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When Things Go Wrong

by on June 15, 2011

Rescission … contract reformation … specific performance … declaratory judgment …  injunction … fraud … slander of title.  What do these terms have in common?  Answer:  one heck of a lawsuit.  In Executive Excellence v. Martin Bros. Invs., LLC, 11 FCDR 1152 (4/15/11), all these issues and more were fought over and appealed to the Georgia Court of Appeals.

The case involved the sale of two parcels of property owned by Executive Excellence, LLC, Executive Excellence LLC’s principal owner, Richard R. Fritts, and Sterling Trust Company (collectively “sellers”).  In December 2006, the sellers agreed to sell two tracts of land to Sund Enteprises.  Sund Enterprises assigned its purchase rights to Southern Tradition Investments, LLC and Martin Brothers Investments, LLC (collectively “buyers”).  Each agreement contained a zoning contingency, entitling buyers and sellers to rescind the contract if zoning approval hadn’t been completed by April 1, 2007.

Ultimately the county didn’t schedule zoning approval meetings until April 2 and April 26, 2007, which was after the deadline in the agreements.  Thus, on March 28, 2007, buyers notified sellers they were unilaterally removing the zoning contingency from the agreements.  That didn’t go over well with the sellers, who responded by formally rescinding the agreements.

A lawsuit was filed in which the buyers sought contract reformation based upon a scrivener’s error.  Buyers asserted that the parties intended the zoning contingency deadline to be June 1, 2007, rather than April 1, 2007.  Buyers also sought an injunction, declaratory judgment, specific performance, fraud, and attorneys’ fees.  Sellers filed a counterclaim for slander of title and attorney fees.

Sellers filed a motion for summary judgment, which apparently caused buyers to dismiss their claims.  But that did not end the litigation because sellers still had claims for slander of title and attorney fees.

Sellers complained their title was maliciously impugned because buyers filed a lis pendens but failed to cancel it after buyers had dimsissed their claims.  Further, sellers claimed that buyers made verbal statements to third-parties about the property that weren’t true.  The buyers filed summary judgment on the slander of title claim, which was granted by the trial court.

In analyzing slander of title, the Court of Appeals reiterated the criteria to recover under slander of title: (1) publication of slanderous statements, (2) false and malicious statements, (3) that the plaintiff sustained special damages, and (4) that the plaintiff possessed an estate in the subject property.  OCGA Sec. 51-9-11.

With regard to the lis pendens (a lis pendens is a notice to the public that a lawsuit had been filed in connection with real estate), the Court of Appeals ruled that lis pendens were privileged under OCGA Sec. 51-5-8, and, by definition, could not be be the basis of a slander of title claim.  Regarding whether sellers were liable because they failed to timely cancel the lis pendens after dismissing their claims, the Court explained that a lis pendens notice remains in effect until a final judgment has been entered and the time for appeal has expired.  OCGA Sec. 44-14-612 states that it is the clerk of court’s responsibility, not a plaintiff’s, for  marking the lis pendens with the final disposition of the case.  In this case, the buyers didn’t have any responsibility for cancelling the lis pendens, and therefore couldn’t be liable for slander of title for not timely cancelling the lis pendens.

With regard to the alleged slanderous remarks to third parties, the Court determined that these statements were not actionable because the statements were either substantially true or “were nothing more ‘than subjective, hyperbolic opinion that cannot be proved to be true or false[.]‘”  Citing Evans v. The Sanderville Georgian, 296 Ga. App. 666, 669, 675 SE2d. 574 (2009).

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