Willis v. Red Reef, Inc.
921 So. 2d 681
| Fla. Dist. Ct. App. | 2013Background
- Willises and Giacomino formed Ocean One North, Inc. to own/manage a Boca Raton building; Red Reef leased space in Ocean One for a restaurant.
- Ocean One breached the lease; Red Reef sued in county court seeking specific performance and damages not exceeding $15,000.
- Before Red Reef’s county case concluded, Ocean One sold the building for $3.1 million; remaining proceeds were distributed to the Willises ($1.2M) and Giacomino ($1.9M).
- Willises used $490,345.19 of their proceeds to pay off their homestead mortgage in Boca Raton.
- Red Reef’s later amended complaint (2002) and subsequent 2004 final judgment found fraudulent transfers under Fla. Stat. 726.105(1)(a),(1)(b) and 726.106(1), but not under other counts, and imposed an equitable lien/constructive trust on the Willises’ homestead for $490,395.19 plus prejudgment interest.
- On appeal, the court affirmed in part, reversed in part, and remanded for further proceedings, including prejudgment interest calculation and post-judgment interest language.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the fraudulent transfer counts were supported by substantial evidence | Willises argue directed verdict should have been granted on these counts | Red Reef contends the transfers violated the Fraudulent Transfer Act and were supported by evidence | Affirmed as to liability on fraudulent transfers (Counts 1–3) |
| Whether the homestead was improperly subjected to an equitable lien | Willises claim Havoco limits apply; funds used to pay mortgage not from Red Reef’s funds | Red Reef argues funds were traceable to Ocean One’s proceeds and thus could encumber homestead | Reversed; no equitable lien or constructive trust against homestead because Havoco limits apply and funds were not derived from Red Reef to extinguish the mortgage |
| Whether the mortgaged homestead protection was correctly treated under Florida Constitution Article X, §4(a)(1) | Non-exempt funds may be converted into an exempt homestead even with fraudulent intent | The transfer of funds to pay the mortgage should be liable to satisfy creditors | Claim resolved in favor of Willises; Havoco limits prevent an equitable lien on the homestead |
| Remand-related administrative fixes to final judgment | Remanded to calculate prejudgment interest and to include post-judgment interest language; no merit to other points | ||
| Overall disposition of the appeal | Affirmed in part, reversed in part, and remanded with directions |
Key Cases Cited
- Havoco of America, Ltd. v. Hill, 790 So. 2d 1018 (Fla. 2001) (equitable liens on homesteads limited to fraud-derived funds used to invest in or improve the homestead)
- Palm Beach Sav. & Loan Ass'n., F.S.A. v. Fishbein, 619 So. 2d 267 (Fla. 1993) (equitable lien on homestead where fraudulently obtained funds were used to extinguish a mortgage)
- Jones v. Carpenter, 90 Fla. 407, 106 So. 127 (Fla. 1925) (trustee entitled to equitable lien against homestead for embezzled funds used to improve)
- Argonaut Ins. Co. v. May Plumbing Co., 474 So.2d 212 (Fla. 1985) (pre-judgment/post-judgment interest considerations in final judgments)
- Friedman v. Friedman, 825 So.2d 1010 (Fla. 4th DCA 2002) (practical sufficiency of execution language in final judgments)