Martin v. Villa Roma, Inc.

Opinion

GRODIN, P. J.

Villa Roma, Inc., is a corporation formed to provide moderate and low-cost housing pursuant to section 221(d)(3) of title II of the National Housing Act (12 U.S.C. § 1701 et seq.). Its bylaws provide that when a person is terminated from membership in the corporation, the membership may be sold only to persons meeting certain eligibility requirements, and for a price which does not exceed an amount established by a formula. Appellant, whose membership was terminated through eviction, challenges these bylaws on the ground that they constitute an unreasonable restraint on alienation. She contends, in effect, that she has a property interest which she should be able to sell to whomever she likes, and at whatever price the market will bear. The trial court, in her action for declaratory relief, entered judgment declaring the challenged bylaw provisions to be valid and enforceable. We agree, and affirm.

Section 221 is “designed to assist private industry in providing housing for low and moderate income families” (12 U.S.C. § 1715/(a)). It

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does so through the insurance of mortgages. To be eligible for insurance under section 221(d)(3) (12 U.S.C. § 1715/(d)(3)(iii)), the property or project must be used “as a rental or cooperative project, and low and moderate income families or displaced families shall be eligible for occupancy in accordance with such regulations and procedures as may be prescribed by the Secretary.” Applicable regulations provide that a “cooperative mortgagor shall be a nonprofit cooperative ownership housing corporation approved by the Commissioner which restricts permanent occupancy of the project to the members of the corporation and which requires membership eligibility and transfers of membership in a manner approved by the Commissioner” (24 C.F.R. § 221.510(d)); and that the mortgagor “shall not permit occupancy except under an occupancy agreement or lease approved by the Commissioner” (24 C.F.R. § 221.533(a)).

Villa Roma, Inc., was incorporated May 3, 1963. Its articles of incorporation authorize it to enter into a regulatory agreement with the Federal Housing Commissioner for the purpose of obtaining mortgage insurance. The regulatory agreement provides, among other things, that “any membership shall be sold by the Mortgagor or by a member only in the manner and for the amount as provided in the By-Laws,” that “occupancy by a member .. . shall be permitted only upon the execution of an Occupancy Agreement,” and that no person may be approved for membership or tenancy unless that person “is a member of a low or moderate income family as defined by the Commissioner.”