Cooperative Housing; Landlord and Tenants

Cunningham v Georgetown Homes, Inc, 708 NE2d 623 (Ind Ct App 1999).

Facts: Cunningham paid $3,500 to Georgetown to become a member of a "cooperative housing corporation" for the purpose of occupying a unit. Both parties entered into an Occupancy Agreement and Subscription Agreement where the plaintiff-member agreed to pay a monthly carrying charge to cover her portion of the common expenses of the cooperative. Cunningham sub-leased her unit without obtaining approval from the corporation, a violation of the Occupancy Agreement. Shortly thereafter, Georgetown filed a complaint for ejectment, damages, and termination of the Occupancy Agreement. Georgetown presented evidence to the trial court on three separate occasions in Cunningham's absence. The trial court ordered pre-judgment possession of the unit back to Georgetown unless Cunningham posted a $10,000 possessory bond. Cunningham appealed, alleging that the trial court erred in ordering possession of the unit back to Georgetown without foreclosure proceedings as provided in Ind. Trial Rule 68(C) and I.C. 32-8-16-1, and for failing to follow the rules established in I.C. 32-7-1.5-1 by ordering pre-judgment possession of a unit back to the corporation.

Holding: Vacated and remanded for further proceedings consistent with the court of appeals' opinions. The court of appeals first recognized that no Indiana case or statute has addressed the rights of parties in cooperative living relationships or what process a cooperative association must take to dispossess a member of his or her unit. The court found that a cooperative member is an owner of personal property with stock in the cooperative housing corporation and does have a vested right in the unit. That right cannot be forced to forfeiture based only upon a trial court's finding that the member breached the Occupancy Agreement. However, when a party joins a cooperative and signs an occupancy agreement with specific conditions, he or she is bound to those obligations. Additionally, since the member is neither an owner nor a tenant of the unit, neither statutory foreclosure nor forfeiture through an eviction procedure is an appropriate remedy to protect the interests of both parties. The court found that ejectment, pursuant to I.C. 32-6-1.5-1, is an appropriate remedy for removing a member in violation of the Occupancy Agreement from possession of the unit. However, in this case the trial court is limited to direct proceedings for the sale of the member's unit to adequately protect the member's interests. Finally, the court of appeals found that a trial court cannot enter a pre-judgment possession order in ejectment proceedings without allowing the member to present contradicting evidence.

ILLINOIS ANALYSIS: Generally, in Illinois a cooperative has elements of both real and personal property. There is no transfer of a fee interest to the unit "owner." The relationship between the cooperative member and the cooperative is largely determined by reading together the certificate of incorporation, the stock offering prospectus, the stock subscription agreement, and the proprietary lease. Sinnissippi Apartments v Hubbard, 448 NE2d 607 (2nd D 1983). For the Forcible Entry and Detainer Act to apply to cooperatives, the occupancy agreement executed by members of the cooperative corporation has to have sufficient inferences to a landlord-tenant relationship. Quality Management Services, Inc v Banker, 685 NE2d 367 (1st D 1997). A "mutual-ownership contract" signed by a member and a cooperative association does not necessarily create a landlord-tenant relationship, and so the cooperative's actions to terminate a member's rights are not covered within the Forcible Entry and Detainer Act. In this situation, the cooperative had given possessory rights to members based on ownership interests rather than lease agreements. Central Terrace Co-op v Martin, 569 NE2d 944 (2nd D 1991).

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