United States Court of Appeals,
Eleventh Circuit.
No. 94-2823.
In re Edward ENGLANDER and Phyllis S. Englander, Debtors.
Edward ENGLANDER; Phyllis S. Englander, Plaintiffs-Appellants,
v.
George E. MILLS; First Union National Bank of Florida;
Transamerica Commercial Finance Corporation, Defendants-Appellees,
Charles W. Broun, Trustee.
Sept. 19, 1996.
Appeal from the United States District Court for the Middle
District of Florida. (No. 93-59-Civ-Orl-19), Henry H. Dickinson,
Judge.
Before TJOFLAT, Chief Judge, COX, Circuit Judge, and CLARK, Senior
Circuit Judge.
PER CURIAM:
In this bankruptcy appeal, appellants Edward and Phyllis S.
Englander ("Debtors") contest the district court's affirmance of
the bankruptcy court's denial of their claim of homestead exemption
and order of a sale of the property and allocation of the proceeds
so that the Bankruptcy Estate could realize the value of its
interest in the non-exempt portion of the property.
FACTS
On September 27, 1990, Edward and Phyllis S. Englander
("Debtors") filed a joint petition under Chapter 7 of the
Bankruptcy Code. The Debtors claimed their entire residence and
lot at 440 Henkel Circle, Winter Park, Florida as their homestead
exemption. The property lies within the city limits of Winter
Park, Florida, and is located on a lake front lot which exceeds
one-half acre. The parties agree that the property cannot be
subdivided due to local zoning and building regulations.
The creditors and trustee objected to the claim of exemption
for this property because the acreage exceeded the allowable amount
1
under Florida law. The Debtors admitted that the property was
1.05 acres and attempted to clarify the size of the claimed exempt
and non-exempt property. A landowner can designate a portion of
their property as their homestead, subjecting only the remainder to
sale. Fla.Stat.Ann. § 222.02 (1989). The Debtors' designated
portion of non-exempt property had no access to roads, utilities or
lake frontage and was completely surrounded by the claimed exempted
.5 acres of land. The bankruptcy court granted the creditors' and
trustee's motion for summary judgment, noting that the Debtors'
"attempt at homestead exemption "gerrymandering' was clearly made
in bad faith."2 In lieu of granting the exemption, the bankruptcy
court gave the Debtors an exemption in a portion of the proceeds to
be derived from the sale of the property. The parties subsequently
filed a stipulation and briefs on the issue of allocation, and the
Debtors again attempted to amend the description of their claimed
exempt property. The bankruptcy court denied the Debtors'
amendment to their homestead exemption, and ordered the property
sold and the proceeds allocated.3
1
Although the creditors and trustees also objected to other
claimed exemptions and to this claim on other grounds, only the
acreage limitation is considered by this appeal.
2
R1-1, Exhibit 2-20; In re Englander, 156 B.R. 862, 864
(Bankr.M.D.Fla.1992).
3
R1-1, Exhibit 3-26.
The district court affirmed the decision of the bankruptcy
court relating to the claim of homestead exemption.4
JURISDICTION AND STANDARDS OF REVIEW
This Court has jurisdiction to review the district court's
order under 28 U.S.C. § 158(d). In reviewing a bankruptcy court
judgment as an appellate court, the district court reviews the
bankruptcy court's legal conclusions de novo.5 The district court
must accept the bankruptcy court's factual findings unless they are
clearly erroneous, and give due regard to the bankruptcy court's
opportunity to judge the credibility of the witnesses.6 This Court
reviews factual findings for clear error, and the district court's
determinations of law de novo.7 Neither the district court nor
this court may make independent factual findings.8
DISCUSSION
The issue on appeal is whether the bankruptcy court can order
the sale of a claimed homestead property, which exceeds the area
limitation under the homestead provision and cannot be practically
or legally subdivided, and then order an apportionment of the
proceeds.
4
R1-14 at 19. The district court also affirmed in part and
vacated in part the bankruptcy court's order as to the allocation
of the proceeds of the sale, and remanded for further
proceedings. However, those rulings were not appealed.
5
In re JLJ Inc., 988 F.2d 1112, 1116 (11th Cir.1993), citing
In re Goerg, 930 F.2d 1563, 1566 (11th Cir.1991); Bankruptcy
Rule 8013, 11 U.S.C. (1988).
6
Id.; Bankruptcy Rule 8013, 11 U.S.C. (1988).
7
In re Sublett, 895 F.2d 1381, 1383 (11th Cir.1990).
8
In re JLJ, Inc., 988 F.2d at 1116.
A bankruptcy estate consists of all property that the debtor
9
owned at the time of the filing of the bankruptcy petition.
Although the Bankruptcy Codes provides for exemption of property
which would otherwise be subject to the administration of the
bankruptcy estate, Florida has opted out of the federal exemption
scheme and makes its state statutory scheme available to its
residents.10
The Florida law provides for a homestead exemption as follows:
Homesteads—exemptions
(a) There shall be exempt from forced sale under process of
any court, and no judgment, decree or execution shall be a
lien thereon, except for the payment of taxes and assessments
thereon, obligations contracted for the purchase, improvement
or repair thereof, or obligations contracted for house, field
or other labor performed on the realty, the following property
owned by a natural person:
(1) a homestead, if located outside a municipality, to
the extent of one hundred sixty acres of contiguous land
and improvements thereon, which shall not be reduced
without the owner's consent by reason of subsequent
inclusion in a municipality; or if located within a
municipality, to the extent of one-half acre of
contiguous land, upon which the exemption shall be
limited to the residence of the owner or his family....11
Although the Florida Constitution does not define the term
"homestead," it does provide various limitations and requirements
which include an acreage limitation, an ownership requirement, and
a residency limitation. The issue in this case involves the
acreage limitation.
The Florida Constitution provides exemption protection to real
9
11 U.S.C. § 541.
10
11 U.S.C. § 522(b); Fla.Stat. § 222.20.
11
Fla. Const. art. X, § 4(a)(1).
property which is located within a municipality only so long as the
property is limited to one-half acre of contiguous land. There are
no limitations upon the cost, size, or construction of the
residence.12
In order to be exempt the property must meet all of the
13
requirements of the constitution for exemption. It must not
exceed the half of one acre in an incorporated town. 14 Florida
courts have denied the exemption to property that exceeds the
allowed limitations of residency by dividing the property, and
allowing the non-exempt property to be sold for payment of the
owner's debts.15 Because the only exceptions to homestead exemption
are those specifically enumerated in the Florida Constitution,
16
courts have refused to create new ones. The Florida homestead
exemption laws do not contemplate the cutting up and division of an
entire indivisible building situated on exempt real estate. 17 No
Florida state court has considered the precise issue before us.
Florida case law dictates that the homestead exemption laws
be liberally applied to the end that the family shall have shelter
12
Smith v. Guckenheimer, 42 Fla. 1, 37, 27 So. 900, 911
(1900).
13
Smith, 42 Fla. at 17, 27 So. at 915.
14
See Id., 42 Fla. at 17, 27 So. at 915.
15
Id., 42 Fla. at 19, 27 So. at 916.
16
In re Baxt, 188 B.R. 322, 324 (Bankr.S.D.Fla.1995); Bank
Leumi Trust Co. of N.Y. v. Lang, 898 F.Supp. 883, 887
(S.D.Fla.1995); Butterworth v. Caggiano, 605 So.2d 56, 60
(Fla.1992); Smith, 42 Fla. at 36-40, 27 So. at 911-912.
17
Smith v. Guckenheimer, 42 Fla. 1, 53, 27 So. 900, 905
(Fla.1900).
and shall not be reduced to absolute destitution. 18 However, the
homestead exemption law is intended to be a shield, not a sword,
and should not be applied as to make it an instrument of fraud or
as an imposition upon creditors.19 The Florida Supreme Court in a
case where the land was owned by tenants in common following a
divorce stated that, although the purpose of the homestead
exemption is to protect the family home from forced sale for the
debts of the owner and head of the family, it had "never held that
the homestead provision precludes a common owner of property from
suing for partition and obtaining a forced sale in order to obtain
the beneficial enjoyment of her interest in the property."20
Further, "(h)omestead interests should be protected from forced
sale whenever possible, but not at the expense of others owning
interests in the property."21
In considering the residence limitation, although one Florida
bankruptcy court has held that a debtor was entitled to a homestead
exemption in the entire property, the majority of Florida
bankruptcy courts have held such debtors were not entitled to the
homestead exemption. In finding the debtor entitled to the
homestead exemption, the court noted that the debtor used only one
side of a duplex as a residence and used the other side as rental
18
Orange Brevard Plumbing & Heating Company v. La Croix, 137
So.2d 201, 203 (Fla.1962); Smith, 42 Fla. at 41, 27 So. at 912.
19
Palm Beach Savings & Loan Association, F.S.A. v. Fishbein,
619 So.2d 267 (Fla.1993); Orange Brevard Plumbing & Heating
Company, 137 So.2d at 203; Hillsborough Inv. Co. v. Wilcox, 152
Fla. 889, 891, 13 So.2d 448, 450 (1943).
20
Tullis v. Tullis, 360 So.2d 375, 377 (Fla.1978).
21
Id., 360 So.2d at 378.
property, but utilized a new divisibility test which considered
whether the property was divisible and lawfully conveyable.22 The
court found that the debtor was entitled to the exemption because,
although the property was divisible, portions were not salable
under the existing zoning laws.23 Other Florida bankruptcy courts
have denied exemptions to debtors where the debtors used a building
on the property in which they claimed homestead exemption as both
their residence and as rental property, reasoning that "the mere
fact that the claimant occupies part of the property as a residence
is not enough to entitle him to an exemption in the whole."24
The majority of Florida bankruptcy courts that have denied a
homestead in the entire property have ruled that where the property
is not divisible, the trustee could sell the property and the court
would apportion the proceeds.25 In In re Baxt, the court held that
because the Florida homestead exemption is for "one-half acre," not
"one-half acre if you live in Parkland (where the property is not
divisible)," allowance of a homestead exemption on a 2.5 acre in a
municipality would be a contravention of the divisibility test.26
22
In re Kuver, 70 B.R. 190, 192-913 (Bank.S.D.Fla.1986); In
re Makarewicz, 126 B.R. 127, 128 (Bank.S.D.Fla.1991).
23
In re Kuver, 70 B.R. at 192.
24
In re Aliotta, 68 B.R. 281, 282 (Bankr.M.D.Fla.1986); In
re Rodriguez, 55 B.R. 519 (Bankr.S.D.Fla.1985).
25
In re Wierschem, 152 B.R. 345, 347 (Bankr.M.D.Fla.1993)
(holding that rural property that exceeded the residency
limitation was subject to the same administration as In re
Englander, 156 B.R. 862 (Bankr.M.D.Fla.1992)); In re Baxt, 188
B.R. 322, 323-324 (Bankr.S.D.Fla.1995) (finding appropriate the
sale of an urban indivisible 2.5 acre lot, and apportionment of
the proceeds).
26
188 B.R. at 323-324.
Florida courts have extended the homestead exception to include the
proceeds of a voluntary sale when it is intended in good faith that
such proceeds are to be reinvested in a new homestead and only as
to the amount of the proceeds which are intended to be reinvested
in another homestead.27
Bankruptcy courts in other states have similarly ordered the
sale and apportionment of proceeds. In In re Evans, the Vermont
bankruptcy court found the sale and apportionment of the proceeds
"an equitable solution of the existing problem" to a homestead
exemption claim where the property exceeded the state's $30,000
28
limitation on a homestead. The Eighth Circuit affirmed a
bankruptcy court's order of the sale of a property and
apportionment of the proceeds in a situation where the property
exceeded the state homestead limitation on area, finding that the
apportionment allowed an appropriate recognition of the debtor's
homestead exemption and yet afforded the creditors some
satisfaction of their rightful claims.29
CONCLUSION
Here, the debtors' claimed homestead property exceeds the
limitation on area set by the Florida constitution and is
indivisible. A sale and apportionment of the proceeds is an
equitable solution, allows for an appropriate recognition of the
debtors' homestead exemption, and will afford the creditors some
27
Orange Brevard Plumbing & Heating Company, 137 So.2d at
206.
28
51 B.R. 47, 50 (Bankr.D.Vt.1985).
29
O'Brien v. Heggen, 705 F.2d 1001, 1004 (8th Cir.1983).
satisfaction of their rightful claims. Therefore, the judgment of
the district court is AFFIRMED.