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Tagged Opinion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA

FORT LAUDERDALE DIVISION

In re:

Case No. 21-13557-PDR

Suzanne L. Roach,

Chapter 13

Debtor.

/

Russell Everett Conn and

Katrina Lee Conn,

Plaintiffs,

v. Adv. Case No. 21-01233-PDR

Suzanne L. Roach,

Defendant.

/

ORDER GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT 

AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

Peter D. Russin, Judge

United States Bankruptcy Court

_____________________________________________________________________________

ORDERED in the Southern District of Florida on August 16, 2022.

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This is a story about a mother and her children at odds over a timeshare. The 

dispute has been litigated in state court and follows the parties to this Court as the 

mother seeks to discharge the resulting debt to her children. What complicates 

matters is that she is not just a mother, and the children are not just her offspring—

she is the trustee of a trust holding the timeshare for the children’s benefit. While 

parents and children perhaps expect more than they should from each other, in this 

case the law appropriately holds those acting in a fiduciary capacity to a high 

standard. If, in that fiduciary capacity, the trustee falls short, debts that arise from 

that failing may be nondischargeable. That is the result here. While the Court’s 

preferred remedy would be requiring the parties to “hug it out”, jurisdictional limits 

restrict the Court to ruling only on the dischargeability of the debt. 

Background

In 1992, Suzanne Roach (the “Mother” or the “Defendant”) and her Former 

Husband created a Land Trust to hold their interest in a Timeshare for the benefit of 

the Defendant and her two children, Russell Everett Conn and Katrina Lee Conn (the 

“Plaintiffs” or the “Children”). The Mother and her Former Husband served as cotrustees of the Land Trust and were responsible for making alternating annual 

maintenance payments related to the Timeshare (the “Timeshare Payments”). The 

Land Trust Agreement does not require the Land Trust to reimburse the co-trustees 

for the Timeshare Payments. The Mother made her Timeshare Payments and covered 

the Former Husband’s when he failed to make his. Under the Land Trust Agreement, 

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after twenty years, the trustees were to convey the interest in the Timeshare to the 

beneficiaries—50% to the Mother and 25% to each of the Children. 

Twenty years passed and the Timeshare was not conveyed to the beneficiaries. 

Then, in 2018, the Former Husband died, and the Mother became the sole trustee of 

the Land Trust. When the Children sought their share of the Timeshare from their

Mother, she refused to convey it to them until she was repaid the Timeshare 

Payments she advanced for her Former Husband. After the Children refused their 

Mother’s demand, the Mother transferred the Land Trust’s entire interest in the 

Timeshare—the sole trust res—to herself individually. She did not consult legal 

counsel before making the decision to do so.

In response, the Children sued their Mother in Florida state court for breach 

of contract and breach of fiduciary duty.0F

1 The state court granted summary judgment 

in favor of the Children, specifically finding that the Mother “materially breached the 

Land Trust Agreement and her fiduciary duty by . . . failing to transfer the Property 

. . . and . . . by recording a Quit Claim Deed from [herself as trustee] to [herself] 

individually” and ordered the Timeshare to be transferred 25% each to the Children

(the “State Court Summary Judgment”). In addition, the state court granted fees and 

costs under Fla. Stat. § 736.1004, which requires courts to provide fees and costs “[i]n 

all actions for breach of fiduciary duty or challenging the exercise of, or failure to 

exercise, a trustee's powers.” The Mother transferred the Timeshare to the Children 

as required, but the state court was unable to adjudicate the amount of fees and costs

1 See Conn v. Roach, No. CONO-19-000748 (Fla. 17th Jud. Cir. Ct.) (the “State Court Action”).

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because the Mother filed this Chapter 13 bankruptcy case in April 2021, staying the 

state court action.1F

2

The Children filed a proof of claim (the “Claim”) based on the State Court 

Summary Judgment in the amount of $28,875.85, and filed this Adversary 

Proceeding seeking a determination that the debt arises from defalcation while acting 

in a fiduciary capacity and is nondischargeable under 11 U.S.C. § 523(a)(4).2F

3 On June 

3, 2022, the Children moved for summary judgment.3F

4 The Mother opposes the 

Children’s motion and filed her own cross-motion for summary judgment.4F

5

In a Joint Stipulation, the parties agree that: 

(1) the Land Trust exists;

(2) the Mother and her Former Husband were co-trustees of the Land 

Trust;

(3) the Children were beneficiaries of the Land Trust and entitled, 

collectively, to 50% of the Timeshare;

(4) the co-trustees were required to distribute the Timeshare to the 

beneficiaries after twenty years passed;

(5) the Mother was the sole trustee of the Land Trust after the death 

of her Former Husband;

(6) the Children did not receive their share of the Timeshare after 

the expiration of the twenty-year period; and

2 In re Roach, No. 21-13557-PDR (Doc. 1) (Bankr. S.D. Fla. Apr. 15, 2021) (the “Main Case”).

3 (Main Case Claim 8-1). On June 23, 2022, exactly one year after the Children filed their proof 

of claim, the Mother objected to it. (Main Case Doc. 34). The Children oppose the objection as, among 

other things, untimely. (Main Case Doc. 37). The objection remains pending in the Main Case.

4 (Doc. 55).

5 (Doc. 62). 

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(7) the Mother transferred the Timeshare from herself as trustee to 

herself individually.5F

6

The Mother submitted an affidavit in support of her Cross Motion for Summary 

Judgment. The Plaintiffs did not contest the affidavit. In addition, at the hearing on 

the motions on July 20, 2022, the parties stipulated that all facts necessary to 

adjudicate the claims and defenses are before the Court and agreed that no trial is 

necessary.6F

7

Jurisdiction & Venue

The Court’s subject matter jurisdiction is derived from 28 U.S.C. § 1334. The 

Court has statutory authority to hear and determine this proceeding under 28 U.S.C. 

§ 157(a) & (b)(2)(I), and the general order of reference from the United States District 

Court for the Southern District of Florida. The Court has constitutional authority to 

enter final orders in this core proceeding. Venue is proper under 28 U.S.C. §§ 1408 

and 1409.

Analysis7F

8

The Children argue the Mother committed “defalcation while acting in a 

fiduciary capacity” and the debt arising from the State Court Summary Judgment 

and reflected in the Claim is nondischargeable under 11 U.S.C. § 523(a)(4).

“Defalcation” is subject to many definitions, but can broadly be defined as 

misappropriation of, failure to account for, or failure to produce trust property. See

6 (Doc. 61).

7 (Docs. 58 & 66). 

8 The standard for granting summary judgment under Fed. R. Bankr. P. 7056 and Fed. R. Civ. 

P. 56 is well known and given the parties agreement there is no need to recite it here.

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Quaif v. Johnson, 4 F.3d 950, 955 (11th Cir. 1993); Weiss v. Fautz (In re Fautz), 636 

B.R. 553, 571 (Bankr. D. Colo. 2022); Parklex Assocs. v. Deutsch (In re Deutsch), 575 

B.R. 590, 601 (Bankr. S.D.N.Y. 2017). The State Court Summary Judgment Order 

and the Joint Stipulation both independently establish that the Mother committed 

defalcation while acting in a fiduciary capacity when she transferred the entire 

interest in the Timeshare from herself as trustee to herself individually.8F

9 On its face, 

this would ostensibly end the inquiry.

However, not every act of defalcation by a fiduciary satisfies § 523(a)(4). In 

Bullock v. BankChampaign, the Supreme Court explained that the intent 

requirement for defalcation under § 523(a)(4) “includes a culpable state of mind 

requirement . . . involving knowledge of, or gross recklessness in respect to, the 

improper nature of the relevant fiduciary behavior.” 569 U.S. 267, 269 (2013). 

Applying the Model Penal Code’s definition for gross recklessness, the Supreme Court 

explained that a fiduciary acts grossly reckless if she 

consciously disregards (or is willfully blind to) a substantial and 

unjustifiable risk that [her] conduct will turn out to violate a fiduciary 

duty. That risk must be of such a nature and degree that, considering 

the nature and purpose of the actor's conduct and the circumstances 

known to [her], its disregard involves a gross deviation from the 

standard of conduct that a law-abiding person would observe in the 

actor's situation.

9 The Plaintiffs argue that the Court must give the State Court Summary Judgment issue 

preclusive effect as to the state court’s determination of breach of contract and breach of fiduciary 

duty. The Defendant disagrees and argues that the Eleventh Circuit’s decision in In re Harris, 3 F.4th 

1339 (11th Cir. 2021) prevents the State Court Summary Judgment Order from having issue 

preclusive effect. However, this question is immaterial because the relevant facts determined by the 

State Court Summary Judgment are also agreed to in the Joint Stipulation. Because every factual 

issue is resolved by stipulation, the Court need not address the issue preclusive effect of the State 

Court Summary Judgment. 

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Id. at 274 (quoting ALI, Model Penal Code § 2.02(2)(c), p. 226 (1985)).

But defalcation is a civil claim. How might one apply the “law-abiding person” 

standard to a civil claim? Other courts considering this question have turned back to 

the Model Penal Code for answers, which explains that a court’s analysis under the 

“law-abiding person” standard “must focus on the defendant’s perceptions and given 

those perceptions, make a value judgment as to whether the defendant’s conduct 

deserves to be sanctioned.” MacArthur Co. v. Cupit (In re Cupit), 514 B.R. 42, 54 

(Bankr. D. Colo. 2014). The gross recklessness standard, therefore, requires the Court 

to determine whether the debtor was subjectively aware, or willfully blind to, the 

possibility that her conduct might violate a fiduciary duty. See Caitlin Energy, Inc. v. 

Rachel (In re Rachel), 527 B.R. 529, 542 (Bankr. N.D. Ga. 2015) (citing Cupit, 514 

B.R. at 50–52).

The Mother argues her actions were not grossly reckless because she

transferred the Timeshare “to satisfy a debt owed from the [Land Trust] to herself, 

and only after making a good faith effort to transfer the Timeshare property to the 

beneficiaries of the [Land Trust].” The Court accepts that the Mother made 

Timeshare Payments she was not required to make because her Former Husband 

failed to do so. The Court also accepts that those payments benefitted the Land Trust

in that, without them, the rights to the Timeshare may have been lost. Regardless, 

these assertions, even if true, do not affect the Court’s analysis. 

Initially, the Mother fails to articulate any basis for why she believed the Land 

Trust was obliged to reimburse her for the Timeshare Payments. Therefore, the 

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premise upon which the Mother’s defense rests is faulty. The Mother points to no 

provision of the Land Trust Agreement, separate agreement, oral representation, or 

any legal principle to support her claim. Without any subjective basis to believe she 

was actually owed money from the Land Trust, her justification for violating her duty 

under the Land Trust Agreement begins to wither.

More fundamentally, even if the Court assumes the Land Trust owed the 

Defendant a debt, her decision to unilaterally transfer the Timeshare to herself in 

direct contravention of the terms of the Land Trust Agreement was subjectively 

grossly reckless. The Mother had numerous options once the Children refused her 

demands. She could have, for example: (1) contacted a lawyer to determine what 

rights and obligations she had, (2) filed an action so that a court may determine the 

issue, or (3) complied with the Land Trust Agreement and transferred the Timeshare 

to the beneficiaries as required. Instead, the Mother chose to act in her unilateral 

self-interest by transferring the Timeshare to herself individually. She offers no 

legitimate basis for why she might have been laboring under a misconception that 

she had that authority. The Mother certainly did not receive legal advice supporting 

her belief.9F

10

The record is, therefore, devoid of any support for the Mother’s subjective belief 

that her actions were appropriate. Absent any such subjective belief, the transfer in 

violation of the Land Trust Agreement was not merely negligent—it was grossly

reckless. At a minimum, the Mother was willfully blind to a substantial and 

10 The Defendant’s failure to consult counsel in this instance constitutes willful blindness. See 

Rachel, 527 B.R. at 542 (quoting Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 769 (2011)).

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unjustifiable risk that transferring the Timeshare to herself in direct contravention 

of the terms of the Land Trust Agreement would violate her fiduciary duty. That risk

was of such a nature and degree that this disregard of her fiduciary duty constitutes

a gross deviation from the standard of conduct that a law-abiding person would 

observe in her situation.

Accordingly, the Court ORDERS: 

1. The Plaintiffs’ Motion for Summary Judgment (Doc. 55) is GRANTED. 

2. The Defendant’s Motion for Summary Judgment (Doc. 62) is DENIED. 

3. The debt owed to the Plaintiffs as provided for by Claim 8-1 is hereby 

declared NONDISCHARGEABLE. 

4. The Court will enter a separate Final Judgment consistent with Fed. R. 

Bankr. P. 7058.

# # #

Copies to Stephen Orchard, Esq. who is directed to serve this Order on all interested parties.

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