Cunningham v. Georgetown Homes, Inc.

• Decision Date: 09 April 1999
• Docket Number: No. 45A03-9802-CV-44,45A03-9802-CV-44
• Citation: 708 N.E.2d 623
• Parties: Dorothy Jean (Gruzella) CUNNINGHAM, Appellant-Defendant, v. GEORGETOWN HOMES, INC., Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 623

708 N.E.2d 623

Dorothy Jean (Gruzella) CUNNINGHAM, Appellant-Defendant, v.GEORGETOWN HOMES, INC., Appellee-Plaintiff.

No. 45A03-9802-CV-44.

Court of Appeals of Indiana.

April 9, 1999.

James E. Foster, Funk & Foster, Hammond, Indiana, Attorney for Appellant.

Frank J. Koprcina, Merrillville, Indiana, Attorney for Appellee.

OPINION

SULLIVAN, Judge

Appellant, Dorothy Jean Cunningham(hereafter Cunningham), by this interlocutory appeal, challenges a decision of the trial court ordering pre-judgment possession of the property commonly known as 3827 Georgetown Court, Unit 48-D, Hammond, Indiana, to Georgetown Homes, Inc.(Georgetown) unless Cunningham posted a ten thousand dollar ($10,000.00) possessory bond.

On August 28, 1995, Cunningham paid $3,500.00 to become a member of Georgetown Homes, Inc., "a cooperative housing corporation," for the purpose of occupying Unit48-D.Georgetown and Cunningham executed an Occupancy Agreement on September 1, 1995, at which time Cunningham's possession of the unit began.The two parties also executed a Subscription Agreement, wherein Cunningham agreed to pay a monthly "carrying charge" of approximately $385.00 as her portion of the common expenses of the cooperative.Recordat 87, 101.

The Occupancy Agreement contains provisions which are not included in a typical residential lease but, rather, are indicative of an ownership interest in the unit.For instance, pursuant to the Occupancy Agreement, Cunningham was to pay a monthly maintenance charge, part of which included her share of the mortgage on the property, rather than a rental payment.Also, the Occupancy Agreement provides that if the unit is destroyed by fire, through no fault of Cunningham, and Georgetown chose not to rebuild the unit, then Georgetown would "redeem the membership of [Cunningham] and [ ] reimburse [her] for such loss as [s]he may have sustained."Recordat 92.As well, the Occupancy Agreement states that Cunningham is responsible for maintaining the expenses of her own unit, including the decorating and repairs or maintenance needed.

In an effort to define the relationship of Georgetown to its members as one of a landlord to a tenant, Georgetown includes the following provisions in its Occupancy Agreements:

"The Member hereby expressly waives any and all right of redemption in case he shall be dispossessed by judgment or warrant of any court or judge; the words 'enter', 're-enter' and 're-entry', as used in this agreement, are not restricted to their technical legal meaning, and in the event of a breach or threatened breach by the Member of any of the covenants or provisions hereof, the Corporation shall have the right of injunction and the right to invoke any remedy allowed at law or in equity, as if re-entry, summary proceedings and other remedies were not herein provided for.

The Member expressly agrees that there exists under this Occupancy Agreement a landlord-tenant relationship and that in the event of a breach or a threatened breach by the Member of any covenant or provision of this agreement, there shall be available to the Corporation such legal remedy or remedies as are available to a landlord for the breach or threatened breach under the law by a tenant of any provision of a lease or rental agreement."

Recordat 91(b).

Kristy Hutton, Cunningham's sister-in-law, testified that in January of 1997, she entered into a sub-lease with Cunningham, pursuant to which Hutton would pay $505.00 monthly to Cunningham to occupy Unit 48-D with her boyfriend and three children.Sub-leasing, without approval from the Board of Directors of Georgetown Homes, is prohibited by Georgetown.By letter dated March 4, 1997, Georgetown notified Cunningham that she was in violation of the Occupancy Agreement, which letter gave Cunningham ten days to cure the violation.Georgetown filed its Complaint for Ejectment, Damages and Termination of Occupancy Agreement on March 26, 1997.

The trial court heard evidence on the issue of prejudgment possession on three separate occasions, July 7, 1997, August 14, 1997, and October 22, 1997.On October 22, Georgetown filed a Motion to Set a Possessory Bond or Written Undertaking asking the court to require Cunningham to post a bond if she was to stay in possession of the unit.On December 17, 1997, without allowing Cunningham to contradict the evidence already presented by Georgetown, ¹the trial court ordered Cunningham to post a bond of $10,000.00, to be paid within ten days of that date, with immediate possession of the property going to Georgetown if Cunningham failed to post this bond.

Cunningham alleges several trial court errors, which we condense and restate as follows:

1) Did the trial court commit error by ordering possession of the unit to Georgetown, absent the foreclosure proceedings provided in Ind. TrialRule 69(C)andI.C. 32-8-16-1, et seq.

2) Did the trial court commit error by failing to follow the statutory scheme set forth I.C. 32-6-1.5-1, et. seq., in ordering pre-judgment possession of the unit to Georgetown.

Nature of the Parties' Relationship and Remedy for Breach ofOccupancy Agreement

Cooperative housing plans are sui generis: they are often referred to as "legal hybrids" because they contain elements of both property ownership and leasehold.In the typical cooperative housing situation, the member purchases stock in a non-profit cooperative association which owns or leases the real estate.The member will also execute a proprietary lease or occupancy agreement with the cooperative association, thereby acquiring the exclusive right to occupy a particular unit within the cooperative community.This occupancy agreement contains the rights of the members as well as rules and conditions of the community.Because each member of a cooperative pays a portion of the entire cost of maintaining the cooperative community, the whole community necessarily suffers when one member does not make her monthly payments.In order to determine the rights and remedies available to the parties for breach of an occupancy agreement, we first must determine the nature of the real estate relationship which exists between Cunningham (the member) and Georgetown (the cooperative association).Georgetown claims that the parties have a landlord and tenant relationship, pursuant to the Occupancy Agreement and, thus, that Cunningham has no equity in the unit and foreclosure procedures are unnecessary.Cunningham argues that she does have an equity interest in her unit and, thus, possession of her unit cannot be divested absent foreclosure proceedings.

No Indiana case has addressed the respective rights of the parties to a cooperative living situation, or what process a cooperative association must follow to dispossess a member of her unit.However, several other jurisdictions have addressed this issue and have come to differing conclusions.Some jurisdictions have found the relationship between a cooperative and its members to be that of landlord and tenant, to the extent that the cooperative may utilize summary procedures to remove a member from a unit.See e.g., Quality Management Services, Inc. v. Banker (1997) Ill.App., 291 Ill.App.3d 942, 226 Ill.Dec. 264, 685 N.E.2d 367;²Earl W. Jimerson Housing Company, Inc. v. Butler (1979) N.Y.App.Div., 102 Misc.2d 423, 425 N.Y.S.2d 924.Other jurisdictions have found that summary procedures are not adequate to protect the proprietary rights of the member, and, thus, the cooperative-member relationship is not a landlord-tenant relationship, in spite of what the parties label the relationship in the occupancy agreement.See e.g., Kadera v. Consolidated Cooperative of Scottsdale East, Inc. (1996)Ariz.Ct.App., 187 Ariz. 557, 931 P.2d 1067, review denied;Plaza Road Cooperative, Inc. v. Finn (1985)N.J.Super.Ct.App.Div., 201 N.J.Super. 174, 492 A.2d 1072.Finally, one jurisdiction has chosen to define the relationship based solely upon the express provisions of the Occupancy Agreement.SeeJordan v. Placer Holding Co. (1994)Ga.Ct.App., 213 Ga.App. 218, 444 S.E.2d 112.

Absent direction from our General Assembly, we decline to attempt to fit Cunningham's interest vis-a-vis Georgetown into either a landlord-tenant category or a property ownership category; she is neither the owner of the real estate nor is she a tenant of Georgetown, Inc. Cunningham is an owner of personal property, stock in the cooperative corporation....