In re Cashion
| Decision Date | 21 April 2022 |
| Docket Number | 21 B 8085 |
| Parties | In re: MICHAEL J. CASHION, Debtor |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Before the court for ruling is creditor Peter Shagory's Rule 60(b) motion seeking relief from the court's decision refusing to enter an agreed order. The agreed order would have declared that chapter 7 debtor Michael Cashion's debt to Shagory was nondischargeable under section 523(a)(2)(A) of the Bankruptcy Code. For the reasons below Shagory's motion for relief from that decision will be denied.
The facts come from the motion and exhibits as well as from the court's docket. No facts are in dispute.
In September 2019, Cashion borrowed $10, 000 from Shagory, giving Shagory a promissory note payable in thirty days. Shortly before the thirty days had passed, Cashion wrote a check to Shagory for $10, 000. The check bounced. With the loan unpaid, Shagory sued Cashion in Illinois state court and obtained a default judgment for the amount of the note. Shagory later learned that the account on which Cashion had written the check had been closed even before Cashion signed the note. So Shagory sued Cashion again, this time for fraud, and again obtained a default judgment. Shagory began trying to collect his judgment.
Faced with Shagory's collection efforts, Cashion filed a chapter 7 bankruptcy case on July 1, 2021. The first date set for the creditors meeting under section 341 was July 22, 2021. That date made September 20, 2021, the deadline for creditors to object to Cashion's discharge and the dischargeability of his debts. See Fed. R. Bankr. P. 4004(a), 4007(c).
In August, Cashion's counsel approached Shagory's counsel about settling Shagory's claim. She said that Cashion would settle the claim to avoid an adversary proceeding, and later that month she proposed the "immediate entry of an order of nondischargeability." Shagory agreed.
On September 13, Cashion's counsel moved to have the court enter an agreed order declaring Cashion's debt to Shagory nondischargeable under section 523(a)(2)(A) of the Code, which excepts from discharge debts for money obtained by fraud. 11 U.S.C. § 523(a)(2)(A). The motion was noticed for presentment on September 20, the deadline under Rules 4004 and 4007.
On the presentment date, the court denied the motion, explaining:
I can't do this . . . . There are two ways to have a debt survive a discharge. One is to file an adversary proceeding and then have a judgment entered, and the other is to do a reaffirmation agreement. This is trying to have the reaffirmation agreement without complying with the rules or the [C]ode provisions governing . . . reaffirmation agreements . . . and without an adversary proceeding[.] It is a middle ground that just doesn't exist.
Shagory's counsel responded that the parties "were trying to avoid the whole adversary proceeding" and the accompanying expense. To which the court replied: "That is a laudable goal, but . . . the way to do it is with a reaffirmation agreement."
That same day, Cashion agreed to reaffirm his debt to Shagory, and the parties signed a reaffirmation agreement. Cashion's counsel filed the signed agreement several days later.
Because no one had filed a complaint objecting to Cashion's discharge or the dischargeability of any of his debts, the September 20 deadline came and went. On September 21, the day after the reaffirmation agreement was filed, the clerk entered Cashion's discharge. The deadline for Shagory or Cashion to appeal the court's September 20 order was October 5. Fed.R.Bankr.P. 8002(a)(1). The October 5 deadline came and went. Neither party appealed.
On November 5, 2021, Cashion exercised his rights under section 524(c)(4) of the Code, 11 U.S.C. § 524(c)(4), and gave Shagory notice that he was rescinding the reaffirmation agreement. Because the deadlines under Rules 4004(a) and 4007(c) had passed and Cashion's discharge had been entered, his debt to Shagory was discharged.
Shagory now moves under Rule 60(b) for relief from the September 20 order, arguing that the court erred in denying Cashion's motion and declining to enter the parties' agreed order of nondischargeability. Cashion opposes the motion.[1]
Shagory's motion will be denied. Legal error, which is all Shagory asserts, is not a basis for relief under Rule 60(b). And even if it were, the court made no error here.
Rule 60(b) of the Federal Rules of Civil Procedure permits the court to "relieve a party . . . from a final judgment, order, or proceeding" on six grounds. Fed.R.Civ.P. 60(b) (made applicable by Fed.R.Bankr.P. 9024). The first, which Shagory invokes, is "mistake, inadvertence, surprise, or excusable neglect." Fed.R.Civ.P. 60(b)(1). Shagory argues that in denying the parties' motion on September 20 the court made a "mistake." The sixth ground, which Shagory also invokes, is a catch-all, authorizing relief for "any other reason that justifies relief." Fed.R.Civ.P. 60(b)(6).
Relief under any part of Rule 60(b) is "an extraordinary remedy . . . granted only in exceptional circumstances." Dolin v. GlaxoSmithKline LLC, 951 F.3d 882, 886 (7th Cir. 2020) (internal quotation omitted); see also Kathrein v. City of Evanston, 752 F.3d 680, 690 (7th Cir. 2014). And relief under the catch-all in Rule 60(b)(6) is particularly rare, since that provision represents "an even more highly circumscribed exception in [a] rule already limited to exceptional circumstances." Neuberg v. Michael Reese Hosp. Found. 123 F.3d 951, 955 (7th Cir. 1997). Rule 60(b)(6) is thus available "only in the most extraordinary of circumstances." Provident Sav. Bank v. Popovich, 71 F.3d 696, 700 (7th Cir. 1995) (internal quotation omitted); see also In re Rees, 817 Fed.Appx. 258, 261 (7th Cir. 2020).
The problem with Shagory's motion is not so much that it fails to present exceptional circumstances (although it does not) but that its grounds for relief are not cognizable under Rule 60(b). Rule 60(b) authorizes a "collateral attack on a final judgment." Bell v. Eastman Kodak Co., 214 F.3d 798, 800 (7th Cir. 2000); see also Kiswani v. Phoenix Sec. Agency, Inc., 584 F.3d 741, 743 (7th Cir. 2009). That means a modification of the judgment "in light of factual information that comes to light only after the judgment, and could not have been learned earlier." Gleash v. Yuswak, 308 F.3d 758, 761 (7th Cir. 2002). It does not mean a direct attack - "[a] contention that the judge erred with respect to the materials in the record." Id. The grounds for a Rule 60(b) motion, then, must be "grounds . . . that could not have been used to obtain reversal by means of a direct appeal." Adams v. United States, 911 F.3d 397, 403 (7th Cir. 2018).
Because legal error can be addressed on appeal, it does not supply a basis for relief under Rule 60(b). Jones v. Ramos, 12 F.4th 745, 749 (7th Cir. 2021) (); Barnett v. Raoul, 844 Fed.Appx. 916, 918 (7th Cir. 2021) (); Bell v. McAdory, 820 F.3d 880, 883 (7th Cir. 2016) (); Banks v. Chicago Bd. of Educ., 750 F.3d 663, 667 (7th Cir. 2014); Mendez v. Republic Bank, 725 F.3d 651, 659 (7th Cir. 2013); Equilease Fin. Servs., Inc. v. Fincastle Leasing, Inc., 305 Fed.Appx. 291, 294 (7th Cir. 2008) ().
The reason is jurisdictional. The rules of procedure, civil and bankruptcy, establish "strict time limits for filing federal appeals." Mendez, 725 F.3d at 659. If parties could use Rule 60(b) to raise a legal error they could have raised on appeal, the time limits "would lose much of [their] force." Id.; see also Banks, 750 F.3d at 667 (); Gleash, 308 F.3d at 761 ().[2]
Shagory's Rule 60(b) motion is not a collateral attack on the September 20 decision but a direct one. He challenges the court's refusal to enter an agreed order declaring Cashion's debt nondischargeable, arguing that the decision was legally incorrect. But Shagory could have made that argument on appeal.[3] Having failed to appeal, he cannot use Rule 60(b) to make the argument now.[4]
Because Shagory asserts only legal error not cognizable on a Rule 60(b) motion, his motion will be denied.
There was no error in any event. The court correctly refused to enter a freestanding order declaring Cashion's debt nondischargeable under section 523(a)(2)(A).
Unless a party in interest objects, a debtor in a chapter 7 case receives a discharge. 11 U.S.C. § 727. The discharge generally eliminates the debtor's personal liability for all debts the debtor had on the petition date, 11 U.S.C. § 727(b); Johnson v. Home State Bank, 501 U.S. 78, 83 (1991); In re Ranieri, 598 B.R. 450, 453 (Bankr. N.D.Ill. 2019), and permanently enjoins their collection, 11 U.S.C. § 524(a), Tidwell v. Smith (In re Smith), 582 F.3d 767, 771-72 (7th Cir. 2009); Ross v. RJM Acquisitions Funding LLC, 480 F.3d 493, 495 (7th Cir. 2007) ().
Some debts, though, are not discharged. Specific debts can survive the discharge in two ways. First, section 523(a) of the...
To continue reading
Request your trial