Florida's homestead realty: is it exempt from imposition of an equitable lien for nonpayment of alimony and child support?

• Author: Hipler, Harry M.

When payor former spouses obligated by court order to pay alimony and/or child support fall behind, the focus of the law is on helping parents and former spouses collect delinquent support with minimum costs. (1) Regardless of the reasons why alimony and child support are not paid--loss of employment, underemployment, chronic disease, injury, obstinacy--there are many available collection methods, including income withholding; (2) revocation of driver's licenses, motor vehicle and vessel registrations; (3) suspension of professional, recreational, and occupational licenses of parents; (4) denial of passports; (5) federal and state tax refund offsets; (6) liens on property; (7) attachment and garnishment of financial accounts including IRAs; (8) qualified domestic relations orders (QDROs) to recover all or a portion of alimony or child support arrearage from the owner of a retirement plan, (9) and contempt of court. (10) All methods are cumulative and can be used until the amount owed plus interest is paid in full. (11)

Can a circuit court impose an equitable lien against homestead realty owned by a payor former spouse/parent for delinquent support? If a payor former spouse/parent owns homestead realty, does Fla. Const. art. X, [section] 4(a) constitute a complete defense to an equitable lien when a former spouse/parent tries to recover delinquent child support or alimony from a payor former spouse/parent? Florida district courts of appeal have ruled that courts may impose an equitable lien on homestead realty beyond the exceptions provided in Fla. Const. art. X, [section] 4 when a nonpayor former spouse/parent has used the homestead exemption to avoid alimony and child support obligations by the use of fraud and egregious conduct. (12) In Havoco of America v. Hill, 790 So. 2d 1018 (Fla. 2001), the Florida Supreme Court held that the homestead realty exemption in the Florida Constitution protects a homestead acquired by a debtor using nonexempt assets with the intent to hinder, delay, or defraud creditors. (13) Havoco of America appears to be controlling authority to shield homestead realty from all claims of creditors, including those by former spouses/parents against payor former spouse/parent owing delinquent child support and/or alimony. However, footnote 12 of Havoco of America (14) questions and leaves open for future consideration rulings by district courts of appeal that permit equitable liens on homestead realty when a payor former spouse/parent has used the homestead exemption to avoid his or her alimony and child support obligation. (15) This article will discuss why it is a violation of Fla. Const. art. X, [section] 4(a)(1) to impose an equitable lien on homestead realty owned by a payor former spouse/parent, where the payor former spouse/parent has used the homestead exemption to avoid his or her alimony or child support obligation.

* Homestead realty exemption: Is it a shield, sword, or both?

Florida's homestead exemption is one of the most protective in the United States. (16) It grants nearly absolute protection from forced sale from the claims of creditors, except in three special circumstances: 1) payment of taxes and assessments thereon owed to the state, counties, and municipalities (e.g., real estate assessments and taxes); 2) obligations contracted thereon for the purchase, improvement, or repair (e.g., mortgage pledge); 3) obligations contracted with persons in repairing or improving the realty or house, field, or other labor performed on the realty (e.g., construction liens). (17) There are four basic requirements that must be met for realty to qualify as homestead in Florida: An owner must be a natural person, who establishes or intends to establish the realty as a permanent residence within the size and contiguity requirements of the constitution. (18) The value of protected homestead realty within and outside of a municipality is unlimited. (19) Fla. Const. art. X, [section] 4(a) applies automatically upon establishment of these requirements, and it can only be lost if the homeowner permanently abandons its use as a permanent residence. (20) On account of Florida's liberal homestead realty exemption from forced sale, (21) the homestead exemption can be viewed as both a shield and a sword to defeat creditors' claims. (22)

Homestead Protection Under Havoco of America

In 1981, Havoco field suit against Hill in a damages action. A jury found for Havoco in the amount of $15,000,000 in damages. The U.S. district court entered judgment in accordance with the jury verdict on December 19, 1990, and it became enforceable shortly thereafter. Hill, a life long resident of Tennessee, purchased Florida realty on December 30, 1990, for $650,000 in cash. He claimed that he intended to retire and make Destin his primary residence. The Florida Supreme Court was asked by the federal appellate court to decide whether Fla. Const. art. X, [section] 4 exempted homestead realty from forced sale, when the debtor acquired the homestead using nonexempt funds with the specific intent of hindering, delaying, or defrauding creditors. The Florida Supreme Court answered the certified question affirmatively, and held that Hill's homestead realty was exempt from forced sale. (23)

Arguments in Support of Protection from Imposition of an Equitable Lien

* Fla. Const. art. X, [section] 4 is plain, clear, and unambiguous.

The plain and unqualified language of Fla. Const. art. X, [section] 4 supports the principle that homestead exemption provides absolute protection from forced sale regardless of the method the homestead was obtained, except in three enumerated exceptions. Strict construction principles direct that all branches of government--executive, judicial, and legislative--follow the exact wording of Fla. Const. art. X, [section] 4. No branch of government can deviate from the constitution's clear and plain language. (24)

* A referendum is required to alter provisions of the Florida Constitution.

The electorate, not the legislature or judiciary, has the exclusive authority to alter provisions of Fla. Const. art. X, [section] 4. (25) If a change to the Florida Constitution is in order, then referral to the Constitutional Revision Commission is available to decide if an amendment should be placed on the ballot for voter approval. (26) In Strand v. Escambia County, 32 Fla. L. Weekly S587, September 6, 2007, as amended September 28, 2007, the Florida Supreme Court affirmed its obligation to correct legally erroneous precedent, even if a decision departs from long established precedent. Strand held that Fla. Const. art. VII, [section] 12, requires a referendum whenever bonds financing capital improvements are "payable from ad valorem taxation" by tax increment financing (TIF), and if they mature more than 12 months after issuance. Established precedent before Strand indicated that local governing bodies could issue bonds payable from ad valorem taxation and TIF without approval by a referendum. (27) Regardless of how Strand is ultimately decided--the high court in Strand has granted rehearing--the opinion is noteworthy because the Florida Supreme Court affirmed its obligation to correct legally erroneous precedent when necessary to follow Florida law. Although stare decisis is based on the need for stability and consistency in the law, if established precedent has been wrongly decided, it is incumbent on the state's highest court to correct an error in legal analysis and follow the Florida Constitution. (28) Similarly, decisions by district courts of appeal permitting an equitable lien on homestead realty beyond the exceptions provided in Fla. Const. art. X, [section] 4 are questionable, because they amend Fla. Const. art. X, [section] 4 without a referendum. Decisions decided before and after Havoco of America are contrary to the mandate and plain wording of Fla. Const. art. X, [section] 4. The only way to authorize a court to impose an equitable lien on homestead realty beyond the exceptions provided in Fla. Const. art. X, [section] 4 is by referendum.

* "There's no place like the old homestead."

The homestead realty exemption provides for the constitutional sanctity of the home, so that a homeowner's residence remains beyond the reach of creditors. (29) The rationale behind this public policy is, first, homestead protection promotes the stability and welfare of the state and relieves it from the burden of supporting destitute families. Second, homestead exemption protects the homeowner and family from creditors' demands and financial misfortune. (30)

Homestead protection, however, can have a detrimental effect on the debtor's original family if support is ignored by the payor former spouse/parent. If homestead realty is exempt from the imposition of an equitable lien in which a payor former spouse/parent has used the homestead exemption to avoid a support obligation, then homestead exemption treats two separate families owed support from the same payor differently. Does this different...