Opinion of the Court.

or deceit is such, that when animals are sold in one lot together, the warranty or representation as to the whole being single, we can have no doubt that the same principle should apply to the extent of a recoupment; and that the right to recoup in damages should not be confined to the diminished value of those which are proved to have the disease at the time of the sale." 14 Allen, 23. A similar decision was made in Rose v. Wallace, 11 Indiana, 112.

The later decisions of this court, modifying the earlier decision in Thornton v. Wynn, 12 Wheat. 183, affirm the same doctrine. Withers v. Greene, 9 How. 213; Van Buren v. Digges, 11 How. 461; Winder v. Caldwell, 14 How. 434; Lyon v. Bertram, 20 How. 149, 154; Railroad Co. v. Smith, 21 Wall. 255; Marsh v. McPherson, 105 U. S. 709, 717.

In Winder v. Caldwell, Mr. Justice Grier, who was equally familiar with the common law and with the Pennsylvania practice said: "Although it is true, as a general rule, that unliquidated damages cannot be the subject of set-off, yet it is well settled that a total or partial failure of consideration, acts of nonfeasance or misfeasance, immediately connected with the cause of action, or any equitable defence arising out of the same transaction, may be given in evidence in mitigation of damages, or recouped; not strictly by way of defalcation or set-off, but for the purpose of defeating the plaintiff's action in whole or in part, and to avoid circuity of action." 14 How. 443.

In Railroad Co. v. Smith, which was an action against a railroad corporation by a contractor to recover the price of a drawbridge, it was held that the defendant might show that the construction of the bridge was so defective as to make it unfit for its purpose, and the draw worked so imperfectly as to hinder and delay the running of the cars over it; and might prove the number of hands required to work the bridge as it was built, and the number that would be necessary if it had been properly constructed. Mr. Justice Field, delivering judgment, said: "All damages directly arising from the imperfect character of the structure, which would have been avoided had the structure been made pursuant to the contract, and for which the defendant might have instituted a

Opinion of the Court.

separate action against the contractors, were provable against their demand in the present action. The law does not require a party to pay for imperfect and defective work the price stipulated for a perfect structure; and when the price is demanded, will allow him to deduct the difference between that price and the value of the inferior work, and also the amount of any direct damages flowing from existing defects, not exceeding the demand of the plaintiffs. This is a rule of strict justice, and the deduction is allowed in a suit upon the contract to prevent circuity of action." 21 Wall. 261.

The courts of Pennsylvania, having originally had no jurisdiction in equity, have always allowed equitable defences in actions at law, under what is there known as a "plea of payment with leave," that is to say, with leave to prove any special matter. Swift v. Hawkins (1768), 1 Dall. 17; Lewis v. Morgan (1824), 11 S. & R. 234; Light v. Stoever (1825), 12 S. & R. 431, 433; Mackey v. Brownfield (1825), 13 S. & R. 239; Hawk v. Geddis (1827), 16 S. & R. 23; McConnell v. Hall (1831), 3 Penrose & Watts, 53; Uhler v. Sanderson (1861), 38 Penn. St. 128. And the practice was long ago recognized and acted on by Mr. Justice Washington in the Circuit Court. Latapee v. Pecholier, 2 Wash. C. C. 180, 184; Webster v. Warren, 2 Wash. C. C. 456, 458.

In matters of contract, the defendant's right of set-off, with the additional right to recover judgment against the plaintiff for any sum proved in excess of his claim, is given and regulated by a statute which has been in force in Pennsylvania since 1705, and is there commonly known as the Defalcation Act, by which "if two or more dealing together be indebted to each other upon bonds, bills, bargains, promises, accounts, or the like, and one of them commence an action in any court of this province, if the defendant cannot gainsay the deed, bargain or assumption upon which he is sued, it shall be lawful for such defendant to plead payment of all or part of the debt or sum demanded, and give any bond, bill, receipt, account or bargain in evidence; and if it shall appear that the defendant hath fully paid or satisfied the debt or sum demanded, the jury shall find for the defendant, and judgment shall be

Opinion of the Court.

entered that the plaintiff shall take nothing by his writ, and shall pay the costs. And if it shall appear that any part of the sum demanded be paid, then so much as is found to be paid shall be defalked, and the plaintiff shall have judgment for the residue only, with costs of suit. But if it appear to the jury that the plaintiff is overpaid, then they shall give in their verdict for the defendant, and withal certify to the court how much they find the plaintiff to be indebted or in arrear to the defendant, more than will answer the debt or sum demanded;" and the sum so certified shall be recorded with the verdict, and be deemed a debt of record, and may be recovered by scire facias, or, under an act of 1848, by judg ment and execution therefor. 1 Dall. Laws of Penn. p. 65; 1 Purd. Dig. (11th Ed.) 603, 604.

This statute, in its very terms, embraces all matters of contract, and no matter of tort; and so it has always been construed. A breach of warranty is a breach of a contract, and may be sued on as such; and for that reason, and that only, has been allowed to be given in evidence by the defendant, under the statute, not only in an action on the same contract (in which it might be admissible by way of recoupment only, without the aid of the statute), but even in an action upon a distinct contract. Steigleman v. Jeffries, 1 S. & R. 477;1 Nickle v. Baldwin, 4 W. & S. 290; Phillips v. Lawrence, 6 W. & S. 150; Carman v. Franklin Ins. Co., 6 W. & S. 155; Ellmaker v. Franklin Ins. Co., 6 W. & S. 439; IIunt v. Gilmore, 59 Penn. St. 450; Seigworth v. Leffel, 76 Penn. St. 476; Halfpenny v. Bell, 82 Penn. St. 128. But from the earliest to the latest times it has been uniformly held that a claim of damages for a mere tort is not within the statute. Kachlin v. Mulhallon (1795), 2 Dall. 237; S. C. nom Kachlein v. Ralston, 1 Yeates, 571; Heck v. Shener (1818), 4 S. & R. 249 ;2 Gogel v. Jacoby (1819), 5 S. & R. 117;3 Cornell v. Green (1823), 10 S. & R. 14; Light v. Stoever (1825), 12 S. & R. 431; Hubler v. Tamney (1836), 5 Watts, 51, 53; Peterson v. Haight (1838), 3 Wharton, 150; Hunt v. Gilmore (1868), 59 Penn. St. 450, 452; Ahl v. Rhoads (1877), 84 Penn. St. 319, 325.

1 S. C. 7 Am. Dec. 626. VOL. CXX- 41

2 S. C. 8 Am. Dec. 700. 3 S. C. 9 Am. Dec. 339.

Opinion of the Court.

The distinction between the right of equitable defence or recoupment, independent of any statute, which may arise even out of a tortious act of the plaintiff, immediately connected with the contract sued on, and by which the defendant can do no more than defeat the plaintiff's claim, in whole or in part; and the right of counterclaim under this statute, which can be based only on contract, and by which the defendant may not only defeat the plaintiff's action, but recover an affirmative judgment against him; has been clearly brought out in the judgments of Chief Justice Tilghman.

In assumpsit to recover for services as a housekeeper, the defendant pleaded non assumpsit, and payment, with leave to give the special matters in evidence; and offered to prove that the plaintiff, while in his service, clandestinely took and sent away goods of his from the house. Chief Justice Tilghman, after observing that it was contended for the defendant "that the evidence was proper, either by way of set-off, or, under the plea of non assumpsit, as a defence to the action,” expressed the opinion that it was not admissible by way of set-off, because it had been settled that the statute did not comprehend matters of a tortious nature; but that, considering the impolicy of multiplying suits, and the hardship of not permitting the defendant to avail himself of matters arising out of the very transaction on which the plaintiff founds his suit, the evidence offered was admissible under the plea of non assumpsit, to show that the plaintiff's services were ill performed, and thus to affect the amount which she could recover; and on this ground alone the judgment below, which excluded the evidence, was reversed. Heck v. Shener, 4 S. & R. 249.1

So in assumpsit for goods sold and delivered, it was held that the defendant could not give in evidence, by way of setoff, that the goods had been detained by the plaintiff and conveyed by him to third persons; and the same eminent judge said: "Without undertaking, at present, to draw the line which limits the right of defalcation, it may be safely affirmed, that defalcation is not permitted by reason of any demand against the plaintiff for an act done by him of a tortious nature."

1 S. C. 8 Am. Dec. 700.

Opinion of the Court.

"But there are cases, in which the defendant is permitted to give evidence of acts of, nonfeasance or misfeasance by the plaintiff, where these acts are immediately connected with the plaintiff's cause of action; although perhaps such evidence is not so properly a defalcation, as a defeating, in whole or in part, the plaintiff's action." Gogel v. Jacoby, 5 S. & R. 117, 122.1

Again: in debt against principal and surety on a bond given for the purchase money of a mill sold by the plaintiff to the principal defendant, the defendants proved that at the time of the sale the grantee supposed the dam was at its lawful height, whereas it was in fact, as the plaintiff knew, so high as to overflow and injure the land and mill of a neighbor without his consent; and that if the grantee should lower his dam to its lawful height, the value of his mill would be greatly reduced; and then offered to show how much the value of his mill would be diminished by so lowering the dam. It was held that the evidence, though going to prove unliquidated damages, was admissible, for reasons thus stated by Chief Justice Tilghman: "It is very true that these damages were not in the nature of a debt, which can be set off. But they were not offered as a set-off. It was an equitable defence, showing that the plaintiff ought not to be permitted to recover the whole purchase money; and if not, then it was necessary to show what would be a reasonable abatement. Such defences have always been admitted in our courts. Having no court of chancery, we could not get along without them. To permit the plaintiff to recover the whole purchase money, and leave the defendants to their remedy by an action for fraudulent concealment, would be most unjust. The purchase money and damages arise out of the same transaction, and the proper time for inquiry was before the money was taken from the pocket of the defendants. It might be too late afterwards. And certainly the plaintiff has no right to complain, if the whole business is settled at once. What he is not, in good conscience, entitled to receive, he should not be permitted to receive." Light v. Stoever, 12 S. & R. 431, 433.

The result of the Pennsylvania decisions may be summed

1 S. C. 9 Am. Dec. 339.