NO, 81-158
IN THE SUPRGME COURT OF THE STATE OF MONTANA
1981
MOUNTAIN STATES RESOURCES, INC.,
Plaintiff and Appellant,
VS .
M. D. EHLERT,
Defendant and Respondent,
VS .
MONTE GRANDE EXPLORATION, INC.,
Additional Defendant on
Counterclaim and Appellant.
Appeal from: District Court of the Ninth Judicial District,
In and for the County of Glacier
Honorable R. D. McPhillips, Judge presiding.
Counsel of Record:
For Appellant:
Frisbee, Moore & Stufft, Cut Bank, Montana
For Respondent:
Alexander & Baucus, Great Falls, Montana
Submitted on briefs: July 30, 1981
Decided : fi ov 2 7 19@i
Filed:
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
Mountain States Resources, Inc., filed suit against
Ehlert to set aside Ehlert's oil and gas lien and to collect
damages for slander of title. Ehlert counterclaimed and
joined Monte Grande Exploration, Inc., an undisclosed prin-
cipal of Mountain States Resources, in the suit. Montana's
Ninth Judicial District, in and for Glacier County, upheld
the lien and awarded judgment to Ehlert. Mountain States
Resources and Monte Grande Exploration raise eleven, issues
on appeal:
1. Was the lien filed prematurely?
2. Are oil and gas liens proper for work done on gas
pipelines?
3. Does a lien on a pipeline entitle the claimant to
a lien on oil and gas leaseholds served by the pipeline?
4. Must a claimant use the exact language contained
in the statute when filing a lien?
5. Was there an overstatement of amounts due in the
lien?
6. Was the construction completion date correctly
listed in the lien?
7. Was the lien invalid because the pipeline owner
was not listed in the lien?
8. Was a proper description of the property given in
the lien?
9. Was the lien's affidavit sufficient?
10. Was the lien against Monte Grande Exploration
invalid because Monte Grande Exploration was not named in
the original lien?
11. Is Ehlert liable for slander of title?
On September 27, 1977, the plaintiff-appellant,
Mountain S t a t e s R e s o u r c e s , I n c . (MSR), c o n t r a c t e d w i t h M . D.
E h l e r t t o f u r n i s h and e r e c t t h r e e s t e e l b u i l d i n g s t o be u s e d
i n c o n n e c t i o n w i t h t h e Gypsy-Highview ( n a t u r a l g a s ) Gather-
i n g S y s t e m (GHGS) i n P o n d e r a and T e t o n c o u n t i e s i n Montana.
Monte Grande Exploration, Inc. (MGE) was an undisclosed
p r i n c i p a l o f MSR. GHGS was e v e n t u a l l y owned 5 0 % by MSR, 25%
by MGE, a n d 25% by a s s o c i a t e s of M R and MGE.
S The same man,
J. V. Montalban, is p r i n c i p a l e x e c u t i v e o f f i c e r , 10% stock
o w n e r , and d o m i n a n t d r i v i n g f o r c e o f b o t h M R and MGE.
S
On September 27, 1977, MGE owned the oil and gas
lease on the land where the buildings were located, but
t h e r e was no w r i t t e n l e a s e f o r t h e a c t u a l l a n d . M R was t h e
S
a g e n t and p r o j e c t manager f o r t h e c o n s t r u c t i o n p r o j e c t . MGE
was a n u n d i s c l o s e d p r i n c i p a l . M R and MGE b o t h owned o i l
S
and g a s l e a s e s a d j o i n i n g and s e r v i c e d by t h e GHGS b u i l d i n g s .
GHGS was d e s i g n e d t o g a t h e r , process, t r a n s p o r t and
d e l i v e r n a t u r a l g a s f r o m M R and MGE w e l l s t o Montana Power
S
Company, which purchased the gas. GHGS became an
" i n d e p e n d e n t " l e g a l e n t i t y a f t e r t h e MSR-Ehlert c o n t r a c t was
finalized.
A $43,199 b u i l d i n g c o n t r a c t p r o v i d e d f o r a compressor
b u i l d i n g w i t h f l a s h i n g , and s w e e t e n i n g a.nd d e h y d r a t o r b u i l d -
ings without flashing. (Flashing is t h e m a t e r i a l placed
around a pipe at t h e p o i n t where it i n t e r s e c t s a wall in
order t o make t h e j o i n t weatherproof.) Flashing provided
f o r t h e two l a t t e r b u i l d i n g s was a n e x t r a , t o b e p a i d f o r i n
a d d i t i o n t o t h e $43,199 c o n t r a c t p r i c e . Between O c t o b e r 2 2 ,
1 9 7 7 , and December 1 5 , 1 9 7 7 , E h l e r t , a t t h e s p e c i f i c r e q u e s t
o f Bo M i k k e l s o n , MSR's s u p e r v i s o r y a g e n t , i n s t a l l e d f l a s h i n g
o n t h e s w e e t e n i n g and d e h y d r a t o r b g i l d i n g s . On J a n u a r y 1 8 ,
1978, MR p a i d E h l e r t
S t h e b a l a n c e d u e on t h e $ 4 3 , 1 9 9 con-
t r a c t , b u t r e f u s e d t o pay f o r t h e e x t r a f l a s h i n g , amounting
t o $1,818.39, u n t i l c o r r e c t i o n s were made.
On March 8 , 1 9 7 8 , a f t e r s e v e r a l r e q u e s t s f o r payment
had been r e f u s e d , E h l e r t f i l e d a $1,818.39 l i e n pursuant t o
s e c t i o n 45-1001, R.C.M. 1947, now s e c t i o n 71-3-1002, MCA,
a g a i n s t t h e p r o c e e d s of any n a t u r a l g a s s o l d by M R ( b u t n o t
S
MGE and GHGS) t o Montana Power Company.
MR f i l e d s u i t a g a i n s t E h l e r t t o s e t a s i d e h i s l i e n
S
and t o r e c o v e r $ 1 5 , 0 0 0 f o r s l a n d e r o f t i t l e a s a r e s u l t o f
the improper filing of the lien. Ehlert, by answer and
counterclaim, joined MGE and s o u g h t to foreclose the lien
a g a i n s t M R and MGE.
S
The trial court, s i t t i n g without a jury, dismissed
MSR's c o m p l a i n t and awarded E h l e r t $ 1 , 8 1 8 . 3 9 for the lien,
plus i n t e r e s t and a t t o r n e y f e e s , totaling $8,024.19. The
c o u r t a l s o r u l e d t h a t t h e l i e n was v a l i d a g a i n s t a l l M R and
S
MGE property named in the lien, and the proceeds of all
n a t u r a l g a s s o l d by MSR, MGE o r GHGS named i n t h e l i e n . MR
S
and MGE a p p e a l .
Issue No. 1: Was the lien filed prematurely,
t h e r e f o r e making the lien invalid? W hold t h a t t h e l i e n
e
was t i m e l y and v a l i d .
M R made t h e l a s t c o n t r a c t payment o f $ 1 4 , 1 9 9 ,
S which
was due seven days a f t e r t h e b u i l d i n g s w e r e c o m p l e t e and
inspected, on J a n u a r y 1 8 , 1978. A l l work orders for the
e x t r a f l a s h i n g w e r e c o m p l e t e on t h a t d a t e . A d j u s t m e n t s and
r e p a i r s w e r e s u b s e q u e n t l y made on t h e d o o r s and flashing,
b u t t h e c o n t r a c t work was s u b s t a n t i a l l y c o m p l e t e . T h e r e f o r e ,
the lien, filed on March 8, 1978, was filed after the build-
ing was substantially complete, and the lien is valid. See,
Turf Irr. & W.W. Sup. Co. v. Lawyers Title of Phoenix
(1975), 24 Ariz.App. 80, 535 P.2d 1311, 1314; Tabet Lumber
Company v. Baughman (1968), 79 N.M. 57, 439 P.2d 706, 709.
Cf., Western Plumbing of Bozeman v. Garrison (1976), 171
Mont. 85, 556 P.2d 520; Olson v. Westfork Properties, Inc.
(1976), 171 Mont. 154, 557 P.2d 821.
tan\
Issue No. 2: Does section 45-l&€%+, R.C.M. 1947, now
section 71-3-1002, MCA, permit an oil and gas lien for
labor, services and materials provided on the gas pipeline?
We hold the lien is valid.
loat
Section ,
E
+
@
-
5
4 R.C.M. 1947, provides in pertinent
part:
"Any person .. .
which shall contract . . .
with the owner of any leasehold for gas ...
. . . furnish material or services used in
. . . completing, [or] operating [a] gas
pipeline .
. . whether or not such material
is incorporated therein or becomes a part
thereof, shall have a lien . . .
upon all
material owned by the owner of such lease-
hold . . .and . . . upon all oil or gas
produced from such leasehold . . ."
J. V. Montalban, president of MSR and MGE, noted in a
letter to Ehlert, that using the three buildings Ehlert con-
structed, without doors, during December and January caused
"severe and impossible working conditions." It follows that
the completed buildings, with doors installed, were an
essential part of the gas gathering system. In any event, a
lien is valid under the statute "whether or not such mate-
rial is incorporated therein or becomes a part thereof."
Elhert is therefore entitled to a gas lien for the labor and
materials he provided. See, Nemeroff v. Cornelison Engine
Maintenance Co. (Okla. 1962), 369 P.2d 604.
I s s u e No. 3: Does E h l e r t ' s l i e n o n t h e g a s g a t h e r i n g
s y s t e m e n t i t l e him t o a l i e n on t h e l e a s e h o l d s s e r v e d by t h e
system? MR claims t h a t
S M R and
S MGE, which own the gas
leases, a r e completely i n d e p e n d e n t o f GHGS, which owns t h e
g a t h e r i n g system. Thus, t h e l i e n a g a i n s t t h e g a s g a t h e r i n g
s y s t e m d o e s n o t e x t e n d t o M R and MGE.
S Ehlert claims, and
we agree, t h a t GHGS i s a f r o n t f o r MSR and MGE. Ehlert
c o n t r a c t e d w i t h MSR, and M R s e r v e d a s t h e a g e n t and p r o j e c t
S
manager for the building project. MGE was an undisclosed
principal in the building project. GHGS was n o t e s t a b l i s h e d
as an independent entity and owner of the gas gathering
system until after Ehlert started constructing the
buildings. GHGS d i d n o t o b t a i n a w r i t t e n l e a s e f o r t h e l a n d
on which buildings sit until after the lien was filed.
T h u s , we h o l d t h a t E h l e r t c o n t r a c t e d w i t h M R and MGE,
S and
t h a t E h l e r t ' s l i e n e x t e n d s t o t h e d e s i g n a t e d M R l e a s e s , MGE
S
leases, and t h e GHGS. See g e n e r a l l y , Blose v. Havre O i l &
Gas Co. ( 1 9 3 4 ) , 9 6 Mont. 450, 31 P.2d 738.
I s s u e No. 4: Did E h l e r t u s e t h e p r o p e r l a n g u a g e , a s
per section 45-1001, R.C.M. 1947, now section 71-3-1002,
EI'ICA, in his lien? MR a s s e r t s t h a t E h l e r t
S is r e q u i r e d t o
use t h e e x a c t l a n g u a g e of t h e s t a t u t e and c l a i m a l i e n on
the "oil or gas produced from such leaseholds and the
proceeds thereof i n u r i n g t o t h e working i n t e r e s t . . ." The
l a n g u a g e E h l e r t a c t u a l l y u s e d was " c l a i m a n t makes t h i s l i e n
and a s s e r t s h i s r i g h t s u n d e r p r o v i s i o n s o f R . C . M . , of 1947,
S e c t i o n 45-1002 e t seq." W h o l d t h a t t h e l a n g u a g e u s e d by
e
Ehlert, which cites the oil and gas lien statute, is
adequate.
Although this Court has not specifically addressed
t h i s i s s u e i n t h e p a s t , we h a v e n o t e d t h a t " [1] ien s t a t u t e s
should receive a liberal c o n s t r u c t i o n t o t h e end t h a t the
o b j e c t s and p u r p o s e s o f t h e s t a t u t e s may be c a r r i e d o u t . "
C a i r d E n g i n e e r i n g Works v . Seven-Up Gold Mining Co. (1941),
111 Mont. 4 7 1 , 479, 111 P.2d 2 6 7 , 272; F a u s e t t v . Blanchard
( 1 9 7 0 ) , 1 5 4 Mont. 301, 463 P.2d 319, 322. Nothing in the
statute requires parties filing liens to use the exact
language of the statute relied upon. This Court shall
refrain from creating an additional burden for parties
filing liens. The statute, liberally construed, allows
g e n e r a l l a n g u a g e t o be u s e d i n t h e l i e n .
I s s u e No. 5: Did E h l e r t o v e r s t a t e t h e amount c l a i m e d
by lo%, and t h e r e f o r e i n v a l i d a t e t h e l i e n ? W e hold t h a t t h e
$1,818.39 claimed is v a l i d .
The t r i a l c o u r t ' s f i n d i n g s o f fact established that
$1,818.39 was d u e and o w i n g . W h i l e t h e r e was e v i d e n c e t h a t
Ehlert added 10% t o his actual costs, there was also
evidence t h a t t h i s was h i s s t a n d a r d c o n t r a c t i n g p r o c e d u r e .
I n any e v e n t , " [ a l n o v e r s t a t e m e n t of t h e amount d u e , a b s e n t
f r a u d o r bad f a i t h , d o e s n o t i n v a l i d a t e a l i e n . " Figgins v.
S t e v e n s o n ( 1 9 7 3 ) , 1 6 3 Mont. 425, 517 P.2d 7 3 5 , 737.
I s s u e No. 6: Was t h e c o n s t r u c t i o n c o m p l e t i o n d a t e
correctly listed in the lien? The l i e n shows December 15,
1977, as the last day of work. Ehlert claims that only
repairs and a d j u s t m e n t s were made after that date. MR
S
c o n t e n d s t h a t t h e work was n o t c o m p l e t e d u n t i l J a n u a r y 1 2 ,
1978. The l i e n was f i l e d on March 8 , 1 9 7 8 . Thus, t h e e x a c t
d a t e t h a t work was c o m p l e t e d i s i m m a t e r i a l , as either date
is well within the six-month limit allowed by section
45-1004, R.C.M. 1947, now s e c t i o n 71-3-1004, MCA. If no
p a r t y is i n j u r e d , a minor t e c h n i c a l i t y should not preclude
an o t h e r w i s e v a l i d l i e n from b e i n g e n f o r c e d . S e e , Brown v .
F a r r e l l ( 1 9 7 1 ) , 258 O r . 3 4 8 , 483 P.2d 4 5 3 , 455.
I s s u e No. 7: Was t h e l i e n i n v a l i d b e c a u s e GHGS, t h e
p i p e l i n e owner, was n o t l i s t e d in the lien? As we noted
above, Ehlert contracted with MSR to construct the
buildings. GHGS d i d not become a separate legal entity
u n t i l sometime a f t e r t h e c o n t r a c t was made. Further, there
was no w r i t t e n l e a s e f o r t h e l a n d o n which t h e b u i l d i n g s s i t
u n t i l a f t e r t h e l i e n was f i l e d . Therefore, E h l e r t ' s f a i l u r e
t o l i s t GHGS i n t h e l i e n was n o t e r r o r a n d d i d n o t a f f e c t
the lien. See generally, Blose v. Havre Oil & Gas Co.
( 1 9 3 4 ) , 96 Mont. 450, 3 1 P.2d 738.
Issue No. 8: Was a proper description of the
property given i n the l i e n ? MR c l a i m s t h a t s i n c e one of
S
t h e l e a s e s l i s t e d a s belonging t o MR a c t u a l l y belonged t o
S
MGE, t h e l i e n is invalid. W e do n o t c o n s i d e r t h i s t o be
fatal t o the lien.
A s n o t e d a b o v e , M R was t h e a g e n t and p r o j e c t manager
S
of the building project, and it is therefore liable to
E h l e r t . MGE was a n u n d i s c l o s e d p r i n c i p a l i n t h e c o n s t r u c t i o n
p r o j e c t and i s t h e r e f o r e a l s o l i a b l e . F i n a l l y , GHGS was t h e
successor in interest and is also l i a b l e . Regardless of
which c o r p o r a t i o n h e l d t i t l e a t t h e t i m e o f t h e l i e n , f i l i n g
t h e l i e n would g i v e n o t i c e o f t h e e x i s t e n c e o f t h e l i e n t o
interested third parties, which i s t h e p u r p o s e of t h e l i e n .
Morrison-Maierle, Inc. v. Selsco (1980), Mont. I
606 P.2d 1085, 1087, 37 S t . R e p . 299. The d e s c r i p t i o n was
adequate t o properly identify the property subject to the
lien; consequently, t h e d e s c r i p t i o n and t h e l i e n a r e v a l i d .
Varco-Pruden v. Nelson ( 1 9 7 9 ) , - Mont . , 593 P.2d 48,
5 0 , 36 S t . R e p . 704.
I s s u e No. 9: Was the lien's affidavit sufficient?
W h o l d t h a t t h e a f f i d a v i t was a d e q u a t e .
e
An affidavit is d e f i n e d as "a written statement,
under oath, sworn t o or a f f i r m e d by t h e p e r s o n making it
b e f o r e some p e r s o n who h a s a u t h o r i t y t o a d m i n i s t e r an o a t h
or a f f i r m a t i o n . " S t a t e v. K n i g h t ( 1 9 7 6 ) , 219 Kan. 8 6 3 , 549
P.2d 1 3 9 7 , 1 4 0 1 . The maker must h a v e p e r s o n a l knowledge o f
t h e i n f o r m a t i o n c o n t a i n e d i n t h e s t a t e m e n t and m u s t swear t o
its validity. S a u n d e r s Cash-Way, Etc. v. Herr i c k (1978),
1 7 9 Mont. 233, 587 P.2d 9 4 7 , 949, 35 S t . R e p . 1846. Ehlert's
a f f i d a v i t c o n t a i n e d w r i t t e n i n f o r m a t i o n a b o u t items o f w h i c h
he had p e r s o n a l knowledge. He s w o r e t o i t s v a l i d i t y b e f o r e
a notary public. T h e r e f o r e , t h e a f f i d a v i t was a d e q u a t e .
Issue No. 10: Was the lien against MGE invalid
b e c a u s e MGE was n o t named in the original lien? We hold
t h a t t h e D i s t r i c t C o u r t ' s f i n d i n g o f l i a b i l i t y was c o r r e c t .
T r u e , MGE was n o t named in the l i e n a s required by
s e c t i o n 45-1004, R.C.M. 1947. But, t h e D i s t r i c t Court found
t h e r e was an agent-principal r e l a t i o n s h i p between M R
S and
MGE. E h l e r t was unaware of t h i s r e l a t i o n s h i p u n t i l a f t e r h e
filed the lien. C o n s e q u e n t l y , E h l e r t p r o p e r l y j o i n e d MGE i n
the suit when Ehlert filed his answer and counterclaim.
Ehlert has a valid lien against MGE. Miller v. Melaney
( 1 9 7 7 ) , 1 7 2 Mont. 74, 560 P.2d 9 0 2 , 9 0 4 .
I s s u e No. 11: I s E h l e r t l i a b l e f o r s l a n d e r o f MSR's
title? S i n c e we h a v e f o u n d t h a t E h l e r t h a s a v a l i d l i e n , w e
need n o t a d d r e s s t h i s i s s u e .
The judgment o f t h e D i s t r i c t C o u r t is a f f i r m e d .
W concur:
e
QL ! h
ustices 47 ,