must either find a purchaser himself or obtain the services of a broker to represent him. The purchaser of an apartment has full authority to make such changes in the decoration and arrangement of the individual apartment as he sees fit, subject only to the proviso against structural changes. Decorations and re-arrangements of individual apartments are done solely at the member-owner's expense, at his suggestion, and through decorators or contractors selected and paid by him.
Three-fourths of the members of the corporation are authorized by the Charter to sell, lease, exchange or mortgage the assets of the corporation under such terms and conditions as the Board of Directors believes is in the best interests of the corporation.
The Board of Directors, selected by the members, serves without any compensation.
In the light of the factors set forth above, the Court is of the opinion that the purchasers of cooperative apartments in the Broadmoor Apartments are in a much different status than tenants under a lease. In reaching this conclusion it is pointed out that the purchaser of an apartment obtains a perpetual right of occupancy in exchange for a capital investment, which cannot be considered a 'bonus' under the Rent Act. Ultimately, upon the discharge of the present encumbrances upon the title resulting from the purchase of the property by the cooperative, the apartment owners will pay only maintenance and operation costs. These and other factors outlined above are most important indicia of ownership. The substantial result of these indicia must be considered in addition to the form of the transaction which, of necessity, places the bare legal title in the cooperative corporation. See Stafford Owners, Inc., v. United States, 39 F.2d 743, 69 Ct.Cl. 475.
The plaintiffs, in their briefs, refer to the fact that the National Rent Control Acts, 50 U.S.C.A.Appendix, § 1881 et seq., in two separate enactments, contained provisions that required a specified percentage of the present tenants to participate in any plans to change apartment houses to cooperative undertakings. The National Rent Act is, as stipulated by counsel, not applicable to the District of Columbia, and the fact that Congress, in the enactment of the D.C. Rent Act, ignored the provisions incorporated in the National Acts relating to cooperative apartments, must have intended to omit them for any special consideration or requirements in the District of Columbia.
The plaintiffs contend that the sale by the defendants Bralove and Ernst of the apartment building to the Broadmoor Cooperative Apartments, Inc., was a scheme to evade the provisions of the Rent Act and to enable those defendants to make a substantial profit. This Court must point out that the restrictions of the D.C. Rent Act do not restrict profits upon sales of property, but apply only to rentals and leases. Hicks v. Bigelow, D.C.Mun.App., 55 A.2d 924.
Relative to the question of good faith in the transaction, as raised by the plaintiffs, it is pointed out that there is no question raised as to the good faith of the purchasers of apartments under the cooperative plan to obtain and use the purchased apartments as dwellings. The provisions of the D.C. Rent Act raising the question of good faith relates to the intention of the landlord to take 'immediate and personal use and occupancy' of the housing accommodation for his personal use. In purchasing the perpetual use and equity contracts the individual apartment purchasers' contracts provide that the purchase is for their personal use, and, as indicated, there is nothing before the Court to show lack of good faith on the part of any holder of a use-contract. The fact that the cooperative apartment plan may have the incidental effect of ousting present tenants-by-sufferance in possession, is not evidence of bad faith on the part of purchasers of individual apartments nor can such effect be, per se, construed as evidence of an intentional evasion of the Rent Act.
The plaintiffs contend that the defendant apartment purchasers, if not merely tenants under the Rent Act, then are, in the alternative, mere stockholders in a corporation and as such have no legal right to a specific item of the property of the corporation, i.e., an individual apartment. Upon this point attention is directed to the fact that the indicia of ownership as set forth above completely negatives the idea that these purchasers of individual apartments are stockholders. The cooperative corporation, holding bare legal title, has no stockholders. The corporation is a non-profit one which further negatives the suggestion of stockholder status. The principal factor influencing the Court in this conclusion, however, is the fact that the defendant apartment purchasers assume a specifically allocated portion of the mortgage indebtedness upon the property, which obligation is discharged as to principal and interest by monthly payments similar in nearly all respects to contractual obligations which the defendant purchasers would make had they bought a housing accommodation in the form of a detached residence rather than an apartment in a cooperative venture. This situation clearly distinguishes the status of the apartment purchasers from that of stockholders.
Applying all of these factors to the provisions of the D.C. Emergency Rent Act, the Court concludes that the defendant purchasers of the cooperative apartments, because of their proprietary rights, their voice in the management of the building, their voice in any proposed sale or mortgage of the property, plus the exclusive right to personal perpetual occupancy of an apartment as a dwelling, and the other 'indicia of ownership' set forth in this opinion, are landlords within the definition contained in the Act itself and are entitled, under the provisions of the Act, to the possession of the apartments purchased by them for their personal use and occupancy.
Several additional points require comment by the Court. While plaintiffs point out that the 'rent' paid by the purchasers of apartments must include the 1 percent capital assessment for initial operating capital, an estimated percentage of the individual purchase price, depreciation, etc., it is noted that Plaintiffs' Exhibit 6, consisting of a comparative table of rentals charged former tenants and the monthly assessments charged the owner occupants for the same apartments, contains 44 comparative sets of figures. Of these, 21 are at an actual cost to the owner-occupants of less than the rental price to tenants under the non-cooperative owners. The remaining 13 costs are at a higher figure for the new occupants than for the former occupants. Again emphasis must be placed on the fact that the monthly payment contains a substantial allocated amount for trust principal and interest.
The facts in the present case may be readily distinguished from the case of Woods v. Burg, D.C., 82 F.Supp. 242, 243, cited by the plaintiffs, where the Court found in a case involving cooperative apartments that 'some of the prospective purchasers were told that they were not entering into a binding contract for deed, but that they could default at any time they desired without any further obligation. In fact, some of them considered the transaction as one of rent rather than purchase'.
The current case is likewise distinguished from Soule v. McCluskey, Municipal Court, City of Los Angeles, filed August 17, 1948 (not yet reported) and Woods v. Murray, D.C., 80 F.Supp. 4, in that these cases involved sales of undivided interests in an entire apartment.
This decision, going to the merits of the case, negatives the necessity for the Court's ruling upon the several motions of the defendants. The Court, upon the basis of the plaintiffs' complaint and prayer for declaratory judgment, finds for the defendants in this action.