Tow v. Pagano (Tex.App. - Houston [1st Dist.] Nov. 5, 2009)(Higley)
(no judicial estoppel based on nondisclosure of med-mal cause of action as asset in bankruptcy
suit, limitations, relationship between federal bankruptcy and state court proceedings)
We hold that appellees were not entitled to summary based on judicial
estoppel or based on limitations. We reverse the judgment of the trial court
and remand for further proceedings.
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS:
Opinion by Justice Higley
Before Justices Higley, Sharp and Mirabal
01-07-00464-CV Rodney Tow, Trustee for the Bankruptcy Estate of Erwina v. Scott K. Pagano, D.
C. and Campbell Chiropractic Wellness Center
Appeal from 333rd District Court of Harris County
Trial Court Judge: Hon. Joseph Halbach
O P I N I O N
In this medical malpractice suit, the trial court granted summary judgment in favor of
defendant/appellees, Scott K. Pagano, D.C. (“Dr. Pagano”) and Campbell Chiropractic Clinic, P.C.,
d/b/a Campbell Chiropractic Wellness Center (“Campbell Chiropractic Clinic”), against
plaintiff/appellant, Rodney Tow, as Trustee of the Bankruptcy Estate of Erwina Consunji and
Bernardino Consunji (“Tow”). The trial court’s order identifies two grounds supporting summary
judgment against Tow. The order states that Tow’s claims are barred by the statute of limitations
or, alternatively, by the doctrine of judicial estoppel. On appeal, Tow asserts two issues
challenging each ground supporting summary judgment.
We reverse and remand.
Factual & Procedural Background
In April and May of 2004, Bernardino Consunji sought treatment from Dr. Pagano, a chiropractor,
at the Campbell Chiropractic Clinic. On November 30, 2004, Consunji notified Dr. Pagano and the
Campbell Chiropractic Clinic that he had sustained injuries during his treatment at the clinic and
that the injuries were caused by Dr. Pagano’s negligence.
On October 15, 2005, Consunji and his wife, Erwina, filed for Chapter 7 bankruptcy. The
Consunjis did not list the medical liability claim against Dr. Pagano and Campbell Chiropractic
Clinic as an asset in their bankruptcy schedules. On April 18, 2006, Consunji filed a medical
malpractice suit in state court against Dr. Pagano and Campbell Chiropractic Clinic (hereinafter
collectively “appellees”). At that time, the bankruptcy case remained pending. Consunji did not
inform the bankruptcy trustee, Rodney Tow, of the suit’s filing.
The Consunjis received a no-asset discharge on May 5, 2006, and the bankruptcy case was
closed. Trustee Tow did not learn of the Consunji’s medical liability claim during the pendency of
the bankruptcy case.
On October 10, 2006, appellees filed a motion for summary judgment against Consunji.
Appellees asserted that Consunji’s medical liability claim was barred by judicial estoppel because
he had not disclosed the claim in the bankruptcy proceeding.
Tow first learned of Consunji’s pending lawsuit and the medical liability claim on October 18,
2006. Based on this newly learned information, Tow filed an emergency motion to reopen the
bankruptcy case, which was granted by the bankruptcy court.
On October 27, 2006, a first amended petition was filed in the medical liability suit, adding Tow
as a plaintiff. Tow alleged that he was “the duly appointed Chapter 7 trustee of the bankruptcy
estate.” He further alleged that when the Consunjis filed for bankruptcy, all of their assets,
including the causes of action asserted in the lawsuit, “vested in” the bankruptcy estate. The
petition averred that Tow, as the bankruptcy trustee, “is the owner of all such assets and causes of
action and is duly authorized to pursue them on behalf of the [bankruptcy] estate.”
On November 3, 2006, the trial court granted appellees’ motion for summary judgment against
Consunji on the ground that his claims were barred by judicial estoppel. Tow’s claim on behalf of
the bankruptcy estate remained pending.
Appellees filed a second motion for summary judgment. Appellees asserted that judicial estoppel
extended to bankruptcy trustee Tow. They argued that judicial estoppel bars Tow’s pursuit of
Consunji’s medical liability claim because, as trustee, Tow “stepped into the shoes” of bankruptcy
debtor Consunji. Appellees claimed that Consunji’s failure to disclose the claims in the bankruptcy
proceeding was imputed to Tow and operated to bar Tow’s claims as well.
Tow replied that a bankruptcy trustee acquires the rights and liabilities of the bankruptcy debtor
at the time the bankruptcy petition is filed. Tow contended that any conduct by the debtor post-
petition, such as failing to disclose assets, is conduct not imputed to the trustee. Tow pointed out
that he had neither abandoned the medical liability claim nor taken any position contrary to making
the claim, conduct he claimed necessary for judicial estoppel to bar his claim.
In their motion for summary judgment, appellees asserted, alternatively, that Tow’s claims were
barred by the two-year limitations period found in Texas Medical Liability Act (“TMLA”) section
74.251(a). Appellees pointed out that Consunji alleged he was injured by appellees’ negligent
medical treatment on May 10, 2004. Under section 74.251(a), the two-year limitations period
expired on May 10, 2006. Tow filed his claim as trustee on October 27, 2006.
Appellees acknowledged that Bankruptcy Code section 108(a) provides that if a limitations
period has not expired before the filing of the bankruptcy petition, as here, a trustee has two years
from the filing of the bankruptcy petition to commence an action. Under section 108(a), Tow had
until October 15, 2007 to assert his claims as bankruptcy trustee against appellees. If section 108
(a) applied, Tow’s claims, filed on October 27, 2006, were timely.
Appellees argued that section 108(a) did not extend the limitations period beyond that provided
in TMLA section 74.251(a). Appellees asserted that section 74.251(a)’s language indicates that
the Texas Legislature intended the two-year limitations period to be the “absolute” time period in
which to file a medical liability claim in Texas, regardless of Bankruptcy Code section 108(a). In
support of their position, appellees relied on language in section 74.251(a) that its provisions
applied “notwithstanding any other law.”
Appellees further asserted that Tow’s claims were time-barred because TMLA section 74.251(a)
is a statute of repose, not a statute of limitations. Appellees contended that a statute of repose
creates a substantive property right. Allowing Tow to file suit would interfere with that right.
Relying on the Supremacy Clause of the federal constitution, Tow responded that, to the extent
that state statute conflicts with the federal Bankruptcy Code, section 108(a) preempts section
74.251(a). Tow asserted that preemption applied regardless of whether section 74.251(a) is a
statute of repose or a statute of limitations. In further support of its limitations ground,
appellees asserted that Tow did not “step into the shoes” of Consunji when he entered the lawsuit.
Rather, Tow and Consunji are “separate legal entities.” Appellees pointed out that Consunji filed
his claims in his individual capacity for his own benefit, while Tow filed suit as trustee for the benefit
of the bankruptcy estate. Appellees asserted that, as a result, Tow’s claims do not “relate back” to
the filing of Consunji’s claims for limitations purposes. Tow countered that, in the event section 108
(a) was held not to extend the limitations period, his claims did “relate back” to Consunji’s timely
filed claim. Tow asserted that he was properly substituted in as the real-party-in-interest in the
amended petition.
The trial court granted appellees’ Rule 166a(c) motion for summary judgment. In its order, the
trial court specified that Tow’s claims were barred by the statute of limitations or, alternatively, by
the doctrine of judicial estoppel. Tow appeals, challenging both summary judgment grounds.
Footnote
Summary Judgment Standard
The summary-judgment movant must conclusively establish its right to judgment as a matter of
law. See MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986). Because summary judgment is a
question of law, we review a trial court’s summary judgment decision de novo. See Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
To prevail on a “traditional” summary-judgment motion, asserted under Rule 166a(c), a movant
must prove that there is no genuine issue regarding any material fact and that it is entitled to
judgment as a matter of law. See Tex. R. Civ. P. 166a(c); Little v. Tex. Dep’t of Criminal Justice,
148 S.W.3d 374, 381 (Tex. 2004). A defendant moving for traditional summary judgment must
either (1) disprove at least one element of the plaintiff’s cause of action or (2) plead and
conclusively establish each essential element of an affirmative defense to rebut the plaintiff’s
cause. See IHS Cedars Treatment Ctr. of DeSoto, Texas, Inc. v. Mason, 143 S.W.3d 794, 798
(Tex. 2004). A matter is conclusively established if reasonable people could not differ as to the
conclusion to be drawn from the evidence. See City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex.
2005).
In our review, we take the nonmovant’s competent evidence as true, indulge every reasonable
inference in favor of the nonmovant, and resolve all doubts in favor of the nonmovant. Diversicare
Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005). We consider all grounds on which
the trial court ruled that are preserved for review and that are necessary for disposition of the
appeal. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. 1996).
Judicial Estoppel
In his first issue, Tow asserts that the trial court erred by granting summary judgment because
judicial estoppel does not prevent him, as bankruptcy trustee, from prosecuting claims that
Consunji did not disclose in the bankruptcy proceeding.
A. Legal Principles
Because this issue arises in the bankruptcy context, we apply federal law to decide whether
judicial estoppel bars Tow’s claims. See Bailey v. Barnhart Interest, Inc., 287 S.W.3d 906, 909
(Tex. App.—Houston [14th Dist.] 2009, no pet.) (applying Fifth Circuit law to determine whether
trustee’s state court claims were barred by judicial estoppel because debtor failed to disclose
claims in bankruptcy filings); see also Brown v. Swett & Crawford of Tex., Inc., 178 S.W.3d 373,
380–81 (Tex. App.—Houston [1st Dist.] 2005, no pet.) (utilizing Fifth Circuit law to determine
whether judicial estoppel applied to bar claims based on representations made in bankruptcy
petition).
The doctrine of judicial estoppel applies when a party seeks to bring a claim that is inconsistent
with a claim asserted in a prior proceeding. Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380, 385
(5th Cir. 2008). The doctrine protects the integrity of the judicial process by preventing a party
from “playing fast and loose” with courts to suit the party’s own purposes. Id. Generally, courts
apply the equitable doctrine when “intentional self-contradiction is being used as a means of
obtaining unfair advantage in a forum provided for suitors seeking justice.” In re Coastal Plains,
Inc., 179 F.3d 197, 206 (5th Cir. 1999); see Kane, 535 F.3d at 385.
The Fifth Circuit has recognized three particular requirements that must be met for judicial
estoppel to apply: “(1) the party is judicially estopped only if its position is clearly inconsistent with
the previous one; (2) the court must have accepted the previous position; and (3) the non-
disclosure must not have been inadvertent.” Kane, 535 F.3d at 386 (quoting In re Superior
Crewboats, Inc., 374 F.3d 330, 334–35 (5th Cir. 2004)).
B. Analysis
Briefing in the trial court and on appeal focuses on whether judicial estoppel bars Tow’s claims
based on Consunji’s failure to list the medical liability claim in the bankruptcy schedule. Appellees
rely on In re Superior Crewboats to support their argument that judicial estoppel bars Tow’s claims
based on Consunji’s conduct. See 374 F.3d at 336.
In re Superior Crewboats involved debtors who pursued unscheduled claims that the bankruptcy
trustee had formally abandoned. See id. at 334–35. The Fifth Circuit concluded that judicial
estoppel barred the debtor’s pursuit of the claims because such pursuit benefitted the debtors to
the detriment of the creditors. See id. at 336; see also In re Coastal Plains, Inc., 179 F.3d at 213
(holding that judicial estoppel prevented corporate debtor’s CEO from benefitting from corporate
debtor’s earlier failure to disclose claim). The Superior Crewboats court further held that the
trustee’s motion to substitute as plaintiff for the debtors became moot once judicial estoppel
operated to bar the debtors’ claims. 374 F.3d at 336.
Appellees acknowledge that, unlike the trustee in Superior Crewboats, Tow never abandoned
the claims in this case. Nonetheless, appellees’ motion for summary judgment asserted that judicial
estoppel bars Tow’s claims because “a trustee steps into the shoes of the debtor, assumes all
rights and liabilities held by the estate at the time of the bankruptcy filing, and is also subject to
any defenses that could be asserted against the debtor.” Appellees reasoned, “Thus, if judicial
estoppel prevents the debtor from pursuing a claim, then it will also prevent the trustee who has
stepped into the debtor’s shoes from pursuing the same claims.”
In his response, Tow countered, “As a matter law, upon commencement of a bankruptcy case,
the trustee, as the representative of the estate, steps into the shoes of the debtor but only as to
any rights and liabilities which the debtor possessed at the time of filing the bankruptcy case.” Tow
continued, “When a trustee prosecutes a right of action derived from the debtor, the trustee
stands in the shoes of the debtor, subject to any pre-petition defenses.” Tow concluded, “In short,
[appellees’] argument that the Trustee is subject to any defenses that [appellees] would have
against [Consunji], including the post-petition failure to disclose an asset, is simply incorrect.”
The law supports Tow’s position. Under Bankruptcy Code section 541, Consunji’s medical liability
claim vested in the bankruptcy estate when Consunji filed his bankruptcy petition. See 11 U.S.C. §
541(a)(1) (2006) (providing that bankruptcy estate includes “all legal or equitable interest of the
debtor in property as of the commencement of the case”); see also Kane, 535 F.3d at 385.
Because the medical liability claim belongs to the bankruptcy estate, Tow, as trustee, is the real
party in interest and the only party with standing to assert the claim. See 11 U.S.C. §§ 323, 541(a)
(1); see also Kane, 535 F.3d at 385. The filing of the bankruptcy petition extinguished all of
Consunji’s rights in the medical liability claim. See Parker v. Wendy’s Int’l, Inc., 365 F.3d 1268,
1272 (11th Cir. 2004). The claim would have reverted to Consunji had Tow abandoned it under
Bankruptcy Code section 554; however, no such abandonment occurred. See 11 U.S.C. § 554
(2006). Consunji’s failure to list the claim on the bankruptcy schedule leaves the claim in the
bankruptcy estate. See Kane, 535 F.3d at 385; Parker, 365 F.3d at 1272. When Consunji received
his bankruptcy discharge, the medical liability claim remained the property of the estate, even
though it was unscheduled and not administered. See 11 U.S.C. § 554(d); Kane, 525 F.3d at 385;
Parker, 365 F.3d at 1272. Taken together, the facts and applicable law compels the conclusion
that judicial estoppel cannot be applied against Tow based on Consunji’s post-bankruptcy failure
to disclose the claim. See Parker, 365 F.3d at 1272; see also Bank of Marin v. England, 385 U.S.
99, 101, 87 S. Ct. 274, 276 (1966) (“The trustee succeeds only to such rights as the bankrupt
possessed; and the trustee is subject to all claims and defenses which might have been asserted
against the bankrupt but for the filing of the petition.”).
Significantly, since the parties filed their appellate briefing, the Fifth Circuit, in Kane v. National
Union Fire Insurance Co., answered the question at issue in this appeal: whether judicial estoppel
precludes a Chapter 7 trustee from pursuing an undisclosed, pre-petition tort claim that was never
administered or abandoned by the trustee. See 535 F.3d at 388. In deciding the issue, the Fifth
Circuit discussed, and ultimately distinguished, In re Superior Crewboats. See id. at 386–87.
The Kane court explained, “In In re Superior Crewboats, Inc., we were asked only to consider
whether debtors could pursue claims for their own benefit that they failed to disclose in their
bankruptcy schedules.” Id. at 386. “[B]ecause the [Superior Crewboats] trustee had abandoned
the claim, he was not the real party in interest and was not entitled to be substituted as such.” Id.
“Rather, following the trustee’s abandonment, the interest in the claim had reverted to the debtors,
who then stood to collect a windfall from their failure to schedule the asset at the expense of their
creditors.” Id. at 386–87.
The Kane court recognized the distinction between the underlying circumstances in that case
and those underlying In re Superior Crewboats. The court wrote, “In the case before us, the
Kanes’ personal injury claim became an asset of their bankruptcy estate when they filed their
Chapter 7 petition. The Trustee became the real party in interest in the Kanes’ lawsuit at that point
and never abandoned his interest therein.” Id. at 387.
The Kane court then explained the significance of the distinction:
Thus, unlike in In re Superior Crewboats, Inc.—where the debtors stood to benefit directly from
pursuing their claim at the expense of their creditors, and the district court’s dismissal of the claim
against the debtors mooted the trustee’s motion to substitute as a matter of law—here, the Trustee
is the real party in interest and has reopened the Kanes’ Chapter 7 bankruptcy to pursue the
Kanes’ claim for the benefit of the estate’s creditors.
Id. The Kane court concluded that In re Superior Crewboats did not require the application of the
equitable doctrine of judicial estoppel to bar the trustee’s pursuit of the debtor’s undisclosed
claims. See id. The court further concluded that “the only way the Kanes’ creditors would be
harmed is if judicial estoppel were applied to bar the Trustee from pursuing the claim against
Defendants on behalf of the estate.” See id. The court noted, “In this case, equity favors the
Trustee.” See id. In closing, the Kane court held that In re Superior Crewboats did “not control the
outcome” of the case. See id. at 388
We now apply the Fifth Circuit’s analysis in Kane to the facts at hand. See Bailey, 287 S.W.3d at
913.
After the Consunjis filed their bankruptcy petition, Consunji’s medical liability claim vested in the
bankruptcy estate. See Kane, 535 F.3d at 385. Tow, as trustee and the representative of the
bankruptcy estate, became the real party in interest; he was the only party with standing to
prosecute the claim. See id. Consunji’s filing of the bankruptcy petition extinguished his rights in
the claim, unless the claim was abandoned by Tow. See id. It is undisputed that Tow never
abandoned the medical liability claim. Instead, Tow reopened the bankruptcy and actively pursued
the claim for the benefit of the estate’s creditors. See id.
In addition, there is no showing that Consunji will directly benefit at the expense of the creditors
from the Tow’s pursuit of the medical liability claims. See id. at 387. Although Consunji may benefit
to the extent there is a surplus after all debts and fees have been paid, the Consunjis’ creditors
would be harmed if judicial estoppel prevented Tow from pursuing the claims. See id. at 387. As in
Kane, equity favors the trustee in this case. See id.
Following Kane, we conclude that appellees have not satisfied their summary judgment burden
to show that the doctrine of equitable estoppel bars Tow’s pursuit of Consunji’s medical liability
claim as a matter of law. See Bailey, 287 S.W.3d at 913 (following Kane and reversing summary
judgment against trustee that was based on judicial estoppel). Therefore, we hold that the
summary judgment was not appropriate based on judicial estoppel. See id. To the extent that it
based summary judgment on judicial estoppel, the trial court erred.
We sustain Tow’s first issue.
Limitations Period
In his second issue, Tow contends that the trial court erred by granting summary judgment on
the ground that his medical liability claim is barred by the statute of limitations.
A. The Statutes
In their summary judgment briefing, appellees maintained that TMLA section 74.251(a)
determines the period during which Tow had to file his claim as trustee. Appellees recognized, but
then denied, the application of Bankruptcy Code section 108(a) to extend section 74.251(a)’s
limitations period. Tow responded that Bankruptcy Code section 108(a) determines the period
during which he could file the medical liability claim on behalf of the bankruptcy estate.
TMLA 74.251(a) provides,
(a) Notwithstanding any other law and subject to Subsection (b), no health care liability claim may
be commenced unless the action is filed within two years from the occurrence of the breach or tort
or from the date the medical or health care treatment that is the subject of the claim or the
hospitalization for which the claim is made is completed; provided that, minors under the age of 12
years shall have until their 14th birthday in which to file, or have filed on their behalf, the claim.
Except as herein provided this section applies to all persons regardless of minority or other legal
disability.
Tex. Civ. Prac. & Rem. Code Ann. § 74.251(a) (Vernon 2005).
Consunji alleged that he was injured by appellees’ negligent treatment on May 10, 2004. The
two-year limitations period prescribed in section 74.251(a) expired on May 10, 2006. Appellees
assert that Tow’s claim, filed on October 27, 2006, was untimely under section 74.251(a).
Bankruptcy Code section 108(a) provides,
(a) If applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an
agreement fixes a period within which the debtor may commence an action, and such period has
not expired before the date of the filing of the petition, the trustee may commence such action only
before the later of—
(1) the end of such period, including any suspension of such period occurring on or after the
commencement of the case; or
(2) two years after the order for relief. Footnote
11 U.S.C. § 108(a).
Simply stated, Bankruptcy Code section 108(a) allows a trustee to commence an action on
behalf of the debtor’s estate within the period allowed by state law for such an action or within two
years after the filing of a petition for bankruptcy, whichever is later. See id.; see also 11 U.S.C. §
301 (2006). Here, the Consunjis filed their bankruptcy petition on October 15, 2005. Tow contends
that section 108(a) extended the period for him to commence the medical liability action on behalf
of the bankruptcy estate until October 15, 2007. Tow maintains that his assertion of the medical
liability claim against appellees on October 27, 2006 was timely under section 108(a).
B. Analysis
To support summary judgment, appellees asserted in the trial court that section 108(a) does not
extend the limitations period because section 74.251(a) sets forth an “absolute” two-year
limitations period. Appellees maintained that the absolute nature of the limitations period is shown
by section 74.251(a)’s language that, “notwithstanding any other law,” no health care liability claim
may be commenced beyond the specified two-year limitations period. Appellees pointed to Bala v.
Maxwell in which the Texas Supreme Court held, based on the “notwithstanding any other law”
language, that the limitations provision of section 74.251(a) governed over the limitations provision
of the Texas wrongful death statute. 909 S.W.2d 889, 892–93 (Tex. 1995).
Appellees also stressed the important underlying policy reasons for TMLA’s enactment as
support for their position that section 74.251(a)’s limitations provision governs over that of section
108(a). Appellees pointed out that the Supreme Court of Texas has acknowledged that the
impetuses for the enactment of the predecessor statutes of TMLA were concerns over insurance
rates and the cost of healthcare. See Sax v. Votteler, 648 S.W.2d 661, 666 (Tex. 1983). Appellees
also pointed to the supreme court’s comment in Morrison v. Chan regarding a TMLA predecessor
statute: “The Legislature enacted the Medical Liability and Insurance Improvement Act to alleviate
a perceived medical malpractice insurance crisis in the State of Texas. In an effort to accomplish
this goal, the Legislature adopted an absolute two-year limitations period.” 699 S.W.2d 205, 208
(Tex. 1985).
Appellees also stressed that the legislature crafted section 74.251(a) in a fashion to make the
discovery rule inapplicable to medical liability claims. Again, appellees suggested this evinces the
legislature’s intent that section 74.251(a) be the only statute of limitations applicable to medical
liability claims.
Lastly, appellees asserted that section 108(a) cannot extend the limitations period found in
TMLA because section 74.251(a) is a statute of repose, not a statute of limitations. Appellees
argued that, as a statute of repose, section 74.251(a) creates a substantive right to be free from
liability after the expiration of the legislatively defined two-year period. Appellees’ intimate that
section 108(a) cannot be applied to a statute of repose because such application would infringe
on appellees’ substantive property rights.
In Stanley v. Trinchard, the Fifth Circuit recently decided whether section 108(a) applies to a
state statute of repose. 579 F.3d 515 (5th Cir. 2009). Stanley is instructive not only in our
determination of the statute-of-repose sub-issue, but also in determining generally the issue of
whether section 108(a) extends the limitations period in this case.
In Stanley, the bankruptcy trustee sued Trinchard, an attorney, in federal district court on behalf
of the debtor’s estate, asserting claims for legal malpractice. Id. at 516. Trinchard moved for
summary judgment on the ground that the trustee’s lawsuit was barred by Louisiana’s one-year
peremptive period for legal malpractice claims. Footnote See id. at 517. The district court granted
summary judgment, and the trustee appealed to the Fifth Circuit. See id.
On appeal, the issue was framed as follows: “The question here is whether Louisiana’s
peremptive statute, which controls the estate’s claim, is somehow exempt from § 108 because of its
status as a statute of repose.” Id. at 518. The court answered this question in the negative:
“Because Congress expressed an overriding and unqualified interest in allowing bankruptcy
trustees sufficient time to discover causes of action on behalf of their estates, we hold that § 108
(a) of the Bankruptcy Code, 11 U.S.C. § 108(a), extended Louisiana’s legal malpractice
peremption period.” Id. at 516.
In support of its holding, the Fifth Circuit provided the following analysis:
The subject of bankruptcy falls within the express constitutional powers of Congress, and
bankruptcy law therefore takes precedence over state laws under the Supremacy Clause. U.S.
Const., art. VI. Section 108(a) is written broadly to extend any “period [fixed inter alia by ‘applicable
nonbankruptcy law’] within which the debtor may commence an action.” The statute’s clear
purpose is to afford bankruptcy trustees extra time to assess and pursue potential assets of the
debtor’s estate. Congress drew no distinction among the state law vehicles that govern time limits
for filing suit, whether statutes of limitations or prescription, repose or peremption. The language of
Section 108(a) compels the conclusion that Congress expressly extended the time for pursuing
any action that would otherwise be time-barred under state law.
Id. at 519.
We agree with the Fifth’s Circuit’s analysis. Section 108(a)’s purpose is self-evident: it is to
provide the trustee with additional time to evaluate and to prosecute the debtor’s potential claims
as assets of the bankruptcy estate. Equally as clear, as noted by the Fifth Circuit, is that section
108(a)’s application is without qualification. Under its plain language, section 108(a) applies to all
statutes defining a time period for filing suit. Section 108(a) makes no exception for statutes of
repose. Footnote Nor does it restrict its application to statutes of limitations.
In addition, section 108(a) does not exclude from its reach statutes that serve to advance an
important state interest such as regulation of heath care liability. In short, Congress did not make
the application of section 108(a) dependent on the limitation statute’s nature, type, language, or
underlying purpose. The Fifth Circuit correctly concluded, “The language of Section 108(a)
compels the conclusion that Congress expressly extended the time for pursuing any action that
would otherwise be time-barred under state law.” Id. (emphasis added).
Further, we note that section 74.251(a)’s “notwithstanding any other law” language does not in
any fashion trump the language of section 108(a). To the contrary, “state law is naturally
preempted to the extent of any conflict with a federal statute.” Crosby v. Nat’l Foreign Trade
Council, 530 U.S. 363, 372, 120 S. Ct. 2288, 2294 (2000). The United States Supreme Court has
explained that preemption will be found when, “under the circumstances of a particular case, the
challenged state law stands as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.” Id. at 373, 120 S. Ct. at 2294 (citing Hines v. Davidowitz,
312 U.S. 52, 66–67, 61 S. Ct. 399 (1941)).
Here, reading section 74.251(a)’s “notwithstanding any other law” language to require
application of that statute’s limitations period to Tow’s claims would stand as an obstacle to the
accomplishment of Congress’s full purposes and objectives under section 108(a). As discussed,
section 108(a)’s plain language makes clear that Congress’s objective of enactment was to
provide the bankruptcy trustee with sufficient time to evaluate and to pursue causes of action for
the benefit of the bankruptcy estate. Congress determined that sufficient period of time to be two
years from the filing of the bankruptcy petition. In this case, applying section 74.251(a)’s limitations
period would reduce Tow’s post-bankruptcy time to bring suit from two years, under section 108
(a), to seven months. Allowing section 74.251(a) to shorten the time period specifically defined by
Congress would subvert the underlying purpose of section 108(a), frustrate Congress’s overriding
objective, and create a direct conflict with section 108(a).
To the extent that it conflicts with section 108(a), section 74.251(a) is preempted. Section 108(a)
extends section 74.251(a)’s limitations period. Tow had until October 15, 2007 to commence the
medical liability action on behalf of the bankruptcy estate. Footnote Thus, his October 27, 2006
claim was timely filed.
We conclude that appellees are not entitled to summary judgment based on limitations. Footnote
To the extent that it based summary judgment on appellees’ limitations defense, we hold that the
trial court erred.
We sustain Tow’s second issue.
Conclusion
We hold that appellees were not entitled to summary based on judicial estoppel or based on
limitations. We reverse the judgment of the trial court and remand for further proceedings.
Laura Carter Higley
Justice
Panel consists of Justices Higley, Sharp, and Mirabal. Footnote