Daily Development for Thursday, September 16,
Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
CONDOMINIUMS; LIENS; SLANDER OF TITLE: Filing of a notice of
lis pendens stating that a money judgment will result in a lien against the
condominium association and against each condominium unit is proper and does not
constitute slander of title where the creditor has sued the association in good
faith for money damages.
Interlaken Service Corp. v. Interlaken
Condominium Assn., Inc. et al, 599 N.W.2d 262 (Wis. App. 1998).
Plaintiff service corporation sued the
condominium association for breach of contract and filed the disputed lis
pendens. The association counterclaimed for slander of title, claiming that
filing the lis pendens was improper. The association argued that the creditor
knew the unit owners could not be liable for any part of the judgment, if
granted, and their titles could not be affected, because the association
admitted having sufficient funds to pay the judgment. The association also
argued that Wisconsin law conferred no substantive right to file a lis pendens
against individual condominium units in an action against the association. The
trial court dismissed the association's counterclaim and granted the judgment
and lien sought by the creditor.
In a case of first impression, the Court of
Appeals held that the lis pendens was proper and did not constitute slander of
title. The court noted that Wisconsin statutes expressly state that a money
judgment against a condominium association becomes a lien against the
association's property and against each condominium unit in proportion to the
unit owner's liability for common expenses. Thus, the title to individual units
could be affected by any judgment rendered against the association. Under these
circumstances, reasoned the court, Wisconsin statutes require the filing of a
lis pendens to notify third parties of the pending action. The fact that the
association admitted having sufficient funds to pay the requested judgment was
irrelevant because there was no escrow agreement or anything else that required
the association to use its funds for satisfaction of the judgment. Moreover,
Wisconsin law does not require a plaintiff to inquire into the financial status
of a prospective lienee prior to filing a lis pendens.
Comment: Typically, the law doesn't permit a
party bringing a general damages action to cloud the defendant's title before
the suit is won. But any suit to
establish an interest in real estate can be the subject of a lis pendens because
it is not fair for the defendant to avoid the consequences of the suit by
transferring to a third party BFP.
Isn't that really the bottom line here as
well? If it is appropriate for the holder of a judgment against an association
to bind subsequent holders of the individual condominium interests, , then it
should be appropriate to permit plaintiffs seeking such judgments to establish a
lis pendens on the unit interests, to avoid purchasers to make use of the
recording acts to dodge the judgment if and when it comes. The editor believes
that it is fair to bind these subsequent parties. Otherwise, a potential source
of recovery permitted to such plaintiffs under the law would be diluted.
If purchasers have knowledge of the potential judgment, they can take it
into account in the bargaining over the price of the unit. If, as here, the
association can certify that it has adequate amounts to cover the judgment, then
the lis pendens should not have a great impact on salability.
Some jurisdictions (and perhaps some title
companies) make it possible to "bond off" potential liens, such as
mechanic's liens.. In a really serious case, that could be done with these types
of claims as well.
in the Daily Development section generally are extracted from the Quarterly
Report on Developments in Real Estate Law, published by the ABA Section on Real
Property, Probate & Trust Law. Subscriptions to the Quarterly Report are
available to Section members only. The cost is nominal. For the last six years,
these Reports have been collated, updated, indexed and bound into an Annual
Survey of Developments in Real Estate Law, volumes 16, published by the ABA
Press. The Annual Survey volumes are available for sale to the public. For the
Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or
reported here and in the ABA publications are for general information purposes
only and should not be relied upon in the course of representation or in the
forming of decisions in legal matters. The same is true of all commentary
provided by contributors to the DIRT list. Accuracy of data and opinions
expressed are the sole responsibility of the DIRT editor and are in no sense the
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