California, United States of America
The following excerpt is from Nail v. Nail (In re Cati), D071870 (Cal. App. 2018):
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 so far as they equal each other, notwithstanding that an independent action asserting the person's claim would at the time of filing the answer be barred by the statute of limitations." This statute "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." (Granberry v. Islay Investments (1995) 9 Cal.4th 738, 744.) Entitlement to offset depends on the factual and legal context of the case.
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