ON APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS C.A. No. 67-0363
Before Adams, Maris and Sloviter, Circuit Judges.
This is an appeal from the district court's denial of Stedmann Hodge's motion to amend an eight-year-old divorce decree. Specifically, he seeks to avoid the obligation created in the decree to set up a trust of certain property. The motion to amend was based on lack of subject matter jurisdiction over the property and on the contention that the agreement embodied in the decree was premised on a mistake of fact. The district court denied the motion because the issue of subject matter jurisdiction was res judicata and because the facts alleged in the motion were not sufficient under either V.I. Code tit. 16, § 110 or F.R.Civ.P. 60(b) to modify or grant relief from the original divorce decree. We affirm.
Joyce Hodge was granted a divorce absolute from Stedmann Hodge in 1969. The decree explicitly ordered the parties to transfer the title of a piece of real property in accordance with the terms, stated in open court, of a settlement agreement. That agreement called for a specified plot of jointly owned land to be held in trust for the parties' two children and for Mr. Hodge to serve as trustee until the youngest child reached the age of twenty-one, at which point title would vest in the children.*fn1
The divorce decree was amended by the court in 1975 to increase Mr. Hodge's child support obligations. The present dispute derives from Mrs. Hodge's 1977 motion to compel compliance with the trust components of the original decree. She sought to compel execution of the trust agreement and an accounting of the rental proceeds of the property for each year since 1977. Mrs. Hodge alleged that Mr. Hodge had breached his fiduciary duties to his children and, as an alternative to compelling his performance of fiduciary duties, sought removal of Mr. Hodge as trustee and her own appointment to serve in his stead. In response, Mr. Hodge cross-moved for modification of the decree to delete the paragraph referring to a trust agreement. He contended that the parties' agreement and the court's order with respect to the property was based on a mistake of fact: joint ownership had been assumed, when in fact title to the property was his alone. Mr. Hodge also asserted that, because the property at issue was never the parties' homestead, the court lacked jurisdiction to dispose of the property, and the original decree with respect to it was therefore void. We turn first to the jurisdictional point.
In Dyndul v. Dyndul, 541 F.2d 132, 134 (3d Cir. 1976), the general rule was held to be "that authority to distribute real estate in a divorce proceeding can be conferred on a Virgin Islands divorce court only by statute." We stated that "the only such authority the legislature has seen fit to bestow on divorce courts is the power to award a homestead," id., and later held upon full presentation of the issue that the Virgin Islands courts indeed had this power. Todman v. Todman, 571 F.2d 149, 152 (3d Cir. 1978). Relying on the well-settled rule that subject matter jurisdiction may not be conferred by waiver or consent, see, e.g., Restatement of Judgments § 7, Comment (d) (1942), Mr. Hodge argues that the property placed in trust by the divorce decree was never a homestead and that his approval of the settlement as to that property cannot estop him to challenge the alleged jurisdictional defect.
If Mr. Hodge had raised this contention on direct appeal, it might well have had merit. But unless more than the private interests of the litigants is at stake, even the issue of subject matter jurisdiction must at some point be laid to rest. The problem has always been one of balancing judicial concerns for finality against those for validity of judgments. Although traditional doctrine emphasized the importance of validity, the modern trend accords substantially greater weight to finality. See Restatement (Second) of Judgments § 15 note, at 151 (Tent.Draft No. 6, 1979). It was settled long ago by Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 60 S. Ct. 317, 84 L. Ed. 329 (1940), that when a federal court proceeds to final judgment on the merits, the issue of its subject matter jurisdiction is res judicata even though it was not litigated or, indeed, even though the decree was totally uncontested.*fn2
Mr. Hodge's challenge to the court's subject matter jurisdiction over the divorce decree that incorporated the parties' agreed-upon settlement was disposed of by the Supreme Court's response in Chicot to the query
whether respondents having failed to raise the question in the proceeding to which they were parties and in which they could have raised it and had it finally determined, were privileged to remain quiet and raise it in a subsequent suit. Such a view is contrary to the well-settled principle that res judicata may be pleaded as a bar, not only as respects matters actually presented to sustain or defeat the right asserted in the earlier proceeding, "but also as respects any other available matter which might have been presented to that end."
308 U.S. at 378, 60 S. Ct. at 320 (quoting Grubb v. Public Utilities Commission, 281 U.S. 470, 479, 50 S. Ct. 374, 378, 74 L. Ed. 972 (1930)). Federal courts, though of limited jurisdiction, have "authority, when parties are brought before them in accordance with the requirements of due process, to determine whether or not they have jurisdiction to entertain the cause . . . ." Id. at 376, 60 S. Ct. at 319.*fn3
Reflecting the heightened concern for finality of judgments in post-Chicot developments in the law, the Second Restatement of Judgments replaced the First Restatement's simple listing of factors to be considered in weighing finality against validity with a presumption of finality followed by limited, enumerated exceptions.*fn4 A party is foreclosed from litigating subject matter jurisdiction in a subsequent lawsuit except if the lack of jurisdiction was so clear that its assumption "was a manifest abuse of authority," the challenged judgment "would substantially infringe the authority of ...