The truth is that some influential non-profit associations long have vigorously fought attempts to give clear legal form and substance to unincorporated associations. They like  having it both ways.  It is very convenient to be able to be sometimes a legal entity and sometimes not, sometimes a partnership and sometimes not-very convenient for the association (or its managers), not so convenient for creditors, regulatory agencies, injured members, or others affected by the will-o-the-wisp nature of the association

Oleck, Howard L.

English

Cleveland-Marshall College of Law

Cleveland State UniversityEngagedScholarship@CSUCleveland State Law Review Law Journals1964Non-Profit Associations as Legal EntitiesHoward L. OleckFollow this and additional works at: https://engagedscholarship.csuohio.edu/clevstlrevPart of the Business Organizations Law CommonsHow does access to this work benefit you? Let us know!This Article is brought to you for free and open access by the Law Journals at EngagedScholarship@CSU. It has been accepted for inclusion inCleveland State Law Review by an authorized editor of EngagedScholarship@CSU. For more information, please contact library.es@csuohio.edu.Recommended CitationHoward L. Oleck, Non-Profit Associations as Legal Entities, 13 Clev.-Marshall L. Rev. 350 (1964)Non-Profit Associations as Legal EntitiesHoward L. Oleck*U NINCORPORATED ASSOCIATIONS long have been a problem tothe law. They are analogous to partnerships, and yet notpartnerships; analogous to corporations, and yet not corporations;analogous to joint tenancies, and yet not joint tenancies; analo-gous to mutual agency, and yet not mutual agency.1 The mostbaffling of all are the non-profit unincorporated associations.Piecemeal attempts to make legal order and sense of theseorganizations have not solved the basic question. Thus, statutesrequiring the filing of certificates of doing business under an as-sumed name treat a symptom, not the problem itself.2Modern studies of the subject express the same bafflement asdid earlier studies, plus growing impatience with the slovenlylaw that permits such uncertainty to continue so long. Recently,for example, the application of constitutional rights to associa-tions has involved the question of whether or not they are "per-sons" (i.e., "legal entities") for purposes of the privilege againstself-incrimination.3  Certainly the drafters of the Constitutioncould not foresee the modern proliferation of associations, bothincorporated and unincorporated.*Assoc. Dean, Cleveland-Marshall Law School of Baldwin-Wallace College.1 Cousin v. Taylor, 115 Ore. 472, 239 P. 96, 41 A.L.R. 750 (1925); People v.Herbert, 162 Misc. 817, 295 N. Y. S. 251 (1937); Blair v. Southern Clay Mfg.Co., 173 Tenn. 571, 121 S. W. 2d 570 (1938); Stone v. Guth, 232 Mo. 217, 102 S.W. 2d 738 (1937); Security-First Natl. Bank v. Cooper, 62 Cal. App. 2d 653,145 P. 2d 722 (1943); and see, Wrightington, Unincorporated Assns. & Busi-ness Trusts (1923); 3 C. J. S., Agency, Sec. 259; Crane, Law of Partnership537 (1952).2 Bacon v. Gardner, 38 Wash. 2d 299, 229 P. 2d 523 (1951); Notes, 39 YaleL. J. 874 (1930); 18 Calif. L. R. 707 (1930); Anno., L. R. A. 1915D, 982;L. R. A. 1916D, 335; 45 A. L. R. 198 (1926); 59 A. L. R. 55 (1929).3 See, Oleck, Non-Profit Corporations & Associations, c. 3 (1956). (Notethat a second edition of this book now is in preparation. It elaborates onthe non-profit association more than the first edition did, but finds littlemore certainty about it now than existed years ago).Confusion as to "entity" or "group of individuals" concepts was criti-cized recently in, Note, Constitutional Rights of Associations to Assert thePrivilege Against Self-Incrimination, 112 U. Pa. L. R. 394 (1964), citing Halev. Henkel, 201 U. S. 43 (1906) that associations are not "persons," and re-cent Supreme Court difficulties in cases involving unincorporated associa-tions. Under the decision in, United States v. White, 322 U. S. 694, 700(1944), associations again were denied the privilege available to "persons."Hale v. Henkel's artificial separation of associations from their agents stillconfuses decisions in self-incrimination cases, but seems consistent with thetrend towards "entity."1Published by EngagedScholarship@CSU, 1964NON-PROFIT ASSOCIATION ENTITYThe truth is that some influential non-profit associations longhave vigorously fought attempts to give clear legal form and sub-stance to unincorporated associations. They like "having it bothways." It is very convenient to be able to be sometimes a legalentity and sometimes not, sometimes a partnership and some-times not-very convenient for the association (or its managers),not so convenient for creditors, regulatory agencies, injuredmembers, or others affected by the will-o-the-wisp nature of theassociation.Straightforward legislative attempts to force associations tosettle into some specific form (e.g., corporate entity) have beenfutile. Thus a Colorado statute requiring labor unions to incorporate was held to be unconstitutional as an unlawful invasionof "freedom of speech" and of "freedom of assembly." 4 This con-trasts strangely with the common requirement that a nationalbank, for example, must be a "body corporate," as must otherbanks, insurance "companies," or public utilities.5A very recent appellate decision in Ohio, not yet reportedat the time of the writing of this note, has cast a beacon of lightthrough the legal fog called "the non-profit unincorporated asso-ciation." This was the case of Miazga v. International Union ofOperating Engineers, A.F.L.-C.I.O., Local 18.6 Chief Justice LeeE. Skeel, who wrote the opinion, is the same jurist who settledthe problem of advertised product liability with a razor sharpdecision not long ago.7In the Miazga case, the plaintiff and other members sued theunion (a non-profit unincorporated association) for damages fordefamation. The defense was the usual demurrer, based on theusual argument that a member of an unincorporated associationis a co-principal in a joint enterprise, and thus in effect sues him-self if he sues the association. The defense cited a long line ofcases so holding.Judge Skeel pointed out that, since 1955, Ohio's statutes4 American Federation of Labor v. Reilly, 113 Colo. 90, 155 P. 2d 145, 160A. L. R. 873 (1944).5 See, 1 Oleck, Modem Corporation Law, sec. 26 (1958), citing typical stat-utes and cases.6 196 N. E. 2nd 324 (Ohio Ct. of Appeals, 8th Dist., #26670, Opinion Feb. 14,1964); Skeel writing the opinion; Silbert & Corrigan concurring.7 Rogers v. Toni Home Permanent Co., decided by Ohio Ct. Appeals, 8thDist., and affd. in 167 Ohio St. 244, 147 N. E. 2d 612 (1958); see, Skeel, Prod-uct Warranty Liability, 6 Clev-Mar. L. R. 94 (1957); Holdridge, AdvertisedProduct Liability, 8 Clev-Mar. L. R. 14, 40 (1959).2https://engagedscholarship.csuohio.edu/clevstlrev/vol13/iss2/1913 CLEV-MAR. L. R. (2)have provided that an unincorporated association may contractor sue or be sued "as an entity" under its own name.8 Such pro-visions now are found in many states.'Ohio's statute seemingly permits execution only against theassets of the association but has been interpreted otherwise, 0while some statutes expressly permit execution also against assetsof members in some situations."Judge Skeel then referred to the common law origin of thetheory of non-liability in the law of partnership. 12 He said that,while this may be reasonable for small unincorporated associa-tions, it is "completely outmoded" for a labor union consisting ofthousands of members."3He then ruled that "such an association . . . should belike any other corporate entity, held legally responsible as anassociation in a proper case for injuries inflicted by its wrongfulacts not only to members of the public but to its members aswell." He pointed out that the use of the legal fiction of legalentity of an organization has been, and still is, determined bythe courts rather than by legislative action, and that there is nostatutory provision to this effect even as to corporations in Ohioor in most states.14 Judicial control of the actions of private asso-ciations fills what otherwise would be a vacuum in the law."So we have, at long last, in the Miazga decision, a clear anddirect judicial statement that a non-profit unincorporated asso-8 Ohio Rev. Code, Sec. 1745.01; Calif. Code Civ. Prac., Sec. 388; and seeOleck, Non-Profit Corps. & Assns., sec. 20 (1956).9 See, N. J. Stat. Anno., tit. 2A, c. 64; N. Y. C. P. L. & R., Sec. 1025; Okla.Stat. Anno., tit. 12, Sec. 182.10 Ohio Rev. Code, Sec. 1745.02 speaks only of execution against associationassets, but a recent case held that the statutory right to sue the "entity" isone in addition to the right to hold the members of an unincorporated asso-ciation (American Legion Post) personally liable: Lyons v. American Le-gion Post No. 650 Realty Co., 175 N. E. 2d 733 (Ohio 1961).11 See statutes cited supra, n. 9. As to the federal view, that an associationis an entity for suit (venue, jurisdiction) purposes, but that tort liabilityapplies only to members generally, see, Sperry Products v. Assn. of Amer.RR., 132 F. 2d 408 (2d Cir. 1942), cert. den. 63 S. Ct. 1031 (1942).12 See, DeVillars v. Hessler, 363 Pa. 498, 70 A. 2d 333, 14 A. L. R. 2d 470(1950); Anno., 14 A. L. R. 2d 473 (1950).'3 See, Crane, Liability of Unincorporated Association for Tortious Injuryto a Member, 16 Vand. L. R. 319 (1963), citing Marshall v. InternationalLongshoremen's & W. Union, 57 Cal. 2d 781, 22 Cal. Rptr. 211, 371 P. 2d 987(1962); and see Inglis v. Operating Engrs. Local Union No. 12, 18 Cal. Rptr.187 (1962); affd. 23 Cal. Rptr. 403, 373 P. 2d 467 (1963).14 Citing, 1 Oleck, Modern Corporation Law, c. 1, 2 (1958).15 See, Note, Development in the Law: Judicial Control of Actions of Pri-vate Associations, 76 Harv. L. R. 983 (1963).May, 19643Published by EngagedScholarship@CSU, 1964NON-PROFIT ASSOCIATION ENTITYciation is a legal entity, at least in the case of a fairly largeorganization.Prior efforts to solve the problem have employed various de-vices to fasten liability on unincorporated associations, such asthe concept of conspiracy. 16 Some courts have held a union to benot liable for injury done by a member,"7 while others have heldit to be liable.18 Under federal labor law, unions are consideredto be legal entities; under bankruptcy law a non-profit associationmay go into voluntary bankruptcy as an entity.1 9Many states have applied to non-profit associations the co-principal doctrine, which treats them as partnerships, imputingnegligence from one member to another, including the injuredmember himself.20 There is some logical basis for this only in thecase of a small organization, not in the case of a large one.21 Alarge group (Temple of the Mystic Shrine) was held to be liablefor an injury to a member not long ago.22 In labor union casesthe doctrine has been invoked frequently in recent years.2 3As to unions, the tendency has been to hold them liable forintentional acts. 24 So, too, if a union owes a duty of representa-16 Wallick v. International Union of Elec., R. & M. W., 90 Ohio L. Abs. 584;36 Ohio Bar (17) 584 (1963). Compare, Meriwether v. Atkin, 137 Mo. App.32, 119 S. W. 36 (1909) which held an association not to be bound though itsmembers who acted might be; American Art Works v. Republican StateCommittee, 177 Okla. 420, 60 P. 2d 786 (1936) political committee membersnot liable; Magness v. Chicora Chapter, 193 So. Car. 205, 8 S. E. 2d 344(1940) members held liable; Mitterhausen v. South Wisconsin ConferenceAssn., 245 Wis. 353, 14 N. W. 2d 19 (1944) trustee-members held liable;Note, Liability of Members and Officers of Non-Profit Associations for Con-tracts and Torts, 42 Calif. L. R. 812 (1954).17 Benoit v. Amalgamated Local 229 U. E. R. M. W., 188 A. 2d 499 (Conn.1963).18 United Brotherhood of Carpenters & J. of Amer. v. Humphreys, 127 S. E.2d 98 (Va. 1962).19 See, Oleck, Non-Profit Corps. & Assns., sec. 20 (1956). Associations canbe taxed as corporations: see, Sarner, article, 20 N. Y. U. Inst. Fed. Tax.609 (1962). And see, supra, n. 3, 9, 11.20 Anno., 14 A. L. R. 2d 473 (1950); DeVillars v. Hessler, 363 Pa. 498, 70 A.2d 333 (1950).21 Crane, article, supra, n. 13. But in a small group (e.g., a 3 or 5 manpartnership) the individual members deny association (partnership) statustoo, when that is inconvenient; as in refusal of workmen's compensationcoverage to an injured employee of a partnership of farmers, in, Campos v.Jomoi, 122 N. W. 2d 473 (Neb. 1963).22 Thomas v. Dunne, 131 Colo. 20, 279 P. 2d 427 (1955).23 Crane, article, supra, n. 13; Marchitto v. Central R. Co. of N. J., 9 N. J.456, 88 A. 2d 851 (1952).24 International Assn. of Machinists v. Gonzales, 78 S. Ct. 923, 256 U. S. 617,2 L. Ed. 2d 1018 (1958); Morton v. Local 20, Teamsters, Chauffeurs, & Help-ers Union, 200 F. Supp. 653 (D. C. Ohio, 1962) awarded punitive damages.4https://engagedscholarship.csuohio.edu/clevstlrev/vol13/iss2/1913 CLEV-MAR. L. R. (2)tion to a member; 25 but not if a matter of business judgment isinvolved.28All this backing and filling has been of small help to anyonebut the professional managers of unincorporated non-profit asso-ciations. Beyond question, labor unions have been the chief bene-ficiaries of this legal uncertainty-more specifically, professionallabor union managers. In essence, they have claimed the benefitsof unincorporated (partnership) form while operating organiza-tions larger than most corporations, and denied the liabilitiesappropriate to large organizations which are more truly "man-agement controlled" than are most large corporations.The writer of this note does not view a "professionally oper-ated" organization as entitled to the same tolerance that one givesto small groups of amateurs who try to carry on charitable orsocial or educational work pro bono publico.Such views are not anti-labor. The same views would applyto abuse by business corporation management or any other hold-ers of power. Power is respectable only if combined with re-sponsibility.The Miazga case, and its conclusion that at least the largerunincorporated non-profit associations shall be treated as legalentities, is wise and sound. This view will require clarificationof the status of officers, trustees and members, vis-a-vis eachother and vis-a-vis third persons. The constitutional problem ofprivilege of an association against self-incrimination is a goodexample of the problems involved even as to incorporated asso-ciations.2 7 It is now to be settled whether or not corporate normsor some other standards shall be applied to internal and externalrelations of unincorporated non-profit associations. But at leastthe deliberate abuse, by powerful organizations and their man-agers, of a legal concept meant only for small, amateur-operatedclubs now should be ended.25 Fray v. Amalgamated Meat Cutters, etc., 9 Wis. 2d 631, 101 N. W. 2d 782(1960). But no duty was required in Marshall v. International Longshore-men's & W. Union, Local 6, 57 Cal. 2d 781, 22 Cal. Rptr. 211, 371 P. 2d 987(1962).26 Finnegan v. Penna. R. Co., 76 N. J. Super. 71, 183 A. 2d 779 (1962); butsee (no special duty involved) Marshall case, supra, n. 25.27 See comments, supra, n. 3.May, 19645Published by EngagedScholarship@CSU, 1964

Non-Profit Associations as Legal Entities

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Non-Profit Associations as Legal Entities

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