No. 80-125 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

MARGARETTE M. AYE, CLARA E. GREGORY, 

et al., 

Plaintiffs and Appellants, 

ADOLPH FIX AND ROBERT PIX, 

Defendants and Respondents. 

Appeal from: District Court of the Sixteenth Judicial District, 

In and for the County of Carter, The Honorable 

A. B. Martin, Judge presiding. 

Counsel of Record: 

For Appellants: 

Robert L. Stephens, Billings, Montana 

Kinnard and Woodward, Billings, Montana 

For Respondents: 

Gene Huntley, Baker, Montana 

R. W. Heineman, Wibaux, Montana 

Submitted on Briefs: November 19, 1980 

Decided: April 20, 1981 

Filed: APR 2 0 19fl 
Mr. Justice Daniel JL Shea delivered the Opinion of the 

Court. 

Plaintiffs Ralph and Frances Bruski appeal the judgment 

of the Carter County District Court awarding them only 

$3,013.21 for the defendants' occupation of certain stateleased land during the years 1971, 1977 and 1978, in derogation of the Bruskis' right to possession. 

The dispute between the parties centers on the right to 

occupy and farm a section of state-leased land known informally 

as the "school section" or the "school lands", State Lease 

No. 49401. The parties have been embroiled in litigation 

over the property at both the trial and the appellate levels 

for nearly a decade. The case has become confusing and 

complex. For that reason, we will review the factual background 

and procedural history of the case befare setting out the issues 

presented for review. 

The Ayes, are now and always have been the official 

lessees of the school section from the state. The Fixes and 

the Bruskis both claim to have had the right to occupy and 

farm the land in 1971 under separate, but conflicting transfers 

from the Ayes--the Fixes as sublessees and the Bruskis as 

assignees of the Ayes' lease with the state. 

In December 1963, Willis Aye (Aye) orally agreed to 

assign the state lease of the school lands to Adolph Fix 

(Fix) in order to induce Fix to buy some other farmland 

from him known as the "Perso" place. Fix paid the purchase 

price that had been agreed upon and received a deed for the 

Perso place, but no assignment of the state lease. Shortly 

thereafter, on January 3, 1964, John Aye (the brother of 

I 

Willis) leased 5,000 acres of land to Fix. The lease agreement 

expressly granted to Fix a sublease to the school lands for 
the entire unexpired term of the Aye lease with the state. 

Fix objected to this sublease language because he understood 

that he was supposed to be the assignee of the state lands 

rather than a sublessee. Aye explained to Fix that he 

would get the state lease at the end of the term. Fix 

accepted these oral assurances as a sufficient assignment of 

the lease. 

The Ayes' lease of the school lands from the state-- 

and, therefore, the Fixes' right to possession under their 

sublease from the Ayes--was set to expire on February 28, 

1972. But before this expiration date, on February 12, 

1971, the Ayes' attorney sent written notice of cancellation 

of the sublease agreement to Fix. At about the same time, 

the Ayes entered into a contract for deed which assigned the 

state lease to the Bruskis. The Ayes renewed their lease of 

the school lands when it expired by exercising their statutory 

right to meet the highest competitive bid for the land. 

Their right as state lessees of the land remained subject to 

the contract for deed with the Bruskis. 

The Fixes refused to vacate the school lease land and 

litigation ensued. On July 13, 1972, the trial court ordered 

that the Fixes surrender possession of the state-leased 

lands to the Ayes in accordance with the 1972 renewal lease 

issued by the Department of State Lands and Investments. 

The Bruskis, under the assignment of the land from the Ayes, 

then occupied the school lands from July 13, 1972 until 

March 23, 1977. Following a bench trial on the merits, the 

trial court ruled that Fix was the "owner" of the state 

lease based on the oral agreement between Fix and John Aye 

that Fix would be assigned the state lease as part of the 

sale of the Perso place. After the trial court judgment in 
their favor, the Fixes reoccupied the premises on March 23, 

1977, and remained in possession until August 25, 1978. 

The Ayes and the Bruskis appealed the trial court 

judgment to this Court. We reversed. Invoking the statute 

of frauds and the par01 evidence rule, we held that the 

trial court should not have admitted evidence on an oral 

agreement to assign the state-leased lands to the Fixes 

because the written agreements between the Ayes and the 

Fixes expressly referred only to a sublease and not to an 

assignment of the state lease. Because the Fixes had been 

in possession of the property for parts of the years 1977 

and 1978 under the trial court judgment, we remanded for a 

determination of damages they owed to the Bruskis. Aye v. 

Fix (1978), 176 Mont. 474, 580 P.2d 97. 

After our reversal, the Bruskis again re-entered the 

property and are now in possession. At this point in the 

litigation, the Bruskis and the Fixes are the only real 

parties in interest. The Ayes claim no right to compensation 

for the Fixes' use of the land during any of the three years 

in dispute. 

The Bruskis now appeal the amount of compensation 

awarded them by the trial court for the three years during 

which the Fixes were in possession of the land: 1971, 1977 

and 1978. 

They raise three issues. First, they assert that the 

trial court erred in finding that the Fixes did not owe them 

any rent for the use of land in 1971. Second, they assert 

error on the trial court's ruling that the Fixes could 

offset certain lease payments made directly to the state 

from the reasonable rental owing to the Bruskis. Third, 

they challenge the trial court's holding that the Fixes were 
the rightful recipients of certain federal farm benefits for 

the years they were in possession of the land. We affirm in 

part and vacate in part. 

On remand, the trial court ruled that the Bruskis were 

entitled to no rental from the Fixes for the year 1971. In 

so ruling, the trial court relied on its original finding 

before the first appeal of this case that the Fixes were the 

"lawful owners" of the lease for the year 1971. This finding 

was based on the 1964 lease agreement where the Ayes expressly 

subleased the land to the Fixes for the full unexpired term 

of Ayes' lease of the land from the state. 

Given the state of the record before us, we are unable 

to adequately review the trial court's determination that 

Fixes, and not Bruskis, were entitled to possession of the 

property in 1971. Neither the record before us nor the 

briefs of the parties indicate whether either the Fixes or 

the Bruskis ever recorded their respective conveyances from 

the Ayes. We do not know if the recording statutes (Title 

70, Ch. 21) were complied with. Nor do we know whether 

Bruskis were aware of Fixes' occupation of the land at the 

time the Ayes assigned the state lease to the Bruskis in 

1971. See, section 70-21-102, MCA. Therefore, we have no 

way of knowing whose interest has priority under the law. 

See, section 70-21-304, MCA. We, therefore, remand to the 

trial court to make that determination. 

Furthermore, we disagree with the Bruskis' argument 

that former section 81-419, R.C.M. 1947, nullified the 

sublease that Fixes received from Aye in 1964. At the time 

the sublease to the Fixes was made, that section provided 

that a sublease of state land was illegal unless a copy of 

the sublease accompanied by a fee of $2.00 had been filed 
with the state land office and approved by the commissioner. 

Section 81-419 does not override the provisions of section 

70-21-102, MCA, which provides that "[aln unrecorded instrument 

is valid as between the parties and those who have notice 

thereof." The purpose of section 81-419, R.C.M. 1947, is 

to facilitate the management of state lands but it does not 

abrogate general principles of property law. The statute 

must be read in the context of the chapter in which it 

appears. By declaring a sublease that is not filed with the 

commissioner to be illegal, the statute allows the commissioner to look to the original state lessee as the party 

responsible for full compliance with the terms of the state 

lease. 

The ruski is also argue that because of our reversal of 

the trial court's judgment on the first appeal of this case, 

the trial judge could not rely on his original finding that 

the Fixes were rightfully in possession of the property 

under the 1964 sublease from the Ayes. But a reversal 

extends only to those issues which the appellate court 

decided in actuality or by necessary implication; it does 

not affect collateral matters not before the court. Phalen v. 

Rilley (1970), 156 Mont. 91, 475 P.2d 998, 999; Ryan v. Ald, 

Inc. (1967), 149 Mont. 367, 427 P.2d 53, 56. 

On remand, the parties stipulated that the measure of 

damages owing to the Bruskis from the Fixes would be the 

reasonable rental value of the land for the years that the 

Fixes occupied the premises in derogation of the Bruskis' 

right to possession. On this issue, the Bruskis contend 

that the trial court erred in permitting the Fixes to offset 

from reasonable rental value the lease payments which the 

Fixes made directly to the State of Montana. We find no 
error. As a general rule, the party to whom property has 

been awarded under an erroneous judgment may, upon reversal, 

deduct expenses that he necessarily incurred in the protection of that property and the payment of taxes and liens. 

Restatement Restitution S 74, Comment (e) (1937). The 

rental which the Fixes paid to the state was an expense 

incurred to protect the property and was therefore properly 

deducted from the stipulated rental. We cannot agree with 

the Bruskis' attempts to label the lease payments to the 

state as a "cost of production" for which the Fixes as crop 

producers should be responsible. To require the Fixes to 

pay the Bruskis a reasonable rental and then to add to that 

sum the rent due the State of Montana is--as the trial court 

found--to require the Fixes to pay rent twice. 

Finally, the Bruskis urge that the trial court should 

have awarded them and not the Fixes the benefits of the 

federal A.S.C.S. program for the years 1971, 1977, and 1978. 

A.S.C.S. payments are made to producers who raise crops in 

accordance with certain federal guidelines. One-third of 

these payments went to the state as part of the rental due 

on the state lease. The remaining two-thirds has been 

withheld pending a final determination as to which of the 

parties is entitled to the A.S.C.S. payments. Neither party 

has had access to these funds during the pendency of the 

litigation. 

The Bruskis argue that these payments represent an 

issue of the land to which they are properly entitled. 

Generally, a party who has been dispossessed of property by 

an erroneous judgment is entitled, upon reversal, not only 

to specific restitution of the property in question, but 

also to rents, issues or profits therefrom. 5B C.J.S. 
Appeal and Error 5 1983 (1958); Mann v. Thompson (Fla. App. 

1960), 118 So.2d 112, 114-15; see also, Waggoner v. Glacier 

Colony of Hutterites (1957), 131 Mont. 525, 312 P.2d 117. 

We agree that the trial court should have awarded the A.S.C.S. 

benefits to the Bruskis for the years 1977 and 1978. Had it 

not been for the trial court's erroneous judgment before the 

first appeal of this case, the Bruskis would have been in 

possession of the land, could have farmed it, and would have 

been entitled to the lessee's two-thirds share of the 

A.S.C.S. payments. Who is entitled to the A.S.C.S benefits 

for 1971 depends, of course, on which of the two conveyances 

from the Ayes had priority in that year. 

In occupying the land in 1977 and 1978 under the trial 

court judgment in their favor, the Fixes were not in the 

position of trespassers whose wrongs were to be corrected by 

an action at law. They were trustees, subject to make such 

restitution as a court of equity might determine, if the 

trial court judgment were overturned. They were charged 

with the knowledge that they entered onto the land by force 

of a judgment not yet final. A trial court's judgment 

depends for its validity on being sustained. When it is 

reversed or set aside, the party who has received the 

benefit of that judgment must make restitution to the other 

party. Nothing prevents a court, however, in exercise of 

its equitable powers, to allow the party making restitution 

reasonable compensation for labor or improvements benefiting 

the land. 

We affirm the trial court's judgment insofar as it 

permits the Fixes to deduct from the rental owed to the 

Bruskis the lease payments paid directly to the state. We 
vacate the trial court's judgment insofar as it awards the 

lessee's share of the A.S.C.S. payments to the Fixes for the 

years 1977 and 1978. We order those benefits to be paid to 

the Bruskis. We vacate the trial court's ruling that the 

Fixes were lawfully in possession of the land in 1971 and 

remand for the trial court to determine whether the Fixes' 

or the Bruskis' interest in the land had priority for that 

year. The trial court is directed to award the 1971 A.S.C.S. 

We Concur: 

Chief Justice 

I. Justices 

This causes was submitted prior to January 5, 1981.