Henry Hill Oil Services v. Tufto

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
MARCH 3, 2023
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2023 ND 41Henry Hill Oil Services LLC, Plaintiff and Appellee
v.
Abner C. Tufto, Eric Ted Tufto,
Darla Tufto a/k/a Darla O’Donnell,
Kris Bradley Tufto, RWS Holdings, LLC,
and Regional Water Service, LLC, Defendants
and
Lane A. Knudsen, Marcia K. Talley and
David H. Talley, Trustees of the
Marcia K. Talley Living Trust,
and Ann E. Gochnour, Defendants and Appellants
----------
Regional Water Service LLC, Plaintiff
v.
Henry Hill Oil Services LLC, Defendant and Appellee
No. 20220212
Appeal from the District Court of Williams County, Northwest Judicial
District, the Honorable Joshua B. Rustad, Judge.
REVERSED AND REMANDED.
Opinion of the Court by Crothers, Justice.
Mark W. Vyvyan (argued), Minneapolis, MN, and Lawrence Bender (appeared),
Bismarck, ND, for for plaintiff and appellee.
Erich M. Grant, Minot, ND, for defendant and appellant Lane A. Knudsen.
Nicholas C. Grant (argued), and Marissa R. Cerkoney (on brief), Dickinson,
ND, for defendants and appellants Marcia K. Talley and David H. Talley,
Trustees of the Marcia K. Talley Living Trust, and Ann E. Gochnour.
Henry Hill Oil Services v. Tufto, et al.
No. 20220212
Crothers, Justice.
[¶1] Lane Knudsen, Ann Gochnour, and Marcia Talley and David Talley,
Trustees of the Marcia K. Talley Living Trust (Landowners), appeal from a
district court judgment foreclosing Henry Hill Oil Services LLC’s construction
liens against the Landowners’ properties and awarding Henry Hill Oil its costs
and attorney’s fees. We conclude the court erred in determining the
Landowners’ properties were subject to Henry Hill Oil’s construction liens. We
reverse the judgment and remand for a determination of the Landowners’ costs
and attorney’s fees.
I
[¶2] Landowners own real property in Williams County. In 2017 and 2018,
the Landowners executed water pipeline easements with RWS Holdings, LLC.
The agreements granted RWS Holdings 75-foot-wide temporary easements for
constructing a water pipeline and related facilities across and under the
Landowners’ properties. The agreements granted RWS Holdings 30-foot-wide
permanent pipeline easements on the properties. The temporary easements
expired upon completion of the water pipelines.
[¶3] The Talley-Gochnour Defendants also granted RWS Holdings an
easement for constructing a freshwater reservoir on their property. The
easement term was 20 years or “until Grantee permanently removes” the
reservoir from the property. Lane Knudsen and RWS Holdings executed a 10-
year Water Agreement and Memorandum of Understanding. Knudsen granted
RWS Holdings the right to access his property to install “equipment deemed
necessary for the purposes of capturing, transporting and using water.”
[¶4] RWS Holdings hired Regional Water Service, LLC, which then hired
Henry Hill Oil, to construct water reservoirs on the properties. Henry Hill Oil
worked on the Landowners’ properties from June 2018 to October 2018. Henry
Hill Oil recorded construction liens against the Landowners’ properties after it
was not paid for its work. In May 2019, Henry Hill Oil sued Regional Water
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Service for breach of contract. In October 2019, Henry Hill Oil sued the
Landowners to enforce the construction liens.
[¶5] All parties moved for summary judgment. Henry Hill Oil argued it held
valid construction liens against the Landowners’ properties. The Landowners
claimed they did not contract with Henry Hill Oil to perform work on their
properties, and the liens are only effective against RWS Holdings’ easement
interests.
[¶6] After a hearing, the district court granted Henry Hill Oil’s motions for
summary judgment. The court concluded that under the construction lien
statutes, N.D.C.C. ch. 35-27, the Landowners are “owners” who authorized
Henry Hill Oil to work on their properties, and Henry Hill Oil’s liens covered
all of the Landowners’ properties. The court also concluded Henry Hill Oil was
entitled to its costs and attorney’s fees incurred in enforcing the liens.
[¶7] The district court entered a judgment foreclosing the construction liens
and awarding Henry Hill Oil $89,709.79 in costs and attorney’s fees. The court
also awarded Henry Hill Oil $660,228.40 in damages against Regional Water
Service. The judgment against Regional Water Service is not subject to this
appeal.
II
[¶8] This Court’s standard of review for summary judgments is well
established:
“Summary judgment is a procedural device for the prompt
resolution of a controversy on the merits without a trial if there
are no genuine issues of material fact or inferences that can
reasonably be drawn from undisputed facts, or if the only issues to
be resolved are questions of law. A party moving for summary
judgment has the burden of showing there are no genuine issues
of material fact and the moving party is entitled to judgment as a
matter of law. In determining whether summary judgment was
appropriately granted, we must view the evidence in the light most
favorable to the party opposing the motion, and that party will be
given the benefit of all favorable inferences which can reasonably
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be drawn from the record. On appeal, this Court decides whether
the information available to the district court precluded the
existence of a genuine issue of material fact and entitled the
moving party to judgment as a matter of law. Whether the district
court properly granted summary judgment is a question of law
which we review de novo on the entire record.”
Pennington v. Cont’l Res., Inc., 2019 ND 228, ¶ 6, 932 N.W.2d 897 (quoting
Horob v. Zavanna, LLC, 2016 ND 168, ¶ 8, 883 N.W.2d 855).
III
[¶9] The Landowners argue the district court erred in granting Henry Hill
Oil’s motions for summary judgment. They claim the court erred in concluding
they were “owners” under N.D.C.C. § 35-27-01(5) who contracted with Henry
Hill Oil to improve their property. They argue the court erred in concluding
under N.D.C.C. § 35-27-19 that Henry Hill Oil’s liens attached to the
Landowners’ fee simple interests in the properties instead of only RWS
Holdings’ easement interests.
[¶10] Our primary goal in statutory interpretation is to determine the intent
of the legislature, and we first look to the plain language of the statute and
give each word of the statute its ordinary meaning. Laufer v. Doe, 2020 ND
159, ¶ 11, 946 N.W.2d 707; N.D.C.C. § 1-02-02. “When the wording of a statute
is clear and free of all ambiguity, the letter of it is not to be disregarded under
the pretext of pursuing its spirit.” N.D.C.C. § 1-02-05. We presume the
legislature did not intend an absurd result or unjust consequences, and we
construe statutes in a practical manner, giving consideration to the context of
the statutes and the purpose for which they were enacted. Laufer, at ¶ 11.
Statutes relating to the same subject matter shall be construed together and
should be harmonized, if possible, to give meaningful effect to each, without
rendering either one useless. Id. Statutory interpretation is a question of law,
fully reviewable on appeal. Id.
[¶11] Construction liens are authorized by N.D.C.C. ch. 35-27. This case
involves three statutes, N.D.C.C. §§ 35-27-02, 35-27-01(5) and 35-27-19. Under
N.D.C.C. § 35-27-02, the following persons are entitled to a construction lien:
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“Any person that improves real estate, whether under contract
with the owner of such real estate or under contract with any
agent, trustee, contractor, or subcontractor of the owner, has a lien
upon the improvement and upon the land on which the
improvement is situated or to which the improvement may be
removed for the price or value of such contribution.”
An “‘[o]wner’ means the legal or equitable owner and also every person for
whose immediate use and benefit any building, erection, or improvement is
made, having the capacity to contract, including guardians of minors or other
persons, and including any agent, trustee, contractor, or subcontractor of such
owner.” N.D.C.C. § 35-27-01(5). A construction lien covers “[t]he entire land
upon which any building, structure, or other improvement is situated . . . to
the extent of all the right, title, and interest of the owner for whose immediate
use or benefit the labor was done or materials furnished.” N.D.C.C. § 35-27-19.
Reading the statutes together, a person is entitled to a construction lien if they
contract with an owner to improve real property. The lien covers the
contracting owner’s interest in the property.
[¶12] The district court concluded Henry Hill Oil’s construction of water
reservoirs improved the Landowners’ properties. See N.D.C.C. §§ 35-27-01(2)
and (3) (defining “improve” and “improvement”). The Landowners dispute the
court’s conclusion; however, determining whether Henry Hill Oil improved the
Landowners’ properties is not dispositive. Therefore, we assume without
deciding Henry Hill Oil improved the Landowners’ properties.
[¶13] The district court concluded the Landowners were “owners” as defined
in N.D.C.C. § 35-27-01(5) because they were the legal owners of the properties
improved by Henry Hill Oil. The court determined the easements to RWS
Holdings did not transfer ownership of the properties, they only granted RWS
Holdings a right to use a portion of the properties for a specific purpose. The
court said the easements did not change the fact that the Landowners
remained the legal owners of the fee simple interests in the properties, and
concluded that the liens therefore attached to the Landowners’ full property
interests.
4
[¶14] The district court also concluded that through the agreements with RWS
Holdings, the Landowners authorized Henry Hill Oil to work on the properties.
“[The Landowners] do not dispute that RWS Holdings hired
Regional Water Service to commence the construction of certain
water pipelines and reservoirs on [their properties], nor do they
dispute that Regional Water Service in turn made Henry Hill its
subcontractor. See N.D.C.C. § 35-27-01(7) (defining subcontractor
as ‘all persons contributing any skill, labor, or materials to the
improvement except such as have contracts therefor directly with
the owner’). Accordingly, [the Landowners] authorized Henry Hill
to work on [their properties].”
[¶15] Under N.D.C.C. § 35-27-01(5), an “owner” is the “legal or equitable owner
and also every person for whose immediate use and benefit any . . .
improvement is made, having the capacity to contract, . . . and including any
agent, trustee, contractor, or subcontractor of such owner.” The easements
granted RWS Holdings limited possessory rights within defined areas of the
Landowners’ properties. The easements did not grant RWS Holdings authority
to contract on behalf of the Landowners. Although the Landowners hold fee
title to the properties, Henry Hill Oil has cited no easement language or legal
authority supporting its claim RWS Holdings became the Landowners’ agent
or trustee through the easement agreements.
[¶16] Henry Hill Oil made the improvements for the immediate use and
benefit of RWS Holdings but not to the Landowners’ properties generally. As
the easement owner, RWS Holdings had the capacity to contract for the
improvements relating to the easements. RWS Holdings contracted with
Regional Water Service, and Regional Water Service contracted with Henry
Hill Oil. Under N.D.C.C. § 35-27-01(7), Henry Hill Oil was a subcontractor of
RWS Holdings, not the Landowners.
[¶17] Here, the district court erred in concluding the Landowners are “owners”
under N.D.C.C. § 35-27-01(5) by interpreting the definition of “owner” too
broadly. The easements did not grant RWS Holdings the authority to act as the
Landowners’ agent. The Landowners did not become guarantors of RWS
Holdings by executing the easements. To conclude otherwise would expose
5
easement-granting landowners to untold liability for utility, roadway or other
projects knowingly constructed on or across their property.
[¶18] A construction lien covers “[t]he entire land upon which any . . .
improvement is situated . . . to the extent of all the right, title, and interest of
the owner for whose immediate use or benefit the labor was done or materials
furnished.” N.D.C.C. § 35-27-19. Henry Hill Oil improved the properties for the
immediate use and benefit of RWS Holdings, the owner of the easements. Thus,
assuming Henry Hill Oil otherwise was entitled to construction liens for its
work, the liens would only cover RWS Holdings’ easement interests. The
district court erred in concluding Henry Hill Oil’s liens covered all of the
Landowners’ properties.
[¶19] Henry Hill Oil does not have valid construction liens against the
Landowners’ properties. We reverse the portion of the district court’s judgment
foreclosing Henry Hill Oil’s construction liens against the Landowners’
properties, and remand for entry of judgment in favor of the Landowners.
IV
[¶20] The Landowners claim the district court erred by awarding Henry Hill
Oil its attorney’s fees. They contend the court misapplied N.D.C.C. § 35-27-
24.1, dealing with costs and attorney’s fees. We agree.
[¶21] Under N.D.C.C. § 35-27-24.1, “Any owner that successfully contests the
validity or accuracy of a construction lien by any action in district court must
be awarded the full amount of all costs and reasonable attorney’s fees incurred
by the owner.”
[¶22] The district court concluded N.D.C.C. § 35-27-24.1 was ambiguous.
“First, in reviewing the plain language used in N.D.C.C. §
35-27-24.1, the Court finds that this statute is broad by nature,
including phrases such as ‘any owner,’ and ‘any action.’ Second, the
Court finds that in an action to foreclose on a construction lien, as
in this present matter, the contractor must defend the validity or
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accuracy of its construction lien, and N.D.C.C. § 35-27-24.1 is
meant to apply in ‘any actions’ to do the same.”
The court also acknowledged the remedial nature of N.D.C.C. ch. 35-27 and its
purpose to protect those who improve real estate. See Nesdahl Surveying &
Eng’g, P.C. v. Ackerland Corp., 507 N.W.2d 686, 689 (N.D. 1993) (stating the
construction lien laws “should be liberally construed to effectuate its purpose,”
which is “to protect those persons who improve real estate by the contribution
of labor, skill, or materials”).
[¶23] The district court misconstrued N.D.C.C. § 35-27-24.1 in awarding
Henry Hill Oil its costs and attorney’s fees. The statute is not ambiguous about
which party can recover costs and attorney’s fees. The plain language provides
that only an owner (or in this case, one claimed to be an owner) may be awarded
attorney’s fees for successfully contesting a construction lien. The statute does
not allow a contractor to recover its costs and attorney’s fees for successfully
enforcing a construction lien. Henry Hill Oil is not an “owner” under N.D.C.C.
§ 35-27-01(5). Henry Hill Oil sued the Landowners to enforce its liens, and did
not contest the validity or accuracy of its own liens.
[¶24] The Landowners successfully contested the validity of Henry Hill Oil’s
construction liens. The district court erred in awarding Henry Hill Oil its costs
and attorney’s fees. We reverse that part of the judgment awarding Henry Hill
Oil its costs and attorney’s fees, and remand for a determination of the
Landowners’ costs and attorney’s fees for successfully contesting the validity of
Henry Hill Oil’s construction liens. See Northern Excavating Co. v. Sisters of
Mary of the Presentation Long Term Care, 2012 ND 78, ¶ 11, 815 N.W.2d 280(holding that under N.D.C.C. § 35-27-24.1, “a party who successfully contests
the accuracy or validity of a construction lien is limited to recovering only those
costs and fees reasonably expended contesting the lien”).
V
[¶25] The parties’ remaining arguments have been considered and are either
without merit or not necessary to our decision. The judgment is reversed and
the case is remanded.
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[¶26] Jon J. Jensen, C.J.
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
Douglas A. Bahr
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