Case Name: Funk, &c., v. Procter, &c.
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1901-03-13
Citations: 110 Ky. 290
Docket Number: 
Parties: Funk, &c., v. Procter, &c.
Judges: 
Reporter: Kentucky Reports
Volume: 110
Pages: 290–295

Head Matter:
Case 37 — Action to Enforce a Lien —
March 13.
Funk, &c., v. Procter, &c.
APPEAL from: warren circuit court.
Judgment for Plaintiffs and Defendants Appeal.
Affirmed.
Burden of Proof — Identity of Mortgage Note.
Held: Where a mortgagee was made a party defendant to an action by another lienholder, who alleged In his petition that the mortgage was fraudulent and was executed to secure a note for $500 which was without consideration, and the mortgagee filed an answer alleging that the mortgage was executed in good faith to secure a note for $500, money borrowed, which by. payments was reduced to $319, for which a new note was executed, the allegations of the answer being denied by reply, the burden was on the mortgagee to show that the note for the payment of which the mortgage was sought to be enforced was a renewal of the note secured by the mortgage
T. L. EDELEN and WRIGHT & McELROY, for appellants.
W. E. GARTH and PROCTER & HERDMAN, for appellees.
(No briefs.)

Opinion:
Opinion of the court by
JUDGE BURNAM
Affirming.
This action was instituted by appellees against M. S. Funk to subject bis property to the payment of judgments that bad been obtained against bim, and upon which executions had been issued and returned no property found. The Warren Deposit Bank was made a defendant, and the allegations as to them are as follows: "Plaintiff further says that on the--of-. 1894, the defendant executed and delivered to the Warren Deposit Bank, a corporation created and organized under the laws of Kentucky, a certain instrument of writing, called a 'mortgage,' for the sum of $500, by which writing the said Funk attempted to give to said bank a lien upon his property situ ated in said store above described, and now levied on by these plaintiffs; that said attempted mortgage was made during the pendency of the suits in which the aforesaid judgments were rendered, and before execution could be issued theireon, and that it was for the purpose of hindering, delaying, and defrauding these plaintiffs in the execution of their debt; that the property upon which they hold their aforesaid lien consists of a lot of finished stock, at the date of the levy: Marble, $635; rough stone on hand, $135; rough limestone on hand, $80; tools and machinery, $190 — 'amounting in all to $1,010. The material averments of the answer of the Warren Deposit Bank to the allegations quoted supra are as follows: "The defendant says that M. S. Funk agreed, by his promisisory note dated April 24, 1894, thirty days after date to pay to the defendant the sum of $500, negotiable and payable to the Warren Deposit Bank, and that said Funk, in order to secure to this defendant the payment of this debt, which was a loan to said Funk, on that day mortgaged to this defendant the finished monuments on hand, the tools and machinery, and the uñworked stone on hand; that said Funk-paid said deibt, and reduced same until now it was only $319, with interest from August 2d, subject to a credit of $26 paid. August 27, 1894; that the money was loaned simultaneously with the taking of the mortgage, and that its mortgage is a superior lien to the execution lien of plaintiffs; that the property upon which the plaintiff is seeking to enforce a lien is the same property upon which the defendant has a mortgage lien, and the defendant objects to the property mortgaged to it going into the hands of a receiver." And it says "that-this debt herein is a renewal of the $500 debt, and will not fall due until October 2, 1894." Appellant M. S. Funk filed his separate answer, in which 'he admits the execution of the .mortgage to the Warren Deposit Bant, and avers that it was executed in good faith to secure the payment of the money borrowed from the bank for the purpose of buying stock and material in his business as a marble dealer. Appellees filed a joint reply to the separate answers of Funk and the bank. In reply to the answer of Funk they deny that the mortgage was given in good faith to secure a loan of money made simultaneously with its execution. And, for reply to the answer of the Wrarren Deposit Bank, they admit the execution of a note by M. S. Funk to the bank for $500 on April 24, 1894, but deny that the mortgage given on that day w.as a valid one or that it was given in good faith, and allege that, if said mortgage was given in good faith to secure any debt, it was for the note of $500 dated April 24, 1894, and was not given'to secure the payment of a note for $319 dated August 2d; and they allege that this note was executed for a new debt, and that said bank loaned Funic other money to the amount of $-, subsequent to the loan of $500, for which the mortgage was executed, and that Funk had made payments on the $500 note executed to the bank, in addition to those admitted in the answer; and they deny that the $319 set up by the answer of the bank is a renewal of the $500 note, and allege that Funk had paid the hank since the execution of that note sufficient money to discharge same, and that the bank had relinquished its lien for that amount. Subsequently the Warren Deposit Bank filed a rejoinder to this reply, in which they traversed the affirmative allegations of the reply, and denied that the $319 note filed with their answer dated August 2d was executed for a new debt, and alleged that it was the successor to the note for which the $500 mort gage was given; and that they had received no more payments on their original note than were admitted in their answer,'or had in any way surrendered or abandoned their mortgage lien to secure its payment. No proof of any kind was taken upon the issues raised by the pleadings between the appellees and the bank, and upon, final submission the Circuit Judge held that the burden of proof was upon the bank to identify the $819 note set up with its answer ias a renewal of the $500 note which was secured by the mortgage, and also to identify the property covered by the mortgage by proof atiunde, and in default of such proof decided against their alleged lien. And to reverse that judgment the bank and M. S. Funk prosecute this appeal.
The main question, therefore, to be determined on this appeal, is where the burden of proof rested under the pleadings. "An unfailing test adopted by the courts for ascertaining upon which side the affirmative of an issue really lies is to consider which party would be successful if no eyidence at all were given, or, what is substantially the same thing, to examine whether, if the particular allegations to be proved were struck out of the answer or the pleadings, there would or would not be a defense to the action, or answer to the previous pleadings." See 1 Wait, Law & Prac. (5th Ed.) 465; Civil Code, section 526. There are cases where both parties hold the affirmative as to the issue to be tried, as where the plaintiff sues for the recovery of mioney lent, and the defendant interposes with a general denial and also a claim for set-off. In such a case the plaintiff would be bound to prove his case, and if he do so, and then rest his case, the defendant would be required to prove his set-off by evidence, or it will not be allowed. Another well-recognized rule of evidence in regulating the proof is that the law will not force a man bo show anything which by intendment of law is not within his knowledge. In this case the plaintiffs allege, in substance, that the defendant bank has a mortgage of record upon the same property of the defendant Funk, as they levied upon by their executions, to secure the payment of a note for $500; but they allege that the note itself was without consideration, and the mortgage itself fraudulent and against their rights. The bank answers that the mortgage was executed in good faith to 'secure a note for $500 for money borrowed, but that the original note had been materially reduced, and a new note executed for the balance for $319. Plaintiffs, by way of reply, deny that the $319 note is a renewal of the $500, and allege that it was executed for an entirely independent consideration. In passing upon a case of this sort, 1 Jones, Mortg., p. 52, seec. 71, says: "Upon the foreclosure of a mortgage, it is necessary to produce the note, if there be one; and if the note produced corresponds with the description in the mortgage, as to the date, amount, parties, rate of interest, and maturity, such correspondence, coupled with the possession of the note by the holder of the mortgage, raises a presumption of identity, and throws upon the mortgagor the burden of showing another note of like description. Pairol evidence is admissible to identify the note intended to be secured." And the Encyclopaedia Pleading and Practice (volume 9, p. 400) says: "Where a mortgage ¡secures a note or bond, it is a general rule that the secured instrument must be produced in court, or its nonproduction accounted for, before a decree of foreclosure can be properly rendered. The absence of the note or bond raises the presumption of payment, and entitles the defendant to a dismissal."
In this case the note alleged to be a renewal of the note which the mortgage was made to secure does not correspond either in date or amount with that secured by the mortgage. The alleged facts showing it to be a renewal of the secured obligation were peculiarly within the knowledge of the bank, and it seems to us that, as these facts were puit in issue by the reply, the burden of showing them was upon the bank; and, it failing to do so, t'he court prop, erly found against the validity of the claim. For the reasons indicated, the judgment is affirmed.