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 claimed 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.

In a companion case,24 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.25 In the Federal courts, and it is believed, in most States, the fruit 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." 26

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.27 Of course, a cooperative 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 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.

The true conception of this matter can be readily understood when one 24 Barnett Bros. v. Lynn, 118 Wash. 308, 203 P. 387.

25 Kruse v.

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

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

27

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

412528°-58-13

28

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.2 The character of the agent, whether an individual, partnership, or incorporated association,29 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.

In a California case,30 involving application of an apportionment of income statute for corporation franchise tax purposes, it was held that a farming corporation which marketed some of its produce through cooperatives of which it was a member was not doing business outside the State simply because the associations, although acting as marketing agents, made sales outside the State. This would appear to be a somewhat restrictive interpretation for purposes of the tax statute. However, as pointed out in the opinion, the handling of commodities for a foreign corporation by factors. or commission merchants does not ordinarily cause the foreign corporation to be doing business in the State in which such factors or commission merchants are located; and they function as agents.

Cooperatives Liable for Acts of Agents

Incorporated cooperatives, like other corporations, are liable for the acts of their agents while such agents are acting within the scope of their employment. A corporation may be liable for assault and battery, conversion, nuisance, trespass, libel 32 and slander,33 malicious prosecution, wrongful arrest, false imprisonment, fraud and deceit.34 It may also be guilty of crimes.35 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 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 fumi

28 Hudson Cooperative Loan Association v. Horowytz, 116 N. J. L. 605, 186 A. 437.

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

30 Irvine Co. v. McColgan, 26 Cal. 2d 160, 157 P. 2d 847.

31 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, 123 S. W. 2d 612 (Mo. App.); Cooperative Stores Company v. Marianna Hotel Company, 128 Ark. 196, 193 S. W. 529; Kasch v. Farmers' Gin Company, 3 S. W. 2d 72 (Tex. Com. App.); Pacific Wool Growers v. Draper & Co., 158 Ore. 1, 73 P. 2d 1391; Seaman v. Big Horn Canal Association, 29 Wyo. 391, 213 P. 938; Leonard v. North Dakota Cooperative Wool Warketing Association, 72 N. D. 310, 6 N. W. 2d 576.

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

33

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

34 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 Coop. Orange Growers' Association v. Henning, 118 Cal. App. 487, 5 P. 2d 444; 10 Fletcher cYCLOPEDIA CORPORATIONS, Perm. Ed., sec. 4876 et seq. 35 10 Fletcher CYCLOPEDIA CORPORATIONS, Perm. Ed., sec. 4944.

gated 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 $2,250.36 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.37

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 his employment; 38 but this case is believed to be contrary to the weight of authority.3

39

If an agent is not acting within the scope of his authority an association is not liable for his acts.4 40

Taxes

General Taxes

every State it is believed the physical property of a cooperative, such as buildings and office or other equipment, is liable for property taxes on the same basis as similar property owned by others. Taxes must be imposed pursuant to law, and those imposed by a State or any municipality or subdivision thereof must be imposed in accordance with laws that are in harmony with the State and Federal constitutions. Broadly speaking, a State or the Federal Government has relatively comprehensive powers with respect to the classifying of property for taxation.

Is an association liable for property taxes on products received from its members for marketing, if it is in possession of such products at the time property taxes are assessed? This is a local question but, generally, if an association takes title to the products which it is engaged in marketing, there appears to be little doubt that it would be liable for taxes thereon. If an association simply acts on an agency basis in the marketing of products, ordinarily it would not be liable for such taxes because, as a rule, taxes are imposed upon the owner of property or the person who occupies the relation of principal rather than upon the agent who may have custody of the property or be employed to sell the same. In a Kentucky case it was said, referring to the Burley Tobacco Growers' Cooperative Association: "Under its charter and the marketing agreement shown above, the association is authorized to incur all necessary expenses in holding and marketing, and this, together with the absolute legal title and full control of the article, certainly includes liability for taxation." 41

In Massachusetts it was held that a city of that State was entitled to tax tobacco in the hands of an association that was stored by it within the city, the tobacco having been received by the association under a purchase-and

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

37

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

38

Arkansas Valley Cooperative Rural Electric Co. v. Elkins, 200 Ark. 883, 141 S. W. 2d 538.

39

Lichty v. Carbon County Agricultural Association, 31 F. Supp. 809. See also Keifer & Keifer v. Reconstruction Finance Corporation and Regional Agricultural Credit Corporation, 306 U. S. 381, 59 S. Ct. 516, 83 L. Ed. 784.

40 Farmers' Coop. Shipping Association v. George A. Adams Grain Co., 84 Neb. 752, 122 N. W. 55; David Stott Flour Mills, Inc. v. Saginaw County Farm Bureau, 237 Mich. 657, 213 N. W. 147; Christian v. Rice Growers Association of California, 50 Cal. App. 2d 617, 123 P. 2d 534.

Burley Tobacco Growers' Coop. Association v. City of Carrollton, 208 Ky. 270, 270 S. W. 749, 751.

sale contract. The court said: "The tobacco on which the tax was levied was the property of the plaintiff." The association involved was organized in Connecticut but was doing business in Massachusetts.+2

In the Kentucky case referred to, involving the question of the liability of an association for city taxes on tobacco that it had on hand in the city on assessment day, which tobacco had been received by it under a purchaseand-sale contract, section 31 of the cooperative act of that State was declared unconstitutional 43 because the practical effect of that section was to exempt "all products held by the association from all taxation," thus violating the rule of uniformity required by the State constitution and adding to the exemptions allowed thereunder.11 No other cooperative statute contains a taxation provision like that in the Bingham Act.

In a later Kentucky case, which involved the right of a city in Kentucky to impose taxes on tobacco stored therein by the Dark Tobacco Growers' Association, received by it under a purchase-and-sale contract, it was held that the city was not entitled to levy taxes on the tobacco because the constitution of the State authorized its general assembly "to determine what class or classes of property shall be subject to local taxation,” and an act of the assembly declared that "agricultural products in the hands of the producer or in the hands of any agent or agency of the producer to which said products had been conveyed or assigned for the purpose of sale by the producer" were exempt from liability for local taxes. Although the marketing contract under which the tobacco was received was a purchaseand-sale contract, the court was of the opinion that, inasmuch as the “central purpose in the contract was to create an agency with the absolute power in the designated agent to handle and market the tobacco of the grower," the exemption statute covered a situation of this kind.45

In an Arizona case 46 it was held that a wholesaler who furnished goods to a cooperative on consignment, not the cooperative, was required to pay the retail sales tax on goods sold under this arrangement.

In a Washington case 47 the court held that an association, about 20 percent of whose stock was held by nonproducers and which paid dividends of approximately 6 percent, was entitled to exemption from an occupation This conclusion was based on the fact that, as the statute exempted individual farmers, this exemption continued even though the farmers acted through an incorporated cooperative. In this connection, the court said:

tax.

The fact that they operate through a corporate entity in which they own the stock and the corporation makes no profit and distributes the proceeds after a sale and the payment of the expenses on a pro rata per box basis does not put them in a materially different situation than if two or more of them cooperated simply as members of a joint undertaking without corporate existence.

After the occupation tax statute of Washington, referred to above, had been amended so as to include specifically "nonprofit" associations and the word "business" had been defined as including "all activities engaged in

42 Connecticut Valley Tobacco Association, Inc. v. Inhabitants of Town of Agawam, 261 Mass. 110, 158 N. E. 506.

43 See sec. 31 of Bingham Cooperative Marketing Act of Kentucky, p. 307 of Appendix.

44

Burley Tobacco Growers' Coop. Association v. City of Carrollton, 208 Ky. 270, 270 S. W. 749.

45

City of Owensboro v. Dark Tobacco Growers' Association, 222 Ky. 164, 300 S. W. 350, 351, 352.

46

State Tax Commission of Arizona v. Martin, 57 Ariz. 283, 113 P. 2d 640.

47 Yakima Fruit Growers' Association v. Henneford, 182 Wash. 437, 47 P. 2d 831, 833, 100 A. L. R. 435. See also Brady Irrigation Co. v. Teton County, 107 Mont. 330, 85 P. 2d 350.

with the object of gain, benefit or advantage to the taxpayer or to another person or class, directly or indirectly," the court held 48 certain cooperatives subject to the tax "as to their activities of warehousing, cold storage, and the sale of fruit.”

A corporation, chartered as an ordinary business corporation but doing most of its business on a cooperative basis, was held by the Supreme Court of Pennsylvania not to be subject in connection with such business to a gross receipts tax levied on "every person engaged in business," where "business" was defined as an activity carried on for "gain or profit."

99 49

In Georgia it has been held 5o that an “association occupied the status of its individual members as to * * * production and sales,” and that "An attempted levy by a municipal corporation of an ad valorem tax on accounts receivable for money, due to a cooperative marketing agency * from the sales of the dairy products *** is in effect a tax on the gross sales of such products," which tax was prohibited.

**

Under the Employment Compensation Act of the State of Colorado "agricultural labor" was specifically excepted. A cooperative, incorporated in that State under a statute which provided that any exemptions applicable to agricultural products in the possession or under the control of the individual producer should be applicable to such products after their delivery to an association by its members, was held not to be required "to pay contributions on the wages of individuals employed by it." The court said: * ** because of the peculiar relationship between the cooperative association and its members, it would seem evident that such of the purely agricultural activities of the producer members as are incidental to his ordinary farming operations remain so whether they are performed by him on his farm or for him through the medium of his cooperative marketing association. By the circumstance that the expense of marketing service as if he had paid his individual employees for doing the same work. the farmer member just as directly pays the wages for all labor involved in the marketing srevice as if he had paid his individual employees for doing the same work. In either case the labor incident thereto is "agricultural labor" and that is what the statute exempts.

The court stated that a different result might be reached if the farm products were being marketed by a commercial "profit corporation," or if they were "not marketed in an unmanufactured state." 51

A cooperative irrigation company in Montana was held not liable for property taxes on its lands owned in fee, its reservoir, site, dams, ditches, canals, and like property.52 The court drew a sharp distinction, from a tax standpoint, between a commercial and a cooperative irrigation company. It held that in the case of a cooperative irrigation company, where the right to water was appurtenant to the land of the cooperators, the value of all the property of the cooperative was reflected in the value of the lands of the individual owners and was taxed there.

In a Kansas case the court held that a cooperative engaged in the han

48 Yakima Fruit Growers' Association v. Henneford, 187 Wash. 429, 60 P. 2d 62, 65. * School Dis't of Philadelphia v. Frankford Grocery Co., 376 Pa. 542, 103 A. 2d 738. Georgia Milk Producers Confederation v. City of Atlanta, 185 Ga. 192, 194 S. E.

50

181.

51 Industrial Commission v. United Fruit Growers Association, 106 Colo. 223, 103 P. 2d 15, 18. See as bearing upon this matter: Great Western Mushroom Company v. Industrial Commission, 103 Colo. 39, 82 P. 2d 751; Park Floral Company v. Industrial Commission, 104 Colo. 350, 91 P. 2d 492; Duys & Company v. Tone, 125 Conn. 300, 5 A. 2d 23; Big Wood Canal Co. v. Unemployment Compensation Division of Industrial Acc. Board, 61 Idaho 247, 100 P. 2d 49, Redlands Foothill Groves v. Jacobs, 30 F. Supp. 995; Cowiche Growers v. Bates, 10 Wash. 2d 585, 117 P. 2d 624.

52

Brady Irrigation Co. v. Teton County, 107 Mont. 330, 85 P. 2d 350.