Another Florida Court Strengthens Homestead Protection

Florida’s Third District Court of Appeals has upheld Florida’s homestead protection against creditors in Conseco Services v. Cuneo. The Third District Court opinion also clarified some issues and questions raised about the Supreme Court’s important homestead decision in Havoco v. Hill, 790. So 2d 1018.

Conseco Services obtained a civil judgment in Indiana against the Cuneos for their failure to repay a large loan, and after judgment Cunseco filed a proceedings supplementary alleging that the Cuneos transferred assets to other family members to hinder, delay and defraud their creditors. Subsquent to the judgment and the fraudulent conveyance complaint the Cuneos liquidated $8 million in investment securities and took out a $2.45 mortgage on a second home in Connecticut. The invested $10.2 million in a home in Florida which they proceeded to declare as a Florida homestead. Conseco filed an action in Florida attempting to put a lien on the Florida homestead.

The Third District Court of Appeals held that the Cuneos’ Florida homestead was protected against Conseco’s collection actions. The Court pointed out that none of the funds used to purchase the homestead was funds obtained from Conseco, and therefore, based on Havoco v. Hill, Conseco failed to meet the threshold for imposing an equitable lien on the home.

This decision substantiates several common asset protection techniques employed by debtors moving to Florida to escape judgments in other states. First, the Cuneos invested in a Florida home after a judgment was entered and after the creditor first alleged fraudulent conveyances pertaining to other transactions. Second, the Cuneos successfully stripped equity from another property, in Connecticut, and sheltered the loan proceeds in a Florida homestead. Third, the Court found that regardless of the Cuneos’ blatant and unapologetic strategy to avoid paying their debts by injecting funds from various non-exempt assets in a Florida homestead, there is no basis for an equitable lien on the homestead when the funds protected were not obtained by fraud or egregious conduct directly from the complaining creditor.

posted by Jonthan Alper, asset protection and bankruptcy attorney, Orlando, Florida