Richard W. LORENZ and any Successor Trustee, as Trustee, of the Bankruptcy Estate of Willie R. Gauldin, Appellant, v. ANONYMOUS PHYSICIAN # 1, et al., Appellees.
No. 28A01-1501-CT-50.
Court of Appeals of Indiana.
Feb. 19, 2016.
391
Joseph C. Klausing, Stephanie L. Caldwell, O’Bryan, Brown & Toner, PLLC, Louisville, KY, Attorneys for Appellees Anonymous Physician # 1 and Anonymous Physician # 2.
Adriana Katzen, James L. Bleeke, Bleeke Dillon Crandall, Indianapolis, IN, Attorneys for Appellee Anonymous Physician # 3.
David G. Field, Michael F. Mullen, Schultz & Pogue, LLP, Indianapolis, IN, Attorneys for Appellee Anonymous Nurse Practitioner.
Anthony L. Holton, Wilkinson, Goeller, Modesitt, Wilkinson & Drummy, LLP, Terre Haute, IN, Attorneys for Appellees Anonymous Corporation and Anonymous Hospital.
ROBB, Judge.
Case Summary and Issues
[1] Willie Gauldin filed for Chapter 7 bankruptcy in July 2012 and was discharged in November 2012. In March 2014, Gauldin filed with the Indiana Department of Insurance a proposed complaint for medical malpractice against Anonymous Physician # 1, Anonymous Physician # 2, Anonymous Physician # 3, Anonymous Nurse Practitioner, Anonymous Hospital, and Anonymous Corporation (collectively, the “Medical Providers“), alleging acts of negligence occurring in March and April 2012. The Medical Providers filed motions for preliminary determination in the trial court seeking to have the proposed complaint dismissed because the medical malpractice claim had not been included as a possible asset in the bankruptcy. Richard W. Lorenz, the trustee of
[2] The Trustee now appeals, raising the following consolidated and reordered issues for our review: 1) whether the trial court had subject matter jurisdiction to rule on the motions for preliminary determination after the bankruptcy court reopened the bankruptcy; and 2) if so, whether the trial court erred in dismissing the proposed complaint. Concluding the trial court had jurisdiction to rule on the motions but erred in dismissing the proposed complaint, we reverse.
Facts and Procedural History
[3] On March 30, 2012, Gauldin began feeling ill. Over the course of the next several days, he was treated at Anonymous Hospital and Anonymous Corporation by Anonymous Physician # 1, Anonymous Physician # 2, Anonymous Physician # 3, and Anonymous Nurse Practitioner. Ultimately, Gauldin was admitted to Bloomington Hospital in acute renal failure. By the time Gauldin was discharged, he had incurred medical expenses of approximately $190,000.00 and was unable to continue working as a truck driver due to disability.
[4] On August 22, 2012, Gauldin and his wife filed a Voluntary Petition for Chapter 7 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Indiana. The assets listed on Schedule B—Personal Property included automobiles, household goods, and bank accounts worth approximately $8,000.00. Under “[o]ther contingent and unliquidated claims of every nature,” Gauldin listed “none.” Appellant’s Appendix at 23.1 He listed debts of $194,536.74, including his medical debts from March and April of 2012. Lorenz was named trustee of the bankruptcy estate. Based on the Trustee’s report to the court that there was no property available for distribution, the bankruptcy court entered an Order in No Asset Case on November 2, 2012, ordering the scheduled property of the estate be abandoned, any secured creditors be granted relief from the stay, and the Trustee be discharged. On November 27, 2012, the bankruptcy court granted a discharge of debtors and the bankruptcy case was closed.
[5] On March 28, 2014, Gauldin filed with the Department of Insurance a proposed complaint for damages alleging
[6] On July 28, 2014, Lorenz, as trustee of Gauldin’s bankruptcy estate, filed in the bankruptcy court a Motion to Reopen Bankruptcy Case and Motion for Relief from the November 2, 2012 Order in No Asset Case. On July 29, 2014, the bankruptcy court granted the Motion for Relief from Judgment and also granted the Motion to Reopen Bankruptcy Case. The case was reopened and Lorenz was reappointed Trustee of the bankruptcy estate. On August 1, 2014, Gauldin filed in the bankruptcy court an amended Schedule B, which, under “[o]ther contingent and unliquidated claims of every nature,” now included “[p]ossible collection from proposed complaint for damages with the State of Indiana Department of Insurance for injuries sustained prior to the filing of the bankruptcy case, and which claim is an asset of this bankruptcy estate.” Appellant’s App. at 160. The value of the claim was listed as unknown. On August 7, 2014, an Amended Proposed Complaint for Damages was filed with the Department of Insurance listing “Richard W. Lorenz, Trustee of the Bankruptcy Estate of Willie R. Gauldin” as the plaintiff. And on August 8, 2014, Gauldin filed in the trial court a Motion for Substitution of Real Party in Interest seeking to have Lorenz, as Trustee, substituted for Gauldin.
[17] The trial court held a hearing on December 8, 2014, at which it considered the two motions for preliminary determination and the motion for substitution. On January 14, 2015, the trial court issued an order granting the petitions for preliminary determination and ordering the proposed complaint be dismissed with prejudice. The trial court did not rule on the motion for substitution.3 The Trustee now appeals.
Discussion and Decision
I. Trial Court’s Jurisdiction
[8] In most instances, the Medical Malpractice Act (the “Act“) requires that before a party may commence a medical malpractice action against a health care provider in an Indiana trial court, the party’s proposed complaint must first be presented to a medical review panel through
[9] The Trustee claims that, despite this authority to determine matters regarding affirmative defenses (such as standing and judicial estoppel), the trial court lost subject matter jurisdiction “[a]fter the bankruptcy court allowed Mr. Gauldin to cure his bankruptcy case and list his Medical Malpractice Complaint as an asset of the bankruptcy[.]” Appellant’s Brief at 30. The Trustee is mistaken.
[10] “Subject matter jurisdiction exists when the Indiana Constitution or a statute grants the court the power to hear and decide cases of the general class to which any particular proceeding belongs.” R.L. Turner Corp. v. Town of Brownsburg, 963 N.E.2d 453, 457 (Ind.2012). “All standard superior courts have ... original and concurrent jurisdiction in all civil cases and in all criminal cases[.]”
II. Dismissal of Proposed Complaint
A. Standard of Review
[11] When evidence accompanies a motion for preliminary determination,4 the motion is akin to a motion for summary judgment. Haggerty, 998 N.E.2d at
B. Standing
[12] The Bankruptcy Code provides that the bankruptcy estate consists of all legal or equitable interests of the debtor in property as of the commencement of the case.
[13] Standing is similar to, though not identical with, the real party in interest requirement of Indiana Trial Rule 17. Beason-Strange-Claussen v. City of Hammond, 701 N.E.2d 1288, 1290 (Ind.Ct.App.1998), trans. denied.
[14] In the wake of a Chapter 7 bankruptcy, the bankrupt party is not the real party in interest to a personal injury lawsuit arising before or during the bankruptcy; the trustee of the bankruptcy estate is. Hammes, 659 N.E.2d at 1030. However, the bankrupt party does have standing to sue because he is the party who sustained a direct injury as a result of the conduct at issue. Id.; see also Beason-Strange-Claussen, 701 N.E.2d at 1291 (“According to the rationale expressed in Hammes, Rebecca [as the debtor] was not the real party in interest [to her personal injury lawsuit]. Rebecca’s bankruptcy trustee was the real party in interest; however, Rebecca did have standing to sue. She had a demonstrable injury allegedly caused by the parties she was suing.“) (citations omitted).
[15] Gauldin, as the party injured by the Medical Providers’ alleged negligence, has standing to sue because he suffered a direct injury as a result of the conduct at issue. However, because the negligence took place—and his cause of action accrued—before he filed for bankruptcy, his cause of action is an asset of his bankruptcy estate, and the Trustee is the real party
[n]o 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 after objection has been allowed for the real party in interest to ratify the action, or to be joined or substituted in the action. Such ratification, joinder, or substitution shall have the same effect as if the action had been commenced initially in the name of the real party in interest.
By its clear language, Trial Rule 17 encourages allowing the real party in interest to be joined or substituted in the action, and such substitution relates back to the date the initial complaint was filed. Blackford v. Boone Cnty. Area Plan Comm’n, 43 N.E.3d 655, 667-68 (Ind.Ct.App.2015). Thus, in Hammes, our supreme court held that “[b]ecause the [bankrupt] parties had standing to sue, but simply were not the real parties in interest, they should be permitted to amend their original complaints to add their respective bankruptcy trustees to be substituted as real parties in interest, and have that amendment relate back to the original filing....” Hammes, 659 N.E.2d at 1030.
[16] Because Gauldin had standing to sue, he was allowed to amend his proposed complaint to name the Trustee as the real party in interest and have that amendment relate back to the time of the original filing.5 To the extent the trial court granted the motions for preliminary determination based upon Gauldin’s lack of standing or failure to prosecute in the name of the
C. Judicial Estoppel
[17] Anonymous Physician # 3 and Anonymous Nurse Practitioner also alleged in their motion for preliminary determination that the proposed complaint should be dismissed pursuant to the doctrine of judicial estoppel.7
[18] It is a basic tenet of bankruptcy law that “all assets of the debtor, including all pre-petition causes of action belonging to the debtor, are assets of the bankruptcy estate that must be scheduled for the benefit of creditors.” Price v. Kuchaes, 950 N.E.2d 1218, 1227 (Ind.Ct.App.2011) (quoting Kunica v. St. Jean Fin., Inc., 233 B.R. 46, 52 (S.D.N.Y.1999)), trans. denied. Judicial estoppel is an equitable doctrine that prevents a litigant, absent a good explanation, from “gain[ing] an advantage by litigating on one theory and then pursu[ing] an incompatible theory in subsequent litigation.” Morgan Cnty. Hosp. v. Upham, 884 N.E.2d 275, 280 (Ind.Ct.App.2008) (citation omitted), trans. denied. It can be applied where a bankruptcy debtor fails to schedule or otherwise disclose a cause of action to the bankruptcy court and later seeks to recover on that action in state court. Price, 950 N.E.2d at 1227. Judicial estoppel applies only to intentional misrepresentation, so the dispositive issue is the bad faith intent of the litigant. Robson v. Tex. E. Corp., 833 N.E.2d 461, 466 (Ind.Ct.App.2005), trans. denied. “[J]udicial estoppel is not meant to be a technical defense for litigants seeking to derail potentially meritorious claims.” Id. (citing Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 365 (3d Cir.1996)).
[19] Under the
[20] A bankruptcy case may be re-opened at the bankruptcy court’s discretion. Hammes, 659 N.E.2d at 1028 (citing
[21] So, too, here: the bankruptcy court reopened Gauldin’s bankruptcy at the Trustee’s request and allowed the filing of an amended schedule listing the pending medical malpractice action as an asset. For a state court to rule that the medical malpractice action is judicially estopped from going forward would be to “frustrate the bankruptcy court’s intent” in reopening the bankruptcy estate to permit the lawsuit to proceed. See Price, 950 N.E.2d at 1230 (noting, based upon the supremacy of federal law and the exclusive jurisdiction of the federal bankruptcy court, “we may not and will not second-guess the bankruptcy court’s reasoning” in entering an order that a bankruptcy could proceed with the trustee’s knowledge of a pending legal malpractice action that was not originally listed in the debtor’s bankruptcy petition).
[22] The Medical Providers claim allowing the negligence action to proceed would unjustly enrich Gauldin because only one creditor re-filed a claim after the bankruptcy was reopened. There is no allegation, however, that all creditors were not apprised of the reopening of the bankruptcy estate, and should a recovery be obtained from this action, the distribution of the bankruptcy estate will be up to the bankruptcy court. Hammes, 659 N.E.2d at 1028 (noting that reopening a bankruptcy case puts the bankruptcy estate back into the process of administration) (citing In re Succa, 125 B.R. 168, 170 (Bankr.W.D.Tex.1991)). We also note the Hammes court’s discussion of the “sound public policy” behind permitting debtors to substitute the trustee as the real party in interest:
In general, the plaintiff-debtor does not have anything to gain from failing to commence a suit in the name of the trustee, because a debtor who fails to do so is precluded from pursuing that claim in his or her own name. Instead, it is the creditors of such plaintiff-debtors who are deprived of access to a potential asset. The innocent creditors of the plaintiff-debtors should not suffer due to commencing a lawsuit in the name of the plaintiff-debtor rather than in the name of the trustee.
[23] To the extent the ruling on the motion for preliminary determination was based upon the doctrine of judicial estoppel, the trial court erred.
Conclusion
[24] The trial court erred in granting the Medical Providers’ motions for preliminary determination as neither lack of standing nor judicial estoppel serves as a basis for dismissing the proposed complaint. The judgment of the trial court is reversed.
[25] Reversed.
VAIDIK, C.J., and PYLE, J., concur.
Notes
Anonymous Physicians # 1 and # 2 argue that, even though all pending motions were before the trial court and considered at the December 8, 2015, hearing, the fact the trial court granted the motions for preliminary determination and dismissed the proposed complaint without first ruling on the motion for substitution means the proper party to pursue the action was never before the trial court and the case was not commenced within the statute of limitations.
Anonymous Physician # 3 and Anonymous Nurse Practitioner seem to assume the proposed complaint was properly amended but argue that even the amended proposed complaint naming “Richard W. Lorenz, Trustee of the Bankruptcy Estate of Willie R. Gauldin” is not brought in the name of the real party in interest because Lorenz is no longer the trustee. This is a hyper-technical argument that fails to acknowledge it is the office or position of Trustee that is important, not the name of the specific person serving as trustee at any given time.
Anonymous Corporation and Anonymous Hospital present their argument in this regard on the basis that the trial court denied Gauldin’s motion to substitute on its merits. See Joint Appellees’ Brief at 14-16. However, there is no support in the record for the assertion the trial court “exercised its discretion to deny leave to amend the pleadings.” Id. at 16. Rather, the trial court simply did not rule one way or the other, presumably because it believed granting the motions for preliminary determination rendered the motion moot.
All of this, of course, assumes the trial court was required to grant Gauldin permission to amend his proposed complaint.