Rule 13.Counterclaim and cross-claim

Reporter’s Notes—2018 Amendment: Rule 13(j) is abrogated. Justices’ courts were eliminated and their functions transferred to the District Court by Act No. 249 of 1973 (Adj. Sess.). The District Court was subsequently redesignated as the criminal division of the superior court and its civil jurisdiction transferred to that court by Act No. 154 of 2009 (Adj. Sess.), §§ 7c (codified at 4 V.S.A. § 32), 237(b)(3) (effective July 1, 2010).

Reporter’s Notes—2002 Amendment: Rules 13(a), (b), (g) are amended to reflect the abrogation of the District Court Civil Rules and the resulting applicability of the Vermont Rules of Civil Procedure to District Court civil actions. See Reporter’s Notes to simultaneous amendment of Rule 1. Compulsory counterclaims and cross-claims were not permitted under former D.C.C.R. 13.

Reporter’s Notes—1999 Amendment: Rule 13(a) is amended by deleting clause (3), which had excepted claims for damage covered by liability insurance from the compulsory counterclaim rule. As amended, Rule 13(a) is now identical to Federal Rule 13(a). Conforming changes will be made in Forms 1 and 1A. The original exclusion was “intended to preserve to the insured defendant the practical opportunity of obtaining independent counsel to pursue an affirmative claim,” which if compulsory “would either be handled by the insurance company’s counsel, with the attendant possibility of a conflict of interest, or the trial would be encumbered by the presence of two counsel, with possible confusion as to the right to control the presentation of the case.” Reporter’s Notes to Rule 13(a). Despite its salutary purpose, this provision resulted in a trap for counsel, illustrated by Berisha v. Hardy, 144 Vt. 136, 474 A.2d 90 (1984), which held that a party who had failed to assert an affirmative claim in a pending automobile negligence case could not relitigate the question of liability in an independent action after a jury verdict for the opposing party on the issue of negligence in the original action. The Court, 144 Vt. at 139, 474 A.2d at 91, noted that the Reporter’s Notes to Rule 13(b) contained a warning of the danger that the doctrine of collateral estoppel could lead to this result. Under the amended rule, the defendant in such a case will be on notice that failure to file the claim as a counterclaim will be a bar to its subsequent presentation.

Reporter’s Notes: This rule, which is similar to Federal Rule 13, makes two important and desirable changes in Vermont practice: (1) Rule 13(a) makes compulsory the assertion of any counterclaim arising out of the same transaction or occurrence as an opposing claim, with three specific exceptions. (2) Rule 13(b) permits any claim whatsoever to be asserted as a counterclaim. Previously, defendant could, in a contract action at law, set off an opposing contract claim, 12 V.S.A. §§ 5461-5478 (now superseded), but such set-off was not compulsory and, although it extended to unliquidated damages, did not include tort claims. See Hutchins v. George, 92 Vt. 371, 104 A. 108 (1918); Carver v. Adams, 38 Vt. 500 (1866); Vaillancourt v. Gover, 112 Vt. 24, 20 A.2d 122 (1941); Hudson v. Nute, 45 Vt. 66 (1872). Defendants were permitted a somewhat broader range of relief in chancery, where the court exercised jurisdiction by way of cross bill to bring before it all matters between the parties germane to the original bill. See former Chancery Rule 27; Brown v. Derway, 109 Vt. 37, 192 A. 16 (1937); Hardwick Trust Co. v. Dodge, 116 Vt. 349, 75 A.2d 660 (1950). Cf. S. L. Garand Co. v. Everlasting Memorial Works, Inc., 128 Vt. 359, 264 A.2d 776 (1970). Chancery also asserted jurisdiction of original bills for set-off where law would not grant such relief. See 12 V.S.A. §§ 4324, 5478 (now superseded); McLane v. Johnson, 59 Vt. 237, 9 A. 837 (1886). Elimination of multiple litigation is one of the principal purposes of the rules, which Rule 13 serves by compelling claims involving the same facts, and permitting other claims, to be brought together. Any danger of confusion or prejudice from the procedure is obviated by the power of the court under Rule 42(b) to order separate trials. See generally, 1A Barron & Holtzoff, Federal Practice and Procedure § 391 (Wright ed. 1961). Rule 13(a) merely states which counterclaims shall be compulsory. A defendant who fails to assert such a counterclaim will be precluded from a later independent action upon it not by the rule itself, but by way of waiver or estoppel arising from the failure to plead. See 1A Barron & Holtzoff, supra, § 394.1. It should be noted that the court has broad discretion to mitigate the potentially harsh effect of the rule by permitting an omitted counterclaim to be set up as an amendment under Rule 13(f). Furthermore, a defendant who defaults prior to answer or who submits to a consent judgment is not barred, because estoppel should not operate in such circumstances. See 1A Barron & Holtzoff § 394.1; Kent, Rhode Island Practice: Rules of Civil Procedure with Commentaries, § 13.3 (1969); cf. 1 Field, McKusick & Wroth, Maine Civil Practice § 13.3 (1970). Rule 13(a) departs from the federal rule in one important respect. Claims of a defendant whose defense will be managed by his liability insurer are not compulsory counterclaims. This provision, like the exclusion of automobile claims in Maine and Rhode Island Rules 13(a), is intended to preserve to the insured defendant the practical opportunity of obtaining independent counsel to pursue an affirmative claim. If such claims were compulsory they would either be handled by the insurance company’s counsel, with the attendant possibility of a conflict of interest, or the trial would be encumbered by the presence of two counsel, with possible confusion as to the right to control the presentation of the case. Although counterclaims in liability insurance cases are no longer compulsory, defendant may well wish to assert such a claim as a permissive counterclaim under Rule 13(b), which applies to “any claim against an opposing party.” Despite the permissive nature of such claims, judgment against the insured defendant may still preclude a subsequent affirmative action against the plaintiff. This is so, not because of the rule, but because facts crucial to the affirmative claim that have been determined adversely to defendant in the prior suit may not be relitigated by virtue of that branch of res judicata called collateral estoppel, or estoppel by verdict. See Trapeni v. Walker, 120 Vt. 510, 144 A.2d 831 (1958); Gilley v. Jarvis, 94 Vt. 135, 109 A. 41 (1920); Restatement of Judgments § 68(1). Rule 13(c), in permitting recovery exceeding the opposing claim, states what was previously the practice in set-off. See 12 V.S.A. § 5469 (now superseded); Franklin Co. Realty Corp. v. Cunnius, 127 Vt. 452, 252 A.2d 524 (1969). Rule 13(d) is intended to make clear that when the government brings suit, the existence of Rule 13 does not in itself operate as a waiver of sovereign immunity so as to let a counterclaim be brought against the state in the absence of legislative waiver of immunity. Rules 13(e) and (f) are both in accord with the rules’ liberal amendment policy. See Reporter’s Notes to Rule 15. Rule 13(e) changes Vermont law. See 12 V.S.A. § 5464 (now superseded). Rule 13(g) makes generally available relief against co-parties that was hitherto recognized against codefendants in chancery. See former Chancery Rule 27; St. Germain’s Adm’r v. Tuttle, 114 Vt. 263, 44 A.2d 137 (1945). Rules 13(h) and (i) are necessary to give complete relief between all parties. Rule 13(h) embodies a practice previously recognized in chancery. See Brown v. Derway, 109 Vt. 37, 192 A. 16 (1937). Rule 13(j), which is not in the federal rule, is based on Maine Rule 13(j). There are no compulsory counterclaims in justice courts or in the District Court, but the principles of efficiency and economy which lie behind Rule 13 require that claims arising out of the same transaction or occurrence as the opposing claim be asserted once an action is in the county court for trial. Similarly, there seems no reason not to permit all other counterclaims and cross-claims in appealed and transferred actions. In the District Court, any counterclaims may be pleaded, with automatic transfer to a county court when the amount demanded exceeds $5000. See D.C.C.R. 13, 76. There will be situations in which other counterclaims exist and should be allowed in the county court. Of course, if plaintiff has a counterclaim arising out of the same transaction or occurrence as defendant’s counterclaim, plaintiff is required to file such claim.