Morton v. Schlotzhauer
144 A.3d 592
| Md. | 2016Background
- In Jan. 2010 Schlotzhauer was injured in an auto collision involving Morton (employee) and Uni-Select (employer). She filed suit in Queen Anne’s County in Dec. 2012 (within the 3-year statute of limitations).
- In Oct. 2010 Schlotzhauer filed a Chapter 7 bankruptcy but did not list the potential personal injury claim on her schedules; the claim thereby became part of the bankruptcy estate.
- The bankruptcy case was closed with discharge in Jan. 2011. Schlotzhauer later sought to re-open the bankruptcy after the omission surfaced during discovery in her 2012 tort suit.
- The Bankruptcy Court re-opened the case, allowed amended schedules exempting the PI claim, and ultimately ordered the claim re-vested in Schlotzhauer nunc pro tunc to Oct. 6, 2010 (the bankruptcy filing date).
- Unaware of the Bankruptcy Court’s action, the Circuit Court granted summary judgment for defendants on the ground that Schlotzhauer lacked standing because the trustee owned the claim; Schlotzhauer moved to alter or amend the judgment promptly after the Bankruptcy Court’s orders, but the Circuit Court denied relief without explanation.
- The Court of Special Appeals reversed; the Maryland Court of Appeals affirmed, holding the Circuit Court abused its discretion and that either the Bankruptcy Court’s retroactive re-vesting or Rule 2-201 substitution/relation-back preserved Schlotzhauer’s timely suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for denial of motion to alter/amend (Md. Rule 2-534) | Court of Appeals should review legal issues de novo; factual findings get deference | Defer to Circuit Court (abuse-of-discretion) | Mixed approach: deference for factual findings, de novo for pure legal errors; Circuit Court abused discretion by applying incorrect legal principles |
| Effect of Bankruptcy Court re-opening and nunc pro tunc re-vesting on standing and limitations | Bankruptcy Court re-vested claim retroactively to before the suit; Schlotzhauer had standing and suit was timely | Re-vesting should not negate prior divestiture for state-court standing; complaint was a "nullity" and limitations bar relief | Court gives effect to Bankruptcy Court’s retroactive re-vesting for state-court standing; Schlotzhauer owned claim as of filing date and had standing |
| If trustee was real party in interest at filing, must trustee be substituted and re-file? | If trustee is real party, Rule 2-201 allows substitution (or trustee joinder) without new filing; substitution relates back | Substitution would require new action and is time-barred by limitations | Rule 2-201 requires a reasonable opportunity to substitute the real party in interest; substitution relates back to original filing and preserves limitations period |
| Relation-back when plaintiff later re-vested or trustee substituted | Substitution of trustee and later re-substitution to Schlotzhauer would relate back; no new facts or claims; defendants had notice | Relation back inapplicable here; plaintiffs’ complaint was void or nullity and cannot be cured after limitations | Relation-back doctrine applies liberally under Rule 2-201; successive substitutions (trustee then debtor) relate back to the original complaint; no prejudice to defendants shown |
Key Cases Cited
- Wilson-X v. Department of Human Resources, 403 Md. 667 (Md. 2008) (standards for appellate review of discretionary motions and limits on judicial discretion)
- Crowe v. Houseworth, 272 Md. 481 (Md. 1974) (liberal application of relation-back when defendants had notice of operative facts)
- Zappone v. Liberty Life Ins. Co., 349 Md. 45 (Md. 1998) (substitution/relation-back when operative facts unchanged supports relation back)
- Dual Inc. v. Lockheed Martin Corp., 383 Md. 151 (Md. 2004) (discussing when pleadings by a party lacking capacity are treated as nullities)
- Adams v. Manown, 328 Md. 463 (Md. 1992) (allowing opportunity to substitute bankruptcy trustee as real party in interest rather than dismissing)
- Pacific Mortgage & Investment Group, Ltd. v. Horn, 100 Md. App. 311 (Md. Ct. Spec. App. 1994) (bankruptcy closing without trustee assertion can effect abandonment/re-vesting and support state-court standing)