GA Code § 13-7-3 (2021)
2021 Georgia Code|Title 13 - Contracts|Chapter 7 - Setoff and Recoupment|§ 13-7-3. Setoff and Recoupment Distinguished

 Recoupment differs from setoff in this respect: Any claim or demand the defendant may have against the plaintiff may be used as a setoff, while only a claim or demand arising out of the same transaction as that sued on by the plaintiff may be used as a recoupment.   (Orig. Code 1863, § 2851; Code 1868, § 2859; Code 1873, § 2910; Code 1882, § 2910; Civil Code 1895, § 3757; Civil Code 1910, § 4351; Code 1933, § 20-1312.)   Cross references.   - Counterclaim and cross-claim, § 9-11-13.    Effect of counterclaim exceeding opposing claim under Civil Practice Act, § 9-11-13.    Joinder of claims and remedies under Civil Practice Act, § 9-11-18.   Law reviews.   - For article comparing the Federal Rules of Civil Procedure to Georgia trial practice procedures prior to the adoption of the Georgia Civil Practice Act, see 1 Ga. St. B.J. 315 (1965).   JUDICIAL DECISIONS   Distinction between recoupment and setoff.    - Plea of recoupment is confined to contract sued upon by plaintiff, including any cross-obligation or independent covenant arising out of that contract. A plea of setoff is not so confined, but is a defense which goes not to the justice of plaintiff's demand, but which sets up a demand against plaintiff, and which includes all mutual debts and liabilities. Bibb Basket Co. v. Eufaula Bank & Trust Co., 42 Ga. App. 394, 156 S.E. 310 (1930).    Ordinarily, the difference between recoupment and setoff is of little importance. The scheme of the Code is to recoup where both parties rely on same contract, and set off where they urge different contracts. Byrom v. Ringe, 83 Ga. App. 234, 63 S.E.2d 235 (1951).    Recoupment is confined to contract on which plaintiff's suit is brought, and does not include all mutual debts and liabilities as does setoff. Burton v. Campbell Coal Co., 95 Ga. App. 338, 97 S.E.2d 924 (1957).    When a defendant claims a right to a deduction from the plaintiff's damages for breach of a cross obligation arising from the same contract, the proper remedy is recoupment, not setoff. Johnson v. Raatz, 200 Ga. App. 289, 407 S.E.2d 489 (1991).    Defense based on the federal Truth in Lending Act, 15 U.S.C. § 1601 et seq., constitutes a set-off, not a recoupment. Vikowsky v. Savannah Appliance Serv. Corp., 179 Ga. App. 135, 345 S.E.2d 621 (1986).    Claim arising out of distinct transaction cannot be recouped but may be setoff against suit on promissory note. Hamilton v. Grangers' Life & Health Ins. Co., 65 Ga. 750 (1880).    Defendant may plead recoupment, but not setoff, in affidavit of illegality to chattel mortgage foreclosure. Alston v. J.W. Wheatley & Co., 47 Ga. 646 (1873); Arnold v. Carter, 125 Ga. 319, 54 S.E. 177 (1906).    Setoff is a defense which does not go to justice of plaintiff's demand, but which sets up a demand against plaintiff. Aetna Ins. Co. v. Lunsford, 179 Ga. 716, 177 S.E. 727 (1934).   Right to set off damages arising out of tort is an equitable right.    - Right of one sued at law in action ex contractu to set off damages arising out of a tort committed by plaintiff, on ground that latter is insolvent or is a nonresident, is a right in this state recognized only by a court of equity. Bibb Basket Co. v. Eufaula Bank & Trust Co., 42 Ga. App. 394, 156 S.E. 310 (1930).    City court lacks jurisdiction to entertain plea of setoff arising ex delicto against contract action. Bibb Basket Co. v. Eufaula Bank & Trust Co., 42 Ga. App. 394, 156 S.E. 310 (1930).   Defendant seeking setoff arising out of tort must obtain jurisdiction in superior court.    - When suit for damages arising ex contractu is pending in city court, defendant, in order to avail oneself of equitable setoff, may apply to superior court to enjoin proceeding in city court and take jurisdiction of entire controversy. Bibb Basket Co. v. Eufaula Bank & Trust Co., 42 Ga. App. 394, 156 S.E. 310 (1930).    Test of recoupment is whether matter arises out of same contract. Crow v. Mothers Beautiful Co., 115 Ga. App. 747, 156 S.E.2d 193 (1967).   Because a purchaser of a bankruptcy debtor's goods alleged that the debtor breached the debtor's obligation to provide insurance and indemnification against product liability and asserted recoupment against the debtor's unpaid invoices, recoupment was not available since the debtor's obligation to provide insurance and indemnity were not part of the same transaction as the obligation to pay for the goods, even though the obligations arose out of the same contract. Natale v. The Home Depot U.S.A. (In re Krause, Inc.), Bankr. (Bankr. N.D. Ga. July 11, 2005).    Plea of recoupment goes to justice of plaintiff's demand, including independent covenants of same contract. Sammons v. F.A. Read, Inc., 31 Ga. App. 763, 121 S.E. 855, cert. denied, 31 Ga. App. 812 (1924).   Plea of recoupment for breach of contract generally disallowed in defense to trover action.    - Claim for damages arising from breach of contract cannot be allowed by plea of recoupment in defense to action of trover, unless some special intervening equity arises in favor of defendant, such as insolvency or nonresidence of plaintiff. Harden v. Lang, 110 Ga. 392, 36 S.E. 100 (1900); Aetna Ins. Co. v. Lunsford, 179 Ga. 716, 177 S.E. 727 (1934).    In plea of recoupment, averments must be full and clear, as though the averments were set up in original demand. Byrom v. Ringe, 83 Ga. App. 234, 63 S.E.2d 235 (1951).    Cited in Latimer v. Lane, 45 Ga. 474 (1872); Monroe v. Carter, 48 Ga. 174 (1873); Griffin v. Lawton & Willingham, 54 Ga. 104 (1875); Brown v. Alfriend, 61 Ga. 12 (1878); Weaver v. Roberson, 134 Ga. 149, 67 S.E. 662 (1910); Wood & Bro. v. Jones & Son, 10 Ga. App. 735, 73 S.E. 1099 (1912); Atlantic Coast Line R.R. v. A. T. Snodgrass & Co., 14 Ga. App. 668, 82 S.E. 153 (1914); Jordan v. Investment Corp., 39 Ga. App. 144, 146 S.E. 498 (1929); Mashburn Drug Co. v. Valdosta Drug Co., 53 Ga. App. 88, 184 S.E. 903 (1936); Middleton v. Pruden, 191 Ga. 893, 14 S.E.2d 82 (1941); Hollerman v. Commercial Credit Co., 66 Ga. App. 772, 19 S.E.2d 336 (1942); Pittsburgh Plate Glass Co. v. Moulder, 82 Ga. App. 148, 60 S.E.2d 647 (1950); Alpharetta Feed & Poultry Co. v. Cocke, 82 Ga. App. 718, 62 S.E.2d 642 (1950); Carroll v. Taylor, 87 Ga. App. 815, 75 S.E.2d 346 (1953); Moore v. Todd, 223 Ga. 702, 157 S.E.2d 587 (1967).   RESEARCH REFERENCES   Am. Jur. 2d.   - 20 Am. Jur. 2d, Counterclaims, Recoupment, and Setoff, §§ 1, 2, 6, 10, 12, 17.   C.J.S.   - 80 C.J.S., Set-Off and Counterclaim, §§ 2, 13.   ALR.    - Judgment debtor's right to restitution upon reversal or vacation of judgment as subject to setoff in favor of judgment creditor, 101 A.L.R. 1148.