ATTORNEY FOR APPELLANT: ATTORNEY FOR APPELLEE:
JAMES E. FOSTER FRANK J. KOPRCINA
Funk & Foster Merrillville, Indiana
DOROTHY JEAN (GRUZELLA ) ) CUNNINGHAM, ) ) Appellant-Defendant, ) ) vs. ) No. 45A03-9802-CV-44 ) GEORGETOWN HOMES, INC., ) ) Appellee-Plaintiff. )
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."
Record at 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,See footnote 1 the 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. Trial Rule 69(C) and I.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.
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., 685 N.E.2d 367;See footnote
Jimerson Housing Company, Inc. v. Butler (1979) N.Y.App.Div., 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.,
931 P.2d 1067, review denied; Plaza Road Cooperative, Inc. v. Finn (1985)
N.J.Super.Ct.App.Div., 492 A.2d 1072. Finally, one jurisdiction has chosen to define the
relationship based solely upon the express provisions of the Occupancy Agreement. See
Jordan v. Pacer Holding Co. (1994) Ga.Ct.App., 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. However, the stock was purchased by Cunningham solely for the purpose of occupying unit 48-D. Thus, despite Georgetown's ownership of the real estate, we conclude that Cunningham does have a vested right with reference to the unit, which right she shall
not be forced to forfeit merely upon a finding by a trial court, if one is made, that she
breached the Occupancy Agreement.See footnote
Nevertheless, while we do recognize Cunningham's interest in the unit to be more than that of a tenant's in her apartment, and that such interest is subject to protection, we also recognize that the unique and symbiotic nature of cooperative living requires that a cooperative association be able to remove breaching members from its community expediently. Accordingly, when a member joins a cooperative, and signs an occupancy agreement, which contains certain conditions, she obligates herself to those conditions.See footnote 4 Requiring Georgetown to statutorily foreclose upon Cunnningham's interest would place upon it too great an onus. Also, the right of redemption, to which Cunningham would be entitled if Georgetown were required to foreclose upon her interest, would essentially render the conditions within the Occupancy Agreement unenforceable.
Because we conclude that Cunningham is neither an owner nor a tenant of the real estate, we hold that neither statutory foreclosure nor forfeiture through eviction is an appropriate remedy to protect the interests of both parties. Rather, because the relationship
is a legal hybrid, we think it appropriate that the remedy as well be of a hybrid nature. First,
although it was not correctly utilized in this case, we find that ejectment, pursuant to I.C. 32-
6-1.5-1, et. seq. (Burns Code Ed. Repl. 1995), is an appropriate remedy for removing a
violating member from possession of a unit in a cooperative community. However, as well,
we caution the trial court to remember that Cunningham does have a vested interest in
relation to the unit, and she cannot be forced to simply forfeit that interest in the event that
the court concludes in its final judgment that Cunningham did indeed breach the provisions
of the Occupancy Agreement. Instead, the trial court may direct proceedings for the sale of
Cunningham's interest which will insure that her rights are adequately protected.See footnote
Cunningham claims that the pre-judgment possession proceedings were conducted "contrary
to the statutory scheme found in I.C. 32-6-1.5-1, et seq." Appellant's Brief at 5. We agree.
Pursuant to I.C. 32-6-1.5-2, entitled "Hearing - Rights of defendant," the purpose a pre-
judgment possession hearing is to allow the defendant to controvert plaintiff's affidavit which
states why plaintiff is entitled to possession of the property, "or to otherwise show cause why
[s]he should not be taken from the property and plaintiff put in possession." In this case,
only Georgetown was given any opportunity to present evidence before pre-judgment
possession was granted, which process clearly contradicts the stated purpose of the hearing.See footnote
Further, I.C. 32-6-1.5-6 states:
"An order of possession with or without notice, except final judgment, shall not issue in plaintiff's favor until plaintiff has filed with the court a written undertaking in an amount fixed by the court and executed by a surety to be approved by the court to the effect that they are bound to the defendant in an amount sufficient to assure the payment of such damages as the defendant may suffer if the property has been wrongfully taken from him."
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