Case Title: Winmark v. Miles & Stockbridge

Citation: 345 Md. 614

Docket Number: 57/96

State: maryland

Court: Maryland Supreme Court

Date: 1997-05-09T00:00:00Z

Document:
WinMark Limited Partnership et al. v. Miles & Stockbridge et al.,
No. 57, September Term, 1996.
[Judicial Estoppel - Action by debtor in possession and its general
partners alleging legal malpractice - Malpractice claim not listed
as asset in bankruptcy.  Held:  Judicial estoppel not applicable.
Dismissal vacated as to claims of debtor and debtorUs general
partners.  Stay ordered pending bankruptcy court approval as to
debtorUs claim.]
Circuit Court for Baltimore
City Case #94250003/CL-185697
IN THE COURT OF APPEALS OF MARYLAND
No. 57
September Term, 1996
____________________________________
WINMARK LIMITED PARTNERSHIP
et al.
v.
MILES & STOCKBRIDGE et al.
____________________________________
Bell, C.J.
Eldridge
Rodowsky
Chasanow
Karwacki
Wilner, 
JJ. 
____________________________________
Opinion by Rodowsky, J.
____________________________________
Filed:  May 9, 1997
     The facts are drawn from petitionersU complaint and from the
1
exhibits to MilesUs motion for summary judgment that was titled,
"Motion to Dismiss."
In this case we consider whether a debtorUs nondisclosure, as
an asset, of a potential tort claim during a debtor in possession
reorganization under Chapter 11 of the Bankruptcy Code bars the
debtor from post-confirmation litigation of that claim against
defendants who were not creditors in the bankruptcy.
The petitioners are WinMark Limited Partnership (WinMark) and
its two general partners, Jay A. Winer (Winer) and Mark Sapperstein
(Sapperstein).  WinMark was formed in 1987 for the purpose of
owning, developing, and leasing two office buildings on two
adjoining parcels of land (the Front Parcel and the Back Parcel),
totalling 5.324 acres, in Odenton, Anne Arundel County.  The
respondents are Miles & Stockbridge, a law firm, and two of its
attorneys (hereinafter collectively Miles).  In September 1994, the
petitioners sued Miles alleging professional negligence and breach
of contract.  The claims arise out of the background events
hereinafter generally described.   
1
In June 1988, WinMark borrowed $2,070,000 under a construction
loan, secured by a first lien on the Front Parcel, from Sovran
Bank/Maryland, later succeeded by NationsBank of Maryland, N.A.
(the Bank).  On May 17, 1990, WinMark borrowed $300,000 from the
Bank on a land loan that was secured by a first lien on the
undeveloped Back Parcel.  The land loan was due November 16, 1991.
Winer and Sapperstein personally guaranteed both loans.
-2-
     The injunction was dismissed without prejudice after the
2
automatic stay in WinMarkUs bankruptcy took effect.
As the due date of the land loan approached in the fall of
1991, WinMark negotiated with the Bank for an extension of the land
loan and for a restructuring of the construction loan to take
advantage of lower prevailing interest rates.  Petitioners alleged
that, during this period, Miles represented both petitioners and
the Bank in the negotiations and that Miles did so until some time
in December 1991 when Miles withdrew from representation of the
petitioners, but continued representation of the Bank.  Petitioners
further allege that an agreement was reached in January 1992 with
the Bank under which WinMark paid in full the $300,000 land loan
and continued to make all timely payments on the construction loan
but that the Bank nevertheless notified WinMark that it was in
default on the construction loan.  This precipitated an injunction
action in the Circuit Court for Anne Arundel County by petitioners
against the Bank resulting in an order in February 1992,  enjoining
the Bank from exercising any default remedies under the
construction loan.2
The petitioners allege that "[s]ubsequent to the litigation in
State Court, the Bank claimed that it was entitled to attorneyUs
fees [in] excess of $200,000."  Petitioners further aver that 
"[a]s a direct result of the BankUs demand for attorney
fees allegedly due from the State Court litigation,
WinMark and the Bank were unable to agree on the terms of
refinancing of the Construction Loan at maturity, and,
-3-
consequently, WinMark was forced to file bankruptcy under
Chapter 11 of the Bankruptcy Code on July 20, 1993." 
Neither Winer nor Sapperstein, the guarantors, petitioned in
bankruptcy.
WinMarkUs second amended plan of reorganization (the Plan) was
confirmed on March 14, 1994.  Under the Plan WinMark is a debtor in
possession.  On April 28, 1994, the petitioners and others executed
a general release of the Bank, therein called the Lender.  That
release defines "Releasees" to mean, inter alia, "(iii) the LenderUs
officers, ... agents, attorneys, ... but only in their respective
capacities as such ...."  
Six months after confirmation of the Plan, petitioners
instituted in the Circuit Court for Baltimore City the instant
action against Miles.  The theory of the complaint is that the
petitioners were deprived of zealous representation in their
workout negotiations with the Bank because of the alleged conflict
of interests on the part of Miles.
Accepting the allegations of the complaint as true for
purposes of the responsive motion, Miles raised a number of legal
defenses, including release and judicial estoppel.  The defense of
release was based on the document of April 28, 1994.  The factual
predicate for the judicial estoppel argument was the absence from
WinMarkUs filings in the Chapter 11 proceedings of any reference to
the claim against Miles as an asset of the bankruptcy estate.  For
example, WinMarkUs statement of financial affairs, filed with the
-4-
bankruptcy court, included a schedule of personal property.
WinMark replied, "None," in answer to the  category:  "Other
contingent and unliquidated claims of every nature, including tax
refunds, counterclaims of the debtor, and rights to setoff claims."
On the other hand, petitioners argued to the circuit court,
inter alia, that the position asserted by Miles was not consistent
with the policy of the Bankruptcy Code.  Petitioners said that the
claim "is an asset of the [bankruptcy] estate and our position is
that policy dictates that [the] estate be there for the creditors.
The purpose of disclosure in a Chapter 11 case is for the
creditors.  It is not for somebody not involved in the case."
WinMark also represented that the Plan had not been substantially
completed and that the Plan was still subject to amendment.
The circuit court held that the claim was barred by judicial
estoppel and by the release.  In addition, the circuit court
alternatively held that the factual allegations of the complaint
were not sufficient to support petitionersU claim for punitive
damages.
Petitioners appealed to the Court of Special Appeals.  That
court affirmed in an opinion that relied exclusively on the
judicial estoppel defense, one of the two grounds on which the
circuit court had relied in granting summary judgment for Miles on
the entirety of the claims against it.  WinMark Ltd. Partnership v.
Miles & Stockbridge, 109 Md. App. 149, 674 A.2d 73 (1996).  We
-5-
granted the petitionersU request for the writ of certiorari,
primarily to consider the application to the instant matter of
Adams v. Manown, 328 Md. 463, 615 A.2d 611 (1992), which had not
been cited to, or by, either of the courts below.
I
The concept of judicial estoppel is perhaps best presented by
an illustration.  In Kramer v. Globe Brewing Co., 175 Md. 461, 2
A.2d 634 (1938), Kramer had been injured when a beer truck in which
he was riding as a helper overturned.  Kramer considered that he
had been hired by the driver, acting without any authority of the
brewery, and that, as helper, he would be paid by the driver out of
the driverUs wages from the brewery.  Id. at 463, 2 A.2d at 634.
When Kramer sued the brewery and the driver in a common law tort
action, the brewery raised the defense of workersU compensation
exclusivity, averring that Kramer was its employee.  After
obtaining a voluntary dismissal without prejudice of the tort
action, Kramer sought workersU compensation.  It was denied by the
WorkersU Compensation Commission, and that denial was affirmed in
the circuit court.  Id. at 466, 2 A.2d at 636.  This Court reversed
and remanded, setting forth the rationale behind the doctrine of
judicial estoppel, as follows:
"UIf 
parties 
in 
court 
were 
permitted 
to 
assume
inconsistent positions in the trial of their causes, the
usefulness of courts of justice would in most cases be
paralyzed; the coercive process of the law, available
only between those who consented to its exercise, could
be set at naught by all.  But the rights of all men,
-6-
honest and dishonest, are in the keeping of the courts,
and consistency of proceeding is therefore required of
all those who come or are brought before them.  It may
accordingly be laid down as a broad proposition that one
who, without mistake induced by the opposite party, has
taken a particular position deliberately in the course of
litigation, must act consistently with it; one cannot
play fast and loose.U"
Id. at 469, 2 A.2d at 637 (quoting Bigelow on Estoppel 783 (6th
ed.) and citing Ohio & Mississippi Ry. Co. v. McCarthy, 96 U.S.
258, 267-68, 24 L. Ed. 693, 696 (1878) ("Where a party gives a
reason  for his conduct and decision touching anything involved in
a controversy, he cannot, after litigation has begun, change his
ground, and put his conduct upon another and a different
consideration.  He is not permitted thus to mend his hold.  He is
estopped from doing it by a settled principle of law.")).
This Court also applied judicial estoppel against a widower
who, in the probate of his wifeUs estate in Maine, had taken the
position that certain securities were part of the corpus of a trust
of which he was successor to his wife as trustee, but who, in an
action in Maryland for distribution of those securities upon
termination of that trust, took the position that the securities
were his own individual property.  See Stone v. Stone, 230 Md. 248,
186 A.2d 590 (1962).  
In the instant matter our inquiry is whether judicial estoppel
applies when three circumstances are present:  (1) the plaintiff in
the civil action in which judicial estoppel is raised as a defense
is or was a debtor in possession in a proceeding under Chapter 11
-7-
of the Bankruptcy Code, (2) the claim arose prior to commencement
of the bankruptcy proceeding, and (3) the claim was not listed in
the schedules and disclosure statements filed by the debtor in the
bankruptcy proceeding.  As the decisions hereinafter cited and
discussed will illustrate, judicial estoppel is to be distinguished
from equitable estoppel and res judicata.  Where the defendant in
the subsequent civil action was a substantial creditor in the
Chapter 11 proceedings in which a plan of reorganization was
confirmed, the debtor, as plaintiff in the civil action, may be
equitably estopped because of the reliance by the creditor, in
voting for the plan of reorganization, on the absence, as a
disclosed asset, of any claim by the debtor against that creditor.
Similarly to be distinguished from the judicial estoppel issue are
those cases in which the circumstances surrounding the confirmation
of the plan of arrangement cause the order of confirmation to have
claim or issue preclusion effect on the claim asserted in the
subsequent civil action by the debtor against the creditor.  
The issue before us lies at the juncture of competing
interests.  As a result, the reported decisions fall into one of
two categories.  Cases in the numerically larger category emphasize
maintaining the integrity of the judicial system by avoiding the
unseemly encouragement of litigantsU playing "fast and loose" with
the judicial system.  A minority of cases give determinative weight
to the interest of the bankruptcy creditors of the debtor, who
-8-
     An additional factor that was present in Oneida is referred
3
to in a later opinion of the Third Circuit involving judicial
estoppel, Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81
F.3d 355 (3d Cir. 1996).  The opinion in Ryan Operations points out
that "the plaintiff in Oneida had not only failed to disclose its
potential claim against a bank for $7.7 million as a contingent
asset on its § 521 schedule of assets and liabilities, but
simultaneously claimed the corresponding $7.7 million debt to the
bank as a liability on the same schedule."  Id. at 362 n.4.  In
Ryan Operations the Third Circuit reversed a summary judgment
against the debtor based on judicial estoppel because there was "no
basis in this case for inferring that Ryan deliberately asserted
inconsistent positions in order to gain advantage--i.e., that it
played fast and loose with the courts."  Id. at 363.  
should be the initial recipients of any net recovery on the asset
represented by the undisclosed claim.  The two views are
respectively found in the majority and dissenting opinions in
Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414 (3d
Cir.), cert. denied, 488 U.S. 967, 109 S. Ct. 495, 102 L. Ed. 2d
523 (1988).
Oneida, 
in 
addition 
to 
presenting 
the 
three 
basic
circumstances of the issue before us, also involved a principal
bankruptcy creditor as the civil action defendant.  Further, after
the civil action was filed "the plan was modified in order that
one-third of the net recovery that Oneida might obtain against the
bank in [the] lawsuit be paid to the creditors."  Id. at 416 n.1.3
The court emphasized that 11 U.S.C. § 1125(b) prohibits
solicitation of approval of a plan of reorganization by a holder of
a claim against the bankruptcy estate without transmitting "a
written disclosure statement approved, after notice and a hearing,
-9-
by the court as containing adequate information."  "Adequate
information" is defined in § 1125(a)(1) to mean "information of a
kind, and in sufficient detail ... that would enable a hypothetical
reasonable investor typical of holders of claims or interests of
the relevant class to make an informed judgment about the plan
...."
The Oneida majority first applied an equitable estoppel
analysis.  It pointed to "[t]he importance of full disclosure [as]
underlaid by the reliance placed upon the disclosure statement by
the  creditors  and  the  [bankruptcy]  court."   Id.   The court,
however, held that the informationally deficient plan was "not
cured by the later modification."  Id. at 418 (footnote omitted).
Creditors were not alerted by the original plan to "the possible
financial benefits enuring to them upon the successful prosecution
of the claim."  Id.  Further, had the civil action defendant known
of the potential lawsuit, it might not have stipulated concerning
its lien and voted for confirmation of the plan.  Id.  
The majority in Oneida also applied judicial estoppel, which,
it said, "looks to the connection between the litigant and the
judicial 
system 
while 
equitable 
estoppel 
focuses 
on 
the
relationship between the parties to the prior litigation."  Id. at
419.  The majority concluded that the debtorUs "failure to list its
claim against the bank worked in opposition to preservation of the
integrity of the system which the doctrine of judicial estoppel
-10-
seeks to protect."  Id.  This was because, in the Chapter 11
proceedings, the debtor, by silence, had treated the bankUs claim
as undisputed.  Id.  Accordingly, the court affirmed the district
courtUs dismissal of the civil action.  
The dissent presented the case for the other interest involved
in the problem, saying:
"Concern for OneidaUs numerous unsecured creditors
compels me to dissent from the courtUs disposition.
Those creditors, as well as Oneida, stand to lose by
virtue of that disposition.  If Oneida had been able to
foresee this courtUs novel application of equitable and
judicial estoppel, it would have been able to protect
itself against the loss the court today imposes upon it.
OneidaUs unsecured creditors, however, had no way of
protecting themselves and should not be required to
contribute towards a windfall for an alleged wrongdoer."
Id. at 420 (Stapleton, J., dissenting).   
The dissent further said:
"The CodeUs disclosure requirements are intended to
protect those creditors whom a debtorUs failure to
disclose hidden assets would prejudice.  A fortiori, a
courtUs response to nondisclosure should do likewise.
Not only does the court fail to safeguard the interests
of OneidaUs unsecured creditors, but it effectively
penalizes them by foreclosing the prosecution of claims
against the bank that would, if successful, result in a
substantial enhancement of the estate and in their
receiving more than the approximately thirty cents on the
dollar for which they have been forced to settle.  The
only real winner in the case as decided is the bank, whom
the court has relieved of the responsibility of
justifying its allegedly improper behavior."
Id. at 422-23.
The issue before us has been resolved by dismissal of claims
on the ground of judicial estoppel, applied either exclusively or
-11-
in conjunction with other defenses, in the following cases:
Payless Wholesale Distribs. v. Alberto Culver (P.R.) Inc., 989 F.2d
570 (1st Cir.) (a 110 page complaint alleging twenty causes of
action and claiming on each between $5 million and $150 million
damages), cert. denied, 510 U.S. 931, 114 S. Ct. 344, 126 L. Ed. 2d
309 (1993); Rosenshein v. Kleban, 918 F. Supp. 98 (S.D.N.Y. 1996)
(claim against prior property owners for environmental clean up
costs; also lack of standing); Pako Corp. v. Citytrust, 109 B.R.
368 (D. Minn. 1989) (lender liability); In re Hoffman, 99 B.R. 929
(N.D. Iowa 1989) (lender liability; also res judicata, equitable
estoppel, and general equity); In re H.R.P. Auto Center, Inc., 130
B.R. 247 (Bankr. N.D. Ohio 1991) (overpayment of sales tax; also
equitable estoppel and laches); In re B.A. Little, 126 B.R. 861
(Bankr. N.D. Miss. 1991) (lender liability; also res judicata,
equitable estoppel, and waiver); Cafferty v. Thompson, 223 A.D.2d
99, 644 N.Y.S.2d 584 (legal malpractice), appeal denied, 88 N.Y.2d
815, 651 N.Y.S.2d 16, 673 N.E.2d 1243 (1996); Southmark Corp. v.
Trotter, Smith & Jacobs, 212 Ga. App. 454, 442 S.E.2d 265 (1994)
(legal malpractice), cert. denied, 1994 Ga. LEXIS 702 (Ga. May 5,
1994). 
In general, the above-cited cases do not discuss the interest
of the creditors.  The court in Payless Wholesale Distribs.
acknowledged that "[i]ndeed, defendants may have a windfall" but
concluded that "it [was] an unacceptable abuse of judicial
-12-
proceedings" for the debtor to have represented that no claims
existed and then to have attempted to resurrect claims and "obtain
relief on the opposite basis."  989 F.2d at 571.  The court in Pako
Corp. considered the debtor-plaintiffUs argument that it "could
pursue the claim Ustrictly supervisedU by the bankruptcy court"--
supervision that Pako apparently had not sought previously.  109
B.R. at 374 (quoting In re Auto West, Inc., 43 B.R. 761, 764 (D.
Utah 1984)).  The court acknowledged that having the bankruptcy
court "retain jurisdiction to oversee the equitable distribution of
the proceeds from the claim" may be "the preferable rule in that it
prevents an alleged wrongdoer from receiving the windfall that
would result from a finding that the claim was barred by estoppel."
Id.  The court simply concluded its discussion of the debtorUs
argument by saying that if the cause of action survived the
bankruptcy it "remains subject to the claims of PakoUs creditors."
Id. at 375.  In our view, the latter response is a reason not to
apply judicial estoppel to extinguish the claim.
In re Auto West, Inc., 43 B.R. 761 (D. Utah 1984), applies the
competing philosophy.  In that case, more than two years after the
debtors had petitioned for relief under Chapter 11, and three
months after their plan of reorganization had been confirmed, the
debtors petitioned the bankruptcy court for permission to employ
counsel in then-pending state court litigation.   The claim had not
been listed on the bankruptcy schedules, nor mentioned in the
-13-
disclosure statements, nor treated in the reorganization plan.  Id.
at 762.  The civil case defendant argued that it was not in the
best interests of the bankruptcy estate to authorize employment of
counsel to pursue an action barred by, inter alia, estoppel.  Id.
The court first analyzed provisions of the Bankruptcy Code and
concluded that, "[g]iven the express statutory scheme for removing
property from a debtorUs estate, application of res judicata,
estoppel or waiver in this case would be improper."  Id. at 764.
The court then said:   
"Moreover, the extinguishment of unscheduled assets is
inconsistent with the policy of the Code.  Property of
the estate is administered by a trustee or debtor in
possession for the benefit of all creditors.  The debtors
in this case, as debtors in possession, hold the title
and powers of trustee, subject to the control of the
bankruptcy court.  11 U.S.C. § 1107.  The debtor in
possession is strictly supervised by the bankruptcy
court, and its actions, including abandonment or waiver
of a chose in action, must be approved.  To permit
otherwise might be an inducement for a debtor in
possession to fail to schedule claims, which might then
revert to the debtorUs ownership.  See Stein v. United
Artists Corp., 691 F.2d 885, 892 (9th Cir. 1982).
Further, waiver of a chose in action that could benefit
all creditors to the detriment of one creditor, is
inconsistent with the fiduciary obligation of the debtor
in possession."
Id.
Greenheart Durawoods, Inc. v. PHF IntUl Corp., 1994 U.S. Dist.
LEXIS 16509 (S.D.N.Y. Nov. 15, 1994), reports the denial in the
debtorUs civil action of a motion to dismiss, based on nondisclosure
in bankruptcy of the claim against the defendant who was not a
creditor in the bankruptcy.  The court distinguished Pako Corp.,
-14-
109 B.R. 368, on the ground that the civil suit defendant there was
a creditor in the bankruptcy.  Greenheart at 12.  The court said
that "PHF has cited no cases that would support PHFUs novel theory
that GreenheartUs previous omission should result in a windfall to
PHF and prevent the reopening of the bankruptcy proceedings to the
benefit of GreenheartUs creditors."  Id. at 15-16.  The court
concluded that "reopening the bankruptcy proceedings (with the
approval of the Bankruptcy Court and on such terms and conditions
as the Bankruptcy Court orders) would benefit GreenheartUs creditors
and would prevent a windfall to PHF."  Id. at 16.  The court
ordered the civil action stayed pending the debtorUs application to
the bankruptcy court and the result thereof.  Id.
4 D.R. Cowans, Cowans Bankruptcy Law and Practice § 20.32(a)
(6th ed. 1994) (Cowans), addresses the situation of a debtor in a
Chapter 11 reorganization who "does not list an asset in the papers
and does not provide for it in the plan."  Id. at 166.  The author
concludes that "[n]evertheless, an asset could not be considered
abandoned and the court may approve of appointment of special
counsel to collect on the omitted cause of action."  Id.  
This Court, in Adams v. Manown, 328 Md. 463, 615 A.2d 611
(1992), espoused the rationale of the Oneida dissent and of the
minority line of cases reviewed above.  Adams was an action by a
discharged bankrupt, after the estate was closed, to collect a debt
which antedated the bankruptcy proceeding.  The bankrupt had listed
-15-
$3,000 of nonexempt assets and debts of $190,000.  Id. at 468, 615
A.2d at 613.  The defendant in the civil action argued that,
because the bankrupt had not scheduled the alleged indebtedness in
the bankruptcy proceedings, the bankrupt came to court without
clean hands and could not enforce the claim.  A judgment for
$43,000 was entered in favor of the discharged bankrupt, but that
judgment was reversed by the Court of Special Appeals which applied
the clean hands doctrine.  Manown v. Adams, 89 Md. App. 503, 598
A.2d 821 (1991).  
On certiorari review in Adams v. Manown we were faced with the
same competing interests presented in the instant matter.  Indeed,
there, liability of the defendant in the civil action to the
discharged bankrupt had been determined by judgment.  To the extent
that the judgment was collectible, extinguishing it by applying the
clean hands doctrine would have resulted in a windfall to the
judgment debtor and would have deprived the bankruptUs creditors of
an asset from which they should have benefited.  We said:
"By raising cries of unclean hands and in pari delicto,
Manown has successfully presented this case as if the
only alternatives were either to give Adams the benefit
of his fraud or to give Manown the benefit of a windfall.
What has become obfuscated through two levels of courts
is that those who are entitled to benefit from the
judicial determination of ManownUs indebtedness to Adams
are the creditors of Adams."  
328 Md. at 477, 615 A.2d at 617-18.
Adams v. Manown controls on the issue of whether judicial
estoppel should be applied under the circumstances presented here.
-16-
The policy underlying judicial estoppel and underlying the clean
hands doctrine is the same.  "The clean hands doctrine is not
applied for the protection of the parties nor as a punishment to
the wrongdoer; rather, the doctrine is intended to protect the
courts from having to endorse or reward inequitable conduct."  Id.
at 474-75, 615 A.2d at 616 (citing Space Aero Prods. Co. v. R.E.
Darling Co., 238 Md. 93, 120, 208 A.2d 74, 88, cert. denied, 382
U.S. 843, 86 S. Ct. 77, 15 L. Ed. 2d 83 (1965); Niner v. Hanson,
217 Md. 298, 309, 142 A.2d 798, 803 (1958)).  Judicial estoppel
should not have been applied based on the omission of the WinMark
claim against Miles from the bankruptcy papers.
Two of the petitioners, Winer and Sapperstein, were not
bankrupts.  The Court of Special Appeals in its WinMark decision
sustained the application of judicial estoppel against them because
they "stood in a relationship of close privity with WinMark."  109
Md. App. at 174, 674 A.2d at 85.  Inasmuch as we have held that
judicial estoppel should not have been applied against WinMark, it
also should not have been applied against Winer and Sapperstein.
Accordingly, the judgment of the Court of Special Appeals will be
vacated, and the matter of the claims of Winer and Sapperstein will
be remanded to the Court of Special Appeals for consideration of
the other arguments that were raised by Miles in support of the
judgment of the circuit court.
II
-17-
The disposition of WinMarkUs claim against Miles involves
considerations different from the claims of Winer and Sapperstein,
and different from those present in Adams v. Manown.  The
bankruptcy proceedings involved in Adams were under Chapter 7 of
the Bankruptcy Code, and there had been a trustee appointed by the
United States Trustee.  328 Md. at 476-77, 615 A.2d at 617-18.
Because the debt due to the bankrupt in Adams had neither been
administered in the bankruptcy proceedings nor abandoned by the
trustee in bankruptcy, it remained property of the bankruptcy
estate.  Id. at 480, 615 A.2d at 619.  Consequently, in that
Chapter 7 proceeding, we concluded that the discharged bankrupt was
not the real party in interest.  Id. at 480-81, 615 A.2d at 619.
Accordingly, in Adams, we remanded the case to the trial court for
the purpose of giving notice and an opportunity to intervene to the
United States Trustee.  
Under the Bankruptcy Code, in Chapter 11 proceedings, the
"confirmation of a plan vests all of the property of the estate in
the debtor," unless otherwise provided in the plan or in the order
confirming the plan.  11 U.S.C. § 1141(b).  Further, § 1141(c)
provides that, in general, "after confirmation of a plan, the
property dealt with by the plan is free and clear of all claims and
interests of creditors, equity security holders, and of general
partners of the debtor."  Property that is not scheduled or
disclosed in the bankruptcy proceedings is not "property dealt with
-18-
by the plan."  Cf. Stein v. United Artists Corp., 691 F.2d 885,
889, 893 (9th Cir. 1982) (construing "dealt with" under the
Bankruptcy Act).  Property that has not been "dealt with by the
plan" remains with the debtor in possession, but subject to the
claims of creditors.  See Rosenshein, 918 F. Supp. at 102; Pako,
109 B.R. at 374; In re Auto West, 43 B.R. at 763; Cowans
§ 20.32(a), at 166.  Thus, in this Chapter 11 proceeding there is
no need, from the standpoint of standing in the state court, for
the intervention of a trustee.
Under § 1107(a) of the Bankruptcy Code a debtor in possession
shall perform "all the functions and duties ... of a trustee
serving in a case under [Chapter 11]."  Employment by a trustee of
an attorney generally requires the approval of the bankruptcy
court.  11 U.S.C. § 327(a).  WinMark did not obtain the approval of
the bankruptcy court to engage counsel to institute the present
action on its behalf.  Further, and more substantively, we held,
supra, that judicial estoppel should not be applied under the
circumstances presented so that the action may proceed "strictly
supervised" by the bankruptcy court.  In re Auto West, 43 B.R. at
764.  Therefore, we remand the claim of WinMark to the Court of
Special Appeals for the purpose of remanding that claim to the
Circuit Court for Baltimore City.  The Circuit Court for Baltimore
City shall stay further proceedings unless and until the United
States Bankruptcy Court for the District of Maryland authorizes
-19-
further prosecution by WinMark of its claim under conditions
satisfactory to that bankruptcy court.  
JUDGMENT OF THE COURT OF SPECIAL
APPEALS VACATED.  CLAIMS OF THE
PETITIONERS, JAY A. WINER AND MARK
SAPPERSTEIN, REMANDED TO THE COURT
OF SPECIAL APPEALS FOR FURTHER
PROCEEDINGS CONSISTENT WITH THIS
OPINION.  CLAIM OF PETITIONER,
WINMARK 
LIMITED 
PARTNERSHIP,
REMANDED TO THE COURT OF SPECIAL
APPEALS FOR THE ENTRY OF A JUDGMENT
VACATING THE JUDGMENT OF THE CIRCUIT
COURT 
FOR 
BALTIMORE 
CITY 
AND
REMANDING THE CLAIM OF WINMARK
LIMITED PARTNERSHIP TO THAT COURT
FOR THE ENTRY OF A STAY AND ANY
FURTHER PROCEEDINGS CONSISTENT WITH
THIS OPINION.  COSTS IN THIS COURT
AND COSTS PREVIOUSLY INCURRED IN THE
COURT OF SPECIAL APPEALS TO BE PAID
BY THE RESPONDENTS.