Allie v. Ionata

• Citation: 12 Fla. L. Weekly 35,503 So.2d 1237
• Decision Date: 05 January 1987
• Docket Number: No. 66818,66818
• Parties: 12 Fla. L. Weekly 35 Robert C. ALLIE and Rosemary Allie, Petitioners, v. Fred IONATA, et ux., et al., Respondents.
• Court: United States State Supreme Court of Florida

Page 1237

503 So.2d 1237

12 Fla. L. Weekly 35

Robert C. ALLIE and Rosemary Allie, Petitioners, v. Fred IONATA, et ux., et al., Respondents.

No. 66818.

Supreme Court of Florida.

Jan. 5, 1987.

Rehearings Denied April 13, 1987.

Walter A. Ketcham, Jr. of Walker, Miller and Ketcham, P.A., Orlando, for petitioners.

Gordon H. Harris and G. Robertson Dilg of Gray, Harris and Robinson, P.A., Orlando, for respondents.

BARKETT, Justice.

This cause is before the Court on petition to review the holding in Allie v. Ionata, 466 So.2d 1108 (Fla. 5th DCA 1985), in which the Fifth District acknowledged direct conflict with Cherney v. Moody, 413 So.2d 866 (Fla. 1st DCA 1982), and certified to this Court a question of great public importance. We have jurisdiction. Art. V, § 3(b)(4), Fla. Const.

In the late 1970s, respondent Ionata purchased several parcels of land from petitioner Allie. At the time of the purchases, Allie served as Ionata's accountant and financial adviser and recommended the purchase as a tax shelter for Ionata's income. Several years later, after consulting with a second accountant, Ionata discovered that Allie had sold the tracts at severely over-inflated prices. Ionata then stopped making payments on the contracts and sued for restitution and rescission, alleging fraud and breach of a fiduciary duty. In response, Allie pled the relevant statute of limitations ¹ as an affirmative defense and counterclaimed for the unpaid balance on the notes for two of the tracts.

The trial court held Allie's counterclaim in abeyance and submitted Ionata's claim for rescission to the jury. The jury determined that although Allie was not guilty of actual fraud, he had nonetheless breached his fiduciary duty to Ionata. Upon this verdict, the trial judge entered judgment in favor of Ionata and denied Allie's counterclaim. On appeal, the Fifth District held that Ionata's action as to two of the contracts (Parcels 1 and 2) was barred by the statute of limitations, and reversed and remanded for entry of judgment for Allie. See Allie v. Ionata, 417 So.2d 1077 (Fla. 5th DCA), review denied, 424 So.2d 761 (Fla.1982) (hereinafter Allie I ).

After remand, Allie revived his pending counterclaim for the balance due on the two tracts in question. In response, Ionata interposed Allie's fiduciary breach and pled recoupment as a defense, requesting restitution and rescission of the contracts. The trial court granted Ionata's motion for a summary final judgment on his (now) defensive claim of recoupment which included affirmative relief. On the second appeal, after rehearing, the district court reversed in part, limiting Ionata's recovery to the amount claimed by Allie. Allie, 466 So.2d at 1113 (hereinafter Allie II ). Recognizing the conflict with Cherney, the district court certified to this Court the following question:

Does the running of the statute of limitation on an independent cause of action bar the recovery of an affirmative judgment in recoupment on a compulsory counterclaim?

Id.

It is well established that the defense of recoupment may be asserted even though the underlying claim is barred by the applicable statute of limitations as an independent cause of action. Payne v. Nicholson, 100 Fla. 1459, 131 So. 324, 326 (1930). See also Beekner v. L.P. Kaufman, Inc., 145 Fla. 152, 198 So. 794 (1940) (upholding the right to raise the defense of usury when a lender sues on a usury-infected contract even though the claim of usury as an affirmative cause of action would have been barred by the statute of limitations). The court below recognized this principle when it held that "a party otherwise barred from instituting an action because of a time limitation is freed from that bar when he acts in a defensive posture." Allie II, 466 So.2d at 1111. Moreover, in Florida, a plea in recoupment may be used to obtain affirmative relief. See Jacksonville Paper Co. v. Smith & Winchester Mfg. Co., 147 Fla. 311, 2 So.2d 890 (1941). The question is whether these two concepts should be merged in a rule which permits the recovery of an affirmative judgment in recoupment when the statute of limitations would bar the desired relief as an independent cause of action. We are persuaded, as was the court in Cherney, that "the intent of the present rules [of civil procedure] will be best served by holding that a compulsory counterclaim in recoupment permits the recovery of an affirmative judgment even though barred as an independent cause of action by the running of the statute of limitations." 413 So.2d at 869. We adopt the analysis of Justice Shaw in Cherney delineating the history of the plea of recoupment which culminated in the current Florida Rule of Civil Procedure 1.170.

We are further persuaded by consideration of the purposes of statutes of limitation. The expiration of a statute of limitation does not resolve the underlying merits of the consequently barred claim in favor of either party; it merely cuts off the remedy of the party who has slept on his rights. See Hoagland v. Railway Express Agency, 75 So.2d 822, 827 (Fla.1954). See also Osmundsen v. Todd Pacific Shipyard, 755 F.2d 730, 733 (9th Cir.1985); McClure v. Middletown Hospital Ass'n, 603 F.Supp. 1365, 1369 (S.D.Ohio 1985). Limitation statutes are designed as shields to protect defendants against unreasonable delays in filing law suits and to prevent unexpected enforcement of stale claims. Nardone v. Reynolds, 333 So.2d 25, 36 (Fla.1976); Foremost Properties, Inc. v. Gladman, 100 So.2d 669, 672 (Fla. 1st DCA 1958). In Nardone, we explained that statutes of limitation

afford parties needed protection against the necessity of defending claims which, because of their antiquity, would place the defendant at a grave disadvantage. In such cases how resolutely unfair it would be to award one who has willfully or carelessly slept on his legal rights an opportunity to enforce an unfresh claim against a party who is left to shield himself from liability with nothing more than tattered or faded memories, misplaced or discarded records, and missing or deceased witnesses.

333 So.2d at 36 (emphasis in original).

Such statutes protect defendants against claims asserted when all proper vouchers and evidence are lost and after the facts have become obscure from the lapse of time, defective memory or death and removal of witnesses. Whaley v. Wotring, 225 So.2d 177, 181 (Fla. 1st DCA 1969). It is the recognition of the inapplicability of these purposes which has led courts to develop the rule that one may raise as a defense a claim which would otherwise be barred by the statute of limitations. See Beekner v. L.P. Kaufman, Inc.; Payne v. Nicholson. A party who seeks affirmative relief, whether through an original complaint or a counterclaim, effectively asserts that he is prepared to prosecute all aspects of that matter. Having sufficient knowledge of the facts to support a complaint and sufficient evidence to prosecute that complaint, he must be prepared to defend against any affirmative defenses arising therefrom. Thus, once a party files an affirmative action, he cannot thereafter profess to be surprised by or prejudiced by affirmative defenses or compulsory counterclaims that stem from that action. The same rationale which permits the defense of recoupment at all on a claim which would be barred by the statute of limitations supports the recovery of affirmative relief. We can perceive no logical reason to prohibit an affirmative judgment in such circumstances.

Accordingly, we answer the certified question in the negative. This answer, however, does not resolve the unique fact situation presented in this case. The bar to affirmative relief for Ionata lies not in the passage of the statute of limitations but in the existence in this case of the amended final judgment against Ionata on the same claim he is now asserting in recoupment. A final judgment is one that determines the rights of the parties and disposes of the case on its merits, leaving nothing more to be done in the cause except execution. Although a final judgment for Ionata was originally entered on the jury's verdict, this final judgment was appealed and reversed in Allie I. Without any objection, the trial court then entered an amended final judgment for Allie and against Ionata on Ionata's claim. This final judgment was never appealed. Nor did Ionata seek to defer entry of the judgment on this issue until the resolution of Allie's counterclaim and Ionata's recoupment claim. Ionata now attacks the finality of this judgment by arguing that the doctrine of res judicata is not applicable because the judgment did not dispose of the cause on its merits, but merely determined that the action was barred by the statute of limitations. In support of this argument, Ionata first appeals to the general rule that statutes of limitation are rules of procedure. See, e.g., Martin v. United States, 436 F.Supp. 535, 536-37 (S.D.Cal.1977); Strauss v. Sillin, 393 So.2d 1205, 1206 (Fla. 2d DCA 1981). Ionata next draws attention to the generally recognized principle that, because limitation statutes are procedural in character their expiration does not affect the underlying substantive rights of the parties involved. See Piazza Properties, Ltd. v. State Department of Motor Vehicles, 71 Cal.App.3d 622, 628, 138 Cal.Rptr. 357, 360 (1977). See also Henry v. Halifax Hospital District, 368 So.2d 432, 433 (Fla. 1st DCA 1979). It necessarily follows from these two principles, Ionata contends, that a judgment dismissing a claim as barred by a statute of limitation determines procedural matters only, and cannot be deemed an adjudication on the merits. We are compelled both by public policy considerations and the overwhelming weight of authority to disagree.

Under the early common law, a dismissal on the basis of a limitations statute was not always regarded as a determination on the merits for res judicata purposes. See 1B J. Moore, Moore's Federal...