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7th Circuit Opinion Captures The Essence Of An Indiana Lis Pendens Notice

The recent Seventh Circuit Court of Appeals case in Nat'l Asset Consultants LLC v. Midwest Holdings-Indianapolis LLC 2022 U.S. App. LEXIS 16689 (7th Cir. June 16 2022) did not litigate a lis pendens issue per se. The opinion did, however, comment on the practical impact of an Indiana lis pendens filing.

The dispute began with the filing of a state court case in which the plaintiffs [Sellers] sought to require the defendant [Purchaser] “to perform what [Sellers] described as a contract for the sale of a parcel of land.” Sellers filed a lis pendens notice in connection with the suit. Purchaser later alleged that Sellers attached an altered exhibit to their state court complaint. In an effort to combat that wrong, Purchaser filed a federal court action against the Sellers for fraud and counterfeiting.

In the federal court case, the district judge granted summary judgment for Sellers on the basis that the alleged fraud/counterfeiting had not caused any damage. Sellers thus convinced the district court that there was an absence of injury arising out of the bogus exhibit. Purchaser appealed.

At the 7th Circuit, Purchaser asserted that it had been injured by the very existence of the state court litigation, which made the subject real estate unmarketable by greatly diminishing the potential selling price. The Court rejected the theory, noting that “one page of one exhibit to a complaint” did not affect the value or marketability of the real estate. Rather:

it is the complaint itself, accompanied—as Indiana law requires—by a lis pendens in the real-estate property records. The lis pendens notifies potential buyers that the interests a seller can convey may be subject to the suit's outcome…. [A] lis pendens would have been filed whether or not the page had been altered, so any injury would have been the same.

The Court stated that Purchaser could have asked the state court judge to withdraw the lis pendens notice, but Purchaser apparently had not done so. Thus, the “altered page did not injure anyone, which knocks out any claim for damages” under the statute at issue.

A couple takeaways: (1) an Indiana lis pendens notice is a powerful tool that effectively renders the subject real estate unmarketable during the pendency of the underlying lawsuit and (2) if an owner has an objection to a lis pendens notice, the owner should seek an order lifting the notice.

For more on lis pendens, I have a separate category devoted to the subject.
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Part of my practice involves representing parties in real estate-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

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