Federal Agency Pierces Florida Homestead Exemption
Florida’s constitutional homestead protection is considered one of the best asset protection tools because of its unlimited exemption of homestead value from forced sale. Additionally, all real estate, including the homestead, can have additional protection from the creditors of either spouse if the home is owned by both spouses jointly as tenants by entireties.
Exceptions to Florida Homestead
Nevertheless, a court may penetrate both protections when the court finds the debtor obtained funds through criminal and fraudulent activity. Courts can apply equitable remedies to circumvent homestead and entireties protection. Courts can impose a constructive trust on the debtor’s homestead if and when the court can trace the purchase to ill-gotten funds. A court also may impose an equitable lien on a debtor’s homestead when the funds used to buy the property were acquired from egregious wrongdoing or fraud.
The practical result of these exceptions is that when a debtor has obtained money from serious or widespread wrongdoing, a court can find a way to circumvent homestead protections. These equitable remedies are not common, but they have been used when circumstances require homestead invasion to obtain what a court feels is a just and fair result.
Federal Agency Example
Equitable remedies to overcome homestead protection are most often used when the creditor is the U.S. government or a federal agency.
This is what happened when the Federal Trade Commission obtained a judgment against several corporate defendants and their principal owner, Robert Guice. (FTC vs. Robert Guice et al, 2020 WL 13094593, unreported). In this case, Mr. Guice and his companies engaged in a fraudulent enterprise of selling bogus debt-elimination in a manner that violated Section 5 of the FTC Act and the Florida Deceptive and Unfair Trade Practices Act. A receiver found that Mr. Gruice obtained over $8,000,000 from his fraudulent enterprise, which he initially deposited in his personal bank account owned with his wife as tenants by entireties. The Guices used this money to purchase many things, including their Florida homestead.
The court dismissed Mr. Guice’s argument that his house was protected from the FTC money judgment because it was his family homestead and because the homestead was owned jointly with his non-debtor wife. First, the court found that even though Mrs. Guice did not participate in the debt-elimination scheme, she still had access to and did benefit from the proceeds deposited in the joint bank account. Therefore, she was not shielded from equitable remedies. The court also traced the homestead purchase to the proceeds of the fraudulent enterprise.
The court imposed both an equitable lien on the homestead property and a constructive trust on all of the assets that were purchased with the eight million dollars, including the homestead. The court also used the equitable concept of “unjust enrichment” to attack Mrs. Guice’s interest in the entireties bank account and the homestead.
The facts of this case are not typical because the money judgment was issued in favor of a federal agency and involved reprehensible conduct that cheated consumers. Federal agencies have at their disposal unlimited funds to collect money and litigate against debtor defenses, and they have collection remedies not available to non-government creditors. It is possible that an individual creditor would not be able to similarly uses such broad equitable remedies to collect a money judgment based on the same debtor conduct.