DEVON OIL GAS CO INC v AYERS
Annotate this Case
Download PDF
No. 85-161 IN THE SUPREME COURT OF THE STATE OF MONTANA 1985 DEVON OIL & GAS COMPANY, INC., a Washington corporation, Plaintiff and Respondent, -vs- MILAN R. AYERS, et al., Defendant and Appellant. APPEAL FROM: District Court of the Ninth Judicial District, In and for the County of Toole, The Honorable R. D. McPhillips, Judge presiding. COUNSEL OF RECORD: For Appellant: William Conklin; Dzivi, Conklin Montana & Nybo, Great Falls, & Epstein, Cut Bank, For Respondent: James C. Nelson; Werner, Nelson Montana Submitted on briefs: Aug. 15, 1985 Decided: October 8, 1985 Filed: *@? Clerk J u s t i c e Frank B. t h e Court. Mr. M o r r i s o n , J r . , d e l i v e r e d t h e Opinion o f Ayers and Ayers O i l D e f e n d a n t s Milan K. Gas C o r p o r a - & t i o n a p p e a l t h e F e b r u a r y 2 5 , 1985, f i n d i n g s o f f a c t and o r d e r of the Ninth Judicial District Court granting motion for summary judgment a g a i n s t b o t h d e f e n d a n t s i n f a v o r o f p l a i n tiff Devon O i l Gas Company, Inc. We 198'1, & a f f i r m t h e summary Ayers (Ayers) , Terry judgment. O n July 10, Nilan Dunne, and Kenneth H a l v e r s o n m e t i n Spokane, Washing- Rockne T i m m , t o n , t o d i s c u s s t h e p o s s i b i l i t y o f e n t e r i n g i n t o an a g r e e m e n t t o p a r t i c i p a t e i n working g a s and T i m m w e r e p a r t n e r s i n R & l e a s e s h e l d by A y e r s . T Company o f Spokane, and a l s o w e r e on t h e b o a r d o f d i r e c t o r s o f Devon O i l Inc. (Devon) . Dunne & Gas Company, The t r i a l c o u r t found t h a t t h e m e e t i n g p r o - duced two a g r e e m e n t s . The f i r s t a g r e e m e n t was e n t i t l e d Devon Gas F i e l d O p t i o n Agreement, and i d e n t i f i e d R & T Company a s d e s i r i n g t o p u r - c h a s e an o p t i o n from Ayers for t h e d e v e l o p m e n t and p r o d u c t i o n of g a s r e s e r v e s . Tha a g r e e m e n t p r o v i d e d t h a t R & T Company would make an o p t i o n payment, which A y e r s would u s e t o h i r e an e n g i n e e r t o s t u d y t h e a r e a ' s potential. The b a l a n c e o f t h e o p t i o n payment was t o b e u s e d t o p e r f e c t t i t l e o n A y e r s ' e x i s t i n g l e a s e s and t o p u r c h a s e a d d i t i o n a l l e a s e s . & Gas, Inc. Ayers O i l was i d e n t i f i e d a s o p e r a t o r o f t h e p r o j e c t , and a g r e e d t o h o l d R & T h a r m l e s s from a 1 1 l a w s u i t s o r l i a b i l i ties arising out of the execution of the agreement. document was s i g n e d by Dunne, Timm, and Ayers. Ayers signed b o t h a s a n i n d i v i d u a l and a s p r e s i d e n t o f A y e r s O i l Inc The & Gas, . A handwritten stated that the addendum a t t h e b o t t o m of t h e agreement was subject to the l a s t page approval of Devon Oil approval Gas & of Co. Devon, to a participate. replacement w i t h i n 1 5 d a y s would p r e v a i l . Further, document that fully upon executed T h i s addendum was i n i t i a l e d by a l l parties. The identical t o the second a g r e e m e n t was first, with Devon b e i n g s u b s t i t u t e d f o r R & T Company a s p r o v i d e d f o r i n t h e addendum t o t h e f i r s t a g r e e m e n t . T h i s a g r e e m e n t was n o t f u l l y e x e c u t e d u n t i l sometime between J u l y 1 0 , 1 9 8 1 , and J u l y 20, I t was s i g n e d by Dunne, C.W. 1981. of Devon) McWhorter (president , A y e r s , a s an i n d i v i d u a l and a s p r e s i d e n t o f A y e r s O i l & Gas, Inc., and h i s w i f e , Yvonne, a s s e c r e t a r y o f Ayers O i l & Gas, I n c . On J u l y 2 1 , 1981, a n a d v a n c e o f $50,000.00 was p a i d t o Ayers o u t o f Devon's a c c o u n t , t o e n a b l e A y e r s t o p r o c e e d w i t h evaluation of t h e gas f i e l d . O August n 14, 1 9 8 1 , Devon's b o a r d o f d i r e c t o r s u n a n i - mously v o t e d t o d e f e r c o n s i d e r a t i o n o f Ayers, involvement w i t h M r . f o l l o w i n g a phone c a l l r a i s i n g q u e s t i o n s a b o u t A y e r s ' credibility. O August 1 6 , 1 9 8 1 , Ayers s e n t Devon P r e s i d e n t McWhorter n ". . . t h e a l e t t e r i n f o r m i n g him, escrow i s a r e c a l l a b l e one t o t a l l y subject t o t h e purchasers f i n a l approval," and t h a t Ayers c o n s i d e r e d t h e p a r t i e s ' d i s c u s s i o n s t o b e i n a h o l d i n g pattern. On November 24, 1981, Devon entered into an Escrow Gas, Inc. The a g r e e m e n t p r o v i d e d t h a t A y e r s and A y e r s O i l & Gas, Inc. Agreement and R e l e a s e w i t h Ayers and A y e r s O i l would jointly be referred to as "Ayers". & Attached t o t h e document was t h e f i r s t Devon Gas F i e l d O p t i o n Agreement. 1) Escrow Agreement and R e l e a s e p r o v i d e d : tions, and fulfilled obligations by both of parties; the 2) option the The t h e t e r m s , condi- agreement option had agreement been was rescinded, other; 3) a r y 30, 16, and t h e p a r t i e s r e l e a s e d a l l c l a i m s a g a i n s t e a c h " A y e r s " a g r e e d t o p a y t o Devon, o n o r b e f o r e J a n u - 1982, 1981; 4) $50,000.00 as p l u s i n t e r e s t computed security p l a c e i n e s c r o w 37%% o f scribed for the "Ayers" agreed to t h e w o r k i n g i n t e r e s t i n leases d e - i n an a t t a c h e d e x h i b i t ; t h e $50,000.00 debt, from August and 5) i n c o n s i d e r a t i o n o f Devon c o n v e y e d t o " A y e r s " a n y i n t e r - payment, e s t i n t h e l e a s e s it h a d a c q u i r e d u n d e r t h e o p t i o n a g r e e m e n t . The E s c r o w A g r e e m e n t a n d R e l e a s e w a s s i g n e d b y Devon P r e s i d e n t McWhorter, and Ayers, b o t h a s i n d i v i d u a l and a s p r e s i - d e n t o f Ayers O i l & G a s , Inc. A y e r s w a s g r a n t e d a n e x t e n s i o n u n t i l March 1, 1 9 8 2 , t o make t h e p a y m e n t . Ayers requested a d d i t i o n a l e x t e n s i o n s , b u t t h e r e is no evidence i n d i c a t i n g t h e y w e r e granted. 3, On J u l y 1 9 8 2 , Timm w r o t e A y e r s d e m a n d i n g i m m e d i a t e p a y m e n t o r t h e m a t t e r would be turned over t o an attorney. On Jul-y 14, 1 9 8 2 , a n a t t o r n e y f o r Devon s e n t a l e t t e r t o A y e r s g i v i n g h i m u n t i l J u l y 30, 1982, t o pay t h e $50,000.00 July 29, 1982, A y ~ r ssigned a sight plus interest. draft for On $56,000.00 p a y a b l e t o t h e t r u s t e e ; upon h o n o r o f t h e d r a f t , t h e t r u s t e e was t o a s s i g n Devon's back t o Ayers O i l & i n t e r e s t i n t h e l e a s e s h e l d i n escrow Gas, Inc. The s i g h t d r a f t w e n t u n p a i d due t o i n s u f f i c i e n t funds. Due t o Ayers' failure to satisfy the debt, q u e s t e d Ayers t o p o s t more s e c u r i t y . tional interest November 30, to 1982. Devnn The in his following Devon A y ~ r sa s s i g n e d a d d i - oil and March, gas leases on Devon sent out i n q u i r i e s concerning t h e c u r r e n t s t a n d i n g o f Ayers ' The r e s p o n s e s i n d i c a t e d A y e r s ' ment. re- leases. l e a s e s had l a p s e d for nonpay- Devon f i l e d s u i t . B a s e d upon the exhibits, affidavits, a n d b r i e f s before t h e D i s t r i c t C o u r t , m o t i o n f o r summary j u d g m e n t w a s g r a n t e d t o p l a i n t i f f Devon a g a i n s t A y e r s p e r s o n a l l y a n d A y e r s O i l and Gas Corporation 1985. 1) rial On in the appeal, amount of appellants $71,320.55 raise the following 11, issues: Whether t h e D i s t r i c t C o u r t e r r e d i n r u l i n g t h a t no matefact was in dispute sum o f $50,000.00 the l i a b i l i t y of the Inc., to plaintiff for concerning c o r p o r a t e d e f e n d a n t Ayers O i l & Gas, the o n March plus interest, based upon so-called a d m i s s i o n s o f l i a b i l i t y by d e f e n d a n t Milan R. A y e r s on b e h a l f o f d e f e n d a n t Ayers O i l & Gas, Inc., a n d i n g r a n t i n g summary judgment i n f a v o r o f p l a i n t i f f a g a i n s t A y e r s O i l on t h a t b a s i s . 2) & Gas, I n c . , Whether t h e D i s t r i c t C o u r t e r r e d i n i t s i m p l i e d r u l i n g t h a t t h e Escrow Agreement a n d R e l e a s e d o c u m e n t 1981, i s supported by c o n s i d e r a t i o n a s t o d a t e d November 2 4 , c o r p o r a t e defendant Ayers O i l summary 3) judgment Whether iudgment the against Agreement against District both Gas, & defendant Court Inc., Ayers erred defendants and i n g r a n t i n g Oil in & Gas, granting founded upon the Inc. summary Escrow w h i c h d o c u m e n t i s a m b i q u o u s a n d re- and R e l e a s e , q u i r e s explanation with parole evidence. A p p e l l a n t s c o n t e n d numerous findings of b y t h e t r i a l c o u r t on a d i s p u t e d r e c o r d . f a c t w e r e made W h i l e some o f t h e f i n d i n g s may n o t b e p r e c i s e l y c o r r e c t , w e b e l i e v e t h e r e a r e sufficient undisputed facts in the record to uphold the summary judgment a g a i n s t t h e c o r p o r a t e d e f e n d a n t . Ayers contends the p a r t y and i s n o t l i a b l e . corporation is not a contractual Ayers a t t e m p t s t o r a i s e a c o r p o r a t e v e r s u s i n d i v i d u a l d i s t i n c t i o n i s s u e a f t e r d e a l i n g w i t h Devon f o r o v e r a y e a r w h e r e h e r a r e l y d i s t i n g u i s h e d w h e t h e r h e was a c t i n g i n d i v i d u a l l y o r a s c o r p o r a t e head. The t w o v e r s i o n s o f t h e Devon Gas F i e l d O p t i o n A g r e e m e n t w e r e e n t e r e d i n t o by " M i l a n R. Montana, 59474." The Ayers, P.O. corporation was Box 7 3 7 , S h e l b y , not shown as a contracting Ayers' & party at the top of the agreement. a d d r e s s was u s e d b y t h e c o r p o r a t e d e f e n d a n t , A y e r s O i l Both o f t h e a g r e e m e n t s w e r e s i g n e d by A y e r s , a s Gas, I n c . individual, and a s p r e s i d e n t o f A y e r s O i l agreements i d e n t i f i e d Ayers O i l & Gas, held responsible for any Gas, & Inc. t h e p r o j e c t , and f u r t h e r p r o v i d e d A y e r s O i l be However, lawsuits Inc. a s operator of Gas, I n c . would & arising out of the Inc. is president is execution o f t h e agreements. T h a t Ayers O i l & Gas, named Ayers in the sufficient agreements to support and the trial signed as court's The it was finding a p a r t y t o b o t h v e r s i o n s o f t h e Devon Gas F i e l d O p t i o n Agree- ment. S e c t i o n 28-10-603, The Escrow Ayers O i l Gas, MCA. Agreement Release clearly identifies a s a party thereto, and was s i g n e d by A y e r s i n d i v i d u a l l y , and a s c o r p o r a t e h e a d . The document i s a r e c o g n i t i o n t h a t b o t h A y e r s and A y e r s O i l & & Inc. and i n d e b t e d f o r $50,000.00 Subsequently, $56,000.00 Inc." a is were Ayers for p l u s i n t e r e s t t o Devon. sight draft drawn had h i s s i g n a t u r e f o l l o w e d by This Inc. Gas, effective consent to by "Ayers O i l the contract & by Gas, the c o r p o r a t i o n u n d e r 5 28-2-501 ( I ) , MCA. I n sum, w e f i n d t h e t r i a l c o u r t was c o r r e c t i n h o l d i n g t h e r e was no e v i d e n c e o f a g e n u i n e i s s u e o f m a t e r i a l f a c t and i s s u i n g summary judgment a g a i n s t b o t h d e f e n d a n t s . Our h o l d i n g t h a t A y e r s O i l & G a s , t h e Devon t h a t c o n s i d e r a t i o n flowed t o A y e r s O i l & Gas, Inc. of was a p a r t y t o is sufficient t o find Gas F i e l d O p t i o n Agreement Escrow Agreement and R e l e a s e . Lnc. & Gas, I n c . u n d e r t h e The r e l e a s e r e l i e v e d A y e r s 0j.l i t s o b l i g a t i o n t o p e r f o r m and a n y p o s s i b l e c l a i m s a g a i n s t it a r i s i n g u n d e r t h e o p t i o n a g r e e m e n t . lease from c o n t r a c t o b l i g a t i o n s and F.e- forbearance t o sue a r e both MCA adequate consideration. Sections 28-2-801 and -802, . Appellants ambiguous due assert to the R & T Company v e r s i o n ment. the Escrow Agreement attachment of and and Release incorporation t h e Devon Gas F i e l d They f u r t h e r c o n t e n d t h a t t h e R of is the O p t i o n Agree- T document was t h e & o n l y v a l i d a g r e e m e n t s i n c e t h e Devon b o a r d o f d i r e c t o r s v o t e d n o t t o pursue involvement w i t h Ayers. Neither contention is s u p p o r t e d by t h e f a c t s . The f i r s t o p t i o n a g r e e m e n t c o n t a i n e d a n addendum p r o v i d i n g t h a t i t was c o n t i n g e n t upon t h e a p p r o v a l o f Devon, w i t h a subsequently executed document was e x e c u t e d document and supercede. to p a r t i e s made t h e c o n t r a c t b i n d i n g ; directors did not second s i g n e d by D e v o n ' s p r e s i d e n t , c o r d i n g t o t h e t e r m s o f t h e addendum. of The ac- The s i g n a t u r e s o f t h e t h e v o t e by D e v o n ' s b o a r d affect the validity of the contract. The two v e r s i o n s o f t h e Devon Gas F i e l d O p t i o n Agreement were virtually identical. Each i d e n t i f i e d A y e r s O i l & G a s , Inc. and e a c h was as a president. party thereto, s i g n e d by Ayers The a t t a c h m e n t o f o n e r a t h e r t h a n t h e o t h e r d o e s n o t make t h e Escrow Agreement and R e l e a s e ambiguous. . The d e c i s i o n o f t h e t r i a l c o u r t i s a f f i r m e d . W e concurs Justices k as
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
