Case ID: ohio-st_132/html/0487-01.html
Source: Caselaw Access Project
Author: {"author": "Matthias, J. Jones, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Flory, Admr., Appellee, v. Cripps et al., Appellees; Home Owners’ Loan Corp., Appellant.
    (No.26244
    Decided June 16, 1937.)
    
      
      Messrs. Flory S Flory, for appellee.
    
      Mr. James White Bhocknessy, Miss Florence G. Benton, Mr. Roderic Jones and Mr. Max B. Norpell, for appellant.
   Matthias, J.

Section 10510-46, General Code, in its form as enacted January 1, 1932, and as in force at the time of the execution of the mortgage involved in this case in the respects essential to be now considered, read as follows:

“The money arising from the sale of real estate shall be applied as follows':
“(1) To discharge the costs and expenses of sale, including reasonable fees for services performed by attorneys for the fiduciary in connection with the sale, and the commission of the executor or administrator thereon for his administration, or compensation of the guardian for his services as fixed by the court.
“ (2) To the payment of mortgages, judgments, and tax liens against the ward or deceased person * * *.”

In that form it came before this court for interpretation and application in the case of State, ex rel. Fulton, v. Griffith, Admr., 127 Ohio St., 161, 187 N. E., 121. The conclusion then reached and announced by this court as to the meaning, intent and application of the statute made unnecessary the consideration or decision of any question of its constitutional validity. As construed by the court, the statute was conceded to be valid. The syllabus in that case is as follows:

“1. Under the provisions of Section 10510-46, General Code, the commission for the service of an executor or administrator in the sale of real estate and attorney fees for services performed for such fiduciary therein, inay be computed only upon and paid out of ‘the money arising from the sale of such real estate. ’
“2. Where a mortgagee purchases the property for less than the sum found due on his mortgage, the probate court is not authorized to tax, as’ a part of the costs of sale, either a commission for the fiduciary or a fee for his attorney. (Stone v. Strong, 42 Ohio St., 53, approved and followed.)”

Subsequent to the announcement of the decision in that case, the statute in question was amended and enacted in its present form and became effective September 2, 1935. As thus enacted, it provides as follows :

“Tbe sale price of real estate sold shall be applied and distributed as follows:
“(1) To discharge tbe costs and expenses of tbe sale, including reasonable fees' to be fixed by tbe court for services performed by attorneys for tbe fiduciary in connection with tbe sale, and such compensation, if any, to tbe fiduciary for bis services in connection with tbe sale as tbe court may deem warranted and fix, which costs, expenses, fees and compensation shall be paid prior to any liens upon tbe real estate sold and notwithstanding tbe purchase of such real estate by a lien bolder.
“ (2) To tbe payment of taxes, penalties, and assessments' then due, against such real estate and to tbe payment of mortgages and judgments agains tbe ward or deceased person * *

It is to be observed that as amended, instead of providing that “tbe money arising from tbe sale of real estate,” etc., it now provides that “tbe sale price of tbe real estate sold shall be applied and distributed as follows.” Then, after directing tbe fixing and allowance of fees by tbe court, tbe statute provides for tbe payment thereof “prior to any liens upon tbe real estate sold and notwithstanding' tbe purchase of such real estate by a lien bolder.” There seems, therefore, to be little room for question as to tbe. purpose and intent of tbe statute as amended, which was that tbe administrator’s compensation and tbe fee of bis attorney for services rendered in tbe sale of real estate should be fixed and determined by tbe Probate Court and taxed as a part of tbe costs in tbe proceeding and paid prior to any liens upon tbe real estate, even though a lien bolder was tbe purchaser thereof and at a price less than bis lien thereon.

It is contended that? as thus’ interpreted and enforced, the provisions of Section 10510-46, General Code, under and by virtue of which the order of the court now challenged was made, is violative of the constitutional rights of the appellant for the reason that it constitutes the taking of property without due process of law, results in a denial of the equal protection of the law, and impairs the obligation of the mortgagee’s contract entered into prior to the amendment of the statute in the respect in question. It is difficult to follow the contention made that this statute results in either the denial of due process or in the unequal protection of the law. The proceeding instituted by the administrator in the Probate Court to sell the real estate in question was pursuant to and in strict accord with the provisions of the statute, and the sale was ordered and consummated as therein authorized and directed. The validity of that proceeding is not questioned. The mortgagee, by answer and cross-petition, set up its mortgage claim against the premises, asserting that the same had long been in default and prayed foreclosure thereof, and that the real estate described be ordered sold “or sold by the plaintiff.”

The fees of an administrator and his attorney to be allowed and paid as a part of the costs are only such as the court finds to be reasonable, and are limited to the services performed in connection with the sale of the premises. The technical theory that the condition of the mortgage having been breached, the title of the mortgagee became absolute, in our opinion has' no application in the consideration and determination of the constitutional validity of the statute.

The subject of costs is one entirely of statutory allowance and control. As said by Hitchcock, J., in Farrier v. Cairns, Exrx., 5 Ohio, 45, 48, “Costs are unknown to the common law. They are given only by statute, and may be changed, or entirely taken away, at the will of the Legislature.” The principal object of attack of counsel for the mortgagee is the provision respecting the allowance and payment of attorney fees'. Cases wherein statutes allowing attorney fees to plaintiffs in actions for wages and other actions of like character have been cited in support of that contention. The statutory provision specifying a fee and making its allowance and payment mandatory where a claim for wages was sued upon and recovered was held unconstitutional in the case of Hocking Valley Coal Co. v. Rosser, 53 Ohio St., 12, 41 N. E., 263, 53 Am. St. Rep., 622, 29 L. R. A., 386, upon the ground that it .was in the nature of a penalty against a certain class of debtors and, by reason of its restriction to a particular class of citizens, denied them the equal protection of the law. Another cas'e relied upon by the mortgagee is that of Miller et al., Exrs., v. Kyle, 85 Ohio St., 186, 97 N. E., 372, where the court held in approval of former decisions that a provision in a promissory note for the payment of attorney fees if the principal and interest were not paid at maturity was against public policy and void, this being based upon the ground that the. enforcement of such contracts would result in evasions of the usury laws and the obvious tendency of such contracts to encourage suit. The Supreme Court of the United States unanimously held, in Missouri, K. & T. Ry. Co. v. Cade, 233 U. S., 642, 58 L. Ed., 1135, 34 S. Ct., 678, that a statute authorizing allowance of reasonable attorney fees in certain specified cases as' a part of the costs is not repugnant to either the “equal protection” or “due process” clauses of the Fourteenth Amendment of the federal Constitution. No cases have been cited which deal with facts such as here presented or bear directly upon the principle involved in this case.

In the provision made in the statute under consideration, it cannot be claimed that it is in the nature of a penalty or that it is class legislation discriminating against some and favoring others; for this provision, clearly within the sphere of its operation, affects alike all persons similarly situated. The purpose and effect of this statute is not to exact the payment of a fee for services rendered by the attorney of an antagonist in a legal controversy; it is and could be allowed only for the purpose of providing compensation for services rendered in the proceeding for the sale of the real estate in the manner provided for and required by the statute and resulting beneficially to the mortgagee. In this' respect, it is not unlike provisions for the allowance and payment of counsel fees in proceedings in partition. The fear expressed by counsel that expense might be thus incurred in the way of fees for an administrator or his attorney by reason of controversy between heirs or devisees is, of course, entirely unfounded ; for no one would contend that any allowance could be made whatever for service rendered in such behalf. It is only for services performed in connection with the sale that any allowance whatever is authorized.

In our opinion, the amendment of the statute in the respect set forth subsequent to the execution of the mortgage in question does not result in the impairment of the obligation of the contract. This is a remedial provision and the statute in force at the time of the rendition of the judgment is controlling. The principle applicable is' stated as follows in 8 Ohio Jurisprudence, 597, Section 463: “The rule that the obligation of contracts may not be impaired by acting on the remedy does not preclude within certain limits the alteration or modification of remedies. It merely means that the alteration cannot go to the extent of impairing the obligation of contracts. Consequently, legislation which merely affects the remedy, which is always subject to the legislative will, but does not impair the obligation of contracts, is valid.”

This court held, in the first paragraph of the syllabus in Smith v. New York Central Rd. Co., 122 Ohio St., 45, 170 N. E., 637, that “a statute which relates exclusively to remedial rights is not within the purview of the constitutional inhibition against the legislative enactment of retroactive laws.”

It should be particularly observed that, though the amended statute was filed with the Secretary of State June 3, 1935, it did not become effective until September 2, 1935. Payments upon the obligation of the mortgagor had long been in default. This action was not instituted until November 2, 1935. The complaining mortgagee had within its power the right to institute action in foreclosure, and incidentally to assume the burden and expenses thereof, during the several months that intervened between the enactment of the law here in question and the institution of this action in the Probate Court. In view of the fact that ninety days had elapsed between the date of the passage and the effective date of the statute now complained of, during which the mortgagee could have maintained its action in foreclosure, it has slight ground upon which to base complaint of the retroactive effect of the statute. We are of opinion that the judgment of the Court of Appeals was'^n all respects correct, and it is therefore affirmed. ''

Judgment affirmed.

Weygandt, C. J., Day, Zimmerman and Myers, JJ., concur.

Jones and Williams, JJ., dissent.

Jones, J.,

dissenting. In my judgment, this case presents a grave federal question. The Home Owners’ Loan Corporation was organized under the laws of the United States, with its principal place of busi- ‘ ness in the city of Washington, D. C. These corporations are in close control of the federal government.

My dissent is based upon the fact that, since the home owner’s mortgage was executed on January 8, 1934, the statute subsequently enacted and becoming effective September 2, 1935, diminishes the mortgage security and applies a part of its proceeds belonging to the mortgagee to the payment of fees to the attorneys and commissions to the administrator. This clearly impairs the obligation of a contract in contravention of Article I, Section 10, of the United States Constitution, which provides that no state shall pass a law impairing the obligation of contracts. The Ohio Constitution has a similar provision in Article II, Section 28, which reads: ‘ ‘ The General Assembly shall have no power to pass retroactive laws, or laws impairing the obligation of contracts*”

The act effective September 2, 1935, enacted subsequent to, the execution of this mortgage, clearly impairs the obligation of the contract entered into by the mortgagee in 1934. The facts presented disclose that the proceeds of sale of the mortgaged premises were insufficient to pay the mortgage debt; and yet, notwithstanding that fact, the Probate Court further depleted the mortgagee’s security by ordering the payment of commissions to the administrator and fees to his attorney. I do not disagree that “costs” should be paid out of the proceeds; costs have always been paid out of the proceeds of sale under the laws of our state. But the statute designates the allowances made not as “costs,” but as fees and compensation. Had this mortgage been executed subsequent to the enactment of our statute, I would not raise the question as, in that event, the Jaw would not be retroactive and the mortgagee would be considered as assuming the statutory burdens which might affect his security in the future. 8 Ohio Jurisprudence, 577. But this is not so where the burdens ensue after the execution of the mortgage contract. The law applicable in such cases is clearly stated in 6 Ruling Case Law, 365, Section 360. Citing state and federal authority, the text reads:

■“Mortgages. The general rule is that the law in force at the time a mortgage is executed, with all the conditions and limitations it imposes, is the law which determines the force and effect of a mortgage; and hence it is that changes in the laws, imposing conditions and restrictions on a mortgagee in the enforcement of his right, and which affects its substance; are invalid as impairing the obligation and cannot prevail.”

The underlying principle presented is clear. ¡ By a subsequent law, the mortgagee, within the meaning of the foregoing text, has had conditions and restrictions in the enforcement of his right imposed upon him which did not exist when his mortgage was executed.

Our state has always adhered to that rulé of constitutional law announced in Ruling Case Law. In 8 Ohio Jurisprudence, 577 and 578, Section 441,. we find the following text: “The provision of the federal Constitution prohibiting the impairment of the obligation of contracts was intended to prohibit every mode or device having such purpose,” etc. It is further stated in Section 443: “One of the tests that a contract has been impaired is that its value, by legislation, has been diminished. New burdens cannot be imposed so as to decrease materially the value and benefit of a contract.”

An Ohio case frequently referred to is Goodale v. Fennell, 27 Ohio St., 426, 22 Am. Rep., 321, where, in the course of his opinion on page 431, Johnson, J., states the principle as follows:

‘ ‘ The obligation of a contract consists in its binding force on the party who made it. * * * When the contract is once made, the law then in force defines the duties and rights of the parties under it. Any change which impairs the rights of either party, or amounts to a denial or obstruction of the rights accruing by a contract, is obnoxious to this constitutional provision.”

If it be claimed that the statute is remedial only, the same principle applies. In 6 Ruling Case Law,' 355 and 356, Sections 352 and 353, citing ample state and federal authority, the same constitutional rule is applied to the . remedy as well as the substance if the remedy impairs the contract.

Section 352. “Remedies as Part of Contract. It is a fundamental principle of constitutional law in reference to the obligation of contract that the laws in force at the time of making a contract and the right to a remedy enter into and form a part of it as if they were expressly referred to or incorporated in its terms, and that they likewise constitute a part of its obligation. * * m

Section 353. “Alteration of Remedies in General. Under the inhibition in the federal constitution as to legislation impairing the obligation of contracts it is immaterial whether the obligation of a contract is impaired by acting on the remedy or directly upon the contract. Impairment in either case is prohibited by the Constitution.”

One can readily conceive that cases may arise under the newly enacted statute where the attorney fees and commissions of the administrator would absorb all of the proceeds of a mortgage sale and leave the mortgagee nothing. No doubt many Home Owners’ Loan Corporations existing in Ohio have mortgages executed prior to the enactment of the recent statute where the mortgagees, because of the depression, will greatly suffer because of the depreciation in values of the mortgaged property, if the principle announced by the majority is applied.

For the reasons thus briefly stated, I dissent from the judgment of the majority of this court.

Williams, J., concurs in the dissenting opinion.