## Facts

- In April 1996, Darryl L. Maynard borrowed $69,999.52 from Household Finance Corporation III (HFC), secured by a mortgage on his home.
- At the time of the loan, Maynard’s property was already encumbered by two prior mortgages held by Advanta Mortgage Corporation and American General Home Equity, Inc.
- Maynard alleged HFC represented the loan would refinance the existing mortgages by paying them off from the loan proceeds.
- HFC paid a substantial amount to Advanta in May 1996, but the payment did not satisfy that mortgage, and HFC paid nothing to American General.
- Maynard became aware in May 1996 that the prior mortgages had not been satisfied, leaving him with three outstanding home-loan obligations.
- HFC alleged Maynard defaulted starting with the payment due in November 2000 and filed a foreclosure action in May 2001.
- Maynard answered and asserted a counterclaim for fraud in the inducement and breach of contract based on HFC’s alleged failure to satisfy the prior mortgages as promised.
- The trial court entered final summary judgment of foreclosure for HFC and ruled Maynard’s counterclaim was barred by the statute of limitations because it was not pleaded as “recoupment.”

## Issues

1. Whether a mortgagor’s compulsory counterclaim for fraud in the inducement and breach of contract, filed in response to a foreclosure complaint after the limitations period for those claims has run, is barred by the statute of limitations.
2. Whether a counterclaim must be expressly labeled as “recoupment” to avoid dismissal on limitations grounds when it arises from the same transaction as the foreclosure claim.

## Decision

- The appellate court reversed the final summary judgment and remanded.
- The court held Maynard’s counterclaim qualified as recoupment because it arose from the same loan-and-mortgage transaction as the foreclosure claim.
- Because the counterclaim was recoupment asserted defensively, the statute of limitations did not bar it.
- The court rejected the argument that Maynard had to use the word “recoupment” in his pleading; substance controlled over labeling.

## Legal Principles

- A compulsory counterclaim in the nature of recoupment may be asserted defensively even if an independent action on the same claim would be time-barred.
- Recoupment requires the counterclaim to arise from the same transaction or occurrence as the plaintiff’s claim and to operate to reduce or defeat the plaintiff’s recovery rather than obtain unrelated affirmative relief.
- Courts determine whether a counterclaim is recoupment by examining the claim’s substance and its connection to the plaintiff’s cause of action, not by the counterclaim’s caption.

## Conclusion

The court held that a mortgagor may assert otherwise time-barred fraud and contract claims as a compulsory counterclaim in recoupment in a foreclosure action when the claims arise from the same loan transaction, and the counterclaim need not be expressly labeled as “recoupment” to avoid a limitations bar.


Maynard v. Household Fin. Corp. III, 861 So. 2d 1204 (Fla. 2d DCA 2003)