Set-Off

1.

In law, when the defendant acknowledges the justice of the plaintiff's demand on the one hand, but, on the other, sets up a demand of his own, to counterbalance that of the plaintiff, either in whole or in part.^ The subtraction or taking away of one demand from another opposite or cross-demand, so as to extinguish the smaller demand and reduce the greater by the amount of the less, or, if the opposite demands are equal, to extinguish both.' Formerly, sometimes called " stoppage," because the amount sought to be set off was stopped or deducted from the cross-demand.' Obtains where the defendant has a debt against the plaintiff arising out of a transaction independent of the contract on which the plaintiff sues, and desires to avail him- ' See Stimson, Am. Stat. Law, § 370. » State V. Primm, 61 Mo. 171 (1875). s Swalley v. People, 116 HI.

350 (1886). • Missouri, &c.

E. Co. u Davidson, 14 Kan. 351 (1875). « See United States v. Watkins, 3 Cranch, C. C. 477 (1829). self of that debt in the existiiig suit, either to reduce the plaintiff's recovery or to defeat it altogether; and, as the case may be, to recover a judgment in his own favor for the balance.! The defendant's case must be made out in the same manner as if he sought to maintain a separate action upon it." At common law, the right was not recognized: the defendant had his cross-action. To obviate this circuity of action, 2 Geo. II (1729), c. 22, § 13, allowed mutual debts to be set one against the other, and the matter to be given in evidence under the general issue, or to be pleaded in bar, notice of the particular debt being given beforehand.

And 8 Geo. 11 (173,5), c.

24, § 4, enacted that said § 13 should apply to all mutual debts of a different nature except debts acci*ui Dg as a penalty, which were to be pleaded in bar.^ The substance of those statutes has been re-enacted in the States generally, and the principle extended. Antecedently, equity, under peculiar circumstances of right, would compel a plaintiff to submit to a setoff,; but, to obtain this relief, the defendant had to file a sel)arate bill in equity. When the government is plaintiff, no set-off will be allowed, unless Congress has authorized it.* "Offset" has been used, to a limited extent, for set-off.

5 2.

In equity, that right which exists between two persons, each of whom, under an independent contract, owes an ascertained amount to the other, to set off their mutual debts by way of deduction, so that in an action brought for the larger debt, the residue only, after such deduction, shall be recovered.6 The mere existence of cross-demands will not be suf Bcient to justify a set-off in equity. Indeed, a setoff is there ordinarily allowed only when the party seeking the benefit of it can show some equitable ground for being protected against his adversary's demand.*^ But set-off is not allowed of a joint debt as against a separate debt, nor vice versa; that is, more generally stated, it is not allowed of debts accruing in different rights — except under special circumstances, as, where fraud has been practiced.* ' Avery v. Brown, 31 Conn. 401 (1863), Sanford, J. 2Gorham v. Bulkley, 49 Conn. 91 (1881).

See also Cook V. Mills, 5 Allen, 37 (1862), Bigelow, C. J.; 64 Mi.ss. 663; 49 Mo. 572. 3 See 3 Bl. Com. 805; 2 Story, Eq. §§ 1431-33; Adams, Eq. 222; Chitty, Contr. 12S7; United States v. Eckford, 6 Wall. 488 (1867). 'United States v. Robeson, 9 Pet. *324 (1835); 9 Cranch,236; 39 Cal. 389. 5 Mandeville v. Union Bank, 9 Cranch, 11 (1815). « Adams, Equity, 222. ' 2 Story, Eq. § 1436; Quick v. Lemon, 105 111. 686 0883).

Since the statutes of set-off of mutual debts and credits, courts of equity have generally followed the course adopted in the construction of the statutes by courts of law, and have applied the doctrine to equitable debts. They have rarely, if ever, broken in upon the decisions at law, unless some other equity intervened, which justified them in granting relief beyond the rules of law., On the other hand, courts of law sometimes set off equitable against legal debts. ^ In Pennsylvania, set-off is permitted of claims which are not mutual, but this is not in accordance with the general rules of equity. " In Kansas, set-off ia allowed for unliquidated damages.^ Compare Defalcation, 1; Recoupment.