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In re Moniello

United States District Court, D. Connecticut

September 17, 2018

IN RE DOROTHY MONIELLO, Debtor. MICHAEL ROZEA, Appellant.

          RULING AND ORDER ON APPEAL FROM ORDER IMPOSING SANCTIONS

          Stefan R. Underhill, United States District Judge.

         Michael Rozea, Esq. (“Attorney Rozea”) timely appealed an order of United States Bankruptcy Judge James J. Tancredi dated October 10, 2017. Doc. No. 1-1, Notice of Appeal from Bankruptcy Court, Order, at 1-4.[1] The Order instructs Attorney Rozea to pay $2, 000.00 to the Clerk of the Court and $3, 000.00 to Debtor Dorothy Moniello (“Moniello”), as well as consult with “experienced bankruptcy counsel” to develop “a protocol with regard to motion for relief from stay practice, reasonably calculated to avert the mistakes” found by the Bankruptcy Court. Id. at 4.

         In the Order, the Bankruptcy Court held that Attorney Rozea had “occasioned a cascade of grave legal consequences, denigrated the legal process of [the Bankruptcy Court], and resulted in the wrongful removal of a vulnerable human being from her home.” Order, Doc. No. 1-1, at 4. As a result of that finding, the Bankruptcy Court sanctioned Attorney Rozea under “the inherent authority” of the Bankruptcy Court, also relying on “undisputed core principles that relate to Federal Rule of Bankruptcy Procedure 9011 [and] the Code of Professional Responsibility.” Transcript of Bench Ruling on Order to Show Cause, Oct. 6, 2017 (“Bench Ruling Transcript”), Doc. No. 10, at 8:4-8:7.

         Attorney Rozea argued that the Order was based on an incorrect factual finding, and that the Bankruptcy Court applied an erroneous standard in ordering sanctions against him. I am unpersuaded by Attorney Rozea's arguments. The Bankruptcy Court acted within its discretion under its inherent authority and made no clearly erroneous factual findings against Attorney Rozea. Accordingly, I affirm the decision of the Bankruptcy Court.

         I. Background

         On July 6, 2016, Moniello, proceeding pro se, filed a chapter 13 bankruptcy petition in United States Bankruptcy Court. See Order to Appear and Show Cause, Doc No. 16-18, at 2. On August 30, 2016, Attorney Rozea filed a motion for relief from stay on behalf of Wells Fargo Bank, National Association (“Wells Fargo”), asserting that Wells Fargo held title to Moniello's property.[2] See Motion for Relief, Doc. No. 16-8, at 2. Judge Tancredi granted Wells Fargo's motion for relief from stay on September 23, 2016, granting relief to Wells Fargo and its “successors and assignees.” Order Granting Relief from Stay, Doc. No. 16-10, at 2. Wells Fargo had, however, sold its interest in the property to Shmuel Aizenberg on July 29, 2016. See Special Warranty Deed from Wells Fargo to Shmuel Aizenberg, Doc. No. 16-2, at 3. The sale occurred nearly two weeks before Attorney Rozea filed the motion for relief in which he represented to the Bankruptcy Court that Wells Fargo still held title to the property. See Motion for Relief, Doc. No. 16-8, at 2. Shmuel Aizenberg subsequently sold the property to Super Zen, LLC on September 1, 2016. See Quit Claim Deed from Shmuel Aizenberg to Super Zen, LLC, Doc. No. 16-6, at 3.

         On September 29, 2016, Super Zen LLC initiated a summary process action naming “John Doe” and “Jane Doe” as the defendants. See Summons and Complaint of Summary Process Action, Doc. No. 16-7, at 2. The summary process complaint alleged that a notice to quit possession had been served upon each defendant on August 24, 2016, at a time when Moniello's bankruptcy stay was still in effect. Id. at 3.

         Moniello filed a motion to vacate and/or reconsider the order granting relief from stay on October 6, 2016. See Debtor Motion to Vacate Order Granting Relief from Stay, Doc. No. 16-11, at 2. Wells Fargo filed a response in which Attorney Rozea indicated that Wells Fargo still owned the property, even though Wells Fargo had actually sold the property months earlier to Shmuel Aizenberg on July 29, 2016. See Response to Motion to Vacate, Doc No. 16-12, at 2-3; Special Warranty Deed from Wells Fargo to Shmuel Aizenberg, Doc. No. 16-2, at 3. After the Court reconsidered the order, it again granted relief from stay. Order Granting Motion to Vacate, and, after Reconsideration, Granting Motion for Relief from Stay, Doc. No. 16-13. Moniello's chapter 13 bankruptcy case was dismissed on January 6, 2017. Order Reopening Case for a Limited Purpose, Doc. No. 16-14, at 2.

         On September 8, 2017, Moniello filed a second chapter 13 case in response to the Connecticut Housing Session's issuance of an execution for possession of her home following a trial in Connecticut Superior Court that resulted in judgment in favor of Ocean Management, LLC. Bankruptcy No. 17-31385, Doc. No. 1. Moniello filed an emergency motion to stay the eviction. Bankruptcy No. 17-31385, Doc. No. 8. In the motion to vacate, Moniello alleged that she provided a notice of bankruptcy filing to the Connecticut State Marshal who was evicting her, but he proceeded with the eviction. Id. at 2. The Bankruptcy Court held a hearing on September 18, 2018 regarding the emergency stay motion, during which time it discovered that Attorney Rozea may have misrepresented Wells Fargo's property interest during the first bankruptcy proceeding. Order to Appear and Show Cause, Doc. No. 16-18, at 5-7; Appellant's Brief, at 7.

         After the September 18 hearing, the Bankruptcy Court ordered a show cause hearing to determine, among other things, whether Attorney Rozea should be sanctioned for his failure to inform the Court about the sale of Wells Fargo's property to Shmuel Aizenberg. Order to Appear and Show Cause, Doc No. 16-18, at 5-7.

         Judge Tancredi held a show cause hearing on September 29, 2017. Order to Show Cause Hearing Transcript, Doc. No. 9 (“Hearing Transcript”). On October 6, 2017, Judge Tancredi issued a bench ruling on the order to show cause. Bench Ruling Transcript, Doc. No. 10. In the bench ruling, Judge Tancredi made a factual finding that Attorney Rozea should have known, and should have disclosed, that Wells Fargo had sold its interest in Debtor Moniello's property at the time Wells Fargo filed a Motion for Relief from Stay and acted “without reasonable diligence” in representing that Wells Fargo still owned the property. Order, at 4; Bench Ruling Transcript, Doc. No. 10, at 11:2-11:24. The Judge held that Attorney Rozea did not disclose to the Bankruptcy Court any information about the sale, and that that mistake allowed the Bankruptcy Court to vacate the order of relief from stay under Federal Rule of Civil Procedure 60(b) (which provides grounds for relief from a final order for “mistake, inadvertence, surprise, or excusable neglect”). Bench Ruling Transcript, Doc. No. 10, at 11:2-11:24.

         At the conclusion of the bench ruling, Judge Tancredi ordered that sanctions be imposed on Attorney Rozea, for a total of $2, 000.00 payable to the Clerk of the Court and $3, 000.00 payable to Debtor Dorothy Moniello. Bench Ruling Transcript, Doc. No. 10, at 19:5-19:22; Order, at 4. He also ordered Attorney Rozea to consult with “experienced bankruptcy counsel” to develop “a protocol with regard to motion for relief from stay practice, reasonably calculated to avert the mistakes” found by the Bankruptcy Court. Order, at 4, see also Bench Ruling Transcript, Doc. No. 10, at 19:23-20:9.

         Attorney Rozea timely appealed Judge Tancredi's sanctions order.

         II. ...


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