Dindo was driving Whitney's
car while Whitney rode along. Whitney reached over the steering wheel,
Dindo lost control of the car and there was a crash.
Dindo was injured and
Whitney's car was damaged.
Whitney's insurance company
insured Dindo, but warned him that the damages were more than the policy
allowed so he would be liable for the rest. Dindo and the insurer settled
out of court.
At the time Dindo did not
hire a lawyer and did not realize that there might be contributory negligence on Whitney's part.
A year later, Dindo spoke to a
lawyer, realized that he might not be legally 100% responsible for the
accident, and sued Whitney's insurance company to recover the amount they
claimed he was liable for.
The Trial Court dismissed the
case, saying that the issue became res judicata when the first claim was settled. Dindo
The insurer argued that
Dindo could have raised a counterclaim but didn't, and was now barred from reopening the issue due to
the compulsory counterclaim
rule (Rule 13(a)).
Dindo argued that the compulsory
counterclaim rule (Rule 13(a))
was inapplicable since the original case was settled and never received a
judgment on the merits.
The Appellate Court reversed.
The Appellate Court felt
that the purpose of Rule 13(a)
was to reduce the burden on the Courts, but since the original case was
settled, there was no burden.
The Court agreed
that if Dindo knew he had a counterclaim and failed to raise it, that would be enough for equitable
estoppel and he could not raise it
now. But since he didn't know he had a claim, it wouldn't be too much
trouble for the Court to hear the merits of his case.