In Re Clements
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case is before the Court upon an Objection to Debtor’s Claim of Exemptions *924 filed by Locomotion Properties, Ltd. (hereinafter “Locomotion”), a creditor of Debtor and a Motion to Continue and Consolidate Hearing on Objection to Exemptions also filed by Locomotion. A hearing was held on February 8, 1996 and the parties subsequently submitted Memorandums of Law to the Court. Based upon the hearing and the Memorandums and evidence previously presented in this case, the Court makes the following Findings of Fact arid Conclusions of Law.
This is yet another chapter in what has become the continuing saga of the Clements’ bankruptcy case. This case was originally filed under Chapter 13 of the bankruptcy code on September 2, 1994 by Jim and Nell Clements. Locomotion promptly filed a Motion for Relief from Stay in order to continue state court litigation it had pending against the Debtor. After a hotly contested hearing, the Court denied the Motion for Relief from Stay.
(See
Findings of Fact and Conclusions of Law and Order at Doc. Nos. 30 and 31.) The Debtors then filed an Objection to the Claim of Locomotion. After a hotly contested hearing, the Court allowed the claim of Locomotion in the amount of $239,596.48 as an unsecured claim.
(See
Locomotion has now filed an adversary proceeding against Mr. Clements, objecting to the discharge of the Debtor. This chapter of the Clements’ bankruptcy case concerns the Objection to Claim of Exemptions filed by Locomotion in the main case, objecting to Debtor’s claim of exemption for hjs homestead. The next chapter in the saga will probably deal with the Objection to Discharge in the adversary. Trial is currently set for July 30,1996.
The specific issue in the current chapter of this ease concerns the Debtor’s claim of exemption for his homestead in Jacksonville. 1 Locomotion has filed an Objection to the exemption based upon the allegation that Debtor’s homestead was acquired with nonexempt assets, with an intent to defraud Locomotion, and that the knowing conversion of non-exempt properties for the purpose of acquiring exempt assets was fraudulent as to Locomotion. Locomotion has also filed a Motion to Continue and Consolidate the Objection with the trial in its adversary proceeding objecting to the discharge of the Debtor, stating that it feels a full evidentiary trial is merited by the Objection and that the evidence that will be presented in the adversary is very similar to that of the Objection. Debtor opposes the Motion to Continue and Consolidate.
The facts regarding the Objection are few and were stipulated to at the hearing. Debt- or was a life-long resident of the state of Alabama until approximately September, 1993, at which time Debtor, and his now deceased wife, moved to Jacksonville, Florida. Debtor and Mrs. Clements sold their home in Alabama and used the proceeds to purchase their home in Jacksonville. Approximately one year later, Debtor filed this bankruptcy case with this Florida court.
It is not disputed by either party that the property in Jacksonville is Debtor’s homestead. He has been a full-time resident of Jacksonville since his move to Florida in 1993. Locomotion contends that the motivation for Debtor’s move to Florida was to take advantage of Florida’s liberal homestead exemption for debtors. It argues that the sale of Debtor’s home in Alabama, which has only a limited homestead exemption, and the purchase of the home in Florida, with its unlimited homestead exemption, was the conversion of non-exempt to exempt assets, made with the intent to hinder, delay and defraud creditors, specifically Locomotion. Locomotion argues that this is a basis to not allow Debtor to claim an exemption for his home *925 stead. These are the pertinent facts for the issue at bar.
CONCLUSIONS OF LAW
Florida grants its debtors a liberal exemption for homestead property in its state Constitution at Article X, § 4 which states,
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, improvements or repair thereof, or obligations contracted for house, field or other labor performed on the realty,....
In other words, homesteads in Florida may not be used to satisfy court judgments except in three specifically enumerated instances: (1) unpaid property taxes for the homestead itself, (2) mortgages for the purchase or improvement of the homestead itself, or (3) mechanic’s Kens for work performed on the homestead. These are the only three instances in which a homestead may be used to satisfy a debt. In a widely cited case, the Florida Supreme Court held that this provision prohibited civil or criminal forfeiture of the homestead because it was not a specifically enumerated exception to the homestead exemption in the Constitution.
Butterworth v. Caggiano,
The issue in this case is whether, and to what extent, as a matter of law, a homestead exemption may not be allowed to a debtor who allegedly converted non-exempt assets to exempt homestead property, allegedly with the intent to defraud creditors. This Court has previously held in
In re Barker (Crews v. First Colony Life Ins. Co.),
Subsequent to the transfer at issue in
Barker,
the Florida legislature enacted
The next issue is whether the Court’s holding in
Barker,
that an otherwise vaKd exemption under state law cannot be disallowed by the bankruptcy code, is true for homestead property, as well as annuities. The Court
*926
believes that it is. Other courts have also held that the homestead exemption cannot be disallowed, even if the intent was to defraud creditors. In
Bank Leumi Trust Co. of New York v. Lang,
Similarly, the homestead exemption does not contain an exception for real property which is acquired in the state of Florida for the sole purpose of defeating the claims of out-of-state creditors. In light of the Supreme Court’s admonition in the [sic] Caggiano that the three exceptions to the homestead exemption should be read narrowly, this Court is unwilling to graft an additional exception. Bank Leumi Trust Co. of New York v. Lang,898 F.Supp. at 887 .
The court in
Bank Leumi
distinguished a recent Florida Supreme Court case which placed an equitable lien on a debtor’s homestead for the benefit of a defrauded creditor. In
Palm Beach Savings & Loan Ass’n v. Fishbein,
In the instant case, the claim of Locomotion was not fraudulently or illegally procured by Debtor. The claim is a result of a guaranty of a lease agreement between Locomotion, the Debtor, and several other parties. There has been no allegation or evidence presented, that Debtor fraudulently incurred this debt.
Subsequent to
Bank Leumi,
other Florida courts have held that the homestead exemption cannot be disallowed, even if the debtor fraudulently converted property from nonexempt to exempt status to defeat the claims of creditors. In
In re Popek,
Unless the facts are such that they fall within one of the three exceptions specifically provided by Article X, § 4(a), this Court cannot deny the instant Debtor his homestead. Even if the purpose of the Debtor’s actions was to defeat the claims of [the creditor], this Court is without the power to create additional exceptions to protections granted by the Florida Constitution.
The
Popek
court also distinguished
Fishbein
stating that “the funds used by the Debtor to obtain the homestead are not traceable to the objecting creditor.”
Popek,
Similarly in
In re Lane (Ezrol v. Lane),
*927 This Court agrees with Judge Ray and the Bank Leumi court that the exceptions to the homestead exemption in the Florida Constitution must be strictly construed. The Constitution specifically lists three instances when a debtor’s homestead may be used to satisfy the claim of a creditor. Conversion of non-exempt to exempt assets is not one of them. It is not within the power of this Court to create a new exception to the homestead exemption. If property of the debtor is indeed, valid homestead property, then the property is exempt. The Court will not look behind the exemption to see how the debtor acquired the property. If the property is homestead, it is exempt. End of inquiry. However, that is not to say that there are not other remedies available to a creditor. As in Barker, this Court will not disallow an exemption, even if the property was acquired with previously non-exempt funds in order to defeat claims of creditors. However, the creditor may still object to discharge, move to dismiss the case, or pursue an avoidance action. The creditor is not entirely without remedies.
Since the Court has found, as a matter of law, that a homestead exemption cannot be disallowed on the basis that non-exempt assets were used to acquire it, there is no need to continue or consolidate this matter with Locomotion’s pending adversary proceeding. Both parties stipulated that the property at issue is the Debtor’s homestead. That is the end of the inquiry, as far as the Objection to Exemptions goes. Whether the property was purchased with the intent to hinder, delay or defraud Locomotion, which the Court is certain will be argued in the pending adversary proceeding, is not relevant to the Objection. Therefore, the Court will deny the Motion to Continue and Consolidate and overrule the Objection.
A separate final order will be entered in accordance with the foregoing.
ORDER OVERRULING OBJECTION TO CLAIM OF EXEMPTIONS AND DENYING MOTION TO CONTINUE AND CONSOLIDATE
This case is before the Court upon an Objection to Debtor’s Claim of Exemptions filed by Locomotion Properties, Ltd. and a Motion to Continue and Consolidate Hearing on Objection to Exemptions also filed by Locomotion. Based upon Findings of Fact and Conclusions of Law separately entered, it is
ORDERED:
1. The Objection to Debtor’s Claim of Exemptions filed by Locomotion Properties, Ltd. is overruled.
2. The Motion to Continue and Consolidate Hearing on Objection to Exemptions is denied.
DONE AND ORDERED.