Farmers' Bank of Fountain Run v. Hagan

• Decision Date: 23 February 1932
• Parties: FARMERS' BANK OF FOUNTAIN RUN v. HAGAN et al.
• Court: Kentucky Court of Appeals

46 S.W.2d 1084

242 Ky. 535

FARMERS' BANK OF FOUNTAIN RUN v. HAGAN et al.

Court of Appeals of Kentucky

February 23, 1932

Appeal from Circuit Court, Allen County.

Actions by the Farmers' Bank of Fountain Run, Ky. against J. S Hagan and others, in the first of which defendant Federal Land Bank of Louisville filed a cross-petition, and defendant J. S. Hagan and wife filed a counterclaim, and in the second of which defendant J. S. Hagan and wife filed a counterclaim the actions being consolidated. From the parts of the judgment adverse to it, plaintiff appeals.

Affirmed.

F. R Goad and N. G. Goad, both of Scottsville, for appellant.

N. F. Harper, of Scottsville, for appellees.

CREAL C.

On October 24, 1924, J. S. Hagan and Jennie P. Hagan executed and delivered to the Farmers' Bank of Fountain Run a note for $2,500 bearing interest from date and, to secure the payment thereof, executed and delivered to the bank a mortgage on two small tracts of land containing about 2.7 acres improved with a residence and store building.

On June 21, 1927, the bank instituted this action in equity against the makers of the note, asking judgment for the amount of the note subject to credit by $500 paid January 25, 1926, and by interest paid in full to the 24th day of January, 1927, and for the enforcement of its mortgage lien. It further alleged that the value of the real estate was less than the amount of its debt, interest, and the probable cost of the action and that the sale of the property and application of the proceeds to the payment of its debt would leave a substantial balance thereof unsatisfied. The petition made the necessary allegations and asked for a general order of attachment against the defendants. It alleged that J. S. Hagan owned two tracts of land aggregating about 125 acres which he and his wife mortgaged to the Federal Land Bank of Louisville to secure a note for $3,000 and that substantial sums had been paid on that note. It asked that the Federal Land Bank be required to assert any lien or claim it had against the land covered by the mortgage.

By answer and cross-petition, the Federal Land Bank set up its note and mortgage on the 125 acres of land referred to in the petition and alleged that the remainder unpaid on its note was $2,849.17 with interest at 5 1/2 per cent. from May 1, 1927. It further alleged in its answer that J. S. Hagan was the owner of thirty shares of stock of the South Scottsville Farm Loan Association of a par value of $5 each, which were held as collateral to secure the payment of the note.

By answer and counterclaim, defendants J. S. Hagan and his wife, after traversing the allegations of the petition, affirmatively alleged that Jennie P. Hagan signed the note merely as surety and received no benefits whatever therefrom; that this was known to plaintiff; and that she was not liable for the payment of the note. It was further alleged that the store on the real estate covered by plaintiff's mortgage was destroyed by fire in January, 1926, and that J. S. Hagan received $1,000 in settlement of an insurance policy on the building; that he paid $500 of the insurance money received to plaintiff to apply on its note and with the permission and consent of plaintiff paid the remainder of the insurance money to his brother Jim Hagan on an unsecured indebtedness; that on November 28, 1925, and prior to the time the insurance money was paid to plaintiff and to his brother with plaintiff's consent, J. S. Hagan executed and delivered to Jennie P. Hagan, his wife, a deed for the 125 acres of land referred to in the petition and that she was and is the owner thereof and that same was not subject to the payment of plaintiff's demand: that plaintiff's attachment was casting a cloud upon her title which she is entitled to have removed. It was further alleged that an automobile taken under the attachment was not the property of J. S. Hagan but was the property of his wife.

At the January term, 1928, the court entered a judgment in favor of plaintiff for the sum of $2,000 as the balance due on the note with interest from January 24, 1927, and adjudged that the mortgage lien be enforced and that the two small tracts of land be sold and the proceeds applied on the payment of the judgment. The property was sold by the master commissioner and was purchased by plaintiff for the sum of $1,300.

By amended answer, defendants reiterated the allegation that the 125-acre tract had been conveyed to Jennie P. Hagan for a valuable consideration, but asked that in the event the court should not so hold that it be adjudged that J. S. Hagan was entitled to a homestead therein.

By reply, plaintiff traversed the answer and counterclaim and alleged that the conveyance from J. S. Hagan to his wife was fraudulent and was made for the purpose of cheating, hindering, and delaying his creditors.

On June 21, 1927, the Farmers' Bank of Fountain Run instituted another action against J. S. Hagan and Jennie P. Hagan in which it joined the Federal Land Bank of Louisville as a defendant. It alleged that on April 1, 1922, J. S. Hagan executed and delivered to the Bank of Fountain Run a note for $1,030 with interest from date and that thereafter and in due course the note was transferred to and became the property of plaintiff. It asked for judgment in the amount of the note subject to credit by $455.10 paid October 25, 1923, $66.83 paid December 29, 1924, and $33.91 paid May 5, 1926. The petition alleged the necessary grounds and asked for a general order of attachment against the property of J. S. Hagan, including the 125 acres of land hereinbefore referred to, and asked that the Federal Land Bank assert any claim it had to the land. By answer the Federal Land Bank again asserted its mortgage lien on the 125-acre tract.

J. S. Hagan and wife by answer and counterclaim traversed the allegations of the petition and made the same allegations with reference to the conveyance of J. S. Hagan to Jennie P. Hagan of the 125-acre tract as was made in the answer in the first suit. Issues were completed by appropriate pleadings and the two actions consolidated.

On final hearing of the consolidated actions, the court gave plaintiff judgment for the amount of the note sued on in the last action subject to the credits hereinbefore enumerated and sustained the attachment issued in both cases. It was further adjudged that the deed by which J. S. Hagan undertook to convey to his wife the 125 acres of land was not fraudulent but was in reality only a mortgage; that by reason thereof Jennie P. Hagan had a lien upon the real estate for the sum of $880 with interest from January 6, 1915; and that her lien was superior to the lien created by plaintiff's attachment. The Federal Land Bank was adjudged to have a first lien on the 125 acres of land to secure the payment of the balance due on its note. It was ordered and directed that the stock in the Farm Loan Association and the 125 acres of land be sold and the proceeds applied to the satisfaction of the mortgage and attachment liens in the order indicated. It was further adjudged that up to the time of the judgment, each party should pay his own costs, but that the costs accruing thereafter should be paid out of the proceeds of the sale.

The land was sold as...