PATRICIA W. BALLARD APPELLANT/ CROSS-APPELLEE
1400 WILLOW COUNCIL OF CO-OWNERS, INC. APPELLEE/ CROSS-APPELLANT 1400 WILLOW COUNCIL OF CO-OWNERS, INC. APPELLANT/ CROSS-APPELLEE
PATRICIA W. BALLARD APPELLEE/ CROSS-APPELLANT
ON REVIEW FROM COURT OF APPEALS CASE NO. 2008-CA-001155-MR JEFFERSON CIRCUIT COURT NOs. 03-CI-10346, 2008-CA-001345-MR JEFFERSON CIRCUIT COURT NO. 03-CI-10346
COUNSEL FOR APPELLANT/CROSS-APPELLEE: Sheryl G. Snyder Susan Lynn Williams Griffin Terry Sumner John Kendrick Wells IV Frost Brown Todd, LLC
COUNSEL FOR APPELLEE/CROSS-APPELLANT: John L. Fleischaker Bradley A. Case James Lee Adams Dinsmore & Shohl, LLP
This appeal involves a dispute between 1400 Willow Council of Co-Owners, Inc. (the Council), a condominium association, and one of its co-owners, Patricia W. Ballard (Ballard), regarding the need to replace and who should bear the cost of replacement of the two-story wall of windows in Ballard's condominium (the wall of windows). In 1989, Patricia Ballard purchased a penthouse condominium occupying the 20th and 21st floors of the 1400 Willow building located in Louisville, Kentucky. In 1990, Ballard noticed water coming in through a wall between her fireplace and a window. Throughout the next decade, Ballard reported problems with water leakage to the Council. In late 1999/early 2000, the Council waterproofed the exterior masonry, which resolved the problem.
A dispute arose over the need to replace the wall of windows and over who should bear the cost of replacement. Independent contractors advised the Council that glass could fall from Ballard's wall of rotting windows, and they had to be replaced. The Council contended that co-owners, such as Ballard, owned the windows in their condominiums and were personally responsible for replacement costs. Contrary to the Council's assertion, Ballard was advised by Paul Lederer, an engineer and professor at the University of Louisville, that her wall of windows was sound and could withstand the highest wind speeds that have occurred in the Louisville area in the past 100 years. Thus, Ballard contended that her wall of windows did not need to be replaced. Furthermore, Ballard contended that, if her wall of windows did need to be replaced, the Council was responsible for the replacement costs pursuant to the Master Deed because the wall of windows is a "common element" of the structure. Finally, Ballard argued that any need for replacement was caused by the Council's failure to maintain the exterior of the building as required by the Master Deed.
In September 2003, the Council's attorney sent Ballard a letter demanding that she replace the wall of windows within ten days at her own expense or the Council would enter her condominium to perform the / replacement and hold her responsible for the costs. Ballard filed this action on November 24, 2003, seeking injunctive and declaratory relief. The purpose of the temporary injunction was to prevent the Council and its agents from entering her condominium and moving/removing her property to replace her wall of windows. The declaration of rights was sought to determine who was financially responsible for replacing/repairing the wall of windows.
On December 4, 2003, the Council filed an answer and counterclaim and filed a lis pendens with both the circuit and county court clerks. Count I of the counterclaim sought to recover the cost of replacing Ballard's wall of windows. Count II of the counterclaim sought enforcement of a lien for the cost of replacing the wall of windows as well as costs and reasonable attorneys' fees incurred in collecting and enforcing the lien. After a hearing, the trial court entered a restraining order on December 29, 2003, preventing the Council from entering Ballard's condominium before February 1, 2004, in order to repair or replace her wall of windows. Ballard removed her property by February 1, 2004, and the Council replaced her wall of windows in March and April of 2004 at a cost to the Council of nearly $65, 000.
In June 2004, Ballard amended her complaint seeking damages for breach of contract, breach of fiduciary duty, promissory estoppel, as well as punitive damages. On January 24, 2005, the Council filed a document with the Jefferson County Clerk styled "Statement of Claim for Lien Pursuant to Master Deed" (the lien statement). It appears that the Council intended the lien statement to serve as notice, in addition to the lis pendens, that it was asserting a lien against Ballard's condominium.
In May 2005, the trial court denied a motion brought by the Council seeking partial summary judgment on its counterclaim that Ballard bore responsibility for the cost of replacing the wall of windows under the Master Deed. In June 2006, Ballard amended her complaint again to assert a slander of title claim emanating from the Council's filing of the lis pendens and the lien statement. Coupled with the slander of title claim, Ballard filed an action to quiet title to her condominium. In her second amended complaint, Ballard claimed that the filing of the lis pendens and the lien statement diminished the fair market value of her condominium, rendered her condominium unmarketable, and caused the loss of sales of her condominium. The damages alleged by Ballard included $755, 000.82 in lost principal on stock she claimed she was forced to sell to pay legal and other expenses; $213, 061.90 in taxes on the sale of that stock; and damage to her personal property.
Thereafter, the Council moved for summary judgment on the slander of title and personal property damage claims and for dismissal of Ballard's claims for lost stock principal and for payment of taxes related to the sale of that stock. The court granted summary judgment on the property damage claim because it was filed outside the two-year statute of limitations. Furthermore, the court ruled that Ballard could not recover losses suffered as a result of selling stock at a depressed price to pay expenses and attorneys' fees and for the tax consequences on the sale of the stock.
On September 4, 2007, a nine-day jury trial commenced on the remaining claims. The jurors found that Ballard's wall of windows needed to be replaced; the need for replacement did not result from Ballard's willful or negligent acts or omissions; replacement was necessary because the Council had failed to exercise reasonable care in maintaining the exterior of the building; the Council, acting through its Board of Directors, failed to exercise "good faith and loyalty" in making decisions with respect to all co-owners, including Ballard; the Council's failure "was a substantial factor in causing loss to Patricia Ballard;" $54, 000 would compensate Ballard for monthly condominium fees she paid while attempting to sell her condominium; the Council "knowingly and maliciously communicated, orally or in writing, a false statement which had the effect of disparaging Patricia Ballard's title" to her condominium by either decreasing its fair market value or causing a loss of sale; $75, 000 would compensate Ballard for the damages she incurred as a result of the disparagement of her title; and punitive damages should not be awarded to Ballard.
On November 5, 2007, the trial court entered an order that awarded judgment to Ballard in the amount of $129, 000, bearing interest at twelve percent per annum; gave the Council ten days to release its lis pendens notice and statement of lien from Ballard's condominium; authorized Ballard to recover taxable court costs from the Council; and consistent with a stipulation entered by the parties, reserved for an evidentiary hearing on all claims for attorneys' fees under the Master Deed.
On November 15, 2007, the Council moved for a judgment notwithstanding the verdict (JNOV) on Ballard's claims of breach of fiduciary duty and slander of title. The trial court denied that motion. The Council appealed from the trial court's order and final judgment and the court's subsequent order denying its motion JNOV.
Thereafter, the Council moved the trial court to refrain from awarding attorneys' fees to either party under the terms of the Master Deed. The Council admitted that, pursuant to section 10.2 of the Master Deed, a "prevailing party" may recover attorneys' fees in actions arising from a failure of a co-owner or the Council to comply with the terms of the Master Deed, by-laws, or rules and regulations. However, it argued that neither party had "prevailed." Ballard opposed the motion arguing she was the prevailing party because the jurors had found in her favor on virtually all claims and had awarded damages to her. Without holding a hearing pursuant to JRP 404, and with no itemized bill for incurred costs, services rendered or hours worked in the record, the trial court denied the Council's motion. Furthermore, the trial court declared Ballard the prevailing party and entered an order entitling her to recover fees and costs. The Council filed a separate appeal from this judgment, and the two appeals were consolidated.
The Court of Appeals reversed and remanded for a new trial. Specifically, the Court of Appeals concluded that: (1) the Council was entitled to summary judgment on the time-barred slander of title claim; (2) retrial was required regarding breach of fiduciary duty as a result of an instructional error; and (3) prior to an award of attorneys' fees, an evidentiary hearing as mandated by JRP 404 is required. This Court granted discretionary review.
I. SLANDER OF TITLE.
Ballard contends that the Court of Appeals erred when it concluded that summary judgment should have been granted in favor of the Council on her slander of title claim for three reasons. First, Ballard argues that the Court of Appeals incorrectly concluded that a one-year statute of limitations applies to slander of title claims. Second, even if a one-year statute of limitations applies, the Court of Appeals erred when it: (1) concluded that the limitations period began to run when the Council filed the lis pendens instead of when Ballard suffered special damages; and (2) failed to conclude that her claim related back to her original complaint under Kentucky Rule of Civil Procedure (CR) 15.03. Finally, Ballard claims that the Court of Appeals incorrectly concluded that the Council did not commit slander of title as a matter of law. We address each argument in turn..
Summary judgment serves to terminate litigation where "the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56.03. Summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence . at trial warranting a judgment in her favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). Summary judgment "is proper where the movant shows that the adverse party could not prevail under any circumstances." Id. (Citing Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255 (Ky.1985)).
On appeal, we must consider whether the circuit court correctly determined that there were genuine issues of material fact and that the moving party was not entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779 (Ky. App. 1996). Because summary judgment involves only questions of law and not the resolution of disputed material facts, an appellate court does not defer to the circuit court's decision. Goldsmith v. Allied Building Components, Inc., 833 S.W.2d 378 (Ky.1992). Likewise, we review the circuit court's interpretations of law de novo. Cumberland Valley Contrs., Inc. v. Bell County Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007).
A. Statute of Limitations.
Ballard argues that, because slander of title involves real property, it is governed by the five-year statute of limitations set forth in Kentucky Revised Statute (KRS) 413.120(7). That section applies to "[a]n action for an injury to the rights of the plaintiff, not arising on contract and not otherwise enumerated." The Council disagrees and contends that the Court of Appeals correctly concluded that the slander of title claim is governed by the one-year statute of limitations set out in KRS 413.140(l)(d), which governs actions for "libel or slander." In support of its argument, the Council points to Montgomery v. Milam, 910 S.W.2d 237, 240 (Ky. 1995), wherein the Court concluded that the one-year statute of limitations found in KRS 413.140(l)(d) applied to a slander of title claim.
As set forth in Bonnie Braes Farms, Inc. v. Robinson, 598 S.W.2d 765, 766 (Ky. App. 1980):
In order to maintain a slander of title action in this jurisdiction, the plaintiff must plead and prove that the defendant has knowingly and maliciously communicated, orally or in writing, a false statement which has the effect of disparaging the plaintiffs title to property; he must also plead and prove that he has incurred special damage as a result. Contrary to appellant's contention at oral argument, if special damage has not been incurred, the action is not maintainable .... The special damage required may consist of either a loss by the plaintiff of a sale of his property or a diminution in its fair market value.
We find the analysis of slander of title claims in Pond Place Partners, Inc. v. Poole, 567 S.E.2d 881, 890-91 (S.C. Ct. App. 2002) to be instructive:
Slander of title is grounded in the tort of injurious falsehood. See id. ("Both torts are specific examples of the general tort of injurious falsehood and the same privileges which apply to the torts of personal defamation apply to the tort of injurious falsehood."); Zamarello v. Yale, 514 P.2d 228 (Alaska 1973); Procacci v. Zacco, 402 So.2d 425 (Fla.Dist.Ct.App. 1981). In this light, the first comment of section 624 of the Restatement (Second) of Torts explains:
The particular form of injurious falsehood that involves disparagement of the property in land, chattels, or intangible things, is commonly called "slander of title." The earliest cases in which it arose involved oral aspersions cast upon the plaintiffs ownership of land, as a result of which he was prevented from selling or leasing it; and the decisions went upon an analogy to the kind of oral defamation of the person that is actionable only upon proof of special harm. (See § 569). The extension of the liability to other kinds of injurious falsehood has left the terms "slander of title, " and "disparagement, " merely as special names given to this particular form of the tort.
The association with personal defamation through the word "slander" has unfortunately tended to lead the courts to regard the plaintiffs property interest as somehow personified, and so defamed, and thus to look to the law of defamation. "Slander of title, " however, differs from personal defamation in at least three important respects. One is that proof of special harm is required in all cases. (See § 633). Another is that there must be proof of a greater amount of fault than negligence on the part of the defendant regarding the falsity of the statement. (See § 623A, especially Comment d). The third is that because of the economic interest involved the disparagement of property may in a proper case be enjoined, whereas defamation normally cannot.
Id. at cmt. a, quoted in Lone v. Brown, 199 N.J.Super. 420, 489 A.2d 1192, 1195 (App.Div. 1985).
Based on the preceding, we conclude that slander of title is not a subcategory of slander, which is a personal injury action. Rather, it is an action for injury to real property rights resulting from disparagement of title to real estate. Therefore, KRS 413.140(l)(d), which the Court of Appeals relied on, does not apply. Slander of title claims are more akin to the types of actions expressly governed by the five-year limitations period provided in KRS 413.120. For example, KRS 413.120(4) applies to actions "for trespass on real or personal property, " and KRS 413.120(5) applies to actions "for the profits or damages for withholding real or personal property." Although not specifically mentioned, slander of title claims are governed by KRS 413.120(7), which applies to "[a]n action for an injury to the rights of the plaintiff, not arising on contract and not otherwise enumerated." Accordingly, we conclude that the Court of Appeals incorrectly applied a one-year statute of limitations instead of a five-year statute of limitations. To the extent that this holding conflicts with Montgomery, that case is hereby overruled.
B. Running of the Limitations Period/Relation Back.
Having concluded that a five-year statute of limitations applies, the issues of when the slander of title claim in this case began to accrue and whether Ballard's claim related back to her original complaint are moot.
C. Absolute or Qualified Privilege.
The Council contends that the filing of the lis pendens and lien statement enjoy the absolute privilege that is accorded to judicial proceedings. Because we see no distinction between the lis pendens and the lien statement for purposes of this analysis, we refer to them collectively as the "lis pendens."
In its summary judgment order, the trial court stated that it would not address the judicial privilege because no Kentucky case had applied it to a lis pendens. Although raised, the Court of Appeals did not directly address this issue. Instead, it concluded that KRS 382.440(1) specifies the protocol to be followed in filing a lis pendens notice, and the Council was entitled to summary judgment on the slander of title claim because its lis pendens notice comported with the statutory requirements for filing a lis pendens. Ballard contends that, in essence, the Court of Appeals concluded that the lis pendens filed by the Council was absolutely privileged and could not support a slander of title claim.
Whether the filing of a lis pendens is protected by an absolute or qualified privilege is an issue of first impression for this Court. "The prevailing rule and the one recognized in this jurisdiction is that statements in pleadings filed in judicial proceedings are absolutely privileged when material, pertinent, and relevant to the subject under inquiry, though it is claimed that they are false and alleged with malice." Schmitt v. Mann, 163 S.W.2d 281, 283 (Ky. 1942) (citations omitted). "On the other hand, statements which are not pertinent and material are only qualifiedly privileged, ...