United States Mortgage Co. v. Matthews

Digges, J., delivered the opinion of the Court. On July 30th, 1925, Walter H. Worner, unmarried, executed to the Mortgage Gurantee Company, of Baltimore City, a mortgage on property located in Baltimore City known as No. 1339 Patapsco Avenue, to secure a debt of $3,000 due by him to the mortgagee. On July 30th, 1932, the Mortgage Guarantee Company assigned to Mary E. Matthews and John Matthews an undivided 500/2950 share, equivalent to $500, in the Worner mortgage, $50 having been paid on the principal at the time of the assignment; which $500 interest in the mortgage thereby assigned was due and payable on July 30th, 1935. The mortgage contained the usual covenant for the payment of the principal debt and interest, for the payment of all taxes and assessments, and for keeping the property insured for the benefit of the mortgagee.

The mortgage also contained the following language: And the said mortgagor doth hereby declare his assent to the passing of a decree by the Circuit Court of Baltimore City or the Circuit Court No. 2 of Baltimore City for a sale of the property hereby mortgaged in accordance with Sections 720 to 732, inclusive, of Chapter 123 of the laws of Maryland passed at the January session 1898 or any amendments or additions thereto. And upon any default in the terms of this mortgage a sale may be made by the said mortgagee, its successors or assigns, or by its or their attorney under article 66, secs. 6 to 10, inclusive, of the Maryland Code of 1904, Public General Laws, or any other general or local laws of the State of Maryland relating to mortgages. And it is agreed that upon any sale of said property under this mortgage, whether under the above ³⁸⁶ assent to a decree or under the above power of sale, the proceeds of sale shall be applied as follows, to wit, first, to the payment of all expenses incident to said sale, including a counsel fee of twenty-five dollars for conducting the proceedings if without contest, but if legal services be rendered to the mortgagee or its assignee or to the trustee or party selling under the power of sale in connection with any contested matter in the proceedings, then such other counsel fees and expenses shall be allowed out of the proceeds of sale as the Court may deem proper, and also a commission to the party making said sale equal to the commission allowed trustees for making sales of property under decree of a Court of Equity in Maryland; second, to the payment of all claims of the mortgagee, its successors or assigns hereunder, whether the same shall have then matured or not; and third, the balance if any to the said mortgagor, his heirs, executors, administrators or assigns.” Sections 6 to 10 of article 66 of the Code of 1904, referred to in the mortgage, are now the same sections of the same article of the Code of 1924. Section 720 of chapter 123 of the Acts of 1898, now codified as section 720 of article 4 of the Code of Public Local Laws, title “Baltimore City,” subtitle “Mortgages,” was in force at the date of the execution of the mortgage, and reads as follows: “In all cases of conveyances of lands or hereditaments or of chattels real, or goods and chattels personal, situate in the said city, wherein the mortgagor shall declare his assent to the passing of a decree for the sale of the same, it shall be lawful for the mortgagee or his assigns at any time after filing the same to be recorded, to submit to either of the Circuit Courts of Baltimore City the said conveyances or copies thereof, under seal of the Superior Court; and the Circuit Court to which the same is so submitted, may thereupon forthwith decree that the mortgaged premises shall ³⁸⁷ be sold at any one of the periods limited in said conveyances for the forfeiture of said mortgages or limited for a default of the mortgagors, and on such terms of sale as to the said court may seem proper, and shall appoint by said decree a trustee or trustees for making such sale, and shall require bond and security for the performance of the trust as is usual in cases of salés of mortgaged premises.” This section was originally enacted by chapter 181 of the Acts of 1833, and subsequently amended by chapter 249 of the Acts of 1836 and chapter 197 of the Acts of 1890.

It was also designated in the Code of Public Local Laws of 1860 as article 4, sec. 782, and in the Code of Public Local Laws of 1888 as article 4, sec. 692. There has been no amendment since the enactment of chapter 123 of the Acts of 1898, until the passage of chapter 56 of the Extra Session of the General Assembly of 1933. By that chapter (section 1) it was enacted: “That a new section be and the same is hereby added to Article 4 of the Code of Public Local Laws of Maryland (1930 Edition), title ‘Baltimore City,’ sub-title ‘Mortgages,’ said new section to be known as 720A and to follow immediately after Section 720, and to read as follows: 720A. In all cases submitted to either of the Circuit Courts of Baltimore City for the passage of a decree as provided for in Section 720 aforesaid, no such decree shall hereafter be passed during the period of emergency hereinafter declared, unless such application is made or concurred in by the record holders of not less than 25% of the entire unpaid mortgage debt, it being hereby declared to be the intent of this Section during the period this Section is effective, that the holder or holders of a fractional interest in an entire mortgage debt of less than 25% of the entire interest, shall not have recourse to the summary and exparte remedies given under Section 720.” Section 2 of chapter 56 provides: “That the period of the emergency hereinbefore declared as a matter of Legislative determination, shall be the period of time from the date this Act takes effect to the first day of June, 1935.” By ³⁸⁸ section 3 of this chapter the law was declared to be an emergency one and necessary for the immediate preservation of the public health and safety, and being passed by affirmative vote of the necessary three-fifths of all the members elected to each of the two Houses of the General Assembly, should take effect from the date of its passage.

Chapter 56 was approved and became effective December 15th, 1933. The case of Richardson v. Owings, 86 Md. 663 , 39 A. 100 , construed section 720 of chapter 123 of the Acts of 1898, and held that the holder of a fractional part of a mortgage on property in Baltimore City was entitled to the benefits of and to proceed under the provisions of section 720 as it then stood. The date of that decision was January 4th, 1898, and the effect of it was to hold that the word “mortgagee” therein used applied to any fractional holder of such a mortgage, as fully as where the whole mortgage was held by one individual. That decision permitted any holder of a fractional part of a mortgage, without regard to the amount of such holding or interest, to apply for and obtain a decree in accordance with the provisions of section 720.

It will thus be seen that at the time of the execution of the mortgage here in question, as also at the time of the assignment to Mary E. and John Matthews, the appellees, by which they became the holders of 500/2950 of said mortgage, they had the right to apply for and receive a decree for the sale of sáid property, without regard to whether or not at that timé there had been a default in the mortgage. While they could obtain such decree and have a trustee appointed to make sale, the property could not be sold until a default had occurred. On December 22nd, 1933, seven days after chapter 56 of the Acts of 1933 (Ex. Sess.) became effective, the appellees petitioned the Circuit Court No. 2 of Baltimore City for a decree and appointment of a trustee to make sale of the property, in which petition they alleged that the mortgage was in default, in that the covenant to pay the taxes had not been kept, by reason of the taxes for ³⁸⁹ the years 1932 and 1933 not being paid.

Accompanying the petition as exhibits, there were filed the mortgage and assignment to the appellees of their fractional interest. Following the filing of the petition, the appellant United States Mortgage Company, the then owner of the equity of redemption in the property described in the mortgage, and the Mortgage Guarantee Company, the other appellant, the holder of record or the duly authorized representative of approximately eighty-three per cent, of the unpaid mortgage debt secured by the mortgage, upon their application and under an order of court, were permitted to intervene in the proceeding as respondents, and answered the petition, opposing the granting of a decree as prayed for therein, and setting up the provisions of the act of 1933, chapter 56, as a reason why the petition of the appellees should not be granted. Testimony was taken in open court, and after argument a decree was passed on March 22nd, 1934, wherein it was ordered that the mortgaged property in the proceedings mentioned be sold at or after any one of the periods limited in the mortgage filed for the foreclosure of said mortgage, and appointing Clarence H. Tucker as trustee to make said sale, requiring bond of the trustee, and particularly describing the manner and mode of procedure in making the sale. From this decree the appeal here was taken.

The appellees contended that the Act of the Extra Session of 1933, chapter 56, was unconstitutional and void, as being in conflict with section 10 of article 1 of the Constitution of the United States, which prohibits the state from passing any law impairing the obligation of a contract; that said chapter 56 denies to the appellees the equal protection of the laws, guaranteed by the Fourteenth Amendment of the Constitution of the United States; and that the said act contravenes the Declaration of Rights of Maryland, in that it deprives the appellees of their property contrary to the law of the land within the meaning of articles 19 and 23 and 44 of the Declara ³⁹⁰ tion of Rights. The appellants deny those contentions, and in addition to that denial contend that, by the language of the mortgage, the mortgagor assented to the sale of the property under and in accordance with the provisions of sections 720 to 732, inclusive, of chapter 123 of the Acts of 1898 (now codified as sections 720 to 732 of article 4 of the Code of Public Local Laws 1930, title “Baltimore City,” subtitle “Mortgages”), or any amendments or additions thereto; which meant that the mortgagor consented to having the proceedings for a consent decree governed by any future amendments or additions to those sections which should become effective before the application for the consent decree. While it is true that, at the time this language was incorporated in the mortgage, there had been no explicit amendment or addition to those sections of the law providing for consent decrees, the argument is made that the language was intended to apply to any future amendments or additions. We are unwilling to give sanction to such a construction, and we hold that the intention of the parties in employing that language embraced only such amendments or additions as had been made prior to the execution of the mortgage.

A contrary holding would mean that a complete destruction of that remedy was contemplated. Coming now to the contention that the said chapter 56 of the Acts of 1933 (Ex. Sess.) is unconstitutional because in violation of the Federal Constitution’s prohibition against states passing laws violating the obligation of contracts: There is no doubt of the power of the state to change the remedy, or the mode of enforcing the right contained in the contract, provided the remedy which is left, or the method substituted therefor, be substantially equivalent in coercive force to that provided by the law when the obligation was contracted. Or, as stated in New Orleans C. & L. R. Co. v. Louisiana, 157 U. S. 219 , 15 S. Ct. 581, 583 , 39 L. Ed. 679 : “Modes of procedure in the courts of a state are so far within its control that a particular remedy existing at the time of the making ³⁹¹ of a contract may be abrogated altogether, without impairing the obligation of the contract, if another and equally adequate remedy for the enforcement of that obligation remains, or is substituted for the one taken away.” See Bronson v. Kinzie, 1 How. 311, 315 , 11 L. Ed. 143 ; Von Hoffman v. Quincy, 4 Wall, 535, 552, 18 L. Ed. 403 ; Conn.

M. Life Ins. Co. v. Cushman, 108 U. S. 51, 64 , 2 S. Ct. 236 , 27 L. Ed. 648 ; McGahey v. Virginia, 135 U. S. 662, 685, 693 , 10 S. Ct. 972 , 34 L. Ed. 304 ; Home Bldg. Assn. v. Blaisdell, 290 U. S. 398 , 54 S. Ct. 231 , 78 L. Ed. 413 , 88 A. L. R. 1481, and cases there cited in note 13; State, use of Isaac, v. Jones, 21 Md. 432 ; Madigan v. Workingmen’s Bldg. Assn., 73 Md. 317 , 20 A. 1069 ; Wilson v. Simon, 91 Md. 1 , 45 A. 1022 ; Balto. & O. R. Co. v. Maughlin, 153 Md. 367 , 138 A. 334 . “The obligation may be impaired by a change in the remedy in force at the time when the contract was entered into.

If the subsequent law