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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 578 September Term, 2009

NOORIA NOOR v. CENTREVILLE BANK, et al.

Davis, Woodward, Wilner, Alan M. (Retired, Specially Assigned)

JJ.

Opinion by Wilner, J.

__________________________________ FILED: June 3, 2010

On May 9, 2007, appellant entered into a contract with Richland Homes, Inc. to purchase a home at 917 Bargagni Road, in Anne Arundel County. The contract anticipated that Richland would construct a new home on the lot. In fact, the home was nearly completed when the contract was signed, for settlement was set in the contract for July 20, 2007, two-and-a-half months later. The purchase price was $410,000, of which $4,000 was given as a deposit. The contract, which was drafted by appellant's real estate agent, contained an unusual clause that lies at the heart of the principal legal issue presented to us. In the paragraph dealing with "TITLE; POSSESSION," it stated: "Neither legal nor equitable title shall pass until delivery of the deed. Upon payment of the unpaid purchase price at the time of settlement, a special warranty deed shall be executed by Builder, at Buyer's expense." At the time, Richland was indebted to Liberty Savings Bank, which we assume was its construction lender and which held a first deed of trust on the property. It was also indebted to Centreville National Bank by reason of its guaranty of a line of credit the bank had extended to an entity known as RHI Meadow Creek, LLC. That liability was evidenced by a confessed judgment note. The genesis of the dispute before us arose from events that occurred in July 2007. On July 17, Richland obtained from the county a certificate of occupancy for the property, which was the last contingency provided for in the contract. The next day, July 18, Centreville filed a complaint in the Circuit Court for Anne Arundel County against -1-

Richland and others based on its confessed judgment note. On July 19, the clerk recorded a judgment by confession against the defendants in the amount of $3,086,504, and, on July 26, personally unaware of that judgment, appellant went to settlement. She paid $422,752, being the unpaid portion of the purchase price plus expenses allocable to her, of which $260,000 came from the proceeds of a mortgage loan from Branch Banking and Trust Company. From the funds paid by appellant, $348,008 was disbursed to Liberty Savings Bank, in order to discharge its lien on the property, and the balance was paid to Richland. Appellant took possession of the property, and nothing more of significance transpired until January 15, 2009, eighteen months later, when Centreville filed in the confessed judgment case a Request for Writ of Execution by Levy against the property. Noting that the property no longer belonged to Richland (or any other judgment debtor), the court, apparently on its own initiative, entered an order directing Centreville to show cause why a levy should be allowed on the property. Notice was given to appellant who, without objection, was permitted to intervene in order to protect her interest. 1 Appellant's position was that, under the doctrine of equitable conversion, she became the equitable owner of the property, at the latest, on July 17, 2007, when the last

Maryland Rule 2-643(e) sets forth the procedure for a person, other than the judgment debtor, who claims an interest in the property to seek a release of the property from the judgment lien. W hy the court chose to issue a show cause order is not clear. Later in the proceeding, appellant asked the court to treat the show cause proceeding as one under Rule 2-643(e). -2-

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contingency in the contract was resolved and she acquired the right to specific performance of the contract, and that the judgment, entered two days later, therefore could not attach to the property. Centreville countered that (1) the aforecited clause in the contract precluded appellant from obtaining equitable title until the property was actually conveyed to her on July 26, by which time the property was subject to the judgment lien, and (2) even apart from that clause, because the contract expressly limited her remedy in the event of a default by Richland to the return of her deposit, she never acquired a right of specific performance, and, for that reason as well, she never acquired equitable title prior to the entry of Centreville's judgment. The issues before the court were purely legal ones. No material facts were in dispute. During the colloquy between the court and counsel, it was suggested that appellant may have a remedy against her title insurer for not picking up the Centreville judgment, which was of record at the time of closing, but the question of Centreville's entitlement to the writ of execution it sought hinged on whether, by reason of the doctrine of equitable conversion, the judgment had attached to the land prior to the conveyance of legal title to appellant on July 26, 2007. The court concluded that it did, and, on M ay 14, 2009, it entered a judgment to that effect and granted the request for a writ of execution. Because of other funds that had been collected on the judgment, the amount of the levy was $1,170,939.

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During the hearing, counsel for appellant advised the court that, in addition to the defense of equitable conversion , there was a lurking issue of equitable subrogation

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