Case Title: AYE v FIX

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1978-05-31T00:00:00Z

Document:
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 i i7J K L . J [ b Filed: Submitted: March 10, 1978 Decided : .!!d-hv ' . . 7378 M r . Justice John C. Harrison delivered the Opinion of the Court : Plaintiffs appeal from an order of the District Court, Carter County, assigning their s t a t e leased lands to defendant and granting him $20,590, less certain rentals, plus interest, during the time he was dispossessed from the state leased lands. O n January 28, 1961,Mhrgarette Aye and John A. Aye, as administrators of the estate of Lester Aye, leased about 5,104 acres of land i n Carter County, Montana, to Adolph Fix. This lease included the lease on the "school section", State Lease No. 49401, and provided for an annual cash rental of $18,000 payable i n advance. Also on January 28, 1961, Lona B. Aye, the widow of Lester Aye, leased 834 acres (referred to as the "Perso" place) to Adolph Fix. This lease provided for an annual rent of $1.00 payable i n advance. Both leases expired on April 20, 1964. In December 1963, while the leases were still i n effect, W i l l i s Aye (brother of Lester Aye, deceased, and husband of Lona Aye, Lester's widow) solicited Adolph Fix to buy the Perso place for $50 per acre. A t t r i a l Adolph Fix testified this was a high price for land a t that time, but W i l l i s Aye offered the school lease adjoining the Perso place i f Fix would pay $50 per acre for the Perso place. Adolph Fix further testified that he thought the school lease was owned by John Aye, so he received assurance from John Aye that the s t a t e lease would go with the Perso place. Fix stated he paid the $50 per acre, $41,718 total, only be- cause the s t a t e lease was included as part of the consideration. Fix received a deed t o the Perso place but no assignment of the lease. A t the t r i a l , W i l l i s Aye testified the reason he did not convey the state lease to Fix when he sold the Perso place was because it was i n the Lester Aye estate, and he did not have the authority to convey it. O n January 3, 1964, shortly before the expiration of the f i r s t lease, another lease was entered into between John Aye and Adolph Fix. This lease, for the 5,000 acres other than the Perso place, was prepared by John Aye and contained the same language relative to the s t a t e lease a s did the earlier lease, "together with lease on School lands." Fix testified that he objected t o this language and reminded John Aye that he, Fix, was supposed to have the lease on the school lands. Fix also testified that Aye explained to h b that he would get the s t a t e lease a t the end of the term. Fix testified he accepted these assurances as a sufficient assignment of the lease. The 1964 lease also contained a provision granting Fix the f i r s t right t o buy the leased premises or to meet any bid offered. Fix paid the cost of the s t a t e lease t o John Aye directly u n t i l Aye died i n 1966. In 1967, Fix made lease payments t o the state. The state objected to receiving payments from Fix because he was not the lessee of record. Fix testified that he then consulted with W i l l i s Aye, personal representative for both the John Aye and the Lester Aye estates, and asked W i l l i s Aye for the assignment of the state lease. W i l l i s Aye told Fix that he would get the assignment, but for the time being he would have t o s e t t l e for a sublease. On March 18, 1970, W i l l i s Aye, as administrator of the estate of John Aye, gave notice t o Fix that the leasing agreement was terminated because "it is contemplated that said property w i l l be sold." The tenancy on the state lease was cancelled by l e t t e r from John R. Carr dated February 12, 1971. A further notice t o quit was given by W i l l i s Aye, "Agent for the Aye family" on February 3, 1971, "to notify you that the Aye ranch * * * has been sold." The Aye family specifically assigned the s t a t e lease to the buyers, Ralph and Frances Bruski. Fix refused t o vacate the s t a t e leased land and the present litigation ensued. The t r i a l court ruled Fix was the owner of the s t a t e lease by virtue of an oral agreement between Fix and John Aye that the s t a t e lease land would be assigned as part of the Perso place land sale. Plaintiffs raise the following issues on appeal: 1. Does the statute of frauds bar testimony of an alleged oral agreement t o s e l l or assign a s t a t e lease when written lease agreements specifically refer to a sublease of the s t a t e leased lands? 2. Is a sale or assignment of a s t a t e lease a transfer of real property which must be i n writing to be valid under the . statute of limitations? 3. Was the alleged oral agreement for the sale or assign- ment of the s t a t e lease barred by the section 93-2604, R.C.M. 1947, statute of limitations? 4. Did John Aye or W i l l i s Aye have the legal authority t o s e l l or assign the s t a t e lease t o Adolph Fix? 5 . Did Adolph Fix waive his right in state lease No. 49401 when he failed to exert any preference a t the time the lease was up for renewal? 6. M a y an oral agreement to s e l l or assign a s t a t e lease be made withoutstate approval? W e shall discuss only issues 1 and 2, since they are dispositive of t h i s appeal. Evidence relating t o any oral agreements between the parties should have been excluded under the statute of frauds, since the parties' agreement had been reduced t o writink. Montana law is clear that evidence of oral representations, relating directly t o the subject matter of a contract, is not admissible t o add t o or a l t e r the provisions of a written contract. I n Hosch v. Howe, (1932), 92 Mont. 405, 410, 16 P.2d 699, 700, t h i s Court said: "' * * * The chief and most satisfactory index is found i n the circumstance whether or not the particular element of the alleged extrinsic nego- t i a t i o n is dealt with a t a l l in the writing. I f it i s mentioned, covered or dealt with i n the writing, then presumably the writing was meant t o represent a l l of the transaction on that element. '" I n the instant case there are three specific written agreements which are totally inconsistent with the claim of Adolph Fix that State Lease No. 49401 was sold or assigned t o him. The f i r s t written document is the deed of December 26, 1963, which represented the Perso property purchase from W i l l i s and Lona Aye, that Fix claims transferred t o him the Aye interest i n the s t a t e lease. The deed i t s e l f , however, does not mention State Lease No. 49401, and it does not trans- f e r that lease t o Adolph Fix. The second written document is the January 3, 1964 lease agreement between John Aye and Adolph Fix. Fix signed t h i s agreement which contained specific references t o the s t a t e lease a s land which Fix would leave from Aye. I f Fix had purchased an assignment of the s t a t e lease when he bought the Perso place i n 1963, he would obviously have no cause t o pay money t o lease h i s own property from John Aye i n 1964. The third written document i s the mbhSi64- entered into between W i l l i s Aye, a s administrator of the John Aye estate, and Adolph Fix. This sublease clearly refers t o State Lease No. 49401, and clearly provides that Fix s h a l l sublease from Aye the very same lease which Fix contends had been sold or assigned t o him prior t o December 26, 1963. This sublease was signed by Fix on November 30, 1967. Thus, because the alleged o r a l representations claimed by Adolph Fix to have been made t o him by W i l l i s and John Aye were dealt with i n a t l e a s t two of the three written agreements, a l l such par01 testimony varying the terms of the written docu- ments was inadmissible being barred by the statute of frauds. Furthermore, the alleged oral agreement for the sale o r assignment of State Lease No. 49401 is barred by the statute of frauds since it involves an agreement t o transfer an interest i n r e a l property. Such agreements are required by sections 13-606 and 93-1401-7, R.C.M. 1947, t o be i n writing. State Lease No. 49401 is an interest i n real property or lands. "Of course, the execution of a lease of land operates a s a transfer of an interest i n that land, whether the specified term is long or short." 2 Corbin Contracts, $402. This Court i n Rider v. Cooney, (1933), 94 Mont. 295, 307, 308, 23 P.2d 261, stated: "An estate for years has been held by t h i s court t o be an interest i n land. * * * "* * * When a lease is granted upon the public lands of the s t a t e , an interest o r estate i n the lands has been alienated, and therefore the leasing of the lands of the s t a t e for a term of years is the disposal of an interest o r estate i n the lands * * * ." See: Sections 67-502(3) and 67-506, R.C.M. 1947. The District Court relied on O'Neill v. Wall, (1936), 103 Mont. 388, 62 P.2d 672, for the conclusion that leases a r e personal property rather than real property. O'Neill, however, has never been followed by t h i s Court insofar as it seems to say that a lease is not a chattel real or an interest i n real estate or land. The ruling i n Wheeler v. McIntyre, (1918), 55 Mont . 295, 175 P, 892, that a lease is an interest i n land and chattel real has been followed i n a series 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; Williard v, Federal Surety Co., (1932), 91 Mont. 465, 471, 8 P.2d 633. The District Court, i n its conclusions of law No. I, incorrectly found that the alleged o r a l contract t o convey the s t a t e lease was removed from the statutue of frauds for three other reasons: "(1) the oral agreement was partially executed by the execution of the deed conveying the Perso Place". Section 13-607, R.C.M. 1947, provides that the execution of a written contract supersedes a l l o r a l negotiations concerning i t s matter which preceded the execution of the instrument; "(2) the possession by Fix of the s t a t e leased lands." Every lessor would be subject t o claims made by lessees such as Fix, i f mere possession of leased lands under specific written agreements would allow the lessee t o claim exemption from the requirements of transfers i n writing. The statute of frauds is specifically designed t o avoid t h i s type of transaction; "(3) by the sub- sequent agreements subleasing the s t a t e lease which subleases were given i n l i e u of an assignment because of the circumstances described i n the findings of fact." The written agreements that specifically provide for subleasing, a l l entered into a f t e r the purported sale or assignment of the s t a t e lease, however, do not i n any way support the alleged oral promise there would be an assignment or sale of the state lease. Furthermore, Fix could give no reasonable explanation why he would sign an agreement giving him the f i r s t right of purchase of the Ayes' rights i n the state lease i f he i n fact was already the owner of the lease upon purchase of the Perso place. Fix relies on Saling v. Flesch, (1929), 85 Mont . 106, 110, 111, 277 P. 612, for the position that "Whether the instrument * * * was an assignment or a sublease depends upon the intention of the parties." In this. case, the parties i n their 1964 and 1967 agreements, specifically referred to a "sublease" rather than an "assignment" of the state leased land, Moreover, John Aye reserved the right to reenter the property i f Fix failed to f u l f i l l the terms of the lease agreement, a factor which this Court has found indicative of a sublease of lands. Saling v. Flesch, supra. The written agreements of the parties clearly indicate there was no sale or assignment of the entire Aye interest i n the s t a t e leased lands to Fix, The District Court judgment in favor of Fix i s reversed, and the cause is remanded t o the District Court with orders to enter judgment for plaintiffs and to determine damages due them. W e Concur: Chief Just ice Justices. 0 '