Date Posted:

October 22, 2016

Post Author

Andres Beregovich


In a ruling which is useful for sellers of their primary residences, the Supreme Court of Florida affirmed the protected status of funds generated by the sale of a homestead property. The issue was whether proceeds from the sale of a debtor’s homestead retain their Article X, Section 4 Florida constitutional protection against a writ of garnishment when the funds were divided into multiple accounts, including a brokerage account investing in mutual funds and stocks? JBK Assoc., Inc. v. Sill Bros., Inc., Case No.: SC-977 (Fla. April 28, 2016). In finding that the funds retained their constitutional protected status the Court affirmed the Fourth District Court of Appeal decision, which in turn had affirmed the trial court decision.

In short, JBK, a judgment creditor of Sill, served a writ of garnishment upon Wells Fargo. Sill moved to dissolve the writ to protect his deposit accounts at Wells Fargo. As a result of earlier divorce proceedings, the couple’s marital home was sold, and Sill deposited his portion of the proceeds into Wells Fargo accounts, including an investment account.

The Supreme Court began by emphasizing the tradition liberal construction in favor of the homestead declared in Article X, Section 4 of the Florida Constitution exempting homesteads from forced sale. Further, the party objecting to the exemption, normally the judgment creditor, bears the burden “to make a strong showing that the claimant is not entitled to the claim exemption.” (Citations omitted) relying on two Florida Bankruptcy Court decisions.

The Court restated a three part test to protect proceeds from creditors after the sale of a homestead:

(1) there must be a good faith intention, prior to and at the time of the sale, to reinvest the proceeds in another homestead within a reasonable time;

(2) the funds must not be commingled with other monies;

(3) the proceeds must be kept separate and apart and held for the sole purpose of acquiring another home.

The Court recognized that allowing funds to be placed into investment accounts serves a practical purpose:

In today’s economic climate, in which traditional bank accounts do not garner any significant amount of interest earnings, we do not believe placing the proceeds from the sale of a homestead in the type of safe investment account at issue here demonstrates an intent so different from reinvestment in a new homestead within a reasonable time as to violate Orange Brevard.

The Court characterized Sills accounts as not being speculative and not turning over constantly.

So what is the careful debtor to do? When handling homestead proceeds it does bear attention to follow the “Court’s three part requirement” carefully, document the intent to reinvest funds in a new homestead and label the funds as “homestead.”