Kadera v. Superior Court In and For County of Maricopa

• Decision Date: 29 February 1996
• Docket Number: CA-SA,No. 1,1
• Citation: 187 Ariz. 557,931 P.2d 1067
• Parties: Krag KADERA and Erin Kadera, husband and wife, Petitioners, v. SUPERIOR COURT of the State of Arizona, IN AND FOR the COUNTY OF MARICOPA, The Honorable Mark Aceto, a judge thereof, Respondent Judge, CONSOLIDATED COOPERATIVE OF SCOTTSDALE EAST, INC., Real Party in Interest. 95-0265.
• Court: Arizona Court of Appeals

Page 1067

931 P.2d 1067

187 Ariz. 557

Krag KADERA and Erin Kadera, husband and wife, Petitioners, v. SUPERIOR COURT of the State of Arizona, IN AND FOR the COUNTY OF MARICOPA, The Honorable Mark Aceto, a judge thereof, Respondent Judge CONSOLIDATED COOPERATIVE OF SCOTTSDALE EAST, INC., Real Party in Interest.

No. 1 CA-SA 95-0265.

Court of Appeals of Arizona Division 1, Department E.

Feb. 29, 1996.

Reconsideration Denied Sept. 27, 1996.

Review Denied Feb. 26, 1997. ^*

[187 Ariz. 558] Theodore C. Jarvi, Tempe, and Cromwell & U'Ren by Stephen A. U'Ren, Tempe, for Petitioner.

Ayers & Brown, P.C. by Joseph M. Hillegas, Jr., Phoenix, for Real Party in Interest.

OPINION

GRANT, Judge.

Krag and Erin Kadera ("Petitioners") bring this special action asking this court to accept jurisdiction and determine whether a cooperative corporation may initiate summary proceedings against a cooperator-shareholder in an alleged breach of an occupancy agreement. For reasons that follow, we accept jurisdiction and grant relief.

SUMMARY OF FACTS AND PROCEDURE

On January 22, 1993, Petitioners purchased one share of stock in Consolidated Cooperative of Scottsdale East, Inc. ("Respondent"/"Respondent Corporation") from a former shareholder. Respondent is a non-profit corporation organized under Arizona law. Petitioners paid $21,000 for their share in Respondent Corporation. Respondent, however, claims it does not know how much Petitioners paid for their interest. This purchase gave Petitioners the right to live in Unit D-14 ("the Unit"), a three-bedroom residence.

At the time of purchase, Petitioners were required to sign a Beneficiary Designation Form which created a joint tenancy with the right of survivorship in the property. Furthermore, to sell or transfer their interest, Petitioners had to agree to follow the method prescribed in Respondent Corporation's published Policy for Transfer of Membership.

Upon taking possession of the Unit, Petitioners were bound by an Occupancy Agreement. Under the terms of the agreement, Petitioners were obligated to pay Respondent a $200.00 "monthly carrying charge." This amount represents Petitioners' one-twelfth proportionate share of Respondent Corporation's annual expenses. Although Respondent does not allege Petitioners have defaulted on any of their financial obligations, under the terms of the Occupancy Agreement, had Petitioners defaulted, they would have had their right to own and hold a membership in Respondent Corporation revoked. Moreover, by signing the agreement, Petitioners agreed that, if they were ever dispossessed by a court-entered judgment or warrant, they would waive their right of redemption. ¹

On July 20, 1995, Respondent gave Petitioners a written, seven-day Notice of Default, Intention to Terminate Agreement, and Demand for Possession of Premises. The notice, however, contains the wrong unit number. Petitioners' Unit identification is D-14; the Unit to which the notice repeatedly refers is B-15. The notice stated if after seven days the breach is not cured, Petitioners must immediately vacate the Unit or an eviction action would be brought against them.

On August 16, 1995, Respondent filed a forcible entry and detainer action in Superior Court under Arizona Revised Statutes Annotated ("A.R.S.") section 12-1171. In its complaint, Respondents allege Petitioners allowed a non-relative to reside in their unit and conducted a babysitting business from it. Both of these actions violated the non-financial terms of the Occupancy Agreement. Respondent does not claim Petitioners have ever failed to comply with their financial obligations to Respondent Corporation; nor does Respondent claim Petitioners have defaulted on their monthly carrying charges.

Petitioners filed a Motion to Dismiss the complaint arguing the trial court lacked subject matter jurisdiction to conduct a summary disposition proceeding against them pursuant to A.R.S. section 12-1171 et seq. On September 29, 1995, however, the trial court denied Petitioners' Motion to Dismiss, and entered an order scheduling a trial under the forcible entry and detainer statutes. On October 10, 1995, Petitioners filed this special action from that denial of dismissal. Petitioners and Respondent have stipulated to a stay of proceedings pending the outcome of this petition for special action.

DISCUSSION

We have jurisdiction to hear this special action pursuant to A.R.S. section 12-120.21(A)(4). We accept jurisdiction and grant relief on the grounds that the trial court is threatening to proceed without subject matter jurisdiction in excess of its authority. Ariz.R.P. Special Actions, Rule 3(b). Furthermore, Petitioners have no adequate remedy by appeal. Ariz.R.P. Special Actions 1.

The substantive issues presented in this special action are 1. Does the National Housing Act preempt the application of Arizona law where there is a breach by a cooperator-shareholder in a cooperative corporation?

2. Are summary dispossession proceedings appropriate in the residential housing cooperative context?

3. Does a cooperator-shareholder own a real property interest?

4. What are the remedies available to the cooperative corporation for breach?

I. FEDERAL PREEMPTION

Respondent cites Martin v. Villa Roma Inc., 131 Cal.App.3d 632, 182 Cal.Rptr. 382 (1982), arguing since Respondent Corporation is "subject to the terms of both a regulatory agreement with [Housing and Urban Development ("HUD") ] ² and the regulations and statutes enforced by that [agency]," we are bound by HUD's characterization of the relationship between Respondent Corporation and Petitioners as landlord and tenant. ³ See 12 U.S.C.A. § 170 et seq. We disagree. HUD characterizes this relationship for the narrow purpose of administering a national federal mortgage insurance program. This characterization does not prevent us from arriving at our own characterization. Because we find preemption inapplicable in this context, we are free to decide this issue independent of the National Housing Act and HUD.

Federal preemption of state law may be explicit or implicit. Arizona Farmworkers Union v. Phoenix Vegetable Distributors, 155 Ariz. 413, 416, 747 P.2d 574, 577 (App.1986). Preemption is mandated if Congress expressly reserves to itself the exclusive power to regulate a given area of law. Id. Preemption is also mandated if, in the absence of an express statutory provision, the structure and purpose of a federal statute impliedly preempts state law. Id. Congress' intention to preempt state law may be inferred from a statute in which "the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress" meant to occupy the regulatory field. California Federal Savings and Loan Association v. Guerra, 479 U.S. 272, 280-81, 107 S.Ct. 683, 689, 93 L.Ed.2d 613 (1987). The mere fact that Congress enacted a detailed regulatory scheme, however, does not by itself imply preemption of state remedies. English v. General Electric Co., 496 U.S. 72, 87, 110 S.Ct. 2270, 2279, 110 L.Ed.2d 65 (1990).

At issue here is section 1701j-3 of the National Housing Act which contains a clause expressly preempting due-on-sale prohibitions. ⁴ In the Act, Congress retains the exclusive power to preempt state laws prohibiting a lender from declaring secured sums due and payable if the interest securing the real property loan is sold or transferred without the lender's consent. Congress' retained ability to preempt state law in this area is therefore extremely limited. Thus, the Act's express preemption clause is not relevant to the issue now before us.

No implied preemption prevents us from defining and regulating the relationship between a cooperator and cooperative corporation. The National Housing Act was passed with a specific goal in mind: to promote home ownership by providing assistance to borrowers in the form of federal mortgage insurance. Congress intended to create a statutory financing mechanism and thereby occupy and regulate the field of federal mortgage insurance. The National Housing Act, then, is limited to this narrow function and purpose. State law must necessarily fill in the regulatory gaps created by the Act. Furthermore, as established above, the mere fact that the National Housing Act is an extremely detailed regulatory scheme does not per se imply preemption.

The question of Congressional intent is central to any analysis of preemption. Guerra, 479 U.S. at 280, 107 S.Ct. at 689. The analysis must begin "with the assumption that Congress did not intend to displace state law." Maryland v. Louisiana, 451 U.S. 725, 746, 101 S.Ct. 2114, 2129, 68 L.Ed.2d 576 (1981). Moreover, there is a presumption "against finding preemption of state law in areas traditionally regulated by the States." California v. ARC America Corp., 490 U.S. 93, 101, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989). Furthermore, the "narrowness and precision" with which Congress does preempt state law "cuts against an inference of a Congressional intention to preempt laws with a broad brush, and without express reference." Keams v. Tempe Technical Inst., Inc., 39 F.3d 222, 226 (9th Cir.1994). Thus, as the Supreme Court stated:

"[w]hen Congress has considered the issue of preemption and has included in the enacted legislation a provision explicitly addressing that issue, and when that provision provides a reliable indicium of congressional intent with respect to state authority, there is no need to infer congressional intent to preempt state laws from the substantive provisions of the legislation."

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 2618, 120 L.Ed.2d 407 (1992) (internal citations and quotation marks omitted).

Congress' intention in promulgating the National Housing Act was to further the goal expressed in Title 42 U.S.C. section 1441a(a): to realize "as soon as feasible ... the goal of a decent home and a suitable living environment for every...