Court Opinion

ID: 4118719
Source: CourtListenerOpinion
Date Created: 2017-01-26 15:03:21.271638+00
Date Added: 2024-06-11T07:46:19.839681
License: Public Domain

Cite as 2017 Ark. App. 32

                  ARKANSAS COURT OF APPEALS
                                        DIVISION III
                                        No. CV-16-290

                                                   Opinion Delivered: January   25, 2017
REUBEN BARNES AND MARGARET
BARNES                        APPEAL FROM THE BENTON
                   APPELLANTS COUNTY CIRCUIT COURT
                              [NO. 04CV-14-810-2]
V.

OZARKS COMMUNITY HOSPITAL OF    HONORABLE BRAD KARREN,
GRAVETTE CLINIC AND WILLIAM F.  JUDGE
WEBB, M.D.
                      APPELLEES AFFIRMED

                                 BART F. VIRDEN, Judge

        Reuben and Margaret Barnes (hereinafter “the Barneses”) appeal the Benton County

 Circuit Court’s decision awarding summary judgment in favor of Ozarks Community

 Hospital of Gravette Clinic and Dr. William F. Webb (hereinafter “Ozarks”). On appeal,

 the Barneses argue that the circuit court erred in awarding summary judgment based on its

 misinterpretation of 11 U.S.C. section 554. The Barneses also assert that the circuit court

 order granting summary judgment constituted an improper collateral attack on the federal

 bankruptcy court proceedings. In the alternative, the Barneses argue that if the circuit court’s

 interpretation of 11 U.S.C section 554 was correct, then the circuit court erred when it

 found that Arkansas Rule of Civil Procedure 17(a) did not apply under the facts of this case.

 We find no error and affirm.
                                Cite as 2017 Ark. App. 32

                                          I. Facts
       In May 2013, the Barneses filed a bankruptcy petition and listed a medical-

malpractice claim against Ozarks in the schedule of assets. On June 16, 2014, the trustee

entered a “Final Account and Distribution Report Certification that the Estate has been

Fully Administered and Application to be Discharged” (“Final Account”). On line 27 of

the “Individual Estate Property Record and Report Asset Cases” form, a “Potential Medical

Malpractice Action” with an unscheduled value of $45,950 was designated “FA,” or “fully

administered.” In the Final Account a column runs throughout the entire list of assets in

which the trustee is instructed to make the notation “OA” if the asset on that line has been

abandoned pursuant to 11 U.S.C. section 554(a). The column for line 27, or “Potential

Medical Malpractice Action” had been left blank.

       On the same day the Final Account was entered, the Barneses filed a complaint

against Ozarks, contending that, as a result of Dr. Webb’s failure to diagnose Reuben Barnes’

Rocky Mountain Spotted Fever, Reuben had become blind, and he and his wife were

entitled to damages and costs. On April 24, 2015, Ozarks filed a motion for summary

judgment in which it argued that the Barneses did not have standing to file their complaint

because the malpractice claim had not been abandoned at that time; therefore, only the

trustee could have filed the claim on that date. Ozarks attached the trustee’s Final Account

to its motion, which listed the potential medical-malpractice claim among the assets. Ozarks

argued that because the Barneses had no standing to file, the complaint was a nullity. The

Barneses responded that the claim had been abandoned by the bankruptcy trustee on June

16, 2014, pursuant to 11 U.S.C. section 554(a), and they had a right to pursue the claim.

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       The circuit court awarded summary judgment in favor of Ozarks. In the written

order filed July 31, 2015, the circuit court found that the medical malpractice claim had not

been abandoned by the bankruptcy trustee under section 554(a); therefore, when the

Barneses filed the complaint on June 16, 2014, they lacked standing. The circuit court found

that the complaint, filed without standing, was a nullity. The circuit court additionally found

that abandonment of the medical malpractice claim at the close of the bankruptcy case,

pursuant to section 554(c), would not have occurred until July 23, 2014, and that the statute

of limitations on the medical malpractice claim expired on June 19, 2014. The circuit court

found that Arkansas Rule of Civil Procedure 17 did not apply because the Barnes’ complaint

was a nullity and because there was no understandable mistake that would allow for the

application of the rule. The Barneses filed a timely notice of appeal.

                              II. Standard of Review and Applicable Law

                     A. Abandonment of the Malpractice Claim and Standing

       Summary judgment is to be granted by the circuit court only when there are no

genuine issues of material fact to be litigated, and the moving party is entitled to judgment

as a matter of law. Killian v. Gibson, 2012 Ark. App. 299, at 6, 423 S.W.3d 98, 101. In

reviewing a grant of summary judgment, an appellate court determines if summary judgment

was appropriate based on whether the evidentiary items presented by the moving party in

support of the motion left a material question of fact unanswered. Id. This court views the

evidence in the light most favorable to the party against whom the motion for summary

judgment was filed and resolves all doubts and inferences against the moving party. Id.

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       When the proof supporting a motion for summary judgment is sufficient, the

opposing party must meet proof with proof, and the failure to do so leaves the

uncontroverted facts supporting the motion accepted as true for purposes of the motion. See

Inge v. Walker, 70 Ark. App. 114, 15 S.W.3d 348 (2000). In response to a motion for

summary judgment, the supporting material must set forth specific facts showing that there

is a genuine issue of fact for trial. Mount Olive Water Ass’n v. City of Fayetteville, 313 Ark.
606, 856 S.W.2d 864 (1993).

       We recognize a “shifting burden” in summary-judgment motions, in that while the

moving party has the burden of proving that it is entitled to summary judgment, once it has

done so, the burden then shifts to the nonmoving party to show that material questions of

fact remain. See Ford v. St. Paul Fire & Marine Ins. Co., 339 Ark. 434, 5 S.W.3d 460 (1999).

When the movant makes a prima facie showing of entitlement to a summary judgment, the

respondent must discard the shielding cloak of formal allegations and meet proof with proof

by showing a genuine issue as to a material fact. Hughes Western World v. Westmoor Mfg., 269
Ark. 300, 601 S.W.2d 826 (1980).

       The Barneses and Ozarks agree that the medical-malpractice claim was abandoned

by the trustee pursuant to 11 U.S.C. section 554; however, the parties disagree on the

question of whether the documents submitted to the court indicate that the claim was

abandoned pursuant to subsection (a) or pursuant to subsection (c). 11 U.S.C. section 554

sets forth the following:

       (a) After notice and a hearing, the trustee may abandon any property of the estate
           that is burdensome to the estate or that is of inconsequential value and benefit
           to the estate.

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       (b) On request of a party in interest and after notice and a hearing, the court may
           order the trustee to abandon any property of the estate that is burdensome to the
           estate or that is of inconsequential value and benefit to the estate.

       (c) Unless the court orders otherwise, any property scheduled under section
           521(a)(1) of this title not otherwise administered at the time of the closing of a
           case is abandoned to the debtor and administered for purposes of section 350 of
           this title.

       Ozarks and the Barneses agree that the column in the individual estate-property

record and report that was attached to the Final Account, designated as the place where the

trustee should indicate that he wished to abandon the malpractice claim under subsection

(a), was left empty. Ozarks argued in its motion for summary judgment that the empty

column indicated that the claim had not been abandoned pursuant to subsection (a), and

that the claim was automatically abandoned pursuant to subsection (c)—when the

bankruptcy case was closed, and after the statute of limitations had run.

       The Barneses argued in response that the dollar amount of the abandoned assets that

was shown on the Final Account, $663,457, could only be reached if the $45,950 medical-

malpractice claim was included in that overall amount; thus, the medical-malpractice claim

must have been previously abandoned by the trustee. The Barneses, in essence, asked the

court to infer from the amounts of the assets that the malpractice claim must have been

included in the overall amount.

       The circuit court, citing Stanley v. Sherwin Williams Co., 156 B.R. 25 (1993), found

that a proposal of abandonment must be “unequivocal” and that it “is neither desirable nor

consistent with section 554 to return to the practice of attempting to determine the trustee’s

intent.” Based on that reasoning, the circuit court found that the Barneses had not

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demonstrated that the claim had been abandoned pursuant to subsection (a), and thus, the

Barneses did not have standing to file the claim when they did so.

       We have held that inferences to be drawn from undisputed facts must be more than

mere possibilities; they must be such that “reasonable minds” would come to “reasonably”

different hypotheses. Flentje v. First Nat.’l Bank of Wynne, 340 Ark. 563, 573, 11 S.W.3d
531, 538 (2000). Examining the abstract and record, it is evident that no such reasonable

inferences are present and that the Barneses thus failed to “meet proof with proof.” Ozarks

presented the fact that, within the bankruptcy trustee’s Final Report, the column in which

abandonment pursuant to 11 U.S.C section 554(a) should have been noted was left blank.

The Barneses failed to present uncontroverted facts to support their argument that the claim

was abandoned pursuant to subsection (a), which left the uncontroverted fact supporting

Ozarks’s motion accepted as true for purposes of their motion.

       We hold that the circuit court did not err in finding that the Barneses failed to show

that a genuine issue of material fact remained, or that reasonable, differing inferences could

have been drawn from the undisputed facts. On this point we affirm.

                                    B. Collateral Attack

       The Barneses argue that the circuit court’s order granting summary judgment

constituted an impermissible collateral attack on a federal bankruptcy court proceeding. The

Barnes’ point is not well taken, and we affirm.

       A direct attack on a judgment is an attempt to amend it, correct it, reform it, vacate

it, or enjoin its execution in a proceeding instituted for that purpose. Council of Co-Owners

for Lakeshore Resort & Yacht Club Horizontal Prop. Regime v. Glyneu, LLC, 367 Ark. 397, 405,

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240 S.W.3d 600, 607 (2006). An attack is direct where the proceeding in which it is made

is brought for the purpose of impeaching or overturning the judgment, and collateral if

made in any manner other than by a proceeding the very purpose of which is to impeach

or overturn the judgment. Id.

          Absent allegations of fraud or lack of jurisdiction, a judgment entered by a circuit

court bears presumptive verity and may not be questioned by collateral attack. Fed. Nat’l

Mortg. Ass’n v. Taylor, 2015 Ark. 78, at 6, 455 S.W.3d 811, 815

          The circuit court did not attack a bankruptcy court judgment setting forth that the

malpractice claim was abandoned under 11 U.S.C. section 554(a). In no way did the circuit

court modify, overturn, or in any way invalidate the Final Report entered by the bankruptcy

court. The circuit court recognized the Final Report as evidence aiding in its determination

of the issue of summary judgment. The Barneses’ argument concerning impermissible

collateral attack has no merit. On this point we affirm.

                               C. Arkansas Rule of Civil Procedure17(a)

          In the alternative, the Barneses assert that, if the claim had was not abandoned

pursuant to subsection (a), then the circuit court erred when it found that no understandable

mistake occurred that would allow the Barneses to invoke Arkansas Rule of Civil Procedure

17(a). We hold that the circuit court did not err in refusing to apply Rule 17(a), and we

affirm.

          Arkansas Rule of Civil Procedure 17(a) sets forth that

          [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 has been allowed after objection for
          ratification of commencement of the action by, or joinder or substitution of, the real
          party in interest . . .
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In Hobson v. Holloway, 2010 Ark. App. 264, at 4–5, 377 S.W.3d 376, 379, our court has

acknowledged that a lack of standing may be cured by the later abandonment of a claim

where the debtor has made an “understandable mistake” by suing in his or her own name;

however, in Hobson, we also stated that “it is not an understandable mistake to sue in the

name of the wrong person where a statute makes it clear who may bring suit.”

       In Bibbs v. Community Bank of Benton, 375 Ark. 150, 159, 289 S.W.3d 393, 399

(2008) our supreme court held:

               In the instant case, when the original complaint was filed on August 8, 2005,
       the real parties in interest were Bibbs’s and Mason’s bankruptcy trustees. We have
       held in this opinion that the Bankruptcy Code clearly provides that a trustee, and
       only a trustee, has standing to prosecute causes of action that are property of the
       Chapter 7 bankruptcy estate. 11 U.S.C. §§ 323, 701(1). The determination of the
       real party in interest was not difficult for the appellants in this case; nor was there an
       understandable or excusable mistake by Bibbs and Mason in this regard. (See Rhuland
       v. Fahr, 356 Ark. 382, 155 S.W.3d 2 (2004)) (not understandable mistake when
       wrongful-death statute specifically detailed who may bring suit).

          The trustee is the “legal representative” of the bankrupt estate, with capacity to sue

and be sued. 11 U.S.C. § 323; See Vreugdenhil v. Hoekstra, 773 F.2d 213, 215 (8th Cir. 1985).

Legal claims that accrue before the filing of a bankruptcy petition are property of the

bankruptcy estate. Fields v. Byrd, 96 Ark. App. 174, 239 S.W.3d 543 (2006). A debtor lacks

standing to prosecute a claim in his or her own name absent abandonment by the bankruptcy

trustee. Bratton v. Mitchell, Williams, Selig, Jackson & Tucker, 302 Ark. 308, 788 S.W.2d 955

(1990).

       The U.S. Code clearly sets forth that “the trustee in a case under this title has capacity

to sue and be sued.” 11 U.S.C.A. § 323 The circuit court did not err in finding that there

was no understandable mistake.
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       It is well established that Arkansas Rule of Civil Procedure 17(a) does not apply when

the original complaint filed is a nullity. See Brewer v. Poole, 362 Ark. 1, at 15, 207 S.W.3d
458, 466 (2005) (“Where the original complaint is a nullity, Rules 15 and 17 are inapplicable

because the original complaint never existed; thus, there is no pleading to amend and

nothing to relate back.”). The circuit court did not err in finding that, based on the Barneses’

lack of standing, their complaint was a nullity and thus, Rule 17(a) could not be employed

in their favor.

       Affirmed.

       GLOVER and WHITEAKER, JJ., agree.

       The Hershewe Law Firm, P.C., by: Lauren Peterson, for appellants.

       Cox, Cox & Estes, by: Walter Cox; and Hyde, Love & Overby, LLP, by: Kent O. Hyde

and Shannon A. Vahle, for appellees.

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