Heyward v. Judd

4 Minn. 483

• Court: Supreme Court of Minnesota
• Decided: December 15, 1860
• Status: Published

Opinions

Emmett, C. J.

By the Goivrt. In November, A. D. 1858, James E. Heyward and wife gave a mortgage on certain real estate in the county of Bamsey, to Henry B. Judd, to secure the payment of $1,000.00 and interest, This mortgage contained a power authorizing the mortgagee, in case of default, to sell the mortgaged property, at public sale, “ according to the statute in such case made and provided,” and apply the proceeds in discharge of the debt thus secured. In August A. D. 1860, default having been made, the mortgagee foreclosed by advertisement in pursuance of the power, and became the purchaser at the sale. In September following, he formally demanded possession of the premises purchased, and being refused, commenced this action before a Justice of the Peace of the proper county, to recover possession. The action is brought against the executrix of the mortgagor, who was then in possession.' The complaint sets up all the facts in detail. The Defendant below demurred, on the ground that the facts stated did not constitute a cause of action. The Justice ovex1ruled the demurrer, and gave the Plaintiff judgment of restitution. The District Court upon certiorari affirmed this judgment, and the Defendant thereupon sued out of this court a writ oí error.

No objection is made to the regularity of the sale, or of the proceedings taken to give the Justice jurisdiction, and the only question really material to the decision of this case, is as to which party was entitled to the possession at the time the action was commenced.

Ey the law of July 29, 1858, in force at the time this mortgage was executed, the purchaser, upon a sale of mortgaged property by order of the court, or in pursuance of a power given for that purpose, took the property subject to the right of the mortgagor, or other redemptioner, to redeem the same at any time within one year, (or such other time as may be prescribed by law) by repaying the purchase money with interest, at the rate of twelve per cent, per annum, but the mortgagor was not entitled to the possession, during the time allowed for redemption, except upon the condition of paying this interest.

After the mortgage was given, but before the mortgagee attempted to execute the power of sale contained therein, the Legislature, by an act approved March, 10, 1860, amended the law of July 29,1858, by changing the time of redemption from one year to three years, and reducing the rate of interest from twelve per cent, to seven per cent, per annum. The second section of the law of 1858 was also so amended as to give to the mortgagor, or his successor in interest, the right to remain in possession during the time of redemption, by paying at the end of each year interest on the purchase money, at the rate of seven per cent, per annum, and all taxes which may then be due upon the property, with a provision that if the interest and taxes are not so paid, the right so to retain possession longer, shall be forfeited.

In the case of Stone vs. Bassett, decided at the July term, 1860, ante p. 298, this court held that the payment of interest provided for, by the act of July 29,1858, must be made in advance, to entitle the mortgagor to remain in possession, and that the terms of that act applied to a mortgage made prior to its passage, although at the time the mortgage in that case was executed, the mortgagor, after a sale by order of the court, would have had the right to redeem by paying the necessary sum, with interest at ten per cent, only, per annum, and might have retained possession during the time allowed for redemption, without paying the interest in advance.

To regulate the terms upon which possession may be held, during the time for redeeming, does not in our opinion interfere either with the obligation of the mortgage contract, or with the nature of the estate authorized to be sold under a power to sell, where the sale can only be made subject to the right to redeem, and if, as we held in the case of Stone vs. Bassett, before referred to, the legislature may make the terms more onerous to the mortgagor, than they were at the time he executed the mortgage, certainly the purchaser should not be exempted from the application of the same rule, where the change made is unfavorable to him. His rights depend wholly on his contract of purchase, and it is difficult to see why he should not be governed, at least in this respect, by the law in force, at the time his contract is made. Nor can we think it makes any difference whether the purchaser be the mortgagee or creditor, or an entire stranger.

We think the decision in Stone vs. Bassett disposes of this case, and that it could make no difference in the decision, whether the Legislature could extend the time of redemption, and reduce the rate of interest, so as to affect past contracts, or not. We may, for the purposes of this case, strike out the first section of the act of March 10, 1860, and yet, as the second section, which relates merely to the terms upon which the possession may be held, while the title under the purchase is maturing, would still remain, the mortgagor would have the right to remain in possession one year, without paying the interest in advance, whether the time for redemption was according to the old law or the new.

The second section certainly does not affect the contract, and can hardly be said to affect the remedy; for it merely regulates the relations between the mortgagor or debtor and the purchaser, after the contract has been carried into effect according to the course of judicial proceedings, or after the power of sale has been exercised according to the statute.

We are therefore of opinion that this action was premature, and that the judgment of the District Court affirming the judgment of the Justice of the Peace, should be reversed.

This case was not argued orally, and from the statements made at the time counsel submitted their briefs, we were led to believe that the main question involved was the constitutionality of the redemption law, so called, oí March 10, 1860, in its application to a sale made upon a mortgage given previous to the passage of the law. We have seen, however’, that the case is necessarily disposed of without reaching that question. Tet, as the question is one of great public interest, and has been elaborately argued in this, and the case of Dana et al. vs. Farrington, heard at this term, but which was decided on other grounds, we deem it necessary, after a careful examination of the authorities, to state the general conclusions to which we have arrived, but without entering at length into the reasons which led to them.

We are fully aware that the weight of a decision as authority is sometimes impaired by determining questions not necessary to the decision of the case, and that the positive authority of any decision is co-extensive only with facts upon which it is founded, yet as we have authority to decade any question fairly submitted, and it is of vital importance to the people of this State that our views on this question should be known, we shall not hesitate to give them. And we have the less hesitation in view of the fact that the court in the cases of Bronson vs. Kenzie, 1 How. 311; and McCracken vs. Heyward, 2 How. 608, (cited as leading cases on the question), in like manner gave their views notwithstanding it was not necessary to the decision of the cases before them.

Having already said that we discover no valid objection to the second section of the act of March 10, 1860, it will be necessary to consider only section one, or that by which the time of redemption is extended and the rate of interest reduced.

The general objection to the application of this section to mortgages, given prior to its enactment, is, that it impairs the obligation of the contract; and this position is mainly predicated upon the assumption that the law of the remedy enters into and becomes one of the stipulations of the parties.

This court has already, in Grimes vs. Bryne, 2 Minn. 89, substantially dissented from this doctrine, and we now in terms hold that the law of the remedy does not enter into the contract. We further think that it may safely be asserted—

That, only such laws enter into and become a part of the contract, as would be enforced by the courts of a foreign jurisdiction:—

That an act of the Legislature does not become one of the conditions stipulated by the parties to a contract, nor does it’act externally on the agreement, unless it have the full force of law wherever the contract is sought to be enforced:—

That the Legislature may change the law- of the remedy at discretion, provided the obligation of the contract is not thereby impaired, but the mere fact that the new remedy is less convenient than the old one, or renders the recovery of debts more tardy and difficult, does not of itself render it unconstitutional :—

And that as every presumption is in favor of a remedial statute, the fraud upon the constitutional restriction against impairing the obligation of contracts^must clearly appear, or the law will be vindicated.

These several propositions, it is believed are supported by sound reason and authority. Let us see how they affect the statute under consideration.

In a simple mortgage of real property to secure the payment of money, the contract is simply a conveyance by the mortgagor to the mortgagee, upon a condition that the conveyance shall be void if the mortgagor pay a certain sum by a day certain. In other words, that the mortgagee shall have the property unless the money is paid at a given day. At common law the interest of the mortgagor was treated as resting upon the exact performance of this condition; the forfeiture or breach thereof becoming absolute by non payment at the day. But the courts of equity relieved against this forfeiture, by giving to the mortgagor a right to redeem after condition broken, and it has now become necessary for the mortgagee to apply to a court of equity to have this right, or equity of redemption barred of foreclosed, before the mortgage contract can be carried into effect according to its terms, otherwise the right to redeem continues so long as the mortgagor remains in possession, and indeed until after the statute of limitations has run. When application is thus made to enforce the mortgage, the court in the exercise of its chancery powers, may order the mortgagor to pay the amount due by a certain day,' or be forever foreclosed of all right to redeem, thus carrying out the terms of the contract; oi’, if justice require it, it may order the mortgaged property to be sold, and the proceeds applied first to the payment of the debt, and the balance, if any, to the use of the mortgagor. This sale, however, is not, made in pursuance of, but rather despite the express terms of the mortgage. The power so to order it rests entirely in the discretion of the court in the exercise of its equitable powers, and exists independent of any statute. The terms also upon which the sale is made, whether for cash, or upon credit, whether at public or at private sale, and all matters pertaining thereto, are, unless otherwise provided by law, within the control of the court, though the courts have usually adopted the proceedings prescribed in sales upon executions at law.

When, therefore, the Legislature controls the exercise of this discretionary power to order the property to be sold, by directing the conditions upon which the sale shall be made, it is a mere regulation of one of the remedies afforded in judicial proceedings for the foreclosure of mortgages, leaving the remedy by foreclosure absolutely untouched. And although the change may have made the remedy less expeditious, or rendered the collection of debts more tardy and difficult, yet that, as we have before stated, does not render it unconstitutional. So long as a reasonable remedy is provided, there is no fraud upon the constitution; and certainly a mere change in one only of two existing remedies cannot have that effect. The power of our courts to decree a foreclosure absolute has never been interfered with by the legislature. The mortgagee may still ash to have this done, subject, however, to the power of the court to order a sale where equity requires it. But as courts of chancery have always been extremely liberal in such cases, seldom foreclosing where anything beyond the debt can be realized by á sale, and always giving to the mortgagor ample time to redeem before foreclosure, it has been the usual practice for the mortgagee to anticipate by asking for a ‘ sale in the first instance.

There is a class of cases, however, in which another and more difficult question arises. It is common, for the purpose of avoiding the delays incident to judicial proceedings, for the mortgagor to execute a power, authorizing the mortgagee or some third party, in case of default in the payment of the debt secured by the mortgage, to sell the mortgaged property and apply the proceeds to the extinguishment of the debt. And it is insisted that the legislature cannot interfere with the exercise of this power, so as to force the trustee to sell an estate or interest different from that which the power authorized him to sell.

As to this question we hold that where a valid power has been given, the legislature cannot interfere with its exercise sq as to change the estate which the trustee is authorized to sell, as that, we think, would be impairing the obligation of the contract. But when the mortgagee does not resort to the power, but applies to the 'court for the enforcement of his mortgage, then any sale the court may order is not made in pursuance of the power, but by its own inherent authority, and the estate necessaiy to be sold in such cases was always a matter within the control of the court. He must, therefore, take the remedy as he may find it, and cannot object that it is less beneficial than that afforded at the time his mortgage was executed. Judicial remedies are to the fullest extent under rightful control of the legislature, notwithstanding the provision in the federal and State constitution, securing the inviolability of contracts; Morse vs. Gould, 1 Kern. 281; and the mere legislative interference with the power of the court, by imposing a limitation or' Condition upon the sales which it may order, is no interference with the obligation of contracts.

Atwater, J.

The court were unanimous in the opinion that. the judgment below in this case ought to be reversed, on the ground stated in the opinion filed by his Honor, Chief Justice Emmett. I understand, also, that our views substantially agree touching the validity of the Act of March 10, 1860, commonly called the Three Tears’ Redemption law. But as some misapprehension seems to have arisen in regard to the holding of the court upon that law, and as it is highly desirable that this should be avoided, I prefer to express my own view of the law in language somewhat different from that employed in the opinion filed, and in such terms that no misconception can arise.

The mortgage which formed the basis of this action, contained a power of sale, authorizing the mortgagee, in case of default, to sell the mortgaged premises at public auction, pursuant to the statute in such case made and provided, &c. The .statute referred to by this clause, is Chapter 75, Comp. Stat. p. 643, and regulates the manner in which the power shall be exercised, and also specifies the estate which shall pass upon such sale, to wit, the whole interest of the mortgagor, save only the right of redemption, if exercised within one year from the time of sale. The grantor in the mortgage has, therefore, as a part of his contract, authorized the mortgagee to use a certain remedy, to perfect his title in case of default, and, by the same contract, has specified what estate the grantee shall acquire by the use of the remedy. And this power being coupled with an interest, is irrevocable by the grantor. He has bound, or “ obligated ” himself that the purchaser at the sale should acquire absolute title to the premises, at the expiration of one year from the time of sale.

The Act of March 10, 1860, provides, that the purchaser of any real estate, at mortgage sale by advertisement or otherwise, shall hold the same, subject to the right of the mortgagor or judgment creditor to redeem the same at anytime within three years from the day of sale. Hoes this provision impair the obligation of the contract above referred to ? Clearly I think it does, so far as it is sought to be made applicable to mortgages in force at the time of its passage. It attempts to give the mortgagor a three years’ interest in the premises, in place of the one year, which the previous law provided for. The obligation of a contract consists in the power and efficacy of the law which applies to and enforces performance of the contract. That the Act of March 10,1860, impairs the efficacy of the law, wbicb. provides for tbe foreclosure of tbe mortgage, and under which tbe mortgage in tbe case at bar was foreclosed, is manifest from tbe consideration, that it diminishes tbe value of tbe estate obtained by tbe purchaser. Tbe purchaser tabes title under tbe power of sale contained in tbe mortgage, a title, wbicb tbe law in force at tbe time tbe contract was entered into, provided should become absolute at tbe expiration of a year from tbe time of sale, if not sooner redeemed. And tbe mortgagor has expressly adopted this law by making it a part ot bis contract. Tbe legislature steps in and releases tbe mortgagor from bis contract to make no claim on tbe premises after tbe expiration of a year, and gives him tbe privilege of making such claim for two years longer. It needs .no argument to show that a title to real estate, subject to be divested at any time within three years, is not tbe same in value, even if in kind, as one which ■ can only be divested in one year. In other words, tbe effect of tbe law is to lessen tbe value of tbe security, by as much as it has extended tbe reversionary interest of tbe mortgagor.

When, however, a party applies to a Court of Chancery for a foreclosure of bis mortgage, be abandons this power of sale contained in tbe mortgage, and submits bis case to a Court of Equity, for such relief as to that court may seem just. Tbe disposition to be made of mortgaged premises has always been peculiarly within tbe province of a Court of Equity. It will so dispose of tbe property mortgaged, as to protect tbe rights of tbe mortgagor and mortgagee, and especially provide that tbe value of the security be not impaired to tbe mortgagee. And to this end, it has tbe power to decree a strict foreclosure without sale, and bold tbe mortgagor to tbe strict terms of his conveyance, if tbe condition- be broken, or to impose such other terms, as may be in accordance with equity and good conscience. If, however, a sale be decreed, I am inclined to think tbe purchaser, under tbe sale, will bold tbe property subject to tbe rights and liabilities of parties, as defined by tbe law in force at tbe time such sale is made. As tbe Legislature has not by this act restricted tbe court from giving tbe fullest relief wbicb tbe nature of tbe case demands, if prejudice is suffered by tbe mortgagee in tbe disposition of tbe security, it must arise rather from the refusal of the court, to exercise its powers in the proper manner, than from the exercise of legislative powers destroying vested rights or interfering with contracts.

I do not understand that the views above expressed conflict with the ruling in the cases of Bronson vs. Kinzie and McCracken vs. Hayward, decided by the United States Supreme Court, and cited in the brief of the counsel for the Plaintiff in Error. Where that court has directly decided that a State law is in conflict with the Constitution of the State, or of the United States, I think this court should be governed by such decision, in cases involving or depending upon the decision of the same question. It is proper to remark in this connection, that both cases- in which this question arose at the last December Term, were those of foreclosure by advertisement, and ike point principally discussed by counsel, was as to the effect of the law upon the power of sale contained in the mortgage. Eor this, and the further reason, that the construction of this law is not necessarily involved in the disposition of the case at bar, I deem it unnecessary to elaborate or cite authorities, or do more than merely to state the views entertained upon the points raised, for the purpose of affording some guide to those whose interests may be affected by the law of the last Session of the Legislature.