proceeds from an annual pool, within 30 days after the receipt of the money by the association, and it is the duty of the association to render an annual statement of the receipts and disbursements of each pool. The record is conclusive that such statement was never made and such accounting was never rendered to the plaintiff; that, after paying the expenses of the association named in the contract, there is a surplus estimated to be about $80,000.

The marketing association claimed that, by reason of a bylaw which provided that the cancelation of the standard contract shall "cancel and terminate the membership of such grower, together with all benefits accruing thereunder, and all voting power, right, and interest of every kind and nature shall immediately cease and terminate," it was entitled to retain the money in question and that the plaintiff was entitled to no part thereof. The court, however, held that the bylaws did not "apply to a surplus accruing from the sale and purchase of fruit and charges therefor, under an express contract, but are confined and limited to the right, title, and interest which a corporation or individual may have in and to the net assets of the association by reason of membership therein subject to the payment of all of its debts and liabilities. They do not give to the association the right to keep the money which it promised and agreed to pay another under its express contract." In other words, the member was entitled to nothing by reason of his membership, but was entitled to payment in accordance with his marketing contract.

If the contracts or bylaws of an association state, for instance, that unless a person is a member of the association at or prior to a specified time, he shall not be entitled to the return of any money advanced by him, then this language is conclusive and bars from any recovery a person who was not a member prior to the time fixed.24 A member may be estopped by reason of an account stated, or otherwise, from claiming that any part of reserves should be returned to him.25

In associations formed with capital stock, at common law, a person on the sale or transfer of his stock has no further interest in the association and no claims against it except such claims as are independent of stock ownership.26 This is the rule unless it has been changed by statute, by contract, or by a provision in the bylaws.

In contrast with the common-law rule applicable to nonstock associations, many of the cooperative statutes providing for the formation

24 Weber Implement & Automobile Co. v. St. Louis Automobile Mfrs. & Dealers Ass'n (Mo. App.) 181 S. W. 10:5.

25

Mountain View Walnut Growers Association v. California Walnut Growers Association, 19 Cal. App. 2d 227, 65 P. 2d 80; Winter Garden Citrus Growers' Association v. Willits, 113 Fla. 131, 151 So. 509. See also Rusconi v. California Fruit Exchange, 101 Cal. App. 759, 281 P. 84.

26 Whitney v. Butler, 118 U. S. 655, 7 S. Ct. 61, 30 L. Ed. 266.

402026°-42- -6

of cooperative associations require the incorporators of such nonstock associations to state in the articles of incorporation 27 "whether the property rights and interests of each member shall be equal or unequal; and if unequal, the general rule or rules applicable to all members by which the property rights and interests, respectively, of each member may and shall be determined and fixed; and provision for the admission of new members who shall be entitled to share in the property of the association with the old members, in accordance with such general rule or rules." Such statutes also authorize associations formed under them to adopt bylaws relative to the interests of members therein and further provide that "In case of the withdrawal or expulsion of a member, the board of directors shall equitably and conclusively appraise his property interests in the association and shall fix the amount thereof in money, which shall be paid to him within one year after such expulsion or withdrawal." 28 The statutory provisions referred to are applicable only to associations formed under statutes that contain them.

Some associations are authorized in their marketing contracts to make deductions for "creating funds for credits and other general commercial purposes (said funds not to exceed 1 percent of the gross resale price)." Such funds constitute a reserve that may be used for the purposes specified and a member may not successfully sue an association for their return.29 Such funds might be lost or dissipated in the conduct of the business of an association without liability therefor.

At common law, on the dissolution of a nonstock cooperative association, only the persons who are then members are entitled to share in the distribution of the assets remaining after the payment of its debts.30 In an association formed with stock, only stockholders at the time of the dissolution are entitled to share in the net assets of the association. In a nonstock association, at common law the distri

27

See sec. 8 of Bingham Cooperative Marketing Act of Kentucky, p. 377 of Appendix.

28 See sec. 10 of Bingham Cooperative Marketing Act of Kentucky, p. 377 of Appendix.

McCauley v. Arkansas Rice Frowers Co-op. Ass'n, 171 Ark. 1155, 287 S. W. 419; Burley Tobacco Growers' Co-op. Ass'n v. Tipton, 227 Ky. 297, 11 S. W. 2d 119; Burley Tobacco Growers' Co-op. Ass'n v. Brown, 229 Ky. 696, 17 S. W. 2d 1002.

30 Hopkins v. Crossley, 138 Mich. 561, 101 N. W. 822; Clearwater Citrus Growers' Ass'n v. Andrews, 81 Fla. 299, 87 So. 903.

bution is made on a pro rata basis, whereas in a stock association the distribution is made on a stock basis.31

In associations that have preferred stock, the preferred stockholders by express provision are frequently given preference over the commonstock holders in the distribution of the assets of an association on its dissolution.

Before the assets of a cooperative association may be distributed among the members or stockholders, the claims which the members and others have against the association as creditors thereof should first be met, if funds are available. For instance, if the association has issued certificates of indebtedness to its members, these should be paid before any distribution is made among members or shareholders because of the fact that they are members or shareholders.

It should be kept in mind that under normal conditions indebtedness of an association arising from marketing contracts, or evidenced by certificates of indebtedness, certificates of interest, or any other similar instrument, is not to be considered as a part of the property rights and interests of members but simply as indebtedness, subject though it may be to certain conditions.32 In view of this fact the property rights and interests of members would ordinarily be determined only after deducting obligations of the association due its members and others. In an association operating on a revolving-fund basis, it may be that the property rights and interests of members. will be nothing, or merely a nominal sum.

Dissolution

33

Associations are formed by the State, and the charter represents an agreement between the State and the incorporators. Because of the manner in which corporations are created, the State has control over their dissolution. There are State statutes with respect to this matter. Through unanimous consent on the part of the members of an association, it may be dissolved.34

The right of a majority of the stockholders or members at common law to force dissolution of a corporation against the opposition of

31 Krebs v. Carlisle Bank, 14 Fed. Cases 856, Fed. case No. 7932; Central Sav. Bank v. Smith, 43 Colo. 90, 95 P. 307.

32 See Revolving-Fund Plan of Financing, p. 276.

33

Syrian Antiochean St. George Orthodox Church v. Ghize, 258 Mass. 74, 154 N. E. 839.

34 Mobile & Ohio R. R. Co. v. The State, 29 Ala. 573, 586.

35

the minority is not so well established. Some authorities hold that the majority can force a dissolution, whereas a contrary doctrine has been laid down.36 Of course, if there are statutory or charter provisions on the subject, they control.

In many States the directors of a corporation at the time of its dissolution continue for some time thereafter to act as trustees with reference to the payment of obligations of the corporation and the proper distribution of its assets.37

Expiration of Charter

A corporation may cease to exist through the expiration of its charter if the duration of the corporation is limited, or its charter may be forfeited by the State for unauthorized or unlawful action or conduct, or the charter may be repealed through the reserved power of the State.39 A charter also may be canceled by the State for fraud in its procurement.40

38

The dissolution of a corporation is not effected by its failure to elect officers or by a sale or assignment of all its corporate property and by a cessation of all corporate acts.41

The fact that an association is placed in the hands of a receiver does not effect a dissolution; 42 nor does the bankruptcy of an association result in its dissolution.43

35 State ex rel. Majority of Stockholders of Chilhowee Woolen Mills Co. v. Chilhowee Woolen Mills, 115 Tenn. 266, 89 S. W. 741, 2 L. R. A. (N. S.) 493, 112 Am. St. Rep. 825.

36

Polar Star Lodge v. Polar Star Lodge, 16 La. Ann. 53; Stockholders of Jefferson County Agr. Ass'n v. Jefferson County Agr. Ass'n, 155 Iowa 634, 136 N. W. 672; Theis v. Spokane Falls Gaslight Co., 34 Wash. 23; 74 P. 1004.

37 Kansas Wheat Growers' Association v. Markley, 132 Kan. 156, 294 P. 885. 38 Tobacco Growers' Co-op. Ass'n v. Jones, 185 N. C. 265, 117 S. E. 174, 33 A. L R. 231.

39

Swan Land & Cattle Co. v. Frank, 148 U. S. 603, 13 S. Ct. 691, 37 L. Ed. 577. 40 State ex rel. Southerland v. U. S. Realty Imp. Co., 15 Del. Ch. 108, 132 A. 138.

41 Brock v. Poor, 216 N. Y. 387, 111 N. E. 229; Belle City Malleable Iron Co. v. Clark, 172 Minn. 508, 215 N. W. 855. See also Hendrickson v. Bloom, 159 Ore. 428, 80 P. 2d 868.

42 Riverside Oil & Refining Co. v. Lynch, 114 Okla. 198, 243 P. 967.

43 State ex rel. McCoy v. Farmers' Co-op. Packing Co., 50 S. D. 627, 211 N. W. 602; Haynes v. Central Business Property Co., 140 Wash. 596, 249 P. 1057; Petrogradsky Mejdunarodny Kommerchesky Bank v. National City Bank of New York, 253 N. Y. 23, 170 N. E. 479.

If those interested in an association continue to do business in its name after the expiration of the charter, or after the dissolution of the association, they may incur personal responsibility and liability."

In some of the States there are statutes providing for the renewal of charters of corporations that are about to expire, or after they have expired, provided that an application for renewal is filed, usually with the secretary of state, before a certain date.15

Reorganization of Associations

Frequently it is desired to reorganize a corporation handling agricultural commodities, so that it will be an agricultural cooperative in organization and operation. Generally, such a reorganization involves restriction of the voting rights to producers, restriction of the returns on capital to not more than 8 percent per annum, provision for the payment of patronage dividends, and elimination of the voting rights of nonproducers. It may also be deemed advisable to limit the number of shares which any stockholder may own.

In this connection attention is called to the fact that, for a cooperative to be eligible to borrow from a bank for cooperatives, or to be eligible for exemption from the payment of Federal income taxes, it is necessary that substantially all the voting rights in an association be vested in actual producers. As indicated, one of the problems arising in most reorganization cases is how to achieve this result. If the nonproducer members are willing to accept nonvoting preferred stock, revolving-fund certificates, or some other form of certificate that does not carry a vote, then little difficulty should be encountered. On the other hand, if some of or all the nonproducer voting members are unwilling to make such an exchange, an association is confronted with the problem of how such persons may be eliminated from the organization. Generally speaking, if neither the statute under which an organization is incorporated, nor its charter, bylaws, or stock certificates provide for doing so, then an amendment to the articles of incorporation or bylaws may not be adopted to accomplish this purpose, which is binding on the nonproducer members who do not consent thereto.

Burks v. Weast, 67 Cal. App. 745, 228 P. 541.

45 Missouri Slope Agricultural & Fair Ass'n v. Hall, Secretary of State, 46 N. D. 300, 177 N. W. 369; Terrell v. Ringgold County Mutual Telephone Co., 225 Ia. 994, 282 N. W. 702.