Indiana Law Review


The Effect of the Statute of Limitations on Compulsory
Counterclaims: An Analysis of Present Indiana Law

I. Introduction

The Indiana General Assembly recently reaffirmed the inherent power

of the Indiana Supreme Court to adopt, amend, and rescind rules of

court.
1 The significance of this legislative action is two-fold. First, the

legislature recognizes that it is the exclusive prerogative of the Indiana

Supreme Court to establish and abolish procedural rules governing the

course of litigation. 2 Second, any legislative enactment that infringes upon

that prerogative is invalid. 3 Indiana Code section 34-5-2-1 was enacted for

the purpose of removing the conflict that would result from both the

legislature and the supreme court promulgating rules of procedure.4

Further, this section was enacted "to remedy . . . abuses and imperfec-

tions [which] may be found to exist in the practice." 5 This statute provides
the Indiana Supreme Court with the unique opportunity to remedy the

problem created by trial rule 13.

Trial rule 13 of the Indiana Rules of Trial Procedure requires

a defendant in some cases, 6 and permits a defendant in all

'Ind. Code Ann. § 34-5-2-1 (West 1983).
2See Otterman v. Industrial Bd., Violent Crime Compensation Div., 473 N.E.2d

1021, 1021 (Ind. Ct. App. 1985).

'Id.

4 Ind. Code Ann. § 34-5-2-1 (West 1983) states:
All statutes relating to practice and procedure in any of the courts of this state

shall have, and remain in, force and effect only as herein provided. The supreme

court shall have the power to adopt, amend and rescind rules of court which

shall govern and control practice and procedure in all the courts of this state;

such rules to be promulgated and to take effect under such rules as the supreme

court shall adopt, and thereafter all laws in conflict therewith shall be of no

further force or effect. The purpose of this chapter is to enable the supreme

court to simplify and abbreviate the pleadings and proceedings; to expedite the

decision of causes; to remedy such abuses and imperfections as may be found
to exist in the practice; to abolish all unnecessary forms and technicalities in

pleading and practice; and to abolish fictions and unnecessary process and

proceedings.

'Id.

6Ind. R. Tr. P. 13(A) states:

A pleading shall state as a counterclaim any claim which at the time of serving
the pleading the pleader has against any opposing party, if it arises out of the

transaction or occurence that is the subject-matter of the opposing party's claim

and does not require for its adjudication the presence of third parties of whom
the court cannot acquire jurisdiction. But the pleader need not state the claim

if:

(1) at the time the action was commenced the claim was the subject of

787



788 INDIANA LA W REVIEW [Vol. 19:787

others,
7 to assert any claim that he may have against the plaintiff as

a counterclaim in the same suit.8 The defendant may seek and recover
relief exceeding the amount sought by the plaintiff.9 For example, if A
sues B for $100 in personal property damages sustained in an automobile
collision, B may counterclaim seeking $1,000 for personal injuries sus-
tained in the same accident. If B wins, he may recover the full $1,000.

Trial rule 13(J) allows a defendant to assert a time-barred claim to

the extent that it defeats or diminishes the plaintiffs claim. 10 If the

applicable statute of limitations runs subsequent to the plaintiff filing

his claim, but previous to the defendant filing his counterclaim, an issue

arises as to whether the defendant's counterclaim is barred for the

purposes of rule 13(J) or, on the other hand, whether the filing of the

plaintiff's suit tolls the statute of limitations so that the defendant's

counterclaim is not time-barred. Indiana law suggests that the defendant

will be barred from asserting his claim to the extent that it exceeds the

amount sought by the plaintiff. 1 '

The Indiana Rules of Trial Procedure do not expressly indicate

whether the filing of the plaintiff's claim tolls the statute of limitations

for the defendant's counterclaim. Trial rule 13(J), which deals specifically

with counterclaims that normally would be time-barred, simply establishes

another pending action; or

(2) the opposing party brought suit upon his claim by attachment or other

process by which the court did not acquire jurisdiction to render a personal

judgment on that claim, and the pleader is not stating any counterclaim

under this rule.
7 Ind. R. Tr. P. 13(B) states: "[a] pleading may state as a counterclaim any claim

against an opposing party not arising out of the same transaction or occurence that is

the subject-matter of the opposing party's claim."

"The language of the rules does not specifically speak in terms of defendants and

plaintiffs, but rather of parties asserting claims against other parties. For the purposes

of clarity and illustration, this Note will address the defendant-counterclaimant model,

although the law applies equally to the plaintiff-counterclaimant.

'See Ind. R. Tr. P. 13(C). "A counterclaim may or may not diminish or defeat
the recovery sought by the opposing party. It may claim relief exceeding in amount or
different in kind from that sought in the pleading of the opposing party." Id.

wSee Ind. R. Tr. P. 13(J)(1).

The statute of limitations, a nonclaim statute or other discharge at law shall

not bar a claim asserted as a counterclaim to the extent that:

(1) it diminishes or defeats the opposing party's claim if it arises out of

the transaction or occurence that is the subject-matter of the opposing party's

claim, or if it could have been asserted as a counterclaim to the opposing

party's claim before it (the counter-claim) was barred.

"See, e.g., Chauffeurs, Teamsters, Warehousemen and Helpers Local Union No. 135
v. Jefferson Trucking Co., 473 F. Supp. 1255 (S.D. Ind. 1979); Crivaro v. Rader, 469

N.E.2d 1184 (Ind. Ct. App. 1984); In re Estate of Compton v. Shelby Nat'l Bank, 406
N.E.2d 365 (Ind. Ct. App. 1980); Streets v. M.G.I.C. Mortgage Corp. and Assoc. Fin.
Serv. Co. of Ind., 177 Ind. App. 184, 378 N.E.2d 915 (1978).



1986J COMPULSORY COUNTERCLAIMS 789

that such a counterclaim can offset the plaintiffs claim. 12 The rule says
nothing about whether a defendant-counterclaimant may recover damages
in excess of the damages sought by the plaintiff when the statute of
limitations for filing an independent action by the defendant expires

between the filing of the plaintiffs complaint and the filing of the

counterclaim. Consequently, a defendant who has been hauled into court
may be left without an adequate remedy.

The judicial responses in jurisdictions addressing this issue of the
untimely counterclaim have been inconsistent; the courts have adopted

various conflicting and confusing solutions. 13 Some courts have taken
the view that the commencement of the plaintiffs action tolls the statute
of limitations with respect to relief or claims for damages arising out

of the same transaction or occurrence. 14 Others have held that the

commencement of the plaintiffs action does not toll the statute of
limitations where the defendant's counterclaim arises out of the same

transaction or occurrence, except for those pleadings that the court

considers to be purely defensive. 15 One reason invoked by these courts
is that allowing the defendant to assert an otherwise time-barred claim,

to the extent that it diminishes or defeats the plaintiffs claim, tempers

the harshness that would result from totally barring the claim because

it was filed too late. 16 Indiana follows this latter view. 17

In addition to judicial responses, several state legislatures have en-

acted statutes to remedy the situation. Generally, where the matter has

been governed by statute, the state legislatures have favored tolling the

statute of limitations as to the defendant's counterclaim. 18 However,

,2Ind. R. Tr. P. 13(J). Similarly, the federal rules do not address the issue. See

Fed. R. Civ. P. 13. There is no federal prototype to Indiana trial rule 13(J).

"See, e.g., Wallace v. Patterson, 85 Mich. App. 266, 271 N.W.2d 194 (1978), rev'd

on other grounds, 405 Mich. 825, 289 N.W.2d 924 (1979) (plaintiff's filing action tolls

statute of limitations). But see Duhammel v. Star, 653 P.2d 15 (Ariz. Ct. App. 1982)

(plaintiffs filing action does not toll statute of limitations).

"See Anton v. Lehpamer, 534 F. Supp. 239 (N.D. 111. 1982); Azada v. Carson, 252

F. Supp. 988 (D. Hawaii 1966) (cited as majority rule); Armstrong v. Logsdon, 469

S.W.2d 342 (Ky. Ct. App. 1971); Wallace v. Patterson, 85 Mich. App. 266, 271 N.W.2d

194 (1978), rev'd on other grounds, 405 Mich. 825, 289 N.W.2d 924 (1979).

"See Duhammel v. Star, 653 P.2d 15 (Ariz. Ct. App. 1982); Di Norscia v. Tibbett,

50 Del. 118, 124 A.2d 715 (1956); Lovejoy v. Ahearn, 223 Tenn. 562, 448 S.W.2d 420

(1969).

"Crivaro v. Rader, 469 N.E.2d 1184, 1187 (Ind. Ct. App. 1984).

"See, e.g., Chauffeurs, Teamsters, Warehousemen and Helpers Local Union No. 135

v. Jefferson Trucking Co., 473 F. Supp. 1255 (S.D. Ind. 1979); Crivaro v. Rader, 469

N.E.2d 1184 (Ind. Ct. App. 1984); In re Estate of Compton v. Shelby Nat'l Bank, 406

N.E.2d 365 (Ind. Ct. App. 1980); Streets v. M.G.I.C. Mortgage Corp. and Assoc. Fin.

Serv. Co. of Ind., 177 Ind. App. 184, 378 N.E.2d 915 (1978).

'"See, e.g., III. Ann. Stat. ch. 83 § 18 (Smith-Hurd 1966); N.Y. Civ. Prac. Law

§ 203(c) (McKinney 1972).



790 INDIANA LAW REVIEW [Vol. 19:787

some states have enacted statutes definitively stating that untimely coun-

terclaims seeking relief in excess of that sought by the plaintiff are

barred if filed after the limitations period expires.
19

Indiana does not have a statute that deals specifically with the effect

of a statute of limitations on a compulsory counterclaim filed after the

appropriate time period. Thus, Indiana courts have relied upon common
law to address the issue of the effect of the statute of limitations on

compulsory counterclaims.

Recently, the Indiana Court of Appeals was confronted with an

untimely compulsory counterclaim in Crivaro v. Rader.20 The court held

that the plaintiffs commencement of the action did not toll the statute

of limitations as to the defendant's counterclaim.21 The defendant's

counterclaim, which requested relief in excess of that sought by the

plaintiff, was barred by the statute of limitations. 22 The court noted that

its strict concern for the statute of limitations and recognition of the

legislative prerogative in enacting statutes of limitation ' 'overrode any

justification ... for extending the life of the counterclaim. ,,23 Pursuant

to trial rule 13(J)(1), the court allowed the defendant to assert the time-

barred claim to the extent that it diminished or defeated the opposing

party's claim.24

The rationale used by the Crivaro court, mainly, strict adherence

to limitation statutes so as not to defeat the purpose of the statutes,

is analogous to the approach used by many jurisdictions that bar the
defendant's untimely counterclaim. 25 However, such reasoning is less

persuasive when analyzed from the perspective of the purposes served
by limitation statutes as espoused by the courts. 26 The common law
approach used by this and many other jurisdictions may lead to results
that, in fact, defeat the purposes for which limitation statutes and rules

of trial procedure were enacted. 27

'"See, e.g., Kan. Civ. Prac. Code § 60-213(d) (Vernon 1963).
2,,469 N.E.2d 1184 (Ind. Ct. App. 1984).
2i
Id. at 1187.

22
Id. at 1186-87.

2
'Id.

24
Id. at 1187. Because Rader sought $1000 in damages (amount of deductible under

his insurance policy), Crivaro was limited to this amount in his claim. Crivaro was not
allowed to recover the $60,000 he sought in personal injuries.

25See, e.g., Di Norscia v. Tibbett, 50 Del. 118, 124 A.2d 715 (1956); Brown v.
Hipshire, 553 S.W.2d 570 (Tenn. 1977).

26The main purposes of a statute of limitations are to ensure that parties are given
formal and reasonable notice that a claim is being asserted against them and to prevent

the assertion of stale or fraudulent claims. See State ex. rel. Young v. Noble Circuit
Court, 253 Ind. 353, 332 N.E.2d 99 (1975); In re M.D.H., 437 N.E.2d 119 (Ind. Ct.
App. 1982).

27 Rules of civil procedure, including appellate rules, were adopted in order to simplify



1986] COMPULSORY COUNTERCLAIMS 791

This Note will examine Indiana's position regarding the issue of

whether the commencement of the plaintiff's action tolls the statute of
limitations with respect to the defendant's compulsory counterclaim. First,

this Note will survey the different judicial and legislative approaches of

other jurisdictions. Second, Indiana's present position, as stated in the

recent Crivaro decision, will be explained. Third, this Note will analyze

Indiana's approach to the problem. This analysis will focus upon the
common law background of compulsory counterclaims, the language and
policy of trial rules, and the policy of statutes of limitation. The analysis
suggests that trial rule 13(J), in its present form, is not dispositive of

the issue of the untimely compulsory counterclaim; that common law
and the language and policy of the Rules of Trial Procedure suggest

that a compulsory counterclaim seeking affirmative relief should not be

barred; and that the purposes of statutes of limitation are not defeated

by allowing the time-barred claim. Finally, this Note recommends that

Indiana law be changed to allow time-barred compulsory counterclaims,

regardless of the type of relief sought, and proffers a solution to this

effect.

II. Survey of Approaches Taken by Other Jurisdictions

A. Statute of Limitations Tolled for Defendant's Counterclaim

The courts are divided on the issue of whether the filing of a claim

by a plaintiff tolls the statute of limitations as to a defendant's com-

pulsory counterclaim. 28 The general rule holding that the commencement
of an action by the plaintiff tolls the statute of limitations as to the

defendant's then unbarred cause of action was stated in Trinidade v.

Superior Court.29 Trinidade involved an automobile collision and was a

personal injury action brought by the driver of one automobile against

the driver of the other within the applicable one year statute of limitations

period. 30 The defendant, upon leave of court following a contested

motion, brought a claim alleging personal injuries caused by the neg-

ligence of the plaintiff. 31 This counterclaim, which the defendant entitled

a "cross-complaint," was filed more than two years after the cause of

action arose and, therefore, outside the one-year statute of limitations

period. 32 The appellate court stated that it had "consistently been held

and streamline prevailing procedural practice and to secure just, speedy, and inexpensive

determination of every action. See Southern Ind. Rural Elec. Coop. v. City of Tell City,

179 Ind. App. 217, 384 N.E.2d 1145 (1979).
2HSee supra note 13.
2y29 Cal. App. 3d 857, 106 Cal. Rptr. 48 (1973).
M
>Id.

"Id. at 858, 106 Cal. Rptr. at 49.
n
Id. The statute of limitations on an action for injury caused by the neglect of

another was one year.



792 INDIANA LAW REVIEW [Vol. 19:787

that the commencement of an action tolls the statute of limitations as

to a defendants then unbarred cause of action against the plaintiff,

'relating to or depending upon the contract, transaction, matter, hap-

pening or accident upon which the action is brought, . . .'
"33 The court

reasoned that the statute of limitations as to the defendant's counterclaim

was tolled by the filing of the plaintiff's original complaint, permitting

the defendant to assert any claim or defense which may be available,
regardless of the fact that the defendant's claim would have been barred

at the time of filing by the defendant if not for the tolling of the statute

by the plaintiff. 34 Thus, if the plaintiff filed an action one day before

the applicable statute of limitations had run on the defendant's coun-

terclaim, the defendant, who in all likelihood would not be able to
interpose a counterclaim before the end of the applicable limitations

period, would be permitted to assert his claim for any type of relief

within the time for serving a reponsive pleading. 35 This position has

been cited as the majority rule. 36

However, if the defendant's claim is already barred when the plaintiff

brings the suit, this tolling theory would be inapplicable. Such a situation

would arise when the period for the plaintiff to assert his claim is longer
than that provided for the defendant. 37 When the plaintiff commences
his action, the defendant's counterclaim is already barred. Hence, there

is no limitations period to be tolled. 38

Some courts have reasoned that, by commencing an action, the
plaintiff has waived any defense of limitations. 39 According to this

argument, by bringing the action, the plaintiff demonstrates that he does

not desire to let rest the incident upon which the suit is founded. Thus*
the defendant must be afforded the opportunity to assert or defend any

claim that he may have.40 The fact that the statute of limitations ran
on the defendant's counterclaim before the plaintiff commenced his suit
is immaterial, and the defendant is permitted to interpose his claim and

survive a limitations defense.41

3iId. at 860-61, 106 Cal. Rptr. at 49-50 (citation omitted).
34
Id.; see also Holtzendorff v. Housing Auth. of Los Angeles, 250 Cal. App. 2d

596, 58 Cal. Rptr. 886 (1967), cert, denied, 389 U.S. 1038 (1968); Whittier v. Visscher,

189 Cal. 450, 209 P. 23 (1922) (defendant's right of action alive when plaintiff commences
suit; thus statute does not run against it).

35C. Wright & A. Miller, Federal Practice and Procedure, § 1419, at 108 (1971)
[hereinafter cited as C. Wright & A. Miller].

*See generally Annot., 72 A.L.R. 3d 1065 (1976); 51 Am. Jur. 2d Limitation of
Actions § 203 (1970); 54 C.J.S. Limitations of Actions § 285 (1948).

"Sobieski, Counterclaims and Statutes of Limitation: A Critical Commentary on
Present Tennessee Law, 42 Tenn. L. Rev. 291, 302 (1975).

w
Id. at 303.

'"See Armstrong v. Logsdon, 469 S.W.2d 342 (Ky. Ct. App. 1971).
m
Id. at 343.

4I C. Wright & A. Miller, supra note 35.



1986] COMPULSORY COUNTERCLAIMS 793

B. Statute of Limitations Not Tolled for Defendant's Counterclaim

Several jurisdictions hold that a defendant's counterclaim is barred

if filed after the expiration of the statute of limitation applicable to the

plaintiff's cause of action unless the counterclaim is defensive in nature. 42

That is, the counterclaim may not seek recovery in excess of that sought
by the plaintiff. Under this approach, the plaintiffs claim does not toll

the statute of limitations for the defendant's counterclaim. If the coun-

terclaim seeks recovery beyond that sought by the plaintiff, as distin-

guished from defensive remedies such as set-off and recoupment,43 the

defendant is essentially instituting an independent cause of action that

is subject to the statute of limitations.44 The courts have noted that the
defendant could, and perhaps should, have brought a separate suit prior

to the running of the statute of limitations.45

Although aware that a majority of courts allow defendants to bring

compulsory counterclaims, the Delaware Supreme Court, in Di Norscia
v. Tibbett,46 distinguished that rule as involving cases where the coun-

terclaim was used purely in a defensive stance, in the nature of a set-off

or recoupment, and where no affirmative relief was sought. If the

defendant's claim could be regarded as an independent action such that

the defendant is seeking affirmative relief, the statute of limitations will

apply to it as if it were a separate suit, and the untimely claim will be

barred. 47 On the other hand, claims seeking set-off or recoupment or
that are defensive in nature may still be asserted after the running of
the statute of limitations.48

C. The Statutory Response

In a few states, statutory provisions allow the defendant-counter-

claimant to assert a time-barred claim regardless of whether that claim

42See supra note 15.
4,The defense of recoupment, which arises out of the same feature of the transaction

upon which the plaintiff's claim is grounded, is never barred by the statute of limitations

so long as the main action is timely. See generally 51 Am. Jur. 2d Limitation of Actions
§ 203 (1970).

"See Solomon v. Rosol, 10 Conn. Supp. 4 (1941).
4$See Horace Mann Ins. Co. v. DeMirza, 312 So.2d 501 (Fla. Dist. Ct. App. 1975).
4ft50 Del. 118, 124 A.2d 715 (1956).
41
Id. at 119, 124 A.2d at 717.

"See, e.g., Unified School Dist. No. 490 v. Celotex Corp., 6 Kan. App. 2d 346,

629 P.2d 196 (1981); Lovejoy v. Ahearn, 223 Tenn. 562, 448 S.W.2d 420 (1969). However,

even if a defendant's counterclaim is considered to be affirmative in nature, and therefore

barred under this rule, some courts may permit the defendant to amend his answer to
plead the defense of recoupment. See Horace Mann Ins. Co. v. DeMirza, 312 So. 2d
501 (Fla. Dist. Ct. App. 1975).



794 INDIANA LAW REVIEW [Vol. 19:787

seeks what may be characterized as affirmative or defensive relief. 49 The
filing of the plaintiff's claim tolls the statute of limitations as to the

defendant's counterclaim for all purposes. The Illinois statute has been

interpreted to allow the defendant to assert a claim if the claim was

not barred at the time the plaintiff filed his original complaint. 50 The

statute applies to all types of personal actions that the defendant may
have against the plaintiff. 51 In addition to applying to compulsory coun-

terclaims, the statute also extends to permissive counterclaims. 52 Even if

the claim that tolled the statute of limitations is later dismissed, the

defendant may have all other claims litigated in the action. 53 Thus, once
the plaintiff files his complaint, the statute of limitations is effectively

tolled as to any compulsory or permissive counterclaim that the defendant

may assert against the plaintiff, even if one of these claims is later
dismissed.

Similarly, New York has a provision in its code that allows the
defendant to assert an untimely claim. 54 However, new claims asserted
in amended pleadings have been held to be barred if based on grounds

distinct from those asserted in prior pleadings. 55 The statute extends to

cross-complaints and counterclaims seeking affirmative relief. 56 Accord-

ingly, the courts have suggested that, in cases in which the claim asserted

by the defendant relates to the same transaction that gave rise to the

plaintiffs complaint, the defendant's claim should be allowed as a

defense, counterclaim or cross-claim. 57

"See, e.g., III. Ann. Stat. Ch. 83 § 18 (Smith-Hurd 1966), which provides: "[a]

defendant may plead a set-off or counter claim barred by the statute of limitation, while
held and owned by him, to any action, the cause of which was owned by the plaintiff

or person under whom he claims, before such set-off or counter claim was so barred,
and not otherwise . . . ." See also N.Y. Crv. Prac. Law § 203(c) (McKinney 1972) ("a
defense or counterclaim is not barred if it was not barred at the time the claims asserted

in the complaint were interposed . . . .").
wSee, e.g., Benckendorf v. Burlington N. R.R., 112 111. App. 3d 658, 445 N.E.2d

837 (1983); Carnahan v. McKinley, 80 111. App. 2d 318, 224 N.E.2d 297 (1967).

"See III. Ann. Stat. Ch. 83 § 18 (Smith-Hurd 1966).
i2See Benckendorf v. Burlington N. R.R., 112 111. App. 3d 568, 445 N.E.2d 837

(1983).

"See Ogg v. City of Springfield, 121 111. App. 3d 25, 458 N.E.2d 1331 (1984).
<4N.Y. Civ. Prac. Law § 203(c) (McKinney 1972).
"Seligson v. Chase Manhattan Bank, Nat'l Ass'n, 50 A.D.2 206, 376 N.Y.S.2d 899

(1975); Nichimen & Co. v. Framen Steel Supply Co., 44 Misc. 2d 260, 253 N.Y.S.2d 713
(N.Y. Sup. Ct. 1964).

"See Seligson v. Chase Manhattan Bank, Nat'l Ass'n., 50 A.D.2d 206, 376 N.Y.S.2d

899 (1975). Although N.Y. Civ. Prac. Law § 203(c) speaks only to defense and coun-
terclaims, the court held that "despite the apparent legislative oversight, we see no reason
why CPLR § 203(c) should not apply to cross-claims; particularly since '[a] cause of
action in a counterclaim or cross-claim shall be treated' as far as practicable, as if it

were contained in a complaint . . . ." Id.; 376 N.Y.S.2d at 904.
i7See Nichimen & Co. v. Framen Steel Supply Co., 44 Misc. 2d 260, 253 N.Y.S.2d

713 (N.Y. Sup. Ct. 1964).



1986] COMPULSORY COUNTERCLAIMS 795

The purpose of these statutes has been to avoid potential injustice
that would result if the court barred a defendant's counterclaim or cross-

complaint that arose from the same accident or incident that gave rise

to the plaintiffs suit. 58 Courts have reasoned that if the plaintiff is

permitted to present a claim, the defendant should not be prevented

from doing the same simply because of a "mere technicality.

"

59^Simple

justice would seem to dictate that the defendant should be given the

opportunity to present a claim for relief based upon the same accident

or incident. 60

A Kansas statute was interpreted to bar a defendant from asserting
a counterclaim or cross-claim after the applicable statute of limitations

expired, unless the defendant's claim was defensive in nature. 61 Currently,

the statute provides:

When cross demands have existed between persons under such
circumstances that, if one had brought an action against the

other, a counterclaim or cross-claim could have been set up,

neither can be deprived of the benefit ... of the statute of

limitations . . . but the two demands must be deemed compen-
sated so far as they equal each other.62

In accord with this statute, Kansas courts have refused to allow the

defendant to seek any type of affirmative relief.63 Although the defendant

is barred from seeking affirmative relief, he still has the right to use a

counterclaim for purely defensive purposes. 64

E. Summary

Courts outside Indiana are divided on the issue of the untimely

counterclaim that arises out of the same accident or incident as the

plaintiffs complaint.65 The prevailing view suggests that, unless otherwise

provided by statute, if a counterclaim, set-off, or cross-complaint is not

barred by the statute of limitations when the action is commenced, it
will not be barred while the action is pending. 66 The plaintiffs filing a

"See County of Westchester v. Edo Corp., 83 A.D.2d 829, 830, 441 N.Y.S.2d 553,
555 (1981).

"See Azada v. Carson, 252 F. Supp. 988, 989 (D. Hawaii 1966).
H)
Id.

"See Crumrine v. Cummings, 172 Kan. 290, 240 P.2d 463 (1952).
«Kan. Civ. Proc. Code Ann. § 60-213(d) (Vernon 1963).
"See Lightcap v. Mobil Oil Corp., 221 Kan. 448, 562 P.2d 1 (1976), cert, denied,

434 U.S. 876 (1977).
MSee Christenson v. Akin, 183 Kan. 207, 326 P.2d 313 (1958); Unified School Dist.

No. 490 v. Celotex Corp., 6 Kan. App. 2d 346, 629 P.2d 196 (1981).

"See supra note 13 and accompanying text.

"See supra note 14 and accompanying text.



796 INDIANA LAW REVIEW [Vol. 19:787

complaint tolls the statute of limitations as to the defendant's counter-

claim. There is also authority to suggest that a pleading in the nature

of a set-off, conterclaim, or cross-complaint that is regarded as an

affirmative, as opposed to a defensive, claim is subject to the operation

of the statute of limitations.
67 The defendant is not given the benefit

of the tolling rule because he had the opportunity to institute an in-

dependent action against the plaintiff during the applicable statutory

period.

III. Present Position in Indiana

The courts clearly have not resolved the question of whether the

plaintiff, by instituting his action, tolls the statute of limitations with

regard to compulsory counterclaims seeking affirmative relief asserted

after the applicable statute of limitations has expired. Recent decisions

suggest that Indiana is among those jurisdictions that bar the untimely
compulsory counterclaim, unless it seeks to defeat or diminish the op-

posing party's claim or is purely defensive in nature.68 A counterclaim
asserted after the expiration of the statute of limitations is not permitted

if the counterclaim is for affirmative relief.69

Crivaro v. Rader10 is the most recent Indiana decision that addresses

this issue. In Crivaro, two semi-tractor trailers collided. The plaintiff

filed a complaint nineteen days before the expiration of the two-year

statute of limitations, alleging negligence on the part of the defendant,

Crivaro. 71 Rader sought $1,000 in damages.72 Crivaro responded by filing

a counterclaim in which he sought to recover $60,000 for personal injuries

and property damage sustained in the collision.73 The counterclaim was
filed eight days after the running of the statute of limitations on the

action.
74 Rader filed an answer to Crivaro's counterclaim, pleading as an

affirmative defense that the statute of limitations had run on the counter-
claim, and sought partial summary judgment to limit Crivaro's claim to

MSee supra note 15 and accompanying text.

**See Chauffeurs, Teamsters, Warehousemen and Helpers Local Union No. 135 v.

Jefferson Trucking Co., 473 F. Supp. 1255 (S.D. Ind. 1979); Crivaro v. Rader, 469 N.E.2d

1184 (Ind. Ct. App. 1984); Streets v. M.G.I.C. Mortgage Corp. and Assoc. Fin. Serv.

Co. of Ind., 177 Ind. App. 184, 378 N.E.2d 915 (1978).
MSee Chauffeurs, Teamsters, Warehousemen and Helpers Local Union No. 135 v.

Jefferson Trucking Co., 473 F. Supp. 1255, 1258 (S.D. Ind. 1979).
70469 N.E.2d 1184 (Ind. Ct. App. 1984).
71
Id. at 1185.

12
Id. This represented the amount of Rader's deductible under his insurance policy

with plaintiff Harco National Insurance Company covering his 1974 International Harvester
tractor, which was damaged in the collision.

14
Id. According to the court, Crivaro had eleven days after receiving notice of Rader's

claim in which to file within the limitations period. Id. at 1187 n.7.



1986J COMPULSORY COUNTERCLAIMS 797

the amount of $1,000. 75 The trial court granted Rader's motion on the
basis that Crivaro's claim was barred by the applicable statute of limita-

tions except to the extent that it diminished or defeated Rader's claim

asserted in the original complaint. 76

The appellate court affirmed the lower court's holding.77 The court

reasoned that its concern for strict adherence to limitation statutes and

recognition of legislative prerogative in this area "overrode any justi-

fication ... for extending the life of the [untimely] counterclaim." 78

Prior to determining that Crivaro's counterclaim was barred, the court

dispensed with the plaintiff's and defendant's arguments in support of

their positions. The court found that neither the cases cited by the
defendant nor the plaintiff's construction of rule 13(J)(1) were dispositive

of the issue.79 The defendant noted that the issue before the court was

not addressed or resolved by Indiana trial rule 13(J). 80 The defendant
argued that prior Indiana cases, specifically Eve v. Louisu and Zink v.

Zink,*2 allowed a claim seeking affirmative relief to be asserted and

litigated in the same suit even if the time for filing an independent

action had expired. 83 However, the Crivaro court distinguished the earlier

Indiana cases cited by the defendant in much the same manner as the
Di Norscia court distinguished the majority rule regarding the tolling

of statutes of limitation for counterclaims.84 The Crivaro court stated

that the Indiana cases that allowed the defendant to assert the untimely

counterclaim were distinguishable on the basis that the counterclaims

sought relief that was defensive in nature.85

The Crivaro court was quick to accept the defendant's argument

that trial rule 13(J) does not address the issue of whether a claim that

is not barred at the time the plaintiff files the action and that seeks

affirmative relief is barred by the statute of limitations.86 Nonetheless,

"Id. at 1185. See also Ind. R. Tr. P. 56(C). The rule includes the following language:

"[a] summary judgment may be rendered upon less than all the issues or claims, including
without limitation the issue of liability or damages alone although there is a genuine issue

as to damages or liability as the case may be." Id.
7*469 N.E.2d at 1185.

"Id. at 1187. Judge Shields wrote the opinion for the court. Chief Judge Buchanan

and Judge Sullivan concurred.

™Id.

"Id. at 1185.

"'Brief for Appellant at 5-6, Crivaro, 469 N.E.2d 1184.
Kl 91 Ind. 457 (1883).

"56 Ind. App. 677, 106 N.E. 881 (1914).

"See Eve, 91 Ind. 457; Zink, 56 Ind. App. 677, 106 N.E. 381.
MSee supra note 46 and accompanying text.

"469 N.E.2d at 1185.

"See supra note 80.



798 INDIANA LAW REVIEW [Vol. 19:787

the court rejected further arguments of the defendant and affirmed the

trial court's refusal to permit affirmative recovery by way of a time-

barred counterclaim.
87 The Crivaro court ultimately based its finding on

the proposition that the purposes of the statute of limitations would

best be served by barring the untimely counterclaim. 88 Because statutes

of limitation are legislative creations, the courts would be engaging in

judicial legislation by construing limitation statutes in such a manner

that would allow the defendant to assert the time-barred compulsory

counterclaim. 89

The Crivaro court noted that Indiana courts have emphasized that

statutes of limitations are statutes of repose, "founded upon a rule of

necessity and convenience and the well-being of society.
,,9° In Bennett

v. Bennett,91 cited by the Crivaro court, it was noted that limitation

statutes "are grounded upon the presumption that one having a well-

founded claim will not delay enforcing it."92 The court reminded the

defendant that "the aim of limitation statutes [is] to encourage those

with meritorious claims to enforce them without delay.
,,93 Concluding

that Crivaro's counterclaim was barred by the statute of limitations, the

court applied trial rule 13(J)(1) and allowed the defendant to assert the

time-barred claim to the extent that it diminished or defeated the plain-

tiffs claim. 94

IV. Analysis of the Indiana Approach

A. Common Law and Trial Rule 13(J)

The Crivaro court stated that neither the cases cited by the defendant

nor the construction of trial rule 13(J) supported by the plaintiff was

dispositive of the issue of the untimely counterclaim. 95 However, Indiana

common law may suggest that trial rule 13(J) should be interpreted to
allow time-barred claims regardless of the type of relief sought by the

defendant.

As a general rule, under early common law recoupment and set-off
procedures, a defendant could gain relief within the confines of the

action only by diminishing or defeating the plaintiffs claim.96 A defendant

K7469 N.E.2d at 1187.
*H
Id. at 1186-87.

""Id.

™Id. (citing Indiana Dep't of State Revenue v. Estate of Puett, 435 N.E.2d 298 (Ind.

Ct. App. 1982)).
"'172 Ind. App. 581, 361 N.E.2d 193 (1977).
n
Id. at 585, 361 N.E.2d at 196.

w469 N.E.2d at 1187.

*ld.

"Id. at 1185.

*C. Wright & A. Miller, supra note 35, § 1425, at 137 (1971).



1986] COMPULSORY COUNTERCLAIMS 799

could not seek affirmative relief. 97 In Crivaro, the court distinguished

the Eve9S and Zink" cases on the basis that the relief sought by the

defendants in those cases was defensive; therefore, the claims were not

barred. 100 Indiana common law was such that a defendant could recover
on a counterclaim only that which recoupment and setoff procedures

allowed. 101

However, the notion that counterclaim relief must be limited to that

which defeats or diminishes the opponent's relief apparently never had

full currency in Indiana equity practice. 102 Indiana allowed setoff in

certain cases independent of specific statutory authority. 103 Equitable

setoffs were not all mutual, 104 but were granted by courts in equity to

prevent irremediable injustice. 105 From the early courts' interpretation
and application of setoffs, it was clear that the relief sought in coun-

terclaims could exceed the amount or be different in kind from the

relief asked for by the plaintiff; a defendant could seek recovery in

excess of that sought by the plaintiff. 106 Further, setoff in the form of

affirmative relief was codified in the early 1900's 107 and later adopted

in the Indiana Rules of Trial Procedure. 108 Trial rule 13(C) continues

the liberal practice laid down by the Indiana courts and makes it clear
that there is no procedural limitation on the type of claim which may
be interposed in a counterclaim. 109

Trial rule 13(J) makes an exception for the filing of common law
recoupment and setoff after the statutory period has expired. 110 The

counterclaim must be compulsory in nature. 1 " The drafters used the

"Id.

w9\ Ind. 457 (1883).
w56 Ind. App. 677, 106 N.E. 881 (1914).
,00469 N.E.2d at 1185.
,0i See supra note 48; see also Teeters v. City Nat'l Bank of Auburn, 214 Ind. 498,

14 N.E.2d 1004 (1938). "Legal setoff is wholly statutory in Indiana and is a counteraction

growing out of an independent transaction pleaded by the defendant to counterbalance

the plaintiff's recovery and to recover judgment in his own favor." Id. at 501, 14 N.E.2d
at 1005.

U)2See Eigenman v. Clark, 21 Ind. App. 129, 51 N.E. 725 (1898).
,03See Wolcott v. Pierre, 100 Ind. App. 16, 188 N.E. 596 (1934).
ll
»Id.

,(,5Keightley v. Walls, 24 Ind. 205 (1865); McKinney v. Pure Oil Co., 129 Ind. App.

223, 154 N.E.2d 53 (1958); Anderson v. Biggs, 118 Ind. App. 266, 77 N.E.2d 909 (1948).
il*See Love v. Oldham, 22 Ind. 51 (1864); Gordon v. George, 12 Ind. 408 (1859);

Reardon v. Higgins, 39 Ind. App. 363, 79 N.E. 108 (1906).
107 See Ind. Code Ann. § 2-2508 (Burns 1948).
w*See Ind. R. Tr. P. 13(C).
,09 Ind. R. Tr. P. 13(C) comment (Discussion Draft 1968).

"°See Albert Johann & Sons Co., v. Echols, 143 Ind. App. 122, 238 N.E.2d 685
(1968); see Ind. R. Tr. P. 13(J).

u,See Ind. R. Tr. P. 13(J)(1).



800 INDIANA LAW REVIEW [Vol. 19:787

same defensive terms, such as "diminish" and "defeat," that were used

by the courts. 112 The question therefore arises as to whether trial rule

13(J) was drafted with the intent of making an exception for the entire

range of recovery available at common law under the compulsory coun-
terclaim, including the common law remedies of recoupment and setoff.
As noted, a defendant could seek affirmative or defensive relief under

common law setoff. 113 Although trial rule 13(J), in its present form,
uses defensive terms, it arguably was intended to allow affirmative

recovery. The issue, in light of common law, may not be whether the
compulsory counterclaim seeking affirmative relief is time-barred, but

whether trial rule 13(J) is intended to allow compulsory counterclaims

to be filed after the applicable statute of limitations for any purpose.

The use of defensive terms by the drafters of the trial rules is unfortunate

and has led to much confusion as to the actual purpose of this rule.
Common law and the exception supposedly created by trial rule 13(J)
suggest that compulsory counterclaims seeking relief in excess of that

sought by the plaintiff were not intended to be time-barred, but to be

included in the exception. 114 In its present form, however, trial rule 13(J)

does not come into play until the defendant's claim is deemed time-
barred.

B. Affirmative Versus Defensive Relief

Under the present trial rule 13(J), an additional problem arises as

to the difficulty that courts may have in distinguishing clearly between
counterclaims seeking affirmative relief and those primarily for defensive

purposes." 5 This distinction has been used by many courts, including
those in Indiana, to allow or to bar an untimely counterclaim. 116 Ac-

cording to this approach, if the defendant asserts the counterclaim after

the applicable statute of limitations has expired and he is seeking damages

in excess of the amount sought by the plaintiff, the counterclaim is

affirmative and therefore barred by the statute of limitations. 117 Such a

distinction becomes increasingly confusing when the defendant is not
seeking monetary damages, but instead is seeking equitable relief, such

as specific performance of a contract or injunctive or declaratory relief.

"-Id,

"'See Love v. Oldham, 22 Ind, 51 (1864); Gordon v. George, 12 Jnd, 408 (1859);
Reardon v. Higgins, 39 Ind. App. 363, 79 N.E. 208 (1906).

mSee supra notes 110-112 and accompanying text,
ui
See, e.g., Chauffeurs, Teamsters, Warehousemen and Helpers Local Union No.

135 v. Jefferson Trucking Co„ 473 F. Supp. 1255 (S,P. Ind. 1979); Di Norscia v, Tibbett,
50 Del. 118, 124 A,2d 715 (1956).

'"\Se<? supra note 17,
ulSee supra note 15 and accompanying text.



1986] COMPULSORY COUNTERCLAIMS 801

A counterclaim asserted by way of a set-off or recoupment or that
seeks to diminish or defeat the plaintiffs claim is defensive in nature." 8

At present, Indiana will permit the adjudication of untimely counterclaims

premised upon only defensive theories."9 This distinction as to the type
of relief sought by the defendant is confusing and inappropriate. There

is no explicit or implied provision in the Indiana Rules of Trial Procedure

that even suggests that compulsory counterclaims should be distinguished

in such a manner. 120

C. Language and Policy of Trial Rules Suggests Defendant's
Compulsory Counterclaim Not Intended to be Barred

The language and policy of the Indiana trial rules suggests that

compulsory counterclaims were not intended to be subject to the running

of the statute of limitations. Rule 13 requires that a defendant interpose

a counterclaim if it arises out of the "same transaction or occurrence"

that gave rise to the plaintiffs claim. 121 The term "transaction or oc-
currence' ' was intended to be interpreted broadly so as to avoid multiple

law suits. 122 The language expressly provides that "any" claims arising

from the "same transaction or occurrence' ' should be brought in the

same suit. 123 The rule does not prohibit untimely compulsory counter-

claims. Implicit in this rule is the notion that judicial economy would

best be served by litigating all claims, even those filed after the applicable

statute of limitations for the plaintiffs claim had expired. 124 As long as
the defendant's counterclaim arises out of the same transaction or oc-

currence, there is little reason why it should not be adjudicated with
other related claims in a single proceeding.

Yet, according to the holding in Crivaro, if a plaintiff files a

negligence action one day before the running of the statute of limitations,

the defendant, who would probably be unable to answer and file a
counterclaim before the statutory period expires, would be barred from

asserting that counterclaim if he sought relief greater than that sought

by the plaintiff. It would be irrelevant that the defendant's claim arose

from the same accident as the plaintiff's claim, except to the extent that

"*See supra notes 94-95 and accompanying text.
" 9See supra note 17.
,20See Ind. R. Tr. P. 13. Nor is there such a provision in the Federal Rules of Civil

Procedure. See Fed. R. Crv. P. 13.
,2, Ind. R. Tr. P. 13(A).
l22See Daube and Cord v. LaPorte County Farm Bureau Co-op. Ass'n, 454 N.E.2d

891, 893 (Ind. Ct. App. 1983); see also Ind. R. Tr. P. 13(A) comment (Discussion Draft

1968).

"Ind. R. Tr. P. 13(A).
,24
Cf. Bristol Farmers Mkt. and Auction Co. v. Arlen Realty & Dev. Corp., 589

F.2d 1214 (3d Cir. 1978).



802 INDIANA LAW REVIEW [Vol. 19:787

the court would allow the defendant to assert a claim which diminishes

or defeats the plaintiffs claim.
125 Thus, if the plaintiff is found fully

liable, the defendant will not be allowed to recover anything. The Indiana

position seemingly ignores the merit of the defendant's claim and punishes

the defendant for not bringing an independent action. Surely the leg-

islature did not intend such an unjust result when it adopted the Rules

of Trial Procedure.

In addressing the issue of the untimely counterclaim, the Crivaro

court directs its analysis toward the relief sought by the defendant. 126

This analysis is misdirected in that the court is adhering to the defensive

labels developed at common law as a means for barring untimely coun-
terclaims. Regardless of the defendant's actual losses from the accident

or incident that gave rise to the plaintiffs claim, the defendant is limited

to seeking only that relief which defeats or diminishes the plaintiffs

claim, if he wants his fair day in court. 127

Earlier Indiana cases and the trial rules themselves suggest that the

court's analysis should be directed toward the transaction or occurrence

that gave rise to the plaintiff's claim. 128 If the defendant's counterclaim

arose from the same transaction or occurrence as the plaintiff's cause

of action, the defendant's counterclaim is compulsory in nature, and he

should be allowed to have that claim litigated regardless of the relief

sought or the expiration of the limitation period. No further inquiry
should be made by the court.

Nowhere do the rules distinguish as to the type of relief sought by
the defendant-counterclaimant as a means for barring the untimely com-

pulsory counterclaim. 129 Similarly, there is nothing to suggest that com-

pulsory counterclaims were intended to be barred by statutes of limitation.

Indiana trial rule 13(A) was specifically enacted to avoid multiple law

suits arising from the same accident or incident, 130 yet a court would

suggest a defendant with a meritorious claim should have filed that

claim before the plaintiff filed his claim.

Allowing a time-barred counterclaim is entirely consistent with the

purposes and policies with which the rules were enacted by the state

legislature.
131 The rules of trial and appellate procedure were adopted

'"See Ind. R. Tr. P. 13(J).
,26469 N.E.2d at 1185.
l27See Ind. R. Tr. P. 13(J).
l2KSee Eve v. Louis, 91 Ind. 457 (1883); Zink v. Zink, 56 Ind. App. 677, 106 N.E.

381 (1914).
i2*See generally Ind. R. Tr. P. 13.
' wSee Daube and Cord v. LaPorte County Farm Bureau Co-op. Ass'n, 454 N.E.2d

891, 893 (Ind. Ct. App. 1983).
n, See supra note 27.



1986] COMPULSORY COUNTERCLAIMS 803

in order to simplify the procedural process. 132 One purpose of the rules
was to liberalize the practice of trial courts and courts of appeal, to

reduce technical burdens, not to increase them. 133 The courts and drafters

of the rules have suggested that, in order for the rules to achieve the

ends of orderly and speedy jurisprudence, the rules should be liberally

construed. 134 A broad construction of the rules would allow every litigant
the opportunity to have his day in court. Trial rule 13 is no exception.

Such a liberal interpretation is supported by trial rule 1, which

expressly states that the trial rules
*

'shall be construed to secure the just

. . . determination of every action." I35 Other trial rules also suggest that

this approach would comply with the basic policy of the rules. Rule 6

allows a defendant a time period within which to file a responsive

pleading. 136 Rule 13 requires that compulsory counterclaims be asserted

in the responsive pleading. 137 To deny the defendant the opportunity to
seek full recovery under a counterclaim that is not barred at the time

the plaintiff initiates the action denies the defendant the full time within

which he is authorized to file a responsive pleading. 138 Tolling the statute

of limitations for the compulsory counterclaim, in contrast, allows the

defendant his day in court. The tolling approach thus provides the

defendant the rights and benefits of the trial rules and is therefore

entirely consistent with the overall philosophy of the rules. 139

Additionally, the purpose of trial rule 13(J) is more correctly reflected

in the tolling approach. In a jurisdiction that adopts the tolling approach,

the defendant is allowed to assert the counterclaim if it was not barred

when the plaintiff instituted the suit, thus receiving the benefit of the

tolling of the limitations period in regard to his counterclaim. If the

defendant's counterclaim was already barred when the plaintiff filed his

complaint, trial rule 13(J) nevertheless allows the defendant to defeat

or diminish the plaintiffs claim. 140 According to Wright and Miller,

'"Southern Ind. Rural Elec. Coop. v. City of Tell City, 179 Ind. App. 217,

384 N.E.2d 1145 (1979).

'"See Perry v. Baron, 152 Ind. App. 29, 281 N.E.2d 544 (1972).
n4See American States Ins. Co. v. State ex rel. Jennings, 152 Ind. App. 422, 284

N.E.2d 873 (1972).

'"Ind. R. Tr. P. 1, which states:

Except as otherwise provided, these rules govern the procedure and practice in

all courts of the State of Indiana in all suits of a civil nature whether cognizable

as cases at law, in equity, or of statutory origin. They shall be construed to

secure the just, speedy and inexpensive determination of every action.
,36Ind. R. Tr. P. 6(C) states that "[a] responsive pleading required under the rules,

shall be served within twenty (20] days after service of the prior pleading."

'"Ind. R. Tr. P. 13(A).

"*See supra note 136.
mSee supra notes 132-34 and accompanying text.
l40See Ind. R. Tr. P. 13(J).



804 INDIANA LA W REVIEW [Vol. 19:787

although the defendant cannot seek affirmative relief on his counterclaim,

courts have properly held that the defendant may assert a counterclaim
to the extent that it defeats or diminishes the plaintiffs recovery.

141 This

interpretation makes the rule entirely consistent with rule 13 as a whole

because rule 13(J) is not applicable if the counterclaim could have been

asserted at the time the plaintiff initiated the action.

D. Purposes Served by the Statute of Limitations Are Not

Defeated by Allowing the Untimely Claim

The argument that the purpose of the statute of limitations would

be defeated by allowing untimely counterclaims to be litigated may be
misleading. 142 Indiana holds that limitation statutes are statutes of re-

pose. 143 These statutes are favored by the courts, but are not intended

to be construed so as to reach absurd results. 144 The primary purpose

of such statutes is to ensure that parties are given formal and reasonable

notice that a claim is being asserted against them 145 and to prevent the

assertion of stale or fraudulent claims. 146 The purpose of the statute of

limitations would not be defeated by litigating the untimely compulsory

counterclaim.

If the object of the statute of limitations is to give formal notice

to all parties that a claim is being asserted against them, 147 this purpose

is fulfilled when the plaintiff files the action before the expiration of

the applicable limitations period. As long as the plaintiffs action is

timely, whether the action was filed immediately after the accident or

occurrence or on the last day of the statutory period, this objective is

met once the defendant receives notice. As long as the defendant receives
notice, it is irrelevant whether he receives it after the expiration of the

limitations period. There is subsequently little justification for barring

the defendant's claim because both parties then have reasonable notice

of the timely filed action.

When the plaintiff asserts the original action, he has demonstrated
that he does not desire to lay to rest the underlying transaction or

occurrence. Because the plaintiffs claim is not considered stale if it is

mC. Wright & A. Miller, supra note 35, § 1419, at 110 (1971).
i42See Crivaro, 469 N.E.2d at 1184.

'"See Kemper v. Warren Petroleum Corp., 451 N.E.2d 1115 (Ind. Ct. App. 1983);
Indiana Dep't of State Revenue v. Estate of Puett, 435 N.E.2d 298 (Ind. Ct. App. 1982);

Bennett v. Bennett, 172 Ind. App. 581, 361 N.E.2d 193 (1977).

'"See Hamrick v. Indianapolis Humane Soc'y, Inc., 174 F. Supp. 403 (S.D. Ind.
1959), aff'd, 273 F.2d 7 (7th Cir. 1959), cert, denied, 362 U.S. 919 (1959).

'"See State ex. rel Young v. Noble Circuit Court, 263 Ind. 353, 332 N.E.2d 99

(1975).

'"See In re M.D.H., 437 N.E.2d 119 (Ind. Ct. App. 1982).
ulSee supra note 145.



1986] COMPULSORY COUNTERCLAIMS 805

filed before the applicable statute of limitations, it is illogical to say

that the defendant's counterclaim, arising out of the same incident, is

stale simply because it is filed some time later. As long as the defendant's
counterclaim arises from the same transaction or occurrence, it should

be no more stale than the plaintiffs claim. 148 The court's initial inquiry
should thus be limited to matters directly related to that event which

triggered the plaintiff's claim. Any concern for potentially stale evidence
regarding the defendant's counterclaim is minimal if evidence of the

same transaction or occurrence is not stale as to the plaintiff's claim. 149

This necessarily close relationship between the timely claim and the

untimely counterclaim ensures that the latter is not stale in the sense

that evidence and witnesses are no longer available; 150 the evidence is

equally available for adjudicating all claims arising out of the same

transaction or occurrence.

Allowing a party in a motor vehicle collision to wait until the last

moment to file a complaint in hopes of evading liability or reducing
the extent of exposure on a counterclaim only encourages last minute

filing of claims. 151 Such a policy cannot be rationalized as consistent

with the purposes of statutes of limitations. 152 Allowing the defendant

to assert the compulsory counterclaim may, in fact, reduce the filing

of fraudulent claims by plaintiffs. A plaintiff would be less likely to
assert a fraudulent claim near the end of the applicable statute of

limitations if it were clear that the defendant would be allowed to counter

the plaintiff's claim and seek affirmative recovery.

Allowing the defendant to assert the time-barred claim thus promotes

justice and efficiency. All interested parties are likely to have notice of

any counterclaim filed in response to the original claim, and evidence

regarding the underlying transaction or occurrence is equally available

for litigating both claims. In addition, allowing the defendant's coun-

terclaim reduces fraudulent claims and removes any incentive for attorneys

to postpone filing the original complaint until shortly before the statute

of limitations runs.

E. Potential for an Independent Action Should Not Bar the

Counterclaim

The Crivaro court suggested that if the defendant had a meritorious

claim, he should have initiated an independent action. 153 However, the

l4
*See Armstrong v. Logsdon, 469 S.W.2d 342, 343 (Ky. Ct. App. 1971).

,4
*/tf.

,50C. Wright & A. Miller, supra note 35, § 1419, at 109, 110 (1971).
'"Brief of Appellant at 10-11, Crivaro, 469 N.E.2d 1184 (Ind. Ct. App. 1984).
lS2

/d.

,M 469 N.E.2d at 1187 nn. 7,8.



806 INDIANA LAW REVIEW [Vol. 19:787

failure of a defendant to assert an independent action does not mean

that his claim lacks merit.
154 A defendant's inaction may be the result

of several factors. It may reflect an uncounseled ignorance of the law
regarding his rights and privileges. 155 The defendant may also have
intended to lay the matter to rest, an intention that was unexpectedly

altered by the filing of the plaintiffs claim. 156 Additionally, the defendant

may be completely surprised that the plaintiff would bring any action
based upon the particular incident. Yet, regardless of the specific reasons

why a defendant chose not to assert an independent action, as long as
none of the policies underpinning the statute of limitations are defeated,

the potentially meritorious counterclaim should be litigated in the same

proceeding.

F. Justice and Fairness Would Best Be Served by Adjudicating the
Untimely Counterclaim.

The policies of justice and fair play would best be served by allowing

the adjudication of both the plaintiffs timely claim and the defendant's

untimely counterclaim. The defendant's counterclaim should, of course,

be brought within a reasonable time during the pendency of the lawsuit. 157

Simple justice dictates that if the plaintiff has the opportunity to present

a claim based on a particular event, the defendant should not be prevented

from having his claim adjudicated because of a mere technicality. 158

After all, it is the defendant who is being hauled into court against his
will by the plaintiff.

Judicial and legislative action can mitigate the harshness of denying

the defendant's counterclaim. 159 A majority of courts now hold that,
where a plaintiff institutes an action in a timely manner, the running

of the statute of limitations is tolled as long as the counterclaim was

not barred at the commencement of the plaintiff's action. 160 Legislatures
have enacted statutes to the same effect. 161

The Crivaro court declined the invitation to adopt a tolling rule,

for it perceived such action as judicial legislation. 162 Yet, it is the Indiana

'"Although Crivaro was seeking $60,000 in damages compared to Rader's $1,000,

the court is the proper forum to determine the validity of each claim. See id. at 1187.

See generally Foster v. New, 407 N.E.2d 271 (Ind. Ct. App. 1980). "The complaint is
not subject to dismissal unless it appears to a certainty that [a party] would not be entitled

to relief under any set of facts." Id. at 273 (citation omitted).

'"See Sobieski, supra note 37, at 293-94.
li
"Id. at 294.

'"See Wallace v. Patterson, 85 Mich. App. 266, 271 N.W.2d 194 (1978), rev'd on
other grounds, 405 Mich. 825, 289 N.W.2d 924 (1979).

""See Armstrong v. Logsdon, 469 S.W.2d 342, 343 (Ky. Ct. App. 1971).
'"See supra notes 14 and 49-56 and accompanying text.

"•"See supra note 36.
XM See supra notes 49-56 and accompanying text.
,H469 N.E.2d at 1187 (quoting Di Norscia, 50 Del. at 120, 124 A.2d at 717).



1986] COMPULSORY COUNTERCLAIMS 807

Supreme Court's prerogative to establish Indiana procedural rules. 163 The
Indiana General Assembly has reaffirmed this inherent power of the

state supreme court to adopt, amend and rescind rules affecting matters
of procedure and practice. 164 Thus, the Indiana Supreme Court could

pass on this most important issue either directly or on appeal from the

lower courts. If the Indiana courts decline to adopt a tolling rule, the

legislature could enact such a statute to remedy the present situation,

as it is the legislature that has the authority to adopt or amend statutes
of limitation. 165

V. Suggested Statutory Response

State legislatures have enacted statutes that allow the defendant to

assert a counterclaim after the expiration of the applicable statute of

limitations if the counterclaim was not barred at the time the original

complaint was filed. 166 The statutes make no distinction as to the type
of relief sought or the type of action from which the claim arose 167 and

allow the defendant to assert an untimely compulsory counterclaim. 168

Such statutes have been upheld on judicial review. In Indiana, however,

the Rules of Trial Procedure are silent regarding how to deal with an
untimely compulsory counterclaim. 169 The courts have held that the

untimely counterclaim may not be litigated, but the rationale for this
result seems to conflict with the policies behind the procedural rules and

statutes of limitation. 170

A statute broad enough to allow the defendant to assert any claim
that arises out of the same transaction or occurrence that gave rise to

the plaintiffs action 171 would be consistent with trial rule 13. The

defendant should, however, be required to assert his claim within a

reasonable time after receiving notice of the plaintiffs claim. 172 Addi-

tionally, the statute should require that the defendant's claim be ac-

{biSee Otterman v. Industrial Bd., Violent Crime Compensation Div., 473 N.E.2d

1021 (Ind. Ct. App. 1985). '*[I]t is the exclusive prerogative of the Indiana Supreme Court

to establish procedural rules governing the course of litigation, and any legislative enactment

which infringes upon that perogative must yield." Id. (citations omitted).
iMSee Ind. Code § 34-5-1-2 (West 1983).
^Crivaro, 469 N.E.2d 1184.
s<*See supra note 49.

^See id. and accompanying text.
,("See Benckendorf v. Burlington N. R.R., 112 111. App. 3d 658, 445 N.E.2d 837

(1984); Seligson v. Chase Manhattan Bank, Nat'l Ass'n., 50 A.D.2d 206, 376 N.Y.S.2d

899 (1975).

'""See generally Ind. R. Tr. P. 13.

""See supra note 17 and accompanying text.
tn See supra note 49 and accompanying text.
,12See generally Ind. R. Tr. P. 6(C). A reasonable time may be the twenty [20] day

period required under the trial rules for responsive pleadings.



808 INDIANA LAW REVIEW [Vol. 19:787

tionable when the plaintiffs complaint was filed. If the defendant's

claim was not valid at that time, trial rule 13(J)(1) would apply to allow

the defendant to assert a claim that arises out of the same transaction

or occurrence and that seeks to diminish or defeat the opposing party's

claim. 173 Thus, for all practical purposes, the suggested statute would

effectively toll the limitations period as to the defendant's claim.

VI. Conclusion

A defendant should be allowed to assert a counterclaim in excess
of the amount sought by the plaintiff so long as the claim was not

barred by the applicable statue of limitations at the time the plaintiff's

complaint was filed and the counterclaim arose out of the same trans-

action or occurrence as the plaintiff's action. The reasoning in Crivaro

is not consistent with the purposes behind the statute of limitations.

The policies of the statute of limitations are not related to the type of

relief or the amount of recovery, but instead address only the question

of the timeliness of the plaintiff's claim.

Present law in Indiana concerning the effect of the statute of lim-

itations on compulsory counterclaims is in need of revision. The current

focus of judicial analysis is on the type of relief sought in the coun-

terclaim, but the rationale is often confusing and arguably incorrect in

light of Indiana common law, the language and policies of the trial
rules, and the purposes of statutes of limitation.

A tolling rule should be adopted by the Indiana Supreme Court or
enacted by the legislature, with regard to statutes of limitation, to remedy

this procedural problem. The rule should allow the assertion of the

untimely counterclaim, regardless of the type or amount of relief sought,

so long as both claims arose out of the same transaction or occurrence

and the defendant's claim was not barred when the plaintiff's claim was
interposed. The counterclaim should, however, be filed within a rea-
sonable time during the pendency of the lawsuit. Such a response by

the Indiana Supreme Court or the legislature would lead to fairer pro-

cedural jurisprudence in Indiana.

John R. Gaskin

n
*See Ind. R. Tr. P. 13(J).