### 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: 

# EB191984 Filed:

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ClerkMr. Justice Gene B. Daly delivered the Opinion of the Court.

Plaintiffsappeal from a finaljudgment of the Dictrict Court, sittingwithout a jury, inthe Sixteenth Judicial District, inand for the County of Rosebud, inan action for refund of taxespaid under protest to the City of Forsyth. The DistrictCourt 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 inRosebud County, Montana. The Gregories purchased these parcels in 1964 and received a quitclaim deed astitle. The deed described the parcels by 

### metes and bounds and referred toone of the parcels aspart of "Lord's Addition toForsyth, 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, 

### werewithin the City of Forsyth. From the 

### timeof the purchase until 1976, both the City of Forsyth and the Gregorys considered the disputed property tobe inside the municipal boundaries of the city. Property taxes 

### wereregularly assessed and paid; cityordinances 

### were enforced; and city services, including 

### sewer, water, fire and police protection, 

### wereprovided. Citymaps dating back to 1938 and 1945 show the disputed property tobe within city

### limits. Also, in 1961afterpublication of notice, allof the cityordinances 

### 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, liensand satisfaction of liens. The abstract did not indicatewhether the property was inside the city limits. In 1972, a plat of the Gregorys' land was prepared by a surveyor. The platexpressly defined the property, including the disputed portion, as "a parcel of land situated intheCity of Forsyth, Montana." Itwas not until 1976 that the Gregorys first suspected thatpart of their property was outside the city

### limits. In a conversation with a local resident, Gregory 

### was told that hisproperty 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 statutorilyannexed. 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 isoutside the cityboundaries and therefore nontaxable. At

### trial on August 15, 1978, the only witness was Arthur A. Gregory. He testified thathe thought the disputed property was inside the city 

### limitsby

reason of the citymaps he had observed posted on the door of the County Attorney's Office. The DistrictCourt held, among other things, that the 1964 deed and 1967 abstract constituted means of knowledge sufficient toput the Gregorys upon inquiry as to the extent of the city

### limitsand that their failure to discover the true factswithin the 

### timeprescribed by the statuteof limitations, section 93-2607(4), R.C.M. 1947 barred their claim. The court alsoconcluded that the disputed propertywas annexed by acquiescence. The plaintiffs appeal from that finaljudgment. Three issues have been presented to this Court for review: 1. Whether failure to comply with the statutory annexationprocedures for towns and cities defeats the city's claim that the subjectproperty 

### iswithin the city

### limitsof Forsyth, Montana. 2. Whether the court erred inholding that the Gregorys' claimwas barred by the statuteof limitations. 3. Whether the court erred inholding 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 atthe second and third issues, i.e. the statute of limitations, diligence, discovery requirements and acquiescence. The firstissuewas carefully avoided and there was no in depth treatment of the necessity of compliance with statutory annexation procedures. The general rule is thatmunicipal boundaries may be extended only asprescribed by law. 2McQuillin, Municipal Corporations § 7.14 at317 (3rdrev. ed. 1979). Since the jurisdiction of a city toextend itsboundaries 

### is a special power, conferred by the legislature, a substantial compliance with allthe mandatory requirements of statutory law is essential. McQuillin, supra, 

### 5 7.29 at422; Pool v. Town of Townsend (1920), 58 Mont. 297, 304, 191P.385, 386. In Pool, itwas argued thatcertain land was brought within the town boundaries by common law dedication and also by the filingof a platwhich displayed the land aswithin the Town of Townsend. This Court rejected these contentions andheld:"'In this statethere 

### isno common law inany case where the law isdeclared by the Code.' (Sec. 6213, Rev. Codes [Section 12-104, R.C.M. 1947, now section 1-1-108, MCAI.) If then, theCodes provide themeans by which an addition becomes a part of a cityor town and subject to itsjurisdiction, the means soprovided must be held to be exclusive." Pool, supra, at304, 191P. at386. Montana's adherence to thisview was recently underscored in Missoula Rural Fire Districtv. 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 thatmethod. This Court held that since summary annexation was not provided for under the Planned Community Development Actof 1973 (section 11-514, R.C.M. 1947, et seq., now section 7-2-4701, MCA, 

### etseq.), the statedpurpose of which was todevelop a system for "adding to and increasing cityboundaries" (section 11-515, R.C.M. 1947, now section 7-2-4703, MCA), itwas excluded as


### a method of annexation. Missoula Rural Fire District, supra, at74, 540 P.2d at960-961. There are importantpolicy considerations which favor atleast substantial compliance with statutoryannexation procedure. The legislativehistory of Montana's annexation laws demonstrates thatpublic notice and participation (particularlyfor the persons affected by a proposed annexation) are cardinal. There is, however, no argument tobe heard that the statutory scheme for annexation 

### is not exclusive. The second issue concerns the application of the statute of limitationsbythe trialcourt, i. e.

## , section 93-2607 

### (4)

## , R.C.M. 1947, now section 27-2-203, MCA.Plaintiffs contend that the statutedid not startto

run until discovery of the factsby the aggrieved party. Ordinary diligence should be exercised indiscovery. Ray v. Divers (1928), 81Mont. 552, 264 P. 673, 675. The gistof the City's argument is thatplaintiffs did not exercise due diligence because of their failure toread the deed and abstract carefully. But these documents do not indicate whether the land 

### iswithin the city limits. Rather, the citymap formed the basis for plaintiffs' conclusion that the land was inside the city. Reasonable diligencewould require inspection of the citymap and ordinance. These 

### were the only directofficial 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 allannexation proceedings. Clearly, this 

### is beyond the pale of reasonable diligence. In fact, plaintiffs' discovery of the defect in the ordinance came as a resultof a conversation with a local resident. The City contends that for the purposes of the statuteof limitations, section 93-2607(4), R.C.M. 1947, the "discovery" requirements 

### are identical to Israelson v. Mountain Tractors Co. (1970), 155Mont. 69, 73, 467 P.2d 149, 152, wherein thisCourt 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 statutebegins 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 ormistake 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), 121Mont. 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 (4thEd. 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), 140Mont. 358, 373374,

The mistake in the instant case was a mutual mistake of fact. Both the City and the Gregorys (as well as theirpredecessors in

### title) erroneously believed the disputed property tobe inside the city

### limits. Application of section 93-2607(4) thus appears tobe appropriate. The Gregorys contend the two year statuteof limitations commenced running when they discovered in 1976 that the disputed land was not annexed orpart of the dedicated Lord's Addition. They maintain that reasonable diligence would not require inquiry and ascertainment of facts inconsistentwith the cityordinances and maps. The critical question iswhether the Gregorys had either constructive or actual notice before 1976 of factswhich 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 DistrictCourt found the 1964 quitclaim deed and 1967 abstract constituted such notice. The deed merely described theparcels conveyed by 

### metes and bounds. Apart from locating the parcels, the fact that one parcel 

### was designated as part of Lord's Addition toForsyth has no independent significance. As stated inAmerican Min. Co. v. Basin & Bay StateMin. Co. (1909), 39 Mont. 476, 482, 104 P. 525, 526: "We think the better rule tobe established inthis state

### is that the recording of the instrument 

### is tobe considered with other facts and circumstances indetermining whether the plaintiff is tobe charged with notice, either actual orconstructive, but that the factof recording alone willnot so charge him." Here, the record 

### is clear that at

### least since 1938 the city maps and ordinances defined the disputed property tobe within the City of Forsyth. Mr. Gregory testified thathe relied on these officialdocuments. The abstract likewise contains nothing toput the Gregorys on inquiry. The last page of the abstract indicates that alltaxes 

### were paid as of that date. It is alsonotable that in 1972, when theGregorys's property, including the disputed portion, was platted by a professional surveyor, the land was defined as "aparcel of land situated inthe City of Forsyth, Montana." These circumstances, incombination with the City's active and continuing exercise of jurisdiction over the disputed property fail to constitutenotice 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), 71Mont. 1, 227 P. 819 are

cases thatrequire an affirmative showing of intentional concealment asa condition precedent torecovery under section 93-2607(4). However, these cases are 

### all fundamentallydistinguishable inthat fraud, unlike mistake, is an intentional actof misrepresentation. Mistake, by definition, 

### isunintentional. 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 inthe law. "The general rule thatproperty owners 

### are estopped by

reason of long-continued acquiescence toquestion directly the validity of the extension of boundaries of a municipality



### seems tobe well settled." 56 Am.Jur.2d Municipal corporations 

### 8 80 at134 (1971). See also, 2McQuillin, supra, § 7.09 at 294. Although Montana has never recognized thisprinciple, other jurisdictions have applied the doctrine of acquiescence toafter-the-fact challenges of allegedly defective annexation proceedings. Annot., 101A.L.R. 581 (1936); 18A.L.R.2d 1255 (1951). Acquiescence has alsobeen found tobe 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), 204Va. 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 (emphasisadded). 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 isvacated and the

cause remanded for furtherproceedings inconformity with thisopinion.

Justice We concur:

Chief Justice



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