who loaned the money, in the event the note evidencing the same was not paid at maturity, would have the right to bring suit on a sufficient number of the demand notes to pay his claim, without his bringing suit against the association on its note.33 Many of the cooperative statutes authorize the taking of notes in payment for stock in associations formed under them.34 Between the original parties to a negotiable note some defenses to a suit on the note may be made that are not available if a suit is brought on the note by a holder in due course. But even between the original parties, a signer of a note is restricted in the defenses which he may successfully make.

When an association was induced to execute a note by promises, which the payee of the note did not fulfill and which were made with no intention of fulfilling them, this was a defense to a suit on the note; 35 but "Mere promises, predictions, or opinions as to future transactions or events do not warrant relief as for deceit, where they are not performed or do not come true" and such statements were held not to constitute a defense to a note.36

When dividends on stock for which the purchaser gave his note were insufficient to pay the note over a period of years, although the rights of creditors were not involved, on the liquidation of the company the purchaser was held liable for the unpaid balance on the note, notwithstanding that it was originally understood the note would be paid out of dividends.37

A person gave an unconditional promissory note for stock in a cooperative association. It was held the fact that it was represented to him at the time of the signing of the note that it would be paid by applying 8 percent of the amount of purchases made by him from the association on the note was immaterial and did not operate to relieve him from liability on the note.38

Normally, if an association borrowed money on its own note, which was signed on its behalf by its proper officers, the officers would not be personally liable for the amount involved. However, in a Louisiana case a cooperative association executed a note and each of its directors placed his name upon the back of the note. They contended that they had thus signed only for the purpose of showing that the president and secretary of the association were authorized to issue

33 Packard v. Abell, 113 N. Y. S. 1005.

See sec. 14 of Bingham Cooperative Marketing Act of Kentucky, p. 379 of Appendix.

35

Lockney Farmers Cooperative Society v. Egan, (Tex. Civ. App.), 275 S. W. 732, 284 S. W. 937.

36

37

Industrial Co-operative Union v. Lewis, 174 Wis. 466, 182 N. W. 861.

Dealers' Finance Company v. Woodard, 151 So. 145, reversing 147 So. 556.

38 Bushnell v. Elkins, 34 Wyo. 495, 245 P. 304, 51 A. L. R. 13.

the note, but this was disputed and they were held to be individually liable as endorsers.39

40

An officer, in signing an association note, should make it entirely plain upon the face thereof that he is signing in his official and not in his personal capacity. The normal way is for the name of the association to be affixed to the note by a proper officer, with a statement thereunder that it was affixed thereto "by" him, followed by his title. Although members of an association are not liable for its debts under the statute under which an association is formed, this does not prevent members from giving or endorsing notes to or for the association on which they may be held liable. Likewise, it does not prevent members of an association from agreeing among themselves to furnish money to enable the association to pay its debts.41

Amay

Agency

Cooperative Associations as Agents

a general rule, whatever an individual may do in person he may do through an agent. And the doctrine is well established that one who acts through an agent acts himself. An agent derives all his authority from his principal-the one for whom he is acting. Cooperative associations frequently act as agents for members in the sale of produce or the purchase of supplies, and it is therefore important to consider the rights and liabilities of such associations and of their members, under these circumstances. A cooperative association that is acting as an agent may sue in its own name on account of a breach of a contract entered into by it with a third person.42 Likewise where an association was the sole agent of growers for the handling and marketing of their tobacco, it was held the association could have maintained a suit in its own name for the recovery of damages for the negligent destruction of tobacco without joining any of the growers."

39

40

43

Herring v. Farmers' Co-operative Association, 148 La. 557, 87 So. 271. Agricultural Bond & Credit Corporation v. Courtenay Farmers' Co-operative Association, 64 N. D. 253, 251 N. W. 881.

"Farmers Co-operative Union of Lyons v. Reynolds, 127 Kan. 16, 272 P. 108; Thomas County Co-operative Business Association of Colby v. Pearson, 124 Kan. 430, 260 P. 623.

43

42 Tustin Fruit Association v. Earl Fruit Company, 6 Cal. Unrep. 37, 53 P. 693. Louisville & Nashville Railroad Company v. Burley Tobacco Society, 147 Ky. 22, 143 S. W. 1040. See also Dairymen's League Cooperative Association, Inc. v. Hartford Accident and Indemnity Company, 300 N. Y. S. 431, 252 App. Div. 527.

A case decided in 1922, by the Supreme Court of Washington, illustrates one of the important problems that may arise. A peach fruit growers' association entered into a contract in its name covering the sale and delivery of fruit of its members. Certain of the members of the fruit growers' association delivered a part of their fruit to the plaintiff, but sold and disposed of a quantity thereof to another dealer.

Plaintiff brought suit against the members in question to recover an amount equal to the profits which it claimed it would have made. if the members had delivered all the fruit in accordance with the contract. The contract, as stated, was with the fruit growers' association and did not state that it was made for the benefit of the members. Defendants claim that for this reason they could not be sued on the contract. The court held that plaintiff could maintain a suit against the defaulting members because they had delivered some fruit to plaintiff under the contract. The court said:

if a principal not disclosed by a contract made by and in the name of his agent subsequently claims the benefit of the contract, it thereby becomes his own to the same extent as if his name had originally appeared as the contracting party.

45

In a companion case, decided at the same time and involving the same contract, the facts being that the members sued had not delivered any fruit under the contract, and hence it could not be said (as) was said in the other case) that they had claimed the benefit of the contract, it was held that the plaintiff could not maintain a suit against the members involved, and that if any suit was to be maintained it would have to be against the fruit growers' association. It is clear that in either of the cases discussed the buyer of the fruit could have sued the fruit growers' association for the loss sustained through failure to deliver all the fruit contracted for. If the contract with the buyer had stipulated that it was with the association exclusively, the members could not have been successfully sued in either case.

It should be noted that a provision in the contract of an association with its members cannot be invoked to relieve the members of liability to third persons under circumstances similar to those involved in the cases just discussed, unless the provision was brought to the attention of the persons with whom the association contracted prior thereto.43 In the Federal courts, and it is believed, in most States, the fruit

"Barnett Bros. v. Lynn, 118 Wash. 315, 203 P. 389, 390. See also Phez Co. v. Salem Fruit Union, 103 Ore, 514, 201 P. 222, 205 P. 970, 25 A. L. R. 1090.

45 Barnett Bros. v Lynn, 118 Wash. 308, 203 P. 387.

46 Kruse v. Seiffert & Weise Lumber Co., 108 Iowa 352, 79 N. W. 118.

buyer in the last Washington case referred to would have been allowed to sue the members who had not delivered a part of their fruit. The Supreme Court of the United States has said: "The contract of the agent is the contract of the principal, and he may sue or be sued thereon, though not named therein.” 47

In other words, the general rule appears to be that where a contract is entered into with an agent, the agent contracting in his own name, the person for whom the agent is acting, the principal, may sue the other party on the contract, and in turn the principal may be sued by such party. The fact that the existence of the principal is known or unknown to the opposite party at the time the contract is made is immaterial.48 Of course, a cooperative association could include a provision in its contract with one with whom it was dealing that would control the situation.

In connection with the general matter now under discussion it should be remembered that members of an association are liable to suit, or they may sue, not because they are members of the association, but because they are the principals for whom the association acted. As has already been noted, an incorporated cooperative association is an artificial entity, separate and apart from its members. No case has been found in which members of an association have been held liable for wrongful acts or negligence of an association that acted as agent for members in the transaction of certain business or in the doing of certain work authorized by them, but no reason is apparent why they could not be so held in a proper case.

49

The true conception of this matter can be readily understood when one bears in mind that a person is liable, as a general rule, for all acts of his agent while the agent is acting within the scope of his employment. The character of the agent, whether an individual, partnership, or incorporated association.50 is immaterial. It is upon this theory that automobile owners, whether individuals or corporations, are held liable for injuries to others caused by the negligent driving of their machines by their agents or employees. It is no answer that an agent was not authorized to do the particular act which caused injury or loss if it was done while in the course of the business of his principal or employer.

"Ford v. Williams, 62 U. S. 287, 289, 16 L. Ed. 36.

48

Chapman v. Java Pac. Line, 241 F. 850, and numerous cases therein cited.

49 Hudson Co-operative Loan Association, Inc. v. Horowytz, 116 N. J. L. 605, 186 A. 437.

Alabama Power Co. v. Bodine, 213 Ala. 627, 105 So. 869; New York Trust Co. v. Carpenter, 250 F. 668.

Cooperative Associations Liable for Acts of Agents

Incorporated cooperative associations, like other corporations, are liable for the acts of their agents while such agents are acting within the scope of their employment.51 A corporation may be liable for assault and battery, conversion, nuisance, trespass, libel 52 and slander,53 malicious prosecution, wrongful arrest, false imprisonment, fraud and deceit.54 It may also be guilty of crimes.55 It is apparent that all the acts enumerated would have to be done by the officers, agents, or employees of a corporation, as a corporation can act in no other way.

There is nothing in the nature of an incorporated cooperative association to relieve it from liability under circumstances in which any other type of corporation would be liable, and undoubtedly such associations may be held liable in the proper case for any of the matters mentioned above. For instance, in a California case, it appeared that the Escondido Citrus Union fumigated the orchard of one of its members without his consent, and in a negligent manner. As a result, the orchard was badly damaged. The member then brought suit against the union and recovered a judgment for $2,250.56 In another California case officers of a corporation unlawfully entered vineyards and removed grapes therefrom. It was held that the corporation was liable for their acts.57

It is true that an electric cooperative was held not liable for the tort of one of its agents while apparently acting within the scope of

51 Farmers' Union Warehouse Co. v. Barnett Bros., 223 Ala. 435, 137 So. 176; Ely, Salyards & Co. v. Farmers' Elevator Company of Nohle, 69 Mont. 265, 221 P. 522; Federal Chemical Company v. Farmers Produce Exchange, (Mo. App.), 123 S. W. 2d 612; Cooperative Stores Company v. Marianna Hotel Company, 128 Ark. 196, 193 S. W. 529; Kasch v. Farmers' Gin Company, (Tex. Com. App.), 3 S. W. 2d 72; Pacific Wool Growers v. Draper and Company, 158 Ore. 1, 73 P. 2d 1391; Seaman v. Big Horn Canal Ass'n, 29 Wyo. 391, 213 P. 938.

52

Aetna Life Insurance Company v. Mutual Benefit Health & Accident Association, 82 F. 2d 115. See Pure Milk Producers' Ass'n of Greater Kansas City Territory v. Bridges, 146 Kan. 15, 68 P. 2d 658.

53

Buckeye Cotton Oil Co. v. Sloan, 250 F. 712.

Hill v. Associated Almond Growers of Paso Robles, 90 Cal. App. 291, 265 P. 873; Vest v. Farmers Cooperative Elevator Co. of Riverdale, 108 Neb. 407, 187 N. W. 892; Placentia Cooperative Orange Growers Association v. Henning, 118 Cal. App. 487, 5 P. 2d 444; 10 Fletcher CYCLOPEDIA CORPORATIONS, Perm. Ed., sec. 4876 et seq.

55 10 Fletcher cYCLOPEDIA CORPORATIONS, Perm. Ed., sec. 4944.

56

Andreen v. Escondido Citrus Union, 93 Cal. App. 182, 269 P. 556.

"California Grape Control Board, Ltd. v. Boothe Fruit Company, 220 Cal. 279, 29 P. 2d 857.