Two men have opened a medical marijuana dispensary in north Gilroy less than a month after the City Council effectively rejected their business application. While unlicensed, one of the owners said they don't need a license because the dispensary is a nonprofit - reasoning that several council members aren't buying.

Morgan Hill residents Batzi Kuburovich and Neil Forrest have been trying to start a cannabis collective in Gilroy since May and hit a major roadblock last month when the City Council voted 4-3 against creating a special ordinance to regulate marijuana dispensaries in Gilroy. The vote effectively nixed the application, but specified that the city should reconsider the idea in January.

Nonetheless, without Council or city approval, the store opened Monday at 1321 First St. - near Lana's Dance Studio and Togo's.

After entering the business's glass front door into a sterile lobby devoid of furniture except for a chair facing a window and counter, clients pass through another door into a waiting area lined with several chairs. There, they fill out a clipboard of paperwork, receive an oral briefing by Kuburovich on the rules and regulations of medical marijuana, and are searched by a security guard with a metal-detecting wand. Clients are escorted through two more doors before entering a large room lined on one wall with a glass counter topped with several varieties of cannabis - some of the 31 different types the dispensary sells, Kuburovich said.

"It's pretty mundane," said Eric Madigan of Toluca Lake, who was serving as the dispensary's ombudsman and handling its security issues.

About 40 people had patronized the collective as of 5:30 p.m. Monday, Kuburovich said.

Monday night, the sage green walls filled the dispensary with the aroma of fresh paint. Sixteen security cameras monitor every move the staff and clients make, he pointed out.

"Security is so tight," Kuburovich said.

Kuburovich, his wife, at least two other staff members, and two security guards operated the collective and conducted security checks inside.

The dispensary was originally slated to open near this location, but the dispensary proprietors have considered several other locations since May. No business license has been issued for the current location, City Administrator Tom Haglund wrote in an e-mail to council members. City staff planned to "visually confirm" the address Monday night and double check the business license database today. The police department also planned to investigate this morning, Haglund wrote.

In the meantime, residents have streamed to the dispensary.

John Suarez - a 53-year-old Gilroy resident with an amputated leg - uses a wheelchair to get around, and has traveled to Santa Cruz, Hayward and Oakland in the past to purchase medical marijuana for back pain and a broken pelvis.

"I think it's going to work out for me," he said of the collective.

Cassie Lopez, manager of Rock Zone next door to the dispensary, said she was happy to see MediLeaf open.

"It's a good idea," she said. "I think of it as any other pharmacy."

Although she said that the dispensary may bring in more business to Rock Zone - which contains rolling papers - she said she did not support the dispensary for that reason. Instead, she was happy that medical marijuana patients would not have to travel so far.

Similarly, a Togo's Eatery staff member, who identified himself only as Andy, said several people stopped by his business after patronizing the collective on Monday. He said he was content with the security at the facility, and that several of those customers noted that they no longer will have to travel to San Jose for medical marijuana.

"Some people consider it as a drug," he said. "I consider it as a medicine."

At least one Kern Avenue resident, on the other hand, was not enthused about the new neighbor, questioning how many patrons would actually need the pot for medicinal purposes.

"I'm just wondering how much truth there is with this medical marijuana deal," she said.

Kuburovich took offense that anyone would question the legitimacy of the dispensary's patient's needs.

"People are using fear and deceit to discredit what's being done," Kuburovich said.

The city has denied him a business license, he said, but his attorney advised him that he could set up shop because the collective is a not-for-profit and not a business.

Council members, however, had still more reservations about the dispensary.

Councilman Peter Arellano expressed surprise at the dispensary's opening, but said he supports the state law that allows for such clinics to exist. He has never prescribed marijuana for patients, but he knows that some doctors do so to help patients with chronic pain, he said.

On the other hand, Councilwoman Cat Tucker saw the opening as a blatant disregard for the City Council's wishes and of the law. She noted that Kuburovich said he wanted to open the dispensary in an open, honest manner, and she believed that Monday's opening flew in the face of that.

"This is clearly not coming in the front door or openly or honestly," she said.

She said the business does not adhere to federal law, and without a city ordinance, there is no way that the dispensary is able to legally operate.

State law permits medical marijuana dispensaries but federal law prohibits cannabis across the board. Without a local law, City Attorney Linda Callon said last month that staff are unable to process MediLeaf's business application. The applicants had argued they deserve due process in front of the planning commission, which can impose project-specific conditions on unorthodox business applications.

One of many cases winding its way through state courts came from the Second District Court of Appeals last month. The court upheld a Claremont city ban on dispensaries, a move which suggests cities can bar citizens from setting up shops that are specifically permitted by state laws. In addition, the Los Angeles County District Attorney announced last month that prosecutors would pursue hundreds of "over the counter" collectives in the area that exchange marijuana for cash - a sticky situation Santa Clara County Deputy District Attorney Steve Lowney told the council it should avoid by working with District Attorney Dolores Carr on any proposed ordinance.

While the proposed ordinance would have regulated store hours, security requirements and products, council members said they were swayed to vote against it by an outpouring of e-mails and phone calls from constituents. They also expressed concerns of a dispensary inviting legal interference from above.

Reporter Sara Suddes contributed to this article.