Bean, J.
(after stating the facts). — 1. But one question is presented by this record, and that is, does the matter pleaded in the answer as a further and separate defense constitute a counter-claim wfchin the meaning of our Code ? So far as this question is concerned, the Code provides that the counter-claim “must be one existing in favor of a defendant, and against a plaintiff, between whom a several judgment might be had,” and “arising out of the contract or transaction set forth in the complaint, as the foundation of the plaintiff’s claim”: Hill's Code, § 73. Two classes of counter-claims are here provided for: first, a demand existing in favor of the defendant and against the plaintiff, which arises out of the contract upon which the plaintiff bases his cause of action; second, a demand so existing, which arises out of the transaction, — a broader term than a contract, — upon which the action is based; but in both instances the right of action of the plaintiff and that of the defendant must arise out of the same contract or transaction. As Mr. Pomeroy says: “The central idea of this subdivision is, that one and the same contract (or transaction) is the basis of both *301parties’ demand for relief”: Pomeroy, Rem. 802. In. many, and perhaps most, of the code states, it is sufficient if the counter-claim, whether of a legal or equitable nature, arises out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim, or be connected with the subject of the action: Pomeroy, Rem. § 581; and it was under these statutes that the decisions relied on by appellant were made. Now, there is a broad distinction between a counter-claim arising out of the contract or transaction upon which plaintiff’s claim is based, and one connected with the subject of the action, as is clearly pointed out by Mr. Justice Earl, in Carpenter v. Manhatten Life Ins. Co. 93 N. Y. 552, where he says: “The word ‘connected’ may have a broad signification. The connection may be slight or intimate, remote or near, and where the line shall be drawn it may be difficult sometimes to determine. ” But in this state, it is not sufficient that the counter-claim, in an action at law, be connected with the subject of the action, but it must arise out of and be legally connected with the contract or transaction upon which the plaintiff’s claim is based. It is only proper in cases where the subject matter of the counter-claim arises out of and is connected with the original claim, and is not permitted where the matter relied on is an independent one, having no connection with the subject of the original complaint: Loewenberg v. Rosenthal, 18 Or. 178 (22 Pac. Rep. 601).
In Conners v. Winton, 7 Ind. 523, under a statute somewhat similar in import to ours, it is said: “A counterclaim is that which might have arisen out of, or could have some connection with, the original transaction 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 noncompliance with its provisions. ”
2. Now, in this case, the answer does not allege, or in any way show, that the subject matter of the counterclaim, as pleaded, arose out of, or is legally connected *302with, the contract or transaction upon which plaintiff’s cause of action is .based. If the statute was to receive a strict and literal construction according to its language, the defendant would be confined in his counter-claim to such matter as arose out of the making and execution of the note sued upon, for that is “the contract set out in the complaint as the foundation of plaintiff’s claim. ” But statutes of this kind should be construed liberally, to the end that all controversies between parties may be adjusted in a single action in all cases coming fairly within the terms of the statutes; and so construing our statute, we are of the opinion that any cause of action in favor of the defendant, and against the plaintiff, arising out of the contract or transaction between the parties, of which the promissory note set out in the complaint is but the evidence, can be said to arise out of the contract or transaction upon which plaintiff’s action is based, and may be set up as a counter-claim to an action on the note. But under this rule the answer is insufficient. From the complaint and answer it may be inferred, although not distinctly alleged, that the foundation of plaintiff’s claim is the sale by it to defendant of certain sewing-machines; but there is no averment.that the agreement of plaintiff “to furnish defendant a good and reliable man to assist him in the sale ” of the machines was a part of or arose out of the sale of the machines, or the execution and delivery'of the note. As alleged, it was a separate and independent matter, occurring some two months before the note was executed, and whether at the time of, before, or subsequent to, the sale of the machines, does not appear. The breach of an independent agreement by the plaintiff, — to furnish defendant a good and reliable man to assist in the sale of the machines in payment for which the note was given, although it might be a good cause of action for damages in defendant’s favor, — would not under our statute constitute a counter-claim to an action to recover the price of the machines, because it did not arise out of or have any legal connection with the *303plaintiff’s cause of action, and that is all the answer alleges in this case, giving it the most liberal construction possible.
It follows that the judgment must be affirmed.