No. 87-291 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

ACCOUNTS MANAGEMENT CORP., a 

corporation, 

Plaintiff and Respondent, 

LYMAN RANCH, a corporation, and 

HOWARD F. LYMAN, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable Thomas McKittrick, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

J. Daniel Hoven; Browning, Kaleczyc, Berry & Hoven, 

Helena, Montana 

For Respondent : 

J. Vaughan Barron, Great Falls, Montana 

Submitted on Briefs: Oct. 16, 1987 

Decided: December 31, 1987 

4- 

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Clerk 
Mr. Justice R. C. McDonough delivered the Opinion of the 

Court. 

Howard Lyman appeals the judgment of the District Court 

of the Eighth Judicial District dated April 7, 1987. We 

affirm. 

The lower court's judgment concerns a debt incurred by 

Lyman Ranch Corporation (Lyman Ranch). Howard Lyman owned 

the majority of stock in Lyman Ranch, and acted as Lyman 

Ranch's representative. The suit, originally brought by 

Farmers Union Oil of Great Falls (Farmers Union), named 

Howard Lyman and Lyman Ranch Corporation as defendants. 

The debt springs from a charge account. For several 

years Lyman Ranch had charged ranch operating expenses at 

Farmers Union. In the fall of each year Lyman Ranch utilized 

funds from a loan obtained from the Production Credit 

Association (PCA) to pay the Farmers Union debt. In 1981, 

however, the PCA denied Lyman Ranch's loan application and 

reapplication, and the Farmers Union debt went unpaid. 

In December of 1981 Howard Lyman met with Farmers Union 

representative John Boysun to discuss the debt. Lyman told 

Boysun that he would personally guarantee that everything 

that could be done would be done to pay off the account, and 

that there was a possibility that the ranch would have to be 

sold to satisfy its obligations to creditors. Lyman also 

assured Boysun that the value of the ranch exceeded its 

liabilities. 

Boysun wanted to document Lyman's acknowledgement of the 

debt and his guarantee for payment. To that end, Boysun's 

associate, James McDonald, drafted the following document 

entitled "CHECK-NOTE": 
I CUSTOMER (Debtor) : COOPERATIVE (Creditor) : I 

GHEAT FALLS. MONTANA 59401 

uted as of the nearthe cooperative held by er (Debtor) for any debt 

Customer acknowledges he above described acc 

SIGN THIS DOCUMENT ANY BLANK 

YOU HAVE A RIGHT TO A RIGHT TO 

THE FULL AMOUNT AN 

CE CHARGES 

c ' - ~. . .~ - - -- - 

No. 20998 , 

~~~k at GREAT FALLS, MONTANA I FOR VALUE RECEIVED, I PROMISE TO 1 I/ p~y TO FARMERS UNION OIL GO. OF GREAT PALLS, MONTANA 121,077.49 1 

I/ One Hundred-Twenty (Pne Thousand-Seventy Seven AND 49/100------------------- Dollars 1 

1 

1 It is further agreed that the amount of this instrument will be paid by the makerb) on or before June 1 ' 19&. If it is not honored, this Check-Note shall be in default and the maker(s) agree to pay all costs of collection, I 

i excluding Attorneys Fees, and interest may be assessed by applying a rate of A% m to the amount 

, due at maturity for the period of time after maturity until collected. 

d EXHIBIT 

Address - 

3 
A week after the conversation which lead to the drafting 

of the "CHECK-NOTE", Boysun presented it to Lyman, and both 

individuals signed the document. Their signatures appear 

together midway down the document following the recording of 

the amount owed on the open account and the terms for payment 

of the account. Lyman's signature also appears at the end of 

the document following an unconditional promise to pay 

$121,077.49, on or before June 1, 1982. 

Lyman's first signature shows that he signed in his 

capacity as a corporate representative. The type written 

word "By" precedes the signature, the signature appears 

beneath the heading of "Lyman Ranch", and following the 

signature Lyman penned the word "Sec." to signify his office 

as secretary of the corporation. The second signature by 

Lyman, however, appears without any reference to Lyman R.anch 

or the signatory's capacity. 

On June 1, 1982, the debt went unpaid, and on April 12, 

1984, Farmer's Union brought suit to collect the debt. The 

defendants answered the complaint on June 11, 1984. Lyman 

Ranch admitted it owed the amount specified in the complaint, 

but Howard Lyman denied personal responsibility for the debt. 

The issue of Howard Lyman's personal responsibility on the 

debt went to trial on September 25, 1986. Prior to trial 

Farmers Union assigned its rights against the defendants to 

Accounts Management. 

The lower court entered the judgment at issue on April 

7, 1987. The judgment was based on the court's conclusion 

that Howard Lyman undertook a promise to pay the debt in an 

individual capacity rather than a corporate capacity. The 

lower court supported this conclusion by finding that the 

promise to pay in the bottom of the "CHECK-NOTE" constituted 

a promissory note which unambiguously showed that Lyman acted 

in a personal capacity. The lower court also found from 
trial testimony that Boysun and Lyman were sophisticated 

businessmen, and that in return for Farmers Union's 

forbearance from collection efforts, Lyman agreed to assume 

personal liability for the debt. Lyman contended in the 

lower court that Farmers Union wanted the "CHECK-NOTE" as 

collateral to finance its own debt. At trial testimony 

showed that Farmers Union employed similar documents for debt 

security in its borrowing from the Bank of Cooperatives. 

Lyman raises the following issues on appeal of the 

judgment: (1) Did the District Court err as a matter of law 

in its construction of the check-note? (2) Is the District 

Court's construction of the check-note supported by 

substantial evidence? (3) Is the District Court's 

conclusion that the check-note was unambiguous supported by 

substantial evidence? (4) Should this Court reverse the 

judgment of the District Court and institute a proper 

judgment that Howard Lyman is not personally responsible for 

the debt of Lyman Ranch Corporation? 

We will not consider the issues in order. First we will 

consider the law and evidence surrounding construction of the 

"CHECK-NOTE" as framed by Issues 1 and 3. The following and 

final section of this opinion considers Issue 2 and moots 

Issue 4. 

Issues 1 and 3, Construction of the "CHECKNOTE": Lyman 

argues that the District Court's characterization of his 

promise to pay as a promissory note violates rules of 

contract construction. According to Lyman, when viewed as an 

integrated part of the whole document, the promise to pay 

does not unambiguously show a personal undertaking to pay the 

debt. We agree with the District Court's conclusion that the 

promise to pay constitutes a promissory note. The bottom 

half of the "CHECK-NOTE" containing Lyman's unconditional 

promise to pay a sum certain at a definite time constitutes 
an instrument under 5 30-3-104, PCA, and the fact that the 

inventory of the debt is attached above the promise does not 

affect the nature of the promise. 

However, by statute, as between the immediate parties, 

the document creates an ambiguity in regard to the second 

signature. See $ 30-3-403, MCA. In particular, $ 

30-3-403(2), MCA, provides: 

An authorized representative who signs his own 

name to an instrument: 

(a) is personally obligated if the instrument 

neither names the person represented nor shows that 

the representative signed in a representative 

capacity; - 

(b) except as otherwise established between the 

immediate pgrties, is personally obligated if the 

instrument names the person represented -- but does 

---- not show that the re~resentative - si~ned in a 

representative capacityILor if the instrumentToes 

not name the person represented but does show that 

the representative signed in a representative 

capacity. (Emphasis added.) 

Subsection (b) of $ 30-3-403(2), MCA, applies to the 

signature at issue in this case. Accounts Management should 

be treated as an immediate party under $ 30-3-403 (2), MCA. 

See Moore v. White (Okla. 1979), 603 ~.2d 1119. Moore 

concerned the issue of whether a guarantor to a note was an 

immediate party under Oklahoma's adoption of $? 3-403, U.C.C. 

The Court in Moore held that the guarantor stepped into the 

shoes of the creditor, and thus in a suit between the 

guarantor and the maker of the note, the guarantor was an 

immediate party under the statute. Accounts Management 

stepped into the shoes of Farmers Union when the case was 

postured for trial, and its rights derived not from 

negotiation of the note at issue, but from a separate 

agreement with Farmers Union. Under these circumstances, 

Accounts Management cannot claim greater rights than Farmers 
Union, and is subject to Lyman's defenses against Farmers 

Union. See also Guaranty National Bank v. Beaver (Okla. 

1987), 738 P.2d 1336. 

Subsection (b)'s additional prerequisites are also met 

in this case. The instrument's upper portion names Lyman 

Ranch, but the signature on the lower portion does not show 

that Lyman signed in a representative capacity. In this 

situation, the issue of who is obligated by the note becomes 

a question of fact for the trial court. See Clarks Fork 

National Bank v. Papp (Mont. 1985), 698 P.2d 851, 853, 42 

St.Rep. 577, 580. And in resolving this issue, subsection 

(2) (b) "admits par01 evidence in litigation between the 

immediate parties to prove signature by the agent in his 

representative capacity". Uniform Commercial Code (U.L.A.) § 

3-403 official comment (1977). Thus, the lower court 

incorrectly concluded that Lyman's signature unambiguously 

imparted personal liability. 

However, the lower court also heard evidence and made 

findings concerning the parties' intentions. That is all 

that 30-3-403 (2) (b) , MCA, mandates under these 

circumstances, and we will affirm on the basis of these 

findings if they are supported by substantial evidence. 

ISSUES 2 and 4: Howard Lyman testified that when he 

personally guaranteed that everything that could be done 

would be done to satisfy the debt, his statements referred to 

efforts in a corporate capacity, not to a desire to become 

personally liable on the debt. Boysun testified that he 

relied on Lyman's personal guarantee for ordering the 

preparation of the "CHECK-NOTE", and according to Boysun and 

the "CHECK-NOTEn's drafter, McDonald, the parties intended to 

impart personal liability to Lyman. 

The lower court's finding that the parties intended to 

make Lyman personally liable must be supported by substantial 
evidence. Miller v. Watkins (1982), 200 Mont. 455, 461, 653 

P.2d 126, 129. Substantial evidence "'is such relevant 

evidence as a reasonable mind might accept as adequate to 

support a conclusion.'" Bushnell v. Cook (Mont. 1986), 718 

P.2d 665, 668, 43 St.Rep. 825, 828 (quoting State v. Plouffe 

(1982), 198 Mont. 379, 389, 646 P.2d 533, 538). And this 

Court must give due regard "to the opportunity of the trial 

court to judge of the credibility of witnesses." Rule 52(a), 

M.R.Civ.P. Boysun's testimony, and the fact that Lyman added 

"Sec." after his first signature, and omitted any reference 

to his capacity in the second signature, provide substantial 

evidence to support the lower court's findings and 

concl.usions on the intentions of the parties. Thus we 

affirm. 

We Concur: /' 

/ 

Chief Justice I <.- 

Justice 

I 

Justices