In Illinois, Counterclaims For Contribution and Indemnity Must Be Filed Within 2 Years of Service of Process in the Underlying Action and Are Not "Saved" by Statute Allowing an Untimely Claim to Be Maintained as a Counterclaim or Set-Off
September, 2004
In Barragan v. Osman Construction Co., 2004 WL 1886464, the Illinois Appellate Court handed down an important opinion regarding the interplay between §§13-204 and 13-207 of the Illinois Code of Civil Procedure. Section 13-207 provides that a defendant may plead a counterclaim that is otherwise barred by the applicable statute of limitations. Section 13-204 provides, in pertinent part, that no action for contribution or indemnity may be filed more than two years after the party seeking contribution or indemnity has been served with process in the underlying action. In a split decision, the appellate court majority determined that the filing of a counterclaim for contribution or indemnity is governed by §13-204 and is thus time-barred if not filed within two years regardless of its technical status as a counterclaim.
Facts
In Barragan, a general contractor, (“Osman”) and architect, (“Casco”) were served with plaintiff’s complaint on August 6, 1997. Casco filed a counterclaim for contribution against Osman on July 29, 1999. Osman filed a counterclaim for contribution against Casco on December 7, 2000. Casco moved to dismiss Osman’s counterclaim because it was barred by the two-year statute of limitations for contribution actions set forth in §13-204. The trial court granted Casco’s motion to dismiss and Osman appealed.
Analysis
The appellate court majority affirmed the dismissal of Osman’s counterclaim on the ground that it was time-barred, determining that the legislative history of §13-204 and §13-207 revealed that §13-204 prevailed over §13-207. The majority noted that the purpose of §13-207 is to prevent plaintiffs from intentionally filing their initial complaints as late as possible, thereby depriving defendants of a reasonable opportunity to file counterclaims within the original limitations period. This legislative purpose, however, is not applicable to §13-204. Under §13-204, any claim for contribution or indemnity, regardless of its technical status as a counterclaim, must be filed within two years of the date of service of the underlying action or of knowledge of the wrong action or omission, whichever is later.
The majority also looked to the specific language of both statutory sections. While §13-207 does not specifically mention actions for contribution and indemnity, §13-204 specifically states that it applies to “all actions for contribution or indemnity and shall preempt, as to contribution and indemnity actions only, all other statutes of limitation or repose.” The majority thus determined that:
Under §13-204, Osman had to file its action for contribution within two years after being served with process. That is, no later than August 6, 1999. Yet, because Osman’s action was a counterclaim, the subject of §13-207, and Osman owned the claim before it was barred, §13-207 seemingly would apply. But §13-204 (c) preempts §13-207: “the applicable limitations [two-years] * * * shall preempt, as to contribution and indemnity actions only, all other statutes of limitation * * *.” 735 ILCS 5/213-204 (c) (West 2000). Osman’s counterclaim was an action for contribution. The two-year limitation in §13-204 applies to such actions and cannot be overridden by a different limitation provision. (emphasis added)
The majority disagreed with Osman’s argument that §13-207 is an exception to the two-year statute of limitations required by §13-204. Osman was not deprived of a reasonable opportunity to file its counterclaim and thus, the factual situation anticipated by §13-207 was not present in Barragan. The majority also stated that even if the plain language and legislative intent of §13-204 and §13-207 were insufficient to resolve this conflict, §13-204 would still prevail because §13-204 is more specific and was more recently enacted, noting that Osman based its arguments on cases which pre-date the current applicable version of §13-204.
Learning Point:
The dissent opined that §13-207 applies to any counterclaim, including those for contribution and indemnity, and thus excepted claims for contribution and indemnity from the purview of §13-204 where such claims are pleaded as counterclaims. We will monitor this new and important area of Illinois law and update our readers as new developments occur.
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