In re Gorges
Decision Date | 12 October 2018 |
Docket Number | Case No. 14-59311 |
Citation | 590 B.R. 771 |
Parties | IN RE: Maurice M. GORGES, Debtor. |
Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Stuart Sandweiss, Sandweiss Law Center, P.C., Southfield, Michigan, Attorney for Debtor.
Brian H. Herschfus, Wood, Kull, Herschfus, Obee & Kull, P.C., Farmington Hills, Michigan, Attorney for Stuart Sandweiss and Sandweiss Law Center, P.C.
Marc P. Jerabek, Douglas C. Bernstein, Plunkett Cooney, Bloomfield Hills, Michigan, Attorneys for The Huntington National Bank.
This Chapter 13 case was filed by the Debtor, Maurice M. Gorges ("Gorges") on December 17, 2014. The voluntary bankruptcy petition was signed by Gorges, and also by his attorney, Stuart Sandweiss ("Sandweiss"), of the law firm Sandweiss Law Center, P.C. (the "Sandweiss Firm"), and Sandweiss filed the petition for Gorges.1 Ultimately, Gorges voluntarily dismissed the case, on motion and an order entered on March 4, 2015.2 At all times, at least until the dismissal, Sandweiss represented Gorges as his attorney in this bankruptcy case.
After the voluntary dismissal of this case, on March 10, 2015, a creditor, The Huntington National Bank ("Huntington"), filed a motion entitled "The Huntington National Bank's Motion to Set Aside Order Granting Debtor's Request for Voluntary Dismissal of Chapter 13 Case" (Docket # 50, the "Motion").3 All aspects of the Motion have been resolved by orders of the Court, except that part of the Motion that seeks an order "awarding sanctions in favor of Huntington and against the [Debtor's] counsel," based on the Debtor's alleged filing of this bankruptcy case in bad faith and for an improper purpose. The orders partially resolving the Motion were entered on March 20, 2015 and on April 6, 2015.4 Among other things, those orders left the voluntary dismissal of this Chapter 13 case intact, so that the case remains dismissed, and sanctioned Gorges, by default, in the amount of $78,000.00.
The remaining, unresolved portion of the Motion (the "Sanctions Motion") seeks sanctions against Sandweiss personally, based on 28 U.S.C. § 1927, 11 U.S.C. § 105(a), and Fed. R. Bankr. P. 9011. Huntington is a creditor who had a mortgage on the home owned by Maurice and his wife, Hana Gorges, located at 13248 Maplelawn Drive, Shelby Township, Michigan (the "Real Property"). Huntington foreclosed on its mortgage, and after the redemption period expired without redemption, Huntington sought to gain possession of the Real Property. Huntington was thwarted in that effort, however, by various actions taken by Maurice and Hana Gorges, who continued to live in the home.
Huntington claims that as the attorney for Gorges, Sandweiss filed this bankruptcy case for the sole purpose of delaying Huntington's eviction of Gorges and his wife from the Real Property. Sandweiss denies this, and contends that his action in filing and prosecuting this bankruptcy case for Gorges was done in good faith for a proper, legitimate purpose.
In the Sanctions Motion, Huntington seeks sanctions in the amount of the reasonable attorney fees that it incurred, not only because of attorney Sandweiss's filing of this Chapter 13 bankruptcy case for Gorges, but also because of attorney Sandweiss's filing and/or defense of two earlier cases. The first of these was attorney Sandweiss's filing of a Chapter 13 case by Hana Gorges (Case No. 14-42250, the "Hana Gorges Bankruptcy"). That case was filed by Hana Gorges on February 17, 2014 and dismissed on March 4, 2014. The second of these earlier cases was the defense of an eviction action filed by Huntington in the 41-A District Court of Michigan, Case No. US14-00927-LT (the "Eviction Case"). Huntington claims that as of October 12, 2015, it had incurred reasonable attorney fees and expenses in the total amount of $177,621.51, in connection with the Hana Gorges Bankruptcy, the Eviction Case, and this bankruptcy case filed by Gorges, including fees for litigating the Sanctions Motion itself.5 Huntington seeks an order sanctioning Sandweiss in this amount.
The Court permitted the parties to conduct discovery regarding the Sanctions Motion, and then entered a final pretrial order.6 The Court held an evidentiary hearing, and then took the matter under advisement.
The Court has carefully reviewed the evidence presented in the evidentiary hearing, and the written and oral arguments of counsel for the parties. The evidence includes the testimony of the witnesses and the exhibits that were admitted into evidence. The witnesses who testified are Hana Gorges, Maurice Gorges, Christ Gorges, Stuart Sandweiss, and John Schandevel. The exhibits that were admitted into evidence are Huntington Exhibits 7, 8, 21, 28, 31, 34-40, 42-44; and Sandweiss Exhibits A-E and all their subparts (except D.ii, which was not admitted into evidence).
This Opinion and the Order to follow will constitute the Court's decision on the Sanctions Motion. This Opinion states the Court's findings of fact and conclusions of law.
For the reasons stated in this Opinion, the Court will deny Huntington's Sanctions Motion, and decline to sanction either Sandweiss or the Sandweiss Firm.
This Court has subject matter jurisdiction over this contested matter under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D. Mich.). This is a core proceeding, under 28 U.S.C. §§ 157(b)(2)(A) and 157(b)(2)(O ).
In addition, this adversary proceeding falls within the definition of a proceeding "arising under title 11" and of a proceeding "arising in" a case under title 11, within the meaning of 28 U.S.C. § 1334(b). Matters falling within either of these categories in § 1334(b) are deemed to be core proceedings. See Allard v. Coenen (In re Trans-Industries, Inc. ), 419 B.R. 21, 27 (Bankr. E.D. Mich. 2009). This is a proceeding "arising under title 11" because it is "created or determined by a statutory provision of title 11," see id. ,including Bankruptcy Code § 105(a). And this is a proceeding "arising in" a case under title 11, because it is a proceeding that "by [its] very nature, could arise only in bankruptcy cases." See Allard v. Coenen , 419 B.R. at 27.
1. Stipulated facts
Initially, the Court incorporates and adopts, as part of its findings of fact, the many facts stipulated to by the parties in the final pretrial order (the "Stipulated Facts"). The Court makes other findings later in this Opinion. The Stipulated Facts, as stated in the Final Pretrial Order, are the following:
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...Such relief may be available, under the Court's inherent authority and under 11 U.S.C. § 105(a). See, e.g. , In re Gorges , 590 B.R. 771, 791-94 (Bankr. E.D. Mich. 2018) ("Federal courts, including bankruptcy courts, have the discretion to award attorney fees and expenses as a sanction for ......
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