 77, 116 So. 675.

92

"Tulsa Milk Producers' Co-operative Association v. Hart, 145 Okla. 263, 292 P. 558.

95

Nebraska Wheat Growers' Ass'n v. Smith, 115 Neb. 177, 212 N. W. 39; Pittman V. Tobacco Growers' Co-op. Ass'n, 187 N. C. 340, 121 S. E. 634. See also California

courts analogize the marketing contracts of an association for the delivery of products to contracts of commercial corporations for the delivery of money thereto in payment for stock purchased, and the rule is that mismanagement of a commercial corporation is no defense to a suit for the recovery of the purchase price of stock.96

It has been held that the alleged failure of the association correctly to account operated to relieve a member from his obligations under the contract.97 Again it has been held that the release by the directors of certain members operated to release other members from performing their contracts.98 It has been intimated that the failure on the part of an association to enforce its marketing contract against certain members might operate to release others.99

1

In a Washington case 1 in which it was contended "that no member of the association could lawfully be released from his membership contract and obligations without the consent of all the members of plaintiff association" it was held that compromise agreements entered into by the officers of an association with members, which released the members from their obligations to deliver their commodities under their marketing contracts, were valid. It appeared that with respect to all but one of these members there was a question regarding the validity of the contracts; that all the members paid money to the association for the purpose of obtaining release from their marketing contracts; and that, after the compromise agreements were consummated, all the members of the association had knowledge thereof and made no objection thereto.

Although an association may be justified in breaching its marketing contract by refusing to receive commodities, it has been held that

Bean Growers' Ass'n v. Rindge Land & Nav. Co., 199 Cal. 168, 248 P. 658, 47 A. L. R. 904; Toy v. Lapeer Farmers Mutual Fire Insurance Association, 297 Mich. 174, 297 N. W. 232; California Bean Growers' Ass'n v. Sanders, 86 Cal. App. 689, 261 P. 717.

96

Mississippi, Ouachita & Red River R. R. Co. v. Cross, 20 Ark. 443, 7 R. C. L. sec. 235; 4 Fletcher CYCLOPEDIA CORPORATIONS, Perm. Ed., secs. 1777-1778; American Building & Loan Ass'n v. Rainbolt, 48 Neb. 434, 67 N. W. 493. See also Brewer v. Boston Theater Co., 104 Mass. 378.

"Brown v. Georgia Cotton Growers' Co-op. Ass'n, 164 Ga. 712, 139 S. E. 417; New Jersey Poultry Producers' Ass'n v. Tradelius, 96 N. J. Eq. 683, 126 A. 538.

98 Staple Cotton Co-op. Ass'n v. Borodofsky, 143 Miss. 558, 108 So. 802. See also Beaulaurier v. Washington State Hop Producers, Inc., 8 Wash. 2d 79, 111 P. 2d 559.

99

California Bean Growers' Ass'n v. Rindge Land & Navigation Co., 199 Cal. 168, 248 P. 658, 47 A. L. R. 904.

1

Washington State Hop Producers v. Eglin, 6 Wash. 2d 531, 108 P. 2d 329, 330. See also Beaulaurier v. Washington State Hop Producers, Inc., 8 Wash. 2d 79, 111 P. 2d 559.

the refusal of an association to allow the grower to sell such commodities to others permits the member to recover his membership fee.2

3

In an Oregon case in which the court found that, "The price did not depend on what any other grower was to get, and the release of another grower could not in any way increase or diminish his compensation," it was held that the release of a member from his contract did not release others.

If an association by the terms of its marketing contract is required to receive the products covered thereby, refusal to accept such products terminates the marketing contract.*

The unjustified refusal of an association to regrade a grower's tobacco was held to justify a grower's refusal to continue performance under his marketing agreement. Again, when a milk association required a member to install expensive equipment which it was apparently not authorized to require by the terms of the marketing contract, the court was of the opinion that this would constitute a defense to a suit against the producer on his contract. In a California case a producer was permitted to show, when sued on a written contract, that an oral agreement had been substituted therefor. But statements and actions by an association which are consistent with its marketing agreement have no adverse effect thereon.8

When a member of an association does not object to a practice which the association is following, but apparently acquiesces therein, he may be estopped to question the practice."

In a New York case, a member of a cooperative association contended that the association had breached its contract with him, but

*Central Texas Dairymen's Association v. Jones, (Tex. Civ. App.), 67 S. W. 2d 251, 77 A. L. R. 385. See also Kansas Wheat Growers' Association v. Toothaker, 128 Kan. 469, 278 P. 716.

3 Phez Co. v. Salem Fruit Union, 103 Ore. 514, 201 P. 222, 232, 205 P. 970, 25 A. L. R. 1090.

4

* Central Texas Dairymen's Association v. Jones (Tex. Civ. App.), 67 S. W. 2d 896. See also Guglielmelli v. Walla Walla Gardeners' Association, 157 Wash. 109, 288 P. 251, 77 A. L. R. 385; Mountain States Beet Growers' Marketing Association v. Monroe, 84 Colo. 300, 269 P. 886; Wisconsin Co-operative Milk Pool v. Saylesville Cheese Manufacturing Company, 219 Wis. 350, 263 N. W. 197.

5

Myrold v. Northern Wisconsin Co-Operative Tobacco Pool, 206 Wis. 244, 239 N. W. 422.

8

Watertown Milk Producers' Co-operative Association v. Van Camp Packing Company, 199 Wis. 379, 225 N. W. 209, 226 N. W. 378, 77 A. L. R. 391.

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

8

* Meyer v. California Prune & Apricot Growers' Association, DB Cal. App. 2d 632, 109 P. 2d 726.

Reinert v. California Almond Growers Exchange, 9 Cal. 2d 181, 63 P. 2d 1114, 70 P. 2d 190.

inasmuch as the member continued to make deliveries of milk for a month thereafter, it was held that any alleged previous irregularities did not justify the member in refusing to deliver milk under his contract. 10

In an Oregon case 11 it was said

the rendition of statements each fiscal year to plaintiff and "the purchasers" and plaintiff's failure to object to or protest against such statements of account within a reasonable time thereafter constitute an account stated as to the transactions therein involved.

If a member of an association breaches his marketing contract during a given season, he cannot successfully defend a suit brought by the association on account of such breaches by showing that subsequent thereto the association breached the contract.12 The assertion by a producer that he received less for his products through the association than he would have received by selling to others is no defense to a suit for breach of the contract.13

Under the laws of many States corporations are required to file reports. It is sometimes provided by statute that failure to file a report on or before a given date makes invalid contracts entered into while the corporation is in default.1

WHAT

Deductions

HAT deductions may an association make from the returns received for the products of its members? The answer is, Only those deductions authorized under the contract or bylaws of the associations.15 The fact that deductions, in addition to those

10

Parker v. Dairymen's League Co-operative Association, Inc., 226 N. Y. S. 226, 222 App. Div. 341. See also Lennox v. Texas Farm Bureau Cotton Association (Tex. Civ. App.), 16 S. W. 2d 413; California Prune & Apricot Growers, Inc., v. Baker, 77 Cal. App. 393, 246 P. 1081; Beaulaurier v. Washington State Hop Producers, Inc., 8 Wash. 2d 79, 111 P. 2d 559.

See

"Davidson v. Apple Growers Association, 159 Ore. 473, 79 P. 2d 991, 998. also Boyle v. Pasco Growers' Association, Inc., 170 Wash. 516, 17 P. 2d 6. 12 Nebraska Wheat Growers' Ass'n v. Smith, 115 Neb. 177, 212 N. W. 39; California Bean Growers Ass'n v. Rindge Land & Navigation Co., 199 Cal. 168, 248 P. 658, 47 A. L. R. 904; California Prune & Apricot Growers, Inc. v. Baker, 77 Cal. App. 393, 246 P. 1081.

13 Nebraska Wheat Growers' Ass'n v. Smith, 115 Neb. 177, 212 N. W. 39; Arkansas Cotton Growers' Co-op. Ass'n v. Brown, 179 Ark. 338, 16 S. W. 2d 177. 14 Detroit United Fruit Auction Company v. Kroger Grocery & Baking Company, 227 Mich. 412, 198 N. W. 947.

15 Silveira v. Associated Milk Producers, 63 Cal. App. 572, 219 P. 461. See also Davidson v. Apple Growers' Ass'n 159 Ore. 473, 79 P. 2d 991.