IN RE: GAYLE H. BAGSBY; E. COVINGTON JOHNSTON, JR. v. HENRY E. HILDEBRAND, III, Chapter 13 Trustee; UNITED STATES TRUSTEE, Region 8 - Articles

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Posted by: Karen Belcher on Jul 19, 2022

Court: 6th Circuit Court (Published Opinions)

Attorneys 1: ON BRIEF: Phillip G. Young, Jr., THOMPSON BURTON PLLC, Franklin, Tennessee, Winston S. Evans, EVANS, JONES & REYNOLDS, Nashville, Tennessee, for Appellant.

Judge(s): ROGERS, STRANCH, and DONALD, Circuit Judges

Court Appealed: On Appeal from the Bankruptcy Appellate Panel for the Sixth Circuit

BERNICE BOUIE DONALD, Circuit Judge. Attorney E. Covington Johnston filed bare-bones Chapter 13 bankruptcy petitions on behalf of Gayle Bagsby in 2016 and 2018 at the request of Gayle Bagsby’s daughter, Elizabeth Pace Bagsby. There was only one glaring issue with this arrangement—one cannot file for bankruptcy on behalf of a deceased person and Gayle Bagsby died on February 28, 2006. Elizabeth Bagsby was Administratix of her mother’s probate estate. After the dismissal of the 2018 petition, Elizabeth Bagsby, proceeding pro se, filed three more Chapter 13 petitions on Gayle Bagsby’s behalf.

In March 2019, the Chapter 13 Trustee filed a motion to dismiss and a motion for sanctions against Elizabeth Bagsby after she filed yet another Chapter 13 petition, pro se. As a result, the bankruptcy court ordered Mr. Johnston to appear and show cause as to why he should not be subject to sanctions for filing the two Chapter 13 petitions on behalf of Gayle Bagsby, a deceased person, back in 2016 and 2018.1 After the show cause hearing, the bankruptcy court reopened the first two cases filed in Gayle Bagsby’s name and issued sanctions sua sponte against Mr. Johnston and Elizabeth Bagsby. In particular, the bankruptcy court determined that 1) Mr. Johnston failed to conduct any inquiries or legal research, 2) there was no basis in existing law to support a reasonable possibility of success, and 3) the cases were filed for the express purpose of delaying foreclosure actions. Therefore, the bankruptcy court concluded Mr. Johnston violated Rule 9011 of the Federal Rules of Bankruptcy Procedure and issued sanctions. Mr. Johnston appealed to the Bankruptcy Appellate Panel of the Sixth Circuit (“BAP”), which affirmed after finding that the district court did not abuse its discretion. See In re Bagsby, Nos. 19-8017/2018/8019, 2020 WL 2025906 (B.A.P. 6th Cir. Apr. 27, 2020). For the reasons set forth below, we AFFIRM the bankruptcy court’s order imposing sanctions against Mr. Johnston.

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