App. Div.] First Department, March, 1910. pleaded that the defendant caused the arrest of the plaintiff while the latter was in the act of committing the unlawful trespass, but assuming that such is its effect, we are of opinion that the counterclaim is not authorized. The transaction set forth in the complaint as the foundation of the plaintiff's claim in one instance is the arrest and in the other the acts constituting the malicious prosecution. So likewise the subject of the action, which has been defined in some cases to be the facts constituting the cause of action, was the arrest and malicious prosecution which are personal torts or the material facts relating thereto. (Lehmair v. Griswold, 40 N. Y. Super. Ct. 100; Carpenter v. Manhattan Life Ins. Co., 93 N. Y. 552; Rothschild v. Whitman, 132 id. 472.) The tort set forth in the counterclaim is a trespass on real property. It may be that the material facts with respect to the trespass would necessarily be developed upon the trial of the action for false arrest and malicious prosecution, but the trespass is neither directly nor necessarily connected with the arrest or prosecution of the plaintiff, nor did it arise out of such arrest or prosecution. The rule is stated in the well-considered case of Xenia Branch Bank v. Lee (7 Abb. Pr. 372) that this provision of the Code of Procedure was designed to prescribe a reciprocal rule and that where a counterclaim is properly pleaded the cause of action to which it is pleaded might likewise be pleaded as a counterclaim if the defendant had brought the action. (See, also, Rothschild v. Whitman, 132 N. Y. 472; Story v. Richardson, 91 App. Div. 381.) It seems to us that that test indicates quite clearly that this is not a proper counterclaim. If the defendant sued the plaintiff for trespass no rule of convenience would require that in the same action the court should investigate an arrest and prosecution of the defendant for the trespass on a counterclaim being interposed which denied the trespass and set up the arrest and malicious prosecution and demanded judg ment therefor. This statutory provision of law regulating practice, which has been in force more than sixty years, has frequently been the subject of judicial construction. Thus far, however, no rule has been laid down in its construction by which it can readily be decided in all cases whether or not a given counterclaim is properly interposed and as might naturally be expected it would be difficult to harmonize all of the decisions on that point. In People v. Dennison (84 N. Y. 272), which was an action for fraud in obtaining money First Department, March, 1910. [Vol. 137. from the State on false vouchers and collusion with officials under cover of a contract, it was held that a counterclaim for moneys due on the contract based on the same work was not proper because the subject of the action was the fraud which was wholly distinct from the claim that money was due under the contract. On the other hand, in Ter Kuile v. Marsland (81 Hun, 420) it was held that a counterclaim for moneys due under a contract of agency was proper in an action against the agent for conversion of moneys collected, and in Thomson v. Sanders (118 N. Y. 252), which was an action on a bond, it was held that a counterclaim for damages sustained by the defendant through fraudulent representations of the plaintiff in inducing him to execute the bond was proper, on the theory that it arose out of the same transaction, although it was based upon an affirmance of the bond, and there was no tender back of the consideration received or prayer for rescission. In Bernheimer v. Hartmayer (50 App. Div. 316) it was held that a counterclaim for the storage of property sought to be replevied in the action was not proper. In Sheehan v. Pierce (70 Hun, 22), which was an action for slander, it was held that a counterclaim for a similar slander uttered by the plaintiff against the defendant at the same interview was not proper. The theory of that decision was that if there were slanderous utterances by each of the parties they were necessarily separate and disconnected and each afforded a cause of action the moment it was uttered. It had been held by the same court in Heigle v. Willis (50 Hun, 588) that in an action to recover damages resulting from a collision betweeen the respective vehicles in which the plaintiff and defendant were riding, a counterclaim based on the alleged negligence of the plaintiff in causing the collision was proper, upon the theory that the collision was the transaction and that the parties differed merely as to who was responsible for it, and that as the facts would be developed upon the trial that question would be determined in favor of the plaintiff or of the defendant. In Xenia Branch Bank v. Lee (supra), which was an action for the conversion of notes, a counterclaim against the plaintiff as indorser of the notes was sustained upon the ground that the transaction embraced the history of the notes, or at least the connection of the respective parties therewith and the circumstances under which the defendant received the same, and that one or the other App. Div.] First Department, March, 1910. only could recover, depending upon the facts relating to the transaction. In Carpenter v. Manhattan Life Ins. Co. (93 N. Y. 552), which was an action by a first mortgagee against a second mortgagee, who was in possession, to recover for the conversion of cord wood, defendant admitted taking the wood but denied plaintiff's ownership and interposed a counterclaim to the effect that the security of his mortgage was impaired by plaintiff by unlawfully cutting the timber. The court, in sustaining the counterclaim, said, among other things: "The counterclaim must have such a relation to and connection with the subject of the action that it will be just and equitable that the controversy between the parties as to the matters alleged in the complaint and in the counterclaim should be settled in one action by one litigation; and that the claim of the one should be offset against or applied upon the claim of the other. Here it is sufficiently accurate to say that the subject of the action was the wood wrongfully taken by the defendant, and the counterclaim was for damage sustained by the defendant in the wrongful impairment of its security by the severance of the same wood from the land, and thus diminishing the value of the land by the value of the wood. In such case it is certainly just that the defendant should counterclaim its damage for the severance of the wood against the plaintiff's claim for the conversion thereof. In the forum of conscience the plaintiff was under obligation to restore the wood to the defendant as a portion of its security for its claim against the mortgagor. Thus it can with great propriety be said that defendant's claim had some connection with the subject of the action." It is now well settled that in an action either on contract or on tort a counterclaim may be interposed based upon either contract or tort, provided it answers the other requirements of sections 501 and 502 of the Code of Civil Procedure, namely, that it arises out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim, or is connected with the subject of the action, or, if the action be on contract, is any other cause of action arising on contract and existing at the time the action was commenced. (Deagan v. Weeks, 67 App. Div. 410; Rothschild v. Whitman, supra; Ter Kuile v. Marsland, supra, and Thomson v. Sanders, supra.) If the facts necessary to the proof of either cause of action involve an inquiry First Department, March, 1910. [Vol. 137. concerning the same transaction or matter that is regarded by many of the authorities as a material consideration, but it is not controlling unless from the nature of the counterclain it may fairly be said that it arises out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim, or is necessarily or directly connected with the subject of the action. (Story v. Richardson, 91 App. Div. 381; affd., 181 N. Y. 584; Van v. Madden, 132 App. Div. 535; Deagan v. Weeks, supra; Rothschild v. Whitman, supra.) In Story v. Richardson (supra) the action was on two promissory notes given by defendant as the purchase price of stock, and it was held that a counterclaim for damages for false representations made by plaintiff in inducing defendant to loan money to the corporation, even though the same representations induced the purchase of the stock, was not proper, as the transaction upon which the counterclaim was based was the loan of the money to the corporation, and that it was not connected with and did not arise out of the notes. Applying that reasoning here it would seem that the transaction out of which the counterclaim arises was the trespass and that it was not necessarily connected with the arrest but doubtless preceded it and was not caused thereby. Moreover, the arrest and malicious prosecution were not caused by the trespass in any true sense of cause and effect. The arrest and malicious prosecution are alleged to have been caused by the voluntary act of the defendant. In Van v. Madden (supra) it was held that a counterclaim for failure on the part of the vendor under a conditional sale to retain the property for the statutory period and sell it as provided by law after it had been returned at his request, was not proper in an action by the vendor for the conversion of part and for unlawful injury to the balance of the property. That decision went upon the theory that the transaction of which the plaintiff complained and the subject of the action were the conversion and trespass and that the counterclaim had no connection with the former and only a remote connection with the latter. In Deagan v. Weeks (supra), the court sustaining a counterclaim for assault and battery committed at the same time and place as the assault and battery of which the plaintiff complained, through Mr. Justice CHASE, say: "The sections of the Code relating to counterclaims should have a liberal construction, and where alleged causes of action, one set forth in the com App. Div.] First Department, March, 1910. plaint and the other in the defendant's answer as a counterclaim, are so connected that they must be determined on the same evidence, they should be litigated and determined in one action, although a recovery cannot be had in favor of either defendant or plaintiff without a finding that wholly defeats the alleged cause of action of the other. It does not seem to us in accordance with the spirit of modern procedure to give the sections of the Code quoted such a technical construction that it might require the trial court to twice sit and hear exactly the same facts in actions between the same parties before the proper judgment can be rendered between them. We have not overlooked the fact that there are decisions in this and other States seemingly in conflict with the views herein expressed." The cases of Sheehan v. Pierce (supra) and Deagan v. Weeks (supra) are reconcilable and consistent upon the theory that in the former the court meant to decide that where two causes of action for slander coexisted, one in favor of the plaintiff and the other in favor of the defendant, the one could not be counterclaimed against the other even though the two slanderous utterances were in the same conversation, and that the effect of the decision in the latter is merely that where the transaction, namely, the encounter or affray upon which the plaintiff bases his cause of of action for assault, instead of constituting an assault upon the plaintiff in fact constituted an assault by him upon the defendant so that there is but a single cause of action in favor of one but not in favor of both of the parties, either may interpose a counterclaim based upon his view of the facts in an action brought by the other, which is analogous to the case of the collision between two vehicles. The case of Deagan v. Weeks (supra), however, which carries the doctrine further than any other authority, does not go far enough to sustain the counterclaim in the case at bar. In the case at bar the defendant denies that he caused the arrest of the plaintiff and avers that the arrest was made by a police officer who was an eye-witness to the transaction. If the police officer made the arrest on his own responsibility then the defendant is in no manner connected therewith, and so far as he is concerned it is the same as if no arrest had been made. The case, therefore, is virtually the same as if the defendant took the position that there had been no arrest at all, and on that theory, instead of there |