Pennsylvania Co. for Insurances on Lives and Granting Annuities v. Scott

• Decision Date: 21 March 1938
• Docket Number: 78
• Citation: 329 Pa. 534,198 A. 115
• Parties: Pennsylvania Company for Insurances on Lives and Granting Annuities et al., Appellants, v. Scott, Prothonotary, et al
• Court: Pennsylvania Supreme Court

198 A. 115

329 Pa. 534

Pennsylvania Company for Insurances on Lives and Granting Annuities et al., Appellants, v. Scott, Prothonotary, et al

No. 78

Supreme Court of Pennsylvania

March 21, 1938

Argued January 5, 1938

Appeal, No. 78, Jan. T., 1938, from order of C.P. No. 1 Phila. Co., Sept. T., 1937, No. 2459, in case of The Pennsylvania Company for Insurances on Lives and Granting Annuities and V. Dorothy Osborne Freeman, Trustees, v. John M. Scott, Prothonotary, and Richard S. Cross, intervener. Order reversed.

Petition for writ of alternative mandamus.

The opinion of the Supreme Court states the facts.

Petition dismissed, opinion by McDEVITT, P.J. Plaintiffs appealed.

Error assigned was dismissal of petition.

The order appealed from is reversed, the record is remitted for further proceeding not inconsistent with this opinion; each side to pay its own costs.

Joseph Neff Ewing, with him Samuel E. Ewing, Jr., of Saul, Ewing Remick & Saul, and Murray Forst Thompson, for appellants.

George Linton, with him Hugh D. Scott, Jr., for intervenor, appellee.

Before KEPHART, C.J., SCHAFFER, MAXEY, DREW, LINN, STERN and BARNES, JJ.

OPINION

MR. JUSTICE LINN:

This appeal involves the constitutional validity of the Act of July 2, 1937, P.L. 2751, 21 PS section 821a et seq., entitled: "An Act to protect the obligors or guarantors of bonds and mortgages, and owners of property affected thereby, and others indirectly liable for the payment thereof, by prohibiting, for certain periods, the foreclosure sale of mortgaged property at less than its fair market value; and prescribing the method of fixing the fair market value of said property." ^[1]

The appellants, as trustees under a will, held a bond and mortgage dated June 19, 1925, in the sum of $9,000, secured on premises in Philadelphia. On July 7, 1937, for default in payment of principal, interest and taxes for the years 1935 and 1936, judgment for $10,512 was entered. August 19, 1937, appellants applied for a writ of levari facias directed to the sheriff to proceed with execution on the judgment. The respondent, prothonotary of the court below, declined to issue the writ on the ground of "the failure of your Petitioners to file a statement in Court releasing the obligors from personal liability or to have the fair market value of the mortgaged premises fixed by the Court upon Petition filed as required by the Act" in question. Appellant then applied for a writ of mandamus requiring respondent to perform his duty. The mortgagor, Richard S. Cross, intervened as a party respondent. The mandamus was refused and this appeal followed.

Appellants present four contentions: (1) that the act is a special law changing the method for collecting debts and enforcing judgments and prescribing the effect of judicial sale of real estate; (2) that, as to this mortgage, the Act violates the impairment of contract clauses of the state and federal constitutions; (3) violates the due process clause of the 14th amendment to the federal constitution, and (4) that the title is defective under Article III, section 3, of the state constitution. The appellees deny these contentions. As the parties seem to agree that the Act is not a moratory statute, it is unnecessary to discuss the nature and extent of the exercise of the power under which so-called emergency legislation of that character is sustained or rejected.

We think the Act is clearly a special law within the prohibited sense. Article III, section 7, of the constitution provides, inter alia, "The General Assembly shall not pass any local or special law . . . providing or changing methods for the collecting of debts, or the enforcing of judgments, or prescribing the effect of judicial sales of real estate." This prohibition deals with three subjects: (1) the method of collecting debts, (2) the method of enforcing judgments and (3) the effect of judicial sales of real estate. The act applies to the entire state and is therefore not a local law; it applies to mortgage debts existing when it was passed or thereafter created.

In examining the contentions of the parties, we must consider and apply the now well established test of sustainable classification. In Ayars's Appeal, 122 Pa. 266, at page 281, 16 A. 356, we said: "Some of the cases above cited have been quoted at considerable length for the purpose of showing that this court never intended to sanction classification as a pretext for special or local legislation. On the contrary, the underlying principle of all the cases is that classification, with the view of legislating for either class separately, is essentially unconstitutional, unless a necessity therefor exists, -- a necessity springing from manifest peculiarities, clearly distinguishing those of one class from each of the other classes, and imperatively demanding legislation for each class, separately, that would be useless and detrimental to the others. Laws enacted in pursuance of such classification and for such purposes, are, properly speaking, neither local nor special. They are general laws, because they apply alike to all that are similarly situated as to their peculiar necessities. All legislation is necessarily based on a classification of its subjects, and when such classification is fairly made, laws enacted in conformity thereto cannot be properly characterized as either local or special. A law prescribing the mode of incorporating all railroad companies is special, in the narrow sense that it is confined in its operations to one kind of corporations only; and, by the same test, a law providing a single system for organization and government of boroughs in the state, would be a local law; but every one conversant with the meaning of those words, when used in that connection, would unhesitatingly pronounce such statutes general laws. But, as was said in Scowden's Appeal , supra, 'classification which is grounded on no necessity and has for its sole object an evasion of the constitution' is quite a different thing.

"The purpose of the provision under consideration was not to limit legislation, but merely to prohibit the doing, by local or special laws, that which can be accomplished by general laws. It relates not to the substance, but to the method of legislation, and imperatively demands the enactment of general, instead of local or special laws, whenever the former are at all practicable."

As our inquiry is whether the legislature has attempted, for the benefit of a special class of debtors, to change the method of collecting debts or enforcing judgments, we examine what may be regarded as a typical transaction to which the Act would apply, and compare it with other more or less similar transactions to see whether the class, created out of all the debtors in the state, is supported, as appellees must contend, by "a necessity springing from manifest peculiarities, clearly distinguishing those of one class from each of the other classes, and imperatively demanding legislation for each class, separately, that would be useless and detrimental to the others." The typical transaction is the borrowing by one of money from another; the borrower agrees to repay the loan. The agreement to repay may be shown in various ways; it may be (1) oral, or (2) by simple promissory note, or (3) by such note containing a warrant to confess judgment, or (4) by promissory note or notes secured by the deposit of collateral with specific power to sell for default, or (5) the security may be land in the form of a mortgage without an accompanying written obligation ( Tonkin v. Baum, 114 Pa. 414, 7 A. 185), or (6) of a mortgage with a bond and warrant to confess judgment. The transaction may take other forms. If the borrower defaults and proceedings to collect become necessary, the lender must obtain judgment unless by the contract he has power to sell the collateral, or the mortgage trustee is authorized to sell in case of default as in Bruckman Lumber Co. v. Pittsburgh Insurance Co., 307 Pa. 561, 162 A. 204. While the transactions creating the debt differ in form, there is no difference in the method of collecting the debt by proceeding in personam; it is immaterial to the present inquiry, that, from early days, there have been several methods ^[2] of recovering a mortgage debt.

The absence of substantial basis for selecting the special class proposed in the statute, will appear even more clearly, we think, if the typical cases of two borrowers be considered each having property of the same kind and amount, each in default in repaying a loan of -- say $1,000 -- one creditor being secured by bond and mortgage, and the other by a bond without a mortgage or by a judgment note which, if under seal, is a bond. Judgment is entered in each case by means of the warrant to do so. Execution is necessary. Each defendant had land of the same value, in one case, mortgaged; in the other, not. What substantial basis can there be for discriminating between the two and allowing the judgment note creditor to resort to the usual method of collecting his debt and enforcing his judgment by immediate execution, and to change that method and deprive the other, or mortgage creditor, of precisely the same right the other lender had and, in addition, subject him to possibly two years' delay, together with a loss of interest and taxes, as provided by the challenged Act? There is nothing to justify the discrimination; to say that one creditor has a mortgage and the other has not, is not sufficient; such a difference is not a "necessity springing from manifest peculiarities, clearly distinguishing those of one class from each of the other classes, and imperatively demanding legislation for each class, separately, that would be useless and detrimental to...