Quality Management Services v. Banker

                                             FIFTH DIVISION
                                             August   , 1997







No. 1-96-2103
                                     
QUALITY MANAGEMENT SERVICES, INC., )    Appeal from the
                                   )    Circuit Court of
     Plaintiff-Appellee,           )    Cook County.
                                   )
v.                                 )    No. 96 M1 706924
                                   )
SARVADAMAN and EILEEN BANKER,      )    The Honorable
                                   )    Raymond Funderburk,
     Defendants-Appellants.        )    Judge, Presiding.

 

     JUSTICE HOURIHANE delivered the opinion of the court:
     The sole issue on appeal is whether the Forcible Entry and
Detainer Act (Act) (735 ILCS 5/9-101, et seq. (West 1996))
applies to cooperatives.  We hold that it does and therefore
affirm the judgment of the circuit court.
     Defendants, Sarvadaman and Eileen Banker, are members of the
Rocky Ledge Cooperative, Inc. (Cooperative).  Pursuant to the
terms of an Occupancy Agreement, defendants occupied an apartment
in the Cooperative's building located at 7857-B South Shore Drive
in Chicago.  The Occupancy Agreement obligates defendants to pay
certain "monthly carrying charges" representing their
proportionate share of the Cooperative's operating expenses.
     Plaintiff, Quality Management Services, Inc., as agent for
the Cooperative, filed a forcible entry and detainer action
against defendants, seeking unpaid monthly carrying charges of
$2,503.25, plus attorney fees and costs.  The circuit court
entered an order of possession and money judgment in favor of the
Cooperative.  Defendants filed a motion to vacate the judgment
and dismiss the action, arguing that the Act does not apply to
cooperatives.  The circuit court denied the motion and this
appeal followed.  155 Ill. 2d R. 301.
                                 ANALYSIS
     Section 9-102(a) of the Act sets forth eight circumstances
under which an action for forcible entry and detainer may be
maintained.  Plaintiff asserts that its forcible action is
appropriate under subsection (4) which makes the Act applicable
to situations involving a leasehold.  735 ILCS 5/9-102(a)(4)
(West 1996); Central Terrace Co-Operative v. Martin, 211 Ill.
App. 3d 130, 132, 569 N.E.2d 944 (1991) (hereafter Central
Terrace).  Defendants argue that under subsection (8),
cooperatives are expressly excluded from the coverage of the Act. 
     Subsection (8) provides that an action for forcible entry
and detainer may be maintained "[w]hen any property is subject to
the provisions of a declaration establishing a common interest
community ***."  735 ILCS 5/9-102(a)(8) (West 1996).  Under
section 9-102(c)(1), "common interest community" is defined, in
relevant part, as "real estate other than a condominium or
cooperative". 735 ILCS 5/9-102(c)(1) (West 1996).  Citing Central
Terrace, defendants assert that because the statutory definition
of common interest community expressly excludes cooperatives, the
Act does not apply to cooperatives.  We disagree.
     Under defendants' construction of section 9-102(c)(1),
condominiums would also not fall within the coverage of the Act
since condominiums, like cooperatives, are excluded from the
definition of common interest community.  However, this result is
patently at odds with section 9-102(a) which specifically
provides that a forcible action may be maintained when property
is subject to the provisions of the Condominium Property Act. 
735 ILCS 5/9-102(a)(7) (West 1996).  We note, further, that
section 9-102(b) sets forth certain requirements which must be
satisfied before the Act is deemed applicable to a particular
common interest community.  Thus, by excluding condominiums and
cooperatives from the definition of common interest community,
section 9-102(c)(1) in effect excludes condominiums and
cooperatives from the requirements of section 9-102(b).  This is
not, however, tantamount to excluding cooperatives from the
coverage of the Act. 
     As to defendants' reliance on Central Terrace, although some
legal publishers have cited this case for the proposition that
cooperatives are excluded from the forcible statute[fn1],
Central Terrace does not so hold.  In Central Terrace, David
Martin, a member of the Central Terrace Co-Operative (CTC),
appealed from a judgment in favor of CTC on its complaint for
forcible entry and detainer.  The trial court, relying on this
court's earlier decision in Sinnissippi Apartments, Inc. v.
Hubbard, 114 Ill. App. 3d 151, 448 N.E.2d 607 (1983) (hereafter
Sinnissippi), found that a landlord-tenant relationship was
created by the cooperative lease agreement and thus CTC's cause
was properly brought under the forcible statute.  On appeal, this
court reversed.  We determined that Martin's relationship with
CTC did not appear to be the "usual" cooperative arrangement set
forth in Sinnissippi.  Martin executed only one agreement, a
"Mutual Ownership Contract", not a lease, which referred to
Martin as a member, not a lessee.  The contract provided that
"'perpetual use of each particular dwelling shall be delivered by
the corporation to the member in the form of a membership
certificate.'"  Central Terrace, 211 Ill. App. 3d at 133. 
Further, the bylaws stated that the corporation was formed for
the purpose of owning residential property on a cooperative
basis, not leasing it.  Thus, we held that the trial court's
finding that a landlord-tenant relationship existed was against
the manifest weight of the evidence.
     In Sinnissippi, we considered whether a member of a
cooperative could be compelled by the board of directors to
accept additional shares in the cooperative because certain
improvements made by the member resulted in an additional
contribution to capital.  This court reviewed at length the
nature of a cooperative:
          "'Shares of stock *** are sold to persons who will
          occupy the housing units, the number of shares ***
          depending on the value of the particular apartment
          or unit.  "Proprietary" leases are issued by the
          corporation to the shareholders.  These leases
          contain provisions common to other leases.  ***
          Rent, which is subject to being increased or
          decreased, is based upon estimates of amounts
          necessary to pay operational costs and interest
          and installment of principal on any capital
          indebtedness.
                                    ***
               It would seem clear that the lease in the
          usual cooperative apartment organization creates
          the relation of landlord and tenant between the
          corporation and the shareholder-occupant.  Of
          course, the purpose of the organization is to
          approach individual home ownership as nearly as is
          possible in a situation where the only practical
          solution is common operation and management of
          many features, and the number of the occupant's
          shares are determined by the value of the
          apartment he occupies.  But in legal theory the
          corporation is distinct from its shareholders, 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.'" 
          (Emphasis added.)  Sinnissippi, 114 Ill. App. 3d
          at 156, quoting 1 American Law of Property sec.
          3.10, at 199-200 (1952).
We also observed that a cooperative is a "legal hybrid" in that
the member possesses both stock and a lease.  Although the
Sinnissippi case arose out of an action in small claims court,
rather than in the context of a forcible entry and detainer
action, we nonetheless find it persuasive.
     The proprietary lease, also referred to as an occupancy
agreement, is the basic document entitling a member of a
cooperative the right to occupy a particular dwelling unit and
setting out the member's rights in relation thereto.  As set
forth in Sinnissippi, the proprietary lease generally contains
many of the provisions found in long-term residential leases. 
See also 16 Illinois Jurisprudence, Property  29:64, at 573
(1994).  Thus, we agree with plaintiff that, in the usual
situation, the relationship between a cooperative and its members
is, in part, that of landlord and tenant.  The existence of such
a relationship brings cooperatives within the purview of section
9-102(a)(4) of the Act.   
     Although Central Terrace recognized that there may be some
instances where there are insufficient indicia of a landlord-
tenant relationship to bring a particular cooperative within the
coverage of the Act, we do not find that to be the case here. 
The Occupancy Agreement executed by defendants states that the
Cooperative was "formed for the purpose of acquiring, owning and
operating a cooperative ***, with the intent that its members
shall have the right to occupy the dwelling units thereof under
the terms and conditions hereinafter set forth."  The agreement
further states that "the Cooperative hereby lets to the Member,
and the Member hereby leases from the Cooperative," the
particular dwelling unit identified, and prohibits subletting
without the consent of the Cooperative.  The agreement also gives
the member the right "to have and to hold said Dwelling Unit ***,
renewable from year to year unless terminated under the terms of
this agreement."
     Additionally, under Article 11 of the Occupancy Agreement,
which governs defaults by members, the Cooperative has the right
to take any "suitable action or proceeding at law or in equity or
by any other proceedings which may apply to the eviction of
tenants or by force or otherwise, and to repossess the Dwelling
Unit ***."  Article 11 further provides:
               "The Member expressly agrees that there
          exists under this Occupancy Agreement a landlord-
          tenant relationship and that in the event of a
          breach or threatened breach by the Member of any
          covenant or provision of this agreement, there
          shall be available to the Cooperative such legal
          remedy or remedies as are available to a landlord
          for the breach or threatened breach under the law
          by a tenant or any provision of a lease or rental
          agreement."
While we recognize that defendants also have an ownership
interest in the Cooperative by virtue of their shares in the
corporate entity, as to the individual dwelling unit, only a
leasehold interest exists.  We see no reason to treat the
proprietary lease or occupancy agreement differently than other
leases for purposes of the Act simply because it has been paired
with an ownership interest in the corporation which holds title
to the real estate.  We note also that the term "lease", as used
in the Act, "includes every letting, whether by verbal or written
agreement."  735 ILCS 5/9-214 (West 1996).  
     Other jurisdictions which have considered the nature of the
relationship between a cooperative and its members have found
both the existence of a landlord-tenant relationship (see Earl W.
Jimerson Housing Co., Inc. v. Butler, 102 Misc.2d 423, 425 N.Y.S.2d 924 (N.Y. Sup. Ct. App. Term 1979)), and the absence of
such a relationship (see Kadera v. Consolidated Cooperative of
Scottsdale East, Inc., 931 P.2d 1067 (Ariz. Ct. App. 1996); Plaza
Road Cooperative, Inc. v. Finn, 201 N.J. Super. 174, 492 A.2d 1072 (1985)).  In other cases, the court has found controlling
the express terms of the occupancy agreement as authority for the
cooperative to terminate a member's rights for nonpayment of
fees.  Jordan v. Placer Holding Co., 213 Ga. App. 218, 444 S.E.2d 112 (1994).  
     In those cases where no landlord-tenant relationship was
recognized, the court focused on the proprietary rights of the
member, which a mere tenant does not enjoy, to occupy a
particular unit on a permanent and exclusive basis, and to have a
voice in the management and operation of the building, as well as
the selection of other members.  We are not persuaded, however,
that the member's proprietary rights are necessarily paramount to
the cooperative's interest in maintaining its viability.  The
cooperative is dependent for its existence on the "rent" received
from its members pursuant to the proprietary lease.  Thus, it
makes sense that the cooperative should have access to the
familiar and effective remedies available to a landlord against a
delinquent tenant.  
     Although defendants claim that the Cooperative should
properly bring its suit against defendants in the chancery court,
defendants do not identify the exact nature of such an equitable
proceeding.  Even if the Cooperative could maintain an action in
equity against defendants for non-payment of monthly carrying
charges, this would not preclude the Cooperative's right to bring
an action for forcible entry and detainer.
     Defendants raise various other issues on appeal, none of
which were raised below.  Accordingly, they are deemed waived for
purposes of appellate review.  LaSalle National Bank v. 53rd-
Ellis Currency Exchange, Inc., 249 Ill. App. 3d 415, 437, 618 N.E.2d 1103 (1993).  
     For the foregoing reasons, the judgment of the circuit court
is affirmed.
     AFFIRMED.
     [fn1]See 16 Illinois Jurisprudence, Property  29:65, at 574
(1994) ("Termination of an individual's membership in a co-
operative is not properly brought under the forcible entry and
detainer statute as co-operatives are expressly excluded from the
definition of common interest communities", citing Central
Terrace).  See also headnotes to Central Terrace, 211 Ill. App.
3d at 130 ("cooperatives are excluded from forcible entry and
detainer statute").