Travelers' Ins. Co. v. Marshall

• Decision Date: 21 November 1934
• Docket Number: No. 6791.,6791.
• Parties: TRAVELERS' INS. CO. et al. v. MARSHALL et al.
• Court: Texas Supreme Court

76 S.W.2d 1007

TRAVELERS' INS. CO. et al. v. MARSHALL et al.

No. 6791.

Supreme Court of Texas.

November 21, 1934.

Certified Questions from Court of Civil Appeals of Fifth Supreme Judicial District.

Suit by Schuyler B. Marshall, Sr., and wife against the Travelers' Insurance Company and others. Judgment for plaintiffs was affirmed by the Court of Civil Appeals , and on motion for rehearing, the Court of Civil Appeals certified a question.

Question answered.

Renfro & McCombs and James A. Kilgore, all of Dallas, for appellants.

John Davis, of Dallas, for appellees.

CURETON, Chief Justice.

This case, one of eight submitted as companion cases, is before us on certificate from the Court of Civil Appeals for the Fifth (Dallas) District, and involves but one question, viz. whether or not chapter 16 of the General Laws of the 43d Legislature (2d Called Sess.) 1934 (Vernon's Ann. Civ. St. art. 2218b note) generally known as the Moratorium Law, violates the Constitution of Texas.

On December 2, 1926, Schuyler B. Marshall, Sr., and wife, Janie W. Marshall, obtained a loan from, and executed their note to, the Republic Trust & Savings Bank, in the sum of $125,000, secured by a deed of trust on 1,647 acres of land situated in Dallas county, said to be worth under normal conditions some six or seven hundred dollars per acre—that is, from eight hundred thousand to one million dollars—but at the time of the hearing in this cause its value was only about $200 per acre, or something over $300,000.

The Travelers' Insurance Company, the appellant, became the owner of the note, and, upon default in the payment of amounts due, declared the whole due, and caused the trustee to post notices for the sale of the land under the terms of the trust deed.

Before the date of sale, July 3, 1934, Marshall and wife instituted this suit in a district court of Dallas county, under the Moratorium Law, and prayed for a writ of injunction, restraining the trustee and the Travelers' Insurance Company from selling the land prior to February 1, 1935, which upon trial was granted. The only defense urged by appellants was that the law is unconstitutional, under section 16, art. 1, of our state Constitution, prohibiting the enactment of laws impairing the obligation of contracts.

The case was appealed to the Court of Civil Appeals at Dallas, and was there affirmed. 74 S.W.(2d) 658. On motion for rehearing the Court of Civil Appeals certified the one question involved to this court.

The Moratorium Law before us is the sixth measure of its type enacted by the Legislature, the others having previously expired, and became effective on the 1st day of March, 1934. Chapters 17, 59, 102, 105, General Laws Regular Session (see Vernon's Ann. Civ. St. art. 3804 note; article 2218b) and chapters 2 and 16 of Second Called Session, 43d Legislature (see Vernon's Ann. Civ. St. art. 2218b note).

The act is too lengthy for us to copy in full, but we will make such reference to it as may be necessary.

The purpose of the act was to attempt to ameliorate the conditions incident to the prevailing economic depression, fully described in the preamble to the act.

The first section of the act (Vernon's Ann. Civ. St. art. 2218b note) authorizes judges of the district courts of the state, in so far as here involved, "to grant continuances and stays of execution in all suits instituted for the purpose of foreclosing liens upon real property and to grant writs of injunction restraining the sale of real property under powers created by Deeds of Trust or other contracts and to restrain sales under executions and orders of sale issued out of any Court in this State, when it shall be made to appear by verified motion or petition or from evidence adduced upon a trial on the merits or on ex parte or preliminary hearing as follows:

"(a) That the defendant or the relator is justly obligated to pay a substantial portion of the indebtedness but is financially unable to pay the same or any part thereof.

"(b) That a sale of the incumbered property under Deed of Trust or under process of the Court or a sale of the property seized under execution would result in an unfair, unjust and inequitable financial loss to the defendant or relator; and would not be unfair, unjust and inequitable to the creditor taking into consideration the financial condition of all parties.

"(c) That the value of the property involved is substantially in excess of the amount of the debt demanded.

"(d) That the property will probably sell for substantially less than its value if a sale under Deed of Trust, order of sale, or execution is held in due course.

"(e) That the defendant or relator will not permit the property to be abused, ill-treated or mismanaged and that such property will be managed, controlled and cared for properly during the pendency of the suit.

"(f) That there is a reasonable expectation that the indebtedness will be materially reduced or that a substantial amount thereof will be refinanced within a reasonable time.

"(g) That the defendant or relator will, upon the order of the court, pay into court for application by the clerk upon the indebtedness a sum of money equal to the reasonable value of the income on said property, or, if the property has no income, then the reasonable rental value of the property involved in such suit or sale, or a reasonable part of such income or rental value, as determined by the court."

Section 5 (Vernon's Ann. Civ. St. art. 2218b note) makes provision for successive injunctive or stay orders, or continuances in like manner as in the first instance, but none to be operative beyond February 1, 1935, a date some three weeks after the convening of the next session of the Legislature.

Section 8 (Vernon's Ann. Civ. St. art. 2218b note) undertakes to extend the benefits of the Moratory Act to those secondarily liable on the debtor's obligation, without regard to the ability of the indorser, guarantor, or surety to pay the obligation of his defaulting principal, etc.

The act contains other provisions not deemed essential to the present inquiry.

The basic purpose of the act is to grant stays of action and other proceedings otherwise maintainable on pre-existing contracts for the benefit of distressed debtors.

It is obvious from the record that the appellant has been deprived of the rights and remedies for which it contracted under the then existing law from July 3, 1934, to February 1, 1935. Its right to accelerate the maturity of the contract, foreclose its lien, and receive payment of its debt under judicial or trustee's sale, or at such sale bid in and become the owner of the property involved, and under certain conditions obtain a deficiency judgment, has been suspended for seven months, a stay which, of course, could be prolonged under successive legislative acts so long as the depression continues, should we hold the present law valid.

The question before us, simply stated, is whether or not the act here involved violates section 16, article 1, of the State Constitution, a part of the Bill of Rights, which declares: "No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made." (Italics ours.)

Neither the Legislature, executive officers, nor the judiciary can lawfully act beyond the limitations of the Constitution. 9 Texas Jurisprudence, p. 413, § 2; Ferguson v. Wilcox, 119 Tex. 280, 28 S.W.(2d) 526; Burgess v. American Rio Grande L. & I. Co. (Tex. Civ. App.) 295 S. W. 649; Stockton v. Montgomery, 1 Dallam, Dig. 473; Lytle v. Halff, 75 Tex. 128, 12 S. W. 610.

Article 1 of the Constitution, comprising 29 sections, is designated the Bill of Rights, and consists of express limitations of power. The last section declares: "Sec. 29. To guard against transgressions of the high powers herein delegated, we declare that everything in this `Bill of Rights' is excepted out of the general powers of government, and shall forever remain inviolate, and all laws contrary thereto, * * * shall be void." (Italics ours.)

As to the restraints and prohibitions contained in the Bill of Rights (or in the Constitution generally, for that matter), the rule is that "The restraints of the constitution upon the several departments, among which the various powers of government are distributed, cannot be lessened or diminished by inference and implication; and usurpations of power, or the exercise of power in disregard of the express provision or plain intent of the instrument, as necessarily implied from all its terms, cannot be sustained under the pretense of a liberal or enlightened interpretation, or in deference to the judgment of the legislature, or some supposed necessity, the result of a changed condition of affairs." 9 Tex. Jur., 449, § 35.

We are asked, however, to hold that, under the police power, one of the powers of government (State v. Coleman, 96 Conn. 190, 113 A. 385) vitalized by emergency conditions, the Legislature had the authority to pass the measure before us. We are asked to do this, although the Bill of Rights, section 16, expressly prohibits the enactment of laws impairing the obligation of contracts. Can we do this? Would we be warranted in saying that because of emergency conditions the Legislature could, in violation of section 27 of the Bill of Rights, enact legislation prohibiting the citizens of the state from assembling in a peaceful manner for their common good, and applying to those invested with the power of government for redress of grievances? In effect, we have answered that question in the negative in the case of Bell v. Hill (Tex. Sup.) 74 S.W.(2d) 113. Could we say that, although section 26 of the Bill of Rights declares that monopolies shall never be allowed, yet, because of emergency conditions, the Legislature could pass laws for the purpose of allowing monopolies? Could we say that, although section 15 of the Bill of Rights declares that "The right of trial by...