
    *Charles W. Hill and Elizabeth C. Hill v. Chas. Butler.
    A counter-claim must contain facts recognized by courts of law or equity as constituting an existing cause of action, and which would have entitled the defendant to a judgment or decree in a separate action.
    B. executed liis deed to H., with covenants of warranty, and H. executed a mortgage to secure the purchase money, and went into possession of the premises. A defect in the title was discovered to a part of the premises, after the deed was made, and before the mortgage was executed; and B. assured H. that he would get in the title, but failed to do so. In an action to foreclose the mortgage, H., by way of counter-claim, set up the defect in the title and the assurance and promise of B. to cure the defect, and prayed that B. might be enjoined from collecting the purchase money, until he made the title perfect. Held, that the defect in the title not asserted by action, and H. remaining in possession, did not entitle him to the relief asked; and that until eviction, or something equivalent thereto, nominal damages only could be recovered on the breach of the promise of B. to perfect the title.
    A judgment will not be reversed where the court fail to give nominal damages on a counter-claim, if such omission did not affect the costs or other rights of the defendants.
    In an action to foreclose' a mortgage for the purchase money of land, the mortgagor having covenants of title in the deed from the mortgagee, and, being in possession, can not, in the absence of all fraud, by counter-claim, have alleged defects of title passed upon, or damages awarded to him.
    This ease comes before the court upon a petition in error to reverse the judgment of the district court of Lucas county.
    Charles Butler filed his petition in the court of common pleas of Lucas county against Charles W. Hill and Elizabeth his wife, to foreclose a mortgage executed by Hill and his wife to Butler, on the 1st day of September, 1848.' To this petition Hill and wife filed their answer as follows :
    The defendants, for answer to the petition, say that the bond' and mortgage in the petition mentioned, were given for the pur208] chase money of said lots 285, 286, 287, and 424, *and that no payments have been made thereon other than those mentioned in the petition ; but they deny that the plaintiff is entitled to recover a judgment for the moneys unpaid on said bond and mortgage for the facts and reasons hereinafter stated ; and by way of counterclaim to said petition say: That in the spring of 1846 defendant, Charles W. Hill, was desirous of purchasing said lots 285, 286, and 424, as a site for a residence for himself and family; and being informed that the title to said lots was in the Albany City Bank, but that said plaintiff was in equity the owner thereof, went to said Butler and negotiated for a purchase of the same; and in pursuance of such negotiation, and upon terms fixed and agreed upon by and with said plaintiff, acting in the name of said bank, by John Fitch, Esq., its attorney, a contract was entered into, in writing, on the first day of May, 1846, by which said bank undertook to sell to defendant, Charles W., the three lots last mentioned, and to convey to him the same in fee simple; and binding said Charlee "W. to pay the purchase price thereof, and also to expend certain sums thereon, from year to year for three years, in permanent and valuable improvements. And defendants aver that said clause for improvements was put into said contract at the instance and on the requirement of said plaintiff, ho being at the time the owner of a large number of other lots adjoining those last mentioned, in their immediate vicinity.
    “That in pursuance of said clause defendant, Charles W. Hill, did go on to improve said property then lyiDg vacant. And, in •one year from the making of said contract, had expended on said premises, in constructing drains, erecting fences, and a barn, and in planting trees, more than eight hundred dollars- But in making such purchase said Charles "W. did not investigate the title to said premises, or make any inquiries in relation thereto, but re-209] lied wholly upon the *good faith of the plaintiff, implicitly believing that the plaintiff and said bank held and would convey a good title to said premises, or that they otherwise would not contract to do so.
    “ That about one year after said contract was made, and, as defendants believe, some time in the month of May or June, 1847, defendant Charles W. Hill had another negotiation with the plaintiff, when it was arranged between them, that said lot 287 should be added to those before sold, and that said plaintiff should, by his own deed and that of other necessary parties, convey all four of said lots to said Charles W. Hill, by such sufficient deed or deeds as would vest in him a perfect title to said four lots, with covenant of warranty on the part of the plaintiff. And that, a mortgage should be given by the defendants, with a bond to secure the purchase money for said lots to the plaintiff. And in pursuance of this last arrangement, which defendant believes was not in writing, the deed, a copy of which .is annexed hereto, was executed by said Butler and said banlr, and, on or about the 20th of July, 1847, delivered to defendant, Charles W. Hill, and the mortgage and bond mentioned in the petition, on the day of the date thereof, given in exchange therefor, and the written contract first mentioned given up, or treated as merged and superseded by the deed, bond, and mortgage. And defendants aver that said purchase was made on their part with the sole reference to using the said premises permanently as a place of residence for themselves and their families; that said lots 285, 286, and 287 lay together, and were intended by them as a sits for their dwelling-house; and when purchased as aforesaid were entirely vacant.
    
      “ And defendants aver, that until several months after said deed was made and delivered, as aforesaid, defendants had not examined or inquired into the state of the title *to said lots, or either of [210 them; but relying upon the good faith of plaintiff, and implicitly believing that he would not pretend to sell and convey property to which he had not a perfect title, received said conveyance, and continued to expend money for the improvement of said property, not doubting that said Charles W. Hill had received a perfect title to the same, until a short time before said-bond and mortgage were given.
    “ That a principal object in obtaining said deed, at the time it was received, was to enable the grantee to obtain a loan on said property; and with that view defendant, Charles W. Hill, caused an examination of the title to be made, some time in the summer of 18-18, when it was ascertained that there was some defect in the title of the plaintiff. That an undivided portion of each of said lots, equal to five seventy-second parts of the same, had been, on or about the 15th day of September, 1835, conveyed by Edward Bis-sell and his wife to one Isaac S. Smith, before the accruing of the title under which the plaintiff claims; and such defect defeated said object of obtaining said loan.
    
      “ That soon after said examination was made, said Charles W. Hill informed said plaintiff that said title was defective, .and requested him to get in the outstanding title, which he undertook to do.
    “ That at the time when said bond and mortgage were about to be añade, defendant, Charles W. Hill had a conversation again with the plaintiff about the state of said title, when it was understood "between them, that the plaintiff had several other lots in the vicinity of the four lots- above mentioned, or was interested therein, the iitle to which was in the same condition as those above mentioned, ¡and on that account, and as the plaintiff had sold said four lots to 211] said defendant at their full value, and. undertaken *to give him a perfect title to the same, said plaintiff then assured the said 'Charles W. Hill that he would then proceed to get in said out•standing title, and secure to and vest in said defendant a perfect title to said premises; and the defendants aver that relying upon the good faith of said plaintiff and upon his promise and assurance last aforesaid, said bond and mortgage were given for the full value •of said four lots, and without any diminution in the price thereof in consequence of any defect of title. Defendants further aver that without such assurance and promise on the part of said plaintiff, .-said bond and mortgage would not have been executed or delivered to the plaintiffs, as defendant would not have received property for immediate improvement as a homestead, the title to which was defective, without express and reliable assurances that a perfect title would be promptly secured to them.
    “ That, relying upon the good faith of the plaintiff and upon his ¡assurance aforesaid, said Charles W. Hill, having been j>ut into the possession of said property under said contract and deed, after the making of said bond and mortgage went on to improve said mortgage premises as a homestead, the plaintiff knowing that the ■defendant wished said premises for that purpose, and has expended in improving said premises, and in fitting the same up as a residence for himself and family, more than six thousand dollars in permanent and valuable improvements.
    
      “ That the plaintiff was particularly anxious to have defendant go •on with said improvements, as they would tend to enhance the value of his other property in that vicinity, then vacant also.
    “ That from investigations recently made at the instance of defendants, it appears, and defendants state the fact to be, that said 212] mortgaged premises, with a large number of Hots in the same vicinity, on or about the 15th of September, 1835, belonged to. a joint stock company, the aggregate shares of which amounted to 1, 152 shares; 960 of which belonged to and were held by said Edward Bissell, 80 shares by said Smith, and 112 by one Henry W. Hicks, now of the city of New York — being five-sixths in Bissell and one-sixth in the other parties.
    <! Defendants are not fully advised of the exact state of so much of the title as was held by said Smith and Hicks, but are informed and believe, and therefore state, that a portion of the same has descended to, and vested in the widows and heirs of Hiram Pratt and William E. P. Taylor, viz., Maria E. Pratt, Ann Eliza Pratt, Mary B. Pratt, Maria E. Pratt, Jane Taylor, Henry Taylor, William B. Taylor, and Sheldon Thompson Taylor, of Buffalo, in the State of New York; all but the said Maria E. Taylor and Jane Taylor, being, as defendants are informed and state, infants; and that the remainder of the title so held by said Smith and Hicks, is now held by said Hicks, or otherwise outstanding.
    “Defendants further say that the plaintiff’s title,' as conveyed to said Charles W. Hill, purports to come from said Bissell, and is .also incumbered by a prior conveyance to one Sidney Bissell, of the entire property; and if not thus incumbered, would amount only to five-sixths of the property which plaintiff was to receive pay for by the bond and mortgage, and which he undertook to •convey to said Charles W. Hill; the other sixth being now outstanding in various persons, as aforesaid. .
    “ Defendants further state from information recently acquired, which they believe to be true, that the plaintiff, before said sale to defendant, Charles W. Hill, held such an estate in the mortgaged premises as would vest in his wife, then and still living, an inchoate dower estate; that she *has not released that estate, and in [213 case of his death might legally claim the same against the defendants. N
    “ That said plaintiff resides in the city of New York, and is now about fifty-five years of age.
    “ That said lots 285, 286, and 287 are occupied by the dwelling-house of defendants, and that a partition of the mortgaged premises could not be made without manifest injury to the same.
    “ That more than six years have elapsed since the most prominent defects in said title were made the subject of the special undertaking in relation thereto by the plaintiff, above set forth ; during which period he has taken no steps, so far as defendants are informed, toward getting in and perfecting said title in defendants, or either of' them, but wholly neglects and.refuses to perform his said agreement, and, in direct violation of the rights of the defendant, seeks, to collect the full price of said premises by legal proceedings. ■
    “That defendants are fearful that by the death or insolvency of the plaintiff, or by an assignment or transfer of the bond and mortgage aforesaid by the plaintiff, the title to a large portion of said premises may be wholly lost to defendants, and their remedy on the-warranty of the plaintiff worthless; and that should the warranty aforesaid continue in other respects good, it would not afford an adequate remedy, as the property is not susceptible of division, and the amount that could be recovered would not be equal to the damage sustained, and therefore defendants would suffer irreparable injury.
    “ Defendants are willing to pay the balance of said purchase money, and interest, whenever said plaintiff will vest in said Charles W. Hill a good and perfect title to said premises.
    * “ Defendants therefore pray that any further proceedings on the part of said plaintiff, toward the enforcement of said bond and. mortgage, until said title is perfected as last aforesaid, or any transfer or assignment of said bond or mortgage, or any part of either of them, to any other persons, before said title is so perfected, may be restrained by the order or injunction of this honorable court; and that the plaintiff may be specifically required and directed by this court to perform «aid agreement as to title on his part; and that defendant may have such further relief as is right and proper.”
    The court of common pleas rendered a judgment against the defendants below, and found that they were not entitled to the relief by them prayed for in their answer. An appeal was taken by the . defendants below to the district court, where a like judgment was entered, the court holding that the answer contained no matters constituting a defense, cpunter-claim, or set-off. There had been a reply to the answer, but the case seems to have been submitted to the court upon the answer, as if the allegations therein had been proved. Hill and wife now prosecute a petition in error to reverse the judgment of the district court.
    P. B. Wilcox, for plaintiffs in error:
    I. The agreement to get in the outstanding title is a valid one, and may be enforced specifically, if practicable; or, if not practicaBle, then it is a good ground for damages, by way of counter-claim or set-off. 1 Ohio, 357.
    And the rule is well settled that, where money is paid upon a parol contract, and the vendor refuses or neglects to execute the contract, the money paid may be recovered back. 1 Ohio, 357-363; 14 Johns. 15.
    The allowing the defendant to go on and make so large *im- [215 provements on the faith of the agreement to get in the title; is a ■fraud, and furnishes good ground for damages. 14 Johns. 15, 31.
    II. The party is not bound to look to the covenant of warranty in his deed.
    The subsequent agreement being a valid one, ought certainly to Be taken ídío account, either as a defense, or counter-claim, or set-off
    If 'Butler had the power to specifically perform this subsequent ¡agreement, he would, undoubtedly, be compelled to do it, although it is in parol. 14 Johns. 15, above cited, is a strong case in point. See also 2 Story Eq. Jurisp., sec. 761; 1 Dev. & Bat. Ch. 410.
    III. Besides, a parol agreement is good and will always be enforced, even when it is void under the statute of frauds, unless the ■statute be set up and relied upon in the pleadings. A court of equity will always enforce a parol agreement as soon as any other, unless the statute of frauds is interposed. And such interposition is always to be made by the party. The court never go about to make any such inquiries of their own motion.
    IY. This is not the ease of a common mortgagee suing on his Bond and mortgage to recover his money, when the title is, in whole or in part, defective. In such cases the validity of the title ■is a matter of the mortgagor’s concern only. But this case is where a vendor is seeking to recover his purchase money, where his title .turns out to be defective. And in such cases a court of equity will not allow a sale till the title is cleared up. See 1 Rand. 72.
    Y. And in cases of common mortgages and other public sales, in order to obtain a fair price, and that purchasers may be protected ■by the court, and not compelled to take incumbered or worthless titles, the court will always take notice, in their decree, of any cloud upon the title, or defect *in the title, and order it to be [216 sold at the purchaser’s risk. 1 Ed. Ch. 301; 1 Paige Ch. 120. But here the entire premises are ordered to be sold, as if the title were complete and perfect in all respects. If such sales are allowed) very little confidence will soon be placed in judicial sales.
    
      
      M. R. & R. Waite, for defendant in error.
   J. R. Swan, J.

I. There are three kinds of defense which maybe set up in an answer under the code: 1. Matters which, by the common law, were usually plead in bar of the action; 2. Counterclaim; 3. Set-off. Although the answer may be so unskillftilly drawn as not to distinguish between the three, yet if it contain sufficient facts to show a defense under either, the court will not permit thp defendant to be prejudiced by his not making the proper distinction, in his answer, between the three kinds of defense.

The defense in this case was set up as a counter-claim.

The code allows any ground of defense existing in favor of a de■fendant, and against a plaintiff, between whom a several judgment might be had in the action, and arising out of the contract or transaction set forth in the petition as the foundation of the plaintiff’s, claim, or connected with the subject of the action, to be set up as a. counter-claim. Code, sec. 94. This provision allows the defendant, to plead various matters of defense, which could not be entertained before the adoption of the code, either on account of the separation of the law and equity jurisdiction of courts, or the forms of actions and of pleadings.

But it neither changes contracts, nor alters the rights of parties; it only changes and enlarges the mode by which contracts shall be-enforced and existing rights vindicated. Hence, in the case before-217] us, the rights of Hill under the ^covenants in the deed of Butler, and under the alleged agreement as to a defect in the title,, must be determined upon the recognized principles of courts of ' law and equity, and can obtain no support by means of this provision of the code. In other words, the counter-claim must contain facts recognized by courts of law or equity as constituting an existing cause of action.

II. It is insisted that the defect in the title to the premises ought, to have been considered in fixing the amount due upon the mortgage, or a recovery of so much of the purchase money enjoined, as-would cover the alleged defect of title. In general, where the title fails, in whole or in part, a court will decree a return of the purchase money, even after the purchase money has been paid, and a delivery of the deed containing covenants of warranty, provided-there had been a fraudulent misrepresentation as to the title. Edwards v. McLeary, Cooper Eq. 308; Fenton v. Browne, 14 Ves. 144. But if there be no ingredient of fraud, and the purchaser is not evicted, or something equivalent to an eviction has not transpired, the insufficiency of the title is no ground for relief against a security given for the purchase money, or for rescinding the purchase and claiming restitution of the money. The party is remitted to-his remedies on his covenants to insure his title. Abbott v. Allen, 2 Johns. Ch. 519; Edwards v. Bodine, 26 Mend. 109; Burkhamstead v. Case, 5 Conn. 528; Patten et al. v. Taylor, 7 How. 132; Leggett v. McCarty, 2 Edw. Ch. 124; Maner v. Washington, 3 Strob. 171; Lamerson v. Marvin 8 Barb. S. C. 11; Platt v. Gilchrist, 3 Sand. S. C. 118. And the party is remitted, in such ease, to the covenants in the deed, not on account of the forum in which he proposes to reduce the amount of the purchase money to the extent of the defect in the title, nor on account of the form of judicial ^proceedings, but because, so long as the grantee remains in [2XS possession and enjoys the fruits of the purchase, no real damage has accrued to him ; and the defective title may, by adverse possession, ripen into a perfect one. Simpson et al. v. Hawkins et al., 1 Dana, 309. And where there is no actual prosecution of the paramount title or incumbrance, the insolvency or non-residence of the vendor will not, when coupled with the mere existence of such title or incumbrance, give to the purchaser a right to equitable relief. Latham v. Morgan, 1 Sme. & Marsh. Ch. 618; Rawlins v. Timberlake, 6 Mon. 232. It is said by Chancellor Kent, in the case of Abbott v. Allen, 2 Johns. Ch. 522: “ It would lead to the greatest inconvenience and perhaps abuse, if a purchaser in the actual enjoyment of land, and when no third person asserts, or takes any measures to assert a hostile claim, can be permitted, on suggestion of a defect or failure of title, and on the principle of guia timet, to stop the payment of the purchase money, and of all proceedings at law to recover it.”

When the covetiant is broken at the time the suit is brought to recover the purchase money, the purchaser will be entitled to detain the purchase money to the extent to which he would, at that time, be entitled to recover damages upon the covenant. Knapp v. Lee, 3 Pick. 459; Rice v. Goddard, 14 Pick. 293.

It may however be said that the agreement set forth in the answer is'of such a nature that the general principles of -law relating to covenants of title in deeds are inapplicable. There are several answers to this position. The matters set forth in the answer are a detail of what transpired in various interviews between the plaintiff and defendant; and are so stated for the purpose of raising a presumption that the whole constituted a promise by Butler to obtain a conveyance from those who derive title 219] ^through Smith, etc. That the parties conversed upon the subject is abundantly shown by the answer ; but that the parties mutually understood that an express agreement was entered into, creating a legal liability, and changing their relation to each other under the covenants of title contained in the deed, we do not believe. There was no consideration for such an agreement. Miller v. Watson, 5 Cowen, 195. But if it were held to be an agreement, and that Butler failed to perform it, what damages is Hill entitled to? He is still in possession, enjoying the fruits of his purchase, and ripening his title by that possession. Shall he be compensated as though an eviction had taken place, because by possibility, or even probability, an outstanding title will be asserted ? This would be giving damages by reposing confidence and resting opinions upon a future event which may never happen, for the benefit of the purchaser, and at the same time leaving in him an inchoate title, which may, by possession, become perfect and paramount. At most, therefore, the defendants below would be entitled to nominal damages only, and where a counter-claim or set-off is set up, upon proof of which the party is entitled to nominal damages only, and the court below do not award them, this court on error will not disturb the judgment on that account, if such finding did not affect the costs. But the defendants did not ask for damages, but that Butler might be restrained by injunction from a recovery of the purchase money until he performed the agreement. Such relief must be denied. The plaintiffs in error do not desire to cancel the contract as. to the whole, or as to five seventy-two parts, or place Butler in the position, as respects the five seventy-two parts, he occupied before the sale. On the contrary, their claim is, that they shall retain possession, enjoy the fruits of the contract, have 220] the benefit of the title which is ^ripening, and pay nothing for it until Butler procures a perfect paper title. Such remedy would be making a new contract between the parties.

We are of the opinion that the same reasons which have influenced courts not to relieve, after deed made with covenants of warranty, against the payment of the purchase money, on the mere ground of defect of .title, when there was no fraud and no •eviction, applies with equal force to the agreement set up in the answer.

If Butler was insolvent, and there was an action pending against Hill brought to assert a paramonut title under Smith, etc., or if no •deed had been made by Butler to Hill, and the action below had been upon a title bond or agreement, for the sale of the premises to Hill, the rights and remedies of Hill, upon such executory contract, would have been very different.

III. But it is insisted that the court below should have ascertained the extent and nature of the defect in the title, and, for this purpose, should have ordered the persons who hold the outstanding title to be made parties; settled their respective rights, legal and equitable : made a proper abatement of the purchase money; and ordered that portion of the premises to which Butler was found to have a perfet title, sold to pay the amount found due to him.

The outstanding title accrued in 1835.

Hill, in quiet possession under his deed, and enjoying the fruits •of his purchase, has no right to call upon the court to stir up a • litigation about an outstanding claim to the premises which has never been, and probably never will be, asserted by action or otherwise. If he desires to quiet his title, he can file a petition for that purpose, and under his alleged agreement with Butler, could probably subject the latter to the costs and expenses of the proceeding. To litigate and settle a question of title with third persons having -*no privity with the sale by Butler to Hill, for the purpose [221 of creating a right of action by way of counter-claim in a pending suit relating to that sale, we think is extending the defenses under the code beyond any legitimate claims of justice.

Judgment of the district court affirmed.

Brinkerhoee, Bowen, and Scott, JJ., concurred.

Bartley, C. J., dissented.  