(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued September 12, 1994 -- Decided November 17, 1994
CLIFFORD, J., writing for a unanimous Court.
On July 16, 1988, an automobile driven by Susan L. Molnar collided with a motorcycle operated by
Douglas M. Hedden. As a result of the collision, both parties were injured. Hedden was left paralyzed
below the waist.
On May 31, 1990, about six weeks before the running of the two-year statute of limitations, Molnar
filed a personal-injury lawsuit against Hedden. Hedden, through attorneys provided by his motor vehicle
insurance carrier, filed an answer to the complaint on June 27, 1990, about two-and-one-half weeks before
the expiration of the statute of limitations. His answer included the separate defense of Molnar's
contributory negligence but did not contain any counterclaim seeking affirmative relief.
Molnar's automobile insurer, Selective Insurance Co. (Selective), paid personal-injury-protection
(PIP) benefits to Molnar. On August 20, 1990, Selective filed a separate complaint, in Molnar's name,
against Hedden seeking reimbursement for the PIP payments to Molnar.
In June 1991, the parties settled Molnar's personal-injury claim for $15,000, the limit of Hedden's
bodily-injury-insurance coverage. Selective thereafter determined that it would not pursue reimbursement of
its PIP payments. Hedden's former attorneys forwarded to Molnar's attorney a check for $15,000,
representing the amount of the settlement. One month later, on September 16, 1991, a Stipulation of
Dismissal signed by only Selective's attorneys was filed with the court. On October 22, 1991, the trial court
dismissed without prejudice Molnar's PIP suit for lack of prosecution.
Hedden retained a new attorney and, on November 1, 1991, that attorney filed a substitution of
attorney with the court. On November 12, 1991, Hedden's current attorney filed a motion to amend
Hedden's answer to the complaint to assert a personal-injury counterclaim against Molnar. By that time, the
two-year statutory limitations period, beginning July 18, 1988 and ending July 18, 1990, had expired. Molnar
opposed the motion to amend and the trial court denied it.
The Appellate Division reversed the decision of the trial court, finding that at the time Hedden
attempted to assert his counterclaim, Molnar's action was still pending because the trial court's dismissal
applied only to Selective's PIP claim. The court also ruled that when a defendant files a late claim that is
intertwined with a plaintiff's timely-filed cause of action, the statute of limitations should not bar the
counterclaim because that counterclaim would not be stale and would relate back to the original claim.
The Appellate Division noted further that when plaintiffs file suit, they are put on notice of possible
counterclaims. The court found that Molnar had actual notice of Hedden's counterclaim because Hedden
had charged Molnar with negligence as an affirmative defense. Lastly, the Appellate Division ruled that even
when the statute of limitations does not bar the counterclaim, the counterclaimant must nevertheless first
move to file an amended pleading and that Hedden had met all the standards that apply to late motions to
amend.
Based on its findings, the Appellate Division reversed the trial court's order denying Hedden's
amendment and directed the entry of an order permitting the counterclaim to be filed and served.
The Supreme Court granted certification.
HELD: The statute of limitations precluded Hedden's personal-injury counterclaim filed after the two-year limitations period had expired.
1. The statute of limitations protects against litigation of stale claims, stimulates diligent prosecution of
claims, penalizes dilatoriness, and serves as a measure of repose. When a potential claimant knows that he
or she has been injured and that the injury is the fault of another, the statute of limitations begins to run. In
cases in which courts have permitted a party to pursue a late claim, courts have not extended the statute of
limitations but rather have found that because of the relation-back doctrine, the statute did not preclude the
claim. (pp. 7-9)
2. In focusing on concerns of substantial justice, procedural fairness, and prevention of a surprise, the Court
is satisfied that the statute of limitations had run by the time Hedden sought to file his counterclaim. Both
the PIP suit and the personal-injury suit effectively had been disposed of by that time. The personal-injury
complaint was disposed of by settlement, execution of a release, and payment of $15,000 by Hedden's liability
insurer. The PIP-reimbursement complaint was settled by voluntary relinquishment of that claim, followed
by the trial court's dismissal for failure to prosecute. Thus, because the statute of limitations had run, the
relation-back doctrine is inapplicable. (pp. 9-11)
3. The Court does not rule on whether Hedden's counterclaim, brought after the statute of limitations
expired but while Molnar's claim was still "alive," could be saved by application of the relation-back doctrine.
That determination will be left for a case that provides a more appropriate factual background. In addition,
the Court does not determine whether Molnar's suit tolled the statute of limitations because the facts of this
case do not implicate the tolling question. (pp. 11-12)
Judgment of the Appellate Division is REVERSED.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and
STEIN join in JUSTICE CLIFFORD's opinion.
SUPREME COURT OF NEW JERSEY
A-
16 September Term 1994
SUSAN L. MOLNAR,
Plaintiff-Appellant,
v.
DOUGLAS M. HEDDEN,
Defendant-Respondent.
Argued September 12, 1994 -- Decided November 17, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at
260 N.J. Super. 133 (1992).
Mark S. Hochman argued the cause for
appellant (Gertler & Hanna, attorneys).
John J. Markwardt argued the cause for
respondent (Markwardt & Katkocin, attorneys;
Ronald M. Katkocin, on the brief).
The opinion of the Court was delivered by
CLIFFORD, J.
We granted certification,
135 N.J. 303 (1994), to review the
Appellate Division's determination that the statute of
limitations did not bar defendant's personal-injury counterclaim.
The counterclaim arose out of the same accident that formed the
basis of plaintiff's complaint, but defendant did not seek leave
to file it until after the two-year period of the statute of
limitations had run. Having concluded that plaintiff's action
was still pending when defendant sought leave to file his
counterclaim, the court below held that under the circumstances
defendant's counterclaim was "a litigation component embraced by
the entire controversy doctrine" and was therefore "eligible for
the relation-back principle of [Rule 4:9-3] and consequently for
protection from the limitations bar."
260 N.J. Super. 133, 140
(1992).
We reverse.
On July 16, 1988, an automobile driven by plaintiff, Susan
L. Molnar, collided with a motorcycle operated by defendant,
Douglas M. Hedden. The collision, which injured both parties,
left defendant paralyzed below the waist.
Plaintiff, through her personal attorney, sought recovery for her injuries by filing a complaint against defendant on May 31, 1990, about six weeks before the running of the two-year period of limitations, N.J.S.A. 2A:14-2. Defendant, through his attorneys provided by his liability insurer (referred to herein as his "former attorneys"), filed an answer to the complaint on June 27, 1990, about two-and-one-half weeks before the expiration of the statutory period. The answer included a separate defense
of plaintiff's contributory negligence but contained no
counterclaim for affirmative relief.
Because Molnar's automobile insurer, Selective Insurance
Company (Selective), had paid personal-injury-protection (PIP)
benefits to her, it filed a separate complaint in plaintiff's
name against defendant on August 20, 1990, seeking reimbursement
for its PIP payments, presumably as provided by N.J.S.A. 39:6A-9.1. Defendant, however, was never served with that complaint,
so he filed no answer to it -- despite which the trial court
granted Selective's motion to consolidate its suit with
plaintiff's suit for personal injuries. The consolidation order,
dated September 14, 1990, bears the captions of both cases but
carries the docket number of plaintiff's personal-injury case
only, with no indication of the docket number of Selective's
complaint. See Rule 4:38-1(c)(1) (requiring that all papers
filed in consolidated action "include the caption and docket
number of each separate action, that of the earliest instituted
action to be listed first").
After discovery, the parties settled plaintiff's personal-injury claim in June 1991 for $15,000, the limit of defendant's bodily-injury-insurance coverage. Although the record is unclear surrounding the filing of a Stipulation of Dismissal, as we read the various representations of counsel Selective's attorneys,
apparently aware that plaintiff's personal-injury case had been
settled, "confirmed" on August 15, 1991, that they "would not be
pursuing" Selective's claim for reimbursement of its PIP
payments. The next day defendant's former attorneys forwarded to
plaintiff's attorney a check for $15,000, representing the amount
of the settlement. One month thereafter, on September 16, 1991,
a Stipulation of Dismissal bearing the caption and docket number
of the personal-injury case and signed only by Selective's
attorneys was filed with the court.
Thereafter the trial court, on its own motion, gave notice
of its intention to dismiss plaintiff's complaint for lack of
prosecution. The notice bore the docket number of Selective's
complaint. On October 22, 1991, the court ordered that that
action be dismissed without prejudice and that the court's order
"not supersede any previously filed judgment, order, stipulation
of dismissal or other closing documents of record."
The next phase of the case began on November 1, 1991, when
defendant's current attorney filed a notice of substitution of
attorney, dated October 29, 1991, and signed by defendant's
current and former attorneys. That was followed, on November 12,
1991, by the current attorney's motion to amend defendant's
answer to the complaint to assert a personal-injury counterclaim
against plaintiff. By that time the statute of limitations' two-year period, which had begun on July 18, 1988, had long since
expired. Plaintiff opposed the motion and the trial court denied
it.
The Appellate Division reversed. The court below held that the running of the time period set forth in the statute of limitations before a party moves to amend its answer to include a related counterclaim does not, by itself, foreclose that claim. 260 N.J. Super. at 136. In so holding, the Appellate Division declared that the initial question in a "relation-back" problem is whether the underlying action is still pending, so that the counterclaim has a cause or a claim to which it can relate back. If the underlying claim is not still pending, the counterclaim is barred by the statute of limitations and the entire-controversy doctrine. Id. at 139. Here, the Appellate Division found that at the time defendant sought to assert his counterclaim, plaintiff's action technically was still pending because the trial court's dismissal applied only to Selective's claim for reimbursement. It based that finding on the facts that, first, the dismissal order, which bore the docket number of Selective's action, technically represented the dismissal of only that action; and, second, only the subrogation attorney had signed the stipulation of dismissal of the action bearing the docket number of the personal-injury case, contrary to Rule 4:37-1(a), which
requires all parties who have appeared in an action to sign the
stipulation of dismissal. Id. at 140.
After summarizing cases that hold that a plaintiff who has
filed a claim within time against a defendant is not time-barred
from filing against that defendant additional late claims that
have arisen out of the same transaction, the Appellate Division
found no difference in notice to the opposing party between a
plaintiff who asserts a late claim and a defendant who asserts a
late counterclaim. It ruled that therefore a late counterclaim,
like a late claim, is eligible for the relation-back principle of
Rule 4:9-3 and hence is protected from the bar of the statute of
limitations if it falls within the entire-controversy doctrine.
The court based that ruling on the fact that New Jersey courts
apply procedural rules liberally. Id. at 140-42.
In so holding, the Appellate Division accepted the proposition that a statute of limitations is designed to bar stale claims, and therefore when a defendant files a late claim that is intertwined with plaintiff's timely-filed cause of action, the statute of limitations should not bar the counterclaim, because the counterclaim would not be stale. Id. at 143-44. The court adopted the view that when plaintiffs file suit, they are on notice of possible counterclaims. It noted that that policy is consonant with the federal practice of
tolling the statute of limitations for compulsory counterclaims
on the assumptions that at the time plaintiffs file their suits,
they are on notice of possible counterclaims, and that compulsory
counterclaims are not "stale" in the sense of evidence or
witnesses having disappeared, because their close relationships
to the plaintiffs' timely claims renders their accessibility for
adjudication of the counterclaim as likely as for the main claim.
Id. at 145.
Additionally, the Appellate Division found that plaintiff
had actual notice of defendant's counterclaim because defendant
had charged plaintiff with negligence as an affirmative defense.
Id. at 145-46. Therefore, plaintiff "was apprised that proof of
her affirmative claim would require a full exploration of the
asserted negligence of both parties." Id. at 146.
The Appellate Division then declared that even when the statute of limitations does not bar the counterclaim, the counterclaimant must nevertheless first move to file an amended pleading. A motion seeking leave to include a counterclaim must first meet the standards that apply to all late motions to amend. Ibid. Those standards require that permitting the amendment would serve the interests of justice and would not unduly prejudice any party to the action; that the counterclaim have facial merit and not be pursued in bad faith; that the failure
timely to pursue the counterclaim is excusable; and that the
counterclaimant would be unable to bring the counterclaim in a
separate action because of the statute of limitations, the
entire-controversy doctrine, or both. Id. at 146-47. Because
the court below was satisfied that the foregoing standards had
been met, it reversed the trial court's order denying the
amendment and directed the entry of an order permitting the
counterclaim to be filed and served. Id. at 147.
As we have recently pointed out, the principal consideration behind statutes of limitations is fairness to the defendant. Grunwald v. Bronkesh, 131 N.J. 483, 496-97 (1993). Limitations periods serve that essential consideration by protecting against the litigation of stale claims, stimulating diligent prosecution of claims, penalizing dilatoriness, and serving as a measure of repose. Grunwald, supra, 131 N.J. at 497 (stating first three principles); Rivera v. Prudential Property & Casualty Ins. Co., 104 N.J. 32, 39 (1986) (stating fourth).
A statute of limitations represents an "arbitrary line" drawn by the Legislature that "fixes the time within which suit must be bought, [and] it does not invite variations depending on what the equities of a case may be." Rivera, supra, 104 N.J. at
40. When a potential claimant knows that he or she has been
injured and that the injury is the fault of another, the statute
of limitations begins running. P.T. & L. Constr. Co. v. Madigan
& Hyland, Inc.,
245 N.J. Super. 201, 209 (App. Div. 1991). In
cases in which courts have permitted a party to pursue a late
claim, courts have not extended the statute of limitations but
rather have found that because of the relation-back doctrine, the
statute did not constitute a bar. See Cockinos v. GAF Corp.,
259 N.J. Super. 204, 209 (Law Div. 1992) (allowing plaintiff's late
claim of wrongful death resulting from exposure to asbestos to
relate back to original complaint based on injuries caused by
exposure to asbestos). In contrast, when the statute has run,
this Court has refused to allow a party to assert a late claim in
a case in which the claimant showed no evidence of wrongful or
dilatory conduct by the opposing party. Rivera, supra, 104 N.J.
at 39. If equitable considerations exist, courts use them to
determine whether the purposes of the statute of limitations are
served by its application, but not to decide whether the statute
of limitations ran or was tolled.
In determining whether the statute of limitations has run, we are mindful of the admonition stated in Tackling v. Chrysler Corp., 77 N.J. Super. 12, 16 (Law Div. 1962), that "[c]ourts should disregard subtleties and answer technical objections by an honest effort to determine the real issues on their merits and to
do substantial justice between litigants." Looking to the real
issues in this case and focusing on concerns of substantial
justice, procedural fairness, and prevention of surprise, we are
satisfied that the statute of limitations had indeed run by the
time defendant sought to file his counterclaim. Both of the
claims embraced in the complaints filed in plaintiff's name had
effectively been disposed of by that time -- the personal-injury
complaint by settlement, execution of a release, and payment of
$15,000 by defendant's liability insurer; and the PIP-reimbursement complaint by voluntary relinquishment of that
claim, followed by the trial court's dismissal for failure to
prosecute.
Lawyers' disregard of basic rules of drafting simple
documents that are filed routinely in our courts every day -
orders of consolidation, stipulations of dismissal -- or, worse,
their ignorance of those rules, and their failure to abide by the
simple requirement of including correct docket numbers on those
documents would, were it to become widespread, create havoc with
our courts' filing system. Inattention to such rudimentary
requirements can make tracking cases next to impossible and can,
as here, cause needless confusion to, and unnecessary expenditure
of time by, those court personnel who are charged with following
the status of civil cases.
The procedural missteps recited above, however, cannot mask
the fact that the lawyers in this case knew that by the time
defendant's former lawyers sent a check for $15,000 to
plaintiff's personal-injury attorney, all existing claims were
extinguished. The former lawyers had insisted on receiving
closing papers that would close out all claims against defendant,
and had withheld the personal-injury settlement check until
receiving those papers. The PIP carrier's lawyer acknowledged
that he gave up the claim for reimbursement of PIP payments the
day before the $15,000 personal-injury settlement check was
released. And when the lawyers' woefully ineffectual efforts
left an undisposed-of case on the court's records -- and only on
the court's records -- the trial court entered an order of
dismissal. If anything in the procedural confusion of this case
is clear, it is that by the time defendant tried to file his
counterclaim, nothing remained to which the counterclaim could
relate back.
Applying the governing principles to the foregoing facts, we conclude that because the statute of limitations has run, the relation-back doctrine of Rule 4:9-3 is inapplicable. The relation-back Rule "does not authorize amendment of the pleading to allege a new cause of action against another party to the litigation [that] is barred by the running of the statute of limitations." Pressler, Current N.J. Court Rules, comment 1 on
R. 4:9-3 (1994). That is because ordinarily, after the statute
of limitations has run, the opposing party "acquire[s] a vested
right to be forever free of [the relevant claim]." McGlone v.
Corbi,
59 N.J. 86, 94 (1971).
Therefore, we do not rule on whether defendant's
counterclaim, whether considered germane or new, pressed after
the statute of limitations expired but while plaintiff's claim
was still "alive" could be saved by virtue of the relation-back
doctrine. Because we find nothing to which defendant's amendment
can relate back, we save such a determination for a case that
provides the proper factual support.
As well, we do not determine whether plaintiff's suit tolled defendant's statute of limitations. The reasons for finding such a tolling is to prevent a plaintiff from waiting until shortly before the statute of limitations has expired to file to prevent a defendant from asserting a cause of action. That circumstance is not present in this case. Nothing in the record suggests that plaintiff delayed filing, and defendant had time within which to file a counterclaim before the running of the statute of limitations. Cases that toll the statute of limitations, thereby allowing the defendant to assert a counterclaim after the statute of limitations would normally have run, do so because of the inherent inconsistency in permitting plaintiffs to amend
complaints after the statute of limitations has expired but
refusing defendants similar opportunities. Here, plaintiff,
having accepted $15,000 in settlement of her claim, could not be
heard thereafter to amend her claim or to press a new claim.
Therefore, denying defendant an opportunity to pursue his late
counterclaim on a "tolling" theory does not create the
inconsistency that otherwise might justify a tolling of the
statute. The facts of this case do not implicate the tolling
question.
Because defendant's motion cannot stand independent of
plaintiff's claim, and because we treat plaintiff's claim as
dismissed, we reverse the judgment below. No costs.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion.
NO. A-16 SEPTEMBER TERM 1994
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
DECIDED November 17, 1994
Chief Justice Wilentz PRESIDING
OPINION BY Justice Clifford
CONCURRING OPINION BY
DISSENTING OPINION BY