Clients Keep Home After Fierce Argument Over Florida’s Homestead Protection Law

by | March 30, 2016

A husband and wife (which we refer to as “Ron” and “Julie” – but these are not their real names) recently came to our office with little hope that their home could be saved. Their difficult situation started years ago in Virginia after Julie sold her business. The party (“Smiths”) that purchased her business sued Julie for breach of the sales contract. Their financial troubles started to snowball.

Julie immediately began transferring all of her assets to Ron with the intent to prevent the Smiths from collecting. Eventually the Smiths obtained a $1.3 million judgment against Julie. They also discovered that she had been transferring all of her assets to Ron. The Smiths sued Ron for receiving assets from Julie with the intent to hinder, defraud, and delay a creditor, and they obtained a similar judgment against him. The Smiths were then able to collect virtually every asset owned by Ron and Julie in Virginia.

However, while the Smiths were obtaining these judgments in Virginia, Julie and Ron used a portion of the money to purchase a home in Florida. The intent was to use Florida’s homestead protection to prevent the Smiths from taking their final asset. The Smiths came to Florida and argued that the homestead protection does not apply when the proceeds used to purchase the home are obtained through fraud. They cited to multiple cases where the homestead protection failed when money was obtained through falsifying mortgage documents or making false promises to lenders.

Determined to keep Ron and Julie in their Florida home, Kunal Mirchandani, Klein Law Group’s attorney who specializes in real estate and bankruptcy law, presented a very unique argument to the court. He pointed out that in the plethora of cases cited by the Smiths, the one thing that unified them was that the fraud was committed against the creditor. In other words, the false statement or falsified mortgage documents was fraud committed directly on the creditor, not an intermediary.

This case was different because the Smiths only obtained a judgment against Julie for breach of contract. Any fraud in Julie’s transfer of assets was between her and Ron. There was no fraud directly against the Smiths. Mr. Mirchandani also argued that Florida’s constitutional homestead protection is a powerful force, and cited to cases where it was upheld when a home was purchased with money from an illegal enterprise.

After hearing oral arguments and reading lengthy legal memorandums, the Judge ruled in favor of the homestead protection. Now Ron and Julie no longer have to worry about losing their home to the Smiths.

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