Ernеst WILLIS, Sunday Willis, and Matthew Giacomino, Appellants,
v.
RED REEF, INC., a Florida Corporation, Appellee.
District Court of Appeal of Florida, Fourth District.
*682 Lance A. Harke and David J. Maher of Harke & Clasby LLP, Miami, for appellants.
Stephen Rakusin of The Rakusin Law Firm, Fort Lauderdale, for appellee.
HOROWITZ, ALFRED J., Associate Judge.
Ernest and Sunday Willis appeal a finаl judgment which 1) found that they fraudulently transferred assets and 2) imposed an equitable lien upon their homestead property. Red Reef, Inc. cross-appeals the final judgment arguing there were several *683 defects in the final judgment. Matthew Giacomino filed a notice of appeal of the same final judgment; however, he voluntarily dismissed his appeal. This court sua sponte consolidated these cases for all purposes. We affirm in part, reverse in part, and remand fоr further proceedings.
In 1989, Ernest Willis, his wife Sunday Willis, and Matthew Giacomino formed Ocean One North, Inc. for the sole purpose of owning and managing a commercial building located at One North Ocean Boulevard in Boca Raton, Florida. On February 16, 1996, Red Reef, Inc. entered into a lease agreement with Oceаn One whereby Red Reef was to lease certain premises in the Ocean One building so that Red Reef could operate a restaurant. Ultimately, Ocеan One breached the lease agreement by failing to allow Red Reef to occupy the leased premises.
On November 13, 1996, Red Reef filed a lаwsuit against Ocean One in county court seeking specific performance of the lease and "damages that do not exceed $15,000 exclusive of attorney's fees and costs." In addition to the litigation with Red Reef, another tenant, PNR, Inc., had also brought suit against Ocean One. Just prior to Red Reef's county сourt suit being administratively dismissed, Ocean One entered into an Agreement for the Purchase and Sale of the building to an unrelated third party. The purchase priсe was $3,100,000. The closing occurred on or about April 27, 1998. In accordance with the terms of the settlement statement, Ocean One retained virtually no prоceeds from the sale of the subject property. After payment of expenses, the remaining proceeds of sale were disbursed with the Willises receiving $1,200,000 and Giacomino receiving $1,900,000. The Willises' proceeds were deposited directly into their joint checking account. Immediately thereafter, the Willises used $490,345.19 of the proceeds they received from the sale of Ocean One's building to pay off the mortgage on their homestead property in Boca Raton.
In June 1998, Red Reef successfully had the trial court set aside the order administratively dismissing its lawsuit. In February 2000, Red Reef filed an amended complaint and the case was transferred to circuit court. On December 18, 2001, the trial court entered an amended final judgment against Ocean One, in which the court awardеd Red Reef damages in the amount of $1,523,684.24.
On March 27, 2002, Red Reef filed a new six-count complaint against the Willises and Giacomino alleging fraudulent transfers of corporate assets, alter ego liability, and tortious civil conspiracy. After a non-jury trial, the court entered a final judgment dated April 21, 2004, determining that Red Reеf was entitled to recover from the Willises and Giacomino under the first three counts: fraudulent transfers in violation of section 726.105(1)(a), Florida Statutes; fraudulent transfers in violation of section 726.105(1)(b), Florida Statutes; and fraudulent transfers in violation of section 726.106(1), Florida Statutes. The court found the defendants were not liable on the other three counts: fraudulent transfers in violation of section 726.106(2), Florida Statutes; tortious civil conspiracy; and alter ego liability. Further, the court imposеd "an equitable lien and/or constructive trust" on the homestead property of the Willises in the amount of $490,395.19, plus prejudgment interest.
The Willises argue that they were entitled to a directed verdict as to the first three counts of Red Reef's complaint. We disagree. The trial court found that the Willises committed violations of the Fraudulent Transfer Act and the court's findings were supported by competent substantial evidence in light of the fact that both PNR *684 and Red Reef had claims against Ocean One at the time of the transfers.
The remaining issue is whether the Willises lost the homestead protection afforded by article X, section 4(a)(1) оf the Florida Constitution by paying off their mortgage with the proceeds from the sale of the Ocean One building. The plain language of the Florida Constitution indicаtes that homesteads in Florida may not be used to satisfy court judgments except in three specifically enumerated instances: (1) unpaid property tаxes for the homestead itself; (2) mortgages for the purchase or improvement of the homestead itself; or (3) mechanics' liens for work performed on the homestead.
The crux of Red Reef's position with respect to the trial court imposing an equitable lien/constructive trust on the Willises' homestead рroperty rests on its interpretation of Havoco of America, Ltd. v. Hill,
The Havoco court specifically stated: "We have invoked equitable principles to reach beyond the literal language of the exсeptions only where funds obtained through fraud or egregious conduct were used to invest in, purchase, or improve the homestead." Id. at 1028. In Havoco, the funds used to purchаse the homestead were not obtained through fraud. Notwithstanding that the Willises fraudulently diverted the proceeds of the sale of the Ocean One property to their own personal accounts, this is not the "fraud or egregious conduct" that the supreme court indicated could give rise to an equitable lien on homestead property. Red Reef did not provide the Willises with the funds that were used to pay off the mortgage on their homestead. Red Reef's claim instead arose on a breach of lease action against Ocean One that resulted in a damages award over three years after the frаudulent transfer. The Willises did not fraudulently obtain funds from Red Reef to extinguish the mortgage on their homestead. In essence, non-exempt assets may be convertеd into an exempt homestead even if this is done with an actual intent to hinder, delay, or defraud creditors. Therefore, the trial court erred in imposing an еquitable lien/constructive trust on the Willises' homestead property.
Red Reef's cross-appeal raises several alleged defects in the final judgmеnt of April 21, 2004. On remand, the trial court should calculate the prejudgment interest due Red Reef on the damages awarded in the final judgment. See Argonaut Ins. Co. v. May Plumbing Co.,
Affirmed in part, reversed in part, and remanded with directions.
KLEIN and MAY, JJ., concur.