UNITED STATES v. Michael MURRAY, Judith Murray, Eastern Savings Bank, Household Finance Corporation II, Lep Profit In╜ternational, Inc., United States District Court, D. Massachusetts., 73 F.Supp.2d 29, Civil Action No. 97-10602-RGS., March 5, 1999

UNITED STATES v. Michael MURRAY, Judith Murray, Eastern Savings Bank, Household Finance Corporation II, Lep Profit In╜ternational, Inc.

United States District Court, D. Massachusetts.

73 F.Supp.2d 29

Civil Action No. 97-10602-RGS.

March 5, 1999.

Order Vacating Opinion in Part on Reconsideration in Part, May 7, 1999.

Carina J. Campobasso, Trial Atty., Tax Div., U.S. Dept. of Labor, Washington, DC, for Plaintiff.

John C. Ottenberg, Berry, Ottenberg & Dunkless, Boston, MA, for Judith E. Mur╜ray.

Robert L. Marder, Lynn, MA, for East╜ern Savings Bank.

Peter J. Brockmann, Shectman, Litsey, Levy & Halpern, Providence, RI, for Household Finance Corp.

MEMORANDUM AND ORDER ON

CROSS-MOTIONS FOR SUMMARY JUDGMENT

STEARNS, District Judge.

The Internal Revenue Service (IRS) is seeking to confirm the validity of a tax lien it holds on Michael Murray's beneficial interest in a home ("Juliette Road") in Saugus, Massachusetts. Judith Murray, Michael Murray's former wife, contends that the entire beneficial interest in the home is hers, and that the lien, while valid, attaches to nothing.

BACKGROUND

The facts construed in the light most favorable to the Murrays are as follows. ¹ Judith and Michael Murray were married in 1967. J. Murray Aff. ╤ 5. In 1976, the Murrays purchased a home at 9 Juliette Road in Saugus, taking title as tenants by the entirety. Id. , at ╤ 9. In 1980, the Murrays were advised to put the home in trust. An attorney, Richard Reynolds, prepared a trust instrument deeding the property to the trustees of the M & J Murray Realty Trust. Plaintiff's Ex. 4; J. Murray Aff. ╤ 9. The Trust was recorded at the Southern Essex County Registry of Deeds on February 4, 1981. Plaintiffs' Exs. 3 and 4.

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^1. Several salient counter-facts favorable to the IRS are noted where appropriate, although the material facts are largely undis╜puted.

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The trust instrument named Judith Murray, Michael Murray, and Frederick Chalifoux as trustees. Chalifoux is Judith Murray's step-brother and is "an experi╜enced and trusted business and financial advisor." J. Murray Aff. ╤ 11. Chalifoux participates actively in the management of the Trust. Id . Under the terms of the trust, the trustees have "absolute control, management, and disposition of the Trust Property as if they were the absolute own╜ers thereof, free from the control of the beneficiaries," including the powers to sell, lease or mortgage the property, and to invest the trust's assets without restric╜tion. Plaintiff's Ex. 4, Art. IV. Any action requires the vote of at least two trustees. Id. , Art. III, ╤ 2. The Trust has a twenty year term, but it can be terminated at any time by a majority of the trustees. Id. , Art. VII. Michael and Judith are the bene╜ficiaries of the Trust, each having an equal share of its income and assets. Id ., Art. II, ╤ 1 and 2. The Trust provides that at its termination, the Trust Assets will be distributed evenly between Michael Mur╜ray and Judith Murray "if they shall be living;" but if either Michael or Judith predecease the other, the survivor takes the decedent's share. Id ., Art. II ╤ 3. The trust instrument also contains a spend╜thrift clause stating that the interest of the beneficiaries may not be assigned, at╜tached or alienated in any way. Id. , Art. II, ╤ 4.

The Murrays were solvent when the Trust was created and had no reason to anticipate any unmanageable debt. The Trust was intended to provide the Mur╜rays with an ownership vehicle for pur╜chases of additional real estate. J. Murray Aff. ╤ 9. ² Also of concern was a swimming pool that the Murrays had recently install╜ed. The Murrays were advised by their attorney that the Trust would put Juliette Road beyond the reach of any injured judgment creditor. Id .

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^2. There is no evidence that the Murrays ever purchased any additional real estate.

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In March of 1987, Michael Murray's air freight trucking business, All Air Trans╜portation Corp. (AATC), needed capital. The Trust agreed to give a second mort╜gage on Juliette Road to Household Fi╜nance Corporation as security for a loan to AATC of $26,714.05. ³ Id ., ╤ 13. The Mur╜rays considered the loan as a distribution from Michael's share in the Trust. Id. , ╤╤ 14 and 16; M. Murray Aff. ╤╤ 3 and 6. ⁴

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^3. At the time of the Household Finance loan, Juliette Road was appraised at $135,000. J. Murray Aff. ╤ 13.

^4. No Trust document reflects this understand╜ing.

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Michael has not contributed towards the payment of the Trust's expenses since 1985. Nor has he made the payments on the Household Finance loan. ⁵ J. Murray Aff. ╤ 14. Judith Murray has since 1985 made all payments on the first and second mortgages. She has also paid the real estate taxes and the costs of maintaining Juliette Road. Id .

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^5. The total payment required over the life of the second mortgage is $61,885.15. The loan presently has an outstanding principal bal╜ance of approximately $4,000.

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Judith and Michael Murray separated in May of 1987. Judith filed for divorce in March of 1988, and obtained an attach╜ment on Michael's interest in Juliette Road. The parties executed a Separation Agreement in September of 1988. The divorce became final in March of 1989. J. Murray Aff. ╤╤ 5 and 16.

On November 21, 1998, the IRS as╜sessed Michael Murray the sum of $105,╜243.06 for his failure to pay AATC's withholding and employment taxes during calendar 1987 and for the first quarter of 1988. Plaintiffs Exs. 1 and 2. A notice of the assessment and a demand for pay╜ment was served on Michael Murray. ⁶ On March 14, 1989, the IRS recorded a Notice of Federal Tax Lien at the South╜ern Essex County Registry of Deeds. Plaintiff's Ex. 2.

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^6. Judith states that she first learned of the tax lien when this case was filed in 1997. J. Murray Aff. ╤ 8.

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When Judith and Michael Murray exe╜cuted their Separation Agreement in Sep╜tember of 1988, "Judith and Michael be╜lieved there was no remaining value to Michael's beneficial interest in the Trust." ═ J. Murray Aff. ╤ 16. The Separation Agreement, however, required Michael Murray to convey his "right, title and in╜terest" in Juliette Road to Judith Murray within thirty days. ⁷ Separation Agree╜ment, at 4; J. Murray Aff. ╤ 16; M. Mur╜ray Aff. ╤ 6. Both Judith Murray and Michael Murray state in affidavits that they intended any remaining beneficial in╜terest in the Trust held by Michael to devolve on Judith upon execution of the Separation Agreement. J. Murray Aff. ╤ 16; Michael Murray Aff. ╤ 6. The trust╜ees, however, did not formally transfer Juliette Road to Judith Murray until March 29, 1989. Plaintiff's Ex. 6. The deed transferring the property was record╜ed on April 5, 1989. Id .

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^7. There is no evidence that Michael Murray did so.

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In 1994, Michael Murray was unem╜ployed, suffering from depression and homeless. Judith allowed Michael to re╜sume living at Juliette Road. ⁸ Michael makes no present contribution towards the maintenance of the property. Id. , at ╤ 19.

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^8. Judith testifies that she and Michael "have not resumed [their] relationship as husband and wife, either legally or de facto." J. Murray Aff. ╤ 18.

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DISCUSSION

Summary judgment is appropriate if the court finds that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The stan╜dard of review of cross-motions for sum╜mary judgment

is identical to that for an individual mo╜tion, the Court must handle each of the cross motions as if they were two dis╜tinct, independent motions. Arnold Pontiac-GMC v. General Motors, 700 F.Supp. 838, 840 (W.D.Pa.1988). Thus, in evaluating each motion, the Court must consider the facts and inferences in the light most favorable to the nonmov╜ing party. Continental Grain Co. v. Puerto Rico Maritime Shipping Auth., 972 F.2d 426, 431 (1st Cir.1992).

Lowel-Light Manufacturing, Inc. v. Fed╜eral Deposit Insurance Corp., 848 F.Supp. 278, 281 (D.Mass.1994).

A federal tax lien arises when unpaid taxes are assessed. The lien con╜tinues until the tax liability is satisfied or the lien becomes unenforceable because of the running of the statute of limitations. 26 U.S.C. ╖╖ 6321, 6322. Federal tax liens attach to "all property and rights to prop╜erty, whether real or personal, belonging to [the taxpayer]." 26 U.S.C. ╖ 6321. What is "property" for purposes of the lien is determined by state law. Markham v. Fay, 74 F.3d 1347, 1355-1356 (1st Cir. 1996). While a delinquent taxpayer's vest╜ed interest in a trust can ordinarily be attached, the matter becomes complicated when the taxpayer's interest is intermixed with the interests of other beneficiaries. Under federal law "a tax lien extends only to property or rights to property belonging to the delinquent taxpayer, and not to property belonging to innocent third par╜ties." ⁹ Markham, 74 F.3d at 1356.

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^9. Section 6323 of the Code sets out the inter╜ests that have priority over a ╖ 6321 lien. Consistent with the statute, the IRS has stipu╜lated to the prioritv of the Eastern Bank and Household Finance mortgages.

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The IRS attacks the M & J Murray Family Trust on several fronts. The Mur╜rays, it will be recalled, were the settlors and sole beneficiaries of the Trust. They were also two of the three trustees. Ju╜liette Road constituted the entire corpus of the Trust. Because the Murrays, acting in concert, had the power at any time to terminate the Trust and reclaim their re╜spective shares, ¹⁰ the IRS argues that the Trust was in essence a revocable trust. Thus, the IRS contends that the federal tax lien attached to Michael Murray's one╜half interest in the property without re╜gard to the niceties of trust. See Mark╜ham., 74 F.3d at 1357 ("If Fay revoked the trust, or amended it to make herself the sole beneficiary, the legal title and equita╜ble interest would merge and thereby ter╜minate the trust").

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^10. Article III of the Trust states that "at least two of the Trustees shall act with respect to the administration of the Trust hereunder or to exercise any of the powers hereby con╜ferred."

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Alternatively, the IRS argues that the Trust was a sham because the Murrays "continued to treat [Juliette Road] in ex╜actly the same manner after the transfers as they did before that time, quite simply, as their own." F.P.P. Enterprises and D & S Trust v. United States, 830 F.2d 114, 117 (8th Cir.1987). ¹¹

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^11. The government notes that in conjunction with her divorce action, Judith Murray filed an attachment against "the right, title and interest" held by Michael Murray in the Ju╜liette Road property, thus evidencing her be╜lief that the Trust had no valid existence.

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They lived there together continuously from the time they purchased it in 1976 to [the] time that they separated in the spring of 1987. Mrs. Murray continued to live there after the separation. They took the mortgage interest and real es╜tate tax deductions on their personal returns . . . . In short, the Murrays never acted toward the Property in any way except as its true owners.

IRS Memorandum, at 8-9 (citations omit╜ted).

Finally, the IRS argues that the trans╜fer of Juliette Road to the Trust was a fraudulent conveyance. According to Ju╜dith Murray, the residence was put in trust so that

if [she] got into an accident and the limits of my [insurance] policy had ex╜pired that they could not come and at╜tach my property. The same thing if anybody got injured in the pool, they could not come and take the house at 9 Juliette Road, attach the property, what╜ever. ¹²

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^12. Michael Murray refused to answer the IRS' questions regarding the purposes of the Trust. Plaintiff's Ex. 13. Based upon this refusal, the IRS contends that an adverse inference may appropriately be drawn. Cf. F.D.I.C. v. Elio , 39 F.3d 1239, 1248 (1st Cir. 1994).

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See Plaintiff's Ex. 10, at 39. Under the Uniform Fraudulent Conveyance Act, G.L. c. 109A, ╖ 7,

every conveyance made and every obli╜gation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors.

The IRS contends that ╖ 9(1)(b) of the UFCA permits it to "[d]isregard the con╜veyance and attach or levy execution upon the property conveyed." ¹³

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^13. Because Judith Murray is not a "purchaser for fair consideration without knowledge of the fraud," the IRS asserts that any purported conveyance of Michael's interest in Juliette Road to Judith must be disregarded. IRS Memorandum, at 16-17.

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Merely because property is held in trust, it is not necessarily immune from creditors. It has long been the law in Massachusetts "that a settlor cannot place property in trust for his own benefit and keep it beyond the reach of creditors." Ware v. Gulda, 331 Mass. 68, 70, 117 N.E.2d 137 (1954), quoting Merchants Na╜tional Bank v. Morrissey, 329 Mass. 601, 605, 109 N.E.2d 821 (1953). See Restate╜ment (Second) of Trusts ╖ 156 . This is true even when a settlor-beneficiary en╜cumbers the trust with a spendthrift provi╜sion. State Street Bank and Trust Co. v. Reiser, 7 Mass.App.Ct. 633, 636, 389 N.E.2d 768 (1979). It is also true that where the powers of the trustee may only be exercised at the direction of the benefi╜ciary, the trust may be penetrated by the beneficiary's creditors. Zuroff v. First Wisconsin Trust Co., 41 Mass.App.Ct. 491, 493, 671 N.E.2d 982 (1996). And finally, where a settlor-beneficiary names herself as the sole trustee with unlimited powers over the corpus, a creditor may reach through the trust to its assets. Markham 74 F.3d at 1357 ("The touchstone of the analysis ... is whether the trust instru╜ment as a whole gives [the trustee] the power to eliminate the interests of all oth╜ers in the trust"). The result is different, however, where the beneficiary of a trust, even a settlor-beneficiary who serves as the sole trustee, is unable under the terms of the trust instrument to treat the trust assets as if the trust did not exist.

Although Fay is the settlor, trustee and a beneficiary, the trust instrument gives her no power to unilaterally alter, amend or revoke the trust, limits her discretion as trustee to distribute in╜come, and limits her right to receive income as a beneficiary to an amount in proportion to the shares owned by her. Fay's rights and powers therefore were not so centralized as to make the entire trust property her own.

Id. , at 1363.

The instrument creating the M & J Murray Family Trust names three trust╜ees imbued with broad powers to manage the trust assets. ¹⁴ Michael Murray did not, however, as a trustee, have the unilat╜eral right to alter or amend the terms of the trust instrument. While it is true that Michael Murray, acting in concert with Judith Murray, had total control of the assets of the trust, this is legally irrele╜vant. It is only when a trustee beneficiary has the unilateral power to extinguish the interests of his co-beneficiaries that the separation of legal and equitable title is destroyed. A.W. Scott, The Law of Trusts, ╖ 150.1 (1967).

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^14. "Broad powers are typically conferred on a trustee as an effective way to manage trust property." Markham, 74 F.3d at 1357.

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The IRS's second argument, that the Trust was simply an alter ego for the Murrays, depends for its authority on F.P.P. Enterprises, supra . The trusts that figured in F.P.P. Enterprises, however, were business trusts, organized without regard for the requirements of state law, and for the admitted and sole purpose of sheltering the settlors' assets from credi╜tors. Of even greater significance, the trustees in F.P.P. E nterprises had no con╜trol over the trust property. Control rath╜er was vested exclusively in the beneficia╜ries. 830 F.2d at 117. The trusts, in other words, were de facto nominee trusts whose assets were reachable by creditors under Wyoming law just as they would be under Massachusetts law. See Znroff, su╜pra , 41 Mass.App.Ct. at 493, 671 N.E.2d 982 (a beneficiary's interest in a nominee trust may be seized to satisfy a tax liabili╜ty). The M & J Murray Family Trust, on the other hand, is an inter vivos trust, created under a proper instrument and duly recorded. See Markham, 74 F.3d at 1357 ("Traditionally, Massachusetts has given full effect to inter vivos trusts").

The IRS's final argument, that the transfer of Juliette Road to the Trust was a fraudulent conveyance rests on Judith Murray's admission that one of the rea╜sons for creating the Trust was to put Juliette Road beyond the reach of a poten╜tial tort claimant. If that had been the only reason, the IRS's argument would be conclusive (as it was in F.P.P. Enterpris╜es ). However, Judith Murray testified that the Trust was created for an addition╜al legitimate purpose: to provide an own╜ership entity for the couple's planned real estate investments. ¹⁵ While the Murrays' investment ambitions were never realized (plausibly because of Michael Murray's en╜suing financial difficulties), absent any evi╜dence that their stated intentions in this regard were "false when made," there is no basis upon which the Trust can be disregarded. In sum, I conclude that the Trust is a valid legal entity.

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^15. This testimony is corroborated by the trust instrument's statement of purpose.

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Given the validity of the lien and the validity of the Trust, the issue remains whether the lien attaches to Mi╜chael Murray's interest in Juliette Road. A federal tax lien as a rule does not attach to property that the delinquent taxpayer has no present right to receive. United States v. Cohn, 855 F.Supp. 572, 576-577 (D.Conn.1994). On the other hand, it does attach to a taxpayer's vested right in a trust.

[W]hether a right in a trust has vested depends on "whether, in substance, the interest is sufficiently established to con╜stitute an interest or right which has accrued to its holder," that is, whether it is subject to defeat only by biological events, in which case the right is vested, or whether it is subject to defeat by another person's decision to exercise a power that he or she holds, in which case the right does not vest until the person holding the power can no longer exercise it.

Markham, 74 F.sd at 1365 (internal cita╜tions omitted). The right of a beneficiary to have his share of the trust corpus paid over to his successors upon his death, free of trust, is under Massachusetts law, a present right to property. See Forbes v. Snow, 245 Mass. 85, 91-92, 140 N.E. 418 (1923); Alexander v. McPeck, 189 Mass. 34, 44, 75 N.E. 88 (1905). Similarly, in Markham, the Court found that the trust╜ee-beneficiary's (Fay) right to receive an╜nual distributions until her death or the termination of the trust was a presently vested property right. 74 F.3d at 1364. On the other hand, Fay's right to the corpus was not vested because she could not convey it to a stranger without the co╜beneficiaries' consent. Id . Moreover, she could receive her share of the liquidated assets during her lifetime only if a majori╜ty of the' beneficial shareholders voted to terminate the trust; otherwise, her execu╜tors, administrators or assigns succeeded to her rights upon her death. 74 F.ad at 1364-1365. Consequently, Fay's interest in the corpus was "too ethereal" to be a present right to property. 74 F.3d at 1365. This did not mean, however, that the IRS's lien was of no effect. "The lien will attach . . . upon Fay's death to what╜ever beneficial interest [in the corpus] she holds at that time, again assuming the tax debt remains unpaid." Id .

Under Massachusetts law, a properly constituted testamentary or inter vivos trust cannot be prematurely termi╜nated to pay a beneficiary's debt to a creditor (although the beneficiary's right to any eventual distribution from the trust corpus may be vested in the creditor to be paid over when the trust instrument ex╜pires). Forbes, 245 Mass. at 92-93, 140 N.E. 418. The M & J Murray Family Trust provides that the Trust will expire on January 9, 2001. At that time the corpus will be divided equally between Mi╜chael and Judith Murray "if they shall be living." Plaintiff's Ex. 4, Art. II, ╤ 3. That Michael's right to a share in the distribu╜tion is contingent -is legally irrelevant. Under Massachusetts law, a "bested inter╜est in a contingent right" is property reachable by an attachment. Clarke v. Fay , 205 Mass. 228, 235-236, 91 N.E. 328 (1910) (analyzing a remainder interest ac╜cruing to a debtor on the contingency that he should survive his father). Thus, the IRS's lien, which was recorded before the trustees purported to transfer Juliette Road to Judith Murray, is impressed on Michael's beneficial interest in the trust corpus and will attach to that interest when the Trust expires in 2001, unless the Trust is terminated earlier by the trustees or the tax debt is paid. ¹⁶ (The IRS, in the meantime, would be entitled to any distri╜bution of income from the Trust to Michael Murray, although as a practical matter, none is likely to be made).

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^16. While the trustees have broad powers in the interval over the trust corpus, their ac╜tions are constrained by their fiduciary obli╜gations to Michael Murray as a beneficiary and by the weight of Massachusetts law obligating his assets to his creditors. Ware, 331 Mass. at 71, 117 N.E.2d 137. See also In re Landry , 226 B.R. 507, 512-513 (Bankr. D.Mass.1998).

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Judith Murray, however, argues that Michael's interest in the Trust was either dissipated or transferred to her before the IRS lien arose. She first con╜tends that Michael's failure to repay the $26,714 loan guaranteed by the Trust ex╜hausted his rights as a beneficiary. While the trustees had the power (within the constraints of fiduciary duty) to remove Michael as a beneficiary, to do so required

an instrument in writing executed and duly acknowledged in the manner re╜quired for deeds and filed at the appro╜priate Registry of Deeds where any land, if any, conveyed to this Trust lies, and such change, modification, alteration or termination shall become effective upon said filing with the Registry of Deeds.

Plaintiffs Ex. 4, Art. VII ╤ 2. There is no evidence that any writing extinguishing Michael's rights as a beneficiary was ever recorded. See Restatement (Second) of Trusts ╖ 139 (1959) ("If by statute it is provided that all grants and assignments of any trust of land shall be in writing, signed by the party granting or assigning the same, a transfer of the interest of a beneficiary of a trust of land is not en╜forceable, unless the provisions of the stat╜ute are complied with").

In the alternative, Judith Mur╜ray argues that the Separation Agreement, executed prior to the IRS lien, transferred Michael's beneficial interest in Juliette Road to her. Whether a separation agree╜ment takes effect on execution is governed by the intent of the parties. Pavluvcik v. Sullivan, 22 Mass.App.Ct. 581, 584, 495 N.E.2d 869 (1986). The Murrays maintain that they did intend the Agreement to have immediate effect. However, the Agreement explicitly states that "[t]he Husband agrees to convey to the Wife, within thirty (30) days, all his right, title and interest in the real estate located at 9 Juliette Road, Saugus, County of Essex, Massachusetts." Art. II(B). There is no evidence that Michael ever did so, nor was any such conveyance ever recorded. What was recorded was the transfer of Juliette Road to Judith Murray on April 5, 1989, well after the IRS had recorded its lien. Consequently, the transfer was a nullity.

Finally, Judith Murray claims that Michael's interest in the Trust should be construed as personal rather than real property, based on the recital in the Sepa╜ration Agreement that "the parties ha[d] divided their personal property between them to their personal satisfaction." Art. II(A). When a "trust instrument directs that the trust assets be liquidated upon termination of the trust, the beneficiaries' interests are personal property from the trust's inception." Markham, 74 F.3d at 1361. However, the M & J Murray Fami╜ly Trust instrument does not direct a liqui╜dation of the trust corpus, merely a return of the legal title to the Trust assets to the Murrays.

ORDER

For the foregoing reasons, the court CONFIRMS the validity of the lien held by the Internal Revenue Service on Mi╜chael Murray's beneficial interest in the M & J Murray Family Trust. The court also AFFIRMS the validity of the Trust. The court further DETERMINES that Mi╜chael Murray's one-half beneficial interest in the Trust has not been dissipated and that any purported transfer of Michael's interest in the assets of the Trust to Judith Murray is a nullity. The IRS's Motion for Summary Judgment is therefore AL╜LOWED in part. Judith Murray's request that the Complaint be dismissed is DE╜NIED. The IRS, as the prevailing party, shall submit a proposed form of judgment within fourteen (14) days of this ORDER.

SO ORDERED.

MEMORANDUM AND ORDER ON DE╜FENDANT JUDITH E MURRAY'S OPPOSITION TO ENTRY OF JUDGMENT AND MOTION TO RECONSIDER

The motion to reconsider will be ALLOWED in part. On further reflection, I am persuaded by defendant Judith Murray's argument that the reasoning of my March 5, 1999 Memorandum is flawed in one respect-the finding that Michael Murray's interest in the M & J Murray Family Trust had vested prior to the filing of the federal tax lien. That determination was based on the holding of Clarke v. Fay, 205 Mass. 228, 235-236, 91 N. E. 328 (1910), that under Massachusetts law, a vested interest in a contingent right is reachable by a creditor (assuming that its value can be ascertained by sale or appraisal). While Clarke is good law, on closer read╜ing of the facts of the case, it is distin╜guishable. In Clarke, the right of the defendant to share in the fund established by his testator grandfather was "fixed" in the sense that the defendant "could by no contingency be deprived of the certainty of sharing in the fund, provided that he was alive at the death of his father." Id. , at 235, 91 N.E. 328. While at the expiration of the Murray Trust, Michael A,-ill be entitled to one-half of the remaining corpus so long as he is alive, it is true, as Judith Murray points out, that in the interval, a majority of the Trustees could oust Michael as a beneficiary. Thus, the Murray Trust is, as defendant contends, more like the High╜land Avenue Nursing Home Trust in Markham v. Fay, 74 F.3d 1347, 1360-1366 (1st Cir.1996), than the trust described in Clarke. While the March 5 Memorandum, at 10 (quoting from Fay ) correctly, states the Massachusetts rule as to when a prop╜erty right in a trust vests, I am now convinced that I incorrectly applied the rule to the Murray facts in the penultimate sentence of page 11. Like Fay, Michael Murray has no title to the trust property or right under the trust instrument to call for a partition. Nor does he have the right to receive or withdraw any part of the trust principal. Id. , at 1364. While the March 5 Memorandum correctly concluded that the tax lien attached to Michael's presently vested right to receive a share of any distribution of income from the Trust, as Fay makes clear, "a federal tax lien . . . does not attach to the trust corpus when [the taxpayer] has no present right to re╜ceive it." Id . ¹

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^1. "The possibility that Fay might receive a share of the trust corpus during her lifetime hinges on whether or not a majority of the holders of the beneficial shares vote to termi╜nate the trust, and whether or not they decide to amend the trust by removing her as a beneficiary. Thus, it does not amount to a present right to property under Massachusetts law." Id ., at 1365.

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This, however, does not end the matter. The federal tax lien has priority in time over the purported transfer of Michael's interest in Juliette Road to Judith. ² The issue remains whether the Trustees acted lawfully in attempting to extinguish Mi╜chael's beneficial interest in the Trust, or whether they were obligated by their fidu╜ciary duty to Michael and his creditors to refrain from doing so. On this issue, I invite the comments of the parties. Cf. Fine v. Cohen , 35 Mass.App.Ct. 610, 617, 623 N.E.2d 1134 (1993) ("Even where there are broad discretionary powers, a trustee may not exercise his or her discre╜tion so as to shift beneficial interests in the trust").

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^2. The nature of this transaction is not clear from the record. Attached to the Govern╜ment's Memorandum is a deed (Exhibit 6) appearing to convey the entirety of Juliette Road to Judith Murray outright. If this is the case, then equitable and legal title in Mi╜chael's interest has merged in Judith, thus freeing Juliette Road from the Trust. The parties may wish to address the ramifications of this transaction.

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ORDER

For the foregoing reasons, the Motion to Reconsider is ALLOWED in part. The court vacates so much of its March 5, 1999 Memorandum and Order as rested on a determination that Michael Murray had a vested interest in the M & J Murray Fam╜ily Trust at the time the IRS perfected its lien. The court concludes instead that he did not, and that the IRS lien did not therefore attach to Michael Murray's one╜-half beneficial interest in the corpus of the Trust. The parties will have thirty (30) days from the date of this ORDER to submit briefs to the court on the issue of whether the Trustees are constrained by their fiduciary duty from any attempt to extinguish Michael Murray's contingent in╜terest in the corpus of the Trust, and whether the conveyance of the property in deed to Judith Murray is as a result null and void.

SO ORDERED.

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