Argued: April 1, 2016
Court for Queen Anne’s County Case No. 17-C-12-017577
Barbera, C.J. [*] Battaglia Greene Adkins McDonald
Watts Rodowsky, Lawrence F. (Retired, Specially Assigned),
case is about the procedural and substantive effect that a
bankruptcy proceeding may have on the prosecution of a
personal injury claim in State court. Our disposition of this
case is compelled by the respect we accord a decision of the
federal Bankruptcy Court and by our own injunction to
interpret our rules "to do justice between the
allows one overcome by debt to obtain a discharge of debts
and have, more or less, a fresh start. Part of the price that
the debtor must pay is to detail the debtor's property
interests in the bankruptcy case so that it can be determined
what is available for distribution to creditors and what the
debtor may retain. Among the property interests that must be
listed are personal injury claims of the debtor, although
such claims typically are exempted from the bankruptcy estate
by operation of bankruptcy and Maryland law and, as a result,
remain the debtor's property. Failure to list such a
claim in the bankruptcy proceeding, however, means that it
remains part of the bankruptcy estate.
Cindy L. Schlotzhauer was involved in a motor vehicle
accident with Petitioner Kevin Morton, Jr., who was employed
at the time by Petitioner Uni-Select USA, Inc. t/a Kunkel
Service Company. Almost three years later, but within the
pertinent statute of limitations, she brought this action
against Mr. Morton and Uni-Select asserting that she had
suffered personal injuries in the accident allegedly as a
result of Mr. Morton's negligence in the course of his
the time of the accident and the filing of this action, Ms.
Schlotzhauer happened to file personal bankruptcy and was
discharged from her debts. She neglected to list her (then)
potential claim for personal injuries as an asset or as
exempt property in her bankruptcy petition. It appears to be
undisputed that this happened out of ignorance, rather than
any deliberate effort to conceal the potential claim. By
operation of bankruptcy law, her claim became the property of
her bankruptcy estate.
the prior bankruptcy proceeding came to light during
discovery in this action, thus raising the question of Ms.
Schlotzhauer's standing to litigate the claim, the
parties began to shuttle back and forth between the Circuit
Court and Bankruptcy Court in a race for relief from those
tribunals. Mr. Morton and Uni-Select sought to have the
Circuit Court dismiss the personal injury action for lack of
standing on the ground that the claim did not belong to Ms.
Schlotzhauer - a dismissal that would be a dead end for the
claim, as the period of limitations had expired in the
interim. Ms. Schlotzhauer sought to re-open the bankruptcy
process to eliminate the standing question by having the
claim exempted and restored to her or by joining the
bankruptcy trustee as plaintiff in this action.
race ended in a dead heat, more or less. The Bankruptcy Court
granted Ms. Schlotzhauer's request to re-open and
re-vested her with the claim - a decision it ultimately
decided was retroactive to the filing of the bankruptcy
petition. In a nearly simultaneous ruling, the Circuit Court,
unaware of the Bankruptcy Court's action, awarded summary
judgment to Mr. Morton and Uni-Select on the ground that Ms.
Schlotzhauer lacked standing. Ms. Schlotzhauer informed the
Circuit Court of the Bankruptcy Court's action and asked
it to reconsider its award of summary judgment. The Circuit
Court declined to do so, without explanation.
Court of Special Appeals reversed. It held that, even if Ms.
Schlotzhauer was not the proper plaintiff under Maryland law
at the time she filed her complaint, Maryland Rule 2-201
allows for substitution of the real party in interest - in
this case, the bankruptcy trustee and ultimately Ms.
Schlotzhauer herself when she was re-vested with the claim.
That rule incorporates the doctrine of "relation
back" and allows the real party in interest to prosecute
an existing action without need to file a new complaint. In
any event, the intermediate appellate court noted that the
Bankruptcy Court's ruling re-vested Ms. Schlotzhauer with
her claim as of a date well before the filing of her
complaint and nullified the prior divestiture of that claim
in the bankruptcy proceeding. Accordingly, Ms. Schlotzhauer
was an appropriate plaintiff on a timely-filed complaint.
reasons detailed below, we agree with the Court of Special
A Bankruptcy Primer
understand the unusual procedural path of this case it is
helpful to make a brief excursion into bankruptcy law.
Luckily for us, most of the applicable bankruptcy principles
are not at issue. In its opinion in this case, the Court of
Special Appeals provided an excellent summary, which we draw
upon liberally as follows:
Obligation to List Property Interests
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. 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 creditors.
Schlotzhauer v. Morton, 224 Md.App. 72, 75-76, 119
A.3d 121 (2015) (citations omitted).
Rights over Property of Bankrupt Estate
Generally, the bankruptcy trustee alone may assert the
person's rights, including the right to pursue a tort
claim for personal injuries, unless the trustee abandons the
rights or the bankruptcy court declares them to be exempt
from creditor claims. 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.
224 Md.App. at 76 (citations omitted).
for Personal Injury Claims
The debtor … must list all property that the debtor
claims as exempt. A party in interest to the bankruptcy
proceeding, in turn, may object to the debtor's claims
for exemptions. If an interested party fails to object within
the time allowed, a claimed exemption will exclude the
subject property from the estate.
Maryland residents can claim exemptions under state law,
including an exemption "from execution on a
judgment" that is payable in the event of sickness,
accident, injury, or death of any person, including
compensation for loss of future earnings.
Id. at 88 (citations and quotations marks omitted).
to Reopen Bankruptcy Case to Amend Schedules
Debtors may amend or supplement their schedules as a matter
of course before the bankruptcy case closes. In addition, the
bankruptcy court has discretion to reopen a case to
administer assets, to accord relief to the debtor, or for
other cause. The bankruptcy court has discretion to permit a
party to perform an act, such as the filing of amended asset
schedules, even after the specified period in which the act
is required or allowed to be done.
Id. at 88 (citations and quotation marks omitted).
Facts and Procedural History
undisputed that, on January 4, 2010, Ms. Schlotzhauer was
involved in an automobile collision in the parking lot of the
Centreville post office with Mr. Morton while he was driving
a pickup truck owned by his employer, Uni-Select. The details
of that accident are unimportant to the resolution of the
issues in this appeal. Suffice it to say, in the complaint
that Ms. Schlotzhauer filed some years later to initiate this
case, she alleged that Mr. Morton was talking on a cell phone
when he backed his truck into her car, resulting in various
physical injuries to Ms. Schlotzhauer.
after the automobile accident, Ms. Schlotzhauer retained
counsel, who resolved a claim for property damage to Ms.
Schlotzhauer's car with Uni-Select's insurer and
periodically corresponded with the insurer over the course of
the next year and a half concerning her injuries, diagnosis,
and treatment, evidently in anticipation of pursuing a
personal injury claim. However, her counsel did not file suit
until the end of 2012, shortly before the three-year statute
of limitations would expire.
meantime, Ms. Schlotzhauer, with the assistance of a
different attorney, had sought relief from various debts in
the federal Bankruptcy Court. On October 6, 2010, she filed a
voluntary petition in bankruptcy under Chapter 7 of the
Bankruptcy Code in the United States Bankruptcy Court for the
District of Maryland. On the schedules attached to her
bankruptcy petition, Ms. Schlotzhauer did not list the
potential personal injury claim arising from the January 4,
2010 accident as either an asset or as property claimed to be
exempt. On January 19, 2011, the Bankruptcy Court
granted Ms. Schlotzhauer a discharge from her debts and
closed the case.
Personal Injury Case
December 26, 2012, Ms. Schlotzhauer initiated this case by
filing a complaint in the Circuit Court for Queen Anne's
County against Mr. Morton and Uni-Select, seeking damages for
her injuries. The complaint alleged that the accident was
attributable to Mr. Morton's negligence and that he was
operating his vehicle within the scope of his employment. Mr.
Morton and Uni-Select (hereafter, collectively,
"Uni-Select") answered the complaint with a general
denial, as well as a number of affirmative defenses.
parties pursued discovery. In response to an interrogatory,
Ms. Schlotzhauer indicated that she had filed for bankruptcy
in October 2010. In questioning by defense counsel during a
subsequent deposition on July 31, 2013, it emerged that she
had not listed her potential personal injury claim arising
from the accident as an asset in her bankruptcy petition.
Question of Ms. ...