ORDER

STEVEN D. MERRYDAY, UNITED STATES DISTRICT JUDGE

Chase Bank (USA), N.A., holds a pre-petition bankruptcy claim amounting to more than $30,000 against Claudia Acosta-Garriga. In an adversary proceeding brought by the Chapter 7 trustee, the bankruptcy judge found that Chase, while attempting to collect the debt, violated Sections 559.72(7) and 559.72(18) of the Florida Consumer Collection Practices Act (FCCPA). Incorporating a ruling from another adversary proceeding, Meininger v. Chase (In re Gutshall), 8:10-ap-977, Doc. 52 (Bankr. M.D. Fla. July 24, 2011), the bankruptcy judge awarded the trustee statutory damages of $1,000 plus attorneys' fees but refused to set off the award against Chase's claim. The denial results in Chase's paying $1,000 plus attorneys' fees to the estate rather than receiving a reduction of the claim. Chase appeals the bankruptcy judge's refusal to set off the judgment against the claim.

DISCUSSION

The bankruptcy judge reasoned (1) that McCollum v. Hamilton Nat'l Bank of Chattanooga, 303 U.S. 245, 58 S.Ct. 568, 82 L.Ed. 819 (1938), and Newton v. Beneficial Finance Company of New Orleans, 558 F.2d 731 (5th Cir.1977), preclude a setoff,1 (2) that the debt and the claim lack "mutuality" as required by Florida law, and (3) that "public policy" and "the equities" disfavor setoff of FCCPA debts (or "penalties"). Although each finding of fact is reviewed for an abuse of discretion, each legal conclusion is reviewed de novo. In re Chira, 567 F.3d 1307, 1310-11 (11th Cir. 2009); In re Bennett Funding Group, 146 F.3d 136, 140 (2d Cir.1998).

An established, practical, and preferred practice, "setoff (also called `offset') allows entities that owe each other money to apply their mutual debts against each other, thereby avoiding `the absurdity of making A pay B when B owes A.'" Citizens Bank of Maryland v. Strumpf, 516 U.S. 16, 18, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston Nat'l Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 57 L.Ed. 1313 (1913)); 5 Collier on Bankruptcy § 553.03[3][c] (16th ed. 2013) ("In general, setoff is favored under the law in order to avoid a multiplicity of suits, added expense, inconvenience, injustice and inefficient use of judicial resources."). Section 553(a) of the Bankruptcy Code, 11 U.S.C. § 553(a), preserves setoff in bankruptcy and states, "[T]his title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case."

5 Collier on Bankruptcy § 553.02[3] (16th ed. 2013). In this instance, the applicable "nonbankruptcy law" is the law of Florida. Cf. Strumpf, 516 U.S. at 18-19, 116 S.Ct. 286; Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979); In re Prudential of Fla. Leasing, 478 F.3d 1291, 1298, 1299 (11th Cir.2007) ("Section 553 allows states unfettered discretion to create, eliminate, and otherwise define any rights to offset mutual debt and requires federal courts to recognize those rights."); In re Blanton, 105 B.R. 321 (Bankr. E.D.Va.1989); 5 Collier on Bankruptcy § 553.04 (16th ed. 2013).

A discussion of setoff in Florida begins with the statutory plea of setoff and the common law plea of recoupment, each of which the modern counterclaim incorporates and expands. Before the adoption of counterclaim practice, a defendant invoked the defensive plea of recoupment if the defendant's claim arose from the same transaction or occurrence as the plaintiff's claim. A defendant invoked the offensive plea of setoff even if the defendant's claim arose from a transaction or occurrence separate from the occurrence from which the plaintiff's claim arose. Unlike recoupment, which proscribed an affirmative judgment for the defendant, setoff permitted a judgment for the defendant if the defendant's entitlement exceeded the plaintiff's entitlement. In other words, the plaintiff's judgment would "set off" the defendant's judgment. Cherney v. Moody, 413 So.2d 866, 867-68 (Fla. 1st DCA 1982); Buffington v. Quackenboss, 5 Fla. 196, 197 (1853). But the setoff statute prevented the plea of setoff if the parties alleged a different legal theory, such as a claim in contract (or assumpsit) and a setoff in tort. Matthews v. Lindsay, 20 Fla. 962 (1884); Hall v. Penny, 13 Fla. 621 (1869); Robinson v. L'Engle, 13 Fla. 482 (1869).

In 1931 recoupment joined setoff in the Florida Statutes, and the codification explicitly eliminated the distinction between the two. Chapter 14823, Laws of Florida (1931) (creating in recoupment "the same right of recovery to the defendant ... as pleas of setoff"); Cherney, 413 So.2d at 868. A decade later, the counterclaim replaced the pleas of recoupment and setoff in Section 52.11, Florida Statutes. Since 1941 and through the modernization of the procedural rules, a counterclaim has replaced the pleas of setoff and recoupment. Today, no generally applicable statutory right of setoff lingers. Instead, a defendant may plead against a plaintiff a counterclaim under Rule 1.170, Florida Rules of Civil Procedure, which resembles the 1941 statute.2 So, "nonbankruptcy law" requires setoff (1) if Florida permits a defendant sued for a violation of the FCCPA to assert as a counterclaim the breach of contract arising from the underlying debt and (2) if, when the claimant and counter-claimant each prevail, Florida requires a judgment for the net amount of the offsetting liabilities.

First, Rule 1.170(a), Florida Rules of Civil Procedure, the "compulsory counterclaim" rule, requires a "pleading [to] state as a counterclaim any claim ... the pleader has against any opposing party, provided it arises out of the same transaction or occurrence that is the subject matter of the opposing party's claim." Rule 1.170(b), the "permissive counterclaim" rule, permits a "pleading [to] state as a counterclaim any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing party's claim." If, outside of bankruptcy, Acosta-Garriga sues Chase for a violation of the FCCPA, Chase may assert as a counterclaim "any claim," including one to recover the debt owed by Acosta-Garriga.3

Second, Florida prefers the entry of a judgment — one judgment — for the net amount of the offsetting liabilities. The rule derives from common law and common sense. In Angel Home Health Care, Inc. v. Mederi of Dade County, Inc., 696 So.2d 487, 488 (Fla. 3d DCA 1997), Angel Home sued Mederi — a nearly insolvent defendant — for breach of contract, and Mederi counterclaimed for fraud. The jury returned a $45,459.33 verdict for Angel Home and a $6,432 verdict for Mederi. Rather than set off the obligations, the trial judge entered a separate judgment on each verdict. In a per curiam reversal, Angel Home remands with instructions to set off the judgments:

696 So.2d at 488. "Such a result," the opinion concludes, "would be totally absurd."4 696 So.2d at 488.

In Nationwide Mutual Fire Ins. v. Voigt, 21 So.3d 895 (Fla. 2d DCA 2009), an insured obtained a $440,915.49 judgment against an insurer. The insurer appealed, and the appellate court reversed the judgment with instructions to enter a final judgment against the insured for $50,000, the applicable policy limit. The appellate court sanctioned the insured for appellate attorneys' fees and remanded to the trial court for the calculation of a reasonable fee. After the fee calculation, the trial court entered two judgments, one in favor of the insured for $50,000 in damages and one in favor of the insurer for $23,021.60. The insurer appealed and argued that the trial court "erred" by failing to enter a judgment for the net amount of the offsetting liabilities. Voigt reverses the entry of separate judgments and remands "for the trial court to enter a net judgment after setting off the $23,021.60 that [the insured] owes to [the insurer] from the $50,000 that [the insurer] owes [the insured]." 21 So.3d at 896. Voigt orders a setoff despite the punitive nature of a sanction.

The bankruptcy ruling relies on McCollum v. Hamilton Nat'l Bank of Chattanooga, 303 U.S. 245, 58 S.Ct. 568, 82 L.Ed. 819 (1938), and Newton v. Beneficial Finance Company of New Orleans, 558 F.2d 731 (5th Cir.1977), each of which construed the repealed Section 68a of the Bankruptcy Act, which granted a positive, federal right of setoff.5 In McCollum, the trustee sued the creditor and prevailed on a claim under the federal usury statute. Considering the law before the enactment of the Federal Rules of Civil Procedure, McCollum relies explicitly on the law of usury:

McCollum, 303 U.S. at 247-49, 58 S.Ct. 568 (internal citation omitted; emphasis added) Decided before modern pleading, McCollum construes the law of usury and relies on a positive right of setoff in bankruptcy, a right conferred by a subsequently repealed statute. McCollum neither controls nor informs whether Florida law prohibits a setoff if a creditor violates the FCCPA.

An opaque, barely two-page opinion preventing the setoff of a "Truth in Lending" violation against a bankruptcy claim, Newton considered "whether a debt discharged in bankruptcy may be set off against a claim under [the Truth in Lending Act (TILA)] and arising out of that debt." In Newton, the trustee in bankruptcy abandoned the TILA claim, which reverted to the debtor, who — in the capacity of the debtor and not in the capacity of the estate — sued under TILA outside of bankruptcy.6 The creditor argued, and the district judge accepted, that under Louisiana law the discharged debt "was a `natural obligation.'" 558 F.2d at 732. The Fifth Circuit reversed and compared TILA to the McCollum usury statute and reasoned that TILA bore "a strong similarity" to usury because the remedy for each violation was "primarily punitive." Like McCollum, Newton construes the application of a federal statute (rather than the FCCPA) under the repealed setoff provision, which — rather than leaving the disposition of setoff to "nonbankruptcy law" — provides a positive, federal right of setoff. Whatever precedent lingers from McCollum and Newton, neither opinion, each construing a federal statute, controls whether the Florida Consumer Collection Practices Act prohibits a setoff.7

The bankruptcy ruling relies in part on "public policy" — but not policy found in the Florida Statutes or even in the Florida courts. Setting off the obligations, the bankruptcy ruling contends, will permit "lenders" to "violate the FDCPA or FCCPA with impunity."8 (Doc. 3-13 at 16) In addition, the ruling reasons:

. . .

(incorporated ruling from In re Gutshall, 8:10-ap-977, Doc. 52 at 43) The "public policy" enforceable in this instance is the "public policy" preferred by the Florida legislature, not the "public policy" preferred by the federal judiciary. If Florida chooses to deny a defendant the ability to counterclaim against, or to set off, an FCCPA violation, the Florida legislature can say so.9 See Fla. Stat. § 46.015 (governing setoff for a covenant not to sue); § 679.340 (governing setoff against a deposit account); § 766.118(7) (governing setoff for non-economic damages in medical malpractice actions); § 768.041 (governing setoff for a covenant not to sue in a tort action); cf. § 768.31 (governing contribution among tort defendants). Florida law permits a counterclaim and compels a judgment for the net amount of the offsetting liabilities. Under nonbankruptcy law, no reason appears to deny a setoff.

Subject to the presently inapplicable exceptions in Sections 553(a) and the avoidance criteria of Section 553(b), a setoff under the Bankruptcy Code requires the creditor's holding a claim that arose before the commencement of the debtor's bankruptcy and the creditor's owing a pre-petition debt to the debtor. No party disputes that each obligation arose pre-petition. In addition, the Bankruptcy Code requires "mutual" obligations, which in this instance means that the parties — Chase and the trustee — owe the obligations to each other and only to each other, that is, in the same "right" and in the same "capacity." Collier's explains:

5 Collier on Bankruptcy § 553.03[3][c] (16th ed. 2013); see Dakin v. Bayly, 290 U.S. 143, 146, 54 S.Ct. 113, 78 L.Ed. 229 (1933); In re Bevill, Bresler & Schulman Asset Management Corp., 896 F.2d 54, 57-58 (3d Cir.1990). "[T]he requirement that obligations be owed in the same `right' simply enforces the rule that joint obligations are not subject to setoff against separate debts in bankruptcy." 5 Collier on Bankruptcy § 553.03[3][d] (16th ed. 2013). In other words, a claim held jointly by A and B against C is not subject to a setoff against a claim held by C against A only; C must hold a claim against A and B jointly to set off the claim held jointly by A and B against C. Chase holds a claim against the estate for $30,000; the estate holds, perforce the claim's inclusion as property of the estate under Section 541(a)(1) and the successful adversary proceeding, a judgment against Chase for $1,000 plus attorneys' fees.

The trustee unpersuasively contends that the obligations arise in a different "capacity" and a different "right," as defined by Florida. The bankruptcy ruling agrees with the trustee and relies on late nineteenth-century and early twentieth-century cases construing the statutory plea of setoff, which forbade a setoff if the obligations arose under different legal theories. As discussed above, the parties' asserting distinct legal theories prevents neither a counterclaim nor a setoff. The counterclaim embodies the only meaningful remnant of "mutuality" remaining under Florida law, and the definition is effectively the same as the Bankruptcy Code's. 40 Fla. Jur.2d Pleadings § 91 (2d ed.2013) (citing cases). The obligations set off.10

CONCLUSION

The order of the bankruptcy court declining a setoff is REVERSED and REMANDED. The bankruptcy judge must set off the judgment of $1,000 plus attorneys' fees against Chase's claim. The clerk is directed to close the case.

ORDERED in Tampa, Florida, on July 1, 2013.