_____________

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.*

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 Submitted: February 15, 1996

 Filed: August 16, 1996

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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.
2

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
3

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
4

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. 
5

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. 
6

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
7

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
8

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)
9

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)
10

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.
11

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. 
12

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.