Opinion ID: 2378365
Heading Depth: 1
Heading Rank: 1

Heading: Statute of Limitations and Assertions of the Counterclaim Against Sears

Text: The first counterclaim asserted by Goudie against Sears was filed on July 3, 1966, and stated, Plaintiff has failed to fulfill its contract with the Defendant, thereby causing her loss of business income.  [Emphasis supplied.] On December 13, 1966, a Sears motion to dismiss was granted based on the fact that Goudie was counterclaiming as an individual for loss suffered by Cafe. On August 23, 1967, motions to reinstate and amend the counterclaim against Sears and to join both the Sears and Climate actions were filed by Goudie. This amended counterclaim, including later amendments, asserted not only Goudie's loss of business income, but also personal loss and punitive damages. The amended counterclaim was allowed because the [trial] Court believes it should exercise its discretion in favor of a trial on the merits on all issues. Courts have held that the assertion of a counterclaim must be viewed as an affirmative cause of action and should therefore be tested apart from the primary claim in determining whether the statute of limitations would bar the counterclaim. In Durant v. Murdock, 3 App.D.C. 114 (1894), the court said: [I]t is not the institution of a suit, but the exhibiting of a cause of action, that determines the application of the statute of limitations, whether it be by amendment of the declaration or bill of complaint, by addition of new and independent counts to a declaration, or by the interposition of a counter-claim by way of a plea of set-off, which may of itself be the foundation of a substantial judgment for the defendant. Id. at 126-127. [Morris, J., denying petition for rehearing.] This statement is in accord with the generally accepted view that affirmative claims made by way of setoffs and counterclaims must be tested by the statute of limitations while recoupment sought only by way of defense is a right that continues in existence with the primary claim. Sullivan v. Hoover, 6 F.R.D. 513 (D.D.C.1947). See also 20 Am.Jur.2d Counterclaim, Recoupment, Etc. §§ 6, 7, 8 (1965). In the instant case, Goudie has asserted her claim of breach of contract both as a matter of defense (recoupment) and as an affirmative cause of action on counterclaim. To the extent that Goudie's claim went beyond matters of defense, it must be tested by the statute of limitations. The law in this jurisdiction is clear that the statute of limitations in an action for breach of contract, including breach of warranty, runs from the time of the breach or completion of the contract. Poole v. Terminix Co. of Maryland and Washington, Inc., 91 U.S.App.D.C. 287, 200 F.2d 746 (1952); Maddox v. Andy's Refrigeration & Motor Service Co., D.C.Mun.App., 160 A.2d 799 (1960). Sears claims that the three-year statute of limitations found in D.C.Code 1967, § 12-301, governing contracts, should apply to the instant case. However, Goudie contends that the four-year statute of limitations in D.C.Code 1967, § 28:2-725(1), regarding sales of goods, is controlling. Although Goudie's viewing these contracts as being covered by the sale provisions of the commercial code may have merit, the statute of limitations provision therein is not to be applied to actions that accrued prior to January 1, 1965. D.C.Code 1967, § 28:2-725(2), (4). The general three-year statute of limitations provision contained in section 12-301 is therefore appropriate. As applied to the instant case, section 12-301 would bar a cause of action asserted in counterclaim which was brought more than three years after August 15, 1964, the most recent date of completion of any of the contracts. [2] Goudie's first counterclaim was brought in July of 1966 and sought loss of business income. Although this claim was later dismissed by the court, Goudie was successful in obtaining its reinstatement at a later date. The fact that the counterclaim for loss of business income was reinstated after the expiration of the statute of limitations does not affect the right to assert the claim because a counterclaim which is merely reinstated relates back to its original date. Super.Ct. Civ.Rule 15(c). See, also Dawn v. Stern Equipment Co., D.C.Mun.App., 134 A.2d 341 (1957); Nesbit v. Pollak, D.C.Mun. App., 80 A.2d 54 (1951). Whether or not Goudie was reasserting the same claim (loss of business income) or whether she had been diligently pursuing her cause of action [3] were matters which in the trial court's discretion could be considered in allowing the reinstatement of the counterclaim. We find no abuse of discretion in allowing reinstatement. [4] Sears' contention that the original dismissal of the counterclaim should be res judicata and thus bar reinstatement of the counterclaim is without merit. Rule 54(b) of the Superior Court Rules of Civil Procedure provides in part: When more than one claim for relief is presented in an action, . . . [including counterclaims], the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction,. . . the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties. [Emphasis supplied.] The dismissal of the counterclaim for loss of business income falls within the provisions of Rule 54(b) as an order subject to revision before the entry of judgment. Such orders are interlocutory in nature and are not final or subject to immediate appeal. Golden Commissary Corp. v. Shipley, D.C.Mun.App., 134 A.2d 324 (1957). Similarly, because such orders are not final, they cannot give rise to the asserted bar of res judicata in later proceedings in the case. See 6 Moore's Federal Practice ¶ 54.42 (2d ed. 1971). See also Republic of China v. American Express Co., 190 F.2d 334, 339 (2d Cir. 1951). It is only after final judgment has been rendered that prior provisional orders become effective as final orders, giving rise to appealability or a claim of res judicata. Here, the order dismissing the original counterclaim against Sears was revised, as Rule 54 allows, at the time the Sears and Climate cases were joined. To the extent the counterclaim also stated a cause of action which was for the first time being asserted, it cannot relate back. Because Goudie's claim for personal loss (unrelated to her loss of business income) was brought after the statute of limitations had run, it was barred. However, because Goudie also asserted her claim as a matter of defense, the trial court's findings must be considered in granting Goudie recoupment. The trial court's award of damages against Sears for Goudie's personal loss, $14,120 for replacement of the unit and remodeling and renovation, should therefore be construed as a finding for Goudie on her defense against the claim by Sears for the amount due and owing on Goudie's account. [5] Thus this award is set aside, but the findings underlying it are sustained and by operation of law are treated as defeating the amount allegedly due and owing on the account. Durant v. Murdock, supra, 3 App. D.C. at 125; Sullivan v. Hoover, supra, 6 F.R.D. at 513. Goudie has also alleged that fraud in not obtaining proper building permits, denial of discovery, and deliberate delays in litigation should give rise to punitive damages. Because the evidence is not clear as to when these causes of action might have accrued, we will assume, without deciding, that Goudie's claim for punitive damages was timely brought under the statute of limitations. On the merits of those claims against Sears and Climate the record reveals that the trial court did not err in finding against Goudie.