Schlotzhauer v. Morton, 49, Sept. Term, 2014.

CourtCourt of Special Appeals of Maryland
Citation119 A.3d 121,224 Md.App. 72
Docket NumberNo. 49, Sept. Term, 2014.,49, Sept. Term, 2014.
PartiesCindy L. SCHLOTZHAUER v. Kevin MORTON, Jr., et al.
Decision Date30 July 2015

224 Md.App. 72
119 A.3d 121

Kevin MORTON, Jr., et al.

No. 49, Sept. Term, 2014.

Court of Special Appeals of Maryland.

July 30, 2015.

119 A.3d 123

Lindley M. Cowperthwait, Jr. (Law Office of Thomas N. Yeager, on the brief), Chestertown, MD, for Appellant.

Robert L. Ferguson, Jr. (Jonathan D. Nelson, Ferguson, Schetelich & Ballew, PA, on the brief), Baltimore, MD, for Appellee.




224 Md.App. 75

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,

224 Md.App. 76

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, 615 A.2d 611 (1992) ; Bowie v. Rose Shanis Fin. Servs., LLC, 160 Md.App. 227, 235, 862 A.2d 1102 (2004) ; Pacific Mortgage and Inv. Group, Ltd. v. Horn, 100 Md.App. 311, 319, 641 A.2d 913 (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, 615 A.2d 611 ; Bowie, 160 Md.App. at 246–47, 862 A.2d 1102.

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, 641 A.2d 913 ) or the bankruptcy court declares them to be exempt from creditor claims. 11 U.S.C. § 522(b) ; Bowie, 160 Md.App. at 249, 862 A.2d 1102. If the rights have not been abandoned or exempted, the bankruptcy trustee retains the sole right to assert them even after the bankruptcy

119 A.3d 124

court has closed the bankruptcy case and granted the debtor a discharge. See, e.g., Adams, 328 Md. at 478, 615 A.2d 611 ; Bowie, 160 Md.App. at 246–47, 862 A.2d 1102.

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

224 Md.App. 77

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

224 Md.App. 78

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

119 A.3d 125

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, 2011, the bankruptcy court granted Schlotzhauer a discharge from her debts and closed the case.

Nearly three years after the automobile accident, on December 27, 2012, Schlotzhauer filed a complaint against Uni–Select in Circuit Court for Queen Anne's County. Uni–Select answered and elected for a jury trial. The answer included a general denial of the allegations in Schlotzhauer's complaint and asserted that the complaint failed to state a cause of action upon which relief may be granted, as well as several affirmative defenses.2

224 Md.App. 79

B. Motion for Summary Judgment and Reopening of Bankruptcy Case

After discovery, which included a deposition of Schlotzhauer both about the merits of the case and her bankruptcy, Uni–Select moved for summary judgment on August 23, 2013. In its motion, Uni–Select asserted that Schlotzhauer had not scheduled her claim in the bankruptcy case and that her bankruptcy trustee had not abandoned it. Uni–Select also asserted that Schlotzhauer's bankruptcy trustee alone could prosecute the claim and that Schlotzhauer had no “standing.”

Promptly thereafter, on September 12, 2013, Schlotzhauer moved the bankruptcy court to reopen her Chapter 7 case so that she could file amended schedules that disclosed the personal injury claim and obtain a declaration that the claim was exempt from the claims of her creditors. Uni–Select moved to intervene in the bankruptcy case to oppose the reopening of the case.

Meanwhile, Schlotzhauer opposed Uni–Select's motion for summary judgment and moved the circuit court to stay its decision until the bankruptcy court had ruled.

On October 24, 2013, the bankruptcy court ordered that the bankruptcy case be reopened for the filing of amended schedules of assets. On that same date, Schlotzhauer filed the amended schedules, listing her claim for “personal injury damages” with the value of $1.5 million and claiming that the property was exempt pursuant to section 11–504(b)(2) of the Courts and Judicial Proceedings Article.3 Uni–Select opposed the amended schedules.

119 A.3d 126
224 Md.App. 80

Schlotzhauer promptly notified the circuit court that she had reopened the bankruptcy case, and she requested a stay of the circuit court proceedings. On October 29, 2013, the circuit court ordered that Schlotzhauer's motion to stay and Uni–Select's motion for summary judgment would be held sub curia for 30 days, “to permit [the] parties to address matters of bankruptcy jurisdiction and to permit [the] parties to supplement their motions[.]” At a motions hearing held on December 5, 2013, Schlotzhauer requested, as an alternative remedy, that the court permit the bankruptcy trustee to be added as a co-plaintiff.

C. The Bankruptcy Court's Initial Ruling

The bankruptcy court issued its ruling regarding Schlotzhauer's amended schedules at a hearing on January 7, 2014. The court held, first, that Uni–Select lacked standing to object to the amendment of the schedules in Schlotzhauer's bankruptcy case, because Uni–Select was not a creditor or otherwise affected by the distribution of the bankruptcy estate. In the absence of any valid objection to the amended schedules, the bankruptcy court concluded that Schlotzhauer's exemption “became allowed 31 days after the Debtor's Amended...

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