Sabaugh v. Snyder

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
STEPHEN SNYDER, No. 05-14194
Debtor(s).
______________________________________/
KIMBERLY SABAUGH,
Plaintiff(s),
v. A.P. No. 06-1045
STEPHEN SNYDER,
Defendant(s).
_______________________________________/
Memorandum on Motion for Summary Judgment
_________________
Plaintiff Kimberly Sabaugh was once the girlfriend of defendant Stephen Snyder, who is a lawyer.
After they broke up, Sabaugh accused Snyder of stealing her money. Snyder then gave Sabaugh a note for
$131,000.00, which recited that the note was not dischargeable in bankruptcy. Snyder then filed a Chapter 7
petition, and Sabaugh brought this action for a determination that Snyder’s debts to her are not
Entered on Docket
July 10, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-01045 Doc# 64 Filed: 07/10/08 Entered: 07/10/08 14:10:40 Page 1 of 4

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1The complaint originally contained claims for denial of discharge and assault. These claims have been
subsequently waived.
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dischargeable.1 Snyder does not argue that the provision of the note is binding.
Snyder has moved the court for summary judgment, filing a declaration which refutes all of the
allegations of the complaint. Since Sabaugh bears the burden of proof at trial, it is incumbent upon her to
make a showing sufficient to establish the existence of each element essential to her case. 27A
Fed.Proc.L.Ed., Pleadings and Motions § 62:642, p. 389, citing Celotex Corp. V. Catrett, 477 U.S. 317
(1986). See also Crawford-El v. Britton, 523 U.S. 574, 600 (1998). The court accordingly considers her
declaration to determine if she has provided evidence sufficient to create a triable issue of fact.
The court first notes that Sabaugh has declared that “[o]ver a period of time, without my knowledge,
and wrongfully, Stephen Snyder took almost all of my money: my savings, retirement, and the credit available
on my credit card.” This creates a triable issue of fact as to nondischargeability pursuant to § 523(a)(6) of
the Bankruptcy Code.
There is also a triable issue of fact as to whether Snyder acted as a fiduciary. He admits that he was
given $180,000.00 to be used for Sabaugh’s benefit by Sabaugh’s father. That may be sufficient to establish
that Snyder was acting in a fiduciary capacity even though he was never Sabaugh’s lawyer.
In addition, Sabaugh has declared that Snyder was “holding” her IRA funds. A trial is necessary to determine
exactly what that means.
Sabaugh has not established a triable issue of fact as to fraud. She alleges that in reliance on Snyder’s
representation that the note would not be dischargeable in bankruptcy she would have sued him for fraud.
However, this allegation by itself is insufficient to establish a nondischargeable debt; it was incumbent upon
Sabaugh to produce evidence that she had valuable collection remedies at the time she received the note, and
that those collection remedies subsequently became worthless. In re Siriani, 967 F.3d 302, 305 (9th Cir.
1992).
Moreover, It is clear from the declarations of both parties that Sabaugh’s claims against Snyder arose
Case: 06-01045 Doc# 64 Filed: 07/10/08 Entered: 07/10/08 14:10:40 Page 2 of 4

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2A finding of defalcation can be made only if a specific, identifiable sum was entrusted to Snyder. It
cannot be based merely on the fact that Snyder is a lawyer. In re Young, 91 F.3d 1367, 1371 (10th
Cir.1996). General fiduciary duties under state law do not form a basis for a finding of defalcation in a
fiduciary capacity under federal bankruptcy law. The latter requires an express trust imposed before and not
arising out of the wrongdoing which caused the debt. In re Cantrell, 329 F.3d 1119, 1125 (9th Cir. 2003). “
In the Ninth Circuit, a general fiduciary attorney-client relationship may rise to the level of a fiduciary
relationship for purposes of § 523(a)(4) if there are client trust funds involved.” In re Bigelow, 271 B.R.
178, 187 (9th Cir.BAP 2001).
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before the note was given, and that the note was intended as a liquidation of those claims. Section 523(a)(2)
of the Bankruptcy Code makes debts for fraud nondischargeable only to the extent that the debtor obtained
money, property, services, or an extension, renewal, or refinancing of credit. While forbearance can be
considered to be such consideration where the original debt was a loan or other voluntary extension of credit,
Sabaugh has declared under penalty of perjury that Snyder obtained her money without her knowledge and
wrongfully. Since there was no original credit given, Sabaugh’s forbearance cannot be considered an
extension, renewal or refinancing of credit.
For the foregoing reasons, Snyder’s motion for summary judgment will be denied. However, at trial
Sabaugh will be limited to two arguments: that Snyder took her money without her knowledge and that he
defalcated in a fiduciary capacity.2 It shall be deemed without substantial controversy that there is no
nondischargeable debt for fraud.
Counsel for Snyder shall submit an appropriate form of order.
Dated: July 10, 2008
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 06-01045 Doc# 64 Filed: 07/10/08 Entered: 07/10/08 14:10:40 Page 3 of 4

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CERTIFICATE OF MAILING
The undersigned deputy clerk of the United States Bankruptcy Court for the Northern District of
California hereby certifies that a copy of the attached document was mailed to all parties listed below
as required by the Bankruptcy Code and Rules of Bankruptcy Procedure.
Dated: Jul 10, 2008
Kimberly Sabaugh
6 Pembroke Ct.
Dearborn, MI 48126
Case: 06-01045 Doc# 64 Filed: 07/10/08 Entered: 07/10/08 14:10:40 Page 4 of 4