24 BULLETIN 1106, U. S. DEPARTMENT OF AGRICULTURE 
such by-laws have been enforced as contracts between the corporation 
and its members, 9 although a contrary conclusion has been reached. 10 
Closely akin to the question of whether a cooperative association 
may restrict the transfer of its stock is the right of such an associa- 
tion to purchase its stock from its members. Many of the statutes 
providing for the formation of cooperative associations contain pro- 
visions authorizing the associations to purchase or redeem their stock. 
If such provisions are present in the statute under which an associa- 
tion is formed, it is clear that it has the right to do so, assuming that 
the constitution of the State do~s not contain a provision to the con- 
trary. Even though no statutory authority for the purchase or 
redemption of stock is contained in the statute under which the asso- 
ciation is formed, generally speaking it would have the right to do so 
because at common law a corporation, by the weight of authority, 
may purchase its own stock if solvent and if no injury to creditors 
results. 11 
Corporations are prohibited by statute in some States from using 
any portion of their capital stock (assets) in the purchase of their 
own stock. 12 
WHO MAY BECOME MEMBERS 
Ma} 7 a cooperative association select its members and thus deter- 
mine for whom it will market products or furnish supplies? Judg- 
ing by the decisions of the courts with respect to other organizations 
the answer is "Yes." In the absence of a statute prescribing rules 
relative to the admission of members or stockholders, an association 
at common law is free to accept some and reject others. With respect 
to nonstock associations, numerous court decisions support this 
view. 13 The Supreme Court of Minnesota has said: "The right to 
membership in a corporation might by a provision in its articles of 
incorporation, be restricted to persons of a certain nationality where 
the provision was not inconsistent with any statute." 14 
The courts have universal^ declared that stock corporations have 
the right to determine to whom they will sell their stock. 15 The 
right of associations to restrict the transfer of their stock is dis- 
cussed elsewhere. Membership in a nonstock association or a certifi- 
cate of membership evidencing the same is not transferable 16 in the 
absence of a statutoiy, charter, or by-law provision making it 
transferable. 
With respect to the general subject under discussion it should 
be remembered that those engaged in a private business at common 
law may arbitrarily refuse to sell to or buy from others. 17 Banks, 
9 New England Trust Co. v. Abbott, 162 Mass. 148, 38 N. E. 432, 27 L. R. A. 271; 
Model Clothing House v. Dickinson, 146 Minn. 367, 178 N. W. 957. 
10 Steele v. Farmers' & Merchants' Mutual Tel. Ass'n, 95 Kan. 580. 148 P. 661 ; Brinker- 
hoff-Farris Trust & Savings Co. v. Home Lumber Co., 118 Mo. 447, 24 S. W. 129. 
11 Whitney v. Farmers' Co-op. Grain Co., 110 Neb. 157, 193 N. W. 103 ; Cole v. Cole 
Realty Co., 169 Mich. 347, 135 N. W. 329. 
12 Poultry Producers of Southern California, Inc.. v. Barlow, 189 Cal. 27S. 208 P. 93 ; 
Poultry Producers of Central California (Inc.) v. Murphy, 64 Cal. App. 450, 221 P. 962. 
13 McKane v. Adams as President of the Democratic General Committee of Kings Co., 
123 N. Y. 609 ; Connelly v. Masonic Mutual Benefit Ass'n, 58 Conn. 552, 20 A. 671 ; 
State v. Siblev, 25 Minn. 387 ; LaSalle County Farm Bureau v. Thompson, 245 111. App. 
413 ; W. G. Press & Co. v. Fairy, 313 111. 262, 145 N. E. 103 ; 6 R. C. L., par. 371 ; 25 
R. C. L. 54. 
»* Blien v. Rand, 77 Minn. 110. 
15 14 C. J. 838. 
"American Live-Stock Commission Co. v. Chicago Live-Stock Exchange, 143 111, 210, 32 
N. E. 274, 18 L. R. A. 190, 36 Am. St. Rep. 385. 
17 Federal Trade Commission v. Raymond Bros. Clark Co., 263 U. S. 565. 
1 
