### No. 85-161 IN THE SUPREMECOURTOF THE STATE OF MONTANA 1985

DEVON OIL & 

### GASCOMPANY, INC., a 

### Washington corporation, Plaintiff and Respondent,

-vs

### MILAN R. AYERS, et al., Defendantand Appellant.

APPEAL FROM: District Court of the Ninth JudicialDistrict, In and for the County ofToole, The Honorable R. D. McPhillips,Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: 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

*@?

### ClerkMr. Justice Frank B. Morrison, Jr., delivered the Opinion of theCourt. Defendants Milan K. Ayers and Ayers Oil & Gas Corporation appeal theFebruary 25, 1985, findingsof factand 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, todiscuss thepossibilityof entering intoan agreement to participate in working gas leases held by Ayers. Dunne and Timm

### were partners in R & TCompany 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 topurchase an option fromAyers 

### for thedevelopment and production 

### of gas reserves. Tha agreement provided that R & T Company would make an option payment, which Ayers would use tohire

an engineer to study the area's potential. The balance of the optionpayment was tobe used toperfect titleon Ayers' existing leases and topurchase additional leases. Ayers Oil & Gas, Inc. was identified as operator of the project, and agreed tohold R & Tharmless 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 ofDevon Oil & Gas Co. to participate. Further, that upon approval of Devon, a replacement document fully executed within 15days would prevail. This addendum was initialedby allparties. The second agreement was identical to the first, with Devon being substituted for R & T Company asprovided for in the addendum tothe firstagreement. This agreement was not fullyexecuted until sometime between July 10, 1981, and July 20, 1981. Itwas signed by Dunne, C.W. McWhorter (president 

### of Devon)

### , Ayers, as an individual and aspresident of Ayers Oil & Gas, Inc., and hiswife, 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, toenable Ayers toproceed with evaluation of thegas field. On August 14, 1981, Devon's board of directors unanimously voted todefer consideration of involvement with Mr. Ayers, following a phone call raising questions about Ayers' credibility. On August 16, 1981, Ayers sentDevon PresidentMcWhorter

a letterinforming him,

# ".

. . theescrow 

### isa recallable one totally subject tothepurchasers final approval," and that Ayers considered the parties' discussions tobe ina 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 firstDevon Gas Field OptionAgreement. The Escrow Agreement and Releaseprovided: 1) the

### terms, conditions, and obligations of the option agreement had been fulfilled by both parties; 

### 2) the option agreement wasrescinded, and the parties released all claims against each other; 3) "Ayers" agreed topay toDevon, onorbefore 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 inthe leases 

### it had acquired under theoption agreement. The Escrow Agreement and Release was signed by Devon President McWhorter, and Ayers, both as individual and aspresident ofAyers Oil & Gas, Inc. Ayers was granted an extension until March 1, 1982, to make thepayment. Ayers requested additionalextensions, 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, anattorney forDevon senta 

### lettertoAyers givinghim until July 30, 1982, topay 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 toassign Devon's interest in the leases held in

### escrow back toAyers Oil & Gas, Inc. The sight draft went unpaid due toinsufficient funds. Due to Ayers' failure to satisfy the debt, Devon requested Ayers topost 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

### toplaintiff Devon againstAyers 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., toplaintiff for the sum of $50,000.00 plus interest, based upon so-called admissions of liabilityby defendantMilan R. Ayers on behalf of defendant Ayers Oil & Gas, Inc., and in granting summary judgment infavorof plaintiff againstAyers Oil & Gas, Inc.,

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

### its implied rulingthattheEscrow Agreement and Releasedocument dated November 24, 1981, 

### is supported by consideration asto 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 requiresexplanation with parole evidence. Appellants contend numerous findings of fact were made by the trialcourt 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 corporatedefendant. Ayers contends the corporation 

### is not a contractual party and 

### isnot liable. Ayers attempts toraise a corporate versus individual distinction issue after dealing with Devon for over 

### a year where he rarely distinguishedwhether he was actingindividually orascorporatehead. The 

### twoversions of theDevon Gas Field Option Agreement



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

### 737, Shelby, Montana, 59474." The corporation 

### was not shown as acontracting party at the top of the agreement. However, Ayers' addresswas used by the corporatedefendant, 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 theproject, and furtherprovided 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 toboth versions of the Devon Gas Field Option Agree

### ment. 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 ascorporatehead. The document 

### isa recognition that both Ayers and Ayers Oil & Gas, Inc. 

### were indebted for $50,000.00 plus 

### interest toDevon. 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 inholding therewas no evidence of 

### a genuine issue of material fact and issuing summary judgment againstboth 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 toAyers 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 areboth 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 sincetheDevon board of directorsvoted not topursue involvement with Ayers. Neither contention 

### is supportedby the facts. The firstoption agreement contained an addendum providing that 

### itwas contingentupon the approval of Devon, with a subsequently executed document to supercede. The second document was executed and signed by Devon's president, according tothe 

### termsof the addendum. The signatures of the parties made the contract binding; thevote by Devon's board of directors did not affect the validity of the contract. The two versions of theDevon 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 theEscrow Agreement and Release ambiguous. The decision of thetrialcourt 

### isaffirmed.



# .

We concurs

Justices 

# k