     OFFICE OF THE ATTORNEY             GENERAL     OF -I’EXAS
                           AUSTfN




Eon. Z.R. YoDoEala, Ooud.seloner
Departmeat d Agrioultora
Austin,   Texrl




        Wo are la T40c)lpt
quotes*
      our opinion npoa thr
t&ore 18 a* oaniliet b3tweea
6959, a8 anondod, Vernon*
R4vie44 air11 statut4e, 1
                                                   wiry   ir Based i8

                                                  Vi1 Statute8
                                                   peruon ml-
                                                  teal   pro&ate

                                        50 of the etatutee
                                         4 8toekholder oi a
                                         11 OWAAOZW than




                        0otltl44 to DaOf4than onr wt4
                       * 4lst L4girlatur4 m4ndsd and
                       ala 6739 a8 follo~rt rive 01
      i&4    p er 8olanag a g
                            ill
                              dtb
                                i op r o duo otio
                                               r Q
      uultwal     produotr or      or 111or4 associat
                                thr44               Y' on8
      oay for18 a non-ProSit  00094rati*r assool&tlon
             or wittou -oapltal dook, under tha pro-
      %!toa
          dohAptsr*.
                                                              244

Hon. J.S. XdoDo::ald,
                    p-e 2

          eBy the original enaotment, and by the sub-
     sequent amndmnt and re-enactzmt of Artiale
     5739, the Leglslaturo obriouoly      lntezded that,
     any firs ~ersonr engaged in the production d
     agrlaoltural products     oould organizr a oorfir-
     atlon under the provlslons of Chapter 8.        Pur-
     thermore, on two different oooasloua, thd Leg-
     i8laturr   oxtpreeaed  it8 intention to permit tC4
     arsation of suah oorporatlonby fit4 perooos
     or nom who &all       be engaged in the jwoduotlon
     of agrlouituralproduota,       with os?lt
     But then, under the provIa=         of Ar
     quoted above, it la lm;Mssiblo to organixa an
     aseooletlonwith oapftal rtook ooatemplatedby
     Article 5739 unisss twenty perao~a or rare be-
     ooxe ltoakholdera of the assoo1ation.e
         Torae  Jurlrpnkdenas,Volume 28, page 667, has the
foLlo*ing general observationsto snake ooaoemfng   the bo-
oprrativoKrketi       AssoolatlonAot of 1921, a8 emendedin
1930 and 1934 (Art Y oiea 5937 through 3964, Vsrnon*e Anno-
tated Civil Statutea):
         The Aot of 1921 1s thr *standard Aot' whloh
      haa not only been adopted in smlar fonu by
      the Legislatures of nearly all of ths statea,
      but has aiso been reoognizsd by Congress. The
      dealared policy of the Act ia:
       "'To promote, foster and enoourego the ln-
       telllgent and order-iymarketing 0r agrlocl-
       tural produets  through oo-operationand to
       lliminato rpeoulatlon and wallto;     and to
       sake the distribution of agrtoultural       prod-
       aot4 as dlreot  aa casl be effioientiy    done
       between produaer and ool;sumer~ and to ata;-~
       blllza tbo markstlry problesm,o? agrloui-
       tural probuotfb * (Artiole    5937, su3l-a)

         Vho statute la ooraprehenslve.It deo1*res
      that the term *a@loultural ;)roducta'lnoluder
      hortloultural.,rltloultural,forestry, dairy,
      ~f~~~t"~k(*Pt""lSl~$,b~a,~~P."~t'~f~~dt~~E-
      ing in advunaa OS iiwldstad dtmager for breaoh
      of a marketing mntraot, and eonteinr no re-
      atrlotiona as to the looality of tLo oparations
Eon. 5.3.   UcDorald, page S

      of essooletlons under it.* (Perenthatloelin-
      se=tlone oure).



         l(b) The term *manbar* shell lnoludo dotual
      mmbara of assooletlonswithout oapitel stook
      ena holders of oo&aon stock In lsso o ia tlo nr
      organized with oepltel r to o k ; l a'* l
            In tha aa98 ertlole a 'persona 1s defined aa:
         *(a) The term *pernon* shell inolodo lndiria-
      uel, firms, pertnerrhlps,oorporeb?ona and asso-
      oiatlons. * I * "
            Article 5139, rupra, reed@ as followrr
         Vlre or zore persons engaged in the produo-
      tlon OS agricultural products or three or zmra
      e3aoci6tlo3amey form a non-profit oo-operative
      association with or without oepltel stook, under
      the provisions of this ohaptsr.W
            ArtSole 5715, supra, prorides:

          *(a) Under the term8 end ooaditlom preqorib-
      sd in its by-laws, en aascotation    am7 admit a0
      resaberta, or issue oomon stook, only to persons
      ewaged     in the ?roduotlon of the egrioultural
      produats to be handled by cr through the a~co-
      ciation. lno:udlng tbe lessees end tenants of
      land used for the production of such produotr
      end any lessors end landlords who raoelva a8
      rect pert of the orop raised on tha leased pre-
      mises. (b) If a mmber of e non-stook assooia-
      tion be other then a natural perron, such aember
      ney be presented by any lndirldunl, asoooiatb
      offioer or reaber thereof, duly authorized in
      writ      . (0) Any e5sooletlonas detineb in *rt.
      5738"'d( ) may beams a sember or rtoek.holdor oi
      any other assocletion or ls6ooiationr~Orge~is6d
      hereunder.m
            krtiale   5744, rupro,   read8 as follows~
            "Kaoh Assooietlon formed under thi8 AoS mast
Hon. ST.& XoDoneld, page 4

      prepare and fllo Artlolea of Incorjuxetion,
      setting forth: (a) The note of the easooletlon.
      (b) The >cryoses  for whloh  it is torined.(a)
      The p1c.e:~where its rrinolpal buslnesa will be
      transected. (d) The tern    for wtioh it is to




      atook, uhsther the Crop6rts right8 and interest
      of aeah menber shall be equal or unequal; acd
      if anequal; the Artioloa  ahall ret forth the
      goneral rule or ruler applicable to all Ioesbera
      by whlah the property right.8 and lntereata,
      reapeotlrely,or eaoh nember ray and ahall be
      datermined and fired; end the asaoolatloa aball
      have the power to admit nev aefaberawho shall
      be entltled to ahere in the property of the
      assoeletlon with the old nembera, in aooordanea
      with auah general rule or rulea. Thia provlaloa
      of the lrtiolea of Inoor~orationshall not be
      altered, emendad or repealed exaept by the nlt-
      ten  oonaeat or the Ybts of three-fourthsof the




      the Aklolea of Inoorporetlonmust oontain a
      statesent of the number oi stares o? stook
                                             stook to
                                                   to
      whloh pr8rer8oOSiis granted and the number of
      sharer ot stook to wLloh no prefsrenoa is granted
      and the nature and extent of the prsferenoea    end
      prltllegea granted to eeoh. z     ArtioSea must
.      .
                                                                 247

    Bon. J.S. ;.eDor.ald,
                       pqe 3

           or Inoor?orstlooskall also be riled with the
           Comdssioncr of idarket.8 ‘and Xarehousea; provld-
           ed, however,  co part of such sagital atook ahall
           be reculred  to be bubsorlbed and/or paid in aa
           a prerequlrlta to tha filing or mob Xrt1al.d




              Artlola 5746, supra, deals with •By-Lau~*. Ve
    shall not quota the mrtlola in full, but, inter alia, it
    stlpulotd   that the by-larr may provide for the rollowing
    retterz
               '(1) 2%. number and qu@ifiaatlan of aerobere
           or stookholderaof the aasoafatlon and the oon-
           ditiona precedent to Itember of cwnershlp o?
           oosmon stoakl  tho method, tLmo and manner of
           pemlttlng embers torrlthdrar or the holdera
           of common atook to transfer tl;elrstosk; the
           imnnar 0r asilgnment and tranorsr 0r the inter-
           est w ittf3mb~r8,and 0r the ebares or o-on
           stook;  t&s oondltlona uson whlah, and time when
           ;lenberstipat any zienb8r&all cease s * z *
             Artlole 5750, supra, a key stetuto in rerpoot to
    tbir opinion, readr as followar
               WWm a memberof an aaaooiatlon eatabllahed
           without oapltal stook, haa paid hia aamberohlp
           r04 in idi,  tm shall rsaeire a 40rtirittat0 of
           meinberahip.Ho assoolatloo shall issue sfook
           to a nambar until it hes been fully pald ror.
           The proialasorynotea or tha mu$bers nay be aa-
           ospted by the assoolatlon a8 fWIl or partial
           peyment The assoolatfon ohall hold the atoek
                  l

           as security tar thr payment of the note, but
           auoh retention aa rstaurltyshall not aftoot the
           meabara' right to tots. Zxoept ior debta lar-
                                                              248

Hon. J.iE.MoDo.-.al&,
                   paga 6

    rullr oontraoted betman hi.8and the aeeooiatlon,
    no nember ahall bu liable ior the dsbtn of the
    aaooolstion to an amount exossdiq       the eua m-    .
    mining unpaid on hi8 aumberehlp f&e OT hi8 61&b-
    moriptlon to the oepltal rtoak, inoluding aa7
    unpaid balanoe on any prorilWOI+y  not48 giw       in
    paymmt theroo?. ho ilrtbrk-holdor      or a 004pam-
    tivs as6o0latlon aIiZlI~~Ou?l
                                80r4 thr’ii   Cm*-truntl4th




    sSKiiZT”b,Stm            more than one rot.. 4
    assoolatioa orgmlsod with atoak, uadu thi6 law
    may lseuo prrrerred etaak, with or without the
    rigat to vote.     Such etouk 6my be redemble or
    r4tlr4ble by the assoai6tlonon euoh tenw and
    aondltion4 a6 6ia.y   be protided   for by the Artlelr8
    of'Iaoorporationaad printed on the tam OS the
    asrtirieat4. The by-law6 shall prohibit tbo
    transfer    or the oormnonstouk of thr arsooiatlon
    to psrronr not engags in the produatloa or the
    agrlou2tuzal produote handled by the as2304iatlon,
    and suah rsrtrietlonrmwt be printed upos era17
    autirioata     or stool rubjert    ttsrato. 'Ph4a6eo-
    elation mar at any tla4 aro4pt when the debt4
    0t th4 865Ouiatlon exceed rirty per 4ent or the
    asnbt.8 thereof, b      in or purahaer it8 aowmt
    atook at book TalQ   3 thereof n8 aonolu4iv4l~dstbr-
    &eb      by tte board cri direotore    an& pa for it
    in oeah within oue year thereaft6r.* TUndersaor-
     in(r ours).
       Utbr oarerul ooseldoratioaor the above quoted pro-
risloc~ of the CooporativsHarketiry AOt Of loal, as amnd-
04, YO fall to peroelru any lrreoonoilableoonfllot betaesn
Arti     5939 and 5750, eupre.
       u aseoolatlon 16 forned Udsr the CooperativeSiu-
keting Aot by *five or more parson6 ongaged in the pmdua-
tion ot agrloulturalproduotr or three or vmmv asaoolatlone*
in acoardanoewith thr prori6lon6 0r xrtio1. SPZIO.
       Those are the lnoorporotorr who rubrorlbe to the
ArtloI.48of Inoorporation and filr then au provided in Ar-
t101* 21744,eupm. Th4 artiole8, if the assoalatlon 16
Eon. J-2. YcDoxdd, page 7

organlzod rith capital stook, ret., forth t&toaaouat of
euab aapital rtook and the nlrslberuf starvs into rhiaftit
is divided an4 t& par value tfiersof.




               A Wa b e P   o f a nlsaooletlon      o r & mlte;b
                                                              r ith a sp -
itil rtook 18 l holdar ai ooaam stook in that oqacAs4tlon.
Artte1. 5736B,rupra.
               brtlal* 5950, lupr4, plmlnly povidrr          that:

            *Ho r to a k -h o lder52 l o~opwatl+e amooS.ation
         shall own sore ttui      one-tvostioth or tha imao
         oomcm atook or the asaooiatloa~ ld M 4889414-
         tlaa in itr by-lam, My lbit tho mount of
         OO;S~DOR
                stook uhloh one asnber ay owa to my
         azmrit 1.~8 thn       one-taentleth of th4 Is4u4d
         ooaam sto6k.”



               80 do not 8ae rhy the ~inoorporator8a under A&f-
clr    5039,    sqwa,   abald   be aonfurd       rith   th4 me&b4mhip of
the eksaaiation        or stookb3ldsrs    I? It     ir an 8asoolation
with oapftal       stool.
         The qt~:aorjmatar*Rrep.-*sent the pmsmotlr*                 maa-
berm of tha asswlatfon beire ohattered.


            aGanrrdl~ the organisrtlon      la orfeet by
         l ‘group of pereoRYor or&ariratlQn      4omltt44,
         who mtq make @inor ohslyer lr the organio Iea-
               o f the h a o r p o r a tlown,
         ta r es                           tm lutno r lztiby
         the otganisation ~remaent, md 8 ;luJorltt       of
         *hoa mm7detormino the proprbty       oi Mixpletlnq
         the orqanlratlon, at least whom then la no
         dlsaent or objrotlon on tha part of 4b44kto44.*
Hon. J.X. XaDonald, page 8

         The Qoeparative Marketins Act mdoabtsdly OOB-
tan:latea a aesberahip for a oooperstire marketfng asao-
olatloa aatabliahadwith oommon atook large enough to'
aaaimllata the Issued atoak tn amousta oi ona-twent Mb
or lam.   In other vorda than waa oontm2latad qa’er4   tba
pr0t18i0~  0r Arti0h 59. ~., lupra, abate quoted,      A.8rg~
eno u gnumb
        h      o i lto ek2 hding memberato met the requlre-
              er
mat that *no stoakholdsr ot a oo-oprrutire        ass’oalatian
ah411 own more than on*fwontioth    of the laausd oa~soa
ltoek of th4 aaaoeiatbm) rnd nn aaao4iation, in it8           by-
lawa,     may llmlt              tho    4monElt o? aomoa   atoak whloh ona mnrb4r
uy      ONP to asy              mount     lars   than onetventleth of tha iasud
00sno R    sto o k .    l




              .In fo na lng l ur k etb  l8804iatioa,
                                          a 6           it   a p-
          pears that agreeaentm, rinllar in terms,         are
          olreqlstedbr the prarotara and slgn4d by the
          lndiridual   growora who am to beaozo aember&
          Thaaa agroeaantr                        e lppllaa-
                              not only la b r a oea
          ticm ror meaber8hfp and tha proposed larksting
          agreement,              but    81~0 spe4fiy          the   64~4   and ooa-
          dltiona andor whloh the laooaiatlwamay be
          organirad . Taken together they oonstitute a
          8isgh   OoI¶tYaOt between the mIkber8 & the
          proapeotlwe   rsaoolatlon and an organio oontraot
          betwesn   thou and the aaaooiatlon,rhea it la
          0rgaalzeQ.    5oubtlaaa3t i8,iaproper   to prooee(i
          rlth tha inoorporatloao;C-?masaooiation wham
          the repulaito   number ei ai;gnatorea bar8 not been
          obtained, or if other ooaditioaa authorizing
          the oozmlttao to aot lmre not ooourrmd * * * l

          TZXAS        t.GN BURMJ COTTOBASS’E. v. LKSOI                              (Mr.
           APP* 257 3.N. 995, aubsequant appeals (Mr.
               1 283 S.W. 619 896 3.1. 328 1.48.V. (Xd)
           %'   31 9.H. (2d) bl, (COWSi. A&,  5s S.W. (x4)
           543:
              An assooiation                 organized         andor the Gooperative Xar-
ketlng     AOt    i8        a    lagaliad       qYia\ilttUti          OoOpOr~t~To,          OOa8iSt-
fJl6    at growers              of 4grioultural         produet..

           19 AMZitICMiBAR &33OCInTIO2 JOU.iNAL21S)1
           TZXM  F.GIpI
                      BUZUU COlTOK k38'Y. t. XXLIS,(51~. &ipp.)
            281 S.U. 629 (Cotton Qrowora).
Hon. z.3. MaDonald, page 0

       da auah, tha Laglalatura no doubt considerad lt
aounffpub110 polloy that no ln4lrl4uel atookholderof auoh
an laaoolatlonwith dock should own ino,". thaa one-
trentieth of the issue4 oomon stotlk,and Caa ao proyS4ad
in Art101e SYSO, aupta.

       Yarketing acts ace giren a liberal oonetryljtlonla
order to aoooapllah the purposes for v&Lab they ware an-
acted.
     Li!XNOX'1.T‘CEASCOTTON C3OP3.~TIV1p
                                       WJCXX.iTIO;I,
        (00aO. App.) 55 9-W. (24) 543, r#l~erSing 39 8.W.
         2d 931, former  appeals (CIT. Ap x .) 16 S.V.
       I 24 I US,   296 8.1.   328, 263 S.-i?. 619, 289 3.V.
       935.
       It la our oplnloa, aad yea ara so edYlaa4 that
them la no oonfllat between the protlalon of Artlo l5939,
Vornon*a Annotated Civil Statutes, that flra or pioroper-
sona engaged in the jmduotion ot agrloultunl ~roduata
6ay ion q non-profit a~oporatlra la8oalatlon with oapltal
atook end the repulreaant of drtfale 5950, B.C.&, 19ZS,
that -
       '150atoakholder of e cooperatlro assoolation
     shall own more than one-teentiath of the iaau-
     ad aozvooadock of tba a8aoalatlon,m

vhan the aasoalation la aatablfahed with sapltal stook.
       It la our further opinion that the requirement OS
Artlola 5950, B.C.S., 1925, that no &b&holder of a
oooperatireassooiation shall 0~x1plore then one-tweutisth
                     St&i
of the issued ocaiaiori    of the aaaoclction ie mandato-
ry and that lrreopeatlve of tha nuaber of lnaorgoratora
under Artiole 5959, Vernon*8 Anzotatad Civil Statutes, and
the number of aambers ss defined in Artiolea 3938 an6 5745,
Yernon*a Annoteted Cltll Statutes, no individual atook-
holders may own a greater  ,psraeotagr     ai tke   total   issued
lomma   atcck than one-twantlsth.
