cannot be universal. It seems, therefore, more in accordance with the nature of actions and more in harmony with the language of the statute to regard the "subject of the action" as denoting the plaintiff's principal primary right to enforce or maintain which the action is brought, than to regard it as denoting the specific thing in regard to which the legal controversy is carried on. In this manner alone can we arrive at a general rule applicable to all possible cases, and the rule thus reached fully satisfies all the requirements of the legislative language, and can be invoked in all classes of actions. While I suggest and adopt this meaning of the term "subject," I freely concede that no decision, so far as I have discovered, pronounces this interpretation to be the only one admissible; many cases sanction it, none directly reject it; but none, on the other hand, have gone so far as to declare in its favor to the exclusion of all other meanings. The construction proposed, as it has been judicially approved in many instances, would remove all doubt and conflict of opinion, and would furnish a simple and practical rule of universal application.

§ 776. In respect to the phrase "connected with " the subject of the action, one rule may be regarded as settled by the decisions, and it is recommended by its good sense, and its convenience in practice. The connection must be immediate and direct. A remote, uncertain, partial connection is not enough to satisfy the requirements of the statute. The criterion proposed by the Supreme Court of Indiana in one of the cases cited is as certain and practical as the nature of the subject admits, and only needs to be known to be universally accepted. It is, that the connection must be such that the parties could be supposed to have foreseen and contemplated it in their mutual acts; in other words, that the parties must be assumed to have had this connection and its consequences in view when they dealt with each other. I now pass, according to the order already stated, to the three branches into which the subject-matter is naturally separated.

I. Cases in which the Cause of Action alleged as a Counterclaim arises out of the Contract set forth in the Complaint or Petition as the Foundation of the Plaintiff's Claim.

§ 777. Mr. Justice Woodruff, in the opinion last quoted, declares that the second subdivision of the definition was intended

to embrace all cases in which the plaintiff's cause of action arises on contract, and the defendant's counterclaim also arises on contract, either the same or another, and that the clause of the first subdivision above mentioned was designed to include only those cases in which the contract is set forth by the plaintiff as the foundation of his action, although the action itself is not on the contract. This is, I think, attributing too much nicety and precision of thought to the legislature, and assumes that it would never enact any duplicate provisions. The first subdivision no doubt covers the cases mentioned by Judge Woodruff, but it also embraces many others. Undoubtedly, the codifiers and the legislature in drawing and adopting the first subdivision had in mind the doctrine of recoupment, and so framed the language that it should include cases of recoupment and all others, legal and equitable, analogous to it, — that is, all cases in which the right of action of the plaintiff and that of the defendant arise from the same contract. It describes, therefore, not only the special and infrequent classes of instances in which the plaintiff's claim is not technically on the contract, although a contract is set forth as its foundation, but also all other instances in which the plaintiff's action is strictly brought on the contract, while the defendant's counterclaim in both cases arises from the same contract. The central idea of this subdivision then is, that one and the same contract is the basis of both parties' demand for relief. Passing to the second subdivision, the central thought is equally plain, viz., that the plaintiff's cause of action, and that of the defendant, spring from different contracts; in other words, the codifiers and the legislature had in mind the familiar case of set-off, both legal and equitable. But, in framing the clause, the language was made broader than was necessary, and it actually covers all cases in which the plaintiff's cause of action is on contract, and the defendant's counterclaim is also on contract the same or another. The law-makers have thus in fact given us two provisions authorizing a counterclaim arising from the same contract as that from which the plaintiff's cause of action results, but only one authorizing a counterclaim springing from another contract than the one upon which the plaintiff's demand is based. The same case may, therefore, be often referred to both of these subdivisions; but I shall, following what seems to be the plain design of the statute, consider under the first all those

instances in which the demands of both parties arise from the same contract, and postpone to the second all those in which each demand arises from a separate contract. That this is the correct construction of the whole provision is made certain, when we turn to the form which it assumes in all the codes which constitute the second group according to the classification stated at the commencement of this section.

§ 778. It may be stated as a general proposition that in all actions to recover a money judgment, debt or damages, upon a contract, or where a contract is set forth as the foundation of the plaintiff's claim, a counterclaim of a money judgment against the plaintiff for his breach or non-performance of any stipulations of the same agreement, or for his fraud in procuring the same to be entered into, is admissible. The following examples will illustrate this proposition. In an action for rent brought by the lessor or by the grantee of the reversion against the lessee or an assignee of the term, where the lease contains a covenant to repair on the part of the landlord, damages sustained by the defendant from a breach of this covenant may be alleged, and recovered as a counterclaim. The damages in one such case, where the demised premises were a hotel, were held to be the sum paid by the defendant for making the necessary repairs, together with the amount of loss occasioned by the inability to use certain rooms in the hotel while they were out of repair.1 In an action by the buyer against the seller to recover damages for the non-delivery of goods bargained and sold, the latter may counterclaim the unpaid price of that part of the goods already delivered under the contract. When sued for the price of two articles sold under one agreement, the defendant may set up and recover damages resulting from the fraudulent representations of the plaintiff in respect to one of them, even though such damages exceed in amount the whole price agreed to be paid for both. A person having sold his business and good-will at a

1 Myers v. Burns, 35 N. Y. 269; Cook v. Soule, 56 N. Y. 420; 1 N. Y. S. C. 116; Benkard v. Babcock, 2 Robt. 175.

2 Leavenworth v. Packer, 52 Barb. 132, 136.

3 Rawley v. Woodruff, 2 Lans. 419 and see Hoffa v. Hoffman, 33 Ind. 172, where damages from fraud were counterclaimed in a foreclosure suit. When, in

an action on a contract, the defendant set up a counterclaim of damages from the plaintiff's fraud, he cannot, at the trial, rely upon a mistake in making the agreement: fraud and mistake are distinct grounds of recovery or defence; and proof of one cannot be given when the other alone is pleaded, Dudley v. Scranton, 57 N. Y. 424, 427.

certain price, and having covenanted in the same agreement not to engage therein at the same place, and the damages for a breach of this covenant having been liquidated and fixed at a specified sum, in an action brought by the vendee to recover this amount of liquidated damages on the ground that the vendor had violated his agreement, the defendant was permitted to recover the unpaid portion of the purchase price as a counterclaim.1

1

§ 779. It is settled by numerous decisions, although there were at first some expressions of a contrary opinion, that in an action to recover the price of goods sold and delivered, or bargained and sold, the purchaser's demand of damages for the plaintiff's breach of his warranty of the quality of the goods may be pleaded as a counterclaim; in fact, there can be no simpler and plainer illustration of a counterclaim arising out of the very contract set up by the plaintiff as the basis of his recovery.2 When the plaintiff, who had been employed as a superintendent of the defendant's manufactory under a written agreement stipulating for his services in that capacity at a specified salary for a year, brought an action for his wages, alleging that he had been wrongfully discharged, a counterclaim of damages sustained by the defendants in their business, through the negligent and unskilful conduct of the plaintiff in violation of the provisions of the same contract, was pleaded, and was fully upheld by the court.3

§ 780. I have collected and placed in the foot-note a number of additional cases in which the answers were sustained as valid counterclaims on the ground that they arose out of the contract set forth in the complaint or petition; in some of them, however, the court merely said that they arose either from the "contract or transaction set forth" by the plaintiff, and did not distinctly determine which of these expressions was strictly the proper one to be used.4

1 Baker v. Connell, 1 Daly, 469; and see Ainsworth v. Bowen, 9 Wisc. 348.

2 Lemon . Trull, 13 How. Pr. 248; Warren v. Van Pelt, 4 E. D. Smith, 202; Dounce v. Dow, 57 N. Y. 16; Love v. Oldham, 22 Ind. 51; French v. Saile, Stanton's Code (Ky), 96; Morehead v. Halsell, ib. 96; Earl v. Bull, 15 Cal. 421; Hoffa v. Hoffman, 33 Ind. 172. See, contra, Nichols v. Boerum, 6 Abb Pr. 290. This case has been expressly overruled.

12 Ohio St. 344; Stoddard v. Treadwell, 26 Cal. 294; but see Barker v. Knickerbocker Life Ins. Co., 24 Wisc. 630, in which, under exactly similar circumstances, the defendant's claim, that the contract should be cancelled, was refused, on the ground that the facts made out a perfect defence at law; but no counterclaim of damages was pleaded.

4 Racine Bank v. Keep, 13 Wisc. 209; Butler v. Titus, 13 Wisc. 429; Koempel

3 Lancaster, &c. Man. Co. v. Colgate, v. Shaw, 13 Minn. 488; Gleadell v. Thom

II. Cases in which the Cause of Action alleged as a Counterclaim arises out of the Transaction set forth in the Complaint or Petition as the Foundation of the Plaintiff's Claim.

§ 781. I shall in this subdivision pursue the same plan as in the last, and collect the various classes of cases in which counterclaims, legal or equitable, have been sustained as 'properly arising out of the transaction set forth in the complaint, and also those in which such attempted counterclaims have been overruled; and I shall add whatever comments, or extracts from judicial opinions, seem necessary to the clear inference and statement of the general principles and practical rules established by the courts. The import of the term "transaction," and of the phrase "arising out of," has been already discussed with some fulness. Without repeating this discussion, the cases cited will illustrate and complete it.

§ 782. The cases cited will be classified and arranged into groups according to their nature; that is, according to the relief demanded by the respective litigants. The first of these classes will contain cases in which the actions are legal, and both parties seek to recover a judgment for money alone. This will be subdivided into (1) Those in which the plaintiff's cause of action and the defendant's counterclaim are in form for debt or damages upon contract express or implied; (2) Those in which the plaintiff's cause of action is in form for debt or damages upon contract express or implied, and the defendant's counterclaim is for damages arising from a tort, either (a) for conversion of goods, or (b) for trespasses or injuries to property or to person, or (c) for fraud; (3) Those in which the plaintiff's

son, 56 N. Y. 194, 198; Isham v. Davidson, 52 N. Y. 237; Whalon v. Aldrich, 8 Minn. 346; Mason v. Heyward, 3 Minn. 182; Dale v. Masters, Stanton's Code (Ky.), 97; Dennis v. Belt, 30 Cal. 247; Wilder v. Boynton, 63 Barb. 547; Burton v. Wilkes, 66 N. C. 601, 610; Hay v. Short, 49 Mo. 139. See McKegney v. Widekind, 6 Bush, 107, as to the extent of the relief which may be granted to the defendant in a legal action, and when the contract must be reformed by an equitable proceeding. For examples of valid counterclaims where the defendant had an election to sue for a tort or on contract, see Gordon v. Bruner, 49 Mo. 570; Tins

ley v. Tinsley, 15 B. Mon. 454; Norden v. Jones, 33 Wisc. 600, 604; but, per con tra, see Slayback v. Jones, 9 Ind. 470. Damages resulting to the defendant from a wrongful issue of an attachment in the action may be counterclaimed, if such act of the plaintiff was a breach of the contract sued on, Waugenheim v. Graham, 39 Cal. 169, 176; but such damages cannot generally be recovered by way of a counterclaim, Hembrock v. Stark, 53 Mo. 588; Nolle v. Thompson, 3 Metc. (Ky.) 121. A counterclaim of damages from a personal tort, as, e. g., a slander, is impossible, Conner v. Winton, 7 Ind. 523.