No. 85-161 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

DEVON OIL & GAS COMPANY, INC., 

a Washington corporation, 

Plaintiff and Respondent, 

-vsMILAN R. AYERS, et al., 

Defendant and Appellant. 

APPEAL FROM: District Court of the Ninth Judicial District, 

In and for the County of Toole, 

The Honorable R. D. McPhillips, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

William Conklin; Dzivi, Conklin & Nybo, Great Falls, 

Montana 

For Respondent: 

James C. Nelson; Werner, Nelson & Epstein, Cut Bank, 

Montana 

Filed: 

Submitted on briefs: Aug. 15, 1985 

Decided: October 8, 1985 

*@? 

Clerk 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court. 

Defendants Milan K. Ayers and Ayers Oil & Gas Corporation appeal the February 25, 1985, findings of fact and order 

of the Ninth Judicial District Court granting motion for 

summary judgment against both defendants in favor of plaintiff Devon Oil & Gas Company, Inc. We affirm the summary 

judgment. 

On July 10, 198'1, Nilan Ayers (Ayers) , Terry Dunne, 

Rockne Timm, and Kenneth Halverson met in Spokane, Washington, to discuss the possibility of entering into an agreement 

to participate in working gas leases held by Ayers. Dunne 

and Timm were partners in R & T Company of Spokane, and also 

were on the board of directors of Devon Oil & Gas Company, 

Inc. (Devon) . The trial court found that the meeting produced two agreements. 

The first agreement was entitled Devon Gas Field Option 

Agreement, and identified R & T Company as desiring to purchase an option from Ayers for the development and production 

of gas reserves. Tha agreement provided that R & T Company 

would make an option payment, which Ayers would use to hire 

an engineer to study the area's potential. The balance of 

the option payment was to be used to perfect title on Ayers' 

existing leases and to purchase additional leases. Ayers Oil 

& Gas, Inc. was identified as operator of the project, and 

agreed to hold R & T harmless from a11 lawsuits or liabilities arising out of the execution of the agreement. The 

document was signed by Dunne, Timm, and Ayers. Ayers signed 

both as an individual and as president of Ayers Oil & Gas, 

Inc . 

A handwritten addendum at the bottom of the last page 

stated that the agreement was subject to the approval of 
Devon Oil & Gas Co. to participate. Further, that upon 

approval of Devon, a replacement document fully executed 

within 15 days would prevail. This addendum was initialed by 

all parties. 

The second agreement was identical to the first, with 

Devon being substituted for R & T Company as provided for in 

the addendum to the first agreement. This agreement was not 

fully executed until sometime between July 10, 1981, and July 

20, 1981. It was signed by Dunne, C.W. McWhorter (president 

of Devon) , Ayers, as an individual and as president of Ayers 

Oil & Gas, Inc., and his wife, Yvonne, as secretary of Ayers 

Oil & Gas, Inc. 

On July 21, 1981, an advance of $50,000.00 was paid to 

Ayers out of Devon's account, to enable Ayers to proceed with 

evaluation of the gas field. 

On August 14, 1981, Devon's board of directors unanimously voted to defer consideration of involvement with Mr. 

Ayers, following a phone call raising questions about Ayers' 

credibility. 

On August 16, 1981, Ayers sent Devon President McWhorter 

a letter informing him, ". . . the escrow is a recallable one 

totally subject to the purchasers final approval," and that 

Ayers considered the parties' discussions to be in a holding 

pattern. 

On November 24, 1981, Devon entered into an Escrow 

Agreement and Release with Ayers and Ayers Oil & Gas, Inc. 

The agreement provided that Ayers and Ayers Oil & Gas, Inc. 

would jointly be referred to as "Ayers". Attached to the 

document was the first Devon Gas Field Option Agreement. The 

Escrow Agreement and Release provided: 1) the terms, conditions, and obligations of the option agreement had been 

fulfilled by both parties; 2) the option agreement was 
rescinded, and the parties released all claims against each 

other; 3) "Ayers" agreed to pay to Devon, on or before January 30, 1982, $50,000.00 plus interest computed from August 

16, 1981; 4) as security for the debt, "Ayers" agreed to 

place in escrow 37%% of the working interest in leases described in an attached exhibit; and 5) in consideration of 

the $50,000.00 payment, Devon conveyed to "Ayers" any interest in the leases it had acquired under the option agreement. 

The Escrow Agreement and Release was signed by Devon President McWhorter, and Ayers, both as individual and as president of Ayers Oil & Gas, Inc. 

Ayers was granted an extension until March 1, 1982, to 

make the payment. Ayers requested additional extensions, but 

there is no evidence indicating they were granted. On July 

3, 1982, Timm wrote Ayers demanding immediate payment or the 

matter would be turned over to an attorney. On Jul-y 14, 

1982, an attorney for Devon sent a letter to Ayers giving him 

until July 30, 1982, to pay the $50,000.00 plus interest. On 

July 29, 1982, Ay~rs signed a sight draft for $56,000.00 

payable to the trustee; upon honor of the draft, the trustee 

was to assign Devon's interest in the leases held in escrow 

back to Ayers Oil & Gas, Inc. The sight draft went unpaid 

due to insufficient funds. 

Due to Ayers' failure to satisfy the debt, Devon requested Ayers to post more security. Ay~rs assigned additional interest to Devnn in his oil and gas leases on 

November 30, 1982. The following March, Devon sent out 

inquiries concerning the current standing of Ayers ' leases. 

The responses indicated Ayers' leases had lapsed for nonpayment. Devon filed suit. 

Based upon the exhibits, affidavits, and briefs before 

the District Court, motion for summary judgment was granted 
to plaintiff Devon against Ayers personally and Ayers Oil and 

Gas Corporation in the amount of $71,320.55 on March 11, 

1985. On appeal, appellants raise the following issues: 

1) Whether the District Court erred in ruling that no material fact was in dispute concerning the liability of the 

corporate defendant Ayers Oil & Gas, Inc., to plaintiff for 

the sum of $50,000.00 plus interest, based upon so-called 

admissions of liability by defendant Milan R. Ayers on behalf 

of defendant Ayers Oil & Gas, Inc., and in granting summary 

judgment in favor of plaintiff against Ayers Oil & Gas, Inc., 

on that basis. 2) Whether the District Court erred in its 

implied ruling that the Escrow Agreement and Release document 

dated November 24, 1981, is supported by consideration as to 

corporate defendant Ayers Oil & Gas, Inc., and in granting 

summary judgment against defendant Ayers Oil & Gas, Inc. 

3) Whether the District Court erred in granting summary 

iudgment against both defendants founded upon the Escrow 

Agreement and Release, which document is ambiquous and requires explanation with parole evidence. 

Appellants contend numerous findings of fact were made 

by the trial court on a disputed record. While some of the 

findings may not be precisely correct, we believe there are 

sufficient undisputed facts in the record to uphold the 

summary judgment against the corporate defendant. 

Ayers contends the corporation is not a contractual 

party and is not liable. Ayers attempts to raise a corporate 

versus individual distinction issue after dealing with Devon 

for over a year where he rarely distinguished whether he was 

acting individually or as corporate head. 

The two versions of the Devon Gas Field Option Agreement 

were entered into by "Milan R. Ayers, P.O. Box 737, Shelby, 

Montana, 59474." The corporation was not shown as a 
contracting party at the top of the agreement. However, 

Ayers' address was used by the corporate defendant, Ayers Oil 

& Gas, Inc. Both of the agreements were signed by Ayers, as 

individual, and as president of Ayers Oil & Gas, Inc. The 

agreements identified Ayers Oil & Gas, Inc. as operator of 

the project, and further provided Ayers Oil & Gas, Inc. would 

be held responsible for any lawsuits arising out of the 

execution of the agreements. That Ayers Oil & Gas, Inc. is 

named in the agreements and Ayers signed as president is 

sufficient to support the trial court's finding it was a 

party to both versions of the Devon Gas Field Option Agreement. Section 28-10-603, MCA. 

The Escrow Agreement and Release clearly identifies 

Ayers Oil & Gas, Inc. as a party thereto, and was signed by 

Ayers individually, and as corporate head. The document is a 

recognition that both Ayers and Ayers Oil & Gas, Inc. were 

indebted for $50,000.00 plus interest to Devon. 

Subsequently, a sight draft drawn by Ayers for 

$56,000.00 had his signature followed by "Ayers Oil & Gas, 

Inc." This is effective consent to the contract by the 

corporation under 5 28-2-501 (I), MCA. 

In sum, we find the trial court was correct in holding 

there was no evidence of a genuine issue of material fact and 

issuing summary judgment against both defendants. 

Our holding that Ayers Oil & Gas, Lnc. was a party to 

the Devon Gas Field Option Agreement is sufficient to find 

that consideration flowed to Ayers Oil & Gas, Inc. under the 

Escrow Agreement and Release. The release relieved Ayers 0j.l 

& Gas, Inc. of its obligation to perform and any possible 

claims against it arising under the option agreement. F.elease from contract obligations and forbearance to sue are 
both adequate consideration. Sections 28-2-801 and -802, 

MCA . 

Appellants assert the Escrow Agreement and Release is 

ambiguous due to the attachment and incorporation of the 

R & T Company version of the Devon Gas Field Option Agreement. They further contend that the R & T document was the 

only valid agreement since the Devon board of directors voted 

not to pursue involvement with Ayers. Neither contention is 

supported by the facts. 

The first option agreement contained an addendum providing that it was contingent upon the approval of Devon, with a 

subsequently executed document to supercede. The second 

document was executed and signed by Devon's president, according to the terms of the addendum. The signatures of the 

parties made the contract binding; the vote by Devon's board 

of directors did not affect the validity of the contract. 

The two versions of the Devon Gas Field Option Agreement 

were virtually identical. Each identified Ayers Oil & Gas, 

Inc. as a party thereto, and each was signed by Ayers as 

president. The attachment of one rather than the other does 

not make the Escrow Agreement and Release ambiguous. 

The decision of the trial court is affirmed. . 

We concurs 

Justices 

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