Court Opinion

ID: 9468916
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:26:45.697572+00
Date Added: 2024-06-11T17:41:06.946367
License: Public Domain

JAMES HUNTER, III, Circuit Judge,
concurring:
In this appeal we are asked to examine the constitutionality of the New Jersey lis pendens statute.1 The district court invalidated the statute as an unconstitutional deprivation of property rights by the state without due process of law. The majority has reversed that decision and has upheld the statute as complying with due process. I write separately because I do not believe that the appellees were deprived of a constitutionally protected right. While my view would not require reaching the question of state action, I discuss it because it was reached by the district court and by Judge Sloviter. I would find state action to be lacking in this case. I would not reach the due process analysis except to note my disagreement with the analysis of the district court. For the reasons that follow, I concur in the judgment of the majority reversing the decision of the district court.
A. Whether the Lis Pendens Constitutes a “Taking. ”
The history of the doctrine of lis pendens has been set forth in careful detail by Judge Sloviter. At common law, the filing of a suit affecting property imparted constructive notice of that suit to the whole world. A purchaser who acquired the property during the pendency of the action took subject to the outcome of the litigation. See Haughwout & Pomeroy v. Murphy, 22 NJ.Eq. 531, 544 (N.J.1871); Wendy’s of South Jersey, Inc. v. Blanchard Management Corp., 170 N.J.Super. 491, 496-97, 405 A.2d 1337, 1339-40 (Ch.Div.1979). Restrictions on the alienability of property, property which was the subject of litigation, arose from the filing of the suit itself.
The fiction of imputing knowledge of pending litigation to an innocent purchaser resulted in hardship and injustice. To remedy that problem, in 1902 the New Jersey legislature adopted the predecessor to its current lis pendens statute. The statute altered the common law by providing for the actual filing of a notice of lis pendens. N.J.Stat.Ann. § 2A:15-6 (West) (1952). As a result, a purchaser could easily determine whether the property was the subject of litigation. Even if he did not, the statute bound the purchaser to constructive knowledge of the lawsuit. N.J.Stat.Ann. § 2A:15 — 7 (West) (1952).
The enactment of the statute did not change the basic nature of the doctrine of lis pendens. Both before and after the statute was enacted, a purchaser of property took that property subject to the outcome of pending litigation. It remained the litigation, and not the notice, that prevented the unencumbered transfer of property. The statute eliminated the harshness that resulted from application of the common law doctrine of constructive notice.
Appellees concede that the lis pendens statute applies under the facts of this case. See Polk v. Schwartz, 166 N.J.Super. 292, 399 A.2d 1001 (App.Div.1979). In fact, the essence of appellees’ contention is that the statute works too well and that its property has been taken. The basic inquiry then *1335must be whether the statute acts to deprive appellees of a constitutionally protected right. If it does not, procedural due process guarantees are not implicated and our inquiry is ended.
Judge Sloviter’s opinion fully explains the effect of the statute: the statute sets forth the required contents of the notice of the litigation; 2 it provides for constructive notice to the world of pending litigation;3 it provides for the discharge of the notice of lis pendens if the underlying action is not prosecuted diligently;4 it allows discharge of the lis pendens after the passage of three years;5 it allows the court to discharge the notice if defendant posts sufficient security with the court; 6 and finally, it allows the discharge of a lis pendens when a judgment is entered for defendant,7 a judgment for plaintiff is paid or settled, or the action is settled or abandoned.8
To me, however, the answer to the question before us (i.e., whether there has been a deprivation of a constitutionally protected right) is best seen from an analysis of what the filing of the lis pendens did not do with respect to the Edison property. There was no deprivation of possession or of any manner of use or enjoyment of the realty. Profits earned from Fedders’ operations remained in the exclusive possession of Fed-ders. Fedders was (and remains to this day) free to sell the property. In spite of this, the district court ruled that “the filing of a lis pendens is a taking of property,” and that there had been a taking of “something of worth” since Fedders could not convey free of plaintiff’s claims. 519 F.Supp. at 1260.
I disagree with the conclusion of the trial court that the lis pendens effected a taking. The fact is that if “something of worth” was taken, it was taken by the suit itself. It is no doubt true that a prospective purchaser would be made cautious by the notice of lis pendens, but that purchaser would be no more cautious than if he had obtained notice of the Chrysler suit by any other means. It is the underlying claim and not the notice that would make a buyer cautious. The statute acts only to provide a means by which a potential purchaser can be assured of actual notice of a claim. Under the traditional doctrines of notice and bona fide purchaser, a buyer with notice of Chrysler’s claim would — even without the lis pendens — take subject to the equities Chrysler asserts. Wood v. Price, 79 N.J.Eq. 620, 622, 81 A. 983, 984 (N.J.1911). The statute merely replaced the common law fiction of constructive notice with a more realistic means of ensuring actual notice. N.J.Stat.Ann. § 2A:15-8 (West) (1952).
Appellees ask this court to find that for all “practical” purposes, they cannot sell their property because of the lis pendens. In this regard they submit the affidavit of a title expert who states that during the pendency of a filed lis pendens, a title insurance company would not insure title without an exception for the claim of which the lis pendens is notice. Appellees’ argument is not compelling. This is the same treatment afforded by title companies to easements, restrictive covenants and liens such as mortgages. The title company does not effect a “taking” by making these exceptions.9
Thus, if there is a taking at all in this case, it results not from the operation of the lis pendens statute, but from the doctrine that any purchaser with notice takes the property subject to the underlying claim. We must ask, then, whether Fedders has the right to convey its property clear of *1336Chrysler’s claims. If such a right exists, and, as Fedders asserts, the pending litigation prevents it from exercising that right, then we would be compelled to hold that the mere institution of litigation constitutes a “taking” of “something of worth.” A holding to that effect would be tantamount to stating that the owner of real estate has either a constitutional right not to be sued at all if the suit concerns real estate, or a constitutional right to sell that real estate as if there were no litigation, even though interests in the property were disputed and in the process of being adjudicated. No such rights exist. See Wood v. Price, 79 N.J.Eq. 620, 81 A. 983 (N.J.1911); Wendy’s of South Jersey, Inc. v. Blanchard Management Corp., 170 N.J.Super. 491, 406 A.2d 1337 (Ch.Div.1979).
Appellees do not ask us to go so far. They ask us only to strike the statute so that it can be modified by the legislature. Appellees contend that, as now worded, the statute gives plaintiffs unfair leverage: by filing a suit and a corresponding notice of lis pendens, plaintiffs can encumber .a defendant’s property for up to three years— virtually forcing a favorable settlement with the property owner.
Certainly appellees cannot claim that a meritorious suit gives a plaintiff unfair leverage. As discussed, a property owner has no right to be free from the burdens imposed by such a claim. To the extent that leverage is obtained by the filing of a meritorious suit, such leverage is not unfair. Indeed, meritorious claims have the natural and desirable effect of inducing settlements in all types of litigation.
If, on the other hand, the underlying claim is frivolous, the property owner has numerous adequate remedies. The statute allows a lis pendens to be discharged for failure to prosecute diligently, for good cause or by summary judgment. Further, the property owner can remove the lis pen-dens by posting a bond or other security with the court. Finally, appellees have the right to sue for malicious prosecution and abuse of process.
This comprehensive scheme of protecting an individual’s property rights has led most courts that have considered this issue to find that no “taking” results from the filing of a lis pendens. See, e.g., Batey v. Digirolamo, 418 F.Supp. 695 (D.Hawaii 1976); Debra 1 Realty, Inc. v. DiChiara, 420 N.E.2d 343 (Mass.Sup.J.G.1981); George v. Oakhurst Realty, Inc., 414 A.2d 471 (R.I.Sup.Ct.1980); Empfield v. Superior Court, 33 Cal.App.3d 105, 108 Cal.Rptr. 375 (1973). Each of the statutes reviewed was essentially the same as the New Jersey statute. Appellees cite only one decision in which a state lis pendens statute was held unconstitutional. Kukanskis v. Griffith, 180 Conn. 501, 430 A.2d 21 (1980).10 The Connecticut court in Kukanskis and the district court in this case followed the line of cases beginning with Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), and including Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972) and North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975). Each of these cases involved the complete deprivation of a property owner’s use and possession of personal property. There is no such deprivation here. Reliance on these cases is therefore inappropriate.
Appellees’ reliance on a line of cases holding non-possessory prejudgment real estate attachments unconstitutional is similarly misplaced. In Winpenny v. Krotow, 574 F.2d 176 (3d Cir. 1978), we ruled that the Pennsylvania Municipal Claims and Tax Liens Act, which permitted a municipality to create a lien on an individual’s property by filing a claim without a prefiling hear*1337ing, is not unconstitutional,11 contrary to Terranova v. Avco Financial Services of Barre, Inc., 396 F.Supp. 1402 (D.Vt.1975) (prejudgment real estate attachment unconstitutional as violative of due process). Even assuming that we would not follow Winpenny, the non-possessory real estate attachment cases are inapplicable to the issue before us. In each of the cases cited by appellees,12 the attachment acted to create a right in property which did not previously exist, whereas a lis pendens creates no rights in property.
The decision in Spielman-Fond, Inc. v. Hanson’s, Inc., 379 F.Supp. 997 (D.Ariz.1973) (three-judge court) (per curiam), aff’d mem., 417 U.S. 901, 94 S.Ct. 2596, 41 L.Ed.2d 208 (1974), provides clear support for the view that there was no deprivation here. In Spielman-Fond, a mechanic’s lien, which left the property owner with the use, possession and ability to alienate the realty, was held not to take or deprive the owner of its property. Appellees contend that, because a mechanic’s lien is based upon an implied underlying agreement between the parties, Spielman-Fond is distinguishable from the instant case. Appellees can cite no case involving real estate which has distinguished Spielman-Fond on these grounds. Further, our holding in Winpenny, and the Ninth Circuit’s holding in In re Northwest Homes of Chehalis, Inc., 526 F.2d 505 (9th Cir. 1975), cert. denied, 425 U.S. 907, 96 S.Ct. 1501, 47 L.Ed.2d 758 (1976),13 undercut any such distinction. The non-possessory real estate attachment cases cited by appellees are inapposite for the reasons discussed above.
The operation of the lis pendens statute in this case has taken nothing from Fedders other than the ability to convey its property free from the claims asserted by Chrysler— something it has no right to do. As I conclude that there has been no taking, I would reverse. As it is not necessary for me to discuss state action and due process, I would avoid the consideration of those constitutional questions. See Halderman v. Pennhurst State School & Hospital, 612 F.2d 84, 94 (3d Cir. 1979) (en banc), rev’d on other grounds, 451 U.S. 1, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981).
B. Whether There is State Action.
The district court, without discussion, referred to “the state action of the county clerk filing the notice of lis pendens.” 519 F.Supp. at 1260. Judge Sloviter has analyzed this issue and found that state action exists. I disagree.
In Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1978), the Supreme Court held that state action does not exist by virtue of a state statute which permits a warehouseman to enforce a lien for storage charges by a sale of the stored goods. The adoption of a system of rights and remedies does not in and of itself constitute state action. The Supreme Court distinguished the line of cases dealing with state action under creditor-remedy statutes on the ground that the facts in Flagg Bros. showed a lack of “overt official involvement.” 436 U.S. at 157, 98 S.Ct. at 1734. The Court went on to say:
This situation is clearly distinguishable from cases such as North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601 [95 S.Ct. 719, 42 L.Ed.2d 751] (1975); Fuentes v. Shevin, 407 U.S. 67 [92 S.Ct. 1983, 32 L.Ed.2d 556] (1972); and Sniadach v. Family Finance Corp., 395 U.S. 337 [89 S.Ct. 1820, 23 L.Ed.2d 349] (1969). In each of those cases a government official participated in the physical deprivation of *1338what had concededly been the constitutional plaintiff’s property under state law before the deprivation occurred. The constitutional protection attaches not because, as in North Georgia Finishing, a clerk issued a ministerial writ out of the court, but because as a result of that writ the property of the debtor was seized and impounded by the affirmative command of the law of Georgia. The creditor in North Georgia Finishing had not simply sought to pursue the collection of his debt by private means permissible under Georgia law; he had invoked the authority of the Georgia court, which in turn had ordered the garnishee not to pay over money which previously had been the property of the debtor. See Virginia v. Rives, 100 U.S. 313, 318 [25 L.Ed. 667] (1880); Shelley v. Kraemer, 334 U.S. 1 [68 S.Ct. 836, 92 L.Ed. 1161] (1948).
436 U.S. at 160-61 n.10, 98 S.Ct. at 1735-36 n.10 (emphasis added).
In this case, the county clerk took the notice of lis pendens and filed it, in accordance with the statute. The clerk exercised no discretion; the filing of the notice was, as in Flagg Bros., a purely ministerial act. I see no difference between the extent of state involvement here and that which we found insufficient for purposes of state action in Gibbs v. Titelman, 502 F.2d 1107 (3d Cir.), cert. denied, 419 U.S. 1039, 95 S.Ct. 526, 42 L.Ed.2d 316 (1974). There, the ministerial acts of the clerk involved the issuance of a certificate of ownership. We held that such minimal involvement by the state does not transform an essentially private transaction into a state action. This position was reaffirmed in Parks v. “Mr. Ford”, 556 F.2d 132, 141 (3d Cir. 1977) (en banc).
The filing of the ,lis pendens creates no substantive rights in any party; therefore, no rights are created or denied by the actions of the clerk. In fact, neither the lis pendens statute nor any other law compels the filing of the lis pendens. Filing is not a prerequisite to the institution or maintenance of the suit. The powers of the sovereign are not invoked, nor is its authority used to affect property rights. The action remains private, not public; it involves only private parties and privately owned realty. The state merely acquiesces. As the Supreme Court stated in Flagg Bros., “[t]his court . . . has never held that a State’s mere acquiescence in a private action converts that action into that of the State.” 436 U.S. at 164, 98 S.Ct. at 1737.
For these reasons I would find no state action present here. To me, neither the enactment of the statute nor the filing of the lis pendens by the county clerk implicates the procedural due process guarantees upon which the decision of the majority rests.
C. Whether the Procedure Under the New Jersey Lis Pendens Statute Complies with Due Process.
I agree with the views set forth in the majority opinion to the extent that they do not contradict the analysis I have set forth above regarding the lack of a deprivation of a constitutionally protected right. If it were necessary to reach the issue, I would hold that the New Jersey lis pendens statute comports with the due process guarantees of the Fourteenth Amendment.'
For the foregoing reasons, I concur in the judgment rendered by the majority, reversing the decision of the district court and holding the New Jersey lis pendens statute to be constitutional.

. N.J.Stat.Ann. § 2A:15-6 to 17 (West) (1952). The text of the statute is set forth in the Appendix to the majority opinion.

. N.J.Stat.Ann. § 2A:15-6 (West) (1952).

. N.J.Stat.Ann. § 2A:15-7 (West) (1952).

. N.J.Stat.Ann. § 2A:15-10 (West) (1952).

. N.J.Stat.Ann. § 2A-.15-11 (West) (1952).

. N.J.Stat.Ann. § 2A:15 15 (West) (1952).

. N.J.Stat.Ann. § 2A:15-14 (West) (1952). 7.

. N.J.Stat.Ann. § 2A:15-17 (West) (1952).

. I do not mean to suggest that there are no differences between these latter rights in property and a lis pendens. I state only that the exception of a lis pendens from a title insurance policy is neither an extraordinary event nor evidence of a taking.

. Appellees also cite Lake Tulloch Corp. v. Dingman, No. WEL 27140 (Cal.Super.Ct, L.A. Co., June 1, 1973), aff'd sub nom. Dingman v. Superior Court, 2 Civ. 42127 (Cal.Ct.App., 2d Dist., July 17, 1973). While the Superior Court in Dingman.held the California lis pendens statute to be violative of the Fourteenth Amendment, the Appellate Division affirmed without commenting on the constitutional issue involved therein. It should be noted that the California statute was upheld as constitutional in Empfield v. Superior Court, 33 Cal.App.3d 105, 108 Cal.Rptr. 375 (1973).

. In addition, see In re Northwest Homes of Chehalis, Inc., 526 F.2d 505 (9th Cir. 1975), cert. denied, 425 U.S. 907, 96 S.Ct. 1501, 47 L.Ed.2d 758 (1976) (prejudgment attachment of real estate which did not deprive the property owner of use or possession was not unconstitutional).

. In addition to those cases which have been noted in the majority’s opinion, appellee cites Briere v. Agway, Inc., 425 F.Supp. 654 (D.Vt.1977), and United States General, Inc. v. Arndt, 417 F.Supp. 1300 (E.D.Wis.1976) (three-judge court).

. See note 11 supra.