In re Roberti, Bankruptcy No. 93-52894

• Decision Date: 10 October 1996
• Docket Number: Bankruptcy No. 93-52894,Adv. No. 93-5282.
• Citation: 201 BR 614
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re Vincent A. ROBERTI, Debtor. FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Vincent A. ROBERTI, Defendant.

201 B.R. 614 (1996)

In re Vincent A. ROBERTI, Debtor FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Vincent A. ROBERTI, Defendant.

Bankruptcy No. 93-52894, Adv. No. 93-5282.

United States Bankruptcy Court, D. Connecticut.

October 10, 1996.

COPYRIGHT MATERIAL OMITTED

Leeland J. Cole-Chu, Cole-Chu and Cipparone, New London, Connecticut, for Plaintiff.

Kevin L. Burns, Owens, Schine, and Nicola, Trumbull, Connecticut, Craig Taschner, Rome, McGuigan, Sabonosh and Klebanoff, P.C., Hartford, Connecticut, for Defendant.

MEMORANDUM AND ORDER ON COMPLAINT TO DETERMINE DISCHARGEABILITY OF DEBT

ALAN H.W. SHIFF, Chief Judge.

The plaintiff seeks a determination that the default judgment entered by the Connecticut Superior Court in its favor collaterally estops the defendant from raising the same issues decided by that judgment in this court. As such, the plaintiff contends that the debt corresponding to that judgment is excepted from discharge under §§ 523(a)(2)(A), 523(a)(2)(B), and 523(a)(4). In the alternative, the plaintiff contends that on the merits, the debt is not dischargeable under those code provisions.

BACKGROUND

The applicability of the doctrine of collateral estoppel was previously considered by this court on the plaintiff's motion and the defendant's cross-motion for summary judgment. See Resolution Trust Corporation¹ v. Roberti (In re Roberti), 183 B.R. 991 (Bankr. D.Conn.1995) ("Roberti I"). In denying the plaintiff's motion for summary judgment, it was determined that while abode service was adequate, collateral estoppel could not be applied to prevent the relitigation of the issues raised in this dischargeability proceeding because the state court "did not determine whether the defendant had actual knowledge of the pendency of the state court action and therefore a full and fair opportunity to litigate." Roberti I, supra at 1003. The cross-motion was also denied because there were disputed material issues of fact.

The plaintiff again seeks summary judgment on the basis of collateral estoppel and the defendant reasserts his claim that he was not afforded a full and fair opportunity to litigate the issues in state court. For the reasons that follow, the defendant is collaterally estopped from relitigating the issues of whether he engaged in fraudulent conduct and committed larceny.

I

COLLATERAL ESTOPPEL

Procedural History

By summons and complaint dated August 29, 1991, Coastal Savings Bank, FSB ("Coastal Savings") commenced an action against the defendant in Superior Court for the Judicial District of New London to recover damages for alleged breach of contract, unjust enrichment, fraud, forgery, and theft in connection with an unsecured line of credit it had extended to a nonexistent corporate borrower ("New London Action"). See Pl. Exh. K. As a result of the defendant's failure to appear, Coastal Savings moved for and was granted a default judgment on November 5, 1991, and awarded damages in the amount of $817,156.16 plus costs on December 4, 1991. The damage award included punitive damages for fraud, statutory treble damages for theft, and double damages for forgery under Conn.Gen.Stat.Ann. §§ 52-564 and 52-565 (West 1995). By motion dated September 18, 1992, the defendant moved to open and vacate the default judgment, claiming that he did not receive the summons and complaint, he had no notice of the action, and therefore the court lacked jurisdiction. Motion to Open and Vacate Judgment, Pl.Exh. R.² The New London court concluded that abode service was proper and denied the motion on January 4, 1993. See Memorandum of Decision re: Defendant's Motion to Open and Vacate Judgment, Pl.Exh. T.

On July 23, 1993, counsel for the defendant filed a complaint in the Superior Court for the Judicial District of Fairfield at Bridgeport ("Fairfield Action"), seeking a new trial on the issues already determined by the New London court. See Pl.Exh. FF. A copy of the summons and complaint commencing the New London Action was attached to that complaint. The Fairfield Action was stayed on September 3, 1993 when the defendant commenced this chapter 7 case, see 11 U.S.C. § 362(a).

DISCUSSION

As noted in Roberti I:

Summary judgment shall be granted `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.\' Fed. R.Civ.P. 56(c). `The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.\' . . . While the court must view the inferences to be drawn from the facts in the light most favorable to the party opposing the motion, a party may not `rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment.\' The non-moving party may defeat the summary judgment motion by producing specific facts sufficient to establish that there is a genuine issue of material fact for trial. `Mere conclusory allegations or denials\' in legal memoranda or oral argument are not evidence and cannot by themselves create a genuine issue of material fact where none would otherwise exist. . . . The burden is upon the moving party to demonstrate that no genuine issue respecting any material fact exists. . . . That burden may be satisfied by showing that little or no evidence may be found in support of the non-moving party\'s case. . . . There is no genuine issue of material fact where no rational jury could find in favor of the non-moving party because the evidence to support its case is so slight. . . .\' Summary judgment is proper only when reasonable minds could not differ as to the import of the evidence.\'

Roberti I, supra, 183 B.R. at 998-99 (citations omitted) (emphasis in original).

With few exceptions, not applicable here³, the full faith and credit doctrine, codified at 28 U.S.C. § 1738, requires a federal court to give preclusive effect to a state court judgment whenever the state in which the federal court sits would do so. Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 415-16, 66 L.Ed.2d 308 (1980). See also Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S.Ct. 1327, 1331-32, 84 L.Ed.2d 274 (1984); Burka v. New York City Transit Authority, 32 F.3d 654, 657 (2d Cir.1994); Kelleran v. Andrijevic, 825 F.2d 692, 694 (2d Cir.1987), cert. denied, 484 U.S. 1007, 108 S.Ct. 701, 98 L.Ed.2d 652 (1988); Roberti I, supra, 183 B.R. at 999; Tavella v. Edwards (In re Edwards), 172 B.R. 505, 521-522 (Bankr. D.Conn.1994). Under Connecticut law, "collateral estoppel applies to an issue that was actually litigated and necessarily determined in a prior action between the same parties on a different claim." Roberti I, supra at 1001; see also Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 714, 627 A.2d 374 (1993). An issue is "`necessarily determined' if, in the absence of a determination of the issue, the judgment could not have been validly rendered." Id. at 714-15, 627 A.2d 374; Roberti I, supra at 1001 (internal quotations and citations omitted). "Actual litigation under Connecticut law requires a `full and fair opportunity to litigate.'" Id. at 1002.

Contrary to the defendant's assertions, the entry of a default judgment for failure to appear in the New London Action does not eliminate the application of collateral estoppel.

Although not every default judgment should have the same preclusive effect as an actual adjudication between the present parties, in the interest of judicial economy and repose for litigants, we envision some circumstances where it would be appropriate to give issue preclusive effect to a default judgment. We have previously noted, after addressing the scope of issue . . . preclusion, that the appropriate inquiry . . . is whether the party had an adequate opportunity to litigate the matter in the earlier proceeding . . . State v. Ellis, supra 197 Conn. 436, 464-65 n. 22 497 A.2d 974, quoting D. Currie, "Res Judicata: The Neglected Defense," 45 U.Chi. L.Rev. 317, 342 (1978). Our decision in Ellis indicates that had there been a full and fair opportunity to litigate issues and such issues were necessary to a default judgment, that judgment should put to rest subsequent litigation of all issues necessary for the rendering of the default judgment.

Jackson, supra, 225 Conn. at 717-718, 627 A.2d 374 (internal quotations and citations omitted) (emphasis added). See also Roberti I, supra, 183 B.R. at 1002; 1 Restatement (Second), Judgments § 27, comment (e) (1982) ("It is true that it is sometimes difficult to determine whether an issue was actually litigated; even if it was not litigated, the party's reasons for not litigating in the prior action may be such that preclusion would be appropriate"). For those reasons, the conclusion in Roberti I that collateral estoppel could not be applied absent a determination that the defendant had actual knowledge of the pendency of the New London Action, arguably set a higher standard than necessary for the application of collateral estoppel. Roberti I, supra, 183 B.R. at 1003. Nonetheless, on the basis of the evidence submitted in the New London Action, it is concluded that the defendant did have actual knowledge of the pendency of that action. The question then is whether, armed with that knowledge, the defendant had a full and fair opportunity to litigate in the New London Action. For the reasons that follow, the plaintiff has established a prima facie case on that issue.

Plaintiff's Exhibit FF is a copy of the summons and complaint that was filed in the Fairfield Action. A copy of the summons and the first page of the complaint filed in the New London Action was attached to that exhibit. The attached papers bear the late Sheriff Warren Tingley...