No. 14584 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1979 

ARTHUR A. GREGORY and 

DOROTHY R. GREGORY, 

Plaintiffs and Appellants, 

VS. 

THE CITY OF FORSYTH 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: 

Lee Overfelt argued, Billings, Montana 

For Respondents: 

William Meisburger argued, Forsyth, Montana 

Submitted: December 14, 1979 

Decided : EB 19 1984 

Filed: E# 13 lm 

Clerk 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

Plaintiffs appeal from a final judgment of the Dictrict 

Court, sitting without a jury, in the Sixteenth Judicial 

District, in and for the County of Rosebud, in an action for 

refund of taxes paid under protest to the City of Forsyth. 

The District Court determined that the statute of limitations, 

section 93-2607(4), R.C.M. 1947, now section 27-2-203, MCA, 

barred plaintiffs' claim and that the disputed land was 

annexed to the City of Forsyth by acquiescence. 

Plaintiffs, Arthur and Lorothy Gregory, are the owners 

of three parcels of real property located in Rosebud County, 

Montana. The Gregories purchased these parcels in 1964 and 

received a quitclaim deed as title. The deed described the 

parcels by metes and bounds and referred to one of the 

parcels as part of "Lord's Addition to Forsyth, Montana." 

Lord's Addition was platted and dedicated to the City of 

Forsyth in 1907. The deed did not specifically designate 

whether the other two parcels, "the disputed property" comprising one acre of land, were within the City of Forsyth. 

From the time of the purchase until 1976, both the City 

of Forsyth and the Gregorys considered the disputed property 

to be inside the municipal boundaries of the city. Property 

taxes were regularly assessed and paid; city ordinances were 

enforced; and city services, including sewer, water, fire 

and police protection, were provided. 

City maps dating back to 1938 and 1945 show the disputed 

property to be within city limits. Also, in 1961 after publication of notice, all of the city ordinances were recodified, 

and the disputed property was again included within city 

boundaries. 
In 1967, for reasons unrelated to this appeal, Gregory 

obtained an abstract of title for his land and checked for 

mortgages, liens and satisfaction of liens. The abstract 

did not indicate whether the property was inside the city 

limits. In 1972, a plat of the Gregorys' land was prepared 

by a surveyor. The plat expressly defined the property, 

including the disputed portion, as "a parcel of land situated in the City of Forsyth, Montana." 

It was not until 1976 that the Gregorys first suspected 

that part of their property was outside the city limits. In 

a conversation with a local resident, Gregory was told that 

his property was not annexed to the city. Upon investigation, 

Gregory discovered that the disputed property was not part 

of the dedicated Lord's Addition and had never been statutorily annexed. Thereafter the Gregorys paid their city taxes 

under protest. 

On January 20, 1977, the Gregorys filed suit for recovery 

of the taxes paid under protest and for a judicial declaration 

that the disputed property is outside the city boundaries 

and therefore nontaxable. At trial on August 15, 1978, the 

only witness was Arthur A. Gregory. He testified that he 

thought the disputed property was inside the city limits by 

reason of the city maps he had observed posted on the door 

of the County Attorney's Office. 

The District Court held, among other things, that the 

1964 deed and 1967 abstract constituted means of knowledge 

sufficient to put the Gregorys upon inquiry as to the extent 

of the city limits and that their failure to discover the 

true facts within the time prescribed by the statute of 

limitations, section 93-2607(4), R.C.M. 1947 barred their 

claim. The court also concluded that the disputed property 
was annexed by acquiescence. The plaintiffs appeal from 

that final judgment. 

Three issues have been presented to this Court for 

review: 

1. Whether failure to comply with the statutory annexation procedures for towns and cities defeats the city's 

claim that the subject property is within the city limits of 

Forsyth, Montana. 

2. Whether the court erred in holding that the Gregorys' 

claim was barred by the statute of limitations. 

3. Whether the court erred in holding that the Gregorys 

acquiesced to the inclusion of their land in the city and 

were therefore estopped from asserting the contrary. 

The parties' argument for the most part is a shallow 

swipe at the second and third issues, i.e. the statute of 

limitations, diligence, discovery requirements and acquiescence. 

The first issue was carefully avoided and there was no in 

depth treatment of the necessity of compliance with statutory 

annexation procedures. 

The general rule is that municipal boundaries may be 

extended only as prescribed by law. 2 McQuillin, Municipal 

Corporations § 7.14 at 317 (3rd rev. ed. 1979). Since the 

jurisdiction of a city to extend its boundaries is a special 

power, conferred by the legislature, a substantial compliance 

with all the mandatory requirements of statutory law is 

essential. McQuillin, supra, 5 7.29 at 422; Pool v. Town of 

Townsend (1920), 58 Mont. 297, 304, 191 P.385, 386. In 

Pool, it was argued that certain land was brought within the 

town boundaries by common law dedication and also by the 

filing of a plat which displayed the land as within the Town 

of Townsend. This Court rejected these contentions and 
held: 

"'In this state there is no common law in any 

case where the law is declared by the Code.' 

(Sec. 6213, Rev. Codes [Section 12-104, R.C.M. 

1947, now section 1-1-108, MCAI.) If then, 

the Codes provide the means by which an addition becomes a part of a city or town and subject to its jurisdiction, the means so provided 

must be held to be exclusive." Pool, supra, 

at 304, 191 P. at 386. 

Montana's adherence to this view was recently underscored in 

Missoula Rural Fire District v. City of Missoula (1975), 168 

Mont. 70, 540 P.2d 958. The City of Missoula urged that 

earlier law which provided for summary annexation of land 

"wholly surrounded" by a city (section 11-403, R.C.M. 1947, 

now sections 7-2-4501 to 7-2-4504, MCA) was sufficient 

authority for annexation by that method. This Court held 

that since summary annexation was not provided for under the 

Planned Community Development Act of 1973 (section 11-514, 

R.C.M. 1947, et seq., now section 7-2-4701, MCA, et seq.), 

the stated purpose of which was to develop a system for 

"adding to and increasing city boundaries" (section 11-515, 

R.C.M. 1947, now section 7-2-4703, MCA), it was excluded as 

a method of annexation. Missoula Rural Fire District, 

supra, at 74, 540 P. 2d at 960-961. 

There are important policy considerations which favor 

at least substantial compliance with statutory annexation 

procedure. The legislative history of Montana's annexation 

laws demonstrates that public notice and participation 

(particularly for the persons affected by a proposed annexation) are cardinal. There is, however, no argument to be 

heard that the statutory scheme for annexation is not exclusive. 

The second issue concerns the application of the statute 

of limitations by the trial court, i. e. , section 93-2607 (4) , 

R.C.M. 1947, now section 27-2-203, MCA. 
Plaintiffs contend that the statute did not start to 

run until discovery of the facts by the aggrieved party. 

Ordinary diligence should be exercised in discovery. Ray v. 

Divers (1928), 81 Mont. 552, 264 P. 673, 675. 

The gist of the City's argument is that plaintiffs did 

not exercise due diligence because of their failure to read 

the deed and abstract carefully. But these documents do not 

indicate whether the land is within the city limits. Rather, 

the city map formed the basis for plaintiffs' conclusion 

that the land was inside the city. 

Reasonable diligence would require inspection of the 

city map and ordinance. These were the only direct official 

evidence of the City's boundaries. As such, any reliance on 

them was justified. Any other method would involve, first, 

an assumption the ordinance was defective, and second, a 

search of all annexation proceedings. Clearly, this is 

beyond the pale of reasonable diligence. 

In fact, plaintiffs' discovery of the defect in the 

ordinance came as a result of a conversation with a local 

resident. The City contends that for the purposes of the 

statute of limitations, section 93-2607(4), R.C.M. 1947, 

the "discovery" requirements are identical to Israelson v. 

Mountain Tractors Co. (1970), 155 Mont. 69, 73, 467 P.2d 

149, 152, wherein this Court explained that an aggrieved 

party must show some intentional concealment and diligence 

before he can rely on the discovery exception to the general 

rule that the statute begins running upon the occurrence of 

the fraud. Here, plaintiff admitted that there had been no 

concealment, and thus plaintiffs' cause of action expired in 

1966. 
Before addressing the parties' points of argument as to 

when the two year statute of limitations, section 93-2607(4), 

R.C.M. 1947, now section 27-2-203, MCA, started running, the 

issue of whether this statute of limitations applies to 

plaintiffs' claim deserves discussion. Section 27-2-203, 

MCA provides: 

"Actions for relief on ground of fraud or mistake. 

The period prescribed for the commencement of an 

action for relief on the ground of fraud or mistake is within 2 years, the cause of action in 

such case not to be deemed to have accrued until 

the discovery by the aggrieved party of the facts 

constituting the fraud or mistake." 

In Opp v. Boggs (1948), 121 Mont. 131, 140, 193 P.2d 379, 

385, this Court stated: "This section of our statute 'applies 

only to actions for fraud or mistake within the common 

acceptance of the term.'" 

"Mistake" is defined in Black's Law Dictionary as "some 

unintentional act, omission or error arising from ignorance, 

surprise, imposition or misplaced confidence . . . A Mistake 

exists when a person, under some erroneous conviction of law 

or fact, does, or omits to do, some act which, but for the 

erroneous conviction, he would not have done or omitted." 

Black's Law Dictionary 1152 (4th Ed. 1968). The "mistake" 

provision of section 93-2607(4) has rarely been discussed by 

this Court. In a suit for reformation and enforcement of a 

contract for the sale of corporate assets based on mutual 

mistake, this Court deemed the statute to be applicable and 

to have commenced running when the plaintiff realized the 

mistake. Favero v. Wynacht (1962), 140 Mont. 358, 373374, 

The mistake in the instant case was a mutual mistake of 

fact. Both the City and the Gregorys (as well as their 
predecessors in title) erroneously believed the disputed 

property to be inside the city limits. Application of 

section 93-2607(4) thus appears to be appropriate. 

The Gregorys contend the two year statute of limitations commenced running when they discovered in 1976 that 

the disputed land was not annexed or part of the dedicated 

Lord's Addition. They maintain that reasonable diligence 

would not require inquiry and ascertainment of facts inconsistent with the city ordinances and maps. The critical 

question is whether the Gregorys had either constructive or 

actual notice before 1976 of facts which should have put 

them on inquiry. Falls Sand and Gravel Co. v. Western 

Concrete, Inc. (D. Mont. 1967), 270 F.Supp. 495, 503-504. 

The District Court found the 1964 quitclaim deed and 1967 

abstract constituted such notice. The deed merely described 

the parcels conveyed by metes and bounds. Apart from locating the parcels, the fact that one parcel was designated as 

part of Lord's Addition to Forsyth has no independent significance. As stated in American Min. Co. v. Basin & Bay 

State Min. Co. (1909), 39 Mont. 476, 482, 104 P. 525, 526: 

"We think the better rule to be established 

in this state is that the recording of the 

instrument is to be considered with other 

facts and circumstances in determining whether 

the plaintiff is to be charged with notice, 

either actual or constructive, but that the 

fact of recording alone will not so charge him." 

Here, the record is clear that at least since 1938 the city 

maps and ordinances defined the disputed property to be 

within the City of Forsyth. Mr. Gregory testified that he 

relied on these official documents. The abstract likewise 

contains nothing to put the Gregorys on inquiry. The last 

page of the abstract indicates that all taxes were paid as 

of that date. It is also notable that in 1972, when the 
Gregorys's property, including the disputed portion, was 

platted by a professional surveyor, the land was defined as 

"a parcel of land situated in the City of Forsyth, Montana." 

These circumstances, in combination with the City's active 

and continuing exercise of jurisdiction over the disputed 

property fail to constitute notice of any error in the 

designation of municipal boundaries. 

The City lays great stress on the fraud cases construing 

the "discovery" element in section 93-2607(4). Israelson, 

supra; Lasby v. Burgess (1930), 88 Mont. 49, 289 P. 1028; 

and Kerrigan v. O'Meara (1924), 71 Mont. 1, 227 P. 819 are 

cases that require an affirmative showing of intentional 

concealment as a condition precedent to recovery under 

section 93-2607(4). However, these cases are all fundamentally distinguishable in that fraud, unlike mistake, is an 

intentional act of misrepresentation. Mistake, by definition, 

is unintentional. 

Annexation can only be accomplished by statutory procedures as set forth, supra. However, we do not wish to 

leave the impression that acquiescence has no place in the 

law. 

"The general rule that property owners are estopped by 

reason of long-continued acquiescence to question directly 

the validity of the extension of boundaries of a municipality 

seems to be well settled." 56 Am.Jur.2d Municipal corporations 

8 80 at 134 (1971). See also, 2 McQuillin, supra, § 7.09 at 

294. Although Montana has never recognized this principle, 

other jurisdictions have applied the doctrine of acquiescence 

to after-the-fact challenges of allegedly defective annexation 

proceedings. Annot., 101 A.L.R. 581 (1936); 18 A.L.R.2d 

1255 (1951). Acquiescence has also been found to be probative 
in ascertaining the location of municipal boundaries which, 

by their description, are uncertain or obscure. 2 McQuillin, 

supra, .§ 7.05 at 280, S 7.09 at 294; Town of Brookline v. 

Town of Newfane (Vt. 1966), 224 A.2d 908, 911; Crescent City 

v. Dodd (1933), 131 Cal.App. 153, 18 P.2d 999, 1001. However, 

"neither usage and custom nor contemporaneous construction 

will prevail over a plainly designated boundary line." 56 

Am.Jur.2d Municipal Corporations $ 41 at 103; Town of Stephens 

City v. Zea (1963), 204 Va. 82, 129 S.E.2d 14, 18. As 

stated in McQuillin, "the ---- rule as to establishment of municipal - 

boundaries - by acquiescence -- does not apply where the period 

of acquiescence is short or -- where the boundary involved - is 

clearly otherwise than claimed." McQuillin, supra, § 7.09 

at 295 (emphasis added). See also, La Porto v. Village of 

Philmont (N.Y.App. 1976) 346 N.E.2d 503, 506; Crescent City, 

supra, at 1001; -- Town of Brookline, supra, at 911. 

In the instant case, the boundaries of the City of 

Forsyth are clear. Th~~

&-. Furthermore, the Gregorys 

are not, by this suit, attacking the validity of annexation 

proceedings. No such proceedings were ever conducted. 

Therefore, the doctrine of acquiescence could not apply to 

these facts. 

Therefore, we find the City of Forsyth failed to substantially comply with the annexation procedure and the property 

in dispute is not, therefore, subject to municipal taxes. 

Under the circumstances of this case, the statute of 

limitations, section 93-2607(4), now 27-2-203, MCA, is 

deemed to have commenced running in 1976. 

The doctrine of acquiescence does not apply to boundaries 

that are easily or clearly defined. 
The judgment of the District Court is vacated and the 

cause remanded for further proceedings in conformity with 

this opinion. 

Justice 

We concur: 

Chief Justice 

a e.~ 

Justices