Riley v. Montgomery, 83-1358

Citation11 OBR 319,463 N.E.2d 1246,11 Ohio St.3d 75
Decision Date06 June 1984
Docket NumberNo. 83-1358,83-1358
Parties, 11 O.B.R. 319 RILEY, Appellee, v. MONTGOMERY et al., Appellants.
CourtUnited States State Supreme Court of Ohio

Syllabus by the Court

1. A claim of a defendant which would be barred by the statute of limitations if brought in an action for affirmative relief is available as a defense or under the common-law theory of recoupment, when the claim arises out of the same transaction as the plaintiff's claim for relief, and when it is offered only to reduce the plaintiff's right to relief.

2. Where a party moves for summary judgment asserting the statute of limitations the other party may not merely rely on his pleadings, but is under an affirmative duty to present, by affidavit or otherwise, a genuine issue of material fact demonstrating that the statute of limitations is not applicable.

Appellee, J.T. Riley, sued appellants, Louise B. Montgomery and Jean M. Robbins, for the unpaid balance of a note for $16,097.61 given by them to pay attorney fees. Riley alleged payment had been demanded and refused. Appellants responded, denying that Riley had performed all legal services required of him and counterclaiming for negligence and breach of fiduciary obligation.

Riley had been retained to settle the estate of Montgomery's mother in 1977. Montgomery was appointed executrix of the estate and is an heir of the estate. Robbins is also an heir of the estate. The note was executed on October 1, 1977. Appellants alleged that Riley negligently prepared an Ohio Estate Tax return for the estate on October 13, 1977, and breached his fiduciary duty by failing to advise Montgomery of her right to appeal a subsequent tax underpayment assessment.

Riley's legal services for the estate were completed on September 5, 1978, but he did not bring suit on the note until 1981.

Riley moved for summary judgment in the trial court on the grounds that appellants' denial and counterclaims were barred by the one-year statute of limitations for malpractice, R.C. 2305.11. Appellants argued, first, that the one-year statute of limitations did not apply to their counterclaims, and second, that the counterclaims should be considered as defenses under Civ.R. 8(C), unaffected by any statute of limitations. Appellants filed no affidavits or other evidence in support of this defense.

The trial court granted Riley's motion for summary judgment on liability, holding that appellants' claims were barred by the statute of limitations, R.C. 2305.11. The parties then stipulated to "damages" of $8,690.04, after credit for the partial payment of Montgomery. The court of appeals affirmed.

This cause is now before this court upon the allowance of a motion to certify the record.

Ruppert, Bronson & Chicarelli Co., L.P.A., and James D. Ruppert, Franklin, for appellee.

H. Charles Wagner and Victor T. Whisman, Dayton, for appellants.

GREY, Justice.


Preliminary Issues

A Filing of Notice of Appeal

Riley urges the court to dismiss this appeal because a copy of appellants' notice of appeal from the court of appeals was not filed in the Supreme Court within the thirty days prescribed by Section 1(B), Rule I, Rules of Practice of the Supreme Court. Section 1, Rule II, Rules of Practice does provide that this court may dismiss such an appeal for lack of prosecution, but failure to file is not a jurisdictional defect. We are not inclined to dismiss in this case where the delay was a mere four days and appellee was not prejudiced in any way.

B The Applicable Statute of Limitations

The parties apparently no longer dispute the applicability of the one-year statute of limitations of R.C. 2305.11 to appellants' claims of negligence and breach of trust. In any event, appellants have not raised this issue in their propositions of law, and it will not be considered in this appeal.

II Substantive Issues

The first issue in this case is whether a claim of negligence, breach of trust, or malpractice may be considered as a defense or recoupment to an attorney's suit for fees grounded on a written note, when the statute of limitations for an original action based on malpractice has run. A second issue is the effect of appellants' failure to produce affidavits or other evidence supporting the recoupment defense in response to a motion for summary judgment as required by Civ.R. 56(E).

This court has not previously been asked to rule on the issue of the defensive use of a time-barred claim. Several of the state's appellate districts have ruled in favor of such use when the time-barred claim is intimately related to the claim sued upon.

In Conway v. Ogier (1961), 115 Ohio App. 251, 184 N.E.2d 681 , the defendants counterclaimed for malpractice and loss of consortium in a physician's suit for fees. The court allowed the malpractice claim as a defense, despite the fact that an affirmative claim would be barred by the statute of limitations. The court held at 252-253 that:

"A claim of malpractice is, of course, an allegation of non-performance, or at least effective performance of services by the doctor. To that extent, it is a true defense and not affected by limitations. A claim of malpractice asserted as here, in an action for the value of the services from which the malpractice arises, is a cross-demand within Section 2309.19, Revised Code. It arises from the same transaction and subject of action, and came into existence simultaneously with the plaintiff's claim for services. Cross-demands are not barred by limitations but, as the statute provides, 'must be deemed compensated so far as they equal each other.' In re Estate of Butler (1940), 137 Ohio St. 96, 28 N.E.2d 186 ; Shriner v. Price, Exr. (1944), 74 Ohio App. 373, 59 N.E.2d 152 ; Cohn v. Krauss (1943), 67 N.E.2d 62, 45 Ohio Law Abs. 148. See also, 1 A.L.R. (2d), 661, Section 23. It also constitutes a proper claim for commonlaw recoupment and, for the additional reason, is not barred."

In Cauffiel Machinery Co. v. Eastern Steel & Metal Co. (1978), 59 Ohio App.2d 1, 391 N.E.2d 743 , the court reviewed a case where a note had been given in payment for a machine which had allegedly malfunctioned, breaching the supplier's contractual obligations. The court held at 5-6 that:

" * * * [A]ppellant, by bringing suit only on the note, cannot avoid defenses to the underlying contract. * * * Affirmative relief would be based on breach of contract and, as such, would be barred by the statute of limitations. * * * [Citation omitted.] The statute of limitations does not, however, operate to bar strict defenses, that is, defenses which grow out of the same transaction connected with plaintiff's claim. Summers v. Connolly (1953), 159 Ohio St. 396, 112 N.E.2d 391 . Appellee's defense by way of recoupment was not barred and was properly considered. Recoupment is a defense which arises out of the same transaction as plaintiff's claim, is a claim of right to reduce the amount demanded and can be had only to an extent sufficient to satisfy the plaintiff's claim. As noted in 20 American Jurisprudence 2d [1965] 235, Counterclaim, Recoupment, and Setoff, Section 11:

" '* * * [R]ecoupment goes to the justice of the plaintiff's claim, and no affirmative judgment can be had thereon * * *. [I]t does not confess the indebtedness alleged in the complaint, as is understood by a setoff, but its proposition is that the plaintiff's claim is based on a particular contract or transaction and that to entitle the plaintiff to the sum claimed, he must prove compliance with certain obligations of the contract; that he failed to do so; and therefore that the defendant has been so damaged in the transaction that the plaintiff is not entitled to recover.'

"See also 67 American Jurisprudence 2d [1973] 828, Sales, Section 634 supra. In the case sub judice plaintiff made a prima facie case upon presentation of the note; however, defendant did not lose its right of recoupment. Recoupment survives as long as the main cause of action survives and is not barred by a period of limitation so long as the main action is timely. Conway v. Ogier (1961), 115 Ohio App. 251, 184 N.E.2d 681 . Cf. R.C. 2309.19, 14 Ohio Jurisprudence 2d [1955] 132, Counterclaim, Section 23. See also 34 Ohio Jurisprudence 2d [1958] 511, Limitation of Actions, Section 24."

In Easy Living v. Whitehead (1979), 65 Ohio App.2d 206, 417 N.E.2d 591 , the court held that the one-year statute of limitations on an affirmative claim for statutory damages under the federal Truth-in-Lending Act did not bar recoupment of damages from a creditor suing on the non-complying note. The court at 212 reasoned that recoupment, as a defense, survives as long as the main action is timely brought.

" * * * Both claims arose out of the same contract. Easy Living sued to recover a debt owing on the contract and Whitehead is alleging the illegality of certain terms of the contract. To be a recoupment the defendant's claim need not be of the same form nor controlled by the same body of law as the plaintiff's. Comments, Truth in Lending and the Statute of Limitations, 221 Vill.L.Rev. 904. Since Whitehead's defense arose out of the same transaction as the claim against her and since she claimed damages no larger than the claim against her, the defense was in the nature of a recoupment rather than a set-off, and Section 1640(h), Title 15, U.S.Code, is not applicable."

A review of the issue in other jurisdictions reveals a similar treatment. The general rule is that statutes of limitations bar affirmative counterclaims, but do not affect claims offered in defense or recoupment, arising from the same transaction that forms the basis for the plaintiff's complaint. Cooper v. Reaves (Ala.1978), 365 So.2d 670, 671; W.J. Kroeger Co. v. Travelers Indemnity Co., (1975), 112 Ariz. 285, 287, 541 P.2d 385, 387; Sears, Roebuck & Co. v. Goudie (D.C.App.1972), 290 A.2d 826, certiorari denied (1972), 409 U.S. 1049, 93 S.Ct. 523, 34 L.Ed.2d 501; Horace Mann Ins. Co. v. DeMirza (Fla.App....

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