In re Earl Blasingame, No. 18-5549 (6th Cir. 2019)Annotate this Case
Over a decade ago, the Blasingames filed for bankruptcy, seeking to discharge $7.7 million in debt, claiming they made $900 per month and owned less than $6,000 worth of assets. Their creditor, Church,allegedly discovered that the Blasingames made over $300,000 per year and had at least $18 million in assets, including “a 28-acre, gated residence compound,” 1,700 acres of “prime farmland,” and hundreds of thousands of dollars in financial assets that belonged to trusts and corporations under the Blasingames’ control. The Blasingames’ bankruptcy trustee initially tried to recover the assets by authorizing Church to sue derivatively on its behalf in bankruptcy court but later decided to sell the cause of action to Church. Since the sold cause of action could no longer affect the bankruptcy estate's value, the bankruptcy court dismissed. Church filed a new lawsuit against the Blasingames and their trusts, alleging “alter-ego.” The district court dismissed, concluding that Tennessee would not recognize that theory outside of the corporate context. Church filed another adversary proceeding on behalf of the trustee, against the Blasingame Family Investment Trust, which was self-settled; the settlors, trustees, and beneficiaries were all the same. The bankruptcy court concluded that the was just a subset of the cause of action that was sold and dismissed. Church filed another adversary proceeding on behalf of the trustee, targeting the Blasingame Family Residence Trust, which granted the Blasingames a life estate. The bankruptcy court dismissed, finding that the Blasingames’ interest was equitable, not legal, and beyond their creditor’s reach. The Bankruptcy Appellate Panel and the Sixth Circuit affirmed, adopting the bankruptcy court reasoning.