East New York Sav. Bank v. Hahn

• Decision Date: 30 December 1944
• Citation: 293 N.Y. 622,59 N.E.2d 625
• Parties: EAST NEW YORK SAV. BANK v. HAHN et al.
• Court: New York Court of Appeals Court of Appeals

293 N.Y. 622

59 N.E.2d 625

EAST NEW YORK SAV. BANK

v.HAHN et al.

Court of Appeals of New York.

Dec. 30, 1944.

Appeal from Supreme Court, Kings County.

Action by East New York Savings Bank against Alvin Hahn and others. From a final judgment of the Supreme Court in favor of the defendant upon a dismissal of the complaint by the court on a trial at Special Term, Fennelly, J., at the close of plaintiff's case upon the ground that plaintiff had failed to establish that chapter 93 of the Laws of 1943 was invalid at the time it became a law or at the time of the commencement of the action, the plaintiff appeals on constitutional grounds.

Affirmed.

LEWIS, J., dissenting. John P. McGrath and Charles H. Heinlein, both of New York City, and John J. Buckley, of Brooklyn, for appellant.

George R. Fearon, of Syracuse, for Savings Banks Ass'n of State of New York, amicus curiae, in support of appellant's position.

No appearance for respondents.

Nathaniel L. Goldstein, Atty. Gen. (Orrin G. Judd and Herbert A. Einhorn, both of New York City, of counsel), appearing pursuant to section 68 of the Executive Law.

I. Nathanson, George A. Roland, and Seymour C. Simon, all of Brooklyn, for Slocum Realty Corporation, amicus curiae.

LEHMAN, Chief Judge.

The legislative declaration in chapter 793 of the Laws of 1933, Ex.Sess., that ‘a serious public emergency, affecting and threatening the welfare, comfort and safety of the people of the state and resulting from the abnormal disruption in economic and financial processes, the abnormal credit and currency situation in the state and nation, the abnormal deflation of real property values and the curtailment of incomes by unemployment and other adverse conditions, exists' did not ‘create’ a legislative power to suspend or change the legal remedies of holders of bonds and mortgages. The existence of conditions ‘affecting and threatening the welfare, comfort and safety of the people of the state’ may, however, furnish the occasion for the exercise of such power. Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413, 88 A.L.R. 1481;In re People, by Van Schaick (Title & Mortgage Guarantee Co., of Buffalo), 264 N.Y. 69, 94, 190 N.E. 153, 161, 96 A.L.R. 297. Concededly the existence of extraordinary conditions in 1933 as set forth in this legislative declaration and as confirmed by common knowledge, justified the extraordinary remedy that till July 1, 1934, no action should be brought to foreclose a mortgage for a default in the payment of principal. Klinke v. Samuels, 264 N.Y. 144, 190 N.E. 324. Each year thereafter the Legislature on similar findings decreed that the remedy provided in 1933 should remain in force for another year.

In 1943 the Legislature again declared that ‘the serious public emergency, which existed at the time of the enactment of * * * chapter seven hundred and ninety-three of the laws of nineteen hundred thirty-three * * * having continued, in the judgment of the Legislature, to the present time and still existing, the provisions of such chapters seven hundred and ninety-three of the laws of nineteen hundred thirty-three * * * shall * * * remain and be in faull force and effect until July first, nineteen hundred forty-four.’ The Legislature at the same time provided that an owner of mortgaged permises should not be entitled to claim the benefit of the suspension of the right to foreclose the mortgage unless he amortised the principal at the rate of one per cent per annum. The plaintiff challenges the finding of the Legislature that the ‘serious public emergency’ which existed in 1933 still existed in 1943, and urges that the exercise of the power of the Legislature to provide an extraordinary remedy for extraordinary conditions which was justified in 1933 may not be invoked in 1943 when the abnormal conditions of an earlier time have disappeared.

The Legislature has the responsibility of determining when extraordinary conditions exist ‘threatening the welfare, comfort and safety of the people of the state.’ Within the limits of its powers as defined by the Constitution of the State and as limited by the Constitution of the United States, choice of the appropriate remedy for such conditions is then vested in the Legislature. When the legislative choice of a remedy is challenged on the ground that it transcends the limits placed by the Constitution of the State or the Constitution of the United States upon the power of the Legislature and that it impairs the obligation of a contract or deprives a person of his property without due process of law, the legislative finding that a threatening public emergency exists is not conclusive. Judicial inquiry is not precluded whether the remedy chosen is within the power of a State Legislature ‘construed in harmony with the constitutional limitation on that power.’ In re People, by Van Schaick (Title & Mortgage Guarantee Co. of Buffalo), 264 N.Y. 69, 190 N.E. 153, 157, 96 A.L.R. 297. But upon such an inquiry the legislative findings are entitled to great weight and the legislative remedy will not be stricken down unless its invalidity is clearly established.

An extraordinary remedy which is appropriate and legitimate in an exigency resulting from abnormal conditions may be inappropriate and beyond the limits of the power of a State if temporary impairment of the obligation of a contract is continued after the exigency has passed. Block v. Hirsh, 256 U.S. 135, 157, 41 S.Ct. 458, 65 L.Ed. 865, 16 A.L.R. 165. When this court sustained the validity of limitations upon the remedies of the holder of a bond and mortgage created by chapter 793 of the Laws of 1933, Ex.Sess., we said that ‘such legislation, reasonably seeking only temporary relief, is not unconstitutional.’ Klinke v. Samuels, supra (264 N.Y. 144, 190 N.E. 326); italics are new. ‘It is always open to judicial inquiry whether the exigency still exists upon which the continued operation of the law depends.’ Home Building & Loan Ass'n v. Blaisdell, supra (290 U.S. 398, 54 S.Ct. 241).

Doubtless such a judicial inquiry would disclose that many perhaps all of the adverse conditions created by the ‘abnormal disruption in economic and financial processes' which, as the Legislature found, existed in 1933 and resulted in a ‘public emergency,’ disappeared before 1943. The Legislature did not, in 1943, find that these conditions still existed. It found only that the ‘serious public emergency’ existing in 1933 and ‘resulting’ from these conditions, still existed. In 1943 the fact that payrolls and savings bank deposits had increased in almost unprecedented degree was a matter of common knowledge. The Legislature could not ignore the great changes in the economic situation. On the other hand, an accumulation of past due mortgages resulting from the ten-year-old ban upon actions to foreclose mortgages for default in the payment of principal might reasonably cause apprehension that a flood of foreclosure actions would follow removal of the ban and might itself justify a statute reasonably calculated to stem the impending flood. Reports which legislative committees made to the Legislature in 1938 and 1943 as well as a message of the Governor called to the attention of the Legislature also the fact that abnormal conditions incident to a war economy or resulting from other causes might still constitute a threat ‘to the welfare, comfort and safety of the people of the state’ and might call for the exercise of the legislative power to provide an extraordinary remedy for extraordinary conditions.

The presumption is that the Legislature ‘inquired and found’ that under the conditions then disclosed there was need for a continuance of the suspension of the right of holders of bonds and mortgages to foreclose for default in the payment of the principal. Szold v. Outlet Embroidery Supply Co., 274 N.Y. 271, 278, 8 N.E.2d 858, 860. It is entirely unimportant whether the conditions then existing have created a new emergency, as said by the Governor in his message, or have, as the Legislature said, resulted in the continuance of an emergency itself created by conditions which have run their course. The question which the court must decide is whether the Legislature in the challenged statute has provided an appropriate remedy to tide over an exigency resulting from present conditions. We have said in an analogous case that : ‘Whether an emergency exists or not, the test in each case is whether a situation exists which calls for the exercise of the reserved power of the state and whether the remedy adopted by the state is reasonable and legitimate.’ In re People, by Van Schaick (Title & Mortgage Guarantee Co. of Buffalo), supra. We conclude that the challenged statute meets that test.

The judgment should be affirmed, with costs.

LEWIS, Judge (dissenting).

In this action to foreclose a mortgage on real property a challenge by a mortgagee to the constitutionality of the 1943 Mortgage Moratorium Law (L.1943, ch. 93) has been denied at Special Term. The defendants-mortgagors, who offered no proof in opposition to the plaintiff's case, have been awarded a judgment dismissing the complaint upon the ground that the evidence presented by the plaintiff-mortgagee failed to establish a cause of action.

Coming to us by direct appeal on constitutional grounds (Civil Practice Act, s 588, subd. 4) the case presents the question whether the undisputed facts of record afford a valid basis for the legislative finding upon which the challenged statute rests, viz., that the public emergency, which existed in 1933 at the time of the enactment of section 1077-a of the Civil Practice Act (L. 1933, Ex.Sess., ch. 793) continued and still constituted a public emergency on March 11, 1943, when chapter 93 of the Laws of 1943 became a law.

By the 1933 Mortgage Moratorium Law (L.1933, Ex.Sess., ch. 793) the Legislature declared ‘* * * that a serious public emergency, affecting and threatening...