Mountain States Resources, Inc. v. Monte Grand Exploration, Inc.

                                   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   ,