Section 1950

Citation: Section 1950
Parent Document: Granberry v. Islay Investments, 889 P.2d 970 (1995)
Jurisdiction: California (state)
Effective Date: 1995-03-06
Original Source: https://www.courtlistener.com/opinion/1436586/granberry-v-islay-investments/ ↗

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The English chancery courts allowed setoff to be raised as a defense as early as the 17th century. (Prudential Reinsurance Co. v. Superior Court (1992) 3 Cal.4th 1118, 1124 [14 Cal. Rptr.2d 749, 842 P.2d 48]; 3 Story, Commentaries on Equity Jurisprudence (14th ed. 1918) § 1867, pp. 468-469; *744 see also Tigar, Automatic Extinction of Cross-Demands: Compensatio From Rome to California (1965) 53 Cal.L.Rev. 224 [tracing the history of setoff to the Roman law concept of compensatio].) It was founded on the equitable principle that "either party to a transaction involving mutual debts and credits can strike a balance, holding himself owing or entitled only to the net difference, ..." (Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, 362 [113 Cal. Rptr. 449, 521 P.2d 441, 65 A.L.R.3d 1266].) Setoff, as it applies to this case, is now codified as section 431.70 of the Code of Civil Procedure, which provides in pertinent part: "Where cross-demands for money have existed between persons at any point in time when neither demand was barred by the statute of limitations, and an action is thereafter commenced by one such person, the other person may assert in the answer the defense of payment in that the two demands are compensated for so far as they equal each other, ..." (2) The quoted statute, however, does not create a substantive right to raise setoff as a defense to a claim for monetary relief, but merely describes the procedures to be followed in raising this defense. (Kruger v. Wells Fargo Bank, supra, 11 Cal.3d 352, 362; Hauger v. Gates (1954) 42 Cal.2d 752, 755 [269 P.2d 609].) To determine whether setoff is available in this case, we must turn to section 1950.5.

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