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Schlotzhauer v. Morton

Court of Special Appeals of Maryland

July 30, 2015

CINDY L. SCHLOTZHAUER
v.
KEVIN MORTON, JR., ET AL.

Meredith, Arthur, Leahy, JJ.

OPINION

Arthur, J.

This appeal concerns an intersection of federal bankruptcy law and Maryland civil procedure. The appeal specifically concerns the identity of the real party in interest and the effect of the statute of limitations, including the doctrine of relation back, when a person has been divested of the right to pursue a tort claim because of a bankruptcy filing, but later reacquires that right by operation of bankruptcy law.

When a person files for protection from creditors under federal bankruptcy law, all of the person's property, including personal injury claims, become the property of the bankruptcy estate. See 11 U.S.C. § 541(a); see also Adams v. Manown, 328 Md. 463, 477 (1992); Bowie v. Rose Shanis Fin. Servs., LLC, 160 Md.App. 227, 235 (2004); Pacific Mortgage and Inv. Group, Ltd. v. Horn, 100 Md.App. 311, 319 (1994). Those rights become the property of the estate even if the person intentionally, inadvertently, or innocently fails to disclose them to the trustee, the bankruptcy court, and the creditors. See Adams, 328 Md. at 478; Bowie, 160 Md.App. at 246-47.

Generally, the bankruptcy trustee alone may assert that person's rights, including the right to pursue a tort claim for personal injuries, unless the trustee abandons the rights (see 11 U.S.C. § 554; Horn, 100 Md.App. at 319-21) or the bankruptcy court declares them to be exempt from creditor claims. 11 U.S.C. § 522(b); Bowie, 160 Md.App. at 249. If the rights have not been abandoned or exempted, the bankruptcy trustee retains the sole right to assert them even after the bankruptcy court has closed the bankruptcy case and granted the debtor a discharge. See, e.g., Adams, 328 Md. at 478; Bowie, 160 Md.App. at 246-47.

In this case, appellant Cindy Schlotzhauer filed for bankruptcy protection a few months after she suffered personal injuries in an automobile accident. In her bankruptcy filings, however, Schlotzhauer neither disclosed her personal injury claim nor asserted that it was exempt from the claims of her creditors. Consequently, her bankruptcy trustee did not abandon the claim, and the court did not declare it to be exempt. Instead, even after the bankruptcy court discharged her debts and closed her case, the claim remained the property of her estate, which her trustee alone could assert.

After emerging from bankruptcy, Schlotzhauer asserted the personal injury claim in the Circuit Court for Queen Anne's County. Her adversaries, appellees Kevin Morton Jr. and Uni-Select USA, Inc. (collectively "Uni-Select"), moved for summary judgment on the ground that she had no right to assert the claim because it belonged to her bankruptcy trustee. Schlotzhauer responded by promptly returning to the bankruptcy court, reopening her case, disclosing the personal injury claim, and obtaining a ruling that the claim was exempt from the claims of her creditors and had been revested in her.

Nonetheless, on the same day that the bankruptcy court docketed the ruling in which it declared the claim to be exempt and to have been revested in Schlotzhauer, the circuit court, which was unaware of the bankruptcy court's decision, granted Uni-Select's motion for summary judgment. In a motion to alter or amend, Schlotzhauer apprised the circuit court both of the bankruptcy court's decision and of a subsequent decision in which the bankruptcy court ruled that the personal injury claim had been revested in her by operation of federal bankruptcy law before she even commenced this case. After the circuit court denied the motion to alter or amend, Schlotzhauer took this timely appeal.

Question Presented

Schlotzhauer asks this Court to consider five interrelated questions, of which it is necessary only to consider one: Did the circuit court err in denying Schlotzhauer's motion to alter or amend the court's judgment? Because we answer that question in the affirmative, we reverse the judgment.[1]

Factual and Procedural History

A. The Underlying Complaint and Initial Bankruptcy Proceedings

On January 4, 2010, a car driven by Schlotzhauer collided with another vehicle in the parking lot of a post office in Centreville, Maryland.

On October 6, 2010, Schlotzhauer filed a voluntary petition for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Maryland. On the schedules accompanying her petition, Schlotzhauer did not list any potential claim arising from the automobile accident as an asset, nor did she claim an exemption for that asset. On January 19, ...


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