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Bankruptcy Trustee, not beneficiary, had standing to prosecute breach of fiduciary duty claim

On April 23, 2021, the Tennessee Court of Appeals decided Estate of Shelton D. Ramey, Case No. E2020-00270-COA-R3-CV. The Court’s syllabus is as follows:

This appeal concerns a residual beneficiary’s objection to an estate administrator receiving any fees based upon the latter’s alleged breach of fiduciary duty. David Ramey (“Ramey”) is a beneficiary under his late father’s will. However, Ramey was in Chapter 7 Bankruptcy at the time of his father’s death, and Ramey’s inheritance became part of the bankruptcy estate. Dustin Crouse (“Crouse”) was appointed administrator of the probate estate. Michael Fitzpatrick (“Fitzpatrick”) is the Chapter 7 Trustee. Ramey filed an objection alleging Crouse breached his fiduciary duty by selling the estate’s primary asset, a house, below market value in a private sale. The General Sessions Court for Loudon County, Probate Division (“the Trial Court”) ruled against Ramey, although it found he had standing to bring his claims. Ramey appeals, objecting to fees paid to Crouse. We hold that Ramey lacks standing as any such claims of his to the probate estate belong to the Chapter 7 Trustee rather than him. We, therefore, affirm the Trial Court, although on different grounds. The judgment of the Trial Court is affirmed as modified.

In ruling against Ramey, the Court noted that “standing,” a judge-made rule, only allows an aggrieved party to prosecute an appeal. Ramey was not an aggrieved party because, under the Bankruptcy Code, 11 U.S.C. § 541(a)(1), Ramey’s interest in his father’s estate, including any cause of action relating to it, passed to the bankruptcy trustee. The bankruptcy trustee “stepped into Ramey’s shoes, so to speak.”

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