U.C. Leasing, Inc. v. State ex rel. State Bd. of Public Affairs

• Decision Date: 26 May 1987
• Docket Number: No. 53374,53374
• Citation: 737 P.2d 1191,1987 OK 43
• Parties: U.C. LEASING, INC., Appellee, v. STATE of Oklahoma, ex rel. STATE BOARD OF PUBLIC AFFAIRS; State Department of Public Safety, Oklahoma Law Enforcement Telecommunications Systems Division, Appellants.
• Court: Oklahoma Supreme Court

Page 1191

737 P.2d 1191

1987 OK 43

U.C. LEASING, INC., Appellee, v. STATE of Oklahoma, ex rel. STATE BOARD OF PUBLIC AFFAIRS State Department of Public Safety, Oklahoma Law Enforcement Telecommunications Systems Division, Appellants.

No. 53374.

Supreme Court of Oklahoma.

May 26, 1987.

As Corrected June 4, 1987.

Rhodes, Hieronymus, Holloway & Wilson by Page Dobson and William C. McAlister, Oklahoma City, for appellee.

Jan Eric Cartwright, Atty. Gen., Johnny J. Akins, Asst. Atty. Gen., Oklahoma City, for appellants.

PER CURIAM:

This appeal is from a judgment awarding damages for breach of a personal property lease to U.C. Leasing, Inc. (Appellee) against the State of Oklahoma ex rel. The State Department of Public Safety, Oklahoma Law Enforcement Telecommunications Systems Division (Appellant) in the sum of $92,812.59 together with prejudgment interest from December 16, 1974, the date of the breach.

The State Department of Public Safety, Oklahoma Law Enforcement Telecommunications Systems Division is the legal successor to Commission on Criminal and Traffic Law Enforcement Systems, a state commission created pursuant to the statutes of the State of Oklahoma.

Appellee as lessor and Appellant's predecessor entered into a lease agreement for the leasing of certain communications switching system equipment. The lease provided for 60 consecutive rental payments during the life of the lease, and further provided a right of acceleration of the lease payments upon the default of the lessee (Appellant).

I.

In its argument on appeal Appellant first claims that the lease agreement was rendered void because it was not made in procedural conformity with the Oklahoma Central Purchasing Act as constituted at the time of the making of the lease. ¹

There can be no doubt that the lease agreement is subject to the Act since by definition an "acquisition" includes a lease of equipment. ²

The procedures which must be followed by a "state agency" in the "acquisition" of equipment are explicit. ³

The lease agreement had its origin in a request made by the Oklahoma Criminal and Traffic Law Enforcement Systems ⁴ to the State Board of Public Affairs which solicited bids under the provisions of 74 O.S.1971, § 85.1 et seq. from prospective bidders for the purchase or lease of a message switching device for a private wire teletypewriter communications network serving the Oklahoma Criminal and Traffic Law Enforcement System to meet the specifications provided with the invitation to bid. On or about August 12, 1970, Computer Control Systems, Inc. (CCS) submitted a proposal for bid which resulted in a written lease agreement and the State Board of Public Affairs issuing an award of contract for the lease of one message switching device. Thereafter, Appellant negotiated with CCS for additional features and equipment to be added to modify the original system, all of which became a part of the lease agreement. U.C. Leasing, Inc. became a party to the ultimate agreement by purchasing the entire system from CCS in contemplation of the lease agreement.

The only specific shortfall alleged by Appellant in the long list of statutory procedural requirements is a terse excerpt from one of the Appellee's witnesses, Willis Willey, President of U.C. Leasing, Inc., wherein the witness stated in effect that "we did not know any invitations to bid existed, and were not aware of the proposals and specifications that were submitted by Teleswitcher in 1970." However, the evidence was undisputed that "Teleswitcher" was a wholly owned subsidiary of Computer Control Systems, Inc., a party to the lease agreement, and that "Teleswitcher" was merged into Computer Control Systems, Inc. It is uncertain whether Willey in his answer was purporting to speak for himself and unidentified persons associated with either corporation, Computer Control Systems, Inc. or "Teleswitcher," or all of them. But in any event, if the procedural requirements of the Act are in fact met, we do not deem the lessor's ignorance of their existence or of the compliance with them a vitiation of the lease agreement, nor does Appellant point out any prejudice arising therefrom.

This Court indulges in the presumption that the trial court's decision is correct, and decisions will not be reversed on argument of error not supported by authority, if authority is available, unless error is apparent without further research. ⁵

II.

Appellant next contends that the lease before us is in violation of Article 10, § 26 of the Oklahoma Constitution. However, since the governmental contracting party to the lease is neither a "county, city, town, township, school district, or other political corporation, or subdivision of the state" within the meaning of § 26, that section does not apply here. ⁶ Rather, it is the fiscal authority and restraints of Art. 10, §§ 23 and 25, and of the Oklahoma Budget Law of 1947, as amended, (62 O.S.1971, § 41.1 et seq.) which govern.

The lease agreement before us was entered into on October 15, 1971. It purports to be for a term of 60 months. It also provides: "Time is of the essence of this Agreement * * *. If Lessee shall fail to pay any rental as herein provided when the same is due and payable, * * * the lessor * * * may declare the remaining unpaid installments of rent at once due and payable * * *." Monthly rentals in the sum of $4,465 were due commencing upon written acceptance of the equipment and for 60 consecutive months thereafter. The primary switching unit was in place by October 15, 1971, with a "back-up" unit to be installed later in connection with the lease agreement. The "back-up" unit was accepted on November 17, 1971.

Contained within the lease agreement is the following: "Notwithstanding anything to the contrary contained herein, if the legislative body appropriating funds for Lessee does not allocate funds for the payment of a communications switching system for Oklahoma Criminal and Traffic Law Enforcement, the Lessee will not be obligated to pay the net total of periodic payments remaining on the lease beyond the then current fiscal period. Lessee agrees to notify CCS (Computer Control Systems, Inc.) of such nonallocation in writing at the earliest possible time."

U.C. Leasing learned that the interface connecting with the National Law Enforcement Teletype System, one of the components called for in the lease agreement, had never been furnished. Due to changes and technical advancements then existing in connecting systems, the automatic interface called for in the lease agreement would not work. U.C. Leasing thereupon refunded all lease rentals paid by the State for the device and reduced the subsequent monthly payments by the value of the same, without objection by Appellant.

Oklahoma Commission on Criminal and Traffic Law Enforcement Systems notified U.C. Leasing, Inc. on December 16, 1974, of its intent to discontinue lease payments and lease rental payments ceased on that date.

For each year during the lease term the Oklahoma Legislature appropriated Line Item sums to the Department of Public Safety in excess of the amount of the rental payments for the fiscal year.

Appellant asserts that except for the fiscal year July 1, 1974, through June 30, 1975, when the State of Oklahoma through the State Board of Public Affairs issued to U.C. Leasing, Inc. an Award of Contract in writing for the fiscal year 1974-1975, there were no contracts entered into between U.C. Leasing, Inc. and Appellant during the period of default, and that therefore there can be no award of damages for any period other than the fiscal year July 1, 1974, through June 30, 1975. Appellants claim that the contract for a five year lease is void for those fiscal years where a new contract was not entered into by reason of the state's statutory inability to encumber unappropriated funds.

Art. 10 of the Oklahoma Constitution, § 23 provides, in part:

"Any department, institution or agency of the state operating on revenues derived from any law or laws which allocate the revenues thereof to such department, institution or agency shall not incur obligations in excess of the unencumbered balance of cash on hand."

Title 62 O.S.1971, § 41.6 provides in part that appropriations made by the Legislature for each fiscal year shall not be available for contractual or expenditure purposes until alloted as provided in the Budget Law of 1947. Section 41.9 provides in part that: "The Budget Director shall not allot to any spending agency during any fiscal year, an amount which will be in excess of the amount of revenue collected and allocated to appropriations made to such spending agency."

Where a person or entity enters into a valid contract with the proper State officials and a valid appropriation has been made therefor, the State has consented to be sued and has waived its governmental immunity to the extent of its contractual obligations and such contractual obligation may be enforced against the State in an ordinary action at law. ⁷

Did the State incur liability for the entire rental period prescribed in the lease agreement when the lease contract was made? We hold that it did not incur anything more than a potential liability as hereafter explained.

While the lease agreement before us purports to bind an agency of the State for a term of 60 consecutive months from its inception, the lease agreement explicitly provides that if the Legislature fails to allocate funds for payment, lessee is not obligated to pay rentals beyond the term for which funds have been allocated or in excess of such funds. Thus the obligation was not absolute and in all events binding upon the State at the time of its execution, but was made contingent upon continued funding on a fiscal year basis by the Legislature continuing to appropriate funds to satisfy the obligation.

III.

Appellant next contends that, although the Legislature appropriated sums to it and to its predecessor agency in excess...