Court Opinion

ID: 4010161
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:11:28.357502+00
Date Added: 2024-06-11T13:34:26.939429
License: Public Domain

I think the judgment of dismissal should be reversed.  The legislation relied on to support the judgment to my mind clearly violates the provision of the constitution of the United States that forbids a state legislature from enacting a statute that impairs the obligation of contracts. The contract here in suit was entered into prior to the enactment of the statute relied on.  It is my understanding that it is such legislation as is here involved that the constitutional provision referred to was inserted to prevent.  I understand it was the purpose of that provision to prevent the enactment of such statutes as were passed by some of the states for relief of debtors during and following Shays' Rebellion and like disturbances in other states that preceded the adoption of the constitution.  If that idea be historically correct, I am unable to see how, if proper consideration were given to it, the Blaisdel Case, 290 U.S. 398, 54 Sup. Ct. 231,78 L. Ed. 413, which is the basis for the justification of the moratorium statutes recently enacted in the several states, could have been decided as it was.  But we must take that case as the law and measure the instant statute by the yardstick it prescribed. *Page 505 
Statutes that affect remedies fall within the contract clause of the constitution, although they do not directly change the terms of the original contract.  Cleary v. Brokaw, 224 Wis. 408,272 N.W. 831; St. Joseph's Hospital v. Maternity Hospital,224 Wis. 422, 272 N.W. 669, 273 N.W. 791.  Any statute that substantially lessens the value of a pre-existing contract so fails.  Pawlowski v. Eskofski, 209 Wis. 189,244 N.W. 611.  That the instant statute substantially lessens the value of notes secured by mortgage executed prior to their execution is hardly subject to denial.
It was held in the Blaisdel Case, supra, in respect of the Minnesota moratorium statute, that such a statute can only be constitutional if it is temporary in its application, and that whether the emergency exists on which its operation depends is always open to judicial inquiry.  The suspension of the remedy involved in the Blaisdel Case was limited to two years, and the emergency existing in 1933 when the act was passed had begun in 1932.  It is also held in the Blaisdel Case that the provision making the suspension of the remedy conditional on paying a sum equal to the rental value of the mortgaged premises during the extended period saved the statute from being unconstitutional because it thereby prevented the mortgagee from being deprived of the use of the mortgaged property during that period without compensation.  And it was held in W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56,55 Sup. Ct. 555, 79 L. Ed. 1298, that a moratorium statute affecting mortgages was unconstitutional as violative of the contract clause that extended by a minimum two and a half years and a maximum of six and a half years, the time by which a mortgagee might be deprived of interest on the debt and possession of the mortgaged property in case of foreclosure and sale.  It is held in First Trust Co. v. Smith,134 Neb. 84, 277 N.W. 762, and First Trust Joint Stock LandBank v. Arp, 225 Iowa, 1331, 283 N.W. 441, 120 A.L.R. 932, that moratorium statutes enacted in 1935 and 1937 *Page 506 
extending the application of a moratorium statute enacted in 1933 were unconstitutional as not involving temporary conditions and as being unreasonable in their period of continuance.
As counterbalancing the Nebraska and Iowa cases above cited the opinion of the court cites Wilson B. Co. Liq. Corp. v.Colvard, 172 Miss. 804, 161 So. 123.  It is to be noted that that case was decided by the supreme court of Mississippi in April, 1935.  The statute involved in that case like the instant one was grounded on the emergency commencing in 1932.  It is a long stretch from April, 1935, to January, 1941.  To hold an emergency commencing in 1932 continued to 1934 when the Mississippi act was passed, or to April, 1935, when the case cited was decided by the supreme court, is an entirely different matter from holding that the 1932 emergency continued until 1941.  In one case a continuance of two or three years at most was involved.  The instant case involves a continuance of nine years.  While the lapse of two or three years might properly be held temporary under the Blaisdel Case,supra, which involved two years, a lapse of nine years can hardly be held so under the Worthern Case, supra, which voided a statute as not involving a temporary emergency which fixed a maximum suspension of remedy for nine years.
Our legislature has adopted a series of moratorium statutes like those enacted by the Iowa and Nebraska legislatures.  Our legislature adopted its first such statute in 1933, and re-enacted it without change in 1935.  These two statutes took away the action at law on a debt secured by mortgage and were held unconstitutional, as to a series of bonds secured by trust deeds, which bonds were transferable by holders and which deeds gave the right of foreclosure only to the trustee.  The ground of the holding was that the statute of 1933 did not place a limit to the time during which the right to bring the action at law was suspended.  Hanauer v. Republic Bldg. Co. 216 Wis. 49,255 N.W. 136, 256 N.W. 784.  It was also so held as to *Page 507 
ordinary mortgages in First Nat. Bank of Neenah v. W. J.Durham L. Co. 216 Wis. 66, 256 N.W. 783.  In 1937 and 1935 the statute was re-enacted and a limit of two years was fixed for the suspension.  The 1937 act recited at length a number of assumed conditions constituting the emergency involved, including among others the drought in Wisconsin of 1936 and extended the suspension another two years.  In 1939, the 1937 act was extended another two years.  The 1939 act contains the same recitals of conditions creating the emergency contained in the 1937 act, but omits drought.  In 1939 and 1941 the act was extended for another two years by both statutes and the 1941 act recites practically the conditions of the 1939 statute as creating the emergency.  All these statutes in describing the conditions constituting the emergency hark back to the depression of 1932, and in effect declare those conditions as still continuing, and their assumed continuance constitutes the basis for the several enactments.  The 1937 statute was in force when the instant suit was started. The 1939 act was in force when the judgment of dismissal involved was entered, and the 1941 act was passed a few days after entry of the judgment.  The 1937 act was doubtless constitutional if for no other reason because of its inclusion of the local drought as reason for the continued suspension of the right of the action at law.  But the 1939 act was in force when the judgment was entered, and there was no drought in 1937 and 1938 and drought is omitted as a condition constituting the emergency declared in 1939.  The 1939 act being in force when the judgment was entered, became the basis of the dismissal. If it was unconstitutional it afforded no lawful basis, and the dismissal was erroneous.  I think it too plain to permit of reasonable controversy that the emergency which is the assumed basis of the act of 1939 began in 1932 and that eight or nine years is too long a stretch for a mere "temporary" emergency to exist; it is an unreasonable time to suspend a right of action on the debt secured by the mortgage and the *Page 508 
remedies of attachment, garnishment, and execution incident to that action on the ground of an assumed continuance of the original emergency.
It is implied in the Blaisdel Case, supra, that if the emergency that forms the basis of a moratorium statute has expired when a case coming under its terms is tried the statute cannot be applied.  It seems to me that the evidence in this case, received without objection, shows beyond reasonable controversy that on January, 1941, when the instant case was decided by the circuit court, the "emergency" of 1932 that resulted in the original enactment of sec. 281.22 (4), Stats., had passed.  If the legislature in 1939 and 1941 had had before it this evidence, it could not have reasonably considered that the emergency of 1932 still continued or that any emergency in the farm situation existed in 1939 or 1941.  It is quite true that the situation of farmers, who bought farms during the inflation of farm values in the 1920's when prices were nearly double the norm of 1910 to 1914, and incumbered them for half or more of the purchase price, is now deplorable. But their condition is permanent, not temporary.  Their situation cannot be considered one of emergency, and emergency legislation cannot relieve it even if permanently continued. As to prices of farm products and prices of necessities the farmer must purchase, they had risen in 1937 and 1939 from the low point of sixty-four to sixty-seven in 1932 to practically the norm of 1910 to 1914.  One who purchased city property at boom prices, and mortgaged it for the purchase price to the extent stated, is in general in no better, but even worse condition, than the farmer.  His situation is also permanent and further suspension of the remedial rights of his creditor cannot help him.
It is further to be considered that the instant statute suspending the remedy of suit on the mortgage debt, and its incidental rights of attachment, garnishment, and execution, gives no compensatory remedial rights in place of them.  This *Page 509 
brings the statute under the condemnation of the Blaisdel Case,supra, above stated as implied, and fails to bring it under the rule of the South Carolina State Highway Dept. Case,303 U.S. 177, 58 Sup. Ct. 510, 82 L. Ed. 734, which involved a statute taking away one remedial right and giving another in its place.  One remedial statute or provision may be abolished and made applicable to existing contracts if another remedy reasonable in its provisions be given in its stead, but nothing whatever is given by the instant statute in place of the remedy suspended.
For the above reasons briefly stated I am of opinion that the judgment of the circuit court should be reversed.  If the legislature wants to declare sub. (4) of sec. 282.22, Stats., a permanent statute which will then make it apply only to contracts entered into subsequent to its declaration, it will be well within its province to do so.  But it should respect the plain mandate of the United States constitution, sec. 10, art. I: "No state shall . . . pass any . . . law impairing the obligation of contracts."  It cannot by the subterfuge of declaring what is permanent merely temporary avoid and evade that mandate.