By Clark J. Belote, James L. Windsor

Yesterday, the Supreme Court of Virginia addressed the scope of the absolute privilege defense to claims based on a recorded lis pendens. In Givago Growth, LLC, et al. v. iTech AG, LLC, Givago Growth entered into an agreement with a real estate developer called Artifact, LLC to invest in developing a property and splitting proceeds from a later sale. 

In furtherance of its deal with Givago, Artifact took out an unsecured loan from iTech AG, LLC. Artifact subsequently defaulted on its loan with iTech. In negotiations to work out the iTech loan, Artifact agreed to give iTech a deed of trust on the property being developed. However, Artifact had to later disclose to iTech that it did not own the subject property (Givago and others did), and therefore, could not give iTech the promised deed of trust. As a result, Artifact assigned to iTech its proceeds from the original deal with Givago, but iTech filed suit against Givago and Artifact seeking specific performance of execution of a deed of trust on the subject property. 

iTech also recorded a lis pendens against the subject property. The lis pendens held up a sale of the property, and iTech refused to release the lis pendens. Eventually, the property was sold with proceeds held in escrow. Following a nonsuit of iTech’s suit, Givago sued iTech for abuse of process, slander of title, tortious interference with contract, and conspiracy based on its recording  and refusal to release the  lis pendens. The trial court dismissed the complaint on demurrer, holding that absolute privilege barred all the claims. 

The Supreme Court of Virginia reversed for two reasons. First, it held that absolute privilege is an affirmative defense, and affirmative defenses cannot be resolved on demurrer. 

Second, the Court addressed the scope and application of absolute privilege under Virginia law. Absolute privilege is the doctrine “that ‘words spoken or written in a judicial proceeding that are relevant and pertinent to the matter under inquiry are absolutely privileged’ from subsequent charges of defamation.” Slip Op. at 4 (quoting Lindeman v. Lesnick, 268 Va. 532, 538 (2004)). Emphasizing their similarity to mechanic’s liens, the Court held that a lis pendens is entitled to absolute privilege so long as the content is “relevant and pertinent to the matter under inquiry.” Slip Op. 6. However, absolute privilege does not apply to non-defamation torts. In this case, it only applied to slander of title, not abuse of process, tortious interference, or conspiracy. 

This opinion clarifies the scope of the absolute privilege defense in Virginia and serves as a reminder to always exercise due care and diligence prior to recording a lis pendens. While it carries privilege, the privilege will only bar defamation torts and not others. Also, always remember: “[n]o memorandum of lis pendens shall be filed unless the action on which the lis pendens is based seeks to establish an interest by the filing party in the real property described in the memorandum, or unless the action on which the lis pendens is based seeks to enforce a zoning ordinance.” § Va. Code Ann. 8.01-268(B).

A copy of the Court’s opinion is available here: https://www.vacourts.gov/opinions/opnscvwp/1201267.pdf.

If you have any questions or would like to discuss the impact of this significant new opinion, or title and real property issues in general, please contact Jim Windsor at (757) 873.6308 or jlwindsor@kaufcan.com, or Clark Belote at (757) 624.3109 or cjbelote@kaufcan.com.  

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.