Opinion ID: 1660198
Heading Depth: 2
Heading Rank: 2

Heading: Recoupment/Compulsory Counterclaim

Text: Unlike its statutory counterpart, recoupment was of common-law origin. It was an innovation upon, or departure from, the strict rules of law, sanctioned by the courts for the purpose of doing equity between parties, where it either could not otherwise be attained, or not without a circuitous and expensive process. T. Waterman, A Treatise on the Law of Set-Off, Recoupment, and Counter Claim § 463, at 480 (2d ed. 1872); see also J.C. Lysle Milling Co. v. North Alabama Grocery Co., 201 Ala. 222, 223, 77 So. 748, 749 (1917). Recoupment applie[d], when the abatement claimed [sprang] out of the very contract, or transaction, on which the recovery [was] sought. Washington v. Timberlake, 74 Ala. 259, 263 (1883). At common law, recoupment could be asserted as a mere right of deduction from the amount of the plaintiff's recovery, T. Waterman, supra, § 460, at 480, that is, the defendant could not recover an amount in excess of the amount awarded the plaintiff on his claim. Id. § 469, at 483. As a corollary of this latter principle, recoupment was not subject to statutes of limitations. It was said to run with the instrument out of which the plaintiff's breach-of-contract claim arose and was not time-barred as long as that contract was executory and enforceable. Conner v. Smith, 88 Ala. 300, 311, 7 So. 150, 153 (1889); see also City of Grand Rapids v. McCurdy, 136 F.2d 615, 619 (6th Cir.1943) (The defense of recoupment exists as long as the plaintiff's cause of action exists and may be asserted, though the claim as an independent cause of action is barred by limitations). Shaw aptly referred to this aspect of recoupment as the `indestructibility-of-recoupment' doctrine. 524 So.2d at 589. In contrast to set-off, which had been the subject of legislation as early as 1799, recoupment first received the attention of our legislature in 1879. Act No. 126, 1879 Ala. Acts 154 (codified at Ala.Code 1886, § 2683) (the affirmative-recoupment rule). Section 2683 provided: On a plea of recoupment, if the claim or demand of the defendant equals the claim or demand of the plaintiff, judgment must be rendered for the defendant; if the claim or demand of the defendant exceeds the claim or demand of the plaintiff, and the plaintiff be the party liable to its satisfaction, judgment must be rendered against him in favor of the defendant for such excess and all costs. (Emphasis added.) This section modified common-law recoupment by authorizing an affirmative recovery on a counterdemand, that is, the recovery of an amount exceeding the amount of the original claim. The affirmative-recoupment provision was recodified without relevant change in the next four Codes. See Ala.Code 1896, § 3734; Ala. Code 1907, § 5865; Ala.Code 1923, § 10179; Ala.Code 1940 (Recomp.1958), Tit. 7, § 357. As this history indicates, the indestructibility-of-recoupment doctrine was, before 1879, clearly established in Alabama. After passage of the affirmative-recoupment provision, a defendant could recoup an amount in excess of the plaintiff's claim. Inevitably, of course, the question would arise whether the affirmative-recoupment provision, that is, the provision allowing a recovery of an amount exceeding the original claim, had effectively incorporated the indestructibility-of-recoupment rule to authorize an affirmative recovery without regard to statutes of limitations, or whether the relation-back provision qualified the indestructibility-of-recoupment rule to foreclose this result. The first opinion in which this Court considered recoupment after the enactment of the affirmative-recoupment provision suggested, albeit in dicta, that the claim could be asserted without regard to the statute of limitations. In Conner v. Smith, 88 Ala. 300, 7 So. 150 (1889), the Court stated: Such a claim [recoupment] runs with the contract, so to speak, and may, at least when it goes to the consideration, as it generally does in some sort, and as in the case here, be relied on without regard to the statute of limitations. So long as the contract, upon a breach of which the claim is predicated, subsists, and may be enforced, the claim itself may be pleaded in reduction, at least, of the demand on the contract; and this notwithstanding the matter of recoupment, independently considered, may be barred, not only when it is pleaded, but also when the right of action, against which it is asserted, accrued. 88 Ala. at 311, 7 So. at 153 (emphasis added). In explaining that recoupment would at least reduce or cancel the amount of the claim without regard to timeliness, the Court implicitly construed § 2683 as incorporating the indestructibility-of-recoupment rule to allow an affirmative recovery without regard to the statute of limitations. The Conner dicta were subsequently quoted verbatim in cases both preceding and succeeding the adoption of the Alabama Rules of Civil Procedure in 1973. Snow v. Baldwin, 491 So.2d 900 (Ala.1986); Campbell v. Regal Typewriter Co., 341 So.2d 120 (Ala. 1976), holding modified, Sharp Electronics Corp. v. Shaw, 524 So.2d 586 (Ala.1987); Downing v. Williams, 238 Ala. 551, 191 So. 221 (1939); Wilson v. Montgomery Bank & Trust Co., 203 Ala. 340, 83 So. 64 (1919); Harton v. Belcher, 195 Ala. 186, 70 So. 141 (1915). Thus, when this Court adopted the Rules of Civil Procedure, the concept of incorporation of the two rules was represented in our cases.