Chapter 12 - § 12.2 • EQUITABLE LIENS

• Jurisdiction: Colorado

§ 12.2 • EQUITABLE LIENS

§ 12.2.1—In General

In Colorado, an equitable lien may be created either by a written contract showing an intention to charge property with a debt or obligation, or by a court of equity, out of general considerations of right and justice, as applied to the relations of the parties and the circumstances of their dealings.¹² An equitable lien must be based on established equitable principles.¹³ When imposed to prevent unjust enrichment, an equitable lien is a special and limited form of a constructive trust. Whereas the beneficiary of a constructive trust receives title to the trust property, a plaintiff who obtains an equitable lien obtains merely a security interest in the property held by the defendant and can use that interest to satisfy a claim against him. An equitable lien is the proper remedy where part of the property belongs in good conscience to the defendant, or at any rate to someone other than the plaintiff. An equitable lien also may be the preferable remedy in a case in which the defendant has used the plaintiff's property to purchase other property and the other property has decreased in value. In such a case, in proper circumstances, the plaintiff can have an equitable lien on the later-acquired property and a money judgment for any deficiency between the value of the plaintiff's property and the value of the later-acquired property.¹⁴

An equitable lien is good as against all persons who acquire an interest with knowledge or notice of the lien, but not as against one who acquired an interest for value¹⁵ without such knowledge or notice.¹⁶

An equitable lien is not available against a bona fide purchaser for value.¹⁷ If the owner of property on which another has a lien sells it to an innocent purchaser for value who is protected from the lien, the lienor has a right to have the lien transferred to the proceeds of the sale.¹⁸ A statutory lien may become an equitable lien on the proceeds of the sale when the particular circumstances of the case render the statutory remedy ineffectual.¹⁹

§ 12.2.2—Express Contracts Resulting in Equitable Liens

A person may, by manifest intent and agreement, create a security charge, or claim in the nature of a lien on real property, which a court of equity will enforce against him.²⁰ But an equitable lien cannot be created by an unsigned instrument.²¹ The filing of a notice of lis pendens does not constitute the filing or recording of an equitable lien.²²

§ 12.2.3—Equitable Liens Not...