Morris v. Waite , 119 Fla. 3 ( 1935 )

The appeal in this case is from an order granting motion to strike certain portions of the answers of defendants in a foreclosure suit. The stricken portions of the answer attempted to set up as a defense the numerous untoward results of the general financial depression and natural misfortune such as hurricanes, freezes and other devastating weather conditions which occurred and existed between the years 1926 and 1933 and prayed that the court take judicial notice of the alleged prevailing economic conditions and that by the reason thereof the market value of real estate in Florida, and particularly in Lee County, Florida, has been destroyed, and that the court enter an order staying the proceedings during the present economic depression under equitable terms and conditions, as to the application of rental income from the mortgaged premises to the payment of taxes, insurance and upkeep, etc.

There is no statute in this State which authorizes the court to fix conditions upon which a moratorium of a mortgage contract may be granted and, therefore, the courts are without authority to extend the period of redemption in mortgage foreclosure proceedings and to stay such proceedings during periods of economic depression.

The applicable law with which we are here concerned has been quite clearly stated by Mr. Chief Justice HUGHES in Home-Building Loan Association v. Blaisdell, 78 L.Ed. 290, U.S. 298, 54 Sup. Ct. Rep. 231, 88 A. L. R. 1481, wherein he said:

"1. An emergency existed in Minnesota which furnished a proper occasion for the exercise of the reserved power of the State to protect the vital interests of the community. The declarations of the existence of this emergency by the Legislature and by the Supreme Court of Minnesota cannot be regarded as a subterfuge or as lacking in adequate basis. Block v. Hirsch, 256 U.S. 135, 65 L.Ed. 865, 41 S.Ct. 458, 16 A. L. R. 165, supra. The finding of the Legislature and state court has support in the facts of which we take judicial notice. Atchison T. S. F. R. Co. v. United States,284 U.S. 248, 260, 76 L.Ed. 273, 280, 52 S.Ct. 146. It is futile to attempt to make a comparative estimate of the seriousness of the emergency shown in the leasing cases from New York and of the emergency disclosed here. The particular facts differ, but that there were in Minnesota conditions urgently demanding relief, if power existed to give it, is beyond cavil. As the Supreme Court of Minnesota said, the economic emergency which threatened 'the loss of homes and lands which furnish those in possession the necessary shelter and means of subsistence' was a 'potent cause' for the enactment of the statute.

"2. The legislation was addressed to a legitimate end, that is, the legislation was not for the mere advantage of particular individuals but for the protection of a basic interest of society.

"3. In view of the nature of the contracts in question — mortgages of unquestionable validity — the relief afforded and justified by the emergency, in order not to contravene the constitutional provision, could only be of a character appropriate to that emergency and could be granted only upon reasonable conditions.

"4. The conditions upon which the period of redemption is extended do not appear to be unreasonable. The initial extension of the time of redemption for thirty days from the approval of the Act was obviously to give a reasonable opportunity for the authorized application to the court. As already noted, the integrity of the mortgage indebtedness is not impaired; interest continues to run; the validity of the sale and the right of a mortgagee-purchaser to title or to obtain a deficiency judgment if the mortgagor fails to redeem within the extended period, are maintained; and the conditions of redemption, if redemption there be, stand as they were under the prior law. The mortgagor during the extended period is not ousted from possession but he must pay the rental value of the premises as ascertained in judicial proceedings and this amount is applied to the carrying of the property and to interest upon the indebtedness. The mortgage-purchaser during the time that he cannot obtain possession thus is not left without compensation for the withholding of possession. Also important is the fact that mortgagees, as is shown by official reports of which we may take notice, are predominantly corporations, such as insurance companies, banks, and investment and mortgage companies. These, and such individual mortgagees as are small investors, are not seeking homes or the opportunity to engage in farming. Their chief concern is the reasonable protection of their investment security. It does not matter that there are, or may be, individual cases of another aspect. The Legislature was entitled to deal with the general or typical situation. The relief afforded by the statute has regard to the interest of mortgagees as well as to the interest of mortgagors. The Legislation seeks to prevent the impending ruin of both by a considerable measure of relief.

"In the absence of legislation, the courts of equity have exercised jurisdiction in suits for the foreclosure of mortgages to fix the time and terms of sale and to refuse to confirm sales upon equitable grounds where they were found to be unfair or inadequacy of price was so gross as to shock the conscience. The 'equity of redemption' is the creature of equity. While courts of equity could not alter the legal effect of the forfeiture of the estate at common law on breach of condition, they succeeded, operating on the conscience of the mortgagee, in maintaining that it was unreasonable that he should retain for his own benefit what was intended as a mere security; that the breach of condition was in the nature of a penalty, which ought to be relieved against, and that the mortgagor had an equity to redeem on payment of principal, interest and costs, notwithstanding the forfeiture at law. This principle of equity was victorious against the strong opposition of the common law judges, who thought that by 'the Growth of Equity on Equity the Heart of the Common Law is eaten out.' The equitable principle became firmly established and its application could not be frustrated even by the engagement of the debtor entered into at the time of the mortgage, the courts applying the equitable maxim 'once a mortgage, always a mortgage, and nothing but a mortgage.'

"Although the courts would have no authority to alter astatutory power of redemption, the legislation in questionpermits the courts to extend that period, within limits andupon equitable terms, thus providing a procedure and reliefwhich are cognate to the historic exercise of the equitablejurisdiction. If it be determined, as it must be, that the contract clause is not an absolute and utterly unqualified restriction of the State's protective power, this legislation is clearly so reasonable as to be within the legislative competency." (Italics supplied.)

While it is true that "in the absence of legislation, courts of equity have exercised jurisdiction in suits for the foreclosure of mortgages to fix the time and terms of sale and to refuse to confirm sales upon equitable grounds where they were found to be unfair, or inadequacy of price was so gross as to shock the conscience," the exercise of this jurisdiction does not mean that without statutory provision the courts of equity may withhold the decree of foreclosure which is required to be granted in conformity with the contract and the statutory law governing foreclosure. When a cause of this sort shall have proceeded to final decree it is clearly, by the weight of authority, within the jurisdiction and power of the chancellor, in the absence of any statutory provision to the contrary, to fix the date of forfeiture and foreclosure at such time and under such conditions as the facts in the case may show will be fair and equitable to all parties to the litigation. But under the law, as fixed by our foreclosure statutes we deem that the court of chancery may not withhold from the complainant in foreclosure suit the decree of foreclosure which is warranted under the law and facts merely because of adverse economic conditions and the resultant misfortunes of the defendant. The result of general adverse economic conditions must be assumed to operate on all alike and, therefore, that the mortgagor and mortgagee have come alike under the hardships incident thereto. Contracts of this character are made in anticipation of the fact that conditions may change and that the time may come when the mortgagee can only look to his security pledged in the mortgage for the payment of his debt and also that that security may have so depreciated in value as to be insufficient to bring the amount of his debt. The mortgagor enters into the contract not only agreeing to pay the debt but further agreeing as an evidence of his good faith and intention to pay the debt that if the debt is not paid at maturity the mortgagee shall have the right to enforce his pledge and to have the property described in the mortgage sold to pay the debt, or so much thereof as the pledged property will produce.

The time of payment is definitely fixed. If it is extended for any appreciable length of time it is impossible for man to foretell whether the extension will operate to the advantage and for the betterment of the mortgagor or of the mortgagee.

We must respect the sanctity of the contract, as did the court below, and affirm the order. It is so ordered.

Affirmed.

ELLIS, P. J., and TERRELL, J., concur.

WHITFIELD, C. J., and DAVIS, J., concur in the opinion and judgment.

BROWN, J., dissents in part.