In Re: Jerasimos Papapanayotou, Esq., Jerasimos Papapanayotou, Esq. v. Jeffrey Sapir, Esq., as Chapter 7 Trustee

218 F.3d 109, 44 Collier Bankr. Cas. 2d 655, 2000 U.S. App. LEXIS 15953
Court of Appeals for the Second Circuit·Decided July 10, 2000·No. 1999·Published·Cited by 153 cases

Opinion

STRAUB, Circuit Judge:

Jerasimos Papapanayotou, attorney pro se, appeals from an order of the United States District Court for the Southern District of New York (Charles L. Brieant, Judge) imposing sanctions on him pursuant to 28 U.S.C. § 1927, for maintaining in bad faith an appeal of the Bankruptcy Court’s decision in his representation of 60 East 80th Street Equities, Inc., the debtor (“Debtor”) 1 . In addition, Jeffrey Sapir, *112 the trustee of the Debtor’s estate (“Trustee”), moves for sanctions from this Court under Fed. R.App. P. 38. Because we agree with the District Court that Papapa-nayotou’s actions in the proceedings below evidence clear bad faith and an unreasonable pursuit of frivolous claims, we affirm the order of the District Court imposing the sanctions. We also grant the Trustee’s motion for sanctions in this Court, based on Papapanayotou’s similar conduct on appeal of the sanctions. Finally, we deny Papapanayotou’s cross-motion for sanctions against the Trustee.

BACKGROUND

In order to evaluate properly the appeal of the sanctions imposed upon Papapanay-otou, it is necessary to describe, in some detail, the factual circumstances surrounding Papapanayotou’s representation of the Debtor in the underlying action in the Bankruptcy Court and in the District Court.

A. Events in the Bankruptcy Court

Angelo Slabakis is the sole shareholder of the Debtor. On April 25, 1996, the Debtor’s former attorney, and purported creditor of the Debtor, filed an involuntary petition against the Debtor under Title 11, Chapter 7 of the United States Bankruptcy Code. The involuntary bankruptcy filing occurred one day prior to a scheduled foreclosure sale, thereby frustrating the sale of the Debtor’s sole asset: property at 60 East 80th Street, New York, New York (“Property”). By virtue of the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a), the foreclosure sale was automatically stayed. Pursuant to an order of the Bankruptcy Court, the automatic stay was vacated to allow mortgagee Dorlexa Company to foreclose on the Property. Dorlexa completed its foreclosure and ultimately obtained a $1,189,968.73 deficiency judgment against Slabakis on June 11, 1999, plus interest and costs from May 1997.

Pursuant to another order of the Bankruptcy Court, Jeffery Sapir was appointed trustee of the Debtor’s estate. The Trustee commenced an adversary proceeding against Slabakis and various tenants in possession of apartments at the Property, including Slabakis’s friends Courtney Red-ding, Doug Bronsky, Eddie Gupta, and Juan Zapata (collectively “Judgment Debtors”). The essential allegations were that Slabakis directed a scheme by which the Debtor granted below-market leases to the other Judgment Debtors, on the eve of a foreclosure action on the Property, in order to destroy the value of the Property and force the mortgagee to sell the mortgage to Slabakis at a steep discount. The Judgment Debtors defaulted either by failing to file an answer or failing to appear for trial. Default judgments were entered on April 4, 1997 and April 25, 1999 (“Judgments”). The Judgment Debtors, through attorney Papapanayotou, sought to vacate the Judgments. The Bankruptcy Court denied those applications after a hearing, and referred Slabakis’s and Redding’s allegedly perjurious testimony in connection with the hearing to the U.S. Attorney’s Office.

The Trustee unsuccessfully attempted to recover assets from the Judgment Debtors. As part of his efforts to locate such assets, the Trustee commissioned an asset search that revealed that none of the Judgment Debtors had any real or personal property and that Slabakis had unsatisfied judgments recorded against him that collectively exceeded $27,000,000. Concluding that recovery against the Judgment Debtors was unlikely, the Trustee then petitioned the Bankruptcy Court to sell the Judgments. The Judgments were eventually sold to Dorlexa for $15,000, together with a release by Dorlexa of its $1.2 million deficiency claims against the Debt- *113 or’s estate, in order to recover assets for the estate. See 11 U.S.C. §§ 363(b) & (f). 2

The Debtor, again through attorney Pa-papanayotou, then sought to vacate the sale of the Judgments in Bankruptcy Court, contending that it was entitled to and did not receive notice of the sale and that the sale constituted a violation of the Trustee’s fiduciary duty. The Bankruptcy Court dismissed the Debtor’s motion to vacate the sale, and held that, under the applicable case law, the Debtor had no standing to object to the sale. In fact, it “had no more entitlement to notice [of the sale] than any other corporate entity in the world or any passerby in the street,” In re 60 East 80th Street Equities, Inc., No. 96 B 20772 (Bankr.S.D.N.Y. Feb. 23, 1999) (“Bankr.Decis.”) at 6, and the sale “constituted a valid and good faith exercise of business judgment and benefited the estate more than any other potential disposition of the Judgments,” id. at 7. In its decision, the Bankruptcy Court concluded that the Debtor’s purported basis for vacating the sale was without “support in logic or the law,” id. at 4, and further characterized the Debtor’s theory as “absurd[],” id. at 6, “frivolous,” id., “implausible],” id. at 7, and “inconceivable,” id.

B. Appeal to the District Court and Imposition of Sanctions

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In Re: Jerasimos Papapanayotou, Esq., Jerasimos Papapanayotou, Esq. v. Jeffrey Sapir, Esq., as Chapter 7 Trustee, 218 F.3d 109, 44 Collier Bankr. Cas. 2d 655, 2000 U.S. App. LEXIS 15953 (2d Cir. 2000).

218 F.3d 109 (In Re: Jerasimos Papapanayotou, Esq., Jerasimos Papapanayotou, Esq. v. Jeffrey Sapir, Esq., as Chapter 7 Trustee) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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