K & H WELL SERVICE, INC. v. TCINA, INC.

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K & H WELL SERVICE, INC. v. TCINA, INC.
2002 OK 62
51 P.3d 1219
Case Number: 93451
Decided: 07/02/2002
Mandate Issued: 08/01/2002

THE SUPREME COURT OF THE STATE OF OKLAHOMA

K & H WELL SERVICE, INC., Plaintiff/Appellant
v.
TCINA, INC. and TCINA HOLDING CO., LTD., Defendants/Appellees

[51 P.3d 1219]

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION IV

APPEAL FROM THE DISTRICT COURT OF POTTAWATOMIE COUNTY

HONORABLE GLENN DALE CARTER, JUDGE

¶0 K & H Well Service, Inc. [K&H] sued to secure both a money judgment and to foreclose its

THE COURT OF CIVIL APPEALS'' OPINION IS VACATED; THE TRIAL COURT''S JUDGMENT IS REVERSED IN PART AND AFFIRMED IN PART; AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH TODAY''S PRONOUNCEMENT.

Thomas A. Thompson, Shawnee, Oklahoma, for appellant
Larry Jay McMains of Johnston & McMains, Seminole, Oklahoma, for appellees.

LAVENDER, J.

¶1 Today''s cause requires review of the process employed by K&H Well Service, Inc. [lien claimant or K&H] to secure a money judgment against named leasehold owners, to establish the validity of its

I
FACTS AND PROCEDURAL HISTORY

¶2 K&H provided materials, supplies and well services in the reworking and drilling of several oil and gas wells in Seminole and Pottawatomie counties during a period beginning in July 1998 and ending in November 1998. K & H alleges that it was hired to perform this work by Tcina, Inc., the wells'' operator. Upon not being paid for the rendered services K&H filed (in early December 1998) "oil and gas well lien statements" covering the respective wells in the county clerk''s office of either Pottawatomie or Seminole County, depending upon where the specific well which was worked on was located. Each lien statement contained a legal description of the lands against which it was intended to be impressed.

¶3 On December 10, 1998 K&H brought suit in Seminole County District Court seeking a money judgment and to foreclose its liens. Tcina, Inc., as operator, and Tcina Holding Co., Ltd. [Tcina or defendants], among others, were named as defendants [51 P.3d 1221]. After the suit''s initiation but before trial commenced, the liens on all wells but the Salma Wells Nos. 3 and 4

¶4 The appealed-from judgment addresses the legal efficacy and effect to be given to K&H''s lien statement filed in Book 7453, Page 62 in the Seminole County Clerk''s office. The challenged lien purports to encumber the following described land:

The Fleet Osborn Gilcrease Unit

W/2 NW/4 and N/2 SW/4 and S/2 Lot 2, Lot 4, Lot 5, Lot 6, all in Sec. 25-T5N-R7E, and E/2 NE/4 and NW/4 NE/4 and East 20 acres of Lot 1, Lot 4, Lot 5, all in Section 25 -T5N-R7E, including all riparian rights

all in Seminole County, State of Oklahoma.

The Salma Well No. 3 per a filed Oklahoma Corporation Commission report was recompleted in the SE/4 NW/4 NW/4 of section 25-T5N-R7E to the Booch formation; and the Salma Well No. 4 per a filed Oklahoma Corporation Commission report was recompleted in the W/2 NE/4 SW/4 NW/4 of section 25-T5N-R7E to the Wapanucka formation. The defendants did not contest that K&H performed the work which is the subject of the above lien or the amount charged.

¶5 At trial Tcina, Inc. alleged that although it was the contract operator of the Salma wells, it did not possess an interest in the leases covering the lands subject to the lien. Berry Doyal (the principal owner of both Tcina, Inc. and Tcina Holding Co., Ltd.) represented that when negotiating with K&H for the well work to be performed he disclosed (1) that Tcina, Inc. was an agent for the owners of the leasehold estate upon which the well work was to be done and (2) the leasehold owners were going to pay for the requested rework. Tcina, Inc. asserts that its status as a non-leasehold owner and an agent for disclosed principals precludes its liability for the work which K&H performed on the Salma wells.

¶6 Tcina Holding Co., Ltd., claims that it owns no interest in the leasehold estate against which K&H''s liens were impressed. Nonetheless, there is recorded in the Seminole County Clerk''s office an assignment, dated December 1, 1997, of an undivided 5% interest in leases (covering the same mineral estates as the leasehold estate against which K&H''s lien was impressed) from Grant Oil and Gas Corporation to Tcina Holding Co., Ltd. At trial Tcina Holding Co., Ltd., asserted that the acquired interest was only a carried working interest.

¶7 After trial judgment was entered in favor of the Tcina entities on K&H''s (a) claim for a money judgment and (b) attempt to foreclose its lien. The trial court also awarded an attorney fee to Tcina, Inc. and Tcina Holding Co., Ltd. K&H appealed and the Court of Civil Appeals [COCA] reversed the trial court''s judgment and remanded the cause. The COCA found that Tcina, Inc. was merely a contract operator of the wells [51 P.3d 1222] subject to the lien in issue, had disclosed the principals for which it was the agent to K&H, and owned no leasehold interests in the lands subject to K&H''s lien. It concluded that Tcina, Inc. was correctly found to have no liability. Nonetheless, the COCA held that Tcina Holding Co., Ltd. did possess a leasehold interest in the wells subject to the lien and remanded the case with instructions to allow the foreclosure to proceed. It also determined that K&H was the prevailing party in the action and vacated the trial court''s attorney-fee award.

¶8 The Tcina entities sought certiorari which was granted.

II
THE STANDARD OF REVIEW

¶9 The judgment presented for review is a compilation of both findings of facts and conclusions of law.

III
SINCE K&H''S PERFORMANCE OF THE CONTRACT AND THE AMOUNT OWED IS UNDISPUTED, THE TRIAL COURT SHOULD HAVE AWARDED A MONEY JUDGMENT AGAINST THE NAMED LEASEHOLD OWNER.

¶10 The following facts were not controverted at trial: (a) that K&H provided labor and services for the Salma Wells nos. 3 and 4 pursuant to an oral contract with Tcina, Inc. as agent for the leasehold owners and (b) the correctness of the amount charged for the labor and services provided. Rather, the defendants contested who was liable for the same. Tcina, Inc. and Tcina Holding Co., Ltd.''s defenses to liability were primarily alike i.e., that neither owned a leasehold interest in the lands subject to the lien in issue.

¶12 The same result does not follow as to Tcina Holding Co., Ltd. The record discloses an absolute assignment of a 5% interest in the oil and gas leases covering the mineral estate on which the Salma wells nos. 3 and 4 were drilled, recorded in the Seminole County Clerk''s office, from Grant Oil and Gas Corporation to Tcina Holding Co., Ltd. The recorded assignment bore no terms relating to payment of expenses attributable to the interest assigned. Tcina Holding Co., Ltd.''s attempt to restrict the recorded assignment''s effect by its introduction at trial of an unrecorded disclaimer and assignment to the "record owners" of the leases is not persuasive for several reasons.

¶13 First, when Tcina Holding Co., Ltd. executed the (unrecorded) disclaimer and assignment quitclaiming its interest in the Salma wells nos. 3 and 4 to the "record owners", it was itself one of the record owners of the leasehold estate in question. Hence, the legal effect of the assignment language employed by Tcina, Inc. would be a reconveyance to itself of some quantum of interest in the leasehold estate covering the Salma wells nos. 3 and 4. Even if its attempted disclaimer and assignment were effective, it would have remained a leasehold owner.

¶14 Second, Tcina Holding Co., Ltd was assigned of record a five percent (5%) interest in various leases covering the lands subject to K&H''s lien. A recorded conveyance imparts constructive notice on and after the date it is recorded to the assignee''s [here Tcina Holding Co., Ltd.] creditors [here K&H] that it owns an interest in the oil and gas leases the subject of the assignment.

¶16 Because the record does not identify the record owners [other than Tcina Holding Co., Ltd.] of the leases covering the drilling and spacing unit for the Salma wells,

¶17 Of initial import in deciding K&H''s entitlement to foreclosure of its oil and gas well lien is an assessment of the legal quality and scope of the § 144 lien (filed against the Salma wells nos. 3 and 4) recorded in the Seminole County Clerk''s office. One of the standards for assessing the efficacy of K&H''s lien is whether it was perfected? The perfection requirement has as its central purpose notification i.e., advisement of record to potential buyers and third parties, as well as those against whose interests the lien is sought to be impressed, of the nature and amount of the vendor''s claim.

¶18 A 42 O.S.2001 § 14418 oil and gas lien statement must be filed in accordance with all, but the temporal, provisions of 42 O.S.2001 § 142.19 The pertinent § 142 requirements are that (1) the lien statement be filed in the county clerk''s office for the county in which the land sought to impressed with the lien is located, (2) that the lien statement set forth the amount claimed and, as practicable, the items for which the charges were incurred, and (3) it identify the owner(s), contractor, and claimant''s names and the legal description of the property subject to the lien. When filed in conformity with the statutory requirements, the lien relates back to the date work was first performed on the job site.20 The provisions of 42 O.S.2001 § 172 allow for the lien statement''s amendment as to the above elements except for the amount claimed upon showing that the same would be "in furtherance of justice."

¶19 In applying the above statutory standards the Court has held that a lien is perfected when (1) the labor and supplies are furnished pursuant to either an express or implied contract;21 (2) the content of the oil and gas lien statement substantially conforms to applicable statutory requirements22 and is sued upon within the time prescribed by statute;23 and (3) the lien is filed within [51 P.3d 1225] the time allowed by law in the county clerk''s office for the county where the land sought to impressed with the lien is located.24

¶21 Oklahoma''s extant jurisprudence has on several occasions since statehood addressed deficient legal descriptions in materialmen and mechanics'' liens and how to resolve the same. It is not required that the legal description used be precise in every detail. Substantial compliance with the lien statute will be found when the description used would enable a person familiar with the property to identify the premises intended to be impressed with lien or would put the party named on inquiry notice i.e., give the named party enough notice that he should make inquiry about what land the lien is intended to cover.

¶23 We hold that under the adduced evidence and as a matter of law K&H''s lien is in substantial compliance with statutory requirements and hence perfected. As such it is entitled to foreclosure against the leasehold interest owned by Tcina Holding Co., Ltd [51 P.3d 1226].

V
BECAUSE K&H SECURED A MAJORITY OF THE RELIEF WHICH IT
SOUGHT IN THE CASE BEFORE THE TRIAL COURT, IT IS THE PREVAILING PARTY IN THE ACTION AND ENTITLED TO AN ATTORNEY-FEE AWARD UNDER THE PROVISIONS OF

¶25 Extant jurisprudence clearly sets forth the correct standard for assessing who is a prevailing party for purposes of an attorney-fee award under the provisions of

[N]o attorney''s fee may be allowed the attorney for the defendant unless the final judgment be against the lien claim.

Here, K&H prevailed against Tcina Holding Co., Ltd. on its lien claim. Hence, the attorney-fee award for Tcina Holding Co., Ltd. is reversed. Nonetheless, Tcina, Inc. defeated K&H''s lien on the Salma wells and the trial court''s attorney-fee award (as to the litigated lien) in favor of Tcina, Inc. is affirmed.

VI
SUMMARY

¶26 Since statehood Oklahoma has sought through legislative enactments to protect those who provide labor and materials to others which result in the enhancement of the latter''s property. It is the application of these statutory procedures to the oil and gas lien statement which K&H filed that is called into issue by today''s cause. When an purveyor of labor and oilfield equipment has supplied the same to another and has not been paid, Oklahoma''s statutes provide an avenue of protection for the former if it substantially complies with the applicable statutory scheme Title 42, Chs. 3 and 5, Oklahoma Statutes.

¶27 Our review of the record in the instant case demonstrates that K&H''s effort to perfect and enforce its liens did substantially comply with the applicable statutory provisions and as a matter of law K&H perfected a § 144 lien against Tcina Holding Co., Ltd.''s leasehold interests, which is enforceable by foreclosure. Since Tcina, Inc. is but an agent of the leasehold owners, it has no liability under the contract which it negotiated with K&H on behalf of the owners of the Salma Wells nos. 3 and 4. The trial court, while correct in giving judgment to Tcina, Inc., erred in not allowing foreclosure of K&H''s § 144 lien to proceed against Tcina Holding Co., Ltd.

¶28 Lastly, we hold that the trial court erred when it determined who prevailed below and, hence, was entitled to an attorney-fee award. K&H succeeded on its lien claim against Tcina Holding Co., Ltd and should have been awarded an attorney fee under the terms of

¶29 Upon certiorari previously granted,
THE COURT OF CIVIL APPEALS'' OPINION IS VACATED; THE TRIAL COURT''S JUDGMENT IS REVERSED IN PART AND AFFIRMED IN PART; AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH TODAY''S PRONOUNCEMENT.

¶30 HARGRAVE, C.J., WATT, V.C.J., HODGES, LAVENDER, SUMMERS, BOUDREAU and WINCHESTER, JJ., concur.[51 P.3d 1227

]¶31 KAUGER, J., concurs in result.

¶32 OPALA, J., concurs in part; dissents in part. [51 P.3d 1228]

FOOTNOTES

1The pertinent terms of 42 O.S.1991 § 144 are:

Any . . . corporation . . . who shall, under contract, expressed or implied, with the owner of any leasehold for oil and gas purposes, . . . or agent of such owner, perform labor or services, . . . or furnish material, machinery, and oil well supplies used in the digging, drilling, torpedoing, completing, operating, or repairing of any oil and gas well, . . . shall have a lien upon the whole of such leasehold . . . or lease for oil and gas purposes, the buildings and appurtenances, the proceeds from the sale of oil or gas produced therefrom inuring to the working interest, . . . and upon the material and supplies so furnished, . . . and upon all the other oil or gas well fixtures and appliances used in the operating for oil and gas purposes upon the leasehold for which said material and supplies were furnished or labor or services performed. . . . . [C]ompliance with the provisions of this shall constitute constructive notice of the lien claimant''s lien to all purchasers and encumbrancers of said property or any part thereof, subsequent to the date of the furnishing of the first item of material or the date of the performance of the first labor or services. [Emphasis added.]

2 At various places in the record and the parties'' appellate paperwork the Salma wells are referred to as either the "Salma" or "Selma" wells. For purposes of this opinion these wells will be referred to as the "Salma" wells because that is the name assigned to them in the paperwork filed with the Oklahoma Corporation Commission.

3See Mayfield v. H.B. Oil & Gas, 1987 OK 106, 745 P.2d 732, 733 fn. 1 [citing 8 Williams and Meyers, Oil and Gas, Law Manual of Terms, 102 (1984)], where "carried interest" is defined as follows:

A carried interest is a fractional interest in an oil and gas property, usually a lease, the holder of which has no personal obligation for operating costs, which are to be paid by the owner or owners of the remaining fraction, who reimburse themselves out of production, if any. The person advancing the cost is the carrying party and the other is the carried party.

4Barnes v. Okla. Farm Bureau Mut. Ins. Co., 2000 OK 55, 11 P.3d 162, 166.

Every conveyance of real property acknowledged or approved, certified and recorded as prescribed by law from the time it is filed with the register of deeds for record is constructive notice of the contents thereof to subsequent purchasers, mortgagees, encumbrancers or creditors. [Emphasis added.]