Ann:By contrast, intrinsic frauds are those which took place during trial and which might very well have been discovered through legal skill and good pre-trial and courtroom diligence. There might very well have been some excellent means of discrediting or otherwise impeaching a plaintiff's witness which went undiscovered throughout the trial of a matter (perhaps due to failure to ask the right interrogatories or to depose the witness in advance of trial or to have explored some avenue with other witnesses). The subsequent discovery of such impeaching evidence may very well not be a means to set aside a judgment absent the actual perjury or fraud of the other side. And even where perjury or fraud is belatedly discovered, court rules in most places limit the time period during which a matter can be reopened and a judgment set aside on this basis.
Statutes of limitations vary from state to state and from matter to matter. That is, limitations of suits for breach of contract will vary from limitations on various torts, including fraud.
But one must also distinguish between limitations on bringing a suit and limitations relating to reopening matters already litigated, by motion to set aside a judgment or by appeal.
In most states, court rules identify matters which are deemed "affirmative defenses", "compulsory counterclaims" and "permissive counterclaims".
For example, in suit on a note several available defenses in most jurisdiction might include accord and satisfaction, duress, failure of consideration, fraud, illegality, release, res judicata, statute of frauds, statute of limitations, etc.
A defense of accord and satisfaction would essentially be that the loan had already been paid off (satisfied).
A defense of duress might be that you signed the promissory note because the evil bankers had kidnapped your daughter, tied her up and placed her on train tracks in front of an oncoming locamotive and that you signed only to spare her life.
A defense of failure of consideration might be that you had signed the promissory note, but that the plaintiff had never actually advanced the promised funds which constituted the consideration for the contemplated loan (and that you had paid your own cash for the house).
A defense of fraud would include assertions that you had been induced to execute the promissory note by the fraudulent representations of the Lender.
Illegality would have once included usury (state usury laws were pre-empted nationally for mortgages by the Depository Institutions Deregulation and Monetary Control Act of 1980), but would probably include any assertion that the consideration involved illegality (e.g. a loan for prostitution services or a loan to finance an illegal drug purchase).
A defense of release would involve the assertion that the Lender had already forgiven (released) the loan balance, more common where the loan was from a close friend or relative (e.g. Aunt Lucy had leant you $5,000 taking back a promissory note, had forgiven the balance but later had insisted upon repayment when you married a redhead).
A statute of frauds defense would involve the assertion that the alleged loan for an amount in excess of a certain threshold amount or for repayment over a period in excess of that threshold (e.g. loans over $10,000 or to be performed over a period in excess of one year) was not made in writing, when a state statute so requires (state statutes of frauds in virtually every state require contracts for the sale of interests in real estate to be in writing). If the plaintiff alleged a debt on an oral contract when the state statute of frauds required such a contract to be in writing the oral contract might be found to be unenforceable.
A statute of limitations defense could be asserted where the alleged breach of promissory note had occured sufficiently long ago that recovery was now barred by such a limitations period. Usually with mortgage loans the limitations period wouldn't start until the loan's maturity (when the last payment was due), but this might be advanced when the Lender accelerated the loan upon default. So if a Lender accelerated the balance and then tarried in filing suit for several years, the suit might be time barred under state law.
Res judicata might be asserted where you had been sued on this very debt before and the matter had been litigated and resolved through final judgment. It is res judicata that the mortgage investor plaintiff will plead when a borrower seeks to reopen a matter already litigated.
Generally in most states, the defendant is going to have to plead these affirmative defenses during the suit on the original claim and failure to do so is typically going to operate as waiver and a bar to subsequent assertion.
There is a common sense aspect of this. In the interests of both judicial economy and of the public's interest inthe finality of judgments, it would make no sense to allow a trial on a suit on a promissory note to proceed to judgment and then have the defendant reappear years later and assert, "Oh, by the way, that loan was paid in full but I neglected to interpose that defense".
Judicial rules that allow a party to amend pleadings and to explore the facts through discovery, as well as ask for continuances for cause, are all intended to give a defendant time to obtain the facts, marshall the evidence and plead all of the known effective possible defenses.
Counterclaims similarly may be required to be consolidated into the original action. Counterclaims are very often distinguished as to whether these are compulsory or permissive.
Generally, where the defendant's counterclaims arise out of the same set of facts as the original complaint, judicial economy and the interests of those who may be called upon as witnesses dictates that these matters be consolidated into a single action. This avoids having to have multiple trials on different aspects of the very same matters. There may be some instances where counterclaims cannot be reasonably consolidated, as where a counterclaim involves the rights of some parties who cannot be brought before the court.
Suppose that you purchased a newly constructed house and subsequently found that the roof was defective (it leaked) and the builder used defective Chinese drywall which was causing a chemical problem. These problems emerged as you sought to sell the property. Ultimately, you stopped paying your mortgage. The mortgage investor sues you under the promissory ntoe and mortgage. You want to counterclaim about the defects in the construction.
Generally, you are going to find that the mortgage investor is going to interpose holder in due course defenses (that it innocently purchased the promissory note while not in default, that this was simply a financing transaction and that the mortgage investor has nothing to do with the construction defects). The builder isn't even a party to the suit.
A claim against the mortgage investor would be a counterclaim. A claim against a non-party would be a third party claim (you would have to serve that party and get jurisdiction).
The mortgage investor's holder in due course defense is probably going to be pretty potent and you are probably going to have difficulty holding the mortgage investor responsible for the construction defects. Moreover, the construction defects might be said to arise out of a different set of facts (facts relating to faulty construction) than the alleged default (facts arising out of the financing and non-payment).
Since the builder isn't even a party to the original suit, while you might file a third party claim and bring the builder in, you probably need not do so in most places. You can later sue the builder separately and the builder is unlikely to obtain any res judicata immunity from your failure to assert the faulty construction claim in the original suit.
The specific requirements as to what constitutes a compulsory counterclaim and what counterclaims are permissive is likely to be set forth in the court rules of your jurisdiction as elaborated by your jurisdiction's court rulings.
Where a counterclaim was compulsory and you failed to assert it in the origianl proceeding, you are going to have some difficulty in asserting it later.
Courts often recognize an exception for torts which were unknown to you at the time, as where you were a victim of fraud the nature of which was unknown to you at the time of the suit and not readily discoverable by you through reasonable diligence. That is, it is not enough to simply assert that you didn't know about the fraud, but you may also need to show that you couldn't have readily discovered or detected the fraud using ordinary diligence expected from a person in a similar situation.
When such an exception is recognized, you may get some additional time to sue on your additional claim. Often, the limitation period is said to toll during the period when the fraud was unknown to you and the limitation period then begins with your discovery of the fraud, giving rise to the term the "discovery rule".
Alleging an undisclosed fraud can be particularly problematic though within the context of a matter already litigated. Court rules relating to discovery are expressly intended to give each party the opportunity to explore and discover the critical facts of the case. And if the reason that the fraud remained undiscovered was your failure to conduct any discovery (as opposed to the plaintiff's willful resistence to discovery or even false discovery responses), then it may turn out that you failed to exercise reasonable diligence!
Courts also often distinguish between what is termed intrinsic fraud and extrinsic fraud. Extrinsic fraud may keep the defendant from appearing at all and denies the defendant a full trial on the merits. For example, forms of "sewer service" (as are now emerging in New York State) which precluded a defendant from even knowing about a suit or representations which kept the defendant from the courthouse or trial, as in telling the defendant that the matter is being dismissed when in fact proceeding (both of these present proof problems, but when such deceit can be shown it can be potent).
The period for setting aside judgments based on extrinsic fraud may be extended or the judgment itself may be actually void where a court never really obtained jurisdiction over a party. In the limiting case, imagine a judgment rendered after sewer service where the defendant is already dead. Any dispute as to whether the named defendant had actual notice of the suit is rather persuasively resolved by the fact of known death prior to the alleged sewer service! Such a judgment would pretty clearly be void ab initio and unworthy of respect in any forum!
So, overall, even if a defendant had an excellent case or argument that might have changed the outcome, if the defendant failed to assert this defense in the original trial, the matter may often not be re-litigated unless there was some demonstrable fraud on the part of the other party. A forged assignment might very well be something that could be the basis for reopening a matter, as long as the reopening was undertaken in a timely way as expressly permitted within the rules.
The example of the interred Japanese Americans is not particularly relevant. These folks mostly never had their day in court, so there wasn't a res judicata problem.
Very often, class actions are mostly beneficial primarily to the attorneys bringing the suit and may be most helpful in discouraging certain ill behavior in the future. Prior victims very rarely receive adequate compensation for the wrongs they suffered. Moreover, a class action settlement can actually immunize the perpetrators by res judicata from individual suits by those victims that fail to timely opt out of the class!
I would also distinguish that in most cases the mortgage investors bringing the foreclosures actually were the owners of the alleged mortgage indebtedness, with the promissory notes actually timely endorsed and delivered to the mortgage investor's institutional custodian. So these mortgage investors mostly probably did have standing to sue. However, they used forged assignments and perjured affidavits in support of their cases, mostly as a matter of arrogance and convenience rather than due to the inability to produce truthful evidence that might have supported a foreclosure.
This makes establishing the measure of damages somewhat problematic. The forgeries and perjury no doubt resulted in a faster and more certain outcome. I am doubtful that the ultimate results would have been much different in most of the cases, unless the defendant was able to persuade the court that the forgery and perjury was sufficiently egregious as to merit a dismissal with prejudice.