LEGAL PHASES OF COOPEKATIVE ASSOCIATIONS 23 
A statute may authorize associations incorporated under it to 
adopt by-laws restrictive of the right to transfer stock. This was 
the situation in a North Dakota case. 4 The statute empowered as- 
sociations incorporated under it "to regulate and limit the right of 
stockholders to transfer their stock " and " to make by-laws for the 
management of its affairs, and to provide therein the terms and lim- 
itations of stock ownership." It was held that a by-law which 
provided that " No stockholder shall transfer his stock without first 
giving the corporation ninety days' notice and option to purchase 
said stock at par, plus the accrued and undivided dividends, which 
are payable per share " was valid. The by-law was referred to on 
the face of the certificates of stock. 
A similar conclusion was reached in an Ohio case involving an 
analogous statutory provision. 5 If the statute under which an asso- 
ciation is incorporated authorizes the inclusion in the articles of asso- 
ciation or the certificate of incorporation, or in the by-laws, of a 
provision restricting the transfer of its stock, such a provision will 
be enforced by the courts of the State where suit is brought, although 
the association was incorporated in another State. These were the 
facts in the case last mentioned. In that case the corporation was 
incorporated in Delaware, but the transactions relative to the stock 
took place in Ohio, where the corporation had its principal place 
of business, and the suit was brought there. 
A Kentucky case involved a subsidiary warehouse corporation of 
the Burley Tobacco Growers' Cooperative Association. Although 
there was no authority in the general corporation laws of the State 
under which the warehouse corporation was formed that authorized 
the language included in its articles of incorporation and by-laws 
saying that the common stock should be sold and issued only to mem- 
bers of the association, the court was of the opinion that the public 
policy of the State favored such restrictions in the case of cooperative 
associations because the cooperative statute authorized them. There- 
fore the court held that the warehouse corporation was not required 
to issue common stock to a party not a member of the association 
who had taken an assignment in good faith from one of its members, 
but held that the assignee was entitled to a lien on the stock in the 
hands of the association. 6 
All courts hold reasonable restrictions on the transfer of stock 
valid if statutory authority therefor exists, but if no statutory au- 
thority exists the courts are not in harmony regarding the validity 
of such restrictions. 7 If on the face of a certificate of stock notice 
is given that it may be transferred only under certain conditions or 
to members of a specified class, this would appear to be sufficient 
notice to a prospective purchaser to prevent his acquiring title thereto 
in some of the States, even though no statutory authority existed 
for the restriction, barring a statutory provision to the contrary. 8 
Even though a by-law restricting the right to transfer stock is 
unauthorized by the statute under which the corporation is formed, 
4 Chaffee v. Farmers' Co-op. Elevator Co., 39 N. D. 585, 168 N. W. 616. 
"Nicholson v. Franklin Brewing Co., 82 Ohio St. 94, 91 N. E. 991, 19 Ann. Cas. 699. 
6 Carpenter v. Dummit, 221 Ky. 67, 297 S. W. 695. 
7 Carpenter v. Dummit, 221 Ky. 67, 297 S. W. 695. 
8 Wilkinson v. Home Bank, 137 Tenn. 198, 192 S. W. 920 ; Jewell v. Nuhn, 173 Iowa 
112, 155 N. W. 174, Ann. Cas. 1918D, 356. 
