Jed Spectrum v. Stoakes: South Dakota Adopts a Subjective “Actual Malice” Standard for Slander of Title and Limits SDCL 44‑9‑22 to Liens “In Fact” Satisfied

Court: Supreme Court of South Dakota | Date: July 2, 2025 | Citation: 2025 S.D. 31

Introduction

This decision reshapes South Dakota slander of title law in the mechanics’ lien context. In a dispute arising from excavation work and a proposed shared-well arrangement for a residential build, the Supreme Court of South Dakota reverses slander of title judgments entered against Bighorn Construction, LLC (Bighorn) and JED Spectrum, Inc. (JED), and clarifies the governing legal standard. The Court expressly adopts a subjective “actual malice” requirement—knowledge of falsity or reckless disregard (serious doubts) about falsity—for slander of title claims, replacing prior ambiguity that mingled subjective and objective tests such as “reasonable grounds.” The Court also narrows the application of SDCL 44‑9‑22, holding it applies only when a lien has “in fact been satisfied” within SDCL 44‑9‑21.

The parties, Keith Stoakes (homeowner), Bighorn (contractor), and JED (well-system owner), litigated competing claims after Bighorn and JED filed mechanics’ liens against Stoakes’s property. The circuit court invalidated JED’s lien, refused Bighorn’s lien foreclosure, awarded Stoakes substantial slander of title damages for an alleged lost refinance opportunity, and later denied Stoakes’s promissory estoppel claim (related to an oral shared-well promise). On appeal, Bighorn and JED challenged slander of title liability and damages; Stoakes, by notice of review, challenged the denial of promissory estoppel and associated fees.

This opinion is significant for construction lien practice, title litigation, and defamation-adjacent torts: it harmonizes South Dakota slander of title with the “actual malice” framework from defamation law, retools the elements, and clarifies when lienholders must issue satisfactions under SDCL 44‑9‑21/22.

Summary of the Opinion

Slander of title reversed: The Court holds the record does not support a finding that Bighorn or JED filed their liens with actual malice—i.e., with knowledge of falsity or in reckless disregard of truth (serious doubts). Invalidity or untimeliness of a lien is not enough; plaintiffs must prove the lienor subjectively knew or doubted its truth and intended harm.
SDCL 44‑9‑22 inapplicable: The statutory penalty for failing to execute a lien satisfaction within 10 days (SDCL 44‑9‑22) applies only when the lien has “in fact been satisfied” as defined in SDCL 44‑9‑21 (by payment, foreclosure, compromise, or other method). Because Bighorn never negotiated the “lien waiver check” and thus was not paid, the lien was not satisfied; JED had no payment at all. The circuit court erred in using 44‑9‑22.
Promissory estoppel denied: The Court affirms the circuit court’s ultimate denial of Stoakes’s promissory estoppel claim against JED. Stoakes failed to show substantial economic detriment: he never paid the $24,000 “buy-in” for shared-well ownership, and awarding him the cost of a separate well would be inequitable.
Attorney fees: The Court affirms Stoakes’s attorney fee award of $33,394.20 under SDCL 44‑9‑42 (prevailing party fees in mechanics’ lien actions), notwithstanding the reversal on slander of title, and denies Stoakes’s request for appellate attorney fees.
Damages present-value issue moot: Because slander of title is reversed, the Court does not reach whether the circuit court erred by not discounting future damages to present value.

Detailed Analysis

1) The Court’s Reframed Slander of Title Standard

The Court acknowledges that prior South Dakota decisions, particularly Gregory’s, Inc. v. Haan, 1996 S.D. 35, 545 N.W.2d 488, and Brown v. Hanson, 2011 S.D. 21, 798 N.W.2d 422, left ambiguity about the mental state required for slander of title, mixing subjective “actual malice” concepts with objective “reasonable grounds” language. Drawing from the Restatement (Second) of Torts §§ 623A and 624 and Prosser & Keeton’s torts treatise, the Court resolves the inconsistency and aligns slander of title with defamation’s “actual malice” doctrine:

New clarified elements (modifying Gregory’s four-part test and separating malice as element one):
1. The publisher knew of, or recklessly disregarded, the falsity of the publication (actual malice—serious doubts about truth).
2. The publication was derogatory to the property title/quality or to plaintiff’s business and was calculated to interfere with dealings (intentionality, not mere foreseeability).
3. The publication was communicated to a third party.
4. The publication materially or substantially induced others not to deal with the plaintiff.
5. The publication resulted in special damages.
Actual malice is subjective: “Reckless disregard” turns on whether the publisher actually had serious doubts as to truth—not on what a reasonable person should have known.
Conditional privilege folded into malice: Because the malice element is demanding, the Court dispenses with separate, freestanding privilege analysis in lien cases; proof of actual malice defeats any conditional privilege.

In so doing, the Court expressly disavows negligence-style standards (“no reasonable grounds,” “should have known”) for slander of title liability in South Dakota.

2) Precedents and Authorities That Shaped the Decision

Gregory’s, Inc. v. Haan, 1996 S.D. 35, 545 N.W.2d 488:
- Earlier South Dakota precedent that articulated elements and recognized a conditional privilege for filing liens, but blended inconsistent “good faith,” “reasonable belief,” and “reckless disregard” formulations.
- This opinion clarifies Gregory’s by elevating the subjective “knowledge or reckless disregard” standard and repositioning privilege as subsumed in malice.
Brown v. Hanson, 2011 S.D. 21, 798 N.W.2d 422:
- Quoted Gregory’s but did not resolve the subjective/objective tension; relied on a finding that the filer “maliciously filed.”
- Jed Spectrum provides the missing doctrinal clarity.
Defamation cases: Tibke v. McDougall, 479 N.W.2d 898 (S.D. 1992); Kieser v. Southeast Props., 1997 S.D. 87, 566 N.W.2d 833; Janklow v. Viking Press, 459 N.W.2d 415 (S.D. 1990), overruled on other grounds; Harvey v. Regional Health Network, 2018 S.D. 3, 906 N.W.2d 382.
- Provide the “serious doubts” actual malice standard and emphasize subjective awareness of probable falsity.
Restatement (Second) of Torts §§ 623A, 624 and Prosser & Keeton, § 128:
- Propose liability for injurious falsehood based on knowing or reckless falsehood, not negligence; the Court embraces this approach.
SDCL 44‑2‑9 versus SDCL ch. 44‑9:
- Gregory’s already held SDCL 44‑2‑9 (personal property liens) is inapplicable to Chapter 44‑9 mechanics’ liens. The circuit court improperly imported SDCL 44‑2‑9 language (“reasonable grounds” and “willfully made false substantial statement”) into the real property lien context—error reaffirmed here.

3) The Court’s Application to This Case

a) Bighorn’s lien

Bighorn invoiced $31,728.61 (after negotiating down from $42,674) for excavation and related work. Pennington Title issued a check stamped “THIS IS A LIEN WAIVER CHECK.” Bighorn refused to cash it, fearing it would waive other claims (notably the $24,000 shared-well “buy-in”). Bighorn then filed a lien.

The circuit court found Bighorn had “no reasonable grounds” to file because Stoakes tendered full payment. The Supreme Court rejected this objective framing. The record contained no evidence that Jerry (Bighorn’s owner) subjectively knew the lien was false or harbored serious doubts about its validity; his refusal to cash a lien-waiver-stamped check, his stated belief that acceptance might waive other claims, and his use of counsel all undermined a finding of malice. The Court reversed slander of title as to Bighorn.

b) JED’s lien

JED claimed $24,000 for Stoakes’s one-fifth share of a shared-well system; Stoakes briefly connected and drew water, but the parties never finalized a written agreement. The circuit court had already invalidated JED’s lien (untimely and insufficiently itemized). But invalidity is not malice. The Supreme Court held the record showed at most a genuine contractual dispute, not subjective knowledge of falsity or serious doubts at the time of filing. The slander of title judgment against JED was reversed as well.

4) SDCL 44‑9‑21 and 44‑9‑22: Satisfaction and Penalties

SDCL 44‑9‑21 requires a creditor to execute and deliver a satisfaction when a recorded lien is “afterward satisfied by payment, foreclosure, compromise, or other method.” SDCL 44‑9‑22 imposes damages, costs, fees, and a $100 penalty if the lienholder fails to deliver such satisfaction within 10 days after written demand, “when such lien has in fact been satisfied.”

The Court held the statutory trigger was absent here:

Bighorn: No payment was made; the “lien waiver check” was never negotiated. Without satisfaction “in fact,” 44‑9‑22 did not apply, notwithstanding Stoakes’s demand to release.
JED: No payment at all; 44‑9‑22 plainly inapplicable.

Bottom line: 44‑9‑22 liability arises only after actual satisfaction under 44‑9‑21. A tendered but uncashed “lien waiver check” does not satisfy a lien.

5) Promissory Estoppel

Stoakes claimed JED promised shared-well access and a one-fifth ownership interest for $24,000. Although the circuit court’s initial findings suggested an oral agreement existed, it later denied relief. The Supreme Court affirmed the denial of promissory estoppel, emphasizing:

No substantial economic detriment: Stoakes never paid the $24,000 ownership payment; he is not worse off than if no promise had been made.
Equity: Awarding him the $62,000 (plus interest) cost of drilling his own well would be inequitable; promissory estoppel is an equitable doctrine.
Doctrinal clarity: Whether there was a “meeting of the minds” is a contract concept; promissory estoppel does not require it. The claim fails on detriment and equity, not formation.

6) Attorney Fees and Damages

Attorney fees affirmed: The Court affirmed $33,394.20 in fees to Stoakes under SDCL 44‑9‑42 (which allows fees and expenses in mechanics’ lien litigation), even though slander of title was reversed and 44‑9‑22 was misapplied. Appellants did not ask the Supreme Court to reduce the fee award; the remaining statutory basis (44‑9‑42) sufficed.
Future-damages present value: Because slander of title failed, the Court did not reach whether the trial court erred in not discounting the alleged long-term interest-rate differential to present value.

Impact and Practical Implications

A. Litigation Strategy in Slander of Title

Higher plaintiff burden: Plaintiffs must now produce evidence of the filer’s subjective state of mind—emails, testimony, admissions, or circumstantial proof showing the filer knew the lien was false or actually had serious doubts—plus intent to interfere (“calculated” harm). Mere invalidity, untimeliness, or lack of itemization is not enough.
Privilege folded into malice: Courts need not separately analyze conditional privilege. The malice element does the work: if actual malice is proven, any privilege is defeated; if not, the claim fails.
Summary judgment posture: The subjective standard will often preclude quick plaintiff victories; conversely, lienors may obtain summary judgment absent evidence of knowledge or serious doubts.

B. Mechanics’ Lien Practice

Advice of counsel matters: Consulting counsel before filing and documenting the basis for the amount claimed can rebut malice.
“Lien waiver checks”: A stamped check is not payment until negotiated. If a lienor reasonably fears that endorsing a “lien waiver” instrument might waive other claims, refusal to cash—without more—will not itself support malice or a 44‑9‑22 penalty. Parties should use formal, partial lien waivers aligned to precise amounts and phases of work.
Demand for satisfaction: Before demanding a statutory satisfaction under 44‑9‑22, owners should assess whether the lien has “in fact been satisfied” under 44‑9‑21. Otherwise, the statutory penalty claim will fail.
Scope of lienable work: The Court flagged, but did not decide, whether costs for a shared-well system beneficial to the property fall within SDCL 44‑9‑1 (improvement, development, or operation). Expect future litigants to test lienability of shared infrastructure.

C. Damages Theories

Lost refinancing and rate differentials: The circuit court’s damages model—lost chance to convert to a lower-rate permanent mortgage—illustrates potential “special damages” in slander of title. But after this decision, such damages will be recoverable only if actual malice is proven.
Present-value discounting: Though unresolved here, future damages for long-term interest differentials may require present-value reduction in appropriate cases.

D. Promissory Estoppel in Construction Contexts

Substantial detriment is critical: Without an actual outlay or comparable economic change to one’s position, promissory estoppel will fail. Simply not receiving the promised benefit—when the reciprocal payment was never made—does not constitute substantial economic detriment.
Contract vs. equity: Courts will not award equitable damages that give a claimant a windfall relative to the unperformed exchange.

Complex Concepts Simplified

Slander of title: A tort where someone publishes a false statement disparaging someone else’s property rights, causing financial loss. In lien cases, it often involves filing a false or invalid lien that frustrates sales or financing.
Actual malice: Not personal ill-will. It means the filer knew the statement was false or had serious doubts about its truth and published anyway. This is a subjective test focused on the filer’s state of mind at the time.
Conditional privilege (in lien filings): Historically a defense recognizing that filing a lien can be privileged. After this case, plaintiffs prove malice to defeat any privilege; courts need not conduct a separate privilege analysis.
SDCL 44‑9‑21/22: A lien must be actually satisfied (by payment, foreclosure, compromise, or other method) before the lienholder is legally obligated to deliver a satisfaction and before the penalty in 44‑9‑22 can attach.
“Lien waiver check”: A check stamped with language suggesting acceptance waives lien rights. If not negotiated, it is not payment and does not satisfy a lien. The legal effect of such stamps can be fact-specific; formal written waivers are best practice.
Promissory estoppel: An equitable remedy when someone reasonably and foreseeably relies on a promise and suffers substantial economic detriment. No contract “meeting of the minds” is required, but equity and measurable detriment are.

What the Court Did Not Decide

Burden of proof for actual malice: The Court imported defamation’s “serious doubts” framework but did not expressly state whether malice must be proven by clear and convincing evidence in slander of title cases.
Present-value reduction: Unresolved due to reversal on liability; future cases may address whether rate-differential damages must be discounted.
Lienability of shared infrastructure: The Court noted SDCL 44‑9‑1’s “improvement, development, or operation” language without deciding whether a shared-well cost is lienable against an individual lot.

Conclusion

Jed Spectrum, Inc. v. Stoakes marks a pivotal clarification in South Dakota law. First, it firmly adopts a subjective, defamation-style “actual malice” standard for slander of title, requiring proof that the filer knew or seriously doubted the falsity of the lien and intended to interfere. Negligence, “no reasonable grounds,” or mere invalidity of a lien will not suffice. Second, it narrows SDCL 44‑9‑22 to cases where a lien has “in fact been satisfied” under SDCL 44‑9‑21; a tendered but uncashed lien-waiver check is not satisfaction.

Practically, lien filers who consult counsel, document their basis, and avoid knowingly inflated or unfounded claims reduce exposure to slander of title. Property owners who challenge liens should focus discovery on the filer’s subjective knowledge and intent. In equitable claims like promissory estoppel, substantial, out-of-pocket economic detriment remains the threshold.

By realigning slander of title with actual malice and clarifying the satisfaction-and-penalty regime, the Court brings doctrinal coherence to a recurrent friction point in construction and title practice and sets a more predictable path for litigants in future lien-related disputes.