No. 13029 

IN THE 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: 

Terry L. Seiffert argued, Billings, Montana 

Submitted: September 26, 1975 

Decided: NCV 2 6 1975 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This is an appeal from a final judgment of the district 

court, Yellowstone County, granting a permanent injunction and 

declaratory judgment against defendant corporation. The injunction prohibits defendant from evicting plaintiff from its housing 

unit without first complying with the due process protection 

of the Fifth and Fourteenth Amendments of the United States Constitution, either by court hearing or sufficient administrative 

procedure, establishing good cause for the eviction. 

Defendant landlord is a nonprofit corporation organized 

to provide housing for low income and senior citizens. It is 

the owner of a 120 unit multi-family apartment complex known as 

Ponderosa Acres in Billings, Montana. Financing of the complex 

was through a 100% federally guaranteed mortgage pursuant to 

12 U. S.C. 5 1715L (d) (3). To receive the 100% federally insured 

mortgage, defendant was required to and did sign a regulatory 

agreement. Defendant also signed a Rent Supplement Contract with 

the Department of Housing and Urban Development (HUD). The 

latter contract allows defendant to receive rent subsidies from 

the government on behalf of low income tenants. Together, these 

contracts bind defendant to government regulations in the areas 

of construction, design, management, maintenance, eligibility of 

the tenants, content of the leases and amount of rent charged the 

tenants. The standard Federal Housing Administration (FHA) regulatory agreement that limits occupancy to families of low or moderate 

income, as defined by the government was not required of the defendant corporation and this provision was stricken, thereby allowing 

Ponderosa Acres to admit tenants of its choice who were not involved 

with rent supplements. 

On October 26, 1971, plaintiff rented the apartment involved 

in this action and entered into a lease agreement. Plaintiff qualified and received federal rent supplement. On September 26, 1974, 

defendant sent a notice of termination and notice to quit to plaintiff. 
The notice was in accord with the FHA furnished lease, which 

1 I provided that Either party may terminate this lease * fc by 

giving 30 days written notice in advance to the other party. ff 

The notice followed several earlier attempts by 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 filed her complaint to restrain defendant from 

evicting her on the grounds that the Fifth and Fourteenth Amendments to the Constitution of the United States require defendant 

to include in the notice 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 as a private landlord under the 

Montana statutes pertaining to unlawful 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 federal rental assistance to the economically underprivileged. 

2) Defendant's acceptance of rent supplements and 

subsidies in behalf of eligible low income tenants and specifically 

the plaintiff. 

3) ~efendant's acceptance and execution of a regulatory 

agreement pertaining to method of operation, form of leases, eligible 

tenants, etc., with the Secretary of Housing and Urban Development. 

Defendant appeals from the district court judgment. 

The issues presented for review concern whether the involvemenr oi the 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 L ed 2d 45, noted 

that whether a state is sufficiently involved in private activities 

to make those activities governmental in nature will depend upon 

a close analysis of the facts of each case. 

Plaintiff relies heavily 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 to be 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. As heretofore pointed out, a close analysis of the cited 

cases reveals significant distinguishable fact situations of a 

substantive nature. 

In McQueen, McClellan and Colon the housing involved in those 

cases had these additional government ties not found in the instant 

case: 1) The housing projects were built on land which was part 

of an urban renewal project. 2) The city or state government gave 

the owners of the housing projects reduced tax rates. 3) The 

daily operations of the projects were regulated and supervised by city, 

county and state - as well as federal agencies. 4) Occupancy of 

the projects was limited exclusively to low or moderate income 

people as defined by the federal government. 

Plaintiff further contends (a) that defendant is subject 

to the requirements of the federal constitution because it is 

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

11 of the federal government 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 the program 

here under consideration is designed to assist private industry in 

providing housing. For support plaintiff cites 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.Ct. 486, 15 L ed 2d 373. McQueen has already 
been factually distinguished. Yarsh involved the right to distribute religious literature in a company owned town contrary to 

the wishes of the town's management. The United States Supreme 

Court found state action there. Evans involved a park created pursuant 

to a trust established in a will. The park was initially operated 

by the city and later by 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" doctrine has to 

date not been applied to facts as are in the case before us, and 

we are not inclined to expand 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 to be done to the end of 

determining when it is fair and reasonable to hold 

an individual subject to the same duties of 

observance of constitutional rights as are imposed 

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 in the form of mortgage 

insurance and rent supplements under 12 U. S.C. 51715L (d) (3), with 

freedom to select the tenants remaining in the landlord, does 

not make the defendant an agency of the federal government or the 

state of Montana so as to require defendant to accord the procedural 

due process which the Fifth and 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, if urban 
renewal was involved, or if the federal government's control was 

so complete as to constitute this landlord's activities to be 

governmental in nature. 12 U.S.C.A. 51715L (d)(3), and annotations 

thereto. 

Here the rent supplement contract and regulatory agreement 

do noL appear to create any more governmental control than would 

be expected in any commercial transaction securing a substantial 

loan and receiving rent supplements of some proportion. Each 

agreement, one with FHA, and the other with HUD, contains provisions 

primarily to protect 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 for reduced 

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 trial court is reversed and the 

cause dismissed. 

1, 

4' 

Justices.