Opinion
Case No. 04-80360-Civ-Paine/Johnson.
March 31, 2005
ORDER AFFIRMING THE BANKRUPTCY COURT'S FINDINGS OF FACT AND CONCLUSIONS OF LAW AND AMENDED FINAL JUDGMENT
This is an appeal from the order of United States Bankruptcy Judge Paul G. Hyman. entered February 24, 2004, denying the dischargeability of the hereinafter stated debt of the Appellant-Debtor Andrea Chauncey.
Appellant filed a voluntary petition under Chapter 7 of Title 11 of the United States Code on December 31, 2002. The Debtor claimed her home as homestead and as exempt under 11 U.S.C. Section 522(b), Fla. Const. Art. 10, Section 4(a)( 1) and Fla. Stat. Section 222.01 (2003). Thereafter, Appellee Patricia Dzikowski, Trustee, filed a complaint objecting to appellant's requested discharge and seeking: to avoid an allegedly fraudulent transfer under 11 U.S.C. Section 548 (Count I); to avoid a transfer under 11 U.S.C. Section 544 (Count II); to avoid a fraudulent transfer under Fla. Stat. Section 726.105 (Count III); an order for turnover of property of the estate (Count IV); a denial of discharge under 11 U.S.C. Section 727(a)(2)(A) (Count V); a denial of discharge under 11 U.S.C. Section 727(a)(3) (Count VI), a denial of discharge under 11 U.S.C. Section 727(a)(4)(D) (Count VII); a denial of discharge under 11 U.S.C. Section 727(a)(5) (Count VIII), and ti impose an equitable lien of for equitable subrogation (Count IX).
This case is now before the court upon the appeal from the Amended Findings of Fact and Conclusions of Law and Final Judgment entered by the Honorable Judge Hyman after conducting a trial of the adversary complaint filed by the Appellee Patricia Dzikowski, Trustee, against the Appellant, Andrea M. Chauncey. After making findings of facts with respect to the allegedly fraudulent transfer, the bankruptcy court found as a matter of law that appellant was not entitled to discharge of her debt because she had violated sections 727(a)(3) and 727(a)(2)(A) of the Bankruptcy Code. Judge Hyman found in favor of the appellant debtor on the Appellee's objections to discharge under 11 U.S.C. Sections 727(a)(5) and 727(a)(4)(D). Judge Hyman then entered final judgment in favor of Appellee as to Count IX and imposed an equitable lien in favor Appellee against Appellant's homestead real property.
STANDARD OF REVIEW ON A BANKRUPTCY APPEAL
When entertaining an appeal from a bankruptcy court, district courts are entitled to "affirm, modify, or reverse a bankruptcy court's . . . order" and will accept its findings of fact unless those findings are clearly erroneous. Fed. Bankr.R. 8013 (West 1984 Supp. 2004); See In re Sublett, 895 F.2d 1381, 1383 (11th Cir. 1990); see also In re Club Assocs., 951 F.2d 1223, 1228 (11th Cir. 1992). A finding of fact is clearly erroneous when "although there is evidence to support it, the reviewing court on the entire record is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). Although the bankruptcy court's factual findings are subject to a clearly erroneous standard, that standard does not apply to a determination of what law applies or the legal significance afforded the facts by the Bankruptcy Court. Matter of Multiponics, Inc., 622 F.2d 709 (5th Cir. 1980); In re Evans Products Co., 60 B.R. 863 (S.D.Fla. 1986). Further, a district court is not authorized to make independent findings of fact. See In re Sublett, 895 F.2d at 1384. Moreover, if a bankruptcy court's findings are "silent or ambiguous as to an outcome determinative factual question," remand to the bankruptcy court is required. Id. ( quoting Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir. 1987)).
In contrast, conclusions of law, including a bankruptcy court's interpretation and application of the Bankruptcy Code, are reviewed de novo. See In re Chase Sanborn Corp., 904 F.2d 588, 593 (11th Cir. 1990). De novo review requires the court to make a judgment "independent of the bankruptcy court's, without deference to that court's analysis and conclusions." Moody v. Amoco Oil Co., 734 F.2d 1200, 1210 (7th Cir. 1984). This Court, therefore, owes no deference to a bankruptcy court's interpretation of law or its application of the law to the facts.Goerg v. Parungao, 930 F.2d 1563, 1566 (11th Cir. 1991).
FINDINGS OF FACT
Consistent with the applicable authority, this court has reviewed the record of this case and has carefully considered Judge Hyman's factual findings and has scrutinized them to determine if they are clearly erroneous. Having concluded that the factual findings are not clearly erroneous, this court hereby accepts the findings of fact rendered by the Bankruptcy Judge after a trial on the adversary proceeding.
On December 31, 2002, Andrea M. Chauncey ("Defendant" or "Debtor") filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code (the "Petition"). At that time, the Debtor owned a home located at 7225 Coppitt Key Street in Lake Worth, Florida. The Debtor owned her home for eight and one half years prior to filing the Petition and that she continuously resided there during that time. The home is subject to a mortgage (the "Mortgage") held by Chase Mortgage Corporation ("Chase"). The Debtor was the sole shareholder of a Florida corporation, AAA Affordable Transmissions, Inc. ("AAA") from 1997 to November 2000. The Debtor closed AAA in November 2000. All of the assets of AAA were leased and were repossessed by the lessors. The Debtor became unemployed as a result of AAA's closing. The Debtor testified that when she closed AAA, she hired help to clean out the business premises and in that move, she lost all of AAA's books and records. The Debtor testified that she has not been able to locate the books and records of AAA since the move and as a result, she could not make them available to the Trustee for inspection.
The Debtor introduced AAA's 2000 Tax Return (the "2000 Tax Return") into evidence. The 2000 Tax Return reflected One Hundred and Eighty-Eight Thousand Nine Hundred Seventy-Four Dollar ($188,974.00) in income for that year. The Debtor testified that she listed this amount on her Statement of Financial Affairs but that she did not receive any of those funds.
The Debtor has been largely unemployed since she closed AAA in November 2000. The Debtor supported herself through part-time employment, contributions from her boyfriend, ex-husband and father. However, she did not keep any records of the contributions of support from her boyfriend, ex-husband and father. The Debtor was unable to provide the Trustee with documents related to her financial accounts because she did not keep copies of bank statements and cancelled checks. The Debtor testified that it would cost between Fifty ($50.00) and Seventy-Five ($75.00) Dollars to obtain copies of these records and she could not afford to do so. The Debtor is the mother of two young children. In 2002, the Debtor became pregnant with her second child. The Debtor's relationship with her boyfriend ended in 2002 and he moved out of the Debtor's home. The Debtor testified that at that time she was unemployed, living alone, pregnant and afraid that she would lose her home because she was unable to meet her expenses. On March 15, 2002, the Debtor initiated a personal injury lawsuit against Eclipse Marketing of Utah, Inc. ("Eclipse") in state court (the "personal injury lawsuit") seeking to recover for personal injuries sustained as a result of an incident which occurred between the Debtor and an agent of Eclipse.
According to the Palm Beach County Civil Court Public Records, American Express Centurion Bank ("American Express") filed suit against the Debtor on July 30, 2002 (the "American Express Lawsuit"). The Debtor first consulted with and sought the advice of her bankruptcy attorney in August 2002. However, the Debtor did not file for bankruptcy at that time. Also according to the Palm Beach County Civil Court Public Records, on October 23, 2002, a judgment in favor of American Express (the "American Express Judgment") was entered against the Debtor.
On November 22, 2002, the personal injury lawsuit was settled for the gross sum of Eighty-Thousand Dollars ($80,000.00). Upon the direction of the Debtor, these funds were initially deposited into the trust account of the Debtor's personal injury attorney. After payment of attorneys' fees and costs, the Debtor was entitled to a net sum of Forty-Seven Thousand Four Hundred Thirty Dollars and Eight-Two Cents ($47,430.82) ("Settlement proceeds"). The Debtor did not take possession of the Settlement proceeds, nor were they ever deposited into her personal bank account. Instead, the Debtor directed her personal injury attorney to remit the Settlement proceeds directly from his trust account to Chase sometime between November 22, 2002 and December 18, 2002.
On December 18, 2002, Chase received the payment from the Debtor'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 Eighty-Two Thousand Four Hundred Eight-Six Dollars and Sixty-Five Cents ($82,486.65) to Thirty-Four Thousand Nine Hundred Fifty Dollars and Two Cents ($34,950.02). The Debtor testified that her motivation for remitting the Settlement proceeds directly from her personal injury attorney's trust account to Chase was to preserve her ability to keep her home. The Debtor testified that she was afraid that she would lose her home and she realized that the equity in her homestead could be protected from unsecured creditors. The Debtor also denied any intent to deceive, defraud or hinder her creditors. The Debtor further testified that the payment to Chase allowed her to lower the monthly payment on the Mortgage.
The Debtor filed her bankruptcy Petition on December 31, 2002. The Debtor claimed her home as her homestead and as exempt under 11 U.S.C. § 522(b), FLA. CONST. Art. 10, § 4(a)( 1) and FLA. STAT. § 222.01 (2003). The Debtor testified that the filing of the bankruptcy case was intentionally delayed until after she received the Settlement proceeds and the payment was made to Chase.
CONCLUSIONS OF LAW
Generally, pre-confirmation debts are discharged in Chapter 7 proceedings. 11 U.S.C. section 727(b). A Chapter 7 debtor's conduct, no matter how reprehensible, will not forfeit discharge unless covered by one of the grounds listed in Section 727. Matter of Ksenzowski, 56 B.R. 819 (Bkrtcy.E.D.N.Y. 1985). As the debtor's fresh start is one of the primary purposes of bankruptcy law, exceptions to discharge must be strictly construed. In re Cohen, 47 B.R. 871 (Bkrtcy.S.D.Fla. 1985). Section 727 of the Bankruptcy Code provides that a debtor shall be granted a discharge unless one or more of the ten specifically enumerated reasons for denial is proven. 11 U.S.C. Section 727(a)(1)-(10). Among the more frequently invoked of these grounds are the fraudulent transfer of assets, fraudulent concealment of assets or information, failure to keep adequate books and records, the making of false statements in connection with the case, and failure to cooperate with the court. See 4 W. Collier, Collier on Bankruptcy, Section 727.01A (15th ed. 1985) and cases cited therein.
FRAUDULENT TRANSFER OF NON-EXEMPT ASSETS IN VIOLATION OF 11 U.S.C. SECTION 727(A)(2)(A)
As set forth above, an express exception to discharge exists for fraudulent transfers. In this regard, the relevant text of 11 U.S.C. § 727(a)(2)(A) states:
(a) The court shall grant the debtor a discharge, unless —
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed —
(A) property of the debtor, within one year before the date of the filing of the petition;. . . .
The plaintiff in an adversary proceeding has the burden of establishing the nondischargeability of a debt. In re Grogan, 146 B.R. 866, 870 (M.D.Fla. 1992). This burden requires a showing by a preponderance of the evidence. See In re Beaubouef, 966 F.2d 174 (5th Cir. 1992); In re Grogan v. Gardner, 498 U.S. 279 (1991). In fact, the Supreme Court has recognized that the preponderance of the evidence standard (rather than a heightened "clear and convincing" standard) applies to non-dischargeability even when the basis for the objection to discharge is the fraud of the debtor. Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 660 (1991). Therefore, in order to prevail on a § 727(a)(2)(A) claim, a plaintiff creditor is required to prove by a preponderance of the evidence.
(1) that a transfer occurred;
(2) that the property transferred was property of the estate (i.e. belonged to the debtor pre-petition);
(3) that the transfer occurred within one year of the filing of the Petition; and
(4) that at the time of the transfer the debtor possessed a requisite intent to hinder, delay, or defraud a creditor.In re Ingersoll, 106 B.R. 287, 292 (Bankr.M.D.Fla. 1989).
Although the intent required to deny a debtor's discharge is actual intent, In re Harpe, 354 F.Supp. 59 (M.D.Ga. 1973), a finding of actual intent "may be based upon circumstantial evidence or inferences drawn from the course of conduct." In re Kaiser, 94 B.R. 779, 780 (Bankr.S.D.Fla. 1988) (citing In re Topping, 84 B.R. 840 (Bankr.M.D.Fla. 1988). That actual intent may be inferred from the actions of the debtor. Rarely, if ever, will a debtor take the witness stand and testify under oath that yes, he transferred the property in question with the intent to hinder, delay or defraud his creditors. Therefore, necessarily, the intent to defraud must usually be proved by circumstantial evidence. See, In re Freudmann, 362 F.Supp. 429 (S.D.N.Y. 1973), aff'd 495 F.2d 816 (2d Cir. 1974), cert. denied 419 U.S. 841 (1974).
In addition, actual "intent to hinder, delay, or defraud a creditor may be imputed to a debtor where the debtor fails to make a full disclosure of his liabilities in the petition for relief and omits assets of substantial value for the schedules."In re Sofro, 110 B.R. 989, 991 (Bankr.S.D.Fla. 1990) (citingIn re Gonzalez, 92 B.R. 960 (Bankr.S.D.Fla. 1988); Crews v. Topping, 84 B.R. 840, 842 (Bankr.M.D.Fla. 1988) ("Only where the non-disclosed assets [are] of little or no value will such fraudulent intent not be imputed.")).
In the present case, the Bankruptcy Court found as a matter of fact that the Debtor transferred assets in the form of the Settlement proceeds within the year preceding the Bankruptcy filing, with the requisite intent to hinder, delay and defraud her creditors. The record supports a finding that the Debtor put off the filing of her Chapter 7 bankruptcy petition until a time after she has settled her personal injury case. She confessed this in her testimony before Judge Hyman. The record further supports a finding that she further put off filing until after she had effected a transfer of the Settlement proceeds from her peronal injury case to pay down her existing mortgage. The transfer of these non-exempt funds was effected in an unusual way, with the Debtor never taking actual possession of the funds. Rather than take immediate possession of the settlement proceeds as one would expect from an individual with no fraudulent motive, she requested that the funds be deposited in her attorney's trust account until the funds were transferred directly into her mortgage account to be credited against the money she owed on her residence, an exempt asset. Had the Debtor not concealed her ownership of the non-exempt assets in her exempt asset, the settlement proceeds would have been property of the estate and they would have been available to pay off her creditors.
The trial court correctly concluded upon consideration of the circumstances leading up to the transfer, that the Defendant's conduct established that she knew the personal injury settlement would be a non-exempt asset and that, with the intent to defraud her creditors, she attempted to convert this non-exempt asset into an exempt asset by paying down her mortgage debt on her homestead property and securing her benefit from the settlement funds while shielding the money from her creditors.
A thorough review of this record establishes that Judge Hyman's findings of fact are supported by the record and are not clearly erroneous. The record establishes that the Debtor engaged in a shell game with the personal injury proceeds in an attempt to keep them from her bankruptcy estate. Accordingly, the Bankruptcy Judge correctly applied the applicable law and concluded that because the Trustee had proved by a preponderance of evidence that the Debtor acted with the intent to hinder, delay and defraud her creditors, the Debtor's requested discharge had to be denied as a matter of law pursuant to 11 U.S.C. Section 727(a)(2)(A).
This court concludes that the Bankruptcy Judge's findings of fact are well supported by this record and that the legal conclusions are consistent with controlling authority. Accordingly, the Bankruptcy court's ruling denying the Debtor a discharge in bankruptcy under Section 727(a)(2)(A) is due to be affirmed.
FAILURE TO PROVIDE DOCUMENTATION OF FINANCIAL CONDITION IN VIOLATION OF 11 U.S.C. SECTION 727(a)(3)
Appellee argued that Appellant kept insufficient documentation for the court to make a complete and accurate determination of Appellants past and present financial condition pursuant to 11 U.S.C. 727(a)(3).The party objecting to the debtor's discharge pursuant to Section 727(a)(3) has the burden of proving by a preponderance of the evidence that reasonable grounds exist to conclude that the books or records of the debtor are inadequate, the burden shifts to the debtor to establish that either accurate books and records were maintained to determine the debtor's financial condition or that the failure to keep adequate books and records was justified under the circumstances. In re Chalik, 748 F.2d 616 (11th Cir. 1984); In re Goblick, 93 B.R. 771 (Bkrtcy.M.D.Fla. 1988).
The controlling statute initially raised by Appellee and utilized by the trial judge in this case to determine the status of Appellants' discharge was 11 U.S.C. 727(a)(3). This subsection of 727 provides as follows:
(a) The Court shall grant the debtor a discharge unless . . .
(3) The debtor has concealed, destroyed, mutilated, falsified or failed to keep or preserve any recorded information, including books, documents, records and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all the circumstances of the case;
Based on the evidence in the record and the application of the plain meaning of 11 U.S.C. 727(a)(3), the trial court made a factual determination that Appellants failed to adequately keep records and books from which their financial condition could be ascertained, and their failure to do so was not justified under the circumstances. There was no evidence presented by the Debtor that would support a finding excusing Debtor's failure to keep and produce financial records. The trial court specifically found that none of the necessary business records from Debtor's business were made available to the Trustee for review. In addition, the evidence also established that the Debtor failed to provide the Trustee with documentation relating to her personal financial accounts for the year preceding the filing of the Petition.
A debtor is "not under any duty to keep any more detailed records than that of any other individual taxpayer." In re Rowe, 81 B.R. 653, 657 (Bkrtcy.M.D.Fla. 1987). However, in the present case, the record lacks evidence that establishes a similar consistency of facts and circumstances that assisted theRowe court in reaching an accurate accounting of the debtor's financial condition in that case. A determination of what constitutes "accurate" records and books encompasses the reasonableness and particular circumstances that accompany the facts of each individual case. In re Nguyen, 100 B.R. 581, 583 (Bkrtcy.M.D.Fla. 1989); In the Matter of Underhill, 82 F.2d 258 (2d Cir. 1936). In the present case, the trial court concluded that Appellant failed to provide a satisfactory amount of information to assist the Trustee or the court in establishing her accurate financial condition just prior to the filing of her Bankruptcy petition.
There is absolutely no question on this record that Appellant failed to provide records and books from which their financial condition could be ascertained. This was a factual determination made by the trial court and Appellants have not convinced this Court that the trial court was "clearly erroneous" in its determination. Even if this court were to look beyond the "clearly erroneous" standard, the Appellant failed to provide the Bankruptcy Court with any information to determine an accurate financial condition. Based on Appellant's inability to provide sufficient records and books, this court is satisfied that the Bankruptcy Judge's ruling denying Appellants' discharge under 11 U.S.C. 727(a)(3) must be affirmed.
Contrary to Appellant's suggestion, this holding is not inconsistent with the court's finding that the Debtor, who formerly owned substantial, identifiable business assets that were not available to the creditors in the estate, had provided a satisfactory explanation that she did not retain any assets of the business when operations terminated. These are very different sections of the Bankruptcy Code. There is no evidence in this record to suggest that this Debtor is hiding funds other than the settlement proceeds and her testimony in this regard was credible and was accepted by the court. Nonetheless, the Debtor has failed to comply with the entirely different section that requires her to produce documentation to the Trustee. The fact that the Debtor otherwise proved her financial condition with regard to other once-owned assets, does not obviate her obligation to produce the requisite documents pursuant to the Bankruptcy Code. Accordingly, this court finds that Judge Hyman's ruling on Section 727(a)(3) and 727(a)(5) are consistent.
Therefore, this court finds that the trial court correctly determined as a matter of fact that Appellants failed to justify the lack of financial records and books as necessary pursuant to 11 U.S.C. 727(a)(3) and correctly concluded as a matter of law, that the Debtor's requested discharge was to be denied pursuant to that same section. Accordingly, Judge Hyman's ruling on this section shall be affirmed.
IMPOSITION OF EQUITABLE LIEN
The Appellant argues that the Bankruptcy Court erred when it imposed an equitable lien against the Debtor's homestead in the amount of $47,430.82 to reflect the value of the Settlement proceeds that were fraudulently transferred to Chase and sheltered in the homestead. Based upon the findings of fact in this case, the court finds that Judge Hyman's imposition of an equitable lien on the Debtor's homestead is warranted under the circumstances of this case and it is, therefore, due to be affirmed. Article X, Section 4(a) of the Florida Constitution provides in pertinent part:
(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. . . .
This provision grants an exemption from the forced sale of a homestead subject to these three exceptions. Judge Hyman correctly noted that the Supreme Court of Florida has long emphasized that the homestead exemption is to be liberally construed in the interest of protecting the family home. See In re Financial Federated Title Trust, Inc., 273 B.R. 706, 713 (Bankr.S.D.Fla. 2001). However, the homestead exemption is not to be so liberally construed as to make it an instrument of fraud or imposition upon creditors. Id. The principle that the homestead cannot be employed as a shield and defense after fraudulently imposing on others has been applied in numerous cases decided by the Florida Supreme Court. See LaMar v. Lechlider, 135 Fla. 703, 185 So. 833 (1939); Sonneman v. Tuszynski, 139 Fla. 824, 191 So. 18 (1939); Craven v. Hartley, 102 Fla. 282, 135 So. 899 (1931); Jones v. Carpenter, 90 Fla. 407, 106 So. 127 (1925). In 1993, the Florida Supreme Court again emphasized the rule that "where equity demands it this Court has not hesitated to permit equitable liens to be imposed on homesteads beyond the literal language of Article X, Section 4." Palm Beach Savings Loan Ass'n, F.S.A. v. Fishbein, 619 So.2d 267, 271 (Fla. 1993).
In Fishbein, the court allowed an equitable lien against homestead property in favor of a lender, where the debtor husband fraudulently obtained a loan and used the loan to satisfy three preexisting mortgages on the homestead property. Specifically, in March of 1998, Mr. Fishbein borrowed $1.2 million from a Palm Beach bank, securing the debt with a mortgage on the house he owned with his wife. Prior to his marriage, Mr. Fishbein owned the house subject to two mortgages. Following their marriage, Mr. and Mrs. Fishbein received a third mortgage in which they acknowledged the existence of the prior mortgages. In securing the $1.2 million loan, Mr. Fishbein, while engaged in dissolution proceedings with his wife, forged his wife's signature on the mortgage. Mr. Fishbein used approximately $930,000 of the loan to satisfy the three existing mortgages and taxes on the property. In the foreclosure proceeding the trial judge allowed an equitable lien on the property to the extent that the loan proceeds were used to satisfy the existing mortgages and property taxes. As the Fishbein court noted, the imposition of an equitable lien in circumstances suggesting the use of fraud in the acquisition of the homestead was not a remedy of recent vintage: "[W]here equity demands it this Court has not hesitated to permit equitable liens to be imposed on homesteads beyond the literal language of article X, section 4." Fishbein, 619 So.2d at 270.
Finally, the Florida Supreme Court, in Havoco of America, Ltd. v. Hill, 790 So.2d 1018 (Fla. 2001), stated its continued approval of the rule that equitable liens may be used as a remedy for creditors in cases where a debtor converts non-exempt assets into a homestead with the specific intent to hinder, delay and defraud creditors.
Judge Hyman correctly noted that the determination of a creditor's entitlement to an equitable lien on real property must be made in accordance with applicable state law. Matter of Bob Cooper, Inc. 65 B.R. 609, 611 (Bankr.M.D.Fla. 1986). Under Florida law, the test for imposition of an equitable lien is a disjunctive two prong test. In re Diamond, 196 B.R. 635, 639 (Bankr.S.D.Fla. 1996). "[E]quitable liens may be founded upon two bases: (1) a written contract that indicates an intention to charge a particular property with a debt or obligation; or, (2) a declaration by a court out of general considerations of right or justice as applied to the particular circumstances of a case."Williams v. Aloisi, 271 B.R. 676, 683 (M.D.Fla. 2002) (citations omitted). "The basis of equitable liens may be estoppel or unjust enrichment." Blumin v. Ellis, 186 So.2d 286 (Fla. 2d DCA 1966). However in order to prevail on an estoppel theory, there must be evidence of fraud, misrepresentation, or other affirmative deception." Plotch v. Gregory, 463 So.2d 432, 436 n. 1 (Fla. 4th DCA 1985) (citing Rinker Materials Corp. v. Palmer First Nat'l Bank Trust Co. of Sarasota, 361 So.2d 156 (Fla. 1978); Diversified Commercial Developers, Inc. v. Formrite, Inc., 450 So.2d 533 (Fla. 4th DCA 1984)).
In the present case, the court agrees with Judge Hyman that, based on the evidence presented, an equitable lien is appropriate. Here, the evidence supports the conclusion that the Debtor undertook a carefully planned series of actions to defraud her creditors. First, the Debtor strategically and intentionally delayed the filing of the Petition based on her expectation that she would receive an award of damages in the personal injury lawsuit that she filed. Once the Debtor received the Settlement proceeds, she deliberately orchestrated a series of actions to completely avoid possession of the funds. She first directed that the Settlement proceeds be deposited directly into the trust account of her personal injury attorney. Then, instead of depositing the settlement proceeds into her personal bank account, the Debtor instructed her personal injury attorney to remit the funds directly to Chase to pay down the Mortgage on her homestead. After the settlement proceeds were received by Chase and the Debtor was assured that they were safely out of the reach of creditors, she filed for bankruptcy and attempted to protect the funds through her homestead exemption. As a result, the estate was deprived the settlement proceeds.
Based upon this record, this court agrees with Judge Hyman and finds equity demands that an equitable lien be imposed on the Debtor's homestead. It is undisputed that the settlement proceeds that were transferred to Chase are directly traceable to the Debtor's homestead. Therefore, this court specifically finds that the Debtor cannot profit from her strategic and intentional delay of her bankruptcy filing. Further, this court affirms Judge Hyman's holding that the Debtor cannot act to the detriment of her creditors and then use the homestead exemption to deprive the estate of funds that would have been available if not for her fraudulent actions. As such, the imposition of an equitable lien in favor of the Trustee is necessary to prevent the Debtor from using the homestead exemption as an instrument of fraud and to prevent the Debtor from being unjustly enriched in this case. To do otherwise would be to countenance and reward her deceptive actions and would permit her to benefit from the use of nonexempt assets of her bankruptcy estate while her innocent creditors would be harmed.
The Court finds that the amount of the lien shall be based upon the amount of the fraudulently transferred settlement proceeds used to pay down the Mortgage on the Debtor's homestead. The undisputed evidence reflects such amount to be $47,430.82. Therefore, this court will affirm the imposition an equitable lien in the amount of $47,430.82.
CONCLUSION
This court has carefully reviewed the memorandum order of Judge Hyman, as well as the briefs of both parties. Under the standards quoted above, the Court finds that the findings of fact contained in the order are not clearly erroneous. The Court also finds that the conclusions of law contained in the order are sound. Therefore, for the reasons stated above, the court affirms the Bankruptcy Judge's holdings that the Debtor is denied from receiving a discharge pursuant to 11 U.S.C. §§ 727(a)(3) and 727(a)(2)(A). In addition, this court affirms Judge Hyman's conclusion that the Trustee is entitled to the imposition of an equitable lien on the Debtor's homestead property in the amount of $47,430.82.
Accordingly, it is
ORDERED and ADJUDGED that the Order setting forth the Amended Findings of Fact and Conclusions of Law issued on February 18, 2004 is hereby AFFIRMED.
DONE AND ORDERED at West Paim Beach, Florida, this 31st day of March, 2005.