Cannefax v. Clement
170 Utah Adv. Rep. 27, 818 P.2d 546, 1991 Utah LEXIS 131 (1991)
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Rule of Law:
Under the doctrine of equitable conversion, a real property vendor's interest in an executory land sale contract is converted to personal property. Therefore, a judgment docketed against the vendor after the contract is executed does not create a lien upon the real property pursuant to a statute applying liens only to real property.
Facts:
- On August 28, 1981, George and Lila Barker entered into a uniform real estate contract to sell property they owned to Diane Hodge.
- On August 31, 1981, Hodge recorded a notice of the contract.
- In August 1985, Donald and Ruth Clement obtained and docketed a court judgment against the Barkers.
- On September 25, 1985, Hodge paid the full remaining balance on the contract.
- On the same day, the Barkers executed a deed conveying the property to Hodge.
- Also on September 25, 1985, Hodge executed a warranty deed conveying the property to Raymond and Debra Cannefax.
- Following this closing, a title search conducted by a settlement agent revealed the Clements' judgment against the Barkers.
- In 1987, the Clements initiated an execution sale to enforce their purported judgment lien against the property now owned by the Cannefaxes.
Procedural Posture:
- The Cannefaxes filed an action in the trial court to quiet title to the property.
- The trial court granted summary judgment in favor of the Clements, holding that their judgment constituted a lien on the property.
- The Cannefaxes, as appellants, appealed to the Utah Court of Appeals.
- The Court of Appeals reversed the trial court's judgment and ordered it to enter summary judgment in favor of the Cannefaxes.
- The Clements, as petitioners, were granted a writ of certiorari by the Supreme Court of Utah to review the decision of the Court of Appeals.
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Issue:
Does a judgment docketed against a vendor of real property, after the vendor has entered into an executory land sale contract, create a lien upon the vendor's interest in the real property under Utah Code Ann. § 78-22-1, which applies liens to 'real property'?
Opinions:
Majority - Stewart, Justice
No. A judgment docketed against a vendor after an executory land sale contract has been formed does not create a lien on the vendor's interest in the real property. The doctrine of equitable conversion transforms the vendor's interest from real property into personal property—the right to receive the purchase price. Since Utah's judgment lien statute, § 78-22-1, applies only to 'real property,' the lien cannot attach to the vendor's interest. The vendor retains only 'naked legal title' as security for payment, which is insufficient to be considered real property for lien purposes. Public policy supports this conclusion, as a contrary rule would make land sale contracts impracticable by forcing vendees to conduct a title search before every payment and risk double payment or foreclosure.
Analysis:
This decision solidifies the application of equitable conversion in Utah, clarifying the distinct property rights of vendors and vendees in executory land contracts. By treating the vendor's interest as personalty for judgment lien purposes, the court prioritizes the stability and security of land sale contracts, protecting vendees from the vendor's subsequent creditors. This precedent strengthens executory contracts as a viable alternative financing mechanism. It forces judgment creditors to pursue different remedies against a debtor-vendor, such as garnishing the contract payments, rather than executing on the real property being transferred.
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