No. 12702 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1974 

EVAN M. MILLER, 

Plaintiff and Appellant, 

PETE WALTER and BANK OF COLUMBIA FALLS, 

a banking corporation, 

Defendants and Rzspondents. 

Appeal from: District Court of the Eleventh Judicial District, 

Honorable Robert C. Sykes, Judge presiding. 

Counsel of Record: 

For Appellant : 

Graybill, Graybill, Ostrem and Warner, Great Falls, 

Montana 

Leo Graybill, Jr. argued, Great Falls, Montana 

For Respondents: 

White, Vadala, Springer and Astle, Kalispell, 

Montana 

David L. Astle argued, Kalispell, Montana 

Patrick M. Springer appeared, Kalispell, Montana 

Submitted: September 12, 1974 

Decided : WT 8 1 1974 
Mr. Justice Wesley Castles delivered the Opinion of the Court. 

This is an appeal from a judgment of the district court 

of the eleventh judicial district, in the County of Flathead, 

rendered for the defendant Bank of Columbia Falls as against the 

plaintiff Evan M. Miller. A default judgment rendered for plaintiff, Evan M. Miller, against the defendant, Pete Walter, has 

not been appealed. 

In July 1972, A1 Sihrer owned a 1965 Mack logging truck 

which was mortgaged to the defendant Bank of Columbia Falls (hereinafter referred to as the Bank) for the sum of $5,000. On July 

18, 1972, Sihrer sold the truck to defendant Walter. Also on July 

18, 1972, Walter gave a security interest in the truck to the Bank 

for a loan of $6,000. $5,000 of this loan went directly to pay 

off the Bank's loan to Sihrer. The other $1,000 was deposited 

into Walter's checking account with the Bank. This $1,000 arose 

out of the discussion Walter had with the Bank to the effect that 

the truck needed a new engine and was for that purpose. On that 

date, the Bank wrote the following letter: 

"bank of COLUMBIA FALLS 

"P. 0. BOX 280 / TELEPHONE (406) 892-3281 / COLUMBIA FALLS, MONTANA 59912 

"HOWARD AUSTIN, Executive Vice President "July 18, 1972 

"Mr. Pete Wal ter 

"Route 4 

"Kal ispel 1 , Montana 59901 

"Dear Pete: 

"This is to advise you that the Bank of Columbia Falls has 

comnitted for a loan of $1,000 for the purchase of the Cummings engine to be used as a replacement engine in your truck. It is 

understood that this will be put with the $1,000 that you have 

coming from your accounts receivable for a total of $2,000 to be 

used in the purchase of this item. 

"It is our recommendation that a portion of these funds be held 

back for a certain number of days to give yourself a chance to 

install the motor for a trial period. On this basis, we are 
willing to guarantee these funds to whomever you purchase this 

engine from subject to the above conditions. 

"Very truly yours, 

"Is/ Howard Austin 

"Howard Austi n 

"Exec. Vice President 

The district court made the following conclusion of law: 

"5. That it was not the intention of the 

defendant Bank of Columbia Falls that exhibit 

"A" be a letter of credit or guarantee but a 

means by which the purchase of said engine 

could be accomplished." 

Although Walter had previously located an engine in 

Miller's shop in Havre, Austin testified that he did not recall 

whether there had been any discussion between himself and Walter 

as to a particular engine to be purchased with the loan. On July 

20, 1972, Walter went to Havre and purchased the engine for $2,000 

and a starter for $100. Miller testified that, on the strength 

of the letter, which he read, he let Walter take the engine and 

the starter, Walter paying only $1,000 by his personal check at 

that time. Miller testified that he would not have let Walter 

take the engine and starter without paying the full price if it 

had not been for the letter. Miller then attached the letter to 

the sales slip which he retained. 

Walter later installed the engine in the truck. On 

September 21, 1972, shortly after installation, the Bank repossessed 

the truck for nonpayment by Walter of his obligation to the Bank. 

Sometime prior to September 27, 1972, but after the Bank repossessed 

the truck, Miller contacted Walter about payment of the balance 

due on the engine and learned of the Bank's repossession. Miller 

then contacted the Bank about the matter. On December 29, 1972, 

the Bank sold the truck to satisfy its security interest. 

Miller brought this action in the district court to recover 

damages for nonpayment of the $1,000 due on the engine and the $100 

due on the starter. A default judgment was entered against Walter 
for the sum of $1,100. Walter is bankrupt. The case was heard 

by the court without a jury and judgment was rendered for the 

Bank. Miller filed a motion to amend judgment to substitute 

plaintiff's proposed findings of fact and conclusions of law. 

The court by order dated December 27, 1973, denied Miller's motion. 

From the Judgment and order Miller appeals. 

The issues raised herein are as follows: 

1. Whether the Bank's letter constitutes a guaranty of 

the purchase price of the engine purchased by Walter from Miller. 

2. If the letter is a guaranty, whether it is binding 

against the Bank in light of the fact that Miller did not communicate notice of acceptance of the alleged guaranty to Bank. 

3. Whether Bank is responsible for payment of the purchase price of the engine merely because it held a security interest in the truck. 

From a reading of the letter that is the subject of this 

dispute and the facts above enumerated, this Court holds as a 

matter of law that the letter is a guaranty. Section 30-101, R.C.M. 

1947, defines "guaranty" to be " * * * a promise to answer for the 

debt, default, or miscarriage of another person." The Bank specifically uses the word "guarantee". In addition, the last sentence 

of the letter is rendered absolutely meaningless if not construed 

as a collateral promise to another: The Bank had already stated 

in the first paragraph that they were committed to the loan to 

Walter. The promise was to answer for the debt of "another", 

Walter, in that it was a guarantee "to whomever you - purchase this 

engine from * * *." 

The Bank's contention that there could be no guaranty because the Bank did not intend the letter to be a guaranty and 

thus there was no meeting of the minds is without merit. The 

mutual assent essential to the formation of a contract, in this 
case a contract of guaranty, must be gathered from the outward 

objective manifestations of the parties and not by the subjective undisclosed intent of one of the parties. Montana-Dakota 

Power Co. v. Johnson, 95 Mont. 16, 22, 23 P.2d 956. ~yoming 

Farm Bureau Mutual Ins. Co. v. Smith, 259 F.Supp. 870, 873 

(D. Mont.), affld 377 F.2d 918 (9th Cir.) ; Williston on Contracts, 

Vol. 1, section 98 (rev. ed. 1936) p. 314. 

The Bank next contends that even though the letter is a 

guaranty, notice of acceptance of the guaranty was not given to 

the Bank as required by section 30-106, R.C.M. 1947. It reads: 

"A mere offer to guaranty is not binding until 

notice of its acceptance is communicated by the 

guarantee to the guarantor; but an absolute 

guaranty is binding upon the guarantor without 

notice of acceptance." 

Assuming for the purpose of this argument that the letter 

was not an absolute guaranty but was merely an offer to guaranty, 

we hold that the notice of Miller's acceptance was communicated 

to the Bank at the very latest, shortly after the Bank's repossession of the truck and that such notice satisfies the requirements 

of the statute. 

In support of our holding, we cite from 1 Corbin on Contracts, Section 68: 

"Any attempt to review and criticize the innumerable cases in the field of suretyship and guaranty 

must be l e f t t o monographic treatises on that 

special topic. The confusion and conflict in that 

field seem to be due in large part to a similar 

confusion in the general doctrines applicable to 

all agreements. 

"It is beyond question that in many thousands of 

cases an offer to become guarantor for another 

has been made in such terms as to induce the 

offeree to advance money, goods, or services on 

credit without first sending any notice of acceptance to the offeror. Later, when demand is 

made for him to pay the debt of another in accordance with his promise, the guarantor complains 

of this lack of notice and asserts that his offer 

was not accepted as the law requires. 
"With respect to this, there is nothing peculiar 

to the relation of suretyship that requires the 

application of rules different from those applicable in other contracts. One who offers to be 

surety or guarantor for another can prescribe or 

suggest the mode of acceptance, just as in other 

cases. He can prescribe the giving of notice, 

by mail or otherwise, if he likes. In very 

numerous cases, however, he makes no such suggestion; and if the offeree acts as requested, the 

offer should be held to be accepted. 

"In a well known case [Bishop v. Eaton, 161 Mass. 

496, 37 N.E. 6651, Frank Eaton wrote from Nova 

Scotia to Bishop in Illinois: 'If Harry needs 

more money, let him have it, or assist him to get 

it, and I will see that it is paid.' In reliance 

on this and at Harry's request, Bishop indorsed 

Harry's note to Stark. This action by Bishop was 

an operative acceptance that instantly bound 

Frank Eaton as surety. A telegraphic revocation 

would have been too late, even though Bishop had 

not yet written or mailed any notice to Frank that 

he had complied with the latter's request. A 

unilateral contract had been consummated by an 

offered promise requesting action, followed by the 

offeree's action as requested. Frank Eaton's legal 

duty as surety for Harry may, indeed, be conditional on various events, including a notice or two, 

to occur subsequently; but it is not the occurrence 

of these events that constitutes acceptance of the 

offer. 

"The foregoing reasoning has received much judicial 

approval; and it is adopted by the American Law 

Institute. Many of the cases that say that a notice 

of acceptance is required confuse notice as the 

required form of acceptance of an offer with a later 

notice as a condition precedent to the surety's duty 

to 'make payment of the debt. 

"An offer to become surety for another may request 

some promise in return, either by the creditor or 

by the principal obligor. If it does this, a notice 

that the requested promise is given must be made 

in order to accept the offer. Mere action in reliance on the surety's offer would not be enough. * * *I' 

The Restatement of Security, S 86, in which the terms 

"guarantor" and "surety" are used synonymously, is in accord: 

"Where the surety offers to guarantee an extension 

of credit to the principal and the credit is extended as the sole consideration for the surety's 

promise, the contract is complete upon the extension of credit, but if the surety does not know of 

the extension of credit and has no adequate means 

of ascertaining with reasonable promptness and 

certainty that the credit has been extended and 
the creditor should know this, the contract of the 

surety is discharged unless within a reasonable 

time after the extension of credit the creditor 

exercises reasonable diligence to notify the surety 

thereof. I' 

From the foregoing analysis, it can be readily seen that 

section 30-106, R.C.M. 1947, is in accord. The statute does not 

require "acceptance" to be communicated to the guarantor, but 

merely "notice of its acceptance". Thus the contract of guaranty 

was complete when Miller accepted the offer of guaranty by the 

act of selling the engine and extending credit to Walter. Thereupon there arose the statutory requirement of notice of acceptance 

as a condition precedent to the guarantor's duty to make payment. 

Section 30-106, R.C.M. 1947, does not, however, specify 

within what period of time notice of acceptance must be given by 

the guarantee to the guarantor. In the absence of such specification, to quote from the Restatement: " * * * the contract of 

the surety is discharged unless within a reasonable time after 

the extension of credit the creditor exercises reasonable diligence to notify the surety thereof." Miller sold the engine to 

Walter on July 20, 1972. The Bank repossessed the truck on September 21, 1972. Miller contacted the Bank regarding the matter 

sometime between September 21 and September 27, 1972. The Bank 

did not sell the truck until December 29, 1972. There is no contention whatsoever that the Bank did not learn of Miller's acceptance of their offer of guaranty within a reasonable time after 

his acceptance. Especially is this so in a case such as this 

where the guarantor is deeply involved financially in the object 

to which the purchased item is to be attached. There is not, and 

indeed there cannot be, any contention that the Bank was in any 

way injured by Miller's delay in giving notice of acceptance. On 

a loan of $1,000 for the purchase of the engine, the Bank gained 

the benefit of a $2,000 engine which it later realized when the 
truck was repossessed and sold by the Bank. Not only was there 

no injury, the Bank reaped a windfall. 

The Bank next contends that it only guaranteed $1,000 

and that its obligation was fulfilled by the deposit of $1,000 

in Walter's checking account. A resolution of this issue turns 

on the meaning of "those funds" as used in the letter. Miller 

testified: 

"A. Well, I figured it meant that they had 

guaranteed the rest of the purchase price." 

Although he later hedged his answer, to such a point that this 

Court is unable to tell what he meant, Mr. Austin's first reaction to the question "What does 'these funds' mean" was: 

"A. It goes back to the funds I am talking about 

in the first paragraph. These are the funds that 

we are talking about in the total picture." 

It is clear that the phrase "these funds" is ambiguous 

as to whether it refers to the $1,000 loan, the $1,000 accounts 

receivable or the $2,000 "total picture". Any uncertainty in a 

contract should be interpreted most strongly against the party who 

caused the uncertainty to exist. Section 13-720, R.C.M. 1947. 

Thus, we hold that, by guaranteeing "these funds", the Bank 

guaranteed the total sum of $2,000. This interpretation is bolstered by the fact that the Bank did not hand Walters a cashier's 

check or in any other way earmark the $1,000; but, rather, placed 

it in Walter's checking account to use as he saw fit. 

From the view we take of the first two issues raised, it 

becomes unnecessary to discuss the third issue raised. 

The judgment is reversed and remanded to the district court 

with instructions to enter judgment for plaintiff Evan M. Miller 

against defendant Bank of Columbia Falls in the amount of $1,000. 

The judgment is reversed. 
We concur: 

Chief Justice 

\J ........................ 

Justices