certain selected commodities, including tobacco." It said further: Any right of the Association to infringe upon the rights The Court held that under that contract the association could not use the equities for capital unless authorized by Commodity Credit Corporation to do so. It found that such consent had not been obtained. The provisions in marketing contracts and bylaws with respect to deductions, especially deductions for reserves and capital, and with respect to what action the board of directors may take in the event of losses 13 should be clear and explicit and should leave no doubt as to the rights of the association and its members with respect to the amounts in question.14 Broadly speaking, all deductions for reserves are deductions for capital and should be clearly recognized as such. Sometimes a question arises between an association and a member as to whether the association was authorized to make certain deductions. In general, in a case of this character, if the association has rendered a statement of account to the member showing the deductions and he does not object to the statement 13See Neely, Current Legal Developments Affecting Farmer Cooperatives, American Cooperation-1968, 126, for discussion of some of the problems in loss situations. 14 Burley Tobacco Growers' Co-op Association v. Tipton, 227 Ky. 297, 11 S. W. 2d 119 (1928); Burley Tobacco Growers' Co-op Association v. Brown, 229 Ky. 696, 17 S. W. 2d 1002 (1929); Ozona Citrus Growers' Association v. McLean, 122 Fla. 188, 165 So. 625 (1935). within a reasonable period of time, this is held to constitute an "account stated" and the member loses his right to question such deductions. However, if objections are registered within a reasonable time, the right to question the deductions is preserved. 16 It has been held that when an association adopts a bylaw that affects existing and future financial rights of members, a member may be bound by it although he did not vote in favor of the bylaw, if he did not object to deductions made in accordance with the bylaws but apparently acquiesced in the practice.17 Many of the cooperative statutes provide for appraisal of the interest of a member of a nonstock association on the termination of his membership and for payment to him, on stated terms, of the amount thus ascertained.18 But this does not mean that a withdrawing member would be entitled to receive the amount deducted for reserves and capital from the proceeds derived from the sale of his products. Members' rights with respect to these amounts would be governed by applicable statutory, bylaw, or other contract provisions. 15 California Bean Growers' Association v. Williams, 82 Cal. App. 434, 255 P. 751 (1927); California Bean Growers' Association v. Rindge Land & Nav. Co., 199 Cal. 168, 248 P. 658, 47 A. L. R. 904 (1926); Davidson v. Apple Growers' Association, 159 Ore. 473, 79 P. 2d 991 (1938); Mountain View Walnut Growers Association v. California Walnut Growers Association, 19 Cal. App. 2d 227, 65 P. 2d 80 (1937). See also May & Ellis Company v. Farmers' Union Mercantile Company, 120 Ark. 316, 179 S. W. 490 (1915); Huxtable v. Berg, 98 Wash. 616, 168 P. 187 (1917). 16 Dryden Local Growers v. Dormaier, 163 Wash. 648, 2 P. 2d 274 (1931). See also Three Rivers Growers' Association v. Pacific Fruit and Produce Company, 159 Wash. 572, 294 P. 233 (1930). 17 Reinert v. California Almond Growers Exchange, 9 Cal. 2d 181, 63 P. 2d 1114 (1936), 70 P. 2d 190 (1937). See Lambert v. Fisherman's Dock Cooperative, Inc., 115 N. J. Super. 424, 280 A. 2d 193 (1971), modified and remanded, 61 N.J. 596, 297 A. 2d 566 (1972). 18See "Termination of Membership." and "Interest in Association," supra. In Lambert v. Fishermen's Dock Cooperative, Inc., 61 N. J. 596, 297 A. 2d 566 (1972), a bylaw amendment was ineffective to divest an expelled member of the right given him under the bylaws in effect when he purchased his shares, namely, to receive the "fair book value" of his shares upon termination of his membership. This "value" was determined by the court, as of the date of the member's expulsion, to mean the value of the cooperative's assets as set forth in its books at that time, after subtracting liabilities, without reference to then "present market value." On the dissolution of an association, at common law, whether stock or nonstock, the money remaining in the treasury after payment of the debts of the association goes to the persons who are at that time stockholders or members. 19 Those who had previously contributed to the organization, but were not stockholders or members at the time of dissolution, would be entitled to nothing. This rule is applicable to all associations except as it has been modified by statute, charter, bylaws, 20 or contract.21 Assessments Some service cooperatives function exclusively on an assessment basis. The assessment method has been used by cooperative insurance, irrigation, and some of the older telephone associations. For example, a number of farmers' mutual insurance organizations are maintained by assessing the members at the end of the year for their pro rata part of the losses sustained and expenses incurred. Similarly, an irrigation cooperative may assess its members at the end of a year for the expenses of supplying them water during that year. Generally speaking, however, farmer marketing and purchasing cooperatives and electric and telephone cooperatives, like other business corporations, do not and are not authorized to assess their stockholders and members for any purpose. Some statutes under which marketing and purchasing cooperatives are formed may specifically authorize assessments. But it should never be assumed that because a cooperative has had a loss that this loss may be eliminated by making an assessment, unless the members and patrons of the cooperative are obligated to pay assessments under charter or bylaw provisions, or by reason of a specific agreement. Where the statute under which an association was incorporated conferred the power to levy assessments and a bylaw adopted under the statute vested authority in the board of directors to do so, a member was held liable for an assessment of 19 Clearwater Citrus Growers' Association v. Andrews, 81 Fla. 299, 87 So. 903 (1921); Union Benev. Soc. No. 8 v. Martin, 113 Ky. 25, 67 S. W. 38 (1902); Dade Coal Co. v. Penitentiary Co., 119 Ga. 824, 47 S. E. 338 (1904); Henry v. Cox, 25 Ohio App. 487, 159 N. E. 101 (1927); Missouri Bottlers' Association v. Fennerty, 81 Mo. App. 525 (1899); 5 C.J. 1360. 20 Adams v. Sanford Growers' Credit Corporation, 135 Fla. 513, 186 So. 239 (1938). 21 See "Interest in Association," supra, at p. 102. $500, even though the charter, as authorized under the statute, limited the liability of each member to $1.1 When neither the statute nor the articles of incorporation nor the bylaws authorize a majority of the stockholders to obligate all the stockholders to pay additional amounts, or to give notes for the amounts involved, additional liability may not be imposed on stockholders who do not authorize it or consent.2 Stockholders may be liable for assessments, even though there is no statutory warrant or authority for it, by assenting to an agreement to be liable for assessment through stock purchases evidenced by certificates which on their face refer to such an obligation.3 When the statute under which a nonstock association was incorporated conferred no authority to make assessments, provisions for assessments in the articles of incorporation and bylaws were not upheld even on the basis of contract because "the exactions will result in unjust discrimination between its members."4 Although the authority to levy an assessment exists, it may not be levied for carrying out a purpose beyond the powers of the corporation.5 Where an association had the statutory power to levy assessments to pay losses and "necessary expenses," it had the power to levy an assessment to pay a claim arising in tort." 'Lockport Cooperative Dairy Association v. Buchner, 129 Misc. Rep. 73, 221 N. Y.S. 433 (1925), affirmed in 217 App. Div. 784, 216 N. Y.S. 865, affirmed in 244 N. Y. 585, 155 N. E. 907 (1927). See also Lewis v. Monmouth County Farmers' Cooperative Association, 105 N.J. Eq. 257, 147 A. 550 (1929). 2 Farmers' Co-op Union v. Alderman, 126 Kan. 299, 267 P. 1110 (1928). Simons v. Groesbeck, 268 Mich. 495, 256 N. W. 496 (1934). 4 Alfalfa Growers of California v. Icardo, 82 Cal. App. 641, 256 P. 287 (1927). See also Neely, Current Legal Developments Affecting Farmer Cooperatives. American Cooperation-1968, 126, for a discussion of problems involved in departmental loss situations by cooperatives engaged in both marketing and farm supply operations. "Seeley v. Huntington Canal & Agricultural Association, 27 Utah 179, 75 P. 367 (1904); Ehlers v. Farmers Mutual Insurance Company of Thayer County, 130 Neb. 368, 264 N. W. 894 (1936). "Mortimer v. Farmers' Mutual Fire & Lightning Insurance Association, 217 Iowa 1246, 249 N.W. 405 (1933). But see Arkansas Valley Cooperative Rural Electric Company v. Elkins, 200 Ark. 883, 141 S. W. 2d 538 (1940), in which the association was held not responsible for a claim arising in tort. Contra, as to tort liability, Consolidated Electric Cooperative v. Panhandle E. Pipeline Co., 189 F. Assets and Creditors The rules applicable to business concerns generally, in determining their assets and their liabilities, are applicable to cooperatives. Ordinarily, property to which a concern has legal title is one of its assets.1 The question as to what constitutes assets of a cooperative arises most acutely when the rights of creditors are involved. Goods received by a factor, commission man, or other agent to sell and then account to the consignor therefor are not liable for the personal obligations of the agent.2 Likewise, a factor or other agent has no authority at common law to pledge goods received by him to be sold. Moreover, without authority from the owner, such goods could not be pledged for an amount in excess of advances made and expenses incurred by the agent on account of such goods. These fundamental principles are fully applicable to cooperatives that operate on an agency basis.4 If an association is so operating, the members may, in their marketing contracts, confer on the association authority to borrow on the commodities owned and delivered by them. This is purely a matter of contract. If such authority has been conferred on an association and it has obtained loans on the commodities, the lender, if the requisite formalities have been met, has a good lien on the commodities. It is assumed, of course, that there are no prior and superior liens. As indicated, a cooperative may not give a lien on goods which it does not own, or with respect to which it is not authorized to give a lien, to an extent beyond its financial interest in the goods. On the other hand, the fact that an association operating on an agency basis has the power to borrow on such commodities does not mean that the commodities are assets of the association from the standpoint of an attaching creditor who has not made a loan on them.5 2d 777 (8th Cir. 1951); Byrd v. Blue Ridge Rural Elect. Cooperative, 215 F.2d 542 (4th Cir. 1954); Bush v. Aiken Electric Cooperative, 226 S.C. 421, 85 S.E. 2d 716 (1955). Now, by statute, cooperatives in Arkansas are subject to tort liability. Ark. Stats. 1947, § 64-1525, Acts of 1947, No. 362. 'See "Revolving-Fund Plan of Financing,” infra. 233 C.J.S. Executions § 54b. 3 Allen v. St. Louis Bank, 120 U.S. 20 (1887). *Imperial Valley Long Staple Cotton Growers' Association v. Davidson, 58 Cal. App. 551, 209 P. 58 (1922). 5 Runciman v. Brown, 223 Mich. 298, 193 N.W. 880 (1923); Taylor v. |