In Tennessee real estate litigation, frequently, a plaintiff will obtain a liens lis pendens at the time the complaint initiating the action is filed. Once recorded with the register of deeds in the county where the subject property is located, a lien lis pendens can effectively prevent the transfer of the property, its lease, or its use as collateral to secure a loan. Such liens may, in some cases, prevent the refinancing of a loan on the subject property. (For more on the basics of liens lis pendens, see my blog of January 21, 2018.)
Our firm has, over the years, had many clients against whose real estate liens lis pendens were obtained at the outset of litigation and against which those liens remained through the conclusion of our clients’ cases (months or years later). A defendant/property owner can move the court, before a decision on the merits of the case, to have a lien lis pendens dissolved and removed. Motions to dissolve liens lis pendens, when they are filed before decisions on the merits, are most often filed soon after the liens were obtained.
To succeed on a motion to dissolve a lien lis pendens, the defendant/property owner must prove that the plaintiff’s claims, as set forth in its complaint, are unrelated to any claim to an interest in the real estate. (In my previous blog on the subject, I gave some examples of cases where the claims did not relate to any interest in the real estate at issue and where courts found the lien lis pendens improper).
Even where a defendant, like some we have represented, is ultimately successful on the merits in real estate litigation and the lien lis pendens placed on its property is dissolved and becomes ineffectual, it can suffer a monetary loss. How can such a defendant/property owner seek financial compensation for such a loss? Is it possible to recover via a lawsuit for libel of title? The short answer is almost certainly “no.” A lien lis pendens is protected by an absolute privilege.
While the above answer may be met with disappointment by a defendant/property owner who prevails and has a lien lis pendens dissolved, it should give comfort to Tennessee plaintiffs who file lawsuits and obtain liens lis pendens. In Tennessee, a litigant need not have any serious concerns that the filing of a lien lis pendens might ultimately result in liability for libel of title.
Tennessee recognizes an absolute privilege for statements made in the course of judicial proceedings as long as they are “reasonably relevant to the judicial proceeding.” The privilege provides protection against a claim for libel of title even if the statements were knowingly false. Although no Tennessee case has addressed the issue of the application of that privilege to a lien lis pendens, other Tennessee cases, one involving a mechanics and materialman’s lien, virtually ensure that a Tennessee court confronted with such a case would hold that the filing of a lien lis pendens is protected by the litigation privilege. See, Desgranges v. Meyer, (Tenn. Ct. App. 2004)(litigation privilege applied to mechanics and materialman’s lien); Myers v. Pickering Firm, Inc. (Tenn. Ct. App. 1997). See also, Jeffrey v. Cather (Mo. Ct. App. 2003)(litigation privilege applies to lien lis pendens).
There is the possibility, which is remote in my opinion, that, in a case where a lien lis pendens had no reasonable relation to the claims made in the complaint filed by the plaintiff, a defendant property owner might succeed on a libel of title claim. Such a case will never present itself, in my opinion, because, if the lien lis pendens bore no relation at all to the claims asserted by the plaintiff in the complaint, the defendant property owner would have had it dissolved at the outset of litigation (and, presumably, before it incurred any monetary loss of significance). Moreover, for the litigation privilege to apply, it is probably only necessary that the plaintiff craft its complaint to establish some connection between its claims and its right to a lien lis pendens. This is easy to do even where the plaintiff is not claiming an interest in the real estate at issue, and, thus, should not be asserting a lien lis pendens. As well, to prove libel of title, a plaintiff must prove the defendant made a false statement about title to the property. A lien lis pendens, which does not even create substantive rights in the subject real estate, is not a false statement about title to the property. It is notice that the party asserting the lien is claiming an interest in the property which is the subject of the litigation.
Tennessee real estate cases often involve liens lis pendens where defendants must endure the consequences of such liens until the litigation concludes. Absent legislative intervention, such as a more modern lien lis pendens statute which places consequences on plaintiffs who cloud titles to defendants’ properties based on unfounded or unsuccessful claims, property owners have few tools to mitigate the effects of such liens.