95 F.3d 1028 United States Court of
Appeals, Eleventh Circuit. 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. No. 94-2823. Sept. 19, 1996. [*1029] COUNSEL: Robert Augustus
Harper, Tallahassee, FL, for Appellants. David E. Peterson, Lowndes, Drosdick, Doster, Kantor & Reed,
P.A., Orlando, FL, for First Union National Bank. Samuel J. Zusmann, Jr., Maguire, Voorhis & Wells, P.A.,
Orlando, FL, for Transamerica Commercial. Appeal from the United States District Court for the Middle
District of Florida. JUDGES: 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 courts
affirmance of the bankruptcy courts 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 under Florida
law.FN1 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 [*1030] 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 trustees motion for summary judgment, noting that the
Debtors attempt at homestead exemption
gerrymandering was clearly made in bad faith. FN2
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. FN3 FN1. 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. FN2. R1-1, Exhibit
2-20; In re Englander, 156 B.R. 862, 864 (Bankr.M.D.Fla.1992). FN3. R1-1, Exhibit
3-26. The district court affirmed the decision of the bankruptcy court
relating to the claim of homestead exemption.FN4 FN4. R1-14 at 19. The
district court also affirmed in part and vacated in part the bankruptcy
courts order as to the allocation of the proceeds of the sale, and
remanded for further proceedings. However, those rulings were not appealed. JURISDICTION AND STANDARDS OF REVIEW This Court has jurisdiction to review the district
courts order under 28 U.S.C. § 158(d). In reviewing
a bankruptcy court judgment as an appellate court, the district court reviews
the bankruptcy courts legal conclusions de novo.FN5 The district
court must accept the bankruptcy courts factual findings unless they
are clearly erroneous, and give due regard to the bankruptcy courts
opportunity to judge the credibility of the witnesses.FN6 This Court reviews
factual findings for clear error, and the district courts
determinations of law de novo.FN7 Neither the district court nor this court may
make independent factual findings.FN8 FN5. 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). FN6. Id.; Bankruptcy Rule 8013, 11 U.S.C. (1988). FN7. In re Sublett, 895 F.2d
1381, 1383 (11th Cir.1990). FN8. In re JLJ, Inc., 988 F.2d
at 1116. 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. A bankruptcy estate consists of all property that the debtor owned
at the time of the filing of the bankruptcy petition.FN9 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.FN10 FN9. 11 U.S.C. § 541. FN10. 11 U.S.C. § 522(b); Fla.Stat.
&§ 222.20. 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 [*1031] reduced
without the owners 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
áFN11 FN11. Fla. Const.
art. X, § 4(a)(1). 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
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.FN12 FN12. Smith v.
Guckenheimer, 42 Fla. 1, 37, 27 So. 900, 911 (1900). In order to be exempt the property must meet all of the
requirements of the constitution for exemption.FN13 It must not exceed the half
of one acre in an incorporated town.FN14 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 owners debts.FN15 Because the only exceptions to
homestead exemption are those specifically enumerated in the Florida Constitution,
courts have refused to create new ones.FN16 The Florida homestead exemption
laws do not contemplate the cutting up and division of an entire indivisible
building situated on exempt real estate.FN17 No Florida state court has
considered the precise issue before us. FN13. Smith, 42 Fla.
at 17, 27 So. at 915. FN14. See Id., 42 Fla.
at 17, 27 So. at 915. FN15. Id., 42 Fla.
at 19, 27 So. at 916. FN16. 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. FN17. Smith v.
Guckenheimer, 42 Fla. 1, 53, 27 So. 900, 905 (Fla.1900). Florida case law dictates that the homestead exemption laws be
liberally applied to the end that the family shall have shelter and shall not
be reduced to absolute destitution.FN18 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.FN19 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. FN20 Further, (h)omestead interests should be
protected from forced sale whenever possible, but not at the expense of others
owning interests in the property. FN21 FN18. Orange
Brevard Plumbing & Heating Company v. La Croix, 137 So.2d 201, 203
(Fla.1962); Smith, 42 Fla. at 41, 27 So. at 912. FN19. 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). FN20. Tullis v.
Tullis, 360 So.2d 375, 377 (Fla.1978). FN21. Id., 360
So.2d at 378. 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
property, but utilized a [*1032] new divisibility test
which considered whether the property was divisible and lawfully
conveyable.FN22 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.FN23 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. FN24 FN22. In re Kuver, 70 B.R.
190, 192-193 (Bank.S.D.Fla.1986); In re Makarewicz, 126 B.R.
127, 128 (Bank.S.D.Fla.1991). FN23. In re Kuver, 70 B.R.
at 192. FN24. 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). 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. FN25 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.
FN26 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. FN27 FN25. 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). FN26. 188 B.R. at
323-324. FN27. Orange
Brevard Plumbing & Heating Company, 137 So.2d at 206. 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 states $30,000 limitation on a
homestead.FN28 The Eighth Circuit affirmed a bankruptcy courts 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
debtors homestead exemption and yet afforded the creditors some satisfaction
of their rightful claims.FN29 FN28. 51 B.R. 47, 50
(Bankr.D.Vt.1985). FN29. OBrien
v. Heggen, 705 F.2d 1001, 1004 (8th Cir.1983). 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 satisfaction of their rightful claims. Therefore, the
judgment of the district court is AFFIRMED. Briefs of the parties 1995 WL 17061324 (Appellate Brief) Brief of Appellee
(Mar. 16, 1995) 1995 WL 17145307 (Appellate Brief) Brief of Appellee
(Mar. 16, 1995) 1995 WL 17061323 (Appellate Brief) Initial Brief of
Appellants (Feb. 09, 1995) 1995 WL 17145308 (Appellate Brief) Initial Brief of
Appellants (Feb. 09, 1995) |