United States Court of Appeals

For the First Circuit

No. 08-9006

IN RE DAVID HILL,

Debtor.

____________________

STORNAWAYE FINANCIAL CORPORATION,

Plaintiff, Appellant,

v.

DAVID HILL,

Defendant, Appellee.

APPEAL FROM THE BANKRUPTCY

APPELLATE PANEL FOR THE FIRST CIRCUIT

Before

 Torruella, Selya and Lipez, 

Circuit Judges.

Michael B. Feinman, with whom Feinman Law Offices was on

brief, for appellant.

Isaac H. Peres for appellee.

April 1, 2009
 Massachusetts law requires that "an estate of homestead in 1

real property" be recorded either as part of the deed of conveyance

or in a subsequent writing "duly signed, sealed and acknowledged

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SELYA, Circuit Judge. This bankruptcy appeal concerns a

matter of first impression at the circuit court level. The pivotal

question is this: May a debtor's homestead exemption be denied,

under 11 U.S.C. § 522(g), with respect to residential property

fraudulently transferred but voluntarily reconveyed pre-petition in

response to efforts of a creditor? The bankruptcy court answered

this question affirmatively. The bankruptcy appellate panel (the

BAP) disagreed, holding that section 522(g) does not authorize a

denial of the exemption in these circumstances. In re Hill, 387

B.R. 339 (BAP 1st Cir. 2008). We find the language of section

522(g) to be plain and unambiguous. Consequently, we affirm.

At this stage of the proceedings, the material facts are

not seriously disputed. In 2000, the debtor, David Hill,

personally guaranteed a $250,000 bank loan made to a corporation.

Subsequently, Stornawaye Financial Corporation became the holder in

due course of both the promissory note evidencing the debt and the

concomitant guaranty.

In May of 2004, the debtor and his wife, Tina R. Hill,

sold their Connecticut residence and as tenants by the entirety

purchased a home at 11 River Meadow Drive, West Newbury,

Massachusetts (the Property). They recorded the deed, which

contained no homestead declaration, on May 11. The Hills paid 1
and recorded." Mass. Gen. Laws ch. 188, § 2. The rights emanating

from a declaration of homestead are delineated in a separate

subsection. See id. § 1. No Massachusetts homestead exemption may

be claimed pursuant to 11 U.S.C. § 522(b)(3) unless a declaration

has been duly filed and recorded in compliance with state law. See

In re Garran, 338 F.3d 1, 4-5 (1st Cir. 2003).

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$1,000,000 for the Property, $450,000 of which was fronted by a

mortgagee.

On August 26, 2004, the Hills transferred the Property to

Mrs. Hill for $1.00. Five days later, Mrs. Hill recorded a

declaration of homestead. On the same date, she and her husband

refinanced the mortgage, slightly reducing their monthly

installment payments.

The other shoe dropped on January 18, 2005: Stornawaye

sued the Hills in a Massachusetts state court to collect the

balance owed on the guaranteed indebtedness. It alleged, among

other things, that the Property (which it sought to attach) had

been fraudulently conveyed with the Hills' connivance. Mrs. Hill

was served on January 31. She informed the debtor. 

The suit galvanized the Hills into corrective action.

Acting on the advice of counsel, Mrs. Hill re-transferred the

Property to their joint names as tenants by the entirety. The

deed, which restored the status quo ante, was dated February 2,

2005, and was recorded the next day. The debtor immediately

recorded a declaration of homestead.
This appeal concerns only the dispute over the claimed 2

homestead exemption. Details concerning Stornawaye's objection to

a discharge are supplied only for context. 

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On April 4, 2005, the debtor filed a straight bankruptcy

petition under Chapter 7. See 11 U.S.C. §§ 701-727. He opted for

the state exemption scheme and claimed a $500,000 homestead

exemption referable to his interest in the Property. Stornawaye

objected to the claimed exemption and initiated an adversary

proceeding in the bankruptcy court. Amidst other requests for

relief, its complaint sought to bar a discharge in bankruptcy.

Upon the conclusion of trial, the bankruptcy court reserved

decision.

On May 4, 2007, the court rendered a bench decision.

First, it capped the debtor's potential homestead exemption at

$125,000 on the ground that the Property had been acquired within

the 1,215-day period preceding the filing of the bankruptcy

petition. See 11 U.S.C. § 522(p). Second, it determined that even

this reduced sum was unavailable; in its view, 11 U.S.C. § 522(g)

precluded the debtor from taking any exemption because the Property

had been voluntarily transferred and then reconveyed as a result of

a creditor's efforts.

Third, the bankruptcy court sustained Stornawaye's

objection to the granting of a discharge. It reasoned that the 2

transfer of the Property had been undertaken with the intent to

hinder, delay, or defraud a creditor. See id. § 727(a)(2)(A). In
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reaching this conclusion, the court rejected the Hills' explanation

that they had deeded their home to Mrs. Hill in order to refinance

it and obtain a superior interest rate. The court also offered two

other grounds for denying a discharge, each of which involved the

debtor's failure seasonably to disclose and turn over certain tax

refunds. See id. §§ 727(a)(2)(A)-(B), 727(a)(4)(A). 

On appeal to the BAP, the debtor assigned error to the

denial of a discharge, the capping of his claimed homestead

exemption, and the preclusion of that exemption. The BAP upheld

the denial of the discharge based on the debtor's failure to turn

over tax refunds in a timeous manner. In re Hill, 387 B.R. at 349-

50. It did not pass upon the other grounds related to denying a

discharge that the bankruptcy court had formulated. 

As to the homestead exemption, the BAP ruled in favor of

the debtor on both facets of the dispute. It held that the

statutory cap did not apply in bankruptcy cases (like this one)

that had been instituted prior to April 20, 2005. See id. at 348-

49. With respect to the exemption itself, the BAP held that the

plain language of section 522(g) limited its applicability to

"property that the trustee recovers." Id. at 346 (emphasis

supplied). Because the Property had been reconveyed as a result of

an action by a creditor, not an action by a trustee, the statute

did not pertain. Id. This further appeal ensued.
 Stornawaye does not contest that the exemption, if available 3

at all, is capped at $500,000.

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Congress has provided bankruptcy litigants with a twotrack opportunity for intermediate review: they may appeal either

to a district court or to a bankruptcy appellate panel. See 28

U.S.C. § 158. Regardless of which track an appellant selects, our

task is the same: in either event, we concentrate on the bankruptcy

court's decision, reviewing its findings of fact for clear error

and its conclusions of law de novo. In re Healthco Int'l, Inc.,

132 F.3d 104, 107 (1st Cir. 1997). Because this standard of review

is identical to that employed by both of the intermediate appellate

tribunals, we cede no special deference to the intermediate

decision itself. Id.

In this venue, the debtor no longer pursues his claim of

entitlement to a discharge. The sole remaining issue is whether he

is entitled to the homestead exemption. Stornawaye advances two 3

reasons why he has no such right. We examine each reason in turn.

Stornawaye's most loudly bruited remonstrance involves

the proper interpretation of section 522(g). Before turning to

that remonstrance, we pause to rehearse some bedrock legal

principles.

Statutory interpretation begins with the language of the

statute. United States v. Ron Pair Enters., Inc., 489 U.S. 235,

241 (1989); Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1,
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8 (1st Cir. 2007). We assume that the words Congress chose, if not

specially defined, carry their plain and ordinary meaning. Boivin

v. Black, 225 F.3d 36, 40 (1st Cir. 2000). If that meaning

produces a plausible (though not inevitable) result, that is

generally the end of the matter. Plumley v. S. Container, Inc.,

303 F.3d 364, 369 (1st Cir. 2002). Of course, plain meaning

sometimes must yield if its application would bring about results

that are either absurd or antithetical to Congress's discernible

intent. See Baez v. INS, 41 F.3d 19, 24 (1st Cir. 1994).

With this foundation in place, we turn to the text of

section 522(g). The statute provides in pertinent part that,

notwithstanding certain enumerated provisions of the Bankruptcy

Code,

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). Stornawaye insists that this statute forbids

the debtor's use of the exemption in the circumstances of this case

and that, in all events, construing the statute to allow an
 The bankruptcy court also mentioned In re Snyder, 108 B.R. 4

150 (Bankr. N.D. Ohio 1989). Snyder is of little utility. That

decision merely states, in surveying the case law, that section

522(g) can apply to actions by creditors. See id. at 153-54. As

the sole authority for this proposition, Snyder cites Carpenter.

See id. 

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exemption here would contravene its core purpose. We test these

hypotheses. 

To begin, the plain language of section 522(g) is

inhospitable to Stornawaye's linguistic argument. By its own

terms, the statute applies only to "property that a trustee

recovers." "Trustee" and "creditor" are separate nouns, with

distinct meanings, and the Bankruptcy Code does not treat them as

synonyms. Compare, e.g., 11 U.S.C. §§ 701-703 (establishing

procedures for disinterested persons to serve as trustees), with,

e.g., id. § 101(10) (defining "creditor").

The contrary authority on which Stornawaye relies is not

persuasive. The centerpiece of its argument is the decision in In

re Carpenter, 56 B.R. 704 (Bankr. D.R.I. 1986). The Carpenter 4

court held on similar facts that section 522(g) precludes a debtor

from taking an exemption in property voluntarily transferred by him

and later reconveyed pre-petition through the efforts of a

creditor. Id. at 707. In support, the court cited only cases

involving post-petition actions by creditor committees. Id. More

importantly, Carpenter defied the plain meaning of section 522(g)

even while recognizing that the text of the statute seemed to
 In legal parlance, "recover" sometimes means "[t]o obtain by 5

a judgment." Black's Law Dict. 1302 (8th ed. 2004). Even when

used in this sense (a usage that we do not endorse in the present

context), the word does not permit the reading that Stornawaye

promotes. 

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compel a different outcome. Id. We conclude, therefore, that

Carpenter, which appears to have been incorrectly decided,

furnishes no sustenance for Stornawaye's hypothesis.

In a different iteration of its linguistic argument,

Stornawaye contends that the word "recovers" should be interpreted

"passively," such that it would include a pre-petition reconveyance

of property, so long as that reconveyance results in the property's

inclusion in the later-established bankruptcy estate. For this

proposition, Stornawaye relies on several cases holding that when

a trustee causes a debtor to retransfer property to the estate

post-petition simply by filing or threatening to file an action,

the trustee has recovered property within the purview of section

522(g). See, e.g., In re Ringham, 294 B.R. 204, 208-09 (Bankr. D.

Mass. 2003). Stornawaye posits that the situation at hand

represents a logical extension of these holdings. We do not agree.

In the first place, giving force to Stornawaye's word

play would eviscerate the meaning of "recovers." To "recover"

ordinarily means to "get or win back." Webster's Third New Int'l

Dict. 1898 (1993). Here, however, there was nothing to "get . . 5

. back" — no loss to recoup: by the time that the bankruptcy estate
 There is a limited set of circumstances, in Chapter 11 6

cases, in which a creditor may be given permission to exercise some

of these powers. See In re STN Enters., 779 F.2d 901, 904 (2d Cir.

1985). That exception is not apposite here.

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came into existence, the Property had been reconveyed. Because

there was never a loss to the estate, there could be no recovery.

There is, moreover, a second reason why this contention

will not wash. Section 522(g), in terms, requires not just a

recovery, but a recovery by the trustee, pursuant to powers

delineated in particular sections of the Bankruptcy Code, namely,

11 U.S.C. §§ 510(c)(2), 542, 543, 550, 551, and 553. Stornawaye is

a creditor, not a trustee; and in Chapter 7 cases these enumerated

powers are conferred exclusively upon trustees, not upon

creditors. While a trustee may be thought to have used these 6

powers to recover property when he merely threatens to employ them,

a creditor who files a pre-petition suit under state law to annul

a fraudulent conveyance cannot conceivably be thought to have

availed himself of any of these powers. After all, the bankruptcy

estate was not even in existence when the creditor sued. 

The second branch of Stornawaye's statutory construction

argument is based on the premise that section 522(g) is intended to

be punitive and, therefore, construing it to allow the debtor an

exemption notwithstanding his chicanery would be absurd and/or

inconsistent with statutory purpose. But that premise for the

argument is unproven.
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"In determining congressional intent, we employ the

traditional tools of statutory construction, including a

consideration of the language, structure, purpose, and history of

the statute." McKenna v. First Horizon Home Loan Corp., 475 F.3d

418, 423 (1st Cir. 2007) (citation and internal quotation marks

omitted). There is no legislative history that illuminates the

purpose of section 522(g). See In re Glass, 60 F.3d 565, 569 n.4

(9th Cir. 1995). Thus, we are left with language, structure, and

evident purpose.

The phrasing of the statute cuts against Stornawaye's

theory. Section 522(g) is phrased permissively ("the debtor may

exempt"). This is inconsistent with the claim that the statute is

meant to be generally punitive (that is, designed to punish all

dishonest debtors). 

By the same token, the structure of the statute militates

against Stornawaye's theory. Most of the operative language in

section 522 is found in subsection (b), which authorizes a debtor

to select either a federal exemption scheme (laid out in subsection

(d)) or a hybrid state and federal exemption scheme (laid out in

subsection (b)(3)). The fact that Congress allowed debtors to

choose the more generous scheme belies the notion that it meant the

statute to be generally punitive. See generally 4 Lawrence P. King

et al., Collier on Bankruptcy ¶ 522.01 (15th ed. 2003) (noting that
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section 522 is principally concerned with providing debtors with

sufficient resources to effectuate a "fresh start"). 

Although section 522(g) recognizes that the trustee

ordinarily recovers property for the benefit of the bankruptcy

estate, it provides a further opportunity for a debtor to claim an

exemption in property that was not in the debtor's portfolio when

the bankruptcy proceeding began (so that the property was not

subject to section 522(b)). This additional opportunity is

available only for property involuntarily transferred away and not

concealed by the debtor. See id. ¶ 523.12[1]. Seen in this light,

it is at least arguable that, as the BAP stated, section 522(g)

reflects a congressional desire to "prevent the situation in which

a trustee incurs expenses, to be paid by the estate, to recover

fraudulently conveyed property, only to have the debtor exempt it

after the effort has been made." In re Hill, 387 B.R. at 348; cf.

11 U.S.C. § 522(k)(1) (making property exempted under section

522(g) liable for the aliquot share of costs and expenses incurred

in avoiding the transfer). There is, therefore, no clear evidence

that section 522(g) was sparked by Congress's intention to punish

all dishonest debtors. 

Stornawaye has a fallback position. It invites us to

deny the debtor's claim of exemption under an alternative theory.

We decline the invitation.
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Stornawaye's alternative theory runs along the following

lines. It observes, correctly, that the bankruptcy court denied

the debtor a discharge because, among other things, the debtor had

engaged in pre-petition conduct with the intent to hinder, delay,

or defraud creditors. That finding, Stornawaye says, suggests that

the court found each of the constituent conveyances (that is, the

deed from the Hills to Mrs. Hill, the deed from Mrs. Hill back to

the couple, and the debtor's declaration of homestead) to be

fraudulent. Building on that platform, Stornawaye asserts that

setting aside the whole series of fraudulent conveyances was an

available remedy in the state court action — a remedy which, if

effectuated, would have left the house in the Hills' joint names

without any valid declaration of homestead. 

This is wishful thinking: the debtor's forensic tapestry

is woven of gossamer strands of speculation and surmise. In

particular, Stornawaye's theory rests on an incorrect factual

premise. The record makes manifest that the bankruptcy court's

finding of fraudulent intent was predicated on its assessment of

the initial transfer, which was designed to divest the debtor of

his interest in the Property and place that interest beyond the

reach of his creditors. The second transfer — the reconveyance —

was curative, not fraudulent. The ensuing declaration of homestead

was, therefore, unexceptionable. 
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We need go no further. We hold that 11 U.S.C. § 522(g)

does not authorize the bankruptcy court to deny a debtor's

homestead exemption with respect to property that had been

fraudulently transferred and then voluntarily reconveyed prepetition, even though the retransfer came about through the efforts

of a creditor. Consequently, we uphold the BAP's decision

reversing the bankruptcy court's contrary order. 

Affirmed.