Grant v. Kahn
198 Md. App. 421, 18 A.3d 91 (2011)
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Rule of Law:
Under the doctrine of equitable conversion, equitable title passes to a buyer upon executing a specifically enforceable real estate contract, preventing a subsequent judgment lien against the seller from attaching to the property. A contract with a financing contingency remains specifically enforceable by the buyer if the contingency is for the buyer's sole benefit and is therefore waivable.
Facts:
- On May 29, 2007, Kareem Grant entered into a contract to purchase a residential property from Jeffrey Ganz.
- The contract contained a financing contingency, giving Grant 45 days to obtain a loan, which he could remove by delivering a specific form.
- The contingency specified that if Grant failed to deliver the form, the contingency would continue, and Ganz would then have the option to give notice to void the contract.
- On July 24, 2007, after the contract was signed but before the closing, Stacy and Steven Kahn obtained a confessed judgment against Ganz, creating a potential lien on his property.
- Grant never delivered the form to remove the financing contingency, and Ganz never exercised his option to void the contract.
- On July 31, 2007, Grant, unaware of the judgment against Ganz, secured a loan for the full purchase price and completed the purchase of the property from Ganz.
Procedural Posture:
- The Kahns filed a Complaint for Confessed Judgment against Ganz in the Circuit Court for Montgomery County, and the court entered judgment against Ganz.
- The Kahns then filed a Request for Writ of Execution by Levy, directing the sheriff to seize the property that Ganz had sold to Grant.
- Grant filed a Motion to Release Property from Judgment Levy in the same circuit court.
- After a hearing, the circuit court denied Grant's motion, effectively allowing the Kahns' lien to attach to the property.
- Grant, as appellant, filed a timely appeal of the circuit court's decision to this intermediate appellate court, with the Kahns as appellees.
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Issue:
Does a judgment lien entered against a property seller attach to the property if it is entered after a sales contract is signed but before a financing contingency, which benefits only the buyer, has been formally removed or satisfied?
Opinions:
Majority - Woodward, J.
No. A judgment lien entered against a seller after a real estate contract is signed does not attach to the property because, under the doctrine of equitable conversion, the buyer becomes the equitable owner at the time the contract is executed. The court reasoned that equitable conversion applies when a contract is specifically enforceable. Here, the financing contingency was for the sole benefit of Grant, the buyer. Because a party can waive a contract provision included for its own benefit, Grant could have waived the contingency at any time and demanded specific performance. Therefore, the contract was specifically enforceable from its execution, vesting equitable title in Grant and leaving Ganz with only bare legal title to which the Kahns' subsequent judgment lien could not attach.
Analysis:
This decision clarifies that a standard financing contingency in a real estate contract does not, by itself, prevent the doctrine of equitable conversion from taking effect. It establishes a key precedent protecting purchasers from the seller's creditors who obtain judgments after the sales contract is signed but before closing. By focusing the analysis on whether a contingency is for the sole benefit of the party seeking enforcement, the court provides a clear framework for future cases and solidifies the buyer's equitable interest from the moment of contracting. This protects the free transferability of real property by reducing the risk for buyers who enter into contracts with common, buyer-centric conditions.
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