Michael Melito and Paula A. Melito

In re
MICHAEL MELITO and
PAULA A. MELITO,
Debtors
U NITED STATES BANKRUPTCY COURT
D ISTRICT OF MASSACHUSETTS
Chapter 13
Case No. 06-10015-RS
MEMORANDUM OF DECISION
REGARDING HOMESTEAD EXEMPTION
Before the Court are two objections to the Debtors’ claim of a Massachusetts homestead
exemption. The Debtors oppose the objections. At issue is whether the Debtors are entitled to
the homestead exemption even though, when they commenced this bankruptcy case and because
they were then expecting to sell the property, they neither occupied nor intended to occupy as
their principal residence the property that is the subject of the exemption claim. For the reasons
set forth below, the Court allows the Debtors’ homestead exemption claim and overrules the
objections.
Procedural Status
The Debtors commenced this Chapter 13 case on January 4, 2006 (“Petition Date”).
They filed schedules listing their ownership of a Saugus property (“Property”) and their claim of
a Massachusetts homestead exemption as to the Property (“Homestead Claim”). On the Petition
Date, they were residing in a Waltham rental apartment (“Apartment”).
The Homestead Claim occasioned multiple contested matters. First, the above-noted
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There are two formal homestead objections and two such objections raised in the context
of the Debtors’ judicial lien avoidance motions. The two formal objections are made by the
Chapter 13 trustee (“Trustee”) and Michael Kirby dba TPS Industries (“Kirby”). These are the
subject of this decision. The two objections raised in the lien avoidance context are made by
Eastern Savings Bank and Mortillaro Lobster, LLC. These four parties are hereinafter
occasionally referred to as the “Objectors”.
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Made by the Trustee, Kirby, Eastern Savings Bank and Mortillaro Lobster, LLC.
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Made by Eastern Savings Bank and Mortillaro Lobster, LLC.
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objections (“Homestead Objections”); 1 second, four objections to the Debtors’ Chapter 13 plan
(“Plan Objections”); 2 and third, two objections to the Debtors’ lien avoidance motions (“Lien
Avoidance Objections”)3 (together, “Contested Matters”). The Contested Matters require
determination of a single issue, namely, the Debtors’ entitlement to the Homestead Claim.
I held a non-evidentiary hearing on the Contested Matters on March 16, 2006 and an
evidentiary hearing on the Homestead Claim on May 12, 2006. I took the matters under
advisement and now render my decision regarding the Homestead Claim.
Background
The Debtors acquired the Property in 1998. In 2000, they acquired a Massachusetts
estate of homestead in the Property (“Homestead”). In 2005, facing financial problems, the
Debtors decided to sell the Property to avoid foreclosure and to preserve their equity through the
Homestead. In August 2005, they entered into a contract for sale of the Property.
Sometime in September 2005 but before the closing of the sale, the Debtors vacated the
Property as an accommodation to the proposed buyer, who had requested an earlier occupancy
than contemplated in the contract for sale. Due to financing problems, the buyer did not move
in, the sale closing was rescheduled for November 2005, and, when the buyer’s financing finally
failed altogether, the sale fell through. The Debtors resumed their sale efforts but, when they
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The meeting took place on January 31, 2006.
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The Homestead Objections cast the issue as one of intent to occupy rather than one of
abandonment.
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commenced this case on January 4, 2006, the Property remained on the market, vacant and
unsold, and they were residing in the Apartment. Until their relocation to the Apartment, the
Debtors had occupied the Property as their principal residence without interruption from the time
they acquired it in 1998.
At their Section 341 meeting,4 the Debtors testified that, although they owned the
Property, they did not reside there and they did not intend to return there, having vacated it to
accommodate a buyer and to facilitate a sale. The Objectors, present at the meeting, focused on
the occupancy issue and paid little heed to the Debtors’ sale-facilitation explanation. In March
2006, the Debtors’ tenancy at the Apartment was unexpectedly terminated and they returned to
the Property, which remained on the market and still was not sold at the time of the evidentiary
hearing.
The position of the Objectors is that the Debtors are not entitled to the Homestead Claim
because they neither occupied nor intended to occupy the Property as their principal residence on
the Petition Date.5 The position of the Debtors is that (a) on the Petition Date, the Homestead
was valid, enforceable, and fully effective, (b) they did not abandon the Property or otherwise
terminate the Homestead, (c) their relocation was incidental to their sale of the Property, and (d)
their departure from the Property was intended to implement their realization of the Homestead
protection.
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Discussion
a. 	Framework
1. 	Bankruptcy Law
Section 522 of the Bankruptcy Code affords an individual debtor the opportunity to elect
the exemptions available either under federal bankruptcy law or under nonbankruptcy federal,
state and local law. 11 U.S.C. §522(b). The nonbankruptcy exemption law includes the
Massachusetts homestead law. M.G.L.A. c. 188 §1 et seq (“Homestead Statute”). The Debtors
made the election with respect to the Property under the Homestead Statute.
2. 	The Homestead Statute
The Homestead Statute protects up to $500,000 in the net equity of a home for its
owner(s) or lessor(s) (and their families) who occupy that home, or intend to do so, as a principal
residence. M.G.L.A. c. 188 § 1. With certain exceptions not here implicated, the estate of
homestead protects the home and its principally resident occupants from the claims of creditors
for the benefit of the homesteader and his/her family. See In re Fiffy, 281 B.R. 451, 454
(Bankr.D.Mass. 2002); see also In re Vasques, 337 B.R. 255 (Bankr.D.Mass. 2006) (homestead
estate protects homesteader’s economic interest as much as legal interest or property itself).
3. 	Homestead Acquisition
Under the Homestead Statute, an estate of homestead is acquired by designation in the
deed of transfer by which the subject property is acquired or by a declaration in customary form
recorded in the requisite registry. M.G.L.A. c. 188 § 2. As reflected in the above-cited sections,
homesteaders must occupy or intend to occupy a property as their principal residence at the time
of acquisition of an estate of homestead, that is, at the time of the conveyance or declaration.
See Thurston v. Maddox, 88 Mass. 427 (1863); In re Webber, 278 B.R. 294, 298 (Bankr. D.
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I acknowledge support for an inference of termination by abandonment in the early
Massachusetts cases cited in Marrama, for example, Drury v. Bachelder, 77 Mass. (11 Gray)
214, 216 (1858); Silloway v. Brown, 94 Mass. (12 Allen) 30, 33 (1866).
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Mass. 2002).
4. 	Homestead Termination
Under the Homestead Statute, termination like acquisition requires a writing. M.G.L.A.
c. 188 §7. See Webber at 297. Here, there is no allegation of termination by a writing. Rather,
the logic of the Objectors is this: discontinuance of occupancy and of intent to occupy the
Property means loss of the Homestead, whatever the circumstances of discontinuance, however
temporary and for whatever purpose.
Whether a homestead estate can be terminated by abandonment and whether
abandonment can be established by intent (and if so how) are matters not yet finally settled in
this district. Bankruptcy Judge Kenner previously expressed reservations regarding termination
by abandonment. “[By] specifying three methods of termination, all three requiring a writing,
the Massachusetts legislature likely meant to preclude termination by simple abandonment.”
Webber at 298. Bankruptcy Judge Hillman has disagreed, noting long-standing Massachusetts
decisions recognizing termination by abandonment. See In Marrama, 307 B.R. 332, 337 (Bankr.
D. Mass. 2004). See also In re Taylor, 280 B.R. 294 (Bankr. D. Mass. 2002).6
Even if abandonment were a valid termination methodology, it must be clearly and
convincingly demonstrated. “If any acts of abandonment, short of acquiring a new homestead,
will defeat a homestead estate, they must be such as afford unequivocal evidence of an intent to
abandon.” Silloway at 33 (emphasis added).
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b. 	Analysis
The Debtors are entitled to a liberal construction of the exemption claim, and the
Objectors bear the burden of proof by a preponderance of the evidence. Vasques at 256-257.
The Objectors present the following evidence in support of their burden: first, the
Debtors were not in occupancy at the Property on the Petition Date; second, the Debtors
expressed an intention not to return to the Property once they moved out to facilitate the failed
sale; third, they removed all their household items (leaving only clothes for Goodwill, fixtures,
some tools, and a lawn mower); and fourth, they intended to occupy the Apartment as their
principal residence notwithstanding the unexpected termination of their tenancy there after only
six months.
The Debtors present the following evidence in rebuttal: first, they properly acquired the
Homestead and it had not been terminated in writing on the Petition Date; second, their departure
from the Property was merely a sale-related accommodation to their then-buyer; third, their
intent not to occupy was, at all times, premised on the sale of the Property and their recognition
that, upon sale, they would afterward reside elsewhere; fourth, no one but the Debtors and their
family occupied the Property at any time after they acquired it; fifth, in selling the Property, they
intended to preserve their equity in the Property to the extent covered by the Homestead; and
sixth, but for the scheduled sale, they would not have vacated the Property at all until a sale
closing.
I share Judge Kenner’s reservations regarding homestead termination by abandonment in
Massachusetts. Abandonment is not mentioned in the statute, intent is an often elusive because
often changeable creature, and it is not unreasonable to maintain that a protection so formal in its
acquisition should be at least as formal in its loss (what must be acquired in a writing should be
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required to be relinquished in a writing). That said, I make no definitive ruling on the subject
here (since I need not do so for this decision) but merely note some considerations that would
inform any such ruling.
In the matter before me, I decline to opine on termination by abandonment beyond this:
either there is no termination by abandonment in respect of a Massachusetts estate of homestead
or, if there is, the facts advanced by the Objectors to defeat the Homestead fall woefully short of
the unequivocal evidence required under the cited Massachusetts decisional law. Surely
abandonment, if it has any valid place in the homestead framework, must be reflected in a
voluntary, informed and unconditional formation of intent—not, as here, in an act (namely,
relocation) premised on an event (namely, a sale) inextricably connected to and conditioning that
act.
Indeed, the Debtors’ words and actions, far from signifying an intention to abandon the
Homestead, rather clearly and convincingly signify an intention to preserve the benefit of the
Homestead—their unrebutted testimony is that, fearing foreclosure and owning a property with
equity protected by a valid, enforceable, and effective homestead estate, they vacated that
property to facilitate a sale that would realize that protected equity for their benefit. This is a far
more logical reading of the evidence than abandonment.
Having considered the evidence and applicable law, I find that a short-term, temporary
and conditional discontinuance of occupancy in connection with and in contemplation of a sale
of a principal residence neither constitutes nor establishes abandonment either of that principal
residence or of the estate of homestead therein under the Homestead Statute. Hence, I find that
the Objectors have not met their burden of proof and their objections do not stand.
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Conclusion
On the Petition Date, the Debtors had a valid, effective and enforceable estate of
homestead in their Saugus property. They did not abandon either the property or the homestead
at any time from their acquisition of the property through and after the Petition Date. Rather,
they acted to preserve the economic value of the property and their interest therein. Their intent
was unequivocally to preserve and retain that economic value for themselves, as the Homestead
Statute authorizes them to do.
Accordingly, the Homestead Claim is allowed and the Homestead Objections are
overruled. In addition, the Lien Avoidance Objections and the Plan Confirmation Objections
are also overruled to the extent they are based upon the Homestead Objections.
A separate order will issue.
Date: January 4, 2007 	_______________________________
Robert Somma
United States Bankruptcy Judge
cc: Timothy Mauser, Esq., for Debtors
Carolyn Bankowski, Esq., Chapter 13 Trustee
Jordan Shapiro, Esq., for Michael Kirby
Heather Zelevinsky, Esq., for Montillaro Lobster LLC
Robert Marder, Esq., for Eastern Bank
Citizens Bank of Massachusetts
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