Law School Case Brief
Podhorn v. Paragon Grp., Inc. - 606 F. Supp. 185 (E.D. Mo. 1985)
Missouri Supreme Court Rule 55.32(a) requires the filing of compulsory counterclaims and provides, in part: 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.
Defendant landlord, Paragon Group, Inc. ("Paragon"), filed a petition in state court against its leasees, plaintiffs Paul and Liana Podhorn, for rent due. The Podhorns did not file a counterclaim in the state court action, and on March 29, 1984, default judgment was entered against the Podhorns in the sum of $1,113.33, plus costs. The Podhorns then filed a civil action against Paragon in federal district court alleging constructive eviction, breach of implied warranty of habitability, false swearing, false credit report, breach of implied covenant of quiet enjoyment, negligence, abuse of process, prima facie tort, conversion, and initiation of malicious prosecution. Paragon filed a motion to dismiss the Podhorns' claim on the ground that it should have been filed as a compulsory counterclaim in the state court action.
Should the court grant Paragon's motion to dismiss?
The court granted the motion to dismiss. The court held that the case arose out of the transaction or occurrence that gave rise to Paragon's rent action in the earlier state court case, namely the Padhorns' tenancy at Paragon's apartment. Accordingly, the Padhorns were required to file the claims raised in federal court as compulsory counterclaims in the state court action, and their failure to do so barred them from having those claims heard in a separate suit. The court rejected the Podhorns' argument that since their claims exceeded the statutory limit, the state court in which Paragon filed suit was without jurisdiction to hear their counterclaim if filed. The court ruled that under Missouri court rules, in the event a counterclaim was not triable in a specific court an associate because it exceeded that court's jurisdictional amount in controversy, such case was to be certified for assignment to a court that could hear the claim. In short, although the Podhorns' counterclaim may not have been triable before the state court of record, the Podhorns were not relieved of their obligation to file it.
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