(Cz'rcuit Court. N.
Iowa, C. D. May 8,1887.)
FEDERAL CIRCUIT COURT-JURISDICTION-CROSs-BILL-FORECLOSURE.
Where a circuit COUl't of the United States has jurisdiction of a suit to foreclose a chattel mortgage, it may entertain a cross-bill in such suit, filed by a party who intervenes, and .claims to be the owner of a part of the property. although. such party, by reason of his citizenship, being the same as that of defelldant, could not have originated the suit.
Where a suit to foreclOse a chattel mortgage is properly cognizable in a court of eq uity, a party who claims to be the owner of a part Of the property mortglliged may intervene in theeuit, although he would have a remedy by action at law, and in such case the court will have jurisdiction of the prp.ceeding in his behalf as ancillary to the original suit. .
In such a case the party claiming the p'roperty need not have put his claim into judgment before filing his cross-bill, as he alreagy has such an interest in the property as will enable him to question the validity of the mortgage.
SAME-INTERVENTION-LEAVE OF COURT.
Where, in a suit in equity in a United States circuit court to foreclose a chatte.lmortgage, an assignee of the mortgagor for the benefit of his creditor.s files a cross-bill averring that the mortgage is a fraud on creditors, the court may entertain the proceeding, although he did not obtain leave of court to file his bill. Where· parties having claims against the file a cross-bill in a suit to foreclose a chattel mortgage, and in their bill fail to show that the r claims have been reduced to judgment. except the claim of one of them, ana set up an assignment for the benefit of the mortgagor's creditors, and aver that the mortgage is fraudulent as to creditors, a demurrer to the cross-bill will be sustained as to the parties who have not abtained a lien on the propertybyaction at law.
IIi Equity. Bill to foreclose mortgage. Demurrers to cross-bill. Martin & Wambaugh and Wright & FarreU, for complainant. W. J. Covil and Kamrar & Boyer, for defendants.
SHIRAS,J. ·The bill in this cause was filed for the purpose of foreclosing a mortgage alleged to have been executed by the firm of Barge & King to secure an indebtedness due to complainant, a corporation created under the laws of the state of New York. All of the defendants named in the bill were and are citizens of the state of Iowa, and the amount involved exceeded $2,500, so that the jurisdiction of this court of the cause presented by the bill is unquestioned. On the fifth day of February, 1887, the Thomas Harrow Company, a corporation created under the laws of the state of New York, filed its cross-bill, having previously been permitted to become a party to the suit, and in such crossbill it averred that certain portions of the property claimed to be subject to the lien of the chattel mortgage in favor of complainant was in· fact the property of said Thomas Harrow Company, having been placed in the possession of Barge & King under a written agreement, by thetertnl
of which the title remained in said Thomas Harrow Company until payment therefor had .been made. To this cross-bill the complainant demurred, the first ground being that, as it appears upon the face of the record that the Thomas Harrow Company and D. :rtf. ,Osborne & Co., the complainant and defendant in the cross-bill, are alike New York corporations, this court has npt jurisdiction of the cross-bill. As already stated, the jurisdiction of the cause of action presented by the' original bill, and of the parties thereto, cannot oe and is not ques, tioned. Having acquired fuUand complete jurisdiction of the original cause, and the partiesthereto, the court cannot be deprived thereof because another party obtains leave to intervene for the assertion of a right to which is the subject of the proceeding. If it be necessary for the protection of the rights of a third party that he be heard in the cause pending, he may be permitted to intervene, eyen though the court would not have, by reason of his being a citizen of the same state with complainant,jurisdictioll' over an original proceeding between the same parties. ,Fl'eemanv. H9we, 24 How. 450; Kl'ippendorfv. Hyde, 110 U. S. 276, 4 Sup. Ct. Rep. 27; Phelps v. Oaks, 117 U. S. 236, 6 Sup. et. Rep. 714, . . The: second ground of demurrer is that the party has a plain and adequa:teremedy at law, and therefore a court of equity has not jurisdiction. This principle is not applicable to a case of this kind. The origi l1al cause, i. e., the bill to foreclose the mortgage, is properly cognizable in a, court of equity. This court, having jurisdiction of the foreclosure proceedings, has also jurisdiction to entertain the application ot the harrow companY,even though it be true that the company might have a reUledy at law. 'rhe proceeding on behalf of the harrow company is merely ancillary to the foreclosure suit, and, as it is necessary that the party should be heard for the protection of its rights, the court has jurisdiction of the ancillary proceedings by reason of its jurisdiction of the original cause. As a third ground of dernurrer, it is averred that it does not appear that the Thomas Harrow Company has such an interest in the subjectmatter of the suit as entitles it to be heard, because it does not appear that its claim against Barge & King has been put into judgment. The ordinary rule is that a stranger-,--that is, one withontinterest-is not permitted. to question the validity of a conveyance or transfer of property by the owner thereof. Hence it is held that a creditor,who has no lien or right toa lien upon the property of his debtor, cannot question a conveyance of the debtor's property. To do so he must obtain a lien, or right to create one, by procuring a judgment and proceeding to execution. . The necessity of pI:oceeding to judgment and execution is, however, merelYjto create such an interest in the property as will entitle him to question of the cOnveyance; and iihe has, by other means or sources of'title, an interest in the property, he is not required to reduce his claim to judgment. In the present case the Thomas Harrow Company claims to be the owner of part of the property included in the mortgage. It therefore appears that it has an interest to be protected,
!tnd it cannot be refused a hearing on the ground of being a stranger to the controversy. . It is also stated, as ground of demurrer, that the equity, if any, of the Thomas Harrow Company, can only be worked out through the equities of the defendants Barge & King. The interest and ownership of the harrow: company are not derived from any equities in favor of Barge & King, but are dependent upon the independent title averred to exist in that company·· filed in the cause a cross-bill by Robert Fullerton, who avers that the firm of Barge & King executed to him a deed of general assignment for the benefit of creditors, and that 'he has accepted such trust, and duly qualified as assignee, andthat the chattel mortgage sought to be foreclosed is null and void, but forms a cloud upon the title of the assignee, to remove which it is prayed that the mortgage be declared void. Complainant objects to this bill, for that the same 'iatlled without leave of court, and after answer filed, and solely for purposes of ,delay. It is apparent from the entire record that one of the lllany questions involved is between the mortgagee and the· assignee, and it is not perceived why the issue presented by the cross-bill shouldqause any delay in the disposition of the cause. In fact, the real issue as to the validity of the mortgage must be disposed of in determining the issues made upon the original bill, and all that is sought by the cross-bill is an affirmative decree, if the issue is found in favor of the assignee. If the order already made does not cover leave to the assignee to file cross-bill. su(',h leave is now granted, and the objections to the cross-bill are overruled. A.further cross-bill has also been filerl on behalf of A. G.. the Dubuque Brass & Metal Company, Hamilton & Amidown, et al., to which a demurrer isinterposed. It is not shown that the claims of these parties have been reduced to judgment, Elave that of A. G. McDonald, and the cross-bill sets up the execution of the assignment to Fullerton, and avers that the mortgage is void as to the other creditors. ·It not appearing that the parties other than A. G. McDonald have exhausted .their legal remedies, and having no lien or right to a lien upon the property in dispute, the demurrer must be sustained, so far as the cross-bill is based upon the claims of the parties other than A. G. McDonald. ,
WOONSOCKET RUBBER CO.
and others v. FAT,LEY and Qthers. March, 1887.) ,
, (oirc'ttit OO'ttTt, D. Indian"".
In Indial:la, notwitnstandingRev.St. 1881, § 2662, providing that thereafter , all assigri-mentsmade by debtors in embarrassed Or failing circumstances, except general assignments of all their property, in trust, for the benefit of all their bona creditors, Should be deemed fraudulent and void, such debtors may still prefer their creditors by confession of judgment: or by selling, mortgaging,'oripledging their property; but an assigJ;1ment by a partnership of all the firm assets, preferring certain cre(litjors. is neither a sale, a mortgage, nor It in the na.ture of ,8: mort.gage, ,and', at the suit of an tlupreferred ?reditor, WIll be declaredtb be 'an the equal benetit'of all credItors. 1
Iil Equity. De Witt Wa'llace, Harris & Oalkins" and Wm. J. Manning, for complain," ' , ,
Ooffrmh&!Bf:ilhrt, H; TV. Oluiae; and Mr. Adams, for defendants.
GRESH A:MT Jl. On thEdhirddaf of' 'January, 1887, Joseph D. Falley alld Roesi. partne'rsin business as manufacturers of boots arid at:La Fayette, under the firm name of Falley & Hoes; .executed a written'insttuillent" whereby they bargained, soid, transferred, and assigned to James' B.Falley, in trust, all their partner-' ship property,f of every kimf,' i'IlCluding choses inaction, for the benefit, of specified creditorS;: After' specifically describing the property; and the debts to be paid out of its proceeds, the instrument declares that"This sale anl,l transfh is the that is to say: ' The said'}ames B. Fallily'shall take 'immediate possession of the property herebytransferred, and, proceed to the collection o:f:the notes and accounts aforesaid, and shall proceed to convert said property into cash by saleor otherwise, and, if he shall deem best, m,anufacture the said material on hand into, boots and shoes, and then sell said Ja,mes B. Falley shall sell' and diRpose of the said propertYllereby transferred in stich manner as to him shall be deemed most advantagebus to the trust hereby created, and the said James B. Falley shall apply the proceeds ariSing from -the collection of said notes and accounts. and from the ,sale of said property-First, to the payment of the expenses attending :th.e. execution of tile; trust hereby created; IMcond, to the payment and discharge of the indebtedness hereinbefore enumerated, upon which the said James B. Falley & Co. are liable as surety; and, third, to the pro rata payment and discharge of the other indebtedness of the said Falley & Hoes hereinbefore enumerated. In the event of any surplus remaining in the hands of the said James B. Falley. either of money or pNperty. after the payment of said indebtedness, the same shall be paid or turned over to tlle said firm of Falley & Hoes." This suit is brought by part of the creditors, not preferred, against Falley & Hoes, the assignee, and the preferred creditors. The firm was insolvent. The preferred debts amounted to $73,000, and the unpreferred debts to $100,000 or more. The bill prays for a
lSee note at end of case.