909 N.W.2d 671
N.D.2018Background
- Mitchell’s (general contractor) contracted with Brockett (subcontractor) to install materials on oil wells; Brockett purchased materials from Rocky Mountain (materials supplier) on May 22, 2014.
- Mitchell’s paid Brockett in full on June 12, 2014, before Rocky Mountain delivered materials on June 20, 2014 and before the owners received notice of any lien.
- Rocky Mountain recorded two oil-and-gas well liens on October 24, 2014 for unpaid materials and served notice; owners received notice around November 11, 2014.
- Mitchell’s recorded lien-release bonds on November 20, 2014 and the owners paid Mitchell’s in full by January 15, 2015.
- Rocky Mountain timely sued to foreclose its liens; the district court held the liens invalid under N.D.C.C. § 35-24-04 and awarded attorney fees to Mitchell’s. Rocky Mountain appealed.
Issues
| Issue | Rocky Mountain's Argument | Mitchell’s Argument | Held |
|---|---|---|---|
| Whether a subcontractor’s oil-and-gas lien survives where the owner pays the general contractor after receiving notice of the subcontractor’s lien | Rocky Mountain: § 35-24-04 and § 35-24-07 allow subcontractor liens to attach to the same extent as the original contractor, and an owner who pays after receiving notice bears the risk of double payment | Mitchell’s: When owner has no liability to the general contractor (because owner paid), the general contractor cannot have a lien and thus subcontractor likewise cannot | Court: Reversed district court — subcontractor’s lien survives; § 35-24-07 places risk on owner who pays after notice, so Rocky Mountain may foreclose its liens |
| Whether Mitchell’s was entitled to attorney fees under N.D.C.C. § 35-24-19 after prevailing below | Rocky Mountain: Fees are improper because the court wrongly invalidated liens | Mitchell’s: Prevailing party entitled to fees | Court: Reversed award of attorney fees because district court erred in invalidating the liens |
Key Cases Cited
- Josey Oil Co. v. Ledden, 20 P.2d 582 (Okla. 1933) (subcontractor lien held invalid where original contractor abandoned work and owner had no liability)
- Conservation Oil Co. v. Graper, 46 P.2d 441 (Okla. 1935) (similar holding where contractor breach eliminated owner liability)
- Brenner Oil Co. v. Dickason-Goodman Lumber Co., 236 P. 44 (Okla. 1925) (subcontractor lien invalid where owner not liable to original contractor)
- Cameron Ref. Co. v. Jerman, 238 P. 437 (Okla. 1925) (same principle applied)
- Kirkland v. Oberquell, 405 N.W.2d 21 (N.D. 1987) (general construction lien statute interpreted to bar lien where owner paid full value; distinguished by court as a general statute not controlling oil-and-gas lien scheme)