No. COA12-534 (2012)
Sheila Denice Blanton (Blanton) filed a complaint on 14 July 2010 alleging that Ethel Myers King (King) ran a red light and struck Blanton's vehicle, damaging Blanton's vehicle and injuring Blanton. Blanton alleged that King was negligent and that King's negligence "was the sole, direct and proximate cause of the accident, injuries and damages suffered by [Blanton] and her motor vehicle."
King's insurance company, InsTrust Insurance Company (InsTrust), provided an attorney to defend King in the suit filed by Blanton. In May 2011 the parties reached an agreement whereby Blanton agreed to voluntarily dismiss her claims with prejudice in exchange for a cash settlement. Blanton's action was voluntarily dismissed with prejudice on 3 May 2011. The record does not include any answer filed in response to Blanton's 14 July 2010 complaint, but Blanton and King agree that King did not file any counterclaim in response to Blanton's complaint.
King filed the present action on 30 June 2011. In her complaint, King alleged that it was Blanton who ran a red light and caused the 23 April 2010 collision, and that Blanton's negligence was the sole proximate cause of injury to King. Blanton filed an answer and motions to dismiss on 3 August 2011, asserting that King's action should have been filed as a compulsory counterclaim to Blanton's 14 July 2010 action and that King therefore lost her right to bring her negligence claim by failing to include it as a counterclaim. The trial court heard Blanton's motions to dismiss on 19 September 2011. Because the trial court considered documents outside the pleadings, it treated Blanton's motions to dismiss as motions for summary judgment, granted summary judgment in favor of Blanton, and dismissed King's action with prejudice. King appeals.
The sole issue on appeal is whether the trial court erred in granting summary judgment in favor of Blanton.
Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows that "there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citation omitted).
King argues that the trial court erred by granting summary judgment in favor of Blanton because King had not had the opportunity to prosecute her claim against Blanton. Blanton argued to the trial court, and argues on appeal, that King's action against Blanton was a compulsory counterclaim to Blanton's 14 July 2010 action and, because King failed to file this compulsory counterclaim, King is estopped from filing this claim now as a separate action.
N.C. Gen. Stat. § 1A-1, Rule 13(a) (2011)1 governs compulsory counterclaims, and states: "Compulsory counterclaims.—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 occurrence 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."
Our Court has explained Rule 13(a) as follows: "The purpose of Rule 13(a), making certain counterclaims compulsory, is to enable one court to resolve 'all related claims in one action, thereby avoiding a wasteful multiplicity of litigation.' Determining whether a particular claim 'arises out of the same transaction or occurrence' requires consideration of '(1) whether the issues of fact and law are largely the same; (2) whether substantially the same evidence is involved in each action; and (3) whether there is a logical relationship between the two actions.' In addition, there must be 'a logical relationship in the nature of the actions and the remedies sought.' " Kemp v. Spivey, 166 N.C. App. 456, 458, 602 S.E.2d 686, 688 (2004) (citations omitted).
We hold that King's claim "arises out of the same transaction or occurrence." The same collision is at the heart of both actions; the only dispute is where the fault for the collision lay. King's claim was, therefore, a compulsory counterclaim to Blanton's 14 July 2010 action. The remaining question is whether Rule 13(a) required dismissal of King's claim.
In Kemp this Court addressed a similar situation involving an automobile accident in which a party who had failed to file a compulsory counterclaim attempted to institute an action after the initial matter had been resolved by settlement. Kemp acknowledged that different considerations might apply when an action is settled rather than decided on the merits and looked to federal authority for guidance, including Dindo v. Whitney.
In Dindo the First Circuit observed that courts have characterized the bar arising out of Rule 13(a) variously: some view a judgment as res judicata of whatever could have been pleaded in a compulsory counterclaim, while others view the rule as creating an estoppel or waiver. The latter approach seems more appropriate when the case is settled rather than tried. The purposes of the rule are to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters. If a case has been tried, protection of the court and the parties dictates there should be no further directly related litigation; but if a case is settled, the court has not been greatly burdened and the parties can protect themselves by demanding cross-releases. In such circumstances, absent a release, principles of equitable estoppel may be preferable. If the party, clearly having opportunity to assert a counterclaim, knew of its existence, the fact that there was no final judgment on the merits is immaterial, and a Rule 13(a) bar is appropriate; the party's conscious inaction created the additional litigation the rule was designed to prevent. See Dindo v. Whitney, 451 F.2d 1, 3 (1st Cir. 1971). Kemp also cited LaFollette v. Herron, 211 F. Supp. 919 (E.D. Tenn. 1962), for the proposition that one should examine the actions of the party filing the subsequent action to determine whether Rule 13(a) should bar that action, focusing on whether the settlement of the original action deprived the party of a reasonable opportunity to file the compulsory counterclaim.
This Court in Kemp adopted the waiver/estoppel approach for situations where the original action had been settled. Kemp determined that the plaintiff there had been aware of the relevant events and circumstances surrounding the claims, had an opportunity to present her counterclaim prior to settlement, and was represented by attorneys. Kemp suggested those facts could be enough to find the plaintiff estopped from prosecuting the action because she had not filed it as a compulsory counterclaim. Kemp was remanded because the trial court had dismissed the matter pursuant to a Rule 12(b)(6) motion that was converted into a motion for summary judgment without affording the parties a full opportunity to present evidence on estoppel.
Unlike in Kemp, the trial court here recognized that the motion to dismiss had been converted into a motion for summary judgment, held a hearing, and the attorneys for the parties argued Kemp and the issue of estoppel. King had her opportunity to present all pertinent material on estoppel.
King and Blanton were the two drivers involved in the 23 April 2010 collision. Blanton initiated a negligence action against King on 14 July 2010 and King's insurer provided an attorney for her defense. When an attorney is hired by an insurer to defend an insured, "the attorney's primary allegiance must remain with the insured," even though the attorney may be representing the insurer as well. Nationwide Mut. Fire Ins. Co. v. Bourlon, 172 N.C. App. 595, 602, 617 S.E.2d 40, 45 (2005) (citation omitted).
King had more than nine months between the time Blanton filed the 14 July 2010 action and the time of the settlement and voluntary dismissal of that action on 3 May 2011. King makes no argument, and the record includes nothing indicating, that King was unaware of her right to file a counterclaim or that she was not advised she would forfeit her right if she did not file the compulsory counterclaim. Consistent with the approach in Dindo and Kemp, we hold that, on these facts, King's failure to file her compulsory counterclaim constituted a waiver and estops her from bringing a new action for negligence based upon the same events that were at the heart of Blanton's 14 July 2010 action. King's argument is without merit.
Affirmed.
Report per Rule 30(e).
BRYANT, Judge, concurring.
THIGPEN, Judge, concurring.