[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
___________________________ FILED
U.S. COURT OF APPEALS
No. 05-12543 ELEVENTH CIRCUIT
July 7, 2006
___________________________
THOMAS K. KAHN
CLERK
D.C. Docket No. 04-80360-CV-JCP
BKCY No. 03-03116-BKC-PG
IN RE:
ANDREA M. CHAUNCEY,
Debtor.
ANDREA M. CHAUNCEY,
Plaintiff-Appellant,
versus
PATRICIA DZIKOWSKI, Trustee,
Defendant-Appellee.
___________________________
Appeals from the United States District Court
for the Southern District of Florida
____________________________
(July 7, 2006)
Before ANDERSON, FAY and SILER*, Circuit Judges.
SILER, Circuit Judge:
In bankruptcy proceedings, Debtor Andrea Chauncey sought refuge in
Florida’s protection of the homestead. The bankruptcy court concluded that
Chauncey forfeited discharge of her debt obligations when she fraudulently
transferred the proceeds of a personal injury settlement to her mortgagee in an attempt
to shield that asset from her creditors. Accordingly, the bankruptcy court imposed an
equitable lien, benefitting the Trustee, Patricia Dzikowski, on Chauncey’s homestead
property. On appeal, the district court affirmed the bankruptcy court. For the
following reasons, we REVERSE in part and AFFIRM in part.
I.
When Chauncey filed for bankruptcy in 2002, she owned a home in Lake
Worth, Florida. In the late 1990s, Chauncey opened her own business called AAA
Affordable Transmissions (“AAA”), and in 2000, she closed the business. She
claimed that she lost all of AAA’s books and records and has not been able to locate
them since the move. Thus, she could not make them available to the Trustee for
inspection. Furthermore, Chauncey failed to provide the Trustee with documents
*
The Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Sixth Circuit, sitting
by designation.
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related to her financial accounts because she did not retain copies of bank statements
or cancelled checks; she claims that due to the cost (between $50.00 and $75.00) of
obtaining copies of such records, she cannot afford to do so.
In March 2002, she initiated a personal injury lawsuit against Eclipse
Marketing of Utah, Inc. in state court seeking to recover for personal injuries
sustained in an accident which occurred between Chauncey and an agent of Eclipse.
Soon thereafter, in July 2002, American Express Centurion Bank filed suit
against Chauncey. Chauncey first consulted with her bankruptcy attorney in August
2002, but she did not immediately file for bankruptcy. On October 23, 2002, a
judgment in favor of American Express was entered against her.
On November 22, 2002, the personal injury lawsuit was settled for $80,000.00.
After payment of attorney’s fees and costs, the remaining sum of the settlement funds
totaled $47,430.82. Chauncey never took possession of the settlement proceeds;
rather, she directed her personal injury attorney to remit the proceeds directly from
his trust account to the mortgagee (Chase).
On December 18, 2002, Chase received the payment from Chauncey’s personal
injury attorney and applied the settlement proceeds to the outstanding principal
balance that existed on the mortgage. As a result, the principal of the mortgage was
reduced from $82,486.65 to $34,950.02. Chauncey testified that she was afraid that
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she would lose her home and she realized that the equity in her homestead could be
protected from unsecured creditors. Chauncey also denied any intent to deceive,
defraud or hinder her creditors.
Chauncey filed her bankruptcy petition on December 31, 2002. She claimed
her home as her homestead and as exempt under 11 U.S.C. § 522(b), Fla. Const. Art.
10, § 4(a)(1), and Florida Statute §222.01 (2003). The filing of the bankruptcy case
was intentionally delayed until after she received the settlement proceeds and the
payment was made to Chase.
II.
A. Trustee is Not Entitled to an Equitable Lien on Chauncey’s Home
The bankruptcy court granted, and the district court affirmed, the imposition
of an equitable lien on Chauncey’s home benefitting the Trustee. Chauncey claims
such an action was in error and violative of the Florida Constitution’s homestead
exemption. This is correct. See Havoco of Am., Ltd. v. Hill, 790 So. 2d 1018, 1020
(Fla. 2001).
The Havoco court acknowledged that “this Court has not hesitated to reach
beyond the literal language of the [Florida homestead] exemption to allow the
imposition of equitable liens against homestead property used as an ‘instrument of
fraud or imposition upon creditors.’” Havoco, 790 So. 2d at 1023 (quoting Milton
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v. Milton, 58 So. 718, 719 (Fla. 1912)). It would, however, stray only “where the
equities have demanded it,” having “done so rarely and always with due regard to the
exceptions provided in article X, section 4.” Id. at 1023-24.
The Havoco court concluded that the “transfer of nonexempt assets into an
exempt homestead with the intent to hinder, delay, or defraud creditors is not one of
the three exceptions to the homestead exemption . . . . We have invoked equitable
principles to reach beyond the literal language of the excepts only where funds
obtained through fraud or egregious conduct were used to invest in, purchase, or
improve the homestead.” Id. We later affirmed. Havoco of Am., Ltd. v. Hill, 255
F.3d 1321, 1322 (11th Cir. 2001).
Under Havoco, Chauncey’s actions do not warrant the imposition of an
equitable lien upon her homestead. She obtained funds, not through fraud, but by
instituting a personal injury action against Eclipse, and received a settlement through
no wrongdoing. Her decision to delay the filing of a bankruptcy petition until after
she received the funds, while blatantly a move designed to deceive her creditors and
one made in bad faith, does not rise to the level of fraud, nor does it constitute
egregious behavior. The imposition of an equitable lien is not justified under Florida
law.
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B. Sufficient Evidence Supports the Bankruptcy Court’s Denial of
Discharge
Chauncey also appeals the district court’s denial of her right to discharge her
debt. Generally, pre-confirmation debts are discharged in Chapter 7 proceedings,
because the debtor’s fresh start is the primary objective of bankruptcy law. 11 U.S.C.
§ 727(b).
The bankruptcy court denied Chauncey a discharge of her debt under both 11
U.S.C. § 727(a)(2)(A) and § 727(a)(3). Its findings of fact in determining that
Chauncey transferred her property within one year before filing her petition with
intent to defraud creditors and in failing to keep financial records without justification
are not clearly erroneous.
III.
For the foregoing reasons, we AFFIRM the judgment of the district court
denying Chauncey’s discharge under 11 U.S.C. § 727(a)(2)(A) and (3), and
REVERSE the judgment of the district court imposing an equitable lien on
Chauncey’s homestead.
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