Richmond Mortgage Loan Corporation v. Wachovia Bank Trust Co
| Decision Date | 01 February 1937 |
| Docket Number | No. 235,235 |
| Citation | 108 A.L.R. 886,81 L.Ed. 552,57 S.Ct. 338,300 U.S. 124 |
| Parties | RICHMOND MORTGAGE & LOAN CORPORATION v. WACHOVIA BANK & TRUST CO. et al |
| Court | U.S. Supreme Court |
Appeal from the Supreme Court of the State of North Carolina.
Messrs. Kester Walton and John Y. Jordan, Jr., both of Asheville, N.C., for appellant.
[Argument of Counsel from page 125 intentionally omitted] Mr. S. G. Bernard, of Asheville, N.C., for appellees.
This is an appeal from a judgment of the Supreme Court of North Carolina1 sustaining the validity of a statute claimed to impair the obligation of a contract, contrary to article 1, section 10, of the Federal Constitution. The act provides that when the mortgagee, payee, or other holder of an obligation secured by real estate or personal property causes a sale of the property by a trustee, becomes the purchaser for a sum less than the amount of the debt and afterwards brings an action for the deficiency, the defendant may show, by way of defense and set-off, that the property sold was fairly worth the amount of the debt or that the sum bid was substantially less than the true value of the property, and thus defeat the claim in whole or in part. The provision is copied in full in the margin.2
In 1928 the appellees borrowed $8,000 from the appellant for which they executed negotiable promissory notes. As security they delivered a deed of trust pledging real estate. Upon default the appellant demanded that the trustee declare the indebtedness due, in accordance with the terms of the notes and deed of trust, and exercise the power of sale given by the deed. The trus- tee advertised the property as required by the deed and the laws of the state, and made sale June 19, 1933; and one acting in appellant's interest purchased the land for $3,000. Upon expiration of a ten-day period of redemption the property was conveyed to the purchaser. The appellant credited on the notes the sum realized by the sale which left $4,534.79, with interest, due and unpaid, and on June 18, 1934, brought action to recover this balance. The appellees pleaded the statute and alleged that the property, at the time and place of sale, was fairly worth the amount of the debt. In reply the appellant asserted that, as the notes and deed of trust had been executed prior to the passage of the law, the statute violated the contract clause of the Federal Constitution. At the trial exception was taken to the court's refusal to enter judgment for the appellant on the pleadings. The court, over the appellant's objection and exception, submitted to the jury the question of the fair value of the property at the time and place of sale, and the jury found its value to be $8,000. An intermediate appellate court, and the Supreme Court of the state, affirmed judgment for the appellees.
Although admitting that the challenged legislation affects only a remedy for enforcement of the contract, the appellant urges that the alteration is so substantial as to impair the obligation of the contract. The applicable principle is not in dispute. The Legislature may modify, limit, or alter the remedy for enforcement of a contract without impairing its obligation, but in so doing, it may not deny all remedy or so circumscribe the existing remedy with conditions and restrictions as seriously to impair the value of the right. 3 The particular remedy existing at the date of the contract may be altogether abrogated if another equally effective for the enforcement of the obligation remains or is substituted for the one taken away.4 The matter in dispute is whether the questioned enactment falls beyond the boundary of permissible regulation of the remedy for enforcement of the appellant's contract.
The loan rendered the appellees debtors to the appellant. For that debt the borrower pledged real estate as security. The contract contemplated that the lender should make itself whole, if necessary, out of the security, but not that it should be enriched at the expense of the borrower or realize more than would repay the loan with interest. The state provided remedies whereby the security could be made available for solution of the debt.
When the loan was made, two such remedies were available. The mortgagee could proceed by bill in equity to foreclose the security. If it did, the chancellor who controlled the proceeding could set aside a sale if the price bid was inadequate. In addition, he might award a money decree for the amount by which the avails of the sale fell below the amount of the indebtedness, but his decree in that behalf would be governed by well-understood principles of equity. An alternative remedy sanctioned by state law was available if the deed of trust so provided. This was the sale of the pledged property by the trustee. If this were the remedy authorized by the contract, and the mortgagee himself became the purchaser at the trustee's sale, ...
To continue reading
Request your trial
-
Canal Nat. Bank v. School Administrative Dist. No. 3
...the rights and interests of parties to existing contracts.' 'In Richmond Mortgage & Loan Corporation, Appellant v. Wachovia Bank & Trust Company et al., 300 U.S. 124, 57 S.Ct. 338, 339, 81 L.Ed. 552, 108 A.L.R. 886, decided February 1, 1937, the Supreme Court stated the applicable principle......
-
United States Trust Company of New York v. New Jersey
...security provision and thus impaired the obligation of the States' contract. See Richmond Mortgage & Loan Corp. v. Wachovia Bank & Trust Co., 300 U.S. 124, 128-129, 57 S.Ct. 338, 339, 81 L.Ed. 552 (1937).17 The trial court recognized that there was an impairment in this case: "To the extent......
-
Franklin Cal. Tax-Free Trust v. Puerto Rico
...arguably comparable” provision. U.S. Trust Co., 431 U.S. at 19, 97 S.Ct. 1505, accord Richmond Mortgage & Loan Corp. v. Wachovia Bank & Trust Co., 300 U.S. 124, 128–29, 57 S.Ct. 338, 81 L.Ed. 552 (1937) (“The Legislature may modify, limit, or alter the remedy for enforcement of a contract w......
-
City of Charleston v. Public Service Com'n of West Virginia
...that the abridged term was subject to impairment by the legislature. See Richmond Mortgage & Loan Corp. v. Wachovia Bank & Trust Co., 300 U.S. 124, 130 n. 5, 57 S.Ct. 338, 340 n. 5, 81 L.Ed. 552 (1937). Here, as noted above, the cities covenanted to collect charges for sewer service "to the......
-
Are Covid-19 Eviction Restrictions Constitutional?
...supra, 292 U.S. at p. 434.)In 1937, Justice Roberts explained in Richmond Mortgage & Loan Corp. v. Wachovia Bank & Trust Co. (1937) 300 U.S. 124, that "[t]he legislature may modify, limit or alter the remedy for enforcement of a contract without impairing its obligation, but in so doing, it......