36 BULLETIN 110 6, U. S. DEPARTMENT OF AGRICULTURE 
other rule would render the prohibition valueless. It is immaterial 
that the statute prescribes no penalty or imposes no liability. 93 All 
directors are conclusively charged with knowledge of the law, so 
that they can not plead ignorance thereof. 94 Even though all of the 
board of directors of an association, except the contracting director, 
voted therefor, it would not authorize a prohibited contract, because 
the directors can not override the statute but must function within 
its limits. 
OBLIGATIONS AND LIABILITIES OF DIRECTORS 
The board of directors of an association, in directing its affairs, 
must use care to keep within the powers conferred by its charter 
and the plan set forth in its by-laws and marketing contract. Direc- 
tors and officers of an association are simply agents, and if they exceed 
their authority or violate the charter, by-laws, or marketing con- 
tract of the association legal liability results. 95 
The office of the director is no place for a figurehead. The courts 
refer to directors as trustees, quasi trustees, fiduciaries, and agents. 
Although directors of an association occupy positions of trust, 
responsibility, and liability, they are not insurers of the success of 
the association. They should exercise, however, that degree of care 
in directing and supervising the affairs of an association that ordi- 
narily prudent and diligent men would exercise under similar cir- 
cumstances, 96 that is, reasonable care; and a failure to exercise this 
degree of care or to be honest and diligent in attending to the affairs 
of an association may render directors liable at common law to the 
association, to its receiver if in the hands of a receiver, or under some 
circumstances to members of the association acting in its behalf. 
All authorities agree that an association may recover from its 
directors any losses which it suffers because of their fraud or dis- 
honesty. Gross negligence on the part of directors which per- 
mits other directors to defraud an association will render all of 
them liable. 97 Inattention on the part of a director may render him 
liable to his association, at least in those instances in which atten- 
tion to duty should have prevented the loss of a specific amount. 98 
Illness or other sufficient cause will excuse failure to attend board 
meetings. 1 
In addition to the right of an association to compel a director 
to account for any profits arising out of a prohibited contract, it 
appears clear that an association, its receiver, or members acting 
in its behalf would have the right to recover, from the directors 
who attempted to authorize such a contract, any losses which the 
association sustained therefrom. 2 
It should be remembered that even in the absence of a statute pro- 
hibiting directors from entering into contracts with their associa- 
»3 Thompson v. Greeley, 107 Mo. 577, 17 S. W. 962. 
94 Morrison v. Farmers' Elevator Co., 319 111. 372, 150 N. E. 330. 
95 Fergus Falls Woolen Mills Co. v. Boyum, 136 Minn. 411, 162 N. W. 516 ; McCauley v. 
Arkansas Rice Growers Co-op. Ass'n. Ark. , 287 S. W. 419. 
se Briggs v. Spaulding, 141 U. S. 132. 
^McGinnis v. Corporation Funding & Finance Co., 8 F. (2d) 532; Coddington v. 
Canady, 157 Ind. 243, 61 N. E. 567. 
98 Bowerman v. Hamner, Receiver, 250 U. S. 504 ; Besseliew v. Brown, 177 N. C. 65, 
97 S. E. 743, 2 A. L. R. 862. I 
1 Briggs v. Spaulding, 141 U. S. 132. 
2 Thompson v. Greeley, 107 Mo. 577, 17 S. W. 962 ; Oakland Bank of Savings v. Wilcox, 
60 Cal. 126 ; Citizens Bldg. Ass'n v. Coriell, 36 N. J. Eq. 383. 
