Case Name: Henley's adm'r v. Perkins & als.
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1850-01
Citations: 6 Gratt. 615
Docket Number: 
Parties: Henley’s adm'r v. Perkins & als.
Judges: 
Reporter: Virginia Reports
Volume: 47
Pages: 615–625

Head Matter:
Richmond.
Henley’s adm'r v. Perkins & als.
1850. January Term.
(Absent Cabell, P.)
L, P ¿f Co. late partners are indebted to B, and it is agreed that P shall take a tract, of land belonging to tbe partners, and pay B, and tbe title is conveyed to B to be held until P pays him. B makes a lease to P of the land, reserving a rent payable in two, four, and six years, which amounts to his debt, with right of distress, and re-entry. After the first rent falls due, B distrains upon slaves and other property on the land, belonging to P, but which P had mortgaged to II, to secure a debt due him, before the agreement between tbe partners and P and B. H then files a bill against B and P, to restrain the sale of the slaves, &c., under B's distress, and to have them applied to the payment of his debt; and charges a fraudulent combination between B and B to shelter P’s property from his creditors, and to deprive H of his security, and that the land is sufficient to pay P’s debt to B. Pending the suit, the slaves, &c., are sold on the motion of B, and the proceeds are put into the hands of a receiver; and afterwards B objects to the jurisdiction of the Court. Held :
1. It was proper under the circumstances, to bring the parties before a Court of equity, where the whole subject as to the fraud could be investigated, rather than to proceed at law, and attempt to establish the fraud before a jury, in an action for the recovery of the mortgaged slaves.
2. The bill charging that the land on which he had an exclusive lien was sufficient to pay P’s debt to B, on the principle of marshalling assets, a Court of equity had jurisdiction of the case.
3. The Court having, at the instance of the defendant, and without any objection to its jurisdiction, taken possession of the slaves and directed them to be sold, and having since held and controlled the proceeds, it was too late for the defendants to make the objection to the jurisdiction.
4. The rent charge being a fraudulent device to overreach the prior lien of H, and to shelter the property of P from his creditors, His entitled to have the proceeds of the mortgaged subject applied to the satisfaction of his debt in preference to B's claim.
In November 1820, Turner R. Henley instituted a suit in equity in the County court of Buckingham, against Nathaniel Perkins, Thomas Binford and others. In his bill, he charged that Perkins became indebted to him in 1817, in the sum of 3324 dollars, payable the 1st of October 1821; and to secure it, executed to him a mortgage bearing date the 4th of April 1817, on several slaves and other personal property. That when this mortgage was executed, Perkins was indebted to the Farmers Bank of Virginia in the sum of 1500 dollars, by a negotiable note, on which A. Perkins, M. French and G. Perkins were his endorsers, and he reserved the right of securing his endorsers upon some of the slaves conveyed in the mortgage. That on the 25th of August 1817, Perkins conveyed these slaves so reserved, to W. L. Fontaine and R. Hill, in trust to secure said endorsers; and that the amount due on said note was then about seven or eight hundred dollars. That on the 1st of December 1817, N. Perkins and Robert French conveyed to said Fontaine and Hill, and Finch Scruggs, the property embraced in the deed aforesaid, and also other property, in trust for the benefit of Thomas Bin-ford. That on the same day, said Perkins and French, with Warner Lewis and Robert Mimms, conveyed to Binford a tract of land with a mill thereon, for the sum of 9000 dollars. That since the date of this deed, Perkins had remained in possession of said land and mill, and had made various and expensive repairs on the mill, to the amount of between two and three thousand dollars, on his own account; had been in the sole use and control of the property, cultivating the land, cutting off the timber, and exercising all acts of ownership over the property. That said property was in fact the property of Perkins, although the title to the same was then fraudulently in the defendant Binford; and that Bin-ford had no other claim to it than as a mortgage or security, for the purpose of making safe the debt secured by the deed of trust aforesaid, from Perkins and French. ; and that Perkins then had in his possession an obligation from Binford to make him a good title to the property when the said debt was paid. That the title to the property was continued in Binford for the purpose of defrauding the creditors of Perkins. That notwithstanding the plaintiff’s mortgage, Perkins and Binford, had fraudulently combined for the purpose of defrauding the plaintiff and the other creditors of Perkins, and had agreed that Binford should issue his warrant of distress for rent due on the said premises, and held by Perkins, for 2240 dollars, and had levied it on the property conveyed in the plaintiff’s mortgage; and by the direction and contrivance of the said Binford and Perkins, the property so levied on and distrained, was left in the possession of Perkins, and the sale was directed to take place at his house. That by these fraudulent proceedings, if the property should be sold to pay the said pretended rent, the plaintiff would lose the benefit mortgage and the debt thereby secured, as Perkins had not in Virginia property wherewith to satisfy said debt, other than that embraced in said mortgage. That Perkins was about to remove from Virginia, and if the sale for this pretended rent should be made, the property would be purchased by Binford, or some other agent of Perkins, no consideration would be paid therefor, and he would carry it out of the State, and the plaintiff and the other creditors of Perkins would be thus cheated out of their just demands.
The bill further charged that the land and mill upon which Binford had an exclusive lien, was more than sufficient to secure to him all debts due by Perkins to him; and that if this was not the fact, the plaintiff’s mortgage was entitled to priority as to the property embraced therein. That he believed if the property dis-trained was taken out of the hands of the sheriff and restored to Perkins, that it would be secretly disposed of by him and carried out of the State. He, therefore, prayed that it might remain in the hands of the sheriff, subject to the further order of the Court, unless the said Perkins would give bond and security for the forthcoming thereof, answerable to the decree of the Court, when the plaintiff’s mortgage should become due in October 1821. That the defendants, their agents and all others might be enjoined from further proceedings in said distress for rent. That his mortgage might be foreclosed; and that justice might be done in the premises according to the respective rights of the parties.
The injunction was granted according to the prayer of the bill, and the sheriff was directed to take possession of all the property embraced in the mortgage of the plaintiff, unless the defendants Perkins and Bin ford or either of them, should enter into bond with security for the forthcoming of the said property to answer and satisfy the future order and decree of the Court.
At the March term of the Court for 1821, the Court made an order, on the motion of the defendants, that unless the plaintiff consented to a sale of the slaves and other property in the hands of the sheriff, on a credit of three months, under the distress warrant levied thereon in behalf of Binford, taking bond with good security payable to Binford, and taking bond with good security from said Binford, in the penalty of 6000 dollars, with condition that the said Binford should hold the proceeds of said sale, or so much thereof as should come to his hands, subject to the final order of the Court in that suit, the injunction should be dissolved. The plaintiff thereupon entered his consent, and the Court ordered a sale of the slaves, &c., on the terms proposed in the order.
At the May term of the Court 1821, Binford appeared in Court and acknowledged the receipt of 2862 dollars 38 cents, from the proceeds of the sale decreed as aforesaid, and, with George M. Payne as his security, agreed to have the amount aforesaid, or such part thereof as might be required by the future order and decree of the Court, forthcoming: And this undertaking was substituted by consent of parties, in lieu of the bond required by the former order of the Court.
In October 1821, the defendants Binford and Perkins filed their answers. Binford said, that on the 1st day of December 1817, Warner Lewis, Nathaniel Perkins, Robert Mimms and Robert French, merchants and partners theretofore trading under the style of Lewis, Perkins & Co., were justly indebted to him for a valuable, full and fair consideration, in the sum of 11,888 dollars 48 cents, for the payment of which they executed their bond. That on the same day, a general arrange ment was entered into to secure and pay the debt aforesaid, embracing also some other debts of the concern, for a part of which he was bound as endorser. That by this arrangement, it was agreed among the partners, that Nathaniel Perkins should take the Diamond Mills and land thereto attached, at the price of 9000 dollars, and that he should pay to Binford 6000 dollars, with its interest, as a condition precedent, and the balance was to be paid to other creditors of the firm. That the mill and land should be conveyed to Bin-ford, and by him conveyed to Perkins, if Perkins should pay the said 6000 dollars, and interest as stipulated ; which was to be paid in biennial instalments of 2000 dollars, with interest on each instalment, from the 1st of December 1817, until paid. And the more effectually to secure the punctual payment of the said instalments as they became due, it was further stipulated that the same should be charged on the said mill and land as a rent charge, for which distress should be-made, with a clause of re-entry in case of failure on the part of Perkins. That m accordance with this arrangement, the several members of said firm conveyed the mill and land to Binford; and he leased the same premises to Perkins by deed of lease. That at the same time, Binford delivered to Perkins an obligation by which he bound himself to convey the said mill and land to Perkins, upon his compliance with the stipulations contained in said deed of lease : and he endorsed a credit on the bond of said partners, for the said sum of 6000 dollars. That the balance of the debt due by the firm to him, viz: the sum of 5888 dollars 48 cents, was divided among the partners as follows: Warner Lewis gave his bond to Binford for 1800 dollars, Robert Mimms for 1326 dollars 82 cents, and Nathaniel Perkins and Robert French for 2725 dollars 62 cents, secured by the deed of trust referred to in the bill. That of the aforesaid sum of 6000 dollars, and the in terest thereon, secured as a rent charge on the Diamond Mills and laud, he had not received a cent; of the money secured by the deed of trust of Perkins and French, he had received 800 dollars only, which was paid by French.
He further stated, that the instalment of rent charge which fell due on the 1st of December 1819, having been in arrear for some time, he did, as he lawfully might, issue his warrant of distress, and caused the same to be levied on the personal estate upon the premises; part of which was embraced in the aforesaid deed of trust, and was distrained because he was advised that the mortgage set up by the complainant might be paramount to Binford's claim under his deed of trust; and because he was further advised that his right as landlord under the aforesaid deed and agreement, was paramount to the complainant’s mortgage. He admits the possession of Perkins under the lease and agreement aforesaid, and his right to call for the title upon his paying the amount due upon the mill and land, and the deed of trust. He denies that the debt secured by the deed of trust, is all that is due to him; or that the mill and land are sufficient to secure him; and he denies in detail the fraudulent combinations and contrivances charged upon him in the bill.
Perkins in his answer, states that his indebtedness to the complainant was for the purchase of a tract of land upon which it had since appeared there were several incumbrances. He says that the deeds to, and for the benefit of, Binford, were bona fide and on valuable consideration. That it is true he had made repairs and improvements upon the mill: That these repairs and improvements had been begun under a promise of his partners that he should have the property ; that this promise was not recalled until the 1st of December 1817, when the property was sold and conveyed to Binford: That he had then nearly completed the repairs, and being called upon to convey his right to the property to Binford, he stipulated with said Binford for a lease of the land for six years from the 1st of December 1817. That after the execution of the lease, Binford did agree to sell to him the property, upon the terms that he should pay off certain debts of the concern of Lewis, Perkins & Co., which he mentions, one of which was for a balance due upon the purchase money of the property, and for the other, Binford was bound as endorser. and should pay to Binford punctually the rents as they became due, which would be 2240 dollars on the 1st of December 1819, 2480 dollars on the 1st of December 1821, and 2720 dollars on the 1st of December 1823. And he denies the frauds, either executed or intended, imputed to him in the bill.
The deeds referred to in the bill and answers, were filed in the cause and are in their provisions as described. The testimony of the witnesses refers principally to the question, whether Perkins, who was in possession of the mill and land, was the owner thereof; and relate to the improvements made upon the property, and to his speaking of it as his. It appeared, too, in the progress of the cause, that Binford, pending the suit, had sold the land and mill for 6000 dollars, and the purchaser having died before paying the purchase money, Binford had obtained a decree against his administrator for the amount of assets in his hands, 959 dollars 49 cents, and also a decree for the sale of the land to satisfy the balance of the purchase money due.
In 1838 the plaintiff’s death was suggested, and the suit was revived in the name of his administrator. And in 1840 the cause was removed to the Circuit court of Buckingham; and there Binford filed a plea to the jurisdiction of the Court.
The cause came on to be finally heard in April 1841, when the Circuit court dissolved the injunction and dismissed the bill, with costs. And thereupon the plain tiff applied to this Court for an appeal, which was allowed.
Macfarland & Rhodes, John Thompson and Irving, for the appellants.
Taylor, Stanard and Bouldin, for the appellees.

Opinion:
Allen, J.
delivered the opinion of the Court.
The Court is of opinion, that the case as made by the bill and proceedings was proper for the jurisdiction of a Court of equity, upon the ground of the fraudulent combination alleged to have been entered into between Nathaniel Perkins and Binford, by which the latter was charged with seeking to avail himself of the legal title he retained to the mill and land in the proceedings mentioned, and the agreement for a rent charge, to protect the property of said N. Perkins from the claims of his creditors, and to overreach the claims of the creditors secured by prior mortgages. And as the fraudulent character of the arrangement between the parties could only be ascertained by an enquiry into the real nature and object of the deeds and contracts of the parties, in relation to the land in the proceedings mentioned, it was proper, under the circumstances, to bring the parties before a Court of equity, where the whole subject could be investigated, rather than to proceed at law and attempt to establish the fraud before a jury in an action for the recovery of the mortgaged slaves. The bill further charges, that even if the claims of Binford were valid, the mill, and other property to which he had an exclusive lien, was more than sufficient to secure to Binford all the debts due to him by Perkins, without interfering with the fund set apart by the mortgages to secure the appellant's intestate and others; and upon the familiar doctrine of marshalling securities, this would have furnished a ground for going into a Court of equity. The Court is further of opinion, that even if the question of the jurisdiction of a Court of equity had been doubtful upon the case as presented by the bill, yet as it appears that the Court, by its order of the 15th of March 1821, at the instance of the defendants, and without any objection to its jurisdiction, took possession of the slaves in controversy and directed them to be sold; and has since held and controlled the proceeds, and thus put it out of the power of the appellant's intestate ever to recover the subject at law; it was too late for the defendants to raise the objection to the jurisdiction after these proceedings had at their instance; and it was the duty of the Court to go on and dispose of the fund thus placed under its control, according to the rights of the parties. And the Court is further of opinion, that according to the pretensions of the defendant Binford himself, his claim was that of a creditor for the purchase money; the lease reserving a rent charge could be merely construed as a security for the instalments of the purchase money as they fell due ; and the circumstances of the case sufficiently shew, that it was a fraudulent device, resorted to for the purpose of overreaching the prior liens and shielding the personal property of said N. Perkins from the claims of other creditors. The Court is therefore of opinion, that the appellant, and the other creditors provided for in the deeds bearing date the 4th day of April 1817, and the 25th day of August 1817, between said N. Perkins and the appellant's intestate, and the said N. Perkins and Walter L. Fontaine and Robert Hill, are, as against the appellee Binford, entitled to have the proceeds arising from the sale of the property described in said deeds, applied to the payment of their debts. But as the parties interested in said two deeds are not all before the Court, the cause is not in a condition for a decree disposing of the proceeds between them. It is therefore considered, that the decree dismissing the bill is erroneous, and is reversed with costs; and the cause is remanded with directions to have the creditors interested in the deed of 25th August 1817, made parties, to have the fund under the control of the Court collected, if not at this time in the hands of the receiver, and for its application to the debts secured by the said deeds of the 4th of April and the 25th August. 1817, according to the rights of the parties interested in said deeds, as they may be adjudicated when the proper parties are before the Court, and for further proceedings in order to a final decree according to the principles of this decree. Which is ordered to be certified.