2020 Georgia Code
Title 13 - Contracts
Chapter 7 - Setoff and Recoupment
§ 13-7-2. Nature of Recoupment Generally

Recoupment is a right of the defendant to have a deduction from the amount of the plaintiff's damages for the reason that the plaintiff has not complied with the cross-obligations or independent covenants arising under the contract upon which suit is brought.

(Orig. Code 1863, § 2850; Code 1868, § 2858; Code 1873, § 2909; Code 1882, § 2909; Civil Code 1895, § 3756; Civil Code 1910, § 4350; Code 1933, § 20-1311.)

- 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.

- For survey article on construction law for the period from June 1, 2002 through May 31, 2003, see 55 Mercer L. Rev. 85 (2003).

ANALYSIS

• General Consideration
• Application
• Pleadings and Practice

Doctrine of recoupment is but an improvement upon old doctrine of failure of consideration. Toole v. Brownlow & Sons Co., 151 Ga. App. 292, 259 S.E.2d 691 (1979).

Recoupment goes to show that amount claimed is not due plaintiff. Weaver v. Roberson, 134 Ga. 149, 67 S.E. 662 (1910).

- Recoupment looks through the whole contract, treating the contract as an entirety, and regarding things done and stipulated to be done on each side as consideration for things done and stipulated to be done on the other; and when plaintiff seeks redress for breach of stipulations in plaintiff's favor, it sums up grievances on each side, strikes a balance, and gives plaintiff a judgment for only such difference as may be found in plaintiff's favor. Mashburn Drug Co. v. Valdosta Drug Co., 53 Ga. App. 88, 184 S.E. 903, rev'd on other grounds, 183 Ga. 471, 188 S.E. 694 (1936); Atlas Auto Fin. Co. v. Atkins, 79 Ga. App. 91, 53 S.E.2d 171 (1949); Toole v. Brownlow & Sons Co., 151 Ga. App. 292, 259 S.E.2d 691 (1979).

- Ordinarily the difference between recoupment and setoff is of little importance. The scheme of the Code is to recoup where both parties rely on the same contract, and set off where they urge different contracts. Byrom v. Ringe, 83 Ga. App. 234, 63 S.E.2d 235 (1951).

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).

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 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).

Recoupment not allowed as to matters contained in a contract separate from one sued upon. Copeland v. White, 17 Ga. App. 565, 87 S.E. 846 (1916).

- Late performance may constitute breach of contract by plaintiff, but remedy for breach is not nonpayment; it is recoupment or what is now a counterclaim. Sasser & Co. v. Griffin, 133 Ga. App. 83, 210 S.E.2d 34 (1974).

- While damages resulting from the plaintiff's breach of a contract sued on may be set off by plea of recoupment, still this right of setoff is not broad enough to include damages alleged to have arisen from plaintiff's wrongful act in connection with a transaction legally distinct from contract sued on, even though closely connected with it in point of time. Aetna Ins. Co. v. Lunsford, 179 Ga. 716, 177 S.E. 727 (1934).

- When plaintiff has made out a prima facie case by proof of delivery and acceptance of goods, defendant has burden of proving facts set up under defendant's plea of recoupment, and damage thereby. Gem Knitting Mills v. Empire Printing & Box Co., 3 Ga. App. 709, 60 S.E. 365 (1908); Phillips v. Lindsey, 31 Ga. App. 479, 120 S.E. 923 (1923).

- Trial court was authorized to conclude that the buyers were not entitled to recover on the buyers' recoupment claim made in the context of the sellers' suit on three promissory notes; a management agreement was a sham, and the evidence showed that no money was paid thereunder; further, money paid as a downpayment on a business sale contract and additional money paid to one of the sellers in return for services were voluntarily paid, and the evidence did not demand a finding of an overpayment or payment on account of fraud, accident, or mistake. Park v. Fortune Ptnr., Inc., 279 Ga. App. 268, 630 S.E.2d 871 (2006).

- Although the court found that the debtor owed a specific amount to the creditor at the time the bankruptcy case was filed and as scheduled, affirmative defenses of recoupment and setoff were preserved, and the party objecting to the creditor's claim could assert those defenses to reduce the creditor's claims if the defenses were permitted under state law (here, Georgia). Whether called setoff or recoupment, it was undisputed that the debtor paid an amount to the bank to satisfy the creditor's primary obligation to that bank, and it was also undisputed that the obligation of the debtor to the creditor arose when the debtor borrowed money that originated from the bank; thus, under any theory the debtor would get the benefit of the amount the debtor paid on the bank's debt, reducing the creditor's claim accordingly. In re Bay Circle Props., LLC, Bankr. (Bankr. N.D. Ga. Apr. 3, 2020).

Cited in Taylor v. Hardin, 38 Ga. 577 (1869); Latimer v. Lane, 45 Ga. 474 (1872); Griffin v. Lawton & Willingham, 54 Ga. 104 (1875); Western Union Tel. Co. v. Taylor, 84 Ga. 408, 11 S.E. 396, 8 L.R.A. 189 (1890); Arnold v. Carter, 125 Ga. 319, 54 S.E. 177 (1906); 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); Bowers v. Williams, 17 Ga. App. 779, 88 S.E. 703 (1916); Park v. Carmichael, 20 Ga. App. 36, 92 S.E. 397 (1917); Woodall v. Exposition Cotton Mills, 31 Ga. App. 269, 120 S.E. 423 (1923); Georgia Lumber Co. v. Johnson-Battle Lumber Co., 31 Ga. App. 290, 120 S.E. 604 (1923); Shehane v. Eberhart, 33 Ga. App. 23, 125 S.E. 506 (1924); Southern Exch. Bank v. Langston, 33 Ga. App. 477, 127 S.E. 230 (1925); Porter v. Davey Tree Expert Co., 34 Ga. App. 355, 129 S.E. 557 (1925); Frey v. Harry L. Winter, Inc., 166 Ga. 453, 143 S.E. 902 (1928); Archibald Hdwe. Co. v. Gifford, 44 Ga. App. 837, 163 S.E. 254 (1932); Jordan Realty Co. v. Chambers Lumber Co., 176 Ga. 624, 168 S.E. 601 (1933); Helton v. Taylor, 58 Ga. App. 630, 199 S.E. 580 (1938); Middleton v. Pruden, 191 Ga. 893, 14 S.E.2d 82 (1941); Chemetron Corp. v. Southern Nitrogen Co., 102 Ga. App. 577, 117 S.E.2d 180 (1960); H.W. Ivey Constr. Co. v. Southwest Steel Prods., 111 Ga. App. 527, 142 S.E.2d 394 (1965); Moore v. Todd, 223 Ga. 702, 157 S.E.2d 587 (1967); Windjammer Assocs. v. Hodge, 153 Ga. App. 758, 266 S.E.2d 540 (1980); Chapman v. Aetna Fin. Co., 615 F.2d 361 (5th Cir. 1980); Atlanta Window Co. v. Haskell Assocs., 162 Ga. App. 789, 293 S.E.2d 51 (1982); Tempo Mgt., Inc. v. Lewis, 210 Ga. App. 390, 436 S.E.2d 98 (1993); Johnston v. Conasauga Radiology, P.C., 249 Ga. App. 791, 549 S.E.2d 778 (2001); Imex Int'l v. Wires Eng'g, 261 Ga. App. 329, 583 S.E.2d 117 (2003); Natale v. The Home Depot U.S.A. (In re Krause, Inc.), Bankr. (Bankr. N.D. Ga. July 11, 2005).

Pledgor may recoup against pledgee. Bennett v. Tucker & Pennington, 32 Ga. App. 288, 123 S.E. 165 (1924).

Recoupment allowed for damage to principal caused by violation of instructions by factor. Wood & Bro. v. Jones & Son, 10 Ga. App. 735, 73 S.E. 1099 (1912).

- In proceeding to foreclose bill of sale retaining title to secure debt, the debtor may, by affidavit of illegality, avail oneself of any defense which the debtor might set up in an ordinary suit upon demand secured by a mortgage, and which goes to show that amount claimed is not due and owing; and, while the debtor is thus permitted to avail oneself of a valid defense by way of recoupment, the debtor is not entitled to plead defense of setoff in such a summary proceeding, since the latter defense is not one which goes to justice of plaintiff's demand. Atlas Auto Fin. Co. v. Atkins, 79 Ga. App. 91, 53 S.E.2d 171 (1949).

Assignee of purchase money, title retention contract is subject to defense of failure of consideration against original vendor by way of recoupment, although assignee took without notice of it. Columbia Loan Co. v. Parks, 213 Ga. 723, 101 S.E.2d 720 (1958).

- When several shipments of the same article, purchased under terms of a single contract, are made, buyer can recoup for damage caused by delay in any one of the shipments. Gem Knitting Mills v. Empire Printing & Box Co., 3 Ga. App. 709, 60 S.E. 365 (1908).

- When plaintiff sues on one part of contract consisting of mutual stipulations made at same time and relating to same subject matter, defendant may recoup defendant's damages arising from breach of that part which is in defendant's favor, whether the different parts are contained in one instrument or several; and though one part be in writing and other in parol; otherwise where contract for breach of which damages are claimed by defendant, is entirely distinct and independent of one on which plaintiff sues. Atlas Auto Fin. Co. v. Atkins, 79 Ga. App. 91, 53 S.E.2d 171 (1949).

- When seller of automobile or transferee of the note given for the purchase price thereof rely on the contract by suing thereon, the defendant would be entitled to recoup damages against either, suing as plaintiff for the alleged breach of the contract. Commercial Credit Co. v. Anthony, 48 Ga. App. 725, 173 S.E. 204 (1934).

Tenant may recoup damages arising from violation of lease, when landlord brings dispossessory warrant alleging failure to pay rent. Weaver v. Roberson, 134 Ga. 149, 67 S.E. 662 (1910).

- Remedy of recoupment applies to actions ex contractu, between contractor and subcontractor, and for damages alleged to have been caused by delay in completion of construction. Sasser & Co. v. Griffin, 133 Ga. App. 83, 210 S.E.2d 34 (1974).

- While it is true that on acceptance of work by owner after building contractor has rendered entire service for which contractor has contracted, the contractor is authorized to proceed to collect balance due contractor by terms of contract, any damage to owner resulting from negligent performance of contract by contractor is a matter for recoupment. Allied Enters., Inc. v. Brooks, 93 Ga. App. 832, 93 S.E.2d 392 (1956); Sasser & Co. v. Griffin, 133 Ga. App. 83, 210 S.E.2d 34 (1974).

While upon acceptance of work by owner after architect has rendered entire service for which architect has contracted, the architect is authorized to proceed to collect balance due the architect by terms of contract, any damage to owner resulting through negligent performance of contract by the architect is a matter for recoupment. Housing Auth. v. Ayers, 211 Ga. 728, 88 S.E.2d 368 (1955).

If plaintiff in undertaking to perform a building contract could, by use of proper care and skill, have avoided alleged damages to defendant, and defendant is required to incur additional expenditures in order to correct the situation brought about by plaintiff, this is a proper item of recoupment in reduction of plaintiff's demand. Allied Enters., Inc. v. Brooks, 93 Ga. App. 832, 93 S.E.2d 392 (1956); Kuhlke Constr. Co. v. Mobley, Inc., 159 Ga. App. 777, 285 S.E.2d 236 (1981).

On the acceptance of the work by the owner after a building contractor has rendered the entire service for which the contractor has contracted, the contractor is authorized to proceed to collect the balance due the contractor by the terms of the contract, any damage to the owner resulting through the negligent performance of the contract by the contractor is a matter for recoupment. Kuhlke Constr. Co. v. Mobley, Inc., 159 Ga. App. 777, 285 S.E.2d 236 (1981).

When defendant's plea of recoupment seeks to recoup against plaintiff's action on contract with a plea that defendant was forced to spend a certain amount of money to have conveyor system, which the plaintiff erected under contract, repaired due to unskillful and improper manner in which plaintiff did certain of the work, motion to strike plea of recoupment was properly denied. Burton v. Campbell Coal Co., 95 Ga. App. 338, 97 S.E.2d 924 (1957).

Recoupment, by way of crossaction, does not arise ex delicto and does not require affirmative equitable relief. Allied Enters., Inc. v. Brooks, 93 Ga. App. 832, 93 S.E.2d 392 (1956).

- Summary judgment under O.C.G.A. § 9-11-56(c) was properly granted to a creditor in the creditor's action seeking to collect on a debt since the debtor's defense consisted of a claim in recoupment, pursuant to O.C.G.A. §§ 13-7-2 and13-7-13, based on personal injuries the debtor suffered from the negligent conduct of the creditor; the court ruled that such a defense was not applicable to the creditor's claim because the claims were legally distinct. Long v. Reeves Southeastern Corp., 259 Ga. App. 257, 576 S.E.2d 641 (2003).

Speculative damages cannot be recouped. White v. Blitch, 112 Ga. 775, 38 S.E. 80 (1901).

- In an action seeking a writ of possession for a mobile home, because the mobile home's tenants expressly waived any recourse against their bankrupt lender arising from a prior judgment, based on a voluntary settlement with the bankrupt lender accepting a general unsecured claim, the tenants could not later assert any right of recoupment; as a result, the trial court did not err in granting summary judgment as to that claim against the tenants and in favor of a successor lender. Hill v. Green Tree Servicing, LLC, 280 Ga. App. 151, 633 S.E.2d 451 (2006).

- Trial court's finding that the school fulfilled the school's contractual obligation to the parent under enrollment contracts the parties entered into by providing the school, the teachers, and the facilities was supported by "any evidence"; thus, the trial court did not err in ruling against the parent on the parent's breach of contract counterclaim since the parent did not show an entitlement to recoup any of the damages that the trial court awarded to the school on the school's breach of contract claim for unpaid tuition. Fuller v. Lakeview Acad., 261 Ga. App. 607, 583 S.E.2d 282 (2003).

- It was error to exclude certain evidence as to damages on the ground that defendants had not asserted a setoff or recoupment counterclaim. The case did not involve setoff or recoupment under O.C.G.A. §§ 13-7-1 and13-7-2, as there was no claim that plaintiff owed any debt to defendants or breached a cross-obligation or independent covenant. Automated Print, Inc. v. Edgar, 288 Ga. App. 326, 654 S.E.2d 413 (2007).

- In a founder's contract dispute against a corporation, neither party could be said to have not complied with the cross-obligations or independent covenants, because none existed since the contract conceived of a single obligation, the corporation paid the founder in full on the single obligation in dispute. Stewart v. Hooters of Am., Inc., F.3d (11th Cir. June 28, 2011)(Unpublished).

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).

Properly asserted claim for recoupment is not barred by statute of limitation. H.R. Kaminsky & Sons v. Yarbrough, 158 Ga. App. 523, 281 S.E.2d 289 (1981).

Recoupment may be pleaded regardless of the statute of limitations. Therefore, a party may recover damages on claims raised as recoupments after the limitations have run. Multivision N.W., Inc. v. Jerrold Elecs. Corp., 356 F. Supp. 207 (N.D. Ga. 1972).

Plea of recoupment is not barred by statute of limitations when main action is timely. Multivision N.W., Inc. v. Jerrold Elecs. Corp., 356 F. Supp. 207 (N.D. Ga. 1972).

Recoupment may be used to gain affirmative recovery on claim which would ordinarily be barred by limitations. Multivision N.W., Inc. v. Jerrold Elecs. Corp., 356 F. Supp. 207 (N.D. Ga. 1972).

- After filing of a plea of recoupment, neither plaintiff by voluntary act nor court upon its own motion can dismiss petition without defendant's consent so as to prejudice the defendant's right of alleged counterclaim. Calhoun v. Citizens Banking Co., 113 Ga. 621, 38 S.E. 977 (1901).

Defendant cannot move to dismiss plaintiff's petition, yet retain plea of recoupment for trial. Rice-Stix Dry Goods Co. v. Friedlander Bros., 30 Ga. App. 312, 117 S.E. 762 (1923), aff'd, 158 Ga. 303, 122 S.E. 890 (1924).

RESEARCH REFERENCES

Am. Jur. 2d.

- 20 Am. Jur. 2d, Counterclaim, Recoupment, and Setoff, §§ 1, 2, 6, 10, 12, 17.

- 80 C.J.S., Set-Off and Counterclaim, § 2.

- Failure of creditor, or creditor's assignee, to secure credit insurance as affecting rights or liabilities of debtor, upon debtor's loss, 88 A.L.R.3d 794.