NO. 80-269 

IN THE 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 First Judicial 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 16 1989 

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 District Court 

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. In March 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 

lease payments. The State made the lease payments from May 

1973 to May 1977, when Attorney General Mike Greely notified 

Leaseamerica that it was 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 lawsuit was 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 lease payments and attorney fees but denied ~easeamerica's 

claim for interest. 
The following issues are presented in this appeal: 

1. Is a six-year lease of a law enforcement communications system entered into by the attorney general of the 

State of Montana in March 1973 unenforceable as against the 

State under the provisions of section 82-1918, R.C.M. 1947, 

which then limited the term of 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 assignee was not 

filed with the state auditor until just prior to the filing 

of the action? 

3. Is the State obligated to pay attorney fees where a 

lease provided for indemnification of lessor, and the lessor's 

successors, for failure of the State to perform or comply 

with any of the terms of the agreement? 

4. After adoption of the 1972 Montana Constitution, is 

the State obligated to pay prejudgment and post-judgment 

interest on lease payments from the due date of each payment? 

The lease here in dispute was executed in March of 

1973. At that 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 shall provide for the 

delivery - of such articles at such times and in 

such quantities -- as the purchasing agent may determine." (Emphasis supplied.) 

The subject lease was executed by the attorney general 

pursuant to power derived from sections 44-2-301, MCA, and 

44-2-302, MCA. The former authorized establishment of a law 
enforcement telecommunications system while the latter 

authorized the attorney general to lease equipment necessary 

for accomplishing the objective. 

In Holtz v. Babcock (1963), 143 Mont. 341, 389 P.2d 

869, this Court held that lease--purchase contracts executed 

by the state purchasing agent were subject to competitive 

bidding requirements of the state purchasing statutes. 

Here the issues are whether those same statutes and in 

particular, section 82-1918, R.C.M. 1947, limiting contracts 

to three years, applied (1) to leases which have no option 

,and 

to purchase (2) to leases executed by the attorney general. 

The questions have not previously been decided by this 

Court. 

Applicable rules of construction are: (1) Both the context of a statute and the plain meaning of its terms can be 

considered in determining legislative intent. In Matter of 

Adoption of Smigaj (1977), 171 Mont. 537, 540, 560 P.2d 141. 

(2) The title to an act may be looked to in construing the 

act. In re Coleman's Estate (1957), 132 Mont. 339, 343, 317 

P.2d 880. (3) Zn determining legislative intent a court can 

resort to history of the statute. Dept. of Rev. v. Puget 

Sound Power & Light (1978), Mont. , 587 P.2d 1282, 35 

St.Rep. 1368. 

When passed in 1923, section 82-1918, R.C.M. 1947, 

limited contracts to one year. This statute was in effect 

when, in 1967, statutory authorization empowered the attorney 

general to lease telecommunications equipment. The one-year 

limitation was changed to three years by amendment in 1971. 

Section 82-1918, R.C.M. 1947, as it existed when the 

present lease was executed, was silent regarding leases. 

When the Legislature granted leasing power to the attorney 
general, a limitation of years was not provided either by 

reference to the chapter covering purchasing agent or limited 

in Ch. 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 legislative attempt to apply 

the provisions of section 82-1918 to Title 44. 

Prior to the 1971 legislative 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 issue was being discussed 

and was a subject of an attorney general's opinion when 

section 82-1918 was amended in 1971; yet the prohibitions 

were not applied to leases. 

We are persuaded 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 section under Ch. 19, 

entitled Purchasing Department Agent. (3) Title 44, 

giving the attorney general power to lease telecommunications 

equipment, does not limit that power as to time. (4) Section 

82-1918 was amended in 1971, four years after the attorney 

general was authorized to lease without 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 State contends that failure of Leaseamerica or its 

assignor to record the lease assignment with the state 

auditor prior to February of 1978 forecloses this action 

which was not instituted until February 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 as hereinafter provided, shall be 

absolutely null and void and unenforceable against 

the state unless the assignee thereof files written 

notice of the assignment on such forms as may be 

required by the state auditor, together with a true 

copy of the instrument of assignment." (Emphasis 

supplied.) 

Paragraph No. 13 of the subject lease stated: "Lessor 

may, without lessee's consent, assign this lease or any 

interest therein." The State knew of the assignment and 

made payments to the assignee Leaseamerica for a period of 

four years. 

The State's position must fail for at least three 

reasons. First, the statute applies to assignments 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 filing within 

a time certain and a filing was eventually made with the 

auditor prior to instituting suit on February 9, 1978. 

Finally, the State can claim no prejudice as it had actual 

notice of the assignment and made lease payments to Leaseamerica 

for four years. 

Leaseamerica claims attorney fees pursuant to a contractual 

provision with the State. The State was 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 in respect to 

any contract entered into in the same manner and 

to the same extent as a private individual under 

like circumstances, except the State of Montana 

shall not be liable for interest prior to or after 

judgment or for punitive damages. 

"C2)Costs may be allowed as provided in 25-10-711. 

In all other cases, costs shall be allowed in all 

courts to the successful claimant to the same extent as if the state of 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 

in the event that the State's litigation is deemed to be 

frivolous or is pursued in bad faith. Neither of those 

factors exist here. 

A reading of these statutes compels the conclusion that 

liability for attorney fees can arise from contract but 

cannot be awarded as "costs" absent bad faith on the State's 

part. 

The State has 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" as denoted in the lease 

is a cost and cannot be awarded against the State unless the 

State litigates in bad faith. 

Tomten v. Thomas, supra, was overruled by Callant v. 

Federal Land Bank of Spokane (1979), Mont. , 593 P.2d 

1036, 36 St.Rep. 824. Legal "expenses" are not synonymous 

with "costs" but rather, when provided contractually, are 

treated as a special damage recoverable in addition 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 

its judgment 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 

inconsistent with Article 2, Section 18 of the 1972 State 

Constitution which provides that a governmental entity shall 

have "no immunity from suit or injury to a person or property." 

The District Court found that this language was intended to 

apply to tort but not contract actions. 

We have reviewed the constitutional debate prior to the 

adoption of this particular section. The original draft of 

Section 18, Non-immunity -- from Suit, provided: "The State and 

its subdivision shall have no special immunity from suit." 

Delegate Habedank in the 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 

its intent in the debate: 

"Limited as it is, for injury to a person or property, 

the Legislature is still free to make it more open 

if they desire to do so in the future. But we at 

least have assured the people of the State of Montana 

that they can sue for negligent injury." Con.Con. 

Transcript TR. P. 5430, lines 10-14. 

We agree with the District Court that the intent of the 

constitutional delegates was to limit nonimmunity to torts 

committed by the State. 

We find the statutory prohibition against interest in 

section 18-1-404(1), MCA, to be constitutional. The State 

of Montana is not liable for prejudgment or post-judgment 

interest. 

The judgment of the District Court is affirmed. 
We concur: 

v Justices 

Mr. Justice Daniel J. Shea will file a separate opinion later. 
Mr. Chief Justice Frank I. Haswell dissenting: 

I respectfully dissent. The result reached by the 

majority may be an equitable accommodation, but in my view it is 

not the law. 

At the time the six-year lease of the equipment was 

entered into between Leaseamerica and the State of Montana, our 

statute provided: 

"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 

six years. 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), 176 Mont. 364, 369, 578 P.2d 724, 727, and 

cases cited therein; Dunphy v. Anaconda Co. (1968), 151 Mont. 76, 

80, 438 P.2d 660, 662, and cases cited therein. The intention of 

the Legislature must first be determined from the plain meaning 

of the words used in the statute, and if the meaning of the statute can be so determined, courts may not go further and apply 

any other means 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 

for the court to construe. Dunphy, supra, and cases cited 

therein. In such case, the function of this Court is simply to 

ascertain what in terms or in substance is contained in the statute and not to insert what has been omitted. Section 1-2-101, 

MCA; State ex rel. Zander v. District Court (1979), Mont . , 591 P.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 in the 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 to authorize recourse to extrinsic rules of construction. 

State ex rel. Palagi v. Regan (1942), 113 Mont. 343, 351-352, 126 

P.2d 818, 824; State ex rel. Jones v. Erikson (1926), 75 Mont. 

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 statute would be "stupendousn and would outlaw all contracts 

in excess of three years throughout the state, which is not 

rational. This rationality approach is simply an extrinsic aid 

to construction available only where 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 declare what its language plainly states. 

The majority appears to have taken the same course as the 

District Court. They, too, have gone beyond the plain meaning of 

the words in the 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 silent with regard to leases. Yet the statute refers to 

"contracts," and there is no dispute that a lease is a contract. 

The statutory words clearly tell us that a lease is included in 

the statutory prohibition. 

Next the majority notes that when 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 explicitly make 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 statutory provision was 

unnecessary. 

In resorting to these surmises about legislative intent, 

the majority is ignoring the rules of statutory construction as 

set out in Department of Revenue v. Puget Sound Power & Light 

Co., supra. There we said that the courts should first attempt 

to determine statutory meaning from the plain words 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 legislative history. The statute is clear on 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. Justice John Conway Harrison concurring: 

I heartily concur in the above dissent.