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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 : Filed: fi ov 2 7 19@i 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 principal 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 6. Was the construction completion date correctly lien? 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. 10. Was the lien's affidavit sufficient? 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, Mountain S t a t e s R e s o u r c e s , I n c . the plaintiff-appellant, (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 GHGS was e v e n t u a l l y owned 5 0 % by MSR, 25% p r i n c i p a l o f MSR. by MGE, a n d 25% by a s s o c i a t e s of M R and MGE. S J. V. Montalban, undisclosed The same man, 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 lease September on the land 27, 1977, where the MGE owned buildings the oil gas located, were and 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 . was a n u n d i s c l o s e d p r i n c i p a l . MGE 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 " 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 became an 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 around order a pipe flashing. at (Flashing t h e p o i n t where t o make t h e j o i n t is t h e m a t e r i a l placed it i n t e r s e c t s weatherproof.) Flashing a wall in 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 . 1978, MR p a i d E h l e r t S On J a n u a r y 1 8 , 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 , t o $1,818.39, amounting 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 , s e c t i o n 45-1001, E h l e r t f i l e d a $1,818.39 1947, R.C.M. l i e n pursuant t o 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 counterclaim, joined MGE lien. Ehlert, and s o u g h t to by answer foreclose the and lien a g a i n s t M R and MGE. S The MSR's plus trial court, s i t t i n g without a jury, c o m p l a i n t and awarded E h l e r t $ 1 , 8 1 8 . 3 9 i n t e r e s t and a t t o r n e y f e e s , totaling dismissed for the lien, $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 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 . all MR S and MGE a p p e a l . Issue No. t h e r e f o r e making 1: Was the lien the lien invalid? filed prematurely, 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 was due seven days a f t e r inspected, on J a n u a r y 1 8 , which 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 1978. A l l work 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 . orders for the 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 building was substantially complete, and the lien is valid. Turf Irr. W.W. & Sup. Co. (1975), 24 Ariz.App. v. Lawyers Title of See, Phoenix 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 leasehold 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 constructed, without doors, during December and January caused "severe and impossible working conditions." the completed buildings, with doors It follows that installed, were essential part of the gas gathering system. an In any event, a lien is valid under the statute "whether or not such material 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? leases, MR claims t h a t S M R and S MGE, which the gas i n d e p e n d e n t o f GHGS, which owns t h e a r e completely 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 g a t h e r i n g system. 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 we agree, own Ehlert claims, i s a f r o n t f o r MSR and MGE. t h a t GHGS and 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 MGE was the building project. principal in the building project. as an independent system until buildings. on which entity after and GHGS was n o t e s t a b l i s h e d owner Ehlert an undisclosed of the started gas gathering constructing the 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 sit buildings 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. Gas Co. ( 1 9 3 4 ) , 9 6 Mont. 4: I s s u e No. per EI'ICA, section R.C.M. the "oil proceeds thereof 1947, now section MR a s s e r t s t h a t E h l e r t S t h e e x a c t l a n g u a g e of gas Havre O i l & 450, 31 P.2d 738. use or Blose v. 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 45-1001, in his lien? See g e n e r a l l y , 71-3-1002, is r e q u i r e d t o t h e s t a t u t e and c l a i m a l i e n on produced from such leaseholds i n u r i n g t o t h e working i n t e r e s t . and the . ." 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, 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 S e c t i o n 45-1002 e t seq." Ehlert, which cites the Although this Court oil and gas lien statute, not specifically is adequate. has addressed " [1] ien s t a t u t e s 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 should receive a liberal o b j e c t s and p u r p o s e s o f c o n s t r u c t i o n t o t h e end t h a t 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 . 111 Mont. statute 301, requires language Seven-Up Gold Mining Co. 4 7 1 , 479, 111 P.2d 2 6 7 , 272; F a u s e t t v . ( 1 9 7 0 ) , 1 5 4 Mont. of the 463 P.2d parties statute 319, filing relied refrain from creating filing liens. The the an 322. liens additional statute, use This burden liberally Blanchard Nothing to upon. (1941), in the the exact Court shall for parties 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. by lo%, 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 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 $1,818.39 Ehlert was d u e and o w i n g . added 10% t o his fact established that W h i l e t h e r e was e v i d e n c e t h a t 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. 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 6: correctly listed in the lien? 1977, as repairs the and last day of The l i e n shows December work. a d j u s t m e n t s were Ehlert made after claims that that 15, only 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 , is well 45-1004, within the R.C.M. 1947, six-month limit as either date allowed now s e c t i o n 71-3-1004, by MCA. section 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 above, contracted Ehlert buildings. GHGS d i d not in the lien? with MSR become a we As noted to construct separate legal u n t i l sometime a f t e r t h e c o n t r a c t was made. the entity 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 property given i n the l i e n ? proper description of the 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 t h e l i e n is invalid. MGE, 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 . successor in interest and F i n a l l y , GHGS was t h e 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, Morrison-Maierle, 606 P.2d 1085, Inc. 1087, adequate t o properly lien; consequently, v. which i s t h e p u r p o s e of t h e l i e n . Selsco 37 S t . R e p . (1980), 299. Mont. I The d e s c r i p t i o n was identify the property subject to the 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 ) , 5 0 , 36 S t . R e p . - Mont . , 593 P.2d 48, 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 under is d e f i n e d affidavit oath, sworn t o or as "a a f f i r m e d by written statement, t h e p e r s o n making 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 K n i g h t ( 1 9 7 6 ) , 219 Kan. it an o a t h or a f f i r m a t i o n . " S t a t e v. 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 8 6 3 , 549 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. 1 7 9 Mont. 233, 587 P.2d 9 4 7 , 949, 35 S t . R e p . Herr i c k 1846. (1978), 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 s w o r e t o i t s v a l i d i t y b e f o r e he had p e r s o n a l knowledge. a notary public. Issue 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 . No. 10: Was b e c a u s e MGE was n o t named the lien against in the original MGE lien? invalid W e 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 s e c t i o n 45-1004, t h e r e was an 1947. agent-principal l i e n a s required by But, t h e D i s t r i c t Court found r e l a t i o n s h i p between M R S and 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 MGE. filed the lien. the R.C.M. in the suit Ehlert when has 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 Ehlert a valid filed lien his against answer MGE. and counterclaim. 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: title? 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 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 ,

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