Appeal from the District Court of the Virgin Islands (St. Croix), Civil No. 81-182.
BEFORE SEITZ, HIGGINBOTHAM, and ROSENN, Circuit Judges
This appeal raises the question of whether, pursuant to Fed. R. Civ. P. 60(b)(6), a district court may reopen a final judgment assuredly based on an incorrect set of facts, where the plaintiffs' attorney allegedly possessed but did not present, and the Government's trial attorney should have received but by virtue of an honest mistake did not receive, evidence of the actual facts. In Moolenaar v. Government of the Virgin Islands, Nos. 83-3114 and 83-3123 (3d Cir. Feb. 22, 1984) (memorandum opinion) [Moolenaar I], we affirmed the district court's finding of "mutual mistake" surrounding the question of whether the plaintiffs' lease from the Government of 98.307 acres of land included an historic "Great House" and surrounding cottages and land, and upheld a reformation of the contract to carve the area claimed by the plaintiffs out of the lease. We also remanded to the district court for further consideration of whether the plaintiffs were entitled to receive all previously collected rents.
Approximately a month and a half after the district court's decision on remand, but almost two years after its original judgment, the plaintiffs brought the present action to reopen the judgment. This action was based on credible evidence that the Government had in fact intended the disputed land to be a part of the plaintiffs' lease. Accordingly, the district court reopened the judgment pursuant to Fed. R. Civ. P. 60(b)(6), and the Government appeals. We vacate and remand with directions to reinstate the judgment in Moolenaar I.
In 1974 the Government of the Virgin Islands leased to the plaintiffs, Jessica and Halver Moolenaar, 98.307 acres of land "for the purpose of farming or the grazing or breeding of livestock, and for no other purpose whatsoever . . . ." The lease had a term of ten years renewable at the Moolenaars' option, provided for an annual rent of $15 per acre per year, and required additional payments to the Government if the Moolenaars were to sublease at a higher rent.
Although most of the above-mentioned land was covered with underbrush, the land as described included an historic "Great House" and surrounding cottages which were rented out and used by the Government. A dispute eventually arose in 1979 over the Government's use of this property, however, and the Moolenaars brought suit on December 30, 1980, against the Government seeking damages for, inter alia, wrongful exclusion from the Great House and cottages. After hearing the evidence presented, the district court on February 9, 1983, concluded that there had been a "mutual mistake" between the parties, reformed the contract prospectively to carve the disputed land out of the plaintiffs' lease,*fn1 and awarded the plaintiffs all rents previously collected for the land. On February 22, 1984, this court affirmed the finding of mutual mistake, but remanded to the district court for further consideration of whether the plaintiffs were entitled to the previously collected rents. On November 16, 1984, the district court decided that they were not.
On December 29, 1984, approximately six weeks after the district court's decision on remand but more than a year after its original judgment, the Moolenaars filed a pro se motion for retrial. This motion was based, essentially, on what the Moolenaars alleged was newly discovered evidence and inadequate representation by prior counsel. The district court held a hearing on the motion on January 15, 1986.
At the motion hearing, the Moolenaars presented three witnesses: Territorial Court Judge Raymond L. Finch, who had been the Moolenaars' attorney during the 1974 negotiations with the Government; Assistant Attorney General Victor Schneider, who had been assistant legal counsel in the Virgin Islands legislature; and plaintiff Jessica Moolenaar. Judge Finch testified that despite having originally drafted the lease to exclude the disputed lands, and having arranged for a surveyor to overlay the excluded portion on a public works drawing of the entire portion on a public works drawing of the entire parcel, the Government insisted that the Moolenaars take the entire property, all 98 acres, or nothing. Finch also testified that before the matter went to trial in 1983 he alerted the office of the Attorney General to the above-stated facts, and that he had turned over the proposed lease and attached map to the Government in his original negotiations. The Moolenaars' trial counsel, Kenneth R. Lindquist, never called Judge Finch to testify at the trial, and the Moolenaars are suing Lindquist in a separate action for malpractice.
Schneider testified that after having been asked to review the initial draft lease on the legislature's behalf, he spoke to either James Bough or Bruce DeLemos, both of whom Finch had previously identified as the Governor's agents in negotiations regarding the lease, and was told that the Government was preparing a new lease which would not exclude the buildings. Schneider therefore verified the existence of the draft lease, and indeed the map attached to that lease was introduced into evidence at the January 1986 hearing.
Based on the above, on January 21, 1986, the district court filed a memorandum opinion vacating its earlier order in Moolenaar I, finding that "this misrepresentation and circumvention by the government was a wrongful act and that it is inequitable for the government to retain the benefits of those acts and omissions." The court cited Fed. R. Civ. P. 60(b)(3), which allows a court to reopen a judgment based on fraud, misrepresentation, or other misconduct of an adverse party, as authority for vacating the prior order, and ordered that the matter be scheduled for the further taking of evidence.*fn2 At the later hearing, which took place on February 3, 1986, and which was followed by oral argument on February 5, the court found that there was in fact no misconduct, but rather an inadvertent lack of communication: the correct information "had been passed on to one assistant attorney general who failed by reason of an honest mistake to pass it on to the assistant attorney general actually in charge of trying the case."*fn3 Nevertheless, the court concluded that the lease covered all the disputed land, including the Great House and adjacent cottages, and that the Moolenaars were entitled to $56,700 in lost rents, together with attorneys' fees and other costs.
On February 19, the district court entered an order nunc pro tunc to February 5 granting the Government's motion to reconsider the January 21 order, but leaving that order in full force and effect. The court held that although its finding that there was no Government misconduct precluded a new trial pursuant to Fed. R. Civ. P. 60(b)(3), a new trial was justified by the "catchall clause," Fed. R. Civ. P. 60(b)(6), because Moolenaar I was "based on a set of facts which were incorrect," and because "the government knew of the correct information . . . [but] failed by reason of an honest mistake ...