the defendant in the courts of law, as distinguished from those of equity.18

§ 371. The first Class of Counter-claims in the first Sub

division.

The cause of action which may be thus counter-claimed must be one which arises "out of the contract, or transaction, set forth in the complaint as the foundation of the plaintiff's claim, or connected with the subject of the action." Three classes of counter-claims are here provided for: first, a demand existing in favor of the defendant and against the plaintiff, which arises out of the contract upon which the plaintiff has based his action; second, a demand so existing which arises out of the "transaction"—a broader term than "contract"-upon which the plaintiff has based his action; and, third, a demand so existing which need not necessarily arise out of either the contract or the transaction involved in the action, but it is suflicient if it is connected with the "subject of the action." 19

18 The Connecticut Practice Act (section 5) authorizes legal and equitable counter-claims and set-offs without defining them. In Harral v. Leverty, 50 Conn. 46, the Supreme Court holds that the intention of the act was to leave set-off and recoupment where they stood before the passage of the act, and to give the defendant in actions at law, the same right allowed in chancery practice by means of answers and cross-bills.

19 See XENIA BRANCH BANK v. LEE, 7 Abb. Pr. 372. [This was an action brought to recover damages for an alleged conversion of certain bills of exchange. The answer first denied the allegations of the complaint, and averred that the several bills were indorsed to defendant, and received by him in good faith; second, the answer set up, by way of counter-claim, the making of several drafts with plaintiff as drawee, which were duly indorsed, and finally in due course came to the proper possession of defendant, and alleged that there was due upon the said bills a certain sum. The plaintiff moved to strike out from the answer this counter-claim, on the ground that It was not one which the Code authorized to be set up in such an action. Woodruff, J., after quoting the section of the New York statute pertaining to counter-claims, said: "This division of the section shows that there may be a counter-claim when the action itself does not arise on contract, for the second clause is expressly confined to actions arising upon contract, and allows counter-claims, in such cases, of any other cause of action also arising

Under the first class, the original action being based upon a contract, if the plaintiff is liable, at the suit of the defendant, in respect to the same contract, the latter may present his demand by

on contract; and this may embrace, probably, all cases heretofore denominated 'set-off,' legal or equitable, and any other legal or equitable demand, liquidated or unliquidated, whether within the proper definition of 'set-off' or not, if it arise on contract. Gleason v. Moen, 2 Duer, 642. The first division would therefore be unmeaning as a separate definition, if it neither contemplated cases in which the action was not brought on the contract itself, in the sense in which these words are ordinarily used, nor counter-claims which did not themselves arise, on contract. This first subdivision, by its terms, assumes that the plaintiff's complaint may set forth, as the foundation of the action, a 'contract' or a 'transaction.' In this sense every contract may be said to be a transaction; but every transaction is not a contract. Again, the second subdivision having provided for all counter-claims arising on contract,-in all actions arising on contract,-no case can be supposed to which the first subdivision can be applied, unless it be of three classes, viz.: (1) In actions in which a contract is stated as the foundation of the plaintiff's claim,-counter-claims which arise out of the same contract; or (2) in actions in which some transaction, not being a contract, is set forth as the foundation of the plaintiff's claim,-counter-claims which arise out of the same transaction; or (3) in actions in which either a contract or a transaction which is not a contract, is set forth as the foundation of the plaintiff's claim,-counterclaims which neither arise out of the same contract, nor out of the same transaction, but which are connected with the subject of the action. But, secondly, the subdivision authorizes, in actions in which a transaction, not being a contract, is set forth as the foundation of the plaintiff's claim, counter-claims which arise out of the same transaction. This, we think, inIcludes the case before us. The 'transaction' here in question may either include the history of the bills, so far as the title of the plaintiffs or defendants depends upon that history, or the transaction may perhaps be confined to the manner and circumstances of the transfer to the defendants. In the first view of the meaning of that word, 'the transaction set forth in this complaint as the foundation of the plaintiff's claim' consists of those facts which are alleged as showing the plaintiff's title to the bills, their delivery by the plaintiffs for a special purpose to the trust company, the transfer by the trust company to the defendants, and their assertion of right to detain, or their actual detention thereof. All these concur to establish the defendants' counter-claim, and are an essential part thereof. In a just sense, the counter-claim arises out of them. So, if the transaction

set forth as the foundation of the plaintiffs' claim be regarded as more narrow, and as being the transfer of the bills by the trust company to the defendants, then, as before, the defendants' counter-claim arises out of the

way of counter-claim. This covers, as we have seen, what was known as recoupment, and, by the terms of the statute, extends to equitable demands. Questions of difficulty will seldom arise in respect to this class, as it is easy to determine whether the defendant's demand arises out of the contract in suit. Thus, in an action to recover the rent stipulated in a lease, the defendant may present a counter-claim based upon a breach, on the part of the plaintiff, of other provisions in the same lease.20 So, in an action upon the implied agreement to pay for work and labor, the defendant may counter-claim the damages suffered from a breach of the implied agreement that the work shall be skillfully done; 21 so if the work be done under a special contract.22 If the buyer of goods bring an action against the seller for not completing the contract the latter is permitted to counter-claim the price of the goods already delivered; 23 and if one is sued for breach of an agreement not to set up business in a certain place, he may counter-claim the amount agreed to be paid for the good will.24 In an action for rent due upon a verbal lease, the defendant may show that the plaintiff, by the terms of the lease, agreed to build a certain fence, and counter-demand damages arising from his neglect to build it.25 In Kentucky, both under the Code and at common law, in an action for the price of property sold, the defendant may recoup damages resulting from the failure of the consideration; 26 so, in an action for the contract price for building a bridge, the defendant may

same transaction, to wit, that transfer. The present is a case in which the counter-claim is directly and immediately 'connected with the subject of the action.' The subject of the action is either the right to the pos session of the bills of exchange in controversy, or it is the bills of exchange themselves. The defendants' counter-claim is not only connected with, but inseparable from, either or both. The object of the action is damages; but the subject is the bills of exchange, or the right of their possession." See, also, Brown v. Buckingham, 11 Abb. Pr. 387.]

20 Orton v. Noonan, 30 Wis. 611; Cook v. Soule, 56 N. Y. 420; Myers v. Burns, 35 N. Y. 269.

21 Eaton v. Woolly, 28 Wis. 268.

22 Bishop v. Price, 24 Wis. 480.

23 Leavenworth v. Packer, 52 Barb. 132, as to a contract to deliver coal.

24 Baker v. Connell, 1 Daly, 469.

25 Hay v. Short, 49 Mo. 139.

26 Miller v. Gaither, 3 Bush, 152.

counter-claim damages for failure to build it according to contract." In Indiana, in an action against the keeper of a livery and feed stable, who had boarded the plaintiff's horse, for carelessness and negligence in keeping him, by which he broke his leg, the defendant was permitted to counterclaim the value of his keeping, as growing out of the same contract or transaction.28

$ 872. The second Class in the first Subdivision.

The two other kinds of counter-claim named in the first subdivision-to wit, causes of action arising out of the transaction, as distinguished from the contract set forth in the complaint as the foundation of the plaintiff's demand, and causes of action which are connected with the subject of the action-present questions of more difficulty. It is clear, that the term "transaction" is broader than "contract”—is intended to extend to other matters upon which an action may be based. The New York supreme court, at general term,29 recognizes the fact that a contract is a transaction, but a transaction is not necessarily a contract, and gives the following classification: "No case can be supposed to which the first subdivision can be applied unless it be one of three classes, viz.: first, in actions in which a contract is stated as the foundation of the plaintiff's claim, counter-claims which arise out of the same contract;

27 Moore v. Caruthers, 17 B. Mon. 669. And in an action for the price of a mill, and for accounts due, including an account for $500 against one C., the defendant was allowed to set up, by way of counter-claim, the sum of $190 which had been allowed to C. as a deduction from the assigned account. Cook v. Gray, 2 Bush, 121.

28 GRIFFIN v. MOORE, 52 Ind. 295. "The only objection," says the court, "to this ruling is that the complaint is for a tort, and not founded on contract. This objection is wholly untenable, though unnecessary and surplus words as to the carelessness, maliciousness, and willfulness of the defendant are used in the complaint." The spirit of this decision would seem to be that, when a duty arises out of a contract, the neglect of which could be charged as a tort, a pleading charging the wrongful neglect of the duty is really founded upon the contract or transaction, with which a counter-demand arising out of the same contract is so connected that it can be counter-claimed; [Fraker v. Cullum, 24 Kan. 679; Hade v. McVay, 31 Ohio St. 231; Merrill v. Nightingale, 39 Wis. 247.]

29 Per Woodruff, J., in Xenia Branch Bank v. Lee, 7 Abb. Pr. 372.

or, second, in actions in which some transaction, not being a contract, is set forth as the foundation of the plaintiff's claim, counterclaims which arise out of the same transaction; or, third, in actions in which either a contract, or a transaction which is not a contract, is set forth as the foundation of the plaintiff's claim, counterclaims which neither arise out of the same contract nor out of the same transaction, but which are connected with the subject of the action." The transaction, then, upon which the action is based, may be something more than a contract—that is, it may be a tort, and if the plaintiff is never liable to the defendant upon such transaction, it is because, from the nature of the wrong, there can be no such counter-liability. Cases have arisen where the defendant has been held to be liable to the plaintiff for something connected with the subject of the action, although the action was founded upon a tort, as will appear in the next section but one, and notes; but it is difficult to see how such liability can spring from the very injury upon which an action may be based. I know of no case where it has so arisen; and yet the term "transaction" is all embracing, and if a case shall arise in which the defendant is liable to the plaintiff for a wrong based upon the matter which is the foundation of the action, whether it be a contract, or tort, or anything else, such liability is covered by the provision under consideration.30

§ 373. The third Class in the first Subdivision.

The statute further authorizes a counter-claim which arises out of a cause of action which is connected with the subject of the action. This covers the larger class of counter-claims, other than those embraced in the second subdivision; for where there is one case in which the defendant has a right of action against the plaintiff arising from the contract or transaction set forth as the foundation of his action, there are many in which the plaintiff may be

30 I can imagine cases where one neglects a common-law duty, as that of a carrier, where the parties have been brought into obligatory relations by means of a contract, in which the mutual liabilities would be enforced, whether the original action were founded upon the contract and its breach, or upon the common-law duty and its tortious disregard. The transaction would be the same.