Court Opinion

ID: 9703523
Source: CourtListenerOpinion
Date Created: 2023-08-25 23:59:37.936655+00
Date Added: 2024-06-11T18:21:49.959177
License: Public Domain

CHASANOW, Judge,
concurring and dissenting, in which ROBERT M. BELL, joins.
The majority in the instant case, in order to reach what it deems a proper result, takes action, which in kindness to my colleagues I will only characterize as unique and unprecedented.
The Court, after acknowledging that we granted certiorari to consider the issue of “whether the equitable defense of unclean hands applies to this action which, historically, is one at law,” goes on to decide the case on a totally different issue, i.e., “that the trustee in bankruptcy, and not the petitioner, is the real party in interest as plaintiff.” 328 Md. 463, 465-66, 615 A.2d 611, 612 (1992). One of the first things that makes this unusual is that the issue upon which *484the Court decides this case was never raised or discussed in the trial court; never raised, briefed, or argued in the Court of Special Appeals; and never raised by the parties, briefed, or argued in this Court. Indeed the first time either litigant will have any opportunity to learn of this issue will be when they read the opinion of this Court.
Before deciding that the trustee in bankruptcy for the new discharged debtor is the real party in interest, I believe Adams should be given an opportunity to be heard on the issue. I am willing to accept, arguendo, the majority’s conclusion that the trustee is the real party in interest and proceed from there. The Court goes on to make the trial judge a sort of ombudsman and orders the judge to send notice “by ordinary mail” to an address and zip code supplied by this Court. The Court further holds that the trustee in bankruptcy nunc pro tunc will apparently cease to be a real party in interest if the trustee does not affirmatively respond within sixty days to the letter mailed by the trial judge. If failure to join the trustee in bankruptcy constitutes such a gross defect in the proceeding that it was not waived by the parties and can be raised sua sponte by this Court on appeal, it would seem that the judgment is void and the non-joinder cannot be cured simply because the trustee fails to respond within sixty days to a letter mailed by the trial judge.
Courts, particularly appellate courts, are often torn between their desire to develop new and innovative solutions to legal problems and their desire to maintain stability and predictability in the law. Where this Court enters waters not charted for us by the parties and not navigated by either the trial court or the intermediate appellate court, we should do so most cautiously. I am troubled by the novel procedure the court sua sponte formulates to deal with the issue. The majority cites no authority for requiring the trial judge rather than the parties to provide notice to the real party in interest and to do so by ordinary mail (together with a copy of the Court’s opinion). The majority cites no authority for holding that the real party in interest must *485respond to the Court’s letter within sixty days or be deemed to no longer be the real party in interest. The majority acknowledges that, under the provisions of the Bankruptcy Code and the cases cited, the only way the trustee could abandon this unscheduled property would be by “express decision or court order,” 328 Md. at 477, 615 A.2d at 618, but it then apparently directs that the trustee will be deemed to have abandoned the claim by failing to respond to a circuit court letter within sixty days.
When and how a trustee in bankruptcy abandons a claim of the bankruptcy estate is obviously a matter of federal, not state law. It is inappropriate for this Court to decide that a trustee in bankruptcy’s claim or any real party in interest’s claim will be abandoned if the real party in interest does not respond within sixty days to a letter sent by ordinary mail from the circuit court stating that a suit was filed and judgment was obtained by someone not entitled to bring the action. See 4 Collier on Bankruptcy § 554.03, at 554-13 (15th ed. 1992) (“Unless the [bankruptcy] court orders otherwise, formally unabandoned and unadministered property that was not scheduled thus ‘remains property of the estate.’ If the property is valuable, the court may reopen the case; if it is not, the court may order the property to be abandoned without reopening the case and without incurring additional expense.”).
There is a procedure, perhaps less efficient, and certainly less novel and unique, which can be found in the rules that this Court has propounded. That procedure is to remand the case to the trial court with instructions to stay further proceedings for a reasonable time to give Adams an opportunity to either join the trustee in bankruptcy, establish that the trustee has abandoned the claim, or prove the trustee in bankruptcy is not the real party in interest. Maryland Rule 2-201 provides in pertinent part:
“Every action shall be prosecuted in the name of the real party in interest____ No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been *486allowed after objection for joinder or substitution of the real party in interest. The joinder or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.”
Adams may be able to establish the trustee is not the real party in interest for at least part of this claim in light of his testimony in the court below. To rebut the unclean hands defense, Adams testified that, although he listed $117,125 in potential debts, most of these were not actual debts since they included claims for merchandise that was returned by Adams, the mortgage on his wife’s home, and other debts which were ultimately paid. Adams further testified the actual indebtedness discharged by the bankruptcy was only $8,000.
If the trustee in bankruptcy is, in fact, the real party in interest, then Adams is not entitled to a judgment. If Adams does not join or substitute the trustee in bankruptcy or does not prove an abandonment by the trustee, then the trial court should follow the established procedure when a plaintiff fails to join or substitute the real party in interest — the court should dismiss Adams’ claim. Manown would not necessarily receive a windfall as the result of the dismissal. The trustee in bankruptcy would retain the right to proceed against Manown since the unscheduled loan by Adams to her remains an asset of the bankrupt estate.1
I should also point out that Adams only obtained judgment for approximately half the money he claimed was due him from Manown. This might indicate that the jury compromised Adams’ claim. If the trustee in bankruptcy rather than Adams is the real party in interest, then the trustee should have the option of being substituted for Adams and accepting the $43,000 judgment or vacating the judgment and suing Manown for the entire $92,000.
*487Finally, I believe the court should address the issue which was decided by the Court of Special Appeals, i.e., that as a matter of law Adams had “unclean hands” and was barred from recovering in the instant case. If, according to the majority opinion, the trustee in bankruptcy fails to respond to the court’s sixty day letter, then this will be considered a post-judgment abandonment of the trustees claim. The majority goes on to, in effect, hold that the trustee’s post-judgment abandonment retroactively washes Adams’ “unclean hands.” It seems to me that the “unclean hands” doctrine simply was not applicable even based on the circumstances that existed at the time of trial, regardless of whether post trial the trustee decides not to pursue assets fraudulently concealed by Adams.
The somewhat analogous doctrine of in pari delicto rather than “clean hands” is applicable when a litigant is seeking relief at law, as in the instant case. The equitable defense of unclean hands is applicable only when a litigant is seeking relief which is equitable in nature. See, e.g., Manufacturers’ Finance Co. v. McKey, 294 U.S. 442, 449, 55 S.Ct. 444, 447, 79 L.Ed. 982, 986 (1935) (the maxim that one who comes into equity must come with clean hands is inapplicable if one is not seeking equitable relief).
Messick v. Smith, 193 Md. 659, 69 A.2d 478 (1949), which was relied on by Manown, did not hold that the clean hands doctrine was applicable in law as well as in equity. The actual holding in that case was simply that the doctrine of in pari delicto, which is quite similar to the equitable doctrine of clean hands, was applicable. We stated:
[Wjhen plaintiff and defendant have participated in fraudulent or illegal conduct, contrary to law or public policy or in fraud of the law itself, and are in pari delicto, plaintiff cannot maintain suit — at law or in equity — directly arising out of the misconduct. (Emphasis added, citations omitted).
Id. at 669, 69 A.2d at 481. This Court later reiterated in Shirks Motor Express Corp. v. Forster Transfer & Rig*488ging Co., 214 Md. 18, 133 A.2d 59 (1956) that Messick dealt with the defense of in pari delicto. We stated:
“In [Messick v. Smith], it was held in an opinion by Judge Marked, who went into the question of pari delicto in detail, that the plaintiff was barred from suing [on his mechanic’s lien] on the ground that when the plaintiff and defendant participated in fraudulent or illegal contracts contrary to law or public policy, he was in pari delicto and the plaintiff could not maintain a suit in law or equity directly arising out of misconduct.”
Id. at 29-30, 133 A.2d at 65. In addition, in the case of Schaeffer v. Sterling, 176 Md. 553, 6 A.2d 254 (1939), we stated that when applying the clean hands doctrine an equity court “will leave [the complainant] to whatever remedies he may have at law.” Id. at 555, 6 A.2d at 255 (emphasis added).
Other courts agree that the unclean hands defense has no place in an action at law. For example, the District of Columbia Court of Appeals in Truitt v. Miller, 407 A.2d 1073 (D.C.1979), held:
“Although ‘unclean hands’ is a companion principle to the doctrine of in pari delicto, Tarasi v. Pittsburgh National Bank, 555 F.2d 1152, 1156-57 n. 9 (3d Cir.1977), it has no applicability in an action for damages.”
Id. at 1079-80; see also Ligon v. E.F. Hutton & Co., 428 S.W.2d 434, 437 (Tex.Civ.App.1968) (“This reference to a time-honored equitable maxim [“clean hands”] has no proper application here and presents no defense to this common-law action.”); Furr v. Hall, 553 S.W.2d 666, 672 (Tex.Civ. App.1977) (“the ‘clean hands’ maxim is strictly an equitable doctrine not applicable outside equitable proceedings.”); Fellner v. Marino, 4 Misc.2d 16, 158 N.Y.S.2d 24, 32 (Mun.Ct.1956) (“there is very slight distinction between the doctrine of clean hands in equity and the doctrine of in pari delicto used as a defense in actions at law”).
Maryland Rule 2-301 merged law and equity procedurally; it did not change the substantive distinctions between law and equity. The availability of equitable remedies and *489defenses remains unchanged. For example, jury trials are only available in actions at law, not equitable actions. Higgins v. Barnes, 310 Md. 532, 530 A.2d 724 (1987). This Court should not make equitable defenses such as the clean hands doctrine or the doctrine of laches applicable to actions which were traditionally actions at law rather than actions in equity. I believe the Court of Special Appeals erred in holding that the clean hands doctrine was applicable and that as a matter of law Adams had unclean hands. The defense of in pari delicto was not raised and, indeed, does not seem applicable. In ascertaining whether in pari delicto is applicable, the court looks to conduct associated with the transaction before it, and should not forbid recovery on account of a plaintiffs activities in a separate setting. See, e.g., Tarasi v. Pittsburgh Nat. Bank, 555 F.2d 1152, 1157 (3d Cir.), cert. denied, 434 U.S. 965, 98 S.Ct. 504, 54 L.Ed.2d 451 (1977).
I would remand the case to the trial court with instructions to hold a hearing to determine whether the trustee in bankruptcy is the real party in interest. If so, further proceedings should be stayed for a reasonable period. If, following the stay, Adams does not either join or substitute the trustee in bankruptcy as a plaintiff, then the judgment should be vacated and the case dismissed. Manown, though not liable to Adams for the $43,000 “loan,” nevertheless would hold the loan proceeds subject to any claim by Adams’ trustee in bankruptcy.
BELL, J., has authorized me to state that he agrees with the views expressed herein.

. If the members of the Court are concerned that Adams may not notify the trustee in bankruptcy, it seems more efficient for this Court to mail the trustee a copy of its opinion rather than direct the trial court to do so.