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Connecticut: Bankruptcy Court Reviews Whether a State Court Can Award Committee for Sale’s Fees and Costs during a Pending Bankruptcy Case

Posted By USFN, Thursday, April 09, 2015
Updated: Wednesday, September 23, 2015

April 9, 2015 

 

by Jeffrey M. Knickerbocker
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

A bankruptcy court in the District of Connecticut has held, again, that it is not a violation of the automatic stay of Bankruptcy Code Section 362(a) for a state court to award committee fees and costs while a bankruptcy is pending. [In re Tasillo (Piecuch v. Tasillo), 2015 Bankr. LEXIS 11, (Case No. 14-21683, Jan. 5, 2015)].

In Connecticut, if a foreclosure sale is ordered by the state court, the state court will appoint an attorney (referred to as a “Committee of Sale”) to conduct the sale. In the course of the sale, the committee must, among other tasks, hire an appraiser, conduct a title search, advertise in the newspaper, and field phone calls from prospective buyers. Typically, in each sale, there are thousands of dollars of costs that the committee must pay out of his/her own funds until the court approves the fees and costs. Once the court approves the fees and costs, the plaintiff, as required by statute, must pay them. In the past, if a bankruptcy is filed prior to the sale, committees would file a motion with the state court to be paid for the fees and costs incurred up until the filing of the bankruptcy. Once the court ordered the fees to be paid, the plaintiff would pay them. Last year, a judicial decision by the Connecticut Court of Appeals changed that procedure.

In Equity One, Inc. v. Shivers, 150 Conn. App. 745, 93 A.3d 1167 (2014), the Connecticut Court of Appeals found that ordering committee fees, when a bankruptcy case was pending, was a violation of the automatic stay. Based on the Shivers opinion, Connecticut courts have been denying committees’ motions for fees when a bankruptcy is pending. In the Tasillo state court action, the court appointed Gregory W. Piecuch, Esq. to be the committee to sell the subject property. The debtor, Robert Tasillo, was the defendant in the foreclosure action in which the state court had appointed Piecuch. After Tasillo filed a voluntary chapter 13 bankruptcy petition, Piecuch filed a motion with the state court to have his fees and costs paid, which was denied based on Shivers.

After the state court’s denial of his motion for fees, Piecuch filed a “Motion for Relief from the Automatic Stay or Motion to Determine That the Automatic Stay Does Not Apply” with the bankruptcy court. U.S. Bankruptcy Judge Dabrowski held that the automatic stay does not apply to the motions for committee fees and, notably, the bankruptcy court specifically referenced the Shivers decision. In light of Shivers, Judge Dabrowski also reviewed earlier bankruptcy court decisions (including one of his own), still finding their reasoning more persuasive than that of Shivers.

Accordingly, in Connecticut, it appears that the law on whether a state court can grant a motion for committee fees and expenses, while a bankruptcy stay is in effect, is unsettled. Although the state appellate court has held that it is not allowed, the recent bankruptcy court ruling in Tasillo says otherwise.

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