                                  United States Court of Appeals,

                                          Eleventh Circuit.

                                            No. 96-5514.

                                   In re Barbara J. JOST, Debtor.

                          KEY BANK OF MAINE, Plaintiff-Appellant,

                                                  v.

                              Barbara J. JOST, Defendant-Appellee.

                                          March 18, 1998.

Appeal from the United States District Court for the Southern District of Florida. (No. 95-6042-CV-
SMA), Sidney M. Aronovitz, Judge. (Bkcy. No. 94-21320), Raymond B. Ray, Judge.

Before ANDERSON and CARNES, Circuit Judges, and O'KELLEY*, Senior District Judge.

       ANDERSON, Circuit Judge:

       In this case, a creditor objected, pursuant to Bankruptcy Rule 4003(b), to a debtor's claimed

Florida homestead exemption. In making its objection, the creditor contended that the debtor

converted non-exempt assets from the sale of a Missouri home into an exempt Florida homestead

with an intent to hinder, delay, or defraud her creditors. The bankruptcy court denied the creditor's

objection and the district court affirmed. We vacate and remand the case with instructions for the

district court to remand the case to the bankruptcy court for further proceedings consistent with this

opinion.

                           I. FACTS AND PROCEDURAL HISTORY

       In 1986, Barbara J. Jost ("Jost"), her husband, and their family moved to Missouri where Jost

and her husband purchased a home and a business ("Jostco"). Jostco experienced financial


   *
   Honorable William C. O'Kelley, Senior U.S. District Judge for the Northern District of
Georgia, sitting by designation.
difficulties in 1990 and the business filed for bankruptcy. Consequently, on June 22, 1990, Jost and

her husband sold their Missouri home and received net proceeds of approximately $163,000. Jost

and her husband divided the proceeds equally, each receiving $81,500. In July 1991, Jost used most

of the net proceeds received from the sale of the Missouri home to purchase a home in Florida and

to pay for moving costs to Florida.1 This Florida home is titled only in Jost's name. In October

1991, Jost satisfied the $138,000 mortgage on the home using primarily payments she received from

her brother-in-law under a promissory note.2

       Meanwhile, in April 1991, Key Bank had received an assignment of certain obligations owed

by Jost and her husband on a boat loan. Key Bank received an assignment from the Resolution Trust

Corporation ("RTC") of a marine financing agreement, a marine security agreement, and a first

preferred ship mortgage with respect to a boat loan obtained in 1985 by Wavemakers, Inc.

("Wavemakers"), a company owned by Jost and her husband. Jost personally guaranteed the loan.3

During 1991, after the assignment, Key Bank made demand on Wavemakers for payment of the

obligations on the boat loan.

       On April 6, 1994, Jost filed a voluntary petition in bankruptcy under Chapter 7 of the

Bankruptcy Code. Jost claimed a homestead exemption for the Florida home titled in her name and



   1
   Jost made an approximately $54,500 cash down-payment towards the purchase of the Florida
home and obtained an approximately $138,000 mortgage on the home.
   2
    Jost used the approximately $130,000 from the pay off of the promissory note to satisfy most
of her mortgage on the Florida home. The remaining balance of the mortgage was paid from
Jost's personal funds.
   3
    Wavemakers was the primary obligor on the loan, and Jost personally guaranteed the loan to
Manufacturers Hanover Financial Services of Florida, Inc. ("Manufacturers Hanover").
Manufacturers Hanover assigned Jost's promissory note to Horizon Financial, F.A., and in April
1991, this note and the rights under the boat loan were assigned to Key Bank by the RTC acting
as Receiver for Horizon Financial.
valued at $184,000.4 Key Bank filed an objection, pursuant to Bankruptcy Rule 4003(b), to Jost's

claimed exemption alleging that Jost purchased her Florida home, an exempt asset, with non-exempt

assets5 with the intent to hinder, delay, or defraud her creditors.6 In overruling Key Bank's objection

to Jost's homestead exemption, the bankruptcy court concluded that Key Bank failed to establish a

prima facie case for disallowing Jost's homestead exemption because the record was "devoid of any

evidence of eminent [sic] threat of levy, attachment, garnishment, or execution on a judgment just

prior to the debtor's purchase of the Florida homestead." Bankruptcy Court Order, September 27,

1994, at 5. The bankruptcy court stated that "[a]lthough Key Bank produced a copy of the 1991

Judgment [obtained by Maple Park Real Estate Company Employees Pension Plan and Trust

("Maple Park judgment') ] against the Debtor's husband, there was no credible evidence produced

to indicate that the Debtor was being pursued by creditors at the time of the purchase of the disputed




   4
    Article X, § 4(a) of the Florida Constitution provides for an unlimited homestead exemption
as follows:

               Homesteads—exemptions

               (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 ...

       Fla. Const. art. X, § 4(a)(1).
   5
    Key Bank asserts, and Jost concedes, that, because Missouri's homestead exemption is
limited to only $8,000, the proceeds in excess of $8,000 from the sale of Jost's Missouri home
should be considered non-exempt assets.
   6
    Key Bank also raised other objections that are not relevant to this appeal.
homestead property." Id. at 4.7

       Thereafter, Key Bank moved for rehearing. In this motion, Key Bank reiterated its argument

that Jost's testimony at the first meeting of creditors ("§ 341 meeting") and at Jost's Bankruptcy Rule

2004 examination ("2004 examination") should have been allowed as substantive evidence at the

evidentiary hearing to support Key Bank's objection.8 Key Bank contended that the bankruptcy

court erred in concluding that the 1991 Maple Park Judgment was only against Jost's husband and

thus "there was no credible evidence produced" indicating that Jost was being pursued by creditors

at the time she purchased the Florida homestead. In the creditors' § 341 meeting, Jost testified that

all of the liabilities listed in her bankruptcy schedule, including the Maple Park judgment, were joint

debts on which she was liable with her husband.9 Finally, Key Bank also pointed to other evidence

indicating that Jost was being pursued by creditors, and was aware thereof, at the time of her

conversion of non-exempt assets into the exempt Florida homestead. However, the bankruptcy court

denied the motion for rehearing and Key Bank appealed.

       Key Bank appealed the bankruptcy court's order arguing, inter alia, that (1) an imminent

threat of levy, attachment or execution is not essential to the prima facie showing necessary to defeat

a claimed homestead exemption, and (2) even if an imminent threat of levy, attachment, or execution



   7
    Part of the confusion regarding the 1991 Maple Park judgment arose because, on its face, the
judgment was against "Frank Jost, et al.," and the judgment failed to indicate who was
designated by the term "et al."
   8
   The bankruptcy court only allowed the transcripts from the § 341 meeting and 2004
examination to be introduced for the purpose of impeaching Jost's testimony at the bankruptcy
hearing and not as substantive evidence because Jost was present and testified at the bankruptcy
hearing.
   9
    In her 2004 examination, Jost testified that the Maple Park judgment arose from a second
loan on the Missouri home that she owned jointly with her husband, and strongly implied that
the 1991 Maple Park judgment was against both her and her husband.
is necessary to defeat a homestead exemption, the bankruptcy court erred by disallowing such

evidence (i.e., Jost's admissions at the § 341 meeting and her 2004 examination). The parties were

granted oral argument before the district court, and on October 28, 1996, the district court entered

an order affirming the ruling of the bankruptcy court. Relying on Bank Leumi Trust Co. v. Lang,

898 F.Supp. 883 (S.D.Fla.1995), the district court found that Jost was entitled to her homestead

exemption even if she acquired the Florida homestead for the sole purpose of hindering, delaying,

or defrauding her creditors.10 Key Bank appeals the district court's order.

                                           II. DISCUSSION

          The following legal issue was the primary focus of the parties' briefs on appeal: whether a

claimed Florida homestead exemption can be successfully challenged if the home is purchased with

non-exempt assets with the actual intent to hinder, delay, or defraud creditors in violation of Fla.

Stat. § 726.105.11 In Bank Leumi Trust Co. v. Lang, 898 F.Supp. 883 (S.D.Fla.1995), the district

court answered that question in the negative.12 Our research leads us to believe that this question




   10
     In an alternative holding, the district court construed the bankruptcy court's order as a
finding of fact that Jost had no intent to hinder, delay, or defraud creditors, conducted a de novo
review of the evidence including the erroneously excluded evidence (Jost's testimony at the §
341 meeting and 2004 examination), and affirmed the bankruptcy court's finding. We construe
this alternative holding as a conclusion that the exclusion of evidence was harmless. As
indicated below, we disagree.
   11
        Section 726.105 provides that

                  (1) A transfer made or obligation incurred by a debtor is fraudulent as to a
                  creditor, whether the creditor's claim arose before or after the transfer was made
                  or the obligation was incurred, if the debtor made the transfer or incurred the
                  obligation:

                         (a) With actual intent to hinder, delay, or defraud any creditor of the
                  debtor; ...
   12
        We refer to this issue as the Bank Leumi issue.
is a significant issue of Florida law with respect to which the Florida precedent is not clear. See

Butterworth v. Caggiano, 605 So.2d 56, 60 (Fla.1992) (holding that a homestead was exempt from

civil or criminal forfeiture under Florida's RICO Act because forfeitures are not mentioned "either

expressly or by reasonable implication," in the three enumerated exceptions to Florida's homestead

exemption);13 Palm Beach Savings & Loan Ass'n v. Fishbein, 619 So.2d 267, 270 (Fla.1993)

(reasoning that the equitable circumstances of the case fell within "the spirit of the exceptions" to

the constitutional exemption of homestead property, and thus allowing a creditor to enforce a lien

against a debtor's homestead under the doctrine of equitable subrogation);14 Fla.Stat. § 220.30

(providing that a conversion of nonexempt assets to exempt assets is a fraudulent conversion if made

with intent to hinder, delay, or defraud creditors);         In re Thomas, 172 B.R. 673, 674

(Bankr.M.D.Fla.1994) (applying § 222.30 in a creditor's successful objection to a claimed homestead

exemption). See also David E. Peterson, Robert F. Higgins, & Matthew E. Beal, Is the Homestead

Subject to the Statute on Fraudulent Assets Conversions?, 68 Fla.B.J. 12 (1994); R. Wade


   13
     Article X, § 4 of the Florida Constitution provides for three exceptions to the homestead
exemption in which homesteads may be used to satisfy court judgments: "(1) the payment of
taxes and assessments thereon; (2) obligations contracted for the purchase, improvement or
repair thereof; or (3) obligations contracted for house, field or other labor performed on the
realty."
   14
     In Common Law Equity Defeats Florida's Homestead Exemption, 68 Fla.B.J. 54, 56-57
(1994), Greta K. Kolcon recognizes that Fishbein may be a limited holding because the creditor
"stood in the shoes" of prior lienors who could have foreclosed on the debtor's homestead under
one of the constitutional exceptions to the homestead exemption. However, Kolcon suggests
that the "greater impact of Fishbein " may lie in its potential to invite "creditors to develop the
use of equitable concepts as a means of limiting homestead protection." Id.

                Jost argues that because there are only three specifically enumerated
        constitutional exceptions to the homestead exemption, see supra note 13, a debtor's intent
        to hinder, delay, or defraud creditors is not relevant to a claimed homestead exemption.
        Key Bank counters that the transfers which resulted in Jost's ownership of the
        unencumbered homestead were void ab initio under § 726.105, and thus a homestead
        exemption was never recognized in law.
Wetherington, Eleventh-Hour Conversions: A Journey into the Labyrinth of Prebankruptcy

Planning, 69 Fla.B.J. 18 (1995); Greta K. Kolcon, Common Law Equity Defeats Florida's

Homestead Exemption, 68 Fla.B.J. 54 (1994). If the Bank Leumi issue were necessarily presented

in this case, we would certify the question to the Florida Supreme Court, believing as we do that a

legal issue of such significance should be settled by that Court.

           However, we are not persuaded that the Bank Leumi issue must necessarily be decided in

this case, and we are reluctant to certify the question and impose on the good graces of the Florida

Supreme Court in such a context. The legal question would have to be decided only if the

bankruptcy court had made a finding of fact (which we could affirm) that Jost's purchase of her

home and/or her prepayment of the home mortgage were transfers with intent to hinder, delay, or

defraud any creditor.15 For the reasons set out below, we cannot conclude that the bankruptcy court

made such a finding of fact. For the same reasons, we conclude that the appropriate resolution is

to remand this case.

           Even if the bankruptcy court had made such a finding of fact,16 we could not affirm because

the bankruptcy court declined to consider admissible evidence. Jost has conceded that it was error

for the bankruptcy court to decline to consider as substantive evidence Jost's testimony at the § 341




   15
     In other words, if the transfers were not with intent to hinder, delay, or defraud creditors,
then Jost would prevail and there would be no need to address the Bank Leumi issue. If the
bankruptcy court finds that Jost's transfers were with intent to hinder, delay, or defraud her
creditors, then the bankruptcy court should attempt to resolve the Bank Leumi issue. If this
decision were then appealed to the district court and subsequently to this court, then we would be
inclined to certify the Bank Leumi issue to the Florida Supreme Court.
   16
        The parties disagree as to whether the bankruptcy court actually made such a finding of fact.
meeting and during her Rule 2004 examination.17 We have reviewed the record, and unlike the

district court, we cannot conclude that this error was harmless.

        Moreover, it is unclear whether the bankruptcy court applied the appropriate legal principles

in addressing the issue of whether Jost made the transfers with intent to hinder, delay, or defraud

creditors. In the district court, the parties agreed that the appropriate legal analysis would take into

consideration the "badges of fraud" enumerated in Fla. Stat. § 726.105(2). Although the bankruptcy

court's order is unclear, it is doubtful that the bankruptcy court employed this analysis.

        We remand this case to the district court with instructions to remand to the bankruptcy court.

The bankruptcy court shall hold such further proceedings as it may deem appropriate, and shall

make detailed findings including the ultimate finding of fact as to whether Jost's purchase of her

Florida home and/or her prepayment of the home mortgage were transfers made with intent to

hinder, delay, or defraud any creditor in violation of Fla. Stat. § 726.105. If the bankruptcy court

finds that the transfers were with intent to hinder, delay, or defraud creditors, then the court should

address the Bank Leumi issue and decide whether Jost should nevertheless prevail.

        VACATED and REMANDED.




   17
    Jost conceded this evidentiary error in the district court and then acknowledged this
concession at oral argument before us.
