GA Code § 23-2-76 (2021)
2021 Georgia Code|Title 23 - Equity|Chapter 2 - Grounds for Equitable Relief|Article 4 - Accounting of Contribution; Apportionment; Setoff|§ 23-2-76. Equitable Setoff

 Regarding a setoff, equity generally follows the law; but, if there is an intervening equity not reached by the law or if the setoff is of an equitable nature, equity shall take jurisdiction to enforce the setoff.   (Orig. Code 1863, § 3072; Code 1868, § 3084; Code 1873, § 3141; Code 1882, § 3141; Civil Code 1895, § 3996; Civil Code 1910, § 4593; Code 1933, § 37-308.)   Cross references.   - Setoff and recoupment generally, T. 13, C. 7.   Law reviews.   - For survey article citing developments in Georgia trial practice and procedure from mid-1980 through mid-1981, see 33 Mercer L. Rev. 275 (1981).   JUDICIAL DECISIONS    Right of setoff did not originally exist at common law, and before the statutory provisions on setoff and recoupment (see O.C.G.A. § 13-7-1 et seq.) it was cognizable only in a court proceeding in equity. Robinson v. Lindsey, 184 Ga. 684, 192 S.E. 910 (1937).    The right to set off one legal demand against another, other than in cases covered by the statutory provisions on setoff and recoupment (see O.C.G.A. § 13-7-1 et seq.), is an equitable right, which is not and has 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. Quitman Cooperage Co. v. People's First Nat'l Bank, 178 Ga. 90, 172 S.E. 17 (1933); Gormley ex rel. Citizens Bank v. Chance, 55 Ga. App. 838, 191 S.E. 701 (1937); Autry v. Palmour, 124 Ga. App. 407, 184 S.E.2d 15 (1971).    Right of a court in this state to exercise equitable jurisdiction to enforce a setoff extends to cases where there is an intervening equity not reached by the law, or where the setoff is of an equitable nature. Quitman Cooperage Co. v. People's First Nat'l Bank, 178 Ga. 90, 182 S.E. 17 (1933).    Nonresidence of the plaintiff is an intervening equity. Gordy Tire Co. v. Dayton Rubber Co., 216 Ga. 83, 114 S.E.2d 529 (1960).    Insolvency is one of the intervening equities contemplated by this section. McLendon v. Galloway, 216 Ga. 261, 116 S.E.2d 208 (1960); Autry v. Palmour, 124 Ga. App. 407, 184 S.E.2d 15 (1971).    There are decisions that recognize that plaintiff's nonresidence alone will warrant the exercise of equitable jurisdiction. Aetna Ins. Co. v. Lunsford, 179 Ga. 716, 177 S.E. 727 (1934).    Pursuit of the remedy allowed by former Code 1933, § 108-501 (see O.C.G.A. § 53-12-150) did not make an "equity case" of which the Supreme Court had exclusive jurisdiction. Robinson v. Lindsey, 184 Ga. 684, 192 S.E. 910 (1937).   When superior court's equitable powers exercisable.    - Where affirmative defense to action is beyond jurisdiction of city or county court in which it was filed, and plaintiff in that court is nonresident or insolvent so that failure to adjudicate counterclaim urged by original defendant along with main case could result in unfair advantage, superior court may exercise its equitable powers by enjoining suit originally filed and taking cognizance of entire controversy in a single action. Lester v. Goodyear Tire & Rubber Co., 156 Ga. App. 171, 274 S.E.2d 143 (1980).    When, neither nonresidence nor insolvency of original plaintiff is urged, and there is no showing either that such plaintiff corporation is nonresident or, if so, that it has no agent for service within state, no case has been made out for exercise of equity jurisdiction. Arnold v. Carter, 125 Ga. 319, 54 S.E. 177 (1906); Lester v. Goodyear Tire & Rubber Co., 156 Ga. App. 171, 274 S.E.2d 143 (1980).    Insolvency and nonresidence are not the sole grounds of equitable setoff; they are illustrative, but not all-comprehensive, of such grounds and an equitable setoff will be allowed, although the amount is small, and although the party may have a remedy at law, if to recover that small amount he is driven to many suits and to much trouble and expense. Quitman Cooperage Co. v. People's First Nat'l Bank, 178 Ga. 90, 172 S.E. 17 (1933).    Character of the demand does not determine the jurisdiction of the court to entertain the plea of setoff. Quitman Cooperage Co. v. People's First Nat'l Bank, 178 Ga. 90, 172 S.E. 17 (1933).   Setoff as not defeating plaintiff's claim, regardless of legal or equitable nature of setoff.    - Existence of valid right of setoff does not operate to defeat plaintiff's claim, although it might preclude his recovery of any actual damages; and this is true regardless of the assertion of the setoff as a legal right or an equitable right. National City Bank v. Busbin, 175 Ga. App. 103, 332 S.E.2d 678 (1985); Gynecologic Oncology v. Weiser, 212 Ga. App. 858, 443 S.E.2d 526 (1994).    Equity may allow a setoff to prevent a multiplicity of suits. Burns v. Hill, 19 Ga. 22 (1855).    Damages arising ex delicto cannot be set off against a cause of action ex contractu, except upon equitable grounds. Such decisions, however, are based upon general equitable principles, and not upon statute. Harden v. Lang, 110 Ga. 392, 36 S.E. 100 (1900); Aetna Ins. Co. v. Lunsford, 179 Ga. 716, 177 S.E. 727 (1934); McLendon v. Galloway, 216 Ga. 261, 116 S.E.2d 208 (1960).    Where petitioner, a nonresident railroad, brought an action ex contractu against a resident of this state for the collection of freight charges owing the petitioner, and by counterclaim the defendant set off an action ex delicto for negligence, a court of equity will take jurisdiction thereof, under this section, and the Supreme Court has jurisdiction of the writ of error (see O.C.G.A. §§ 5-6-49,5-6-50) from the lower court. Atlanta Paper Co. v. New York, New Haven & Hartford R.R., 211 Ga. 185, 84 S.E.2d 359 (1954).    Except, under the Civil Procedure Act, O.C.G.A. § 9-11-1 et seq., an ex delicto counterclaim may be asserted against an ex contractu action. Ben L. O'Callaghan Co. v. Bond Supply Co., 138 Ga. App. 186, 225 S.E.2d 774 (1976).   Setoff not allowed.    - To an action ex contractu damages sounding in tort cannot be pleaded in defense, where neither the insolvency nor nonresidence of the plaintiff is set up. Berry v. Brunson, 166 Ga. 523, 143 S.E. 761 (1928).   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).   Voluntary rent provision and debt payment.   - Defendant's claim that she satisfied her debt on a promissory note owed to her spouse by providing her mother-in-law with a rent-free apartment and by paying certain debts that spouse owed to certain creditors was to no avail as it was done under a mere volunteer arrangement with no outstanding obligations to do so. United States v. Speir, 808 F. Supp. 829 (S.D. Ga. 1992).    City court has no jurisdiction whatever to entertain a plea setting up an equitable setoff, or an equitable right of setoff, for the simple reason that to entertain such a plea it is necessary for the court, not only to recognize an equitable right, but to give affirmative relief as a result of such recognition. Jones v. George S. Riley, Jr. Co., 14 Ga. App. 84, 80 S.E. 341 (1913); Gormley ex rel. Citizens Bank v. Chance, 55 Ga. App. 838, 191 S.E. 701 (1937).    Setoff was permitted on debt of deceased husband against a note held by his wife. Harwood v. Andrews, 71 Ga. 784 (1883).    By former Civil Code 1895, § 3755 (see O.C.G.A. § 13-7-11), debts not due may be setoff when the plaintiff resides outside the state, or is insolvent. Hecht v. Snook & Austin Furn. Co., 114 Ga. 921, 41 S.E. 74 (1902); Metcalf v. People's Grocery Co., 24 Ga. App. 663, 101 S.E. 768 (1920).    Accommodation maker of note to corporation could set off liability of its organizers before capital subscribed. Crandall v. Shepard, 166 Ga. 396, 143 S.E. 587 (1928).    Setoff was not permitted on a debt of a partner against a debt due the firm. Metcalf v. People's Grocery Co., 24 Ga. App. 663, 101 S.E. 768 (1920).    After an employee had been wrongfully and unlawfully discharged, the employer must pay all of the employee's pay and allowances up until, and including day of discharge minus compensation of other concurrent work. Russell v. Hughes, 244 Ga. 634, 261 S.E.2d 584 (1979).    Discharged servant is bound to use due diligence to prevent the loss from being more than necessary, and to that end must seek employment in similar business and derive such income from it as he reasonably can, which is to be deducted in fixing the damage to be recovered; the burden, however, of showing that he did obtain employment, or could have obtained it by due diligence, is on the other party. Russell v. Hughes, 244 Ga. 634, 261 S.E.2d 584 (1979).   Employer's liability for wages of wrongfully discharged employee mitigated by subsequent earnings.    - When in an unlawful discharge case, plaintiff was engaged in the real estate appraisal business on a part time basis prior to the plaintiff's discharge and after the plaintiff's discharge devoted the plaintiff's full time to these efforts, any increase in earnings should be in mitigation of the county's liability to plaintiff. Russell v. Hughes, 244 Ga. 634, 261 S.E.2d 584 (1979).   Right to setoff may be waived.    - See Solid Waste Mgmt. Auth. v. Transwaste Servs., 247 Ga. App. 29, 543 S.E.2d 98 (2000).    Cited in Mills v. Lumpkin, 1 Ga. 511, 44 Am. Dec. 677 (1846); Jordan v. Jordan, 12 Ga. 77 (1852); Barnes v. Shinholster, 14 Ga. 131 (1853); Lee v. Lee, 31 Ga. 26, 76 Am. Dec. 296 (1861); Moody v. Ellervie, 36 Ga. 666 (1867); Mordecai v. Stewart, 37 Ga. 364 (1867); Hecht v. Snook & Austin Furn. Co., 114 Ga. 921, 41 S.E. 74 (1901); Harris v. Gano, 117 Ga. 934, 44 S.E. 11 (1903); Geer v. Cowart, 5 Ga. App. 251, 62 S.E. 1054 (1908); Scaffold v. Evans, 146 Ga. 180, 91 S.E. 21 (1916); Bellah v. Cleghorn, 165 Ga. 494, 141 S.E. 311 (1928); Quitman Cooperage Co. v. People's First Nat'l Bank, 178 Ga. 90, 172 S.E. 17 (1933); Shepard v. Veal, 178 Ga. 535, 173 S.E. 644 (1934); Attaway v. Attaway, 193 Ga. 51, 17 S.E.2d 72 (1941); Jacksonville Paper Co. v. Owen, 193 Ga. 23, 17 S.E.2d 76 (1941); Nixon v. Nixon, 194 Ga. 301, 21 S.E.2d 702 (1942); Mathis v. Lathrop's Hatchery, Inc., 211 Ga. 320, 85 S.E.2d 764 (1955); Bugden v. Bugden, 226 Ga. 362, 174 S.E.2d 922 (1970); Pickett v. Chamblee Constr. Co., 124 Ga. App. 769, 186 S.E.2d 123 (1971); Glen Oak, Inc. v. Henderson, 258 Ga. 455, 369 S.E.2d 736 (1988); Kruse v. Todd, 260 Ga. 63, 389 S.E.2d 488 (1990).   RESEARCH REFERENCES   Am. Jur. 2d.   - 20 Am. Jur. 2d, Counterclaim, Recoupment, and Setoff, § 11.   C.J.S.   - 80 C.J.S., Set-Off and Counterclaim, § 6 et seq.   ALR.    - 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.    Immaturity of claim against insolvent at time of insolvency proceedings as affecting right of setoff, 51 A.L.R. 1477.    Equitable set-off of claim of one person and claim of his debtor against another, 93 A.L.R. 1164.    Right of endorser of commercial paper to set off amount which he is obliged to pay thereon against independent indebtedness to insolvent maker or other person antecedently liable, where debt is assigned after making but prior to maturity of paper, 117 A.L.R. 900.    Cotenant's right to contribution in respect of taxes, improvements, or repairs as subject to reduction on account of rents and profits for which he is not otherwise responsible, 136 A.L.R. 1022.    Fractional interest in debt as subject of setoff, 139 A.L.R. 1328.    Equitable relief where one against whom judgment has been recovered in an action in a court of limited jurisdiction has a claim against the judgment creditor which would have been available as a setoff in such action apart from fact that it was in excess of the court's jurisdiction, 147 A.L.R. 513.    Remedy available against invalid judgment in favor of United States, state, or other governmental unit immune to suit, 163 A.L.R. 244.    Right of attorney to set off claim for unrelated services against client's claim for money collected, 173 A.L.R. 429.   Claim barred by limitation as subject of setoff, counterclaim, recoupment, cross bill, or cross action, 1 A.L.R.2d 630.   Right of trespasser to credit for expenditures in producing, as against his liability for value of, oil or minerals, 21 A.L.R.2d 380.   Husband's right to set off wife's debt against alimony or child support payments, 100 A.L.R.2d 925.   Modern status of law regarding solicitation of business by or for attorney, 5 A.L.R.4th 866.   Spouse's right to set off debt owed by other spouse against accrued spousal or child support payments, 11 A.L.R.5th 259.