No. 13029 INTHE SUPREME COURT OF THE STATE OF MONTANA 1975

MEDA FTAMM, Plaintiff and Respondent,

RFAL-BLT

## ,INC

# ., d/b/a Ponderosa Acres, Defendant and Appellant.
Appeal from: District Court of the Thirteenth Judicial District, Honorable Robert Wilson, Judge presiding. Counsel of Record: For Appellant: Kurth, Felt and Speare, Billings, Montana William J. Speare argued, Billings, Montana For Respondent: TerryL. Seiffertargued, Billings, Montana

Submitted: September 26, 1975 Decided: 

### NCV

### 26

### 1975Mr. Justice Gene B. Daly delivered the Opinion of the Court.
This 

### is an appeal from a finaljudgment of the district court, Yellowstone County, granting a permanent injunction and declaratoryjudgment against defendant corporation. The injunction prohibits defendant from evicting plaintiff from 

### itshousing unit without firstcomplyingwith the due process protection of theFifth and Fourteenth Amendments of the United States Constitution, eitherby court hearing or sufficientadministrative procedure, establishing good cause for the eviction. Defendant landlord 

### isa nonprofit corporation organized toprovide housing for low income and senior citizens. It 

### is the owner of a 120unit multi-family apartment complex known as Ponderosa Acres inBillings, Montana. Financing of thecomplex
was through a 100%federally guaranteed mortgage pursuant to 12U.S.C. 

### 5 1715L (d)

### (3). To receive the 100%federally insured mortgage, defendant was required toand did sign a regulatory agreement. Defendant also signed a Rent Supplement Contractwith the Department of Housing and Urban Development 

### (HUD). The lattercontract allows defendant toreceive rent subsidies from the government on behalf of low income tenants. Together, these contracts bind defendant togovernment regulations intheareas of construction, design, management, maintenance, eligibilityof the tenants, content of the leases and amount of rent charged the tenants. The standard Federal Housing Administration (FHA) regulatoryagreement that 

### limitsoccupancy to families of low ormoderate income, asdefinedby the government was not required of the defendant corporation and this provision was stricken, thereby allowing Ponderosa Acres toadmit tenants of 

### itschoicewho were not involved with rent supplements. On October 26, 1971, plaintiff rented the apartment involved in this action and entered intoa lease agreement. Plaintiff qualified and received federal rent supplement. On September 26, 1974, defendant sent a notice of termination and notice toquit toplaintiff.The notice was in accord with the FHA furnished lease, which

1I provided that Either party may terminate this lease

# * fc by giving 30 days writtennotice in advance to the other party. ff The notice followed several earlier attemptsby defendant to collect $11.38 from plaintiff for a broken window caused by 

### lai in tiff's son. Prior to the termination of the tenancy as per the 30 day notice, plaintiff filedher complaint to restrain defendant from evicting her on the grounds that the Fifth and Fourteenth Amendments tothe Constitution of the United Statesrequire defendant to include in thenotice of termination reasons which would amount to good cause and that plaintiff should be entitled to a hearing to establish the existence of good cause. The district court held that defendant 

### is so intertwined and intermingled with the United States government and 

### its agencies that it cannot be classified asa private landlord under the Montana statutes pertaining tounlawful detainer and 

### is subject to the Fifth and Fourteenth Amendments to the United States Constitution as a matter of law for these reasons: 1) Defendant's acceptance of 100%federally guaranteed financing under legislation designed for the specific purpose of providing federalrental assistance to the economically underprivileged. 2) Defendant's acceptance of rent supplements and subsidies inbehalf of eligible low income tenants and specifically the plaintiff. 3) ~efendant's acceptance and execution of a regulatory agreement pertaining tomethod of operation, form of leases, eligible tenants, etc., with the Secretary of Housing and Urban Development. Defendant appeals from the district courtjudgment. The issues presented for review concern whether the involvemenr oithe federal government in defendant's business is sufficient
ro remove its classification as a private landlord.The United States Supreme Court in Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 Led 2d 45, noted that whether a state

### is sufficiently involved inprivate activities tomake those activities governmental innaturewilldepend upon
a close analysis of the facts of each case. Plaintiff reliesheavily upon the First Circuit Court of Appeals case of McQueen v. Druker, 317 F.Supp. 1122, aff'd 438 F.2d 781, which held the landlord tobe within the scope of the First, Fifth and Fourteenth Amendments. Likewise plaintiff cited and relies on McClellan v. University Heights, Inc., 338 F.Supp. 374; and Colon v. Tompkins Square Neighbors, Inc., 294 F.Supp. 

### 134. Asheretofore pointed out, a close analysis of the cited
cases reveals significant distinguishable fact situations of a substantivenature. In McQueen, McClellan and Colon the housing involved in those
cases had these additional government tiesnot found in the instant
case: 1) The housing projects were built on land which was part of an urban renewal project. 2) The cityor stategovernment gave the owners of the housing projects reduced tax rates. 3) The daily operations of the projects were regulated and supervisedby city, county and state

# - aswell as federal agencies. 4) Occupancy of the projectswas limited exclusively to low or moderate income people asdefined by the federal government. Plaintiff further contends (a) that defendant 

### is subject to the requirements of the federal constitutionbecause it 

### is performing a governmental function; (b) that the announced policy

11 of the federalgovernment is the realization as soon as feasible 09 the goal of a decent home and suitable living environment for every American family1', 42 U.S.C. 1441; and (c) that theprogram hereunder consideration is designed toassist private industry in providing housing. For support plaintiff citesMcQueen; Marsh v. Alabama, 326 U.S. 501, 66 S.Ct. 276, 90 L ed 265; Evans v. Newton, 382 U.S. 296, 86 S.Ct. 486, 15 L ed 2d 373. McQueenhas alreadybeen factually distinguished. Yarsh involved the right to distribute religious literature in a company owned town contrary to thewishes of the town's management. The United States Supreme Court found stateaction there. Evans involved a park created pursuant to a trust established in a will. The park was initiallyoperated by the cityand laterby private persons. The United States Supreme Court found in fact, the operation and maintenance of the park had not changed hands. The Marsh and Evans "public function" doctrinehas to datenot been applied to facts as are in the case before us, and
we arenot inclined toexpand that doctrine. In McQueen v. Druker, 438 F.2d 781, 784, relied on by plaintiff, Circuit Judge Coffin stated:

11

We view our task of 'sifting facts and weighing circumstances' as one tobe done tothe end of determiningwhen it 

### is fairand reasonable tohold an individual subject to the same duties of observance of constitutional rights asareimposed on a governmental unit. Mere receipt of financial subsidy and subjection to some regulation are the conditions of much of our societal life. Neither 1 factor--or both together--is dispositive of state I 11 action

# . The receipt of federal benefits inthe form of mortgage insurance and rent supplements under 12U.S.C. 51715L (d)

### (3), with freedom to select the tenants remaining inthe landlord, does not make the defendant an agency of the federalgovernment or the stateof Montana so as torequire defendant to accord the procedural due process which the Fifthand Fourteenth Amendments demand of federal government. McGuane v. Chenango Court, Inc., 431 F.2d 1189, (2d Cir.), Cert. denied 401 U.S. 994, 91 S.Ct. 1238, 28 L ed 2d 532. See also analogous discussion: Ham v. Holy Rosary Hospital, 165 Mont. 369, 529 P.2d 361, 31 St. Rep. 948, and cases cited therein. A review of the authority indicates that the tenant's position would be correct if the landlord was public, ifurbanrenewal was involved, or if the federal 

### government's control was
so complete as toconstitute this landlord's activities tobe governmental innature. 12U.S.C.A. 51715L (d)(3), and annotations thereto. Here therent supplement contract and regulatory agreement do noL appear to create any more governmental control than would be expected inany commercial transaction securing a substantial loan and receiving rent supplements of some proportion. Each agreement, one with FHA, and the otherwith 

### HUD, contains provisions primarily toprotect the money being advanced by the United States. Nowhere are the elements of urban renewal, public housing, control
over prospective tenants and the limitation of them to "low income", special concessions by any governmental agency forreduced interest rates, guaranteed return of investment, relief from any taxes either state or federal, or acquisition of land by any governmental body. The judgment of the trialcourt 

### isreversed and the
cause dismissed. 

### 4' 1,

Justices.