A Florida court issued a decision upholding a California court’s power to force a Florida debtor to convey title to his homestead property to a receiver on behalf of a creditor.
A simplified version of the facts are as follows. The debtor is an elderly widow. Her deceased husband had been appointment trustee of a family trust. The husband stole money from the trust and bought a house in California. Subsequently, the husband’s first wife died and the husband married the debtor. The husband died. The surviving spouse, the debtor, sold the California house and bought a Florida homestead. The debtor was not a party to and had no knowledge of her husband’s theft of trust assets which occurred prior to the marriage.
The trust beneficiaries sued for the husband’s breach of fiduciary duty. The California court issued an order imposing a “constructive trust” on the Florida homestead which had been purchased with the proceeds of the husband’s wrongdoing. The California court issued an injunction against the debtor requiring her to convey her Florida homestead to a receiver acting on behalf of the trust’s beneficiaries. When the beneficiaries tried to enforce the California order in a Florida court the debtor said that a California court could not force her to convey her homestead.
The Florida court upheld the California remedy. The court said that although the California court had not direct jurisdiction over Florida property it retained jurisdiction over the debtor/spouse for purposes of its injunction. Florida law will recognize and enforce the injunction against the debtor. The court said that the deceased husband’s breach of fiduciary duty as trustee is a form of “constructive fraud” which may be the basis for an exception to homestead protection. The fraud exception applies, said the court, where funds obtained through one spouse’s fraud are used by the other spouse to buy a homestead even when the other spouse is innocent or ignorant of the wrongdoing. The court ordered the debtor to convey title to her homestead to the receiver out of comity with California. 5th DCA Case No. 09-3054, Hirchert
This decision suggest that people who obtain money by fraud in another state cannot move to Florida to shelter their ill-gotten money in a Florida homestead.