Lebaron Properties, LLC v. Jeffrey S. Kaufman, LTD (12/15/2009)

December 30, 2009

Arizona Court of Appeals Division One Holds That, Under A.R.S. § 33-420, a Sanction for Recording an Invalid Notice of Lis Pendens May Not Exceed $5,000, Unless the Property Owner Suffers Actual Damages.

Jeffrey S. Kaufman represented five defendants in an action filed against them by Lebaron Properties alleging breach of a contract to purchase real property.  Kaufman filed an answer and counterclaim on behalf of his clients, but, before he did so, he recorded a notice of lis pendens with the Maricopa County Recorder.  Because it predated the answer and counterclaim, the notice of lis pendens was improper. 

Pursuant to A.R.S. § 33-420, Lebaron moved to quash the lis pendens and asked for a sanction of $25,000 ($5,000 per defendant) plus attorneys’ fees and costs.  That statute allows the owner of a property to recover “not less than five thousand dollars, or . . . treble the actual damages caused by the recording, whichever is greater” plus attorneys’ fees and costs from a person who causes the recording of an invalid notice of lis pendens, knowing or having reason to know that the notice is invalid.  The trial court awarded Lebaron the sum it requested, ordering that the sanction be paid by Kaufman, not his clients.

The Court of Appeals concluded that a sanction against Kaufman was appropriate, but that the amount awarded by the trial court was not permitted by the statute.  The Court rejected Lebaron’s argument that the statute gave a trial court discretion to award in excess of $5,000 even if no actual damages had been suffered.  The Court also rejected Lebaron’s alternative argument that, because there were five defendants, it was entitled to $25,000 under the statute, $5,000 for each defendant.  According to the Court, “when only one violation or violator and property owner is involved, sanctions may not exceed $5000 unless actual damages are shown.”  In this case, the “violator” was Kaufman, not his clients because they had no reason to know that an invalid notice of lis pendens was recorded.  The Court affirmed the judgment of the trial court but modified the amount of the award.

Judge Barker authored the opinion; Judges Johnsen and Portley concurred.