Court Opinion

ID: 8037039
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:22:05.001476+00
Date Added: 2024-06-11T16:36:56.253313
License: Public Domain

Paine, J.,
dissenting.
As the opinion adopted by the majority of. the court does not express my views, I am filing this dissent.
I will state the facts of the case briefly.- Smith borrowed $8,000 of the First Trust Company of Lincoln on May 1, 1929, at 6 per cent, interest. He finally paid off. down to $3,000 of the principal, and the time was extended on the balance. Foreclosure proceedings were started February 9, 1934, upon his failure to pay interest and taxes, and a decree was promptly entered on April 12, 1934, finding the amount due on the .mortgage of- $3,354.38, with interest at 10 per cent. First the regular nine months’ stay was granted, and later a moratorium stay, which allows Smith to remain in possession of the property upon the payment of $50 a month rent. There is in this case a large equity, for it. is stipulated that the value of the mortgaged property is between $8,500 and $12,000.
This, -case brings to this court the question whether the Nebraska moratorium law is a valid law. The- decision with which I do not agree is based on the finding that “the factual and legislative situation existing on the 16th day of February, 1937, and since continuing” is insufficient to constitute a temporary emergency.
This moratorium law, as found in Legislative Act No. 4, passed by the legislature of 1937, provided in section 1, in substance, that there is an economic crisis, world-wide in extent; that Nebraska experienced an unexpected drouth, that part of the state suffered from insect pests; all of *117which taken together resulted in a practical- total loss .of the 1936 crop, .and threatened a. collapse of real estate values in the,state; that such a.condition was dangerous to the general welfare and prosperity of the state of Nebraska and its people. The act then provided in substance that, after a decree of foreclosure- is rendered, if good cause is shown, the court may leave the owner in possession, providing he pays a fair rental, .income, or profit to the clerk of the district court for the mortgagee, and further providing for taxes, interest, and upkeep. It provides that this moratorium law expires at midnight March 1, 1939.
The decision which I do not support holds that this law contravenes the spirit and express terms of two sections of the Bill of Rights, to wit, sections 13 and 16, art. I of the Constitution. Section 13 reads: “All courts shall be open, and every person, for any injury done him in his lands, goods, person, or reputation, - shall have a remedy by due course of law, and justice administered without denial or delay.” And section 16 reads: “No bill of attainder, ex post facto law, or law impairing the obligation of contracts, or making any irrevocable grant of special privileges or immunities shall be passed.”
It may be frankly admitted that this moratorium law may cause a little, delay before the owner can be deprived of the possession of his property. But, in some states, a stay of 18 months, instead of nine months as in Nebraska, is allowed before confirmation of the foreclosure sale, and such longer delays have been upheld by the courts.
When the question of the validity of such a moratorium law came before the United States supreme court in the famous Blaisclell case from Minnesota (290 U. S. 398) Chief Justice Hughes, in writing the opinion, adopted by the court, upholding the right of the legislature of Minnesota to enact a moratorium law similar to our Nebraska law, embodied in his opinion this statement:
“But into all contracts, whether made, between states and individuals, or between individuals only, there enter con-*118editions which arise not; out of the literal terms of the contract itself; they are superinduced by the preexisting and higher authority of the laws of nature, of nations or of the ■community to which the parties belong; they are always presumed, and must be presumed, to be known and recognized by all, are binding upon all, and need never, therefore; be carried into express stipulation, for this could add nothing to their force. Every contract is made in subordination to them, and must yield to their control, as conditions inherent and paramount, wherever a necessity for their execution shall occur.”
One of the conditions to which, a contract must yield is that of a great emergency, sufficient to warrant the legislature in passing a special act for the general welfare of .all the people, in which case the exact terms of a contract between individuals may be slightly modified. When this moratorium act was pending before our legislature, it is ¡stated in the brief of the appellee that, “After it was referred to the judiciary committee, public hearings were had before that committee on several occasions. At such hearings many prominent persons, interested on one side ■or the other, appeared, and the measure was discussed pro and con and from every possible angle and viewpoint.” It was then decided by the Nebraska legislature that such an emergency existed as justified the'legislature :in passing this law.
May we glance at the conditions generally, and especially in Nebraska as of a year ago, when the law was enacted, as well as conditions “since continuing.”
The United States weather bureau published a report ¡stating that not since 1930 has Nebraska received the normal average rainfall of 22.66 inches; that the average for 1936 was 14.42 inches, and for 1937 it was 17.76 inches, and that one Nebraska station reported the lowest rainfall in 50 years.
Dr. H. Clyde Filley, economist of the Nebraska College •of Agriculture at Lincoln, recently gave out the statement: “The outlook today on the farms of Nebraska is the worst *119it has been for a generation. Over more than one-half of the state there is practically no moisture in the subsoil within five or six feet of the surface. The exceptions to this are along the Missouri river, in the other river valleys, in the irrigated districts and in a few counties in northeastern Nebraska. Last year there was only about one-third of a corn crop; on more than a third of the farms of Nebraska there are at this time no hogs at all, in fact there are the fewest hogs in Nebraska for many years. The majority of the farmers are finding it necessary to buy corn, or other concentrates, for there is practically no reserve grain on the farms this year.”
It is common knowledge that land values in Nebraska have shrunk enormously; that whole townships of grazing land in the cattle country have changed hands at prices of a dollar to three dollars an acre; that farms in tested irrigation districts in the Platte valley have sold far below their cost. In a recent instance, the owner of a fine piece of irrigated beet land, with no improvements, had finally invested $210 an acre before the ditch bonds were paid off. She tried for two years to effect a sale by every means at hand, and finally sold the land on long-time payments, at low interest, for $75 an acre; and many such cases are known to all.
As I set out on page 456 of my dissent in Steinacher v. Swanson, 131 Neb. 439, 268 N. W. 317, there was a total of 225,273 tracts of real estate advertised by the 93 county treasurers of Nebraska for public sale for the delinquent taxes, amounting to over $46,000,000 in the fall of 1935. The present tax situation is very much worse, for no outside buyers can now be found except in isolated instances, and many Nebraska counties and cities are at the present time bringing blanket foreclosure suits to realize something on such delinquent taxes. Has such a condition ever existed in Nebraska before?
Nebraska is also greatly affected by general conditions because serious business declines are still under way, although there has already been a loss in the values of the *120stocks listed on Wall street in the last eight months of more than thirty billion dollars, according to a leading financial journal. In a statement of J. J. Pelly, head of the Association of American Railroads, he declares that the railroads are in a critical financial condition, suffering reduced tonnage, declining revenues with rising wages, higher taxes, and increased costs of everything they’ have to buy. These facts make the future value of all railroad securities most uncertain.
In the Business Bulletin of the Cleveland Trust Company for February 15, 1938, Colonel’ Leonard P. Ayers, the famous statistician, in referring to the present recession, which began in August, 1937, says:
“The federal reserve index of the volume of industrial production dropped from 117 in August to 84 in December, or 33 points in four months: At the beginning of the great depression in 1929 and 1930 the same index moved downward for 13 months before it had lost 33 points, instead of doing it in four months as-it did this time.”
He then tells us that only three business declines in the last 100 years have been comparable to this abrupt depression, for this rapid decline has been exceeded but once, i. e., in the panic of 1893, and has only been approached twice, which was in the panics of 1907 and 1920. He then positively states: “Business confidence has suffered a more rapid decline since last spring than in any recent previous period of similar duration.”
Such well-established facts should not be overlooked by this court, and they prove that this present moratorium law of Nebraska which we are considering is justified when it takes effect at a time of such a rapid decline in business as to have been only equaled once in the last 100 years, which amply supports the declaration of the legislature that this is such an emergency as warrants the enactment of this moratorium law.
In Nebraska, as a result' of numerous foreclosures, life insurance companies and trust companies, as well as the trust funds of estates and ’colleges, are all becoming loaded *121up with farms taken in exchange for real estate; mortgages, and which they are not' prepared to profitably operate. In fact, in many cases they find the former owner is the best possible person to manage the farm they have taken over. Why is it declared to be violative of our Bill of Rights for the legislature to permit an extension of time before the mortgagee gets possession of the farm? For, as a rule, such a mortgagee does not want the farm itself, but only wants the money and interest due on the loan secured by the farm.
The effect of economic and financial distress is widespread, and to show that Nebraska is not standing alone in seeking in this dire emergency to afford some slight relief by means of a legitimate moratorium law, I find that in 1934, in an article in 2 George Washington Law Review, 487, it is said that by 1934 the following 25 states had enacted moratorium laws to meet the emergencies existing in the respective states: Arizona, Arkansas, California, Idaho, Illinois, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Vermont, West Virginia, and Wisconsin. During the last four years many more states have been added to this list, and such moratorium laws have been repeatedly upheld by the decisions of courts of last resort.
In entire disregard of the actual facts of the present widespread agricultural and financial distress, this moratorium law is declared unconstitutional, on the ground that it is based upon an emergency, without the facts necessary to uphold it, and on the further ground that a vital mistake was made by the legislature in setting out the declaration upon which it is founded. In my humble opinion, the legislature of Nebraska was exceedingly careful to rather understate the actual conditions as they existed a year ago, which conditions have grown worse so rapidly that the present business decline has only been equaled once in the last 100 years; so, whatever may have *122been thought of the unfortunate situation which existed four years ago and two years ago, the present financial and agricultural collapse is so much more intense as proves it now to be the great emergency which fully justifies the present moratorium law under the careful pronouncement of Chief Justice Hughes in the Blaisdell case.
It is admitted by all who have studied the situation that business will not be good in Nebraska until we have at least one good crop, for Nebraska is primarily an agricultural state, and cannot have good times unless the farmers are prosperous.
In 6 R. C. L. 97, sec. 98, it is said that all the presumptions are in favor of the constitutionality of a statute, and if there is doubt it must be decided in favor of its validity, for each intendment is in favor of its constitutionality, unless the contrary is made to appear beyond a reasonable doubt. And in section 100: “It has been said that the courts should not conjure up theories to overturn and overthrow the solemn declarations of the legislative body.”
In chapter 7, Cooley, Constitutional Limitations (6th ed.), 219, it is said: “Before proceeding to annul, by judicial sentence, what has been enacted by the law-making power, it should clearly appear that the act cannot be supported by any reasonable intendment or allowable presumption.”
In the opinion of Judge Pound in People v. LaFetra, 230 N. Y. 429, 130 N. E. 601, it is said: “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 same affect the class of landlords now challenging the statutes, the legislation should be upheld.”
*123Judge Pound also held in the same case: “Emergency laws in time of peace are uncommon but not unknown. Wholesale disaster, financial panic, the aftermath of war, * * * 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. * * * Although emergency cannot become the' source of power, and although the Constitution cannot be suspended in any complication of peace or war, * * * art emergency may afford a reason for putting forth a latent-governmental power already enjoyed but not previously exercised.”
These statements were made by Judge Pound in holding constitutional a statute suspending for two years in the city of New York possessory remedies to regain possession of real property.
“In construing an act of the general assembly, such a construction will be placed upon it as will tend to advance the beneficial purposes manifestly within the contemplation of the general assembly at the time of its passage; and courts will hesitate to place such a construction upon its terms as will lead to manifestly absurd consequences, and impute to the general assembly total ignorance of the subject with which it undertook to deal.” Brewster v. Wooldridge, 100 Ga. 305, 28 S. E. 43, cited in 2 Lewis' Sutherland, Statutory Construction, 913, sec. 490.
This court has afforded relief to the owners of Nebraska mortgages in almost every instance when it was proved that the value of the land was less than the amount of the mortgage debt standing against it. Clark v. Hass, 129 Neb. 112, 260 N. W. 792; First Trust Co. v. Stenger, 130 Neb. 750, 266 N. W. 642; Srajhans v. Mares, 130 Neb. 924, 267 N. W. 82; State Life Ins. Co. v. Heffner, 131 Neb. 700, 269 N. W. 629; Keller v. Griffith, 132 Neb. 393, 272 N. W. 203; as well as many others.
In a case brought by this same appellant, it was said such postponement by a moratorium was not intended to *124enable’the'debtor to realize some speculative value out of the real estate or to delay indefinitely the day of reckoning. First Trust Co. v. Airdale Ranch & Cattle Co., 131 Neb. 475, 268 N. W. 362. It would follow that one who has simply purchased an equity of redemption would be denied any delay under moratorium, and the mortgagee would promptly receive his confirmation.
Even in a case after a moratorium had been granted, and it was found that the mortgage debt amounted to $160,446.39 and the real estate had only a value of $100,000, it was held by this court that' moratorium stays are at all times under the control of the court, and may be reexamined, and, upon good cause being shown, may be modified or vacated. Security Mutual Life Ins. Co. v. Herpolsheimer Bldg. Co., 132 Neb. 149, 271 N. W. 343.
The holdings of this court have in the past been uniform that a moratorium stay is not granted to every one as a matter of right, but is only available to those who can show an equity in their land, as was recognized by Judge Donohoe, of the United States district court for Nebraska, in Union Central Life Ins. Co. v. Hoffman, 18 Fed. Supp. 830, in which he added: “This is a matter, not of private concern, but of great public interest.” And further said: “The mortgagor is familiar with the property, and presumably vitally interested in preserving ’ ownership thereof and ready to exert himself to the uttermost to that end.”
The First Trust Company might have been delayed for a few months by this moratorium stay if it had not been held invalid, but its decree is for $3,354.38, drawing 10 per cent, interest, with $50 a month rent in the meantime, and it is stipulated that its security’ in this case is worth from $8,500 to $12,000. I fail to see how appellant could have been injured in any way by abiding by the law passed by the legislature.-
The right of a state to exercise its power to give'temporary relief, when urgent public distress has been brought about by six years of drouths^ insect pests, 'and economic and financial depression, is' not, in the opinion of many *125state and federal judges, su'ch'an abuse of the power of sovereignty that a carefully considered moratorium 'law, of the same general character as enacted by many other states from the Atlantic to the Pacific, should be struck down by the court as an unwarranted act'of the legisla-' ture.
In my opinion, this moratorium law was proper emergency legislation, fully justified by the'conditions set out, and it has prevented, up to this time, widespread evictions of distressed farmers and homeowners, who have in many cases by this beneficial law been able to save their homes, as the legislature wisely provided.