Copyright

Equitable Lien vs. Constructive Trust

Instructor: Tammy Galloway

Tammy teaches business courses at the post-secondary and secondary level and has a master's of business administration in finance.

In this lesson, we'll define equitable restitution and you'll learn about two different types: equitable lien and constructive trust. We'll also explain two scenarios that distinguish the two types.

Types of Equitable Restitution

Attorney Perez is meeting with two clients today to discuss equitable restitution, which is a form of recompense when the plaintiff has no legal options for injury. Let's explore two types of equitable restitution: equitable lien and constructive trust.

Equity
equity restitution

Equitable Lien

Attorney Perez invites Monique into his office to explain her situation. She mentions that she's been married for 20 years and she and her husband own a property management company. Monique states that they purchased 30 properties over a 15-year period in both of their names. Now that they are divorcing, Monique has found out that none of the properties are in her name. She is disheartened since she financially contributed to the remodeling and upkeep of the properties.

Attorney Perez explains that since Monique doesn't live in a community property state (where spouses automatically receive 50% ownership of property acquired during the marriage), one of their options is an equitable lien. An equitable lien is a claim on property by someone other than the owner when an unpaid debt is owed. In this instance, Monique financially contributed to the properties and should receive at least that amount in the divorce settlement. The courts can order her husband to pay the amount owed and can place an equitable lien on the property for the amount she contributed. If the debt is not satisfied, Monique's husband will be forced to pay Monique prior to receiving any proceeds from the sale of the properties. Attorney Perez tells Monique to think about an equitable lien and to let him know how she wants to proceed in the next day or two. She shakes his hand and then leaves. Afterwards, Attorney Perez calls Alvin into his office.

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