Court Opinion

ID: 3512763
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:23:38.89063+00
Date Added: 2024-06-11T13:19:56.847563
License: Public Domain

1 Reported in 249 N.W. 334.
Affirmed 290 U.S. 398, 54 S. Ct. 231, 78 L. ed. 255.
Appellants presented a petition to the district court for an order extending the period of redemption under the provisions of L. 1933, p. 514, c. 339. The substance of the petition was that appellants owned a certain lot in Minneapolis, which was their homestead and of the reasonable value of $15,000; that appellants on May 1, 1931, executed and delivered their mortgage to respondent on said lot to secure the payment of a certain sum of money, which mortgage contained a valid power of sale by advertisement; that thereafter, by reason of circumstances beyond the control of appellants, default in the condition of the mortgage was made, and it was foreclosed by advertisement and sold to respondent on May 2, 1932, for $3,700.98; that the time of redemption will expire on May 2, 1933, *Page 424 
and that respondent is the owner and holder of the sheriff's certificate of sale on the foreclosure; that appellants have made earnest efforts to refinance the loan and redeem but have failed because of the economic depression which has existed throughout the state for the last three years; that unless the period of redemption be extended the property will be irretrievably lost to appellants; that the reasonable net income in normal times is $115 per month and that for the last year it has been only $37 per month; that the reasonable value of the property greatly exceeds the money due on the mortgage; that unless the time to redeem from the said sale be extended appellants will suffer the loss of their whole equitable interest in the property; and appellants prayed that the court grant a hearing to extend the period of redemption until May 1, 1935, that it determine the reasonable rental value of the property and direct and require appellants to pay all or such reasonable part of such rental value toward the payments of taxes, insurance, and interest on the mortgage indebtedness as to the court appears reasonable and just. On the hearing respondent objected to the introduction of any evidence on the ground that L. 1933, p. 514, c. 339, was unconstitutional in that it impaired the obligation of the mortgage contract, that it was special and class legislation, and not warranted under the police power of the state. The objection was sustained, and, appellants' motion for a new trial being denied, they appealed.
Appellants concede, as they must, that L. 1933, p. 514, c. 339, impairs the obligations of the mortgage contract. It is too long for insertion in an opinion. It is declared to be an emergency measure and is not to remain in operation beyond May 1, 1935. Its object is to authorize the district court to extend the time of redemption from mortgage foreclosure sales and execution sales of real estate, and, incidentally thereto, to withhold during that time the power of sale by advertisement and the right to deficiency judgments. That this is impairing the obligation of the mortgage contract and the rights of judgment creditors is settled by the following decisions: Heyward v. Judd, 4 Minn. 375 (483); Goenen v. Schroeder,8 Minn. 344 (387); Carroll v. Rossiter, 10 Minn. 141 (174); Hillebert v. *Page 425 
Porter, 28 Minn. 496, 11 N.W. 84; O'Brien v. Krenz, 36 Minn. 136,30 N.W. 458; Dunn v. Stevens, 62 Minn. 380, 64 N.W. 924,65 N.W. 348; Bronson v. Kinzie, 1 How. 311, 11 L. ed. 143; Edwards v. Kearzey, 96 U.S. 595, 24 L. ed. 793; Barnitz v. Beverly, 163 U.S. 118, 16 S. Ct. 1042, 41. L. ed. 93.
The only ground upon which L. 1933, p. 514, c. 339, can be sustained is that it is legislation in virtue of the police power of the state called into exercise because of "a public economic emergency" which the act declares exists in the state. Respondent concedes that under the police power the state may impair the obligations of contract. Courts have so held. State ex rel. Twin City B.  I. Co. v. Houghton, 144 Minn. 1,174 N.W. 885, 176 N.W. 159, 8 A.L.R. 585; State ex rel. Beery v. Houghton, 164 Minn. 146, 204 N.W. 569, 54 A.L.R. 1012; Sligh v. Kirkwood, 237 U.S. 52, 35 S. Ct. 501, 502, 59 L. ed. 835; Price v. Illinois, 238 U.S. 446, 35 S. Ct. 892,59 L. ed. 1400; Perley v. North Carolina, 249 U.S. 510, 39 S. Ct. 357,63 L. ed. 735; Miller v. Schoene, 276 U.S. 272, 48 S. Ct. 246,72 L. ed. 568. In Sligh v. Kirkwood, 237 U.S. 52, 59,35 S. Ct. 501, 59 L. ed. 835, we find the following:
"The police power, in its broadest sense, includes all legislation and almost every function of civil government. Barbier v. Connolly, 113 U.S. 27, 5 S. Ct. 357, 28 L. ed. 923. It is not subject to definite limitations, but is co-extensive with the necessities of the case and the safeguards of public interest. Camfield v. U.S. 167 U.S. 518, 524, 17 S. Ct. 864,42 L. ed. 260, 262. It embraces regulations designed to promote public convenience or the general prosperity or welfare, as well as those specifically intended to promote the public safety or the public health."
To what extent emergency legislation under the police power of the state may impair contract obligations or impinge on any constitutional provision has received exhaustive consideration in cases arising out of the so-called housing legislation in New York and in the District of Columbia. On all questions involved and decided therein the similarity or occasion for the emergency legislation and its effect in impairing the obligations of contract and in violating *Page 426 
the due process clause are so pointedly applicable here that we feel they should be followed. The opinion of Judge Pound in People ex rel. Durham R. Corp. v. La Fetra, 230 N.Y. 429,130 N.E. 601, 604, 16 A.L.R. 152, and the concurring opinion of Judge Crane, expressed in Guttag v. Shatzkin, 230 N.Y. 647,130 N.E. 929, go quite fully into every legal proposition now raised. Edgar A. Levy Leasing Co. Inc. v. Siegel, 230 N.Y. 634,130 N.E. 923, decided on the opinion in the La Fetra case, was affirmed in 258 U.S. 242, 42 S. Ct. 289, 291,66 L.ed. 595. We quote from Judge Pound's opinion the principles controlling in a case of this sort [230 N.Y. 440]:
"Whether or not a public emergency existed was a question of fact, debated and debatable, which addressed itself primarily to the legislature. That it existed; promised not to be presently self-curative, and called for action, appeared from public documents and from common knowledge and observation. If the law-making power on such evidence has determined the existence of the emergency and has, in the main, dealt with it in a manner permitted by the constitutional limitations upon legislative power, so far as the same affect the class of landlords now challenging the statutes, the legislation should be upheld. * * * The proposition is equally fundamental that the state may establish regulations reasonably necessary to secure the general welfare of the community by the exercise of its police power although the rights of private property are thereby curtailed and freedom of contract is abridged [citing authorities]. * * * Emergency laws in time of peace are uncommon but not unknown. Wholesale disaster, financial panic, the aftermath of war (Hamilton v. Kentucky Distilleries  W. Co. 251 U.S. 146, 161, 40 S. Ct. 106, 64 L. ed. 194), earthquake, pestilence, famine and fire, a combination of men or the force of circumstances may, as the alternative of confusion or chaos, demand the enactment of laws that would be thought arbitrary under normal conditions (Bowditch v. Boston,101 U.S. 16, 18, 19, 25 L. ed. 980; American Land Co. v. Zeiss, 219 U.S. 47, 31 S. Ct. 200, 55 L. ed. 82). Although emergency cannot become the source of power, and although the *Page 427 
Constitution cannot be suspended in any complication of peace or war (Ex parte Milligan, 4 Wall. 2, 18 L. ed. 281), an emergency may afford a reason for putting forth a latent governmental power already enjoyed but not previously exercised."
The laws involved in the La Fetra case, 230 N.Y. 429, permitted tenants to retain possession after the expiration of the lease upon paying reasonable rent; and, where a lease had been entered for a fixed rent, upon the tenant's application that the stipulated rent was unreasonable or extortionate, he could have the rent reduced. The summary dispossessory remedy was temporarily withdrawn from the landlords. A somewhat similar housing or renting act was passed by congress for the city of Washington. The act of congress and the New York acts came before the Federal Supreme Court in Block v. Hirsch,256 U.S. 135, 41 S. Ct. 458, 65 L. ed. 865, 16 A.L.R. 165, and Marcus Brown H. Co. Inc. v. Feldman, 256 U.S. 170,41 S. Ct. 465, 65 L. ed. 877, affirming (D.C.) 269 F. 306. and were sustained by a five to four decision. Later cases arising from the same acts are Edgar A. Levy Leasing Co. Inc. v. Siegel,258 U.S. 252, 42 S. Ct. 289, 66 L. ed. 595, and Chastleton Corp. v. Sinclair, 264 U.S. 543, 44 S. Ct. 405, 68 L. ed. 841. In the Siegel case the New York housing acts were again under attack on various constitutional grounds, but upheld, there being only three dissenters at that time. The proposition was there pressed that the relation of landlord and tenant [258 U.S. 246] "is a private one and is not so affected by a public interest as to render it subject to regulation by the exercise of the police power." But the court held the question foreclosed by the Marcus Brown H. Co. case, 256 U.S. 170,41 S. Ct. 465, 65 L. ed. 877. Again it was contended that that case did not squarely present whether or not the housing acts impaired contract obligations, but the court [258 U.S. 249] in denying this contention, quotes from the Marcus Brown H. Co. decision [256 U.S. 198]:
"The chief objections to these acts have been dealt with in Block v. Hirsch, 256 U.S. 135, 41 S. Ct. 458, 65 L. ed. 865, 16 A.L.R. 165. In the present case more emphasis is laid upon the impairment of *Page 428 
the obligation of the contract of the lessees to surrender possession and of the new lease which was to have gone into effect upon October 1, last year. But contracts are made subject to this exercise of the power of the state when otherwise justified, as we have held this to be."
Several cases are cited to support the last proposition. It is, however, true that the dissenting justices deny that the cases sustain what the majority deduce from them. Even though the dissenting opinions in the Block and Marcus Brown H. Co. cases may appear more in harmony with past interpretation of constitutional provisions, this court should follow the principles established by the prevailing opinions therein. They, and the later cases above cited, hold that in an emergency the legislature under the police power of the state may temporarily withdraw a summary remedy given by statute for the enforcement of contract rights, provided some adequate remedy remains; that in a public emergency statutes may be enacted which impair temporarily the obligations of contract, provided they be such as the emergency reasonably demands and the impairment be no more than is just and equitable under the circumstances; and that whether such an emergency exists as justifies the exercise of the police power is primarily for the legislature, to whose judgment courts must give due weight; but the courts do possess the final authority to determine whether the emergency does in fact exist (Chastleton Corp. v. Sinclair,264 U.S. 543, 44 S. Ct. 405, 68 L. ed. 841), and whether the legislation for its relief is just and reasonable (Lawton v. Steele, 152 U.S. 133, 14 S. Ct. 499, 38 L. ed. 385).
The main proposition upon which this law must rest is the existence of "a public economic emergency." True, the legislature in § 1 of the law declares that it exists, and a preamble of nine "whereases" seeks further to disclose the necessity for the law. It may be questioned whether an economic emergency should invoke the police power of the state to grant relief which impairs the obligations of contract. History reveals that when the constitution of the United States was adopted the economic depression or emergency was, if anything, more acute under then existing conditions than at present; *Page 429 
yet, notwithstanding, there was inserted in the document the prohibition against state legislation impairing contract obligations. Economic depressions may scarcely be called emergencies, for they occur frequently and with more or less severity. The extension of the period of redemption by the Kansas legislature was no doubt caused by one of these economic depressions, yet the court gave the subject of emergency legislation no consideration in Barnitz v. Beverly,163 U.S. 118, 16 S. Ct. 1042, 41 L. ed. 93, holding the law invalid because it impaired the obligation of contract. It may further be questioned as a fact whether there really is an emergency requiring legislative relief in the situation of mortgagor to mortgagee. As a rule, in times of great economic depression and great depreciation of real estate values, the mortgagee does not desire the land, and rather than take the land would be glad to grant longer extensions on better terms than the court would be authorized to give under this law. In a great many foreclosure sales and execution sales under the present depreciated values the right of redemption is of no value, and the owner will not use it even if funds were available. And, again, it may well be argued that legislation which impairs contract obligations defeats its purpose. It tends to withdraw from the borrower the funds which otherwise he might procure. Lenders will not loan their money in a state where the contract for its repayment may be impaired at the uncontrolled whim of its legislature. But, with these and other objections to the law which may be raised, we reach the conclusion that it must be sustained.
In addition to the weight to be given the determination of the legislature that an economic emergency exists which demands relief, the court must take notice of other considerations. The members of the legislature come from every community of the state and from all the walks of life. They are familiar with conditions generally in every calling, occupation, profession, and business in the state. Not only they but the courts must be guided by what is common knowledge. It is common knowledge that in the last few years land values have shrunk enormously. Loans made a few years *Page 430 
ago upon the basis of the then going values cannot possibly be replaced on the basis of present values. We all know that when this law was enacted the large financial companies which had made it their business to invest in mortgages had ceased to do so. No bank would directly or indirectly loan on real estate mortgages. Life insurance companies, large investors in such mortgages, had even declared a moratorium as to the loan provisions of their policy contracts. The president had closed banks temporarily. The congress, in addition to many extraordinary measures looking to the relief of the economic emergency, had passed an act to supply funds whereby mortgagors may be able within a reasonable time to refinance their mortgages or redeem from sales where the redemption has not expired. With this knowledge the court cannot well hold that the legislature had no basis in fact for the conclusion that an economic emergency existed which called for the exercise of the police power to grant relief.
But it is claimed that the emergency sought to be relieved by this law is a private matter between mortgagors and mortgagees or between owners of lands and their judgment creditors which is not of public concern so as to justify the exercise of the state's police power. It is said the housing statutes for the cities of Washington and New York related to shelter or places to live — a matter involving public health, public morality, and public safety. Yet when those statutes came before the courts it was urged, and with perhaps as good reason as in the instant case, that they related to the private affairs between landlords and tenants in which the public was not interested. So here respondent asserts that whether title to lands passes to the mortgagees at any certain time between now and May 1, 1935, can be of no public concern. The title to lands, it is said, must rest in someone, and public welfare is not dependent upon whether it is in one individual or in another. To us it appears about as much of public concern whether numerous owners of homes and lands — providing the necessary shelter and means of livelihood — must lose them because a temporary, unforeseen economic depression prevents a redemption within the time the law or *Page 431 
contract permits as that certain tenants who are in possession shall remain in spite of the terms of the lease because of the temporary scarcity of available quarters. All would-be tenants could not be accommodated, and it would seem that as long as the landlords were willing to let all available room it was none of the public's concern who were accepted as tenants. But the courts found the emergency and its relief one of sufficient public interest to permit the police power of the state to impair the obligation of contracts. It appears to us that the economic emergency which now threatens the loss of homes and lands which furnish those in possession the necessary shelter and means of subsistence is equally as potent a cause for the enactment of L. 1933, p. 514, c. 339, under the police power of the state as the housing emergency was in Washington and New York, which the Supreme Court of the United States deemed sufficient for the enactment of the relief statutes for those cities. We have not overlooked the fact that Mr. Justice Holmes, who spoke for the majority in Block v. Hirsch,256 U.S. 135, 41 S. Ct. 458, 65 L. ed. 865, 16 A.L.R. 165, and Marcus Brown H. Co. Inc. v. Feldman, 256 U.S. 170,41 S. Ct. 465, 65 L. ed. 877, in Pennsylvania Coal Co. v. Mahon,260 U.S. 393, 416, 43 S. Ct. 158, 67 L. ed. 322, 28 A.L.R. 1321, said that the cases mentioned went "to the verge" of what was permissible under the constitutional limitations. However, to us no more of public health or public welfare seems involved in the extension of the tenancy to certain tenants then in possession of shelter than in the extension of the occupation of homes, shelter, or means of subsistence to mortgagors and judgment debtors in possession. That the courts may doubt the wisdom of the law is no ground upon which to declare it invalid. It is to be presumed constitutional until the contrary appears beyond a reasonable doubt. 1 
6 Dunnell, Minn. Dig. (2 ed.  Supp.) §§ 1605 and 8931.
It cannot be said that this law goes beyond what is reasonable to give relief in a temporary emergency. At the mortgagor's option the right to foreclose by advertisement may be withheld or rather changed into a foreclosure by action during the operation of the law, that is, up to May 1, 1935. The right to foreclose by action *Page 432 
remains intact. The right of redemption may be extended by the district courts to the date mentioned; but to do so the courts must determine the terms upon which such extension may be had, and during that period the rental value of the property must be applied upon the payment of taxes, insurance, and the debt. The condition that the mortgagor or the one obtaining the extension to redeem must meanwhile pay the rental value of the property goes far to giving compensation for the extension secured. The relief appears to be no more than what must be regarded as reasonable and just.
After this cause was submitted, on June 12, 1933, the supreme court of North Dakota filed its decision in State ex rel. Cleveringa v. Klein, ___ N.D. ___, 249 N.W. 118, holding the act of that state extending the time of redemption from real estate mortgage foreclosure sales and real estate execution sales unconstitutional. The court said that no matter what the emergency might be the bill of rights in the state constitution prohibited the legislature from enacting any law impairing the obligations of private contract. And it further held that its law extending the time of redemption was forbidden by art. I, § 10 (impairing the obligations of contract) and § 1 of the fourteenth amendment (depriving of property without due process of law) of the federal constitution. We notice this difference between our law and that of North Dakota. The act of North Dakota extends the time of redemption unconditionally; while under our act the mortgagor, or the one who desires to avail himself of the extension, must pay the reasonable rental value of the property, during the period of extension, to the party holding the certificate of sale. It appears to us that this provision of our law may be held to provide compensation so that there is no taking of property without due process of law. However, there can be no doubt that in some degree our act, as well as that of North Dakota, impairs the obligations of the mortgage contract and hence runs counter to art. I, § 10, of the federal constitution. But our conclusion is that the legislature, under the police power of the state, has authority to enact laws to relieve a public emergency even though such laws temporarily impair obligations of contract, provided the *Page 433 
impairment is no more than reasonably necessary. To that extent the police power is supreme.
The law is challenged because of its title. Attention is called to the word "inequitable" therein. The word may be disregarded. It adds nothing except to suggest that perhaps there may be certain foreclosures where no equity whatever remains in the mortgagor, and hence those cannot be said to be inequitable so as to call for the interposition of relief. It is further claimed that the title embraces more than one subject. To us both title and act contain only one subject, viz. the extension of the time to redeem from involuntary sales of real estate under powers or under executions. All other provisions are ancillary or incidental thereto.
The law is said to contravene art. 4, § 33, of the state constitution forbidding special or class legislation. The law is general, applying to the whole state. The classification extends to all mortgage foreclosure sales and execution sales that had taken place and where title had not passed prior to the enactment, and also to sales in the future during the operation of the law — up to May 1, 1935. The temporary economic emergency affecting such mortgagors and judgment debtors justified the classification. That the law does not cover every case of owners of property who are affected by the economic depression or emergency does not condemn it. State v. Elliott, 135 Minn. 89, 160 N.W. 204; Miller v. Wilson,236 U.S. 373, 35 S. Ct. 342, 59 L. ed. 628, L.R.A. 1915F, 829.
The order is reversed.