Ali v. CIT Tech. Financing Serv., Inc.

• Decision Date: 21 October 2010
• Docket Number: No. 7, Sept. Term, 2010.,7, Sept. Term, 2010.
• Citation: 6 A.3d 890,416 Md. 249
• Parties: Ahmed M. ALI v. CIT TECHNOLOGY FINANCING SERVICES, INC.
• Court: Maryland Court of Appeals

6 A.3d 890

416 Md. 249

Ahmed M. ALI

v.CIT TECHNOLOGY FINANCING SERVICES, INC.

No. 7, Sept. Term, 2010.

Court of Appeals of Maryland.

Oct. 21, 2010.

Richard I. Chaifetz, Columbia, MD, for petitioner.

Harold G. Belkowitz (Ober, Kaler, Grimes & Shriver, Washington, D.C.), on brief, for respondent.

Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ.

HARRELL, J.

We are asked here to construe and apply Maryland Code (1974, 2006 Repl.Vol.), Courts & Judicial Proceedings Article, § 5-202,¹ which provides for, upon a debtor filing a "petition in insolvency," a tolling of the pertinent statute of limitations on the bringing of claims against the debtor for a period of time between "the filingand the dismissal" of such a petition. See Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs. Ltd. P'ship, 109 Md.App. 217, 252, 674 A.2d 106, 123 (1996) ("[T]he statute of limitations is ... 'suspended' by statutes, such as the ones tolling the period for ... insolvency, see C.J. § 5-202...."). Dr. Ahmed M. Ali-a defaulting lessee of medical equipment from an entity related to CIT Technology Financing Services, Inc. ("CIT")-appeals from a judgment of the Court of Special Appeals, affirming the judgment of the Circuit Court for Prince George's County, which determined that Ali owed CIT $212,703.80, inclusive of prejudgment interest. Both the Circuit Court and the intermediate appellate court (in Ali's subsequent appeal) held that, despite CIT's failure to file its claim within the generally applicable three-year statute of limitations, as prescribed in Md.Code (1974,2006 Repl.Vol.), Courts & Judicial Proceedings Art., § 5-101,² the filing was timely nevertheless, as Ali's filing of a Chapter 11 petition in bankruptcy in the United States Bankruptcy Court for the District of Maryland constituted a "petition in insolvency" within the meaning of § 5-202, which tolled the statute of limitations for a period of time sufficient to bring the filing within § 5-101's three-year limit.

Ali claims here, as he did in each court in this litigation, essentially that a federal bankruptcy petition is not a "petition in insolvency," considering that the Maryland Legislature did not designate these terms expressly as synonymous, even as it recodified repeatedly the tolling provision over a period of time during which federal bankruptcy proceedings were proliferating nationally and in Maryland. As such, Dr. Ali claims that § 5-202 did not operate to toll the three-year limit, and thus CIT's claim was barred by the statute of limitations. In response, CIT argues that the Legislature's frequent recodifications of § 5-202 during the 19th and 20th centuries-a time period during which bankruptcy and insolvency proceedings, for the most part, were shifting from the state to the federal arena-evinces a clear legislative intent to include the filing of a federal bankruptcy petition within the meaning of "petition in insolvency," as used in § 5-202. We hold, as explained more fully infra, that the plain meaning of § 5-202, confirmed by its legislative history and legislative purpose, supports the conclusion of the Circuit Court and the Court of Special Appeals that a federal bankruptcy petition constitutes a "petition in insolvency," as contemplated by § 5-202. Accordingly, we affirm the judgment of the Court of Special Appeals.

FACTS AND LEGAL PROCEEDINGS

In a 17 June 1997 lease, CIT's predecessor leased medical equipment to Dr. Ali (Petitioner or "Dr. Ali") for a period of sixty months, payable in monthly payments of $3,097.49. Included in the lease was an acceleration clause, providing that, upon Petitioner's default, CIT could declare all rental payments immediately due and could recover interest and attorneys' fees in pursuit of the accelerated debt. Roughly midway through the lease period,Petitioner's medical practice suffered after he broke his hand in a car accident. Petitioner made payments under the lease, however, until April 1999, after which time no further payments were made to CIT. CIT declared Petitioner in default and demanded payment of $158,760.86, the accelerated balance due, on 10 August 2000.

On 11 June 2001, Dr. Ali filed a Chapter 11 petition in bankruptcy in the United States Bankruptcy Court for the District of Maryland. At that time, pursuant to 11 U.S.C. § 362, an automatic stay of pursuit of CIT's claim went into effect, meaning that CIT was barred from filing suit against Petitioner for breach of contract. At some point prior to September 2003, CIT filed a motion to be relieved of 11 U.S.C. § 362's automatic stay, which the bankruptcy court granted on 4 September 2003. Petitioner's bankruptcy case continued otherwise. On 21 June 2006, allegedly because Petitioner did not comply with bankruptcy procedures in completing an acceptable plan of reorganization, the bankruptcy court dismissed Petitioner's bankruptcy case pursuant to 11 U.S.C. § 1112(b).³

Approximately six months after the bankruptcy case was dismissed, on 18 January 2007, CIT filed suit in the CircuitCourt for Prince George's County to enforce its rights under the lease, and sought attorneys' fees, prejudgment interest, post-judgment interest, and costs. Before the Circuit Court, Respondent presented testimony that Petitioner breached the lease and established the amount of damages recoverable. Petitioner did not deny that he breached the lease; rather, he contended (and contends today) that CIT's suit was barred by § 5-101's three-year statute of limitations.⁴ On 27 May 2008, the Circuit Court entered judgment in favor of CIT for $190,725.85 in damages and $21,977.95 in prejudgment interest. In rejecting Dr. Ali's claim that CIT's suit was time-barred, the Circuit Court stated:

Defendant argued that Plaintiff's Complaint and Amended Complaint are barred by a three-year statute of limitations. MD Code Ann., Courts & Jud. Proc. § 5-101. Given the tolling of the statute of limitations by the bankruptcy filing, the Complaint was timely filed. ( See MD Code Ann., Courts & Jud. Proc. § 5-202, 11 U.S.C. 108(c)(1)).

Dr. Ali appealed timely to the Court of Special Appeals. The Court of Special Appeals, in a reported opinion, Ali v. CIT Tech. Fin. Servs., Inc., 188 Md.App. 269, 981 A.2d 759 (2009), undertook a lengthy and impressive survey of the history of state insolvency laws and federal bankruptcy law. See Ali, 188 Md.App. at 277-85, 981 A.2d at 764-68. In affirming the judgment of the Circuit Court, the Court of Special Appeals explained:

State laws that interact with federal bankruptcy law define the term insolvency and its variants for state law purposes. Those definitions include, either explicitly or implicitly, insolvency for purposes of bankruptcy under federalbankruptcy law. For example, [the Commercial Law Article] defines "insolvency proceedings" as "any assignment for the benefit of creditors or other proceedings intended to liquidateor rehabilitate the estate of the person involved." Bankruptcy certainly is a proceeding intended to liquidate or rehabilitate the debtor's estate. Additionally, [the Commercial Law Article] defines "insolvent" as "[a] person ... who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due or is insolvent within the meaning of the federal bankruptcy law." Title 15 of the Commercial Law Article addresses aspects of debt collection. Section 15-101, which addresses preferences in proceedings involving an assignment for the benefit of creditors or receiverships, uses bankruptcy terms, including insolvency and void and voidable preferences, all as defined in the bankruptcy code.

If the General Assembly had intended there be no tolling provision, it would have repealed the statute. Instead, unlike almost all of Art. 47, CJP § 5-202 and its predecessors, it survived many legislative sessions and many code revisions, including code revisions in 1939, 1951, 1957, and the more recent codification of CJP. By reenacting the statute and not changing its substance on multiple occasions, we can presume that the General Assembly intended that it remain in effect. Federal bankruptcy law has expanded to include not only traditional bankruptcy but also traditional insolvency proceedings. Moreover, and very relevant to our analysis, is that the policy behind CJP § 5-202 appears to be applicable to bankruptcies. We conclude that the General Assembly, by retaining and reenacting the statute in question, even though it repealed the State insolvency laws, intended CJP § 5-202 to include bankruptcy proceedings. If the General Assembly did not so intend, it can amend or repeal the statute.

Ali, 188 Md.App. at 285-87, 981 A.2d at 768-69. (internal citations and footnotes omitted).

Dr. Ali filed timely a Petition for a Writ of Certiorari, which we granted, Ali v. CIT Tech., 412 Md. 255, 987 A.2d 16 (2010), to consider "whether the lower court erred when it upheld the trial court's decision which held that the statute of limitationson respondent's claim had not expired at the time the instant complaint was filed."

DISCUSSION

I. Standard of Review

There is no material factual dispute in this case. The arguments before this Court center on the trial court's legal conclusion that Petitioner's filing of a bankruptcy petition fell under the ambit of § 5-202, thus tolling the statute of limitations. It is well settled that "where an order involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court's conclusions are 'legally correct' under a [non-deferential] standard of review." Schisler v. State, 394 Md. 519, 535, 907 A.2d 175, 184 (2006); see Wash. Suburban Sanitary Comm'n v. Phillips, 413 Md. 606, 618, 994 A.2d 411, 418 (2010); Walter v. Gunter, 367 Md. 386, 392, 788 A.2d 609, 612 (2002).

II. Analysis

In Maryland, the general rule is that "[a] civil action at law shall be filed within three years...