United States District Court, D. Connecticut
IN RE STUART SCOTT SNYDER, and DOREEN ANNE SNYDER, Debtors.
JOSEPH J. MURPHY, and NANCY A. MURPHY, Plaintiffs-Appellees. STUART SCOTT SNYDER, and DOREEN ANNE SNYDER, Defendants-Appellants,
RULING AND ORDER
R. UNDERHILL UNITED STATES DISTRICT JUDGE.
Scott Snyder and Doreen Anne Snyder appeal from an order of
the United States Bankruptcy Court for the District of
Connecticut (Manning, C.J.) (the “Bankruptcy
Court”) deeming nondischargeable a judgment rendered
against the Snyders in favor of Joseph Murphy and Nancy
Murphy by the United States District Court for the Eastern
District of New York (the “District Court”). For
the following reasons, I affirm the judgment of the
Standard of Review
district courts have jurisdiction to hear appeals from
“final judgments, orders and decrees” of the
bankruptcy courts. 28 U.S.C. § 158(a). In the context of
an adversary proceeding within a bankruptcy case, an award of
summary judgment is a final appealable order because it
“completely resolve[s] all of the issues pertaining to
the discrete claim.” In re Miner, 222 B.R.
199, 202 (2d Cir. BAP 1998); see Hoffman v. Cheek,
90 B.R. 21, 21 (D. Conn. 1988).
in bankruptcy appeals, the district court reviews the
bankruptcy court's factual findings for clear error and
its conclusions of law de novo.” In re Charter
Commc'ns, 691 F.3d 476, 482-83 (2d Cir. 2012).
Because a motion for summary judgment does not permit the
court to find any facts, however, see Flaherty v.
Lang, 199 F.3d 607, 615 (2d Cir. 1999), “[a] grant
of summary judgment is reviewed de novo by the appellate
court.” Andrews v. McCarron (In re Vincent Andrews
Mgmt. Corp.), 507 B.R. 78, 81 (D. Conn. 2014).
Joseph Murphy and Nancy Murphy are a married couple who live
in Suffolk County, New York. Bankr. Compl., App'x at 3;
Bankr. Answer, App'x at 15. Joseph Murphy's sister,
defendant Doreen Anne Snyder, is married to defendant Stuart
Scott Snyder. The Snyders live in Greenwich, Connecticut.
Bankr. Compl., App'x at 3; Bankr. Answer, App'x at
15. Prior to the events that are the subject of the District
Court lawsuit, the parties “had a very close
relationship . . ., celebrated holidays and vacationed
together, and enjoyed a relationship of personal
trust.” Bankr. Answer, App'x at 15-16; see
Bankr. Compl., App'x at 4 (same).
Snyder has worked in the construction business for more than
twenty years, owning several entities through which he builds
and renovates luxury homes and commercial properties. Joseph
Murphy is a retired New York City firefighter and police
officer. In 2005, Joseph approached Stuart to discuss
investment opportunities for real estate projects. Stuart
“offered the Murphys an opportunity to participate as
‘silent partners' by investing $100, 000 in two
luxury home projects in Haworth, New Jersey” (the
“Haworth Project”). Murphy v. Snyder,
2014 U.S. Dist. LEXIS 134097, at *4 (E.D.N.Y. Aug. 15, 2014),
report and recommendation adopted, 2014 U.S. Dist.
LEXIS 133179 (E.D.N.Y. Sept. 22, 2014). In exchange for the
$100, 000, Stuart “guarantee[d] the Murphys the return
of their initial investment plus twenty percent in
approximately one year.” Id. The Murphys
accepted the arrangement and entered into an oral agreement
with the Snyders. On behalf of himself and his wife, on
December 28, 2005, Joseph wire-transferred $100, 000 to an
attorney trust account in the name of “Defendants'
then counsel, Steven Freesman.” Murphy, 2014 U.S.
Dist. LEXIS 134097, at *41. One week later, the Murphys
received the blueprints for the Haworth Project.
Murphys and the Snyders subsequently entered into a second
oral agreement to purchase a vacant lot located on Bible
Street in Greenwich, Connecticut, for the purpose of
constructing a custom-built luxury home for sale (the
“Bible Street Project”). Unlike the Haworth
Project, the Murphys were to be the Snyders' only
partners on the Bible Street Project, and Joseph Murphy
intended to actively participate in the construction and sale
of the property. “Stuart again guaranteed the Murphys
their initial investment plus a [twenty percent] return and
possibly more.” Id. at *5. On August 28, 2006,
Joseph Murphy wire-transferred $275, 000- which he and Nancy
Murphy allegedly obtained by mortgaging their family home,
id.-to a bank account in the name of one of the
Haworth Project was finished by July 2009, when one of the
houses was sold for $1.4 million. Bankr. Compl., App'x at
9; Bankr. Answer, App'x at 22. The other house appears to
have eventually been sold in March 2012 for $1.3 million,
see Deed, App'x at 281, after a period in which
it was leased for $9, 000 per month. Dist. Ct. Compl.,
App'x at 90; Appellants' Br., Doc. No. 16, at 15.
With respect to the Bible Street Project, however, the
Snyders never purchased the property in Connecticut. Instead,
they used the Murphys' $275, 000 to build two other
luxury homes in Demarest, New Jersey (the “Demarest
Project”). Those houses were sold in 2010 for over $3
million each. Bankr. Compl., App'x at 9; Bankr. Answer,
App'x at 22.
at least portions of the Haworth and Demarest Projects
turning a profit,  the Murphys never recovered their
investments and never received the promised 20 percent
returns. In addition, Scott Snyder spent at least $20, 000 of
the Murphys' investment on personal items. See
Appellants' Br., Doc. No. 16, at 14. Records and checks
obtained from the Snyders' bank indicate that there was
less than $1, 000 in the Snyders' account at the time the
Murphys wired their $275, 000 investment on August 28, 2006.
Over the next two months, nearly all of the Murphys'
money was depleted-even though the Snyders failed to purchase
the Bible Street property-as the Snyders withdrew money to
pay for an expensive meal in Washington, D.C., car repairs,
yacht club dues, and the Snyders' daughter's college
textbooks. See Bankr. Local Rule 56(a)2 Statement,
App'x at 338-39. The Snyders also used the account to
withdraw more than $10, 000 in cash and pay off more than
$50, 000 of credit card debt. Id.
April 6, 2010, the Murphys filed a seven-count complaint
against the Snyders, their companies, and other defendants in
the United States District Court for the Eastern District of
New York, alleging (1) breach of contract; (2) conversion;
(3) unjust enrichment; (4) fraudulent inducement; (5) money
had and received; (6) breach of fiduciary duty; and (7) an
accounting. See Murphy, 2014 U.S. Dist. LEXIS
134097, at *7. The Snyders answered the complaint on November
12, 2010. Id. at *8. A farcical four years of
litigation ensued, in which the Snyders abruptly shuffled
attorneys, neglected to respond to discovery, and failed to
appear at hearings and conferences held by the District
September 15, 2011, as a sanction for the defendants'
“obstreperous conduct regarding the discovery
responses” and “blatant [disregard [of] prior
Orders, ” the District Court struck the Snyders'
answer and entered a default judgment against the Snyders and
their companies. Id. at *10. While the court was
calculating the Murphys' damages, the Snyders appeared
through new counsel and moved to vacate the default judgment.
On March 29, 2013, the District Court vacated the default
judgment. Subsequently, the Snyders' attorneys-who had
changed once again-moved to withdraw because they “had
been unable to communicate with their clients and had accrued
large sums of outstanding attorneys' fees.”
Id. at *15. The District Court granted the motion to
withdraw, and the Snyders appeared pro se. The court warned
the Snyders that their corporations could not proceed pro se,
and that “failure to retain counsel for the corporate
entities would very likely result in default judgments being
entered against them.” Id. Despite the
warning, the Snyders never retained new counsel for their
they appeared pro se, the Snyders “provided no
responses” to discovery, “failed or refused to
appear at their scheduled depositions, ” and neglected
to attend several hearings before the court. Id. at
*17. The Murphys moved the District Court to strike the
Snyders' answer as a sanction and enter a default
judgment against the Snyders and their companies. Concluding
that the Snyders had “consistently disregarded their
discovery obligations as well as multiple Orders of the
Court, ” id. at *20, and had continued in
their “recalcitrant conduct . . . despite numerous
warnings and the issuance of multiple sanctions, ”
id. at *22-*24, the District Court granted the
Murphys' motion and struck the Snyders' answer.
District Court proceeded to determine whether the
Murphys' claims “set forth a valid cause of action,
” as required for entry of default judgment.
Id. at *24. The Court concluded that the Murphys had
“adequately pleaded a breach of contract claim.”
Id. at *26. The alleged facts plausibly indicated
that the Murphys “entered into [two] oral investment
agreement[s]” with the Snyders; that they transferred a
total of $375, 000 in fulfillment of the agreements; that the
Snyders “breached the contract[s] by failing to return
[the Murphys'] initial investment[s], in addition to the
[twenty percent] return[s] on their investment[s]”; and
that the Murphys suffered damages. Id. at *26-*27.
The District Court also held that the Snyders separately
breached the agreement concerning the Bible Street Project
“by failing to purchase the Bible Street property, and
instead, us[ing] [the Murphys'] monies for other projects
and purposes without notice to or authorization by [the
Murphys].” Id. at *27. Thus, the Court held
that the Murphys had “successfully set out the elements
of a claim for breach of contract.” Id.
District Court declined to enter default judgment on the
Murphys' other claims, however. It concluded that the
remaining claims were either “duplicative” of the
breach of contract claim, see Id. at *28-*29
(conversion); id. at *31-*32 (fraudulent
inducement); id. at *35-*36 (breach of fiduciary
duty), or else were precluded due to the existence of a valid
contract. Id. at *30-*31 (unjust enrichment);
id. at *36-*37 (money had and received);
id. at *38-*39 (accounting). The Court also declined
to impose punitive damages on the Snyders because it had held
that “default judgment [would] not be entered on the
breach of fiduciary duty claim.” Id. at *47.
As a result, the District Court granted the Murphys'
motion for default judgment on the breach of contract claim
only, and awarded them $450, 000 in compensatory damages,
plus interest and costs. Id. at *51-*52. Judgment
entered on September 23, 2014.
April 23, 2015, the Snyders filed a petition for bankruptcy
in the United States Bankruptcy Court for the District of
Connecticut. On July 27, 2015, the Murphys initiated an
adversary proceeding by filing a three-count complaint
seeking a declaration that the District Court judgment was
nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A),
(a)(4), & (a)(6). The Snyders filed an answer on December
11, 2015. On August 10, 2016, the Murphys filed a motion for
summary judgment on all three counts, which the Snyders
opposed on September 14, 2016. On May 5, 2017, the Bankruptcy
Court issued an order granting the Murphys' motion with
respect to Counts Two and Three of the Adversary Complaint
(alleging nondischargeability under section 523(a)(4) and
section 523(a)(6), respectively) and denying the motion with
respect to Count One (alleging nondischargeability under
Snyders timely appealed on May 17, 2017. Doc. No. 1.
discharge under Chapter 7 of the Bankruptcy Code
“discharges the debtor from all debts that arose before
the date of the order for relief.” 11 U.S.C. §
727(b). Such a discharge does not, however, discharge any
debt incurred through (among other things):
(4) . . . fraud or defalcation while acting in a fiduciary
capacity, embezzlement, or larceny; [or]
(6) . . . willful and malicious injury by the debtor to
another entity or to the property of another entity . . . .
Id. at § 523(a). “A creditor seeking to
establish nondischargeability under § 523(a) must do so
by the preponderance of the evidence.” Ball v. A.O.
Smith Corp., 451 F.3d 66, 69 (2d Cir. 2006).
may invoke collateral estoppel to preclude relitigation of
the elements necessary to meet a § 523(a)
exception.” Id. Here, the Bankruptcy Court
applied collateral estoppel to the District Court Judgment
and held that the Snyders' debt was nondischargeable
because it had been incurred through “defalcation while
acting in a fiduciary capacity, ” In re
Snyder, 2017 WL 1839122 (D. Conn. May 5, 2017), at *10;
“embezzlement, ” id. at *11; and/or
“willful and malicious injury . . . to another.”
Id. at *12. The Snyders argue that the District
Court Judgment did not render their debt nondischargeable
because, among other things, the judgment “had no
collateral estoppel effect as to Defendants'
intent.” Appellants' Br., Doc. No. 16, at 37.
I will consider whether the Bankruptcy Court's
application of collateral estoppel was proper. If it was,
then I will proceed to assess whether the District Court
Judgment establishes as a matter of law the
nondischargeability of the Snyders' debt.
bankruptcy court [may] properly give collateral estoppel
effect to those elements of the claim that are identical to
the elements required for discharge and which were actually
litigated and determined in the prior action.”
Grogan v. Garner, 498 U.S. 279, 285 (1991). Under
federal law-which courts “apply to establish the