Gvozdanovic v Woodford Corp.

• Decision Date: 19 May 2000
• Docket Number: C-990574,1
• Citation: 742 N.E.2d 1145
• Parties: MARINKO GVOZDANOVIC, Plaintiff-Appellant/Cross-Appellee vs. WOODFORD CORPORATION, Defendant-Appellee/Cross-Appellant APPEAL NOS.TRIAL NO.Date of Judgment Entry on Appeal:
• Court: Ohio Court of Appeals

MARINKO GVOZDANOVIC, Plaintiff-Appellant/Cross-Appellee vs WOODFORD CORPORATION, Defendant-Appellee/Cross-Appellant

APPEAL NOS. C-990574, C-990586

TRIAL NO. A-9603841

Date of Judgment Entry on Appeal: May 19, 2000

IN THE COURT OF APPEALS

FIRST APPELLATE DISTRICT OF OHIO

HAMILTON COUNTY, OHIO

OPINION

Civil Appeals From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed in Part, Reversed in Part and Cause Remanded

Finney, Bacon, & Stagnaro and Paul T. Saba, for Appellant/Cross-Appellee,

Kevin P. Roberts and James J. Condit, for Appellee/Cross-Appellant.

Please Note: We have sua sponte removed this case from the accelerated calendar.

PAINTER, Judge.

Ohio has no settled law concerning how a cooperative housing association should remove a tenant/shareholder when the shareholder has breached the lease.We attempt here to resolve the issue.In doing so, we have written rather more than is our custom, and stated the facts in more detail, because we believe it necessary in this unusual case.

This case involves the deteriorating relationship between a corporation and one of its shareholders under a cooperative housing arrangement.A cooperative is neither a freehold nor a condominium.It is a "multi-unit dwelling in which each resident has (1) an interest in the entity owning the building and (2) a lease entitling him to occupy a particular apartment within the building."¹

Private cooperative housing arrangements are a rare species in Ohio.No specific legislation governs them.The caselaw is also sparse.With these difficulties, we do our best to fit this "square peg" into the "round holes" provided by the legislature and the common law.

We hold that either forcible entry and detainer, under R.C. Chapter 1923, or ejectment, under R.C. 5303.03, may be used to evict a member of a housing cooperative.Though one method may be preferable given the circumstances of individual cases, they are both proper vehicles.

Though we affirm in part, we also remand, because the trial court's order provided an incomplete remedy to the cooperative association and failed to address the issue of the member's shares in the cooperative association.

I. Gvozdanovic's Purchase

AppelleeWoodford Corporation is the owner and operator of a housing cooperative.(Woodford's property consists of six apartment buildings and a two-story house, all in proximity.)The shareholders of Woodford are the cooperative members who reside in the housing units.Each member's stock is directly related to the particular apartment unit in which the member resides.The price paid by the member for each share of stock reflects the fair market value of the member's corresponding apartment unit.Upon purchasing stock in Woodford, a member enters into a lease for the apartment unit associated with the member's share of stock.

AppellantMarinko Gvozdanovic is a member shareholder in the cooperative, holding two shares of Woodford stock relating to the house, Building G, which is equivalent to two housing units.Gvozdanovic contracted to purchase the shares relating to Building G from a former member.In conjunction with the purchase, he applied for membership in the Woodford Corporation and his application was approved.Woodford, through its officers, executed closing documents in relation to Gvozdanovic's purchase, including a mortgage and promissory note with Kenwood Savings and Loan Association.To become a member of the cooperative, Gvozdanovic signed a lease for each unit comprising Building G and was given a copy of the Amended Code of Regulations of the Woodford Corporation and the House and Pool Rules.

II.Gvozdanovic's Lawsuit and Woodford's Counterclaim

On June 4, 1996, Woodford notified Gvozdanovic, as required under the applicable provisions of the leases, that he was in default of his lease agreements, and that unless the defaults were cured the agreements would be terminated July 15, 1996.On July 10, 1996, Gvozdanovic sued Woodford, alleging invalidity of the lease agreements, discrimination in violation of the Fair Housing Act of 1988, and harassment.Gvozdanovic sought compensatory damages, punitive damages, and a declaration that Woodford's house rules were not binding on him, and were contrary to law, to the extent that they allowed only a member's immediate family, aged eighteen or older, to reside in a housing unit.

Woodford answered and counterclaimed, asserting that Gvozdanovic had breached the leases, the cooperative's regulations, and its rules.It asserted that Gvozdanovic had been notified of the breach and had been informed that his lease agreements would be terminated unless he cured the breach, and that Gvozdanovic had failed to take corrective action.Woodford sought damages in an amount to be set forth at trial, the eviction of Gvozdanovic and anyone residing in his units, termination of Gvozdanovic's membership in Woodford, costs expended, attorney fees, and any other relief that the court deemed appropriate.

III.Gvozdanovic's Escrow of Mortgage and Maintenance Payments

At one point during the lawsuit, Gvozdanovic deposited the mortgage and maintenance payments that he owed to Woodford with the clerk of courts.Gvozdanovic alleged that Woodford had failed to maintain Building G as he had requested, and had discriminated against him by making defamatory remarks and by withholding services.Woodford applied for release of the monies, arguing that the mortgage and maintenance payments did not constitute rent under the Ohio Landlord-Tenant Act.²

The trial court ordered the release of the funds placed in escrow and further ordered that Gvozdanovic make all future payments directly to Woodford.The trial court identified both the original claims and the counterclaim as ones for breach of contract.It concluded that the Landlord-Tenant Act was inapplicable to cooperatives because members are not tenants as defined by the Act, but are owners, "making them a hybrid between landlord and tenant known as cooperator-residents."The trial court also focused on the fact that the leases did not contain the right to escrow funds.

IV.The Parties' Pretrial Motions

Woodford moved for summary judgment on both the complaint and the counterclaim.It explained that its counterclaim was "based on [Gvozdanovic's] failure to pay monthly carrying charges, keeping a pet dog, subletting to others, conducting auto sales and creating a nuisance from revving engines in the course of those sales, performing unauthorized repairs to the units owned by [him], performing unauthorized construction and wall[ing] off units, financing over and above value, [and] allow[ing] persons other than family to reside on the premises," all in violation of the leases and the cooperative's regulations.Woodford's motion was supported by the affidavit of Betty Morris, President of the Board of Trustees of Woodford, and by excerpts from Gvozdanovic's deposition.

Gvozdanovic moved for summary judgment on Woodford's counterclaim, asserting that Woodford had failed to provide him adequate notice as required under the leases, that Woodford had waived the alleged defects in Gvozdanovic's performance by accepting monthly payments under the leases, that any breaches had been cured or were moot, and that eviction through the Landlord-Tenant Act was improper.Gvozdanovic supported his motion with various documents, his affidavit, and excerpts from the depositions of Woodford's secretary and Betty Morris.

Woodford filed its memorandum in opposition to Gvozdanovic's summary-judgment motion with supporting affidavits of Woodford's previous and current treasurers, both of whom averred that Gvozdanovic's mortgage and maintenance payments had never been made in advance.

Gvozdanovic sought leave to amend his complaint.He argued that the amendment would eliminate some claims, clarify others, and add recently discovered claims against Woodford, i.e., withholding services and corporate waste.Woodford opposed the motion.

V.The Trial Court's Decision

The trial court denied Gvozdanovic's motion to amend his complaint and granted Woodford summary judgment on Gvozdanovic's claims.It also granted summary judgment to Woodford on its counterclaim "in all respects" except damages, which, the court declared, was a moot issue.(In its memorandum decision, the court explained that damages were moot because the contract did not provide for liquidated damages, and because there was no separate cause of action for damages.)

While the judgment entry purports to grant Woodford summary judgment in all respects except damages, the trial court's memorandum indicates that Woodford was not entitled to summary judgment as to the termination of Gvozdanovic's membership, costs, or attorney fees.The trial court stated in the memorandum decision that cooperative apartment complexes "are governed strictly by contract principles," that Gvozdanovic had defaulted under the parties' agreement, thereby providing Woodford with "the right to re-enter and repossess" Building G, and that only the litigation commenced by Gvozdanovic "[had] kept Woodford from exercising its rights."It also found that because the leases did not specify that Woodford's acceptance of Gvozdanovic's monthly mortgage and maintenance fees waived its right of re-entry and repossession, a waiver did not exist.

The trial court also determined that because the leases provided that in the event of default Woodford had the right to re-enter and to repurchase the apartment at book value or proceed with its sale, Gvozdanovic's equity interest would be restored to him.It further stated that "[t]he within action focuses solely on the restitution of possession of the premises, not Gvozdanovic's equitable interest, which may be addressed in a separate action."

It also concluded that to allow Gvozdanovic to amend his complaint would prejudice Woodford, because even though Gvozdanovic had had three years to amend,...