In re Dougan

• Decision Date: 08 January 2013
• Docket Number: No. 11–19503–WCH.,11–19503–WCH.
• Citation: 484 B.R. 529
• Parties: In re Liliana DOUGAN and Dwayne M. Dougan, Debtor.
• Court: U.S. Bankruptcy Court — District of Massachusetts

484 B.R. 529

In re Liliana DOUGAN and Dwayne M. Dougan, Debtor.

No. 11–19503–WCH.

United States Bankruptcy Court,
D. Massachusetts,
Eastern Division.

Jan. 8, 2013.

[484 B.R. 530]

Peter M. Daigle, The Law Office of Peter M. Daigle, P.C., Centerville, MA, for the Debtors.

MEMORANDUM OF DECISION
WILLIAM C. HILLMAN, Bankruptcy Judge.
I. INTRODUCTION

The matter before the Court is the “Motion to Reconsider Order Denying Motion to Avoid Judicial Lien Execution of Mitchell Beede” (the “Motion to Reconsider”) filed by Liliana Dougan and Dwayne M. Dougan (collectively, the “Debtors”). On reconsideration, the Debtors challenge my prior ruling that they did not qualify as “owners” under the Massachusetts Homestead Statute ¹ because title to their home is held by a residential cooperative housing corporation while they hold only a ninety-nine year lease. For the reasons set forth below, I will grant the Motion to Reconsider.

II. BACKGROUND

The Debtors filed a voluntary Chapter 7 petition on October 5, 2011. They initially filed schedules on October 19, 2011, but later amended “Schedule A—Real Property” (“Amended Schedule A”), “Schedule C—Property Claimed as Exempt” (“Amended Schedule C”), and “Schedule D—Creditors Holding Secured Claims” (“Amended Schedule D”). On Amended Schedule A, the Debtors listed a single family residence located at 1 Mayflower Circle in Nantucket, Massachusetts (the “Property”) with a fair market value of $850,000 subject to a secured claim in the amount of $733,452. Notably, they did not characterize their ownership interest in the column labeled “Nature of Debtor's Interest in Property.” On Amended Schedule C, the Debtors claimed an exemption

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in the Property pursuant to Mass. Gen. Laws Ch. 188, § 1 in the amount of $218,231 (the “Homestead Exemption”). They did not list any leases on “Schedule G—Executory Contracts and Unexpired Leases.” Finally, on Amended Schedule D, the Debtors listed two secured debts with respect to the Property—a first mortgage held by Nantucket Bank in the amount of $631,769, and an execution in the amount of $101,683.33 held by Mitchell Beede (the “Lien”).

The Debtors appeared at the meeting of creditors held pursuant to 11 U.S.C. § 341 on December 2, 2011, and on January 6, 2012, Warren Agin, the duly appointed Chapter 7 trustee, filed the Chapter 7 Trustee's Report of No Distribution indicating that the Debtors held no nonexempt assets available for distribution to their creditors. An order discharging the Debtors entered on January 31, 2012.

On October 15, 2012, the Debtors filed the “Motion to Avoid Judicial Lien Execution of Mitchell Beede” (the “Motion to Avoid Lien”) seeking to avoid a judicial lien pursuant to 11 U.S.C. § 522(f)(1)(A) as impairing the Homestead Exemption to which they are entitled. While the Motion to Avoid Lien complied with the requirements of Massachusetts Local Bankruptcy Rule (“MLBR”) 4003–1(a) and otherwise set forth grounds for avoidance under 11 U.S.C. § 522(f)(2)(A), the statement of facts contained therein revealed for the first time that the ownership of the Property was more complex than the Amended Schedule A had suggested. In sum, the Debtors represented that after the acquiring the Property in November, 2005, they transferred the Property to the One Mayflower Circle Cooperative, Inc. (the “Co-op”), a Massachusetts housing cooperative corporation by deed dated April 30, 2008, and recorded on May 5, 2008. On the same date, the Debtors entered into a ninety-nine year lease with the Coop. They subsequently executed and recorded a Declaration of Homestead with the Nantucket County Registry of Deeds on October 3, 2011. Notably, the Declaration of Homestead does not reference the Co-op.

Although no objections to the Motion to Avoid Lien were filed, I nevertheless conducted a hearing on November 9, 2012. At the hearing, I noted the inconsistencies between the Debtors' schedules and the Motion to Avoid Lien, and questioned how the Debtors could claim an exemption where the recently amended Massachusetts Homestead Statute no longer expressly extends to leaseholds.² Debtors' counsel, not having anticipated this issue, simply answered that the Debtors retained an equitable interest in the Property. Ultimately, I denied the Motion to Avoid Lien, concluding that the Debtors were not entitled to the Homestead Exemption on a leasehold.³

The Debtors filed the Motion to Reconsider on November 27, 2012. I held a hearing on the Motion to Reconsider on

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December 10, 2012. At the conclusion of the hearing, I took the matter under advisement.

III. POSITION OF THE PARTY

On reconsideration, the Debtors urge that the Property, which is “a residential cooperative housing unit established pursuant to chapters 156B, 157B, 180 or otherwise,” ⁴ expressly qualifies as a “home” under the Homestead Statute. Citing McElligott v. Lukes,⁵ the Debtors argue that they are “owners” within the meaning of the Homestead Statute because the granting of ninety-nine year lease is the equivalent of a fee simple. Alternatively, they assert that a ninety-nine year lease is an interest in property sufficiently similar to that of a life estate holder to fall within the definition of “owner” under the Homestead Statute.

IV. DISCUSSIONA. The Reconsideration Standard

Pursuant to Fed.R.Civ.P. 59(e), made applicable to bankruptcy cases by Fed. R. Bankr.P. 9023, I may reconsider an order upon the filing of a motion by a party in interest within fourteen days of the entry of that order. “Rule 59(e) motions are aimed at reconsideration, not initial consideration.” ⁶ Nevertheless, “[a] motion for reconsideration is not a means by which parties can rehash previously made arguments.... To succeed on a motion to reconsider, the Court requires that the moving party show newly discovered evidence or a manifest error of fact or law.” ⁷

B. The Homestead Exemption

Under 11 U.S.C. § 522(b), “an individual debtor may exempt from property of the estate the property listed in ... paragraph (3) of this subsection,” which allows a debtor to claim the exemptions provided for under applicable state law.⁸ In Massachusetts, the Homestead Statute in effect on the petition date provides in relevant part:

An estate of homestead to the extent of the declared homestead exemption in a home may be acquired by 1 or more owners who occupy or intend to occupy the home as a principal residence.⁹

Generally, the Homestead Statute defines a “declared homestead exemption” as “an exemption in the amount of $500,000 created by a written declaration” with respect to a “home.” ¹⁰ Therefore, to qualify for the Homestead Exemption, the Debtors must (1) be “owners” (2) occupying or intending to occupy a “home” (3) as a principal residence.¹¹

During my initial consideration of the Motion to Avoid Lien, I concluded that the Debtors, as holders of only a ninety-nine year lease with respect to the Property, were not “owners.” Mass. Gen. Laws ch. 188, § 1 defines an “owner” as “a natural person who is a sole owner, joint tenant, tenant by the entirety, tenant

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in common, life estate holder or holder of a beneficial interest in a trust.” ¹² Upon reconsideration, I find that my initial application of the Homestead Statute was overly technical and predict that if presented with the issue, the Massachusetts Supreme Judicial Court would find that the Debtors qualify as “owners” and are entitled to the benefit of a homestead with respect to the Property.¹³

In Massachusetts, “the primary source of insight into the intent of the Legislature is the language of the statute.” ¹⁴ “[S]tatutory language should be given effect consistent with its plain meaning and in light of the aim of the Legislature unless to do so would achieve an illogical result.” ¹⁵ Additionally,

[c]ourts must ascertain the intent of a statute from all its parts and from the subject matter to which it relates, and courts must interpret the statute so as to render the legislation effective, consonant with reason and common sense.¹⁶

A lessee is not among the six enumerated types of owners who may claim an exemption under the Homestead Statute. Under the maxim of expressio unius est exclusio alterius—the expression of one thing is the exclusion of other things—that would seem to end the inquiry.¹⁷ “However, [the Supreme Judicial Court] ha[s] also recognized that the maxim is not to be followed where to do so would frustrate the general beneficial purposes of the legislation.” ¹⁸ Indeed, they “do not employ the conventions of statutory construction in a mechanistic way that upends the common law and fundamentally makes no sense.” ¹⁹ Nevertheless, I am mindful that the Supreme Judicial Court “will not expand or limit the meaning of a statute unless such is required by the ‘object and plain meaning’ of the statute.” ²⁰

[484 B.R. 534]

Viewing the Homestead Statute as a whole, there is reason to believe that the statutory text defining “owner” is, by itself, incomplete. Notably, a “home” is defined to include “the aggregate of ... a...