In re Vanbuskirk

• Decision Date: 20 May 2014
• Docket Number: No. 13–41947–MSH.,13–41947–MSH.
• Citation: In re VanBuskirk, 511 B.R. 220 (Bankr. Mass. 2014)
• Parties: In re Joseph C. VANBUSKIRK and Patricia A. VanBuskirk, Debtors.
• Court: U.S. Bankruptcy Court — District of Massachusetts

511 B.R. 220

In re Joseph C. VANBUSKIRK and Patricia A. VanBuskirk, Debtors.

No. 13–41947–MSH.

United States Bankruptcy Court,

D. Massachusetts,

Central Division.

Signed May 20, 2014.

Steven Weiss, Esq., Shatz, Schwartz and Fentin, P.C., Springfield, MA, Jordan L. Shapiro, Esq., Shapiro & Hender, Malden, MA, for Joseph C. VanBuskirk and Patricia A. VanBuskirk.

MEMORANDUM OF DECISION ON THE TRUSTEE'S OBJECTION TO EXEMPTION

MELVIN S. HOFFMAN, Bankruptcy Judge.

This matter arises from the objection of Steven Weiss, the chapter 7 trustee of the estate of the debtors in this case, Joseph C. VanBuskirk and Patricia A. VanBuskirk, to the homestead exemption claimed by them in their home identified as unit 1, 11 Moffa Lane, Marlborough, Massachusetts.

Facts

The facts are drawn from the parties' agreed statement and relevant documents attached to various pleadings, the authenticity of which the parties have not questioned.

The Debtors acquired real property located at 11 Moffa Lane in Marlborough, Massachusetts from Ms. VanBuskirk's parents in 1985. Title to the property was taken by the VanBuskirks as tenants by the entirety. On September 6, 1990, the VanBuskirks conveyed the property to themselves as trustees of the A One Forty Nine Realty Trust. The trust was subsequently renamed the A 111 Realty Trust (the “Realty Trust”). The VanBuskirks have been the only trustees of the Realty Trust from its inception.

The declaration of trust establishing the Realty Trust invests the VanBuskirks as trustees with broad powers including the power to sell, lease, mortgage and improve the property of the trust, and provides that “the Trustee shall also have every possible power and right to deal with the Trust property and estate, which an individual can have over his own property as fully and completely as if such individual powers were herein expressed.” The rights of the beneficiaries under the declaration of trust are limited to the right “to receive any distribution of income or principal or Trust property made by the Trustee in his discretion hereunder; and to the Trust property on the termination of the Trust, unless said Trust is revoked or otherwise amended by said Trustee.” The declaration of trust calls for the Realty Trust to terminate thirty days after the death, resignation or incapacity of both trustees.

Paragraph 7 of the declaration of trust provides:

This Declaration of Trust, and the Trust hereby created, may at any time, or from time to time, be altered or amended in any respect or respects, by the Trustee acting hereunder, each alteration or amendment, if any, acknowledged by him and recorded in the Registry of Deeds for the County in which this instrument is recorded. The power to alter or amend the Declaration of Trust and the Trust hereby created, shall not be exhausted by a single exercise thereof, but may be exercised from time to time, and no exercise of said power shall prevent the subsequent exercise of the power to terminate the Trust.

The original beneficiaries of the Realty Trust were three of the VanBuskirks' children:Joseph, who to avoid confusion with the debtor will hereafter be referred to as “Joseph P,” Scott, and Peter. The declaration of trust provides that the beneficiaries “have no right or voice in the control or management of the Trust or the Trust property....”

On October 23, 1998, the VanBuskirks as trustees of the Realty Trust divided the Moffa Lane property into three condominiums, known as units 1, 2 and 3 with each condominium consisting of a single family house. The VanBuskirks and their son Scott, who is disabled, reside in unit 1.

By an amendment dated August 18, 2003, the VanBuskirks as trustees amended the Realty Trust declaration to change the allocation of the beneficial interests in the Trust. Scott, Peter and Joseph P., were named as one-third beneficial interest holders of unit 1. Joseph P. was named the sole beneficiary of unit 2 and Peter was designated the sole beneficiary of unit 3.

On December 24, 2004, when they held only a legal interest in unit 1 by virtue of their status as trustees of the Realty Trust, the VanBuskirks recorded a declaration of homestead for elderly or disabled individuals. The declaration does not refer to the VanBuskirks as trustees of the Realty Trust and it is signed by them individually.¹

On October 4, 2011, the VanBuskirks created the SRVB Family Trust (the “Family Trust”). In addition to being the settlors and grantors, they are the trustees and the beneficiaries of the Family Trust during their joint lives. The instrument establishing the Family Trust provides that upon the death of the VanBuskirks, the Family Trust's property is to be held in trust for Scott and upon his death, it is to pass to the VanBuskirks' grandchildren. Article X of the Family Trust provides that “[t]his Trust is revocable and the Grantors expressly reserve any and all rights which they may have, by operation of law or otherwise, to revoke, alter, amend or otherwise change this Declaration of Trust or any provision hereof.” The Family Trust and the Realty Trust contain spendthrift provisions.

On October 4, 2011, the VanBuskirks as trustees of the Realty Trust amended the Realty Trust declaration yet again to alter the beneficial interests in unit 1, dividing them into four equal shares held by Peter, Joseph P., daughter Lisa A. Sullivan and the Family Trust. None of the VanBuskirk children except Scott, who is not a beneficiary, lives in unit 1. There have been no further amendments to the Realty Trust and no amendments at all to the Family Trust. Both Trusts are governed by Massachusetts law. For all purposes relevant to this matter, the only asset owned by the Realty Trust is unit 1 and the only asset owned by the Family Trust is a 25% beneficial interest in the Realty Trust.

On July 31, 2013, the VanBuskirks filed a voluntary petition for relief under chapter 7 of the United States Bankruptcy Code (11 U.S.C. § 101 et seq.) commencing this case. On schedule A-real property, of the schedules of assets and liabilities accompanying their petition, the VanBuskirks listed their interest in unit 1 of the 11 Moffa Lane property as having a value of $286,410.00, based on a valuation they obtained from zillow.com. They described their interest in the property as a “fiduciary” interest only and further stated that they “are the trustees for the benefit of designated beneficiaries, none of which are Debtor [sic].” They repeated this language on schedule C-property claimed exempt, on which they claimed a homestead exemption in unit 1 in the amount of $131,705.58 pursuant to “Mass. Gen. Laws ch. 188, § 1.”

The chapter 7 trustee filed an objection to the homestead exemption claim prompting the VanBuskirks to amend schedules A and C. On amended schedule A they described their interest in unit 1 as a “beneficial interest” stating:

Debtors are Trustees for the benefit of designated beneficiaries, one of which is the SRVB Family Trust which holds a 25% interest in the A 111 Realty Trust. Debtors are the life beneficiaries of the SRVB Family Trust. The market value of Debtors [interest] does not include a determination of the vlaue [sic] of Debtors [sic] life estate, but is, instead, based on the higher market value. Market value is based on Broker's opinion based on comparable “Sold” and “For sale” units.

The VanBuskirks valued their interest in unit 1 at $64,500.00, which they claimed was one-fourth of its total value.² On their amended schedule C, the VanBuskirks sought to exempt their interest in unit 1 in the amount of $125,000.00, the full amount of the so-called automatic homestead exemption allowed by Mass. Gen. Laws c.188, § 4.

The chapter 7 trustee filed an objection to the amended homestead exemption on the grounds that the VanBuskirks should not be entitled to any homestead exemption in unit 1 or in the alternative, if they are entitled to an exemption, the amount of the exemption should be limited to $31,250.00 which is one-fourth of $125,000.00

Positions of the Parties

The chapter 7 trustee argues that the VanBuskirks are not entitled to a homestead exemption because they are not “owners” of unit 1 as that term is defined in the Massachusetts homestead statute. Specifically, the chapter 7 trustee asserts that the VanBuskirks have no direct interest in unit 1, only an interest in the Family Trust, which has a 25% beneficial interest in the Realty Trust which owns unit 1. This connection, in the chapter 7 trustee's view, is too attenuated to qualify the VanBuskirks as owners within the meaning of the Massachusetts homestead statute.

Why, it would be reasonable to ask, is the chapter 7 trustee bothering to object to the VanBuskirks' homestead exemption in property he claims they don't even own? The answer is the trustee believes that by exercising certain powers available to him he can come to own unit 1 or at least cause it to be sold and retain the net sale proceeds for the benefit of the bankruptcy estate free, he hopes, of any homestead exemption claim. Relying on Nickless v. Lipp (In re Lipp), Adv. Pro. 08–4056, 2009 WL 2032127 (Bankr.D.Mass. July 6, 2009), the chapter 7 trustee asserts that the VanBuskirks' rights to amend the Realty Trust including to change its beneficiaries or to terminate or revoke it are now property rights that belong to the VanBuskirks' bankruptcy estate and that only he, the chapter 7 trustee, may exercise those rights. The chapter 7 trustee appears to intend to make himself the trustee of the Realty Trust or at least to exercise the VanBuskirks' rights as trustees and make the VanBuskirks the sole beneficiaries of the Realty Trust or to terminate the Trust as a result of which he will be in a position as the bankruptcy estate representative to sell unit 1. Were I to find that the VanBuskirks are entitled to homestead protection in unit 1 after the chapter 7 trustee amends or terminates the Realty Trust, the chapter 7 tru...