Equitable Lien Against Wife's Homestead Purchased By Husband With Proceeds Of Husband's Fraud?
The Florida Constitution’s homestead protection does not exempt and protect homes acquired or improved with funds obtained by fraud or other egregious acts. Homestead protection is not available to bad people who have done bad things to get money, and who have invested their ill-gotten money in their homestead. Creditors can get an equitable lien on the debtor’s homestead to the extent the debtor purchased or improved the homestead with money obtained through fraud or egregious conduct.
I encountered a case where a man defrauded some investors for about $500,000. After the got the money he got married. His wife was ignorant of the husband’s fraud; she had nothing to do with the investors. The husband and wife moved to Florida and purchased a homestead using the $500,000 proceeds procured through the husband’s wrongdoing. The husband died, and his wife inherited the homestead. The investors sued the husband’s estate and got a judgment. The investors tried to impose an “equitable lien” on the homestead because it was purchased with proceeds of fraud and other egregious acts of the husband.
The question is whether the creditors can impose an equitable lien upon the wife’s homestead inasmuch as the wife was not involved in her husband’s wrongdoing. My initial review of the law suggests that the creditors can impose an equitable lien on the homestead of the innocent spouse. Even if the wife did nothing fraudulent she was still unjustly enriched through the husband’s actions and is not in a position to benefit from her husband’s acts through homestead protection. If the wife put any of her own money into the house she would probably be permitted to recover her equity. I think a court would permit a creditor to foreclose an equitable lien and force the spouse out of the homestead.
