In re: In re: Mary A. Gordon

Filing

OPINION filed : AFFIRMED in part REVERSED in part and REMANDED, decision of limited precedential value pursuant to BAP rule 8013-1(b). Paulette Delk, Guy R. Humphrey, and Daniel S. Opperman (authoring judge), Bankruptcy Appellate Panel Judges.

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By order of the Bankruptcy Appellate Panel, the precedential effect
of this decision is limited to the case and parties pursuant to
6th Cir. BAP LBR 8024-1(b). See also 6th Cir. BAP LBR 8014-1(c).
File Name: 17b0003n.06

BANKRUPTCY APPELLATE PANEL
OF THE SIXTH CIRCUIT

IN RE: MARY A. GORDON,
Debtor.
__________________________________________
T. LARRY EDMONDSON,
Plaintiff-Appellee,

v.
VIRGIL GORDON, II,
Defendant-Appellant.

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No. 16-8014

Appeal from the United States Bankruptcy Court
for the Middle District of Tennessee at Nashville.
Bankruptcy Case No. 12-09605—Marian F. Harrison, Judge.
Decided and Filed: May 18, 2017
Before: DELK, HUMPHREY, and OPPERMAN, Bankruptcy Appellate Panel Judges.
_________________
COUNSEL
ON BRIEF: Phillip G. Young, Jr., THOMPSON BURTON PLLC, Franklin, Tennessee, for
Appellee. Virgil Gordon, Atlanta, Georgia, pro se.
_________________
OPINION
_________________
DANIEL S. OPPERMAN, Bankruptcy Appellate Panel Judge.

In this case, Virgil

Gordon, II, as pro se Defendant and Appellant, appeals the bankruptcy court’s April 19, 2016
order finding him in civil contempt of court, directing him to turnover certain funds from the sale

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of property, and awarding sanctions for the Chapter 7 Trustee’s attorney’s fees. While we
AFFIRM the bankruptcy court’s Contempt Order in part, we REVERSE the award of sanctions
and remand this matter to the bankruptcy court to allow Appellant an opportunity to be heard
regarding the reasonableness of the amount of sanctions.
ISSUES ON APPEAL
Appellant Virgil Gordon raises the following issues on appeal, as quoted directly from his
“Pro Se Appellant’s Brief”:1
I. Virgil Gordon, never received legal notice of the Bankruptcy Court’s Order
Granting Plaintiff’s Expedited Motion for Summary Judgment in Adversary Case
3:13-ap-90351.
II. Given that there is no proof in the record that Virgil Gordon, ever received
adequate legal notice of the Bankruptcy Court’s Order Granting Plaintiff’s
Expedited Motion for Summary Judgment in Adversary Case 3:13-ap-90351
Virgil Gordon, should never have been subject to civil contempt proceedings.
III. Given that Virgil Gordon, should never have been subject to civil contempt
proceedings, he should not be subject to any contempt judgment or any sanctions
including all attorney fees.
IV. Whether Virgil Gordon, should be responsible for the approximately
$75,000.00 that Mary A Gordon has admitted to spending.
V. When Virgil Gordon was made aware of civil contempt order all monies held
in escrow for Mary A Gordon capital gains taxes were immediately forwarded to
trustee.
VI. Whether any attorney’s fees charged to Virgil Gordon, are excessive.
Attorney’s have billed the Mary A Gordon estate and collected more than
$105,000 all while leaving Mary A Gordon an 81 year old elderly woman
destitute without an income to support herself.
VII. Throughout the entirety of the case Virgil Gordon believes bias may be a
factor in how the court has ruled on several issues.
VIII. Virgil Gordon is financially supporting his mother, Mary A Gordon along
with two children on a salary less than $50,000 a judgment in favor of the trustee
would hinder his ability to provide for his family.

1

The substantive portion of Appellant’s Brief consists exclusively of these eight “specific issues” I. through

VIII.

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For brevity, each issue will be referred to by Roman numeral throughout this Opinion.
JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this
appeal. The United States District Court for the Middle District of Tennessee has authorized
appeals to the Panel, and no party has timely elected to have this appeal heard by the district
court. 28 U.S.C. § 158(b)(6), (c)(1).
A finding of contempt made by the bankruptcy court is reviewed for abuse of discretion
as a finding within the sound discretion of the trial court. Elec. Workers Pension Trust Fund of
Local Union #58 v. Gary’s Elec. Serv. Co., 340 F.3d 373, 378 (6th Cir. 2003) (citing Peppers v.
Barry, 873 F.2d 967, 968 (6th Cir. 1989)).
A bankruptcy court’s decision to sanction is also reviewed for an abuse of discretion.
Badovick v. Greenspan (In re Greenspan), 464 B.R. 61, 2011 WL 310703, at *1 (B.A.P. 6th Cir.
Feb. 2, 2011) (table) (citing B-Line, LLC v. Wingerter (In re Wingerter), 594 F.3d 931, 936 (6th
Cir. 2010). See also See Mayor and City Counsel of Baltimore v. W. Va. (In re Eagle Picher
Indus., Inc.), 285 F.3d 522, 527 (6th Cir. 2002) (equitable determinations subject to an abuse of
discretion standard).
“An abuse of discretion is defined as a ‘definite and firm conviction that the [trial court]
committed a clear error of judgment.’” Id. at 529 (internal citation omitted). The particular
factual findings of the bankruptcy court are reviewed for “clear error.” Behlke v. Eisen (In re
Behlke), 358 F.3d 429, 433 (6th Cir. 2004). Findings of contempt and sanctions premised “upon
an erroneous view of the law or an erroneous assessment of the evidence are necessarily an abuse
of discretion.” In re Royal Manor Mgmt., 525 B.R. 338, 346 (B.A.P. 6th Cir. 2015) (citing
Cooter & Gell v. Hartmax Corp., 496 U.S. 384, 405, 110 S. Ct. 2447, 2461 (1990)).
FACTS
On October 19, 2012, Mary A. Gordon filed a voluntary Chapter 7 bankruptcy case and
T. Larry Edmondson (“Appellee” or “Trustee”) was appointed to serve as Chapter 7 Trustee for
the Debtor’s estate. On September 13, 2013, the Appellee filed an adversary proceeding against

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Virgil Gordon, II, as Trustee for The Mary Alice Gordon 2012 Irrevocable Accounts Trust and
Retirement Plan, to avoid the transfer of two parcels of real property in San Diego, California.
Virgil Gordon, II, is the son of Mary A. Gordon.

The Trustee alleged in this adversary

proceeding that the properties were transferred into the Trust within two months of the petition
date for no value. On May 15, 2015, the Trustee filed an expedited motion for summary
judgment and brief in the adversary proceeding to avoid the transfers of property from the
Debtor to the Trust, and place all contents of the Trust into the Debtor’s bankruptcy estate.
The Court held a hearing on the Expedited Motion for Summary Judgment on May 26,
2015. At the hearing, counsel for the Trustee was present, as was the Debtor and her counsel.
Also present was Appellant Virgil Gordon, II, representing himself. At the conclusion of that
hearing, the bankruptcy court granted the Trustee’s Motion for Summary Judgment, and on May
28, 2015, the Court issued an Order Granting Plaintiff’s Motion for Summary Judgment
(“Summary Judgment Order”). The Court’s Order stated as follows:
1) The Motion is GRANTED.
2) All transfers of property from the Debtor to the Trust are hereby avoided
pursuant to 11 U.S.C. § 548.
3) All property held by the Trust, including but not limited to real property known
as 1290-1294 Keeler Court, San Diego, California, hereby reverts back to the
Debtor and is property of the bankruptcy estate.
4) The Trustee has authority to take all necessary steps and execute any and all
documents needed to control, manage, rent and/or liquidate property previously
held by the Trust.
5) The Debtor, Virgil Gordon II, and any other party exercising control over the
Trust are hereby ordered to immediately turn over all property held by the Trust to
the Trustee.
6) The Court retains jurisdiction to interpret or enforce the terms of this Order.
On June 12, 2015, the Appellee sold one of the parcels of real property. The proceeds
from that sale were placed in the Debtor’s bankruptcy estate. Appellant Virgil Gordon II, acting
on behalf of the Trust, sold the other property, known as the Auto Zone property, without the
knowledge or approval of the Trustee on or around December 2, 2015, for an approximate sale
price of $1,815,000.00, which the Trustee alleges resulted in an approximate $900,000 profit to
the Trust, Virgil Gordon II, and/or Mary Gordon from the transfer. Because this property was

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part of the Debtor’s bankruptcy estate, the Trustee sought and obtained an Order from the
bankruptcy court against the Debtor, Virgil Gordon, and the Trust for immediate turnover of all
funds associated with the sale of this property pursuant to 11 U.S.C. § 550. The bankruptcy
court entered this order for turnover on March 25, 2016 (“Turnover Order”). The Trustee sought
and obtained, also on March 25, 2016, an order to show cause as to why Virgil Gordon should
not be held in civil contempt of court for the sale of this property, as well as his failure to appear
at the previous hearing on the motion for turnover (“Contempt Show Cause Order”).
A hearing was held on the Contempt Show Cause Order on April 11, 2016. Virgil
Gordon appeared for that hearing. Counsel for the Trustee and counsel for the United States
Trustee also appeared at this hearing. Virgil Gordon testified as to the sale of the subject real
property, and Trustee’s counsel further questioned Mr. Gordon about the hearing underlying the
Summary Judgment Order. Due to Mr. Gordon’s inability to completely remember his presence
and what happened at the May 26, 2015, hearing on the summary judgment motion, the
bankruptcy court directed the relevant portion of the audio recording from the May 26, 2015
hearing be played into the record. The bankruptcy court’s ruling resulting in the Summary
Judgment Order was confirmed as was Mr. Gordon’s presence at that hearing to hear the ruling.
As a result, the bankruptcy court ruled at the April 11, 2016 hearing as follows:
The Court finds, based on the previous testimony of Mr. Gordon, that he knew of
the Court’s order requiring the property to be turned over, requiring the Auto
Zone property to be turned over to the trustee, and therefore not sold by him or
Mrs. Gordon, and that it appears, based on his taking the Fifth Amendment and
not answering these questions, that $173,614.39 was not – was either taken at the
time of the sale or given by Ms. Gordon to Mr. Gordon or something of that
nature.
In any event, it appears that $173,614.39 was paid to or for the benefit of
Mr. Gordon and that the Court finds him in contempt of court. We’ll award
attorneys’ fees for failure to turn that over, and we’ll require him to turn that
money over . . . . [by] April the 26th to turn over the money. If not, we’ll send out
a marshal – we’ll turn it over to the marshal for – to pick him up.
(Tr., Apr. 11, 2016 hearing, pp. 21-23).2

2

Although the transcript of the April 11, 2016, hearing was not formally designated by Appellee for the
record on appeal, this transcript was docketed at ECF No. 310 in the bankruptcy case of Mary A. Gordon, Case No.

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On April 19, 2016, the bankruptcy court entered an order finding Virgil Gordon in
contempt of court, directing turnover of funds in the amount of $173,614.39 from the sale of the
subject property, and awarding sanctions for the Trustee’s attorney’s fees in the amount of
$26,602.50 (“Contempt Order”). Specifically, in the Contempt Order, the bankruptcy court
found:
IT IS HEREBY FOUND:
A. Pursuant to Federal Bankruptcy Rule 7052, the Court hereby incorporates and
adopts the findings and conclusions stated orally at the hearing on April 11, 2016.
See Fed. R. Bankr. P. 9014.
B. Proceeds in the amount of $173,614.39 were taken by Virgil Gordon, II, or
were paid to or for the benefit of Virgil Gordon, II.
C. Virgil Gordon, II, was present at the May 26, 2015 hearing for Summary
Judgment in the associated Adversary Proceeding, 3:13-ap-90351.
On appeal, Appellant Virgil Gordon’s first argument is that he did not receive “adequate
legal notice” of the Summary Judgment Order. Next, Appellant argues the bankruptcy court
erred in finding him in civil contempt and awarding sanctions because of this alleged notice
issue, and further because he had or has complied to the extent possible with turn over of all
“monies held in escrow” for the Debtor. Appellant asserts that attorney’s fees charged as
sanctions are excessive and that he does not have the financial ability to comply with the
Contempt Order. Appellant also vaguely asserts bias as “a factor in how the Court has ruled on
several issues.”
DISCUSSION
The Panel determines that the first four issues Appellant raises in his Brief, I through IV,
are dependent upon the underlying Summary Judgment Order. All four issues concern whether
Appellant received adequate notice of either the May 28, 2015 Summary Judgment Order, or the
two orders entered on March 25, 2016–the Turnover Order and Contempt Show Cause Order.

3:12-bk-09605, and was attached to Appellee’s Brief on Appeal as an exhibit. Pursuant to Federal Rule of
Bankruptcy Procedure 8009(a)(4), this transcript is considered part of the record on appeal without separate formal
designation.

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First, if Appellant is attempting to include the May 28, 2015 Summary Judgment Order
as an issue on appeal, he is untimely. Federal Rule of Bankruptcy Procedure 8002(a) provides
that a notice of appeal shall be filed with the clerk “within 14 days of the date of the entry of the
judgment, order, or decree appealed from.”

Congress has specifically adopted this time

limitation. See 28 U.S.C. § 158(c)(2) (An appeal from the bankruptcy court to the bankruptcy
appellate panel “shall be taken in the same manner as appeals in civil proceedings generally are
taken to the courts of appeals from district courts and in the time provided by Rule 8002 of the
Bankruptcy Rules.”). This appeal was filed on May 3, 2016, almost a year after the Summary
Judgment Order.
Second, to the extent Appellant raises a lack of notice of the Summary Judgment Order
for the first time on appeal, such is without merit. “It is well-settled that this court will not
consider arguments raised for the first time on appeal unless our failure to consider the issue will
result in a plain miscarriage of justice.” Bailey v. Floyd Cnty. Bd. of Educ., 106 F.3d 135, 143
(6th Cir. 1997). Appellant has not presented an argument that the Panel’s failure to consider this
issue will result in a miscarriage of justice. As Appellee points out, Appellant has not preserved
this issue on appeal because it was not raised in any of the pleadings or at hearings before the
bankruptcy court subsequent to the Summary Judgment Order, all of which ultimately resulted in
the Contempt Order. Even if timeliness was not in issue, Appellant was served with the summary
judgment motion per Appellee’s proof of service on May 15, 2015, and Appellant clearly had
knowledge of the Court’s ruling underlying the Summary Judgment Order because he was
present at the May 26, 2015 hearing.
As to what may be considered the remaining four issues on appeal, V through VIII, the
Panel will address each separately.
Issue V–Appellant states that when he became aware of the Contempt Order, “all monies
held in escrow for Mary A Gordon capital gains taxes were immediately forwarded to the
trustee.” This statement speaks to whether or not Appellant has complied in whole or in part
with the Contempt Order, not whether the bankruptcy court abused its discretion and committed
clear error in entering the Contempt Order. Thus, the Panel finds no abuse of discretion on this
issue raised by Appellant.

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Issue VI–Appellant challenges whether the attorney’s fees charged and ultimately
awarded as sanctions in the Contempt Order are excessive.

The total of $26,602.50 for

attorney’s fees were awarded by the bankruptcy court as sanctions in the Contempt Order.
Appellant argues these fees are excessive because attorneys in this case have already collected
$105,000, and further pointing to his inability to now support himself and his mother, who is
unable to support herself.
Federal Rule of Bankruptcy Procedure 9020 states, “Rule 9014 governs a motion for an
order of contempt made by the United States trustee or a party in interest.” The power further
arises from 11 U.S.C. § 105(a), which provides:
The court may issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of this title. No provision of this title
providing for the raising of an issue by a party in interest shall be construed to
preclude the court from, sua sponte, taking any action or making any
determination necessary or appropriate to enforce or implement court orders or
rules, or to prevent an abuse of process.
The party seeking a contempt order “must establish three elements by clear and
convincing evidence: (1) the alleged contemnor had knowledge of the order which he is said to
have violated; (2) the alleged contemnor did in fact violate the order; and (3) the order violated
must have been specific and definite.” Hunter v. Magack (In re Magack), 247 B.R. 406, 410
(Bankr. N.D. Ohio 1999) (citing Glover v. Johnson, 138 F.3d 229, 244 (6th Cir. 1998)); In re
Temple, 228 B.R. 896, 897 (Bankr. N.D. Ohio 1998)).

Courts have emphasized that

“[w]illfulness is not an element of civil contempt and intent to disobey the order is irrelevant.”
In re Walker, 257 B.R. 493, 497 (Bankr. N.D. Ohio 2001) (citing Rolex Watch U.S.A., Inc. v.
Crowley, 74 F.3d 716, 720 (6th Cir. 1996)).
The bankruptcy court awarded $26,602.50 in attorney fees as sanctions finding this
amount “established by the accompanying affidavit of Justin T. Campbell, counsel for the
Chapter 7 Trustee.” The bankruptcy court awarded these sanctions in the Contempt Order, in
addition to requiring the $173,614.39 in estate funds to be paid back, after finding that Appellant
was present at the May 26, 2015 hearing on the summary judgment motion and that Appellant
did indeed violate the ruling and directive given to Appellant by the bankruptcy court at that

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hearing, as later incorporated in the Summary Judgment Order. The bankruptcy court entered
the Contempt Order after the Contempt Show Cause Order setting the April 11, 2016, hearing
was duly served upon Appellant at two separate addresses by first class mail on March 27, 2016.
Doc. No. 234, BK Case No. 3:12-bk–09605. Thus, the Panel finds no abuse of discretion in the
bankruptcy court’s finding that Appellant was declared to be in civil contempt of its orders.
Next the Panel turns to the issue of sanctions, first noting that the bankruptcy court is
accorded “wide discretion” in determining the amount of sanctions to impose.

Runfola

& Assocs., Inc. v. Spectrum Reporting II, Inc., 88 F.3d 368, 375-76 (6th Cir. 1996). However,
“such discretion is not unfettered.” Nicole Energy Mktg., Inc. v. McClatchey (In re Nicole
Energy Servs.), Inc., 356 B.R. 786, 2007 WL 328608, at *3 (B.A.P. 6th Cir. Feb. 1, 2007) (table
decision) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S. Ct. 2123, 2133 (1991)).
Before addressing the amount, the Panel is not satisfied that the Appellant received sufficient
notice of the possibility sanctions could be imposed upon him at the April 11, 2016, hearing, as
well as an opportunity to respond. The March 25, 2016 Contempt Show Cause Order was duly
served upon Appellant and directed his appearance, but did not warn of the possibility of
monetary sanctions even if he did, in fact, appear for the April 11, 2016 hearing. The Contempt
Show Cause Order did state that if he failed to “comply,” with the directive of the order, i.e.,
appear for the show cause hearing, such could result in “sanctions for civil contempt and further
action as the Court deems necessary and appropriate to ensure compliance with its Orders.”
Absent from this order is any mention of the possible imposition of monetary sanctions if
Appellant did appear for the show cause hearing on April 11, 2016. Thus, the bankruptcy court
abused its discretion in awarding sanctions without proper notice pursuant to Federal Rules of
Bankruptcy Procedure 9020 and 9014.
In addition to the lack of notice, the Panel finds that Appellant was not given an
opportunity to respond to the amount of sanctions requested in the Affidavit of counsel for the
Trustee. The imposition of sanctions does not necessarily require a separate hearing as to the
amount of sanctions, “so long as the Appellants were provided a procedure for opposing the
reasonableness and calculation of the sanction based upon attorney fees incurred.” Nicole
Energy Servs., 2007 WL 328608, at *4. The Affidavit was not introduced as evidence at the

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hearing so that Appellant could examine counsel as to the fees or otherwise raise issues as to the
fees sought in the Affidavit. Rather, the Affidavit was submitted to the court by counsel for
Appellee after the hearing without Appellant having had the opportunity to contest those fees in
any manner. Nor was Appellant given an opportunity to contest the fees sought in the Affidavit
after the Affidavit was submitted to the court. As an alternative to introduction of the Affidavit
at the hearing, the court could have established a procedure through which Appellant could have
raised any objection he had to the fees sought after the Affidavit was submitted to the court, such
as allowing Appellant to file an objection setting forth any issues he had with the fees sought.
As the BAP stated in Nicole Energy:
Due process also requires notice and an opportunity to be heard before a
court imposes sanctions. It is unclear, however, whether due process requires
both a hearing to consider whether to impose sanctions and a separate hearing to
consider the amount of the sanction. The Sixth Circuit Court of Appeals has not
directly addressed this issue. Jurisdictions that have addressed this issue have
found that due process is satisfied when the trial court holds “a hearing on the
motion for sanctions, at which both sides are [permitted] to present arguments as
to the propriety and type of sanctions to be awarded.” Such courts have also
found that a separate hearing to determine the amount and scope of the sanction
awarded is not necessary. The bankruptcy court afforded the Appellants the
fundamental requirements of due process. The Appellants agree that they had
notice and an opportunity to be heard before the court imposed sanctions.
A second hearing to determine the amount of the sanction to be imposed was not
necessary so long as the Appellants were provided a procedure for opposing the
reasonableness and calculation of the sanction based upon attorney fees incurred.
The Appellants were provided this opportunity and, in fact, submitted an
opposing affidavit in response to the Trustee’s affidavit, both of which were
considered by the bankruptcy court. It is significant that the opposing affidavit by
Appellants’ counsel only challenged the total amount as being unreasonable but
failed to specify any particular time entry or hourly rate that was inappropriate or
unreasonable.
Nicole Energy Servs., 2007 WL 328608, at *4. In this case, the bankruptcy court did not
provide Appellant with notice and opportunity to contest the amount of the fees sought. While
those fees may have been previously approved by the court through Appellee’s fee applications,
Appellant still at a minimum had the right to dispute whether all of those fees were
appropriately awarded as sanctions for his contemptuous conduct. In other words, were all of
those fees incurred as a result of Appellant’s conduct for which he was found in contempt?

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Appellant had the right to examine any such issues and was not provided with that right due to
the Affidavit having been submitted to the court after the hearing and without the court’s
otherwise establishing a procedure for those fees to be contested.
Furthermore, The Affidavit submitted by the Trustee’s counsel, which was attached to the
Contempt Order, did not itemize the 34.3 hours of time spent by attorney Phillip G. Young, Jr.
and the 68.7 hours of time spent by attorney Justin T. Campbell. Rather, the Affidavit simply
multiplied the total hours by the applicable hourly rates to total the $26,602.50 ultimately
awarded as sanctions. On remand, Appellee should be required to itemize the time entries in
affidavit form, so as to give Appellant the opportunity to respond.

This will allow the

bankruptcy court on remand to make the required findings of reasonableness.
Issue VII–Appellant broadly and vaguely asserts “bias” as a possible “factor in how the
court has ruled on several issues.” Appellant has not argued, nor can the Panel find bias was
raised before the bankruptcy court, and as such, it will not now be considered for the first time on
appeal.
Issue VIII–Appellant argues that he is unable to comply with the Contempt Order due to
his financial situation, which includes supporting his mother, Mary Gordon, as well as his two
children on a salary of less than $50,000. Again, this issue does not address whether the
bankruptcy court abused its discretion in entering the Contempt Order. Appellee is entitled to
attorney fees as compensation as long as the Appellant is provided notice of the reasonableness
of such fees.

Reasonableness is limited in these circumstances to the normal applicable

standards for bankruptcy courts reviewing fee applications and whether these fees were related to
the contemptuous conduct. Cf. Rolex Watch U.S.A., Inc. v. Crowley, 74 F.3d 716, 722 (6th Cir.
1996); Nicole Energy, 2007 WL 328608, at *4. See also United States v. United Mine Workers
of Am., 330 U.S. 258, 303-04, 67 S. Ct. 677, 701 (1947) (civil contempt is coercive, but also
compensates for losses sustained).
CONCLUSION
Appellant Virgil Gordon did not timely appeal the Summary Judgment Order, when he
had notice of the underlying motion, was present at the hearing, and had notice of the Summary

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Further, Appellant has not shown that the bankruptcy court abused its

discretion in entering the Contempt Order. The bankruptcy court’s Contempt Order is affirmed
on all but the portion of the Contempt Order that awarded attorney fees as sanctions. As to
sanctions, the Panel finds that the bankruptcy court abused its discretion in not according
Appellant proper notice and allowing him the opportunity to respond, and remands this matter to
the bankruptcy court for the limited purposes of providing appellant notice and an opportunity to
respond as to whether the sanctions awarded were reasonable and related to Appellant’s
contempt.