Court Confirms Project Owners Cannot Sue Mechanic’s Lien Claimants For Slander Of Title merely because claim is found to lack merit.
Court confirms project owners cannot sue mechanic’s lien claimants for slander of title merely because claim is found to lack merit.
By William C. Last, Jr. and Jonathan M. Bowne of Last & Faoro
Project owners facing mechanic’s lien claims they believe lack merit will often threaten to retaliate with a slander of title action against the claimant. But the law generally does not allow a slander claim against a lien claimant, even if the claim lacks merit. In a recent appeals court case a project owner sought to have the court create a lack of merit exception to this rule. The court refused to do so, instead confirming that even unmeritorious lien claims are privileged acts and not subject to a slander claim.
Slander of title is when one party falsely disparages someone else’s title to property, causing that person monetary damages. In the context of mechanic’s liens, property owners typically allege that the lien claim wrongfully encumbered their property, preventing them from selling or refinancing it, resulting in a loss.
The law of slander provides that certain acts are privileged, meaning they cannot result in a slander claim. The privileges are set forth a Civil Code section 74. Once such privilege is the litigation privilege, which protects publications made in the course of a judicial proceeding and which are otherwise permitted by law. Courts have interpreted this privilege as applying to the recordation of both mechanic’s liens and lis pendens. The privilege applies regardless of the merits of the claim.
But this did not stop the project owner in Alpha & Omega Development, LP v. Whillock Contracting, Inc., 200 Cal.App.4th 656 (2011) from seeking slander damages against a lien claimant who the owner believed had asserted an unmeritorious claim.
In Whillock a contractor had recorded a mechanic’s lien on a condominium project, filed suit to foreclose the lien, and recorded a lis pendens. A lis pendens is notice which is placed on title to real property to advise that the property is subject to litigation. The project owner successfully sought to have the lis pendens removed by court order. While the opinion is not clear regarding the details of this effort, it appears the trial court had determined the claim lack evidentiary merit. Eventually the case was resolved via a settlement.
Thereafter the project owner filed a slander of title action against the contractor, who responded with an Anti-SLAPP motion asserting the slander action should be dismissed on the basis that the contractor’s actions were protected by the litigation privilege. The trial court agreed with the contractor and dismissed the case.
The project owner appealed, and argued that the litigation privilege should not apply to the contractor’s actions because the trial court had found the claim lacked evidentiary merit. In making this argument the project owner suggested that there was an exception to the litigation privilege for cases which lacked merit. It cited a passage from a 2003 appellate case (Palmer v. Zaklama) which appeared to suggest the same. The court rejected this interpretation of Palmer, and deferred to the plan language of Civil Code section 47, which does not suggest any such exception. In doing so the court affirmed the trial court’s ruling, and held that there is no “lack of evidentiary support” exception to the litigation privilege.
This holding confirms that lien claimants may not be subject to a slander action even if their claim is shown to lack merit. Accordingly, while contractors should do their best to evaluate the merits of a lien claim prior to asserting it, they can rest easy knowing that a mistake or misjudgment will not subject them to liability for slandering title.
This article, ©2011, was written by William C. Last, Jr. and Jonathan M. Bowne. Mr. Last is an attorney who has been specializing in Construction Law for over 32 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California “A” and “B” license. He can be contacted at 415-764-1990 or 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.