Peretti v. State

No. 88-499

I N THE SUPREME COURT OF THE STATE O F MONTANA

1989

MICHAEL P E R E T T I , HENRI HODNIK,
et al.,
P l a i n t i f f s and R e s p o n d e n t s ,
-vs-
THE STATE OF MONTANA; THE BOARD OF
P U B L I C EDUCATION and i t s m e m b e r s ,

D e f e n d a n t and A p p e l l a n t .

APPEAL FROM: D i s t r i c t C o u r t of t h e F o u r t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y o f M i s s o u l a ,
T h e H o n o r a b l e J a m e s B . Wheelis, Judge p r e s i d i n g .

COUNSEL O F RECORD:

For Appellant:

Hon. M a r c R a c i c o t , A t t o r n e y G e n e r a l , H e l e n a , M o n t a n a
John P a u l s o n argued, A s s t . A t t y . G e n e r a l , H e l e n a

For R e s p o n d e n t :

W i l l i a m s Law F i r m ; R i c h a r d R a n n e y argued, Missoula,
Montana

p- ---- - -

Submitted: June 2 0 , 1 9 8 9
Decided: July 19, 1989

Filed :
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Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.

Defendants appeal from the final judgment of the Fourth
Judicial District Court of Missoula County awarding the
fourteen plaintiffs a sum total of $2,479,916 in damages.
This judgment was based upon the District Court's earlier
grant of partial s m a r y judgment in favor of the plaintiffs
on the issue of liability. The court ruled that the State
was liable for a breach of implied contract caused by the
premature termination in 1977 of the Aviation Technology
Program at the Missoula Technical Center. We reverse.
The issues presented for review:
1. Did the District Court err in granting partial
summary judgment in favor of plaintiffs on the issue of
liability?
2. Did the District Court err in determining the
measure and amount of damages to be awarded plaintiffs?
In the fall of 1976, plaintiffs enrolled in the
Aviation Technology Program at the Missoula Technical Center
(Center). This Center is one of five such post-secondary
vocational education centers financed by state
appropriations. Permissive county levies may supplement
State financing. The Board of Public Education (Board)
retains overall control over the budget and curriculum of
each center.
In 1977, the legislature appropriated $7,042,721 in
funding for the five centers, a reduction of $819,388 from
the 1975 biennial legislative appropriation. This reduction
entailed a cutback in vocational programs. After
consideration of various alternatives, the Board decided to
eliminate the Aviation Technology Program (Program) because
it had the highest cost per student of all the programs
offered at the Center and because it would affect fewer
students (approximately 30 to 45 students) than a cut in many
other programs.
In June of 1977, the Board notified those sixteen
students at the Center who had already successfully completed
one year of the integrated two-year program, that they would
be unable to complete the second year of training because the
program was being discontinued. The students thereafter
filed suit alleging breach of the State's implied contract to
provide a two-year, six-quarter course of study which would
prepare them for a career as a commercial pilot. As alleged
by the students, the "Career Pilot Program" detailed in the
Training Course syllabus was designed as a two-year
integrated whole, with completion of course work and flight
training more than sufficient to meet minimum FAA
requirements and to qualify students for employment as
commercial pilots and certified flight and ground
instructors. Plaintiffs also alleged that this breach
summarily deprived them of liberty and property interests
without due process of law.
Plaintiffs initially filed suit in federal district
court for damages allegedly resulting from the premature
termination of the Program. See Peretti v. Montana (D. Mont.
1979), 464 F.Supp. 784. The Ninth Circuit Court of Appeals,
however, subsequently held the State of Montana had not
consented to suit in federal court and the Eleventh Amendment
therefore precluded district court jurisdiction over the
suit. Montana v. Peretti (9th Cir. 1981), 661 F.2d 756.
Plaintiffs then filed suit in the Fourth Judicial District
Court of Missoula County.
The parties agreed to bifurcate the issues of liability
and damages. The issue of liability was then submitted on
cross-motions for summary judgment; the parties stipulated
t h a t t h e c o u r t c o u l d r e n d e r a d e c i s i o n on t h e s e c r o s s - m o t i o n s
b a s e d upon i t s c o n s i d e r a t i o n o f an a g r e e d s t a t e m e n t o f f a c t s
and the exhibits and transcript from the earlier federal
court t r i a l s .
On July 12, 1985, the District Court ruled that an
i m p l i e d c o n t r a c t u a l r e l a t i o n s h i p e x i s t e d between t h e p a r t i e s
which e n t i t l e d p l a i n t i f f s t o an o p p o r t u n i t y t o c o m p l e t e t h e
Program's six-quarter training period and to receive a
diploma upon completion. The court held that the State
breached its implied contract with the students when it
p r e m a t u r e l y t e r m i n a t e d t h e Program. The c o u r t t h u s g r a n t e d
partial summary judgment in favor of plaintiffs, finding
defendants liable for those damages resulting from this
breach.
The S t a t e r e q u e s t e d and r e c e i v e d a c e r t i f i c a t i o n o f t h e
partial summary judgment as final under Rule 54(b),
M.R.Civ.P., so it c o u l d then file an interlocutory appeal
prior to resolution of the issue of damages. The State,
however, s u b s e q u e n t l y d e c i d e d n o t t o i n i t i a t e a n a p p e a l u n t i l
a f t e r judgment on t h e i s s u e o f damages.
The i s s u e o f damages was l a t e r t r i e d w i t h o u t a jury.
On J u l y 15, 1988, the court issued i t s Findings of Fact,
Conclusions of Law, Opinion and O r d e r a w a r d i n g damages to
each of the fourteen plaintiffs who were deposed and
presented evidence of t h e i r damages. The c o u r t h e l d that
those seven students not engaged in a career as pilots
(hereinafter "the non-pilots") r e c e i v e d no f i n a n c i a l b e n e f i t
from the one-year aviation training. The court thus
concluded that the detriment suffered by these non-pilots
equaled the losses they i n c u r r e d i n a t t e n d i n g t h e one-year
a v i a t i o n program ( r e l i a n c e damages) p l u s t h e l o s t e x p e c t a n c y
of their bargain. The court then multiplied the total
amounts expended i n 1977 t o a t t e n d one y e a r o f t h e Program by
an i n f l a t i o n i n d e x o f 1.9 t o a r r i v e a t t h e 1988 e q u i v a l e n c y
o f t h e t o t a l amount of damages i n c u r r e d by t h e n o n - p i l o t s in
r e l i a n c e on t h e i m p l i e d c o n t r a c t . The t o t a l amounts awarded
t o e a c h n o n - p i l o t ranged from a low o f $193,940 t o a h i g h of
$237,979.
The damages awarded t h o s e seven s t u d e n t s who went on t o
become pilots, on the other hand, equaled the increased
a v e r a g e c o s t o f a l t e r n a t e t r a i n i n g , t h e a v e r a g e l o s t income
c a u s e d by t h e a v e r a g e one-year d e l a y i n b e g i n n i n g a c a r e e r a s
p i l o t s , and t h e v a l u e o f t h e employment b e n e f i t l o s t by l a c k
o f a d e g r e e from a s c h o o l w i t h a f o r m a l i n t e g r a t e d two-year
pilot t r a i n i n g program. The t o t a l awarded t o e a c h p i l o t ,
a f t e r consideration of the 1.9 i n f l a t i o n index, amounted t o
$147,350. The c o u r t d i s m i s s e d t h e c l a i m s o f t h e two s t u d e n t s
who p r e s e n t e d no e v i d e n c e o f damage.
Defendants t h e r e a f t e r f i l e d t h i s a p p e a l from t h e f i n a l
judgment o f t h e D i s t r i c t C o u r t .
The S t a t e c o n t e n d s that the District Court e r r e d in
h o l d i n g it l i a b l e f o r b r e a c h o f an i m p l i e d c o n t r a c t s i n c e t h e
S t a t e h a s n o t c l e a r l y and unambiguously waived i t s s o v e r e i g n
immunity a s t o i m p l i e d c o n t r a c t a c t i o n s . Absent such a c l e a r
waiver, a l l e g e a p p e l l a n t s , t h e S t a t e may n o t be sued i n i t s
own c o u r t s .
We recognize that t h e modern trend among t h e states
f a v o r s a d i m i n u t i o n o f t h o s e s o v e r e i g n immunity p r o t e c t i o n s
available t o the states. The Colorado c a s e o f Evans v. Board
of County Comm'rs o f E l Paso County (Colo. 1 9 7 1 ) , 482 P.2d
968, provides a striking rationale for this latent trend
toward a b o l i s h i n g many forms of s o v e r e i g n immunity p r e v i o u s l y
recognized:
The m o n a r c h i c a l p h i l o s o p h i e s i n v e n t e d t o
s o l v e t h e m a r i t a l problems o f Henry V I I I
a r e not sufficient justification for the
d e n i a l o f t h e r i g h t of r e c o v e r y a g a i n s t
 the government in today's society.
Assuming that there was sovereign
immunity of the Kings of England, our
forbears [sic] won the Revolutionary War
to rid themselves of such sovereign
prerogatives.
Id. at 969.
7

Montana similarly has endorsed this trend toward
diminishing sovereign immunity protections, as evidenced by
the 1972 constitutional abolishment of the State's sovereign
immunity as to all actions involving injuries to a person or
property. As stated in the 1972 Montana Constitution,
Article 11, sec. 18:
The state, counties, cities, towns, and
all other local governmental entities
shall have no immunity from suit for
injury to a person or property, except as
may be specifically provided by law by a
213 vote of each house of the
legislature.
While Art. 11, sec. 18 diminishes sovereign immunity
protections previously available to the State, it does not
abolish all sovereign immunity. This Court has previously
held that the waiver found in Art. 11, sec. 18 extends only
to tort actions, and not contract actions, involving injuries
to a person or property. LeaseAmerica Corp. of Wis. v. State
(Mont. 1981), 625 P.2d 68, 71, 38 St.Rep. 398, 403. By
interpreting Art. 11, sec. 18 as applying only to tort
actions, this Court effectuated the intent to prevent a
constitutional waiver of sovereign immunity as to contract
actions, an intent expressed by Constitutional Convention
Delegate Habedank:
... I think there are many instances
where there may be some governmental
employees [who] do some things in
connection with contractual fields that
we try to stick the government for where
 there is a good reason to maintain our
governmental immunity in those
situations.
Montana Constitutional Convention, Vol. V, at 1761.
Moreover, this interpretation comports with the principle
that any waiver of a State's sovereign immunity must be
strictly construed. Storch v. Board of Directors of E. Mont.
Region Five Mental Health Center (1976), 169 Mont. 176, 179,
545 P.2d 644, 646, citing 72 Am.Jur.2d, States, Etc., S 121.
Finding no waiver of sovereign immunity for contract
actions in the Constitution, we next turn to an examination
of the statutes for such a waiver, because a state cannot be
sued in its own courts without its plain and specific consent
to suit either by constitutional provision or by statute.
See, e.g., Heiser v. Severy (1945), 117 Mont. 105, 158 P.2d
501; State ex rel. Freebourn v. Yellowstone County (19391,
108 Mont. 21, 88 P.2d 6. Read by itself, 5 18-1-404, MCA,
appears to provide just such an unambiguous and specific
waiver of the State's immunity as to all contract actions,
express and implied alike. Section 18-1-404(1), MCA, reads:
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. (Emphasis added. )
This individual statutory provision, however, may not be read
and properly understood in a vacuum. Rather, it must be read
and construed in such a manner "as to insure coordination
with the other sections of an act." Hostetter v. Inland Dev.
Corp. of Mont. (1977), 172 Mont. 167, 171, 561 P.2d 1323,
1326; see also Barney v. Board of R.R. Comm'rs (19321, 93
Mont. 115, 129, 17 P.2d 82, 85 (requiring a court to consider
all statutes in their entirety relating to the matter at
issue).
The meaning of § 18-1-404, MCA, is ambiguous when read
in conjunction with the other provisions in part 4,
specifically § 18-1-401, MCA. Section 18-1-404, MCA, appears
to waive sovereign immunity as to both express and implied
contracts, yet 5 18-1-401, MCA, expressly grants district
courts jurisdiction only over express contract actions. As
stated in S 18-1-401, MCA:
The district courts of the state of
Montana shall have exclusive original
jurisdiction to hear, determine, and
render judgment on any claim or dispute
arising out of any express contract
entered into with the state of Montana or
any agency, board, or officer thereof.
(Emphasis added. )
Because these two above-mentioned statutes, when read
together, render the plain meaning of each ambiguous, we turn
to the legislative history of each to determine the
legislative intent, and thereby the proper statutory
construction of each provision. See, e.g., Thiel v. Taurus
Drilling Ltd. 1980-11 (1985), 218 Mont. 201, 710 P.2d 33.
These two statutory provisions were first enacted by
the 34th Legislature in 1955. They were enacted as part of
Chapter 138, which was entitled "An Act Permitting Actions on
Express Contracts Against the State of Montana and Describing
the Practice and Procedure Therefor." 1955 Laws of Montana,
Ch. 138. The title provides a clear indication that the
legislature intended only to waive the State's sovereign
immunity as to express contracts. As stated in Dept. of
Revenue v. Puget Sound Power & Light Co. (1978), 179 Mont.
255, 263, 587 P.2d 1282, 1286, the title of an act is
presumed to indicate the legislature's intent with regard to
the provisions contained therein. See also Barney, 17 P.2d
a t 85 ( s t a t i n g t h e t i t l e o f an Act " i s i n d i c a t i v e o f t h e
l e g i s l a t i v e i n t e n t and p u r p o s e s i n e n a c t i n g i t " ) . Because
t h e l e g i s l a t u r e i n t e n d e d o n l y t o waive t h e S t a t e ' s immunity
as to express contracts, as is readily apparent from t h e
t i t l e , we h o l d t h a t § 1 8 - 1 - 4 0 4 ( 1 ) , MCA, d o e s n o t s u b j e c t t h e
S t a t e t o l i a b i l i t y on i m p l i e d c o n t r a c t s . Having concluded
t h u s , we f i n d t h a t t h e D i s t r i c t C o u r t e r r e d i n f i n d i n g t h e
S t a t e l i a b l e on a b r e a c h o f i m p l i e d c o n t r a c t t h e o r y and i n
t h e n awarding damages.
The s t u d e n t s a l s o i n c l u d e d arguments t h r o u g h o u t t h e i r
brief which were based on c o n t e n t i o n s that the "premature
termination" of the Program violated their constitutional
r i g h t t o due p r o c e s s , t h e S t a t e ' s d u t y t o d e a l f a i r l y and i n
good faith with its citizens, and the State's express
contract to provide a two-year integrated program. The
liability and damages imposed by the District Court and
appealed by the State, however, were based only on the
d e t e r m i n a t i o n t h a t t h e S t a t e breached an i m p l i e d c o n t r a c t .
The s t u d e n t s d i d n o t c o n t e n d by way o f c r o s s - a p p e a l that the
D i s t r i c t C o u r t e r r e d i n f a i l i n g t o b a s e i t s judgment on t h e s e
other constitutional and express contract theories. We
t h e r e f o r e w i l l n o t c o n s i d e r t h e p o t e n t i a l m e r i t s and e f f e c t
of these other theories on the issues of liability and
damages.
The orders of the District Court finding. t h e State
l i a b l e and awarding damages a r e r e v e r s e d and we remand t o t h e
District Court for entry of judgment
We concur:

Justices
Mr. Justice John C. Sheehy, concurring in part and dissenting
in part:

I dissent from that portion of the majority opinion
which finds state immunity to exist here on two
grounds: (1) this case involves an express, and not an
implied contract; (2) the legislature intended to waive
sovereign immunity as to any contract.
In the fall of 1976, the plaintiffs enrolled in the
Career pilot Program in the Department of viat ti on Technology
at the iss sou la ~echnical Center, one of five
state-designated post secondary vocational education centers.
The program was advertised and represented by the state as a
six quarter program, extending to two years.
Before making their decision to enroll in the aviation
technology program, the students received a brochure
describing it and the iss sou la ~echnicalCenter's catalogue
of course offerings. After enrolling, they received a
detailed outline of the program, including two full years of
classes. The brochures and outlines plainly contained full
representation by the state that the program was being
offered for six quarters and would not be terminated. The
students relied on these documents, and on various statements
from their instructors throughout the first year in enrolling
in the course and continuing in the course.
The plaintiffs first brought this case in the federal
court, and the decision in favor of the plaintiffs in that
court was appealed to the Court of Appeals for the Ninth
Circuit. The opinions in ~ a r e t t iv. State of Montana (D.
Mont. 1979), 464 F.Supp. 784. The decision was reversed not
because it was incorrect, but because the Ninth circuit Court
felt that it had no jurisdiction, in this case, of the cause
against the state. What is important to this case is that in
a reply brief filed in the Court of Appeals for the Ninth
Circuit, pp. 9, 10, the state admitted:
While the District Court found and "implied
contract" as the result of the solicitation
c~ntained in exhibits 1, 2, and 3 , it could have
just as easily found "express contract" as that
term is defined in 5 28-2-103 which provides in
pertinent part:
. . . an express contract is one the terms of
which are stated in words ...
'
I would hold that an express contract existed here.
But even if the contract is regarded as one arising from
implication, the statute waiving state immunity, S
18-1-404(1), MCA, provides:
The state of Montana shall be liable in respect to
contract entered into - - -
in the same manner-and to
--
the - extent - - private individual under like
- same as a
circumstances ...
In an exercise of nimble sophistry, the majority
determined that the word "any" excludes implied contracts.
One has to be fast to keep up with this Court.
The finding that an implied contract is involved here,
and that immunity does not extend to implied contracts
violates the policy of this state set forth in S
20-30-101 (I), MCA, as follows:
It is the policy of this state to encourage and
enable its citizens to obtain and receive an
education commensurate with their abilities and
desires. It is recognized that institutions
offering post secondary education, vocational, and
professional instruction perform a useful an6
necessary service to the citizens of this state in
achieving this objective. It is found that certain
institutions have either by unscrupulous, unfair,
and deceptive practices or through substandard
instruction deprived the citizens of this state of
education opportunity and subjected them to
financial loss.
 In the light of our public policy, in which class of
educators shall we place the state of Nontana?
I concur in part as to the damages awarded. They should
have been individualized and not generalized. I would remand
only for the purpose of adjusting the damages based on the
individual losses.

-
Justice
i

Mr. Justice William E. Hunt, Sr., dissenting:

I concur in the foregoing dissent of Justice Sheehy.