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BOYLE v. WEISS
461 Mass. 519 (2012)
ROBERTA A. BOYLE
v.
STEVEN WEISS, trustee in bankruptcy.
SJC-10933.
Supreme Judicial Court of Massachusetts, Suffolk.
November 7, 2011.
February 16, 2012.
Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.
BOTSFORD, J. In a proceeding under Chapter 7 of the United States Bankruptcy Code currently pending in the United States Bankruptcy Court for the District of Massachusetts, a question has arisen concerning the application of the Commonwealth's homestead protection statute, G. L. c. 188, § 1, as amended through St. 2004, c. 218, to a beneficiary of a trust. Finding no controlling precedent in our decisions, the Bankruptcy Court judge certified the following question to this court pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981): "May the holder of a beneficial interest in a trust which holds title to real estate and attendant dwelling in which such beneficiary resides acquire an estate of homestead in said land and building under G. L. c. 188, § 1?"1
Confining our answer to the 2004 version of the homestead statute,2 we answer the certified question in the negative.1. Background. The facts are undisputed. On July 16, 1990, Robert and Janet Boyle conveyed a property on Westview Road in Lowell, Massachusetts (Lowell property), consisting of land and a house, to one of their daughters, Maria A. Boyle, as trustee of the Westview Realty Trust (trust). The trust was established that same day under a declaration of trust filed and recorded in the Middlesex north district registry of deeds (registry). Robert Boyle and another daughter, the plaintiff Roberta Boyle (debtor), each hold fifty per cent of the beneficial interest in the trust. Robert Boyle succeeded Maria Boyle as trustee of the trust on May 22, 2009. The trust instrument does not reference the Lowell property or any other specific real estate, but it does give the trustee "full power and authority ... to buy, deal in and manage real estate." The trust does not contain a spendthrift provision that would bar alienation of a beneficiary's interest to satisfy claims of creditors. At all relevant times the debtor has lived in the house located on the Lowell property, apparently as a tenant at will of the trust3; it is her residence. On February 26, 2010, the debtor caused to be recorded in the registry a declaration of homestead in the Lowell property. Four days later, on March 2, she filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. §§ 301 et seq. (2006). Pursuant to 11 U.S.C. § 522(b)(3), in Schedule C of her bankruptcy filing, the debtor claimed an exemption for her "[b]eneficial interest in The Westview Realty Trust, which holds title to real property used as the [d]ebtor's [r]esidence." The bankruptcy trustee objected to the debtor's claim of the exemption, arguing that under Massachusetts law a trust beneficiary residing in property owned by the trust may not acquire a homestead estate. Thereafter, the Bankruptcy Court judge certified to this court the question quoted above.
2. Discussion. a. Homestead statute: 2004 act. The validity of the debtor's homestead declaration must be resolved under G. L. c. 188, § 1, as amended through St. 2004, c. 218 (2004 act), the version of the homestead statute in effect when she recorded her declaration. See Dwyer v. Cempellin, 424 Mass. 26, 29 (1996) (Dwyer). Section 1 of the 2004 act provided in relevant part:
1. This court previously has interpreted S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981), to include certification of questions from the United States Bankruptcy Court, even though that court is not specifically mentioned in rule 1:03. See Colonial Tavern, Inc. v. Boston Licensing Bd., 384 Mass. 372, 373 n.3 (1981).
2. General Laws c. 188, § 1, as amended through St. 2004, c. 218, was revised in 2010. St. 2010, c. 395, § 1, effective March 16, 2011 (2010 act). We discuss the 2010 act infra.
3. Roberta Boyle (debtor) describes herself as a tenant at will of the Westview Realty Trust (trust). The bankruptcy trustee does not dispute that characterization, and we accept it as true for purposes of answering the certified question.
4. References to G. L. c. 188, § 1, in this opinion are to the statute as it appeared in St. 2004, c. 218 (2004 act), unless otherwise noted. See note 2, supra.
5. The debtor argues also that the amendments to the homestead statute effected by the 2010 act among other things clarified that under the 2004 act, a trust beneficiary could acquire a homestead estate. We address this argument in Part 2 (b), infra.
6. The trust instrument provides that if or when the trust is terminated, the trustee is to transfer and convey specific trust assets, including real property, to the trust beneficiaries according to their respective interests. The record contains no suggestion that the trust had been terminated at the time the debtor recorded her declaration of homestead.
7. That the debtor's interest in the trust qualifies as one in personal property is also reflected in the fact that under the terms of the trust, she is entitled to sell her beneficial interest for any purchase price she might set, subject to a right of first refusal held by the other trust beneficiary or beneficiaries.
8. We do not mean to suggest that under the 2004 act, the beneficiary of a trust holding real property can never acquire an estate of homestead in real property held by that trust. There is merit in the reasoning set forth in decisions of the United States Bankruptcy Court that where legal and equitable interests in a trust merge in one person — as in the case of a nominee trust with a sole beneficiary and trustee — that person especially may be eligible to file a declaration of homestead with respect to a home that is owned by the trust and in which she resides. See In re Szwyd, 346 B.R. 290, 293 (Bankr. D. Mass. 2006), aff'd, 370 B.R. 882 (1st Cir. 2007). See generally Birnbaum, The Nominee Trust in Massachusetts Real Estate Practice, 60 Mass. L.Q. 364, 365 (1976). The trust at issue here, however, is distinctly different. The debtor is a beneficiary but not the trustee, and as a beneficiary, she does not have the power to direct or control the trustee's actions.
9. Statute 1855, c. 238, § 1, provided in pertinent part that a homestead exemption was available for "the homestead farm or the lot and buildings thereon, occupied as a residence and owned by the debtor, or any such buildings owned by the debtor and so occupied, on land not his own, but of which he shall be in rightful possession, by lease or otherwise."
10. The court in Thurston v. Maddocks, 6 Allen 427 (1863) (Maddocks), appears to have misquoted St. 1855, c. 238, § 1, but the phrase the court did quote has virtually the same meaning as the actual language of the statute ("and owned by the debtor . . . of which he shall be in rightful possession, by lease or otherwise"). See note 9, supra.
11. The Maddocks case is an old case. Within the much more recent past, however, the Appeals Court, in Assistant Recorder of the N. Registry Dist. of Bristol County v. Spinelli, 38 Mass.App.Ct. 655 (1995) (Spinelli), relied on Maddocks to conclude that under the version of the homestead statute at issue in that case — G. L. c. 188, § 1, as amended through St. 1992, c. 286, § 239, which is identical in all relevant respects to the 2004 act — did not permit a beneficiary of a trust who held an equitable interest in the property in question to acquire a homestead estate in it. Id. at 658-660. To the extent that the Spinelli case may suggest that even one who holds an interest in a property as the sole beneficiary of a Massachusetts nominee trust could not qualify for a homestead estate under the homestead statute, its reasoning may be subject to question, see note 8, supra, but the issue is not before us and we do not decide it. The point worth emphasis here is that although the homestead statute was amended several times between the date of the Spinelli decision and the enactment of the 2010 act — see St. 1995, c. 297, § 1; St. 2000, c. 174; St. 2004, c. 218 — the Legislature left unaltered the provision allowing a party "who rightfully possess[es] the premise by lease or otherwise" to acquire an estate of homestead. It was not until the 2010 act, discussed infra, that the Legislature amended the statute explicitly to allow holders of a beneficial interest in a trust to acquire an estate of homestead.
12. We continue to follow the principle, as stated in Dwyer v. Cempellin, 424 Mass. 26, 30 (1996), that the State homestead exemption is to be interpreted liberally. However, we cannot stretch that principle in a manner that fundamentally ignores the words of the statute.
13. The 2010 act also grants an "[a]utomatic homestead exemption" of $125,000, but an owner filing a written declaration of homestead can receive an exemption of $500,000. See G. L. c. 188, § 1, as appearing in St. 2010, c. 395, § 1.
14. The 2004 act included "a sole owner, joint tenant, tenant by the entirety or tenant in common" within its definition of "owner." G. L. c. 188, § 1. A joint tenant, tenant by the entirety, or tenant in common holds a direct ownership interest in the property in question. That is not true of the holder of a life estate interest or, as a general matter, one holding a beneficial interest.
15. It is also the case that under G. L. c. 188, § 5 (a) (4), as appearing in St. 2010, c. 395, § 1, a homestead declaration must be executed by the trustee of a trust; a beneficiary is not authorized to do so. Consequently, even if the provisions of the 2010 act were to apply to the debtor's homestead declaration, the declaration would have been invalid because it was not executed by Robert Boyle, the sole trustee of the trust. The debtor relies on language in St. 2010, c. 395, § 3, providing that existing estates of homestead continue to remain in full effect notwithstanding their failure to comply with the law's execution requirements, to argue that her declaration was exempt from the § 5 (a) (4) execution requirement. However, as correctly noted by the bankruptcy trustee, because the debtor's homestead declaration was not valid when recorded initially, it cannot be deemed to have been "in effect on the effective date of [the 2010 act]."
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