Santa Fe Ridge Homeowners’ Assoc. v. Bartschi – 7/29/2008

August 1, 2008

Arizona Court ofAppeals Division One Holds A Homeowner’s Association May Not Properly Record a Lis Pendens Under A.R.S. § 12-1191(A) in Connection with an Action to Enforce the CC&Rs Where the Action Would Not Expand, Restrict, or Burden the Property Owner’s Rights as Bestowed by Virtue of the

Defendant Bartschi owns a home in the community of Santa Fe Ridge.  PlaintiffSanta Fe filed a complaint against Bartschi seeking permanent injunctive relief due to her failure to maintain her lot.  It also asked that it be entitled to certain “self-help” remedies, for which it could recover expenses from Bartschi if she failed to comply with any injunctive order imposed by the court.  Four days later, Santa Fe recorded a notice of lis pendens against Bartschi’s property.  Bartschi counterclaimed, alleging wrongful recordation of the lis pendens.  She also moved for partial summary judgment on her counterclaim, which the trial court granted.  Bartschi then moved for statutory damages, attorneys’ fees, and costs pursuant to A.R.S. § 33-420(A), which the trial court awarded.  Santa Fe appealed. 

The ArizonaAppeals Court affirmed in part and reversed in part.  It primarily held that Santa Fe improperly filed the lis pendens because the lawsuit it brought against Bartschi did not affect title to real property, as required by A.R.S. § 12-1191(A).  The Court first explained that the purpose of recording a lis pendens is to provide constructive notice to prospective purchasers and lenders of a pending lawsuit that may affect title to real property.  The Court then discussed and distinguished Tucson Estates, Inc. v. Superior Court, 151 Ariz. 600, 729 P.2d 954 (App. 1986), a case holding that a lis pendens may be recorded for an action affecting rights incident to title to real property.  The Court explained that the claim in Tucson Estates affected rights tied to ownership of real property and would bind future property owners, and thus the lis pendens fulfilled the purposes of § 12-1191(A) by providing notice to anyone affected by the outcome, or innocent third parties who might acquire interest in the real property at issue.  Under the Court’s reading of Tucson Estates, “a lawsuit affects a right incident to title if any judgment would expand, restrict, or burden a property owner’s rights as bestowed by virtue of that title.”

The Court found that Santa Fe’s lawsuit did not fall within its narrow reading of Tucson Estates, because any judgment against Bartschi would not have affected rights incident to her title, which was already burdened by the CC&Rs.  Moreover, the Court noted that the purpose of the lis pendens statute was not satisfied because any judgment would have been personal to Bartschi, and would have had no effect on future interest-holders. 

The Court also rejected Santa Fe’s contention that the action affected title to real property because it could have resulted in the imposition of a lien.  It cited Coventry Homes, Inc. v. Scottscom P’ship, 155Ariz. 215, 745 P.2d 962 (App. 1987), for the proposition that merely asking for the imposition of a lien does not affect title to real property, there must be a basis for such a lien.  Because no such basis existed – Bartschi had not failed to comply with any injunction – the lis pendens was premature.

Finally, the Court affirmed the trial court’s finding that Santa Fe knew or had reason to know that its recordation of the lis pendens was groundless and that Bartschi was therefore entitled to recover damages, fees, and costs under A.R.S. § 33-420(A).  The Court, however, vacated the trial court’s award of attorneys’ fees because that award included fees Bartschi incurred defending against Santa Fe’s complaint, which was distinct from Bartschi’s counterclaim.  On appeal, attorneys’ fees were awarded to Bartschi.

Judge Timmer authored the opinion; Presiding Judge Johnsen and Judge Thompson concurred.