Agin v. Stella (In re Stella)
| Decision Date | 07 March 2012 |
| Docket Number | Adversary No. 10–1154.,Bankruptcy No. 10–11922–JNF. |
| Citation | 470 B.R. 1 |
| Parties | In re William A. STELLA, Debtor. Warren E. Agin, Chapter 7 Trustee, Plaintiff v. William A. Stella, Defendant. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
OPINION TEXT STARTS HERE
Prior Version Limited on Preemption Grounds
Warren E. Agin, Boston, MA, pro se.
Brian E. Donovan, Law Offices of Brian E. Donovan, Quincy, MA, for Defendant.
Two matters are before the Court: 1) the Partial Objection to Debtor's Claim of Homestead Exemption filed by Warren E. Agin, the Chapter 7 Trustee (the “Chapter 7 Trustee”), and the Response to the Trustee's Partial Objection filed by William A. Stella (the “Debtor”) (the “Contested Matter”); and 2) the Chapter 7 Trustee's Complaint against the Debtor pursuant to which the Chapter 7 Trustee seeks revocation of the Debtor's discharge pursuant to 11 U.S.C. § 727(a)(3). The Court consolidated the Contested Matter and the adversary proceeding, both of which involve consideration of the terms of the Stella Family Realty Trust (the “Trust”), which the Debtor established in 2001, and conducted a trial on October 25, 2010. At the trial, two witnesses testified and 27 exhibits were introduced into evidence.
Prior to the trial, the parties filed a Joint Pretrial Statement in both the Contested Matter and the adversary proceeding. They agreed that with respect to the Contested Matter there were no facts in dispute. With respect to the Chapter 7 Trustee's Complaint, they agreed that the following issues of fact were in dispute: 1) Whether the Debtor always believed that he was the sole beneficiary of the Trust; 2) Whether the Debtor believed his signature on, and delivery of, a 2010 Schedule of Beneficiaries of the Trust to the Chapter 7 Trustee was appropriate; and 3) Whether the Debtor justifiably relied on advice of counsel in signing and delivering the 2010 Schedule of Beneficiaries of the Trust to the Chapter 7 Trustee.
The Court now makes its findings of fact and conclusions of law in accordance with Fed. R. Bankr.P. 7052.
The Debtor filed a Chapter 7 petition on February 26, 2010. The Debtor, who was born on April 5, 1942, is divorced and the father of two adult sons: William A. Stella, Jr. and Andrew J. Stella. Prior to 2007, the Debtor was the owner of Bill Stella Kitchens, Inc. In 2007, he commenced doing business as a sole proprietorship known as BSK Designs. Bill Stella Kitchens, Inc., however, was reincorporated in 2008. The Debtor's home address is 82 Dillingham Way, Hanover, MA 02339 (the “Property”). On August 13, 1987, the Debtor purchased the Property, individually. He financed the purchase with a mortgage on the Property, which was satisfied in 2006.
At all times, the Property has been the Debtor's principal and only residence. When the Debtor purchased his home, he had physical custody of his sons, and they lived with him until they were emancipated. In 2001, the Debtor engaged Thomas Carpenter Esq. (“Attorney Carpenter”), who was associated with the firm of Ardito, Sweeney, Stusse, Robertson & Dupuy, P.C. at the time. The Debtor knew Attorney Carpenter because he had attended Boston College with his son, William A. Stella, Jr. The Debtor asked Attorney Carpenter if he could draft some sort of document which would provide that his sons would receive the Property when he died or became incapacitated. The Debtor wanted to avoid the probate process, as he had heard that it was both expensive and complicated.
Attorney Carpenter and the Debtor discussed the Debtor's wish to protect the Property from creditors for the benefit of his sons, while maintaining control over the Property because it was his principal residence. Attorney Carpenter told the Debtor that he could draft a trust which would satisfy that purpose. Attorney Carpenter stated: “I advised him that I could draft a document for him that would give him complete control of the house.” Attorney Carpenter prepared a deed from the Debtor to himself as Trustee of the Trust, as well as the “Declaration of Trust Establishing Stella Family Realty Trust.” The Debtor executed both documents in Attorney Carpenter's Cape Cod office on September 5, 2001. Attorney Carpenter also prepared a Schedule of Beneficiaries of the Trust, which the Debtor signed. The Schedule of Beneficiaries listed the Debtor's two sons, each with a 50% beneficial interest in the Trust. Both William A. Stella Jr. and Andrew J. Stella executed the 2001 Schedule of Beneficiaries which was then notarized. The Declaration of Trust, but not the Schedule of Beneficiaries, was recorded in the Plymouth county Registry of Deeds.
At all times, the Debtor believed he was the actual owner of the Property. At all times, the Debtor paid all expenses for the Property from his personal accounts. At all times, the Debtor paid the mortgage from his personal accounts. At all times, the utility bills were in the Debtor's name and he paid those bills from his personal accounts. In addition, at all times, the Debtor, on his individual state and federal tax returns, deducted expenses for real estate taxes and mortgage interest, whether they were available as itemized deductions or were applied to standard deductions. The tax returns were prepared by the accounting firm of O'Brien, Riley & Ryan, P.C. For example, on Schedule A–Itemized Deductions to his 2003 federal income tax return, the Debtor deducted $4,036 for real estate taxes and $9,025 for mortgage interest. The Debtor claimed the same deductions in the following years. In addition, he testified that his sons never contributed any monies toward the payment of expenses associated with the Property.
The Trust never applied for or received a Federal Identification Number (FID), and the Trust never filed its own or any other tax return. The Trust never generated any income from rent or otherwise.
In 2006, the Debtor applied to Rockland Trust Company for a mortgage. The mortgagor was the Trust and the Debtor was identified as the Trustee. The Debtor signed all of the loan documents for the mortgage. The Debtor, however, always sent personal checks for the mortgage payments, and Rockland Trust Company always accepted those checks. The 1099's issued by the bank were in the name of William Stella, Trustee, although the Debtor's social security number was set forth on the 1099.
The Town of Hanover issued tax bills after 2002 in the name of “Stella, William A TT, Stella Family Realty Trust.” Those bills were sent to the Debtor at his residence. The Debtor paid those bills with his personal funds, and the town accepted those funds and cashed the checks.
In June of 2009, the Debtor called Attorney Carpenter for a meeting. The Debtor told him that his business was not doing well as it was tied to the real estate market and that he had problems with his landlord and had signed a personal guaranty of the lease. He also informed Attorney Carpenter that he thought he might have to seek bankruptcy protection. Attorney Carpenter informed the Debtor that his house “could be in jeopardy.” Attorney Carpenter advised the Debtor to deed the Property from the Trust to himself to obtain homestead protection for the Property. The Debtor agreed to have Attorney Carpenter draft the necessary documents, and the Debtor signed them in Attorney Carpenter's office on July 2, 2009. The deed from the Debtor, as Trustee of the Trust, to himself, individually, provided in pertinent part the following:
The undersigned being the Trustee of the Stella Family Realty Trust, under a declaration of trust dated September 5, 2001 and recorded on September 21, 2001 at the Plymouth County Registry of Deeds ..., hereby certify in accordance with the terms of the Trust:
1. I am the sole Trustee and beneficiary of the Trust;
2. I, as sole Trustee and beneficiary, have authority to act with respect to the real property owned by the Trust; and
3. I, as Trustee, hereby certify that the existence or nonexistence of a fact which constitutes a condition precedent to acts by the Trustee or which are in any other manner germane to affairs of the Trust, shall be binding on all Trustees and the Trust estate in favor of a purchaser or other person relying in good faith on this certificate.
(emphasis supplied). The deed was notarized by Attorney Carpenter. The deed and declaration of homestead were recorded on the Debtor's behalf by Attorney Carpenter on July 9, 2009.
Attorney Carpenter testified that the reference to the Debtor's status as the sole beneficiary was a “typographical error” that he caused and for which he was responsible because he did not have a copy of the original, 2001 Schedule of Beneficiaries in his possession. Neither he nor the Debtor testified that the Debtor instructed Attorney Carpenter to formally amend the Schedule of Beneficiaries to eliminate the Debtor's two sons as the sole beneficiaries of the Trust in July of 2009.
When the Debtor and Attorney Carpenter concluded their meeting, Attorney Carpenter advised the Debtor to consult a bankruptcy lawyer whom he knew because the Debtor had suggested he might have to file a bankruptcy petition. At Attorney Carpenter's suggestion, the Debtor consulted an attorney on Cape Cod whom the parties identified as Attorney Johnson. The Debtor met with Attorney Johnson for approximately 15–20 minutes at which time Attorney Johnson explained the bankruptcy process to the Debtor, including what assets he might retain. The Debtor, however, never discussed the Property with Attorney Johnson and Attorney Johnson did not ask the Debtor anything about it, except to inquire about whether the Debtor owned his own home, to which the Debtor replied in the affirmative.
Sometime after the Debtor's meeting with Attorney Carpenter, in the fall of 2009, the Debtor went to the Hingham Institution for Savings to inquire about getting a mortgage to pay off the equity loan on...
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