recoupment and recoup and defalcation and defalk and cowell and dyers reports

When studying the Uniform Sales Act of 1906, I realized that in the discussion on remedies for breach of warranty Samuel Williston used the word recoupment (Sec. 69(1)(a)) while his underlying source, the 1893 English Sale of Goods Act, does not use the word. This got me thinking about how the concept of recoupment, as distinguished from set-off, might have emerged in the common law, even though the ideas became merged in the 19th century so that almost no one distinguishes them today. This essay is an attempt to probe gently the early history of recoupment. And, can you believe it? When I was researching this seemingly small idea, I discovered that there was an 1872 treatise (2nd ed.), written by a New York lawyer Thomas W. Waterman entitled A Treatise on the Law of Set-off, Recoupment and Counter Claim. It is, get this, 700 pages in length, and never really adequately explains recoupment's history. But I will try to put a few things together here and there to explain this term, as well as a near neighbor, defalcation.

Recoupment and Set-off

These two terms are often used, when at all, as synonyms, but they differ in the following particulars. Set-off had a statutory origin at the time of Queen Anne (around 1700), and originally related to diminishing a plaintiff's recovery because the defendant could show that plaintiff owed him a certain liquidated sum in another transaction. Recoupment, on the other hand, was an equitable (not statutory) remedy which related to a deduction from plaintiff's recovery because of a claim that he had not fully performed the contract or because defendant had already paid some of the bill for that contract. In other words, it had to do with the same action. In addition, while originally set-off only had to do with liquidated (precisely determined) damages, recoupment could relate to unliquidated claims. As Williston said in his 1909 treatise on sales, if the doctrine of set-off had expanded early beyond its rather narrowly defined confines, it could easily have swallowed up the concept of recoupment so that we would only have had one, and not two, concepts to learn. But this is law, and there are always more concepts than you really need to know.

Toward an Early History of Recoupment

Waterman is unhelpful in tracing the history of the concept. His treatise, which is only cited seven times in the voluminous legal literature of the past two decades, gives some hints, however, that take us on our way. The term seems to have its origin in the 16th century, but Cowell's Interpreter (1607) didn't refer to it. However, Manley's first edition of Cowell's dictionary (1672) had an entry for recoupment. In addition, Dyer's Reports, a three-volume nominate reporter from the mid-1580s, has the following note referring to the days of Henry VIII (d. 1547):

"If a man disseize me of land out of which a rent charge is issuant, which has been in arrears for several years, and the disseizor pay it, if the disseizee recover in our assize, the rent that the disseizor paid shall be recouped in damages," 2 Dyer's Reports at 6.

Here the concept of recoupment is equivalent to our present-day word "deduction." If someone evicts me out of land that is mine, but in the process pays off the taxes due on the property, when I get the property back from him, I will get damages for his action less the amount of money he paid for the taxes. Recoupment was thus pleaded as a counterclaim in the same action in which the plaintiff (in this case the disseizee) sought to recover the land.

It was no doubt this quotation from Dyer which formed the basis for the definition in Manley's 1st ed. of Cowell's Interpreter (1672), which is quoted by the OED as the third usage of the term (Coke's commentary on Littleton's Tenures, from 1628, rather than Dyer's Reports, is the first entry). Interestingly enough, as mentioned above, there is no entry in the 1607 edition of Cowell, so the term could not have been in widespread usage in that year. The 1672 definition had:

"Recoupe...to defalke or discount. As if a man hath ten pounds issuing out of certain Lands, and he disseises the Tenant of the Land in an Assise brought by the Disseisee, the Disseisor shall Recoupe the Rent in the Damages."

The idea is the same here though not expressed as clearly as in the Dyer's Reports. Thus, we probably have an action for recoupment arise primarily in the context of real estate law, specifically relating to evicting tenants and then, when they return, deducting or recouping the rent which should not have been charged in the meantime.

When Waterman defines the concept in 1872 he does so as follows:

"The defendant might recoup for damages resulting from the plaintiff's lack of skill....the defendant might recoup damages for a breach of warranty for the thing sold."

Thus, by 1872 it had been associated primarily with a defendant's action, which he pursues by way of a counterclaim (i.e., in the same action), and it is not confined to real property issues. While Waterman also mentions that the action seems to have emerged in the context of actions for fraud (p. 485), he gives us no good historical data to confirm this. From the two definitions above, we can understand how recoupment would at first have been confined to the same legal action.

Connection with Other Words

I will finish this essay by connecting recoup/recoupment with other terms that define it. Some of its synonyms are: defalk (defalcation), deduction, reduction, abatement, discount, or mitigation, though the last is generally used in tort law. The term recoup comes from the French and means "to cut off" or "to cut back," and its most interesting connection with another English word is with defalk or defalcation. Though both defalk and defalcation go back to the 15th century, the latter fell out of use in the 18th century, and when defalcation continued on its own, it picked up another usage, current today, which was not in its original scope. Let me illustrate what I mean.

Let's begin with the current definition of defalcation, the one which most law students learn. It is "a monetary deficiency through breach of trust by one who has the management or charge of funds; a fraudulent deficiency in money matters." When we speak of defalcation today, we refer primarily to fraud or embezzlement. Not so in earlier days. The earliest usage, going back to 1476 is of defalcation as a cutting off or diminution (a falx in Latin is a sickle or scythe). From a will: "An equall defalcacion or diminucion pounde poundelike penny pennylike and rate ratelike of all the legates aforesaide." And then, to conclude with a theological usage, we have, from 1652: "If we be still our old selves..without defalcation of our corruptions, without addition of Grace."

Conclusion

So, this essay provides at least three things: a distinguishing of recoupment from set-off, the showing of recoupment's probable origin in the law of landlord/tenant or real estate law, and finally the changing meaning of words over time. A good lesson to end the year.

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