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Bankruptcy Trustee May Not Present Evidence of Debtors' Financial Condition in Injury Claim - Stanton v. Hart

November 23, 2011

Even people who have been through a bankruptcy may not realize that they should count a potential legal judgment among their assets. This is one of the questions we ask as Rancho Cucamonga personal bankruptcy attorneys, since we don't expect most bankruptcy filers to know it's important. But even though a favorable legal judgment can be helpful for people in tough financial situations, not every bankruptcy trustee will pursue one. In Stanton v. Hart, however, the bankruptcy trustee pursued a medical negligence case unsuccessfully. Stanton was the trustee for bankruptcy debtors Anthony and Sandra King, who had filed a medical negligence suit against James Hart, D.O., before filing for bankruptcy. Stanton reopened the case, but the jury decided against her. Her appeal to the Missouri Court of Appeals was likewise rebuffed.

The Kings originally sued Hart and others, alleging failure to diagnose Anthony King's stroke. Four months after filing, they voluntarily dismissed their suit and filed for bankruptcy. Stanton became their trustee and opted to file a new suit. All defendants but Hart had settled or been dismissed by trial. As a result of the failure to diagnose, the suit said, King had suffered a permanent disability that created financial hardship by leaving him unable to work but with large medical bills. Hart successfully moved to prohibit discussion of the Kings' financial situation at trial, saying it was irrelevant and potentially prejudicial. Stanton argued that the financial information was not only relevant, but unavoidable given that a bankruptcy trustee was the plaintiff. Nonetheless, the court granted the motion and barred reference to Stanton as trustee in front of the jury. Over her objections, this is how the trial proceeded. The jury decided in favor of Hart and Stanton appealed.

On appeal, Stanton first argued that because the Kings were not parties to the suit and indeed had no standing to sue, the forms submitted with their names could not have created a valid judgment against her. The Missouri Court of Appeals disagreed. Suits are often brought under names other than the beneficiary, including subrogation cases and John or Jane Doe cases, it said. In none of these cases does the court lose jurisdiction. Indeed, it said, the underlying issues and defenses are the same regardless of the names on the forms. It then turned to Stanton's contention that the exclusionary order was incorrect because it infringed on her right to testify and present evidence about the Kings' financial status. Again, the appeals court disagreed, noting that it's well established that pleas of poverty are immaterial in litigation. Stanton argued that Hart's negligence contributed to the Kings' bankruptcy, but she recognized on appeal that this is only an argument on damages, not liability Thus, it upheld the trial court on this issue as well.

As Buena Park individual bankruptcy lawyers, we were interested in this case because it exposes the divide between bankruptcy filers and their trustees. A trustee does not necessarily represent the interests of the debtor; his or her job is to secure the maximum amount of money available for creditors. This may or may not serve the interests of the people who filed for bankruptcy in the first place. In this case, any recovery from the medical malpractice lawsuit would have gone to the bankruptcy estate, and the Kings would have benefited from this only indirectly by being able to pay more to creditors. As Torrance consumer bankruptcy attorneys, we look forward to seeing whether the case is appealed, since its issues are novel.

If you're deep in debt and you don't believe you can realistically pay your way out, you should contact Howard Law, P.C., to discuss whether bankruptcy is right for you. You can reach us through our website or call toll-free at 1-800-872-5925.

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