Onsrud v. Kenyon

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Action brought by John A. Onsrud against S. V. Kenyon to recover the balance of $4,000 due as principal on a promissory note. Defendant moved to dismiss the complaint on the ground that the action was commenced in violation of sec.281.22 (4), Stats. 1937. The court granted the motion, and judgment dismissing the complaint was entered. Plaintiff appealed there from. This appeal is in an action commenced on December 3, 1937, to recover from defendant the balance of $4,000 owing as principal on a promissory note for $6,000. The note was secured by a mortgage on defendant's farm homestead, and on October 5, 1940, plaintiff commenced also an action of foreclosure based on the note and mortgage. Thereupon defendant, who had filed an answer and plea in abatement to the complaint in the action commenced on the note in December, 1937, moved for the dismissal of this action on the ground that it was commenced in violation of sec.281.22 (4), Stats. 1937, which prohibits the commencement of any action, excepting for the foreclosure of a mortgage, where the evidence of indebtedness is secured by a mortgage on real estate, until the mortgage is first foreclosed and the incumbered property sold on foreclosure and the sale confirmed. On the hearing of the motion the principal issue was the constitutionality of the statute, and upon the evidence produced by the parties, the court concluded that the statute was valid, and that under its provisions defendant was entitled to judgment dismissing the complaint.

On this appeal from the judgment plaintiff contends that sec.281.22, Stats., and particularly sub. (4) thereof, is unconstitutional on the grounds that it deprived a mortgage note-holder of valuable rights for a long and indefinite time without any compensating relief; that such denial of constitutional rights is justified only by a great public disaster or calamity, and then only by a law necessary and appropriate to alleviate the disastrous conditions, which affords protection to all parties and is of temporary duration; and that when sec. 281.22 (4), Stats., was enacted in 1937, no emergency amounting to a public disaster or calamity existed as a matter of fact, or if conditions of distress then existed they were not new conditions, but a continuation of conditions existing before 1931, and did not constitute an "emergency" condition; and that the provisions of sec. 281.22 (4), Stats., were not necessary to alleviate any conditions existing in 1937, or appropriate to any such conditions and do not afford protection to all parties involved, and are not limited or temporary in scope or time.

These contentions cannot be sustained. Plaintiff, as sole owner of the note and mortgage involved herein, is not deprived, as he contends, of valuable rights for a long and indefinite time. As such sole owner, he could and, on October 5, 1940, did bring an action to recover on the note and mortgage by the foreclosure thereof; and if there is a deficiency judgment upon the confirmation of a foreclosure sale, he can proceed to enforce payment thereof by attachment, garnishment, or execution as in the case of any judgment in an action based on solely the note. His contract is intact; he has not actually lost any contract right; and his property right survives. There is a change in but the order or method of procedure in that his remedy is in part postponed, but the limitation does not exceed the bounds of reason.

As was stated in Conley v. Barton, 260 U.S. 677, 681,43 Sup. Ct. 238, 67 L. Ed. 456, —

"It is recognized that the legislature may modify or change existing remedies or prescribe new modes of procedure without impairing the obligation of contracts if a substantial or efficacious remedy remains or is given, by means of which a party can enforce his rights under the contract." See alsoNorthwestern Mut. L. Ins. Co. v. Neeves, 46 Wis. 147,49 N.W. 832; Hanauer v. Republic Building Co. 216 Wis. 49,54, 255 N.W. 136, 256 N.W. 784.

By express provision in sub. (1) of sec. 281.22, Stats. 1937, the effect of sub. (4) thereof (which was originally enacted in 1935) was limited to the duration of the emergency and in any event not later than April 1, 1939; and by an amendment in 1939, that date was extended to April 1, 1941. In sub. (4) of sec. 281.22, Stats., there has been since its initial enactment the provision that "This is emergency legislation," and in sub. (1) thereof there has been the legislative declaration (without any change since 1937 excepting as to the extension of time), —

"that a public economic emergency does, and continues to, exist in the state of Wisconsin. A widespread drought within the state has aggravated and made more serious the conditions already existing. This economic emergency has deprived thousands of people in this state of employment, has necessitated the expenditure of many millions of public funds within this state to prevent starvation, has thrown the burden of support of thousands on the state and nation, has destroyed property values, and has caused many of the people of this state to lose their homes, their farms and their places of business by foreclosure of mortgages or execution upon judgments, and threatens the loss of homes, lands and business which furnished those in possession the necessary shelter and means of subsistence and livelihood, and resulting in increased burdens on the state. In view of this emergency it is deemed necessary to adopt reasonable means to safeguard and preserve through this crisis the vital economic structure upon which the good of all depends. Such measures are designated ``emergency legislation.' All laws so designated shall expire when the emergency ceases, which shall be so proclaimed by the governor, and in any event, not later than April 1, 1939, unless another date is specifically provided."

To such a legislative declaration and judgment there are applicable the rules stated by Mr. Justice STONE in SouthCarolina State Highway Dept. v. Barnwell Bros., Inc.,303 U.S. 177, 191, 58 Sup. Ct. 510, 82 L. Ed. 734, to wit:

"Being a legislative judgment it is presumed to be supported by facts known to the legislature unless facts judicially known or proved preclude that possibility. Hence, in reviewing the present determination we examine the record, not to see whether the findings of the court below are supported by evidence, but to ascertain upon the whole record whether it is possible to say that the legislative choice is without rational basis."

Upon the hearing in the circuit court there was considerable proof in respect to farm land values, prices paid for agricultural products and farmers' purchasing power in the prewar years of 1912 to 1914, and the years following until 1940, and although there were conflicts in the evidence, it reasonably admitted finding that in this state there was a gradual rise in such values and prices until about 1921, the year in which the note and mortgage involved herein were executed, when farm values were one hundred sixty-eight per cent of the prewar level; and that there was then a decline until in 1933 and 1934 there was reached the low point in farm values and they were but eighty per cent of prewar values, and that although there were some fluctuations in March, 1940, they were still but eighty-four per cent thereof, which was still but half of the values in 1921. In view of the proof establishing the existence of such facts and other distressing economic conditions, it cannot be said that there was no rational basis for the legislative declarations in enactments in 1935 to 1939 as to the continuing existence of the disastrous and distressing conditions and the consequent public economic emergency stated therein. Whether under the facts known to the legislature the existing conditions constituted such an emergency, the extent and effect and duration thereof, and what relief by legislation was necessary and appropriate to alleviate the disastrous consequences and afford due protection to all parties concerned, were matters to be determined by the legislature, and its judgment is presumed to be supported by facts within its knowledge, unless facts are proven that preclude that conclusion.

It is not necessary, as appellant contends, that great and public disaster or calamity result in order to constitute such an emergency as to justify the enactment, in the exercise of the police power, of a temporary legislative limitation on the exercise of a contractual right. An emergency justifying such legislation may exist when there is a great and public need for such relief, although it does not constitute a great public disaster or calamity. As the court said in Home Building Loan Asso. v. Blaisdell, 290 U.S. 398, 439, 54 Sup. Ct. 231,78 L. Ed. 413, —

"The reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all contracts, as is the reservation of state power to protect the public interest in the other situations to which we have referred. And if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood or earthquake. That power cannot be said to be nonexistent when the urgent public need demanding such relief is produced by other and economic causes." See also Hanauer v. Republic Building Co., supra, p. 57.

The mere fact that the distressing conditions which existed at the time of the re-enactment of sec. 281.22, Stats. 1937 and 1939, are the continuation of the abnormal conditions which first gave rise to the emergency and the resulting great and public need that necessitated alleviation by this emergency legislation when it was first enacted in 1935, does not impair the legislative power to continue to re-enact such legislation to protect the public against continuing disastrous consequences of the abnormal conditions because of which such alleviation is considered still necessary and appropriate by the legislature. The period during which that may be exercised cannot be limited to merely the earlier stage of the abnormal conditions which necessitated such remedial legislation when the emergency first arose, when there is a rational basis for the legislative finding that because of conditions which are still abnormal, the emergency is still in being and there is still great and pressing public necessity for such alleviation.

In support of his contentions appellant relies upon the decisions in First Trust Joint Stock Land Bank v. Arp,225 Iowa, 1331, 1335, 283 N.W. 441, 120 A.L.R. 932, and FirstTrust Co. v. Smith, 134 Neb. 84, 277 N.W. 762, in which reenactments in 1937 of the provisions of prior moratorium acts were held unconstitutional. In the Nebraska case the factual and legislative situation existing at the time of the re-enactment and continuing thereafter was examined by the court and was held to be insufficient to constitute such a temporary emergency as was considered necessary to justify the legislation. In the Iowa case the court reached a similar conclusion, and apparently determined that the temporary emergency no longer continued to exist "by record facts, history of current events, and common knowledge and information." On the other hand, in Wilson B. Co. Liq. Corp. v. Colvard, 172 Miss. 804,817, 161 So. 123, the court, in sustaining as constitutional a moratorium act enacted in April, 1934, and in passing upon the issue as to whether there existed at the time of the enactment such an urgent emergency as justified its passage, concluded that, although the evidence tended to show that at the time this act was passed, the price of farm products had advanced and business conditions had materially improved over those existing during the four years immediately preceding, the court could not say —

"from our knowledge of conditions, or from the evidence in this record, that the legislature had no basis in fact for its conclusion that an economic emergency then existed which called for the exercise of the police power to, grant relief."

Likewise, because of similar considerations in the case at bar, we cannot say that the legislature had no rational basis for its declaration that the economic emergency and the conditions stated in sub. (1) of sec. 281.22, Stats., did continue to exist and necessitate the re-enactment of the act in question.

By the Court. — Judgment affirmed.