In re Brink, Bankruptcy No. 93-226-9P7.
| Decision Date | 22 December 1993 |
| Docket Number | Bankruptcy No. 93-226-9P7. |
| Citation | 162 BR 355 |
| Parties | In re Paul L. BRINK and Loraine D. Brink, Debtors. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
Harvey Paul Muslin, Tampa, FL, for debtors.
Mark D. Hildreth, Sarasota, FL, for Philip and Kathleen Palmer, creditors.
Diane L. Jensen, trustee.
ORDER ON OBJECTION TO CLAIM OF EXEMPTION
THIS IS a Chapter 7 case and the matter under consideration is an objection to the claim of exemptions of Paul and Loraine Brink (Debtors). Their claim of exemptions is challenged by Philip and Kathleen Palmer (Palmers) on the ground that a residence located in Port Charlotte, Florida which the Debtors claimed as an exempt homestead has been abandoned and is therefore subject to administration by the trustee. In addition, the Palmers contend that even if the residence is homestead property, the Debtors should not be entitled to retain all of the proceeds from the sale of that property if and when it is sold, because the Palmers are entitled to a lien securing a debt in the amount of $7,000.00. The Palmers also contend that the Debtors are not entitled to claim as exempt an annuity purchased by them in 1991, based on the proposition that the Debtors fraudulently converted the equity in their North Carolina property for the purpose of creating an exempt asset in the form of an annuity, based on Florida Statutes § 222.21. The relevant facts, as developed at the final evidentiary hearing by testimony of witnesses and by stipulation of the parties, are as follows:
At the time relevant, the Debtors were 51% shareholders in Real Estate Digest of Charlotte County, Inc., a Florida corporation engaged in the business of publishing a digest of real estate listings. The Palmers were 49% minority shareholders. In 1989, the Debtors sold their stock interest in the company to Sedilane Corporation, a corporation wholly owned by the Debtors. In 1990, the Palmers filed a shareholders' derivative suit against the Debtors, which resulted in court-ordered mediation and ultimately a Settlement Agreement signed on May 3, 1991. Although the Debtors tried to set aside the Settlement Agreement, the Palmers obtained a Final Judgment against the Debtors in the principal amount of $58,800.00.
On May 24, 1991, shortly after the execution of the Settlement Agreement, the Debtors listed their Port Charlotte residence for sale with Gonsalves Realty with the asking price of $145,000.00. In addition to the Port Charlotte home, the Debtors also owned a home in North Carolina since 1987.
In June, 1991, the Debtors entered into a lease agreement with John Johnson Ford, Inc. in Brevard, North Carolina for the lease of a 1991 Ford Explorer. (Palmers' Exh. 13). The Debtor's application to lease the vehicle stated that their "present address" was in Brevard, North Carolina and that their "previous address" was in Port Charlotte, Florida. (Palmers' Exh. 15). A condition in the Lease included the proviso that the "lessee will not use or permit the use of the vehicle outside the State where the vehicle was first titled or registered for more than thirty (30) days without the lessor's and Ford Credit's prior written consent . . ." (Palmers' Exh. 13). The vehicle was registered in North Carolina (Palmers' Exh. 14), and the vehicle had not been used outside the state of North Carolina for more than 30 days since it was acquired.
In August, 1991, the Debtors applied for a home equity loan from CK Federal Savings Bank for $15,400.00, secured by a second mortgage on their North Carolina real property (Palmers' Exh. 19). A requirement for the underwriting of this equity loan was that the Debtors intended to make the North Carolina property their permanent home (Palmers' Exh. 21). The Debtors received the loan and, in December 1991, used $13,400.00 of the proceeds to purchase an annuity with Nationwide Life Insurance Company through their financial advisor, Susan Mosely, to whom they were referred by their attorney. It is without dispute that the Debtors specifically inquired of Ms. Mosely whether or not the purchase of the annuity was exempt from the claims of creditors. The Debtors also inquired as to the method of cashing in the annuity before the annuity maturity date of April 15, 1996, and the penalty to be incurred if they elected to do so. At the time the Debtors purchased the annuity, the Debtors were already involved in litigation with the Palmers.
In March, 1992, ten months before filing the Petition for Relief under Chapter 7 of the Bankruptcy Code, the Debtors received $7,000.00 from Mr. Brink's daughter and paid off the second mortgage equity loan on the Port Charlotte property, which reduced their monthly payments on the property by $100.00 per month.
The Debtors continued to attempt to sell their Port Charlotte property throughout 1991 and 1992. In January, 1992, the Debtors signed a new listing agreement with Morris Realty with a revised listing price of $139,900.00. In July, 1992, the Debtors entered into a third listing agreement with Aztec Realty Corporation and reduced the listing price to $119,900.00. (Palmers' Exh. 10). On September 24, 1992, while under the third agreement with Aztec, the Debtors signed a contract for the sale of the Port Charlotte property for the purchase price of $116,500.00, with the closing originally scheduled for November 13, 1992. (Palmers' Exh. 11). The closing, however, never took place due to a cloud on the title as a result of the Palmers' unsatisfied judgment for $58,800.00. The contract to sell the property is still open and technically could be closed.
In October, 1992, following the signing of the contract for sale of the Port Charlotte property, the Debtors moved their belongings out of the home. Some of the removed possessions were moved to the North Carolina residence, and the rest was placed in a storage facility in Florida....
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