476 B.R. 370
Bankr. D. Mass.2012Background
- Debtor filed Chapter 13 on January 26, 2012, listing a $162,682.26 surplus from foreclosure as exempt via MA homestead statute.
- Property formerly owned jointly by Debtor and Baralee Murphy, later subject to divorce decree allocating payments and ownership interests.
- Baralee quitclaimed her interest to Debtor in 2010; Debtor declared a homestead in 2011; Murphy suit and attachment followed in 2011.
- Foreclosure occurred in June 2011; Murphys purchased the Property for $401,000; interpleader action pending on surplus distribution.
- Murphys and Chapter 13 Trustee objected to Debtor’s exemption claim; Debtor moved to avoid Murphys’ liens as impeding the exemption.
- The court concluded Debtor had not received the surplus, so exemption in the surplus under M.G.L. c. 188, § 11 could not apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Debtor may exempt the surplus as a homestead under MA law | Debtor asserts § 11 enables exemption of sale proceeds from a homestead. | Murphys contend proceeds are not received and thus not exempt; Surplus not property of estate under § 541(d). | Debtor cannot exempt because he has not received the surplus. |
| Whether the surplus is property of the estate for exemption purposes | Surplus is property of estate under § 541(a)(1). | Surplus is in custodia legis; § 541(d) excludes it from property of the estate. | Surplus is property of the estate; exemption analysis proceeds on that basis. |
| Whether the term 'received' in § 11(a) controls Debtor’s right to exemption | Debtor should be able to exempt by virtue of sale or ownership interest. | Recipient must have actually received proceeds; otherwise no exemption. | Debtor cannot claim exemption because he has not received the Surplus. |
Key Cases Cited
- First Colonial Bank for Savings v. Bergeron, 38 Mass.App.Ct. 136 (1995) (surplus funds; junior lienee rights; custodia legis context)
- Davis v. Mazzuchelli, 238 Mass. 550 (1921) (receivership; levy on funds invalid)
- Commonwealth v. Brown, 431 Mass. 772 (2000) (untethered to exemption; tax/receipts reasoning cited)
- Dean v. U.S., 556 U.S. 568 (2009) (principles of statutory interpretation and plain meaning)