Can Foreign Court Impose Equitable Lien or Constructive Trust On Florida Homestead?
I have previously written on this blog about out-of-state courts trying to stop debtors from evading money judgments by moving to Florida and buying a house. Judges in other states are issuing orders imposing an equitable lien or a constructive trust on the debtor's Florida house in favor of the creditor on the theory that the debtor has "fraudulently" used money owed to the creditor to buy a Florida homestead. A recent opinion by a Florida bankruptcy judge explains Florida law's requirements to impose a constructive trust and equitable lien on Florida real estate.
The Florida court pointed out that an equitable lien may be imposed only to capture money that was obtained through fraud or egregious conduct. The fact that money was rightfully obtained and then used for improper purpose is not enough to impose an equitable lien. The court points out that an equitable lien on homestead is not warranted when a debtor uses money lawfully obtained to buy an exempt asset for the purposes of avoiding and defrauding creditors.
A constructive trust requires the plaintiff to demonstrate four elements: a promise from defendant to plaintiff, a transfer of property based on the promise, a confidential relationship, and the defendant's unjust enrichment. These four elements are rarely found in a debtor's use of non-exempt assets to purchase a Florida homestead.
This ruling indicates that out-of-state court orders which attempt to impose an equitable lien or a constructive trust of recently acquired Florida homesteads will should not impair title to the debtor's homestead absent a judgment based on common law fraud.
2006 WL 3913440
posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida
I have an interesting question. My wife in 12/2002 took care of her mother until she passed away in 10/2004. None of her other relatives(sister,niece,nephew) took care her mother except for five days the niece spelled my wife in May 2003. In June 2004, her mother based upon the advice of her accountant and also another best friend decided to sign over her house to my wife. Her mother's attorney changed the trust and signed over the home to my wife witnessed and notarized by her attorney and witnessed by her best friend who is also a notary and a neighbor from across the street. This change was to be upon her death. They all stated that she was of sound mind at the time of signing. She later changed her trust concerning some other financial matters which that is another subject for another day. The day after her mother passed away the trust attorney quit claimed the deed to my wife. I am asking that since everything was done in the proper legal manner, does not my wife have a valid homestead on the day after her death since she had a Florida drivers license and voter registration at the time of her death. That home should not then be part of the trust. There is a dispute of the monies in the trust and an undue influence and accounting issues with the other family members. I am not a part of the lawsuit. If you have any case studies I would appreciate.
To PJ: Normally, I would say your wife does not deserve to be enriched simply for taking care of her ailing mother. Inheritance by children should ethically be based on blood relationship and not as a reward for specific performance of familial duties, but if she was the only child, then she should be the only heir. Sisters and nieces are not part of the inheritance chain unless the decedent has no children or the decedent specifically bequeathed them.