No. 13029
I N THE SUPREME COURT OF THE STATE OF M N A A
OTN
1975
MEDA FTAMM,
P l a i n t i f f and Respondent,
RFAL -BLT , I N C ,.
d / b / a Ponderosa A c r e s ,
Defendant and A p p e l l a n t .
Appeal from: D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a l D i s t r i c t ,
Honorable R o b e r t Wilson, Judge p r e s i d i n g .
Counsel o f Record:
For Appellant:
K u r t h , F e l t and S p e a r e , B i l l i n g s , Montana
W i l l i a m J. S p e a r e a r g u e d , B i l l i n g s , Montana
F o r Respondent:
T e r r y L. S e i f f e r t a r g u e d , B i l l i n g s , Montana
Submitted: September 26, 1975
Decided: NCV 2 6 1975
M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court.
T h i s i s an a p p e a l from a f i n a l judgment of t h e d i s t r i c t
c o u r t , Yellowstone County, g r a n t i n g a permanent i n j u n c t i o n and
d e c l a r a t o r y judgment a g a i n s t defendant c o r p o r a t i o n . The i n j u n c -
t i o n p r o h i b i t s defendant from e v i c t i n g p l a i n t i f f from i t s housing
unit w i t h o u t f i r s t complying w i t h t h e due process p r o t e c t i o n
of t h e F i f t h and Fourteenth Amendments of t h e United S t a t e s Consti-
t u t i o n , e i t h e r by c o u r t h e a r i n g o r s u f f i c i e n t a d m i n i s t r a t i v e
procedure, e s t a b l i s h i n g good cause f o r t h e e v i c t i o n .
Defendant l a n d l o r d i s a n o n p r o f i t c o r p o r a t i o n organized
t o provide housing f o r low income and s e n i o r c i t i z e n s . It i s
t h e owner of a 120 u n i t multi-family apartment complex known a s
Ponderosa Acres i n B i l l i n g s , Montana. Financing of t h e complex
was through a 100% f e d e r a l l y guaranteed mortgage pursuant t o
12 U. S.C. 5 1715L (d) ( 3 ) . To r e c e i v e t h e 100% f e d e r a l l y i n s u r e d
mortgage, defendant was r e q u i r e d t o and d i d s i g n a r e g u l a t o r y
agreement. Defendant a l s o signed a Rent Supplement C o n t r a c t w i t h
t h e Department o f Housing and Urban Development (HUD). The
l a t t e r c o n t r a c t allows defendant t o r e c e i v e r e n t s u b s i d i e s from
t h e government on b e h a l f of low income t e n a n t s . Together, t h e s e
c o n t r a c t s b i n d defendant t o government r e g u l a t i o n s i n t h e a r e a s
of c o n s t r u c t i o n , d e s i g n , management, maintenance, e l i g i b i l i t y o f
t h e t e n a n t s , c o n t e n t of t h e l e a s e s and amount of r e n t charged t h e
tenants. The s t a n d a r d F e d e r a l Housing Administration (FHA) r e g u l a -
t o r y agreement t h a t l i m i t s occupancy t o f a m i l i e s of low o r moderate
income, a s d e f i n e d by t h e government was n o t r e q u i r e d o f t h e de-
fendant c o r p o r a t i o n and t h i s p r o v i s i o n was s t r i c k e n , t h e r e b y allowing
Ponderosa Acres t o admit t e n a n t s of i t s c h o i c e who were n o t involved
w i t h r e n t supplements.
O October 26, 1971, p l a i n t i f f r e n t e d t h e apartment involved
n
i n t h i s a c t i o n and e n t e r e d i n t o a l e a s e agreement. Plaintiff quali-
f i e d and r e c e i v e d f e d e r a l r e n t supplement. On September 26, 1974,
defendant s e n t a n o t i c e of t e r m i n a t i o n and n o t i c e t o q u i t t o p l a i n t i f f .
The n o t i c e was i n accord w i t h t h e FHA f u r n i s h e d l e a s e , which
provided t h a t 1I
E i t h e r p a r t y may t e r m i n a t e t h i s l e a s e * fc by
g i v i n g 30 days w r i t t e n n o t i c e i n advance t o t h e o t h e r p a r t y . ff
The n o t i c e followed s e v e r a l e a r l i e r a t t e m p t s by defendant t o
c o l l e c t $11.38 from p l a i n t i f f f o r a broken window caused by
lai in tiff's son.
P r i o r t o t h e t e r m i n a t i o n of t h e tenancy a s p e r t h e 30
day n o t i c e , p l a i n t i f f f i l e d h e r complaint t o r e s t r a i n d e f e n d a n t from
e v i c t i n g h e r on t h e grounds t h a t t h e F i f t h and F o u r t e e n t h Amend-
ments t o t h e C o n s t i t u t i o n of t h e United S t a t e s r e q u i r e defendant
t o i n c l u d e i n t h e n o t i c e of t e r m i n a t i o n r e a s o n s which would amount
t o good c a u s e and t h a t p l a i n t i f f should b e e n t i t l e d t o a h e a r i n g
t o e s t a b l i s h t h e e x i s t e n c e of good c a u s e .
The d i s t r i c t c o u r t h e l d t h a t defendant i s s o i n t e r t w i n e d
and i n t e r m i n g l e d w i t h t h e United S t a t e s government and i t s a g e n c i e s
t h a t i t cannot b e c l a s s i f i e d a s a p r i v a t e l a n d l o r d under t h e
Montana s t a t u t e s p e r t a i n i n g t o unlawful d e t a i n e r and i s s u b j e c t t o
t h e F i f t h and F o u r t e e n t h Amendments t o t h e United S t a t e s C o n s t i t u -
t i o n a s a m a t t e r of law f o r t h e s e r e a s o n s :
1) Defendant's a c c e p t a n c e of 100% f e d e r a l l y g u a r a n t e e d
f i n a n c i n g under l e g i s l a t i o n designed f o r t h e s p e c i f i c purpose of
p r o v i d i n g f e d e r a l r e n t a l a s s i s t a n c e t o t h e economically under-
privileged.
2) Defendant's a c c e p t a n c e of r e n t supplements and
s u b s i d i e s i n b e h a l f of e l i g i b l e low income t e n a n t s and s p e c i f i c a l l y
the p l a i n t i f f .
3) ~ e f e n d a n t ' sa c c e p t a n c e and e x e c u t i o n of a r e g u l a t o r y
agreement p e r t a i n i n g t o method of o p e r a t i o n , form o f l e a s e s , e l i g i b l e
t e n a n t s , e t c . , w i t h t h e S e c r e t a r y o f Housing and Urban Development.
Defendant a p p e a l s from t h e d i s t r i c t c o u r t judgment.
The i s s u e s p r e s e n t e d f o r review concern whether t h e i n v o l v e -
menr o i t h e f e d e r a l government i n d e f e n d a n t ' s b u s i n e s s i s s u f f i c i e n t
r o remove i t s c l a s s i f i c a t i o n a s a p r i v a t e l a n d l o r d .
The United S t a t e s Supreme Court i n Burton v. Wilmington
Parking A u t h o r i t y , 365 U.S. 715, 8 1 S.Ct. 856, 6 L ed 2d 45, noted
t h a t whether a s t a t e i s s u f f i c i e n t l y involved i n p r i v a t e a c t i v i t i e s
t o make t h o s e a c t i v i t i e s governmental i n n a t u r e w i l l depend upon
a c l o s e a n a l y s i s of t h e f a c t s of each c a s e .
P l a i n t i f f r e l i e s h e a v i l y upon t h e F i r s t C i r c u i t Court of
Appeals c a s e of McQueen v. Druker, 317 F.Supp. 1122, a f f ' d 438
F.2d 781, which h e l d t h e l a n d l o r d t o be w i t h i n t h e scope of t h e
F i r s t , F i f t h and Fourteenth Amendments. Likewise p l a i n t i f f c i t e d
and r e l i e s on McClellan v. U n i v e r s i t y Heights, I n c . , 338 F.Supp.
374; and Colon v. Tompkins Square Neighbors, I n c . , 294 F.Supp.
134. A s h e r e t o f o r e pointed o u t , a c l o s e a n a l y s i s of t h e c i t e d
c a s e s r e v e a l s s i g n i f i c a n t d i s t i n g u i s h a b l e f a c t s i t u a t i o n s of a
substantive nature.
I n McQueen, McClellan and Colon t h e housing involved i n t h o s e
c a s e s had t h e s e a d d i t i o n a l government t i e s n o t found i n t h e i n s t a n t
c a s e : 1 ) The housing p r o j e c t s were b u i l t on land which was p a r t
of an urban renewal p r o j e c t . 2) The c i t y o r s t a t e government gave
t h e owners of t h e housing p r o j e c t s reduced t a x r a t e s . 3) The
d a i l y o p e r a t i o n s of t h e p r o j e c t s were r e g u l a t e d and s u p e r v i s e d by c i t y ,
county and s t a t e - a s w e l l a s f e d e r a l a g e n c i e s . 4 ) Occupancy of
t h e p r o j e c t s was l i m i t e d e x c l u s i v e l y t o low o r moderate income
people a s d e f i n e d by t h e f e d e r a l government.
P l a i n t i f f f u r t h e r contends ( a ) t h a t defendant i s s u b j e c t
t o t h e requirements of t h e f e d e r a l c o n s t i t u t i o n because i t i s
performing a governmental f u n c t i o n ; (b) t h a t t h e announced p o l i c y
11
o f t h e f e d e r a l government i s t h e r e a l i z a t i o n a s soon a s f e a s i b l e
09 t h e g o a l of a decent home and s u i t a b l e l i v i n g environment f o r
every American family1', 42 U. S.C. 1441; and ( c ) t h a t t h e program
h e r e under c o n s i d e r a t i o n i s designed t o a s s i s t p r i v a t e i n d u s t r y i n
providing housing. For support p l a i n t i f f c i t e s McQueen; Marsh v.
Alabama, 326 U.S. 501, 66 S.Ct. 276, 90 L ed 265; Evans v. Newton,
382 U.S. 296, 86 S . C t . 486, 15 L ed 2d 373. McQueen has a l r e a d y
been f a c t u a l l y d i s t i n g u i s h e d . Yarsh involved t h e r i g h t t o d i s -
t r i b u t e r e l i g i o u s l i t e r a t u r e i n a company owned town c o n t r a r y t o
t h e wishes of t h e town's management. The United S t a t e s Supreme
Court found s t a t e a c t i o n t h e r e . Evans involved a park c r e a t e d pursuant
t o a t r u s t established i n a w i l l . The park was i n i t i a l l y operated
by t h e c i t y and l a t e r by p r i v a t e persons. The United S t a t e s
Supreme Court found i n f a c t , t h e o p e r a t i o n and maintenance of t h e
park had n o t changed hands.
The Marsh and Evans "public f u n c t i o n " d o c t r i n e has t o
d a t e n o t been a p p l i e d t o f a c t s a s a r e i n t h e c a s e b e f o r e u s , and
we a r e n o t i n c l i n e d t o expand t h a t d o c t r i n e .
I n McQueen v. Druker, 438 F.2d 781, 784, r e l i e d on by
p l a i n t i f f , C i r c u i t Judge Coffin s t a t e d :
11 e view our t a s k of
W ' s i f t i n g f a c t s and weighing
c i r c u m s t a n c e s ' a s one t o be done t o t h e end o f
determining when i t i s f a i r and r e a s o n a b l e t o hold
an i n d i v i d u a l s u b j e c t t o t h e same d u t i e s o f
observance of c o n s t i t u t i o n a l r i g h t s a s a r e imposed
on a governmental u n i t . Mere r e c e i p t of f i n a n c i a l
subsidy and s u b j e c t i o n t o some r e g u l a t i o n a r e t h e
c o n d i t i o n s of much of our s o c i e t a l l i f e . N e1i t h e r
f a c t o r - - o r both t o g e t h e r - - i s d i s p o s i t i v e of s t a t e
.
a c t i o n I 11
The r e c e i p t of f e d e r a l b e n e f i t s i n t h e form of mortgage
insurance and r e n t supplements under 12 U. S.C. 51715L (d) ( 3 ) , w i t h
freedom t o s e l e c t t h e t e n a n t s remaining i n t h e l a n d l o r d , does
n o t make t h e defendant an agency of t h e f e d e r a l government o r t h e
s t a t e of Montana s o a s t o r e q u i r e defendant t o accord t h e procedural
due process which t h e F i f t h and Fourteenth Amendments demand o f
f e d e r a l government. McGuane v. Chenango Court, I n c . , 431 F.2d
1189, (2d C i r . ) , C e r t . denied 401 U.S. 994, 91 S . C t . 1238, 28 L ed
2d 532. See a l s o analogous d i s c u s s i o n : Ham v. Holy Rosary H o s p i t a l ,
165 Mont. 369, 529 P.2d 361, 3 1 S t . Rep. 948, and c a s e s c i t e d
therein.
A review of t h e a u t h o r i t y i n d i c a t e s t h a t t h e t e n a n t ' s
p o s i t i o n would be c o r r e c t i f t h e l a n d l o r d was p u b l i c , i f urban
renewal was involved, o r i f t h e f e d e r a l government's c o n t r o l was
s o complete a s t o c o n s t i t u t e t h i s l a n d l o r d ' s a c t i v i t i e s t o be
governmental i n n a t u r e . 12 U.S.C.A. 51715L ( d ) ( 3 ) , and a n n o t a t i o n s
thereto.
Here t h e r e n t supplement c o n t r a c t and r e g u l a t o r y agreement
do noL appear t o c r e a t e any more governmental c o n t r o l than would
be expected i n any commercial t r a n s a c t i o n s e c u r i n g a s u b s t a n t i a l
loan and r e c e i v i n g r e n t supplements of some p r o p o r t i o n . Each
agreement, one w i t h FHA, and t h e o t h e r w i t h HUD, c o n t a i n s p r o v i s i o n s
p r i m a r i l y t o p r o t e c t t h e money being advanced by t h e United S t a t e s .
Nowhere a r e t h e elements of urban renewal, p u b l i c housing, c o n t r o l
over p r o s p e c t i v e t e n a n t s and t h e l i m i t a t i o n o f them t o "low
income", s p e c i a l concessions by any governmental agency f o r reduced
i n t e r e s t r a t e s , guaranteed r e t u r n of investment, r e l i e f from any
t a x e s e i t h e r s t a t e o r f e d e r a l , o r a c q u i s i t i o n of land by any
governmental body.
The judgment o f t h e t r i a l c o u r t i s r e v e r s e d and t h e
cause dismissed.
1
4' ,
Justices.