Hoang v. Lowery

Minh-vu Hoang v. Jeffrey Lowery, No. 17, September Term, 2019, Opinion by Booth, J. Courts & Judicial Proceedings – Statutes of Limitations – Tolling Provisions – Petitions in Insolvency. The tolling provision of the Maryland Code, Courts & Judicial Proceedings Article, § 5-202 applies only to actions that are dismissed by a United States Bankruptcy Court pursuant to the dismissal procedures of Title 11 of the United States Code. There is nothing in the plain meaning of the statute, or the legislative history, its structure or purpose, which would allow us to broadly define the word “dismissal” to include any bankruptcy proceeding that ends in a manner unfavorable the debtor’s interest regardless of whether the case is dismissed. Circuit Court for Montgomery County Case No.: 223525-V Argued: October 4, 2019 IN THE COURT OF APPEALS OF MARYLAND No. 17 September Term, 2019 MINH-VU HOANG v. JEFFREY LOWERY Barbera, C.J. McDonald Watts Hotten Getty Booth Greene, Clayton, Jr. (Senior Judge, Specially Assigned), JJ.

Opinion by Booth, J. McDonald and Getty, JJ., dissent. Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. Suzanne Johnson 2020-06-05 12:12-04:00 Filed: June 5, 2020 Suzanne C. Johnson, Clerk Perhaps the single most defining feature of federal bankruptcy law in the United States is the ultimate discharge of a person’s pre-existing debts. This discharge of indebtedness embodies a deeply-held American ideal—the notion that, despite bad luck or bad judgment, people deserve a second chance to build a life for themselves and contribute to our great national experiment.

Not all insolvent debtors who seek a fresh start receive one, though. The federal bankruptcy court may deny discharge to debtors who commit egregious misconduct in the administration of their cases, such as through acts to defraud their creditors or their court- appointed bankruptcy trustee; to conceal, alter, or destroy records; or to mislead the court. Moreover, entry of an order denying discharge also lifts the stay that federal law provides to shield debtors from actions by their creditors while their bankruptcy cases proceed. Petitioner Minh-Vu Hoang is an insolvent debtor currently participating in an active bankruptcy case pending before the United States Bankruptcy Court for the District of Maryland.

Respondent Jeffrey Lowery is an unsecured creditor of Ms. Hoang who holds a claim in Ms. Hoang’s bankruptcy case arising from a judgment he obtained against her in the Circuit Court for Montgomery County in 2002. Ms. Hoang filed her bankruptcy petition in May 2005 and the matter remains pending. Administration of Ms. Hoang’s bankruptcy estate has taken an unusually long time and required a great deal of effort. Foremost, Ms. Hoang held extensive assets through a complex array of entities.

Early in the administration of her estate, the bankruptcy court also determined that Ms. Hoang had attempted to hide assets and circumvent federal law. For those bad acts, the court issued an order denying Ms. Hoang a discharge of indebtedness, forfeiting her right to a fresh start, and lifting the stay on actions against her. With great difficulty, approximately $19 million of Ms. Hoang’s assets have been discovered and claimed by the court-appointed trustee of her bankruptcy estate. Much to the distress of Ms. Hoang’s creditors, though, the administration of her estate has generated more than $16 million in legal, accounting, and other related fees.

Sensing that his unsecured claim would not be satisfied when estate funds are ultimately distributed, Mr. Lowery sought to garnish the proceeds of a settlement Ms. Hoang received in 2016 that the bankruptcy court segregated from her bankruptcy estate. Ms. Hoang challenged the writ of garnishment, arguing that Mr. Lowery’s judgment had expired under Maryland Code (1974, 2013 Repl. Vol., 2019 Cum. Supp.), Courts & Judicial Proceedings Article (“CJ”) § 5-102(a)(3) 12 years from its date of entry because he had not renewed it pursuant to Maryland Rule 2-625.

Mr. Lowery argued that CJ § 5- 202 (the “Tolling Statute”) tolled the time to renew his judgment until after Ms. Hoang’s bankruptcy case was finally closed. The Circuit Court for Montgomery County quashed Mr. Lowery’s writ of garnishment. The Court of Special Appeals reversed, holding that CJ § 5-202 tolls the statute of limitations on a claim against a bankruptcy debtor during the pendency of a bankruptcy which results in an “unsuccessful” outcome to the debtor—either through the dismissal of a petition or, as in this case, the denial of a discharge but a continuation of the bankruptcy proceeding. 2 Ms. Hoang filed a petition for writ of certiorari with this Court, which we granted to consider the following question, which we have rephrased and consolidated as follows: Did the Court of Special Appeals err in holding that CJ § 5– 202 tolls the statute of limitations running on a claim against a bankruptcy debtor, from the filing of a bankruptcy petition until the closure of the bankruptcy case, where the debtor is denied a discharge in bankruptcy, and which does not result in a “dismissal” of the bankruptcy proceeding?1 We hold that under the plain language of CJ §5-202, the statute does not operate to toll the statute of limitations on a claim against a bankruptcy debtor that does not result in a dismissal of the petition. Accordingly, we reverse the judgment of the Court of Special Appeals.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY A. Debt Owed to Mr. Lowery Mr. Lowery obtained a default judgment against Ms. Hoang in the amount of $16,987 in the Circuit Court for Montgomery County in April 2002. With interest, Mr. 1 The questions as presented in Petitioner’s petition for writ of certiorari are as follows: 1. Did [the Court of Special Appeals] ignore established precedent and rules of statutory construction in holding that the tolling statute provided for under Md. Cts. & Jud. Proc. § 5- 202 indefinitely tolled, until the closure of the bankruptcy case, actions only against debtors denied a discharge in bankruptcy? 2.

Assuming, arguendo, that the policy of the tolling statute should apply to cases where the debtor is denied a discharge, did [the Court of Special Appeals] err in holding (1) that the statute applied to the creditor’s failure to renew his judgment; and (2) that the tolling should continue until the closure of the bankruptcy case? 3 Lowery’s judgment totaled over $41,000 by July 2016. In Maryland, a money judgment expires after 12 years, unless it is renewed before it expires. See CJ § 5-102(a)(3); Md. Rule 2-625. Under Maryland Rule 2-625, to renew a judgment, Mr. Lowery needed to file a “notice of renewal” with the clerk of the court within the 12-year period, “and the clerk shall enter the judgment renewed.” Mr. Lowery did not renew the judgment within the 12- year period, which expired on April 11, 2014.

Accordingly, the judgment expired unless the limitations period was tolled. B. Ms. Hoang’s Bankruptcy Ms. Hoang filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland in May 2005. In October 2005, Ms. Hoang’s bankruptcy case was converted to a liquidation under Chapter 7, and a Chapter 7 trustee was appointed. In March 2006, as a result of Ms. Hoang’s attempts to conceal her assets from the government, the bankruptcy court issued an order denying Ms. Hoang a discharge of indebtedness pursuant to 11 U.S.C. § 727 .

Instead of dismissing Ms. Hoang’s bankruptcy case because of her fraudulent and deceitful conduct, the Chapter 7 trustee continued to marshal Ms. Hoang’s pre-filing assets for eventual distribution to creditors. The Chapter 7 proceeding is ongoing. Upon the entry of the bankruptcy court’s order denying Ms. Hoang’s discharge, unsecured judgment creditors such as Mr. Lowery were no longer barred by the “automatic stay” provisions of 11 U.S.C. § 362 (a) that enjoined collection actions against Ms. Hoang. In other words, once the automatic stay expired on March 22, 2006, any impediment under 4 federal bankruptcy law which may have prevented Mr. Lowery from renewing his judgment prior to its 12-year expiration was eliminated.

C. 2016 Settlement Recovery In April 2016, Ms. Hoang received $87,000 in the settlement of an unrelated real estate dispute involving a defunct limited liability company (“LLC”) of which she was the sole member and manager. As part of the settlement, the bankruptcy trustee would receive $43,500 and the LLC would receive the remaining $43,500, which would pass directly to Ms. Hoang and remain separate from the bankruptcy estate. Ms. Hoang’s settlement funds were vulnerable to creditor claims because she had been denied a discharge and had lost the protection of the automatic stay. Mr. Lowery learned of the settlement, and he served Ms. Hoang’s attorney (who was holding the settlement funds in escrow) with a writ of garnishment in the amount of $41,294.31 for the 2002 judgment plus interest.

Ms. Hoang moved to quash the writ of garnishment on the basis that Mr. Lowery’s judgment was more than 12 years old and had expired pursuant to the 12-year statute of limitations set forth in CJ § 5-102(a)(3). Ms. Hoang contended that the automatic stay expired on March 22, 2006, when the bankruptcy court denied the discharge, and Mr. Lowery never renewed his judgment, which expired on April 11, 2014, over two years prior to the issuance of the writ of garnishment. Mr. Lowery responded that his time for renewing the judgment had been extended by operation of CJ § 5-202. The circuit court agreed with Ms. Hoang and found that CJ § 5-202 did not toll the limitations period on Mr. Lowery’s judgment.

Mr. Lowery appealed. 5 D. Court of Special Appeals The Court of Special Appeals reversed the circuit court, holding that CJ § 5-202 tolls the statute of limitations for renewing judgments where a debtor’s bankruptcy case has been dismissed or where the case is not dismissed, but the bankruptcy court denies the debtor a discharge pursuant to 11 U.S.C. § 727 and the case continues. In reaching its holding, the Court of Special Appeals reviewed Maryland’s insolvency laws enacted in the 1800s and categorized historical insolvency proceedings into “successful” and “unsuccessful” proceedings. Specifically, the court defined a “successful” insolvency under traditional Maryland practice as one in which the debtor’s nonexempt assets would be marshalled and distributed to their creditors in exchange for a discharge of their debts. Lowery v. Hoang, 240 Md. App. 240 , 247–48 (2019).

Conversely, the Court of Special Appeals determined that an “unsuccessful” insolvency under traditional Maryland practice was one in which the creditors did not receive the debtor’s available assets and the debtor did not receive a discharge. Id. at 248 . In such cases, Maryland insolvency law preserved creditors’ claims and, through operation of the predecessor statute of CJ § 5-202, all parties returned to their pre-petition status. Id.

The Court of Special Appeals then similarly characterized the potential outcomes of modern bankruptcy actions under federal law. In the Court of Special Appeals’ view, a “successful” bankruptcy action today is one that results in a “closure,” after the bankruptcy trustee marshals all of the debtor’s nonexempt assets, distributes them to their creditors, and the debtor receives a discharge of remaining indebtedness. Id. Likewise, an “unsuccessful” bankruptcy action is one that results in a “dismissal” under the relevant 6 chapter of the Bankruptcy Code, resulting in a dissolution of the automatic stay protection of 11 U.S.C. § 362 (a) and a restoration of all parties to their pre-petition statuses.

Id. In reaching its holding, the Court of Special Appeals classified Ms. Hoang’s denial of discharge as an unsuccessful insolvency. See Lowery, 240 Md. App. at 250 . The court defined success from the perspective of the debtor, based on whether the debtor receives a discharge and fresh start.

See id. at 248 . After reviewing the legislative history and purpose of CJ § 5-202, the intermediate appellate court determined that the Legislature intended to protect creditors who get tied up in unsuccessful bankruptcies, where the matter concludes but their claims are neither satisfied nor discharged. Id. at 250. This way, unscrupulous debtors could not manipulate the insolvency process by filing for bankruptcy, waiting for the statute of limitations to run on their creditors’ claims, and then withdraw their petitions or receive a dismissal.

Id. (quoting Ali v. CIT Tech. Fin. Servs., 416 Md. 249, 268 (2010)).

Therefore, the Court of Special Appeals held that the tolling provision of CJ § 5-202 applies to both dismissals and denials of discharge in federal bankruptcy proceedings under Chapter 7, where creditors’ claims remain intact after the bankruptcy matter has concluded. Id. Under the Court of Special Appeals’ holding, CJ § 5-202 will continue to toll the period within which to renew a judgment under Md. Rule 2-625 until Ms. Hoang’s bankruptcy case finally concludes, which has been ongoing for over a decade. Ms. Hoang filed a petition for writ of certiorari, which this Court granted. 7 II.

DISCUSSION A. Standard of Review The Court reviews issues of statutory interpretation de novo. Bd. of Cty. Comm’rs of Washington Cty. v. Perennial Solar, LLC, 464 Md. 610, 617 (2019) (quoting Koste v. Town of Oxford, 431 Md. 14, 25 (2013) (“When an issue involves an interpretation and application of Maryland constitutional, statutory, or case law, an appellate court must determine whether the trial court’s conclusions are legally correct under a de novo standard of review.”)) (internal citations omitted). B. Analysis CJ § 5-202 provides that: If a debtor files a petition in insolvency which is later dismissed, the time between the filing and the dismissal is not included in determining whether a claim against the debtor is barred by the statute of limitations.

As set forth below, the Tolling Statute was originally enacted as part of Maryland’s insolvency law in 1815.2 With the emergence of the modern federal bankruptcy laws, Maryland’s tolling statute is one of a few relics of our State’s insolvency laws that remain in effect. As discussed herein, although the General Assembly repealed the State’s insolvency law, thereby abolishing Maryland’s judicial insolvency proceeding that pre- dated modern federal bankruptcy, it retained a tolling provision that tolls any state statute 2 The predecessor to the Tolling Statute was passed on February 1, 1815, as an amendment to the Act for the Relief of Sundry Insolvent Debtors passed by the General Assembly in the Acts of 1805, ch. 110. Acts of 1814, ch.122 § 2. Although this amendment was adopted in 1815, we shall refer to the Maryland insolvency statute as the 1814 Act because it is included among the statutes enacted with the Acts of 1814. 8 of limitations that arises between the filing of a “petition in insolvency” and its dismissal.

In this case, we are asked to interpret the meaning of “dismissal” or “dismissed” under a tolling provision that refers to an insolvency process that is no longer in existence. Ms. Hoang contends that we should interpret “dismissal” in the same manner as the term is used under the federal Bankruptcy Code. Mr. Lowery contends that we should adopt the reasoning of the Court of Special Appeals and determine that “dismissal” encompasses any bankruptcy action that concludes in a manner that is unsuccessful from the debtor’s perspective. As part of our analysis, it is instructive to briefly review the history of Maryland insolvency law, and its evolution in the context of the emergence of federal bankruptcy laws.

Fortunately, the history of the Maryland insolvency statute and its interaction with the later enacted federal bankruptcy statute were summarized in detail by Judge James Eyler in Ali v. CIT Technology Financing Services, Inc., 188 Md. App. 269 (2009), aff’d 416 Md. 249 (2010). We shall provide a cursory review of the history that is comprehensively addressed in that opinion. Interplay Between Federal Bankruptcy Laws and Maryland’s Insolvency Laws Federal Emergence of Bankruptcy Law—Historical Perspective Clause 4 of Section 8 of Article I of the United States Constitution gives Congress the power “[t]o establish . . . uniform laws on the subject of bankruptcies throughout the United States.” Despite this express grant of authority, for over 100 years after its adoption, the country continued to debate the meaning of the clause and the extent of Congress’s power. Ali, 188 Md. App. at 278 (citing David A. Skeel, Jr., Debt’s Dominion: A History 9 of Bankruptcy Law in America 23–47 (2001)).

Throughout the 1800s, a pattern emerged where Congress would enact a bankruptcy law during a period of recession or depression, only to have the law repealed during a time of prosperity. Ali, 188 Md. App. at 278–79. “All the while, states enacted insolvency laws, generally granting rights to debtors, to fill the void left by the lack of a national bankruptcy law.” Id. at 278 (citing Skeel, supra, at 24–28). It was clear by the late 1800s that many state insolvency laws violated the Constitution’s prohibition against state “laws impairing the obligations of contracts . . . .” See id. at 281; U.S. Const. art. I, § 10. “Nevertheless, despite that and preemption issues, many state insolvency laws remained active simply because they were not challenged.” Ali, 188 Md. App. at 281 (citation omitted).

Following the financial crisis of 1893, Congress enacted the first permanent federal bankruptcy system with the Bankruptcy Act of 1898 (also known as the “Nelson Act”), which applied to all classes of debtors and provided for involuntary and voluntary bankruptcy. Id. (citations omitted). Shortly thereafter, the Supreme Court made it clear that Congress possessed plenary power over bankruptcies, which was broadly defined.

Id. (citing Hanover Nat’l Bank v. Moyses, 186 U.S. 181 (1902)). Since then, bankruptcy law has been stable, although it has been repealed and replaced on several occasions, most notably in the 1930s and 1970s. Ali, 188 Md. App. at 281 (citations omitted).

The Early Maryland Insolvency Act During the period of ebb and flow of federal bankruptcy laws, between 1805 and 1975, Maryland enacted insolvency laws that provided for the discharge of debts. Under the Act for the Relief of Sundry Insolvent Debtors, enacted by the General Assembly with 10 the Acts of 1805, ch. 110 (the “1805 Insolvency Act”), a debtor’s nonexempt assets were gathered, turned over to a court-appointed trustee, and eventually distributed to creditors. Acts of 1805, ch. 110, §§ 3–5. If the debtor complied with the requirements of the 1805 Insolvency Act and all other procedures were followed, the debtor would receive a discharge of debts and a fresh start.

Id. at § 5. Not all debtors received a fresh start. Like modern federal bankruptcy laws, the 1805 Insolvency Act also provided for the denial of discharge for misbehaving debtors, stating that debtors who attempted to defraud their creditors or committed various other forms of misconduct in the course of insolvency proceedings would be “for ever [sic] precluded from any benefit of this act. . . .” Id. at § 9. The Tolling Statute has its origins in the General Assembly’s 1814 amendments to the 1805 Insolvency Act.

Acts of 1814, ch. 122 (“1814 Act”). The 1814 Act had three sections. Section 1 of the 1814 Act “limited the ability of courts to continue pending petitions from one court session to another.” Ali, 188 Md. App. at 283 . Section 2 of the statute addressed renewals of judgment, providing that, “upon dismissal or withdrawal of a petition, or a decision adverse to petitioner, it was not necessary for a creditor to revive any judgment suspended by the petition.”3 Id.

(Emphasis added). Under the plain language in section 2, judgments that could not be enforced during the pendency of an insolvency action were automatically valid and enforceable upon dismissal, withdrawal, or a decision 3 Specifically, section 2 of the 1814 Act provided that “upon the dismissal or withdrawing of any petition for the benefit of said acts, or upon decisions thereon against the petitioner, it shall not be necessary to revive by scire facias any judgment which may have been suspended by such petition [in insolvency], and process of execution may be issued upon such judgments as if no such suspension had taken place.” Acts of 1814, ch. 122, § 2. 11 adverse to petitioner. The language of the 1814 Act contains similarities to modern federal bankruptcy law. Like the federal Bankruptcy Code, which distinguishes between a dismissal of a petition and a denial of discharge, the language of the 1814 Act reflects that the “dismissal” of an insolvency petition was different from a “decision adverse to [a] petitioner.” Section 3 of the 1814 Act contains the first iteration of the Tolling Statute, providing “[t]hat the time intervening between the petitioning of any of said debtors and the time that any of said petitions may be dismissed, shall not be computed on any plea of limitation so as to defeat any claim of any person against such debtor.” Acts of 1814, ch. 122 § 3.

In short, section 3 tolled any statute of limitations running on any claim against a debtor from the filing of the insolvency petition to its dismissal where a petition was dismissed. Significantly, the language in section 2 and section 3 contain a key distinction that assists with our statutory analysis of the current statute. Like the current Tolling Statute, section 3 of the 1814 Act only tolled the statute of limitations where a petition was “dismissed.” By contrast, the automatic reinstatement of judgments under section 2 occurred “upon the dismissal or withdrawing of any petition for the benefit of said acts, or upon decisions thereon against the petitioner, . . . .” Acts of 1814, ch. 122, § 2. By the plain terms of the 1814 Act, the General Assembly established automatic reinstatement of judgments in the event of dismissal, withdrawal, or denial of discharge, but granted tolling only in the event of dismissal of the petition. 12 Modern Revisions to Maryland’s Insolvency Laws When the General Assembly first consolidated the State’s laws into the Maryland Code of 1860, it codified the vast majority of the insolvency laws in Article 48.

See Md. Code, Art. 48 (1860). The General Assembly later moved the insolvency laws to Article 47, where they remained until 1975. Ali, 188 Md. App. at 284 . However, the Legislature located the Tolling Statute in Article 57, with the other limitations statutes.

See Md. Code, Art. 57, § 8 (1860). The Court of Special Appeals summarized the legislative history of the Tolling Statute in Ali as follows: At some point prior to 1860, the General Assembly slightly changed the wording of the provision to read: “The time intervening between the petitioning of an insolvent debtor, and the time when his petition may be dismissed, shall not be computed on any plea of limitation so as to defeat the claim of any person against such debtor.” See Maryland Code of 1860, Art. 57, § 8. At a later point, the General Assembly moved this provision to Art. 57, § 9. Art. 57, § 9 remained unchanged until 1973, when the General Assembly recodified Art. 57, § 9 to CJ[] § 5-202.

Ch. 2, § 1 of the Acts of 1973 (1st Sp.Sess.). When doing so, the General Assembly changed the wording of the statute to its current form. A “Revisor’s Note” explained that “[t]his section is new language derived from Art. 57, § [] 9.” Id. The preface to the bill further explained that the bill was meant to “revise, restate, and recodify the laws of this State pertaining to courts and proceedings therein . . . .” Id.

CJ[] § 5-202 exists unchanged today. Ali, 188 Md. App. at 284 . Two years later, in 1975, as part of the recodification of the commercial laws into our current Commercial Law Article, the General Assembly repealed the insolvency laws set forth in Article 47. The only insolvency law provisions that were recodified consisted 13 of former-Article 47 §§ 8 and 14, which involve preferences and priorities in insolvency.

Those sections were recodified in Maryland Code (1975), §§ 15–101, 15–102 of the Commercial Law Article (“CL”). Acts of 1975, ch. 49, § 3. A General Revisor’s Note explained: In revising this subtitle, the Commission to Revise the Annotated Code concluded that the provisions of present Art. 47, except those revised and not contained in §§ 15–101 and 15–102 of this subtitle, are preempted by the Federal Bankruptcy Act. Accordingly, these provisions of Art. 47 are proposed for repeal.

A Revisor’s Note to § 15-101 further explained: While Art. 47 is proposed for repeal as obsolete, the two sections of Art. 47 nevertheless are contained elsewhere in the common law, as well as in Art. 23, § [] 81, and therefore should be retained. This section [15-101] sets forth the law as it has been applied in insolvency proceedings, whether brought pursuant to Art. 23 or Art. 47. As the Court of Special Appeals explained in Ali, “[a]lthough obviously belated, the repeal of Art. 47 reflected a recognition of the pervasive role of federal bankruptcy law, the limited role of states in bankruptcy, and the outdated nature of Maryland’s insolvency laws.” 188 Md. App. at 285 . As part of the recodification of the limited sections of former-Article 47 involving preferences of creditors, the General Assembly recognized the preemptive nature of the federal bankruptcy laws and incorporated by reference specific provisions of the Bankruptcy Act as part of the recodification.4 Title 15 of the Commercial Law Article 4 See Revisor’s Note to CL § 15–101, explaining that subsection (d), pertaining to the rights of an assignee for the benefit of creditors or a receiver of the insolvent’s assets, 14 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 “insolvent” and “void” and “voidable” preferences, all as defined in the Bankruptcy Code. The current version of CL § 15-101 sets forth definitions of words “as used in federal bankruptcy laws.” See CL § 15-101(a). CL § 15-101(a)(11) contains a “catchall” provision, which provides that: “Other words, including ‘insolvent’ and ‘insider’, when used in federal bankruptcy law shall have the meanings set forth in the definition section of the federal bankruptcy law or as interpreted by the federal courts applying the federal bankruptcy law.” The only remnants of the historic insolvency laws, codified at CL §§ 15-101, 15-102 and 15-103, recognize the pervasiveness of the federal bankruptcy statute and supplement the federal statute with State procedures, including some definitions, but only to the extent not inconsistent with federal bankruptcy law. To summarize, in 1975, all of Maryland’s insolvency laws were repealed, with the exception of the above-described provisions of Title 15 of the Commercial Law Article addressing aspects of debt collection.

Despite the repeal of the historical insolvency laws, which had been preempted by the federal Bankruptcy Code, the Legislature kept intact the Tolling Statute, CJ § 5-202, which provides a tolling of the pertinent statute of limitations on claims against the debtor for a period between the “filing and the dismissal” of a petition for insolvency. “is derived from the Bankruptcy Act . . . and [has] been incorporated by reference . . . but [is] particularly set forth within the section to avoid problems with respect to incorporation by reference of entire bodies of federal law.” Acts of 1975, ch. 49 § 3. 15 In Ali v. CIT Technology Financing Services, Inc., 416 Md. 249 (2010), this Court was asked to determine whether, under the plain language of the Tolling Statute, the phrase “petition in insolvency” included a federal bankruptcy petition. Despite the fact that the Tolling Statute dates back to the early Republic and predated the enactment of modern federal bankruptcy laws, after considering the plain meaning, legislative history, and legislative purpose of CJ § 5-202, we held that “a federal bankruptcy petition constitutes a ‘petition in insolvency’ and the Tolling Statute therefore, “operated to toll any applicable statute of limitations from the time the debtor . . . filed his federal bankruptcy petition until the time that petition was dismissed.” Id. at 271. In analyzing the statute, this Court considered the same legislative history outlined above, and also considered the plain language of the statute by consulting various 19th century legal and general dictionary definitions of “insolvency” and “insolvent.” Id. at 262–63. In addition to considering the plain meaning of the phrase during the early 19th century, the Court also looked at the legislative history during the 1963 adoption of the Uniform Commercial Code.

Id. at 264. As part of that code adoption, this Court noted that the General Assembly adopted a definition for the term “insolvent,” which it defined as one “who either has ceased to pay his debts . . . as they become due or is insolvent within the meaning of the federal bankruptcy law.’” Id. (citing CL § 1-201(23)). We further commented that 10 years later, in 1973, the Tolling Statute was recodified for the last time, moving from Art. 57 § 9 to CJ § 5-202.

Id. We explained that, “had the legislature, during its recodification process, desired an alternative definition, it would have enacted one. Its 16 silence, however, informs us that the Legislature was content with the definition as codified in the Commercial Law Article.” Id. We concluded that, “at the time that the [predecessor to the Tolling Statute] was enacted, it was understood that a ‘petition in insolvency’ was a petition filed by one in relation to his or her inability to pay off his or her debts in full.” Id. at 264.

We explained that, “It seems incontrovertible that the filing of a Chapter 11 federal bankruptcy petition is [also] a petition by one in relation to his or her inability to pay off his or her debts in full.” Id. at 265. Accordingly, we determined that modern day bankruptcy fits “squarely within § 5-202’s definition of ‘petition in insolvency.’ As such, a plain-meaning analysis . . . compels the conclusion that the filing of a federal bankruptcy petition operates to toll Maryland’s generally-applicable three-year statute of limitations.” Id. at 266. In addition to undertaking a plain meaning analysis, we also reviewed the legislative history and purpose underlying the tolling provision and concluded that the “Legislature presumably intended for § 5-202 to apply to what was once segmented into ‘bankruptcy’ and ‘insolvency’ proceedings, and to what is now predominantly under the purview of federal bankruptcy law.” Id. at 267. Finally, we turned to the public policy behind the tolling provision, which buttressed our conclusion.

We agreed with the Court of Special Appeals’ analysis that, like the default federal tolling provision in 11 U.S.C. § 108 , the state tolling provision contained in CJ § 5- 202 “was enacted ‘to address the public’s complaint that debtors manipulated the bankruptcy and insolvency processes to avoid paying creditors by entering bankruptcy, 17 waiting for the statute of limitations to expire, and subsequently dismissing the bankruptcy proceeding.’” Id. at 268 (quoting Ali, 188 Md. App. at 283–84) (citations omitted). Having concluded in Ali that the tolling provision in CJ § 5-202 applies to the filing of a federal bankruptcy petition, we must determine whether the word “dismissal” has the same meaning as the term is used under the modern federal Bankruptcy Code, or whether it means something different, such as the broad definition supplied by the Court of Special Appeals, to encompass all “unsuccessful” bankruptcies, which do not result in a discharge of the debtor’s pre-petition debts. As part of our analysis, it is instructive to consider the manner in which the federal Bankruptcy Code uses the term “dismissal” as well as the term “denial of a discharge.” Modern Federal Bankruptcy Laws—The Automatic Stay, Dismissal of a Petition, Denial of Discharge A bankruptcy case begins when a debtor files a petition under the applicable chapter of Title 11 of the “Bankruptcy Code with the appropriate federal bankruptcy court. 11 U.S.C. § 301 (a); § 302.5 Commencing a bankruptcy case creates an estate (the “bankruptcy estate” or “estate”) comprised of the debtor’s assets as established under 11 U.S.C. § 541 , by which all of the debtor’s property becomes the property of the estate except for that 5 Creditors may initiate involuntary bankruptcy proceedings under 11 U.S.C. § 303 , but they are exceedingly rare—a report by the Administrative Office of the United States Courts shows that they represented less than one-tenth of one percent of all bankruptcy cases between 1990 and 2016. Administrative Office of the United States Courts, Judicial Facts and Figures, Table 7.2, https://www.uscourts.gov/sites/default/files/data_tables/jff_7.2_0930.2016.pdf (Perma.cc: https://perma.cc/ZN4S-R53S). 18 which the Bankruptcy Code exempts.

The estate is represented by a trustee who has the capacity to sue and be sued. 11 U.S.C. § 323 . Chapter 7 of the Bankruptcy Code governs cases in which the debtor’s assets are to be liquidated and then distributed to creditors rather than reorganized and their debts restructured. The trustee administers the estate for the benefit of the debtor’s creditors; in the case of a liquidation under Chapter 7, this broadly includes marshalling and liquidating the assets of the estate for distribution to creditors. See 11 U.S.C. § 704 .

Only creditors with an allowed claim under 11 U.S.C. § 502 may participate in the case. Creditors receive assets distributed from the estate (to the extent that they exist) pursuant to established priority rules. The filing of a petition operates as a stay (the “automatic stay”) of actions against the debtor. See 11 U.S.C. § 362 (a).

The automatic stay applies to several types of actions, including “the commencement or continuation” of an action “to recover a claim against the debtor”; enforcement against the debtor or property of the bankruptcy estate of a judgment obtained pre-filing; and any act to obtain possession of property of the bankruptcy estate or from the estate or to exercise control over the property of the estate. 11 U.S.C. § 362 (a)(1)–(3). The automatic stay offers strong protection to debtors and applies in all but a select set of circumstances. See Elizabeth Warren, Chapter 11: Reorganizing American Businesses 27–30 (2008). The automatic “stay ‘is designed to provide breathing space to the debtor, prevent harassment of the debtor, assure that all claims against the debtor will be brought in the sole forum of the bankruptcy court, and protect creditors as a class from the possibility that one or more creditors will obtain payment to the detriment 19 of others.’” In re Swintek, 906 F.3d 1100, 1103 (9th Cir. 2018) (quoting Burton v. Infinity Capital Mgmt., 862 F.3d 740, 746 (9th Cir. 2017)).

Section 362(c)(2) of the Bankruptcy Code identifies three instances when, by operation of law, the automatic stay terminates in a bankruptcy case: (1) “the time the case is closed”; (2) “the time the case is dismissed”; or (3) “the time a discharge is granted or denied” in a case under Chapter 7. See 11 U.S.C. § 362 (c)(2). Creditors may also petition for relief from the automatic stay under 11 U.S.C. § 362 (d). The Bankruptcy Code uses distinct terms to describe multiple possible ends to a bankruptcy action.

As set forth below, under the federal bankruptcy scheme a “dismissal” of a bankruptcy petition does not encompass all “unsuccessful” bankruptcies, as that concept was devised by the intermediate appellate court in this case. The bankruptcy court “close[s]” what the Court of Special Appeals referred to as “successful” bankruptcy actions. See 11 U.S.C. § 350 (a) (“After an estate is fully administered and the court has discharged the trustee, the court shall close the case.”). In this instance, the creditors recover from available funds at their level of priority while the debtor receives a discharge of remaining debts and a fresh start.

By contrast, a bankruptcy can end “unsuccessfully” by a “dismissal” of the action. See 11 U.S.C. § 707 (a) (providing for the dismissal of a Chapter 7 bankruptcy); § 1112(b)(1) (providing for the dismissal of a Chapter 11 bankruptcy); § 1307(b) (providing for the dismissal of a Chapter 13 bankruptcy)). Under Chapter 7, the court may dismiss a case for cause, including if the debtor causes unreasonable delay that prejudices 20 their creditors, does not pay required fees, or fails to file required information. 11 U.S.C. § 707 (a). If a bankruptcy case is dismissed, the debtor does not receive a discharge.

Instead, “the automatic stay is dissolved and dismissal ‘restores the assets and the parties to their prepetition status, as if the case had never been