What is slander of title?
Slander of title refers to both slander and libel. Any interest in real estate can be harmed or damaged by:
- false statements, called slander; or
- false written statements, called libel.[Restatement of the Law Second, Torts §624]
For a person to be liable for slander of title based on their comments about another person’s interest in a parcel of real estate, the oral or written statement needs to:
- be published;
- be untrue and disparaging to the owner’s property interest;
- be made without privilege; and
- cause money losses. [Rest. 2d Torts §624]
A real estate interest is slandered when a person:
- makes an unprivileged false statement about a real estate interest;
- the statement brings into question the right or title to the interest, called disparagement; and
- the statement causes the owner of the real estate interest to lose money.
A false statement consists of writings, words or conduct communicated to another — the publication — which adversely affects the desirability of a marketable interest in real estate.
Harmed by slander
For example, a business owner places their business on the market for sale. The lease on the premises occupied by the business owner is assignable without prohibition or resitriction.
The lease contains an option to renew or extend the lease. The option needs to be exercised to assure potential buyers the business may remain in possession of the premises since the location contributes to the goodwill value of the business.
However, the landlord informs the business owner they expect the business owner to vacate the property when the original term of the lease expires. Regardless, the business owner timely exercises the option to renew/extend the lease.
A buyer for the business is located and escrow is opened. The landlord contacts the buyer and orally advises them that the business owner’s attempt to exercise the renewal option was ineffective. The landlord threatens to sue and physically retake possession of the premises when the buyer accepts an assignment of the lease and occupies the premises.
The landlord’s oral statements cause the buyer to cancel the purchase agreement and escrow. Thus, the business owner lost the monies from the sale. Further, the landlord continues to interfere with the business owner’s marketing of the business, making a sale of the business virtually impossible by causing the value of the leasehold interest to be uncertain.
Has the landlord slandered title to the business owner’s leasehold interest in the real estate occupied by the business?
Yes! The landlord’s oral misrepresentations about the validity of the exercise of the renewal option are a publication made to a buyer who acted on the information to the financial detriment of the business owner. Thus, the landlord is liable to the business owner for the loss in the value of the leasehold caused by the disparaging remarks made to the prospective buyer. [Baker v. Kale (1947) 83 CA2nd 89]
Examples of written publications constituting slander of title include:
- forging a trust deed which is recorded as a lien on real estate [Forte Nolte (1972) 25 CA3d 656]; and
- conveying real estate by a deed without holding a claim to title. [Cavin Memorial Corporation Requa (1970) 5 CA3d 345]
Privileged statements are not slander
A statement made about a real estate interest as part of a privileged publication does not subject the person making the statements to liability for slander of title.
Two types of privileges exist:
- conditional privilege; and
- absolute privilege.
A conditional privilege is a defense used by the person to defeat an owner’s claim that they made a statement which slandered the owner’s title. A statement made to another person about an owner’s interest is a communication legally called a publication.
To be a privileged publication and thus avoid liability, the statement about an owner’s interst in a parcel of real estate needs to be made without malice toward the owner of the interest. [Calif. Civil Code §47(c)]
A conditionally privileged communication includes the content of a lawsuit filed in good faith, or a dispute over a right or interest in real estate, such as a claim of ownership by way of a prescriptive easement.
The malice required to impose liability as a breach of good faith when making a statement about an ownership interest can be:
- actual; or
- implied.
Actual malice, also called malice in fact, exists when a statement adverse to an owner’s interest is made solely for the purpose of causing harm to the owner.
While the existence of malice is essential for the owner to overcome the defense of a conditional privilege, the elevated level of actual malice is not required for the owner to prove their title has been slandered. The lower level of implied malice will suffice.
Implied malice, also called malice in law, is determined by the conduct of the person making a disparaging statement as evidence they are not acting in good faith. Here, malice is inferred from the actions of an individual who is attempting to establish an invalid claim against an owner’s title.
Thus, when the individual who slanders title is able to show their statement was made in good faith and they honestly believed their claim of title to be valid, then the individual cannot be held liable for slander of title when they fail to prove their claim and do not prevail.
Absolute privilege
A publication classified as an absolute privilege bars a slander of title action, even when an individual makes the publication with actual malice.
A communication protected as an absolute privilege is any statement made as prat of a legislative, judicial or other official proceeding authorized by law. [CC §47(b)]
For example, an unsecured lender brings an action to impose a lien on property to recover money owed by the owner. The lender records a lis pendens referencing the action which clouds title to the owner’s property.
The lender does not prevail in the action and the owner’s title is cleared of the lis pendens. The owner then files a slander of title action seeking to recover money losses they incurred due to the lender’s recording of the lis pendens.
The lender claims the recordation of the lis pendens is absolutely privileged, barring the owner from any recovery in a slander of title action.
The owner claims the lis pendens is not absolutely privileged since it was not made in a judicial proceeding, such as pleadings and communications of the judge, parties, witnesses, etc.
Is the recording of the lis pendens absolutely privileged?
Yes! A recorded lis pendens which identifies a court action concerning adverse claims — against title or right of possession to the owner’s real estate — is an absolutely privileged publication. [CC §47(b)(4)]
To be a properly recorded lis pendens, the recorded statement needs to identify all parties to the lawsuit and give an adequate description of the real estate. The object of the lawsuit, whether for title of possession, does not need to be stated in the lis pendens. [Calif. Code of Civil Procedure §405.20]
Absolute privilege applies to any publication required by law in the course of a judicial proceeding to achieve the objectives of a final judgment in the litigation. This includes publications made outside the courtroom, such as a lis pendens. [CC §47(b)]
Additionally, papers filed during court proceedings are absolutely privileged from a slander of title action. Absolute privilege applies to the recording of a lis pendens since its use is authorized to give constructive notice of a claim against property asserted in pending litigation. [Albertson v. Raboff (1956) 46 C2d 375]
Loss of privilege for lis pendens
A lis pendens loses its status as absolutely privileged when the litigation references fails to state a claim to title or possession of the real estate described in the lis pendens.
For example, a buyer bids and acquires a property at a sheriff’s sale in a judicial foreclosure on a money judgment awarded to an unsecured creditor in a debt collection action. The buyer intends to renovate and sell the property at a profit.
The prior owner who was wiped out by the sheriff’s sale appeals the money judgment and records a lis pendens against the property. The lis pendens references the debt collection lawsuit which resulted in the sheriff’ sale. The lis pendens prevents the buyer from selling the property for three years, during which time it drops in value.
The buyer seeks to recover their loss of value from the prior owner, claiming they were prevented from selling the property since the lis pendens slandered title to the property. The prior owner claims a slander of title did not occur since the recording of the lis pendens was absolutely privileged.
Is the recording of the lis pendens absolutely privileged when the money judgment is on appeal?
No! Here the buyer is able to recover their money losses caused by the recorded lis pendens. The lis pendens referenced an action for the collection of an unsecured debt, a lawsuit with no claim against the title or possession of the property, only to the creditor’s entitlement to a money judgment for the debt owed. Thus, the lis pendens was improper and lost its status as absolutely privileged. [Palmer v. Zaklama (2003) 109 CA4th 1367]
Editor’s Note — The remedy for an improperly recorded lis pendens is to have the lis pendens expunged as lacking a real estate claim or evidence to support a real estate claim, collect damages caused by the recording of the lis pendens or proceed with a malicious prosecution action. [CCP §405.30; Calif. Penal Code §1447]
Money losses due to slander of title
To impose liability, an individual’s slanderous statements about title or possession do not need to be made for the purpose of directly influencing another person’s conduct.
The individual making a disparaging statement is liable for an owner’s losses when it is reasonably foreseeable others will act in reliance on their statement and cause the owner to suffer out-of-pocket money losses. [Rest. 2d Torts §623A, Comment b]
However, when the owner does not suffer out-of-pocket money losses due to the disparaging remarks, no basis exists for a claim of slander of title since the owner lost nothing to be recovered.
Punitive amounts for known falsehoods
When an owner is able to show an individual made the slanderous statement with actual malice, the owner may recover punitive amounts of money from the individuals slandering the owner’s title. [CC §3294]
For example, to improve their residence, an owner intends to remove an existing privacy fence constructed by the prior owner and relocate it on the boundary line, which is located six feet into what the neighbor now uses as part of their backyard. Both the owner and the neighbor are aware the fence is for privacy purposes and was not built to establish an agreed-to-boundary.
Further, an existing utility pole needs to be relocated to the boundary line which is also the center of an easement held by the utility company. The owner takes out their building permits to relocate the fence and the utility company is requested to move the pole.
The neighbor is notified of the owner’s construction plans to relocate:
- the privacy fence to the boundary line; and
- the utility pole to the center of the utility easement.
The neighbor does not want the fence or the utility pole to be moved and intends to prevent the construction by asserting a boundary line dispute. The neighbor notifies the owner and the utility company in writing that they consider the privacy fence to be the property’s agreed-to boundary line — a statement the neighbor knows is false.
The utility company refuses to proceed with the relocation of the utility pole until the dispute with the neighbor over the boundary line is resolved. As a result of the neighbor’s actions, construction is delayed and the owner’s construction costs to improve their residence increase.
The owner sues the neighbor to establish the fence as a privacy fence and not an agreed-to boundary fence. The owner makes a demand on the neighbor for payment of increased construction costs, claiming they are the result of the neighbor slandering their title and delaying the construction of the improvements.
Has the neighbor slandered the owner’s real estate title?
Yes! The neighbor made statements about the owner’s real estate which the neighbor knew to be false, causing the owner to lose money and incur expenses. The neighbor knew the privacy fence was not the agreed-to boundary yet tried to enforce it as the boundary line by interfering with the construction. Thus, the neighbor is liable for:
- the owner’s increased construction costs; and
- punitive amounts of money for slandering the owner’s title. [Appel Burman (1984) 159 CA3d 1209]
Editor’s Note — When the neighbor files an action to dispute the boundary line instead of making the comments to the owner and the utility company, the neighbor still slanders the title. Any lawsuit the neighbor initiates is not absolutely privileged since it is not brought in good faith to protect their interest in another’s property.
