membership; restrictions on the transfer of stock or membership; the handling and disposition of money received by the cooperative; provisions for expelling or suspending the rights of members; the time, place, and manner of calling and conducting meetings and the giving of notice thereof; the number of members constituting a quorum; the qualifications, terms of office, and duties of directors and officers and their compensation, if any; and suitable penalties for violation of the bylaws.

A bylaw must be general in its application and not aim at a particular member. 102 Where stock in a mutual ditch company was acquired after ascertaining that the company did not have a bylaw prohibiting the transfer of water from one tract of land to another without the approval of the board of directors, a bylaw adopted by the board of directors immediately after the acquisition of such stock, prohibiting such a transfer, was held arbitrary and unreasonable. 103

Bylaws should be distinguished from rules adopted for the guidance of the public dealing with the association. The members of a corporation and its directors and officers usually are conclusively presumed to have notice of bylaws and of what they contain, and hence are bound by them, although, as a fact, they may be ignorant of them. 104 Alsó, persons who join an association and pay dues in accordance with bylaws which have been in effect since organization, even though such bylaws are inconsistent with the charter, are estopped from questioning the validity of such bylaws. 105

The great importance of members, officers, and directors knowing the provisions of the bylaws of their association is thus apparent. On the other hand, strangers having no knowledge of bylaws are not bound by them unless perhaps in States where this is specifically made so by statute. 106

102 Budd v. Multnomah St. Ry. Co., 15 Ore. 413, 15 P. 659, 3 Am. St. Rep. 169 (1887).

103 Costilla Ditch Company v. Excelsior Ditch Company, 100 Colo. 433, 68 P. 2d 448 (1937).

104 Washington Co-op Egg & Poultry Association v. Taylor, 122 Wash. 466, 210 P. 806 (1922); Brent v. Bank of Washington, 10 Pet. 596, 35 U.S. 596 (1836); Columbia Bldg. & Loan Association v. Junquist, 111 F. 645 (C.C.D. Wyo. 1899).

105 State v. Bankston, 7 So. 2d 667 (La. 1942). See also 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).

106

06 McKinney v. Mechanics' Trust & Savings Bank, 222 Ky. 264, 300 S.W.631 (1927).

If notice of bylaws, either actual or constructive, reaches strangers, the bylaws usually are held to be binding on them. 107

In some States, it is held that where the statute or the charter provides that a given power shall be exercised by particular officers or agents of the corporation, the power can be exercised only by such officers or agents and that a bylaw providing otherwise is void. 108 On the other hand, it has been held, at least as to third persons, that the board of directors may confer the authority to do certain acts on persons other than those who the bylaws stipulate shall exercise such authority. 109

A question frequently raised is whether the majority of the members of an association may adopt bylaws which will be binding upon the minority who oppose their adoption. 110 The answer is "Yes," if such bylaws are reasonable and consistent with the charter and the general law. Herein lies an important difference between bylaws and other contracts. A valid bylaw is binding upon a member or stockholder although he opposed its adoption, but assent is necessary to the creation of other contracts.

A majority of the members cannot adopt and enforce bylaws that violate the law or run counter to the purpose for which the association was formed. If an association represented that a bylaw was in effect, although it was adopted by only a majority vote where a two-thirds vote of the members, or their written assent, was required, the association may be estopped from denying that it is not valid as against members who have relied on the bylaws. III

107 Harley v. Hartford Fruit Growers' & Farmers' Exchange, 216 Mich. 146, 184 N. W. 507 (1921); Rathbun v. Snow, 123 N. Y. 343, 25 N.E. 379, 10 L.R.A. 355 (1890); Iowa-Missouri Grain Co. v. Powers, 198 Iowa 208, 196 N.W. 979, 33 A.L.R. 1268 (1924); Rundell v. Farmers' Cooperative Elevator Co. of Corunna, 210 Mich. 642, 178 N.W. 21 (1920).

108 Security Savings & Trust Company v. Coos Bay Lumber & Coal Company, 219 Wis. 647, 263 N. W. 187 (1935); Maasdam v. Jefferson County Farmers' Mutual Insurance Association, 222 Iowa 162, 268 N. W. 491 (1936).

109 Keenan v. Zemaitis, 4 F. 2d 572 (D. Mass. 1925); Sealy Oil Mill & Manufacturing Company v. Bishop Manufacturing Company, 235 S. W. 850 (Tex. Com. App. 1921).

110 Iowa State & Savings Bank v. City Nat. Bank, 106 Neb. 397, 183 N. W. 982 (1921); Kelly v. Republic Building & Loan Association, 34 S.W. 2d 924 (Tex. Civ. App. 1930).

III Buford v. Florin Fruit Growers' Association, 210 Cal. 84, 291 P. 170 (1930).

In an Arkansas case, a majority of the members of a corporation sought through a bylaw to make what, under the circumstances, was held to be an attempted gift of a sum of money to one of their members. Certain stockholders of the corporation opposed the bylaw and later resorted to the courts to prevent the turning over of the money. It was held that the action contemplated was a distinct violation of their rights and was therefore illegal. 112

The fact that a person at the time he becomes a member of an association agrees to be bound by all present and future bylaws does not permit the association to adopt bylaws which will deprive him of vested rights under the bylaws which were in effect when he became a member. 113 For instance, if an association at the time a person acquires stock in the organization agrees that it will refund the purchase price if he leaves the community and it has a bylaw to this effect, the fact that the shareholder agrees to be bound by all present and future bylaws does not permit the association to adopt a bylaw abrogating the arrangement as to him;114 but agreements to abide by future bylaws will be given effect in certain types of cases. 115

A bylaw obligating an association to repurchase its shares under given conditions constitutes "a contract with the corporation which could not be abrogated by simple repeal of the bylaw" at least as against a member who did not concur in the repeal.116 Where a member did not vote in favor of a bylaw which affected his existing and future financial rights, but did not object to deductions made in accordance with the bylaw and apparently acquiesced in the deductions being made, he was bound by the

112 Jones Lumber Co. v. Wisarkana Lumber Co., 125 Ark. 65, 187 S. W. 1068 (1916).

113 Farrier v. Ritzville Warehouse Co., 116 Wash. 522, 199 P. 984 (1921); Jaeger v. Grand Lodge, Order of Hermann's Sons, 149 Wis. 354, 135 N. W. 869, 39 L.R.A. (N.S.) 494 (1912); Model Land & Irrigation Co. v. Madsen, 87 Colo. 166, 285 P. 1100 (1930). See Lambert v. Fishermen's Dock Cooperative, Inc., 61 N.J. 596, 297 A. 2d 566 (1972).

114 Whitney v. Farmers' Co-op Grain Co., 110 Neb. 157, 193 N. W. 103 (1923). See Lambert v. Fishermen's Dock Cooperative, Inc., 61 N.J. 596, 297 A. 2d 566 (1972).

115 15 Kelsey v. Early Grain & Elevator Company, 206 S. W. 849 (Tex. Civ. App. 1918).

116 Loch v. Paola Farmers' Union Cooperative Creamery & Store Association, 130 Kan. 136, 285 P. 523 (1930), rehearing denied, 130 Kan. 522, 287 P.

bylaw.117 A later section of this publication will discuss the extent to which the association may, by adopting suitable bylaws, restrict the transfer of stock previously issued. 118

If a member voted in favor of repealing a bylaw or of adopting one that adversely affected his interests under bylaws in effect when he became a member, he would be estopped from challenging its validity. 119

If a bylaw provides for action by the board of directors, the same action taken by the manager will not be binding on the association. 120 Again, where the statute under which a mutual insurance company was incorporated, and its bylaws, required applications for insurance to be in writing, the insurance company was not liable for a loss in a case in which a member, without complying with the bylaws, left his insurance policy with the secretary of the company, requesting that he renew it. 121

A bylaw of an association purporting to impose personal liability on members for its debts has been held void if the charter of the association or the statute under which it was formed did not authorize such a bylaw. 122

Although an act authorized the inclusion in the articles of incorporation of provisions restricting the liability of members, it was held that bylaws purporting to restrict such liability were void

269 (1930). See also Whitney v. Farmers' Co-op Grain Co., 110 Neb. 157, 193 N. W. 103 (1923); Adams v. Sanford Growers' Credit Corporation, 135 Fla. 513, 186 So. 239 (1938); Lambert v. Fishermen's Dock Cooperative, Inc., 61 N. J. 596, 297 A. 2d 566 (1972).

117 Reinert v. California Almond Growers Exchange, 9 Cal. 2d 181, 63 P. 2d 1114 (1936), 70 P. 2d 190 (1937). See also Searles v. Bar Harbor Banking & Trust Company, 128 Me. 34, 145 A. 391, 65 A.L.R. 1154 (1929).

118 See "Reorganization of Associations," infra, p. 112.

119 Farrier v. Ritzville Warehouse Co., 116 Wash. 522, 199 P. 984 (1921); Kent v. Quicksilver Mining Co., 78 N.Y. 159, 12 Hun. 53 (1879); Morrison v. Dorsey, 48 Md. 461 (1878). See also 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).

120 Farmers' Co-op Mercantile Co. v. Shultz, 113 Neb. 801, 205 N.W. 288 (1925).

121 Smith v. Miami Farmers' Mutual Fire Insurance Company, 125 Kan. 10, 262 P. 552 (1928).

122 Mitcham, et al. v. Citizens' Bank of Bullochville, 34 Ga. App. 707, 131 S.E. 181 (1925), 136 S.E. 798 (1927); Monroe Dairy Association v. Webb, 40 App. Div. 49, 57 N. Y.S. 572 (1899). See also Farmers' Co-op Union v. Alderman, 126 Kan. 299, 267 P. 1110 (1928).

where no limitation was contained in the articles of incorporation and the adoption of bylaws was restricted to matters "within the limitations of this act."123

If a bylaw provides for the automatic termination of membership upon failure or neglect to deliver products, a member cannot, by refusing to deliver, terminate his membership unless the association consents. 124 Such a bylaw is for the association's benefit; furthermore, the maxim that no man may take advantage of his own wrong would seem to apply.

The fact that the statute under which a cooperative was incorporated authorized the members to adopt a bylaw delegating to its board of directors the right to expel members did not authorize the board to expel members where no such bylaw had been adopted. 125

Propositions embodied in valid bylaws are as binding on the members of a cooperative as if included in the marketing contract. Where the place of performance of a marketing contract is stated in a bylaw by which the member has agreed to be bound, it is as effectual as though it were stated in the marketing contract. 126

An egg association, acting in accordance with a bylaw, allowed members to sell their eggs outside the association under specified conditions and, in a suit on its marketing contract by the association against a member who failed to comply with such conditions, the court held that the bylaw was valid and virtually a part of the contract. 127

Where deductions from proceeds received from the sale of commodities were made by an association on the basis of a percentage of sales proceeds instead of on a tonnage basis, a member of the association who was aware of the deduction method followed and who did not object to a bylaw amendment

123 Lewis v. Monmouth County Farmers' Cooperative Association, 105 N. J. Eq. 257, 147 A. 550 (1929).

124 California Bean Growers' Association v. Rindge Land & Nav. Co., 199 Cal. 168, 248 P. 658 (1926); Milk Producers' Association v. Webb, 97 Cal. App. 650, 275 P. 1001 (1929).

125 State ex rel. Boldt v. St. Cloud Milk Producers' Association, 200 Minn. 1, 273 N. W. 603 (1937).

126 East-West Dairymen's Association v. Dias, 59 Cal. App. 2d 437, 138 P. 2d 772 (1943).

127 Washington Co-op Egg & Poultry Association v. Taylor, 122 Wash. 466, 210 P. 806 (1922).