Our Lady of Guadalupe Home Found., Inc. v. Massucco , No. 203-3-09 Rdcv (Cohen, J., June 22, 2010) [The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] STATE OF VERMONT RUTLAND COUNTY ) OUR LADY OF GUADALUPE ) Rutland Superior Court HOME FOUNDATION, INC., ) Docket No. 203-3-09 Rdcv ) Plaintiff, ) ) v. ) ) L. RAYMOND MASSUCCO, ) ) Defendant )

DECISION ON DEFENDANT’S MOTION TO RECONSIDER OR FOR LEAVE TO FILE INTERLOCUTORY APPEAL Defendant L. Raymond Massucco moves for the Court to reconsider its previous order denying his motion for summary judgment. In t he alternative, Mr. Massucco seeks leave to file an interlocutory appeal. The plaintif f, Our Lady of Guadeloupe Home Foundation, Inc., is represented by A. Jeffry Taylo r, Esq. The defendant, L. Raymond Massucco, is represented by S. Stacy Chapman, III, Esq. 

### BACKGROUND In his motion for summary judgment, Mr. Massucco ar gued that Our Lady of Guadeloupe lacked standing to bring this legal malp ractice claim because it did not list the claim on its schedule of assets in a prior Chap ter 11 bankruptcy case that was eventually dismissed. He relied upon the case of Kunica v. St. Jean Financial, Inc. , 233 B.R. 46 (S.D.N.Y. 1999), which the Court did not fi nd persuasive in light of the

difference between discharge and dismissal of a case under the bankruptcy code. Thus, the Court denied Mr. Massucco’s motion for summary judgment.2 

### DISCUSSION At the outset, the Court recognizes that in the de cision on the motion for summary the Court addressed the standing issue while assumi ng that the malpractice claim had accrued and was required to be listed as an asset i n the bankruptcy proceeding. When a debtor files for bankruptcy protection, “all legal or equitable interests of the debtor in property as of the commencement of the case” become property of the bankruptcy estate. 11 U.S.C. § 541(a)(1). As “legal and equitable inte rests,” causes of action that belong to the debtor constitute property of the estate under § 541(a)(1). In re Parker , 499 F.3d 616, 624 (6th Cir. 2007). In Vermont, the discovery rule applies to legal mal practice claims to define when

the cause of action accrues. Howard Bank, N.A., v. Estate of Pope , 156 Vt. 537, 538 (1991). Under the discovery rule, a plaintiff's cau se of action is deemed to have accrued “at the earliest point at which [the] plaintiff dis covers an injury and its possible cause.”

Earle v. State , 170 Vt. 183, 190 (1999). Accordingly, a cause of action accrues upon the discovery of facts sufficient to put a person of or dinary intelligence and prudence on inquiry which, if pursued, would make the person aw are of a possible cause of action. Agency of Natural Res. v. Towns , 168 Vt. 449, 452 (1998); see also Rodrigue v. VALCO

Enters. , 169 Vt. 539, 541 (1999) (mem.) (limitations perio d begins to run when the plaintiff has or should have discovered both the in jury and the fact that it may have been caused by the defendant's negligence or other breac h of duty). Based on the plaintiff’s Complaint, the Court finds that the legal malpractice claim had accrued at the time of the bankruptcy fil ing. In the underlying foreclosure case, summary judgment was granted, unopposed, on June 26 , 2003, and default judgment was3

entered against the plaintiff on November 3, 2003, all while Our Lady of Guadeloupe was represented by Mr. Massucco. The plaintiff filed it s bankruptcy asset schedule on November 20, 2003. Thus, the plaintiff either did d iscover or should have discovered the events which form the basis for the legal malpracti ce action before it filed for bankruptcy. Also, in Plaintiff’s opposition to Defendant’s moti on for summary judgment, it did not dispute that its claim had accrued at the t ime of the bankruptcy filing. Furthermore, Plaintiff listed the legal malpractice claim on its schedule for its second bankruptcy filing, which was subsequently dismissed by the bankruptcy court. Turning to the motion for reconsideration, the stan dard for granting such a motion “is strict, and reconsideration will generally be d enied unless the moving party can point to controlling decisions or data that the court ove rlooked-matters, in other words, that might reasonably be expected to alter the conclusio n reached by the court.” Shrader v. CSX Transp., Inc. , 70 F.3d 255, 257 (2nd Cir. 1995). Here, the defen dant raises essentially the same arguments that he did in his m otion for summary judgment, this time bolstered by further cases that have cited Kunica . He argues that because other cases have adopted its holding, so should this Court. Although other courts may have adopted Kunica ’s reasoning regarding lack of standing, this Court still does not find it persuas ive. It is not supported by the bankruptcy code, which distinguishes between discharge and dismissal of a case. Regarding discharge , when a bankruptcy action is closed, properly sche duled

assets not otherwise administered revert to the deb tor through abandonment. 11 U.S.C. § 554(c). However, assets not properly scheduled, t hus not abandoned or administered, remain property of the bankruptcy estate. 11 U.S.C. § 554(d). Thus, after discharge, a4

debtor would lack standing to bring a cause of acti on that was not properly scheduled, because the asset remains the property of the estat e. In contrast, “a dismissal of a case . . . revests t he property of the estate in the entity in which such property was vested immediatel y before the commencement of the case under this title.” 11 U.S.C. § 349(b)(3). The purpose of § 349(b) is to “undo the bankruptcy case, as far as practicable, and to rest ore all property rights to the position in which they were found at the commencement of the ca se.” H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 338 (1977), U.S. Code Cong. & Admi n. News 1978, pp. 5787, 6294. Thus, under Kunica ’s reasoning an undisclosed cause of action vanishe s after dismissal— under the code it does not remain the property of t he estate, yet somehow the debtor also lacks standing to bring the claim. Furthermore, the argument that a plaintiff lacks st anding after improperly scheduling assets appears to be related to the doct rine of judicial estoppel. The Vermont Supreme Court has not affirmatively adopted judicia l estoppel—a doctrine that is based on the inconsistency between the current position o f a party and a prior position of that party, but requires that the prior position be “ado pted by the court in some manner.” In re Chittenden Solid Waste District , 2007 VT 28, ¶ 29, 182 Vt. 38 (citing Gallipo v. C ity of Rutland, 173 Vt. 223, 237, 789 A.2d 942, 953 (2001) ; Maharaj v. Bankamerica Corp., 128 F.3d 94, 98 (2d Cir.1997)).

In Kunica , the court recognized the distinction between disc harge and dismissal under the code, yet bypassed the issue by couching it in terms of the importance of

disclosure . The Kunica court stated, “[t]he parties do not cite and indep endent research has not revealed any authority dealing with the eff ect of dismissal on non-disclosed5

claims. However, the key issue in this case is not dismissal nor discharge, but disclosure.”

Kunica , 233 B.R. at 54. After analyzing the importance of disclosure in bankruptcy cases, the court concluded that “it cannot be that the req uirement of adequate disclosure evaporates because a reversion of property is obtai ned by dismissal, under § 349, as opposed to abandonment under § 554.” Id . It reasoned that to hold otherwise would encourage end-runs around the disclosure requiremen ts. Id . at 54-55. Thus, the Kunica court’s decision on lack of standing, at its heart , was mainly concerned with protecting the integrity of the judi cial process—one of the rationales supporting the doctrine of judicial estoppel. See Maharaj v. Bankamerica Corp. , 128 F.3d at 98. Furthermore, the Kunica court also found that the plaintiff was judicially estopped from asserting the undisclosed claim. Kunica , 233 B.R. at 58. While this Court certainly does not condone improper disclosure of a ssets in a bankruptcy case, a bankruptcy court itself is not helpless to remedy s uch a situation.

Because this Court does not find Kunica persuasive and because the Vermont Supreme Court has yet to affirmatively adopt judici al estoppel, the Court will not reconsider its decision denying the defendant’s mot ion for summary judgment. In the alternative the defendant requests leave to file an interlocutory appeal. Under V.R.A.P. 5(b), the Court may “permit an appea l to be taken from any interlocutory order or ruling if the judge finds that the order o r ruling involves a controlling question of law as to which there is a substantial ground for d ifference of opinion and that an immediate appeal may materially advance the termina tion of litigation.” The Court finds that the criteria under V.R.A.P. 5( b) are met. The Court’s Order denying the motion for summary judgment involves a controlling question of law;6

whether the plaintiff has standing to bring the cau se of action. There is a substantial ground for difference of opinion in that the Vermon t Supreme Court has not construed the issue of whether a plaintiff lacks standing to bring an undisclosed cause of action after dismissal of its bankruptcy case, nor has the Supreme Court affirmatively adopted the doctrine of judicial estoppel. Meanwhile, other courts have construed the issue and held differently than this Court. Finally, immediat e appeal may materially advance termination of litigation because if the plaintiff lacks standing to bring this claim, then the cause of action will be disposed of. 

### ORDER (1) Defendant’s Motion to Reconsider, filed April 7, 20 10, is DENIED. (2) Defendant’s Motion for Leave to File Interlocutory Appeal, filed April 7, 2010, is GRANTED.

Dated at Rutland, Vermont this _____ day of ______ __________, 2010.

____________________ Hon. William Cohen Superior Court Judge