                            No.   93-386

          IN THE SUPREME COURT OF THE STATE OF MONTANA




GERALD F. ANDERSON,
          Plaintiff and Appellant,
     v.
                                                        MAW 1 - 1994
RICHARD L. JOHNSON,
                                                             3 L k
                                                          L C /
                                                   CLERK OF SUPRLMF:  COUW~
          Defendant and Respondent.                      STATE OF MONTANA




APPEAL FROM:   District Court of the Twentieth Judicial District,
               In and for the County of Lake,
               The Honorable C B. McNeil, Judge presiding.
                              .


COUNSEL OF RECORD:
          For Appellant:
               Terry G. Sehestedt, Attorney at Law,
               Missoula, Montana
          For Respondent:
               Douglas J. Wold, Wold Law Firm,
               Polson, Montana


                            Submitted on Briefs:           November 23, 1993
                                           Decided: March 1, 1994
Filed:                                         I    .,
~ustice~illiam Hunt, Sr., delivered the opinion of the Court.
              E.
     Plaintiff/Appellant, Gerald F. Anderson, appeals from a
judgment of the Twentieth Judicial District Court, Lake County,
finding respondent, Richard L. Johnson, the title owner of property
leased by Anderson from Johnson near Flathead Lake, and awarding
Johnson damages and costs of suit.
     Affirmed.
     The parties raise three issues:
     1.   Did the District Court err when it denied Anderson's
motion for partial summary judgment based on his alternative
theories of conclusiveness of deed or adverse possession?
     2.   Did the District Court err when it found that the
September 5, 1973 deed from Anderson to Johnson was executed after
the September 7, 1973 deed from Johnson to Anderson?
     3.   Did the District Court err when it found that Anderson's
possession of the property was permissive and not adverse?
     Since about 1958, Anderson and Johnson had been friends.   In
1972, Johnson was owner of approximately 15 acres near Flathead
Lake as purchaser under a contract for deed.    Johnson informally
divided the tract into lots with the intent to offer ten to 20-year
leases for the lots' recreational uses.
     On August 4, 1972, Johnson and Anderson entered into two
nonrenewable written ten-year leases for two of the lots commencing
August 1, 1972. The agreements required Anderson to pay Johnson a
total of $40 per month as rental, to pay all taxes and assessments
imposed on improvements placed on one of the lots, and to pay a
pro rata share of any increases in real property taxes for the
years 1974 through 1982. Further, the leases afforded Anderson the
first opportunity to purchase the lots in the event Johnson platted
and subdivided the lots during the lease period.
     In late fall 1972, or early 1973, Anderson constructed a
nonpermanent geodesic dome on the leased property as provided in
the lease agreement.   In May 1973, Johnson formally surveyed the
two leased lots and in June bought the two lots outright from the
seller.
     In August 1973, Anderson asked Johnson to loan him the title
to the leased property so that Anderson could give a mortgage on
the lots to secure a loan to fund his new business enterprise in
Colorado.   Johnson agreed as a gesture of their friendship and
because Anderson's father represented to Johnson that he would
stand behind the obligation.
     The parties orally agreed to structure the loan of title as
follows: Anderson's father, an attorney, simultaneously prepared
two deeds for conveyance of the lots. He sent one deed to Johnson
which required Johnson's signature and conveyed the two lots to
Anderson. Johnson dated and signed that deed on September 7, 1973.
Johnson mailed the September 7 deed back to Anderson's father. As
security for the loan of the title, Anderson's father had prepared
a reciprocal deed which transferred the two lots from Anderson back
to Johnson, and which he sent to Anderson in Colorado for his
signature. The deed from Anderson to Johnson is dated September 5,
1973, and notarized by Anderson's father on that same date.    The
September 5 deed was a security interest for the loan of the title
which Johnson was to put into safekeeping. Anderson or his father
recorded the September 7 deed on September 14, 1973. The record is
not clear as to whether Johnson received the September 5 deed
before or after he had sent the September 7 deed back to Anderson's
father. The parties orally agreed that Johnson was free to record
the deed from Anderson to Johnson at any time, but subject to the
mortgage.   However, Johnson originally planned to record the
September 5 deed when Anderson paid off the mortgage obligation.
Soon thereafter, Anderson mortgaged the two lots to a Polson bank.
     From 1972 to 1975, Anderson paid the $40 monthly rent on the
lots. In 1975, however, Anderson discontinued his rental payments
after the parties could not reach terms for sale of the lots to
Anderson.   The parties did not enter into any written agreement
regarding the sale of the lots to Anderson.       Their friendship
deteriorated. Anderson continued to pay the property taxes on the
two lots after 1973, pursuant to the rental agreement. Johnson did
not attempt to collect past due rent from Anderson because he knew
Anderson became unable to pay both the lease payments and his
mortgage payment on the lots.       In the late 19701s, Johnson
attempted to collect the past due rent from Anderson with no
success. Johnson periodically contacted the Polson bank to check
on the status of Anderson's mortgage. Anderson's mortgage payments
had been kept current.
     In early 1979, Anderson left the property after cold weather
froze up the dwelling. That year he asked Johnson to provide   $7000
in "consideration" to take back the two lots subject to the unpaid
balance on the mortgage.   Johnson refused, denying any obligation
to do so.
     Between 1979 and 1985, Johnson did not hear from Anderson or
see him on the property.   In 1980 or 1981, Johnson fenced off the
two lots from the rest of his property which closed off prior
access to the two lots.        In addition, Johnson put up     Ifno
trespassing" signs on the fences.    The signs faced his adjacent
lots. He shut off the water supply to Anderson's dwelling after it
froze.
    Anderson failed to pay all the property taxes on time and in
1979 the property was sold for taxes but later redeemed.
     In about 1985, Anderson conveyed the lots to a third party as
security for another loan, in contravention of the lease and
without Johnson's approval.     Also in 1985, Anderson informed
Johnson that he intended to claim the property as his own.      In
1992, Johnson learned that the third party had transferred the
property back to Anderson.    In August 1992, Johnson also learned
that Anderson had received a slash permit and cut more than 15
trees from the property, in contravention of the lease agreement.
Anderson received between $900 and $1000 for the timber.   Johnson
had not given Anderson permission to cut the trees.
     On August 17, 1992, Johnson recorded his September 5, 1973
deed from Anderson to reclaim title to the two lots.
     In the Twentieth Judicial District Court, Anderson sought
cancellation of the September 5, 1973 deed, or alternatively for
declaratory relief that he was the owner of the property, and
sought damages, costs, and fees.         Johnson counter-claimed for
damages, fees, and costs.      On March 31, 1993, Anderson filed a
motion for partial summary judgment to quiet title in him to the
two   lots   and   denounced   any   fraud   on   his   part.    Johnson
cross-motioned for partial summary judgment seeking a determination
that he was the lawful owner of the two lots as a matter of law.
On April 28, 1993, the court denied both motions, finding "a
plethora of genuine issues of fact and [that] summary judgment was
not appropriate."
      At the time of the bench trial on May 10, 1993, Anderson owed
the Polson bank $3975.77, plus interest, on the mortgage.
      On May 27, 1993, the District Court found that Johnson had
superior title to the two lots after recording the September 5,
1973 deed on August 17, 1992, because Anderson had given Johnson
the September 5, 1973 deed as security for the loan of the title,
and that Johnson had been free to file it at any time.          The court
awarded Johnson fee simple title of the two lots free and clear
from all encumbrances, including Anderson's $3975.77 mortgage.
However, the court granted Anderson the option of making payments
upon the encumbrance and keeping it free from default.           Finally,
the court awarded Johnson his costs of suit.
      On June 25, 1993, Anderson filed this appeal from denial of
his motion for summary judgment and from the District Court's
findings of facts and conclusions of law and judgment.
                                    ISSUE 1
      Did the District Court err when it denied Anderson's motion
for summary      judgment based          on his    alternative theories of
conclusiveness of deed or adverse possession?
      At the hearing for summary judgment, Anderson argued that
summary judgment was appropriate because the material facts before
the court were:         (1) the explicit and unambiguous deeds that
conveyed     Johnson's        property     to     Anderson;   (2)   Johnson's
acknowledgment that there were no other writings concerning the
transfer of title; (3) ~ohnson'sSeptember 7 deed to Anderson gave
Anderson title as the last deed signed and delivered; and (4) that
in the alternative, Anderson could claim superior title under the
theory of adverse possession.
      Summary judgment is appropriate:
      if the pleadings, depositions, answers to interroga-
      tories, and admissions on file, together with the
      affidavits, if any, show that there is no genuine issue
      as to any material fact and that the moving party is
      entitled to a judgment as a matter of law.
Rule 5 6 ( c ) , M.R.Civ.P.
      Although the September 7 deed explicitly and unambiguously
transferred the two lots from Johnson to Anderson, in like manner,
the September 5 deed transferred the lots from Anderson back to
Johnson.     These facts could not conclusively establish superior
title in Anderson because the parties disputed the facts involving
the signing and delivery of the deeds, and the legal effect of the
transfers.     The District Court properly denied Anderson's motion
for summary judgment because the parties presented genuine issues
of fact and law in regards to which deed controlled.
     In addition, Anderson argues that summary judgment was
appropriate because Johnson acknowledged that the parties entered
no written agreement other than the two deeds.          The court heard
oral argument that the parties had structured the loan of the deed
through an oral agreement.     The parties had agreed to a certain
transaction in the exchange of the deeds and the conditions under
which Johnson could record his reciprocal deed.            However, on
summary judgment, the parties disputed the terms of the oral
agreement, thereby raising genuine issues of material fact. Thus,
the District Court properly denied Anderson's motion for summary
judgment despite the absence of writings other than the deeds.
     Anderson also argues that summary judgment was appropriate
because the September 7 deed from Johnson to him conclusively
established his superior title to the property as the last deed
signed and delivered.    The court disagreed and applied the belief
that where Anderson had given the September 5 deed to Johnson as
security for the loan of the title, the September 7 deed
controlled, being the last recorded deed. The court noted that the
date of transfer of real property is presumed to be the date of
recording the deed. Anderson asserted that the court misstated the
applicable law.     As a result, the court properly denied summary
judgment because of the genuine issues of law presented.
     Finally,     Anderson   asserts   that   summary    judgment   was
appropriate because he had superior title under a theory of adverse
possession.    Anderson asserts that because he had breached the
lease agreements by conveying the property to a third party and
cutting down trees, his leasehold possession had become hostile and
adverse.   The court found sufficient evidence to refute Anderson's
claim that his possession of the lots was hostile and adverse to
Johnson's fee simple interest.    In fact, the evidence presented
could have supported the conclusion that Anderson's possession had
been purely permissive.     The court properly denied Anderson's
motion for summary judgment on Anderson's adverse possession claim.
     From the foregoing, we hold that the District Court did not
err when it denied Anderson's motion for summary judgment based on
his alternative theories of conclusiveness of deed or adverse
possession.
                              ISSUE 2
     Did the District Court err when it found that the September 5,
1973 deed     from Anderson to Johnson was executed      after the
September 7, 1973 deed from Johnson to Anderson?
     We will uphold the findings of the trial court if they are not
clearly erroneous.   Steer, Inc. v. Department of Revenue (1990),
245 Mont. 470, 474, 803 P.2d 601, 603.   In so doing, we also will
consider whether the findings are supported by substantial credible
evidence and the trial court has not misapprehended the effect of
the evidence, and whether a mistake has been committed. Interstate
Prod. Credit Assln. v. DeSaye (1991), 250 Mont. 320, 323, 820 P.2d
     Anderson argues that the timing of the execution and delivery
of the two deeds in 1973 should determine which party now may claim
rightful title to the two lots. Anderson asserts that the District
Court erred when it found that Johnson did not receive the
September 5 deed until after he had sent the September 7 deed back
to the Anderson law office. The transmittal letter from Anderson's
father and the accompanying deed which Johnson was to sign were
dated September 5, 1973. Johnson testified that he was not certain
whether he had received the September 5 deed before or after
mailing the September 7 deed.   Anderson contends that as the last
deed signed and delivered, the September 7 deed conclusively
transferred title to him.
     Anderson is correct to assert that a grant of real property
duly executed is presumed to have been delivered at its date.
Section 70-1-509, MCA. However, the District Court heard testimony
that the exchange of deeds was intended by the parties to secure a
loan of the title to the two lots, and that Johnson had the right
to record the September 5 deed at any time, subject to the
mortgage.
     We have held that an unrecorded deed affecting title to land
is valid between the parties.    Blakely v Kelstrup (1985), 218
                                          .
Mont. 304, 306, 708 P.2d 253, 254 (citing T, 70-21-102, MCA)   .   In
Blakelv, we reasoned that although duly recording a deed has the
purpose of giving notice to subsecruent ~urchasersand encumbrancers
and of establishing priority, it does not convey title unless the
parties have so intended.   Blakelv, 708 P.2d at 254.

                                10
     The court rejected Anderson's argument that the parties1
transaction was a sale.       It found the September 7 deed, although
duly recorded by Anderson, was subject to the conditions of the
parties' oral security agreement, made as part of the loan of the
deed transaction.
     When        interpreting an instrument, the Montana code also
provides     for consideration of     circumstances surrounding its
execution:
     For the proper construction of an instrument, the
     circumstances under which it was made, including the
     situation of the subject of the instrument and of the
     parties to it, may also be shown so that the judge be
     placed in the position of those whose language he is to
     interpret.
Section 1-4-102, MCA.
     Similarly, the Montana code provides:
          (1) When terms of an agreement have been reduced to
     writing by the parties, it is to be considered as
     containing all those terms, and therefore there can be
     between the parties and their representatives or
     successors in interest no evidence of the terms of the
     agreement other than the contents of the writing     ...
             *   ..
                 .
             (2) But this section does not exclude other
     evidence of the circumstances under which the asreement
     was made or to which it relates, as defined in 1-4-102,
     or to explain an extrinsic ambiguity or to establish
     illegality or fraud.
          (3) The term "agreement" includes deeds and wills as
     well as contracts between parties. [Emphasis added].
section 70-20-202, MCA; seealso 5 28-2-905, MCA.

     The court properly heard testimony about how the deed exchange
came to be and the absence of an exchange of consideration for sale
of the two lots.
      More important, grant of the property in the September 7 deed
did   not    conclusively       establish title      in Anderson   because   on
September 5, 1973, Anderson did not have a fee simple interest to
convey to Johnson.            At that time, Anderson had only a lessee's
possessory interest in the two lots.           Althoughthe September 5 deed
was perhaps the first deed executed and delivered, the parties did
not intend anything other than a simultaneous exchange of deeds,
the effect of which was to temporarily convey title in the two lots
to Anderson.     Only after Johnson transferred the title to Anderson
on September 7, 1973, did Anderson have a fee simple interest in
the property to reconvey to Johnson.                Even then, Anderson8s fee
simple      interest    was    subject   to   the    parties'   security   deed
arrangement.
      Anderson's       argument that the September 7 deed granted him
rightful title to the two lots denies the parties8 oral agreement
as found by the District Court.               Even if Anderson ignores the
parties' oral agreement, Montana law provides that "an unrecorded
instrument is valid as between the parties and those who have
notice thereof."         Section 70-21-102, MCA.         The order of events
involving the exchange of the simultaneous and reciprocal deeds was
irrelevant to the issue of which party retained fee simple title at
any given time throughout the 20-year transaction.
      The court's finding that the parties8 transaction was intended
as a disguised loan and that Johnson could record his deed from
Anderson at any time is supported by substantial credible evidence.
We conclude that the District Court did not misapprehend the effect
of the evidence, and we are not left with a definite and firm
conviction that a mistake was committed.
        We hold that the District Court did not err when it found that
Johnson did not receive the September 5 deed until after he had
sent the September 7 deed back to the Anderson law office.
                                ISSUE 3

        Did the District Court err when it found that Anderson's
possession of the property was permissive and not adverse?
        Anderson argues that the District Court's finding that his
''use and occupation of the two lots had been open and actually
known of by [Johnson] and with [Johnson's] permission" was clearly
erroneous.     Anderson asserts that even if the September 5 deed is
controlling, Johnson owns the property subject to Anderson's
adverse possession. He argues that because Johnson took no action
when he breached the lease agreement by conveying the lots to a
third party and cutting down trees on the lots, his lessee's
possession ripened into adverse possession five years after the
lease expired in 1982.       Anderson misapplies the law of adverse
possession in Montana.
        Adverse possession of real property in Montana under a claim
founded on an instrument requires that the claim be exclusive of
any other right.      The applicable statute provides in pertinent
part:
    When it appears that the occupant or those under whom he
    claims entered into the possession of the property under
    claim of title, exclusive of other riaht, founding such
    claim uDon a written instrument as beina a convevance of
    the ~ r o ~ e r t v question or upon the decree or judgment
                     in
       of a competent court and that there has been a continued
       occupation and possession of the property included in
       such instrument, decree, or judgment or of some part of
       the property under such claim for 5 years, the property
       so included is deemed to have been held adversely
       [Emphasis added].
                                                                    ....
Section 70-19-407, MCA.
       The    record   is    clear   that    the    parties   considered    the
September 5 deed conveyed by Anderson to Johnson as security for
Johnson's loan of the title to the property to Anderson and that
Johnson was entitled to record that deed at any time.               As a result,
Anderson's claim to the two lots was not exclusive of Johnson's
right to repossess the lots after September 7, 1973.                In addition,
Anderson entered into possession of the lots only through the 1972
lease    agreement,      not   through      the    1973   written    conveyance
instrument, as the statute requires.              Therefore, Anderson's claim
that    his   lessee's      possessory   interest      ripened   into   adverse
possession is misplaced.
       We hold that the District Court did not err when it found that
Anderson's     possession of the property was permissive and not
adverse.
       Af finned.
We concur:
                                     March 1, 1994

                             CERTIFICATE OF SERVICE

I hereby certify that the foIlowing order was sent by United States mail, prepaid, to the
following named:


Terry G. Sehestedt
Attorney at Law
P.O. Box 8281
Missoula, MT 59807-8281

Douglas J, Wold, Esq.
Wold Law Firm, P.C.
P.O. Box 1212
PoIson, MT 59860-1212


                                               ED SMITH
                                               CLERK OF THE SUPREME COURT
                                               STATE OF MONTANA
