It's a scenario that has long frustrated bankers and retailers who believe a liberal interpretation of Florida's homestead exemption has turned the state into a haven for swindlers, deadbeats and frauds. "It's outrageous what Florida law allows," says Chicago lawyer Richard Campbell, who represents an Illinois company trying to collect its judgment from Hill. "If that's what the framers of the constitution intended, it's absurd."
But Elmer Hill may end up being the best thing that's happened to creditors in a while. That's because his case has put the question squarely before the Florida Supreme Court for the first time. Finally, after years of debate and threats of legislative and constitutional reform, the state's high court must decide: Does Article X, Section 4 of the Florida Constitution protect a homestead even if it can be shown that it was purchased to "hinder, delay or defraud" creditors by hiding assets behind the homestead exemption?
Yes, according to the bankruptcy judge who heard Hill's case. The judge decided it wasn't necessary to determine whether Hill intended to defraud creditors. "Simply purchasing a home with 'clean' funds, even done with the intent to hinder creditors, cannot overcome the Florida homestead exemption," the bankruptcy court held.
Many judges around the U.S. agree, particularly since a 1992 Florida Supreme Court opinion held that the exemption trumps even state forfeiture laws that otherwise allow for the seizure of property with connections to a criminal enterprise. The court held to a strict reading of the provision, which lists only three kinds of debt that can overcome the exemption: Mortgages, unpaid property taxes and liens for work performed on the homestead.
But other bankruptcy courts have interpreted the law differently. And the federal appeals court hearing Hill's case found the law murky enough to ask the Florida Supreme Court to settle it.
Creditors' lawyers now hope to convince the court to rein in the exemption by citing cases that say it "can't be used as an instrument of fraud." Some courts have relied on that language to carve out exceptions for such things as a husband or father trying to shield assets in a homestead to avoid paying alimony or child support. Exceptions have also been made in cases where the homestead was paid for with money taken out of a corporation to avoid paying the corporation's debts.
Orlando lawyer Jules Cohen, whose firm represents the Florida Bankers Association and who has filed a brief in the case on behalf of bankers, the Florida Retail Federation and Florida chapters of the National Association of Credit Managers, says research of the case law has left him encouraged. "I think we have a pretty good chance," he says. Agrees J. Nixon Daniel, the Pensacola lawyer representing the coal supplier trying to collect from Hill: "If we can't tip the scales on this case, I'm not sure the scales can be tipped."
But Hill's Pensacola lawyer, Louis K. Rosenbloum, says the law is "very clear" in favor of his client. And two years ago, creditors' lawyers seemed to concede the same point when they asked the state's Constitutional Revision Commission to include an item on the referendum that would narrow the exemption.
The commission never seriously considered it. Its chairman, Tallahassee lawyer Dexter Douglass, says the panel was not sympathetic to the arguments of creditors. "This irritates the hell out of the bankers," he says. "But the answer is you shouldn't have lent the money to the yahoo in the first place." Though not familiar with the specific facts of the Hill case, Douglass says Hill's creditors probably have the more difficult argument. And that, he says, is a good thing. "It really has been a godsend to many thousands of people who don't have anything but their homes."
Trial Judges: To Elect or Not?
After long debate, Florida Bar leaders have decided to support the idea of ending the current system of electing trial judges [Florida Trend, Nov. 1999]. Florida voters will be asked to decide the same issue in November.
Under an alternative system, the governor would appoint trial judges from among groups of nominees selected by local nominating commissions. The Bar's board of governors supported this method 34 to 9, but the subject remains a touchy one. Opponents of the alternative include minority and women lawyer groups and others who simply don't trust the governor not to play politics with judicial appointments.
"The real issue is, are we going to transfer power from the little guy who is not on the inside and give that power to the governor alone?" Miami board member Manuel Morales asked recently.
Another south Florida board member, Coral Gables lawyer Miles McGrane, reminded the board of recent legislative attempts to give the governor and legislative leaders more influence on the commissions, which are currently used to fill judicial vacancies that occur between elections. "How do we know the (nominating commissions) will be protected in the future?" he asked.
For Carol Licko, the Miami attorney tapped to serve as Gov. Jeb Bush's general counsel, allaying such suspicions has become a regular part of her job. Licko says Bush has been unfairly characterized as seeking to stack the courts with political conservatives when his primary concern is to increase the number of minorities and women on the bench.