In our last newsletter, we discussed the latest statutory assault on the homestead citadel Assault on the Homestead Citadel. In this newsletter, we will discuss a recent case law assault on Florida’s broad homestead protections.

In Flinn v. Doty, the Fourth District Court of Appeal recently held that a finding of “unjust enrichment” is sufficient to permit an equitable lien to be imposed against a homestead. In that family dispute, a daughter exercised undue influence over her incapacitated father to secure title to his properties. She sold the properties and then used the proceeds to pay off the mortgage on her homestead. The Court imposed a lien on her homestead for those monies used to pay off her mortgage, specifically rejecting an argument that an equitable lien could be imposed only where fraud or egregious conduct are shown (I guess the daughter’s misconduct wasn’t “egregious,” only “unjust.”). The Court expanded on the reasoning in the case of Palm Beach Savings & Loan Association v. Fishbein, 619 So.2d 267 (Fla. 1993) in which the Florida Supreme Court allowed an equitable lien against homestead property in favor of a lender, where the debtor fraudulently obtained a loan and used the loan to satisfy three existing mortgages on his homestead property.

Contrast this line of reasoning with the case of Havoco of America, Ltd. v. Hill, 790 So.2d 1018 (Fla. 2001). There, the Florida Supreme Court cautioned that its equitable lien jurisprudence should not be read too broadly. The Court reasoned that equitable liens only have been imposed in cases where proceeds from “fraud” or “reprehensible conduct” were used to invest in, purchase or improve the homestead. Specifically, the Court refused to impose an equitable lien in the (Havoco) case, even though the transfer of the non-exempt assets into an exempt homestead in that case was done with the specific intent to hinder, delay or defraud creditors. The Court stated that it could not reasonably extend our equitable lien jurisprudence to except such conduct from the homestead exemption’s protection because it has invoked principles to reach beyond the literal language of the exceptions only where funds obtained through fraud or egregious conduct were used to invest in, purchase, or improve the homestead.

Your reaction to reading this summary likely is to conclude that Florida Courts have reached contradictory decisions and that it is very difficult to determine in advance whether or not a particular case will protect the homestead citadel or permit an assault upon it. The concepts of equitable lien, equitable subrogation, equitable estoppel and unjust enrichment are difficult to explain in black and white terms. When is conduct “egregious” or “reprehensible?” The take away is that the broad homestead protections provided by Article X, Section 4 of the Florida Constitution are subject to certain exceptions and that misconduct in availing oneself of these protections, frequently, but not always, is punished. Homestead owner beware!

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