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Farinella v. North Hudson Yacht Club

June 28, 2007

CHARLES THEODORE FARINELLA, GEORGE AHTO, JR., STANLEY BERKOWITZ, BARNEY L. KRIEG, NICHOLAS PAPPAGALLO, JOSEPH P. MARTIN, RAYMOND ORSI, EDWARD CZECZUGA, DAVID C. KESICK, ANDREW NUNZIATO AND ROD STORMS, PLAINTIFFS-APPELLANTS,
v.
NORTH HUDSON YACHT CLUB, A NEW JERSEY NOT FOR PROFIT CORPORATION, DEFENDANT-RESPONDENT.
SALVATORE VASSALLO, ANTHONY J. NEGLIA, GERHARD W. TAPKEN, KRIS A. TAPKEN, MICHAEL VERGHITSIS AND ROBERT C. BOWAN, PLAINTIFFS-APPELLANTS,
v.
NORTH HUDSON YACHT CLUB, INC., NORTH HUDSON YACHT CLUB BOARD OF DIRECTORS CONSISTING OF COMMODORE ROBERT KENYON, VICE COMMODORE SANDY MARKS, REAR COMMODORE ANTHONY D'AGOSTA, FLEET CAPTAIN RICHARD ROBINSON, RECORDING SECRETARY FRANK SARKISIAN, FINANCIAL SECRETARY JOHN SABATINI, TREASURER GLENN KENYON, DIRECTOR THOMAS OLSZEWSKI AND DIRECTOR CARMINE TETA, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket Nos. BER-C-0203-04 and BER-C-67-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 18, 2007

Before Judges Parker, C.S. Fisher and Messano.

In this dispute between former members of a yacht club and the club's current members, plaintiffs*fn1 appeal from two orders entered on January 17, 2006 granting summary judgment in favor of defendants and two orders entered on February 24, 2006 denying plaintiffs' motions for reconsideration. We affirm.

Defendant North Hudson Yacht Club (Club) is a recreational and social not-for-profit corporation in Edgewater. Its purpose is to promote social recreation and proficiency in boating.

Plaintiffs in Docket No. A-3300-05T5, Charles T. Farinella, George Ahto, Jr., Stanley Berkowitz, Barney L. Krieg, Nicholas Pappagallo, Joseph P. Martin, Raymond Orsi, Edward Czeczuga, David C. Kesick, Andrew Nunziato and Rod Storms, all former members of the Club, filed their complaint in the Bergen County Chancery Division on June 4, 2004. Plaintiffs in Docket No. A-3322-05T5, Salvatore Vassallo, Anthony J. Neglia, Gerhard W. Tapken, Kris A. Tapken, Michael Verghitsis and Robert C. Bowman, are also former members of the Club who filed a separate complaint on June 17, 2004 in the Bergen County Law Division.

The Law Division case was transferred to the Chancery Division on a sua sponte motion by the court and the cases proceeded back-to-back.

Each of the plaintiffs voluntarily resigned his membership in the Club between 1981 and 2001. In addition to naming the Club as defendant, the Vassallo group named the current Board of Directors as defendants.

The Club was incorporated on January 12, 1912. In June 1968, the Club purchased property in Edgewood fronting on the Hudson River for $125,000. The property was intended to be used for Club purposes. Some time in 2004, various former members learned that the current membership had voted to potentially disband the Club and sell the property.

In their complaints, plaintiffs claim that the Club cannot disband but must continue in perpetuity; that the property cannot be sold, but if the property is sold, the proceeds must be given to charity or to the State. Alternatively, plaintiffs maintain that if the property is sold, they are entitled to share in the proceeds of the sale.

The Club's bylaws contain a provision for potential dissolution and sale of the Club's assets. Article XVIII provides as follows:

The funds of this Club shall not be used for any purpose other than that for which the Club was organized. No member or members shall have the power to disband the Club or dispense with the funds or property belonging to the Club, as long as a total of fifteen (15) Regular Life[] or Inactive Members remain in good standing and wish to retain the charter and "operate the Club for the purpose for which it was founded."

At a meeting on February 28, 2003, the Club's current membership voted eighteen to eleven to sell the property and divide the money among the current thirty members. In August 2003, the Club entered into a contract for sale of the property for $7.5 million.

The Farinella group of plaintiffs sought in their complaint to have (1) the proceeds of the sale held in escrow pending a determination of rights and liabilities of the parties and an accounting made of all assets of the Club; (2) plaintiffs' memberships reinstated; and (3) the Club amend its corporate resolution and file the appropriate tax forms to pay all tax liability on the proceeds and then distribute the proceeds to plaintiffs, as well as the current members.

In their complaint, the Vassallo group sought (1) an accounting and constructive lien against all of the Club's assets; (2) appointment of a receiver to take control of the Club's assets; (3) an order directing that proceeds of the sale be held in escrow; (4) an order prohibiting dissolution of the Club and expelling current members who have violated their fiduciary duty; and (5) reinstatement of plaintiffs as members of the Club entitled to distribution of the sale proceeds.

Two of the former members, Salvatore Vassallo and Anthony J. Neglia, were granted honorary life membership in 1991. As life members, they were not required to pay dues until an amendment to the bylaws in 1997. When the Club adopted the amendment requiring them to pay dues, they resigned permanently.

These two plaintiffs contend that the amendment to the bylaws was intentionally adopted in 1997 to force them to leave the club, thereby depleting the membership for purposes of distributing future profits in 2002.

After discovery was completed, defendants moved for summary judgment. On January 17, 2006, the trial court granted defendants' motion for summary judgment in both cases. The trial judge rendered a written decision in which he set forth the undisputed facts and found that "[t]he constitution and bylaws are not specific regarding the ...


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