Wednesday, July 15, 2015

The Intersection of Florida's Homestead Protections and Irrevocable Licenses

This post is a bit different than previous posts. It stems from a real-world issue I dealt with several years ago, and then morphed into an article that I've tinkered with since then. When I tried to publish it, the feedback I received from a state bar section was that it was too narrow to be publishable. I am skeptical of that, but it very well could be true. In any case, I decided to self-publish it, in hopes that it may be useful to someone tasked with dealing with the perplexing intersection of Florida's powerful homestead protections and its murky law of irrevocable licenses. I welcome any feedback.

Florida’s Homestead Protections and Irrevocable Licenses 

This article explores the limitations that the homestead protections in the Florida Constitution place on irrevocable license claims. You may already be skeptical: everyone knows that the homestead protections do not extend to licenses because they are not property interests. Are you sure? I argue that irrevocable licenses may well be captured by the homestead protections against alienation. This could have important implications for both your transactional and litigation practices. 

I. Florida’s Constitution Protects against Alienation of the Homestead

Let’s work through the basics quickly. Article X, section 4 of the Florida Constitution provides for several homestead protections. We are concerned with the protection against alienation in subsection 4(c): “[t]he owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift and, if married, may by deed transfer the title to an estate by the entirety with the spouse.” This requires joinder of both husband and wife for the alienation of homestead property, even if only one spouse is the title owner.[i] Consequently, defective attempts to alienate homestead property are ineffectual and possibly void.[ii]

As an interpretative matter, like other constitutional homestead protections, the protection against alienation is a creature of equity that “must be liberally construed.”[iii] It should be construed in the “interest of the family home,”[iv] and “for the benefit of those whom it was designed to protect.”[v] These rules of interpretation mean, for instance, that because intent and substance are more important than form, the homestead protections may not be avoided indirectly.[vi] They also mean that the protection against alienation extends beyond the mere sale of the homestead. The dictionary definition of “alienation” is a conveyance of property to another.[vii] The constitutional meaning encompasses the broadest possible understanding of this definition: conveyance of “any right, title, or interest whatever in the homestead real estate.”[viii]

II. Irrevocable Licenses are Subject to the Protection against Alienation 

Consider, for example, the wide variety of interests subject to homestead protections: easements,[ix] possessory rights subject to a third-party trust,[x] mortgages,[xi] contracts for purchase and sale,[xii] leases,[xiii] and other contracts concerning interests in land.[xiv] But licenses are not interests in property: they are personal rights to use the property of another for a specific purpose, which are revocable at the will of the grantor.[xv] How then can licenses be subject to the protection against alienation? 

Florida courts have not directly addressed whether the protection against alienation applies to licenses. The evidence suggests, however, that it does apply to some licenses: namely irrevocable licenses. In Florida, unlike in some other jurisdictions, irrevocable licenses are distinct from easements.[xvi] Irrevocable licenses are remedial creatures of equity[xvii] that usually arise as a defense or counterclaim.[xviii] Licenses in Florida only become irrevocable under certain narrow circumstances: where a licensee: (1) is granted use of “property for a particular purpose or in a certain manner,” and (2) “in the execution of that use [expends] large sums or incurred heavy obligations for its permanent improvement.”[xix] In that case, the grantor’s right of revocation is “compromised.”[xx] Therefore, the licensee’s reliance investment is protected for a reasonable duration.[xxi] Even an oral license can become irrevocable.[xxii]

Despite this guidance, Florida and other courts have at times struggled to differentiate between easements and licenses.[xxiii] This is not surprising, since there are numerous cases with interests that share characteristics of both easements and license, such as irrevocable licenses and easements terminable upon a condition subsequent.[xxiv] Consider, for example, that easements are usually permanent but do not have to be, just as licenses are usually revocable at the will of the grantor but do not have to be.[xxv]

Only one case appears to have considered an irrevocable license in the context of the protection against alienation. In High v. Jasper Manufacturing Co., 49 So. 156, 156 (Fla. 1909), Mr. Register sold the rights to cut and remove timber from his homestead to Mr. High. When Jasper Manufacturing began cutting and removing the timber, Mr. High sued for an injunction.[xxvi] Although the trial court originally issued a preliminary injunction, after an evidentiary hearing, it dissolved the injunction because Mrs. Register had not joined in the conveyance in violation of the protection against alienation.[xxvii] Even though there was apparently a bill of sale, the Florida Supreme Court questioned whether the sale of standing timber was written or oral—if it were oral, then the Supreme Court appeared to believe it would operate as an irrevocable license. Ultimately, the Supreme Court did not make a determination, seemingly holding in affirming the trial court that the protection against alienation applied whether the contract was an interest in land or an irrevocable license.[xxviii] Therefore, the Supreme Court may have held that an irrevocable license is subject to the protection against alienation, but it did not do so clearly. 

The unfortunate lack of clarity in the High case can be overcome, however, in considering the nature of an irrevocable license. As described above, it is primarily a remedial and equitable claim. Florida courts generally do not allow defenses to homestead claims, other than fraud. Statutes of limitation and laches generally are not defenses.[xxix] Neither are estoppel[xxx] or waiver.[xxxi] Similarly, courts shy from affirmatively applying documents that violate the protection against alienation.[xxxii] Consequently, between High and this skepticism of Florida courts in allowing defenses to homestead protections, the protection against alienation probably applies to irrevocable licenses. 

III. Implications for the Practitioner 

So what does this mean for the practitioner? Two hypotheticals illustrate the importance of understanding that irrevocable licenses are subject to homestead protections. First, suppose you are drafting a license for the benefit of your client over his neighbor’s homestead. Both parties agree to provisions that restrict the ability of the neighbor to terminate the license. At first glance, it may only seem necessary to have a title owner of the property execute the license. It is not an interest in land, after all. But if the spouse of the neighbor is not a title owner and later wants to terminate the license, your client may have no defense. Therefore, it is prudent to have all beneficial owners of the property execute the license in order to protect against disagreements later. This article suggests it may be most prudent to draft and execute the document as an easement to avoid the problems of interpretation discussed here. 

Second, suppose your client believes he has a valid, recorded easement over his neighbor’s property leading to the entrance of your client’s property. In reliance on that interest, your client has built a road, fence, and extensive landscaping on his neighbor’s property. After an argument, however, the neighbor sues to declare the easement void. You believe that the neighbor has a strong claim because his wife, who lives with him on the property as their homestead, did not sign it. Could you at least ask the court to award your client an irrevocable license in equity? Probably not, according to my analysis. 

In conclusion, as with most real estate questions in Florida, when confronted with a license, practitioners must be ever mindful of the Florida Constitution’s homestead protections. 

Taylor v. Maness, 941 So. 2d 559, 563 (Fla. 3d DCA 2006) (enough that wife lived on homestead property with husband, who was the title owner).
[ii] See Pitts v. Pastore, 561 So. 2d 297, 301 (Fla. 2d DCA 1990)
[iii] Butterworth v. Caggiano, 605 So.2d 56, 58 (Fla.1992); accord Hillsborough Inv. Co. v. Wilcox, 13 So. 2d 448, 450 (Fla. 1943) (“Equity has complete jurisdiction over homesteads and exemptions.”).
[iv] Havoco of Am., Ltd. v. Hill, 790 So.2d 1018, 1021 (Fla. 2001); Heath v. First Nat. Bank in Milton, 213 So. 2d 883, 888 (Fla. 1st DCA 1968) (applying interpretative rule to the alienation protection). In Jones v. Carpenter, 106 So. 127, 130 (Fla. 1925), the Florida Supreme Court explained:
A homestead in this country is for the benefit of the family, where it can be sheltered and live beyond the reach of financial reverses. It is one of the issues of our republican government designed to encourage freeholders, those citizens who are the prop and mainstay of all free government. It is designed to keep sacred and inviolate the home for the family …. It cannot be alienated except as the law directs, and when the parties are sui juris and dealing at arm's length it is notice to the world of all these facts and more.
[v] Taylor, 941 So. 2d at 56.
[vi] Norton v. Baya, 102 So. 361, 363 (Fla. 1924).
[vii] Black’s Law Dictionary (8th ed. 2004).
[viii] High v. Jasper Mfg. Co., 49 So. 156, 157 (Fla. 1909); Thomas v. Craft, 46 So. 594, 596 (Fla. 1908); see also Bessemer Properties v. Gamble, 27 So. 2d 832, 833 (Fla. 1946) (Homestead protections extend to “any right or interest.”).
[ix] In re Minnig, 119 B.R. 326, 327 (Bankr. M.D. Fla. 1990); Dotson v. Wolfe, 391 So. 2d 757, 759 (Fla. 5th DCA 1980).
[x] Callava v. Feinberg, 864 So. 2d 429, 432 (Fla. 3d DCA 2003) (possessor of home protected by homestead, where her name was not on the title, which was held in trust by an unrelated party).
[xi] Pitts, 561 So. 2d at 301 (mortgage).
[xii] Taylor, 941 So. 2d at 562 (contract to sell homestead).
[xiii] In re Alexander, 346 B.R. 546, 551 (Bankr. M.D. Fla. 2006).
[xiv] Adams v. Malloy, 70 So. 463, 465 (Fla. 1915) (lease of timber growing on homestead, with right of ingress and egress for 10 years); High, 49 So. at 157 (whether the sale of timber was a contract concerning an interest in land or a license, it violated homestead alienation protection).
[xv] Dotson, 391 So. at 759; Dance v. Tatum, 629 So. 2d 127, 128 (Fla. 1993).
[xvi] Dance, 629 So. 2d at 128-29.
[xvii] Tatum v. Dance, 605 So. 2d 110, 113 (Fla. 5th DCA 1992) app’d, 629 So. 2d 127 (Fla. 1993).
[xviii] See, e.g., id. at 110 (pleaded defensively by a third party to a foreclosure); Brevard Cnty. v. Blasky, 875 So. 2d 6, 13 (Fla. 5th DCA 2004) (affirmative defense); Dupont v. Whiteside, 721 So. 2d 1259, 1261 (Fla. 5th DCA 1998) (counterclaim).
[xix] Dance, 629 So. 2d at 129. It is unclear whether Florida courts would accept the theory that a license is made irrevocable when it is couple with an interest. See James Ely & Jon Bruce, The Law of Easements & Licenses in Land § 11:8. Such a case may be presented in Richbourg v. Rose, 44 So. 69 (Fla. 1907) (license to cut trees may be irrevocable to the extent of removing trees already cut when license terminated because it was “coupled with an interest”), but it is unclear whether Dance overruled or narrowed it.
[xx] Blasky, 875 So. 2d at 12.
[xxi] Id.; see Tatum, 605 So. 2d at 113.
[xxii] Id.
[xxiii] Dotson, 391 So. at 758 ("The distinction between an easement and a license is often so metaphysical, subtle, and shadowy as to elude analysis.”); Burdine v. Sewell, 109 So. 648, 652 (Fla. 1926) (“An easement is distinguished from a license, though it is often difficult to make out whether a particular case is the one or the other.”).
[xxiv] See Dotson, 391 So. at 759.
[xxv] See id.; Seaboard Air Line Ry. Co. v. Dorsey, 149 So. 759, 761 (Fla. 1932).
[xxvi] Id.
[xxvii] Id. at 157.
[xxix] Reed, 145 So. 2d at 870 (declining to apply laches or statute of limitations to bar homestead alienation protections, where deed had been recorded for over twenty years).
[xxx] Sigmund v. Elder, 631 So. 2d 329, 331 (Fla. 1st DCA 1994); Moore v. Moore, 237 So. 2d 217, 220 (Fla. 4th DCA 1970).
[xxxi] DeMayo v. Chames, 934 So. 2d 548, 551 (Fla. 3d DCA 2006) approved, 972 So. 2d 850 (Fla. 2007); Callava v. Feinberg, 864 So. 2d 429, 432 (Fla. 3d DCA 2003); In re Estate of Nicole Santos, 648 So. 2d 277, 282 (Fla. 4th DCA 1995).
[xxxii] Taylor, 941 So. 2d 559, 564 (Fla. 3d DCA 2006) (refusing to enforce contract for purchase and sale in a way that would violate the protection against alienation).