                                       No. 8 7 - 4 0 9 h
                     IN THE SUPREME COURT OF THE STATE OF MONTANA
                                           1988


ERNEST E. TOOKE and PEGGY TOOKE,
              Plaintiffs and Appellants,
          -VS-

THE MILES CITY PRODUCTION CREDIT ASSOCIATION,
a corporation, THE INTERSTATE PRODUCTION
CREDIT ASSOCIATION, a corporation, and ALBERT
VAN HAMLRYCK,
              Defendants and Respondents.


APPEAL FROM:             District Court of the Sixteenth Judicial District,
                         In and for the County of Carter,
                         The Honorable Peter L. Rapkoch, Judge presiding.
COUNSEL OF RECORD:
          For Appellant:
                  Gene Huntley argued, Baker, Montana
          For Respondent:
                  George W. Huss, Brown and Huss; Miles City, Montana
                  John D. Alexander, Ugrin, Alexander, Zadick & Slovak;
                  Great Falls, Montana
                  R. Alan Wight argued; Miller, Nash, Wiener, Hager &
                  Carlsen, Portland, Oregon
          For Amicus Curiae:
                  Brian J. Smith argued, (~eschamps), Missoula, Montana
                  Theodore Thompson argued, (Steretts), Havre, Montana
                  Warren C. Wenz argued, (R&C Farming & R5 Ranch), Great
                  Falls, Montana
                  Kenneth R. Dyrud argued, (Kenneth Sollid & Son) , Great
                  Falls, Montana
             I-   Martin S. King, (Western Mt. Prod. Credit), Missoula,
             nT
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        ,         Montana
     . i-
                  Brad L. Arndorfer, (Miller & D&M Farms), Billings,
     -1       .-
              L.? Montana

                                           Submitted:      September 13, 1988

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                                              Decided:     October 31, 1988
Filed :g      r
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      CO         52


                                           Clerk
Mr. Justice R.   C. McDonough delivered the Opinion of the
Court.

     This is an appeal from the Sixteenth Judicial District
Court, Carter County. The only issue is whether the District
Court properly dismissed Appellants Tookes' tort claim
against Respondents Miles City Production Credit Association,
Interstate Production Credit Association, and Albert Van
Hamlryck, (MCPCA), for lack of subject matter jurisdiction.
We reverse. (Production credit associations in general are
hereinafter referred to as PCA's, and the Federal Tort CI-aims
Act is hereinafter referred to as the FTCA).
     This Court has already issued one opinion affirming the
District Court.   That opinion appears at 45 St.Rep. 641.
Subsequent to issuing the first opinion this Court granted
Tookes' petition for rehearing, allowed further briefing by
the parties and their amici, and heard oral argument. Our
decision to reach a result opposite the first opinion issued
is based    on  reconsideration of    previously  submitted
authority, new authority, and recent federal district court
decisions which continue to restrict federal subject matter
jurisdiction in actions where PCA's attempt to invoke the
FTCA .    We hereby order the first opinion withdrawn and
substitute this opinion in its place.
      Tookes alleged that MCPCA's actions on the Tookes' loan
application amounted to breach of: fiduciary duty and
constituted constructive and actual fraud.    MCPCA moved to
dismiss the suit contending that under the Federal Tort
Claims Act subject matter jurisdiction for torts alleged
against PCA's rested exclusively in federal court.     See 28
U.S.C. § 1346(b) (1982). The District Court agreed citing In
the Matter of Sparkman (9th Cir. 1983), 703 F.2d 1097, and
Towery v. Willamette PCA (Dist. Ct. Ore. Sept. 19, 1983), No.
83-28BE. Towery relied on Sparkman to dismiss a tort claim
in state court against an Oregon PCA.
     On appeal, Tookes argue that Sparkman does not apply,
and that PCA's are exempted from FTCA coverage.         Their
arguments are premised on the fact that; (1)         Congress
authorized suit against PCA's in the Farm Credit System
legislation, (2)    Congress provided for an exemption for
PCA's in the FTCA, and (3) under the test set out in Lewis v.
United States (9th Cir. 1982), 680 F.2d 1239, PCA's are not
instrumentalities for purposes of the FTCA.
     Tookes present the further argument on rehearing that
our first decision in this case effectively denies tort
claimant's access to court for prosecution of claims against
PCA's because the Montana Federal District Courts continue to
deny federal jurisdiction of such causes of action.       See
Federal Land Bank of Spokane v. Stiles (D. Mont. March 1,
1988), No. CV 86-69-M-CCL (citing Sterrett v. Milk River PCA
(D. Mont. 1986), 647 F.Supp. 299).     In particular, Tookes
assert that the denial of a forum for their claim violates
their rights under the Montana Constitution, Article 11,
Section 16.
     MCPCA responds that: (1) Sparkman controls the extent of
the waiver of sovereign immunity granted by the Farm Credit
System legislation for tort claims against PCA's, (2) PCA's
were not exempted from FTCA coverage even though some of the
Farm Credit System's components are arguably exempted, and
(3) Sparkman provides the test for determining whether PCA's
are instrumentalities for purposes of the FTCA.
     MCPCA also responds to Tookes' argument on the rights
guaranteed by the Montana Constitution, Article 11, Section
16, by asserting that sovereign immunity protections fall
outside the constitutional guarantees.
     MCPCA   points   out    that   tort   claims  against
instrumentalities acting primarily as agents of the United
States must be pursued according to the FTCA. 28 U.S.C. S
2671 (1982). And tort claims cognizable under the sovereign
immunity waiver in the FTCA must be brought in federal
district court. 28 U.S.C. S 1346 (b) (1982)    .
     The   farm    credit  enabling    legislation  provides
instrumentality status for PCA's.   13 U.S.C. S 2091 (1982).
                                     1
And at least in regard to state taxation, Congress protected
PCA's by granting them instrumentality status. 12 U.S.C. §
2098 (1982). MCPCA argues that these statutes and Sparkman
demonstrate that PCA's are instrumentalities for purposes of
applying the FTCA.
     Tookes argue that despite the instrumentality status of
PCA's, they are subject to state court jurisdiction on tort
claims.   Tookes point out that Sparkman relied on general
principles of sovereign immunity rather than the FTCA to find
protection from punitive damages for PCA's.         The more
specific authority, Lewis, allows state court jurisdiction,
according to Tookes.     We agree with Tookes that Lewis
controls over Sparkman.
     In Sparkman the Ninth Circuit Court of Appeals reviewed
a decision from bankruptcy court where the debtor's
counterclaim in tort sought punitive damages from the
creditor PCA. The bankruptcy court refused to hold the PCA
liable for punitive damages. The Court of Appeals relied on
general   principles   of   sovereign   immunity   to   affirm   the
decision.    Sparkman, 703 F.2d at 1100.      The fact that
Sparkman relied on general principles of sovereign immunity
rather than the FTCA is evident by its citation of Painter v.
Tennessee Valley Authority (5th Cir. 1973), 476 F.2d 943.
Painter held that sovereign immunity protected the Tennessee
Valley Authority from punitive damages. Painter, 476 F.2d at
944.    However, Painter is not a FTCA case because the
Tennessee Valley Authority is specifically exempted from the
agencies and instrumentalities covered in the FTCA.       28
U.S.C. S 2680(1) (1982). Thus, Sparkman did not decide the
issue before us in this case.
     Nevertheless, Sparkman stands for the proposition that
current federal law grants some of the benefits of sovereign
immunity to PCA's. According to the Court,
     The sovereign, along with       its agencies and
     instrumentalities, enjoys immunity from suit unless
     it waives    that   immunity.     Federal Housing
     Administration v. Burr, 309 U.S. 242, 244, 60 S.Ct.
     488, 490, 84 L.Ed. 724 (1940).           A federal
     instrumentality, therefore, retains its immunity
     from punitive damages unless Congress explicitly
     authorizes liability for such damages.

                                                 .
Sparkman, 703 F. 2d at 1101 (emphasis in original)   The case
also makes it clear that the waiver of sovereign immunity as
found in the sue and be sued provision in the PCA enabling
legislation   does    not  waive   all   sovereign   immunity
protections.   Sparkman, 703 F.2d at 1101.     And generally,
waivers of sovereign immunity are to be strictly construed.
Library of Congress v. Shaw (1986), 478 U.S. 310, 106 S.Ct.
2957, 92 L.Ed.2d 250.
     On the other hand, however, we agree with Tookes that
sue and be sued provisions in general should be construed to
include actions sounding in tort, as well as those sounding
in contract. Keifer v. Reconstruction Finance Corp. (1939),
306 U.S. 381, 395-96, 59 S.Ct. 516, 520-21, 83 L.Ed. 784,
792-93. And unlike Shaw, Lewis considers the more specific
issue of whether a particular entity should be classified as
a government agency under 28 U.S.C. 5 2671, the applicable
provision of the FTCA.   Lewis, 680 F.2d 1240.
     More recent authority persuades this Court that Sparkman
should be distinguished, and Lewis should be applied in favor
of Tookesl argument. In the case of In re Hoag Ranches (9th
Cir. May 19, 1988), No. 87-2461, the Court considered the
status of PCA1s to determine whether they should be
considered government agencies under Rule 4 (a)(1), F.R.App.
P. Rule 4(a)(l) allows government agencies 60 days to file a
notice of appeal, while private parties are allowed only 30
days.    The Court in Hoag Ranches refused to allow the
appealing PCA agency status under Rule 4 (a)(I) reasoning as
follows:

         Considering the history and current status of
    PCA1s, we conclude that they are not government
    agencies within the meaning of Rule 4(a) (1). We
    recognize that some factors weigh in favor of
    finding agency status. PCA's undoubtedly further a
    government interest in improving the well-being of
    American farmers and ranchers, and the government
    was extensively involved in their establishment.
    At one time it was also actively involved in
    supervising PCA activities.
         We also take note of decisions suggesting that
    PCA1s are, for some purposes, arms of the
    government.   In Schlake v. Beatrice Prod. Credit
    Assln the court found- that because of the
    government's pervasive involvement in the creation
    and operation of PCA1s, PCA action was a colorable
    basis for jurisdiction in an action alleging a
    fifth amendment violation. 596 F.2d 278, 281 (8th
    Cir. 1979). We ourselves have found that PCA1s are
    immune from punitive damages based on their status
    as federal instrumentalities. In re Sparkman, 703
    F.2d 1097, 1101 (9th Cir. 1983).
         However, since these cases were decided, the
    government has withdrawn from management of PCA
    operations and has taken additional steps to
    establish PCA1s as private entities.   The role of
    the Farm Credit Administration has been changed
    from supervisor to arms-length regulator.     PCA1s
    are now privately owned, organized and operated;
    the government has no proprietary interest. These
     changes suggest that PCA's, as they now stand, are
     not government agencies.
Hoag Ranches, slip op. at 5627.
     The method for determining PCA agency status in
Hoag Ranches follows along the       same lines used      for
determining FTCA coverage for federal reserve banks in Lewis.
For example, in Lewis the Court considered; (1) whether the
federal government controlled the entity's detailed physical
performance and day to day operations, (2) whether the entity
was an independent corporation, (3) whether the government
was involved in the entity's finances, and (4) whether the
mission of the entity furthered the policy of the United
States. In Hoag Ranches each of these factors was addressed,
and except for the issue of whether the mission of PCA's
furthers U.S policy, the factors weighed for finding no
agency status.
     Similarly, in South Central Iowa PCA v. Scanlan (Iowa
1986), 380 N.W.2d 699, the Court found that application of
the Lewis test lead to the conclusion that PCA's could not
claim agency status:

         In Lewis the court followed the approach
    suggested in Orleans to determine whether federal
    reser~lebanks were federal instrumentalities within
    the meaning of the FTCA.           The Lewis court
    considered several factors:     whether the federal
    government    controlled    the     daily   physical
    performance of reserve banks; whether the bank in
    question was an independent corporation; whether
    the government was involved in the bank's finances;
    and whether the mission of the bank furthered the
    policy of the United States.        Lewis, 680 F.2d
    1240-41.     Applying these factors the court
    determined that the federal reserve bank was not a
    federal instrumentality for purposes of the FTCA.
         We believe that application of those same
    factors in this case reveals that PCA's are
    essential-ly nongovernmental, independent entities
     which Congress did not intend the FTCA to cover.
     Like federal reserve banks, PCA's are privately
     owned.   Each PCA sells stock to obtain capital;
     however, only individual borrowers can purchase
     shares. 12 U.S.C. § 2094(b). Each PCA is operated
     by an independent board of directors. 12 U.S.C. § §
     2092, 2093.   South Central employees are neither
     federal employees nor      supervised by   federal
     employees.
Scanlan, 380 N.W.2d at 701.       The authority provided by
Scanlan, and the new authority provided by Hoag Ranches,
leads this Court to conclude that PCA's are not FTCA agencies
under the test from Lewis.
     MCPCA argues that Hoag Ranches does not apply to the
case at bar because the Court in Hoag Ranches relied in part
on the 1985 amendments to the Farm Credit Act which made the
Farm Credit Administration more of an "arms length regulator"
than a "hands on" supervisor.     Hoag Ranches, slip op. at
5627.   The case at hand arose prior to the amendments, and
thus Hoag Ranches does not apply, according to MCPCA.
However, in addition to the 1985 amendments, Hoag Ranches
recognized that:

    there are other factors which have always weighed
    against treating PCA1s as agencies. PCA1s are not
    referred to as agencies in either Title 12 or the
    legislative history, and they have no greater
    access to federal court than do other private
    corporations. When they do go to court, they are
    represented by private, rather than government,
    counsel.  ...Finally, Federal Land Banks, which are
    comparable to PCA's in many ways, are not
    considered government agencies.        Cotton, 410
    F.Supp. at 171.
Hoag Ranches, slip op. at 5627-28.    We are also convinced
that even prior to 1985, PCA1swere
     "privately   organized,    privately   owned,   and
     privately operated corporation[s], albeit federally
     chartered."
United States v. Haynes (M.D. Tenn. 1985), 620 F.Supp. 474,
477 (quoting Sparkman, 703 F.2d at 1102 n. 1 (Fryer J.,
dissenting)) .
     Moreover, the 1959 amendments to the Farm Credit Act
removed federal ownership and control of the Farm Credit
System. See Sterrett v. Milk River PCA (D. Mont. 1986), 647
F.Supp. 299, 302 (citing House Rep. No. 287, 86th Congress
lst, Sess. 1, reprinted - [I9591 U.S. Code Cong. & Admin.
                          in
News 2123).    The lack of control, the most important factor
in Lewis, existed when this claim arose, and it weighs
heavily here for finding that MCPCA cannot claim agency
status under the FTCA.
     In addition to the authority provided by Lewis, this
Court is reluctant to leave Tookes without access to court
for pursuing their claims as guaranteed by the Montana
Constitution, Article 11, Section 16, which provides in part:


          Courts of justice shall be open to every
     person, and speedy remedy afforded for every injury
     of person, property, or character.

(Emphasis added). The constitutional guarantee under Section
16 mandates that the courts be "accessible to all persons
alike, without discrimination, at the time or times and the
place or places appointed for their sitting, . . .I'  Shea v.
North-Butte Mining Co. (1919), 55 Mont. 522, 533, 179 P. 499,
501. Conflicting decisions of the Montana Federal District
Courts and this Court deny Tookes a forum for their claim
even though there is no issue presently that their claim is
coqnizable in some court. In the face of these rulings, we
are loathe to deprive court access to plaintjffs in these
types of claims.     Thus, we reverse and remand for further
proceedings   consistent ~ri.th our   finding that. PCA's   may   be
sued outside the FTCA.




We Concur-
   n   , -/
