Havoco of America, Ltd. v. Hill
| Decision Date | 21 June 2001 |
| Docket Number | No. SC99-98.,SC99-98. |
| Citation | 790 So.2d 1018 |
| Parties | HAVOCO OF AMERICA, LTD., Appellant, v. Elmer C. HILL, Appellee. |
| Court | Florida Supreme Court |
J. Nixon Daniel, III and John P. Daniel of Beggs & Lane, Pensacola, FL, for Appellant.
John E. Venn, Jr., and Louis K. Rosenbloum, Pensacola, FL, for Appellee.
Virginia B. Townes and Jules S. Cohen of Akerman, Senterfitt & Eidson, P.A., Orlando, FL, for Florida Bankers Association, Florida Retail Federation, NACM of Florida, Inc. and NACM Florida Gulf Coast Unit, Inc., Amici Curiae.
We have for review the following question of Florida law certified by the United States Court of Appeals for the Eleventh Circuit that is determinative of a cause pending in the federal courts and for which there appears to be no controlling precedent:
Does Article X, Section 4 of the Florida Constitution exempt a Florida homestead, where the debtor acquired the homestead using non-exempt funds with the specific intent of hindering, delaying, or defrauding creditors in violation of Fla. Stat. § 726.105 or Fla. Stat. §§ 222.29 and 222.30?
Havoco of America, Ltd. v. Hill, 197 F.3d 1135, 1144 (11th Cir.1999). We have jurisdiction. Art. V, § 3(b)(6), Fla. Const. For the reasons that follow we answer the certified question in the affirmative.
On July 22, 1992, Elmer Hill filed a voluntary Chapter 7 bankruptcy petition in which he claimed that real property located in Destin, Florida, (Destin Property) was exempt as his homestead under article X, section 4 of the Florida Constitution.1 Havoco objected, arguing that Hill converted nonexempt assets into the homestead with the intent to hinder, delay, or defraud his creditors. The dealings between the parties which precipitated the instant action, as stated by the Eleventh Circuit in its opinion, are as follows:
Havoco, 197 F.3d at 1137 (footnote omitted).
The bankruptcy court held an evidentiary hearing in which Havoco attempted to present evidence of other transfers of nonexempt assets by Hill to demonstrate that the purchase of the Destin property was part of a larger scheme to defraud Hill's creditors via bankruptcy. The bankruptcy court deemed the evidence irrelevant and denied Havoco the opportunity to present the evidence in support of its claim. Thereafter, the bankruptcy court overruled Havoco's objections to Hill's homestead claims, concluding that Havoco had not proven by a preponderance of the evidence that Hill acted with the specific intent to defraud his creditors when he purchased the Destin property.
On appeal, the district court reversed, finding error in the bankruptcy court's supposition that a debtor's specific intent to defraud his creditors could provide a ground to deny the homestead exemption. The district court ordered the bankruptcy court on remand "to determine whether and under what circumstances Florida law prevented debtors in 1990 and 1991 from converting nonexempt property to exempt property." Havoco, 197 F.3d at 1138. Further, the district court ordered the bankruptcy court to conduct an evidentiary hearing during which Havoco would be allowed to present evidence of Hill's other transfers of nonexempt assets if it determined that Hill's homestead claim was limited under Florida law.
On remand, the bankruptcy court, relying upon Bank Leumi Trust Co. v. Lang, 898 F.Supp. 883 (S.D.Fla.1995), and Butterworth v. Caggiano, 605 So.2d 56 (Fla. 1992), held that Florida law did not prohibit Hill from converting nonexempt assets into a homestead, even if done with the intent to place those assets beyond the reach of his creditors. Havoco, 197 F.3d at 1138. The bankruptcy court further concluded that Florida's fraudulent conveyance statute did not "affect the debtor's right to the homestead exemption." Id. The district court affirmed the bankruptcy court's decision.
The Eleventh Circuit, detailing the inconsistent treatment of the issue in the bankruptcy courts stemming from this Court's application of the homestead exemption, certified the instant question to this Court.2
Florida's homestead exemption provides, in pertinent part:
Art. X, § 4(a)(1), Fla. Const. This Court has long emphasized that the homestead exemption is to be liberally construed in the interest of protecting the family home. See, e.g., Milton v. Milton, 63 Fla. 533, 58 So. 718, 719 (1912) (). However, in the same breath we have similarly cautioned that the exemption is not to be so liberally construed as to make it an instrument of fraud or imposition upon creditors: "[T]he [homestead exemption] should not be so applied as to make it an instrument of fraud or imposition upon creditors." Id. The petitioner and amici curiae3 seize upon this latter language to argue that the transfer of nonexempt assets into an exempt homestead with the intent to defraud creditors cannot receive constitutional sanction. While we are certainly loathe to provide constitutional sanction to the conduct alleged by the petitioner and implicated by the certified question, this Court is powerless to depart from the plain language of article X, section 4.4
As previously mentioned, this Court's homestead exemption jurisprudence has long been guided by a policy favoring the liberal construction of the exemption: "Organic and statutory provisions relating to homestead exemptions should be liberally construed in the interest of the family home." Milton, 58 So. at 719. A concomitant in harmony with this rule of liberal construction is the rule of strict construction as applied to the exceptions. See, e.g., Quigley v. Kennedy & Ely Ins., Inc., 207 So.2d 431, 432 (Fla.1968)
.5 Indeed, this strict construction of the exceptions proved paramount in our most recent inquiries into the homestead exemption in the context of civil and criminal forfeitures.
In Butterworth v. Caggiano, 605 So.2d 56 (Fla.1992), the State sought civil forfeiture of Caggiano's residence following Caggiano's conviction on one count of racketeering in violation of the Florida Racketeer Influenced and Corrupt Organization Act and fifteen counts of bookmaking. The State sought forfeiture of Caggiano's homestead on the grounds that the property was used by Caggiano in the course of racketeering activity. Id.
This Court, in rejecting the State's attempted distinction between forfeitures and the constitution's reference to "forced sale[s]," held that article X, section 4 prohibited the forfeiture of Caggiano's homestead:
Consequently, in light of the historical prejudice against forfeiture, the constitutional sanctity of the home, and the rules of construction requiring a liberal, nontechnical interpretation of the homestead exemption and a strict construction of the exceptions to that exemption, we hold that article X, section 4 of the Florida Constitution prohibits civil or criminal forfeiture of homestead property.
Id. at 61. While our conclusion was influenced by the legally disfavored status of forfeitures,6 paramount in our reasoning was the plain language of the homestead provision and the strict construction of the exceptions enumerated therein:
Most significantly, article X, section 4 expressly provides for three exceptions to the homestead exemption. Forfeiture is not one of them. According to the plain and unambiguous wording of article X, section 4, a homestead is only subject to forced sale for (1) the payment of taxes and assessments thereon; (2) obligations contracted for the purchase, improvement or repair thereof; or (3) obligations contracted for house, field or other labor performed on the realty. Under the rule "expressio unius est exclusio alterious"—the expression of one thing is the exclusion of another —forfeitures are not excluded from the homestead exemption because they are not mentioned, either expressly or by reasonable implication, in the three exceptions that are expressly stated.
Id. at 60 (first emphasis added). Notably, we rejected the State's attempt to imply an exception for homesteads acquired through criminal or immoral conduct:
The homestead provision of our Constitution sets forth the exceptions and provides the method of waiving the homestead rights attached to the residence. These exceptions are unqualified. They create no personal qualifications touching the moral character of the resident nor do they undertake to exclude the vicious, the criminal, or the immoral from the benefits so provided. The law provides for punishment of persons convicted of...
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