already mentioned, and shall discuss the three subdivisions into which the subject has been separated, and in so doing shall incidentally define the legal import of the several phrases and terms above enumerated. The decisions which have given, or have attempted to give, a construction to the clause are numerous and conflicting. I shall freely refer to these cases, citing those which represent all theories and schools of interpretation, and shall endeavor to collect from them such doctrines and practical rules as seem to be correct upon principle and to be supported by the weight of authority. As a preliminary step to the discussion of the three subordinate heads, I shall quote and analyze certain judicial opinions which have treated of the clause as a whole, and have proposed general rules by which its meaning may be determined. Having thus ascertained these general rules, I shall inquire what particular cases or classes of cases do or do not fall within one or the other of the three subdivisions before mentioned.

§ 769. General Principles of Construction. The cases now to be cited throw more or less light upon the meaning of the statutory clause as a whole, and also, to a certain extent, upon that of the special phrases and terms which it contains; and from them some general principles of interpretation can be inferred. The lower floor of a building having been leased, the landlord brought an action for rent due. The answer was pleaded as a counterclaim. It alleged that the plaintiff occupied the upper floors of the building; that he wantonly and negligently suffered waterpipes to get out of repair and to leak, and by this means caused filthy water to come upon the defendant's premises; also that plaintiff wantonly and negligently caused filthy water to be thrown from his rooms upon defendant's premises; that by these acts damages were caused to the defendant in an amount specified, for which judgment was demanded against the plaintiff. A demurrer to this answer having been sustained, the defendant appealed to the New York Court of Appeals, which affirmed the decision below.1 As already said in a former chapter, the diffi

i Edgerton v. Page, 20 N. Y. 281,285. From the opinion of that court the following extracts are taken: "The demand of the defendant set out in the answer does not arise out of the contract set forth in the complaint. That contract is for the

payment of rent upon a lease of the demised premises. The defendant's demands arise from the wrongful acts of the plaintiff in permitting water to leak and run into the premises, and in causing it to be thrown upon the premises and prop

culty in arriving at the true interpretation of the term "transacaction" lies in the fact that it had no strict legal meaning before it was used in the statute. Being placed in immediate connection with the word "contract," and separated therefrom by the disjunctive" or," one conclusion is certain at all events; namely, that the legislature intended by it something different from and additional to "contract." The most familiar rules of textual interpretation are violated by the assumption that no such signification was intended. The only question at all doubtful is, How far did the law-makers design to go, and how broad a sense did they attach to the word? Is it to be used in its widest popular meaning, or must it be narrowed into some limited and technical meaning, and thus be made a term of legal nomenclature? While in common speech, a single assault, or slander or lie, would not be called a "transaction," yet the whole series of events grouped around such a central fact, and connected with it, would, I think, be so designated in popular language, and a fraudulent scheme, or

erty of the defendant. These acts are entirely independent of the contract of hiring, upon which the action is brought. The demands are not connected with the subject of the action; that is, the rent agreed to be paid for the use of the premises. The defendant's demands are for a series of injuries to his property deposited upon the premises, and for impairing the value of the possession. It would be a very liberal construction to hold, that, in an action for rent, injuries arising from trespasses committed by the lessor upon the demised premises might be interposed as a counterclaim. The acts of the plaintiff in this case are of a similar nature. They are either acts of trespass or of negligence from which the injuries to the defendant accrued. Such a construction could only be supported by the idea that the subject of the action was the value of the use of the premises. But where there is an agreement as to the amount of the rent, that value is immaterial. Unless the acts of the plaintiff amount to a breach of the contract of hiring, they are not connected with the subject of the action." The opinion proceeds to show that the acts complained of were not a breach of an implied covenant of quiet enjoyment, and concludes: "There is nothing in the

answer in this case tending to show that any of the acts of the plaintiff were done under any claim of right whatever. They did not, therefore, amount to a breach of the contract created by the lease; and the injuries sustained by the defendant do not, therefore, constitute a counterclaim connected with the subject of the action." To the same effect are the decisions and the general interpretation given to the clause in Mayor v. Parker Vein Co., 12 Abb. Pr. 300, 301, per Woodruff J.; Askins v. Hearns, 3 Abb. Pr. 184, 187, per Emott J.; Schnaderbeck v. Worth, 8 Abb. Pr. 37, 38, per Ingraham J.; Drake v. Cockroft, 4 E. D. Smith, 34, 39, per Woodruff J.; Bogardús v. Parker, 7 How. Pr. 303, 305; Barhyte v. Hughes, 33 Barb. 320, 321, per Clerke J. These cases all give a very narrow meaning to the term " transaction," and incline to the position that a cause of action on contract, and one for tort, or two causes of action for tort, can never be said to arise out of the same transaction. The last case cited, Barhyte v. Hughes, goes so far as to hold that "transaction" and "contract" are synonymous; in other words, that no cause of action can arise out of a "transaction" unless it springs from a contract.

in other words a cheat, is a most familiar example of the class of events to which the term is usually applied. But taking the word "transaction" in the limited sense of a "negotiation of business," or some other similar expression, it is certainly a mistake to say that torts cannot arise out of it different from and adverse to the plaintiff's cause of action. In the first place, it is certain that a cause of action based upon the plaintiff's fraud may arise out of such a "transaction," for it may spring from a contract pure and simple. In the second place, as the "negotiation" or "business" or "conduct of affairs" may be concerned with property, with the title to or possession of land or chattels, it is easily conceivable that a distinct cause of action in favor of the defendant may arise out of a tort to property committed by the plaintiff in the course of the "business" or "negotiation or "conduct of affairs," such as a claim for the taking or conversion of goods, or for a trespass to or wrongful detention of land. Indeed, the difficulty in conceiving of distinct torts arising from one and the same "transaction" is confined almost entirely to the cases of torts to the person. It may be noticed that most of the decisions already cited, in which the possibility of distinct torts having such a common legal origin is denied, directly relate to personal wrongs alone; and the reasoning of the courts is extended from them to all torts, without any discrimination between their different classes, and the different rules which may govern them.

§ 770. The cases thus far cited have all been decided by courts of New York; I shall now quote a few which have arisen in other States. A complaint alleged that the plaintiff delivered certain flour to the defendant to be sold on commission, but that the latter had converted the same, or the proceeds thereof, to his own use, and prayed judgment for its value as damages. The answer set up the following facts as a counterclaim that defendant had leased a flouring-mill to the plaintiff, who covenanted in the lease that he would furnish to defendant constant employment during the continuance of the term for two teams in drawing flour to Milwaukee at a stipulated sum for each load, and further covenanted that all the flour sent from the mill should be delivered to the defendant at Milwaukee, to be sold by him on commission, in pursuance of which agreement the flour mentioned in the complaint was in fact delivered; that the plaintiff had neglected and

refused to perform both of his said covenants, by reason of which the defendant had sustained damages to a specified amount, and judgment was demanded for such sum. A demurrer was interposed to this counterclaim, and was sustained by the Supreme Court of Wisconsin. This opinion, quoted at large in the note, necessarily leads to the conclusion that when the plaintiff has an election to adopt one or the other of two forms of remedy, one on the contract for the breach thereof, and the other in tort for a conversion, and the like, the ability of the defendant to plead a counterclaim depends upon the kind of action selected; in other words, the propriety of the counterclaim does not depend upon the actual facts out of which the plaintiff's remedial rights arise, but upon the mere nature of the remedy which he elects to enforce, and of the means which he employs for such enforcement. The result would be, that by changing the kind of action the plaintiff may cut off a counterclaim otherwise admissible. In my opinion, it was not the intention of the legislature, in adopting the reformed procedure, that the essential rights of defendants should be made to rest in this manner upon the form of remedy chosen by the plaintiffs.

1 Scheunert v. Kaehler, 23 Wisc. 523, per Dixon C. J.: "Assuming that a counterclaim may be pleaded to an action of tort, -a question not necessary to be decided, — and assuming also that no objection exists, because the contract for the breach of which the defendant claims damages is not set forth in the complaint, but that the counterclaim would be admissible, if at all, under the last clause of the subdivision as being connected with the subject of the action, the question resolves itself into an inquiry as to the origin of the cause of action stated in the complaint, whether it arises upon the contract set forth in the answer, or originates in facts outside of and disconnected with that contract. If the former, then the counterclaim would seem to be clearly within the statute; but, if the latter, then it would not be." The opinion states that the plaintiff might have sued upon contract for a violation of it, or might have sued in tort for the wrong done him, and that he had chosen the latter form of action, and adds: "The subject of the action

is the tort or wrong done in the conversion of the money; that is the foundation, and the sole foundation, of the plaintiff's claim in this form of action; for, unless the money was unlawfully converted, the action cannot be maintained." The counterclaim was, therefore, held to be inadmissible. See also Akerly v. Vilas, 21 Wisc. 88, 109, 110, which holds that the counterclaim must be directly connected with the subject of the plaintiff's action, or so connected that a cross-bill would have been sustained, or a recoupment allowed under the former practice, when it is claimed to fall within the last clause of the first subdivision; and Vilas v. Mason, 25 Wisc. 310, 321, where, in an action brought upon a contract, -on a lease against the tenant, -a counterclaim for the conversion of chattels which the defendant had placed upon the demised premises, was sustained, on the ground that both causes of action arose out of the same transaction; also Ainsworth v. Bowen, 9 Wisc. 348.

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§ 771. In a case already quoted under a former head, an action brought to set aside a deed of lands on account of the defendant's fraud, to which a counterclaim was pleaded denying the fraud, alleging the validity of the conveyance, the plaintiff's continued possession of the land and pernancy of the rents and profits, and praying a judgment awarding possession, quieting title and giving damages, the Supreme Court of Indiana sustained the answer, and granted the relief demanded by the defendant.1 The same court has discussed the legal meaning of the phrases arising out of" and "connected with," and has arrived at one general principle, at least, which may aid in determining their application to all particular cases. The action was to recover money deposited with the defendant who had refused to deliver it when demanded. The defendant pleaded by way of counterclaim, that the plaintiff had falsely charged him with stealing the money deposited, and had slandered him by uttering such charge in the presence of others, and prayed judgment for damages. In sustaining a demurrer to this answer the court suggested a rule of construction which may be followed in all cases.2 The High Court of Appeals in Kentucky has construed

1 Woodruff v. Garner, 27 Ind. 4, per Frazer J. "The plaintiff's cause of action is the alleged fraud of the defendant in procuring the deed sought to be rescinded. The defendant's cause of action averred in the counterclaim does not arise out of the plaintiff's cause of action, for it cannot even exist consistently with it. If the fraud alleged by the plaintiff was perpetrated, then the defendant cannot have any right of action whatever. So the defendant found it necessary to deny the fraud. But the deed sought to be set aside constitutes part of the transaction upon which the plaintiff and the defendant both rely for a recovery. It is the link which forms the direct connection between the two diverse causes of action. So the counterclaim for possession is connected with the cause of action of the plaintiff directly, and is therefore authorized by the statute." The "transaction' set forth in the complaint was not simply the alleged fraud: it was the entire business or matter of agreeing to sell and purchase the land, and of executing and delivering the deed in pursuance of such

"

agreement. The plaintiff averred that the defendant was guilty of fraud; and such fraud was therefore a part of the transaction, according to the plaintiff's version. The defendant's cause of action arose out of the same transaction, — in fact, it was the entire transaction, except the element of fraud, which he asserted did not exist. No plainer illustration of a cause of action arising out of the transaction which was also the foundation of the plaintiff's claim could be imagined.

2 Conner v. Winton, 7 Ind. 523. "The question is, What is the legal effect of the words arising out of' or 'connected with'? Do they refer to those matters which have an immediate connection with the transaction? or do they include also those which have a remote relation with it by a chain of circumstances which were not had in view at its inception? Suppose C. [the defendant] had beaten W. [the plaintiff] for uttering the slander, could W. have replied the damages occasioned by the battery to those resulting from the slander? and could the parties have settled all their quarrels in the ac