Raymond G. Craytor

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW JERSEY

In Re:

Case No.: 20-12098-ABA

Raymond G. Craytor,

Chapter: 7

Debtor

Judge: Andrew B. Altenburg, Jr.

MEMORANDUM DECISION

I. INTRODUCTION

Raymond G. Craytor (the “debtor”) moved this court to reopen his bankruptcy case,

alleging that the Estate of Hattie Maiorano (the “Estate”) violated the discharge injunction when

it sought a state court order recognizing and enforcing a settlement. The court concludes,

reluctantly so, that though the parties settled, the agreement was discharged, and it is too late to do

anything about that. Accordingly, the Estate’s attempt to enforce the agreement violated the

discharge injunction.

II. JURISDICTION AND VENUE

The court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a)

and the Standing Order of the United States District Court dated July 23, 1984, as amended

September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core

proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I), (O). Venue is proper in this Court

pursuant to 28 U.S.C. § 1408. The statutory predicate for the relief sought herein is 11 U.S.C. §

524(a). Pursuant to Fed. R. Bankr. P. 7052, the court issues the following findings of fact and

conclusions of law.

III. PROCEDURAL HISTORY

The debtor filed a Motion to Reopen his bankruptcy case to prosecute a “Motion for

Damages for Creditor Misconduct” against the Estate, the plaintiff in a state court lawsuit, for

violation of the discharge injunction. Doc. Nos. 46, 45. The Estate objected to both motions. Doc.

Nos. 47, 48. The court advised that it would hear the Motion to Reopen along with the Motion for

Damages. The parties filed briefs in support of their positions. Doc. Nos. 50, 52. The parties

consenting to the court deciding the matters on the papers, the matters are now ripe for

determination.

IV. BACKGROUND

The debtor. through Mark S. Cherry, Esquire, filed a chapter 13 bankruptcy case in

February 2020, Bankr. No. 20-12098-ABA, that was voluntarily converted to a no asset chapter 7

case in April 2020.

In March 2020, Hattie Maiorano filed a Motion for Relief from Stay to continue state court

litigation against the debtor. Doc. No. 13. Ms. Maiorano had alleged claims of breach of fiduciary

duty, conversion, improvident gifting, and unjust enrichment. Id., ex. A. The debtor filed

opposition, arguing in part that the bankruptcy court has exclusive jurisdiction over a non-

dischargeability determination under section 523(a)(2), (4) or (6). Doc. No. 14. This court ordered

as follows:

The Motion for Relief is granted to the extent to allow the parties to continue the

litigation in state court to liquidate the claim. The Motion for Relief is denied to

the extent that the movant asked to enforce any judgment against property of

the debtor.

Doc. No. 15 (emphasis added) (the “Stay Order”).

In July 2020, Grayce Watkins, through a power of attorney granted by Ms. Maiorano,

timely filed an adversary proceeding against the debtor alleging Ms. Maiorano’s claim

nondischargeable under section 523(a)(4).1

The debtor received a discharge on August 7, 2020. The discharge order was served on Ms.

Watkins and Ms. Maiorano’s counsel, Michael Hahn of the Simeone firm. Doc. No. 32, p. 3. In

part it stated:

This order means that no one may make any attempt to collect a discharged debt

from the debtors personally. For example, creditors cannot sue, garnish wages,

assert a deficiency, or otherwise try to collect from the debtors personally on

discharged debts. Creditors cannot contact the debtors by mail, phone, or otherwise

in any attempt to collect the debt personally. Creditors who violate this order can

be required to pay debtors damages and attorney's fees.

Doc. No. 31, p. 1. It also stated that “Examples of debts that are not discharged are:. . . debts that

the bankruptcy court has decided or will decide are not discharged in this bankruptcy case.” Doc.

1 The plaintiff also sued TD Bank, seeking to have a mortgage obtained by the debtor to be subordinate to an equitable

mortgage she alleged she had on the debtor’s residence. These parties later stipulated to dismissal. Adv. Proc. No. 20-

1428, Doc. No 18.

No. 31, p. 2. The Bankruptcy Noticing Center certified service of the Order Discharging Debtor

on plaintiff’s counsel. Doc. No. 32. The case was closed on September 11, 2020.2

Nine months after entry of the Order Discharging Debtor, on May 21, 2021, attorney Bryan

Eggert of the Simeone firm, sent to Mark Cherry and Cherry’s associate, Steve Burke, copied to

Michael Hahn and Dominic Simeone, an email advising that his client had agreed to settlement

terms. The email is as follows:

Mr. Cherry and Mr. Burke:

My client has agreed to the following terms to resolve this matter based upon the

terms we discussed this after [sic]. If these terms are agreeable, please send back

an email acknowledge [sic] and confirming that your client is agreeable to these

terms and I will advise the Court that this matter has been resolved.

The matter shall be settled as follows:

1. Raymond Craytor shall make a payment of $5,000.00 to the Estate of Hattie

Maiorano (to be paid to our office).

2. Raymond Craytor shall execute a note and second position mortgage in favor of

the Estate or its designee against his home in the amount $55,000.00 bearing

interest at 4%, annually for a period of ten years, which shall be paid in monthly

payments in the amount of $506.07 paid to the Estate or its designee.

3. Raymond Craytor shall execute a third position non-performing mortgage in the

amount of $150,000.00, which does not bear interest and shall be payable on

transfer of the property for any reason.

4. Raymond Craytor shall be permitted to continue to reside in his home and shall

be permitted to sell the same, subject to standard protections in the event that

Raymond seeks to sell the home short (Subject to an appraisal and approval of

the Estate or approval by the Court}[sic]

5. Raymond Craytor will have the Estate or its designee as the insured on

homeowner’s insurance and designated payee behind TD Bank.

6. Raymond Craytor will escrow the insurance and tax monies through his mortgage

with TD Bank and ensure that the same are paid.

7. Any uncured default on the TD Bank mortgage on Raymond Craytor’s home will

trigger personal liability on Raymond in the amount of $60,000.00, less the

payments Raymond has paid to the Estate or its designee.

2 The trustee reopened the case in December 2020, stating that he had been made aware the debtor was an heir to Ms.

Maiorano’s estate, she having passed away on November 11, 2020. Doc. No. 39. The court granted the motion, but

the trustee filed a second Report of No Distribution in July 2021.

8. Any uncured default on any tax or municipal lien shall trigger the personal

liability on Raymond Craytor in the amount of $60,000.00 less any payments

received.

9. Raymond Craytor shall place facts on the record to allow for a non-dischargeable

judgment in the amount of $60,000.00 (capped judgment amount).

10. Raymond Craytor on behalf of himself and his heirs shall disclaim any and all

interest in Hattie’s Estate.

11. The Estate will transfer any claims it has against Brenda Craytor to Raymond

Craytor.

12. The parties shall execute any and all documents necessary to effectuate the terms

of this settlement.

Very Truly Yours,

Bryan T. Eggert, Esq.

Doc. No. 45-7 (the “May 2021 Settlement”).

A few hours later that same day, Mr. Burke replied:

Mr. Eggert:

I have conferred with Mr. Craytor and he is agreeable to the terms of the settlement

as outlined in your email below.

As indicated, please inform the Court that this matter is resolved and copy us on

the correspondence. In the event there are any unforeseen issues that need to be

brought to our attention over the weekend, please reach out to me via email at

spburke@markcherrylaw.com and I will get back to you.

Thank you, Steve Burke

Id., ex. F.

Also on the same day, via letter to the state court, Mr. Eggert reported the matter settled so

that the court could remove it from the trial calendar. Doc. No. 45-15, ex. N. He also asked that

“the Court schedule the matter for a control date later in June to permit the parties time to draft

and execute the necessary paperwork to finalize the agreed[-]upon settlement.” Id. Mr. Cherry was

copied on the letter.

On June 22, 2021, Mr. Cherry docketed the following letter in the adversary proceeding.

This office represents Raymond Craytor with respect to the Adversary Proceeding

filed under Adversary No.: 20-01428, ABA. This matter was settled between the

parties several weeks ago. In anticipation of the control date hearing scheduled this

afternoon, 6/22/2021, at 2:00 p.m., I have conferred with Michael Hann [sic] of the

Law Firm of Simeone & Raynor, Counsel for Hattie Maiorano by her Attorney in

Fact, Grayce Watkins.

Mr. Hann [sic] asked me to send a letter informing the Court that he is in the process

of drafting and filing a Stipulation of Dismissal With Prejudice as to Raymond

Craytor under terms agreed upon between all parties. He represented that he intends

to have the Stipulation of Dismissal filed prior to today’s hearing, making it

unnecessary for the parties to appear unless otherwise directed. However, Mr. Hann

[sic] asked me to advise the Court that his firm is severely understaffed today, and

he may have difficulty having the Stipulation of Dismissal filed on time.

Accordingly, as a courtesy to Mr. Hann [sic], this office has no objection to the

control date in this matter being extended and the hearing scheduled for today being

continued if Your Honor deems it appropriate under the circumstances. I will follow

up with your Law Clerk to inquire as to whether you wish the parties to appear for

the hearing today.

Adv. Proc. No. 20-1428-ABA, Doc. No. 19.

This court entered a minute on the docket allowing one week for the stipulation to be filed.

6/22/2021 minute entry. On June 29, 2021, when no stipulation had been filed, the court entered

an Order to Show Cause for the plaintiff to show cause why the adversary proceeding should not

be dismissed for lack of prosecution. Id., Doc. No. 20. The order ended “This adversary

proceeding will be dismissed with prejudice if stipulation is not filed prior to hearing.” Id.

(bold in original). The order was served on attorney Michael Hahn at his email address at the

Simeone firm. Id.

Nobody appearing at the hearing, the court dismissed the adversary with prejudice. Id.,

Doc. No. 21.

Thereafter, on July 19, 2021, Mr. Hahn asked via email whether Mr. Burke could call him

to discuss the Maiorano matter “so we can get this resolved. I would hope to get everything

executed this week and payments to begin on August 1.” Doc. No. 45-15, ex. N, p. 22. Mr. Burke

replied, “This shouldn’t be a problem” and asked to speak the following morning. Id. Mr. Burke

made no reference to the claim needing to be deemed nondischargeable by the bankruptcy court,

thus that pushing the settlement would violate the discharge injunction.

The next communication appears not to have occurred until some six months later. On

January 25, 2022, Mr. Hahn email Mr. Cherry that “This one kind of feel [sic] through the cracks

have [sic] you reviewed the settlement and other documents [sic] I sent you in december [sic].”

Id., p. 24. Mr. Cherry referred the message to Mr. Burke who responded the same day “Can you

email the Agreement and other docs separately and I’ll get it taken care of this week?” Id. Again,

Mr. Cherry did not raise the discharge or that any settlement at this point would only be voluntary

on the debtor’s part.

On February 4, 2022, Mr. Hahn asked Mr. Burke and Mr. Cherry for an update. Id., p. 26.

“I need to talk to my client today.” Id. Mr. Burke replied the same day “Michael: we have Raymond

Craytor coming in Tuesday at 3:00 to review and sign. That’s the first time that is mutually

available.” Id. Again, Mr. Burke did not indicate that the claim had been discharged.

On February 10, 2022, Mr. Burke wrote to Mr. Hahn “Ray Craytor had to move his

appointment to today at 1:00 p.m. from Tuesday. I hope to have the Agreement to you this

afternoon. I’ll let you know if we run into any issues.” Id., p. 29. No mention was made of the

claim having been discharged.

According to plaintiff’s counsel, Dominic Simeone, in March 2022, debtor’s counsel

attempted to make changes to the proposed agreement that materially altered the terms of the

agreement. Doc. No. 45-15, ex. N, p. 9, ¶ 12. (In the debtor’s brief, Mr. Cherry stated that the

debtor objected to the $150,000 mortgage on his real property. Doc. No. 50, p. 1. Presumably, Mr.

Cherry was not taking the position at that time that continuing settlement negotiations violated the

discharge injunction.) Mr. Simeone told debtor’s counsel the changes were not acceptable and that

he must execute the agreement as drafted. Doc. No. 45-15, ex. N, p. 9, ¶ 12. He further alleged

that since July 2022 he had been communicating with Mr. Cherry to resolve the matter but alleged

that he believed the debtor had no intention of honoring the agreement and executing the

settlement. Id., ¶ 14. Therefore, in October 2022 he filed in the Superior Court of New Jersey,

Camden County, a Notice of Motion to Enforce Settlement Agreement asking that the court

compel the debtor to execute the settlement agreement. Id., ¶ 16.

Attorney Simeone argues in this court that “The court should take particular judicial notice

that the claims against Debtor in the state court matter included fiduciary fraud, and defalcation,

both of which are non-dischargeable debt under the Bankruptcy Code; therefore, Respondents

were not doing anything in violation of Debtor’s discharge in pursuing a debt not dischargeable in

bankruptcy.” Doc. No. 47, p. 3, ¶ 12. He further “respectfully request[s] this Court consider

allowing Respondents to file an Affidavit of Services with the Court as a request to be re-imbursed

for time and costs expended to respond to this baseless motion.” Doc. No. 48, p. 1, ¶ 3.

Debtor’s counsel argued that because the bankruptcy court never approved the settlement,

the debt represented by the settlement was discharged. He cited DNJ LBR 7058-1(d) as giving

parties seven days to rescind their approval of a settlement.3

3 This may not be the intended reading of the rule, which provides interested parties the opportunity to object to a

settlement “not later than 7 days after submission of the judgment.” DNJ LBR 7058-1(d). Certainly, a party to the

settlement would not be objecting. Whether the party could rescind their consent to a settlement is a different issue

and not addressed by this local rule.

V. DISCUSSION

A bankruptcy case may be reopened to administer assets, afford relief to the debtor, or for

other cause. 11 U.S.C. § 350(b). Prosecution of a motion for violation of the discharge injunction

is cause to reopen a bankruptcy case. In re Geo Specialty Chemicals Ltd., 577 B.R. 142, 179

(Bankr. D.N.J. 2017). Because I determine that Estate of Maiorano violated the discharge

injunction, the case should be reopened.

A. The parties settled

Though as mentioned above, it does not matter whether the parties settled because this

court did not determine nondischargeability, it does appear that the parties settled consistent with

the Stay Order pursuant to which the court instructed the parties to liquidate the claim in state

court. In New Jersey, a settlement can be found even though the parties have not signed a document

memorializing the terms.

“An agreement to settle a lawsuit, voluntarily entered into, is binding upon the

parties, whether or not made in the presence of the court, and even in the absence

of a writing.” Zong v. Merrill Lynch Pierce Fenner & Smith, Inc., 632 F. App’x

692, 694 (3d Cir. 2015) (quoting Green v. John H. Lewis & Co., 436 F.2d 389, 390

(3d Cir. 1971)). “Even the failure to execute release documents does not void the

original agreement, or render it deficient from the outset. Execution of a release is

a mere formality, not essential to formation of the contract of settlement.” Jennings,

885 A.2d at 489 (citing Hagrish v. Olson, 603 A.2d 108 (N.J. Ct. App. Div. 1992)

(a settlement agreement which required defendants to pay a stated sum of money

and which barred plaintiffs from pursuing an appeal is enforceable even though the

plaintiffs failed to execute general releases)); see also Bistricer v. Bistricer, 555

A.2d 45 (N.J. Ch. Div. 1987) (holding case was settled at settlement conference

where parties agreed on essential terms, notwithstanding plaintiff's numerous

objections to the written agreement).

Ashley v. Metelow, CV 15-3153 (RMB-AMD), 2020 WL 6537197, at *8 (D.N.J. Nov. 6, 2020).

Thus, debtor’s counsel could bind the debtor to the settlement as the parties’ emails confirm

that they had agreed on the essential terms. Debtor’s counsel’s letter to this court, docketed in the

adversary proceeding, confirmed that. In addition, debtor’s counsel later acted in conformance

with this impression, telling the Estate’s counsel that the debtor would be coming to the counsel’s

office to sign the formal settlement agreement – all without debtor’s counsel ever suggesting that

the claim was never determined nondischargeable as a result of the dismissal of the adversary

proceeding.

B. The settlement was discharged

The Estate sought nondischargeability pursuant to section 523(a)(4). Section 523(c)

provides that “the debtor shall be discharged from a debt of a kind specified in paragraph (2), (4),

or (6) of subsection (a) of this section, unless, on request of the creditor to whom such debt is

owed, and after notice and a hearing, the court determines such debt to be excepted from

discharge. . . .” 11 U.S.C. § 523(c) (emphasis added). Thus, bankruptcy court approval was needed

for the debt represented by the settlement to be nondischargeable. In re Wall-McMahel, 09-05754-

8-JRL, 2010 WL 3744301, at *6 (Bankr. E.D.N.C. Sept. 16, 2010) (“Section 523(c)(1) provides

that all debts described in § 523(a)(2)(A) will be automatically discharged unless the creditor to

whom the debt is owed obtains a determination by the bankruptcy court that the particular debt is

non-dischargeable.”); In re Moran, 413 B.R. 168, 179 (Bankr. D. Del. 2009) (state court cannot

determine nondischargeability under section 523(a)(4) because that jurisdiction is exclusive to the

bankruptcy court); In re Saler, 205 B.R. 737, 742 (Bankr. E.D. Pa. 1997), aff'd sub nom. Saler v.

Saler, 217 B.R. 166 (E.D. Pa. 1998) (explaining that a state court judgment cannot render a

judgment nondischargeable when the jurisdiction to do so decide resides exclusively with the

bankruptcy court).

This holds even if a defendant settles a claim that could be nondischargeable under section

523(a)(2), (4) or (6). In re Saler, 745 (“[A] debtor may validly settle bankruptcy

nondischargeability litigation without following the reaffirmation provisions of section 524(c), and

such a settlement will be enforceable if approved by the bankruptcy court.”) (footnote omitted,

emphasis added); In re Bermingham, 201 B.R. 808, 817 (Bankr. W.D. Mo. 1996) (“As a result of

the bankruptcy discharge, creditors can only enforce these agreements pursuant to a Bankruptcy

Court Judgment finding that the debt is nondischargeable.”) (emphasis added). See Collier on

Bankruptcy:

Section 523(c)(1) gives the bankruptcy court exclusive jurisdiction to determine the

dischargeability of debts excepted from discharge under paragraph (2), (4) or (6) of

section 523(a) and requires a creditor who is owed a debt that may be excepted

from discharge under paragraph (a)(2), (4) or (6) to initiate proceedings in the

bankruptcy court for an exception to discharge. If the creditor does not act, the debt

is discharged.

4 Collier on Bankruptcy, ¶ 523.29[1] (16th 2022) (emphasis added). Indeed, the settlement itself

recognized that a further step was required to prevent discharge of the debtor’s personal liability.

Even if the parties could agree to nondischargeability under section 523(a)(4) without a

bankruptcy court order, the settlement did not so provide. Rather, it required the debtor to put facts

on the record for the bankruptcy court to determine whether the debt was nondischargeable. That

the debtor agreed to do this is not tantamount to the debtor admitting he defalcated: that was a

decision the settlement reserved for the bankruptcy court. See In re Grayson, 199 B.R. 397, 401

(Bankr. W.D. Mo. 1996) (refusing to approve agreed-judgment of nondischargeability “without

some evidence that there is a reasonable basis for the entry of same, that the debtor both

understands and agrees to the terms, and that the debtor is aware of his or her right to a trial on the

merits.”). And the court never decided it because the Estate allowed the adversary proceeding to

be dismissed with prejudice.

The Estate’s counsel has not alleged that his firm did not receive notice of this court’s

Order to Show Cause regarding the closing of the adversary proceeding with prejudice. All it

needed to do was to appear and ask for more time to get the settlement agreement signed. Instead,

it allowed the adversary to be dismissed and then forgot all about the settlement agreement until

January 2022 – some six months later. Because the Estate did not return to the bankruptcy court

for a finding of nondischargeability, the May 2021 Settlement was discharged. See In re Mascoll,

246 B.R. 697 (Bankr. D.D.C. 2000):

In any event, even if Mascoll or his attorneys had notified the court of the

Repayment Agreement, it would not have prevented the discharge of Mascoll’s

debt to ARC. Again, ARC had only two methods to ensure that its debt would not

be discharged, executing a valid reaffirmation agreement or filing a timely § 523(c)

complaint.

Id., 701. What is more, while the Estate initially protected itself through the filing of the complaint,

that is of no moment, as counsel allowed the complaint to be dismissed with prejudice preventing

the court from finding the claim was nondischargeable.

That the Estate may have felt misled by Mr. Craytor and/or his attorney into believing that

its claim was enforceable unfortunately is no defense. Equitable estoppel “cannot be created by

representations or opinions concerning matters of law.” In re Close, 93-17145DWS, 2003 WL

22697825, at *7 (Bankr. E.D. Pa. Oct. 29, 2003) (citing Gabovitz v. State Auto. Ins. Ass'n, 523

A.2d 403, 406 (Pa. Super. 1987)).

Certainly, as alluded to above, a debtor may voluntarily repay a debt. 11 U.S.C. § 524(f).

However, discharge operates as an injunction against the continuation of an action “whether or not

discharge of such debt is waived.” 11 U.S.C. § 524(a)(2). Thus, while Mr. Craytor could have

complied with the settlement, the plaintiff could not enforce the settlement against him. In re Close,

93-17145DWS, 2003 WL 22697825, at *5–6 (Bankr. E.D. Pa. Oct. 29, 2003). The bankruptcy

court has no discretion under the Bankruptcy Code to find otherwise. In re Munoz, 287 B.R. 546,

552–53 (B.A.P. 9th Cir. 2002).

To the extent that agreeing to the settlement terms could be deemed a reaffirmation of the

debt, the parties did not comply with section 524’s reaffirmation requirements, at minimum that it

be entered into prior to the granting of discharge. In re Bennett, 298 F.3d 1059, 1066–67 (9th Cir.

2002); 11 U.S.C. § 524(c).

Accordingly and unfortunately, this court’s hands are tied by the Bankruptcy Code to not

conclude other than that the settlement was discharged.

C. No reconsideration of dismissal with prejudice

To correct its error, the Estate might have sought to vacate the order dismissing the

adversary proceeding. A party may seek relief from an order based on “mistake, inadvertence,

surprise, or excusable neglect.” Fed. R. Civ. P. 60(b)(1), incorp. in title 11 by Fed. R. Bankr. P.

9024. But even if the Estate’s counsel’s ignorance of the law could be considered excusable—a

stretch considering the May 2021 Settlement Agreement expressly recognized the need to return

to this court—a motion made under Rule 60(b)(1) or (3) must be made “no more than a year after

the entry of the judgment or order or the date of the proceeding.” Fed. R. Civ. P. 60(c)(1). The

order dismissing the adversary proceeding was entered July 13, 2021, more than a year ago.

A party may also seek relief from an order based on “fraud . . . , misrepresentation, or

misconduct by an opposing party.” Fed. R. Civ. P. 60(b)(3). But the order dismissing the case was

not obtained by fraud or misconduct. Debtor’s counsel related that the parties had settled and that

the Estate’s counsel would be filing the settlement agreement after it had been signed. That was

true. The dismissal order was entered because the Estate’s counsel did not advise the court that he

needed more time. That was on him.

The time limitation for moving under Rule 12(b) cannot be extended by the court. Fed. R.

Bankr. P. 9006(b)(2) (prohibiting enlargement under Rule 9024 except as provided in the rule).

Neither is equitable tolling available.

The principles of equitable tolling do not extend to garden variety claims of

excusable neglect, but require deceit or some other extraordinary grounds for relief.

Id. Accord DeMatthews v. The Hartford Ins. Co., 402 Fed. Appx. 686, 689, n. 4 (3d

Cir. 2010) (not for publication). Extraordinary circumstances rarely exist when a

party seeks relief from a judgment that resulted from the party’s deliberate choices.

DeMatthews, 402 Fed. Appx. at 689.

In re G & M Enterprises, Inc., 485 B.R. 112, 127 (Bankr. E.D. Pa. 2013). The strict limitations

period “is designed to further the fresh start goals of bankruptcy relief by requiring creditors to

promptly join their objections to discharge in order that the debtor and other participants in the

proceedings may enjoy finality and certainty of relief.” In re Costa, BAP MB 12-032, 2013 WL

63916, at *4 (B.A.P. 1st Cir. Jan. 3, 2013) (internal quotation omitted).

The Estate has not pled any basis for the court to presume that its failure to respond to the

Order to Show Cause was anything but deliberate. That the Estate sat on its rights for a year and a

half rebuts any argument that equity should intervene. Thus, the mistake of the Estate’s counsel in

allowing the adversary proceeding to be dismissed without a non-dischargeability finding cannot

now be rectified.

To instead seek reconsideration under Rule 60(b)(6), the “catchall” provision that must be

brought “within a reasonable time,” Fed. R. Civ. P. 60(c), the plaintiff “must show ‘extraordinary

circumstances’ suggesting that the party is faultless in the delay.” Pioneer Inv. Servs. Co. v.

Brunswick Assocs., 507 U.S. 380, 393 (1993). But the Estate here is not faultless in the delay. “The

grounds for relief . . . , involving straightforward claims of attorney error and strategic

miscalculation, do not satisfy this rigorous standard.” McCurry ex rel. Turner v. Adventist Health

Sys./Sunbelt, Inc., 298 F.3d 586, 596 (6th Cir. 2002). In any case, “[t]hese provisions are mutually

exclusive, and thus a party who failed to take timely action due to ‘excusable neglect’ may not

seek relief more than a year after the judgment by resorting to subsection (6).” Id.

A last ditch possibility is Rule 60(d), which permits a court to: “(1) entertain an independent

action to relieves a party from a judgment, order, or proceeding; . . . or (3) set aside a judgment

for fraud on the court.” Fed. R. Civ. P. 60(d)(1), (3). “However, circumstances warranting relief

under this subsection are even more limited than under Rule 60(b)(6).” In re Rockaway Bedding,

Inc., 454 B.R. 592, 599 (Bankr. D.N.J. 2011).

Regarding Rule 60(d)(3), setting aside an order for fraud on the court, one judge explained

that the rule

allows a separate, independent action for fraud on the party and fraud on the court.

. . . For a claim to qualify as an independent action under Rule 60(d), the party must

show that the extraordinary relief is necessary to avoid a sufficiently gross, grave

miscarriage of justice. Id. The claim of an independent action remains subject to

laches and fraud must be pled. Id. An independent action can only be permitted in

the case of the most egregious conduct and must be supported by clear,

unequivocal, and convincing evidence. Id. The requirements of a claim of fraud on

the court are (1) intentional fraud, (2) by an officer of the court, (3) directed to the

court itself, and (4) which deceives the court. Id.

In re G & M Enterprises, Inc., 485 B.R. 112, 128–29 (Bankr. E.D. Pa. 2013) (footnotes and internal

citation omitted).

In addition,

[p]arties seeking relief from a judgment through an independent action generally

must satisfy the following three elements: “(1) show that they have no other

available or adequate remedy; (2) demonstrate that movants’ own fault, neglect, or

carelessness did not create the situation for which they seek equitable relief; and

(3) establish a recognized ground—such as fraud, accident, or mistake—for the

equitable relief.” Campaniello Imports, Ltd. v. Saporiti Italia, S.p.A., 117 F.3d 655,

662, 665 (2nd Cir. 1997) . . . .

In re Mucci, 488 B.R. 186, 195–96 (Bankr. D.N.M. 2013).

Here, the Estate has not alleged that the debtor’s counsel’s letter to this court stating that

the parties had settled was untrue. Therefore, there is no intentional fraud by an officer of the court

that deceived this court. Moreover, it appears that it was the Estate’s own fault, neglect, or

carelessness that created the situation.

Finally, the Estate may not seek to revoke the debtor’s discharge under 11 U.S.C. § 727(d),

as more than a year has elapsed since the debtor obtained his discharge. See § 727(e)(1). Moreover,

§ 727(d) is not applicable here because there was no fraud—the debtor did not ask for the adversary

proceeding to be closed due to the settlement—the creditor allowed that to happen because it did

not respond to the court’s two Orders to Show Cause.

D. Attempting to enforce the settlement violated the discharge injunction

Not being able to reconsider the order dismissing the adversary, the issue of the violation

of the discharge injunction remains. Section 524 provides:

(a) A discharge in a case under this title—

(1) voids any judgment at any time obtained, to the extent that such judgment is a

determination of the personal liability of the debtor with respect to any debt

discharged under section 727, 944, 1141, 1192, 1228, or 1328 of this title, whether

or not discharge of such debt is waived;

11 U.S.C. § 524(a)(1) (West).

Though this court finds that the parties settled the state court matter, all of the debtor’s

obligations under that settlement were personal obligations: pay $5,000, pay $55,000 over 10

years, place two mortgages on the residence, place facts on the record regarding dischargeability.

None of these, survived discharge. Accordingly, the Estate’s attempt to enforce the settlement in

the state court, and that court’s entry of an order, technically violated the discharge injunction.

E. Damages for violation of the discharge injunction

A bankruptcy court may hold a creditor in civil contempt for violating a discharge order if

there is no fair ground of doubt as to whether the order barred the creditor’s conduct, that is, if

there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful.

Taggart v. Lorenzen, 139 S. Ct. 1795 (2019). Accordingly, there is no civil contempt if “there is

[a] fair ground of doubt as to the wrongfulness of the defendant’s conduct.” Taggart, 139 S. Ct. at

1801. A subjective belief that one was complying with an order ordinarily will not insulate them

from civil contempt if that belief was objectively unreasonable. Id., at 1802. Civil contempt

sanctions may be warranted when a party acts in bad faith. Id. On the flip side, a party’s good faith

may help to determine an appropriate sanction. Id.

The contempt power derives from the court injunctive power and section 105.

Longshoremen's Ass'n, Local 1291 v. Phila. Marine Trade Ass’n, 389 U.S. 64, 76 (1967). Thus,

“violation of the discharge injunction does not provide a private right of action for damages. . . .

Instead, courts use their inherent civil contempt power under section 105 to provide a remedy for

violations of the discharge injunction. Re Andrade, 13-22850(TBA), 2015 WL 4940047, at *2

(Bankr. D.N.J. Aug. 18, 2015) (internal quotation omitted). “Here, the statutes specifying that a

discharge order ‘operates as an injunction,’ § 524(a)(2), and that a court may issue any ‘order’ or

‘judgment’ that is ‘necessary or appropriate’ to ‘carry out’ other bankruptcy provisions, § 105(a),

bring with them the ‘old soil’ that has long governed how courts enforce injunctions.” Taggart,

1801. “Taggart clarifies that the standard to find civil contempt is objective, but subjective good

or bad faith may affect the size of the range of losses attributable to noncompliance with the

injunction. Bad faith may widen the range of what is compensatory. . . . Good faith may narrow

the range.” In re LeGrand, 612 B.R. 604, 613 (Bankr. E.D. Cal. 2020). Award of attorneys’ fees

is one method to remedy the discharge injunction violation. In re Eastman, 05-57404-C, 2010 WL

5462469, at *3 (Bankr. W.D. Tex. Dec. 29, 2010); In re Browne, 358 B.R. 139, 142 (Bankr. D.N.J.

2006).

Here, to the extent that the Estate’s counsel did not understand bankruptcy law, that is

insufficient to avoid sanction.

“As a general rule, ignorance of the law, or mistake as to the law, will not operate

as an excuse from a charge of contempt, but it may be a mitigating circumstance,

as in a case of honest mistake as to the controlling law.” 17 C.J.S. Contempt § 64.

This is because the standard for contempt is an objective one. Therefore, a good

faith mistake generally does not preclude contempt. Taggart, 139 S. Ct. at 1802;

High Tech Nat'l, LLC v. Charles Stead, Case No. MC 19-191, 2020 WL 5076796,

at *3 (E.D. Pa. Aug. 27, 2020).

In re Paventy, 2:14-BK-29018, 2022 WL 16545514, at *13 (B.A.P. 9th Cir. Oct. 28, 2022).

That the Estate’s counsel may not practice bankruptcy law also does not excuse it. As one

judge stated:

I recognize that the creditor was represented by in-house counsel who may not have

been fully versed in bankruptcy law and procedure. Nevertheless, it would be a

dangerous precedent for me to apply a different standard to non-bankruptcy

attorneys than I would apply to the conduct of experienced bankruptcy

practitioners. A bankruptcy lawyer would never be justified in allowing a deadline

to pass simply because he expected the Debtor to reaffirm the debt or believed that

an oral agreement existed with the Debtor. Instead, the diligent creditor’s attorney

would and must file a motion seeking to extend the deadline pending the

consummation of the negotiated agreement.

In re Yohler, 127 B.R. 492, 494 (Bankr. S.D. Fla. 1991). See In re Valentine, 611 B.R. 622, 643

(Bankr. E.D. Mo. 2020) (stating in automatic stay violation case “The old adage ‘ignorance of the

law is not a defense’ wins the day.”).

The order granting relief from stay expressly limited the parties to liquidating the claim,

prohibiting enforcing the judgment against property of the debtor. The Estate and its counsel were

later served with the discharge order that warned that one may not attempt to collect a discharged

debt from a debtor personally and that violation of this could result in being required to pay

damages and attorney’s fees. In re Moss, 618 B.R. 123, 130 (Bankr. D.N.J. 2020) (stating that

language of the discharge order is clear). It also stated that debts that are not discharged are “debts

that the bankruptcy court has decided or will decide are not discharged in this bankruptcy case.”

The bankruptcy court never decided that this debt was not discharged.

Accordingly, there was no objectively reasonable basis for concluding that the creditor’s

conduct might be lawful.

As to the sanction for this violation, the court is mindful that while civil contempt may

include “relatively mild non-compensatory fines tailored to rule enforcement,” In re LeGrand, 612

B.R. 604, 613 (Bankr. E.D. Cal. 2020) (internal quotation omitted), “the degree of sanctions other

than compensation is limited to the least possible exercise of power adequate to the end of

preventing repetition.” Id. (citing Taggart, 139 S. Ct. at 1802). Given this court’s ruling regarding

the discharge, it doubts that the Estate will repeat the violation.

Accordingly, it will set a hearing for determination of the damages, i.e., the reasonable

attorney’s fees and costs to debtor for having counsel appear at the state court hearing and for

prosecuting this matter. In re Trinidad, 21-03022 (ESL), 2022 WL 3363888, at *14 (Bankr. D.P.R.

Aug. 12, 2022); In re Moss, 130 (stating that upon finding contempt, court may issue sanctions

such as costs, compensatory damages, and attorney’s fees); In re Eastman, 05-57404-C, 2010 WL

5462469, at *3 (Bankr. W.D. Tex. Dec. 29, 2010) (recognizing attorney’s fees incurred to

prosecute discharge injunction as actual damages).

In addition to minding the Supreme Court’s directive that sanctions be limited to the

minimum necessary to prevent repetition, in determining whether the debtor’s attorney’s fees are

reasonable the court will also consider whether the debtor’s attorney had the opportunity to, and

did, mitigate, the damages. In re Schmelcher, 11-61607, 2015 WL 639076, at *5 n. 5 (Bankr.

N.D.N.Y. Feb. 13, 2015), order aff'd, appeal dismissed sub nom. Schmelcher v. Cnty. of Oneida,

6:15-CV-00245 (MAD), 2016 WL 297713 (N.D.N.Y. Jan. 22, 2016) (warning that attorneys’ fees

would not be awarded “carte blanche” and that “bankruptcy courts frequently refuse to award the

total attorneys' fees requested for a violation of the discharge injunction when there is evidence

that a debtor and/or his counsel could have mitigated damages by attempting to resolve the matter

prior to litigation but did not do so.”); In re Parker, 576 B.R. 1, 14 (Bankr. N.D. Cal. 2017) (stating

that court would consider mitigation efforts if and when it needed to determine damages); In re

Robb, 399 B.R. 171, 176 n. 3 (Bankr. N.D.W. Va. 2008) (noting that “there is no ‘blanket rule’

that all debtors must first notify creditors of stay or discharge violations before filing a cause of

action, but ‘for inadvertent violations, such a requirement serves to notify the creditor of its

improper behavior and serves to prevent needless litigation.’” (quoting Price v. Pediatric

Academic Assoc., Inc., 175 B.R. 219 (S.D. Ohio 1994)).

To be sure, this entire matter stinks. Could debtor’s attorney have saved the expense of

appearing in the state court enforcement matter had he earlier objected to the Estate pressing to

have the debtor sign the settlement agreement after the adversary proceeding had been dismissed,

or by informing plaintiff’s attorney that the state court action violated the discharge injunction, or

by immediately filing the motion here upon notice of the state court action? See In re Haltermon,

592 B.R. 311, 322 (Bankr. S.D. Ohio 2018) (suggesting that bankruptcy attorney should have

alerted that violated discharge injunction, but other counsel could have alerted sooner that claim

sought to be enforced arose prepetition); In re Lewis, 570 B.R. 195, 202 (Bankr. E.D.N.C. 2017)

(finding the failure of the creditors to “communicate properly” with the debtor “precluded any

mitigation of time and expenses spent on rectifying the situation.”). Was debtor’s counsel

complicit in expending time and expenses advancing an otherwise unenforceable settlement?

We’ll see.

VI. CONCLUSION

Based on the foregoing, the court will grant the motion to reopen the bankruptcy case and

the motion seeking damages for violation of the discharge injunction. The debtor is instructed to

file a certification detailing its reasonable attorney fees.

An appropriate judgment has been entered consistent with this decision.

The court reserves the right to revise its findings of fact and conclusions of law.

/s/ Andrew B. Altenburg, Jr.

United States Bankruptcy Judge

Dated: February 22, 2023