A district court order reversing the bankruptcy court's denial of relief to setoff and remanding for further significant proceedings is not final and appealable. In re Buckner, 66 F.3d (10th Cir. ). 2. Standard of Review. Whether the United States has a right of setoff is a matter of law which the appellate court reviews de novo. United. Recoupment differs in that the opposing claims must arise from the same transaction. 4 Lawrence P. King, Collier on Bankruptcy ¶ (15th ed. ). B. The Bankruptcy Code is not an independent source of law that authorizes setoff or recoupment; it recognizes and preserves rights that exist under non-bankruptcy law. Jul 31, · The recoupment rights in the ADI cases arise from advertising credits asserted by the debtors against its vendors prior to the bankruptcy filing, which credits are common in the retail industry.
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Butler v. NationsBank, N. Robins Co. Character Of The Claim. The debt and the claim need not arise from the same transaction nor must they be of the same character. See, e. However, if the creditor's debt to the debtor is based on the recovery of a fraudulent conveyance under 11 U. In re Acequia, Inc. Maizel Commercial Litigation Branch U. Strumpf , S. Boylston Nat'l Bank , U. Setoff "occupie[s] a favored position in our history of jurisprudence," Bohack Corp.
Borden, Inc. Utah , and "[t]he primacy of setoffs is essential to the equitable treatment of creditors. Absent a setoff, a creditor It was to avoid this unfairness that setoffs were allowed in bankruptcy in the first place. Rollo , 85 U. Dep't of Pub. Welfare , F. See also Darr v. Muratore , 8 F. United States , 14 F. United States , U. May 23, en banc , vacting panel decision at 59 F. United States , 58 F. United States , F. Rinehart , 88 B. A Bankr. Mutuality is not destroyed simply because a claim arose against the debtor in one agency of the executive branch while the debtor is owed an amount from a different agency.
FmHA , 75 B. United States , S. National R. Passenger Corp. United States , 5 F. Contra In re Chateaugay Corp. Other courts have required "'some type of overpayment,' whether accidentally or contractually made" to permit recoupment.
In re Photo Mech. See , e. Ohio quoting In re Maine , 32 B. Eddie Parker Interests Inc. Master Auto Serv. Bernstein , 59 F. Smith , F. Utah "A single contract must be considered one transaction. CBS, Inc. Regional Airlines, Inc. Cheney , F. Airlines, Inc. Iowa Contra University Medical Ctr. Sullivan , F. United States Right To Recoupment. The United States has a long recognized right to recoup federal monies erroneously paid out.
Carr , U. PBGC , F. Recoupment And The Automatic Stay. The automatic stay does not apply to recoupment. See In re Holford , F. Sullivan , B. Utah ; In re Maine , 32 B. Contra In re Scharff , B. Iowa ; In re Heafitz , 85 B. See also In re Izagirre , B. The time limits of setoff do not apply; prepetition claims can be withheld from postpetition debts. See In re Midwest Serv. Utah recoupment allowed when prepetition progress payments exceeded value of construction work when performance continued postpetition ; Waldschmidt v.
But see In re Ruiz , B. Recoupment After Discharge. Recoupment is unaffected by a discharge in bankruptcy. In re Flagstaff Realty Assocs. General Motors Corp. When recoupment is used as a defense to a plaintiff's action it is not barred by a statute of limitations as long as the main action itself is timely.
United States v. Dalm , U. Fund, Inc. Failure of the debtor to assume an executory contract does not impair a creditor's ability to recoup prepetition overpayments from ongoing postpetition payments to a debtor, where both arise from the same contract.
See In re Wang Labs. Contra In re University Medical Ctr. The right of recoupment is not contingent upon there being an express contract provision contemplating recoupment. New York Dep't of Social Servs.
Y Recoupment And Sovereign Immunity. As with setoff, recoupment alone should not waive sovereign immunity; recoupment is a merely a defense, not a claim a right of payment as defined in 11 U. In re Harmon , B.
A creditor who holds a properly perfected Article 9 security interest is nonetheless subject to the defense of recoupment. Bank v. Eastern Mt. Sports , F. But see In re Tucumseh Const. State Laws May Restrict Recoupment. In re Fox , B. However, we should argue that does not restrict the federal government. One court has held that claims arising from rejection of an executory contract are not available for recoupment.
Dewey Freight Sys. Consequently, post-petition debts are not setoff against pre-petition claims. See In re Ruiz, B. Recoupment, on the other hand, is " In fact, unlike setoff, the Code does not reference recoupment. Indeed, recoupment differs from setoff in that the doctrine of recoupment "is the setting up of a demand from the same transaction as the plaintiff's claim, to abate or reduce that claim.
Stated otherwise, recoupment is a recovery of money owed arising from the same transaction as the plaintiff's claim or cause of action strictly for the purpose of abatement or reduction of such claim. See Schachter v. In fact, recoupment "is merely the means used to determine the proper liability on the amounts owed Since recoupment is typically defensive in nature and used to establish the proper amount of liability, pre-petition claims can be withheld from post-petition debts.
See Maizel at ; see, also, Tolassi, B. This difference also affects the applicability of the automatic stay. The automatic stay applies to "the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor Although the automatic stay "enjoins the enforcement of the creditor's [setoff] right pending the orderly examination and administration of the estate," it does not "defeat" such right.
Therefore, a motion seeking relief from the automatic stay must be pursued before setoff can occur. Recoupment, on the other hand, is not subject to the automatic stay because of its inherent difference from setoff.
See New York State Elec. The debtor was also due certain sums from the insurance company for commissions on policies sold. The insurance company moved for relief from the automatic stay to set off the commissions against the advances.
See Ruiz, B.