Court Opinion

ID: 9586233
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:08:31.912864+00
Date Added: 2024-06-11T17:25:48.810334
License: Public Domain

On Motion for Rehearing.
On motion for rehearing, borrowers raise the contention their counterclaim is in the nature of recoupment, and that therefore the Truth-In-Lending statute of limitation should not be a bar thereto. Upon careful consideration of this contention we find it to be without merit.
It is true that a statute of limitation is not a bar to a recoupment defense. As was said in Swindell v. Bainbridge State Bank, 3 Ga. App. 364, 371 (60 SE 13), "As long as the plaintiff has a legal right to sue on the notes, the defendants would have a correlative right to defend; and the plaintiff could not insist upon the statute of limitations in order to avoid the defendants’ defense, while seeking to enforce the contract against him. Morrow v. Hanson, 9 Ga. 398.”
The rationale for the non-applicability of a statute of limitation to a defense in the nature of recoupment is that the defense arises out of the very contract which the plaintiff wishes to enforce. See Lufburrow v. Henderson, 30 Ga. 482. But the defense must arise via an obligation or covenant of the contract itself: "A defendant’s right to recoupment is confined to the *344contract on which the plaintiff sues... for the reason that the plaintiff has not complied with a cross-obligation or an independent covenant of the same contract.” Atlantic C. L. R. Co. v. Snodgrass, 14 Ga. App. 668 (1) (82 SE 153). Thus, "Where the plaintiff sues on one part of a contract consisting of mutual stipulations made at the same time and relating to the same subject-matter, the defendant may recoup his damages arising from the breach of that part which is in his favor. [Cits.]” Byrom v. Ringe, 83 Ga. App. 234, 241 (63 SE2d 235).
The Truth-In-Lending counterclaim sub judice did not arise out of the mutual obligations or covenants of the loan transaction upon which this suit was founded but is independent thereof. Although the claim arose contemporaneously with the execution of the contract, it is not a product of a breach of any obligation or covenant therein; nor is it related either to the subject matter of the contract or the plaintiffs suit. On the contrary, the borrowers’ claim for recovery of a penalty created by federal law is an extrinsic by-product of this transaction and is not dependent upon the lender’s contractual obligations. It has no relationship to an infringement of the mutual obligations and stipulations of the transaction. In short, it is not a defense which goes to the justice of the lender’s claim but an affirmative action which demands a penalty for an independent wrong. Accordingly, borrowers’ counterclaim is in the nature of set-off, not recoupment. See Code §§ 20-1301, 20-1312; Sammons v. Read, 31 Ga. App. 763 (121 SE 855). As such it is subject to the statute of limitation stated in the federal statute creating the penalty. Code § 3-708; Byrom v. Ringe, supra.

Motion for rehearing denied.