Citizens Mut. Bldg. Ass'n Inc v. Edwards

• Court: Virginia Supreme Court
• Writing for the Court: EGGLESTON, Justice
• Citation: Citizens Mut. Bldg. Ass'n Inc v. Edwards, 167 Va. 399, 189 S.E. 453 (1937)
• Decision Date: 14 January 1937
• Parties: CITIZENS MUT. BLDG. ASS'N, Inc. v. EDWARDS.

189 S.E. 453

CITIZENS MUT. BLDG. ASS'N, Inc.

v.EDWARDS.

Supreme Court of Appeals of Virginia.

Jan. 14, 1937.

Error to Law and Chancery Court of City of Norfolk; Richard McIlwaine, Judge.

Suit by Mrs. Karl C. Edwards against the Citizens Mutual Building Association, Incorporated. Judgment for plaintiff, and defendant brings error.

Affirmed.

Argued before CAMPBELL, C. J., and HOLT, HUDGINS, GREGORY, BROWNING, EGGLESTON, and SPRATLEY, JJ.

Mann & Tyler, of Norfolk, for plaintiff in error.

M. T. Bohannon and J. Hume Taylor, both of Norfolk, for defendant in error.

EGGLESTON, Justice.

On March 10, 1931, the Citizens Mutual Building Association, Incorporated (hereinafter referred to as the building association), executed and delivered to Mrs. Karl C. Edwards (hereinafter called the plaintiff) its bond in the principal sum of $500, bearing interest at the rate of 6 per cent, per annum, and payable to her order on January 1, 1936.

Payment of the obligation at its maturity having been demanded and refused, the present suit was instituted in the court below by a notice of motion for judgment returnable on February 17, 1936. This notice was properly served, returned to the clerk's office, and the cause was duly docketed.

On the return day of the notice of motion counsel for the plaintiff moved for judgment. This was resisted by the defendant on the ground that one of its attorneys was a member of the General Assembly of Virginia, which was then in session, and the cause was continued until after the adjournment of that body.

On April 10, 1936, the defendant filed a special plea averring that, pursuant to Code Supp. 1932, § 4167 (17), as amended by Acts 1934, c. 142, the State Corporation Commission, on March 31, 1936, on the ex parte application of the defendant, had entered an order wherein it had found that the said defendant building association was "confronted with an emergency due to probable withdrawals of funds and otherwise"; that consequently said order had authorized and directed the said defendant to "suspend the payment of indebtedness by the association, however evidenced, for a period of six months from March 28, 1936, * * * unless otherwise directed or permitted by the State Corporation Commission"; that the defendant association had "accepted the said order and in pursuance thereof, by resolution of its board of directors, suspended the payment of its indebtedness, however evidenced, including the indebtedness now sued on, for the period named in the order"; and that pending said order the trial court was without jurisdiction to proceed with the cause.

To this plea the plaintiff filed a demurrer contending that Code Supp. 1932, § 4167 (17), clause sixth, as amended by the Acts of 1934, p. 217, c. 142 (relied on by the defendant), and the order of the State Corporation Commission based thereon and purporting to suspend the payment of plaintiff's claim, were in derogation of the rights guaranteed to her by the Federal and State Constitutions.

The court sustained the demurrer to the special plea, and, there being no defense on the merits to the action, entered a judgment in favor of the plaintiff for the amount claimed.

The sole assignment of error is to the action of the court in sustaining the demurrer to the plea and entering judgment for the plaintiff. In support of this position the building association asserts:

(1) That the action of the commission and the statute in question are not violative of either the Federal or the State Constitution.

(2) That the action of the trial court in retaining jurisdiction of the cause and in proceeding to final judgment therein had the effect of reviewing and annulling the order entered by the State Corporation Commission on March 31, 1936, and as such was contrary to subsection (d) of section 156 of the Virginia Constitution.

Code Supp.1932, § 4167 (17), as amended by the Acts of 1934, p. 217, c. 142 provides for the supervision by the State Corporation Commission of all building and loan associations doing business in this State; the examination of such associations by the Commissioner of Insurance and Banking; and the assessment against said associations of the necessary fees for the purpose of defraying the expenses of such supervision and examination. Then follows the provisions of the act which are here under review:

"If, upon the examination of any such building and loan association, the State Corporation Commission shall ascertain that the laws of this State are not being fully observed or that any irregularities are being practiced, or that the capital stock of such association has been impaired or is in danger of being impaired, or that the interests of the public are not being properly protected, the said commission shall give immediate notice thereof to theofficers and directors of such association and if deemed necessary in order to conserve the assets of such association or to protect the interest of members and creditors, or either, thereof, the commission may exercise any or all of the following powers: * * * (sixth) without examination, close, for such period or periods as the commission may deem necessary, any association facing an emergency due to withdrawal of funds or otherwise, or without closing such association grant to it the right to suspend or limit the payment of indebtedness by the association, however evidenced, for such period as the commission may determine; and during such period no court shall entertain a suit or action therefor against such association. The powers enumerated in (one), (two) and (six) shall be exercised by the commission only upon request of the directors of such association."

Some idea of the far-reaching scope of this statute may be gathered from what happened here. Pursuant to the provisions of this act, on the ex parte application of the building association, the commission granted to it a moratorium suspending the payment of its debts on the ground that it was "confronted with an emergency due to probable withdrawals of funds and otherwise." This was done "without examination" of the association, without closing it, without taking its assets into custody, without inaugurating any steps for its liquidation, without notice to the creditors affected, and without making any provision for the payment or security of their claims, although a suit was then actually pending in a court of competent jurisdiction to enforce the payment of one of such claims.

During the pendency of this cause the defendant building association again appeared before the commission on May 11, 1936, and on its ex parte application the said order of March 31, 1936, was modified to permit and allow the building association to pay some of its debts in full without paying or securing the payment of others.

Again, on September 28, 1936, and on the ex parte application of the building association, the commission extended the moratorium period for an additional term of six months from that date.

In fairness to the State Corporation Commission it should be said that there is no contention that its action went beyond the provisions of the statute.

The first question which we are called upon to answer is, Does this statute, and the action of the commission based thereon, violate the rights guaranteed to the plaintiff by the Federal and State Constitutions?

Article 1, § 10, of the Constitution of the United States, provides: "No State shall * * * pass any * * * Law impairing the Obligation of Contracts."

Section 58 of the Virginia Constitution says: "The general assembly shall not pass * * * any law impairing the obligation of contracts."

The Fourteenth Amendment to the Constitution of the United States provides: " * * * nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."

The plaintiff's contract with the defendant association was made in 1931, three years prior to the legislative enactment authorizing the granting of this moratorium. Her rights are to be determined by the law in force at the date of the making of the contract. W. B. Worthen Co. ex rel. Board of Com'rs v. Kavanaugh, 295 U.S. 56, 60, 55 S.Ct. 555, 79 L.Ed. 1298, 97 A.L.R. 905.

According to the law in effect at the inception of the contract the plaintiff had the right, upon default in the payment of the bond, immediately to institute an action on the contract in the forum which she selected, and, upon presentation of proper evidence, to secure judgment and collect the debt according to the then established processes of law.

If the act of the General Assembly under review is to be given its full force and effect, then the State Corporation Commission was empowered, on the ex parte application of the defendant association and without notice to the plaintiff, to.enter an order suspending the payment of the plaintiff's claim for an indefinite period, and thereby bring into operation the provision of the statute ousting, during the pendency of said order, the jurisdiction of the court which had theretofore attached.

To us it is clear beyond question that this act of the General Assembly, which undertook to give such power to the State Corporation Commission, was in violation of the rights guaranteed to the plaintiff by the Federal and State Constitutions.

The widespread economic disturbance of the last few years has prompted the passage of many laws of a moratory nature by the legislatures of the several States, and the attack on the constitutionality of these has produced a multitude of decisions from the federal and state courts. It would serve no useful purpose to undertake to here review and classify these. Many of such cases are collected in the annotations found in 86 A.L.R. 1539; 88 A.L.R. 1519; 90 A.L.R. 1330; 94 A.L.R. 1352; 96 A.L.R. 312, 826, 853; 97 A.L.R. 911, 1123; 104 A.L.R. 375.

An examination of a number of these cases convinces us that the...