Jennifer Covello v. Stephen Feinstein

STATEWIDE GRIEVANCE COMMITTEE

Jennifer Covello, Complainant vs. Stephen Feinstein, Respondent

Grievance Complaint #03-0289

DECISION

Pursuant to Practice Book §2-35, the undersigned, duly appointed reviewing committee of the Statewide Grievance Committee conducted a hearing at the Superior Court, 300 Grand Street, Waterbury, Connecticut on May 4, 2004. The hearing addressed the record of the complaint filed on October 7, 2003 and the probable cause determination rendered by a reviewing committee of the Statewide Grievance Committee on March 19, 2004, finding that there existed probable cause that the Respondent violated Rules 1.3, 1.4(a) and 1.15(b) of the Rules of Professional Conduct. This finding was contrary to the finding of no probable cause filed by the Stamford/Norwalk Judicial District Grievance Panel on January 9, 2004.

Notice of the hearing was mailed to the Complainant and to the Respondent on April 2, 2004. The Complainant and the Respondent appeared and testified. Attorney Lawrence Church represented the Respondent. Four exhibits were admitted into evidence.

This reviewing committee finds the following facts by clear and convincing evidence:

The Complainant retained the Respondent and his law firm, Feinstein and Herman, to represent her in the refinancing of her home located in Norwalk, Connecticut. The property was encumbered by a first mortgage in favor of Wells Fargo Financial (hereinafter referred to as the “Wells Fargo mortgage”) and a home equity mortgage with Chase Manhattan Mortgage Corporation (hereinafter referred to as the “Chase mortgage”). The Complainant intended to pay off the two mortgages from the proceeds of the refinancing. The Respondent represented the Complainant at the refinancing that took place on August 8, 2003. The Complainant telephoned the Respondent during the week of August 16, 2003, after the period of rescission had passed, to confirm that the requisite disbursements had been made. The Respondent did not return the Complainant’s telephone call.

During the week of August 22, 2003, the Complainant received the proceeds from the refinancing, minus the requisite disbursements, including the amount owed to Chase of $150,754.15 and the amount owed to Wells Fargo of $21,405.86. The Complainant again attempted to contact the Respondent to confirm that all the necessary disbursements had been made. The Respondent did not return the Complainant’s telephone calls. Because the Respondent failed to return the Complainant’s telephone calls, she contacted the lenders and discovered that neither payoff had been received.

On September 1, 2003, the Wells Fargo mortgage payment for September, 2003 was deducted automatically from the Complainant’s checking account. The Complainant immediately attempted to contact the Respondent to discuss the matter. The Respondent did not return the Complainant’s telephone call but he did investigate the matter. The Respondent learned that the Wells Fargo mortgage payment had not been made after the refinancing was complete. On or about September 4, 2003, the Respondent forwarded check #7952 in the amount of $150,884.16 from his firm’s clients’ funds account at Fleet Bank to Wells Fargo. The check represented the mortgage payoff amount plus an additional payment to cover excess interest that had accrued due to the late payment.

On or about September 3, 2003, the Complainant received a bill for the September payment for the Chase mortgage. The Complainant immediately attempted to contact the Respondent to discuss the matter. After the Respondent had received the Complainant’s message, he did not return her telephone call but he again investigated the matter. The Respondent learned that the Chase mortgage had not been paid off. On or about September 4, 2003, the Respondent forwarded check #7960 in the amount of $21,405.86 from his firm’s clients’ funds account at Fleet Bank to Chase.

Chase and Wells Fargo received the payoff funds on or about September 9, 2003. The check written to Wells Fargo cleared the Respondent’s clients’ funds account on September 9, 2003. The check written to Chase cleared the Respondent’s clients’ funds account on September 15, 2003. The amount paid to Chase was insufficient to cover the excess interest that had accrued and, as a result, the Respondent disbursed check #7986 in the amount of $51.48 to Chase on or about September 19, 2003 to cover the shortfall.

In a letter dated September 11, 2003 and addressed to Wells Fargo, the Respondent averred that his firm had represented the Complainant in a refinancing of her home. The letter went on to assert that the firm had, “forwarded to you the full payoff of the above loan which your bank received, accepted and cashed. In the interim, apparently [the Complainant] has automatic (sic) deduction from her checking account which she failed to cancel in a timely manner. Thereby having the bank take an additional mortgage payment in the amount of $1,461.45. Since the bank has already received a full payoff, this sum would be an overpayment to the bank and should be returned immediately to Ms. Covello.” Chase had not refunded the excess payment to the Complainant or the Respondent at the time the hearing was held in this matter. The Respondent reimbursed the Complainant for the September automatic withdrawal that was erroneously deducted from her bank account as a result of the Respondent’s failure to disburse the funds on or about August 16, 2003.

This reviewing also considered the following:

The Respondent conceded that he handled the Complainant’s refinancing. The Respondent explained that when he returned to his office after the closing, he turned the file over to his staff to complete the process and, thereafter, attended to several court matters involving other clients. The Respondent testified that his father, Attorney Norton Feinstein, handled the disbursement of the funds from the refinancing transaction. The Respondent blamed an “internal accounting error” as the cause of the late disbursement.

The Respondent’s clients’ funds account bank statements for the months of August and September of 2003 were produced at the hearing pursuant to a subpoena duces tecum issued by this reviewing committee. The bank records produced indicated that sufficient funds remained in the Respondent’s clients’ funds account from the time the refinancing took place in August of 2003 through the time the September, 2003 disbursements were made to pay off the Wells Fargo and Chase mortgages.

As to his failure to respond to the Complainant’s telephone calls in August and September of 2003, the Respondent explained that he was experiencing personal issues that kept him from the office frequently during August and September of 2003.

This reviewing committee concludes by clear and convincing evidence that the Respondent violated the following Rules of Professional Conduct:

The Complainant attempted on several occasions to contact the Respondent to confirm that the necessary disbursements were made to Chase and Wells Fargo during the week of August 16, 2003. Had the Respondent responded to these inquiries, he may have avoided the untimely disbursements. When the Complainant discovered that her mortgages still had not been paid by the end of August, 2003, she again attempted to contact the Respondent. On or about September 3, 2003, the Complainant again attempted to contact the Respondent to discuss the matter. The Respondent failed to timely return the Complainant’s telephone calls regarding the non-payment of the mortgages. Rather, he investigated the error, discovered the mortgages had not been paid and sent checks to pay off the mortgages. It was only then that he returned the Complainant’s telephone calls. Notwithstanding the fact that a relatively short period of time elapsed between the time the Complainant attempted to contact the Respondent and his response, this reviewing committee finds that the substance of the Complainant’s messages were serious enough to warrant an immediate response from the Respondent. The Respondent’s failure to respond to the Complainant’s numerous telephone calls violated Rule 1.4(a) of the Rules of Professional Conduct.

The Respondent represented the Complainant at the closing and it was reasonable for her to expect that the Respondent would perform the refinancing promptly and diligently, including making all the requisite disbursements in a timely manner. The Respondent’s failure to verify that the appropriate disbursements were made after the closing, particularly after the Complainant had telephoned him requesting verification thereof, violated Rule 1.3 of the Rules of Professional Conduct. The Respondent’s lack of diligence was exacerbated by his failure to verify that all the appropriate disbursements were made once he became aware that the Wells Fargo payoff had not been made.

The Respondent failed to promptly remit funds to Wells Fargo and Chase, funds which they were entitled to receive. However, the Respondent was initially unaware that the appropriate disbursements had not been made. Once the Respondent became aware that the disbursements had not been made, he endeavored to do so. Further, the record before this reviewing committee shows that sufficient funds remained in the Respondent’s clients’ funds account to pay off the Wells Fargo and Chase mortgages from the time the refinancing took place in August 2003 through the time the September, 2003 disbursements were made. Therefore, this reviewing committee does not find that the Respondent failed to safeguard the funds. Accordingly, this reviewing committee concludes that the Respondent did not violate Rule 1.15(b) of the Rules of Professional Conduct.

Because this reviewing committee concludes that the Respondent has violated Rules 1.3 and 1.4(a) the Rules of Professional Conduct, we reprimand the Respondent.

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Attorney Vincent DeAngelo

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Mr. William Carroll

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Reverend Meredith Payton