NO. 80-269 INTHE SUPREME COURT OF THE STATE OF MONTANA 1981

LEASEAMERICA CORPORATION OF WISCONSIN, Plaintiffs and Respondents,

VS

# . STATE OF MONTANA, Defendant and Appellant.

Appeal from: 

### District Court of the FirstJudicial

### District, In and for the County of Lewis and Clark. Honorable Gordon Bennett, Judge presiding. Counsel of Record: For Appellant: Hon. Mike Greely, Attorney General, argued, Helena,

Montana Richard Larson argued, Assistant Attorney General,

Helena, Montana For Respondents: Jardine, Stephenson, Blewett and Weaver, Great Falls,

Montana Jack Lewis argued, Great Falls, Montana

Submitted: February 17, 1981 Decided: 

## MAR

## 161989 Filed: 

## MAR

## 16 

# 9. y- 4 Clerk

### Mr. Justice Frank 

### B. Morrison, Jr., delivered the opinion of the Court.

The State appeals a Lewis & 

### Clark County DistrictCourt decision awarding plaintiff, Leaseamerica, a summary judgment. Leaseamerica cross-appeals for prejudgment and post-judgment interest. In 1967 the Legislature authorized the state attorney general to establish a law enforcement teletypewriter communications system (LETS)and to acquire the necessary equipment by'lease,purchase or other means. InMarch 1973, then Attorney General Robert Woodahl entered into a lease arrangement with Action Communications Systems,Leaseamerica's assignor, whereby the State agreed to lease the necessary equipment for a period of six years,paying $2,388 in 72 monthly payments. Immediately thereafter, Action assigned the lease to Leaseamerica, together with all rights to the leasepayments. The State made the lease payments from May 1973 to May 1977, when Attorney General Mike Greely notified Leaseamerica that itwas unilaterally terminating the lease. Notice of Action's sale, assignment, and transfer of all interest in the lease to Leaseamerica was not filed with the state auditor until shortly before this lawsuitwas instituted. At the end of the 72-month period, Leaseamerica took possession of the equipment. On February 9, 

### 1978, Leaseamerica commenced

an action seeking: (1) specific performance of the State's obligation to pay under the lease; (2)attorney fees pursuant to an indemnity provision in the lease; (3)prejudgment and post-judgment interest. The District Court entered judgment in favor of Leaseamerica for the leasepayments and attorney fees but denied ~easeamerica's claim for interest.The following issues arepresented inthisappeal: 1. 

### Is a six-year lease of a law enforcement communications system entered intoby the attorney general of the Stateof Montana inMarch 1973unenforceable as against the Stateunder the provisions of section 82-1918, R.C.M. 1947, which then limited the 

### termof those state contracts covered by the statute to three years? 2. 

### Is an assignee of the lessor of a law enforcement communications system prohibited by section 17-8-211(1), MCA, from filing an action against the State for specific performance of the lease agreement where notice of the assignment of the lessor's interest to the assigneewas not filedwith the stateauditor until just prior to the filing of the action? 3. 

### Is the Stateobligated topay attorney feeswhere a leaseprovided for indemnification of lessor, and the lessor's successors, for failureof the State toperform or comply with any of the terms of the agreement? 4. After adoption of the 1972Montana Constitution, 

### is the State obligated topay prejudgment and post-judgment interest on leasepayments from the due date of each payment? The leasehere 

### indispute was executed inMarch of 1973. Atthat 

### time, Ch. 19, of Title 82, entitled Purchasing Department and Agent, section 82-1918, R.C.M. 1947, provided: "Contracts limited to three years. No contracts shall be made for a longer period than three (3) years and such contract shallprovide for the 

## -- delivery of such articlesatsuch 

### times and in 

## - such quantities as 

## -- the purchasing agentmay determine." (Emphasis supplied.) The subject leasewas executed by the attorney general pursuant topower derived from sections 44-2-301, MCA, and 44-2-302, MCA. The former authorized establishment of a lawenforcement telecommunications system while the latter authorized the attorneygeneral to lease equipment necessary for accomplishing the objective. InHoltz v. Babcock (1963), 143Mont. 341, 389 P.2d 869, this Court held that lease--purchase contracts executed by the 

### statepurchasing agentwere subject to competitive bidding requirements of the statepurchasing statutes. Here the issues 

### are whether those same statutes and in particular, section 82-1918, R.C.M. 1947, limiting contracts to threeyears, applied (1)to leases which have no option ,and topurchase (2) toleases executed by the attorneygeneral. The questions have not previously been decided by this Court. Applicable rules of construction are: (1)Both the context of a statuteand the plainmeaning of 

### its terms can be considered indetermining legislativeintent. InMatter of Adoption of Smigaj (1977), 171Mont. 537, 540, 560 P.2d 

### 141.

(2) The 

### title to an actmay be looked to inconstruing the act. In

### re Coleman's Estate (1957), 132Mont. 339, 343, 317 P.2d 880. (3) Zn determining legislativeintenta court can resort tohistory of the statute. Dept. of Rev. v. Puget Mont. Sound Power & Light (1978), 

## , 587 P.2d 1282, 35 St.Rep. 1368. When passed in 1923, section 82-1918, R.C.M. 1947, limited contracts toone year. This statutewas ineffect when, in 1967, statutory authorization empowered the attorney general to lease telecommunications equipment. The one-year limitationwas changed to threeyears by amendment in 1971. Section 82-1918, R.C.M. 1947, as it existedwhen the present leasewas executed, was silentregarding leases. When theLegislature granted leasing power to the attorneygeneral, a limitation of years was not provided either by reference to the chapter covering purchasing agent or limited inCh. 2, Title 44, which established the system. The Legislature amended section 82-1918, in 1971, four years after the attorney general was authorized to lease telecommunications equipment; there was no legislativeattempt to apply theprovisions of section 82-1918 toTitle 44. Prior to the 1971legislative session, the attorney general had, on July 14, 1969, issued a formal opinion stating the prohibitions of section 82-1918, R.C.M. 1947, did not apply to state leases. The lease issuewas being discussed and was a subject of an attorney general's opinion when section 82-1918 was amended in 1971; yet the prohibitions



### werenot applied to leases. We arepersuaded by the following factors: (1)Section 82-1918, R.C.M. 1947, refers specifically to the purchasing agent, but 

### it does not refer to any other agents of state government. (2) Eection 82-1918 

### is a sectionunder Ch. 19, entitledPurchasing Department Agent. (3) Title44, giving the attorney general power to lease telecommunications equipment, does not 

### limitthatpower as to 

### time. (4) Section 82-1918 was amended in 1971, four years after the attorney general 

### was authorized to leasewithout limitation and two years after the attorney general gave an opinion that section 82-1918 did not apply to leases; yet no attempt was made by the Legislature to apply section 82-1918 to the attorney general's leasing power. We find section 82-1918, R.C.M. 1947, not applicable to leases executed by the attorney general pursuant to section 44-2-302, MCA.The Statecontends that failure of Leaseamerica or 

### its assignor torecord the lease assignment with the state auditorprior toFebruary of 1978 forecloses this action which was not instituteduntilFebruary 9, 1978. Section 17-8-211 (I), MCA, provides: "All transfers and assignments made of any claim against the state, or any part thereof or interest thereon, except ashereinafter provided, shallbe absolutely null and void and unenforceable against the stateunless the assignee thereof fileswritten notice of the assignment on such forms asmay be required by the stateauditor, together with a true copy of the instrument of assignment." (Emphasis supplied.) Paragraph No. 13of the subject lease stated: "Lessor may, without lessee's consent, assign this lease or any interest therein." The Stateknew of the assignment and made payments to the assignee Leaseamerica for a period of four years. The State's positionmust fail for atleast three

reasons. First, the statute applies toassignments of "claim" rather than assignments of contract. Anti-assignment statutes have historically been limited to liquidated debts. Explosive Chemical Co. v. William S. Gray & Co. (1925), 207 N.Y.Supp. 638. Secondly, the statute does not require filingwithin

a 

### timecertain and a filingwas eventuallymade with the auditor prior to instituting suiton February 9, 1978. Finally, the Statecan claim no prejudice as 

### it had actual notice of the assignment and made leasepayments to Leaseamerica for four years. Leaseamerica claims attorney feespursuant to a contractual provision with the State. The Statewas to indemnify the lessor for "legal expenses'' incurred as the result of any default upon the part of lessee, State of Montana. Section 18-1-404, MCA, provides:"Liability of state--1imi tation--costs. (1)The State of Montana shall be liable inrespect to any contract entered into in the same manner and to the same extent as

### a private individual under likecircumstances, except the State of Montana shall not be liable for interest prior to or after judgment or for punitive damages. "C2)Costsmay be allowed asprovided in 25-10-711. In allother cases, costs shallbe allowed inall courts to the successful claimant to the same extent as if the stateof Montana were a private litigant, except that such costs shall not include attorney's fees." Section 25-10-711, MCA, referred to in the above-quoted statute, provides for an award of reasonable attorney fees inthe event that the State's litigation 

### isdeemed tobe frivolous or 

### ispursued inbad faith. Neither of those factors existhere. A reading of these statutescompels the conclusion that liability for attorney fees can arise from contract but cannot be awarded as "costs" absent bad faithon the State's part.The Statehas relied on Tomten v. Thomas (1951), 125 Mont. 159, 232 P.2d 723, wherein this Court held that the word "expensen

### was synonymous with "costs". Therefore, argues the State, "legal expense" asdenoted inthe lease 

### is a cost and cannot be awarded against the Stateunless the State litigates inbad faith. Tomten v. Thomas, supra, was overruled by Callantv. Mont. Federal Land Bank of Spokane (1979), 

## , 593 P.2d 1036, 36 St.Rep. 824. Legal "expenses" arenot synonymous with "costs" but rather, when provided contractually, are treated as a special damage recoverable inaddition to the principal sum. Bovee v. Helland (1916), 52 Mont. 151, 156

We find the State liable for attorney fees under 

### its lease indemnity provision.Leaseamerica asserts that 

### it is entitled to interest on 

### itsjudgment despite the provisions of section 18-1-404(1), MCA, quoted above, which prohibits an award of interest against the State. Leaseamerica argues that section 18-1-404(1), MCA, 

### is inconsistentwith Article 2, Section 18 of the 1972 State Constitutionwhich provides that a governmental entity shall have "no immunity from suitor injury to a person or property." The DistrictCourt found that this language was intended to apply to tortbut not contract actions. We have reviewed the constitutional debate prior to the adoption of thisparticular section. The original draftof Section 18, Non-immunity 

## -- from Suit, provided: "The State and 

### its subdivision shall have no special immunity from suit." Delegate Habedank inthe Constitutional Convention moved to support an amendment which would add, following the words suit, the language "for injury to a person or property." Delegate Habedank, the sponsor of the amendment, revealed 

### itsintent inthe debate: "Limited as

### it

### is, for injury to a person orproperty, the Legislature 

### is still free tomake 

### it more open if they desire to do so in the future. Butwe at leasthave assured the people of the Stateof Montana that they can sue for negligent injury." Con.Con. Transcript TR. P. 5430, lines 10-14. Weagree with the District Court that the intent of the constitutional delegateswas to 

### limitnonimmunity to torts committed by the State. We find the statutory prohibition againstinterest in section 18-1-404(1), MCA, tobe constitutional. The State of Montana 

### isnot liable forprejudgment orpost-judgment interest. The judgment of the District Court 

### is affirmed.We 

### concur:

v 

### Justices

Mr. 

### Justice Daniel J. 

### Shea willfilea separateopinion later.

### Mr. 

### Chief Justice Frank I. 

### Haswell dissenting: I 

### respectfully dissent. The result reached by the majority may be an equitable accommodation, but inmy view it 

### is not the 

### law. At

### the 

### time the six-year lease of the equipment 

### was entered intobetween Leaseamerica and the Stateof Montana, our statuteprovided: "Contracts limited to three (3)years. No contracts shall be made for 

### a period lonqer than three (

### 3) 

### years, and such contkact shall-provide for the delivery of such articles at such times 

### and in such quantities as the purchasing agent may determine." Laws 

### of Montana (1971), Ch. 301, 

### S 2. A 

### lease is a contract. Here it 

### was made for a period of sixyears. Such a contract 

### was prohibited by the clear, unambiguous language of the statute. In construing a statute, the intention of the Legislature 

### is controlling. Section 1-2-102, MCA; 

### Haker v. Southwestern Railway Co. 

### (1978), 176Mont. 364, 369, 578 P.2d 724, 727, and



### cases cited therein; Dunphy v. Anaconda Co. 

### (1968), 151Mont. 76, 80, 438 P.2d 660, 662, and 

### cases cited therein. The intentionof the Legislaturemust firstbe determined from the plain meaning of the words used inthe statute, and if the meaning of the statute can be 

### so determined, courtsmay not go further and apply any othermeans of interpretation. Haker, supra, and 

### cases cited therein; Dunphy, supra, and 

### cases cited therein. Thus where the language of the statute 

### is plain, unambiguous, direct and certain, the statute speaks for itself and there 

### is nothing left forthe court to construe. Dunphy, supra, and 

### cases cited therein. In such case, 

### the function of thisCourt is 

### simply to 

### ascertain what in terms 

### or in substance is 

### contained inthe statute and not to insert what has been omitted. Section 1-2-101, MCA; 

### Stateex rel. Zander v. District 

### Court (1979), Mont

# .

, 591P.2d 656, 662, 36 St. Rep. 489, 496; Dunphy, supra, and

cases cited therein. In sum, it 

### is simply the duty of the Court 

### to construe the 

### law

### as it 

### finds it. 

### Dunphy, supra, and 

### cases cited therein. -10

# -

### Here the District

### Court created an ambiguity inthe 

### act by referring to 

### its title 

### and then proceeding to apply a variety of extrinsic rules of construction in determining that the contract



### was not void. This it 

### cannot do. The title 

### of a legislative act cannot be used to 

### create an ambiguity in the text of the act so


### as toauthorize recourse 

### to extrinsic rules of construction. Stateex 

### rel. Palagi v. Regan (1942), 113Mont. 343, 351-352, 126 P.2d 818, 824; Stateex 

### rel. Jones v. Erikson (1926), 75Mont. 429, 453, 244 P. 

### 287, 296. The District Court's recourse 

### to extrinsic rules of construction is bottomed on 

### its view that otherwise the scope of the statutewould be "stupendousn and would outlaw all 

### contracts inexcess of three years throughout the 

### state, which 

### is not rational. This rationality approach 

### is simply an extrinsic aid 

### to construction available onlywhere the statute 

### is ambiguous. It 

### cannot be used 

### to defeat the plain and unambiguous language of the statute. Our function here is 

### not to "improve" the statute by resort 

### to extrinsic rules of statutory c o n s t r u c t i o n , but simply to declarewhat 

### its language plainly 

### states. The majority appears 

### to have taken the 

### same course 

### as the District 

### Court. They, too, have gone beyond the plainmeaning of the words inthe statute. In attempting 

### to ascertain the intention of the legislature, the majority points to the fact that the statute 

### as it 

### existed at the 

### time the state 

### lease was executed



### was silentwith regard to 

### leases. Yet 

### the statuterefers 

### to "contracts," and there is 

### no dispute that 

### a lease is 

### a contract. The statutorywords clearly

### tell us that a 

### lease 

### is included in the statutoryprohibition. Next the majority notes thatwhen the legislature gave the Attorney General the power to establish the LETS system by lease



### or purchase of equipment, the legislature did not provide a time limitation for those contracts, nor did it explicitlymake the 

### time limitations of section 82-1918 applicable to the 

### leases or purchases. In

### my view, it 

### is 

### clear why the legislature did not do this. Section 82-1918 provides a three-year limitation on 

# - 11-

### state contracts; an additional statutoryprovision was unnecessary. Inresorting to these surmises about legislative intent, the majority is 

### ignoring the rules of statutory construction as 

### set out inDepartment of Revenue v. Puget Sound Power & 

### Light Co., supra. There 

### we said that the courts should firstattempt 

### to determine statutorymeaning from the plainwords of the statute. Following that inquiry, the court can 

### resort to the legislative history. Dept. of Revenue, supra, Mont. at I 

### 587 P.2d 1287, 35 

### St.Rep. at 1373. In my view, there 

### is no need 

### to

### resort to legislativehistory. The statute is 

### clearon 

### its face. I 

### would declare the contract prohibited by the three-year limitation and remand the 

### case to the District

### Court for reformation on 

### a three-year basis.

Chief Justice

Mr. 

### JusticeJohn Conway Harrison concurring: I 

### heartily concur inthe 

### above 

### dissent.