Wednesday, March 5, 2014

Waiver of Florida Homestead Exemption in Unsecured Agreement Unenforceable

In the year 2007, the Florida Supreme Court issued its opinion in Chames v. DeMayo, 2007 WL 4190796 (Florida December 20, 2007) upholding the 3rd District Court of Appeals' decision (on rehearing) that the waiver of the Florida homestead exemption in an unsecured agreement is unenforceable. The court applied the doctrine of stare decisis and refused to recede from precedent of over a hundred years that the homestead exemption cannot be waived in an unsecured agreement. See Carter's Adm'rs v. Carter, 20 Fla. 558 (1884), Sherbill v. Miller Mfg. Co., 89 So.2d 28, 31 (Fla.1956).

In this case, an attorney who held an unsecured claim for legal fees based on a retainer agreement asked the court to recede from its precedent based on three arguments. First, based on a certain amendment to article X, section 4 of the Florida Constitution. Second, based on a purported national trend approving such waivers. Third, based on other Florida Supreme Court holdings that constitutional rights may be waived. The court rejected each of these arguments in turn.

The creditor first argument was that the 1985 amendment to article X, section 4 of the Florida Constitution, which replaced the phrase "the head of a family" with "a natural person" changed the purpose of the homestead exemption from that of one protecting the family into a personal right that may be waived. The court found no intent on the part of Florida voters to change the fundamental purpose of the Florida homestead when they expanded the homestead protection by no longer requiring one to be the head of a family to claim a homestead. The court stated that the creditor's argument overlooked the State's interest in protecting the home so that homeowners are not reduced to destitution and public charge. Havoco of Am., Ltd. v. Hill, 790 So.2d 1018, 1020 (Fla. 2001).

The creditor next argued that there has been a shift in the position of other states on the issue of homestead exemption waiver. The court noted that if this were true, it would furnish a reason to reconsider its precedent and that it has been willing to recede from precedent when it conflicted with the law in a majority of states. See, e.g., Fridovich v. Fridovich, 598 So.2d 65, 69 (Fla. 1992). The court stated that due to differing constitutional and statutory provisions, any such trend is difficult to discern and "to the extent it can be discerned, the trend appears to go in the opposite direction." The court found that the "majority of jurisdictions that have addressed the issue (whether by constitution, statute, or judicial opinion) do not permit a general waiver of homestead or personal property exemptions in an executory contract."

The court did note some cases from other states that found a waiver of homestead exemption in other manners but concluded that they did "not inform our analysis" as they were in different contexts. In Shuler v. Wallace, 61 Haw. 590, 607 P.2d 411, 414 (Haw. 1980) the court found that the failure to assert the right to claim an exemptions results in a waiver. In Cameron v. McDonald, 216 N.C. 712, 6 S.E.2d 497, 499 (N.C.1940), the court found that the party was estopped from relitigating his right to a homestead when he failed to assert his right.

Lastly, the creditor argued that the waiver of the homestead exemption should be permitted because the court has permitted the waiver of other constitutional rights. The court held that although most personal constitutional rights may be waived, an individual cannot waive a right designed to protect both the individual and the public. The court reiterated that "the homestead exemption protects not only the debtor, but also the debtor's family and the State." See Havaco, 790 S.2d at 1020.

The court recognized the trend in permitting the waiver of personal constitutional rights, especially rights given to criminal defendants. But the court noted that the waiver must be made knowingly, voluntarily and intelligently. Indeed, the court noted that it recently allowed a civil plaintiff to make a certain waiver with regard to a civil attorney fees but imposed safeguards such that the attorney must inform the client about his constitutional right, the possible consequences of waiver, and the initialing of six separate paragraphs. See R. Regulating Fla. Bar 4-1.5(f)(4)(B). In contrast, in this case, the court noted that the waiver was contained on page four of a six page single-spaced contract and at the end of a 118-word sentence.

The court went on point out that the Florida Constitution and case law do permit the waiver of the Florida homestead if accomplished in a certain manner. The court noted Carter and Sherbill do not absolutely prohibit the waiver of the homestead exemption, but they require that a waiver be accomplished in the manner that the article X, section 4 of the Florida Constitution prescribes: by "mortgage, sale, or gift." What is prohibited is a "general waiver of the homestead exemption in an otherwise unsecured instrument." The court stated that "[r]equiring that a waiver of the homestead exemption be made in the context of a mortgage assures that the waiver is made knowingly, intelligently, and voluntarily."