No. 92-239 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

C B & F DEVELOPMENT CORPORATION, 

Plaintiff and Respondent, 

-vsCULBERTSON STATE BANK, 

Defendant and Appellant. (2 ~<i3mifL 

CLEFPI< OF SUPREME COURT 

STATE OF MONTANA 

APPEAL FROM: District Court of the Fifteenth Judicial District, 

In and for the County of Roosevelt, 

The Honorable M. James Sorte, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Ward E. Taleff, Floyd D. Corder, Alexander, Baucus 

& Linnell, Great Falls, Montana 

For Respondent: 

Laura Christoffersen, Matthew W. Knierim, Gallagher, 

Archambeault & Knierim, Wolf Point, Montana 

Filed: 

Submitted on Briefs: September 24, 1992 

Decided: December 17, 1992 

Clerk 
Justice Fred J. Weber delivered the Opinion of the Court. 

This is an appeal from a jury verdict in the Fifteenth 

Judicial District Court, Roosevelt County, awarding damages of 

$300,000 to C B & F Development Corporation in a contract action 

against Culbertson State Bank. We affirm. 

We address the following issues: 

1. Was the evidence sufficient as a matter of law to justify 

the verdict? 

2. Did the District Court abuse its discretion by instructing 

the jury on equitable estoppel and on a third-party beneficiary 

theory? 

C B & F Development Corporation (C B & F) was a feed business 

located in Culbertson, Montana. It originated as an Economic 

Development Corporation in the early 19601s and from its inception 

maintained a twenty year relationship with Culbertson State Bank 

(Bank). The Bank provided C B & F with an annual line of operating 

credit, negotiated yearly. 

C B & F obtained one loan from the Bank involving the Small 

Business Administration (SBA). This loan, SBA-H, made in 1983, was 

for a total of $418,400, seventy percent of which was guaranteed by 

the SBA through its Helena, Montana off ice. The loan term was for 

ten years, with C B & F paying monthly payments. 

A second loan, SBA-S, was a direct loan from the SBA San 

Francisco office under its disaster program. C B & F applied for 

the loan in order to alleviate its cash flow difficulties due to 

the 1985 drought. The second loan for $140,000 was approved by the 

2 
San Francisco SBA on June 27, 1986. This loan was secured by real 

and personal property and by the personal guarantees of several 

directors of C B & F. 

The Loan Authorization and Agreement between SBA and C B & F 

covering the second loan for $140,000 provided that prior to 

disbursement of any loan proceeds C B & F will provide a letter of 

commitment from Culbertson State Bank to the SBA which would state 

that the Bank would grant borrower an operating line of credit for 

1986 with approximately the same terms, conditions, and credit 

limit as granted to the Borrower prior to the disaster period." 

The Bank wrote a letter of commitment to the SBA dated August 6, 

1986, which stated in part: 

In reply to page 5 of the June 27, 1986 Loan 

Authorization and Agreement for the operating line for 

the balance of 1986, [tlhe Culbertson State Bank, in 

keeping with our lending limit of $140,000, can extend up 

to $41,000.00 to CB&F Dev., if the balance of the present 

operating line of $42,551.43 principal and $3,061.65 

interest to date, is paid. Also this would be subject to 

a subordination from SBA in Helena, under the original 

loan dated 2/1/83 covering all Real Estate (approx 5 

acres) and all Machinery, Equipment and Inventory, 

releasing the inventory to secure the needed capital 

needs. We have enclosed copies of the last years line of 

$71,000., which covered $25,000.00 from the draught (sic) 

of 1984, to show how we are sec[ur]ed to 8/13/86. 

The proceeds of this loan were used to pay off the Bank as required 

under the letter of commitment. The Bank accepted the payment, but 

subsequently refused to provide the operating line of credit for 

C B & F brought suit against the Bank based on various tort 

and contract theories. The Bank answered and filed a third party 

complaint against the SBA. The case was removed to the United 
States ~istrict Court for the ~istrict of Montana, Billings 

Division. By memorandum and order filed April 10, 1991, the 

federal court granted SBAts combined motion for dismissal and for 

summary judgment; the court then remanded the case to the state 

district court because the Bank had failed to allege federal 

jurisdictional issues or name the United States as a party. 

C B & F filed an amended complaint dated May 3, 1991, alleging 

negligent misrepresentation, breach of express contract, breach of 

implied contract, estoppel, and fraud and punitive damages. The 

case was tried before a jury on January 21, 1992. After submission 

its case-in-chief, the District Court, pursuant 

motion, limited the issues to a consideration of contract theories. 

On January 24, 1992, the jury entered a verdict of $300,000 in 

favor of C B & F. The Bank moved for judgment notwithstanding the 

verdict or in the alternative for a new trial. The District Court 

denied these motions and the Bank appealed. 

Was the evidence sufficient as a matter of law to justify the 

verdict? 

The Bank contends that the record does not support the jury's 

verdict for C B & F because no contract existed between it and SBA 

or between it and C B & F. 

Our function on appeal from a jury verdict is to review the 

evidence in the light most favorable to the prevailing party and to 

determine whether substantial evidence supports the verdict. Hash 

v. State (1991), 247 Mont. 497, 807 P.2d 1363. After a careful 
review of the record, we conclude that substantial evidence was 

presented supporting the jury verdict. 

The Bank contends that evidence of the requisite element of 

contractual consent (offer and acceptance) is not contained in the 

record. According to the Bank, no written contract between C B & 

F and the Bank existed. The Bank's position is that no meeting of 

the minds on essential terms occurred, thus there could be no valid 

offer or unconditional acceptance of that offer. C B & F contends 

that the Bank erroneously limits its consideration to the August 6, 

1986 letter of commitment to the SBA as though that were the only 

evidence to support a contractual relationship. C B & F refers to 

various other matters presented to establish the contract. 

This case involves two contracts made between three parties. 

"A contract is either express or implied. An express contract is 

one the terms of which are stated in words. An implied contract is 

one the existence and terms of which are manifested by conduct." 

Section 28-2-103, MCA. The first contract, between SBA and C B & 

F, is an express contract. A condition precedent to that express 

contract, is the submission to SBA by the Bank of a letter of 

intent to loan C B & F an operating line of credit. 

The second contract is that between C B & F and the Bank. 

While no written contract existed here, plaintiff contends a 

contract did exist. As stated in 5 28-2-103, MCA, an implied 

contract is one the existence and terms of which are manifested by 

conduct. See Billings Clinic v. Peat Marwick Main and Co. (1990), 

244 Mont. 324, 797 P.2d 899. Here, we look to the Bank's and C B 
& F's conduct to see if it is sufficient to establish an implied 

contract. 

The record shows that C B & F specifically requested an 

operating loan commitment letter from the Bank as a prerequisite to 

obtaining the disaster loan from SBA. The record shows that the 

Bank assured C B & F it would send this letter. After a twenty 

year business relationship in which the Bank had loaned it 

operating money every year, C B & F had reason to, and did, accept 

the assurance of the Bank's official. 

The record further shows that a Bank officer spoke personally 

with an SBA officer on several occasions concerning its intent to 

loan money to C B & F. The record establishes that the Bank 

understood that SBA needed a firm commitment and that the letter it 

sent to SBA had been interpreted as such a commitment. SBA notes 

indicate its understanding that the Bank would loan C B & F the 

money pursuant to its pre-1986 terms and conditions. 

C B & F also understood that the Bank would make an operating 

loan for 1986. As part of the conditions for such an operating 

loan, the Bank required C B & F to repay its outstanding operating 

debt. The Bank argues that C B & F never received a copy of the 

August 6 letter of commitment so it could not have agreed to any 

contractual terms. The record shows that C B & F had been informed 

by SBA of the contents of the Bank letter. Subsequently, the Bank 

accepted payment of the C B & F debt, knowing that the money came 

from SBA, and fulfilled its own condition for the operating loan. 
The Bank's acceptance of the payment of C B & Fvs operating 

debt with SBA funds is evidence that the Bank agreed to loan C B & 

F money. C B & F1s conduct in repaying the loan indicates that it 

understood that in order to receive the new operating line of 

credit, it would have to repay its existing operating debt. Yet, 

the Bank argues that there can be no contract between it and C B & 

F because essential terms such as the amount of the loan and the 

rate of interest were not established. 

The letter of commitment from the Bank to SBA establishes a 

$41,000 credit limit. Testimony at trial established that over a 

twenty year business history, the interest rates on the yearly 

operating line of credit fluctuated with the amount borrowed and 

general interest rate. 

In SBA1s Loan Authorization and Agreement to C B & F covering 

the 1986 loan to C B & F, SBA states that the Bank must provide a 

letter of commitment to SBA indicating an extension of an operating 

line of credit to C B & F on llapproximately the same terms, 

conditions, and credit limit as granted" prior to the 1986 loan. 

The Bank and C B & F understood that the Bank's August 6 commitment 

letter was written with these implied terms. As a result, the Bank 

was required to make the loan on terms and conditions similar to 

those of preceding years. 

The Bank contends that its second condition to extending the 

line of credit was not completed because SBA did not subordinate 

its loan. Testimony by the SBA at trial established that the Bank 

failed to request the subordination so none was issued. 
The elements required to establish an implied contract are: 

identifiable parties, consent, a lawful object and consideration. 

Daniels v. Thomas, Dean & Hoskins, Inc. (1990), 246 Mont. 125, 804 

P.2d 359. The parties to the implied contract were the Bank and C 

B & F. We have discussed, and the record evinces, consent by both 

parties to the operating loan. As far as consideration is 

concerned, C B & F received its disaster loan and paid the 

delinquent current operating loan to the Bank; and the Bank 

accepted the delinquent amount from the SBA funds. We conclude 

that the implied contract between the Bank and C B & F was 

established by substantial evidence. 

C B & F argues that the evidence supports the contractual 

theory of promissory estoppel. Because we conclude that an implied 

contract existed between the Bank and C B & F, we do not find it 

necessary to discuss promissory estoppel in detail. We do point 

out that substantial evidence exists from which the jury could also 

have concluded that promissory estoppel prevents the Bank from 

denying a contractual relationship between it and C B & F. 

We therefore hold that the evidence presented was sufficient 

to justify the jury verdict. 

11. 

Did the District Court err by instructing the jury on 

equitable estoppel and on a third party beneficiary theory? 

Both plaintiff and defendant provided the court with an 

estoppel instruction which the court gave to the jury. The Bank 

offered a promissory estoppel instruction. C B & F's instruction 
merely designated its instruction as one for llestoppel;ll the Bank 

contends the instruction was really an equitable estoppel 

instruction. As such, the Bank argues the instruction was 

inappropriate because equitable estoppel is a defense theory. The 

Bank further argues that the giving of both instructions was 

confusing for the jury. C B & F argues that its instruction was 

not designated as an equitable estoppel instruction and that 

nothing in the simultaneous giving of the two instructions was 

confusing. 

C B & F's instruction with six elements specifically mentions 

I1silencen as a possible conduct which could indicate the party is 

estopped from denying a contract. The Bank objects to use of the 

"silence1' element; yet the facts of this case strongly suggest that 

silence could have played a part in analyzing the Bank's conduct. 

This Court has recognized equitable estoppel, promissory 

estoppel, and estoppel by silence. Northwest Potato Sales, Inc. v. 

Beck (1984), 208 Mont. 310, 678 P.2d 1138. But, in so doing we 

have also determined that the lines separating all three kinds of 

estoppel are blurry at best: 

Although we base our decision on estoppel by silence, we 

cannot deny that the facts may fit elements of estoppel 

also appropriate to equitable estoppel. This is so, 

because as is so often the case in any branch of the law, 

each form of estoppel does not fall into a neatly 

packaged and exclusive category. Rather, the forms of 

estoppel also blend with each other. 

Northwest Potato, 208 Mont. at 317, 678 P.2d at 1141. 

We have reviewed and compared both instructions and have 

concluded that under the facts of this case, the jury could 
properly have found for the plaintiff under both instructions. As 

a result, we hold that the giving of both instructions does not 

constitute reversible error. 

The Bank also objects to the District Courtts instruction on 

the theory of third party beneficiary. The basis for the Bank's 

objection is that the federal district court found no contract to 

exist between SBA and the Bank. The Bank argues res judicata on 

the issue of any contractual relationship between it and the SBA. 

First, we find res judicata inapplicable. Res judicata 

requires the same parties, the same subject matter, the same 

issues, and the same capacities of the parties. Filler v. Richland 

County (1991), 247 Mont. 285, 806 P.2d 537. The parties on appeal 

are C B & F and the Bank. The action in federal court was an 

action by the Bank against the SBA. The parties are not the same. 

Further, the issues involved are different. The Bank argued 

to the federal court that SBA had breached an agreement with it to 

subordinate and that this breach caused the Bank damage. In the 

underlying action now on appeal, C B & F argues that the Bank 

breached its agreement with C B & F, causing C B & F damage. We 

conclude that the determination by the federal district court did 

not constitute res judicata as to the issues in this case. 

We note that the transcript does contain the Bank's objection 

to the third party beneficiary instruction as presented by C B & F. 

The record also shows that following a discussion on the 

appropriateness of the theory to the case, the Court granted the 

Bank's request for permission to write a limiting instruction to be 
given with the original. The Bank never furnished the instruction 

at the agreed upon time so the court gave the original instruction 

by itself. We conclude that the Bank's failure to provide the 

instruction, which the court stated that it would give to the jury, 

prevents the Bank from now arguing that the instruction on this 

issue was deficient. 

We hold the District Court did not err by instructing the jury 

on an equitable estoppel theory and on a third party beneficiary 

theory. 

Affirmed. 

We Concur: