Orange Brevard Plumbing & Heating Co. v. La Croix

On May 22, 1959, the appellant, who was the plaintiff in the action below, obtained and recorded a judgment in the circuit court for Orange County, Florida against the appellees in the sum of $5,972.18. At the time the judgment was rendered and for some three and one-half years prior thereto the appellees owned as tenants by the entirety and occupied as their homestead certain real property in Orange County, Florida. On July 22, 1959, the appellees sold this homestead property. The attorneys for the purchaser, having discovered the aforementioned judgment of record, withheld from the appellees $6,000.00 of the purchase price of the property pending a determination that it was homestead property as of the date of sale.

While the attorneys for the purchaser were thus holding the sum of $6,000.00 the appellant caused to be issued by the Circuit Court of Orange County in September 1959 a writ of garnishment against the attorneys. Thereafter the garnishees filed their answer in which they admitted holding the sum of $6,000.00 for and on behalf of the appellees. Subsequently the appellees filed a motion to dissolve the writ of garnishment on the ground that the sum of $6,000.00 held by the garnishees was exempt from forced levy, since that sum represented proceeds of the sale of homestead property. In support of its motion the appellees filed an affidavit of appellee Henry J. LaCroix, the con+^nts of which are set forth herewith:

“I, Henry J. LaCroix, having- first been duly sworn upon oath by the undersigned officer, depose and say as follows:

“1. That I am one of the Defendants in the above style [sic] cause and the other Defendant, Helen P. LaCroix, is my wife.

“2. That on the 22nd day of May, 1959, and for approximately three and one-half (3[4) years prior thereto my wife and I owned Lot 3, Stonehurst Estates as per plat thereof, recorded in Plat Book -, Page -, of the Public Records of Orange County, Florida. Said property is located in Orange County outside the corporate limit of any municipality. Said property is less than one-half acre in size. The street address of said property is 1807 Stonehurst Drive, Winter Park, Florida.

“3. Located upon said property is a single family residence and on the aforesaid date and during the aforesaid period my wife and I resided upon said property with our children, Patricia B. and Henry J. LaCroix, Jr. During all said time we have continuously resided in Florida and on said property with the intention of making Florida our permanent home.

“4. During the latter part of 1958 and the early part of 1959, I was self-employed in the business of constructing houses and the business failed to prosper and it was necessary that I discontinue said business at a time when I was heavily indebted. As a result of business failure, it became necessary for me to sell the above described property because I could no longer afford to maintain a house as large and as expensive. Said house had a market value of approximately $25,000.00 and an area of 2,000 square feet. In July I listed the house for sale with the intention of selling it and purchasing a smaller and less expensive home for my family. On the 15th day of July, 1959, I entered into a contract to sell the house and the transaction was closed on July 22, 1959. The attorney for the purchaser in examining title of said property discovered the judgment of record in the amount of $5,972.18 obtained by Orange Brevard Plumbing & Heating Company against me and my wife and withheld the sum of $6,000.00 from the proceeds of the sale pending a determination that the property was homestead on date of said sale.

“5. On the date of the sale and on date of the closing my wife and I were residing on the property and continued to reside there until approximately August 15, 1959, when we rented a house at 514 Dunblane Street, Winter Park, Florida, where we intended to reside until we could find a suitable house to purchase for our home.

“I intend to purchase a home with the funds in the hands of Winderweedle & Hunter when they are paid to me.

“Further affiant sayeth not.”

A hearing was held before the circuit court on the motion to dissolve the writ of garnishment, and it was agreed by the parties that the issues should be determined on the basis of the affidavit of Henry J. La-Croix. Thereafter the court entered an order dissolving the writ of garnishment and finding that the sum of $6,000.00 held by the garnishees was exempt from forced levy under the Constitution and laws of the State of Florida.

The appellant then appealed to the District Court of Appeal, Second District. The district court, however, noting that the circuit court in its order had construed a controlling provision of the Constitution and that therefore exclusive jurisdiction of the appeal rested with the Supreme Court, ordered the appeal transferred to this court pursuant to Rule 2.1, subd. a(5) (d), Florida Appellate Rules, 31 F.S.A.

The question with which we are faced, therefore, is whether the exemption of homestead property from forced sale which is accorded by Article X, Section 1 of the Florida Constitution, F.S.A., extends also to the proceeds of a voluntary sale of a homestead when it is intended in good faith that such proceeds are to he reinstated in a new homestead.

Article X, Section 1 of the Florida Constitution provides in part:

“A homestead to the extent of one hundred and sixty acres of land, or the half of one acre within the limits of any incorporated city or town,' owned by the head of a family residing in this State, together with one thousand dollars worth of personal property, and the improvements on the real estate, shall be exempt from forced sale under process of any court, and the real estate shall not be alienable without the joint consent of husband and wife, when that relation exists.”

The specific question raised herein is one of the first impression before this court. There are, however, two Florida cases which are sufficiently related to the matter at hand to merit our attention. In Hill v. First National Bank, 79 Fla. 391, 84 So. 190, 20 A.L.R. 270, it was held that where a person owning a homestead brings an action to recover damages sustained because of an unlawful invasion of the homestead rights, the damages recovered in such an action partake of the nature of the homestead property and are also exempt. The facts of the case were that the defendant had a judgment against the plaintiff which the defendant sought to have satisfied by execution and forced sale of the plaintiff’s homestead. The homestead property was sold at a judicial sale and as a consequence thereof the plaintiff was deprived of the use of the property and was put to the expense of bringing an action to set aside the levy and sale. After the judicial sale of the homestead had been set aside, the plaintiff brought an action to recover the damages which she had suffered as a result of the unlawful judicial sale of her homestead. The defendants attempted to set off from plaintiff’s damages the amount of their judgment which gave rise to the judicial sale. Tlie Supreme Court held that such set off could not be allowed for the reason that the damages suffered by the plaintiff were exempt under the homestead exemption provision of the Constitution. The following statement by the court appears on page 193 of the opinion and is pertinent here:

“It may be said that the Constitution protects homestead property from a ‘forced sale’ only, and that the plea of set-off in this case does not amount to a ‘forced sale’ of plaintiff’s exempt property. But such contention would he out of harmony with what the courts almost universally hold to be the object and policy of exemption laws. It ignores the rule of liberal construction to which this court and many other courts are committed.”

The court employed similar reasoning and reached a similar result in a subsequent case where the question raised was whether the proceeds of a fire insurance policy due to be paid for destruction of the homestead by fire are exempt from claims of creditors. It was held in Kohn v. Coats, 103 Fla. 264, 138 So. 760, that such proceeds were exempt and were not subject to garnishment. The court in that case recognized that it was committed to a liberal interpretation of the homestead law and stated:

“The reason for the rule [exempting fire insurance proceeds] is that the homestead was provided for the benefit of the exemptor’s family, and it may be insured to protect them from loss. The insurance is intended to restore the property in case it is destroyed by fire; those contracting with the ex-emptor are on knowledge of this fact, and to hold that creditors could seize the proceeds of the insurance policy would give them an advantage they never contemplated would deprive the insured of the means provided to take the place of and restore his homestead.”

Although these cases do not decide the point now before us they are valuable precedents in that they shed light on the attitude of this court in similar cases and reflect our predisposition toward a liberal interpretation of the homestead provision of our Constitution.

The policy of the Constitution cannot be misapprehended. Its design and purpose is to benefit the debtor by securing to him his homestead beyond all liability from forced sale under process of any court. The case law of this state dictates that homestead exemption laws should be liberally applied to the end that the family shall have shelter and shall not be reduced to absolute destitution. Bessemer Properties v. Gamble, 158 Fla. 38, 27 So.2d 832; Olesky v. Nicholas, Fla., 82 So.2d 510; Slatcoff v. Dezen, Fla., 76 So.2d 792. Obviously Article X intended to confer valuable rights on the owner of the homestead and was not drawn for the benefit of creditors. However, it should also be kept in mind that “ * * * the law should not be so applied as to make it an instrument of fraud or imposition upon creditors”. Milton v. Milton, 63 Fla. 533, 58 So. 718.

Turning to the authorities of other jurisdictions on the point of law before us, we find that there is a definite split of authority. See the annotations in 1 A.L.R. 483, supplemented in 46 A.L.R. 814; 40 C.J.S. Homesteads § 71; and 26 Am.Jur., Homestead, Section 48 which states:

“Whether the statute [exempting homesteads] may be invoked for the protection of a fund which has been derived from a voluntary sale of the homestead property is a question which has occasioned a conflict of authority.

“In the absence of statutory provisions to the contrary, the voluntary sale of homestead property is held, in a majority of jurisdictions, to be a complete extinguishment of the homestead right; and consequently, the proceeds of such a sale, until invested in other exempt property, may be subjected to the claims of creditors. While a contrary opinion has been expressed, the claim of homestead is usually held not to be sustainable as to the proceeds of a sale of the homestead, although the sale may have been made by the claimant with the intention of acquiring other property to be used as a homestead. A view sometimes taken is that the proceeds of the sale of a homestead constitute exempt property for a reasonable time pending the investment of the same in another homestead; and such an exemption has been held to be implied by a statute which gives an absolute right to exchange one homestead for another, or to sell the homestead and acquire a new one, which shall be exempt to the same extent as the former one. Likewise, a provision that the debtor may convey his homestead free from all liens has been held to imply the exemption of the proceeds of such sale which are in good faith intended by the debtor to be used in the purchase of another homestead.” (Italics supplied.)

Notwithstanding the statement just quoted which indicates that the majority rule is that the proceeds of a voluntary sale of the homestead are not exempt, there appear to be substantial and responsible authorities favoring the minority view that such proceeds are exempt where there is a bona fide intention on the part of the owner of the homestead to reinvest them in another homestead.

The homestead exemption laws of the State of Oklahoma are, with respect to the problem at hand, essentially no different from our own except that there is a $5,-000.00 limitation on the value of the homestead protected. In Field v. Goat, 70 Okl. 113, 173 P. 364, 365; 1 A.L.R. 478, it was held that under the rule of liberal construction the exemption of the homestead “must be held to impliedly extend to the proceeds of a voluntary sale of the homestead bona fide intended to be invested in another homestead”. (Italics supplied) This principle has since been reaffirmed in the case of State ex rel. Freeling v. Brown, 92 Okl. 137, 218 P. 816.

Under a Kentucky statute which provided for an exemption from sale, execution, attachment or judgment of a homestead not exceeding $1,000.00 in value and which also provided that if the value of the homestead exceeds $1,000.00, the property may be sold and $1,000.00 of the proceeds paid to the debtor to enable him to purchase another homestead, the Kentucky Supreme Court held, in Marcum v. Edwards, 181 Ky. 683, 205 S.W. 798 that these provisions by implication protected from attachment $1,000.-00 of the proceeds of the voluntary sale of the homestead. See also Becher v. Shaw, 44 Wash. 166, 87 P. 71.

A similar result has been reached in Kansas, which has homestead provisions similar to our own. Smith v. Gore, 23 Kan. 488, Smith testified that when he received the proceeds from the note and mortgage executed upon the sale of his homestead, he intended to buy another home. The court in its decision stated, “Whether at any time previous to the trial, Smith ever expected or intended to use the money due on said note and mortgage to purchase another homestead, is not shown. The foregoing testimony is all the evidence that tended to show that he ever at any time had any such expectation or intention * * * We think the intention to use the proceeds in procuring another homestead should be formed at or before the time of the sale, and the intention should be to procure another homestead with the proceeds immediately. It would not do to form the intention two years after the sale, nor would a present intention to procure the homestead two years afterward be sufficient. If the party himself supposed that he could get along without a homestead, the law would not protect his money or his credits, and exempt them from the payment of his debts, merely because it supposed he needed a homestead.” The court held that although the state homestead-exemption laws are construed liberally Smith had not shown that he was entitled to have the money due on the note and mortgage exempt. It was stated that “The law does not, in express terms, in any case exempt money or credits, merely because they are proceeds of a homestead. They are exempted only by a sort of equitable fiction drawn from the spirit of the homestead exemption laws, and adopted for the purpose of enabling persons to change their homesteads when they desire.” A later case, First National Bank of Manhattan v. Dempsey, 135 Kan. 608, 11 P.2d 735, contains the following syllabus by the court: “In a proceeding in garnishment to subject a sum of money due defendant from a third party to the satisfaction of defendant’s debt to plaintiff, the evidence tended to show that the money garnisheed was part of the proceeds of the sale of a homestead which the debtor intended to invest in another homestead, and that he had such intention at the time he sold his first homestead, and had not abandoned that intention at the time the garnishment process was invoked. Held, the money was exempt, and the garnishment was properly discharged.”

In Iowa the homestead statute specifically provides that the homestead may be sold and a new homestead acquired which shall be exempt from execution to the extent of the value of the old. It is not, however, specifically provided that the proceeds themselves shall be exempt. Nevertheless, the Iowa Supreme Court has consistently held that in order to effectuate the object of the statute, the proceeds collected from the voluntary sale of the old homestead which are intended to be used for the purchase of another homestead and which are not put to an intervening use are exempt while thus in transit from the old homestead to the new. State v. Geddis, 44 Iowa 537; Mann v. Corrington, 93 Iowa 108, 61 N.W. 409; Schuttloffel v. Collins, 98 Iowa 576, 67 N.W. 397; Millsap v. Faulkes, 236 Iowa 848, 20 N.W.2d 40, 161 A.L.R. 1252. See also Watkins v. Blatschinski, 40 Wis. 347. The case of Cullen v. Harris, 111 Mich. 20, 69 N.W. 78, reaches a similar result, but lays down the additional requirement that the fund, in order to be exempt, must be segregated from other monies of the debtor.

A number of the cases alluded to are from jurisdictions where the homestead provisions specifically provide for the sale of the homestead and the acquisition of a new one free from the claims of creditors. It might be urged that this factor should serve as a distinguishing feature between the cases alluded to and the case at bar. ■However, we perceive no essential difference between the law of our state and that of the states referred to. By the very terms of our constitution, the homestead may be sold with joint consent of husband and wife when that relationship exists. Moreover, there is no question but that a head of a family residing in the state may, after disposing of one homestead, acquire another, which will, upon the satisfaction of all the homestead requirements, be exempt just as the former one was.

After a full consideration of the applicable authorities representing both views on the issue before us, and in recognition of the liberal interpretation of the homestead exemption to which this court is committed, we hold the proceeds of a voluntary sale of a homestead to be exempt from the claims of creditors just as the homestead itself is exempt if, and only if, the vendor shows, by a preponderance of the evidence an abiding good faith intention prior to and at the time of the sale of the homestead to reinvest the proceeds thereof in another homestead within a reasonable time. Moreover, only so much of the proceeds of the sale as are intended to be reinvested in another homestead may be exempt under this holding. Any surplus over and above that amount should be treated as general assets of the debtor. We further hold that in order to satisfy the requirements of the exemption the funds must not be commingled with other monies of the vendor but must be kept separate and apart and held for the sole purpose of acquiring another home. The proceeds of the sale are not exempt if they are not reinvested in another homestead in a reasonable time or if they are held for the general purposes of the vendor.

The homestead exemption provision was not placed in our Constitution for the purpose of tying the owner thereof and his family to a particular home, once established, for the remaining period of their natural lives. It is a protection which should remain inviolate so long as the head of the family who is indebted acts in good faith and with reasonable diligence in converting one homestead into another. In our modern peripatetic society it often becomes necessary for a family to give up its former homestead and move to a new home out of economic necessity or for other compelling reasons. To hold other than we have in the instant case would be to deny to a family finding itself in such circumstances the full benefit of the homestead exemption provision of our Constitution and would be inimical to our declared policy of a liberal construction thereof.

We have considered the early case of Drucker v. Rosenstein, 19 Fla. 191, wherein it was held that the intent of the owner of a parcel of land to build a home thereon and to occupy it as his homestead is not sufficient to invest such land with the character of a homestead and thus put it beyond the reach of creditors. Our present holding .is by no means inconsistent with that case. We adhere to the rule that intent alone is not a sufficient basis for the establishment of a homestead. There must first be, as there unquestionably was in this case, property which meets the constitutional requirements of a homestead. In the Drucker case there was never any real property to which the homestead exemption could attach. In the instant case, on the other hand, the appellees had established and maintained a homestead up until the time of the sale. Having done so, the funds realized from such sale enjoy an exempt status provided the other requirements for such exemption as herein set forth are fully met.

The principle established by this decision is akin to the doctrine of equitable conversion, which obtains in this state. Trotter v. Van Pelt, 144 Fla. 517, 198 So. 215, 131 A.L.R. 1018. The funds resulting from the voluntary sale of the homestead are “converted”, and while “in transit” assume the character of the exempt real property, dependent, however, upon a bona fide intent of the seller to reinvest such funds in another homestead within a reasonable time. The requirement as to the intention of the seller to reinvest is necessary in order to carry into effect the real, underlying purpose of the homestead exemption as hereinbefore outlined.

It is not for the courts to fix in a case such as this an iron clad inflexible period of time and thereby define reasonable period of time. The question whether funds received from the sale of a homestead are invested in another homestead within a reasonable time must be determined from the facts and circumstances of each case.

Returning now to the facts of the instant case as they are presented to us on this appeal, we are of the opinion that additional evidence should be taken before a proper final decision can be reached. As previously pointed out the only evidence which the trial court had before it was the affidavit of the seller. Although the parties stipulated that the issues should be decided on the basis of this affidavit, we feel that in light of the views expressed in this opinion the parties should be given an opportunity to produce additional evidence on the material points. There appears to be no concrete evidence as to the time within which Mr. LaCroix expects to purchase a new home, nor does it clearly appear that the entire amount of the $6,000.00 now held by the attorneys is needed arid is to be used for the purchase of a new home. In this connection it is noted that the affidavit does not reveal the sale price of the former homestead but merely states that its market value was approximately $25,000.00. Moreover, there is no evidence as to what disposition was made of the proceeds of the sale, if any, over and above $6,000.00. If there were other funds coming into his hands as a result of the sale, then it would be an act of bad faith on the part of the seller to place these funds beyond the reach of his creditors in some manner and yet hold the remainder of the proceeds for reinvestment in another homestead.

In order that all the facts may be fully developed and that a decision may be reached in harmony with the views expressed herein, the judgment below is reversed and the cause remanded in the interest of simple justice, for further proceedings in accordance with this opinion.

It is so ordered.

ROBERTS, C. J., and TERRELL and THORNAL, JJ., concur.

THOMAS and DREW, JJ., and ODOM, C. J., dissent.