No. 13795 IN THE SUPREME COURT OF THE STATE OF MONTANA 1978

MARGARETTE M. AYE, et al., Plaintiffs and Appellants,
-vsADOLPH 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 KL .J[ b Filed: Submitted: March 10, 1978 Decided:

### .!!d-hv'.

. 

## 7378Mr. Justice John C. Harrison delivered the Opinion of the Court:
Plaintiffs appeal from an order of the District Court, Carter County, assigning their state 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. OnJanuary 28, 1961,Mhrgarette Aye and John A. Aye, as administrators of the estate of Lester Aye, leased about 5,104

acres of land inCarter County, Montana, toAdolph Fix. This lease included the lease on the "school section", StateLease No. 49401, and provided for 

### an annual cash rental of $18,000 payable inadvance. Also on January 28, 

### 1961, Lona B. Aye, the widow of Lester Aye, leased 834 acres (referred to as the "Perso" place) toAdolph Fix. This lease provided for an annual rent of $1.00 payable inadvance. Both leases expired on April 20, 1964. InDecember 1963, while the leases were 

### still in effect, 

### WillisAye (brother of LesterAye, deceased, and husband of Lona Aye, Lester's widow) solicited Adolph Fix tobuy the Perso place for $50 per acre. AttrialAdolph Fix testified this


### was a high price for land atthat time, but WillisAye offered the school lease adjoining the Perso place if Fix would pay $50 per acre for the Perso place. Adolph Fix further testified that he thought the school leasewas 

### owned by John Aye, so he received assurance from John Aye that the state leasewould go with the Perso place. Fix statedhe paid the $50 per acre, $41,718 total, only because the state lease was included as part 

### of the consideration.Fix received a deed to the Perso place but no assignment of the lease. Atthe trial, WillisAye testified the reason he did not convey the state lease toFixwhen he sold the Perso place was because itwas inthe Lester Aye estate, and he did not have the authority to convey it. On January 

### 3, 1964, shortlybefore the expiration of the first lease, another leasewas entered intobetween 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 state lease asdid the earlier lease, "together with lease on School lands." Fix testified that he objected to this language and reminded John Aye that he, Fix,

was supposed tohave the lease on the school lands. Fix also testified thatAye explained to

### hbthat 

### he would get the state lease atthe end of the term. Fix testifiedhe accepted these assurances as a sufficient assignment of the lease. The 1964 lease also contained a provision granting Fix the first right tobuy the leased premises or to meet any bid offered. Fix paid the cost of the state lease toJohn Aye directly untilAye died in 1966. In 1967, Fix made lease payments to the state. The state objected to receiving payments from Fix because he was not the lessee of record. Fix testified that he then consulted withWillisAye, personal representative for both the John Aye and the Lester Aye estates, and askedWillis Aye for the assignment of the state lease. WillisAye told Fix that he would get the assignment, but for the time being he would have to settle for a sublease. 

### On March 18, 1970, WillisAye, as administrator of the estate of John Aye, gave notice toFix that the leasing agreement
was terminated because "it 

### is contemplated that said property

### willbe sold." The tenancy on the state lease was cancelled by letter from John R. Carr dated February 12, 1971. A further notice toquit was given by WillisAye, "Agent for the Aye family" on February 

### 3, 1971, "to notify you that theAye ranch 

# * ** has been sold." The Aye family specificallyassigned the state lease to the buyers, Ralph and Frances Bruski. Fix refused tovacate the state leased land and the present litigation ensued. The trial court ruled Fixwas the owner of the state lease by virtue of

an oral agreement between Fix and John Aye that the state lease land would be assigned as part of the Perso place land sale. Plaintiffs raise the following issues on appeal: 

### 1. Does the statuteof frauds bar testimony of an alleged oral agreement to sellor assign a state lease when written lease agreements specifically refer to a sublease of the state leased lands? 2. 

### Is a sale or assignment of a state lease a transfer of realproperty which must be inwriting tobe valid under the

. statuteof limitations? 

### 3. Was the alleged oral agreement for the sale or assignment of the state lease barred by the section 

### 93-2604, R.C.M. 1947, statute of limitations? 4. Did John Aye or

### WillisAye have the legal authority to sellor assign the state lease toAdolph Fix? 5. Did Adolph Fixwaive his right in state leaseNo. 49401 when he failed to exert any preference atthe time the leasewas up for renewal? 6. May an oral agreement to sellor assign a state lease be made withoutstateapproval? We shalldiscuss only issues 

### 1and 

### 2, since they are dispositive of this appeal.Evidence relating to any oral agreements between the parties should have been excluded under the statute of frauds, since the parties' agreement had been reduced towritink. Montana law 

### is clear that evidence of oral representations, relating directly tothe subject matter of a contract, 

### isnot admissible toadd toor alter the provisions of a written contract. InHosch v. Howe, (1932), 92 Mont. 405, 410, 16 P.2d 699, 700, this Court said: 

## "'

# * *

# * The chief and most satisfactory index 

### is found inthe circumstance whether or not the particular element of the alleged extrinsic negotiation is dealtwith atallin the writing. If it 

### ismentioned, covered or dealt with in the writing, then presumably the writing was meant to represent allof the transaction on that element.

## '" Inthe instant case there are three specificwritten agreements which are totally inconsistent with the claim of Adolph Fix that StateLease No. 49401 was sold or assigned to him. The firstwritten document 

### is the deed of December 26, 1963, which represented the Perso property purchase from Willisand Lona Aye, that Fix claims transferred tohim the Aye interest inthe statelease. The deed itself, however, does not mention StateLease No. 49401, and it does not transferthat lease toAdolph Fix. The second written document 

### is the January 3, 1964 lease agreement between John Aye and Adolph Fix. Fix signed this agreement which contained specific references to the state lease as land which Fix would leave from Aye. If Fix had purchased an assignment of the state lease when he bought the Perso place in 1963, he would obviously have no cause topay money to lease his own property from John Aye in 1964.The third written document 

### is the 

### mbhSi64- entered into between WillisAye, asadministrator of the John Aye estate, and Adolph 

### Fix. This sublease clearly refers to StateLease No. 49401, and clearly provides that Fix shall sublease from Aye the very same leasewhich Fix contends had been sold or assigned tohim prior toDecember 26, 1963. This sublease was signed by Fix on November 30, 1967. Thus, because the alleged oralrepresentations claimed by Adolph Fix tohave been made tohim by Willisand John Aye

were dealt with inatleast two of the three written agreements, allsuch par01 testimony varying the terms of thewritten documents was inadmissible being barred by the statute of frauds. Furthermore, the alleged oral agreement for the sale or assignment of StateLease No. 49401 isbarred by the statute of frauds since it involves an agreement to transfer an interest inrealproperty. Such agreements are required by sections 13-606 and 93-1401-7, R.C.M. 1947, tobe inwriting. StateLease No. 49401 

### is an interest inreal property
or lands. "Of course, the execution of a lease of land operates
as a transfer of an interest inthat land, whether the specified term 

### is long or short." 2 Corbin Contracts, $402. This Court inRider v. Cooney, (1933), 94 Mont. 295, 307, 308, 23 P.2d 261, stated: "An estate for years has been held by this court tobe an interest inland. 

# * ** "***When a lease 

### is granted upon the public lands of the state, an interest or estate in the lands has been alienated, and therefore the leasing of the lands of the state for a term of years 

### is the disposal of an interest or estate inthe lands

# **

# *

# ." See: Sections 67-502(3) and 67-506, R.C.M. 1947.The District Court relied on O'Neill v. Wall, (1936), 103Mont. 388, 62 P.2d 672, for the conclusion that leases are personal property rather than realproperty. O'Neill, however, has never been followed by this Court insofar as it seems to say that a lease 

### isnot a chattel real or an interest inreal estate

or land. The ruling inWheeler v. McIntyre, (1918), 55 Mont

# . 295, 175

### P, 892, that a lease 

### is an interest inland and chattel real has been followed ina series of Montana cases. See: Brubaker

v. ~'Orazi,(1947), 120Mont. 22, 34, 179P.2d 538; Standard OilCo. v. Idaho Community OilCo., (1934), 98 Mont. 131, 37 P.2d 660; Williard v, Federal Surety Co., (1932), 91Mont. 465, 471, 8 P.2d 633. The District Court, in

### its conclusions of law No. I, incorrectly found that the alleged oralcontract toconvey the stateleasewas 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 alloralnegotiations concerning its matter which preceded the execution of the instrument; 

### "(2) the possession by Fix of the state leased lands." Every lessor would be subject toclaims made by lessees such asFix, if mere possession of leased lands under specific written agreements would allow the lessee toclaim exemption from the requirements of transfers inwriting. The statute of frauds is specifically designed toavoid this type of transaction; "(3) by the subsequent agreements subleasing the state lease which subleases

were given in lieuof an assignment because of the circumstances described inthe findings of fact." The written agreements that specifically provide for subleasing, allentered into after thepurported sale or assignment of the state lease, however, do not inany way support the alleged oral promise there would be an assignment or sale of the state lease. Furthermore, Fix could give no reasonable explanationwhy he would sign an agreement giving him the firstright of purchase of the Ayes' rights in the state lease if he in factwas already the owner of the lease upon purchase of the Perso place. Fix relies on Salingv. 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 in 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 if Fix failed to fulfill the terms of the lease agreement, a factorwhich 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 entireAye interest in the state leased lands to Fix, The District Court judgment in favor of Fix isreversed, and the cause 

### is remanded to the District Court with orders to enterjudgment for plaintiffs and to determine damages due them.

### We Concur:

Chief Justice

Justices.

# 0'