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Hirchert v. Hirchert Family Trust, --- So.2d ----, 2008 WL 2695897 (Fla. 5th DCA Jul 11, 2008)

California constructive-trust judgment:

This case started in California where, after a two-day bench trial, the trial court found that a California trustee had breached his fiduciary duties by wrongfully withdrawing trust funds, which were then used to buy a house for himself and his wife in California. After the trustee died, his widow sold their California home, moved to Florida, and bought a Florida home with the sales proceeds of the California residence. The California court entered a judgment imposing a constructive trust on the widow's Florida home.

The first issue on appeal was whether the California court had jurisdictional authority to enter a judgment imposing a constructive trust on Florida real property. The trial court said yes, based on the following reasoning, which was adopted verbatim by the 5th DCA:

The trial court analyzed the jurisdictional issue as follows:

The Superior Court of the State of California for the County of San Diego, which entered the judgment in question in this matter, entered said judgment after a trial on the merits. Counsel for Defendant, JOHNEE ANN ALLE HIRCHERT actively participated in the trial. The California court, while not having in rem jurisdiction over the property that was situated in Florida did have in personam jurisdiction over the Defendant, JOHNEE ANN ALLE HIRCHERT.
....

A court of one state does not have the power to directly affect title to land physically located in another state. However, “[a] court of equity, having authority to act upon the person, may indirectly act upon real estate in another state, through the instrumentality of this authority over the person.” Fall v. Eastin (1909) 215 U.S. 1 at 8, 30 S.Ct. 3, 54 L.Ed. 65 (Emphasis supplied) [sic]. “The court's decree does not operate directly upon the property or affect its title, but is made effectual through coercion of the defendant.” Groza-Vance v. Vance, 834 NE.2d 15 (Ohio App.2005) citing Fall at 10, 11 supra. See also MDO Development corporation v. Kelly, 735 F.Supp 591 (S.D.N.Y.1990)....

Counsel for the Defendant has raised the “local action rule.” Under such rule, “... court may not exercise in rem jurisdiction over property located outside its geographical territory.” Bauman v. Rayburn, 878 So.2d 1273 (Fla. 5th DCA 2004) (Emphasis in the original] [sic]. However, as long as in personam jurisdiction exists, relief may be granted even if it might incidentally affect real property. Bauman at 1274. In that the California court in this matter had in personam jurisdiction, the local action rule would not apply for the relief sought and subsequently obtained in this matter. See also Gardiner v. Gardiner, 705 So.2d 1018 (Fla. 5th DCA 1998).

While “... jurisdictional authority exists over the property only in the circuit where the land is situated,” this rule does not apply where a party, “... [seeks] equitable relief alleging, inter alia, resulting and constructive trust claims....” Ruth v. Department of Legal Affairs, 684 So.2d 181, 186 (Fla.1996). “The court's in personam jurisdiction alone provides the court with authority to determine the equitable rights of the parties.” Id. See also General Electric Capital Corporation v. Advance Petroleum, Inc., d/b/a World Fuel Services of Florida and World Fuel Services, 660 So.2d 1139 (Fla. 3d DCA 1995) [In personam jurisdiction comports with the mandates of the Federal and Florida Due Process Clause.]

(Emphasis in original). We agree with the trial judge's analysis.

Was Florida's homestead creditor protection pierced? Probably NOT

As I've written before, under Florida law the circumstances permitting the imposition of an equitable lien on homestead property are extremely narrow [click here, here]. Apparently hoping to avoid getting sucked into the twilight zone that is Florida homestead jurisprudence, the trial court attempted to punt on this issue as follows:

The trial court went on to note:

Defendant has also raised the issue of her homestead status of the Florida property. Here, the property is not being conveyed or the title changed or transferred. No change in legal ownership has been ordered. A constructive trust has been established by the California court and the legal document so establishing the constructive trust is being filed in the Florida courts. Homestead is not a matter before the Court at this point.[FN 1]

[FN 1]. It may be that at a later point when, and if, there is an attempt to convey the property an issue may arise as to the validity of the Homestead status based, in part, on the source of the funds used to purchase the property. LaBelle v. LeBelle, [sic] 624 So.2d 741 (Fla. 5th DCA 1993) [.] That issue is one for another day and another court.

Nice try, but no cigar. The 5th DCA remanded the case back to the trial court to decide the homestead issue:

We believe that the homestead issue raised in Ann's declaratory judgment count was properly before the court. The domesticated California judgment is creating homestead issues which the trial judge needs to resolve. We therefore remand for a judicial determination of homestead status and the legal effect, if any, of the California judgment on Ann's property.

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Coral Gables trusts-and-estates attorney Eric Virgil recently posted a PDF copy of Kelley's Homestead Paradigm on the list service for the RPPTL section of the Dade County Bar Association.  This handy chart was developed by one of the deans of Florida probate law, Rohan Kelley, and is exactly the type of resource I like to post on this blog for future reference.

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Clemons v. Thornton, --- So.2d ----, 2008 WL 624863 (Fla. 1st DCA Mar 10, 2008)

When an appellate opinion comes along dissecting a discombobulated homestead deed and explaining "who" gets "what" when the dust settles, it's gold because it's like getting the answers to your final exam in advance.  The linked-to case serves up one of those opinions.

The linked-to case addressed the following common estate-planning scenario:

Widowed father wants to make sure his second wife has the right to live in the house he purchased and paid for years prior to the second marriage, but also wants to make sure that when he and second wife die, the house goes to his children, not second-wife's children from a prior marriage.

This estate plan is simple enough, and if done properly, works all the time.  In the linked-to case the "widowed father" apparently decided to save a few bucks in legal fees by doing his own legal work.  The following facts of the case are all you need to know to see that by being "penny wise" he was setting his estate up for litigation from the get go (which is exponentially more expensive than simple estate planning).

2d DCA describes discombobulated deed:

The preprinted form warranty deed Mr. Clemons executed described the homestead property and named himself and “Ruth Clemons his wife” as grantees. But the deed contained a typewritten provision immediately following the property description, entitled “Addition to This Instrument,” which stated:

The parties of the second part, W.C. Clemons Jr. and Ruth Clemons Witness that the death of the last surviving party of the second part [sic] shall be cause to convey and confirm and assign forever all that certain parcel of land described above to Joyce M. Thornton.

Mr. Clemons died intestate some seven years later, survived by his widow and lineal descendants, including Joyce M. Thornton. By deed dated January 6, 2004, Mrs. Clemons purported to convey the property to herself and Lloyd Gilpin, Jr., her grandson. Ms. Thornton then sued for declaratory and other relief.

The key facts to note are: deed was executed after second marriage, and second wife did not sign the deed. When this deed eventually became the subject of litigation (surprise?!), the 2d DCA unwound the deal by addressing the following 4 questions.

[1st Question]: Did the deed validly convey a life estate to grantor and his wife?  YES

The trial court and 2d DCA both said "yes." Here's how the 2d DCA explained the Florida homestead law governing this point:

Mr. Clemons's grant of a life estate to himself and Mrs. Clemons as tenants by the entireties was a valid conveyance. See Matthews v. McCain, 125 Fla. 840, 170 So. 323, 325 (Fla.1936) (holding husband and wife may hold life estates as tenants by the entireties). Like the provision on the books today, section 689.11, Florida Statutes (1993), allowed conveyances of real property, including homestead property, between spouses, and did not require the grantee spouse to join in such conveyances. The summary judgment correctly confirms the existence of a life estate in Ruth Clemons, widow of her erstwhile cotenant by the entireties.

[2d Question:]  Did the deed validly convey a remainder interest to the daughter, in the absence of joinder by the wife?  NO

The trial court concluded that the grantor clearly "intended" to convey a remainder interest in his home to his daughter, and ruled that the deed accomplished the grantor's stated intent.  For those of us who follow Florida's homestead laws (and aren't embarrassed to admit it), it's no surprise to see once again that what people "want" to do with their homes often bears no relation to what Florida law requires.  That's what happened in this case, and the 2d DCA reversed the trial-court on this point as follows:

But Mr. Clemons's attempt to convey the remainder interest to Joyce M. Thornton was ineffective without Mrs. Clemons's joinder. Florida's Constitution requires that both spouses join in alienating homestead property in favor of any third party. See Art. X, § 4(c), Fla. Const. Interpreting the constitutional provision, our supreme court has noted that “it is clear that both [spouses] must join in a conveyance of a homestead owned by one spouse to a third party.” Jameson v. Jameson, 387 So.2d 351, 353 (Fla.1980) (quoting Note, Our Legal Chameleon is a Sacred Cow: Alienation of Homestead under the 1968 Constitution, 24 U. Fla. L.Rev. 701, 705-07 (1972)). A purported transfer of the homestead, not in compliance with constitutional requirements, is void. See Robbins v. Robbins, 360 So.2d 10, 11-12 (Fla. 2d DCA 1978), appeal dismissed, 365 So.2d 714 (Fla.1978); Gotshall v. Taylor, 196 So.2d 479, 481 (Fla. 4th DCA 1967), cert. denied, 201 So.2d 558 (Fla.1967). Mr. Clemons's attempt to convey the remainder interest in the homestead to Ms. Thornton by the deed he executed on February 23, 1993, did not succeed, because Mrs. Clemons did not sign the deed.

[3d Question:]  If the deed is invalid as to the conveyance of a remainder interest, was the life-estate conveyance to second wife also invalidated?  NO

This third point makes clear that a deed can be partially valid, and partially invalid.  In other words, it's not an all or nothing proposition.  Here's how the 2d DCA explained this point:

The fate of the intended grant of the remainder interest has no bearing on the validity of the grant of the life estate. See generally W.W. Allen, Annotation, Prior estate as affected by remainder void for remoteness, 168 A.L.R. 321, 322 (1947) (“[P]rovisions of a ... deed, valid in themselves, are as matter of course to be given effect notwithstanding the invalidity of other provisions, unless ... to permit the valid to take effect without the invalid would produce results presumably objectionable to ... [the] grantor.”); see also Leffler v. Leffler, 151 Fla. 455, 10 So.2d 799, 804 (Fla.1942) (en banc) (“Where the will provides for successive estates the invalidity of one may not affect the others as for example, the invalidity of a trust in remainder may not affect the validity of a trust for the life tenant ....”) (quoting Schouler on Wills, Executors and Administrators, Vol. 2, 6th ed., par. 902, pp. 1039-41).

[4th Question:]  What happens to invalidly conveyed homestead property?

This last issue is probably of most interest to probate counsel.  Here's the "estate plan" Florida law imposes on your homestead property in the absence of a legally-effective deed/will.

Mr. Clemons retained the remainder interest as his sole property, because the deed was ineffective to convey it. When the fee owner of homestead dies intestate “survived by a spouse and lineal descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the lineal descendants in being at the time of the decedent's death.” § 732.401(1), Fla. Stat. (2000). The failure of Mr. Clemons's attempt to convey the remainder interest to Ms. Thornton redounded to the benefit, not of Mrs. Clemons, but of Mr. Clemons's lineal descendants, including Ms. Thornton. Only if Ms. Thornton (and her descendants, if any, see § 732.104, Fla. Stat. (2000) (“Descent shall be per stirpes ....”)) had been Mr. Clemons's sole survivor(s), would the summary judgment be affirmable in toto-and she has pleaded the existence of other survivors. Upon his death, the remainder vested in his lineal descendants, per stirpes, pursuant to sections 732.104 and 732.401(1), Florida Statutes (2000).

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Schneberger v. Schneberger, --- So.2d ----, 2008 WL 373243(Fla. 4th DCA Feb 13, 2008)

The linked-to case is the latest example of the lopped-sided unfairness resulting from how current Florida law treats life estates in homes.  Ft. Lauderdale attorney Jeffrey A. Baskies published in excellent article in the June 2007 edition of the Florida Bar Journal that summed up the current state of affairs as follows:

[S]urviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

Click here for prior blog post with link to Baskies article.

Hurricane damages were at the heart of the dispute in the linked-to case between the life tenant (surviving spouse), and the remainderman (decedent's son from a prior marriage).  To make matters worse, the life tenant in this case was prohibited from renting the property; and under Florida law a life tenant can't force a sale of the property through a partition action.  Bottom line, she was stuck in the property and apparently stuck with the bills for major repairs to the home - plus taxes and insurance.  Here's how the 4th DCA summed up the trial court's ruling, which was upheld on appeal:

When the home was damaged by hurricanes, the expense of repair and insurance became an issue between the wife and the remainderman, the husband's son by a prior marriage, who was also the trustee of the husband's trust. The wife filed a complaint against the trustee and remainderman to determine who was responsible for the cost of repairs as well as the continuing cost of insurance. The remainderman filed a counterclaim for declaratory judgment as to the same issues.

After a trial, the court declared that the .  .  .  wife was entitled to a life estate in the property and as such was responsible for those duties of a life tenant, including the responsibility to pay all ordinary and necessary expenses that inure to a homeowner, including taxes, insurance, homeowner's association fees, and general repairs for the upkeep and maintenance of the property. The remainderman was responsible to pay for the hurricane repair costs from the proceeds of the insurance as an extraordinary expense to the property. He was also required to pay the special hurricane assessment by the homeowner's association.

As support for its affirmance of the trial court's ruling, the 4th DCA summarized Florida law governing the allocation of expenses between life tenants and remaindermen as follows:

In Florida, “a tenant for life or a person vested with an ordinary life estate is entitled to the use and enjoyment of his estate during its existence.” Sauls v. Crosby, 258 So.2d 326, 327 (Fla. 1st DCA 1972). “The only restriction on the life tenant's use and enjoyment is that he not permanently diminish or change the value of the future estate of the remainderman. This limitation places on the ‘ordinary life tenant’ the responsibility for all waste of whatever character.” Id. (footnote omitted). “It is well settled that life tenants are bound in law to pay property taxes during their continuance of their estate. Failure to pay taxes constitutes waste.” Chapman v. Chapman, 526 So.2d 131, 135 (Fla. 3d DCA 1988) (citations omitted). Therefore, it follows that the wife would have the responsibility to pay all ordinary and necessary expenses that inure to a homeowner, including taxes, insurance, homeowner's association fees, and general repairs for the upkeep and maintenance of the property, and not to dissipate or cause waste to the property.

Lesson learned?

If you own property and can't afford to keep it up, the best way to deal with the problem is to sell the property.  If you co-own property with someone you don't get along with (for example, your ex's children), the best way to deal with the problem is to sell the property.  Under existing Florida law a life tenant can NOT force a sale of the property.  I am assuming that the surviving spouse in the linked-to case would sell the property if she could, but her ex's son told her to take a hike.

What's needed is a legislative fix: surviving spouses with life estates in their homes should be able to force a sale of the property when the expenses become burdensome and the remaindermen wont voluntarily consent to the sale.  Fortunately, this legislative fix is in the works, as reported by Jeffrey A. Baskies (yes, same guy who wrote the Florida Bar Journal article) in the written materials for the January 2008 meeting of the Florida Probate Law and Procedure Committee.  The following is an excerpt from the Baskies report [click here for link to committee agenda containing Baskies' full report starting on page 17]:

Chapter 64 of the Florida Statutes governs partition actions. With only a few modifications, it can be amended to allow partition of protected homestead property between surviving spouses and the decedent’s lineal descendants.  The subcommittee proposes revising chapter 64 as follows:

Section 64.031 is amended to read as follows.

64.031 Parties.--The action may be filed by any one or more of several joint tenants, tenants in common, owners of life estate created by F.S. 732.401, or coparceners, against their cotenants, coparceners, or the holders of remainder interests (in the case of life estates created by F.S. 732.401), or others interested in the lands to be divided.

Section 64.041 is amended to read as follows.

64.041 Complaint.--The complaint shall allege a description of the lands of which partition is demanded, the names and places of residence of the owners, joint tenants, tenants in common, owner of life estate created by F.S. 732.401 or the holders of remainder interests (in the case of life estates created by F.S. 732.401), coparceners, or other persons interested in the lands according to the best knowledge and belief of plaintiff, the quantity held by each, and such other matters, if any, as are necessary to enable the court to adjudicate the rights and interests of the party. If the names, residence or quantity of interest of any owner or claimant is unknown to plaintiff, this shall be stated. If the name is unknown, the action may proceed as though such unknown persons were named in the complaint.

Section 64.051 is amended to read as follows.

64.051 Judgment.--
(1) The court shall adjudge the rights and interests of the parties, and that partition be made if it appears that the parties are entitled to it. When the rights and interests of plaintiffs are established or are undisputed, the court may order partition to be made, and the interest of plaintiffs and such of the defendants as have established their interest to be allotted to them, leaving for future adjustment in the same action the interest of any other defendants.
(2) In the case of an action for partition of protected homestead as defined in s. 731.201(32) where the surviving spouse owns a life estate, the surviving spouse shall be entitled to an order of partition if the action is brought by the surviving spouse.
(3) If any party to the action alleges that tax as defined in s. 733.817(1)(n) will be due by reason of a severance as ordered by the court, the court shall determine all issues concerning apportionment of that tax under applicable federal and state law. The court shall have jurisdiction to determine the probable tax due or to become due from all interested persons, apportion the probable tax, and enter orders and judgments to enforce payment of any tax as so apportioned. The court may retain jurisdiction over the parties and issues to modify the order of apportionment as appropriate until after the tax is finally determined.

This proposal only gives the spouse a right to a partition. The subcommittee debated giving remainder beneficiaries a right to seek partition, but overall the subcommittee seemed to favor only permitting surviving spouses to seek partition, while not permitting remainder beneficiaries to displace the life tenants – not affording the ability to “throw the life tenant out” at will. This proposal will go a long way to helping and protecting those surviving spouses who currently have life estates (or may receive them in the future) they don’t desire to retain, while weighing and balancing the interest of the remainder beneficiaries.

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Chames v. DeMayo, --- So.2d ----, 2007 WL 4440212 (Fla. Dec 20, 2007)

Within the probate context there are two aspects of Florida's constitutional homestead protections that loom large: the debtor protections found in sections 4(a) and (b) of article 10 of the Florida Constitution; and the limitations on devise found in section 4(c) of article 10.

Homestead Debtor Protections:

For probate practitioners this case is important because the Florida Supreme Court clearly defines the public policy reasons for why Florida's constitutional homestead debtor protections are NOT purely personal rights that may be waived by a homeowner like any other constitutional protection.  Florida's homestead laws protect not only the homeowner, they also protect the homeowner's family and the State.  So no matter what the homeowner/debtor may say, the "State" has a stake in the outcome and will thus limit the homeowner's personal property rights in his or her home to the extent necessary to protect those public interests.  That's been the law in Florida for over a hundred years, and in the linked-to opinion the Florida Supreme Court makes clear it sees no reason to change things now.

Here's how the Florida Supreme Court made this point:

Chames argues that waiver of the homestead exemption should be permitted because we have permitted waiver of other constitutional rights. This would be the most compelling reason for receding from Carter and Sherbill, for if indeed we have held that other constitutional rights can be waived, it would seem anomalous to prohibit waiver of the homestead exemption. We do not agree, however, that such an inconsistency exists.

It is true that we recently noted that “most personal constitutional rights may be waived.” In re Rule 4-1.5(f)(4)(B), 939 So.2d at 1038; see also In re Shambow's Estate, 153 Fla. 762, 15 So.2d 837, 837 (Fla.1943) (“It is fundamental that constitutional rights which are personal may be waived.”). However, an individual cannot waive a right designed to protect both the individual and the public. See, e.g., Coastal Caisson Drill Co. v. Am. Cas. Co. of Reading, Pa., 523 So.2d 791, 793 (Fla. 2d DCA 1988), approved, 542 So.2d 957 (Fla.1989); Asbury Arms Dev. Corp. v. Fla. Dep't of Bus. Regulations, 456 So.2d 1291, 1293 (Fla. 2d DCA 1984). We have repeatedly recognized that the homestead exemption protects not only the debtor, but also the debtor's family and the State. See Havoco, 790 So.2d at 1020; Snyder, 699 So.2d at 1002; Caggiano, 605 So.2d at 60; Lopez, 531 So.2d at 948; Slatcoff, 76 So.2d at 794; Hill, 84 So. at 192. Therefore, the right to the homestead exemption is not purely personal as some others are.

Homestead Limitations on Devise:

In contrast to Florida's homestead debtor-protection rights, the limitations on the devise of homestead property ARE purely personal in nature, and thus ARE subject to waiver [click here for explanatory examples].  For Florida probate practitioners understanding this distinction is the key to any hope of making sense of Florida's convoluted homestead laws.  Here's how the amicus curiae brief of the Real Property Probate & Trust Law Section of the Florida Bar explained the difference between the constitutional homestead protections for general creditor-debtor relationships found in article 10, sections 4 (a) and (b), versus the homestead protections involving the devise of homestead property and other intra-family transactions found in article 10, section 4 (c) of the Florida Constitution:

[S]ections (4) (a) and (b) protect Floridians from general creditors. Section 4 (c), on the other hand, protects the surviving spouse and minor children from having the homestead transferred out from under them without the consent of both spouses.

Section 4 (c) has nothing to do with protection from general creditors and is manifestly a pure, personal right that is subject to waiver. Similarly, waiver of homestead in agreements between spouses is permissible in the context of nuptial agreements and divorce settlements. See Hartwell v. Blasingame, 584 So. 2d 6 (Fla. 1991); §732.702, Fla. Stat.; Myers v. Lehrer, 671 So. 2d 864, 866 (Fla. 4th DCA 1996)

Sections 4 (a) and (b), on the other hand, when applied to general creditors are mandatory and have precisely expressed exceptions, precluding all others. See Sherbill v. Miller Mfg. Co., 89 So. 2d 28, 31 (Fla. 1956); see also In re Clements, 194 B.R. 923, 925 (M.D.Fla. 1996) (confirming that under the expressio unius est exclusio alterius rule, homestead, in Florida, may not be used to satisfy debts other than those expressly permitted by article X, section 4). To be sure, the purpose of sections 4 (a) and (b) in the context of a general creditor-debtor relationship is to protect each of us from being destitute and, in that regard, might be considered a personal right and waivable. See City of Treasure Island v. Strong, 215 So. 2d 473, 479 (Fla. 1968) (“[I]t is firmly established that such constitutional rights designed solely for the protection of the individual concerned may be lost through waiver.”). But, this homestead protection is also designed to promote the stability and welfare of the state, which would otherwise be burdened as the caregiver for its destitute citizens. See McKean v. Warburton, 919 So. 2d 341, 344 (Fla. 2005); Public Health Trust v. Lopez, 531 So. 2d 946, 948 (Fla. 1988). Because of the state's interest in protecting debtors in the general creditor-debtor relationship, the homestead protection cannot be lost through waiver. See Sherbill v. Miller Mfg. Co., 89 So.2d at 31.

For more background on this case and a link to the underlying 3d DCA opinion click here and here.

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Kristen D. Drake, JD, CFP, publishes Coast Law, LLC, an excellent Florida-specific blog focusing on estate planning matters.  Her goal is to is to build a "One-Stop Florida Homestead reference page," and she's off to a great start.  For example, in her blog post entitled Homestead Descent Examples she provides a link to homestead-related case studies prepared by Bruce Stone, one of Florida's most well regarded estate planning attorneys.  Here's the post in its entirety:

Sometimes the best way to understand a complicated issue is with examples. Bruce Stone, a prominent estate planning attorney in Florida (more about Mr. Stone here), presented "What Every Georgia Trusts and Estates Practitioner Needs To Know About Florida Law" and included some excellent homestead descent examples in his materials. He was kind enough to let us post them here. Test your knowledge of homestead descent with these great examples.

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Taylor v. Maness, 941 So.2d 559 (Fla. 3d DCA Nov 15, 2006)

Property rights vs. homestead rights: which wins out in litigation involving homestead property?  That's a no-brainer: homestead rights trump property rights any day of the week.  The linked-to case underscores this general principal by applying it to a real live set of facts with very real economic consequences riding on how the court ruled.

Does the deed control? NO

In this case husband (but not wife) signed a sales contract for the sale of his homestead property located on Marathon Key, Florida (think VERY EXPENSIVE real estate!).  The house was deeded in husband's name alone.  Wife was not consulted, and refused to sign a deed effectuating the sales contract.  Buyer sued to enforce the sales contract.  But buyer didn't just want damages, he also wanted the court to specifically enforce the contract.  Court said NO WAY, and it didn't matter that wife's name wasn't on the deed.  Why? Because spouse's homestead rights trump all else.  The following excerpts should be enough to make the point:

The undisputed facts, which were before the trial court, are as follows. Mr. and Mrs. Maness were married on June 14, 1986. Sometime in September 1986, Mr. Maness purchased a vacant lot located at 180 Ana Court, Marathon, Monroe County, Florida, which was titled solely in the name of “James G. Maness, as a married man” (“Marathon Property”).     .     .     .     .     On or about September 25, 2002, Mr. Maness, as the seller, and the Taylors, as the purchasers, entered into a contract, whereby Mr. Maness agreed to convey the Marathon Property to the Taylors. Mrs. Maness did not execute the contract, nor was she named in the contract. Closing was to take place on or before December 2, 2002. Mrs. Maness, however, refused to execute the deed transferring the Marathon Property to the Taylors, claiming that she has a homestead interest in the Marathon Property, thereby precluding consummation of the contract.

*     *     *     *     *
In reaching our conclusion, we wish to address Mrs. Maness' homestead interest in the Marathon Property. The Taylors correctly point out that Mrs. Maness is not the title owner of the Marathon Property. However, the individual claiming the homestead exemption need not hold fee simple title to the property. Callava v. Feinberg, 864 So.2d 429, 431 (Fla. 3d DCA 2003). Article X, section 4 “does not designate how title to the property is to be held and it does not limit the estate that must be owned, i.e., fee simple, life estate, or some lesser interest.” Stilwell, 810 So.2d at 569. Thus, even if Mrs. Maness owns only a beneficial interest in the Marathon Property, she is entitled to claim a homestead exemption to the forced sale of the property. See Callava, 864 So.2d at 431 (holding that even if divorced wife only owned a beneficial interest and not title interest in the residence constituting her homestead, she was nonetheless entitled to claim a homestead exemption from the forced sale of the property).

Lesson learned:

Former U.S. Secretary of Defense Donald Rumsfeld once famously said that it was the "unknown unknowns" that worried him most (see here for the You Tube version).  In litigation involving homestead real property, simply reading the deed tells you very little about the principal issue driving the case.  Knowing this unstated fact in advance may make all the difference in the world.  If your opponent is unaware of this fact, he or she is about to learn why the "unknown unknowns" are the scariest part of practicing law.

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Dowling v. Davis, Slip Copy, 2007 WL 1839555 (M.D.Fla. Jun 26, 2007)

Does Florida's homestead exemption from creditor claims extend to cases where all parties concede that the judgment debtor purchased a home in Florida with the intent to hinder creditors?  As explained in this federal court decision, the Florida Supreme Court says YES it does:

Crooks Welcomed:

[T]he Florida Supreme Court has expressly held that “[t]he transfer of nonexempt assets into an exempt homestead with the intent to hinder, delay, or defraud creditors is not one of the three exceptions to the homestead exemption provided for in article X, section 4.” Havoco of Am., Ltd. v. Hill, 790 So.2d 1018, 1028 (Fla.2001) ( “Havoco I” ) (emphasis added); Havoco of Am., Ltd. v. Hill, 255 F.3d 1321, 1322 (11th Cir.2001) ( “Havoco II” ) (affirming that judgment debtor's purchase of home with intent to hinder creditors did not overcome homestead exemption, based on answer to certified question in Havoco I ). This is precisely what Plaintiff is alleging Defendants sought to accomplish by purchasing the Florida residence. For this reason, Plaintiff's claim fails.

But what about an equitable lien? Don't count on it:

Plaintiff argues that the fraud occurred when Defendants, knowing a judgment was imminent, purchased a house with proceeds that could have been used to satisfy Plaintiff s judgment against Davis. Again, however, the homestead exemption does not contain an express exception for real property that is acquired in Florida for the sole purpose of defeating the claims of out-of-state creditors. Havoco II, 255 F.3d at 1322; Havoco I, 790 So.2d at 1028; Bank Leumi Trust Co. v. Lang, 898 F.Supp. 883, 887 (S.D.Fla.1995); In re Adell, 321 B.R. 562, 569-70 (Bankr.M.D.Fla.2005). Indeed, in one of the primary cases relied upon by Plaintiff, the court specifically distinguished those cases in which a debtor owned the funds-where an equitable lien is not proper-from those cases in which a debtor purchased a residence with fraudulently-obtained funds. In re Fin. Federated Title & Trust, Inc., 273 B.R. 706, 716 (Bankr.S.D.Fla.2001) aff'd 347 F.3d 880 (11th Cir.2003) (affirming imposition of equitable lien where funds were undisputedly obtained through fraudulent Ponzi scheme).FN5

FN5. Although not cited by Plaintiff, one court has imposed an equitable lien where a judgment debtor transferred funds to his daughter and son-in-law to satisfy a mortgage on their residence. Babbit Elecs., Inc. v. Dynascan Corp., 915 F.Supp. 335, 337 (S.D.Fla.1995). The court held that the transfer was made to delay, hinder, and defraud the defendant's judgment creditor in collection of its judgment and that imposition of an equitable lien would not change the position of the daughter and son-in-law. Id. at 338. However, this pre- Havoco I decision appears to be in conflict with the Eleventh Circuit's ultimate holding in Havoco II that the homestead exemption shields a debtor's purchase of a residence with non-exempt funds, even when the purchase is made with the intent to hinder a judgment creditor. Havoco II, 255 F.3d at 1322.

Lesson Learned:

As this case proves -- again -- Florida's homestead laws are almost impenetrable creditor protection shields.  And as I've written about before (see here), getting around this protective wall via an "equitable lien" theory almost never works.  Bottom line: people who admittedly move to Florida for the express purpose of evading their just debts can get away with it.

I have to believe this result is an unintended consequence of Florida's outdated homestead laws.  Until someone decides this is a crisis, I assume we'll be stuck with the status quo.  So if you're looking to defraud your creditors, sunny Florida says "welcome home!"

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In a comment posted here in connection with Phillips v. Hirshon (a recent 3d DCA opinion holding that a cooperative apartment may not be considered homestead property for the purpose of subjecting it to Florida Statutes regulating the descent of homestead property), Bradenton attorney Jeffrey S. Goethe discussed a case where he successfully argued that Florida's homestead creditor protections apply to cooperative apartments.  The key to possibly reconciling these two divergent results is to recognize the divergent lines of case law that has evolved with respect to each of the three distinct facets of homestead law addressed in Florida's constitution:

• Article X, §4(c) for devise and descent
• Article X, §4(a) and (b) for exemption from forced sale
• Article VII, §6 for taxation

In a follow up to his comments, Jeff was kind enough to share a copy of the 11-page legal memorandum he filed in his case and agreed I could post it on the blog for the benefit of others (see here for copy).

Thanks again Jeff.

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One of the basic building blocks of Florida probate law is the "life estate" in homestead property all surviving spouses are entitled to.  The statutory basis for this rule is found in F.S. 732.401, which provides as follows:

(1) If not devised as permitted by law and the Florida Constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and lineal descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the lineal descendants in being at the time of the decedent's death per stirpes.

(2) Subsection (1) shall not apply to property that the decedent and the surviving spouse owned as tenants by the entirety.

Pretty basic stuff for any Florida probate practitioner.  What may not be so simple is explaining the real life practicalities of a life estate to a surviving widow.  Which is why you may want to keep a copy of The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford handy.  In this just published article Ft. Lauderdale attorney Jeffrey A. Baskies does a good job of explaining the costs assumed by surviving spouses/life tenants, a point often overlooked by families and their advisers.

Costs Borne by Life Tenants

F.S. §738.801 provides in part that “the provisions of F.S. §738.701-738.705 … shall govern the apportionment of expenses between tenants and remaindermen when no trust has been created….” In the absence of some agreement, those provisions apply to all life estate/remainder situations created by the Florida homestead laws (created by the constitutional restrictions on devise in art. X, §4 of the state’s constitution and F.S. §732.401).

Taken together, these statutes require the life tenant to pay:

• All of the ordinary expenses incurred in connection with the administration, management, or preservation of property, including ordinary repairs (including condo or homeowners’ association maintenance charges) and regularly recurring taxes (ad valorem property taxes).
• The interest portion of mortgage payments, if any, on the property.
• Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
• The costs of, or special taxes or assessments for, an improvement representing an addition of value to property shall be paid by the tenant when the improvement is not reasonably expected to outlast the estate of the tenant. In all other cases, a part only shall be paid by the tenant, ascertainable based on the present value of the tenant’s estate (actuarially).

Thus, surviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

While the surviving spouses have borne all of these huge increases in their costs of living, the remainder beneficiaries have seen property values double in most of the state (and increase three to five times in some areas) over the past five to 10 years. One hundred percent of that appreciation inures to the benefit of the remainder beneficiaries, while they are not forced to pay for any of these increased expenses.

Contrast the “rent free” use of the property by the widow with the “free ride” the remainder beneficiaries have had on property values, and ask who is being helped and who is being harmed by our homestead “protections”? The costs of property taxes and homeowners’ insurance have skyrocketed at the same time property values have appreciated at a meteoric pace. This situation has exposed in stark relief the discrepancy in treatment and benefits of surviving spouse life tenants and remainder beneficiaries.

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Phillips v. Hirshon, --- So.2d ----, 2007 WL 1263475 (Fla. 3d DCA May 02, 2007)

Article X, section 4(c) of the Florida Constitution, which declares that “homestead shall not be subject to devise if the owner is survived by a spouse or minor child,” is one of the few "forced heirship" rules applicable under Florida law (the only other example of significance would be Florida's spousal elective share rules).  These rules provide an opportunity to challenge a will that is exponentially easier than traditional grounds for challenging a will in Florida (see here).

Children challenge dad's devise to girlfriend on homestead-law grounds

In this case dad devised a life estate in his Key Biscayne penthouse to his girlfriend.  One of his two surviving sons was a minor, so they challenged this devise by arguing that the property was homestead property.  Here's how the 3d DCA summarized their argument:

After their father's death, Joseph and David filed separate petitions to determine homestead. The thrust of their argument to the trial court was that the co-op was homestead property in the hands of their father at the time of his death and therefore not subject to devise by him under Article X, section 4(c) of the Florida Constitution, which declares that “homestead shall not be subject to devise if the owner is survived by a spouse or minor child.” The brothers contend that because David was a minor, the bequest under the will fails and the property passes outside of the estate, and therefore, the brothers now share the father's interest in the co-op on an equal basis as a matter of law.

Court says NO to homestead status for co-op

The trial court didn't buy this argument, and neither did the 3d DCA based on a conflicting Florida Supreme Court opinion.  However, the 3d DCA made clear that it felt the sons should have prevailed, and took the extra step of certifiying the issue to the Florida Supreme Court for reconsideration.  Here's ow the 3d DCA summarized its holding:

The Levine brothers urge that because their father occupied the co-operative apartment under a long-term proprietary lease received in conjunction with his purchase of his interest in the co-op, the property is protected homestead property under Florida law. Applying the principle of stare decisis, we affirm the decision of the trial court on authority of In re Estate of Wartels v. Wartels, 357 So.2d 708 (Fla.1978), which expressly holds “that a cooperative apartment may not be considered homestead property for the purpose of subjecting it to Florida Statutes regulating the descent of homestead property.” Id. at 711 (construing Article X, section 4(a)(1), Fla. Const.). At the same time, we certify to the Florida Supreme Court as a question of great public importance under Article V, section 3(b)(4) of the Florida Constitution, whether its decision in Wartels has continuing vitality in light of subsequent legislative action. We also find certifiable, direct conflict between our decision today and the decision of the Fourth District Court of Appeal in S. Walls, Inc. v. Stilwell Corp., 810 So.2d 566 (Fla. 5th DCA 2002), which construed the same section of Article X, section 4 of the Florida Constitution upon which the Wartels court relied to deny the benefit of homestead to an heir in the devise and descent context of Article X, section 4(c) to nevertheless afford the benefit of homestead protection from a forced sale under Article X, sections 4(a) and 4(b) of the same constitutional provision.

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The one crack in the almost impenetrable fortress protecting Florida homestead property from creditors is the amorphous "equitable lien" doctrine.  There isn't a lot of case law out there on equitable liens against Florida homestead, so In re Gosman, 2007 WL 707365 (Bankr.S.D.Fla. Mar 05, 2007) should be of interest to anyone whose practice involves homestead issues.

In this case the bankruptcy court said NO to a creditor seeking to impose an equitable lien on $22.5 million in net sales proceeds generated by the sale of former health care executive Abe Gosman's Palm Beach mansion.  The court articulated the following two-part test for determining "the very narrow circumstances warranting the imposition of an equitable lien" on homestead property under Florida law:

• that the money was obtained fraudulently or through egregious conduct, and
• that the money obtained was utilized to invest in, purchase or improve the homestead. The Court finds that neither of the two prongs has been satisfied.

Here's how the bankruptcy court summarized Florida's equitable lien case law:

The Florida homestead exemption is construed liberally and the three exceptions to the Florida homestead exemption are construed narrowly and strictly. Havoco of America. Ltd. v. Hill, 790 So.2d 1018 (Fla.2001). A limited legal basis has been established for imposing an equitable lien on homestead. The first case from the Florida Supreme Court to impose an equitable lien determined that the imposition of a lien was proper due to the embezzlement of funds by an employee who, in turn, used the funds to make improvements to the home. Jones v. Carpenter, 106 So. 127 (Fla.1925). The Court in Jones elaborated that if the money had been obtained through a valid contract and then utilized to make home improvements, the imposition of an equitable lien would not be appropriate. Id. In Palm Beach Savings & Loan Association, F .S.A v. Fishbein, 619 So.2d 267 (Fla.1993), the Florida Supreme Court allowed an equitable lien against homestead property wherein monies were obtained fraudulently by use of a forged mortgage instrument and then utilized to satisfy a valid mortgage. In Chauncey v. Dzikowski, 454 F.3d 1292 (11 Cir.2006), the Eleventh Circuit Court of Appeals referenced the standard for imposing an equitable lien by stating that it may be necessary to reach beyond the literal language of the Florida homestead exemption to invoke an equitable lien against homestead property when funds were obtained through fraud or egregious conduct and utilized to invest in, purchase, or improve the homestead. Id. at 1294.

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I previously wrote here about Engelke v. Estate of Engelke, a 4th DCA opinion holding that homestead held in a revocable trust remained exempt from forced sale or lien by judgment creditors pursuant to Article X, Section 4(a) of the Florida Constitution.  The reason why opinions like Engelke are especially interesting for estate planners is because they chip away at the precedential value of In re Bosonetto, 271 B.R. 403 (Bankr.M.D.Fla.2001), a Middle District Bankruptcy Court opinion ruling that homestead property in a revocable trust lost its creditor protection.  Bosonetto has been the subject of heavy criticism every since.

We now have two new Middle District Bankruptcy Court opinions expressly refusing to follow Bosonetto:  In re Alexander, 346 B.R. 546, 19 Fla. L. Weekly Fed. B 356 (Bankr.M.D.Fla. Jul 25, 2006), and In re Edwards, --- B.R. ----, 2006 WL 3788803 (Bankr.M.D.Fla. Oct 04, 2006).

This is good news for planners, although the issue is not yet dead.  Bosonetto hasn't been overruled.  Until it is, planners should remain cautious.  The following excerpts from Edwards summarize the well-reasoned analyses underlying both opinions:

The issue for determination is whether real property in which a debtor resides qualifies for the Florida homestead exemption when title to the property is held by a revocable trust. The issue is governed by Florida state statutory and case law. Florida opted out of the federal bankruptcy exemption scheme and a debtor filing for bankruptcy protection in Florida must use Florida's state law exemptions. The Florida exemptions include a homestead exemption found at Florida Constitution, Article X, Section 4(a)(1):

(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:

(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner's consent by reason of subsequent inclusion in a municipality; upon which the exemption shall be limited to the residence of the owner or the owner's family.

Fla. Const. Art. X, § 4 (emphasis added).

*     *     *     *     *

The Trustee relies on the decision In re Bosonetto, 271 B.R. 403 (Bankr.M.D.Fla.2001) in which the Bankruptcy Court held a debtor may not claim real property owned by a trust as exempt homestead property. The great weight of the relevant case law holds to the contrary. Fee simple title of the property is not required, and an equitable or legal interest should afford protection pursuant to the provision.

The Florida Appellate Court ruled in Engelke v. Estate of Engelke, 921 So.2d 693, 696 (Fla. 4th DCA 2004) a revocable trust was constitutionally protected homestead property and could not be used to pay claims and expenses of the grantor's estate. The grantor of the trust retained an ownership interest in the property since the trust was revocable. The trust, due to its revocable nature, was owned by a “natural person” within the meaning of the Florida homestead exemption. The revocable trust only held title to the property, while the grantor retained ownership.

A recent case decided in the Middle District of Florida, In re Alexander, 346 B.R. 546 (Bankr.M.D.Fla.2006) is in agreement holding fee simple title to the property is not necessary to qualify for the homestead exemption.  “... [I]n order to claim property in which the individual resides as exempt it is sufficient that: (1) the individual have a legal or equitable interest which gives the individual the legal right to use and possess the property as a residence; (2) the individual have the intention to make the property his or her homestead; and (3) the individual actually maintain the property as his or her principal residence.” The Bankruptcy Court ruled homestead property titled in a revocable trust can be exempt from a debtor's bankruptcy estate in a Chapter 7 case.

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Cutler v. Cutler, --- So.2d ----, 2007 WL 601866 (Fla. 3d DCA Feb 28, 2007)

Homestead is known as Florida’s legal chameleon because it has different meanings depending upon its context.  Here's how the 3d DCA described the three faces of Florida's homestead law in the linked-to opinion:

As the Florida Supreme Court noted in Snyder v. Davis, 699 So.2d 999, 1001-02 (Fla.1997), there are three kinds of homestead with one purpose: preserving the family home for its owner and heirs. The first kind, unrelated to this case, provides homestead with an exemption from taxes. See Art. VII, § 6, Fla. Const. The second protects homestead from forced sale by creditors. Art. X, §§ 4(a)-(b), Fla. Const. The third delineates the restrictions a homestead owner faces when attempting to alienate or devise homestead property. Art. X, § 4(c), Fla. Const.

This case is another example of homestead law derailing a Florida testator's estate plan.  All parties conceded that the homestead property at issue was "freely devisable" under Florida law, and yet the testator's intent was still frustrated by Florida's homestead law.

The estate plan at issue was simple: mom, whose only surviving family was her adult son and daughter, specifically devised 2 pieces of real estate, her home to her daughter and an adjacent vacant lot to her son.  In the event the administrative expenses of her estate exceeded her residuary estate, mom wanted the remaining expenses to be shared equally by son and daughter.  Here's how the 3d DCA described mom's plan:

Edith's [estate] plan [was] that if other available assets are insufficient to satisfy her creditors' claims and the final expenses of her estate upon her death, the residence she devised to Cynthia and the adjacent vacant parcel she devised to her son Edward will abate equally to satisfy those expenses.

Daughter objected to apportioning any probate expenses to her devise of freely-devisable homestead property and the trial court agreed pursuant to the “inuring clause” of Article X, section 4(b) of the Florida Constitution, effectively frustrating mom's clearly expressed testamentary intent.  The following excerpts from the linked-to opinion provide a good summary of the 3d DCA's rationale for upholding the trial court's ruling:

The specific homestead protection at issue in this case is protection against forced transfer for use by an estate after the death of a decedent. Art. X, § 4(b), Fla. Const. To clearly distinguish this particular protection in the Florida Probate Code from other forms of homestead, the Legislature has denominated it as “protected homestead.” See § 731.201(29), Fla. Stat. (2003)(defining “protected homestead as “[that] property described in s. 4(a)(1), Art. X of the State Constitution on which at the death of the owner the exemption inures to the owner's surviving spouse or heirs under s. 4(b), Art X of the State Constitution”).

*     *     *     *     *
Here, we are confronted with two specific devises of property, which, in the general residuary clause of her will, Edith directed should be contingently available to her personal representative, if necessary, to pay the expenses of her estate. See Park Lake Presbyterian Church v. Estate of Henry, 106 So.2d 215, 217 (Fla.1958)(defining a specific devise as “a gift of a particular thing or of a specified part of a testator's estate so described as being capable of distinguishment from all others of the same kind,” and defining a residuary legacy as “a general legacy wherein fall all the assets of the estate after all other legacies have been satisfied and all charges, debts, and costs have been paid”). On their face, these two specific devises appear equal in dignity. But upon closer examination, it is clear that they are not. In the case of the specific devise of the vacant land to Edward, there is no question but that Edith had the legal right to subject this devise to the debts of the estate if she so desired. § 733.805(1) Fla. Stat. (2004)(“Funds or property designated by the will shall be used to pay debts [of the estate] ... to the extent the funds or property is sufficient.”); In re Estate of Potter, 469 So.2d 957, 959 (Fla. 4th DCA 1985). However, as we have learned, the devise to Cynthia was followed by a constitutional exemption from forced sale of her devise to satisfy the expenses of Edith's estate. This constitutionally created benefit is personal to Cynthia, and hers to assert. For reasons of her own, she has determined to do so. We do not consider ourselves liberated to deny her this constitutional benefit.

Lesson learned:

The lesson to be drawn from this case is that the creditor protection aspects of even freely-devisable homestead property will trump all other interests -- including a testator's individual property rights in his or her own home.  This point is made by the Judge Schwartz in his dissent:

The ground of my dissent is aptly stated in the appellant's brief:

When there is no surviving spouse or minor child, as in this case, the decedent's homestead may be freely transferred, gifted, or devised without limitation. Art. X, Section 4(c), Fla. Const.; City National Bank of Fla. v. Tescher, 578 So.2d 701, 703 (Fla.1991). ... If Mrs. Cutler could have left her properties to someone outside of her family, which she could have done, why could she not leave it to her heirs with the provision that the properties be available to satisfy her debts? The answer to this question is simple-she was lawfully entitled to do so.

See also DeMayo v. Chames, 934 So.2d 548, 551 (Fla. 3d DCA 2006) (Shepherd, J., concurring) (persuasively stating view that property owner should have authority to deal with homestead property as she sees fit), review granted, 937 So.2d 122 (Fla. 2006).FN6

FN6. I hope, without confidence, that the majority is not saying that the limitation on the devise would have been okay if it were contained in the same sentence or paragraph as a condition of the devise, but it is not and the testatrix's clearly expressed wishes must be frustrated because it is in a separate provision of the will. If my hope is unjustified, as I write I can hear workers installing the words-in Gothic letters, of course-“All common sense abandon, ye who enter here” over the doors to our courtroom.

I am sympathetic to Judge Schwartz's position, as I previously stated here.

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Demayo v. Chames, __ So.2d __ (Fla. 3d DCA Mar 15, 2006)

I previously wrote here about the Third DCA's initial ruling in this case enforcing a charging lien against the debtor's homestead property based on a written waiver. On its own motion the Third DCA subsequently reconsidered the case en banc and then completely reversed itself!
According to this Third DCA opinion even if a person knowingly waives his or her homestead protection against forced sale, such waiver is not enforceable unless it falls within one of exceptions specified in Article X, section 4 of Florida's constitution, which provides in relevant part as follows:

Homestead; exemptions.-- (a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person.... (Emphasis added.)

The Third DCA was apparently uncomfortable with this outcome, but felt it had no choice under binding Florida Supreme Court precedent.

[Carter's Administrators v. Carter, 20 Fla. 558, 570 (1884)] and [Sherbill v. Miller Mfg. Co., 89 So.2d 28, 31 (Fla.1956)] confirm that Article X, section 4 "protects the homestead against every type of claim and judgment except those specifically mentioned in the constitutional provision itself" and that other than for the purposes stated in this provision, cannot be waived. . . . Because the attempted waiver in this case is unrelated to those purposes stated in Article X, section 4, it is invalid.

Perhaps recognizing the unfairness of the outcome in this case, the Third DCA took the extraordinary step of essentially asking the Florida Supreme Court to overrule itself. More specifically, the Third DCA certified the following question to the Florida Supreme Court as a matter of great public importance:

WHETHER, IN LIGHT OF SUBSEQUENT PRECEDENT IN FLORIDA AND OTHER JURISDICTIONS, AND THE TEXTUAL CHANGES MADE BY THE PEOPLE OF THE STATE OF FLORIDA IN ARTICLE X, SECTION 4 OF THE FLORIDA CONSTITUTION IN THE GENERAL ELECTION OF NOVEMBER 1984, THE HOLDING IN CARTER'S ADM'RS v. CARTER, 20 Fla. 558 (1884), FOLLOWED IN SHERBILL v. MILLER MFG. CO., 89 So.2d 28 (Fla.1956), THAT A WAIVER OF THE BENEFIT AND PROTECTION OF THE EXEMPTION FOUND IN ARTICLE X, SECTION 4(A) OF THE FLORIDA CONSTITUTION IS UNENFORECEABLE AGAINST THE CLAIM OF A GENERAL CREDITOR, SHOULD BE OVERRULED?

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Engelke v. Estate of Engelke, __ So.2d __ (Fla. 4th DCA February 8, 2006)

Navigating Florida's homestead-protection laws is one of the primary focus points for estate planning attorneys in this state. There were two Florida Supreme Court opinions in 2005 alone attempting to unravel the thorny probate issues inherent to Florida homestead properties (see here and here).

In this case the 4th DCA addressed one of the most common questions faced by Florida estate planning attorneys: should the homestead property be put into the client's revocable trust? According to the 4th DCA, the answer is an unqualified YES. There has been hesitation in the past to put homestead property into a revocable trust because of an unfortunate Florida bankruptcy-court opinion that stood for the proposition that homestead property in a revocable trust was not owned by a "natural person," thus it lost its creditor protection. As far as I know, every published Florida opinion addressing the same issue since then has ruled the other way. The 4th DCA case linked-to above does the same, directly answering two key estate-planning questions as follows:

• "We note that in this case while [the decedent's] residence was held in a revocable trust, it was owned by a "natural person" for purposes of the constitutional homestead exemption. Because [the decedent] retained a right of revocation, he was free to revoke the trust at any point in time. Accordingly, he maintained an ownership interest in his residence, even though a revocable trust held title to the property. We therefore conclude that [the decedent's] interest as beneficiary of his own revocable trust would entitle him to constitutional homestead protections." (Emphasis added.)
• Frequently, as here, the trust contains provisions regarding the payment of expenses of the estate after the settlor's death. We have found no case in which a general direction to pay the estate expenses has trumped the constitutional homestead protections which are the rights of the heirs as much as the decedent. Because revocable trusts are merely will-substitute devices, we see no reason why the reasoning of Thompson v. Laney, precluding use of the homestead to satisfy estate debts, should not apply with equal force when homestead property is transferred through a revocable trust. Therefore, unless the trust specifically directs that the freely devisable homestead be sold, the rights of the heirs attach at the death of decedent, and the property is protected from the claims of all creditors." (Emphasis added.)

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McEnderfer v. Keefe, 2006 WL 129320 (Fla. Jan 19, 2006)

In 2005 I wrote here about the Florida Supreme Court's decision in Warburton construing Florida's homestead laws as applicable to otherwise freely devisable homestead property. This was a companion case to the 2005 decision, and the Court merely restates its earlier position.

This Court recently quashed Warburton and answered the certified question in the negative. We therefore answer the certified question in this case in the negative and hold that where a decedent is not survived by a spouse or minor children, the decedent's homestead property passes to the residuary devisees, not the general devisees, unless there is a specific testamentary disposition ordering the property to be sold and the proceeds made a part of the general estate. See McKean v. Warburton, 30 Fla. L. Weekly S613, --- So.2d ----, 2005 WL 2155180 (Fla. Sept. 8, 2005).

The following briefs were filed with the Court in this case:

• Petitioner's Initial Brief on the Merits
• Respondent's Answer Brief on the Merits
• Petitioner's Reply Brief

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Demayo v. Chames, 2005 WL 3180187, 30 Fla. L. Weekly D2692 (Fla. 3d DCA Nov 30, 2005)

In December 2002 Henry DeMayo retained Deborah Chames and her law firm, Heller and Chames, P.A., to represent him in a post-dissolution proceeding to modify his child support and alimony obligations. The retainer agreement included the following clause:

It is specifically agreed that Heller & Chames, P.A. shall have and is hereby granted all general, possessory and retaining liens and all equitable, special and attorney's charging liens upon the client's interests in any and all real and personal property within the jurisdiction of the court for any balance due, owing and unpaid as well as a lien in any recovery whether by settlement or trial; and such lien or liens shall be superior to any other lien subsequent to the date hereof and that the client hereby knowingly, voluntarily and intelligently waives his rights to assert his homestead exemption in the event a charging lien is obtained to secure the balance of attorney's fees and costs. (Emphasis added.)

In October 2003 Miami-Dade Judge Robert N. Scola, Jr. granted Heller and Chames' request to withdraw from representing Mr. DeMayo and shortly thereafter entered a final judgment in the sum of $33,207.76 in favor of the law firm. The trial court expressly enforced the waiver provision of the retainer agreement.

On appeal, the Third DCA upheld the trial court's ruling on the following grounds:

[W]e see no reason why an owner of homestead property should not be able to waive [his constitutional right under Article X, Section 4 of the Florida Constitution against divestment of homestead property via a forced sale] if he so desires. As the Florida Supreme Court stated in Caggiano, 605 So.2d at 59,"the homestead exemption *** was intended simply to guarantee that the homestead would be preserved against any involuntary divestiture by the courts****" See also Havoco, 790 So.2d at 1022 ("The homestead guarantee uses broad language protecting the homestead from involuntary divestiture****"). Absent a plain and unambiguous statement in the Florida Constitution to the contrary, we decline to imply a prohibition against a voluntary divestiture of one's constitutional right to homestead protection.

Warning: see this post: on is own motion Third DCA reconsidered this case en banc and then completely reversed itself!

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Harrell v. Snyder, 2005 WL 2899461 (Fla. 5th DCA Nov. 4, 2005)

In this case, the decedent had divorced his wife several years before his death, but never got around to changing his will. So when he died, his ex-wife became personal representative of his estate under the terms of his last will (although she was deemed to have predeceased him for purposes of the will's dispositive provisions). The decedent was not survived by any minor children and had not remarried prior to death, so his homestead property was freely devisable . . . or was it?

Brevard County Judge Kerry I. Evander ruled that the personal representative had the authority to both take control of the freely-devisable homestead property and to sell it. The Fifth DCA disagreed, holding as follows:

• Under F.S. § 733.608(2), a trial court MAY authorize a personal representative to take possession of homestead property to preserve it for the heirs.
• This same statute does NOT grant to a personal representative the power to sell such property.

Bottom line, in the absence of specific instructions authorizing the personal representative to sell freely-devisable homestead property, such property passes to the residuary beneficiaries of the decedent's estate. In an opinion I wrote about here, the Florida Supreme Court provided the following directive regarding the sale of freely-devisable homestead property:

We therefore . . . hold that where a decedent is not survived by a spouse or minor children, the decedent's homestead property passes to the residuary devisees, not the general devisees, unless there is a specific testamentary disposition ordering the property to be sold and the proceeds made a part of the general estate.

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McKean v. Warburton, 2005 WL 2155180 (Fla. September 8, 2005) (4th DCA Reversed)

REVISED OPINION: McKean v. Warburton, 2005 WL 3601898 (Fla. September 8, 2005)

The Florida Supreme Court reversed this Fourth DCA decision permitting the distribution of freely devisable homestead property to satisfy a preresiduary bequest. For the reasons discussed here, I think the Florida Supreme Court got this one wrong, turning what should be a benefit, i.e., Florida's homestead protection laws, into one very big trap for the unwary.

In light of skyrocketing real estate values in Florida, for most Florida homeowners, their single most valuable asset is their home. If a homeowner is survived by a spouse or minor children, his or her residence is protected homestead property under Florida's Constitution (Art. X, § 4(c)) and Probate Code (F.S. § 731.201(29)), and thus not subject to devise pursuant to F.S. § 732.4015. However, if the homeowner's residence is NOT protected homestead property, one might be forgiven for assuming that the residence was "freely" devisable.

Not so fast says the Florida Supreme Court. If a homeowner that expects NOT to be survived by a spouse or minor children wants to make sure that his or her single most valuable asset at death can be used to satisfy pre-residuary bequests, the Florida Supreme Court's holding in this case will require that the homeowner specifically provide in his or her Will that the homestead property be sold and added to the general probate estate. Specifically, the Florida Supreme Court summed up its holding in this case as follows:

We therefore . . . hold that where a decedent is not survived by a spouse or minor children, the decedent's homestead property passes to the residuary devisees, not the general devisees, unless there is a specific testamentary disposition ordering the property to be sold and the proceeds made a part of the general estate.

The following appellate briefs were filed with the Florida Supreme Court for this case:

• Petitioner's Initial Brief on the Merits
• Answer Brief of Respondent
• Petitioner's Reply Brief
• Brief of Real Property Probate & Trust Law Section of The Florida Bar, as Amicus Curiae

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Who would have thought that "Dear Abby" could teach us something about practicing trusts and estates law in Florida? Read the following exchange (also available here) and ask yourself three questions:

• Assuming the estate planning attorney described below only represented the husband, did the attorney violate his confidentiality obligations under Florida Ethics Rule 4-1.6? Answer: Yes.
• Under Florida Bar Ethics Opinion 95-4, could the estate planning attorney represent both husband and wife in the scenario described below? Answer: No.
• Is this type of behavior great advertising for Florida's homestead protection laws and spousal elective share rights? Answer: Yes!!!

DEAR ABBY: My husband, "Girard," and I have been married two years. We both have children from previous marriages. Girard always told me I would have a home if I outlived him, even though his children will eventually inherit the property.

One day I asked Girard if it was in the will, and he said no, but that he and his children "had discussed it." When I asked him to put it on paper,