Daniel G. Hamm and Leo Paul Brooks, Appellant,
Norfolk Southern Railway Company, Appellee.
Supreme Court of Alabama
52 So.3d 484
Leo Paul Brooks and Daniel G. Hamm, a trustee in bankruptcy for Brooks, appeal from a summary judgment entered in favor of Norfolk Southern Railway Company in a personal-injury action Brooks filed in the Circuit Court pursuant to the Federal Employers’ Liability Act.
Brooks was an employee of Norfolk Southern. Brooks filed a petition for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Middle District of Alabama. However, Brooks did not list among his assets a cause of action against Norfolk Southern. On January 14, 2005, Brooks filed the present FELA for injuries he allegedly had sustained in the course of his career with Norfolk Southern. Brooks did not amend his bankruptcy schedules or otherwise inform the bankruptcy court of the FELA claim he had filed against Norfolk Southern. On March 2, 2005, Brooks received a complete discharge of his debts in the bankruptcy proceeding as a no-assets case. According to the briefs on appeal, both Norfolk Southern and Alexander learned of Brooks’ bankruptcy during Brooks’ deposition in the FELA action. Norfolk Southern filed an amended answer to Brooks’ complaint asserting the affirmative defense of judicial estoppel. They filed a motion seeking to reopen Brooks’ bankruptcy estate on the ground that Brooks had filed a Chapter 7 Petition and failed to disclose a cause of action that existed on that date. Brooks then amended his bankruptcy schedules to list the FELA claim against Norfolk Southern as a potential asset of the bankruptcy estate. The trial court granted Norfolk Southern’s motion for a summary judgment, finding that Brooks was barred by the doctrine of judicial estoppels. Norfolk Southern filed a motion to dismiss the appeal or, in the alternative, to strike Hamm as an appellant. Brooks and Hamm filed a response asking this Court to deny the motion or to consider it with the merits of the appeal.
The court considered whether the assets of a bankruptcy estate including legal claims held by the debtor become the responsibility of the bankruptcy trustee.
Norfolk Southern contends that this Court should dismiss this appeal or at least strike Hamm as an appellant because he was not a party to the proceeding. The court affirmed the trial court’s judgment to the extent that it recognizes that Brooks is judicially estopped from pursuing any claim against Norfolk Southern beyond the foregoing.
The court examined that most of a debtor’s possessions become property of the bankruptcy estate upon the filing of a bankruptcy petition. The right to bring a post-discharge action based on a pre-bankruptcy claim exists only when the trustee abandons the claims pursuant to 11 U.S.C. § 554. In the absence of an abandonment of the FELA cause of action by Daniel G. Hamm, Leo Paul Brooks was not the real party in interest when he commenced the post-discharge action against Norfolk Southern Railway Company.
The court observed that once the bankruptcy case is filed, the debtor lacks standing because the trustee owns the cause of action. The court discussed rule 17(a) as it allows an action to proceed after an objection is made based on the absence of the real party in interest if curative steps are taken. The court examined that an absence of a real party in interest does not implicate subject-matter jurisdiction or the sole remedy would be dismissal, as opposed to countenancing curative measures.
The court observed that under 11 U.S.C. § 704(1), the bankruptcy trustee has a duty on behalf of the creditors of the bankruptcy estate to collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest and concluded that the assets of the bankruptcy estate including legal claims held by the debtor become the responsibility of the bankruptcy trustee. Consequently, once a bankruptcy petition has been filed, the bankruptcy trustee is the real party in interest to all nonexempt lawsuits that are part of the debtor’s bankruptcy estate.