Court Opinion

ID: 3512764
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:23:38.896615+00
Date Added: 2024-06-11T13:19:57.014188
License: Public Domain

I agree that L. 1933, p. 514, c. 339, is not constitutionally objectionable on account of anything contained, or not contained, in its title. But in my judgment, as to preëxisting mortgages and mortgage notes, it openly violates the due process and equal protection of law guaranties of both federal and state constitutions. All agree that it impairs the obligation of contracts. Its violation of both letter and spirit of constitutional guaranties being conceded, the effort to sustain it is based solely upon the assumption that it is, notwithstanding, legitimate exercise of police power in the emergency created by the present, long-continued, world-wide depression.
The contract rights involved are the power of sale found in all Minnesota mortgages and the right to collect the debt by action. The power may be exercised through foreclosure by suit or by *Page 440 
advertisement in the summary way provided by statute. 2 Mason Minn. St. 1927, § 9602, et seq. In that connection we have a line of decisions, establishing a rule of property, holding that the power to sell by advertisement, under the statute, is something more than mere matter of remedy. It is a substantive contract right protected by our constitutions against impairment. Heyward v. Judd, 4 Minn. 375 (483); Goenen v. Schroeder, 8 Minn. 344 (387); O'Brien v. Krenz, 36 Minn. 136,30 N.W. 458, all in accord with Barnitz v. Beverly,163 U.S. 118, 16 S. Ct. 1042, 41 L. ed. 93.
Against that background of fact stands c. 339, consisting of two parts, aside from its preamble reciting the well known adverse economic conditions said to justify the law. The purpose in both parts is to permit mortgagors or their successors, in possession of mortgaged premises, to have both foreclosure and collection of judgment, if any, for the debt (part I, § 3.2) stayed until May 1, 1935, or for such shorter period as a court may direct. Section 4 even extends the period of redemption under mortgage foreclosures and execution sales already had. In any case the moratorium may be "for such additional time as the court may deem just and equitable but in no event beyond May 1st, 1935." The law makes no attempt to fix standards, or lay down rules, for the determination of what shall be "just and equitable." The only condition is that the applicant shall procure from the court "an order determining the reasonable value of the income on said property, or, if the property has no income, then the reasonable rental value of the property involved in such sale, and directing and requiring such mortgagor or judgment debtor, to pay all or a reasonable
part of such income or rental value, in or toward the payment of taxes, insurance, interest, mortgage or judgment indebtedness at such times and in such manner as shall be fixed and determined and ordered by the court."
So, during the two-year period ending May 1, 1935, the law authorizes judges to make new contracts and substitute the same for the originals. They shall be "just and equitable"; otherwise the whole matter is left to the untrammeled discretion of the judge. The mortgagee, no matter how indulgent he has been nor how long *Page 441 
past due his debt, cannot even get all the income or rental value of the mortgaged property if some judge determines that it would be "reasonable" under the circumstances for him to do with less.
Toward the end of § 4 there is open invasion of judicial function by the lawmaking power, for it is declared that the time of redemption from recent foreclosures, even though by action, and from recent execution sales, shall be "and the same hereby is extended to a date 30 days after the passage * * * of this act," so that the debtor, if he wishes, may apply for and procure the legislative modification of a judicial decree which the law substantially directs. Finally, § 4 suspends until May 1, 1935, the mortgagee's right to a deficiency judgment. At least that right is postponed "until the period of redemption * * * as extended under the provisions of this act, has expired."
The framers of the act, doubtless sensing that they were covering a dangerously wide extent of territory by part I, enacted part II. Without going into its details, it is similar to part I, except that it applies "only to real estate occupied as a home exclusively by the person seeking relief or persons dependent upon him and to farm lands [area not limited] used by the person seeking relief as his principal means of furnishing necessary support to such person, his family and dependents." It applies only to cases not entitled to relief "under somevalid provision of part I."
In the majority opinion no distinction is made between parts I and II. Part I sustained, there is small occasion to discuss part II. But so that I may not be misunderstood, let me say that my strong inclination would be to uphold a law, if we had such a one, and nothing more, subjecting for the period of the present emergency all sales of mortgaged property by advertisement to the closest judicial scrutiny, in order, as far as possible, to protect the equities of home owners, particularly the operating owners of farms, and temper the oppression and injustice sometimes perpetrated by mortgagees of the Shylock variety, now as always ready to take advantage of the letter both of the law and their bond. But part II of the act goes far beyond that. Equally with part I, it makes the whole subject a matter of judicial grace rather than judicial duty. *Page 442 
Going back to part I, I cannot find ground for declaring that mortgaged real estate of all kinds, and whatever its condition or use, is affected by public interest, even in the present emergency, so as to justify the exercise of police power in the manner attempted. As it stands, the law applies with the same force to vacant, idle, and even "wild" land as it does to any other. It embraces the very large acreage in this state of mortgaged lands which have been for some time and will doubtless long remain the subject of speculation and in the ownership, not of home owners or farmers, but of mere speculators. It applies as much to apartment house properties, office buildings, and other like investment properties, not occupied or used by the owners nor intended to be so used, but which are owned and dealt in as investment properties or for sheer speculation. How it comes that the public has any interest in staying foreclosures on such properties is beyond my comprehension. In many instances public interest would be better served by foreclosure, with the consequent squeezing out of speculative interests and inflated values.
It is no answer to say that, when a court is applied to in cases of mortgages on other than home, farm, or business property of the occupant, foreclosure may and doubtless will be permitted to proceed. That is possible, but the law does notdemand it. Aside from its equivocal provisions concerning ascertainment of rent or rental value for benefit of the mortgagee, the law requires nothing for the protection of his security. The field is so open and so vast that the admitted impairment of contract obligation is not cured by the declaration that judges may, notwithstanding the law, decree foreclosure if in their judgment equitable. Constitutional guaranties are not satisfied by statutes which make compliance mere matter of grace rather than demandable right. "The constitutional validity of law is to be tested, not by what has been done under it, but by what may, by its authority, be done." Stuart v. Palmer, 74 N.Y. 183, 188, 30 Am. R. 289. "The law itself must save the rights of the parties." Gove v. County of Murray, 147 Minn. 24, 179 N.W. 569. *Page 443 
The law permits outright repudiation for the time being and until May 31, 1935, of contract obligation. The limitation is a suggestion by the legislature of 1933 to its successor of 1935 that the repudiation be extended for another two years or more, as the law-makers may then decide.
Repudiation of private and public contract debts was the main factor, the most alarming manifestation of chaos and near anarchy, which prevailed increasingly in the American colonies from the end of the Revolution in 1781 to the going into effect of the constitution in 1788. It was the whole animus of Shays' Rebellion in Massachusetts, a disturbance which, although localized, was most alarming. It was distinctly a rebellion of militant debtors against their creditors and against courts and the judges thereof sworn to enforce all law, including the law of contracts.
"Against lawyers and courts the strongest resentments were manifested; and to such a dangerous extent were these dispositions indulged, that, in many instances, tumultuous assemblages of people arrested the course of law, and restrained the judges from proceeding in the execution of their duty." I Beveridge, Marshall, 299, quoting 2 Marshall, Life of Washington, 117.
We need not go far in recent local experience for phenomena exactly parallel. Our constitutional system was the cure of the one condition. Surely its abandonment cannot remedy the other. Once the law breaks down, it becomes so much the easier to break it down in other cases where the plainest right requires its enforcement. That process does not continue long before all laws go to smash.
If in economic emergency the legislature may suspend constitutional guaranties and the courts may sustain the suspension whenever they think there is reasonable ground and that the suspension does not go too far, we have at once government by proclamation. There will be a pronouncement for each case instead of one law for all. The system will be none the less objectionable because the proclamation emanates from judicial rather than executive sources. It was government by proclamation that lost Charles I his head. It was one of the dangers that the framers of the constitution sought *Page 444 
to save us from in perpetuity, in good times and bad, by inviolable, written guaranties we now hold may be set aside whenever the legislature feels so inclined and the courts can be persuaded to agree that the feeling is justified.
Economic arguments have been much stressed, and very properly, for the economic welfare of our people is the one desideratum of the law. But to my notion that welfare will be hindered ultimately rather than helped by such laws as c. 339. Our western country was largely built into what it is on money borrowed — some from our own people, but much from lenders in other states and overseas. Just now we are sadly in need of rebuilding, and we must rebuild largely on borrowings to be secured by mortgages on our real estate. Just how or from whom can we borrow if we serve notice, as this law does, that foreclosure of mortgages may be deferred indefinitely at the pleasure of officials owing their office to the favor of the debtors? In my judgment economic considerations alone forbid the debtors themselves to resort to repudiation. Such resort will be harmful in proportion as the repudiation takes the form of law and is confirmed by judicial action. That, indeed, would not only impair the obligations of the involved contracts; but would also destroy the confidence of people, even our own people, in the disposition of our community to perform its contracts. Confidence gone in the contract-performing disposition of any community, its prosperity is at an end, for it has divorced itself from that without which business cannot go on — the confidence of people generally in the disposition of people generally faithfully to perform their contractual obligations to the best of their ability. Compare Farrington v. Tennessee, 95 U.S. 679, 24 L. ed. 558.
Mortgages on real estate are held very largely by trustees and quasi trustees. According to the best figures available (those for all our states, of the United States bureau of agricultural economics, as of January, 1928), 10.8 per centum of them are held by commercial and savings banks, 19.1 per centum by the federal and joint stock land banks, and 22.9 per centum by insurance companies. Both banks and insurance companies are quasi trustees, handling *Page 445 
in the latter case the savings of the people put aside for the protection of the insured and their dependents, and in the former the savings and working capital of business and the people generally. In 1928, 29.6 per centum of real estate mortgages were held by individuals, 14.2 per centum by farmers, and 10.6 per centum by retired farmers, that is, by the men and women who to a very large degree made our farms what they are and put into them by way of improvement and cultivation a goodly portion of whatever intrinsic value they have. Discrimination against them now would indeed be a poor sort of encouragement to farmers who naturally must and do look forward to the time when advancing years will compel retirement. Their ambition and their hope for the future will be reduced in proportion as their confidence in their ability to retire on the security, in part, of a mortgage on the home farm is diminished.
In 1930 (Farm Mortgage Foreclosures in Minnesota, by E.C. Johnson, University Farm, St. Paul, December, 1932) 53.8 per centum of Minnesota owner-operated farms were reported as mortgaged, leaving 46.2 per centum clear. A substantial portion of mortgaged farms have an encumbrance so well within the owner's capacity to pay that foreclosure is not threatened. Those owners, together with the owners of the clear farms, make up much more than half our farmers living on and operating their own farms. They are entitled to consideration. They are a highly important part of the public, in the interest of which this law professes to operate. That these farmers are economically safe shows that they, by and large, are the best farmers. But they need borrowing power, and what they had is greatly lessened by this law. Sooner or later most of them will desire to sell, but their ability to do so and the value of their land are reduced by this law.
Ordinarily when a farm is sold a purchase money mortgage is taken for a goodly proportion of the purchase price. To the extent that the right of the mortgagee to enforce such a mortgage is impaired a serious obstacle is interposed to renewed movement and consequent increase in value of farm lands. The same consideration *Page 446 
applies, but in less degree, to urban real estate. It is no answer to say that lands may be sold on executory contract, the vendor retaining the legal title — no answer, because if the legislature may impair the obligation of the covenants of a mortgage it may, by the same token and to the same extent, destroy those of the vendee in a contract of sale.
The District of Columbia and New York Housing acts, sustained in Block v. Hirsh, 256 U.S. 135, 41 S. Ct. 458, 65 L. ed. 865, 16 A.L.R. 165; Marcus Brown H. Co. Inc. v. Feldman,256 U.S. 170, 41 S. Ct. 465, 65 L. ed. 877; Edgar A. Levy Leasing Co. Inc. v. Siegel, 258 U.S. 242, 42 S. Ct. 289, 66 L. ed. 595; Chastleton Corp. v. Sinclair, 264 U.S. 543, 44 S. Ct. 405,68 L. ed. 841, upon the authority of which the majority opinion stands, were laws providing for the fixing of reasonable rates for the public's use of property, its use of which was necessary at the time being. We have now no scarcity of human habitations, rural or urban. Our present difficulty is just the opposite. Everywhere there is vacancy, more of it probably in our cities than in the country.
As said in a later case, the decisions of the Supreme Court in these rent cases went to the very verge of the law. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 416,43 S. Ct. 158, 67 L. ed. 322, 28 A.L.R. 1321. It was suggested in Block v. Hirsh, 256 U.S. 135, 41 S. Ct. 458, 65 L. ed. 865, 16 A.L.R. 165, that the United States, in the emergency which followed the world war, was doing only what other countries were doing to protect their people. That would have been apropos if the war powers of congress or the states had been invoked. They were not. The constitutional guaranties against impairment of contract obligation and of due process and equal protection were simply contracted, and the police power stretched, by a bare majority of the court, to sustain the laws. With the utmost deference, I submit that even to suggest that our government may do anything that old world governments may do is to forget that with us all government (not the executive alone, as in England) is restrained by constitutions, the very purpose of which is to bar forever many things which formerly were done by *Page 447 
governments, to the horror of mankind, the oppression of their people, and the destruction of popular rights.
If, as is now contended, the police power may be used as a cover under which the legislative branch of government may, at its will, ignore constitutional guaranties, we have nothing left of our constitutions but parchments of mere historical interest; the bill of right becomes a mere scrap of paper. If a contract may be impaired (directly and avowedly as the sole purpose, rather than incidentally as the result of accomplishing some other in the public interest as in the housing law cases) and due process or equal protection similarly denied, at the will of any legislature, it is just as logical to hold that in great emergency bills of attainder may be passed and citizens again hanged, drawn, and quartered whenever the lawmaking power so wills. It is no answer to say that mankind has advanced beyond all that. There may be doubt on that point. Our constitutions were framed by men and adopted by people who knew (what so many are prone to forget) that the interests of the masses, particularly those least able to protect themselves, cannot safely be trusted to any government, even our own, unless restrained by the inhibitions which characterize all our constitutions, state and federal. Imprisonment for debt is explicitly prohibited by our state constitution (art. 1, § 12). But in 1887 the legislature of this very state enacted such a measure. If it had not been for the decision here in Meyer v. Berlandi, 39 Minn. 438,40 N.W. 513, 1 L.R.A. 777, 12 A.S.R. 663, many of those engaged in the building trades might have become victims of the law. It had not occurred to anyone then that the police power doctrine was expansible to infinity.
No thinking man, conscious of the changes wrought and yet to be wrought by progress, can consider our constitutions the ultimate of perfection. They too must change from time to time, in adaptation to accomplished facts of evolution of peoples and government. However, they express some principles which promise to be the ultimate concepts for the restraint of government in the interests of the governed. While so restraining government as to leave a high degree *Page 448 
of freedom to individualism, they yet leave in government enough power to prevent individualism from becoming too rugged for the welfare of the masses. They may be amended or entirely done away with if the people so desire. But as long as they stand, no higher duty rests upon government and citizens than obedience to them. To the extent that they need change it should be brought about openly and honestly by amendment rather than by nullification. There can be no more effective and dangerous cover for nullification than the acquiescence of courts in legislation plainly violative of constitutional guaranties. Our experience under the eighteenth amendment demonstrates that the nation as a whole can find no better formula for prolific incubation of disregard of all law, social disorganization, and moral deterioration than the general disregard of constitutional mandates.
Considering as I do that L. 1933, p. 514, c. 339, is violative of constitutional guaranties in the respects indicated and finding myself unable to come to any other conclusion, I respectfully dissent from the decision upholding it.