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SMS Financial, LLC v. CBC Financial Corp.

Supreme Court of Utah

December 27, 2017

SMS Financial, LLC, Appellant,
v.
CBC Financial Corporation and Barton Maybie, Defendants, and Call Center Building, LLC,

         On Direct Appeal Third District, West Jordan The Honorable James Gardner No. 136400004

          Zachary E. Peterson, Salt Lake City, for appellant

          David M. Bennion, Salt Lake City, for appellee

          Justice Himonas authored the opinion of the Court, in which Chief Justice Durrant, Associate Chief Justice Lee, Justice Pearce, and Judge Hyde joined. Having recused herself, Justice Durham did not participate herein; District Court Judge Noel Hyde sat.

          Himonas Justice

         INTRODUCTION

         ¶1 Does the doctrine of equitable conversion operate to protect a buyer of real property's interests in the land from a seller's creditors from the time the buyer's contract is capable of specific enforcement? In a well-reasoned decision, the district court determined that the Real Estate Purchase Contract (REPC) at issue was an executory real estate contract and, as such, it was "subject to the equitable conversion doctrine." Thus, the district court concluded that the seller's creditor was unable to attach a judgment lien to land that the seller had already entered into a REPC to sell. SMS Financial, LLC appeals this judgment, arguing that equitable conversion doesn't apply to noninstallment land sales contracts, or, alternatively, that unfulfilled conditions in the REPC prevented it from being specifically enforceable at the time SMS recorded its judgment.

         ¶2 SMS's arguments are unpersuasive. We agree with the district court's analysis, hold that the doctrine of equitable conversion operates to protect a buyer's interest in the land from the time a land sales contract is capable of being specifically enforced by the buyer and, therefore, affirm the district court's decision.

         BACKGROUND

         ¶3 In October 2012, SMS Financial obtained a judgment against CBC Financial Corporation in a Nevada state court. At that time, CBC owned a piece of real property located in Salt Lake County. SMS domesticated its judgment in Utah's Third District Court on January 16, 2013, but it didn't record an abstract of judgment with the Salt Lake County Recorder's Office, as required by Utah Code section 78B-5-202, until March 4, 2013.

         ¶4 Meanwhile, between the time SMS domesticated its judgment and recorded it, CBC entered into a REPC on February 15, 2013, to sell the Salt Lake County property to Kevin Gates or assigns for $1, 500, 000. Mr. Gates put down $10, 000 in earnest money on February 19, 2013. Mr. Gates subsequently assigned his rights under the REPC to Call Center Buildings, LLC on March 19, 2013.

         ¶5 On March 21 and 26, 2013, Gates or Call Center received title commitments for the property that identified SMS's judgment lien on the property. Despite this, the sale under the REPC successfully closed, and CBC conveyed the property to Call Center by a special warranty deed on March 27, 2013. It wasn't until May 12, 2015 that SMS filed for a writ of execution on its lien against the property. Call Center intervened in the action to protect its right to the property. The district court denied SMS's writ of execution, concluding that the doctrine of equitable conversion applied and that CBC didn't have a property interest at the time SMS recorded its abstract of judgment, preventing the lien from attaching to the property. SMS appeals this determination. We have jurisdiction pursuant to Utah Code section 78A-3-102(3)(j).

         STANDARD OF REVIEW

         ¶6 "We review a grant of equitable relief for an abuse of discretion." Mack v. Utah State Dep't of Commerce, Div. of Sec., 2009 UT 47, ΒΆ 22, 221 P.3d 194. But "[w]e review the underlying ...


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