United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 97-2121
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Stokors S.A., *
*
Appellant, *
*
Mission Bank, *
* Appeal from the United States
Plaintiff, * District Court for the
* Western District of Missouri.
v. *
*
Richard E. Morrison, *
*
Appellee. *
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Submitted: November 17, 1997
Filed: June 26, 1998
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Before RICHARD S. ARNOLD,1 Chief Judge, and McMILLIAN and MAGILL,
Circuit Judges.
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MAGILL, Circuit Judge.
1
The Hon. Richard S. Arnold stepped down as Chief Judge of the United
States Court of Appeals for the Eighth Circuit at the close of business on April 17,
1998. He has been succeeded by the Hon. Pasco M. Bowman II.
Richard Morrison owed a judgment of $4,167,540.07, plus interest, to Stokors
S.A. and the Mission Bank on a guaranty of a loan. Morrison filed a motion under
Federal Rule of Civil Procedure 60(b) for satisfaction of the judgment. The district
court granted Morrison's motion, holding under Rule 60(b)(5) that it was no longer
equitable that Morrison's money judgment should have prospective application.
Stokors now appeals, and we reverse.
I.
On December 24, 1985, the Mission Bank loaned $3,000,000 to the Elms Inn
Partners. The loan was secured by an industrial revenue bond issued by the City of
Excelsior Springs, Missouri, which in turn was secured by the Elms Hotel in Excelsior
Springs. In addition, the loan was absolutely and unconditionally personally guaranteed
by Morrison. See Guaranty, Dec. 24, 1985, reprinted in Appellant's App. at 11. The
Elms Inn Partners defaulted on the loan, and, as of June 1, 1994, $4,167,540.07 in
principal and interest was due and owing under the bond.
The Mission Bank assigned part of its interest in Morrison's guaranty to Stokors,
a Swiss investment management firm. Stokors and the Mission Bank then brought an
action against Morrison in the district court to enforce Morrison's guaranty. On May
8, 1995, the district court granted summary judgment against Morrison, and awarded
Stokors and the Mission Bank a judgment of $4,167,540.07, plus interest accruing from
June 1, 1994. See Order (May 8, 1995) at 6-7, reprinted in Appellant's App. at 107-08.
Morrison's appeal of this grant of summary judgment was dismissed by this Court as
untimely filed. See Stokors, S.A. v. Morrison, No. 95-2530, slip op. at 1 (8th Cir. July
26, 1995) (per curiam).
Meanwhile, the successors in interest to the Elms Inn Partners were in
bankruptcy. In addition to the $4,167,540.07 debt owed to the Mission Bank, the
bankruptcy estate was indebted to the Federal Deposit Insurance Corporation (FDIC)
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for $9,575,225.84, as successor in interest to two failed banks who were also
bondholders on the project. The bankruptcy trustee was unsuccessful in disposing of
the real property that secured the debts owed to the Mission Bank and the FDIC, and
on July 28, 1995--several months after the district court reduced Morrison's guaranty
to judgment, and after this Court dismissed Morrison's untimely appeal of that
judgment--the Mission Bank and the FDIC assigned all of their interests in the debt
owed to them to the City of Excelsior Springs. In making this assignment, the Mission
Bank explicitly retained
[a]ny and all rights, title and interests in those certain guarantys signed
and delivered by Clifford Roth and/or Richard Morrison to The Mission
Bank and/or Metro North State Bank, dated December 24, 1985, by
which Messrs. Roth and Morrison guaranteed repayment of the 1985
Elms Bond indebtedness to The Mission Bank and/or Metro North State
Bank.
Assignment Agreement (July 28, 1995) at 1, Ex. B, reprinted in Suggestions in Supp.
of Appellant's Mot. to Expand the R. (July 30, 1997) at Supplemental R. 6, 27.2 In
exchange for this assignment, with a face value of $13,742,765.91, the Mission Bank
and the FDIC together received $411,000. See id. at 2, reprinted in Suggestions in
Supp. of Appellant's Mot. to Expand the R. at Supplemental R. 7. The record does not,
however, reflect how this amount was distributed between the Mission Bank and the
FDIC.
2
Stokors has moved to expand the record on appeal, and Morrison--who has
agreed that the submitted materials are relevant and accurate--has made no objection
to this motion. Because the district court granted Morrison's Rule 60(b) motion
without an evidentiary hearing, and because we conclude that the expanded record
allows a more complete understanding of the events at issue in this matter, we grant
the motion to expand the record.
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On March 12, 1996, the City of Excelsior Springs foreclosed on the property
securing the total debt of $13,742,765.91. Although the City Commissioners appraised
the property as having a value of $675,000.00, see Report of Commissioners (Mar. 19,
1996) at 5, reprinted in Suggestions in Supp. of Appellant's Mot. to Expand the R. at
Supp. 42, during the foreclosure sale the City bid the same amount as the debt.3
Accordingly, the City of Excelsior Springs gained title to the property--valued at
$675,000--and cleared the underlying debt, and the Mission Bank gained an unknown
portion of $411,000.4
Following the foreclosure sale, Morrison brought this motion under Federal Rule
of Civil Procedure 60(b) for satisfaction of his judgment to Stokors and the Mission
Bank. Morrison's legal theory was that, because the underlying debt had been satisfied
in the foreclosure sale, the guaranty had also been satisfied. See Mem. in Supp. of
Def.'s Rule 60 Mot. for Satisfaction of J. (June 18, 1996) at 3-4, reprinted in
Appellant's App. at 132-33.
The district court disagreed with Morrison's legal argument and held that, under
Missouri law, the satisfaction of an underlying debt does not satisfy a judgment on the
guaranty of the loan. See Op. and Order (Mar. 18, 1997) at 10, reprinted in Appellant's
Add. at 10.5 The district court nevertheless granted Morrison's motion for Rule 60(b)
3
It appears that the City of Excelsior Springs's bid at the foreclosure sale "was
in practical effect only a paper transaction, a bookkeeping device for obtaining title
to land." Regional Inv. Co. v. Haycock, 723 F.2d 38, 41 (8th Cir. 1983).
4
The City of Excelsior Springs subsequently sold the property to a
redeveloper for $100, in exchange for a promise to redevelop the property.
5
Morrison has not cross-appealed, or even presented a cogent argument, that
the district court erred in its construction of Missouri law. Accordingly, we do not
consider this issue on appeal. See, e.g., Bethea v. Levi Strauss and Co., 916 F.2d
453, 455 & n. 6 (8th Cir. 1990) (noting that, while an appellate court "does maintain
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relief. See id. at 15, reprinted in Appellant's Add. at 15. Relying on Federal Rule of
Civil Procedure 60(b)(5), the district court concluded that prospective application of
the monetary judgment against Morrison would no longer be equitable. See id. at 14-
15, reprinted in Appellant's Add. at 14-15. Accordingly, the district court held that,
because Mission Bank had assigned its interest in the underlying debt to the City of
Excelsior Springs, and because the City of Excelsior Springs had satisfied the debt at
the foreclosure sale, the $4,167,540.07 judgment against Morrison would not be
enforced. Stokors now appeals.
II.
We review the district court's grant of Rule 60(b) relief for an abuse of
discretion. See Schultz v. Commerce First Fin., 24 F.3d 1023, 1024 (8th Cir. 1994).
"The movant must establish its right to such relief by clear and convincing evidence."
United States v. Denham, 817 F.2d 1307, 1309 (8th Cir. 1987). "Generally, such relief
is granted only when new and unforeseen conditions cause extreme and unexpected
hardship so that the decree is oppressive." ARC v. Sinner, 942 F.2d 1235, 1239 (8th
Cir. 1991) (quotations and citations omitted). A district court necessarily abuses its
discretion if it bases its decision on an erroneous view of controlling law. See Cooter
& Gell v. Hartmarx Corp., 496 U.S. 384, 402 (1990).
Federal Rule of Civil Procedure 60(b) provides:
On motion and upon such terms as are just, the court may relieve a party
or a party's legal representative from a final judgment, order, or
broad discretion with respect to legal issues" and "may, sua sponte, apply the
correct rule of law to an issue properly before it even though neither party argued it
at either the district or appellate level," the general rule is that "[a] federal appellate
court's scope of review is limited to issues raised both below and on appeal."
(emphasis added)).
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proceeding for the following reasons: . . . (5) the judgment has been
satisfied, released, or discharged, or a prior judgment upon which it is
based has been reversed or otherwise vacated, or it is no longer equitable
that the judgment should have prospective application . . . .
(emphasis added). In this case, the district court held that the prior judgment had not
been satisfied, and there was no allegation that a prior judgment had been reversed.
Accordingly, the only basis for the district court's grant of Rule 60(b)(5) relief in this
case was the district court's conclusion that it was not equitable for a final money
judgment to have prospective application.
Most courts have agreed that a money judgment does not have prospective
application, and that relief from a final money judgment is therefore not available under
the equitable leg of Rule 60(b)(5). In Maraziti v. Thorpe, 52 F.3d 252, 254 (9th Cir.
1995), the court noted that:
Virtually every court order causes at least some reverberations into the
future, and has, in that literal sense, some prospective effect. That a
court's action has continuing consequences, however, does not necessarily
mean that it has prospective application for the purposes of Rule 60(b)(5).
The standard used in determining whether a judgment has prospective
application is whether it is executory or involves the supervision of
changing conduct or conditions. . . . The construction of the Rule sought
by [the movant], which apparently is to the effect that a judgment has
prospective effect so long as the parties are bound by it, would read the
word "prospective" out of the rule.
(quotations, citations, and alterations omitted); see also DeWeerth v. Baldinger, 38
F.3d 1266, 1275 (2d Cir. 1994) (interpreting United States v. Swift & Co., 286 U.S.
106 (1932), and noting that, "[i]n practical terms, these standards mean that judgments
involving injunctions have 'prospective application,' while money judgments do not");
Gibbs v. Maxwell House, 738 F.2d 1153, 1155-56 (11th Cir. 1984) (per curiam) ("The
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judgment of dismissal in this case was not prospective within the meaning of 60(b)(5).
It was final and permanent. That plaintiff remains bound by the dismissal is not a
'prospective effect' within the meaning of rule 60(b)(5) any more than if plaintiff were
continuing to feel the effects of a money judgment against him." (citations omitted));
Marshall v. Board of Ed., 575 F.2d 417, 425 (3d Cir. 1978) (agreeing that "Rule
60(b)(5) 'does not cover the case of a judgment for money damages'" (quoting Ryan v.
United States Lines Co., 303 F.2d 430, 434 (2d Cir. 1962))).
The district court cited to several cases, including one from this Court, to sustain
its conclusion that Rule 60(b)(5)'s equity leg can be used to relieve a party from a final
money judgment. See Hansen v. United States, 340 F.2d 142 (8th Cir. 1965); Bros Inc.
v. W.E. Grace Mfg. Co., 320 F.2d 594 (5th Cir. 1963). Neither of these cases,
however, offer much support for the district court's interpretation of Rule 60(b)(5). In
Hansen, this Court explicitly relied on Rule 60(b)(6), rather than Rule 60(b)(5), to deny
a party relief from a money judgment. See Hansen, 340 F.2d at 143. While Bros Inc.
did involve relief from a money judgment under Rule 60(b)(5), see 320 F.2d at 610, the
case has had little persuasive value even in the Fifth Circuit. See McDonald v. Oliver,
642 F.2d 169, 171 (5th Cir. 1981) ("[A] judgment for money damages, which was
awarded and is under review in this case, offers a present remedy for a past wrong as
contrasted with any judgment that has an on-going or prospective effect such as an
injunction. Since the third part of Rule 60(b)(5) applies only to prospective judgments,
it is not appropriate to the instant case.").
In this case, while the judgment against Morrison may be "prospective" to the
extent that he has failed to pay it in a timely manner, it is nevertheless a final order and
is not "prospective" for purposes of Rule 60(b)(5). We conclude that Rule 60(b)(5)'s
equitable leg cannot be used to relieve a party from a money judgment, and hold that
the district court abused its discretion in granting relief to Morrison under this
provision. We accordingly vacate the district court's grant of satisfaction of judgment
in this matter, and reinstate the guaranty judgment.
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III.
In originally seeking summary judgment on Morrison's liability under the
guaranty, Stokors and Morrison represented to the district court that "there is no risk
of duplicative liability as all parties with interest in the underlying debt and the
Guaranty will be bound by any recovery on the Guaranty." Reply to Def.'s Mem. in
Opp'n to Mot. for Summ. J. (Mar. 29, 1995) at 3, reprinted in Appellant's App. at 78.
Contrary to this position, however, the Mission Bank has received some portion of
$411,000 for the debt that it sold to the City of Excelsior Springs. The City of
Excelsior Springs, in turn, redeemed $675,000 worth of property, some of which
secured the debt that Morrison had guaranteed. We thus conclude that there is a risk
of duplicative recovery in this case.
At oral argument, Stokors conceded that any amount received by the Mission
Bank for its assignment to the City of Excelsior Springs would constitute a double
recovery, and that a set-off from the judgment against Morrison for that amount would
be proper. In supplemental briefings, Stokors went further and agreed to a set-off of
$675,000 (the full value of the property that was redeemed at the foreclosure sale, some
of which had secured the debt guaranteed by Morrison) against the judgment against
Morrison on the guaranty. See Appellant's Supplemental Br. at 5. In his supplemental
briefing, however, Morrison has shown no indication of accepting this stipulation.
Accordingly, we remand this matter to the district court for the sole purpose of making
a factual determination--with Morrison bearing the burden of proof--of the proper
amount of monetary set-off, if any, that Morrison is entitled to against Stokors in light
of the amount paid to the Mission Bank by the City of Excelsior Springs and the value
of the property redeemed by the City of Excelsior Springs that had secured the loan
guaranteed by Morrison. The judgment against Morrison on the guaranty should then
be reduced by that amount. See Fed. R. Civ. P. 60(b)(6).
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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