21 530 ) 49 154 National Bank of the Metropolis v. Sprague. 1 49 473 THE NATIONAL BANK OF THE METROPOLIS and others, appellants, vs. SPRAGUE and others, respondents. 1. In strict practice, a complainant is put to his supplemental bill, and a defendant to his own cross-bill, to raise a defence, arising pendente lite, affecting a co-defendant. 2. When a party is brought into equity, he is entitled to an equitable decree according to his case as it then exists. 3. A chattel mortgage duly filed does not, by want of refiling, lose its priority over a subsequent one taken before the time for refiling arrives. 4. If a chattel mortgage is filed, or possession is taken under it before a subsequent mortgage is given, it maintains its priority. 5. Insolvency defined. 6. A mortgage given by an insolvent firm to trustees to secure bonds, which the debtors subsequently passed to their creditors, declared to be void under the second section of the statute of frauds, and within the rule in Owen v. Arvis, 2 Dutcher 23. 7. But it is void only as to those creditors who have raised the issue by their pleadings. 8. The right of the insolvents to pass the bonds to their individual creditors not assented to. Before this cause came to hearing, the appeal of the bank was settled, and the argument had upon the other appeals. The opinion of the Chancellor is reported in-5 C: E. Green 23. Mr. Williamson and Mr. C. Parker, for Klous and Hillburn. Mr. Gilchrist, Attorney-General, for Woolman Stokes. Mr. W. H. Vredenburgh, for Elisha Woolley. The opinion of the court was delivered by VAN SYCKEL, J. This is a strife for priority between the creditors of Sprague and Stokes. The statement following will disclose the facts applicable to the questions discussed on the appeal: C. C. Sprague and Howard A. Stokes, by written contract bearing date September 7th, 1865, had stipulated to pur National Bank of the Metropolis v, Sprague. chase of Woolman Stokes, the Continental Hotel property at Long Branch, on certain terms therein specified. On the 27th day of March, 1866, Woolman Stokes conveyed the property to Howard A. Stokes, and Lydia J. Sprague, the wife of C. C. Sprague, subject to a mortgage of $15,500, then existing on the premises, and the vendees executed a mortgage of the same date to Woolman Stokes, to secure $29,500 of the purchase price, which was duly recorded. Thereafter the following mortgages were executed by them on the real estate: To Klous and Hillburn, May 18th, 1866, for $35,000. To A. V. Conover, November 2d, 1866, $1020.10; and the following chattel mortgages: To Klous and Hillburn, May 24th, 1866, for $30,000. To Woolman Stokes, November 2d, 1866, for $12,000; and a mortgage covering both the lands and chattels, to Allen and Mitchell, trustees, acknowledged October 8th, 1866, securing the payment of one hundred bonds of $1000 each, payable in three years to blank or bearer. November 30th, 1866, the Bank of the Metropolis recovered their judgment in the Supreme Court of this state against C. C. Sprague, for the sum of $65,892.80, and thereupon filed their bill as hereinafter set forth. The first question submitted is, whether the chattel mortgage of Klous and Hillburn, for $30,000, which will be called the Klous mortgage, must be displaced, because it was not re-filed between the 20th of June and the 21st day of July, 1867? Woolman Stokes, who holds a subsequent chattel mortgage, claims now to be preferred by reason of the default of Klous and Hillburn in re-filing their mortgage within the time required by law. The Klous mortgage is dated May 24th, 1866; was filed July 20th, 1866, and re-filed May 10th, 1867. The Woolman Stokes mortgage is dated November 2d, 1866; filed November 7th, 1866, and re-filed October 10th, 1867. Prior to June 20th, 1867, while the Klous chattel mortgage was a perfect security in the order of priority in which National Bank of the Metropolis v. Sprague. it originally stood, the following facts mark the history of this case: The Bank of the Metropolis, on the 6th of November, 1866, filed their original bill, and on the 20th of March, 1867, their supplemental bill, to which Sprague and Stokes, Klous and Hillburn, Woolman Stokes, and the trustees above named were made defendants, setting up, among other things, that the trustee mortgage was intended to delay and hinder creditors, and therefore void; and that a less amount was due to Klous and Hilburn, and Woolman Stokes, than appeared on the face of their respective mortgages, and praying that they might be enjoined from proceeding at law upon their mortgages; that upon an account being taken of the amount actually due, the complainants might be permitted to redeem those securities, and be subrogated to the rights of the mortgagees, and that the trustee mortgage might be declared to be void. March 29th, 1867, Klous and Hillburn filed their bill to foreclose their mortgage on the real estate. April 2d, 1867, the trustees and Woolman Stokes, filed their joint bill to foreclose the trustee mortgage, and Woolman Stokes' chattel mortgage, making Sprague and Stokes, the National Bank of the Metropolis, A. V. Conover, and sundry judgment creditors, defendants thereto, and setting forth the execution of the Klous chattel mortgage, the amount, date and time of filing thereof, without in anywise questioning its bona fides or validity, and without making Klous and Hillburn parties to their bill, although process was served upon them, and they subsequently filed an answer thereto insisting upon their priority. To the first bill Klous and Hillburn filed their answer insisting upon, and the trustees and Woolman Stokes filed their separate answers, admitting the bona fides and priority of the Klous mortgage. If the case had remained in this condition, Klous and Hillburn would have been secure in their position. In the first bill no issue was made which could affect them, except as to the amount actually due on their security. In the second bill no reference was made to their National Bank of the Metropolis v. Sprague. chattel mortgage, and in the third bill, it was not questioned or attacked, either in the bill, or by any answer thereto. In neither or all of those cases combined therefore, could a decree have been made depriving the Klous mortgage of its original place. The disturbing element was introduced by the filing of the fourth bill, on the 13th of September, 1867, by Klous and Hillburn, to foreclose this chattel mortgage. In the answer of Woolman Stokes to this bill, the defence to the Klous mortgage first appears, and there is no doubt that if this had been the only bill filed in the cause, the questions raised by the answer would have been properly before the court. This bill did not even preserve its detached form, there is no decree under it as a distinct cause, its progress having been arrested by the order of the Chancellor, made and filed on the 10th day of March, 1868, consolidating the four suits, and directing that the three bills last filed be treated as cross-bills to the first in order of time. Without intending to make the case turn upon this point. of practice, it is not conceded that in the suit as so consolidated, the defence now insisted upon to the Klous mortgage can be entertained. It is questionable, whether the bill last filed can be used as a cross-bill for any such purpose. It did not claim any discovery in aid of Klous and Hillburn's defence to the original bill, nor did it seek any decree against a co-defendant, which it was not within the power of the court to grant in the original suit. As a cross-bill, therefore, in aid of any relief to which Klous and Hillburn were entitled, it was entirely unnecessary, and should have been dismissed, even if filed originally as a cross-bill. If this was in the way of an equitable result, the court could hold to the strict practice, which puts a complainant to his supplemental bill, and a defendant to his own cross-bill, to raise a defence, arising pendente lite, affecting a co-defendant. It is true that a departure from the earlier practice enables a defendant, without cross-bill, to attack a co-defendant; but the rule has never been so far relaxed as National Bank of the Metropolis v. Sprague. to permit matter happening after the institution of the suit to be put in evidence without a supplemental or cross bill. But admitting that the defences raised by Woolman Stokes may be considered, are they available for the purpose for which they are offered? The claim of Klous and Hillburn is neither deferred nor affected, if re-filing was unnecessary, or if possession within the terms of the chattel mortgage act was taken by them. This raises three questions. First: Whether in the position these parties occupied on the 20th of June, 1867, re-filing was at all essential? Secondly: Whether in any case, failure to re-file advances the subsequent mortgage taken before the default occurs? Thirdly: Whether the possession taken by Klous and Hillburn was such as the act requires? When the first bill was filed and these defendants were brought into court, equity assumed control over their security, and the subjects embraced in it, and these defendants thereby became entitled to an equitable decree according to the case as it then existed. The court having taken the control of a lien, then perfect at law, had full power without any aid from a court of law, or any further act of the holder, to preserve and enforce his rights. Not only was such interference by the mortgagees unnecessary, but if attempted, it would have subjected the actor to injunction process. The rights of all the parties were fixed before the time for re-filing had arrived, and if it was necessary to re-file at all, that necessity would follow the mortgage pending the entire litigation. If prior to July 20th, 1867, the mortgaged chattels had, by order of the Chancellor, been converted into money, or a receiver put into possession of them, it would not be seriously insisted that any action was neces sary on the part of these defendants, for they could not in either case take possession, and having by the statute an election to do either of two things, they cannot be restricted to one. The possession taken under the order of the court would enure to the benefit of those entitled to the avails of |