Village Green Mutual Homes, Inc. v. Randolph

CATHELL, Judge. Petitioner, Village Green Mutual Homes, Inc. (Village Green), sought certiorari for review of an order of the Circuit Court for Prince George’s County affirming a District Court dismissal of petitioner’s claim for an “Order of Restitution of the possession of the leased premises” against respondent, Ms. Delores E. Randolph. The case originated in the District Court of Maryland, sitting in Prince George’s County, which ruled that petitioner’s Complaint and Summons against Tenant in Breach of Lease was improperly brought before the District Court. Ruling that the action did not involve a landlord-tenant matter, the District Court dismissed the case for lack of subject matter jurisdiction. 1 The circuit court, in ¹⁸² affirming the dismissal, agreed.

We granted petitioner’s writ of certiorari to answer one question: Are the landlord-tenant provisions set forth in Maryland’s Real Property Article applicable to the Occupancy Agreement between Village Green, a housing cooperative, and its member, [Ms.] Randolph, where the Agreement states that thereunder the parties^] relationship is that of landlord and tenant? We answer this question in the affirmative. Accordingly, we reverse the decision of the Circuit Court for Prince George’s County and remand the case to that court with instructions to reverse the judgment of the District Court of Maryland, Prince George’s County, and to remand the case to that court for trial. I. Facts & Background Village Green is a non-stock, cooperative housing corporation whose tenants are members of the corporation. 2 In order to occupy a unit in the cooperative, an individual must sign two agreements with Village Green: (1) a Subscription Agreement, which serves, in part, as an application to become a member of the cooperative; and (2) an Occupancy Agreement, which secures an actual apartment for occupancy.

Ms. Randolph entered into a Subscription Agreement with Village Green on August 3, 1970 and was subsequently approved for ¹⁸³ membership in the cooperative. On October 5, 1970, she entered into an Occupancy Agreement with Village Green for dwelling unit 132 located at 1527 Belle Haven Drive in Land-over, Maryland. On or about November 24, 1998, Village Green, in the District Court in Prince George’s County, filed a Complaint and Summons against Tenant in Breach of Lease for an “Order of Restitution of the possession of the leased premises” against Ms. Randolph for failure to pay sums due under the agreement. On December 15, 1998, the District Court judge, sua sponte, dismissed the Complaint on the basis that the matter was improperly before that Court. 3 Village Green filed a timely appeal to the Circuit Court in Prince George’s County.

That court affirmed the ruling of the District Court on January 5, 2000, reasoning that “[pjarties cannot by contract or otherwise confer jurisdiction on the [District] Court.” Petitioner filed a timely petition to this Court.

II

Discussion We hold that the relationship created by the occupancy agreement between Village Green and Ms. Randolph is subject, generally, to the landlord-tenant laws outlined in the Real Property Article of the Maryland Annotated Code. This Court has recognized that, generally, in Maryland, unless the relevant documents dictate otherwise, in actions involving the breach of occupancy agreements, the relationship of a housing cooperative to its member is that of landlord-tenant. Additionally, in making a determination whether an express writ ¹⁸⁴ ten landlord-tenant relationship exists between parties in a cooperative arrangement, the language and nature of the relevant agreements must be considered. “To determine the intent of the parties and the status created, it is necessary to look to ‘the writing between the parties, to the circumstances under which they were made, and to the matter with which they deal.’ ” Green v. Greenbelt Homes, Inc., 232 Md. 496, 504 , 194 A.2d 273, 277 (1963) (quoting 1915 16th St. Co-op. Ass’n v. Pinkett, 85 A.2d 58 (D.C.Mun.App.1951)).

The express wording of the agreement between the parties in the case sub judice which we will discuss, infra, clearly defines the relationship as landlord and tenant. A. Applicability of Landlord-Tenant Law, Generally In order to address the issue presented in the case sub judice, it will be helpful to first provide a general description of a cooperative housing corporation. Housing cooperatives have been in existence in the United States since the 1880’s. B.C. Ricketts, Annotation, Transfer of, and voting rights in, the stock of co-operative apartment association, 99 A.L.R.2d 236 , 237 (1965).

A purpose for housing cooperatives originally was “to provide dwellers in thickly settled urban communities with some of the indicia of home ownership, together with the accompanying convenience and security, while freeing them from a large measure of the burdens and responsibilities inherent in the ownership and maintenance of a private residence in a large city.” Id. at 237 . Maryland Code (1975,1999 RepLVol.), section 5-6B-01 (f) of the Corporations and Associations Article defines a “cooperative housing” corporation as- “a domestic or foreign corporation qualified in this State, either stock or nonstock, having only one class of stock or membership, in which each stockholder or member, by virtue of such ownership or membership, has a cooperative interest in the corporation.” 4 A ¹⁸⁵ cooperative housing corporation is a unique legal entity. As one court said, “Cooperative housing plans are sui generis[ 5 ]: they are often referred to as ‘legal hybrids’ because they contain elements of both property ownership and leasehold.” Cunningham v. Georgetown Homes, Inc., 708 N.E.2d 623, 625 (Ind.App.1999); see also Quality Management Services, Inc. v. Banker, 291 Ill.App.3d 942, 945 , 226 Ill.Dec. 264, 266 , 685 N.E.2d 367, 369 (1997) (“[A] cooperative is a ‘legal hybrid’ in that the member possesses both stock and a lease.”). It is important to recognize the relevant portions of this legal hybrid and how they affect the outcome of the case at bar.

This intertwined relationship can be described as follows: [O]wnership of a cooperative does not include individual fee simple title to a unit. Rather ... all cooperatives involve some form of undivided joint ownership by individual cooperators in the land and building or buildings that make up the complex.... Upon its formation, the cooperative corporation acquires either a fee simple title to or a long term lease on the complex.... The organizers of the cooperative determine how many shares of the cooperative’s own corporate stock are to be allocated to each living unit.

The allocation formula is usually designed so that the number of shares that are allocated to a particular living unit will be in ¹⁸⁶ the same proportion to the total number of shares as the value of that unit is to the value of the entire complex. A buyer of a unit in a cooperative acquires not an actual title to his respective unit but, rather, the ownership of the shares of the cooperative’s stock that are allocated to his specific unit. Therefore, a unit owner in a cooperative is, in reality, not a unit owner at all but rather a shareholder in the corporation that owns the complex in which the unit is situated. As a part of the cooperative agreement each shareholder, by virtue of being a shareholder, automatically becomes entitled to a proprietary lease to the specific unit to which his shares of stock are assigned.

It is this proprietary lease which in turn gives him the exclusive right to occupy his unit. Patrick E. Kehoe, Cooperatives and Condominiums 14 (1974) (emphasis added). See William M. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 2991.05 (perm. ed. rev.vol.1997) (“Generally, a cooperative apartment corporation owns the land and apartment building and its individual shareholders have the right to proprietary leases covering particular apartments, which are considered to be personal property rather than realty and under which the lessee-shareholder is in much the same position as any other tenant under the usual leasing arrangement.”) (footnotes omitted). We considered the nature of a cooperative housing corporation’s relationship with its shareholders in Green v. Greenbelt Homes, Inc., 232 Md. 496 , 194 A.2d 273 (1963).

In that case, which is factually similar to the case at bar, we addressed the question of whether a member of a cooperative housing corporation held the property as a leasehold or in fee simple. Ms. Green was a member and resident whose relationship with the cooperative was terminated by Greenbelt Homes, due to numerous violations of the contractual agreements. 6 Ms. Green ¹⁸⁷ argued that the provisions of the contract relating to termination were invalid. She contended that “the financial terms and the wording of the contract ... were sufficient indicia of ownership to classify her as an owner of real property rather than a holder of a leasehold interest.” Id. at 501 , 194 A.2d at 275 (footnote omitted). Ms. Green relied on our decision in Tudor Arms Apts. v. Shaffer, 191 Md. 342 , 62 A.2d 346 (1948).

In Tudor Arms, where this Court was construing the effect of a rent control act, we held that a lessee of a cooperative apartment unit was, for the purposes of the Federal Housing and Rent Act of 1947, an owner. Our holding was limited to that specific context. 7 Moreover, in Greenbelt Homes, we commented that our statement in Tudor Arms, that “the essence of the transaction is that in exchange for a capital investment, a prospective purchaser will obtain a right, under the proprietary lease, to occupy a particular unit for an indefinite period, during good behavior ” served to undermine Ms. Green’s argument. Greenbelt Homes, 232 Md. at 501, 194 A.2d at 276 (quoting Tudor Arms, 191 Md. at 348 , 62 A.2d at 348 ). We concluded that our holding in Tudor Arms, “instead of supporting [Ms. Green’s] contention that she was an owner and not a lessee, clearly indicates that in [such a case] — where the issue concerns the right of a member to occupy a dwelling unit after proof of her misconduct — the member of the cooperative corporation would be held to be a lessee rather than an ¹⁸⁸ owner.” Greenbelt Homes, 232 Md. at 501 , 194 A.2d at 275 .

We continued our analysis in Greenbelt by stating: “[I]n legal theory the corporation is distinct from its shareholders [or members], no one of whom has a right to receive legal title to any specific property of the corporation under the better-drawn plans, and it is necessary that this distinction be observed in order to carry out the purposes of the cooperative. The courts have recognized that the relation is that of landlord and tenant in allowing the corporation the usual remedies of a landlord against a tenant.” Id. at 503 , 194 A.2d at 276 (emphasis added) (alteration in original) (quoting 1 American Law of Property at 200 (Casner ed.1952)). We also find support for our rationale in the holdings of other state courts. California Coastal Comm’n v. Quanta Inv.

Corp., 113 Cal.App.3d 579, 597 , 170 Cal.Rptr. 263, 272 (1980) (“[T]he shareholder in a stock cooperative is a mere lessee, and stands in a landlord-tenant relationship to the corporation which owns the land.”); Clydesdale, Inc. v. Wegener, 372 A.2d 1013, 1015 (D.C.1977)) holding that “[T]he relationship between the operator of a cooperative apartment building and a stockholder-tenant is one of landlord and tenant, and that the right to continue in possession of any given unit depends upon compliance with the terms of the contract and lease.”); Jordan v. Placer Holding Co., 213 Ga.App. 218, 219 , 444 S.E.2d 112, 114 (1994) (Holding that “a landlord-tenant relationship exists in the context of housing cooperatives.”); Harper Square Housing Corp. v. Hayes, 305 Ill.App.3d 955, 962 , 239 Ill.Dec. 135, 141 , 713 N.E.2d 666, 672 (1999)(“[I]n a usual cooperative situation the relationship between the cooperative and its members is that of a landlord and tenant.”); Quality Management Services Inc. v. Banker, 291 Ill.App.3d 942, 947 , 226 Ill.Dec. 264, 267 , 685 N.E.2d 367, 370 (1997) (“[I]t makes sense that the cooperative should have access to the familiar and effective remedies available to a landlord against a delinquent tenant.”); 333-335 East 209th Street HDFC v. McDonnell, 513 N.Y.S.2d 935, 936 , 134 Misc.2d 1022, 1024 (N.Y.City Civ.Ct.1987) (“[I]t is well settled ¹⁸⁹ law that a proprietary lease is no different from any other type of lease, and the relationship between a shareholder-tenant and the co-op corporation is akin to that of landlord and tenant.”) 8 B. The Contract in the Case Maryland has long adhered to the law of objective interpretation of contracts. Auction & Estate Representatives, Inc. v. Ashton, 354 Md. 333, 340 , 731 A.2d 441, 444 (1999); Calomiris v. Woods, 353 Md. 425, 435 , 727 A.2d 358, 363 (1999); Adloo v. H.T. Brown Real Estate, Inc., 344 Md. 254, 266 , 686 A.2d 298, 304 (1996); State v. Attman/Glazer P.B. Co., 323 Md. 592, 604 , 594 A.2d 138, 144 (1991); see also Cloverland Farms Dairy, Inc. v. Fry, 322 Md. 367, 373 , 587 A.2d 527, 530 (1991). “In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.” Adloo, 344 Md. at 266 , 686 A.2d at 304 (quoting General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261 , 492 A.2d 1306, 1310 (1985)); see also Beckenheimer’s Inc v. Alameda Assocs. Ltd. Partnership, 327 Md. 536, 547 , 611 A.2d 105, 110 (1992) (holding that when interpreting ¹⁹⁰ contracts, “[a] party’s intention will be held to be what a reasonable person in the position of the other party would conclude the manifestations to mean.”). When interpreting the contractual relationship between a cooperative and its members, we concluded in Greenbelt that [a]n important factor in the maintenance of a