Malicious Prosecution – Can It Result From Filing A Lis Pendens?

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Those of us with any significant history of practice in South Carolina have made an allegation or defended against an allegation of slander of title. Such allegations, and actions for slander of title, were significantly limited, however, with the advent of Pond Place Partners.^[1] There, the South Carolina Court of Appeals found the filing of a lis pendens is absolutely privileged. Further, the court concluded because the recordation of a lis pendens is specifically authorized by statute and does not exist separate from the underlying litigation of which it gives notice, the filing of a lis pendens cannot form the basis of an action for slander of title. Pond Place Partners did not, however, eliminate every form of relief when a party files a lis pendens motivated by malicious intent; the appropriate action against a maliciously motivated lis pendens is pursuant to abuse of process or malicious prosecution. The court recently undertook further exploration of whether a cause of action for malicious prosecution may result from the favorable termination of a lis pendens and what, exactly, constitutes a favorable termination. Gecy v. Somerset Point at Lady’s Island Homeowners Association, Inc. 2019 WL 361653 (January 30, 2019).

Gecy, through two limited liability entities of which he was owner, built several homes and other improvements in Somerset Point, a subdivision developed by Coosaw Investments, LLC. A dispute arose between Gecy, and his entities, and Coosaw, and related entities, concerning the design standards applicable to the development, as well as other issues. As a result, Gecy filed an action against Coosaw alleging several causes of action. Coosaw counterclaimed, seeking a temporary injunction to block Gecy from continuing construction in Somerset Point. Coosaw also filed a lis pendens, asserting a particular property was affected by the litigation. Pursuant to Gecy’s motion, the master-in-equity struck the lis pendens, finding Coosaw’s claims did not seek to affect the title to the subject property. Coosaw sought reconsideration, which the master-in-equity denied, ultimately finding the harm to Gecy in granting reconsideration was greater than the benefit to Coosaw of allowing the lis pendens to remain in place. Subsequently, Gecy filed claims for malicious prosecution and abuse of process based upon the earlier lis pendens. Coosaw filed a successful motion for summary judgment and the case was before the court on Gecy’s appeal.

An action for malicious prosecution requires the following: 1) the institution or continuation of original judicial proceedings; 2) by or on behalf of defendant; 3) termination of the proceedings in plaintiff’s favor; 4) malice in the institution of the proceeding; 5) lack of probable cause and 6) resulting damage.

In opposition to Coosaw’s motion, Gecy argued the filing of a lis pendens is an ancillary proceeding and the favorable termination thereof supported the malicious prosecution claim. Rejecting Gecy’s argument, the court reminded a lis pendens is a statutory precept constructed to inform prospective purchasers or lienors that a piece of property is subject to litigation. A lis pendens is another form of pleading in the underlying litigation that acts to duplicate publication of the proceedings; it is not an ancillary action.

Gecy also argued the element of favorable termination necessary to sustain a claim for malicious prosecution was met by the master’s decision to strike the lis pendens. This argument was also rejected. While historically South Carolina courts have not categorically addressed the element of favorable termination of malicious prosecution arising out of a civil proceeding, there is precedent establishing the cause of action is governed by the same general rules in a civil action as when based upon criminal proceedings. In criminal cases, favorable termination has been found only on the merits of the dispute underlying the malicious prosecution claim. Here, the court extended that rationale to malicious prosecution arising from a civil action, finding a favorable termination is a termination reflective of the merits of the underlying action; to hold otherwise could potentially result in conflicting decisions in the same case. Conceptually, a party could secure a favorable decision on the malicious prosecution claim and an unfavorable decision in the underlying litigation. Significantly, the court also found that because a lis pendens is fundamentally procedural, and thereby lacking any substantive claim, its termination alone cannot constitute a favorable termination on the merits of a claim sufficient to support an action for malicious prosecution. Because the underlying litigation  remains ongoing, and there had been no favorable termination addressing the merits,  this action for malicious prosecution was found premature.

Building upon the foundation established by Pond Place Partners, and requiring the same termination on the merits as required with an underlying criminal action, the court offered a warning: a maliciously filed lis pendens may serve as the primary basis of a malicious prosecution claim if the asserting party can establish a favorable termination reflective of the merits of the underlying action. Thus, while the court has worked to refine those instances wherein liability arises as a result of placing a cloud on title such that an owner cannot freely dispose of or lien it, practitioners should remain aware that liability for restricting one’s free use of property has not been completely dissolved, even when that cloud is created by a statutory lis pendens. 

Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.