Summary
In Fidelity-Philadelphia Trust Co. v. Allen, 343 Pa. 428, 22 A.2d 896, in the interest of conformity with federal law, this statute was upheld, the United States Supreme Court having decided, in Gelfert v. National City Bank, 313 U.S. 221, that such legislation does not impair the obligation of a mortgage bond.
Summary of this case from Pennsylvania Co., Etc. v. ScottOpinion
October 6, 1941.
November 28, 1941.
Constitutional law — Impairment of contracts — Mortgages — Foreclosure — Deficiency judgments — Act of July 16, 1941, P. L. 400.
The Deficiency Judgment Act of July 16, 1941, P. L. 400, as applied to this case, is not in conflict with the contract clause of the Constitution of Pennsylvania.
Mr. Justice STERN filed a concurring opinion; Mr. Justice DREW dissented.
Argued October 6, 1941.
Before SCHAFFER, C. J.; MAXEY, DREW, LINN, STERN and PATTERSON, JJ.
Appeal, No. 317, Jan. T., 1941, from judgment of C. P. No. 7, Phila. Co., June T., 1941, No. 3852, in case of Fidelity-Philadelphia Trust Company, surviving trustee, v. Thomas W. Allen et al., liquidating trustees. Judgment reversed.
Assumpsit on case stated.
The facts are as follows:
On September 30, 1895, Edwin L. Boger gave his bond in the sum of $6,000 secured by a mortgage on premises 2308 West Columbia Avenue, Philadelphia, of which property he was the owner. The debt represented by the bond has since been reduced by payments to $4,500. The bond and mortgage were assigned from time to time, the last assignment being to plaintiff herein, Fidelity-Philadelphia Trust Company, Surviving Trustee under the Will of Augustus Thomas, Deceased. On July 19, 1928, title to the premises was conveyed to Legion Building Loan Association, which on June 10, 1930, entered into a written agreement with plaintiff whereby the mortgage indebtedness was extended for a period of three years from March 30, 1930, and in return the Association guaranteed payment of principal and interest. Default having occurred, and the Association having conveyed the premises on December 28, 1934, to one Griffen, plaintiff brought foreclosure proceedings under which judgment was obtained and damages were assessed on December 10, 1935, in the sum of $4,872.03. No judgment in personam was obtained. The property was sold at sheriff's sale to plaintiff for $50; title was taken in the name of plaintiff on January 13, 1936; the $50 was absorbed by the costs of the sale, unpaid taxes and water rent. Plaintiff brought the present suit on August 8, 1941, to recover the sum of $4,500 and accumulated interest against the Liquidating Trustees of the Building and Loan Association, which, on March 12, 1936, had gone into voluntary liquidation. The suit was defended on the ground that plaintiff had not petitioned to have the fair market value of the premises fixed in accordance with the Deficiency Judgment Act of 1941.
Judgment was entered for plaintiff, opinion by FLOOD, J. Defendants appealed.
F. Raymond Heuges, for appellants.
Robert M. Green, with him Harold E. Kohn, Thomas P. Glassmoyer and Murdoch, Paxson, Kalish Green, for appellee. Boyd Lee Spahr filed a brief under Rule 61.
Cuthbert H. Latta, Jr., with him Philip A. Bregy, Walter C. Janney, Jr., and MacCoy, Brittain, Evans Lewis, filed a brief under Rule 61.
John B. Nicklas, Jr., E. B. Wolfe, and McCrady, Nicklas Hirschfield filed a brief for amici curiæ.
A majority, Mr. Justice DREW dissenting, agrees that, as applied to this case, the challenged statute may be held not to conflict with the contract clause of the state constitution, reaching that conclusion on the ground that it is desirable to preserve uniformity of construction or the contract clauses of both state and federal constitutions: compare Gelfert v. National City Bank, 313 U.S. 221.
As the record does not involve the application of the Act to sales on judgments in personam made prior to its effective date, no opinion on that subject is expressed. See, however, McCabe v. Emerson, 18 Pa. 111; Ladner v. Siegel (No. 4), 298 Pa. 487, 498, 148 A. 699, 702; Memphis v. United States, 97 U.S. 293, 296; McCullough v. Virginia, 172 U.S. 102, 123, 124; Hodges v. Snyder, 261 U.S. 600, 603; 30 Am. Jur. 898, section 146; 31 Am. Jur. 364, section 883; 16 C.J.S. 689, section 271a.
Judgment reversed; record remitted for further proceedings.
Having written the opinion in the case of Beaver County Building and Loan Association v. Winowich, 323 Pa. 483, 187 A. 481, declaring the Mortgage Deficiency Judgment Act of 1934 unconstitutional, I think it fitting that I should give separate expression to my reasons for concurring in the present decision.
The Winowich case did not seek to justify the doctrine that a mortgage creditor who purchases at a foreclosure sale can recover from the mortgagor the excess of the amount of his bond over the sum realized at the sale, regardless of the value of the property. What it held was that, since that doctrine admittedly was, and from the earliest times had been, the law of Pennsylvania, any subsequent legislative change whereby real estate at an appraised valuation was substituted in whole or in part for the money due under the mortgage loan, and whereby the amount recoverable from the mortgagor was greatly reduced, necessarily constituted a substantive impairment of the obligation of preëxisting mortgage contracts and was therefore unconstitutional as to them, however desirable and proper it might be as to mortgages thereafter executed. While it was pointed out in the Winowich opinion (pp. 502-505) that all states passing upon the question, except New York, had likewise so decided, it was upon the rulings of the United States Supreme Court cited and reviewed in the opinion (pp. 497-502) that main reliance was placed, the principal aim being to conform on this important constitutional problem to the decisions of that tribunal. But now that same motivation compels a finding that the Mortgage Deficiency Judgment Act of 1941 is constitutional, because the United States Supreme Court in the case of Gelfert v. National City Bank of New York, 313 U.S. 221, reversing the New York Court of Appeals which had held the permanent Mortgage Deficiency Judgment Act of that state unconstitutional, says, in regard to its earlier cases, that "Those cases . . . have been confined to the special circumstances there involved. . . . We cannot permit the broad language which those early decisions employed to force legislatures to be blind to the lessons which another century has taught."
Arkansas, California, New Jersey, Texas, Georgia, Arizona.
Later, New York, in the Gelfert case, also came into accord with the other jurisdictions mentioned, its decision in that case being the one now reversed by the United States Supreme Court. Since the Winowich decision South Carolina ( Federal Land Bank of Columbia v. Garrison, 185 S.C. 255, 193 S.E. 308) and Alabama ( First National Bank of Birmingham v. Jaffe, 239 Ala. 567, 196 So. 103) have likewise held their Mortgage Deficiency Judgment Acts unconstitutional.
The impairment-of-the-obligation-of-contracts clause dates back in our State to the Constitution of 1790, only three years after the Federal Constitution, and, considering this close historical relationship, the practical identity of the clauses, and their outstanding importance in our constitutional scheme, it would seem obviously desirable that this court, while not bound, of course, in interpreting our State Constitution, to follow the views of the United States Supreme Court, should do so in this instance. For that reason I concur in the present decision.