Edward T. CUTLER, Appellant,
v.
Cynthia CUTLER, In re The Estate of Edith Alice Cutler, Appellee.
District Court of Appeal of Florida, Third District.
*342 Billbrough & Marks, and G. Bart Billbrough and Geoffrey B. Marks, for appellant.
Brian R. Hersh and Andrew Teschner; Shutts & Bowen and William Jay Palmer, for appellee.
Goldman Felcoski & Stone and Robert W. Goldman, Naples; Brigham and Moore and John W. Little, III, West Palm Beach, as Amicus Curiae.
Before GERSTEN, C.J., and COPE, GREEN, RAMIREZ, WELLS, SHEPHERD, SUAREZ, CORTIÑAS, ROTHENBERG, LAGOA and SALTER, JJ.
ON MOTION FOR REHEARING, REHEARING EN BANC, CLARIFICATION, AND CERTIFICATION
WELLS, Judge.
Appellant seeks rehearing, rehearing en banc, clarification, and certification of this Court's opinion filed February 28, 2007. We grant the motion for rehearing en banc, withdraw our prior opinion, and substitute the following modified opinion in its stead.
I. PROCEDURAL BACKGROUND
Edward T. Cutler appeals from an order declaring a devise of property to Cynthia Cutler, his sister, to be homestead property and exempt from the decedent's debts. While we affirm that portion of the order confirming that the devised property retained its homestead character even though titled in a trust at the time of the decedent's death, we reverse that portion of the order finding it exempt from the decedent's debts.
II. FACTS
In October 2003, approximately eight months before her death, Edith Cutler created a land trust for estate planning purposes. Edith, a widow with two adult children, named herself and her two children, Edward and Cynthia, co-trustees of the trust and conveyed her residence and an adjacent vacant lot to the trust subject to a life estate in herself. Edith was the sole beneficiary of this trust and retained the right to withdraw and appoint the principal of the trust to or for her benefit at any time. The trust also provided that the remainder interests in these properties, which were titled to the trust, would be distributed to Edith's estate upon her death:
[T]he entire remaining Trust Estate, including without limitation any accumulated *343 income, shall be distributed to the Estate of the Settlor to be administered and distributed as any other part of the Estate of the Settlor.
On the same day on which this trust was created, Edith deeded her residence and the adjacent vacant lot to it. She also executed a will, in which she specifically devised the residence titled to the trust to her daughter, Cynthia; she specifically devised the adjacent vacant lot titled to the trust to her son, Edward. She also directed that her debts be satisfied equally from both properties should the funds in her estate be insufficient to satisfy those debts:
[Article VI: I leave] all of my right, title and interest in the home in which I now live ... to my daughter, CYNTHIA.... [Article VII: I leave] all of my right, title and interest in the ... the vacant real property located next to my home in which I now live ... to my son, EDWARD....
[Article XII: I direct that] [a]ll claims, charges and allowances against, and costs of administration of [] my Estate... shall be paid out of the residuary portion of my Estate to the extent that gift suffices. The balance of such items shall be paid out of and shall reduce equally the gifts under Article VI (the gift of my home to Cynthia ...) and Article VII (the gift of the vacant real property next to my home to Edward ...) herein.
(Emphasis added).
On June 6, 2004, Edith died. Because estate funds were insufficient to satisfy all of Edith's creditors, Edward sought to have the two parcels devised to Edith's estate abate "equally" in accordance with his mother's express wishes. Cynthia objected. The trial court concluded that the residence retained its homestead status while titled in the trust and passed to Cynthia where it remained exempt from Edith's creditors after her death. Edward appealed. While we agree that the residence retained its homestead status even though titled in the trust, we do not agree that it passed to Cynthia free of the obligations Edith validly impressed upon it.
III. DISCUSSION
A. The property titled in the trust retained its homestead status.
To qualify for protection under Article X, section 4 of the Florida Constitution, a parcel of property must meet constitutionally defined size limitations and must be owned by a natural person who is a Florida resident who either makes or intends to make the property that person's residence. Art. X, § 4(a), 4(a)(1) Fla. Const. (1985); Estate of Van Meter,
Edward claims that the residence devised to Cynthia does not qualify as homestead property because it was not owned by a "natural person" at the time of Edith's death. We disagree.
This court, and other district courts of appeal as well, have confirmed that property held in trust may be impressed, legally speaking, with the character of homestead. Callava v. Feinberg,
This court has also confirmed that the Florida Constitution does not limit the types of interests that may qualify for homestead protection. See Callava,
The Constitution limits the homestead land area that may be exempted, but it does not define or limit the estates in land to which homestead exemption may apply; therefore, in the absence of controlling provisions or principles of law to the contrary, the exemptions allowed by section 1, article 10 [now Article X, section 4], may attach to any estate in land owned by the head of a family [now natural person] residing in this state, whether it is a freehold or less estate, if the land does not exceed the designated area and it is in fact the [natural person's] home place.
S. Walls, Inc.,
Based on the terms of the trust involved in this case, the remainder estate in Edith's residence titled in Edith's trust was correctly determined by the lower court to qualify for homestead protection.
B. The constitutional exemption from creditors' claims did not inure to Cynthia's benefit following Edith's death.
While we agree with the trial court's conclusion that the property devised to Cynthia was Edith's homestead, we cannot agree that the constitutional exemption from creditors' claims inured to Cynthia's benefit.
It is a cardinal rule of testamentary construction that "the primary objective in construing a will is the intent of the testator." McKean v. Warburton,
In this case, the trust agreement expressly stated that the corpus of the trust, that is, the interests in Edith's residence and the adjacent vacant lot, were to pass to, and be administered as part of, her estate upon her death. Edith's will provides that the interest in her residence held by the trust should be passed to her daughter and that the interest in the adjacent vacant lot should pass to her son. She also directed that her debts be satisfied equally from both properties should the funds in her estate be insufficient to satisfy those debts.
In City National Bank of Florida v. Tescher,
This is not a recent development. It has long been recognized that the owner of homestead property may devise that property in a manner that terminates the protections accorded by article X, section 4. In Estate of Price v. West Florida Hospital., Inc.,
Although Edith did not direct that her home be sold, she did direct, in a specific manner, that it be used to satisfy her debts. This was the equivalent of ordering it sold and the proceeds distributed to pay debts, actions which Price and its progeny confirm results in loss of homestead protections.[1] While the benefits of homestead protections vest in a qualified beneficiary at the moment of a testator's death,[2] the property in this case passed *346 into the beneficiary's hands impressed with the obligation to pay the testatrix's debts, an obligation that deprived the property of homestead protection under article X, section 4.
This is, of course, wholly consistent with article X, section 4 which expressly confers the power on the owner of homestead property to sell, mortgage, or give it away. See Art. X, § 4(a)(2)(c), Fla. Const. ("The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer title to an estate by the entirety with the spouse."). If a homestead owner (with no spouse and children) can sell, mortgage or give homestead property away while alive and use the proceeds from any such transaction as he or she sees fit, that same owner may give the property away upon death and order it to be used to satisfy debts even if such a devise means the property will no longer enjoy homestead protection.
In this case, rather than selling or mortgaging her homestead interests while alive and using the funds recognized to pay debts, Edith devised her homestead property to her daughter and expressly directed that this devise be used to satisfy a portion of her debts. This devise is wholly consistent with Tescher, Snyder, and Warburton and with article X, section 4 of the Florida Constitution and should be given effect.
IV. CONCLUSION
In sum, if it was legally permissible for Edith to have left her properties to someone outside of her family not qualified for homestead protection, which would make this property subject to payment of debts, we see no reason why she could not lawfully leave it to her heirs with the provision that the properties be available to satisfy her debts. While we are hard put to imagine a situation where the desire to satisfy one's debts is deemed anything but laudable, we reach our conclusion today not out of concern for Edith's creditors, but out of consideration for Edith's legal right to have her wishes followed in the absence of any constitutional impediment.[3]See Tescher,
COPE, GREEN, RAMIREZ, SUAREZ, CORTIÑAS, ROTHENBERG and SALTER, JJ., concur.
SHEPHERD, J., dissenting.
The reason "why [Edith] could not lawfully leave her homestead property to her heirs with the provision that the properties be available to satisfy her debts," see supra p. ___, is simply because the people of the State of Floridain the organic document by which they have joined themselves together to be governed and livehave expressly prohibited her from doing so.
With certain exceptions not applicable to this case, Article X, section 4(b) of the Florida Constitutionof which the majority makes no mentionstates that the exemption from forced sale of Edith's property to satisfy her debts that inured to Edith's benefit during her lifetime "inure to [the] heirs of the owner" upon her death.[4] As recognized by the majority, Edith specifically devised her residence to her daughter. There are no other devises of the property in her will. See § 731.201(8), Fla. Stat. (2003) (defining a devise as a "testamentary disposition of real or personal property"). By virtue of Edith's specific devise of her residence to Cynthia, title to the property passed to Cynthia upon Edith's death, in a twinkle of an eye as it were. Estate of Hamel v. Theodore Parker, P.A.,
Despite this unbroken history, the majority seizes upon the language of an administrative will provision located among the final paragraphs of Edith's will to take the dubious leap that Edith preferred her creditors over her children. As I read her willwhich contains two unambiguous, specific devises to her heirs, a residuary clause that split any residuary between these same two heirs,[6] and an administrative will provision seeking, ineffectually, at least as to the devise to Cynthia, to alter the general provisions of Florida's abatement *349 statute, section 733.805, Florida Statutes (2003), a provision that applies only to probate assets and only during the administration of estatesEdith's true desire was to do all she could to get her residence and the vacant lot into the hands of her daughter and son respectively. If it had been otherwise, the accepted way for Edith to assure her creditors came first would have been either to devise the two parcels to her estate to be held until it was known whether they were needed for estate expenses or, alternately perhaps, to order them sold upon her death with the proceeds to be administered and distributed as set forth in her will. See McKean v. Warburton,
However, as I intimated at the beginning, Edith's intent is not relevant to the resolution of this case. As the Fifth District Court of Appeal observed more than two decades ago:
The homestead character of a piece of property is not created by, nor is it dependent upon, any general or specific mental intent on the part of the owner to create or maintain a certain piece of property as his homestead, but arises and attaches from the mere existence of certain facts in combination of place and time.
Pierrepont v. Humphreys (In re Estate of Newman),
The majority urges to the contrary on the strength of City National Bank v. Tescher,
Nor do the "sale cases" cited by the majority offer any comfort to the majority. See supra p. ___. In both Estate of Price v. West Florida Hospital, Inc.,
Florida law specifically provides that homestead property is not subject to the administration of the court unless the will specifically requires that the property be sold. See §§ 733.607-608 Fla. Stat. (1995); Knadle v. Estate of Knadle,686 So.2d 631 (Fla. 1st DCA 1996) (where a testatrix directs in her will that her homestead be sold and the proceeds divided between her adult children, the proceeds lose their homestead character and become subject to the claims of creditors); Estate of Price v. West Florida Hosp., Inc.,513 So.2d 767 (Fla. 1st DCA 1987) (proceeds of sale of testatrix' homestead, pursuant to will directing sale and distribution of proceeds to adult children, lost their homestead character and were subject to creditors' claims). The will in the present case makes no such provision.
Thompson,
The case before us is indistinguishable from Engelke. In that case, Paul Engleke and his wife, Judy, owned an individual one-half interest in their homestead property (as tenants in common) in separate inter vivos trusts when Paul died. Id. at 694. At the time of his death, he had three adult children from a previous marriage. Id. In a prenuptial agreement, Paul and Judy waived their homestead rights under Article X, section 4(c) of the Florida Constitution. Because Judy waived her homestead rights as a spouse and Paul had no minor children, there was no limitation on his ability to devise his individual one-half interest in their home. Id. at 696. Paul's trust instrument provided that after his death, Judy would have the right to live in the residence during her lifetime, provided that she pay all of the expenses to maintain the home.[8] Upon her death or removal from the home, Paul's children would receive the property through the residuary provisions of the trust. Id. at 694. Article IV, paragraph A of Paul's trust contained a paragraphdescribed by that court as a "general direction"remarkably similar to that found in Article XII of Edith's will. It provided:
Except as otherwise specifically provided in this Article, upon the death of Grantor, to the extent that Grantor's residuary probate estate shall have insufficient liquidity as so certified by the Personal Representative of Grantor's estate, Trustee shall pay from the trust estate: ... (2) all of Grantor's funeral expenses, claims allowable against Grantor's estate, costs of last illness and costs of the administration of Grantor's estate including ancillary.
Id.
As in our case, there were insufficient assets in Paul's residuary probate estate to pay the claims against the estate or a family allowance the trial court ordered be paid to Judy. Id. at 695; see also § 732.403, Fla. Stat. (2004). Judy moved to compel the transfer of Paul's individual one-half interest in the homestead property from the trust to Paul's estate to pay these charges. Engelke,
At the outset, the court expressly found that Paul's waiver of his homestead interest under Article X, section 4(c) had no effect on Michael's right to maintain his own ability to assert his rights as an heir under Article X, section 4(b) of the Florida Constitution. The court said,
[T]he property continued to remain [Paul's] homestead.... Thus, the homestead continued to retain the constitutional protections provided in sections 4(a) and (b). Paul's homestead interest was protected from creditors by section 4(a) while he was alive, and his heirs can claim the exemption for themselves under section 4(b), even though they retain only a remainder interest in the property. See Hubert v. Hubert,622 So.2d 1049 (Fla. 4th DCA 1993).
Engelke,
A homestead devised to an heir is protected from forced sale to pay the expenses of administering the estate. See Thompson v. Laney,766 So.2d 1087 (Fla. 3d DCA 2000). It is only when the testator directs that a freely devisable homestead be sold and distributed to a devisee that the constitutional protection from creditors is disregarded. See Knadle v. Estate of Knadle,686 So.2d 631 (Fla. 1st DCA 1996). In such a case, the decedent has devised money and not the homestead itself. Otherwise, the homestead protections against forced sale attach upon the moment of the owner's death. See In re Estate of Hamel,821 So.2d 1276 , 1280 (Fla. 2d DCA 2002) (stating, "If the property is homestead on the date of death, the homestead protection is impressed upon the land and the protection from creditors' claims inures to the benefit of the heirs to whom the property is devised.").
Here, Paul used a revocable living trust to hold title to his homestead. We do not think that the use of the trust removes the homestead protection to his heirs, to whom the property ultimately passes. Revocable living trusts are widely used will-substitute devices that provide flexibility in managing the settlor's assets during his or her lifetime. In other contexts, revocable trusts are treated similarly to wills. See, e.g., § 732.4015, Fla. Stat. (2005) (treating disposition by trust of grantor's homestead as a "devise" where grantor is survived by spouse or minor child); see also Johns v. Bowden,68 Fla. 32 ,66 So. 155 (1914) (retention of entire beneficial estate in grantor during his lifetime makes revocable trust in the nature of a testamentary disposition of homestead property); In re Johnson's Estate,397 So.2d 970 (Fla. 4th DCA 1981). Frequently, as here, the trust contains provisions regarding 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. Knadle, [686 So.2d at 632 ].
Engelke,
I find the reasoning of Engelke both flawless and directly applicable to the case at bar. By requiring the devise to Cynthia to abate to pay estate expenses, we incorrectly become the first court to hold that a general direction to pay estate expenses trumps constitutional homestead protections.
I respectfully dissent.[9]
GERSTEN, C.J., and LAGOA, J., concur.
NOTES
Notes
[1] See generally Direction in will for payment of debts and expenses as subjecting exempt homestead to their payment,
[2] See In re Estate of Hamel,
[3] We find this analysis consistent with the Supreme Court's recent decision in Chames v. DeMayo,
[4] Article X, section 4, reads as follows in its entirety:
SECTION 4. 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:
(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; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner's family;
(2) personal property to the value of one thousand dollars.
(b) These exemptions shall inure to the surviving spouse or heirs of the owner.
(c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child, except the homestead may be devised to the owner's spouse if there be no minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.
Art. X, § 4(a)-(c), Fla. Const.
[5] The substance of the provisions of the Florida Constitution of 1868, see Art. IX, Fla. Const. (1868), providing to owners of homestead property both a lifetime and deathtime protection of their property from forced sale to pay estate expenses is remarkably similar to the provisions providing the same relief today. See Art. X, § 4(a), (b), Fla. Const. (2003). Article X, section 4(c) of the present Constitution, separately placing restraints on alienation of homestead during the homesteader's lifetime and limitations on devise, first appeared in its current form in the 1968 Constitution. Its historical development is substantially unrelated to that of Article X, sections 4(a) and (b). See Donna Litman Seiden, There's No Place Like Home (stead) in FloridaShould It Stay That Way?, 18 Nova L.Rev. 801 (1994). For a complete version of the 1868 Florida Constitution, see Art. IX, Fla. Const. (1868), available at http://www.law.fsu. edu/crc/conhist/contents.html.
[6] Article VIII, the residuary clause of Edith's will, reads as follows:
All of the rest, residue and remainder of my Estate, of whatsoever kind and character and wheresoever situated, which I may own at the time of my death, including without limitation all lapsed legacies, devises and bequests and any property over which I may have any power of appointment at my death, I give, devise, bequeath and appoint as follows:
A. One-half (1/2) to my daughter, CYNTHIA VIRGINIA CUTLER, or if she does not survive me, to the Trustee of the Edith A. Cutler Trust under Agreement of August 15, 1994 between Edith A. Cutler as Settlor and First National Bank of South Miami as Trustee, and
B. One-half (1/2) to my son, EDWARD TROTTER CUTLER, or if he does not survive me, to CYNTHIA VIRGINIA CUTLER, or if she does not survive me, to the Trustee of the Edith A. Cutler Trust under Agreement of August 15, 1994 between Edith A. Cutler as Settlor and First National Bank of South Miami as Trustee.
(emphasis added).
[7] As is not uncommon in contests between siblings after death of a parent, this case presents a history of pre-death estrangement between the contestants in this case. It is not for us to seek to salve such wounds.
[8] The fact the deathtime disposition of his one-half interest in the homestead property was accomplished through his lifetime intervivos trust was immaterial to the court's analysis. As the court stated, "[r]revocable living trusts are widely used will substitute devices...." Id. at 697.
[9] Upon the issuance of the original panel opinion in this casewhich concluded that the lifetime exemption enjoyed by Edith inured to CynthiaEdward, for the first time, argued to us that if the parcel devised to Cynthia is clothed with Article X, section 4(b) inuring clause protection, then the adjacent vacant parcel devised to him also qualifies, so that both parcels are exempt from forced sale to pay Edith's last expenses. Adjacent parcels can qualify for homestead protection. See Quigley v. Kennedy & Ely Ins., Inc.,