Title: FLAMM v REAL-BLT INC
Citation: N/A
Docket Number: 13029
State: Montana
Issuer: Montana Supreme Court
Date: November 26, 1975

No. 13029 I N THE SUPREME C O U R T O F T H E STATE O F M O N T A N A 1975 MEDA F T A M M , P l a i n t i f f and Respondent, RFAL -BLT , I N C . , d/b/a Ponderosa Acres, Defendant and Appellant. Appeal from: D i s t r i c t Court of t h e Thirteenth J u d i c i a l D i s t r i c t , Honorable Robert Wilson, Judge presiding. Counsel of Record: For Appellant: Kurth, F e l t and Speare, B i l l i n g s , Montana William J. Speare argued, B i l l i n g s , Montana For Respondent: Terry L. S e i f f e r t argued, 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 delivered t h e Opinion of the Court. This is an appeal from a f i n a l judgment of t h e d i s t r i c t court, Yellowstone County, granting a permanent injunction and declaratory judgment against defendant corporation. The injunc- t i o n prohibits defendant from evicting p l a i n t i f f from i t s housing u n i t without f i r s t complying with the due process protection of t h e F i f t h and Fourteenth Amendments of the United States Consti- t u t i o n , e i t h e r by court hearing o r s u f f i c i e n t administrative procedure, establishing good cause f o r the eviction. Defendant landlord i s a nonprofit corporation organized t o provide housing f o r low income and senior 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 Billings, Montana. Financing of t h e complex was through a 100% federally guaranteed mortgage pursuant t o 12 U. S.C. 5 1715L (d) (3). To receive the 100% federally insured mortgage, defendant was required t o and did sign a regulatory agreement. Defendant a l s o signed a Rent Supplement Contract with the Department of Housing and Urban Development (HUD). The l a t t e r contract allows defendant t o receive r e n t subsidies from the government on behalf of low income tenants. Together, these contracts bind defendant t o government regulations i n t h e areas of construction, design, management, maintenance, e l i g i b i l i t y of the tenants, content of the leases and amount of r e n t charged the tenants. The standard Federal Housing Administration (FHA) regula- t o r y agreement t h a t l i m i t s occupancy t o families of low o r moderate income, a s defined by t h e government was not required of the de- fendant corporation and t h i s provision was stricken, thereby allowing Ponderosa Acres t o admit tenants of i t s choice who were not involved with r e n t supplements. O n October 26, 1971, p l a i n t i f f rented the apartment involved i n t h i s action and entered i n t o a lease agreement. P l a i n t i f f quali- f i e d and received federal r e n t supplement. On September 26, 1974, defendant sent a notice of termination and notice t o q u i t t o p l a i n t i f f . The notice was i n accord with the FHA furnished lease, which 1 I provided t h a t Either party may terminate t h i s lease * fc by giving 30 days written n o t i c e i n advance t o the other party. f f The notice followed several e a r l i e r attempts by defendant t o c o l l e c t $11.38 from p l a i n t i f f for a broken window caused by lai in tiff's son. Prior t o the termination of the tenancy a s per the 30 day notice, p l a i n t i f f f i l e d her complaint t o r e s t r a i n defendant from evicting her on the grounds t h a t the F i f t h and Fourteenth Amend- ments t o the Constitution of the United States require defendant t o include i n the notice of termination reasons which would amount t o good cause and t h a t p l a i n t i f f should be e n t i t l e d t o a hearing t o e s t a b l i s h the existence of good cause. The d i s t r i c t court held t h a t defendant i s so intertwined and intermingled with the United States government and i t s agencies t h a t it cannot be c l a s s i f i e d a s a private landlord under the Montana s t a t u t e s pertaining t o unlawful detainer and i s subject t o the F i f t h and Fourteenth Amendments t o the United States Constitu- tion a s a matter of law f o r these reasons: 1) Defendant's acceptance of 100% federally guaranteed financing under l e g i s l a t i o n designed f o r the specific purpose of providing federal r e n t a l assistance t o the economically under- privileged. 2) Defendant's acceptance of r e n t supplements and subsidies i n behalf of e l i g i b l e low income tenants 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 ' s acceptance and execution of a regulatory agreement pertaining t o method of operation, form of leases, e l i g i b l e tenants, e t c . , with the Secretary of Housing and Urban Development. Defendant appeals from the d i s t r i c t court judgment. The issues presented for review concern whether the involve- menr o i the federal government i n defendant's business is s u f f i c i e n t ro remove i t s c l a s s i f i c a t i o n a s a private landlord. The United States Supreme Court i n Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 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 private a c t i v i t i e s t o make those a c t i v i t i e s governmental i n nature w i l l depend upon a close analysis of the f a c t s of each case. P l a i n t i f f r e l i e s heavily upon the F i r s t Circuit Court of Appeals case of McQueen v. Druker, 317 F.Supp. 1122, a f f ' d 438 F.2d 781, which held the landlord t o be within the scope of the 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. University Heights, Inc., 338 F.Supp. 374; and Colon v. Tompkins Square Neighbors, Inc., 294 F.Supp. 134. A s heretofore pointed out, a close analysis of the c i t e d cases reveals significant distinguishable f a c t situations of a substantive nature. In McQueen, McClellan and Colon the housing involved i n those cases had these additional government t i e s not found i n the i n s t a n t case: 1) The housing projects were b u i l t on land which was p a r t of an urban renewal project. 2) The c i t y o r s t a t e government gave the owners of the housing projects reduced tax r a t e s . 3) The d a i l y operations of the projects were regulated and supervised by c i t y , county and s t a t e - a s well a s federal agencies. 4) Occupancy of the projects was limited exclusively t o low o r moderate income people a s defined by the federal government. P l a i n t i f f further contends (a) t h a t defendant i s subject t o the requirements of the federal constitution because it i s performing a governmental function; (b) t h a t the announced policy 1 1 of t h e federal government is the 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 the goal 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 here under consideration i s designed t o a s s i s t private industry in 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.Ct. 486, 15 L ed 2d 373. McQueen has already been factually distinguished. Yarsh involved the r i g h t t o dis- t r i b u t e religious l i t e r a t u r e i n a company owned town contrary t o the wishes of the town's management. The United States Supreme Court found s t a t e action there. Evans involved a park created 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 the c i t y and l a t e r by private persons. The United States Supreme Court found i n f a c t , the operation and maintenance of the park had not changed hands. The Marsh and Evans "public function" doctrine has t o date not been applied t o f a c t s a s a r e i n the case before us, and we a r e not inclined t o expand t h a t doctrine. In 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 , Circuit Judge Coffin s t a t e d : 11 W e view our task of ' s i f t i n g f a c t s and weighing circumstances' a s one t o be done t o the end of determining when it is f a i r and reasonable t o hold an individual subject t o the same duties of observance of constitutional 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 subjection t o some regulation a r e the conditions of much of our s o c i e t a l l i f e . Neither 1 factor--or both together--is dispositive of s t a t e I 11 action . The receipt of federal benefits i n the form of mortgage insurance and r e n t supplements under 12 U. S.C. 51715L (d) ( 3 ) , with freedom t o s e l e c t the tenants remaining i n the landlord, does not make the defendant an agency of the federal government o r the s t a t e of Montana so a s t o require defendant t o accord the procedural due process which the F i f t h 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 a l s o analogous discussion: H a m v. Holy Rosary Hospital, 165 Mont. 369, 529 P.2d 361, 31 St. Rep. 948, and cases c i t e d therein. A review of the authority indicates t h a t the tenant's position would be correct i f the landlord was public, i f urban renewal was involved, or i f the federal government's control was so complete a s t o c o n s t i t u t e t h i s landlord's a c t i v i t i e s t o be governmental i n nature. 12 U.S.C.A. 51715L (d)(3), and annotations thereto. Here the r e n t supplement contract and regulatory agreement do noL appear t o c r e a t e any more governmental control than would be expected i n any commercial transaction securing a s u b s t a n t i a l loan and receiving r e n t supplements of some proportion. Each agreement, one with FHA, and the other with HUD, contains provisions primarily t o protect the money being advanced by t h e United States. Nowhere a r e the elements of urban renewal, public housing, control over prospective tenants and the limitation of them t o "low income", special concessions by any governmental agency f o r reduced i n t e r e s t r a t e s , guaranteed return of investment, r e l i e f from any taxes e i t h e r s t a t e o r federal, o r acquisition of land by any governmental body. The judgment of the t r i a l c o u r t i s reversed and t h e cause dismissed. 4 ' 1 , Justices.