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In re Giblen

United States District Court, D. Connecticut

March 28, 2018

IN RE GARY M. GIBLEN, and ANNA MARIE GIBLEN, Debtors. SCOTT M. CHARMOY, Appellant.

          RULING AND ORDER CONCERNING APPEAL FROM SUA SPONTE ORDER IMPOSING SANCTIONS

          STEFAN R. UNDERHILL, UNITED STATES DISTRICT JUDGE.

         Scott M. Charmoy, Esq. (“Attorney Charmoy”) timely appealed an order of Chief United States Bankruptcy Judge Julie A. Manning dated March 29, 2017. Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 1-5. The order instructs Attorney Charmoy to compensate Attorney Merrie Hawley, acting as committee for sale (“the Committee”) for all fees and expenses incurred in a related foreclosure action in state court. See Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 4-5.

         In her Order Granting Relief from Automatic Stay and Imposing Sanctions After Show Cause Hearing, Chief Judge Manning held that Attorney Charmoy had “committed violations of the duty of candor to the Court and violations of Federal Rule of Bankruptcy Procedure 9011 and Federal Rule of Civil Procedure 11.” Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 3. Attorney Charmoy correctly pointed out a few technical problems regarding the procedures employed in connection with the sanctions issue by the Bankruptcy Court. In addition, the Bankruptcy Court erred in ordering Attorney Charmoy to pay a Rule 11 sanction to the Committee. Accordingly, I remand the matter to the Bankruptcy Court for further proceedings consistent with this Order.

         I. Background

         On December 18, 2017, Attorney Charmoy filed a Chapter 7 bankruptcy case in United States Bankruptcy Court on behalf of Gary and Anna-Marie Giblen (“the Giblens” or “the Debtors”). March 23, 2017 Transcript (“Transcript”), Doc. No. 10, at 104:1-9. On December 3, 2017, more than two weeks before the Chapter 7 case was filed, the Giblens' home was sold in a foreclosure sale approved by the Stamford Superior Court. Transcript, Doc. No. 10, at 4:8-13. The foreclosure sale of the Giblens' property occurred prior to the filing of the Debtors' case, but Chief Judge Manning did not find out about the foreclosure sale until March 7, 2017, during a hearing at which the Chapter 7 Trustee objected to the Debtors' claim of exemptions and sought to employ a realtor to market and sell their property. Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 3; Transcript, Doc. No. 10, at 3:22-4:4; 5:5-13, 5:20-6:9.

         On March 23, 2017, after learning that the foreclosure had taken place before the Chapter 7 case was filed, Chief Judge Manning ordered a show cause hearing to determine, among other things, whether Attorney Charmoy should be sanctioned for his failure to inform the Court about the foreclosure sale. Transcript, Doc. No. 10, at 6:10-18.

         Chief Judge Manning made a factual finding that Attorney Charmoy knew that the Connecticut Superior Court had entered a judgment of foreclosure by sale in a foreclosure action in state court at the time the Objection, the Application to Employ Realtor, and the Response to Objection were filed in the Chapter 7 bankruptcy. Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 3; Transcript, Doc. No. 10, at 88:6-18. She held that Attorney Charmoy did not disclose any information about the foreclosure action or the pre-petition foreclosure sale to the Bankruptcy Court. Transcript, Doc. No. 10, at 177:2-178:3.

         At the conclusion of the March 23, 2017 hearing, Chief Judge Manning ordered that sanctions be imposed on Attorney Charmoy, for a total of $8, 074.86, to be paid to the Committee in full on or before April 6, 2017, and leaving open the possibility for additional fees and expenses to be paid to the Committee within 14 days of April 6, 2017. Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 4. Attorney Charmoy timely appealed Chief Judge Manning's sanctions order.

         II. Standard of Review

         A federal district court has jurisdiction to hear appeals of “final judgments, orders, and decrees” of the bankruptcy court for the same district pursuant to 28 U.S.C. § 158(a). When reviewing bankruptcy appeals, the district court reviews conclusions of law de novo and applies the clearly erroneous standard to findings of fact. In re Ionosphere Clubs, 922 F.2d 984, 988 (2d Cir. 1990). The district court may “affirm, modify, or reverse a bankruptcy court's judgment, order, or decree[, ] or remand with instructions for further proceedings.” In re Indicon, 499 B.R. 395, 400 (D. Conn. 2013) (quoting former Federal Rule of Bankruptcy Procedure 8013).

         III. Discussion

         A. Jurisdiction

         This court has jurisdiction to hear the present appeal. A district court has jurisdiction to hear appeals “from final judgments, orders, and decrees” of the bankruptcy court. 28 U.S.C. § 158(a).

         Chief Judge Manning's Order Granting Relief from Automatic Stay and Imposing Sanctions After Show Cause Hearing did not intend to leave open any issues pertaining to the order for sanctions, and thus is treated as a final order. Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 4-5. Even if that order is not final because it leaves open the issue of whether the Debtors' case should be dismissed as a bad faith filing, and is rather an ...


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