No. 13795
IN THE SUPREME COURT OF THE STATE OF MONTANA
1978
MARGARETTE M. AYE, et al.,
Plaintiffs and Appellants,
-vs-
ADOLPH FIX et al.,
Defendants and Respondents.
Appeal from: District Court of the Sixteenth Judicial
District,
Honorable A. B. Martin, Judge presiding.
Counsel of Record:
For Appellants :
Lucas, Jardine, Monaghan, Miles City, Montana
James P. Lucas argued and Thomas M. Monaghan argued,
Miles City, Montana
Patrick J. Kelly, Miles City, Montana
Jerome J. Cate, Billings, Montana
For Respondents:
Gene Huntley argued, Baker, Montana
R. W. Heineman, Wibaux, Montana
Submitted: March 10, 1978
Decided : .!!d-hv '. . 7378
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Filed: KL
M r . J u s t i c e John C. Harrison delivered the Opinion of t h e
Court :
P l a i n t i f f s appeal from an order of the D i s t r i c t Court,
Carter County, assigning t h e i r s t a t e leased lands t o defendant
and granting him $20,590, l e s s c e r t a i n r e n t a l s , plus i n t e r e s t ,
during t h e time he was dispossessed from the s t a t e leased lands.
O n January 28, 1961,Mhrgarette Aye and John A. Aye, a s
administrators of the e s t a t e of Lester Aye, leased about 5,104
a c r e s of land i n Carter County, Montana, t o Adolph Fix. This
l e a s e included the l e a s e on the "school section", S t a t e Lease
No. 49401, and provided f o r an annual cash r e n t a l of $18,000
payable i n advance.
Also on January 28, 1961, Lona B. Aye, the widow of
Lester Aye, leased 834 acres ( r e f e r r e d t o a s the "Perso" place)
t o Adolph Fix. This l e a s e provided f o r an annual r e n t of $1.00
payable i n advance. Both leases expired on April 20, 1964.
I n December 1963, while the leases were s t i l l i n e f f e c t ,
W i l l i s Aye (brother of Lester Aye, deceased, and husband of
Lona Aye, L e s t e r ' s widow) s o l i c i t e d Adolph Fix t o buy the
Perso place f o r $50 per acre. A t t r i a l Adolph Fix t e s t i f i e d t h i s
was a high p r i c e f o r land a t t h a t time, but W i l l i s Aye
offered the school l e a s e adjoining the Perso place i f Fix
would pay $50 per a c r e f o r the Perso place.
Adolph F i x f u r t h e r t e s t i f i e d t h a t he thought the school
l e a s e was owned by John Aye, so he received assurance from
John Aye t h a t the s t a t e l e a s e would go with the Perso place.
Fix s t a t e d he paid t h e $50 per a c r e , $41,718 t o t a l , only be-
cause the s t a t e lease was included a s p a r t of the consideration.
Fix received a deed t o the Perso place but no assignment of
t h e lease. A t the t r i a l , W i l l i s Aye t e s t i f i e d the reason he
did not convey the s t a t e l e a s e t o Fix when he sold the Perso
place was because i t was i n the Lester Aye e s t a t e , and he did
not have the a u t h o r i t y t o convey i t .
On January 3, 1964, s h o r t l y before the e x p i r a t i o n of the
f i r s t l e a s e , another l e a s e was entered i n t o between John Aye
and Adolph Fix. This l e a s e , f o r the 5,000 acres o t h e r than
the Perso place, was prepared by John Aye and contained t h e same
language r e l a t i v e t o the s t a t e lease a s did the e a r l i e r l e a s e ,
"together with l e a s e on School lands." Fix t e s t i f i e d t h a t he
objected t o t h i s language and reminded John Aye t h a t he, Fix,
was supposed t o have the l e a s e on the school lands. Fix a l s o
t e s t i f i e d t h a t Aye explained t o h b t h a t he would g e t the
s t a t e l e a s e a t t h e end of the term. Fix t e s t i f i e d he accepted
these assurances a s a s u f f i c i e n t assignment of the lease. The
1964 lease a l s o contained a provision granting Fix the f i r s t
r i g h t t o buy the leased premises o r t o meet any bid offered.
Fix paid the c o s t of the s t a t e l e a s e t o John Aye d i r e c t l y
u n t i l Aye died i n 1966. I n 1967, Fix made lease payments t o
the s t a t e . The s t a t e objected t o receiving payments from Fix
because he was not the lessee of record. Fix t e s t i f i e d t h a t
he then consulted with W i l l i s Aye, personal representative f o r
both t h e John Aye and the Lester Aye e s t a t e s , and asked W i l l i s
Aye f o r the assignment of the s t a t e lease. W i l l i s Aye t o l d
Fix t h a t he would g e t the assignment, but f o r the time being he
would have t o s e t t l e f o r a sublease.
On March 18, 1970, W i l l i s Aye, a s administrator of the
e s t a t e of John Aye, gave n o t i c e t o Fix t h a t t h e leasing agreement
was terminated because "it i s contemplated t h a t s a i d property
w i l l be sold." The tenancy on t h e s t a t e lease was cancelled
by l e t t e r from John R. Carr dated February 12, 1971. A further
n o t i c e t o q u i t was given by W i l l i s Aye, "Agent f o r the Aye
family" on February 3, 1971, " t o n o t i f y you t h a t t h e Aye ranch
* * * has been sold."
The Aye family s p e c i f i c a l l y assigned the s t a t e l e a s e t o
the buyers, Ralph and Frances Bruski. Fix refused t o vacate the
s t a t e leased land and the present l i t i g a t i o n ensued. The t r i a l
court ruled Fix was t h e owner of the s t a t e lease by v i r t u e of
an o r a l agreement between Fix and John Aye t h a t t h e s t a t e l e a s e
land would be assigned a s p a r t of the Perso place land s a l e .
P l a i n t i f f s r a i s e the following i s s u e s on appeal:
1. Does the s t a t u t e of frauds bar testimony of an alleged
o r a l agreement t o s e l l or assign a s t a t e lease when w r i t t e n
lease agreements s p e c i f i c a l l y r e f e r t o a sublease of the s t a t e
leased lands?
2. I s a s a l e or assignment of a s t a t e lease a t r a n s f e r
of r e a l property which must be i n w r i t i n g t o be v a l i d under the
. s t a t u t e of l i m i t a t i o n s ?
3. Was the alleged o r a l agreement f o r the s a l e o r assign-
ment of t h e s t a t e lease barred by the s e c t i o n 93-2604, R.C.M.
1947, s t a t u t e of l i m i t a t i o n s ?
4. Did John Aye o r W i l l i s Aye have the l e g a l a u t h o r i t y
t o s e l l o r assign the s t a t e l e a s e t o Adolph Fix?
5. Did Adolph Fix waive h i s r i g h t i n s t a t e l e a s e No.
49401 when he f a i l e d t o e x e r t any preference a t the time the
l e a s e was up f o r renewal?
6. M y an o r a l agreement t o s e l l o r assign a s t a t e l e a s e
a
be made w i t h o u t s t a t e approval?
W s h a l l discuss only issues 1 and 2 , since they a r e
e
d i s p o s i t i v e of t h i s appeal.
Evidence r e l a t i n g t o any o r a l agreements between t h e
p a r t i e s should have been excluded under t h e s t a t u t e of f r a u d s ,
s i n c e t h e p a r t i e s ' agreement had been reduced t o w r i t i n k .
Montana law i s c l e a r t h a t evidence of o r a l r e p r e s e n t a t i o n s ,
r e l a t i n g d i r e c t l y t o t h e s u b j e c t matter of a c o n t r a c t , i s n o t
admissible t o add t o o r a l t e r t h e provisions of a w r i t t e n
contract.
I n Hosch v. Howe, (1932), 92 Mont. 405, 410, 16 P.2d 699,
700, t h i s Court s a i d :
"' * * * The c h i e f and most s a t i s f a c t o r y index i s
found i n t h e circumstance whether o r n o t t h e
p a r t i c u l a r element of t h e a l l e g e d e x t r i n s i c nego-
t i a t i o n i s d e a l t with a t a l l i n t h e w r i t i n g . I f i t
i s mentioned, covered o r d e a l t with i n t h e w r i t i n g ,
then presumably t h e w r i t i n g was meant t o r e p r e s e n t
a l l of t h e t r a n s a c t i o n on t h a t element. '"
I n t h e i n s t a n t case t h e r e a r e t h r e e s p e c i f i c w r i t t e n
agreements which a r e t o t a l l y i n c o n s i s t e n t with t h e claim of
Adolph F i x t h a t S t a t e Lease No. 49401 was s o l d o r assigned t o
him. The f i r s t w r i t t e n document i s t h e deed of December 26,
1963, which represented t h e Perso property purchase from
W i l l i s and Lona Aye, t h a t Fix claims t r a n s f e r r e d t o him t h e
Aye i n t e r e s t i n t h e s t a t e l e a s e . The deed i t s e l f , however,
does n o t mention S t a t e Lease No. 49401, and i t does not t r a n s -
f e r t h a t l e a s e t o Adolph Fix. The second w r i t t e n document i s t h e
January 3, 1964 l e a s e agreement between John Aye and Adolph Fix.
F i x signed t h i s agreement which contained s p e c i f i c r e f e r e n c e s t o
t h e s t a t e l e a s e a s land which Fix would leave from Aye. If
F i x had purchased an assignment of t h e s t a t e l e a s e when he
bought t h e Perso place i n 1963, he would obviously have no cause
t o pay money t o l e a s e h i s own property from John Aye i n 1964.
The t h i r d w r i t t e n document i s the mbhSi64- entered i n t o
between W i l l i s Aye, a s a d m i n i s t r a t o r of t h e John Aye e s t a t e ,
and Adolph Fix. This sublease c l e a r l y r e f e r s t o S t a t e Lease
No. 49401, and c l e a r l y provides t h a t F i x s h a l l sublease from
Aye t h e very same l e a s e which Fix contends had been s o l d o r
assigned t o him p r i o r t o December 26, 1963. This sublease was
signed by F i x on November 30, 1967.
Thus, because t h e a l l e g e d o r a l r e p r e s e n t a t i o n s claimed
by Adolph F i x t o have been made t o him by W i l l i s and John Aye
were d e a l t with i n a t l e a s t two of t h e t h r e e w r i t t e n agreements,
a l l such par01 testimony varying t h e terms of t h e w r i t t e n docu-
ments was inadmissible being barred by t h e s t a t u t e of frauds.
Furthermore, t h e a l l e g e d o r a l agreement f o r t h e s a l e o r
assignment of S t a t e Lease No. 49401 i s barred by t h e s t a t u t e
of frauds s i n c e i t involves an agreement t o t r a n s f e r an i n t e r e s t
i n r e a l property. Such agreements a r e required by s e c t i o n s
13-606 and 93-1401-7, R.C.M. 1947, t o be i n w r i t i n g .
S t a t e Lease No. 49401 i s an i n t e r e s t i n r e a l property
o r lands. "Of course, t h e execution of a l e a s e of land o p e r a t e s
a s a t r a n s f e r of an i n t e r e s t i n t h a t land, whether t h e s p e c i f i e d
term i s long o r short." 2 Corbin Contracts, $402.
This Court i n Rider v. Cooney, (1933), 94 Mont. 295, 307,
308, 23 P.2d 261, s t a t e d :
"An e s t a t e f o r years has been h e l d by t h i s c o u r t
t o be an i n t e r e s t i n land. ***
"* * * When a l e a s e i s granted upon t h e public
lands of t h e s t a t e , an i n t e r e s t o r e s t a t e i n t h e
lands has been a l i e n a t e d , and t h e r e f o r e t h e
l e a s i n g of t h e lands of t h e s t a t e f o r a term of
y e a r s i s t h e d i s p o s a l of an i n t e r e s t o r e s t a t e
i n t h e lands * * * ."
See: Sections 67-502(3) and 67-506, R.C.M. 1947.
The D i s t r i c t Court r e l i e d on O ' N e i l l v. Wall, (1936),
103 Mont. 388, 62 P.2d 672, f o r t h e conclusion t h a t l e a s e s a r e
personal property r a t h e r than r e a l property. O'Neill, however,
has never been followed by t h i s Court i n s o f a r a s i t seems t o say
t h a t a l e a s e i s n o t a c h a t t e l r e a l o r an i n t e r e s t i n r e a l e s t a t e
o r land. The r u l i n g i n Wheeler v. McIntyre, (1918), 55 Mont . 295,
175 P, 892, t h a t a l e a s e i s an i n t e r e s t i n land and c h a t t e l r e a l
has been followed i n a s e r i e s of Montana cases. See: Brubaker
v. ~ ' O r a z i , (1947), 120 Mont. 22, 34, 179 P.2d 538; Standard
O i l Co. v. Idaho Community O i l Co., (1934), 98 Mont. 131, 37 P.2d
660; W i l l i a r d v , Federal Surety Co., (1932), 91 Mont. 465, 471,
8 P.2d 633.
The District Court, i n i t s conclusions of law No. I ,
i n c o r r e c t l y found t h a t t h e a l l e g e d o r a l c o n t r a c t t o convey t h e
s t a t e l e a s e was removed from t h e s t a t u t u e of frauds f o r t h r e e
o t h e r reasons: "(1) t h e o r a l agreement was p a r t i a l l y executed
by t h e execution of t h e deed conveying t h e Perso Place".
Section 13-607, R.C.M. 1947, provides t h a t t h e execution of a
w r i t t e n c o n t r a c t supersedes a l l o r a l n e g o t i a t i o n s concerning i t s
matter which preceded t h e execution of t h e instrument; " ( 2 )
t h e possession by Fix of t h e s t a t e leased lands." Every l e s s o r
would be s u b j e c t t o claims made by l e s s e e s such a s F i x , i f mere
possession of leased lands under s p e c i f i c w r i t t e n agreements
would allow the l e s s e e t o claim exemption from t h e requirements
of t r a n s f e r s i n w r i t i n g . The s t a t u t e of frauds i s s p e c i f i c a l l y
designed t o avoid t h i s type of t r a n s a c t i o n ; "(3) by t h e sub-
sequent agreements subleasing t h e s t a t e l e a s e which subleases
were given i n l i e u of an assignment because of t h e circumstances
described i n the f i n d i n g s of fact." The w r i t t e n agreements t h a t
s p e c i f i c a l l y provide f o r subleasing, a l l entered i n t o a f t e r t h e
purported s a l e o r assignment of the s t a t e l e a s e , however, do
not i n any way support t h e alleged o r a l promise t h e r e would
be an assignment o r s a l e of the s t a t e lease. Furthermore,
Fix could give no reasonable explanation why he would sign an
agreement giving him the f i r s t r i g h t of purchase of the Ayes'
r i g h t s i n t h e s t a t e lease i f he i n f a c t was already the owner
of the l e a s e upon purchase of the Perso place.
Fix r e l i e s on Saling v. Flesch, (1929), 85 Mont . 106,
110, 111, 277 P. 612, f o r t h e position t h a t "Whether the
instrument * * * was an assignment or a sublease depends
upon t h e i n t e n t i o n of t h e parties." I n t h i s . case, the p a r t i e s
i n t h e i r 1964 and 1967 agreements, s p e c i f i c a l l y r e f e r r e d t o a
"sublease" r a t h e r than an "assignment" of the s t a t e leased
land, Moreover, John Aye reserved the r i g h t t o r e e n t e r the
property i f Fix f a i l e d t o f u l f i l l the terms of the l e a s e
agreement, a f a c t o r which t h i s Court has found i n d i c a t i v e of
a sublease of lands. Saling v. Flesch, supra.
The w r i t t e n agreements of the p a r t i e s c l e a r l y i n d i c a t e
there was no s a l e o r assignment of the e n t i r e Aye i n t e r e s t i n
the s t a t e leased lands t o Fix, The D i s t r i c t Court judgment i n
favor of Fix i s reversed, and the cause i s remanded t o the
D i s t r i c t Court with orders t o e n t e r judgment for p l a i n t i f f s
and t o determine damages due them.
W Concur:
e
Chief Just i c e
Justices.
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