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 

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KL .J[ b 

Filed: 

Submitted: March 10, 1978 

Decided : .!!d-hv '. . 7378 
Mr. 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. 

On January 28, 1961,Mhrgarette Aye and John A. Aye, as 

administrators of the estate of Lester Aye, leased about 5,104 

acres of land in 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 in 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 in advance. Both leases expired on April 20, 1964. 

In December 1963, while the leases were still in effect, 

Willis 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. At trial Adolph Fix testified this 

was a high price for land at that time, but Willis Aye 

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 

lease was owned by John Aye, so he received assurance from 

John Aye that the state lease would go with the Perso place. 

Fix stated he 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. At the trial, Willis Aye testified the reason he 

did not convey the state lease to Fix when he sold the Perso 

place was because it was in the Lester Aye estate, and he did 

not have the authority to convey it. 

On January 3, 1964, shortly before the expiration of the 

first 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 state lease as did 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 to have the lease on the school lands. Fix also 

testified that Aye explained to hb that he would get the 

state lease at 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 first 

right to buy the leased premises or to meet any bid offered. 

Fix paid the cost of the state lease to John Aye directly 

until Aye 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 with Willis Aye, personal representative for 

both the John Aye and the Lester Aye estates, and asked Willis 

Aye for the assignment of the state lease. Willis Aye 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, Willis Aye, as administrator of the 

estate of John Aye, gave notice to Fix that the leasing agreement 

was terminated because "it is contemplated that said property 
will be sold." The tenancy on the state lease was cancelled 

by letter from John R. Carr dated February 12, 1971. A further 

notice to quit was given by Willis 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 state lease to 

the buyers, Ralph and Frances Bruski. Fix refused to vacate the 

state leased land and the present litigation ensued. The trial 

court ruled Fix was 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 statute of frauds bar testimony of an alleged 

oral agreement to sell or 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 real property which must be in writing to be valid under the 

. statute of 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 Willis Aye have the legal authority 

to sell or assign the state lease to Adolph Fix? 

5. Did Adolph Fix waive his right in state lease No. 

49401 when he failed to exert any preference at the time the 

lease was up for renewal? 

6. May an oral agreement to sell or assign a state lease 

be made withoutstate approval? 

We shall discuss only issues 1 and 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 to writink. 

Montana law is clear that evidence of oral representations, 

relating directly to the subject matter of a contract, is not 

admissible to add to or alter the provisions of a written 

contract. 

In Hosch v. Howe, (1932), 92 Mont. 405, 410, 16 P.2d 699, 

700, this Court said: 

"' * * * The chief and most satisfactory index is 

found in the circumstance whether or not the 

particular element of the alleged extrinsic negotiation is dealt with at all in the writing. If it 

is mentioned, covered or dealt with in the writing, 

then presumably the writing was meant to represent 

all of the transaction on that element. '" 

In 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 to 

him. The first written document is the deed of December 26, 

1963, which represented the Perso property purchase from 

Willis and Lona Aye, that Fix claims transferred to him the 

Aye interest in the state lease. The deed itself, however, 

does not mention State Lease No. 49401, and it does not transfer that lease to Adolph 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 

to pay money to lease his own property from John Aye in 1964. 
The third written document is the mbhSi64- entered into 

between Willis Aye, as administrator of the John Aye estate, 

and Adolph Fix. This sublease clearly refers to State Lease 

No. 49401, and clearly provides that Fix shall sublease from 

Aye the very same lease which Fix contends had been sold or 

assigned to him prior to December 26, 1963. This sublease was 

signed by Fix on November 30, 1967. 

Thus, because the alleged oral representations claimed 

by Adolph Fix to have been made to him by Willis and John Aye 

were dealt with in at least two of the three written agreements, 

all such par01 testimony varying the terms of the written documents was inadmissible being barred by the statute of frauds. 

Furthermore, the alleged oral agreement for the sale or 

assignment of State Lease No. 49401 is barred by the statute 

of frauds since it involves an agreement to transfer an interest 

in real property. Such agreements are required by sections 

13-606 and 93-1401-7, R.C.M. 1947, to be in writing. 

State Lease No. 49401 is an interest in real property 

or lands. "Of course, the execution of a lease of land operates 

as a transfer of an interest in that land, whether the specified 

term is long or short." 2 Corbin Contracts, $402. 

This Court in Rider v. Cooney, (1933), 94 Mont. 295, 307, 

308, 23 P.2d 261, stated: 

"An estate for years has been held by this court 

to be an interest in land. * * * 

"* * * 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 

in 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 are 

personal property rather than real property. O'Neill, however, 

has never been followed by this Court insofar as it seems to say 

that a lease is not a chattel real or an interest in real estate 

or land. The ruling in Wheeler v. McIntyre, (1918), 55 Mont . 295, 

175 P, 892, that a lease is an interest in land and chattel real 

has been followed in a series of Montana cases. See: Brubaker 

v. ~'Orazi, (1947), 120 Mont. 22, 34, 179 P.2d 538; Standard 

Oil Co. v. Idaho Community Oil 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, in its conclusions of law No. I, 

incorrectly found that the alleged oral contract to convey the 

state 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 all oral negotiations 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 to claims made by lessees such as Fix, if mere 

possession of leased lands under specific written agreements 

would allow the lessee to claim exemption from the requirements 

of transfers in writing. The statute of frauds is specifically 

designed to avoid this type of transaction; "(3) by the subsequent agreements subleasing the state lease which subleases 

were given in lieu of an assignment because of the circumstances 

described in the findings of fact." The written agreements that 

specifically provide for subleasing, all entered into after the 
purported sale or assignment of the state lease, however, do 

not in 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 first right of purchase of the Ayes' 

rights in the state lease if he in 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 

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 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 in 

the state leased lands to Fix, The District Court judgment in 

favor of Fix is reversed, and the cause is remanded to the 

District Court with orders to enter judgment for plaintiffs 

and to determine damages due them. 
We Concur: 

Chief Just ice 

Justices. 0'