David K. Wilkinson Family Law Blog on Lawyers.com

Court Finds Judgment Creditor Can Reach Debtor's Equitable Interest in Trust

Friday, March 26, 2010 by David K. Wilkinson

In the recent case Fidelity
National Title Insurance Co. v. Schroeder, the Court of Appeals ruled that
a trial court incorrectly ruled that a judgment creditor could not maintain a
resulting trust cause of action against a debtor. A resulting trust cause of action generally
arises when a creditor seeks to show that a debtor fraudulently transferred
property to another person to avoid a debt, and if the creditor can show that
the property transferred is owned for the benefit of the debtor, a resulting
trust attaches to the debtor’s equitable interest in the property.

In this case, a former wife recorded a significant money
judgment for unpaid spousal support against her former husband. Subsequently, the former husband and
long-time cohabitant purchased a property together, and title was taken in both
names as joint tenants. The couple
refinanced several years later, and the title insurer (Fidelity) overlooked the
former wife’s recorded lien. As a
result, Fidelity had to pay the former wife and then filed suit against the
former husband and his cohabitant for unjust enrichment, money paid, and
equitable subrogation. Following the
filing of the suit, the former husband and cohabitant transferred title in
their home to several other persons, for no consideration. Fidelity recorded its abstract of judgment
one month later and then sought declaratory relief against the fraudulent
conveyance, sought a determination that the cohabitant held the home in a
constructive trust for the former husband because they were “putative” spouses,
and finally Fidelity sought a determination that a resulting trust exists
because the deed was designed to shield the former husband’s ownership interest
from his creditors. The Court of Appeals
ultimately held that a judgment lien attaches to all interests in real
property, including equitable interests.

This case is important in family law.

Many times, our attorneys need to pursue all
legal methods to collect on child and spousal support orders which remain
unpaid by the debtor.

Wilkinson & Finkbeiner are divorce lawyers in Orange County practicing in all areas of family law.

Posted at 13:09 PM

Topic: Family Law