United States District Court, D. Maryland
IN RE: MINH VU HOANG AND THANH HOANG. GARY A. ROSEN, Trustee, Appellant,
GEMINI TITLE & ESCROW, LLC, et al., Appellees.
DEBORAH K. CHASANOW, District Judge.
Presently pending and ready for resolution is a motion for rehearing filed by Appellees Gemini Title & Escrow, LLC ("Gemini"), the Law Offices of Craig A. Parker, LLC ("Law Offices"), and Craig A. Parker ("Parker"). (ECF No. 12). The relevant issues have been briefed and no hearing is deemed necessary. See Fed.R.Bankr.P. 8012; Local Rule 105.6. For the reasons that follow, the motion will be denied.
Appellant Gary A. Rosen, the chapter 7 trustee for the bankruptcy estate of Minh Vu Hoang ("Debtor"), commenced the adversary proceeding from which this appeal arises on December 18, 2009, related to Appellees' role in ten post-petition real estate transactions while Debtor was serving as debtor-inpossession. The trustee alleged that Gemini "handled the closings" in these transactions and "received the proceeds of [the] sales, which constituted property of the bankruptcy estate." (ECF No. 1-24 ¶ 4). Rather than "turning [the proceeds] over to the estate, Parker (and his LLC) [as agents for Gemini] distributed them to various third parties on [Debtor's] instructions." ( Id. ). According to the trustee, those funds were thereby "lost to the estate" ( id. ), and he filed suit to recover them.
The adversary complaint alleged twelve counts, including, as relevant here, two claims seeking turnover of estate property, pursuant to 11 U.S.C. § 542(a),  and two claims for conversion related to the same property. Although the transactions at issue occurred over four years prior to the time the complaint was filed, the trustee asserted that he "exercised due diligence" in bringing them, adding that,
due to the complicated and tangled nature of [Debtor's] assets and financial affairs, and [Debtor's] efforts (aided and abetted by [Appellees]) to conceal her assets and hinder creditors, [he] did not discover the facts giving rise to the claims being asserted here until less than three years before the commencement of this adversary proceeding.
( Id. at ¶¶ 158-59). Thus, the trustee invoked the so-called "discovery rule, " by which a cause of action is not deemed to have accrued until the plaintiff has, or reasonably should have had, "possession of the critical facts that he has been hurt and who has inflicted the injury." United States v. Kubrick, 444 U.S. 111, 122 (1979); see also Poffenberger v. Risser, 290 Md. 631, 636 (1981).
Appellees moved to dismiss, arguing, in part, that the trustee's claims were time-barred by the two-year statute of limitations applying to avoidance actions under § 549(d). (ECF No. 1-26, at 11-12). In opposing that motion, the trustee maintained that, because turnover is an equitable remedy, the timeliness of such a claim is governed by the doctrine of laches. In establishing a laches defense, he argued, Appellees had the burden of showing both inexcusable delay and resulting prejudice and "[n]either of those elements exists here." (ECF No. 1-34, at 36). As to the issue of inexcusable delay, the trustee asserted:
In deciding whether a plaintiff delayed unreasonably or inexcusably, there is a presumption against a finding of such delay if the complaint was filed within the limitations period applicable to the most closely analogous action at law. In this case, the most closely analogous cause of action is conversion, which is subject to Maryland's three-year general statute of limitations.
( Id. at 36-37 (internal footnotes omitted)). In reply, Appellees argued that the trustee's laches analysis was "wrong, " but, "[e]ven assuming that [he was] correct, all of his claims [were] time barred" because the alleged conduct occurred more than three years prior to the time the adversary complaint was filed and, under Maryland law, "prejudice to defendant need not be shown [to establish laches] if an analogous action at law would be barred by the applicable statute of limitations[.]" (ECF No. 1-40, at 6-7 (quoting Finch v. Hughes Aircraft Co., 57 Md.App. 190, 243 (1984)).
A hearing on Appellees' motion to dismiss was held before United States Bankruptcy Judge Thomas J. Catliota on June 9, 2010. In addressing Appellees' argument as to the timeliness of the turnover claims, the court ruled:
I am going to grant the motion to dismiss on statute of limitations without prejudice to the [trustee's] right to amend [the] complaint, to assert further facts upon which a determination could be made that the discovery rule applies here to allow the complaint to survive.
In particular, factors along the lines of the reason for the invocation of the discovery rule, the cause of the aggrieved parties obtaining knowledge of the wrong at a time later than its initial perpetration.
Those factors [were] given in the, for example, Shah v. Health Plus , 696 A.2d 473, Md.App. 1997[, ] and the other cases cited by the [Appellees].
So, [the dismissal] is without prejudice to the [trustee's] right to amend the complaint and come forward with factors and allegations for which the discovery rule would apply.
(ECF No. 1-41, at 7-8). Counsel for the trustee advised that, in an amended complaint, he "would like to also add alleged facts that would go to the issue of [the Appellees] not being prejudiced with regard to [a] laches defense, " to which Judge Catliota responded, "You can amend as you feel appropriate." ( Id. at 8). Counsel further inquired as to whether the court's "ruling on the statute of limitations also covers laches[.]" ( Id. at 9). The court answered, "It is basically saying that at this point the complaint needs to be bolstered, ...