LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 3 
mercial corporations, in which the dividend rate is, from a legal 
standpoint, unlimited. The payment of a fair rate of interest by 
cooperatives on their stock or membership capital is an operating 
expense, like interest paid on borrowed money. It tends to produce 
equality among the shareholders or members because it eliminates 
the differences caused by the fact that some members utilize the asso- 
ciation less than others or have contributed more than others to its 
establishment. 
The persons with whom a commercial corporation deals are usually 
not members; but in a farmers' cooperative association the members 
are also patrons ; that is, they deliver their products to the association 
for marketing or acquire supplies from or through it. With co- 
operative associations the advantages which accrue to members ac- 
crue primarily because they are patrons of the association. Patron- 
age of, and not money invested in, the cooperative association deter- 
mines the distribution of benefits. Obviously, the progress that may 
be made by a cooperative association and the results that may be 
achieved by it are directly and inevitably affected by the extent and 
the consistency of its members' patronage. 
It is apparent that the relationship between the members of an 
association and the association is much more intimate and personal 
than is the case in the ordinary corporation. The courts have 
recognized that this is true. 3 In a nonlegal sense a cooperative par- 
takes of the nature of a joint enterprise or partnership. Membership 
in a capital-stock cooperative association is had through the pur- 
chase of a share or shares of its stock and the meeting by the pur- 
chaser of any other authorized requirements of the association ; mem- 
bership in a nonstock cooperative association is had through ap- 
plication for membership and acceptance by the association and the 
meeting of any other authorized requirements. A common require- 
ment for both stock and nonstock associations is the signing of a 
marketing contract. 
It should not be assumed that the members or stockholders of a 
cooperative association, except in a technical legal sense, are separate 
and apart from the association. The members are the association, 
and the officers and directors of the association are simply their 
agents for the conduct of the joint enterprise. The officers and di- 
rectors of an association are placed in office and continue there only 
through the action or acquiescence of the stockholders or members. 
In other words, the stockholders or members are the principal or the 
" employer," and the officers and directors are simply their " em- 
ployees " or agents to direct the business ; and agents are subject to 
the control of their employers. 
Frequently, if not generally, cooperative associations on receiving 
the products of a member make an advance to him which constitutes 
merely a " part payment," or to speak more accurately, partial re- 
turns ; final returns are made after the sale of the products or at the 
end of the pooling or marketing period. Pooling is a practice com- 
mon to cooperative associations. 4 It is an averaging proposition. 
For instance, the expenses incident to the operation of an association 
3 California Canning Peach Growers v. Downey, 76 Cal. App. 1, 243 P. 679. 
* See the following'publication : Christensen, C. L. Pooling as Practiced by Coop- 
erative Marketing Associations. U. S. Dept. Agr. Misc. Pub. No. 14, 12 p. 1929. 
