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| Christian W. Habersaat is a director with the law firm of Goulston & Storrs PC, in Boston. He engages in a broad range of commercial litigation, including business disputes, real estate litigation and insurance coverage matters. He, along with Barbara van Gorder, represented HJB, Inc. in the Galipault case. |
It often has been pointed out by real estate practitioners that a significant deficiency in the lis pendens statute, prior to it being amended by chapter 496 of the Acts of 2002, was the failure of the statute to adequately protect a property owner whose property became the subject of frivolous litigation. Prior to the rewriting of the statute, any person could assert a claim that affected title to or use or occupation of property and, by making a minimal threshold showing, be entitled to a court’s endorsement on a memorandum of lis pendens. The memorandum of lis pendens, when properly recorded, embodies a cloud on title and has the practical effect of impairing the alienability of a property for the duration of what often could be protracted litigation.
Although the recorded lis pendens serves the laudable purpose of putting the public on notice of litigation that potentially affects title to land, the cloud on title created by the lis pendens often results in a restraint on alienability and the inability to acquire financing, thereby imposing significant economic harm on the owner of the property subject to the lis pendens.1 It was not, and currently is not, unusual to find a lis pendens used by a party embroiled in a dispute as a strategic mechanism to gain an advantage or leverage in litigation to the detriment of a party who has an interest in the property upon which the lis pendens was recorded.
In theory, the revisions to the lis pendens statute that went into effect in April 2003 leveled the playing field in the sense that a property owner who was “aggrieved by” an unjustified or frivolous lis pendens now had a mechanism or procedure to seek the dissolution of a lis pendens — at the early stages of the litigation. Indeed, the amendment to the lis pendens statute, while balancing competing interests, created “a mechanism for expedited removal of an unjustified lis pendens, including dismissal of frivolous claims supporting an approved lis pendens.”2
Under the amended lis pendens statute, an aggrieved party can move, simultaneously, to dissolve an unjustified lis pendens and seek the dismissal of the underlying claim if the party believed that the claim underlying the approval of a lis pendens was frivolous. The revised statute requires an expedited hearing. According to the express language of the revised statute, upon consideration of the verified pleadings and affidavits before it a
special motion to dismiss shall be granted if the court finds that the action or claim is frivolous because (1) it is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the statute of frauds.3
If a special motion to dismiss is allowed, the movant is entitled to costs and reasonable attorneys’ fees, including those incurred for the special motion to dismiss, any motion to dissolve the memorandum of lis pendens, and any related discovery.4
The special motion to dismiss procedure under the lis pendens statute has received considerable attention. However, until recently, there has been no appellate decision that has considered the special motion to dismiss procedure. In Galipault v. Wash Rock Investments, LLC,5 the Appeals Court considered the lis pendens statute, as amended by St. 2002, chapter 496, section 2, and more especially the provisions for the expedited dissolution of an unjustified memorandum of lis pendens, for a special motion to dismiss, and for an appeal pursuant to Massachusetts General Laws chapter 231, section 118. The Appeal Court’s decision in Galipault provides guidance on the application of the new features of the statute, and it is notable for it (a) holds that the rewritten statute created an exception to the rule that appellate review may only proceed from a final judgment; (b) underscores the consequences of failing to include all material facts in the complaint underlying the lis pendens; (c) addresses the claims asserted in the underlying action using the frivolousness standard set forth in the statute; and (d) addresses the fee and cost award mandated by the statute.
The plaintiffs, Peter Galipault and Nancy Bellantone, owned a business condominium unit at 55 Temple Place in Boston. Less than twenty-four hours prior to a real estate closing in which Wash Rock Investments (“WRI”) was to sell the remaining six business condominium units at 55 Temple Place to HJB Inc., Trustee for the 330 Realty Trust (“HJB”), the plaintiffs filed a complaint in the Superior Court against WRI seeking to enjoin the sale, asserting that WRI had failed to comply with a “right of first refusal” provision in the condominium’s master deed. The next day, a Superior Court judge denied the plaintiffs the injunctive relief they sought. The real estate transaction between WRI and HJB went forward as contemplated and deeds for the six condominium units were recorded a few days later.
One month later, the plaintiffs filed a first amended verified complaint in which they amended their claims against WRI and added HJB as a party. At the same time, the plaintiffs filed a motion for judicial endorsement of a memorandum of lis pendens. In their amended verified complaint, the plaintiffs asserted that under the condominium’s master deed they had a right of first refusal to purchase the units WRI sold to HJB, and sought, among other things, a rescission of the sale of the WRI units based on their claimed right of first refusal. After a hearing in which an attorneyless HJB did not participate, a different Superior Court judge allowed the plaintiffs’ lis pendens motion. The judge reserved HJB and WRI’s right to file a motion to dissolve the lis pendens. The plaintiffs duly recorded the endorsed memorandum of lis pendens thereafter.
HJB and WRI each answered the first amended verified complaint and asserted counterclaims against the plaintiffs and cross claims against each other. Two months later, HJB and WRI each filed a special motion to dismiss under Massachusetts General Laws chapter 184, section 15(c) seeking an order dismissing the first amended verified complaint, dissolving the lis pendens and awarding reasonable attorneys’ fees and costs under section 15(d).
In its motion papers, HJB chronicled the facts and circumstances leading up to the sale of WRI’s condominium units, and pointed to significant and material factual omissions from the plaintiffs’ first amended verified complaint and their motion for endorsement. Among the more significant material omissions identified by HJB in its motion papers included information concerning the plaintiffs’ awareness of WRI’s sale several months before the closing; that the plaintiffs had indicated a desire to facilitate the sale; that the plaintiffs had advised WRI that they would waive any purported right of first refusal; and that the plaintiffs, themselves, sought to sell their own unit, and that only after their sale failed did they purport to exercise a right of first refusal and commenced the litigation. Both HJB and WRI further directed the judge to the complete absence of any factual support or legal basis for the plaintiffs’ asserted claims, which were grounded solely on their claimed right of first refusal. Both special motions to dismiss were subsequently heard by the same judge who had two months earlier heard and denied the plaintiffs’ initial request for injunctive relief.
On the day following argument, the judge issued a memorandum of decision and order on the special motions to dismiss. Applying the standards set forth in the lis pendens statute, the judge found, among other things, that the plaintiffs had omitted material and significant facts in their amended pleadings and in their request for lis pendens, and further that the plaintiffs did not dispute the accuracy of these omitted facts nor challenge their relevancy. The judge also found that the plaintiffs’ suit was devoid of any reasonable factual support and that it was devoid of any arguable basis in law. For these reasons, the judge dissolved the lis pendens, dismissed all counts of the plaintiffs’ first amended verified complaint and awarded attorneys’ fees and costs to HJB and WRI.
Final judgment did not enter in the action because of the pendency of HJB’s and WRI’s counterclaims. On Nov. 15, 2004, the plaintiffs filed a notice of appeal to a full panel of the Appeals Court pursuant to Massachusetts General Laws chapter 184, section 15(d), and the second paragraph of General Laws chapter 231, section 118. In their appeal, the plaintiffs challenged not only the Superior Court’s dissolution of the lis pendens but also the granting of the special motions to dismiss and the award of attorneys’ fees and costs to HJB and WRI. After briefing and oral argument on the matter, the Appeals Court issued an opinion in which it affirmed the Superior Court’s order in its entirety finding that the Superior Court did not abuse its discretion and that it had properly applied the correct legal standards in deciding the special motions to dismiss before it. The Appeals Court then awarded HJB and WRI attorneys’ fees and costs with respect to the appeal and remanded the case to the Superior Court for further proceedings with respect to the remaining counterclaims.
The Appeals Court’s decision in Galipault sheds light on the lis pendens statute and, in particular, on the special motion to dismiss procedure. First, the Appeals Court decided the propriety of the plaintiffs’ appeal under section 15(d) of the lis pendens statute. In doing so, the Appeals Court concluded that the statutory language contained in General Laws chapter 184, section 15(d), authorizing appeals under chapter 231, section 118, created a new exception to the settled rule that appellate review may only proceed from a final judgment.6 The Appeals Court concluded that unlike the special motion to dismiss under the “anti SLAPP” statute, General Laws chapter 231, section 118, a party aggrieved by the allowance of a special motion to dismiss under the lis pendens statute could proceed with an appeal notwithstanding the absence of the entry of a final judgment.7
Next, the Appeals Court underscored the consequences of a movant’s failure to include all material facts in the complaint underlying the lis pendens. In considering whether the Superior Court judge committed an error of law or abused its discretion in dissolving the notice of lis pendens and in dismissing the plaintiffs’ action and awarding fees and costs, the Appeals Court turned to the judge’s application of the standards of General Laws chapter 184, section 15(b). In doing so, the Appeals Court noted, as a threshold matter, that the statute explicitly provides that the proceeding underlying a request for a lis pendens must be commenced by a complaint which shall include a certification from the movant that “no material facts have been omitted therefrom.”8 Upon considering the chronology of facts and circumstances in the record before the Superior Court, the Appeals Court concluded that the judge was warranted on the evidence in his findings that the plaintiffs had omitted significant and material facts in their first amended verified complaint and in their request for lis pendens. In particular, the Appeals Court noted that the plaintiffs’
conduct before, during and after learning of HJB’s interest in purchasing the WRI units, and the interaction between the parties to this lawsuit (and other involved parties) after the execution of the P&S agreement between WRI and HJB through the date of closing (a three month period) were clearly material to the relief Plaintiffs sought in the action, and in particular, in obtaining a lis pendens.9
For this reason, the Appeals Court held that the Superior Court judge “was correct in ruling that Plaintiffs violated the explicit statutory language of G.L. c. 184, § 15(b), and that their claim on this basis was frivolous.”10
The Appeals Court then considered the legal arguments asserted by the plaintiffs in their first amended verified complaint in view of the frivolousness standard embodied in section 15 (c) of the statute, and the verified pleadings and affidavits in the record before it. With respect to the plaintiffs’ claim for declaratory relief, the Appeals Court concluded that the claim was frivolous because the plaintiffs did not have a right of first refusal under the condominium documents or otherwise, and never sought or obtained any assignment of the right of first refusal from the condominium board. With respect to the plaintiffs’ claims seeking rescission and injunctive relief, the Appeals Court concluded that the claims were frivolous because the plaintiffs were never a party to the transaction they sought to rescind and had no right of to rescind the transaction. In considering the specific performance claim asserted by the plaintiffs, the Appeals Court cautioned that that one must behave equitably in order to obtain equitable remedies. The Appeals Court finally concluded that the plaintiffs’ claim was frivolous because the plaintiffs, themselves, did not behave equitably; rather, their conduct was “’savored with injustice,’” was “patently unfair,” and “was aimed at achieving a goal other than adjudication of their rights”11
Lastly, the Appeals Court in Galipault considered and affirmed the Superior Court’s award of costs and attorney’s fees to HJB and WRI finding that the judge did not abuse his discretion or commit error of law making the award. Emphasizing that section 15(c) of the lis pendens statute mandates the award of costs and attorneys’ fees if the court allows a special motion to dismiss, the Appeals Court acknowledged that a trial judge has considerable discretion in awarding attorneys’ fees under applicable statutes, and that when made, the award is presumed to be right and will not be disturbed absent a showing that the award was excessive.12 On review, the Appeals Court concluded that fees and costs awarded by the Superior Court judge to HJB and WRI were not clearly erroneous.
Ultimately, Galipault provides a cautionary tale to parties seeking the endorsement of a memorandum of lis pendens: disclose all material facts in the complaint and pleadings underlying the motion for a lis pendens, and make sure that the complaint has reasonable factual support and an arguable basis in law.
End notes
1. See Debral Realty, Inc. v. DiChiara, 383 Mass. 559, 564 (1981)(noting that the filing of a lis pendens notice may result in “substantial economic effects” for the landowner).[back]
2. Wolfe v. Gormally, 440 Mass. 699, 705 (2004)(commenting on the amendment while interpreting language of the statute prior to the amendment). [back]
3. Mass. Gen. Laws ch. 184, § 15(c). [back]
4. Mass. Gen. Laws ch. 184, § 15(d).[back]
5. 65 Mass. App. Ct. 73 (2005).[back]
6. Galipault, 65 Mass. App. Ct. at 80.[back]
7. Id. at 81.[back]
8. Mass. Gen. Laws ch. 184. § 15(b). [back]
9. Galipault, 65 Mass. App. Ct. at 83. [back]
10. Id.[back]
11. Id. at 85.[back]
12. Id. at 86 (citations omitted).[back]