GA Code § 13-7-4 (2021)
2021 Georgia Code|Title 13 - Contracts|Chapter 7 - Setoff and Recoupment|§ 13-7-4. Limitations as to Claims or Demands for Setoff Generally

 Setoff must be between the same parties and in their own right.   (Orig. Code 1863, § 2842; Code 1868, § 2850; Code 1873, § 2901; Code 1882, § 2901; Civil Code 1895, § 3747; Civil Code 1910, § 4341; Code 1933, § 20-1303.)   Cross references.   - Counterclaim and cross-claim, § 9-11-13.    Joinder of claims and remedies under Civil Practice Act, § 9-11-18.   JUDICIAL DECISIONS    Setoff must be between same parties and in the parties' own legal or equitable right. Shingler v. Furst, 176 Ga. 497, 168 S.E. 557 (1933).    Mutuality of obligation is required for valid setoff. Brunson v. Bridges, 130 Ga. App. 102, 202 S.E.2d 553 (1973).   If demands are mutual and of same nature, setoff need not arise between same parties.    - Right of setoff, under former Code 1933, §§ 20-1301, 20-1302, and 20-1303 (see O.C.G.A. §§ 13-7-1,13-7-4, and13-7-5), if demands were mutual and of the same nature, was not limited to mutual dealings, and need not arise between same parties. Thus, a transferred chose in action, which can be sued on in name of assignee, may be used as a setoff. Wood v. Keysville Lumber Co., 49 Ga. App. 799, 175 S.E. 923 (1934).    Parties may, by agreement, make any debt a setoff. Threlkeld v. Dobbins, 45 Ga. 144 (1872); Long v. Cash, 54 Ga. App. 764, 189 S.E. 73 (1936).    If such agreement is for a consideration, it is binding as is any other agreement. Long v. Cash, 54 Ga. App. 764, 189 S.E. 73 (1936).    If such agreement is executed, it needs no consideration. Long v. Cash, 54 Ga. App. 764, 189 S.E. 73 (1936).    Transferred chose in action, actionable in name of assignee, may be used as a setoff. Meyer v. Hiatt, 40 Ga. App. 583, 150 S.E. 567 (1929).    Defendant, in order to plead a chose in action as a setoff, must obtain such title to it as would enable the defendant to sue upon it either in defendant's own name or in name of another for defendant's use. Meyer v. Hiatt, 40 Ga. App. 583, 150 S.E. 567 (1929).   Setoff against undisclosed principal of claims due by agent.    - When undisclosed principal sues upon contract made with one's agent, the opposite party may setoff any claim one may have against the agent. Ruan v. Gunn, 77 Ga. 53 (1886); Rosser, Armistead & Co. v. Darden, 82 Ga. 219, 7 S.E. 919 (1888); Durant Lumber Co. v. Sinclair & Simms Lumber Co., 2 Ga. App. 209, 58 S.E. 485 (1907).   Defendant cannot set off claim held in representative capacity when sued in individual capacity.    - Defendant sued in defendant's individual capacity cannot set off against plaintiff's demand a claim that defendant held in a representative capacity as executor against plaintiff. Davis v. Hadden, 115 Ga. 466, 41 S.E. 608 (1902).   Owner of business cannot setoff debt owed to business.    - When defendant business owner argued the purchase price of defendant's store's assets should be setoff against the owner's note owed to the debtor, any offset under 11 U.S.C. § 553 belonged to the owner's business, not to the owner and the owner had no setoff rights; because setoff had to be between the same parties and in their own right under O.C.G.A. § 13-7-4, summary judgment was properly entered under Fed. R. Civ. P. 56(c) for the trustee on the trustee's complaint to collect on the owner's note. Levine v. Kenny (In re Flooring Am., Inc.), 302 Bankr. 403 (Bankr. N.D. Ga. 2003).   County cannot set off account due by deceased employee against employee's widow's year's support judgment.    - When effect of defendant county's plea is to set off open account due by deceased county employee to defendant county against year's support judgment which plaintiff surviving spouse and her two minor children obtained and hold against estate of deceased employee, such a setoff is not between the same parties and in their own right. Wayne County Bd. of Comm'rs v. Reddish, 220 Ga. 262, 138 S.E.2d 375 (1964).   Mortgagor-mortgagee obligations.   - When a note and a deed to secure debt is owed by the mortgagor to the mortgagees, who are tenants in common (i.e., a husband "and/or" his wife), while a subsequent judgment arising out of an action on the building contract is owed by one of the mortgagees to the mortgagor, these debts can be said to be "mutual" and can be set off against each other in a bankruptcy proceeding by the judgment debtor-mortgagee. Straughair v. Palmieri, 31 Bankr. 111 (Bankr. N.D. Ga. 1983).    Individual debt due by one partner cannot be set off against claim due to partnership. Bank of La Grange v. Cotter, 101 Ga. 134, 28 S.E. 644 (1897); Carter & Martin v. Carter, 7 Ga. App. 216, 66 S.E. 630 (1909).    Creditor of partner who purchases goods of the partnership cannot setoff creditor's claim against individual partner in action by the firm. Wise v. Copley, Stone & Co., 36 Ga. 508 (1867).    Debt due by partnership cannot be set off against debt due to one partner individually. The firm and its individual members are different contractors, each being, in the eye of the law, a separate person. Security Mgt. Co. v. King, 132 Ga. App. 618, 208 S.E.2d 576 (1974).   Right of setoff in cases other than those covered by O.C.G.A. Ch. 7, T. 13 is an equitable right.    - Right to set off one legal demand against another, other than in cases covered by former Code 1933, § 20-1301 et seq. (see O.C.G.A. Ch. 7, T. 13), was an equitable right, which was not and had never been recognized by a court of law in this state, except in obedience to a statute, and therefore it can be asserted only in a court having jurisdiction in equity matters. Gormley ex rel. Citizens Bank v. Chance, 55 Ga. App. 838, 191 S.E. 701 (1937).    City court has no jurisdiction to entertain a plea setting up an equitable setoff, or equitable right of setoff, for simple reason that to entertain such a plea it is necessary for court, not only to recognize an equitable right, but to give affirmative relief as a result of such recognition. Gormley ex rel. Citizens Bank v. Chance, 55 Ga. App. 838, 191 S.E. 701 (1937).   Setoff improper.    - Trial court erred in ruling for a development company in the company's declaratory judgment action seeking to have the company's debt to a bank set off against the company's loan to a holding company because the bank and the holding company were separate entities; the development company knew the risks involved when the company made the holding company loan, and the bank could not obtain relief unavailable to any other entities who lent money to the holding company simply because the company borrowed money from the bank years ago. Bank of the Ozarks v. DKK Dev. Co., 315 Ga. App. 539, 726 S.E.2d 608 (2012).    Cited in Mordecai v. Stewart, 37 Ga. 364 (1867); Pickett v. Andrews, 135 Ga. 299, 69 S.E. 478 (1910); Ellis v. Dudley, 19 Ga. App. 566, 91 S.E. 904 (1917); Metcalf v. People's Grocery Co., 24 Ga. App. 663, 101 S.E. 768 (1920); Webb-Harris Auto Co. v. Industrial Acceptance Corp., 164 Ga. 54, 137 S.E. 770 (1927); Sheffield v. Preacher, 175 Ga. 719, 165 S.E. 742 (1932); Dickens v. Howard, 67 F.2d 263 (5th Cir. 1933); Roberts v. First Nat'l Bank, 61 Ga. App. 284, 6 S.E.2d 88 (1939); National Sur. Corp. v. Algernon Blair, Inc., 114 Ga. App. 30, 150 S.E.2d 256 (1966).   RESEARCH REFERENCES   Am. Jur. 2d.   - 20 Am. Jur. 2d, Counterclaim, Recoupment, and Setoff, §§ 57, 74 et seq., 161.   C.J.S.   - 80 C.J.S., Set-Off and Counterclaim, §§ 66 et seq., 101.   ALR.    - Right of one indebted to insolvent bank to set off deposits which he has made as trustee, 5 A.L.R. 83; 55 A.L.R. 822.    Right to set off claim of individual partner against claim against partnership, 5 A.L.R. 1541; 55 A.L.R. 566.    Right to setoff deposit in insolvent bank against indebtedness to bank, 25 A.L.R. 938; 82 A.L.R. 665; 97 A.L.R. 588.    Setoff by surety of claim paid for insolvent principal whose assets are being administered for the benefit of creditors, against own indebtedness to principal, 40 A.L.R. 1096.    Judgment by consent, confession, or default of principal as affecting sureties whose obligation is conditioned upon judicial determination of liability or rights of principal, 51 A.L.R. 1489.    Equitable setoff of claim of one person and claim of his debtor against another, 57 A.L.R. 778; 93 A.L.R. 1164.    Availability as setoff or counterclaim of claim in favor of one alone of several defendants, 81 A.L.R. 781.    Right to set off deposit in insolvent bank against indebtedness to bank, 82 A.L.R. 665; 97 A.L.R. 588.    Setoff as between dividends from assets of insolvent bank or other corporation and liability of creditors as stockholders, 91 A.L.R. 326.   Right of counterclaim, setoff, and the like, of defendant against partners individually, in action to enforce partnership claim, 39 A.L.R.2d 295.