No. 80-125
IN THE SUPREME COURT OF THE STATE OF MONTANA
1980
MARGARETTE M. AYE, CLARA E. GREGORY,
et al.,
Plaintiffs and Appellants,
ADOLPH FIX AND ROBERT PIX,
Defendants and Respondents.
Appeal from: District Court of the Sixteenth Judicial District,
In and for the County of Carter, The Honorable
A. B. Martin, Judge presiding.
Counsel of Record:
For Appellants:
Robert L. Stephens, Billings, Montana
Kinnard and Woodward, Billings, Montana
For Respondents:
Gene Huntley, Baker, Montana
R. W. Heineman, Wibaux, Montana
Submitted on Briefs: November 19, 1980
Decided: April 20, 1981
Filed: APR 2 0 19fl
Mr. Justice Daniel J L Shea delivered the Opinion of the
Court.
Plaintiffs Ralph and Frances Bruski appeal the judgment
of the Carter County District Court awarding them only
$3,013.21 for the defendants' occupation of certain state-
leased land during the years 1971, 1977 and 1978, in deroga-
tion of the Bruskis' right to possession.
The dispute between the parties centers on the right to
occupy and farm a section of state-leased land known informally
as the "school section" or the "school lands", State Lease
No. 49401. The parties have been embroiled in litigation
over the property at both the trial and the appellate levels
for nearly a decade. The case has become confusing and
complex. For that reason, we will review the factual background
and procedural history of the case befare setting out the issues
presented for review.
The Ayes, are now and always have been the official
lessees of the school section from the state. The Fixes and
the Bruskis both claim to have had the right to occupy and
farm the land in 1971 under separate, but conflicting transfers
from the Ayes--the Fixes as sublessees and the Bruskis as
assignees of the Ayes' lease with the state.
In December 1963, Willis Aye (Aye) orally agreed to
assign the state lease of the school lands to Adolph Fix
(Fix) in order to induce Fix to buy some other farmland
from him known as the "Perso" place. Fix paid the purchase
price that had been agreed upon and received a deed for the
Perso place, but no assignment of the state lease. Shortly
thereafter, on January 3, 1964, John Aye (the brother of
I
Willis) leased 5,000 acres of land to Fix. The lease agreement
expressly granted to Fix a sublease to the school lands for
the entire unexpired term of the Aye lease with the state.
Fix objected to this sublease language because he understood
that he was supposed to be the assignee of the state lands
rather than a sublessee. Aye explained to Fix that he
would get the state lease at the end of the term. Fix
accepted these oral assurances as a sufficient assignment of
the lease.
The Ayes' lease of the school lands from the state--
and, therefore, the Fixes' right to possession under their
sublease from the Ayes--was set to expire on February 28,
1972. But before this expiration date, on February 12,
1971, the Ayes' attorney sent written notice of cancellation
of the sublease agreement to Fix. At about the same time,
the Ayes entered into a contract for deed which assigned the
state lease to the Bruskis. The Ayes renewed their lease of
the school lands when it expired by exercising their statutory
right to meet the highest competitive bid for the land.
Their right as state lessees of the land remained subject to
the contract for deed with the Bruskis.
The Fixes refused to vacate the school lease land and
litigation ensued. On July 13, 1972, the trial court ordered
that the Fixes surrender possession of the state-leased
lands to the Ayes in accordance with the 1972 renewal lease
issued by the Department of State Lands and Investments.
The Bruskis, under the assignment of the land from the Ayes,
then occupied the school lands from July 13, 1972 until
March 23, 1977. Following a bench trial on the merits, the
trial court ruled that Fix was the "owner" of the state
lease based on the oral agreement between Fix and John Aye
that Fix would be assigned the state lease as part of the
sale of the Perso place. After the trial court judgment in
their favor, the Fixes reoccupied the premises on March 2 3 ,
1977, and remained in possession until August 25, 1978.
The Ayes and the Bruskis appealed the trial court
judgment to this Court. We reversed. Invoking the statute
of frauds and the par01 evidence rule, we held that the
trial court should not have admitted evidence on an oral
agreement to assign the state-leased lands to the Fixes
because the written agreements between the Ayes and the
Fixes expressly referred only to a sublease and not to an
assignment of the state lease. Because the Fixes had been
in possession of the property for parts of the years 1977
and 1978 under the trial court judgment, we remanded for a
determination of damages they owed to the Bruskis. Aye v.
Fix (1978), 176 Mont. 474, 580 P.2d 97.
After our reversal, the Bruskis again re-entered the
property and are now in possession. At this point in the
litigation, the Bruskis and the Fixes are the only real
parties in interest. The Ayes claim no right to compensation
for the Fixes' use of the land during any of the three years
in dispute.
The Bruskis now appeal the amount of compensation
awarded them by the trial court for the three years during
which the Fixes were in possession of the land: 1971, 1977
and 1978.
They raise three issues. First, they assert that the
trial court erred in finding that the Fixes did not owe them
any rent for the use of land in 1971. Second, they assert
error on the trial court's ruling that the Fixes could
offset certain lease payments made directly to the state
from the reasonable rental owing to the Bruskis. Third,
they challenge the trial court's holding that the Fixes were
the rightful recipients of certain federal farm benefits for
the years they were in possession of the land. We affirm in
part and vacate in part.
On remand, the trial court ruled that the Bruskis were
entitled to no rental from the Fixes for the year 1971. In
so ruling, the trial court relied on its original finding
before the first appeal of this case that the Fixes were the
"lawful owners" of the lease for the year 1971. This finding
was based on the 1964 lease agreement where the Ayes expressly
subleased the land to the Fixes for the full unexpired term
of Ayes' lease of the land from the state.
Given the state of the record before us, we are unable
to adequately review the trial court's determination that
Fixes, and not Bruskis, were entitled to possession of the
property in 1971. Neither the record before us nor the
briefs of the parties indicate whether either the Fixes or
the Bruskis ever recorded their respective conveyances from
the Ayes. We do not know if the recording statutes (Title
70, Ch. 21) were complied with. Nor do we know whether
Bruskis were aware of Fixes' occupation of the land at the
time the Ayes assigned the state lease to the Bruskis in
1971. See, section 70-21-102, MCA. Therefore, we have no
way of knowing whose interest has priority under the law.
See, section 70-21-304, MCA. We, therefore, remand to the
trial court to make that determination.
Furthermore, we disagree with the Bruskis' argument
that former section 81-419, R.C.M. 1947, nullified the
sublease that Fixes received from Aye in 1964. At the time
the sublease to the Fixes was made, that section provided
that a sublease of state land was illegal unless a copy of
the sublease accompanied by a fee of $2.00 had been filed
with the state land office and approved by the commissioner.
Section 81-419 does not override the provisions of section
70-21-102, MCA, which provides that "[aln unrecorded instrument
is valid as between the parties and those who have notice
thereof." The purpose of section 81-419, R.C.M. 1947, is
to facilitate the management of state lands but it does not
abrogate general principles of property law. The statute
must be read in the context of the chapter in which it
appears. By declaring a sublease that is not filed with the
commissioner to be illegal, the statute allows the com-
missioner to look to the original state lessee as the party
responsible for full compliance with the terms of the state
lease.
The ruski is also argue that because of our reversal of
the trial court's judgment on the first appeal of this case,
the trial judge could not rely on his original finding that
the Fixes were rightfully in possession of the property
under the 1964 sublease from the Ayes. But a reversal
extends only to those issues which the appellate court
decided in actuality or by necessary implication; it does
not affect collateral matters not before the court. Phalen v.
Rilley (1970), 156 Mont. 91, 475 P.2d 998, 999; Ryan v. Ald,
Inc. (1967), 149 Mont. 367, 427 P.2d 53, 56.
On remand, the parties stipulated that the measure of
damages owing to the Bruskis from the Fixes would be the
reasonable rental value of the land for the years that the
Fixes occupied the premises in derogation of the Bruskis'
right to possession. On this issue, the Bruskis contend
that the trial court erred in permitting the Fixes to offset
from reasonable rental value the lease payments which the
Fixes made directly to the State of Montana. We find no
error. As a general rule, the party to whom property has
been awarded under an erroneous judgment may, upon reversal,
deduct expenses that he necessarily incurred in the pro-
tection of that property and the payment of taxes and liens.
Restatement Restitution S 74, Comment (e) (1937). The
rental which the Fixes paid to the state was an expense
incurred to protect the property and was therefore properly
deducted from the stipulated rental. We cannot agree with
the Bruskis' attempts to label the lease payments to the
state as a "cost of production" for which the Fixes as crop
producers should be responsible. To require the Fixes to
pay the Bruskis a reasonable rental and then to add to that
sum the rent due the State of Montana is--as the trial court
found--to require the Fixes to pay rent twice.
Finally, the Bruskis urge that the trial court should
have awarded them and not the Fixes the benefits of the
federal A.S.C.S. program for the years 1971, 1977, and 1978.
A.S.C.S. payments are made to producers who raise crops in
accordance with certain federal guidelines. One-third of
these payments went to the state as part of the rental due
on the state lease. The remaining two-thirds has been
withheld pending a final determination as to which of the
parties is entitled to the A.S.C.S. payments. Neither party
has had access to these funds during the pendency of the
litigation.
The Bruskis argue that these payments represent an
issue of the land to which they are properly entitled.
Generally, a party who has been dispossessed of property by
an erroneous judgment is entitled, upon reversal, not only
to specific restitution of the property in question, but
also to rents, issues or profits therefrom. 5B C.J.S.
Appeal and Error 5 1983 (1958); Mann v. Thompson (Fla. App.
1960), 118 So.2d 112, 114-15; see also, Waggoner v. Glacier
Colony of Hutterites (1957), 131 Mont. 525, 312 P.2d 117.
We agree that the trial court should have awarded the A.S.C.S.
benefits to the Bruskis for the years 1977 and 1978. Had it
not been for the trial court's erroneous judgment before the
first appeal of this case, the Bruskis would have been in
possession of the land, could have farmed it, and would have
been entitled to the lessee's two-thirds share of the
A.S.C.S. payments. Who is entitled to the A.S.C.S benefits
for 1971 depends, of course, on which of the two conveyances
from the Ayes had priority in that year.
In occupying the land in 1977 and 1978 under the trial
court judgment in their favor, the Fixes were not in the
position of trespassers whose wrongs were to be corrected by
an action at law. They were trustees, subject to make such
restitution as a court of equity might determine, if the
trial court judgment were overturned. They were charged
with the knowledge that they entered onto the land by force
of a judgment not yet final. A trial court's judgment
depends for its validity on being sustained. When it is
reversed or set aside, the party who has received the
benefit of that judgment must make restitution to the other
party. Nothing prevents a court, however, in exercise of
its equitable powers, to allow the party making restitution
reasonable compensation for labor or improvements benefiting
the land.
We affirm the trial court's judgment insofar as it
permits the Fixes to deduct from the rental owed to the
Bruskis the lease payments paid directly to the state. We
vacate the trial court's judgment insofar as it awards the
lessee's share of the A.S.C.S. payments to the Fixes for the
years 1977 and 1978. We order those benefits to be paid to
the Bruskis. We vacate the trial court's ruling that the
Fixes were lawfully in possession of the land in 1971 and
remand for the trial court to determine whether the Fixes'
or the Bruskis' interest in the land had priority for that
year. The trial court is directed to award the 1971 A.S.C.S.
We Concur:
Chief Justice
I.
Justices
This causes was submitted prior to January 5, 1981.