Wisconsin Court of Appeals Holds that Filing of Mechanics Lien Claim Without Adequate Investigation as to Timeliness Can Subject Attorneys to Liability for Slander of Title

Tym v. Ludwig,
1995 Wisc. App. LEXIS 974 (Wisc. Ct. App. Aug. 9, 1995)

Slander of Title – Lawyer who filed a mechanics’ lien against a homeowner’s property on behalf of contractor that constructed the home was not entitled to summary judgment on homeowner’s slander of title claim because the record had not been sufficiently developed regarding the issue of whether the lawyer had a reasonable ground or believing the truth of the facts pleaded in the mechanics’ lien claim.

The Tyms (“Homeowner”) hired Lemel Homes, Inc. (“Contractor”) to construct their new home. After moving into the home, the Homeowner notified the Contractor that certain work remained to be completed and withheld a final payment. The Homeowner and Contractor eventually amended the contract by outlining the items of work to be completed by the Contractor and by setting forth the amount of the final payment. Thereafter, the Contractor did not complete all the work and the Homeowner was forced to do so.

In May of 1990, the Homeowner put the home up for sale. In July of 1990, the Contractor sent the Homeowner a Notice of Intent to file a claim and the Homeowner then withdrew the home from the real estate market. In August of 1990, the Homeowner wrote to the Contractor’s attorney stating that the Contractor had not performed work on the home for at least 11 months and, therefore, the Contractor was not entitled to a lien. In September of 1990, the Contractor’s attorney filed a claim for lien against the Homeowner’s residence. Eventually, the Homeowner obtained a release of the lien claim as part of a settlement.

Thereafter, the Homeowner filed the present slander of title action against the attorney who filed the lien and her law firm ivilege. The trial court granted the motion on the ground that the Homeowner had not produced any evidence of loss, but did not address the second ground. The appellate court reversed concluding that a plaintiff need not allege and prove the loss of a specific sale to a specific potential purchaser in order to maintain a slander of title action. Rather, a plaintiff can produce evidence of a general decrease in the marketability of the home.

The appellate court went on to discuss the Lawyers’ claim that they were entitled to a conditional privilege of qualified immunity in this slander of title action. The court noted that a defendant in a slander of title action is protected against liability for the truth of statements made in a claim by a conditional privilege. The protection, however, is subject to two conditions: “(1) the pleader must have a reasonable ground for believing the truth of the pleading and (2) the statements made in the pleading must be reasonably calculated to accomplish the privileged purpose.” In the present case, the parties disputed whether there was a reasonable ground for the Lawyers to believe the truth of the claim for lien.

In Wisconsin, a valid construction lien must be filed within six months of the last day labor and materials are furnished by the claimant. Warranty or repair work on an original installation does not extend the time for filing a construction lien. The Lawyers argued that before filing the claim for lien they contacted the contractor to verify the information contained in the claim. The Lawyers claimed that the Contractor told them that work was last performed on the home on May 15, 1990 and that such work was not warranty work. The Homeowner argued, however, that the Lawyers’ investigation into the facts and their reliance on the client’s statements were inadequate because of letters that were sent by the Homeowner to the Lawyers stating that the Contractor had not performed any work since August of 1989.

The appellate court noted the reasonableness of an attorney’s inquiry depends on the circumstances of each case and is a determination within the trial court’s discretion. The appellate court held that the trial court did not have sufficient facts before it to determine whether the Contractor’s attorneys had conducted a reasonable inquiry — or whether they had a reasonable basis for believing the lien claim — and remanded the case so that discovery could take place regarding the reasonableness of the inquiry undertaken by the contractors’ attorneys. The appellate court noted that although the Lawyers had refused to answer certain discovery requests concerning conversations between the Contractor and the Lawyers on the grounds that the conversations were privileged, the trial court had compelled discovery of those conversations prior to dismissing the law suit.

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