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Winmark Limited Partnership v. Miles & Stockbridge5/9/1997
Opinion by Rodowsky, J.
In this case we consider whether a debtor's 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.
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.
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.
The petitioners allege that "subsequent to the litigation in State Court, the Bank claimed that it was entitled to attorney's fees excess of $200,000." Petitioners further aver that
"as a direct result of the Bank's 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, 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 .
WinMark's 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 Lender's 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 c
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