MIF Realty L.P. v. Rochester Associates , 92 F.3d 752 ( 1996 )

_____________
Nos. 95-2765 & 95-2864
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MIF Realty L. P., substituted *
as plaintiff for plaintiff RTC; *
a Delaware limited partnership, *
*
Appellant/Cross-Appellee, * Appeals from the United States
* District Court for the
v. * District of Minnesota.
*
Rochester Associates, a New *
York general partnership; David *
Glaser; Jeri Glaser; Steven *
Glaser; Susan Glaser; Edward *
Lapidus; Kathryn Lapidus; Paul *
Lapidus; Lori Lapidus; Maynard *
Koenigsberg; Elaine Koenigsberg;*
Craig Koenigsberg; Andre Hercz; *
and Victoria Hercz, *
*
Appellees/Cross-Appellants.*
_____________
Submitted: February 15, 1996
Filed: August 16, 1996
_____________
Before HANSEN, LAY, and JOHN R. GIBSON, Circuit Judges.
_____________
HANSEN, Circuit Judge.
Following settlement negotiations between the parties and upon
representation that a settlement had been reached, the district
court dismissed this foreclosure action with prejudice. Due to
difficulties in reducing the settlement agreement to writing, MIF
Realty L.P. (MIF) sought to set aside the dismissal. See Fed. R.
Civ. P. 60(b). The district court denied MIF's Rule 60(b) motion.
MIF appeals, and Rochester Associates cross appeals. We reverse
and remand to the district court for further proceedings.
I.
Resolution Trust Corporation (RTC), as conservator for Home
Federal Savings Association, brought this action against Rochester
Associates to obtain judgment for a default on a note, which was
secured by a mortgage on Rochester Associates' eight-story office
building, and to initiate foreclosure proceedings to secure payment
of the judgment. The RTC also sought to enforce a guaranty
agreement against the individually named guarantors to secure any
deficiency after foreclosure. In total, the RTC sought a judgment
in excess of four million dollars from Rochester Associates and the
individually named guarantors.
MIF took an assignment of all of the RTC's interests in
Rochester Associate's loan and was substituted as the plaintiff in
this case. The parties then entered into settlement negotiations.
In August 1994, MIF told its counsel that the parties had reached
an oral settlement agreement that would be binding when reduced to
writing and that they were in the process of preparing settlement
documents. MIF's counsel in turn informed the district court of
the settlement. Based on that representation, the district court
sua sponte dismissed the action with prejudice, providing a 60-day
period after dismissal during which any party could move to reopen
the case, file a stipulated form of final judgment, or seek
enforcement of the settlement terms.
Neither party sought to reopen the case within the 60-day
period following entry of the dismissal order. The parties traded
several drafts of settlement documents but never succeeded in
reducing their assumed oral agreement to writing. In February
1995, approximately four months after the 60-day period had
expired, MIF abandoned its efforts to reduce the agreement to
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writing due to Rochester Associates' ever-lengthening list of
disputed terms and commenced a second foreclosure proceeding in
state court. Rochester Associates removed the case to federal
district court and asserted that the action was barred by res
judicata because the first foreclosure action had been dismissed
with prejudice.
MIF then brought a Federal Rule of Civil Procedure 60(b)
motion in the first action to set aside the order of dismissal. As
grounds for the motion, MIF asserted that the parties' belief that
a settlement had been reached and could be reduced to writing had
proven to be a mistake. The district court found that the Rule
60(b) motion was timely. The court also found, however, that at
the time MIF first represented to the court that the case had
settled, MIF knew that its negotiator did not have the necessary
committee approval to enter into an initial settlement. Therefore,
the district court concluded that the doctrine of judicial estoppel
barred MIF from asserting that it had acted under a mistaken belief
that the case had settled.
MIF filed a Rule 59(e) motion requesting the district court to
reconsider its Rule 60(b) ruling, asserting that the court's fact
findings were clearly erroneous. The parties waived their rights
to an evidentiary hearing to determine the existence or terms of
any settlement. Before the district court ruled on the motion to
reconsider, however, MIF timely appealed the order denying its Rule
60(b) motion. The district court determined that the notice of
appeal deprived it of jurisdiction to rule on the motion to
reconsider, yet the court amended the findings in its original
order as follows:
The Court finds that the parties represented to each
other that they had agreed to the material terms of
settlement at the time MIF informed the Court that the
case had settled, and that the necessary decision-makers
had already agreed to the terms of settlement. Thus
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there should have been no need to reach the issue of
judicial estoppel in the Order denying MIF's Motion to
Set Aside the Order of Dismissal. The Court was not
mistaken in its basis for the original dismissal of this
case: the parties agreed to a settlement. The parties
have simply failed to reduce their settlement to writing.
Notwithstanding the parties' ardent dispute about what
the terms of the negotiated settlement actually were,
this case involves the very elements of settlement
breakdown that lead [sic] the Court to retain
jurisdiction for a limited period following settlement.
In short, the parties' dispute over their settlement
should have been brought to the Court's attention within
60 days of the dismissal Order. The Court could have
extended its jurisdiction period to allow additional time
for the settlement terms to be reduced to writing, or
could have returned the case to the trial calendar. The
parties' failure to seek the reopening of this matter
within 60 days of the dismissal Order under the facts now
apparent caused the jurisdiction of the Court to lapse
after 60 days. The Court finds this case does not
include the type of mistake that warrants setting aside
the dismissal.
. . . .
[T]his Court lacks jurisdiction to reconsider its
conclusion that MIF is judicially estopped from asserting
the case had not settled after formerly representing to
the Court that it had. The Court's understanding of the
facts now before it, however, would render such
reconsideration moot.
(Appellants' Addend. at AD-13 to -14.)
MIF appeals, arguing that the district court abused its
discretion by denying its Rule 60(b) motion. Rochester Associates
and the named defendants cross appeal, arguing that the district
court abused its discretion by finding that MIF's motion was
timely. They also contend that the court has no jurisdiction over
Jeri Glaser and Steven Glaser because they were not named on the
notice of appeal.
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II.
We first take a moment to clarify the posture of the district
court's orders. While the district court concluded that it did not
have jurisdiction to rule on the motion to reconsider, it
nevertheless amended the findings of fact in the original order and
indicated that, if it had jurisdiction to reconsider the denial of
Rule 60(b) relief, its previous ruling based on judicial estoppel
would be moot given the amended findings. Contrary to the district
court's belief, it did have jurisdiction to reconsider the Rule
60(b) ruling.
Rule 4(a)(4) of the Federal Rules of Appellate Procedure, as
amended, provides that when a notice of appeal is filed after a
judgment but before a district court has had an opportunity to rule
on "a pending tolling motion, the notice of appeal lies dormant
until the trial court disposes of the pending motion. Upon such
disposition, the notice becomes effective." United States v. Duke,
50 F.3d 571, 575 (8th Cir.), cert. denied, 116 S. Ct. 224 (1995).
Because MIF's Rule 59(e) motion to reconsider is such a tolling
motion, see id. at 574 (noting that a timely Rule 59(e) motion
tolls the time for filing a notice of appeal), MIF's notice of
appeal did not divest the trial court of jurisdiction to rule on
the motion. MIF's notice of appeal was not effective until the
district court disposed of the motion to reconsider. Given this
posture, we construe the district court's order on the motion to
reconsider as properly amending the findings of fact in the order
denying the Rule 60(b) motion. We also give effect to the district
court's indication that, in light of the amended findings, the
judicial estoppel issue is moot. Therefore, we will not consider
whether the district court properly applied the doctrine of
judicial estoppel. We will consider only whether the district
court properly denied Rule 60(b) relief on its merits.
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Federal Rule of Civil Procedure 60(b) provides that the court
may relieve a party from a final judgment for, among other reasons,
mistake, inadvertence, surprise, or excusable neglect. A Rule
60(b) motion is committed to the sound discretion of the trial
court, and we review the district court's decision to grant or deny
the motion only for an abuse of discretion. Rosebud Sioux Tribe v.
A & P Steel, Inc., 733 F.2d 509, 515 (8th Cir.), cert. denied, 469
U.S. 1072 (1984). "``Abuse of discretion occurs if the district
court rests its conclusion on clearly erroneous factual findings or
if its decision relies on erroneous legal conclusions.'" Hosna v.
Groose, 80 F.3d 298, 303 (8th Cir. 1996) (quoting International
Ass'n of Machinists & Aerospace Workers v. Soo Line R.R., 850 F.2d
368, 374 (8th Cir. 1988) (en banc), cert. denied, 489 U.S. 1010
(1989)), petition for cert. filed (U.S. June 28, 1996) (No. 95-
9498). Although we have said that Rule 60(b) motions are
disfavored, we also recognize that they "serve a useful, proper and
necessary purpose in maintaining the integrity of the trial
process, and a trial court will be reversed where an abuse of
discretion occurs." Rosebud Sioux Tribe, 733 F.2d at 515.
Rule 60(b) is to be given a liberal construction so as to do
substantial justice and "``to prevent the judgment from becoming a
vehicle of injustice.'" Id. (quoting United States v. Walus, 616
F.2d 283, 288 (7th Cir. 1980)). This motion is grounded in equity
and exists "to preserve the delicate balance between the sanctity
of final judgments . . . and the incessant command of a court's
conscience that justice be done in light of all the facts." Id.
(internal quotations omitted) (alterations in original). See also
11 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice and Procedure: Civil 2d § 2857, at 255 (2d ed. 1995)
("Equitable principles may be taken into account by a court in the
exercise of its discretion under Rule 60(b)."). One important
equitable consideration is whether the litigants received a ruling
on the merits of their claim. "There is much more reason for
liberality in reopening a judgment when the merits of the case
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never have been considered than there is when the judgment comes
after a full trial on the merits." 11 Wright, Miller & Kane,
supra, § 2857, at 257-58. In such cases, we must balance the
policy favoring finality in judgments against the competing policy
of granting parties a hearing on the merits of their claims. Id.
at 256-57. We also consider whether any substantial rights of the
nonmoving party have been prejudiced. See Hoover Valley West D M,
823 F.2d 227, 230 (8th Cir. 1987).
MIF contends that the district court abused its discretion by
denying its Rule 60(b) motion, because the prior judgment was based
on a mistaken belief that the parties had agreed upon a settlement.
We agree. Our review of the record leads us to conclude that the
district court relied on a clearly erroneous finding of fact to
determine that Rule 60(b) relief was not warranted and failed to
properly balance the equities of this case.
"Settlement agreements are governed by basic principles of
contract law." Sheng v. Starkey Lab., Inc., 53 F.3d 192, 194 (8th
Cir. 1995). To be enforceable, a settlement agreement must be
based upon "a meeting of the minds on the essential terms of the
agreement." Ryan v. Ryan, 193 N.W.2d 295, 297 (Minn. 1971). "As
a general rule, when the parties dispute the existence or terms of
a settlement agreement, the parties must be allowed an evidentiary
hearing." Sheng, 53 F.3d at 194. In this case, the parties waived
their right to an evidentiary hearing, insisting there was no need
for a hearing because they agreed that no settlement agreement
existed. The district court found to the contrary.
Initially in its amended findings, the district court found
that "the parties represented to each other that they had agreed to
the material terms of settlement at the time MIF informed the Court
that the case had settled, and that the necessary decision-makers
had already agreed to the terms of settlement." (Appellant's
Addend. at AD-13.) (emphasis added). This finding is not clearly
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erroneous. The record demonstrates that MIF believed it had
successfully negotiated an oral settlement, which the committee had
approved and which would be binding only when fully reduced to
writing. MIF then notified the district court of the status of the
case.
Within the same paragraph, the district court additionally
found, "the parties agreed to a settlement," (id.), and so
concluded that its basis for the original dismissal was not
mistaken. This finding, that the parties agreed to a settlement,
is clearly erroneous on the record before us and in light of both
parties' arguments to the contrary. The record demonstrates that
during the months following the dismissal, MIF proffered several
written settlement proposals in good faith attempts to execute the
settlement as it believed the parties had orally agreed. MIF's
failure to accomplish the goal demonstrates that the parties'
initial belief that they had agreed to the material terms of a
settlement was mistaken. It is undisputed that the case has not
settled. Neither party on appeal argues that a settlement
agreement, oral or written, exists. To the contrary, MIF argues
that while it originally thought the parties had reached an oral
settlement agreement, that belief has proven to have been mistaken.
Rochester Associates argues that MIF knew at the time it informed
the court of settlement that no settlement in fact existed. On
this record, we conclude that the district court committed clear
error by finding that the parties agreed to a settlement.
Turning to the equities of this case, we first consider the
policy favoring finality. This case was dismissed with prejudice
and was not reopened within the 60 days after dismissal as provided
in the order. Thus, the consideration of finality is not to be
looked upon lightly. It is also important to note, however, as
explained below, that MIF's Rule 60(b) motion was timely and that
the expiration of the 60-day grant of extended jurisdiction did not
deprive MIF of the right to bring thereafter a timely Rule 60(b)
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motion. Second, we consider the policy favoring a hearing on the
merits. MIF claimed that Rochester Associates owed over four
million dollars on a note secured by the property at issue, and the
merits of this claim have never been adjudicated. If the judgment
is not set aside, MIF is deprived of a hearing on the merits of its
claim while Rochester Associates is allowed to keep the real
property and the substantial rents it generates without complying
with any compromise settlement, without the threat of foreclosure,
and without having to pay its obligation on the note. On the other
hand, Rochester Associates has not articulated any substantial
rights that would be prejudiced if the judgment is set aside.
Thus, balancing the equities of this case, we find that allowing
Rochester Associates to obtain such a windfall without according
MIF a hearing on the merits of its claim outweighs the policy
favoring finality of judgments. In other words, our sense of
justice is offended more by permitting this judgment to stand than
by setting aside the judgment in favor of a determination of the
merits of MIF's claim.
Rochester Associates contends that a mistaken belief that a
settlement had been reached is not the type of mistake for which
Rule 60(b) relief is warranted, but we disagree. Ordinarily,
attorney carelessness or neglect is not cognizable under Rule
60(b). See Robinson v. Armontrout, 8 F.3d 6, 7 (8th Cir. 1993)
(holding attorney's failure to object does not warrant Rule 60(b)
relief). MIF is not seeking either to enforce or to escape any
settlement agreement that it erroneously entered into, however.
The mistake in this case did not involve attorney error but a
misunderstanding among the parties resulting in lack of mutual
assent to the settlement agreement. This is precisely the type of
mistake that Rule 60(b) is intended to redress. See Sheng, 53 F.3d
at 194 & n.6 (remanding for a hearing to determine whether there
was mutual assent to a settlement, because if not, then no contract
ever existed and "the dismissal was based on a mistake").
Accordingly, we reverse the district court's denial of Rule 60(b)
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relief and remand this case for a determination of the merits of
MIF's claim.
Rochester Associates cross appeals, arguing that the district
court erred in determining that MIF's Rule 60(b) motion was timely.
Where mistake, inadvertence, surprise, or excusable neglect is
alleged, a motion to set aside the judgment must be made within a
reasonable time and not more than one year after the judgment was
entered. Fed. R. Civ. P. 60(b). MIF's motion was brought within
one year of the judgment. Nevertheless, Rochester Associates
contends that the motion was not made within a reasonable time
under the rule because all the facts were known before the judgment
of dismissal was entered or before the 60-day postjudgment period
expired.
As previously noted, although there was no actual meeting of
the minds, the parties represented to each other that they had
reached a settlement at the time of dismissal. Thus, whether MIF
brought the Rule 60(b) motion within a reasonable time depends upon
when MIF discovered that a mistake had occurred. The record shows
that within the 60-day period, MIF sent Rochester Associates a
proposed loan purchase agreement, and the parties discussed
possible revisions. At the end of that period, Rochester
Associates was still apparently cooperating in the attempt to
reduce the agreement to writing. MIF and Rochester Associates
appeared to be working together to execute the written agreement,
but MIF realized in February 1995 (after the expiration of the 60-
day period to reopen) that, given Rochester Associates' lengthy
list of revisions to the latest proposal, any further attempts to
consummate a written settlement agreement would be futile. Shortly
thereafter, MIF filed a new foreclosure action and returned to this
original action with a Rule 60(b) motion. Given these facts, we
conclude that the district court did not abuse its discretion by
determining that MIF's Rule 60(b) motion was brought within a
reasonable time.
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Finally, Rochester Associates contends that we lack
jurisdiction over two of the individual appellees. Jeri Glaser and
Steven Glaser were defendants but were not listed on MIF's notice
of appeal filed June 30, 1995, the 29th day after the order of
dismissal. On July 11, 1995, MIF filed an amended notice of appeal
that includes their names. Citing Torres v. Oakland, 487 U.S. 312
(1988), Rochester Associates argues that this court does not have
jurisdiction to set aside the judgment as to these defendants,
because they were not specifically named in the notice of appeal
within the time for bringing an appeal.
Rochester Associates' reliance on Torres and Federal Rule of
Appellate Procedure 3(c) is misplaced. Not only has the rule been
amended since the Supreme Court decided Torres, but the rule by its
own language never applied to the situation where an appellee has
been inadvertently omitted from the notice of appeal. Rule 3(c)
provides that all appellants taking an appeal must be specifically
listed in the notice of appeal; it does not require a specific
listing of all appellees called upon to respond to the appeal.
Edgerson v. Clinton, 86 F.3d 833, 835 (8th Cir. 1996); Thomas v.
Gunter, 32 F.3d 1258, 1262 (8th Cir. 1994). Rule 3(c) simply does
not apply to this situation.
III.
We conclude that the district court abused its discretion by
denying MIF's Rule 60(b) motion. We have also considered all of
Rochester Associates' arguments on cross appeal and find them to be
without merit. Accordingly, we reverse the district court's denial
of MIF's Rule 60(b) motion, and we remand for further proceedings
to determine the merits of MIF's complaint. All pending motions
are denied.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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