The Servants of the Parclete v. Does, I-XVI

Citation204 F.3d 1005
Decision Date03 February 2000
Docket NumberI-IV,I-XVI,D,Nos. 98-2258,98-2337,s. 98-2258
Parties(10th Cir. 2000) THE SERVANTS OF THE PARACLETE, a New Mexico non-profit corporation , Plaintiff-Counter-Defendant -Appellee, v. JOHN DOES,; JOHN DOES,efendants - Appellees. CATHOLIC MUTUAL RELIEF SOCIETY OF AMERICA, Defendant Cross-Claimant Cross Defendant, and ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Counter-Claimant-Cross-Claimant Cross-Defendant - Appellant
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO. D.C. No. CIV-93-236-JP

[Copyrighted Material Omitted] Mark A. Wendorf, Reinhardt & Anderson, St. Paul, Minnesota, for the Appellee.

Joe A. Sturges, Sturges, Houston & Johanson, P.C., Albuquerque, New Mexico, for the Appellant.

Before EBEL , HOLLOWAY , and KELLY , Circuit Judges.

KELLY, Circuit Judge.

Appellant, St. Paul Fire and Marine Insurance Company ("St Paul"), appeals from the district court's denial of two Fed. R. Civ. P. 60(b) motions and its denial of a motion to reconsider the denial of the first Rule 60(b) motion. St. Paul argues that the district court abused its discretion (1) in denying its first Rule 60(b) motion because this circuit favors the preservation of the right to appeal, and (2) in denying its second Rule 60(b) motion because the underlying declaratory judgment is not a final order. St. Paul also challenges the district court's coverage decision in the underlying declaratory judgment order. Defendants-Appellees, John Does, I-XVI and John Does, I-IV ("Does"), have filed a motion to dismiss these appeals on the grounds that a party cannot use a Rule 60(b) motion to extend the time to file an appeal. St. Paul has filed a motion to supplement the record with the declaratory judgment proceeding. We deny both motions. Our jurisdiction arises under 28 U.S.C. 1291, and we affirm the district court's orders.

Background

Plaintiff-Counter-Defendant-Appellee, The Servants of the Paraclete ("Servants"), a non-profit corporation, operates a monastic residence in New Mexico for mentally and emotionally troubled Roman Catholic priests. The Servants filed a declaratory judgment, breach of contract, and bad faith action against several insurers alleging that the insurers breached their respective contracts to defend and indemnify the Servants in connection with various lawsuits brought by victims of priest sexual abuse. The Servants eventually settled the suits, and, as part of the settlement, assigned its claims against the insurers to the victims (Does). The Does agreed to execute the stipulated judgments only against the insurers. All insurers settled with the Servants, except for St. Paul.

After a bench trial, the district court determined that St. Paul owed the Servants a duty to defend and was liable to the Servants for one-third of the stipulated defense costs, that the breach of duty to defend was reasonable, that the policy issued by St. Paul covered any damages the Servants were legally obligated to pay the victims, that the damages to each victim constituted an "occurrence" and that St. Paul did not act in bad faith in failing to attempt to settle the claims against the Servants. The court later held that St. Paul must indemnify the Servants to the policy limits of $900,000 for part of the $5,226,665 in stipulated judgments to which the Servants agreed in settling with the victims, "provided the settlements on which the judgments were based were reasonable and prudent, and not collusive or fraudulent." Aplt. App. at 221.

The parties then reached an agreement to submit the issue of reasonableness of the settlement agreements to binding arbitration and "remove that issue from this lawsuit." Aplt. App. at 262. Subsequently, the court requested that the parties submit an agreed upon form of declaratory judgment by December 30, 1997, or, if they were unable to do that, to inform the court what additional things must be done by the court before a judgment could be entered. On December 30, the parties submitted a form of declaratory judgment. The judgment was filed on January 9, and entered on January 15, 1998. No appeal was taken from this judgment.

The judgment provided that: 1) the victims had been molested; 2) St. Paul had breached its duty to defend and was liable to the plaintiff for $43,913.34 for breach of that duty; 3) St. Paul had breached its duty to indemnify and was liable for $369,600, the amount paid to the Does by the Servants; 4) St. Paul was also liable for each stipulated judgment "to the extent that, following arbitration agreed to by the parties, these judgments are found to be reasonable and prudent" with the total liability limited to the $900,000 policy limit; 5) the breach of duty to defend and indemnify was not in bad faith; and 6) the plaintiff was entitled to prejudgment interest, calculated at a rate of 6% per year on the amount awarded for defense damages, indemnity damages, and that portion of liability that would be determined following arbitration. Aplt. App. at 223-25.

On July 24, 1998, St. Paul filed it first Rule 60(b) motion for relief from judgment. St. Paul argued that although local counsel had received a copy of the declaratory judgment, lead counsel in Minnesota had not, and was thus not aware of the entry of judgment until July 17, more than 180 days after its entry.

The district court denied the first Rule 60(b) motion. Minnesota counsel had received a copy of the appellees' motion to tax costs in February. The motion recited that the declaratory judgment had been filed, thereby giving notice to Minnesota counsel. Therefore, no grounds for excusable neglect existed. The court also based its decision on relief being unavailable under Rule 60(b) where the terms of Fed. R. App. P. 4(a)(5) and 4(a)(6) apply to extensions of time to appeal.

St. Paul then sought reconsideration, arguing that the declaratory judgment should be vacated for lack of finality. St. Paul contended that because the declaratory judgment did not set forth damages it was not final. St. Paul also contended that the agreement to arbitrate was void because the agreement was based on St. Paul's ability to actually appeal from the determination of its liability. The district court denied the motion for reconsideration, holding that the declaratory judgment disposed of all the issues before the court and was a final appealable order. Aplt. App. at 394.

St. Paul then filed its second Rule 60(b) motion seeking to vacate the January judgment for lack of finality, in an effort to preserve the issue for appeal. The district court denied the motion.

Discussion
I .The Does' Motion to Dismiss

The Does argue that we lack jurisdiction to consider the denials of St. Paul's Rule 60(b) motions, because these motions were misused to try to extend time for appeal. Thus, the Does argue, the motions were untimely and should be dismissed. This argument conflates the distinction between the merits of St. Paul's Rule 60(b) motions concerning an appeal from the underlying declaratory judgment, and the appeals concerning the Rule 60(b) motions themselves. St. Paul's appeals of the denials of its Rule 60(b) motions are timely and we have jurisdiction.

Under 28 U.S.C. § 1291, we have jurisdiction to reach the merits of an appeal from a denial of a Rule 60(b) motion, so long as the underlying ruling or judgment was a "'final decision of the district court.'" See Stubblefield v. Windsor Capital Group, 74 F.3d 990, 993 (10th Cir. 1996) (quoting Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir. 1991)). For reasons discussed below, the underlying declaratory judgment at issue in the Rule 60(b) motions is final. Thus, we have jurisdiction to review the denial of St. Paul's Rule 60(b) motions, and deny the Does' motion to dismiss. See generally, Morris v. Adams-Mills Corp., 758 F.2d 1352, 1357 (10th Cir. 1985) (reviewing a timely filed Rule 60(b) motion, despite the fact that no appeal from the underlying judgment was timely filed).

II .St. Paul's First Rule 60(b) Motion

St. Paul argues that it should be relieved from judgment because it did not receive notice of entry of the judgment until more than 180 days after its entry. St. Paul claims that circuit authority supports reopening the judgment under Rule 60(b).

We review the district court's denial of a Rule 60(b) motion for abuse of discretion. See Federal Deposit Ins. Corp. v. United Pac. Ins. Co., 152 F.3d 1266, 1272 (10th Cir. 1998). A district court has discretion to grant relief as justice requires under Rule 60(b), yet such relief is "'extraordinary and may only be granted in exceptional circumstances.'" Id. (quoting Bud Brooks Trucking, Inc. v. Bill Hodges Trucking Co., 909 F.2d 1437, 1440 (10th Cir. 1990)). An appeal from a denial of a Rule 60(b) motion addresses only the district court's order denying the motion, and not the underlying decision itself. SeeStubblefield, 74 F.3d at 994.

A Rule 60(b) motion is not intended to be a substitute for a direct appeal. See Cashner v. Freedom Stores, Inc., 98 F.3d 572, 576 (10th Cir. 1996). Moreover, inadvertence by an attorney is not a basis for relief under Rule 60(b)(1). See Pelican Prod. Corp. v. Marino, 893 F.2d 1143, 1146 (10th Cir. 1990). Absent extraordinary circumstances, Rule 60(b) relief should not be used to extend the time for an appeal. See United States v. O'Neil, 709 F.2d 361, 373 (5th Cir. 1983). In narrow circumstances, we have permitted Rule 60(b) relief when a litigant has, through no fault of his own, failed to receive notice of entry of judgment, and has shown that he has exercised due diligence to ascertain whether the judgment has been entered. See Wallace v. McManus, 776 F.2d 915, 917 (10th Cir. 1985).

However, we must now consider an important amendment to Fed. R. App. P. 4 (a) in 1991. As amended Rule 4 (a) (6) now provides:

(6) Reopening the Time to File an Appeal.

The district court...

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