MEMORANDUM
I. INTRODUCTION
The matter before the Court is the Defendant’s Motion for Summary Judgment filed on December 12, 2011 by Helen Patts (“Patts”), the nondebtor spouse of the debtor, Joseph J. Patts (the “Debtor”), and the Opposition thereto filed by the plaintiff, Donald Lassman, the Chapter 7 trustee of the Debtor (the “Trustee”) in connection with an avoidance and recovery action originally commenced by the Trustee solely against Patts. The Court heard the Motion for Summary Judgment and the Opposition on February 22, 2012, requested that the parties file supplementary briefs and took the matter under advisement. The parties thereafter filed their memoranda.
As an initial procedural matter, the Court notes that Patts’s Motion for Summary Judgment, which she supported with an affidavit, refers only to the original complaint filed by the Trustee. Patts, however, filed the Motion after the Trustee filed an amended complaint. The Trustee’s original complaint, filed on November 2, 2011, contained four counts against Patts as the sole defendant, through which the Trustee sought avoidance of a fraudulent transfer pursuant to 11 U.S.C. § 544(b) and Mass. Gen. Laws ch. 109A and a recovery of the property transferred, or its value, pursuant to 11 U.S.C. § 550. Specifically, through the original complaint, the Trustee sought avoidance of a January, 2009 transfer of the couple’s residence by the Debtor and Patts, as tenants by the entirety, to Patts, individually. On December 1, 2011, the Trustee filed a motion to amend the complaint for the purposes of adding the Debt- or as a defendant and adding a count to the complaint (Count V) against the Debt- or and Patts under 11 U.S.C. § 550 seeking to obtain recovery with respect to a second transfer of the property, namely Patts’s retransfer of the residence from herself to herself and the Debtor, as tenants by the entirety, which she effected shortly before the Debtor’s bankruptcy filing. The Court allowed the Trustee’s motion to amend the complaint on December 16, 2011, four days after Patts moved for summary judgment. Because the Trustee filed the amended complaint before Patts filed her Motion for Summary Judgment and because the Trustee addressed all five counts of the amended complaint at the hearing, the Court shall treat the Motion for Summary Judgment as a motion by Patts for summary judgment with respect to all counts in the amended complaint.
The Court finds that, despite the assertions of the Trustee to the contrary which
II. FACTS
In support of her Motion for Summary Judgment, Patts filed an affidavit in which she attested to the following facts concerning the transfers of the couple’s residence. The Debtor and Patts, who are both in their 80s, are husband and wife. Sometime in 1960, they acquired their residence at 47 Big Rock Lane, Hanson, Massachusetts (the “Property”). Except for a brief period between November 2000 and March 2002, the couple owned the Property as tenants by the entirety until January 9, 2009.
On May 19, 2008, Patts filed an Elderly Declaration of Homestead with respect to the Property. From September 11, 2008 through November 1, 2009, the Debtor was a patient at New England Sinai Hospital and Rehabilitation Center and then at South Shore Rehabilitation and Skilled Nursing Care, recovering from multiple illnesses, medical conditions and related surgeries, including colon cancer. During the Debtor’s rehabilitation, the couple consulted a law firm specializing in elder care, to seek advice for Medicaid eligibility. Based on the advice of counsel, as part of their Medicaid planning, on January 9, 2009, the Debtor and Patts conveyed the Property to Patts individually (the “Transfer Deed”). With mounting debts caused primarily by the Debtor’s medical condition, in June 2011, the Debtor sought advice from a bankruptcy attorney. That attorney advised the Debtor and Patts that, notwithstanding the advice of prior counsel, they should retransfer the Property from Patts back to the Debtor and Patts as tenants by the entirety. They effected that transfer by deed dated June 14, 2011 1 (the “Retransfer Deed”). The Debtor also filed on that date a Declaration of Homestead with respect to the Property. The Property has a current value of approximately $250,000 and is currently subject to a mortgage in the approximate amount of $127,000.
In addition to the facts set forth in Patts’s affidavit, the Court takes judicial notice of the Debtor’s schedules and the history of proceedings in this case.
2
Two days after the recording of the Retransfer Deed, on June 16, 2011, the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On the Debtor’s Schedule A — Real Property, he listed his 50
%
interest in the Property by virtue of his tenancy by the entirety interest with Patts, which he valued at $62,000. He also disclosed that the fair market value of the Property was $250,000 and that it is subject to a mortgage in favor of Bank of America Home Loans “in the approximate amount of $127,426.08 in the name of Helen J. Patts.” On Schedule C — Property
On July 27, 2011, the Trustee convened the meeting of creditors pursuant to 11 U.S.C. § 341. The deadline to object to the Debtor’s claim of exemptions was August 26, 2011 and the deadline for filing complaints under 11 U.S.C. §§ 523(a) and 727(a) was originally set for September 26, 2011. See Fed. R. Bankr.P. 4003(b), 4004(a) and 4007(c). Neither the Trustee nor any other party objected to the Debt- or’s claim of exemptions. The Trustee filed three timely motions requesting extensions of time to object to the Debtor’s discharge, all of which the Court granted. The current deadline for the Trustee to object to the Debtor’s discharge is May 27, 2012.
The Trustee asserts that the Motion for Summary Judgment and the Patts affidavit omit certain material facts which, he contends, raise genuine issues to be tried concerning Patts’s intent when executing the Transfer and Retransfer Deeds. In support of his Opposition to the Motion for Summary Judgment, he attached the affidavit of Elizabeth P. Barletta (“Barletta”), who performed a title examination of the Property, as well as copies of several deeds through which Patts and/or the Debtor conveyed their interest in the Property to various family members over the years.
According to the Barletta affidavit, prior to executing the Transfer Deed and the Retransfer Deed, the Debtor and Patts conveyed, mortgaged and refinanced the Property several times. On March 18, 1982, they deeded the Property to Kathleen Patts and Everett J. Bowie, Jr., for no or nominal consideration, and on January 8, 1987 the Bowies deeded the Property back to the Debtor and Patts, as tenants by the entirety, for nominal consideration. On August 8, 2000, the Debtor and Patts deeded the Property to Timothy J. Patts and Kathleen Bowie for nominal consideration. On March 15, 2002, Timothy J. Patts and Kathleen Bowie deeded the Property back to the Debtor and Patts as tenants by the entirety for nominal consideration. Thereafter, the Debtor and Patts executed the Transfer Deed to Patts on January 9, 2009, 4 and Patts subsequently executed the Retransfer Deed back to the couple as tenants by the entirety on May 27, 2011. According to Barletta, the Debt- or and Patts also executed a series of mortgages on the Property between 1987 and 2005, the last one in favor of MERS, as nominee for Arrow Mortgage Corp., securing a debt in the amount of $140,000 which appears to be the only mortgage currently encumbering the property. 5
III. THE COMPLAINT
Based upon the couple’s conveyance of the Property to Patts and her subsequent
IV. POSITIONS OF THE PARTIES
A. Patts
Patts asserts that summary judgment is warranted because, she contends, (1) there is no transfer to avoid and no value to recover pursuant to 11 U.S.C. § 550 because the Property was voluntarily re-transferred prior to the petition date; and (2) the Property is subject to the valid homestead exemptions of both the Debtor and Patts and, thus, there can be no recovery for the estate.
With respect to the first argument, the Debtor maintains that the reconveyance deprives the Trustee of a transfer to avoid, relying primarily on
Stornawaye Fin. Corp. v. Hill (In re Hill),
With respect to her second argument, Patts asserts that, even if there were a transfer to avoid, there can be no recovery for the estate because the Property is subject to the valid homestead exemptions of
B. The Trustee
The Trustee opposes summary judgment arguing that there are genuine issues of material fact to be tried. Additionally, he maintains that Patts is not entitled to summary judgment as a matter of law because: (1) 11 U.S.C. § 522(g) is inapplicable where the Debtor voluntarily executed the Transfer Deed; and (2) the “Debtor cannot exempt the estate[’s] interest arising from the Transfer Deed to Helen Patts.”
In support of his assertion that there are material issues of fact in dispute, the Trustee maintains that Patts’s “predilection for transferring her interest in the [Property] to insiders notwithstanding her spouse’s debts and joint mortgages, creates a genuine issue of material fact: whether her motive for participating in the Transfer and Retransfer Deeds includes actual fraud.” In light of this purported factual dispute, the Trustee asserts that summary judgment is not appropriate under Fed.R.Civ.P. 56(a).
The Trustee’s legal argument appears to be premised on the theory that the Debtor is unable to rely on 11 U.S.C. § 522(g) and, as a result, Patts concomitantly cannot rely upon Hill which was decided in the context of § 522(g). The Trustee argues:
The homestead exemption asserted in the Motion [for Summary Judgment] fails to take into account the undisputed fact that when Debtor and Helen Patts transferred their joint interest in the [Property] through the Transfer Deed, title to the [Property] passed to Helen Patts. Section 551 preserves this contingent, equitable interest for the estate during and after Helen Patts held title. Further, Debtor cannot exempt property that arises from Helen Patts’s ownership interest in the [Property]: sections 541 and 522(b), read in combination, do not permit Debtor to exempt real property he does not own ... Unable to utilize § 522(g), the bulwark to Helen Patts’s defense, the Motion [for Summary Judgment] crumbles.
Helen Patts is not entitled to summary judgment on Count IV, which seeks recovery against Helen Patts as initial transferee, because the estate’s interest in the [Property] arises from the Transfer Deed to Helen Patts, and Debtor cannot exempt that which he does not own.
The Retransfer Deed, which transferred the Residence from Helen Patts back to herself and Debtor as tenants by the entirety, does not alter this result. Section 551 preserves the estate’s interest created by the fraudulent Transfer Deed to Helen Patts, which Trustee may recover from immediate or mediate transferees pursuant to § 550. The estate’s interest springs from Helen Patts, not the Debtor, and the Retransfer Deed merely relocated the estate’s contingent, equitable interest. Again, § 522(g), the bulwark for Helen Patts’s defense, proves ineffective; Helen Patts is not entitled to summary judgment on Count V because Debtor cannot exempt an interest he does not own.
The Trustee distinguishes this case from the Massachusetts cases relied upon by Patts because, he claims, she benefitted from the Transfer and Retransfer Deeds.
V. DISCUSSION
A. Summary Judgment Standard
The United States Court of Appeals for the First Circuit has stated:
It is apodictic that summary judgment should be bestowed only when no genuine issue of material fact exists and the movant has successfully demonstrated an entitlement to judgment as a matter of law. See Fed.R.Civ.P. 56(c). As to issues on which the movant, at trial, would be obliged to carry the burden of proof, he initially must proffer materials of evidentiary or quasi-evidentiary quality — say, affidavits or depositions — that support his position. When the summary judgment record is complete, all reasonable inferences from the facts must be drawn in the manner most favorable to the nonmovant. This means, of course, that summary judgment is inappropriate if inferences are necessary for the judgment and those inferences are not mandated by the record....
Desmond v. Varrasso (In re Varrasso,),
B. Applicable Law
Section 544 of the Bankruptcy Code provides that “... the trustee may avoid the transfer of an interest of the debtor in property ... that is voidable under applicable law by a creditor holding an unsecured claim....” 11 U.S.C. § 544(b)(1). “Applicable law” here is state law, that is, the UFTA. Section 550(a) of the Bankruptcy Code provides that to the extent a transfer is avoided, “... the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from— (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee.” 11 U.S.C. § 550(a). Section 550(d), however, limits that recovery by providing that “... [t]he trustee is entitled to only a single satisfaction under subsection (a) of this section.” 11 U.S.C. § 550(d).
Although the validity of the Debt- or’s claim of homestead in the Property is not at issue in this avoidance and recovery action,
7
Patts relies heavily on the decision of the United States Court of Appeals for the First Circuit in
Stornawaye Fin. Corp. v. Hill, (In re Hill),
(g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title, to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if—
(1)(A) such transfer was not a voluntary transfer of such property by the debtor; and
(B) the debtor did not conceal such property....
11 U.S.C. § 522(g) (emphasis added). Section 522(g) allows a debtor to exempt property that the trustee recovers, subject to certain limitations. Its purpose is “to allow an exemption “where a property interest has been
involuntarily
taken from a debtor by means such as execution, repossession or certification of judgment, [because] it would be inequitable not to permit a debtor to assert an otherwise allowable exemption....”’
Glass v. Hitt (In re Glass),
C. Analysis
Although the Trustee’s argument is less than clear, the Court distills it as follows: Notwithstanding the retransfer, the estate should be able to avoid the Transfer Deed and recover from Patts the value of what the Debtor conveyed to her, and there can be no homestead protection of that interest for the Debtor because the interest the Trustee seeks is owned and held by Patts. Moreover, 11 U.S.C. § 522(g) precludes a debtor’s claim of exemption in property recovered by a trustee which was voluntarily transferred by the debtor. While Patts would maintain that the Retransfer Deed restored the Debtor’s property interest to the estate and made it whole, the Trustee’s position is presumably premised on the assumption that the retransfer actually diminished the estate because it permitted the Debtor to claim a homestead in the Property which the Trustee has no grounds to challenge. In other words, had the retransfer not occurred, the Trustee could have simply avoided the Transfer Deed and recovered the full value of the Debtor’s interest in the Property without a claimed homestead exemption. The Court then is left to determine whether the Trustee can recover the value to the estate “lost” through the Debtor’s declaration of homestead. As discussed below, the Court finds that the Trustee cannot achieve that recovery for a number of reasons.
First, the Court finds that the amended complaint against Patts fails on a conceptual level as a back-door challenge to the Debtor’s claim of homestead and an effort to deprive the Debtor’s spouse of the value of that exemption which was validly claimed by the Debtor for the benefit of his family. In
Hill,
In the first place, giving force to [the creditor’s] word play would eviscerate the meaning of “recovers.” To “recover” ordinarily means to “get or win back.” Webster’s Third New Int’l Diet. 1898 (1993). Here, however, there was nothing to “get ... back” — no loss to recoup: by the time that the bankruptcy estate came into existence, the Property had been reconveyed. Because there was never a loss to the estate, there could be no recovery.
Id. at 33 (footnote omitted). Further, the Hill court found no clear evidence that § 522(g) was intended by Congress to punish all dishonest debtors and that the second transfer — the reconveyance was “curative, not fraudulent” and that the ensuing declaration of homestead was, therefore, “unexceptionable.” Id. at 35.
The above facts are analogous to the instant case. Much like the creditor in Hill, the Trustee here seeks to subvert the Debtor’s homestead which essentially divested the estate of any benefit resulting from the retransfer, a consequence the Trustee is apparently unwilling to accept in the absence of any grounds to object to the Debtor’s homestead. Hill, however, makes clear that a declaration of homestead following a fraudulent transfer and a subsequent voluntary prepetition recon-veyance is “unexceptionable” and that a reconveyance is curative of a prior fraudulent transfer. As the Debtor’s prior conduct in executing the Transfer Deed did not affect his ability to claim a valid homestead in the Property, this Court will not confer viability on the Trustee’s cause of action here to recoup the value of that exemption through an avoidance action commenced against the declarant’s spouse.
Second, the Trustee’s avoidance and recovery action against Patts fails for want of actual loss to the estate. The concepts of avoidance and recovery are distinct. A successful avoidance under § 544 will nullify a transfer, but it will not give a trustee control over the asset.
Congress Credit Corp. v. AJC Int’l.,
[Section] 550(a) is a secondary cause of action after a properly appointed representative has prevailed pursuant to the avoidance sections of the Code. Section 550(a) stands as a recovery statute only and not as a primary avoidance basis for an action, as it will only survive when coupled with the transfer avoidance sections of the Code.
A collective reading of the statutes reveals the foundational defects in the Trustee’s claims. The asset the Trustee seeks to recapture, namely the interest in the Property the Debtor conveyed to Patts or its equivalent value, was part of the Debt- or’s bankruptcy estate on the date the estate was created, having been recon-veyed to the Debtor through the Retrans-fer Deed. See 11 U.S.C. § 541(a). Notably, the Trustee does not allege in the amended complaint or anywhere else in the summary judgment record that the value of what the Debtor received in the retransfer was less than the value of what he conveyed out in the initial transfer. Indeed, the Trustee alleged in the amended complaint that the Property had a value of approximately $250,000 on the date the parties executed the Transfer Deed and alleged no facts to support a decreased valuation on the date of the Retransfer Deed. Patts asserted the identical current value, $250,000, as of the date of her affidavit. Based upon the averments in the amended complaint and the Patts affidavit, there was no economic loss to the estate following the transfers. Simply stated, the transfer the Trustee seeks to avoid has already been undone and the undiminished value of the transferred asset has been restored to the bankruptcy estate. Accordingly, any “recovery” for the benefit of the estate has already been completed, albeit by the Debtor and Patts. The Trustee’s stated premise: “[t]he estate’s interest springs from Helen Patts, not the Debtor ...” is faulty. The estate’s interest “springs” from the legal and equitable interests of the Debtor in property owned by him as of the commencement of the case, which in this case included a 50% undivided interest in the Property. See 11 U.S.C. § 541(a). This result is not altered by the Debtor’s valid homestead which prevents the estate from recovering any value as a result of the transfers. As stated above, a debtor’s claim of homestead following a reconveyance of a fraudulently transferred property is permissible in this Circuit, and this Court, accordingly, will not characterize a validly claimed homestead as a “loss” to the estate.
Moreover, in the absence of any demonstration of a loss to the estate sustained through the Transfer and Retransfer Deeds, the Court finds that a recovery by the Trustee under the facts of this case would constitute a windfall to the estate and a prohibited double recovery under 11 U.S.C. § 550(d). “While section 550(d) is typically implicated in situations where a trustee seeks recovery from multiple parties, this provision has also been used to ‘prohibit a trustee from recovering under [sjection 550(a) from a transferee that has already returned to the estate that which was taken in violation of the Code.’ ”
Bakst v. Wetzel (In re Kingsley),
06-12096-BKC-PGH,
The
Hill
court’s literal interpretation of the word “recover,” albeit in the context of 11 U.S.C. § 522(g), supports the above
The Court finds unavailing the Trustee’s attempt to distinguish this case from the above cases based upon the alleged benefit received by Patts from her participation in the Transfer and Retransfer Deeds. The Trustee offers a somewhat circular construct of the transactions to impose a benefit on Patts, claiming, on the one hand, that she benefitted by executing the Transfer Deed because it placed the Property beyond the reach of the Debtor’s creditors and then claiming, on the other hand, that she also benefitted when she reconveyed the Property back to a tenancy by the entirety which “worked to protect her interest as a non-debtor spouse against efforts by the Debtor’s creditors to seize or execute on the [Property.]” Under the Trustee’s own reasoning, the result of the conveyances placed Patts in exactly the same position she was in beforehand, namely a tenant by the entirety. In the absence of any showing by the Trustee that the Retransfer Deed reconveyed an asset to the estate of lesser value than that which was conveyed out, the fundamental similarity between the cases relied upon by Patts and this case remains firmly lodged, namely that there was no loss to the creditors as a result of the transfers.
Likewise, the Court discounts the Trustee’s emphasis on the unavailability of 11 U.S.C. § 522(g) to the Debtor for the apparent purpose of avoiding the application of Hill to the facts of this case. Far from being the “bulwark” of Patts’s defense, the Court finds that the statute is not in play here because, for all of the above stated reasons, the Debtor has no need to exempt property that is owned by Patts when her interest therein is not subject to avoidance and recovery by the Trustee. Accordingly, the Court gives no weight to the Trustee’s argument that Hill is inapplicable here because the Debtor voluntarily executed the Transfer Deed.
The Court grants summary judgment in favor of Patts on Counts I through IV of the amended complaint which relate to avoidance of the Transfer Deed (Counts I through III) and recovery for the benefit of the estate of the value of the property transferred through the Transfer Deed (Count IV) as there has been no demonstrable depletion to the estate and there is consequently no property or value for the Trustee to recover. The Court also grants summary judgment in favor of Patts on Count V, through which the Trustee seeks recovery pursuant 11 U.S.C. § 550(a) of the property, or its value, Patts transferred through the Re-transfer Deed. Summary judgment on this count is appropriate because the Debtor’s bankruptcy estate has already recovered the value of the Debtor’s interest arising from that transaction, albeit subject to his unchallenged homestead. Moreover, in the absence of any count in the amended complaint seeking to avoid the Retransfer Deed, it is dubious whether a count under § 550(a) can stand alone.
See Santee v. Nw. Nat’l Bank (In re Mako, Inc.),
Notes
. The Retransfer Deed, a copy of which is attached as Exhibit 7 to the Affidavit of Elizabeth P. Barletta, submitted by the Trustee in support of his Opposition, reflects that Patts executed that deed on May 27, 2011 and that it was recorded on June 14, 2011.
. The Court may take judicial notice of the Debtor’s Schedules of Assets and Liabilities.
See LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning Corp.),
. Under that statute, .. A homestead declaration shall benefit each owner making the declaration and that owner's family members who occupy or intend to occupy the home as their principal residence.” Mass. Gen. Laws ch. 188, § 3(a).
. The Transfer Deed contains an acknowledgment in which the notary attested that the Debtor acknowledged to him that he signed the deed voluntarily.
.According to the Barletta affidavit, the Arrow mortgage was granted by both the Debtor and Patts. Notwithstanding this assertion, the Debtor’s Schedules A and D indicate that there is one mortgage on the Property "in the name of Helen J. Patts” and that the Debtor has no creditors holding secured claims. Additionally, the claims register in this case reflects that no creditor has asserted a secured claim against the Debtor.
. Fed.R.Civ.P. 56 was amended effective December 1, 2010. The summary judgment standard now appears in subsection (a) of Rule 56, rather than at subsection (c). The amended rule, however, does not change the standard for summary judgment.
See Farmers Ins. Exch. v. RNK, Inc.,
. The Trustee concedes in his Opposition that he did not file a timely objection to the Debt- or's claim of homestead exemption.
. At the hearing held on February 22, 2012, the Court directed the parties to the decision of
First Nat'l Bank of Boston v. Richmond (In re Gustie),