In re Duda, Bankruptcy No. 94-50871

• Decision Date: 31 May 1995
• Docket Number: 94-50883,94-50570 and 91-52648.,93-53917,94-51042,94-30469,94-51624,94-50016,93-54071,93-53930,Bankruptcy No. 94-50871
• Citation: 182 BR 662
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re Gerald J. DUDA and Marlene V. Duda, Paul H. Gernat, Sr., Richard A. Inzero and Marie Antoinette Inzero, Anne Pelloth, Margaret D. Rockwell, Roger E. Vigneault and Dolores M. Vigneault, Thelma Williams, Rudolph E. Patterson and Daisy M. Patterson, John A. Garrison, David Vincent Roscetti and Tsukiko Roscetti, William A. Stone and Debra S. Stone.

182 B.R. 662 (1995)

In re Gerald J. DUDA and Marlene V. Duda, Paul H. Gernat, Sr., Richard A. Inzero and Marie Antoinette Inzero, Anne Pelloth, Margaret D. Rockwell, Roger E. Vigneault and Dolores M. Vigneault, Thelma Williams, Rudolph E. Patterson and Daisy M. Patterson, John A. Garrison, David Vincent Roscetti and Tsukiko Roscetti, William A. Stone and Debra S. Stone.

Bankruptcy Nos. 94-50871, 94-51042, 93-54071, 94-50883, 93-53917, 93-53930, 94-50016, 94-30469, 94-51624, 94-50570 and 91-52648.

United States Bankruptcy Court, D. Connecticut.

May 31, 1995.

Robert G. Wetmore, Wallingford, CT, for Gerald J. Duda and Marlene V. Duda.

Ira B. Charmoy, Charmoy & Nugent, Bridgeport, CT, for Paul H. Gernat, Sr. and David Vincent Roscetti and Tsukiko Roscetti.

Francis E. Lamboley, The Lamboley Law Firm, Hamden, CT, for Richard A. Inzero and Marie Antoinette Inzero.

David O. Chittick, Monroe, CT, for Anne Pelloth.

Wilfredo Morales, Meriden, CT, for Margaret Rockwell.

Mark S. Carron, Carron and Fink, Westport, CT, for Roger E. Vigneault and Dolores M. Vigneault.

Sheri B. Paige, Wall Street Legal Services, Norwalk, CT, for Thelma Williams.

Charles S. Ambrogio, Ambrogio & Cahill, Stratford, CT, for Rudolph Patterson and Daisy M. Patterson.

Elena L. Cahill, Ambrogio & Cahill, Stratford, CT, for John A. Garrison.

Michele R. Celentano, Dimenstein & Celentano, Milford, CT, for William A. Stone and Debra S. Stone.

Richard Belford, Chapter 7 Trustee, New Haven, CT.

Byron P. Yost, Yost and Associates, Chapter 7 Trustee, New Haven, CT.

MEMORANDUM AND ORDER ON TRUSTEES' OBJECTIONS TO EXEMPTIONS

ALAN H.W. SHIFF, Bankruptcy Judge.

Effective October 1, 1993, the Connecticut General Assembly amended the state's exemption laws to provide for the first time a homestead exemption in the amount of $75,000.00. For the reasons that follow, I conclude that that exemption applies only to claims arising on or after the effective date of that amendment.

BACKGROUND

Chapter 906 of the Connecticut General Statutes, entitled "Postjudgment Procedures," contains provisions relating to the enforcement of money judgments. On June 29, 1993, the Connecticut General Assembly enacted Public Act No. 93-301 (the "Act"), which amended two sections of Chapter 906. Section 2 of the Act added a new subsection 52-352b(t), which provides:

The following property of any natural person shall be exempt:

(t) The homestead of the exemptioner to the value of seventy-five thousand dollars, provided value shall be determined as the fair market value of the real property less the amount of any statutory or consensual lien which encumbers it.

Section 1 of the Act reenacts several definitional provisions, including subsection 52-352a(c), which now reads:

"Exempt" means, unless otherwise specified, not subject to any form of process or court order for the purpose of debt collection.

Section 3 of the Act, from which the instant controversies arise, provides:

This act shall take effect October 1, 1993, and shall be applicable to any lien for any obligation or claim arising on or after said date.

In each of these chapter 7 cases, the debtor claimed the homestead exemption and the panel trustee objected to the claimed exemption. Pursuant to a Scheduling Order entered on November 18, 1994, the parties have stipulated to the following facts:

A. Each case was filed on or after October 1, 1993, except In re Stone, Case No. 91-52648. That case was commenced under chapter 11 prior to October 1, 1993, and converted to a chapter 7 case after that date.

B. In each case, most or all of the unsecured claims arose prior to October 1, 1993.

C. In each case, the residence of the debtor or debtors is property of the estate.

D. In each case, the debtor or debtors have elected to employ the exemptions available under Connecticut law, see § 522(b), and have claimed an exemption in the equity of their residence pursuant to Section 2 of Connecticut Public Act No. 93-301, amending Conn.Gen.Stat. § 52-352b to add subsection (t), creating a $75,000 exemption in the homestead of the exemptioner.

E. In each case, there is no lien on the residence other than one or more "security interests," as that term is defined in § 101(51).

The issues to be decided in each case other than In re Stone are:

A. May a debtor claim the $75,000.00 homestead exemption created by Connecticut Public Act No. 93-301 when the case was commenced after the effective date of that statute (October 1, 1993), as set forth in Section 3 of the Act, but the claims of creditors arose before that date.

B. Assuming that the answer to Issue A. is no, and further assuming that some, but not all, of the claims of unsecured creditors arose before October 1, 1993, what mechanism should be employed to provide for the claiming of the homestead exemption as to claims that arose after that date, and for the distribution of estate assets.

The issue to be decided in Stone is:

If a case was commenced under chapter 11 prior to the effective date of Connecticut Public Act No. 93-301 (October 1, 1993), as set forth in Section 3 of the Act, and converted to a chapter 7 case after that date, may the debtor claim the benefit of the exemption provided by that Act.

DISCUSSION

1. Application of the Act to Claims Arising Before October 1, 1993

Section 522(b) provides in relevant part:

Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (1) or, in the alternative, paragraph (2) of this subsection. . . .

(2)(A) any property that is exempt under . . . State or local law that is applicable on the date of the filing of the petition. . . .

In In re Morzella, 171 B.R. 485, 487 (Bankr.D.Conn.1994), Chief Judge Krechevsky followed the holdings of two Connecticut state courts in concluding "that the homestead exemption only applies to obligations and claims arising after October 1, 1993, the effective date of P.A. 93-301."¹ Thus, under Morzella, even though a case is commenced after October 1, 1993, the homestead exemption may be claimed only as against claims that arose on or after that date, and not as to claims that arose before that date. Morzella relied upon the Connecticut Superior Court decisions in Centerbank v. Associated Risk Servs., Inc., Case No. 93-035-50-42S, 1994 WL 51183 (Conn.Super.Ct., Feb. 7, 1994) and L. Suzio Asphalt Co., Inc. v. Ferreira Constr. Corp., Case No. 35-19-12, 1993 WL 448441 (Conn.Super.Ct., Oct. 19, 1993). Morzella also relied upon this court's decision in In re Toronto, 165 B.R. 746, 757-58 (Bankr. D.Conn.1994), which held, inter alia, that the homestead exemption could not be claimed in a case filed before the effective date of the Act. In Toronto, I concluded:

Under Connecticut law a statutory enactment affecting substantive rights, as Pub. Act 93-301 indisputably does, is presumed to have only prospective effect in the absence of a clear and unequivocal expression of a contrary legislative intent. Conn.Gen. Stat.Ann. § 55-3 (West 1985); In re Judicial Inquiry No. 85-01, 221 Conn. 625, 632, 605 A.2d 545 (1992); Miano v. Thorne, 218 Conn. 170, 175, 588 A.2d 189 (1991). The plain language of Pub. Act 93-301 supports a prospective application only. See Centerbank v. Associated Risk Servs., Inc., 1994 WL 51183 (Conn.Sup.Ct., Feb. 7, 1994); L. Suzio Asphalt Co., Inc. v. Ferreira Constr. Corp., 1993 WL 448441 (Conn.Sup.Ct., Oct. 19, 1993).

I am not persuaded by the debtors' arguments to depart from Morzella. I will follow that decision, and write further to address three issues raised by the debtors that were not treated at length in Morzella and the conversion issue raised in Stone.

a. The language

The debtors do not appear to argue that Section 3 (i.e., "lien for any obligation or claim arising on or after said date") should be read to make the homestead exemption applicable to a lien arising on or after October 1, 1993, rather than to an obligation or claim arising on or after that date. In any event, the latter reading is more faithful to the statute's plain language and is in accord with the authority cited above.² Instead, the debtors argue that the only portion of Section 3 of the Act that is operative in the bankruptcy exemption context is the initial clause, i.e., "this act shall take effect October 1, 1993." That language, taken alone, created a homestead exemption which existed under state law that was "applicable on the date of the filing of the petition" within the meaning of § 522(b)(2)(A). The second clause, "and shall be applicable to any lien for any obligation or claim arising on or after said date," merely creates an exception to the general effective date as to liens for claims arising before the effective date. Because there are no judicial liens affecting the debtors' residences, the debtors argue, the exception created by the second clause does not apply.

I disagree. Parts of a statute must be read so as not to be in conflict and to give effect to each. In re Bellamy, 122 B.R. 856, 862 (Bankr.D.Conn.), aff'd, 132 B.R. 810 (D.Conn.1991), aff'd, 962 F.2d 176 (2d Cir. 1992); Pintavalle v. Valkanos, 216 Conn. 412, 418, 581 A.2d 1050 (1990). Further, statutes are to be construed so as to attain a rational and sensible result that bears directly on the purpose the legislature sought to achieve; a bizarre result signals an erroneous construction. In re Valerie D., 223 Conn. 492, 534, 613 A.2d 748 (1992); Jones v. Mansfield Training Sch., 220 Conn. 721, 726, 601 A.2d 507 (1992). Courts must presume that the legislature did not intend to enact meaningless provisions. Prospect Grove Condominium Ass'n v. Hampton (In re Hampton), 142 B.R. 51, 52 (Bankr.D.Conn. 1992).

The first and second clauses of Section 3 are separated by the conjunction "and." That conjunction denotes not an exception but rather an addition to the previous clause. As such, the second clause must be read as supplementing or further...