§ 656.780. Examples Continued. I have collected and placed in the foot-note a number of additional cases in which the answers were sustained as valid counter-claims 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.1

Cases in which the Cause of Action Alleged as a Counter-Claim arises out of the Transaction Set forth in the Complaint or Petition as the Foundation of the Plaintiff's Claim.

§ 657.781. Plan of Discussing this Subdivision.

I shall in this subdivision pursue the same plan as in the last, and collect

the various classes of cases in which counter-claims, 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 counter-claims 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.

§ 658. * 782. Classification and Arrangement of Cases to be cited. 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 counter-claim 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 counter-claim 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 cause of action is in form for damages arising from a tort, and the defendant's counter-claim is for debt or damages upon contract; and (4) Those in which the demands of both parties are for damages arising from a tort. The second will contain legal actions in which the judgment is other than for money; and the third will embrace equitable actions.

§ 659.783. First Class. (1) Where the Plaintiff's Cause of

Action and the Defendant's Counter-Claim are in Form Debt or Dam

ages upon Contract Express or Implied. A complaint alleged that the defendant had in his possession $115, of which two thirds belonged to the plaintiff, and was received by the defendant to his use, and demanded judgment therefor; the answer, besides a defence of denial, stated by way of counter-claim that the plaintiff had himself in fact received all the money in question ($115): that one third thereof belonged to the defendant, and was received by the plaintiff to the defendant's use, and prayed judgment for

such sum. This answer was adjudged to be a proper counterclaim arising out of the transaction set forth in the complaint; and the plaintiff having failed to reply, the allegations thereof were admitted.1 Several of the decisions quoted in the last preceding subdivision may also be regarded as examples of the class described under the present head; the contract set forth by the plaintiff might be considered a "transaction." Their facts need not be repeated, and their titles will be found in the foot-note.2

§ 660. *784. (2) Cases in which the Plaintiff's Cause of Action is upon Contract, and the Defendant's Counter-Claim is for Damages Arising from a Tort. No little conflict will be found among the decisions which are embraced within this group. The judges have been constantly influenced by the established doctrine of the former procedure, which excluded without exception any setoff or recoupment or cross-demand that did not spring from contract. Some have gone to the length of holding that a cause of

1 Clinton v. Eddy, 1 Lans. 61. In an action upon a note, the defendant was not permitted to recover back usurious interest paid by him to the plaintiff on former loans as a counter-claim, because the demand did not arise out of the same transaction; nor as a set-off, because it did not arise on contract, Smead v. Chris field, Disney, 18; but it seems a demand to recover back usurious interest paid for the very loan which is the basis of the action would be a valid counter-claim, Martin v. Pugh, 23 Wis. 184. A claim for the loss, by the negligence of the holder of the note, of certain collateral security for its payment, is a proper counter-claim, First Nat. Bk. of Ft. Dodge v. O'Connell (Iowa, 1892), 51 N. W. Rep.

162.

[Punteney-Mitchell Mfg. Co. v. Northwall Co. (1902). Neb., 91 N. W. 863; Dowdell v. Carpy (1902), 137 Cal. 333, 70 Pac. 167; Adams v. Warren (1900), 27 Col. 293, 61 Pac. 609; Wintringham v. Hayes (1894), 144 N. Y. 1, 38 N. E. 999. In an action by an administrator to recover the price of articles purchased by defendant at the administrator's sale, debts due the defendant from the intestate could not constitute a counter-claim as they did not grow out of the same transaction, nor a set-off because not mutual: Hancock v. Hancock's Adm'r (1902),

Ky., 69 S. W. 757. See also Griswold v.
Pieratt (1895), 110 Cal. 259, 42 Pac. 821.]
2 Racine Cy. Bank v. Keep, 13 Wis.
209; Butler v. Titus, 13 Wis. 429; Koem-
pel v. Shaw, 13 Minn. 488; Whalon v.
Aldrich, 8 Minn. 346; Mason v. Heyward,
3 Minn. 182; Dale v. Masters, Stanton's
Code (Ky.), 97; McKegney v. Widekind,
6 Bush, 107; Stoddard v. Treadwell, 26
Cal. 294; Dennis v. Belt, 30 Cal. 247; Hay
v. Short, 49 Mo. 139; Gordon v. Bruner,
49 Mo. 570; Wilder v. Boynton, 63 Barb.
547; McKinnon ». Morrison, 104 N. C. 354.

3 [Rood v. Taft (1896), 94 Wis. 380, 69 N. W. 183; Hunter v. Hathaway (1900), 108 Wis. 620, 84 N. W. 996; Loomer v. Thomas (1893), 38 Neb. 277, 56 N. W. 973; President, etc. of Ins. Co. v. Parker (1902), 64 Neb. 411, 89 N. W. 1040; Young v. Borzone (1901), 26 Wash. 4, 66 Pac. 135; McHard v. Williams (1896), 8 S. D. 381, 66 N. W. 930.

In an action for the value of goods, wares, and merchandise sold and delivered, and for services rendered, defendant cannot plead as counter-claim a cause of action for wilfully and maliciously causing a writ of attachment to issue against him, where the facts on which the alleged counterclaim rests arose subsequent to and were wholly independent of those alleged in the complaint: Jones v. Swank (1893), 54 Minn. 259, 55 N. W. 1126.]

action in favor of the defendant resulting from a tort cannot possibly arise from the "transaction" set forth by the plaintiff as the foundation of his claim; others, however, have given a more liberal and comprehensive interpretation of the term.1 Their differing views can best be seen by a comparison of their judicial opinions. In an action for the price of a safe sold and delivered, the defendant pleaded a counter-claim, that the plaintiff had converted to his own use a safe, the property of the defendant, for the value of which he demanded judgment.2 The Common Pleas of New York City held that this answer was based upon tort;

1 [Waring v. Gaskill (1895), 95 Ga. 731, 22 S. E. 659: A note was given to plaintiff by the defendant as drawer, with certain shares of stock as collateral, under the agreement that the collateral should not be sold unless ten days' notice was given to the defendant. The stock was sold without the required notice being given, and did not bring the amount of the note. In an action on the note the court held that defendant might plead in recoupment the damages occasioned by the conversion. Yet the Georgia statute defines recoupment as based only upon cross-obligations or independent covenants arising under the same contract. Mashburn v. Inman (1895), 97 Ga. 396, where the court said: "This case falls within the general rule, that, to an action sounding in contract, the defendant cannot plead as a set-off a claim arising ex delicto."

But see

In Hecht v. Snook (1902), 114 Ga. 921, 41 S. E. 74, the court said: "There is nothing in the statutes of this State which authorizes a defendant in a suit at law to set off, as a matter of legal defence to a suit on a contract, damages arising from a tort committed by the plaintiff; or to set off, in a suit for damages arising from the commission of a tort by the defendant, a claim growing out of a contract between the plaintiff and the defendant."

Blue v. Capital Nat. Bank (1896), 145 Ind. 518, 43 N. E. 655:] "Can slander be the subject of a counter-claim in an action upon a promissory note for borrowed money? In our judgment it cannot. .. A counter-claim is that which might have arisen out of, or could have some connection with, the original trans

action, in view of the parties, and which, at the time the contract was made, they could have intended might, in some event, give one party a claim against the other for compliance or non-compliance with its provisions.' Conner v. Winton, 7 Ind. 523. A tort cannot be regarded as growing out of or connected with contract, within the meaning of the statute, simply because the contract had suggested it, or was remotely an incident to it."

2 [Carson's Executors v. Buckstaff (1898), 57 Neb. 262, 77 N. W. 670: “A debtor, when sued by his creditor, may plead as a counter-claim or set-off, the actual value of any collateral security which the creditor has converted to his own use or the value of any collateral security which he has released, dissipated, or diverted from the purpose for which he held it."

Braithwaite v. Akin (1893), 3 N. D. 365, 56 N. W. 133: Plaintiffs [intervenors] owned certain claims in a steamboat, which was about to be sold under judicial order so as to deprive them of their claims. To protect themselves they arranged with defendant that they would furnish part of the funds necessary to purchase the boat at the judicial sale, that defendant should attend the sale and buy the boat, that the claims of plaintiffs and their advancements should be paid out of the earnings of the boat, the boat being managed by defendant. Held that a counter-claim based on the conversion of the boat by plaintiffs, in an action for an accounting, was improper and did not arise out of the contract or transaction set forth in the intervenor's complaint.]

1

that the defendant had not so framed it as to waive the wrong and sue upon an implied promise for the price, and that the pleading was not a proper counter-claim. Having thus fully disposed of the issues, the court went on to declare that if the defendant might waive the tort and bring suit in form for the price, the demand would not be a valid counter-claim, because the cause of action would not arise upon contract; and upon a complaint for the price of goods sold and delivered, the Superior Court of New York City rejected a counter-claim for the wrongful conversion by the plaintiff of other goods belonging to the defendant.2 No allusion was made in the latter decision to the doctrine of election of remedies between an action for the tort, and one in form upon contract; and in neither of the cases could it be pretended that the defendant's demand, in whatever shape it might be put, arose out of the transaction stated by the plaintiff. On the other hand, when, in a suit upon a promissory note, the defendant pleaded as a counter-claim that he had pledged certain stocks with the plaintiff as security for the debt; that the latter had wrongfully sold them, and prayed judgment for their value, the Supreme Court of Wisconsin, in reversing a judgment for the plaintiff rendered on the trial, assumed that the facts constituted a good counter-claim.3

§ 661. *785. Damages from Trespasses, Nuisances, Negligences, and the Like. In an action by the lessor for rent, an answer, which stated that during the continuance of the term the plaintiff erected an oven, furnace, and other apparatus for a bakery under the store demised to and occupied by the defendant, and by the use thereof had filled the premises with smoke, soot, and steam, and had injured the defendant's goods, and demanded judgment for the damages so caused, was treated as a valid counter-claim by the New York Superior Court. But in a similar action the

1 Piser v. Stearns, 1 Hilt. 86.

2 Kurtz v. McGuire, 5 Duer, 660. See also Steinhart v. Pitcher, 20 Minn. 102; Street v. Bryan, 65 N. C. 619, actions on contracts in which counter-claims of damages arising from unconnected torts were rejected.

3 Ainsworth v. Bowen, 9 Wis. 348; S. P., Cass v. Higenbotam, 100 N. Y. 248; Weston v. Turver (Supr. Ct., Gen. Term, 1888), 17 N. Y. St. Rep. 502.

4

4 Ayres v. O'Farrell, 4 Robt. 668; 10 Bosw. 143. When the cause was first before it, the court held that by replying the plaintiff had waived all objection; on the second appeal, the counter-claim was more definitely approved.

[Kuhn v. Sol: Heavenrich Co. (1902), 115 Wis. 447, 91 N. W. 994; Hawley Bros. Hardware Co. v. Brownstone (1899), 123 Cal. 643, 56 Pac. 468.]