Edward R Szwyd

1 This Court feels compelled to express at the onset its growing frustration with the
application of the Massachusetts Homestead Statute. 	While it is well settled that the statute’s
purpose is to protect the family home, see infra, Dwyer v. Cempellin 424 Mass. 26, 29-30, 673
N.E.2d 863, 866 (1996), the statute’s ambiguities have proven to be legion and its benefits 1)
appear to be available only for those with the legal training or resources necessary to locate a
registry of deeds and record what is, for a layperson, a relatively complex document, and 2) may
be easily and inadvertently lost by statutory language and conditions that are hyper-technical and
often counterintuitive.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
___________________________
)
In re: 	)
) 	Chapter 7
EDWARD R. SZWYD, 	) 	Case No. 05-50837-HJB
)
Debtor. 	)
___________________________)
MEMORANDUM OF DECISION
Before this Court is the “Trustee’s Objection to the Debtor’s Claim of Exemption,”
filed by Jack E. Houghton, the Chapter 7 Trustee (the “Trustee”). The Trustee argues that
the exemption claimed by Edward R. Szwyd (the “Debtor”), pursuant to G.L. c. 188, §1 (the
“Massachusetts Homestead Exemption” and the “Massachusetts Homestead Statute,”
respectively), is not available because title to the Debtor’s residence is held by a trust. 1
Because the Debtor here is the sole trustee and sole beneficiary of the instant trust, the
issue to be determined is whether the Massachusetts Homestead Statute protects the
equity of a residence held by a trust where an individual is both sole trustee and sole
beneficiary.
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I. 	FACTS & TRAVEL OF THE CASE
The facts are not in material dispute. In April of 1992 the Debtor’s parents, Stanley
and Maria M. Szwyd (the “Szwyds”), recorded a declaration of trust named the Myszka
Nominee Realty Trust (the “Trust”) in the Massachusetts Southern Berkshire Registry of
Deeds . The Trust named the Szwyds as co-trustees. At that time, and all relevant times
since, the Debtor has been the sole beneficiary of the Trust.
Incident to the formation of the Trust, the Szwyds caused certain real estate located
at 366 North Plain Road, Great Barrington, Massachusetts (the “Residence”) to be
conveyed to the Trust. Subsequently, the Szwyds resigned as co-trustees and, in June of
1992, the Debtor accepted appointment as sole trustee of the Trust. Since that time, the
Debtor has been both the sole trustee and sole beneficiary of the Trust. 	In February of
1996, the Debtor recorded a declaration of homestead, pursuant to G.L. c. 188, § 1, with
respect to his beneficial interest in the Trust. At all material times, he has resided at the
Residence.
On October 16, 2005, the Debtor filed for protection under Chapter 13 of the
Bankruptcy Code. 	On January 6, 2006, the case was converted to Chapter 7. 	In his
bankruptcy schedules, the Debtor valued the Residence at $450,000.00, subject to
encumbrances totaling $280,646.23, and sought to exempt the balance of the equity by
employing his claimed Massachusetts Homestead Exemption. 	The Chapter 7 Trustee
objects.
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II. 	POSITIONS OF THE PARTIES
In support of his objection to the Homestead Exemption, the Chapter 7 Trustee
relies on Assistant Recorder of the North Registry District of Bristol County v. Spinelli, 38
Mass.App.Ct. 655, 659, 651 N.E.2d 411, 413 (1995). There, the Massachusetts Appeals
Court, employing a strict construction of the Massachusetts Homestead Statute, held that
because there is no explicit statutory reference to trusts in the statute, the beneficial owners
of trusts do not enjoy the exemption in a residence owned by the trust.
The Debtor urges this Court to instead follow Dwyer v. Cempellin, 424 Mass. 26, 29-
30, 673 N.E.2d 863, 866 (1996). In that case, the Supreme Judicial Court held that the
Massachusetts Homestead Statute was intended to be interpreted liberally in favor of a
debtor, in order to protect the family home. The Debtor here advances that more liberal
judicial interpretation. In doing so, the Debtor directs this Court’s attention to rarely quoted
language of the Massachusetts Homestead Statute, which extends eligibility to claim the
exemption beyond an actual owner and to “one or all who rightfully possesses by lease or
otherwise and who occupy or intend to occupy said home as a principal residence.” G.L.
c. 188 § 1 (emphasis supplied). The Debtor suggests that this additional phrase provides
an alternative to the ownership requirement. He submits that, as the rightful possessor of
the Residence, he is entitled to claim the benefits of the Massachusetts Homestead
Exemption.
III. 	DISCUSSION
The Massachusetts Homestead Statute provides, in relevant part:
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An estate of homestead to the extent of $500,000 in the land and buildings may be
acquired pursuant to this chapter by an owner or owners of a home or one or all who
rightfully possess the premise by lease or otherwise and who occupy or intend to
occupy said home as a principal residence. Said estate shall be exempt from the
laws of conveyance, descent, devise, attachment, levy on execution and sale for
payment of debts or legacies. . .
G.L. c. 188, § 1 (2005). 	The Debtor argues that the language of the statute makes the
exemption available not only to owners, but also to “all who rightfully possess the premise
by lease or otherwise and who occupy or intend to occupy said home as a principal
residence,” and this group logically includes those who occupy their residence on account
of their beneficial interest in a trust which owns the property.
This position was rejected by the Appeals Court in Spinelli. That court analogized
the Massachusetts Homestead Statute to tax statutes and was much influenced by Kirby
v. Assessors of Medford, 350 Mass. 386, 215 N.E.2d 99 (1966), where “the Supreme
Judicial Court specifically refused to extend the term ‘owner’ [as it appeared in certain tax
statutes] to include equitable owners.” Spinelli, 651 N.E.2d at 413 (citing Kirby, 215 N.E.2d
at 102). The Spinelli decision only tangentially touched on the “or one or all who rightfully
possess by lease or otherwise” language, relying on Thurston v. Maddocks, 88 Mass. (6
Allen) 427 (1863) wherein the court postulated that “[t]he object of this clause. . . obviously
was to create a homestead right in a house owned by the occupant, but standing on leased
land.” See Spinelli, 651 N.E.2d at 413 (quoting Thurston, 88 Mass. (6 Allen) at 428). In any
event, the Spinelli court believed that the Massachusetts Homestead Statute should be
strictly construed. Id.
But the Spinelli court was wrong in its approach. Not long after that decision was
rendered, the Supreme Judicial Court issued its rulings in Dwyer v. Cempellin. There, the
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2 As this Court has noted, “a bankruptcy court ruling on an issue of state law must rule as
it believes the highest court of the state would rule. When the highest court has not addressed the
issue, the Bankruptcy Court should . . . attempt to predict what the highest court would do and to
that end should accord proper regard to decisions of other courts of the state.” In re DesRoches,
314 B.R. 19, 21-22 (Bankr. D. Mass. 2004) (citations omitted). 	But where, as here, the “other
courts” provide little to no guidance on a novel issue that is grounded firmly in unsettled
Massachusetts state law, this Court has the authority to certify a question to the Supreme Judicial
Court to present that court the opportunity to interpret the laws over which it is the ultimate
authority. Mass. Sup. Jud. Ct. R. 1:03; see U.S. Steel v. M. DeMatteo Const. Co., 315 F.3d 43, 53-
54 (1st Cir. 2002).
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court distinguished tax statutes from the Massachusetts Homestead Statute and opted for
a liberal construction of the latter:
Tax exemptions release taxpayers from their obligation to bear their share of
the cost of government and, in doing so, disturb the objective of equalizing the
distribution of the tax burden. . . In contrast, homestead exemptions help
bankrupts and their families from becoming public charges. 	Accordingly,
homestead exemption statutes should be construed liberally so as to carry out
their underlying purpose - to protect the family residence.
Dwyer, 673 N.E.2d at 866 n.7.
Does this guidance from the Supreme Judicial Court mean that the beneficial owners
of trusts, who are in possession of the res, should also now be considered eligible to be
beneficiaries of the protections afforded by the Massachusetts Homestead Statute? Did the
Spinelli court go too far in its restrictive interpretation of the words “or one or all who
rightfully possess by lease or otherwise?” 	This Court can not reliably answer these
questions by examining the statute alone or its available legislative history. Ordinarily such
an inquiry should be certified to the state’s highest court for resolution.2 This case, however,
will not have to travel that route. It can be disposed of here on account of its unique facts;
specifically, the fact that the Debtor is the sole trustee and sole beneficiary of the Trust.
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3 That the Myszka Trust was a nominee trust does not change this result. The feature that
most definitively sets a nominee trust apart from traditional trusts is that the trustee lacks power to
deal with the trust property, except as directed by the beneficiaries. Roberts v. Roberts, 419 Mass.
685, 688 n.2, 646 N.E.2d 1061, 1063 (1995) (citations omitted). However, “[d]espite a nominee
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It is axiomatic that a purported trust in which the sole trustee is also the sole
beneficiary is a nullity. Where the same person holds both legal and equitable interest in
the res, a trust is one in form only and not in function. Vittands v. Sudduth, 49 Mass.App.Ct.
401, 409 n.15, 730 N.E.2d 325, 334 (2000) (quoting Cunningham v. Bright, 228 Mass. 385,
389, 117 N.E. 909 (1917)) (“[o]ne cannot in the same instance be both the single trustee
and the sole beneficiary of the same estate.”); see also, Restatement (Second) of Trusts §
99 (2006) (“[t]he sole beneficiary of a trust cannot be the sole trustee of the trust”).
When the entirety of legal and equitable interests in property vests in one person,
those interests are said to merge and the trust terminates by operation of law; there are no
duties or rights running between separate persons and the sole trustee/beneficiary is
accountable to no one but him or herself. See generally, Atkins v. Atkins, 279 Mass. 1, 7,
180 N.E.2d 613, 614 (1932); Cunningham, 117 N.E. at 909; In re Lyons, 193 B.R. 637, 645
(Bankr. D. Mass. 1996); see also, Restatement (Second) of Trusts § 341(1) (2006) (“if the
legal title to the trust property and the entire beneficial interest become united in one person
who is not under an incapacity, the trust terminates”). The trust then becomes a mere alias
for the person acting simultaneously as sole trustee and sole beneficiary. Cunningham, 117
N.E. at 909.
On June 16, 1992, when the Debtor succeeded his parents as sole trustee to the
Trust, his legal and equitable interests in the Residence merged and the Trust was
terminated. The Trust was then nothing more than an alias for Edward R. Szwyd.3
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trust’s nontraditional relationship between trustee and beneficiary, such a trust must still adhere
to the rule that no trust exists when the same individual is the sole settlor, sole trustee, and sole
beneficiary.” Vittands, 730 N.E.2d at 334.
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To acquire a valid estate of homestead, Massachusetts law requires a declaration
“by a writing duly signed, sealed and acknowledged and recorded in the registry of deeds
for the county or district in which the property is situated.” G.L. 188, § 2. The Debtor himself
executed the declaration of homestead for the Residence and properly recorded it in the
Southern Berkshire Registry of Deeds. By that time, the legal and equitable interests in the
Residence had merged and vested solely in the Debtor. 	As such, the Massachusetts
Homestead Exemption was his to claim. G.L. c. 188, §§ 1, 2.
IV. 	CONCLUSION
For the foregoing reasons, the “Trustee’s Objection to the Debtor’s Claim of
Exemption,” is OVERRULED.
A separate order in conformity with this Memorandum of Decision shall enter
herewith.
DATED: 	August 7, 2006 	By the Court,
_________________________
Henry J. Boroff
United States Bankruptcy Judge
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