Pomponio v. Claridge of Pompano Condominium, Inc.

• Citation: 378 So.2d 774
• Decision Date: 15 November 1979
• Docket Number: No. 52812,52812
• Parties: Arthur R. POMPONIO, et al., Petitioners, v. The CLARIDGE OF POMPANO CONDOMINIUM, INC., etc., et al., Respondents.
• Court: United States State Supreme Court of Florida

Page 774

378 So.2d 774

Arthur R. POMPONIO, et al., Petitioners, v. The CLARIDGE OF POMPANO CONDOMINIUM, INC., etc., et al., Respondents.

No. 52812.

Supreme Court of Florida.

Nov. 15, 1979.

Rehearing Denied Jan. 30, 1980.

Curtin R. Coleman, of Coleman, Leonard & Morrison, and Davis W. Duke, Jr., of McCune, Hiaasen, Crum, Ferris & Gardner, Fort Lauderdale, for petitioners.

Jeffrey E. Streitfeld and Mark B. Schorr, of Becker, Poliakoff & Sachs, Fort Lauderdale, for respondents.

ENGLAND, Chief Justice.

The present cause is before us to determine the constitutionality of section 718.401(4), Florida Statutes (1977), which provides for the deposit of rents into the registry of the court during litigation involving obligations under a condominium lease. ¹ We have jurisdiction pursuant to article V, section 3(b)(1) of the Florida Constitution. The question of whether this statute impermissibly impairs the obligation of contracts in violation of article I, section 10 of the Florida and federal constitutions an issue expressly reserved in an earlier case concerning the statute's operation ² is now squarely presented.

The Claridge of Pompano Condominium, Inc., ("the Association") and several individual unit owners who are members of the Association brought suit against the developer of the condominium and the lessors of a ninety-nine year recreational lease associated with the condominium. ³ The Association, as a representative of the unit owners, is the named lessee under the recreational lease. As required by section 718.401(4), the trial court granted the Association and unit owners' motion to permit payment of rents into the registry of the court, despite the developer and lessors' contention that the provision is unconstitutional. By this appeal, the developer and lessors seek to have the ruling reversed. We hold that the statute is unconstitutional.

The parties argue, respectively, that the rent deposit statute either permissibly modifies a contractual remedy or impermissibly impairs substantial contract rights and obligations. Yet a proper analysis of this issue cannot hinge exclusively on any supposed distinction between "remedies" and "obligations." The United States Supreme Court has discarded this distinction as "an outdated formalism," ⁴ and we choose to do likewise. To formulate a more logical approach to the question of impairment, it is necessary at the outset to examine the interpretive development of the contract clause in the decisions of the United States Supreme Court.

While the intent of the framers with respect to the contract clause has generated considerable speculation, its origins remain too obscure to be of any assistance in its construction. ⁵ It is nonetheless clear that in the early decisions of the United States Supreme Court the clause was interpreted literally as a strict prohibition. ⁶ As with other seemingly absolute constitutional provisions, however, it soon became evident that some degree of flexibility would have to be read into the clause to ameliorate the harshness of such rigid application. ⁷ In order to accommodate necessary legislation without deviating from the principle that all laws impairing the obligations of contract are constitutionally prohibited, the Court developed two basic analytical devices the "obligation-remedy" distinction and the "reserved powers" doctrine ⁸ both of which dominated contract clause interpretation for the next century.

The "Obligation-Remedy" Test

Home Building & Loan Association v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231 (1934), is the most important case in the history of contract clause interpretation. ⁹ In Blaisdell, the Court upheld a mortgage moratorium statute that Minnesota had enacted to provide relief for homeowners threatened with foreclosure. The statute enabled a court to extend the time for redemption beyond that provided for in the mortgage contract. Though the statute directly affected lenders' foreclosure rights, the Court ruled that it did not violate the contract clause, reasoning that "the state . . . continues to possess authority to safeguard the vital interests of its people." ¹⁰

In its decision, the Blaisdell majority traced the judicial history of the obligation-remedy distinction ¹¹ and the reserved powers doctrine ¹² in contract clause analysis. It then concluded:

It is manifest from this review of our decisions that there has been a growing appreciation of public needs and of the necessity of finding ground for a rational compromise between individual rights and public welfare. . . .

It is no answer to say that this public need was not apprehended a century ago, or to insist that what the provision of the Constitution meant to the vision of that day it must mean to the vision of our time. . . . "The case before us must be considered in the light of our whole experience and not merely in that of what was said a hundred years ago." ¹³

Having jettisoned the analytical framework which governed prior contract clause cases, the Court formulated a new test against which legislation would be measured:

The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, but whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end. ¹⁴

Thus, beginning with Blaisdell, the Court began to permit certain "reasonable" impairments of contractual obligations. ¹⁵ This new and more flexible approach to contract clause analysis later was refined and developed by the Court in three major cases. ¹⁶

The Evolving "Reasonableness" Test

In City of El Paso v. Simmons, 379 U.S. 497, 85 S.Ct. 577 (1965), the Court stated that it would not even "pause to consider . . . again the dividing line under federal law between 'remedy' and 'obligation' . . . ." ¹⁷ Instead, the majority noted that "decisions dating from (Blaisdell ) have not placed critical reliance on the distinction between obligation and remedy," and proceeded to demonstrate that its post-Depression rulings had been made "without any regard to whether the measure was substantive or remedial." ¹⁸ Recognizing that " '(t)he Constitution is "intended to preserve practical and substantial rights, not to maintain theories," ' " ¹⁹ the Court in Simmons clearly refuted the notion that statutes could be properly measured by any criteria other than reasonableness:

This Court's decisions have never given a law which imposes unforeseen advantages or burdens on a contracting party constitutional immunity against change. . . . Laws which restrict a party to those gains reasonably to be expected from the contract are not subject to attack under the Contract Clause, notwithstanding that they technically alter an obligation of a contract. ²⁰

In resolving the controversy before it, the Simmons majority applied what Justice Black decried in dissent as a "balancing" test, ²¹ giving due consideration for the "buyer's undertaking," whether "the buyer was substantially induced to enter into these contracts" because of the promise, and the significance of the "State's vital interest," ²² and concluded that the Texas statute at issue was constitutionally permissible because "(t) he measure taken . . . was a mild one indeed, hardly burdensome to the purchaser . . ., but nonetheless an important one to the State's interest." ²³

The next major decision in the interpretive development of the contract clause was United States Trust Co. v. New Jersey, 431 U.S. 1, 97 S.Ct. 1505 (1977). ²⁴ The Court's analysis in United States Trust both expanded upon the "balancing" test of Simmons and refined the "reasonableness" standard of Blaisdell:

(a) finding that there has been a technical impairment is merely a preliminary step in resolving the more difficult question whether that impairment is permitted under the Constitution.

. . . (T)he Contract Clause limits otherwise legitimate exercises of state legislative authority, and the existence of an important public interest is not always sufficient to overcome that limitation. . . . Moreover, the scope of the State's reserved power depends on the nature of the contractual relationship with which the challenged law conflicts.

. . . The Court in Blaisdell recognized that laws intended to regulate existing contractual relationships must serve a legitimate public purpose. . . . Legislation adjusting the rights and responsibilities of contracting parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption. ²⁵

The Court concluded that the correct standard to be employed in assessing the validity of legislation affecting a state's own contracts is that:

(a)s with laws impairing the obligations of private contracts, An impairment may be constitutional if it is reasonable and necessary to serve an important public purpose. ²⁶

In finding that the challenged statute did not satisfy this test, the Court emphasized that while "(t)he extent of impairment is certainly a relevant factor in determining its reasonableness," an enactment cannot be considered "necessary" if the legislature "without modifying the covenant at all, . . . could have adopted alternative means of achieving their . . . goals," because "a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well." ²⁷

In its most recent pronouncement on the subject, Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716 (1978), the Court invalidated a Minnesota law which retroactively imposed upon certain private companies with voluntary pension plans additional obligations as to employees who would not have been entitled to such benefits under the original terms of the plan. Without any mention of the obligation-remedy distinction, the majority reviewed the underpinnings of the Court's post Blaisdell decisions and formulated its statement of the proper approach to...