Kensington Development Corp. v. Israel
Decision Date | 18 February 1988 |
Docket Number | No. 86-0846,86-0846 |
Citation | 419 N.W.2d 241,142 Wis.2d 894 |
Parties | KENSINGTON DEVELOPMENT CORPORATION and LRB Associates, Ltd., Plaintiffs-Appellants, v. Scott M. ISRAEL and Stephen L. Cleary, Defendants-Respondents-Petitioners, Derald West and David P. Sweeney, Defendants-Respondents. |
Court | Wisconsin Supreme Court |
Edward A. Hannan, Milwaukee, argued, for defendants-respondents-petitioners (Cleary); Godfrey, Trump & Hayes, Milwaukee, on brief.
James G. Allison, Milwaukee, argued, for defendants-respondents-petitioners (Israel); Whyte & Hirschboeck, S.C., Milwaukee, on brief.
Thomas D. Georgeson, Oconomowoc, and Bill Dwyer, Chicago, Ill., argued for plaintiffs-appellants Johnson, Brendemuehl & Georgeson, Oconomowoc, and Mary Anne Gerstner, Tom W. Stonecipher and Burke, Griffin, Chomicz & Wienke, Chicago, on brief.
The issue in this case is whether Wisconsin's common law privilege from liability for relevant statements made in judicial proceedings provides an absolute defense against the tort of slander of title for filing a false, sham or frivolous lis pendens notice, notwithstanding the provisions of sec. 706.13(1), Stats., 1 which expressly provide a cause of action and a statutory penalty for slander of title in such circumstances. In Kensington Development v. Israel, 139 Wis.2d 159, 407 N.W.2d 269 (Ct.App.1987) , the court of appeals held that an absolute privilege does not apply to the acts specified in sec. 706.13 and does not provide a complete defense to a cause of action for slander of title based upon those acts. We agree.
Plaintiffs brought this action in the circuit court for Waukesha county before Judge Clair Voss for slander of title to three parcels of property in Delafield, Wisconsin. Judge Voss granted defendants' motion for summary judgment, recognizing absolute immunity to slander in a judicial proceeding. Plaintiffs' claims arise from the recordation against title to the properties of an alleged false or frivolous lis pendens. The lis pendens was recorded by an unsecured creditor's committee and its attorney, Stephen Cleary (Cleary), the defendants here, in connection with an adversary complaint filed February 21, 1985, in a ch. 11 bankruptcy case, In Re Delafield Development, No. 83-03092, then pending in the federal bankruptcy court for the Eastern District of Wisconsin. The adversary complaint was dismissed twice, the second time for lack of jurisdiction. The final dismissal order included a provision which ordered the defendants to withdraw the lis pendens notice. Plaintiffs allege the lis pendens clouded title to their property for over four months and interfered with sales of the property.
The plaintiffs are Kensington Development Corporation (Kensington), an Illinois corporation, and LRB Associates, Ltd. (LRB), an Illinois limited partnership. Kensington purchased the property at issue at a sheriff's foreclosure sale and contracted to sell a portion of it, a shopping center, to LRB.
All three parcels of land involved, including the Heritage Ridge Shopping Center, were originally owned by Delafield Development (Delafield), a Wisconsin general partnership which developed the shopping center. Two of Delafield's partners were Waukesha Venture and Rubin Associates, both owned by James Flanagan.
In addition to a claim brought by the Chemical Bank of New York, whose foreclosure action precipitated the bankruptcy action, Delafield also faced unsecured creditor claims totaling approximately $1 million. The creditor's committee was formed to protect their interest.
During the latter half of 1984, James Flanagan, acting as debtor in possession for Delafield, proposed a plan whereby Chemical Bank of New York's mortgage would be purchased by LRB at a foreclosure sale. LRB would then own the shopping center and related parcels. The specifics of this proposal were explained to the bankruptcy court and the creditor's committee during a hearing. At that hearing, Flanagan stated that none of the partners of the debtor had any connection or relationship with LRB. This representation was responsive to the court's concern about whether an "insider" was on the purchasing side of the proposed transaction.
The committee's complaint filed in bankruptcy court alleged that James Flanagan did possess an ownership interest as the purchaser because he was a principal in LRB. The committee requested a revesting of title to the property. The committee also filed a lis pendens in connection with the complaint. The bankruptcy court eventually dismissed the committee's complaint and ordered it to release the notice of lis pendens on the ground that the court lacked jurisdiction.
Kensington Development and LRB commenced the instant action claiming that the filing of the lis pendens had created a cloud upon title, allegedly causing LRB to lose sales of certain interests; they also alleged that the committee acted without regard for the truth and with malice toward Kensington and LRB. The Waukesha county circuit court held that the action in filing the lis pendens was absolutely privileged and granted summary judgment for the committee. The court of appeals reversed this decision holding that a conditional privilege applied instead.
Defendant Cleary argues that because the bankruptcy court failed to find the adversary complaint and accompanying lis pendens to be frivolous, the state circuit court was precluded from collaterally reviewing this matter. Gonzales v. Parks, 830 F.2d 1033, 1035 (9th Cir.1987). However, in the instant case, the bankruptcy court dismissed the complaint and ordered the release of the notice of lis pendens on the ground that the court lacked jurisdiction. These events occurred before the instant action was commenced in state court and, therefore, there was no bankruptcy action to take federal supremacy and exclusivity. State courts regularly determine issues involving alleged false, sham or frivolous instruments, the subject matters of sec. 706.13, Stats.
Whether the committee's actions were absolutely privileged is a question of law which this court decides without deference to the trial court or court of appeals. Lambert V. Wrensch, 135 Wis.2d 105, 115, 399 N.W.2d 369 (1987).
The absolute privilege rule upon which defendants rely has roots in the early common law. In Jennings v. Paine, 4 Wis. 372, 375 (1855) the court granted absolute privilege to an attorney for defamatory statements made about a witness to a jury during judicial proceedings. The rule has been subsequently interpreted to grant absolute immunity additionally for pleadings in a judicial action. See Restatement Second of Torts, sec. 592a (1977). In W. Prosser & W. Keeton, The Law of Torts, sec. 114, at 817 (5th ed. 1984) the authors state: "The privilege covers anything that may be said in relation to the matter at issue, whether it be in the pleadings, in affidavits, or in open court."
The committee asserts that this principle of absolute immunity applies because its adversary complaint was part of a judicial proceeding, as was the accompanying lis pendens. The absolute immunity rule protecting slanderous statements made during judicial proceedings evolved to permit the free resolution of controversies in the court system. The rationale is that judges, witnesses, parties and counsel should be able to participate in their respective roles without fear of incurring civil liability arising from any defamatory statements that may be uttered during judicial proceedings. However, the same rationale does not necessarily lie to shield the statements or actions giving rise to a slander of title claim.
The torts of defamation and slander of title 2 evolved in the common law to protect different interests. In a defamation action it is claimed that one's good character or reputation is attacked. In a slander of title action it is asserted that an individual's statement or action has interfered with one's economic interest in real property. Prosser & Keeton on Torts, Injurious Falsehood, sec. 128 at 962-63 states:
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