The Dangerous Art of Employing Lis Pendens Weaponry

A lis pendens is a mighty broadsword in obtaining satisfaction, because it prevents the adversary, a land owner, from conveying his property to a third party or financing it with conventional lenders until it is removed from the title. A statute in Title 33 of the Arizona Revised Statutes makes the offense of “groundless” lis pendens filings punishable by fines and awards of attorneys’ fees. Tying up property of another so that it cannot be put to productive economic use is a serious undertaking, so it behooves the filer of the lis pendens to know what she is doing. Likewise, it behooves the owner to understand his position. There is considerable confusion as to when a lis pendens is appropriately filed against real property in Arizona. The superficial, conventional wisdom is that if an aggrieved party has a claim of title or interest in the title to the property of another, a lis pendens recording is fair game.

But what’s a claim of interest in the title? If a claimant is saying that the property rightfully is hers, then that’s a claim of title, doubtlessly. So, if a person holds a deed to a particular parcel, and there is a dispute over the legitimacy of the deed, file away. If a person records a Notice and Claim of Lien that complies with the mechanics’ lien statutes in A.R.S. Title 33, ditto, filing concurrently or after the foreclosure lawsuit is filed in the Arizona Superior Court. After that, the waters get slushier. If you file a suit to collect a general money judgment, and if you believe that you’ll prevail and hope to execute your judgment against your adversary’s real property—so you file a lis pendens against that property—that’s not murky water. The filer’s name shall be “mud.”

The essence of the lawsuit has to involve staking a plaintiff’s claim affecting title to the property. And, in 2008, we understand in the legal community that a claim of ownership rights to the property has to be immediate, not contingent on the falling into place of a series of pieces. The appellate court decision endeavors to explain the meaning of the ambiguous phrase “rights incident to title to real property,” which is the “hook” upon which parties plaintiff justify the filing of notices of lis pendens in the less obvious claims concerning ownership of property.

In the case of Santa Fe Ridge Homeowners’ Assoc. v. Bartschi, the Arizona Court of Appeals (Division One) held that a homeowner’s association may not properly record a Lis Pendens under A.R.S. § 12-1191(A) in connection with an action to enforce the subdivision’s CC&Rs where the action filed by the association would not expand, restrict, or burden the property owner’s rights as bestowed by virtue of the title to the property. [The decision is subject to a Petition for Review before the Arizona Supreme Court at CV-08-0292, scheduled for consideration by the justices on 1-6-09]

Defendant Bartschi owns a home in the community of Santa Fe Ridge. Plaintiff Santa Fe sued Bartschi, seeking a permanent injunction compelling Bartschi to maintain her lot. It also asked that it be entitled to certain “self-help” remedies, for which the association could recover expenses from Bartschi if she failed to comply with the injunction it sought. Four days after suing, Santa Fe recorded a notice of lis pendens against Bartschi’s property. Bartschi counterclaimed, alleging wrongful recordation of the lis pendens. She moved for partial summary judgment on that counterclaim, which the trial court granted. Bartschi then moved for statutory damages, attorneys’ fees, and costs pursuant to A.R.S. § 33-420(A), which the trial court awarded, leading to Santa Fe’s appeal.

The Arizona Appeals Court affirmed and reversed in parts the ruling of the trial court. It found that the HOA improperly filed the lis pendens, as a matter of law, because the lawsuit it brought against Bartschi did not affect title to real property, as required by A.R.S. § 12-1191(A). In doing so, the Court discussed and distinguished Tucson Estates, Inc. v. Superior Court, 151 Ariz. 600, 729 P.2d 954 (App. 1986), a decision holding that a lis pendens may be recorded in an action affecting rights incident to title to real property. The Court explained that in Tucson Estates the claim affected rights tied to current ownership of real property and would bind future property owners; therefore, the lis pendens fulfilled the purposes of A.R.S. § 12-1191(A) by giving notice both to anyone directly affected by the outcome or to innocent third parties who might seek to acquire interest in the real property. Under the Court’s explanation of the decision in of Tucson Estates, “a lawsuit affects a right incident to title if any judgment would expand, restrict, or burden a property owner’s rights as bestowed by virtue of that title.” (paragraph 16, page 11 of slip opinion)

The Court found that Santa Fe’s lawsuit did not fall within its narrow reading of Tucson Estates, because any judgment obtained against Bartschi would not have affected rights incident to her title; it was already burdened by the CC&Rs—so the judgment would not have increased the land’s burden. Moreover, the Court noted that the purpose of the lis pendens statutes was not realized, because any injunction would have been personal to Bartschi, and therefore would have had no effect on future interest-holders with respect to the residence.

The Court also rejected Santa Fe’s contention that the action affected title to real property because its suit might result, ultimately, in the imposition of a lien. The Court cited Coventry Homes, Inc. v. Scottscom P’ship, 155 Ariz. 215, 745 P.2d 962 (App. 1987), for the rule that merely requesting a lien’s imposition does not affect title to real property--there must be a present basis for such a lien. Because no basis to conclude that a lien’s imposition was inevitable existed at the time of the lawsuit’s filing–and since Bartschi had not yet failed to comply with any order of the court already entered (or with any statute granting a present lien, I suppose)–the lis pendens was premature. The association was anticipating relief (in the event Bartschi did not comply with the injunction sought) that was “not yet ripe for adjudication.” (paragraph 22, page 14 of slip opinion)

The news on the last issue is this, unless our Supreme Court clarifies the waters otherwise: Merely because you believe your cause is just and that, as plaintiff, you’ll ultimately be entitled to the relief you’ve requested from the court, your confidence is not legally sufficient to entitle you to file a burdensome lien against your adversary’s property, unless your lien immediately affects rights bestowed by virtue of title to realty. En garde.

-MNW