Judge Finding Loophole in Homestead Protection
Can a judge in another state enter a judgment against a Florida resident that circumvents the debtor's homestead exemption? One of my clients is facing a judgment in the state of his former residence which may effectively take his homestead to satisfy an obligation to the plaintiff in that case. The facts are that my client received funds from a trust which were improperly distributed by the trustee to the detriment of the intended trust beneficiary. There were no allegations of fraud or breach of fiduciary duty against my client. Upon receiving the money from the trustee my client moved to Florida and bought a home with the money. The trust beneficiaries sued the trustee and my client in seeking return of their rightful share of the trust money. The judge found my client liable to return the money , the judge imposed a "constructive trust" on the client's homestead in favor of the plaintiff trust beneficiaries. Plaintiff's will domesticate the foreign judgment which will result in a Florida judgment stating that the client's homestead is subject to a constructive trust for the plaintiff's benefit.
A constructive trust is a statement of ownership granting to the beneficiaries, in this case the plaintiffs, an equitable right to the homestead. The issue is whether the judgment of constructive trust determining ownership rights effectively circumvents Florida's constitutional homestead protections. There are Florida cases imposing equitable trusts or equitable liens on homestead in situations with different facts. Most of these cases are prior to the Havoco decisions which limited equitable rights against a debtor's homestead to cases of fraud or egregious circumstances. However, the Havoco case involved fraudulent conveyance which is not an issue in this case.
My initial research did not find a Florida case directly on point. In my client's defense, it is not clear whether a judge in a different state has jurisdiction to determine equitable ownership interests in Florida real estate by virtue of constructive trust or otherwise. Additionally, there are Florida cases which describe a constructive trust as a remedial tool. In that event, a Florida court may not permit imposition of a tool to collect money owed the trust beneficiary plaintiffs which contravenes homestead protections in our Constitution. Yet, it is possible a Florida court may simply enforce the finding of the foreign court after the judgment is domesticated. If the judgment were upheld it would provide judges around the country a way to craft a money judgment in appropriate cases that cannot be avoided by the debtor's purchase of a Florida homestead.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
Sometimes I think these judges forget that it is their job to interpret the law, not to enforce or create it. I also think that they believe they are above the law.
Fl. Stat. 55.509 (2):
I would think this statutory provision would offer up a defense to the Florida homesteader on the grounds that a domestic judgment imposing a constructive trust would not be enforceable outside the limited exceptions to the homestead protection.
Also, I would think the jurisdictional defense - a judge from a foreign jurisdiction has limited, if any, power to impose a constructive trust over Florida real estate - would be very powerful. The real route for the foreign judge, it would seem to me, would be equitable relief against the person, directly or indirectly requiring them to cash equity out of their home under pain of contempt.
Does anyone have a form for a Petition for a Constructive Trust? Thank you!