The opinion of the court was delivered, by
Woodward, J.
If the agreement of 10th October 1859 be regarded as an entire contract, which is perhaps the sound view to take of it, the defendant destroyed its entirety by accepting the plaintiffs’ part performance, and making payment therefor in the money and notes of 17th May 1860. The consequence of this was to give the plaintiffs a right of action for the logs delivered. Fessler might have stood upon the agreement and demanded full performance, and then nothing less than substantial performance on the part of the plaintiffs could have given them a right of action, but having severed it he is bound to pay, according to the agreement, for what he accepted.
But if he was damnified by the non-feasance of the plaintiffs, why may he not set off his damages against their cause of action ? The severance of the entirety of the contract did not release them from its obligation. They were bound to furnish two million feet of logs, and, failing in whole or in part, Fessler had a right of action for his damages; and as set-off is in the nature of a cross-action, and is favoured as preventing circuity, it would seem that the defence which was offered ought to have been received.
The reasons of the learned judge for rejecting it are not given upon the record, and so far as we can gather them from the argument, they do not strike us as satisfactory. It cannot be said that the settlement of 17th May 1860 estops the defendant. The payments of that date were not a release of the contract, but were made on account of it, and the effect of them, as already intimated, was to give the plaintiffs what, else, they would not have had, a right to sue for partial performance of an entire, contract, but they cannot be treated as defeating the defendant’s cause of action for the non-performance of the plaintiffs.
Nor is the defence excluded by the circumstance that the suit is upon the notes instead of the contract itself. The notes, like the cause of action attempted to be set off, grew out of the contract, and are inseparably connected with it. In the leading case under our statutes of set-off, Steiglman v. Jeffries, 1 S. & R. 478, the action was upon a promissory note given for burr-stones, and the defendant was permitted to set off his damages resulting from a special contract of warranty. The rule laid down there was that when the cause of action which the defendant wishes to set off arises from the same transaction as that on which the plaintiff founds his action, he may have the latter decided by the same jury. And see Gogel v. Jacoby, 5 S. & R. 122; Shaw v. Badger, 12 Id. 276; Bayne v. Gaylord, 3 Watts 301; McFadden v. Irwin, 2 Wh. 37; Preston v. Finney, 2 W. & S. 53. But this court has gone so far as to declare that an unliquidated cross-demand, arising from a distinct and independent contract from that on which suit is brought, is the subject of set-off: Cannon v. Franklin Fire Insurance Company, 6 W. & S. 155, and Ellmaker v. Same Company, 6 W. & S. 439.
Whichever source the rule be derived from, whether from those cases that require the set-off to arise out of the same transaction, or from those adjudications that impose no such limitations, it is evident the defence offered in this case was improperly rejected.
And the suggestion that the damages claimed by the defendant are too remote to be set off, is answered by these authorities. They cannot be too remote if they grow out of the same transaction as the plaintiffs’ claim. The transaction which was the common source of both causes of action was the contract for the sale and purchase of the timber logs, and it is allied equally near to both.
Another suggestion is that Fessler made no demand on Love & Powell to furnish the balance of the lumber. The contract was the demand. No other was necessary. Again it is said the defendant did not offer to show that the balance of the logs had never been delivered. If the plaintiffs’ can show that they were delivered, it will be an excellent answer to the defendant’s claim of damages.
We say nothing about the measure of damages, because that question is not upon the record.
The judgment is reversed, and a venire facias de novo is awarded.