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UNITED STATES BANKRUPTCY COURT 

SOUTHERN DISTRICT OF FLORIDA 

WEST PALM BEACH DIVISION 

In re: 

 

FRANK GABRIEL CAVALLINO, Case No. 20-22282 -EPK 

 Chapter 13 

 Debtor. 

___________________________________/ 

AIXO, LLC, 

 Plaintiff, 

v. Adv. Proc. No. 21-01001-EPK 

FRANK GABRIEL CAVALLINO, 

 Defendant. 

___________________________________/ 

MEMORANDUM OPINION 

The Court held trial in this adversary proceeding on January 6, 2022. At the Court’s 

direction, the parties filed post-trial briefs. ECF Nos. 36, 40, and 41. The Court carefully 

reviewed the record in light of the Amended Complaint [ECF No. 10] and the post-trial 

Erik P. Kimball, Judge

United States Bankruptcy Court

_____________________________________________________________________________

ORDERED in the Southern District of Florida on March 14, 2022.

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briefs.1 The following constitutes the Court’s findings of fact and conclusions of law 

pursuant to Fed. R. Civ. P. 52, made applicable to this adversary proceeding by Fed. R. 

Bankr. P. 7052. 

 In the Amended Complaint, the plaintiff AIXO, LLC presents three counts for relief 

under sections2 523(a)(4) (embezzlement and larceny) and 523(a)(6). In each, AIXO seeks to 

have the Court except from discharge a debt represented by a state court default judgment 

AIXO obtained against the debtor, Frank Cavallino, and the debtor’s company, Property 

Management Consulting Group, LLC, before Mr. Cavallino filed this bankruptcy case. 

 It is undisputed that AIXO and Property Management entered into a written 

agreement in 2018 under which Property Management was to assist AIXO in managing a 

number of residential rental properties in Florida. Mr. Cavallino was not a party to the 

agreement in his individual capacity. The written agreement was admitted in evidence and 

both Mr. Cavallino and AIXO’s principal testified about it. 

 During the time that Property Management provided property management services 

to AIXO, it also provided property management services to several other landlords. The 

company maintained a single operating account, first at SunTrust Bank and later at 

Seacoast Bank, where it deposited rents and other income and from which it paid property 

expenses and other items including its own expenses. Bank statements from these 

accounts were admitted in evidence. 

1 The Court directed the parties to file briefs in the form of proposed findings of fact and conclusions 

of law. The Court advised the parties that each statement of fact in the proposed findings of fact 

must be supported by a specific reference to documentary evidence admitted or testimony given at 

trial, or the Court may disregard the statement of fact and the party will be deemed to have waived 

the right to rely on such statement of fact. ECF No. 36. 

2 When used in this Memorandum Opinion, the word “section” refers to the relevant section of the 

United States Bankruptcy Code, 11 U.S.C. § 101 et seq., unless otherwise noted. 

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 Mr. Cavallino testified that Property Management also maintained an account or 

accounts for security deposits from the properties it managed, including AIXO’s properties. 

Other than Mr. Cavallino’s limited testimony on this issue, the Court received no 

information regarding such bank account or accounts. No bank statements were admitted 

in evidence. Indeed, AIXO’s counsel was surprised when Mr. Cavallino testified that 

Property Management had a separate account for security deposits. 

 AIXO and Property Management terminated their contractual relationship at the 

end of March 2019. At termination, Property Management owed AIXO an amount equal to 

rent and security deposits from AIXO’s properties less property related expenses and 

management fees, but Property Management failed to pay these amounts to AIXO or to 

AIXO’s new property manager. AIXO sued both Property Management and Mr. Cavallino 

himself in a Florida state court and, the defendants failing to answer, AIXO obtained a 

default judgment against both, jointly and severally. Thus, AIXO holds an unsecured claim 

against Mr. Cavallino in the amount of $62,345.22 as of the petition date in this case, plus 

additional post-judgment interest. The goal of this adversary proceeding is to have that 

claim excepted from Mr. Cavallino’s discharge. 

 The terms of the written agreement between AIXO and Property Management are 

important here. The agreement is titled “Independent Contractor Property Manager 

Agreement.” The agreement does not in any way address collection or payment of rents or 

security deposits; neither of those terms appears anywhere in the agreement. There is 

nothing in the agreement that would cause the Court to conclude that Property 

Management agreed to accept rent or security deposits and hold them separately for the 

benefit of AIXO. Indeed, at section 5.1 of the agreement the parties explicitly disclaim an 

agency relationship between AIXO and Property Management. 

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Based on the terms of the agreement, the relationship between Property 

Management and AIXO was that of a debtor and creditor only. AIXO certainly obtained a 

claim against Property Management, but nothing in their agreement would lead the Court 

to conclude that AIXO had any legally recognizable property interest in rents or security 

deposits AIXO’s tenants gave to Property Management. 

The parties’ conduct also indicates a debtor-creditor relationship. That Property 

Management provided periodic reports to AIXO regarding rent collected, expenses, 

management fees, and reserves does not change the Court’s view. Those reports are 

consistent with AIXO being a creditor of Property Management. Property Management 

was not required to ask AIXO for prior permission to pay any expenses or management fees 

relating to AIXO’s properties. Property Management had unfettered discretion to use funds 

received from AIXO’s tenants. All rents were deposited in Property Management’s 

operating accounts where they were commingled with other funds. In fact, as AIXO itself 

points out, Property Management did not hold sufficient funds to pay the amounts shown 

as owing to AIXO in those reports. 

 The operating accounts maintained by Property Management, at SunTrust Bank 

and later at Seacoast Bank, included all rents collected from properties managed by 

Property Management and apparently other income as well. In other words, rents from 

properties owned by AIXO were commingled with rents from properties owned by other 

landlords and other income. While Property Management was, at least for the final month 

or two, managing properties only for AIXO, there is no tracing or similar evidence from 

which the Court could conclude that the funds remaining in the operating account were 

attributable to AIXO’s properties alone. Nor is it possible for the Court to glean this from 

close examination of the bank statements. AIXO’s post-trial brief does not shed any light 

on the issue. 

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 The Court considered whether the potential existence of a separate corporate bank 

account for security deposits might support the conclusion that AIXO had some 

recognizable property interest in such account. But AIXO did not present any concrete 

evidence relating to any such account or accounts. The Court has only Mr. Cavallino’s brief 

testimony on the issue, itself a surprise to AIXO. The Court has no way of knowing, for 

example, whether security deposits from properties not owned by AIXO or any other funds 

were commingled in any such account, or how such funds were used. The only conclusion 

the Court can make with regard to security deposits received by Property Management 

from AIXO’s tenants is that neither AIXO nor its successor property manager received 

those funds. Based on the evidence admitted in this case, the Court cannot conclude that 

AIXO has any claim relating to security deposits received by Property Management other 

than as a creditor with the ability to sue Property Management to recover those amounts. 

 AIXO holds a pre-bankruptcy state court default judgment against Mr. Cavallino as 

well as against Property Management. That is the basis for AIXO’s claim against Mr. 

Cavallino in this bankruptcy case. Mr. Cavallino undertook no personal contractual duty to 

AIXO. In other words, even if Property Management’s contract with AIXO had established 

a relationship other than a debtor-creditor relationship, Mr. Cavallino undertook no such 

duty himself. 

 In Counts I and II of the Amended Complaint, AIXO seeks relief under section 

523(a)(4) based on larceny and embezzlement. AIXO argues that by accepting rent and 

security deposits from AIXO’s tenants, through his company Property Management, and 

then using such funds for his own purposes rather than paying them to AIXO, Mr. 

Cavallino committed the tort of larceny or embezzlement. 

 Although separate claims, the only difference between embezzlement and larceny 

under section 523(a)(4) is whether the debtor was lawfully in possession of the property at 

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the time of the fraudulent misappropriation. Why Int'l, LLC v. Disbrow (In re Disbrow), 

No. 18-01112-EPK, 2019 Bankr. LEXIS 2902, at *46 (Bankr. S.D. Fla. Apr. 22, 2019). 

Embezzlement is the “fraudulent appropriation of property by a person to whom such 

property has been entrusted, or into whose hands it has lawfully come.” Moore v. United 

States, 160 U.S. 268, 269 (1895). Larceny is the “fraudulent taking and carrying away of 

property of another with intent to convert such property to his use without consent of 

another.” Ford v. Pupello (In re Pupello), 281 B.R. 763, 768 (Bankr. M.D. Fla. 2002) (citing 

Ploetner-Christian v. Miceli (In re Miceli), 237 B.R. 510, 516 (Bankr. M.D. Fla. 1999)). 

Larceny is sometimes described as a “felonious taking of another’s personal property with 

intent to convert it or deprive the owner of the same.” Weinreich v. Langworthy (In re 

Langworthy), 121 B.R. 903, 907 (Bankr. M.D. Fla. 1990) (citing Black's Law Dictionary, 5th 

ed.). 

 As AIXO acknowledges in its post-trial brief, it is a hallmark of both larceny and 

embezzlement that the property taken be property of the plaintiff. The plaintiff must have 

some legally recognizable property interest in what the defendant took. Marbella, LLC v. 

Cuenant (In re Cuenant), 339 B.R. 262, 277 (Bankr. M.D. Fla. 2006) (“A key element of both 

larceny and embezzlement is that the plaintiff must establish ownership of the property 

taken.”) In this case, considering all of the evidence admitted at trial, the Court concludes 

that AIXO had no property interest in the rents or security deposits it claims are due from 

Property Management. Under the terms of the agreement between AIXO and Property 

Management, and in light of their actual course of dealing, AIXO is merely a creditor of 

Property Management, with no right in any funds that flowed through the accounts of 

Property Management superior to any other creditor of Property Management. Because 

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AIXO failed to show that it had a property interest in the funds received by Property 

Management, its claims based on larceny and embezzlement must fail. 

 In Count III of the Amended Complaint, AIXO seeks relief under section 523(a)(6), 

arguing that Mr. Cavallino’s actions in managing Property Management to the detriment of 

AIXO constitute willful and malicious injury to AIXO. As confirmed in AIXO’s post-trial 

brief, at the close of trial AIXO conceded that it had not met its burden on this claim, and 

the Court agrees. However, because this is a chapter 13 case, section 523(a)(6) applies only 

if Mr. Cavallino seeks a discharge under section 1328(b) after confirmation. 11 U.S.C. §§ 

523(a), 1328(a)(2), (b) and (c). Mr. Cavallino has not done so; indeed, his plan has yet to be 

confirmed. Thus, the claim presented in count III is not ripe. The Court will deny relief 

under section 523(a)(6) at this time without prejudice to AIXO raising this issue should Mr. 

Cavallino later seek a discharge under section 1328(b). 

 This may seem like a harsh outcome. Mr. Cavallino used funds from the Property 

Management operating account for his personal use. Some of those funds likely came from 

rent and security deposits paid in connection with AIXO’s properties. But the facts of this 

case appear unique in comparison to existing case law. It is unusual for a property owner 

to structure its agreement with a property manager in such a way as to disclaim even an 

agency relationship, and to allow the manager unfettered discretion over sums collected, 

leaving the property owner with the status of a mere creditor. AIXO must live with the 

agreement it negotiated and implemented. 

 For the foregoing reasons, AIXO is not entitled to any relief requested in the 

Amended Complaint. Consistent with Fed. R. Civ. P. 58, made applicable to this adversary 

proceeding by Fed. R. Bankr. P. 7058, the Court will enter a separate judgment in favor of 

Mr. Cavallino on all counts. 

### 

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Counsel for the Plaintiff is directed to serve a copy of this Memorandum Opinion on all 

appropriate parties and file a certificate of service. 

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