## Facts

- A building-materials supplier sold materials to a developer on an open account for residential construction projects; the supplier sometimes also acted as general contractor.
- The parties disputed oral payment terms: the supplier claimed payment was due when homes were “done and enclosed,” while the developer claimed payment was due only after completion and sale.
- The developer also claimed an oral agreement required the supplier to give 30 days’ notice before demanding payment and before filing any materialman’s lien.
- After two homes were sold without payment to the supplier, the supplier filed materialman’s liens against properties associated with the projects.
- The supplier recorded a lien describing multiple lots, including one lot that was undisputedly vacant and unimproved.
- The supplier also recorded a lien against the developer’s personal residence despite conceding it supplied no labor or materials to that property.
- The developer alleged the liens caused lenders to cancel credit lines, triggered buyers’ warranty-of-title suits, and resulted in project losses.

## Issues

1. Whether an alleged oral promise to give 30 days’ notice before payment was due or before liens were filed was barred as an unwritten “extension of credit.”
2. Whether recording materialman’s liens is absolutely privileged against a slander-of-title claim.
3. Whether liens recorded against property to which the lien claimant supplied no labor or materials can support slander of title, given alleged special damages.

## Decision

- The Supreme Court of South Dakota affirmed in part and reversed in part, and remanded.
- The court largely affirmed judgment for the supplier on unpaid-account/lien-enforcement relief tied to properties for which materials were actually supplied.
- The court reversed dismissal of the developer’s slander-of-title counterclaim as to liens recorded on the vacant lot and on the developer’s personal residence.
- The court held lien recordings were not absolutely privileged; at most, they were subject to a qualified privilege that could be defeated by lack of probable cause, malice, or reckless disregard of the truth.
- Because it was undisputed the vacant lot was unimproved and the supplier provided no labor or materials to the personal residence, summary judgment was improper on slander of title for those filings.

## Legal Principles

- An oral agreement requiring notice or forbearance before enforcing an existing debt may be treated as a term governing enforcement rather than a new “extension of credit” requiring a writing.
- Slander of title requires a false publication concerning title, made with the required culpability (malice or reckless disregard), that causes special damages.
- Recording a mechanic’s/materialman’s lien is not absolutely privileged in slander-of-title actions; the protection is, at most, a qualified privilege conditioned on good faith and probable cause.
- Filing a lien against property to which no labor or materials were furnished can constitute a false publication and may support slander of title when special damages are shown.

## Conclusion

The court allowed the supplier’s recovery for unpaid materials connected to improved properties to stand, but held that wrongful lien recordings are not absolutely immune from liability and remanded for further proceedings on slander of title for liens filed against a vacant lot and the developer’s personal residence where no labor or materials were provided.


Gregory’s, Inc. v. Haan, 545 N.W.2d 488 (S.D. 1996)