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Lambert v. Fisherman''s Dock Cooperative Inc.

Decided: July 9, 1971.


Sullivan, Collester and Labrecque. The opinion of the court was delivered by Labrecque, J.A.D.


Defendant Fisherman's Dock Cooperative, Inc. (the association) appeals from a judgment in favor of plaintiff for $18,498.86 following a trial before the court without a jury.

Defendant is a fishermen's cooperative organized July 1, 1953 pursuant to N.J.S.A. 34:17-1 et seq. governing cooperative societies of working men. Briefly, its purposes were to provide a ready market for the sale of aquatic products (as defined in 15 U.S.C.A. ยง 521 (1963)) produced by its members, provide docking and other facilities for members and patrons, and generally to benefit its members through a more efficient and economical method of marketing their produce. Its capital stock was divided into 2,000 shares, each with a par value of $50. Each member could

cast but one vote, regardless of his share holdings. The certificate of association provided, in pertinent part:

d. Stock may be acquired by producers of aquatic products; and in exceptional cases by other persons having connection with the fishery trades, but not exceeding 5% of the total membership and after approval by the Board of Directors.

The certificate of association recited that it and the bylaws could be amended, altered or repealed "in any manner not inconsistent with the statutes of New Jersey by the written consent of a majority of the stockholders * * * given at any regular or special meeting of the stockholders."

The bylaws provided that the findings of the board of directors as to the original or continued eligibility of a shareholder were to be final and conclusive, and stock in the association was to be transferred only, with the consent of such board, to those eligible to hold the same. The board was vested with power to cancel permanently the membership of a stockholder for good and sufficient cause upon tender to him of the fair book value of the shares held by him, as determined by the board, together with any other sums due and unpaid and less any amount due the association. In the event of the proposed cancellation of membership or expulsion of a member he was to be informed in writing of the charges against him at least ten days before the meeting at which the board was to pass upon his proposed cancellation or expulsion, at which time he was to be afforded an opportunity to be heard.

Under article II of the bylaws the association's stock certificates were to contain the foregoing restrictions on membership and transfer of stock, and a further provision that:

When the board of directors of the association is of the opinion that the association has sufficient working capital to enable the association to do so, certificates of stock shall be retired at their cost to the holder, in the order in which issued, except that each member shall continue to hold at least two shares of the stock. This association shall have the right to purchase any of its stock at its par or book value, whichever is less, in the event the owner thereof is not engaged

in the production of fishery products. This stock is also subject to all the other terms and conditions stated in the articles of incorporation and the by-laws of this association. [Emphasis added]

The articles of association and bylaws were subject to amendment.

Plaintiff William M. Lambert had been in the real estate and insurance business for 22 years. He became a shareholder in the association when he purchased two shares of its stock, allegedly for $125, in 1957.*fn1 During the next two years he was engaged in commercial fishing and sold his catch through the cooperative. For these years he received patronage dividends (more accurately described as patronage refunds) representing his share of the profit derived from the operations of the association, based upon the dollar amount of fish products which it handled for him during those years.

In 1959 plaintiff gave up the fishing business and began to engage in clamming. At first he sought to sell his clams through the association, but the volume was too great for the latter to handle and it was then agreed that plaintiff would market his catch himself, but would use the association's docking, processing and storage facilities, upon payment of a fee. This fee was originally 15 cents a (bushel) basket of clams; it was later reduced to ten, then to eight cents, then increased to ten. An additional $65 per month was paid as rental for space used for maintenance and storage. Besides this plaintiff purchased fuel and supplies for his boats from the association at what was less than the general retail price. This practice continued until plaintiff withdrew from the clamming business and sold his boats sometime in 1964. Thereafter he no longer patronized the association, and in July 1965, after notice, his membership was terminated.

During the period plaintiff engaged in clamming he received no patronage dividends even though the dividends

paid to others included profits derived from goods and services bought by him from the association. The court found that between the years 1960 and 1963 defendant had reduced its charges to plaintiff from ten cents to eight cents a basket after pressure by plaintiff to pay him a patronage dividend based on the amount of business he was doing with defendant. It found that a majority of the members had decided upon an informal policy of pooling ...

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