Opinion ID: 2023892
Heading Depth: 1
Heading Rank: 5

Heading: The Existence of the Debt was Established

Text: We agree with Yanoff that he produced evidence of a promissory note or other written evidence of a debt sufficient to support his claim. In pertinent part, Indiana Code § 26-1-3.1-309 provides: (a) A person not in possession of an instrument is entitled to enforce the instrument if: (1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred; (2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and (3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process. (b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person's right to enforce the instrument. Prove is defined by Indiana Code § 26-1-3.1-103(10) to mean meet the burden of establishing the fact.... The terms that are sufficient to establish Muncy's debt are an obligation to pay, the number and timing of payments, and the amount of each payment. This statute is designed to prevent the obligor from exposure to multiple collections of the same negotiable instrument. It is proper to require, as the statute permits, appropriate security to protect against that risk. Yanoff asserts he meets the requirements of subsection (a) because Steinberg testified without contradiction that he was unable to find all of Yanoff's records. The Trust responds, correctly as far as we can determine, that there is no such testimony, even if Yanoff asserts the fact in his brief. However, there is no dispute, as the trial court found, that no note was offered into evidence by Yanoff or anyone else, and no dispute that an actual debt secured by the mortgage existed in some amount. There is also no evidence supporting the conclusion that Yanoff had sold the note to an unknown third party. In view of the fact that many payments were delinquent by the time of trial and Muncy had received no collection effort, that scenario seems highly improbable. This fact, combined with Yanoff's adjudicated incompetence, makes the inference of either a lost or nonexistent note virtually inescapable. Whether the note existed, and was lost, or never existed, in either case Muncy's undisputed admission of debt secured by the mortgagee is sufficient to establish that fact. The main dispute arises under subsection (b), which requires Yanoff to prove both the terms of the note and his right to enforce it. The Court of Appeals majority reasoned that because the mortgage and the note are separate instruments, Paulausky v. Polish Roman Catholic Union of Amer., 219 Ind. 441, 452, 39 N.E.2d 440, 445 (1942), proof of the existence of one does not prove the existence and terms of the other. This analysis, however, ignores the fact that Muncy admitted the $90,000 debt. Muncy also provided the court with its essential terms. He testified to the amount of the original debt ($90,000), the interest rate of 10%, the existence of a mortgage securing the debt, and the schedule of payments ($1,189.36 monthly). [2] Muncy conceded that he still owed Yanoff on this debt. This undisputed evidence offered (and admitted) by the debtor is enough to prove both the existence of the promissory note underlying the mortgage and the essential terms. The fact that Yanoff was unable to offer proof of the existence and terms of the debt does not bar his recovery when these facts are established by other competent evidence. Cf. Mechanics Laundry & Supply, Inc. v. Wilder Oil Co., 596 N.E.2d 248, 254 (Ind.Ct.App.1992) (an uncontested instrument can be admitted into evidence without proving its execution).