No. 8 7 - 2 9 1
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, 1 9 8 7
Decided: December 31, 1987
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Clerk
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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. M NA A
OTN 59401
uted a s of the near-
the cooperative held by er (Debtor) for any debt
Customer acknowledges he above described a c c
SIGN THIS DOCUMENT ANY BLANK
YOU HAVE A RIGHT TO A RIGHT T O
T H E FULL AMOUNT A N
CE CHARGES
c'
- ~. . .~ - - -- -
No. 2 0 9 9 8 ,
II/ FOR VALUE RECEIVED, I PROMISE TO
p ~ TO
y
~~~k at
FARMERS U N I O N O I L GO. OF GREAT PALLS, M N A A
OTN
GREAT FALLS, M N A A
OTN
121,077.49
11
I/ One Hundred-Twenty (Pne Thousand-Seventy Seven AND 49/100-------------------
Dollars 1
1
1 I t is further agreed that the amount of this instrument will be paid by the m a k e r b ) on or before June 1
' 1.
9& 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 a t maturity for the period of time after maturity until collected.
d EXHIBIT
Address
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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 - - - h e re~resentative s i ~ n e d in a
- show that t
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. 1 9 7 9 ) , 603 ~ . 2 d 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.
Justice
We Concur: /'
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Chief Justice
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Justices