An “association” is the collection of persons uniting together for some common purpose or business.[i] An association assumes legal character once it is incorporated. In such cases, the association will be entitled to hold property, sue and be sued. However, in some states, an unincorporated association is not considered a separate legal entity apart from its individual members.[ii] Since such associations have no separate legal status, courts have held that legal title to property acquired by an unincorporated association must be held by a trustee.[iii]
Common law views unincorporated associations as possessing no status apart from its members and not a legal entity.[iv] This is the same in the case of voluntary unincorporated associations existing under the common law right of contract. Such organizations have no existence apart from the contract of association and cannot sue or be sued in their common or associate name. Thus, in the absence of a statute conferring legal status, an unincorporated association must be sued by means of a class action, in which some members are designated to represent all members of the association.[v] A member of a voluntary association cannot be expelled without notice. Membership in such organization is an individual right and is not subject to the majority will unless the member has been guilty of misconduct.
The legislature may recognize the separate existence of an unincorporated association by statute.[vi] In such a case, the unincorporated association assumes legal status and is empowered to acquire, hold, and transfer property, or to sue and be sued. For instance, the Uniform Unincorporated Nonprofit Association Act states that a nonprofit association is a legal entity separate from its members.[vii]
When an association is organized for profit, the members of the association are treated as partners and an agency relationship is implied from the fact of such association.[viii] However, members of such an association will not automatically incur liability by virtue of their association. On the other hand, a member incurs liability for the debts of the association only when he/she authorizes, assents to, or ratifies the underlying transaction.[ix]
Such members of an association organized for profit, or those members of a non-profit association who have authorized, assented to, or ratified the underlying transaction and thereby have become liable for the association’s debts will also be personally liable for the association’s debts.[x]
In order to attain legal status, an association must have a distinct, identifiable membership.[xi] Legal status is conferred on the basis of the nature of the association and an organization may be deemed to be an “association,” irrespective of the fact that it is named a “society”, “league”, or “board.”
Voluntary associations formed for moral, benevolent, social, patriotic, or political purposes form a different class. Members of such associations are not held to be partners, even though such organizations possess business features and are conducted partly for pecuniary gain.
The relations between an association and its members are governed by the statutes creating such organizations. Similarly, the rights and liabilities of the members are fixed by the enabling statutes or the articles of incorporation / association. In the case of incorporated associations, general corporation rules prevail as to matters not specifically provided for.
[i] Roberts & Schaefer Co. v. San-Con, Inc., 898 F. Supp. 356, 360 (S.D. W. Va. 1995)
[ii] Cox v. Thee Evergreen Church, 836 S.W.2d 167, 169 (Tex. 1992)
[iii] Hutchins v. Grace Tabernacle United Pentecostal Church, 804 S.W.2d 598,600 (Tex. App. Houston 1st Dist. 1991)
[iv] State ex rel. Auto. Club Inter-Insurance Exch. V. Gaertner, 636 S.W.2d 68, 70 (Mo. banc 1982)
[v] State ex rel. Missouri State High School Activities Ass’n. v. Ruddy, 643 S.W.2d 596, 598 (Mo. banc 1983)
[vi] Day v. State, 168 Ind. App. 68 (Ind. Ct. App. 1976)
[vii] Uniform Unincorporated Nonprofit Association Act § 6(a)
[viii] Azzolina v. Order of Sons of Italy, 119 Conn. 681 (Conn. 1935)
[ix] Jim Host & Associates, Inc. v. Sharpe, 639 S.W.2d 784, 785 (Ky. Ct. App. 1982).
[x] Smith & Edwards v. Golden Spike Little League, 577 P.2d 132, 133-34 (Utah 1978)
[xi] Johnson v. South Blue Hill Cemetery Asso., 221 A.2d 280 (Me. 1966)