Court Opinion

ID: 9543591
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:46:53.275298+00
Date Added: 2024-06-11T15:10:39.119559
License: Public Domain

STEINMETZ, J.
(concurring). This writer would hold that the distinction discussed in the majority opinion between the right to contract and the obligation of contract is one that leads to a significant difference.
The framers of the constitution considered having the ex post facto law prohibition in the constitution applicable to the obligation of contract impairment. However, due to Blackstone’s commentaries on the English common law at the time, the constitution was adopted with the distinction made.1
The belief was that the obligation of contract needed protection from interference, as well as protecting against ex post facto laws and therefore each needed a separate statement.
The obligation of contract and ex post facto clauses are both in the same section of the constitution, Art. I, sec. 10. The dual statement of protection was done to accommodate the existing common law distinctions as a compromise to accommodate adoption of the constitution.2
The United States Supreme Court in cases cited in the majority opinion has held that “the contract clause does not operate to obliterate the police power of the States.” However, it carries with it protections so that when the state decides to avoid it or deliberately contravene it by a retroactive invasion of contracts by law, the state, or the party relying on the effectiveness of the legislation, *600must be prepared to produce facts to uphold the statute. Certainly, the challenger of the statute is required to show the law works a substantial impairment of the contract terms by clear and convincing proof. Once that is done, however, the state, or in this case Wipper-furth, the party relying on the statute, must demonstrate a compelling public interest is served by the law or the social need for the invasion of the obligation of existing contracts. There is no burden of proof, but rather a standard of review must be applied by the courts. Wip-perfurth in this case was required to come forward with proof of facts demonstrating there is a social need and that public interest is present sufficiently to abrogate the constitutional provision. The constitution is the basic and fundamental contract between government and its citizens.
There has been a distinction in analysis by the courts between cases involving the right to contract which is a liberty interest protected by the Fourteenth Amendment and the constitutional prohibition against the impairment of the obligations of existing contracts.
Where liberties are considered in the right to contract, it is a matter of balancing of interests between conflicting rights in society. Here the legislature has plenary powers to declare reasonable classifications of interests so that due process and equal protection are provided, but the legislature is limited by a prohibition against making invidious distinctions. In the case of prospective laws, the challenger of the legislation has the burden of persuading the courts beyond a reasonable doubt the unconstitutionality of the act. It is reasonable and proper to so place the burden of persuasion since the legislature is presumed to act constitutionally and courts will make every effort to save legislation.
However, when the state directly and intentionally acts invading the constitutional protection of the obliga*601tion of contract clause through retroactive legislation, it is only reasonable the state has the obligation of coming forward with facts to show the exercise of its police power was necessary, reasonable and that vital public interests will be impaired if the legislation is not given effect.
Alexander Hamilton in the Federalist, No. 78 stated, “or, in other words, the Constitution ought to be preferred to the statute, the intention of the people to the intention of their agents.”
Three major factors in specific areas of concern will be examined:
“[T]he nature and strength of the public interest served by the statute, the extent to which the statute modifies or abrogates the asserted preenactment right, and the nature of the right which the statute alters.”3
When considering the retroactive application of a statute on the obligation of a contract, the tests that will be applied depending on the circumstances involved are the effect on vested rights, the degree of effect being minimal or substantial, the reliance on past rules and regulations, anticipation of change, reasonableness of the solution to a social problem, the extent of the population affected, length of time the legislation will apply (temporary or permanent), and is the effect on substantive rights and obligations of contract or remedies.
The distinction between the right to contract and the constitutionally protected obligations of contract is recognized by legal texts and legal writers.
16A C. J. S. Constitutional Law sec. 575, at 607-09 (1956) states:
“The right to make legal contracts of all kinds, without fraud or deception, is not only a part of the civil liberty possessed by every individual who is sui juris, *602but is both a liberty and a property right within the protection of the guaranties against the taking of liberty or property without due process of law. The liberty of contract which is guaranteed by due process of law clauses in constitutional provisions is freedom from arbitrary or unreasonable restraint; and neither the state nor federal governments may impose such restraint. While freedom of contract is not an absolute, but a qualified, right, and is, therefore, subject to reasonable restraint in the interest of the public welfare, . . . nevertheless, freedom is the general rule and restraint or abridgment is an exception which can be justified only by the existence of exceptional circumstances.” (Emphasis added.)
16 C. J. S. Constitutional Law, sec. 274 at 1272 (1956) states:
“The federal and state constitutions contain provisions which in different language but with essentially the same effect forbid the impairment of the obligation of contracts that are lawful when made and that are not subject to the fair exercise of sovereign governmental power to conserve the general welfare. Such provisions are mandatory, and apply alike to all contracts and protect all obligations of such contracts from destruction or impairment by subsequent legislation.” (Emphasis added.)
16A Am. Jur.2d, Constitutional Law, sec. 591 (1979) at 522 states:
“Although the term ‘freedom of contract’ does not appear in the United States Constitution, and has been described as an abstract doctrine, it has been held or recognized by the courts that freedom of contract is a part of the liberty protected by the due process clauses of the Fifth and Fourteenth Amendments.” (Emphasis added.)
At 525 the following is stated:
“It has been said that the right of liberty of contract differs from a fundamental constitutional right, from the right of liberty of the body or person, from the right of property, including the obligation of existing contracts, from the right of equality, and from the right *603of political liberty, in that it is not a vested right, a right of definite content, or a right protected by specific constitutional guaranties. Elsewhere the position has. been taken that liberty of contract is a fundamental right.” (Emphasis added.)
The same distinction is made in Freund, Police Power, sec. 499 (1904).
16A Am. Jur.2d, Constitutional Law, sec. 687 (1979) at 682 states: “The term ‘contract’ is used in its ordinary sense in the clause of the United States Constitution forbidding state legislation impairing the obligation of contracts.”
Sec. 689 at 687-88 states:
“Although a statute tending to impair the obligation of a contract is inoperative as to contracts existing at the time of its passage, it may nevertheless be valid and operative as to future contracts. The provision of the Constitution which declares that no state shall pass any law impairing the obligation of contracts does not apply to a law enacted prior to the making of a contract the obligation of which is claimed to be impaired, but only to a statute of a state enacted after the making of the contract. The obligation of a contract cannot properly be said to be impaired by a statute in force when the contract was made, for in such cases it is presumed that it was made in contemplation of the existing law. The state, therefore, may legislate as to future contracts as it sees fit, and accordingly, if a law is prospective only, it is — so far as the guaranty of obligation of contracts is concerned — valid.”
This court has recognized the distinction between the prospective right to contract and obligations of contracts already in existence when a statute becomes effective.
In Trading Stamp Cases, 166 Wis. 613, 618, 166 N.W. 54 (1917), the court decided:
“(3) The act is not unconstitutional as impairing the obligation of contract; it being prospective in its operation, and does not affect the use of trading stamps, tokens, tickets, bonds, or similar devices in connection with sales made before it goes into effect.”
*604In Pawlowski v. Eskofski, 209 Wis. 189, 193, 244 N.W. 611 (1932) this court discussed United States Supreme Court cases on the subject as follows:
“That court long ago held that any statute, whether remedial or not, that operated to deprive a party to a contract antedating the enactment of the statute of any valuable right secured to him by that contract is void as to that contract. Edwards v. Kearzey, 96 U.S. 595. If a statute substantially lessens the value of a preexisting contract the constitutional provision bars application of it to the contract. Many decisions of the supreme court of the United States have so held. This was held as far back as 6 Howard, where it is said in Planters’ Bank v. Sharp (p. 327) :
“ ‘One of the tests that a contract has been impaired is, that its value has by legislation been diminished. It is not, by the constitution, to be impaired at all. This is not a question of degree or manner or cause, but of encroaching in any respect on its obligation, dispensing with any part of its force.’ ”
This may be historic law applied to retroactivity but it shows this court and the U. S. Supreme Court have each recognized the distinction between “obligation of” and “freedom to” contract.
In Cleary v. Brokaw, 224 Wis. 408, 417-18, 272 N.W. 831 (1937), the court cited McCracken v. Hayward, 2 How. 608, 611 as follows:
“ ‘. . . The obligation of a contract consists in its binding force on the party who makes it. This depends on the laws in existence when it is made; these are necessarily referred to in all contracts, and forming a part of them as the measure of the obligation to perform them by the one party, and the right acquired by the other. . . . When it becomes consummated, the law defines the duty and the right, compels one party to perform the thing contracted for, and gives the other a right to enforce the performance by the remedies then in force. If any subsequent law affect to diminish the duty, or to impair the right, it necessarily bears on the obligation of the contract, in favor of one party, to the injury of *605the other; hence any law, which in its operation amounts to a denial or obstruction of the rights accruing by a contract, though professing to act only on the remedy, is directly obnoxious to the prohibition of the constitution.’ ”
In the same case at 420, the court stated, “Whether her rights may be violated in the future presents another question.”
In Guardianship of Banski, 226 Wis. 361, 366, 276 N.W. 626 (1937) the court honored the distinction between “obligation of” and “right to” contract as follows:
“It is, of course, competent for a state to regulate priorities as between creditors whose debts are contracted after the passage of the statute. Abilene Nat. Bank v. Dolley, 228 U.S. 1, 33 Sup. Ct. 409.”
In Chippewa Valley Securities Co. v. Herbst, 227 Wis. 422, 425, 278 N.W. 872 (1938) the court cited 6 Page, Contracts, sec. 3676 as follows:
“ ‘A law in force when a contract is made is part thereof. Whatever objections may be made to the validity of such law, it does not impair the obligation of such contracts. To be invalid as impairing the obligation of contracts a statute “must be one enacted after the making of the contract, the obligation of which is claimed to be impaired.” ’ ”
In the same Chippewa Valley Securities Co. case, the court ruled the statute under consideration did not unreasonably deprive the plaintiff of its “right to” contract and did not therefore deprive the plaintiff of property without due process.
Historically, this court has applied the due process standard of the Fourteenth Amendment to prospective legislation. In doing this, however, the court has not always placed the burden of showing the statute unconstitutional beyond a reasonable doubt on the challenger.
In the following cases of challenge to the constitutionality of legislation, the court did not discuss the standard *606nor burden: Knowlton v. Supervisors of Rock County, 9 Wis. 378 (*410) (1859); State ex rel. Northern Pac. R. Co. v. Railroad Commission, 140 Wis. 145, 121 N.W. 919 (1909); State ex rel. Van Alstine v. Frear, 142 Wis. 320, 125 N.W. 961 (1910); Nitka v. Western Union Tel. Co., 149 Wis. 106, 135 N.W. 492 (1912): Ekern v. McGovern, 154 Wis. 157, 142 N.W. 595 (1913); Outagamie County v. Zuehlke, 165 Wis. 32, 161 N.W. 6 (1917); Jessner v. State, 202 Wis. 184, 231 N.W. 634 (1930); State ex rel. Wisconsin Dev. Authority v. Dammann, 228 Wis. 147, 277 N.W. 278, 280 N.W. 698 (1938); Cutts v. Department of Public Welfare, 1 Wis.2d 408, 84 N.W.2d 102 (1957); Bisenius v. Karns, 42 Wis.2d 42, 165 N.W.2d 377 (1969).
The foregoing' cases involved challenges to statutes involving classification, equal protection or uniform taxation prospectively applied.
The following cases of challenge to prospective statutes applied the standard of unconstitutionality being required to be proven beyond a reasonable doubt and the burden being on the challenger: Norton v. Rooker—Rooker v. Norton, 1 Wis. (Pin.) 195 (1842); State ex rel. Chandler v. Main, 16 Wis. 422 (*398) (1863); Northwestern National Bank of Superior v. City of Superior, 103 Wis. 43, 79 N.W. 54 (1899); State ex rel. Busacker v. Groth, 132 Wis. 283, 112 N.W. 431 (1907); Bonnett v. Vallier, 136 Wis. 193, 116 N.W. 885 (1908); Lawrence University v. Outagamie County, 150 Wis. 244, 136 N.W. 619 (1912); Peterson v. Widule, 157 Wis. 641, 147 N.W. 966 (1914); Pauly v. Keebler, 175 Wis. 428, 185 N.W. 554 (1921); State ex rel. Carnation M. P. Co. v. Emery, 178 Wis. 147, 189 N.W. 564 (1922); Building Height Cases, 181 Wis. 519, 195 N.W. 544 (1923); La Crosse v. Elbertson, 205 Wis. 207, 237 N.W. 99 (1931); Petition of Breidenbach, 214 Wis. 54, 252 N.W. 366 (1934); Doering v. Swoboda, 214 Wis. 481, 253 N.W. 657 (1934); Appeal of Van Dyke, 217 Wis. 528, 259 N.W. 700 (1935); *607State ex rel. Atty. Gen. v. Wisconsin Constructors, 222 Wis. 279, 268 N.W. 288 (1936); State ex rel. Sullivan v. Dammann, 227 Wis. 72, 277 N.W. 687 (1938); School Dist. v. Callahan, 237 Wis. 560, 297 N.W. 407 (1941); A B C Auto Sales, Inc. v. Marcus, 255 Wis. 325, 38 N.W.2d 708 (1949); Madison Metropolitan Sewerage Dist. v. Committee, 260 Wis. 229, 50 N.W.2d 424 (1951); State ex rel. Reuss v. Giessel, 260 Wis. 524, 51 N.W.2d 547 (1952); State ex rel. Broughton v. Zimmerman, 261 Wis. 398, 52 N.W.2d 903 (1952); State v. Stehlek, 262 Wis. 642, 56 N.W.2d 514 (1953); Madison v. Chicago, M., St. P. & P. R. Co., 2 Wis.2d 467, 87 N.W.2d 251 (1958); School Dist. v. Marine Nat. Exchange Bank, 9 Wis.2d 400, 101 N.W.2d 112 (1960); State ex rel. McCormack v. Foley, 18 Wis.2d 274, 118 N.W.2d 211 (1962); Chicago & N. W. R. Co. v. La Follette, 27 Wis.2d 505, 135 N.W.2d 269 (1965); State ex rel. La Follette v. Reuter, 36 Wis.2d 96, 153 N.W.2d 49 (1967); Dane County v. McManus, 55 Wis.2d 413, 198 N.W.2d 667 (1972); Ortman v. Jensen & Johnson, Inc., 66 Wis.2d 508, 225 N.W.2d 635 (1975); State ex rel. Strykowski v. Wilkie, 81 Wis.2d 491, 261 N.W.2d 434 (1978); State v. Hart, 89 Wis.2d 58, 277 N.W.2d 843 (1979).
Also, there are cases involving the challenge to prospective legislation where the standard applied varied as follows: State ex rel. Grundt and others v. Abert, 32 Wis. 403 (1873) (courts will not hold an act unconstitutional unless it is clearly so) ; Atkins and others v. Fraker, 32 Wis. 510 (1873) (constitutional if its words fairly admit of such a construction); Bound v. The Wisconsin Central Railroad Company and others, 45 Wis. 543 (1878) (place a construction as will reconcile statutes to the constitution); Palms and another v. Shawano County and others, 61 Wis. 211, 21 N.W. 77 (1884) (a legislative act should, if possible, be so construed as not to conflict with the constitution and that it may be upheld); State ex rel. Hicks v. Stevens, 112 Wis. 170, 88 *608N.W. 48 (1901) (if there is a reasonable construction which will uphold it and at the same time preserve the constitution from infraction, the court is bound to adopt it); Chicago & N. W. R. Co. v. The State, 128 Wis. 553, 108 N.W. 557 (1906) (there is a presumption the legislature intended a valid enactment, and it is to be sustained if in any reasonable view thereof it can be fairly read in harmony with constitutional requirements); In re Appointment of Revisor, 141 Wis. 592, 124 N.W. 670 (1910) (sustained if possible by any reasonable construction of the constitution or of the act itself — and all mere doubts as to its validity are to be solved in favor of the act); State ex rel. Dulaney v. Nygaard, 174 Wis. 597, 183 N.W. 884 (1921) (the question of whether a law should be held void because of its repugnance to the constitution is one of much delicacy, which ought seldom, if ever, to be decided in the affirmative in a doubtful case); State ex rel. Globe Steel Tubes Co. v. Lyons, 183 Wis. 107, 197 N.W. 578 (1924) (a construction is not to be given to a statute that will make it absurd or unconstitutional if any other construction is permissible); Dick v. Heisler, 184 Wis. 77, 198 N.W. 734 (1924) (must construe a statute as constitutional if reasonably possible to do so); State ex rel. Fulton v. Zimmerman, 191 Wis. 10, 210 N.W. 381 (1926) (sustain the legislation if possible by any reasonable construction thereof or by any reasonable construction of the constitution — all doubts of the legislature’s power or as to legality being resolved in favor of the validity); State v. Langlade County Creamery Co., 193 Wis. 113, 213 N.W. 664 (1927) (it is the duty of the court to give acts a construction that will bring them into harmony with the provisions of the constitution); State ex rel. Reynolds v. Sande, 205 Wis. 495, 238 N.W. 504 (1931) (a statute should be held valid whenever by any fair interpretation it may be construed to serve a constitutional purpose); United G., C. & C. Workers v. Wis. E. R. Board, 255 Wis. 154, *60938 N.W.2d 692 (1949) (when reasonably possible, a statute will be held valid rather than invalid); Heimerl v. Ozaukee County, 256 Wis. 151, 40 N.W.2d 564 (1949) (a statute should be held valid whenever by any fair interpretation it may be construed to serve a constitutional purpose); Estate of Ogg, 262 Wis. 181, 54 N.W.2d 175 (1952) (it is the duty of the court to so construe a statute as to uphold its validity, if the resulting construction is one that is reasonable and does not lead to an absurd result); State ex rel. Thomson v. Zimmerman, 264 Wis. 644, 60 N.W.2d 416, 61 N.W.2d 300 (1953) (there is a presumption that all acts of the legislature are constitutional until established otherwise); State ex rel. Thomson v. Giessel, 265 Wis. 558, 61 N.W.2d 903 (1953) (all doubts as to its constitutionality must be resolved in favor of its validity); State ex rel. Smith v. Zimmerman, 266 Wis. 307, 63 N.W.2d 52 (1954) (legislation is presumed to be constitutional unless clearly established otherwise — the obligation of the court to the constitution is superior to the obligation of the court to an act of the legislature); David Jeffrey Co. v. Milwaukee, 267 Wis. 559, 66 N.W.2d 362 (1954) (validity must be sustained unless it palpably contravenes a provision of the state or federal constitution and the supreme court is bound to give an act a construction that will avoid constitutional objections to its validity if the act will bear such construction); Adoption of Morrison, 267 Wis. 625, 66 N.W.2d 732 (1954) (a statute is presumed to be constitutional and the party attacking it has the burden of overcoming the presumption and showing it to be unconstitutional); State ex rel. Harvey v. Morgan, 30 Wis.2d 1, 139 N.W.2d 585 (1966) (court will not impugn the motives of the legislature, but rather, if possible, to so construe the statutes as to find it in harmony with accepted constitutional principles); Gottlieb v. Milwaukee, 33 Wis.2d 408, 147 N.W.2d 633 (1967) (court must find a statute con*610stitutional if it is at all possible to do so — all legislative acts are presumed constitutional and every presumption must be indulged to sustain the law if at all possible — if any doubt exists, it must be resolved in favor of the constitutionality of a statute); Watchmaking Examining Bd. v. Husar, 49 Wis.2d 526, 182 N.W.2d 257 (1971) (the statute is presumed to be constitutional and a heavy burden is placed on the challenger); State v. Mahaney, 55 Wis.2d 443, 198 N.W.2d 373 (1972) (if doubt exists, it should be resolved in favor of the constitutionality); Omernik v. State, 64 Wis.2d 6, 218 N.W.2d 734 (1974) (legislative classification is presumed valid — the burden of proof is on the challenging party to establish invalidity of a statutory classification — any reasonable basis for the classification will validate the statute); WKBH Television, Inc. v. Dept. of Revenue, 75 Wis.2d 557, 250 N.W.2d 290 (1977) (there is a strong presumption that legislative enactments are constitutional and a heavy burden is placed on the challenger asserting the unconstitutionality of the statute); Hopper v. Madison, 79 Wis.2d 120, 256 N.W.2d 139 (1977) (there is a strong presumption that legislature’s acts are constitutional, and it is duty of court to so construe a statute if possible).
Additional cases where the standard of proof for establishing unconstitutionality of a statute beyond the reasonable doubt is not clearly and definitively stated are: Bigelow v. The West Wisconsin Railway Company, 27 Wis. 478 (1871); State ex rel. Gubbins v. Anson, 132 Wis. 461, 112 N.W. 475 (1907); State ex rel. Scanlon v. Archibald, 146 Wis. 363, 131 N.W. 895 (1911); Milwaukee County v. Halsey, 149 Wis. 82, 136 N.W. 139 (1912); Minneapolis, St. P. & S. S. M. R. Co. v. Railroad Comm., 183 Wis. 47, 197 N.W. 352 (1924); Malinowski v. Moss, 196 Wis. 292, 220 N.W. 197 (1928); State ex rel. Blockwitz v. Diehl, 198 Wis. 326, 223 N.W. 852 (1929); Barth v. Shorewood, 229 Wis. 151, 282 N.W. 89 (1938); Estate *611of Nieman, 230 Wis. 23, 283 N.W. 452 (1939); Estate of Ogg, 262 Wis. 181, 54 N.W.2d 175 (1952); State ex rel. Real Est. Exam. Bd. v. Gerhardt, 39 Wis.2d 701, 159 N.W.2d 622 (1968).
The U-Haul Company in the circumstances of this case came forward with evidence showing the retroactive application of the dealership law had a substantial effect on the obligations of the contract between itself and Wipperfurth. Once that was established, Wipperfurth did not demonstrate nor offer facts beyond the equivocating language of the statute. The statute stated an economic need to even bargaining power. It did not state a general social need nor the interest of the public generally would be served by the retroactive impairment of the obligation of contract.
Had the impairment of the obligation in this case been minimal, the quantity or quality of Wipperfurth’s evidence might not have been considered since first, the challenger of the law would not have shown a substantial impairment for entitlement to the constitutional protection of contract clause. Once, however, substantial impairment of obligations is demonstrated by the challenger, the party relying on the legislation must come forward with facts demonstrating to the courts the compelling public necessity or that there is a social need requiring the exercise of the state’s police power. Wipperfurth has failed to do that in this case.
For the reasons in the majority opinion and this concurring opinion, this writer would find unconstitutional the retroactive application of ch. 135, Stats., to the obligation of existing contracts.

 Blackstone asserted ex post facto prohibition applied to criminal laws only.

 Z. Chafee, Jr., Three Human Rights in the Constitution, University of Kansas Press, Library of Congress Catalog No. 56-9451 (1956).

 Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv. L. Rev. 692, 697 (1960).