Misc. Remedies

Question 1

Constructive Trust

Answer 1

A constructive trust is a restitutionary remedy imposed by the courts to prevent unjust enrichment when a wrongdoer has gained title to property through misappropriation of another’s money or property.

Defendant’s title must be traceable solely to the misappropriated property. If established, the court will force the trustee to convey to the plaintiff title to the misappropriated property or its product. This gives the plaintiff priority over unsecured creditors. The usual equitable defenses are applicable, and transfer to a BFP terminates a plaintiff’s equitable right to the property.

Question 2

Equitable Lien

Answer 2

Imposed on a defendant’s property to secure a debt owed to a plaintiff if the plaintiff demonstrates that the defendant misappropriated plaintiff’s money or property and plaintiff’s property can be traced to property held by the defendant, the retention of which results in unjust enrichment. It gives the holder of the lien priority over other creditors. If the property attached does not satisfy the debt completely, a deficiency judgment may be granted.

Question 3

Equitable Lien vs. Constructive Trust

Answer 3

An equitable lien is appropriate when the property in the defendant’s hands is worth less than plaintiff’s claim, or where misappropriated money is used to improve, not acquire title to, property. (A constructive trust should be used when the defendant holds property worth more than the plaintiff’s claim because the plaintiff will receive the more valuable property.) The usual equitable remedies apply, and transfer to a BFP prevents imposition of an equitable lien.

Question 4

Equitable Mortgage

Answer 4

An equitable mortgage is imposed by a court against a deed absolute when a creditor has received the deed from a debtor solely to secure an obligation and later refuses to reconvey the property upon satisfaction of the debt. Under these circumstances, the courts will treat the deed as a mortgage and force the creditor to

(i) foreclose if the mortgage is unpaid, or
(ii) reconvey if the mortgage is paid.

Question 5

Subrogation

Answer 5

Subrogation permits a person who is required to pay the loss or obligation of another, or to discharge a lien on another’s property, to succeed to the rights of the person paid.