The Non-Existence of Liability for Libel of Title for Filing a Lien Lis Pendens

In Tennessee real estate litigation, a plaintiff will frequently obtain a lien 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. In some cases, such liens may also prevent the refinancing of a loan on the property. (For more on the basics of liens lis pendens, see my blog of January 21, 2018.)

Our firm has represented 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 their cases, sometimes months or years later. A defendant/property owner can move the court, before a decision on the merits, to have a lien lis pendens dissolved and removed. Such motions are often filed soon after the lien is recorded.

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 the complaint, are unrelated to any claim to an interest in the real estate. (In my earlier blog on the subject, I gave 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 is ultimately successful on the merits and the lien lis pendens is dissolved, the defendant/property owner may still suffer a monetary loss. How can such a defendant seek financial compensation for that loss? Is it possible to recover through a lawsuit for libel of title? The short answer is almost certainly “no.” A lien lis pendens is protected by an absolute privilege.

While that answer may be disappointing for prevailing defendants/property owners, it should comfort Tennessee plaintiffs who file lawsuits and obtain liens lis pendens. In Tennessee, a litigant need not have serious concerns that filing a lien lis pendens might 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.” This privilege protects against a claim for libel of title even if the statements were knowingly false. Although no Tennessee case has addressed the privilege’s application specifically to a lien lis pendens, other Tennessee cases strongly suggest it would apply. For example:

• Desgranges v. Meyer (Tenn. Ct. App. 2004) (litigation privilege applied to a mechanics and materialman’s lien)

• Myers v. Pickering Firm, Inc. (Tenn. Ct. App. 1997)

• Jeffrey v. Cather (Mo. Ct. App. 2003) (litigation privilege applies to a lien lis pendens)

There is a remote possibility that, in a case where a lien lis pendens had no reasonable relation to the claims made in the plaintiff’s complaint, a defendant property owner might succeed on a libel of title claim. In reality, such a case will almost never arise because, if the lien lis pendens bore no relation at all to the claims, the defendant would likely have had it dissolved at the outset (and before incurring significant monetary loss).

Moreover, for the litigation privilege to apply, it is likely sufficient that the plaintiff draft the 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 truly claiming an interest in the property and, therefore, should not be asserting the lien.

Another obstacle is the requirement that a plaintiff in a libel of title case must prove the defendant made a false statement about title to the property. A lien lis pendens does not create substantive rights in real estate. It is not a false statement about title but rather notice that a party is claiming an interest in the property that is the subject of litigation.

Tennessee real estate cases often involve liens lis pendens where defendants must endure the consequences of those liens until litigation concludes. Absent legislative reform—such as a modernized statute that places consequences on plaintiffs who cloud title with unfounded or unsuccessful claims—property owners have few tools to mitigate the effects of such liens.