Appellants Brief — Honeyman v. Hanan

a : INDEX.

PAGE

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Po SE INES 66 oc bd ce endedceuabussdnndarieen iv

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Re err Te POOP RE Coe ee tas hs 1

Statement of the Case.................... prcedecees 2

Assignment of Errors Relied Upon...... ims jcdaahe as 4

, ’

Bummary of Argument... .......0.ccceccceess reer o

Argument :

Point I—The instrument sued upon is a primary

obligation and_,,is not a mortgage debt or a guar-

MOUS GE G MROTOII GE. os ccccccancccsncccens 6

PoinT I11—The appellant’s contract has been ma-

terially impaired if Chapter 794, jaws of 1933,

SP ee Ns 5 6.65 0's dnntedads cakckaeeon 10

Point I1I—The provisions of Chapter 794, Laws of

1933, impair the obligations of appellant's con-

tract and thus violate the constjtutional prohibi-

tion upon such legislation..................... 14

Appendix—Chapter 794, Laws of 1933, New York...... 25

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TABLE OF CASES. 4

.&§

PAGE =.

Adams v. Spillyards, 187 Ark. 641...5............... 23

Barus ¥. Meverigs 360 U, 6. U2. nk cca siieaas 16, 22

~ Beaver County Building & Loan Assn. vy. Winowich, 187

FN Pere ree re ite oe eer a ee ee ree 18, 20

Bradley v. Lightcap, 195 U. 8. 1.......... eer reviey 16, 22

Brouson v. Minsie, 1- Bow. B11 ois occ eeac cscs 14, 15, 23

4 - City Bank vy. Ardlea, 267 N. Y. 224....2.........05. . i

CRRTM, STROM, TO TT. BO eas isis so Sea ie wen es - 2

Edwards v. Kearzey, 96 U. S, 595..... ere ere | 16, 2:

Federal Land Bank vy. Wilmarth, 218 Iowa 339....... . 23

Peer OO. ¥- ek, Dee i Bs OB a ede hawk sa ea ees 11

Gantly v. Ewing, 3 How. 707...........-. aie wat 15, 23 ;

Sores 6. Rents Ps Bio ook bs ike acu es 14 °

Game ¥. Marty, 16 Walk, G06 s cic os co Saki ce biecncias 23

Hanauer vy. Republic Bldg. Co., 216 Wis. 49.......... a

Home Building & Loan Assn. -v. Blaisdell, 290 U. S.

Steak hs Kena eeeeey sh a on aae ac 44, 36, 37, 19, 21, 22

aorwarG ¥. Haguen, 2A Haw, 068. kk ce ki aesnas 15

Klinke y. Samuels, 264 N. Y. 144....... umacea ee ees 21

nanewer ¥, BETS, TO8 Tee, GO oo ik ek iia eta wnves 23

Louisville Bank v. Radford, 295 U. S. 920.......4... 16, 17

‘ Matter of shines (Title Guarantee & Trust Co.), 264 o

. a Say Ry eer ee Be are nye - 9 e

* McCracken v. Hayward, 2 ‘tox PERE EEO OE ania 15, 23, a

‘ McGahey v. State of Virginia, 185 U. S. 662.......... >

martin ©. Sarange, 8 N.Y. ATE. 6 oan ccc ces 0 jeewan 11

iv

. PAGE

N. Y. Life Ins. Co. y. Guttag, 265 N. Y. 292..... ee ul 11

UD Wx MOO, OO BUM, GEO ssa s ca cscnccssncscucns 16

Rutherford v. Cook, 198 N. Y. 29.........ccccccsccees 11

Sayre v. Duffy, 13 N. J. Misc. 458, 179 eee 20

Sliosberg v. N. Y. Life Ins. Co., 244 N. ¥. 482.......... * 13

Se Wy I OP Ps Us os cb cs sac ewes dosesacnaae 23

State v. Waterfeld, 167 Okla. 207..................4.. 23

Strand v. Griffith, 63 Wash. 334................... ‘tas. ae

pwinourn ¥. Mille, 17 Waah. G11. ... 2... ccc cscc ccc eu. 16

Travelers Ins. Co. v. Marshall, 124 Tex. 45............ 23

Vanderbilt v. Brunton Piano Co., 111 N. J. L. 596...... 20

Von Hoffman v. City of Quincy, 4 Wall. 585.......... 10, 23

Walker vy. Whitehead, 8 a ee ere 3

Wemsee V. FEOSE, 1B Wil, GlG. occ ccccccc se ecctes rire 23

W. B. Worthen Co. vy. Kavanaugh, 295 U. 8. 56. .11, 16, wipe .

“W. B. Worthen Co. vy. Thomas, 292 U. 8 426 abet whalGus lies 16, 22

TEXT. BOOKS CITED.

os | rere rer ee eT e Tee eT EERE Terere 7

STATUTES CITED.

Section 1082, Civil Practice Act, New York........... 11

Section 1083, Civil Praetice Act, New York...... 3, 4, 11, 12

Chapter 793, Laws of 1933, New York.............-+- 3, 22

Chapter 794, Laws of 19338, New York

3, 4, 5, 6, 10, 11, 13, 14, 22, 28

Chapter 277, Laws of 1934, New York.............%.. 4

Chapter 2, Laws of 1935, New York.................. 2

Pennsylvania Mortgage Deficiency Act of 1934........ 1s

IN THE .

Supreme Court of the United States

OCTOBER TERM, 1936.

No. 370. _

MARIAN S. HONEYMAN, .

' Appellant,

VS.

HerpertT G. HANAN, as Executor of the

Last Will and Testament of Herbert W.

Hanan,

Respondent. .

BRIEF FOR APPELLANT.

Jurisdiction.

Appellant filed a statement as to the jurisdiction of this

Court as part of the papers presented to the Chief Judge of

the Court of Appeals upon the allowance of the appeal. Sub-

. Sequehtly leave was asked to amend this statement and upon

, the application for such leave appellee filed a motion for a

dismissal. Upon consideration, this Court entered the fol-

lowing order:

=]

“Further consideration of the question of the juris-

diction of this Court in this case and of the motion to

dismiss or affirm is postponed to the hearing of the

case on the merits.”

al

’

BEER TSS

Statement of the Case.

This action is upon a written instrument or bond evi-,

dencing a loan made by appellant’s guardians to appellee's

testator and others in 1920. ‘As security for this instrument,

the borrowers pledged a bond and mortgage owned by them,

executed and delivered in 1907 by the John‘ H. Hanan Realty

Company, the mortgage being upon a loft building located at

the corner of Bleecker and Elizabeth Streets, New York City.

Upon default in the payment of interest on the loan and ap-

' pellee’s testator having died, and the Hanan Realty Company

having defaulted in the payment of interest and taxes upon

its bond and mortgage, the appellant foreclosed her security

and sold the mortgaged property at a foreclosure sale and

exhausted her remedies upon the security as required by the

laws of the State of New York. She then brought this action

to establish her claim against the appellee’s testator’s estate.

This action is not a foreclosure action nor is it an action to

recover Npon the mortgage debt or any part thereof.

The appellee did not answer the complaint or the amended

complaint and no issue of fact exists.

Upon motion.at Special Term the complaint was dismissed,

the Court merely handing: down a memorandum as follows

(not reported in the Official Reports; see New York Law

Journal, June 26, 1935) :

“Motion by defendant to dismiss the amended com-

plaint is granted. The mortgage moratorium laws

apply to the facts alleged in the said complaint” (Ree-

ord, p. 15).

.

Final judgment was entered upon this decision dismissing

the complaint with costs (Record, p. 7).

Upon appeal to the Appellate Division, the judgment was

affirmed without memorandum or opinion (246 App. Div.

781; Record, p. 17), and upon a further appeal to the

Court of Appeals the judgment was affirmed, likewise with-

‘out memorandum or opinion (271 N. Y. 564; Record, p. 21).

.

. ih ,

_ eas NS wet aig aA An a rea Ph Ban A ames Yan

On mevion, the remittitur of the Court of Appeals. was.

amended so that the same contained the following state- ;

ment (Record, p. 3): -: . :

“* question under the Federal Constitution was a

presented and necessarily passed upon by this court. :

The plaintiff contended that chapter 794 of the Laws f

of the State of New York, enacted in 1933, as amended =

(Sees. 1083-a and 1083-b of Civil Practice Act), im- e.

pairs the obligations of contracts, and thus violates 5

article 1; section 10, of the Constitution of the United ;

States. This court held that such laws do not violate

said provision of article 1, section 10, of the Constitu- :

tion of the United States” (271 N. Y. 662).

Prior to the enactment of Chapter 794 above referred to,

a referee appointed to sell property under a- judgment of

foreclosure made and filed his report showing his proceedings :

and the sale and the disposition of the proceeds and the Clerk ;

of the Court entered a deficiency judgment for the difference’

between the amount due and the net amount realized upon ;

the sale ($1083, Civil Practice Act) ; and in any action upon ‘+

a bond, plaintiff was entitled to judgment for any sum due |

and unpaid. ; | j

Chapter 794 of the Laws of 1933 (which is printed in full

as Appendix A hereto) added two new sections to the Civil

Practice Act, 1083-a and 1083-b. .

Section 1083-a provides that after sale in foreclosure, on

. motion, the Court |

“shall determine, upon affidavit or otherwise as it

shall direct, the fair and reasonable market value of

the mortgaged premises as of the date of sale of such

nearest earlier date as there shall have been any mar-

ket value thereof and shall make an order directing

the entry of a deficiency judgment. Such deficiency

judgment shall be for an amount equal to the sum of

the amount owing by the party liable as determined

by the judgment with interest, plus the amount owing

on all prior liens and encumbrances with interest, plus

.cost and disbursements of the action including the

referee’s fee and disbursements, less the market value

as determined by the court or the sale price of the

property, whichever shall be the higher. If no motion

.

ETI EDL EIA oF

Oe a nag

4 | ‘

for a deficiency judgment. shall be made as herein pre-

scribed the proceeds of the sale regardless of amount

shall be deemed to be in full satisfaction of the mort-

gage debt and no right to recover ayy deficiency in

any action or proceeding shall exist.”

Section 1083-b provides that in an action upon a bond, —

other than an action to foreclose a mortgage, secured by a

mortgage on real estate, “any person directly or indirectly

or contingently liable therefor” may “set off the fair and

r| reasonable market value of the mortgaged property less the

amounts owing on prior ligns and encumbrances.” (By

Chapter 277, Laws of 1934, and Chapter 2, Laws of 1935, the.

period of the emergency has been extended to July 1, 1936,

and has been further extended to July 1, 1937.)

This action being, as stated, upon a bond, which was se-

cured by a bond and mortgage, the New York Courts have

held that §1083-b is applicable and that appellant may not*

recover. ‘The only possible theory to support the decision is

that she has alleged in her complaint that a deficiency judg-

ment .was denied her in the foreclosure proceeding, and this

| is construed to be equivalent to an allegation that the fore-

closed property was of a value equal to the debt; that the

mortgage was security for the debt here sued upon, and that

uppellee is entitled to credit for payment in full regardless

of the amount for which the property was actually sold.

There is no other provision of the Mortgage Moratorium

Laws applicable, and there is no other possible interpretation

of the decisious of the New York Courts.

Assignment of Errors Relied Upon.

1. The State Court erred in holding that Chapter 794 of

the Laws of 1935 of the State of New York was a bar to

uppellant’s action to establish her claim against the dece-

dent’s estate for the sum remaining unpaid upon a loan to

decedent made in 1920, evidenced by a written obligation to

pay, as security for which there was pledged and assigned

to appellant a bond and mortgage executed by another in

1907, and which had been foreclosed by appellant after the

PUTT red Pe rebate Ceetehas Sesmtn Tom 2996

enactment and taking effect of said legislative act for non-

payment of interest and taxes, and the proceeds of sale duly

credited upon account of ‘the loan.

3. The State Court erred in refusing to hold that Chapter

794-of the Laws of 1933 violates the Federal Constitution by

requiring that mortgagees are required to accept the proceeds

of the sale of mortgaged property or the property itself, if

bid in by the mortgagee, at the amount determined by the

State Court to be market value of the property, as a credit or

oftset against the mortgage debt. Z

6. The State Court erred in refusing to hold that the Act

of the Legislature of the State of New York, Chapter 794 of

the Laws of 1933, is repugnant to Article 1, Section 10, of

the Constitution of the United States, in that it impairs ap-

pellant’s contract rights, denies the enforcement thereof, and

permits the repudiation of decedent's debt, and in that it de-

stroys appellant’s rights and property without due process

and without compensation.

‘. The State Court erred in refusing to hold that Chapter

4 of the Laws of 1933 of the State of New York violates

the Constitution of the United States, in that it limits and

abrogates ‘contract rights in the matter of deficiency judg-

ments and actions on bonds or other written obligations with-

out regard to the necessities or the protection of the creditor

or the ability of the debtor to pay.

.

Summary of Argument.

Appellant contends that—

POINT I. The instrument sued upon is a primary obliga-

tion and is not a mortgage debt or a guarantee of a mortgage

debt.

' The New York Courts have, nevertheless, construed the in-

strument as one subject to the provisions of $1083-b of the

Civil Practice Act.

EEN TERA TR OLA OLLIE PERIL SNC RS

~

Presid

6 4

POINT II. The appellant’s contract has been materially im-

‘paired if Chapter 794, Laws of 1933, is applicable thereto.

At the time the contract was made it was subject to the

existing law which entered into and became a part thereof.

The Act complained of requires appellant in any action she

may bring to credit the debtor with the “fair market value”

of the mortgaged property, whether it he sold or not, or w that-

ever it may bring at a sale.

POINT Ill. The provisions a Chapter 794, Laws of 1933,

impair the obligations of appellant’s contract and thus violate

. the constitutional prohibition upon such legislation.

The Supreme Court of the United States has consistently

held ‘over many years that the vacation or serious modifica-

tion of pre-existing law as it affects a contract is repugnant

to Section 10, Article 1, of the Constitution, and practically

all of the State Courts that have had occasion to pass on

similar laws have similarly decided, save only the Courts of

the State of New York.

ARGUMENT.

POINT. I.

The instrument sued upon is a primary obligation and

is not a mortgage debt or a guarantee of a mortgage

debt.

The loan made by appellant’s guardians to defendant's

testator iS evidenced by-a written instrument attached to the

complaint, Exhibit A (Record, p. 12). Briefly, it is in the

form of a bond of defendant’s testator (jointly and severally

wit his father and brother ) to the guardians of the appel-

lant (and her sister, to whose interest plaintiff succeeded

as alleged in the complaint) (Record, p. 10). This instru-

ment, executed August 9, 1920, acknowledged an indebted-

ness in the sun of $60,000 and is an absolute agreement to

cach babi NA

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2

pay that sum. The instrument then refers to a:bond of the

Hanan Realty Company secured by a mortgage on its prop-

erty executed in 1907, ‘which bond and mortgage are stated

to be owned by one of the obligors, who is about to assign

- said bond and mortgage to appellant's guardians, and states:

“WHEREAS, to induce the said obligee to advance the

said sum of sixty thousand dollars ($60,000) upon the

said bond and mortgage, as aforesaid, and to execute

and deliver the said extension agreement the said

obligors hath agreed to make, execute and deliver this

bond as further, and additional security for the pay-

ment of the said above-mentioned bond and mortgage.”

Then follows the condition that if the obligors of the 1920

bond or the John H. Hanan Realty Company pay the appel-

lant’s guardians $60,000 and interest, and if the obligors of

the 1920 bond indemnify the obligees against any loss, dam-

ages, Costs, expenses, etc., by reason of any default in the

1907 ¢bond, then the 1920 obligation is to be void.

It is to be observed that the transaction was ‘not a sale

‘of the 1907 bond and mortgage with a guaranty. It was a

loan or advance to the owners of the 1907 bond, and the obli-

gation of the borrowers is to repay, not upon condition but

absolutely. If the obligors repaid the loan‘ it would not ex-

tinguish the mortyaye debt of the John H>Hanan Realty

Company. The obligors would be entitled to a reassignment

of the 1907 bond and mortgage. The instrument sued upon

is a new and original obligation. Itsis not a mortgage debt

and it is not a gitaranty of a mortgage debt.

In 28 Corpus Juris, page 886, $1, it is sthted:

“The term ‘guaranty’ or ‘guarantee’ as it is called

by some authorities, especially the English and

Canadian jurists and text writers, is a collateral

_ promise or, undertaking by one person to answer for

the payment of some debt or the performance of some

contract or duty in case of the default of another per-

son, who in the first instance is liable for such pay-

Ment or performance; a collateral promise or under-

taking to pay a debt owing by a third person in case

the latter does not pay. It is an agreement by one

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person to answer to another for the debt, default, or

miscarriage of a third person. * * * In a strict or

collateral guaranty the obligation of the guarantor. is

that the principal is able and will perform his under-

taking, or, if he fails, that the guarantor will pay the

resulting damages; but where the promise of the guar-

antor is to do that which another is bound to do if he

_ shall not do it himself, it is not a strict or collateral.

guaranty, but is an original undertaking in the nature

of suretyship, and if it can be seen that the person

sought to be held is primarily liable, prior to the

breach of the contract or duty by someone else, the

contract in question is an original promise or under:

taking and not one of guaranty; and, although a con-

tract is in form to answer for the debt or default of

another, if its leading purpose is to secure some benefit

to the promisor or to promote -his interest, it will be

regarded as an original sae eat i

In Clark v. Howard, 150 N. Y., at page 239, the Court said:

“The character of the defendants’ promise is not to

be determined solely with reference to the language

employed. Words to the effect that a third party will

see the debt paid, or become responsible or the like,

have been held to import an original and absolute

promise when taken in connection with the facts and

circumstances of the transaction. (Chase v. Day, 17

Johns. 114; Mountstephen v. Lakeman, L. R. [7 Eng.

& Ir. App.] 17.)

It is true that the meaning of such words, whether

imputing an original or collateral promise, has been

discussed mostly in cases where the Statute of Frauds

has been relied upon as a defense; still the same prin-

ciple will apply in any case where it is material to

determine whether a promise is original or not. If

the defendants intended to and did make this debt

their own by a promise founded upon a new and origi-

nal consideration of benefit to the defendants, moving

to them from the debtor, the fact that the debt may

still subsist against the original debtor is no objection

to a recovery.”

In Matter of People (Title & Mortgage Guarantee Co.),

264 N. Y., at page 88, the Court said:

“It is said that the certificate holders are the owners

of the mortgages underlying the certificates * * *.

Though the certificate states that the company ‘as-

signs to the registered holder hereof an undivided, co-

ordinate share of the same amaqunt in the principal

sum secured by the bonds and mortgages deposited

or which may hereafter be deposited by the Company

with the Marine Trust Company of Buffalo, * * * as

depositary under the terms of an agreement bearing

date June 10, 1927, subject to which this certificate is

issued, together with interest thereon at the rate of

16% per annum,’ an analysis of all the terms of the

certificate and of the contract, to which it is subject,

discloses that the guaranty company has entered into

an unconditional promise to pay, ten years from the

date of the certificate, the principal sum secured and

acerued interest and has transferred to the holder

only an interest in the deposited mortgages as col-

dteral security for its debt. Certainly the holder ac-

quires, prior to default, no rights in the mortgages

other or greater than the rights of a holder of col-

lateral security and the guaranty company retains at

least the rights of an owner who ‘has cumbered his

title with a lien. True the certificate provides that

the guaranty company shall exercise these rights as

‘agent’ for the holder of the certificate, but we con-

strue the contract in accordance with. its substance

and effect, not with its form. So construed, the guar-

anty company is @ primary.debtor, assigning the mort-

gages only as collateral security for the debt.”

(Italies ours.)

In the case at bar, the instrumént does not say that ap-

_ pellee’s testator will pay if or in the erent that the Hanan

Realty Company does not pay. It does not say that the

obligors will pay the 1907 bond at all. The obligors in the

instrument sued on acknowledge an indebtedness of $60,000,

which sum they agree to pay. They say they are procuring:

an advance on the 1907 bond and mortgage owned by the.

obligors and which they are assigning to the obligee. They

Say that if the 1907 bond is paid, or if they themselves pay

.

it aimanaigaseteemestaamnasat one. sae ee tee sree

10

the full amount of $60,000 and interest, then the obligation

is to be void. They also indemnify obligee against any “loss,

damages, costs, expenses, suits, actions, claims and demands,

_ete.,” by reason of default in the terms of the 1907 bond

and mortgage. This indemnity covers expense incident. to

protect the mortgage lien, such as taxes, assessments, insur-

ance, legal costs and expenses of any action affecting it. °

The obligors in the 1920 bond could not be sued upon the

1907 bond for nowhere did they agree to pay it. It is a direct

and.unconditional obligation to repay the moneys advanced

to the obligors. It is not a “mortgage” debt.or a guaranty

of a mortgage debt, nor does the bend make the obligors

liable for a mortgage debt “directly, indirectly or con-

tingentlv.” ]

POINT II.

f

Appellant’s contract has been materially impaired if

Chapter 794 of the Laws of 1933 is applicable thereto.

5

In Vou Hoffman vy. City of Quincy, 4 Wall. 535, the Court

say: -

“It is also settled that the laws which subsist at

the time and place of the making of a contract, and

where it is to be performed, enter into and fori a

part of it, as if they were expressly referred to or

incorporated in its terms. This principle embraces

alike, those which affect its validity, construction, dis-

charge, and enforcement. * * *”

And at page 552:

«* * * Nothing can be more material to the obli-

gation.than the means of enforcement. Without the

remedy the contract may, indeed, in the sense of the

law, be said not to exist, and its obligation to fall

within the class of those moral and social duties which

depend for their fulfillment wholly upon the will of

the individual. The ideas of validity and remedy are

inseparable, and both are, parts of the obligation,

which is guaranteed by the Constitution against in-

Vasion.” «

And in W. B. Worthen Cag: Kavanaugh, 295 U. S. 638,

640, it is said: :

“To know the obligations of a contract we look to

the laws in force at its making.” :

See also Rutherford vy. Cook, 198 N. Y. 29, 33 (1910), and

NV. Y. Life Ins. Co. v. Guttag, 265 N. Y. 292, 296 (1934).

Prior to the enactment of Chapter 794, Laws 1933, the ap-

pellant could foreclose upon her collateral security and then

maintain an action to recover the unpaid balance of her loan

to appellee's testator. $1082 of the Civil Practice Act pro-

vides for final judgment in foreclosure directing a sale of

the property and $1083 provides for a final judgment against

any person liable for the residue of the debt remaining un-

satisfied after the sale and the application of the proceeds.

The Court of Appeals held in Meiber Realty Corp. v. Abel,

265 N. Y. 94, that the docket of a deficiency judgment was

merely a clerical act in pursuance to the direction of the

judgment entered, citing Morris v. Morange, 38 N.Y. 172.

Since the enactment of Chapter 794, Laws 1933, under

$1083-b of the Civil Practice Act, the New York court. has

held that appellant must credit upon her loan to appellee's

testator the “fair and reasonable market value” of the mort;

gaged property, and that having alleged that a deficiency

judgment was denied in the foreclosure action her loan must

he deemed to have been repaid by legislative enactment.

The New York Court of Appeals say in City Bank Farmers

Trust Co. v. Ardlea, 267 N. Y. 225, that |

s “Sections 1083-a and 1083-b were enacted at the

Same time as Sections 1077-a and 1077-b and as part

of the general purpose of affording relief to distressed

debtors. * * * Section 1083-a prevents a deficiency

judgment when the court finds that the fair market

value of the premises covered by the mortgage equals

or exceeds ‘the amount specified in the judgment and

prior liens. Section 1083-b affords the same protec-

tion, in actions against makers or guarantors of bonds,

‘against any person or corporation directly or indi-

rectly or conutingently liable therefor. ”

7]

20

These sections obviously impair the contract rights of this

appellant. . eat

If the mortgagor does not pay interest or taxes for. any

reason, certainly the holder of the mortgage, whether as se-

curity or otherwise, should do something for his own pro-

tection. The necessities of the holder may be fully as great,

if not gréater, than those of the mortgagor. If nothing is

done the debt will increase at an alarming rate. The holder

must do something to save himself the utter loss of his se-

curity and his entire debt. If he proceeds to foreclosure and

sale—and there is nothing to prevent—he obtains whatever

the property brings or the property itself, which he may jot-

want. The property may have become largely depreciated

and may not earn enough to pay. taxes.

Now, the New York statute says ($1083-a) that

“No judgment shall be granted for any residue of

the debt remaining unsatisfied as prescribed by the

preceding section where the mortgaged property shall

be sold during the emergency, except as herein pro-

vided.”

The statute then states that within ninety days after the

date of sale a motion may be made for a deficiency judgment

and the Court shall determine “the fair and reasonable mar-

ket value of the mortgaged premises as of the date of sale”

and shall limit the deficiency judgment accordingly, and

adds : ,

s

“If no motion for a deficiency judgment shall be

made as herein prescribed the proceeds of the sale re-

‘gardless of amount shall be deemed to be in full satis-

faction of the mortgage debt and no right to recover

any deficiency in any action or proceedings shall

exist.” 7 ”

Under §1083-b, if suit is brought on a bond or any gufar-

anty or indemnity, even if only indirectly secured by mortt-

gage, the value of the property, to be determined by the

Court, may be offset or credited against the amount due. In

other words, a penalty is imposed upon anyone who dares

13° i

to sell in foreclosure or bring suit upon an obligation se-

cured in any remote degree by a mortgage during the emer-

gency when in all conscience he must do something to pro-

tect himself against a defaulting debtor and the penalty is a

loss of his contract rights. In the case at bar, appellant has

been deprived of her contract rights—not tem porarily, but

absolutely and forever. What about the debtor? What is

he required to do? Nothing. He may be rich. or poor, it

makes no difference. At the time of making this contract,

as the Court of AppeaJs in Sliosberg v. New York Life Ins.

('o., 244 N. Y. 482, at page 498, say:

“That a debtor has Jost the wherewithal to pay is

no defense, whether its loss is attributable to simply

robbery or to piracy which has been coated white by

legislation.” .

But now he does not have to show his financial status. He

‘is not required to trustee his property, as security. He is

given relief which is neither felporary or on condition, and

he does not even have to ask for relief.

Where, in appellant's contract with the appellee's testator,

does she agree that the Court may determine the value of

the property and that the debt is to be paid in full or to the

extent that the Court may direct? Where did she agree that

her loan could be repaid by legislative enactment and not by

legal tender? If a debtor is really distressed he has a remedy

hy bankruptey, but the Legislature of the State of New York

has no power to give to a debtor the benefits of the Bank-

ruptey Act, nor has it power to impose any of the condi- “

tions set forth in $1083-a and $1083-b in reduction of the

amount due.

-

14

POINT III.

‘The provisions of Chapter 794, Laws of 1933, impair

the obligations of appellant’s contract and thus violate

the constitutional prohibition upon such legislation.

The Constitution of the United States states:

“No state shall * * * pass any * * * law impair

ing the obligations of contracts. * * * °° (Art. 1, See.

10). |

In the case of Jlome Bldg. & L. Assn. vy. Blaisdell, 290 ULS

398 (1984), the Court said (p. 431) :

“The obligations of a contract are impaired by a

law which renders them invalid, or releases or extin-

guishes them (Sturges v. Crow ninshield, 4 Wheat. 122

[1819], pp. 197, 198) and impairment, as above noted,

has been predicated of laws which without destroy:

ing contracts derogate from substantial contractual

rights.”

In Green v. Biddle, 8 Wheat. 1 (1828), the Court said (p.

eh:

“It is no answer, that the acts of Kentucky, now

in question, are regulations of the remedy, and not

of the right’ to lands. If those acts so change the

nature and extent of existing remedies, as materially

to impair the rights and interests of the owner, they

ave just as much a violation of the compact as if they

directly overturned his rights and interests.”

In Bronson vy. Ninzie, 1 Mow. 311 (1843), the Court said

(p. 316):

oe *.* Whatever belongs merely to the remedy

may be altered according to the will of the state, pro-

vided the alteration does not impair the obligation of

the contract. But if that effect is produced, it is im-

material whether it is done by ycting on the remedy

or directly on the contract itself. In either case it is

prohibit d by the Constitution.”

: any

15

‘ Likewise, the ( ‘ourt, in M cCracken Vv. Hayward, 2 How. 608

(1844), significantly stated (p. 612):

oe & #

The obligation of a contract consists in its:

binding force on the party who makes it. This de-

pends on the laws in existence when it isemade; these

are necessarily referréd to in all contracts, and form-

ing a part of-them as the measure of the obligation to

perform them by the one party, and the right acquired

by the other, * * * Jf any subsequent law affect to

diminish the duty, or to impair the right, it necessarily :

hears on the obligation of the contract, in favour of

one party, to the injury of the other; hence any law,

which in its operation amounts to a denial or obstruc-

tion of the rights accruing by a contract, though pro-

fessing to act only on the remedy, is directly obnoxious

to the prohibition of the Constitution.”

In Bronson y. Kinzie, supra, two Illinois statutes were

involved, the first of which provided that the equitable estate

of the mortgagor should not. be extinguished for twelve

~Inonths after sale on foreclosure, and the second, that there

should be-no sale unless two-thirds of the appraised value of

the property should be bid therefor. The Court held both

statutes unconstitutional. In condemning the second, the

Court said (p. 320) :

“The observations already made in relation to the

other act apply with equal force to this. It is true

that this law apparently acts upon the remedy, and

not directly upon the contract. Yet its effect is to

deprive the party of his pre-existing right to forsclose

the mortgage by a sale of the premises, and to impose

fy upon him -conditions which would frequently rende:

any sale altogether impossible.” (

%

In the cases of McCracken y, Hayward, supra, Gantly's$.

Lessee v. Ewing, 3 How. 707 (1845), and Howard y. Bugbee,

24 How. 461 (1860), the decision in Bronson Vv. Kinzie, supra,

was followed. The VY cCracken case, supra, condemned a

Statute which provided that an execution sale should not be

made of property unless it would bring two-thirds of its value

‘according to the opinion of householders, while the c4ge of

5a Au a a a

16

Gantly’s Lessee condemned,a statute which required a sale

for not less than one-half the appraised value. Howard y. ©

Bugbee, supra, made a similar ruling as to'an extension of

two years for redemption from foreclosure sale. Ldwards y.

Kearzey, 86 U.S. 505 (1877), condemned as unconstitutional

a statute which, as applied to existing contracts, increased

the amount of the property of judgment debtors which was

exempted from levy and sale on execution. And in Barnits:

v. Beverly, 163 U.S. 118 (1896), it was held that a statute

which authorized the redemption of property. sold on fore-

closure, where no right of redemption previously existed, or

which extended the period of redemption beyond the time

formerly allowed, could not constitutionally apply to a sale

under a mortgage executed before its passage. This decision

was followed by the Court in Bradley v. Lighteap, 195 U. S.1-

(1904), in condemning a statute which effected a. forfeiture

of the mortgagee’s estate upon his failure to obtain a deed

within the prescribed time after bidding in the mortgaged

premises at sale on foreclosure.

Upon the same principles, State Courts have condemned

statutes which, as applied to existing morteages, permit fore-

closure sales only for not less than a fixed’ percentage of the

appraised value of the property.

Sredultuarviee ws. Melles, Ws 1Hasiih Wh, Wo Baa. te@

(1897) ;

Strand vy. Griffith, 68 Wash. 334, 115 Vac. 512

(1911) ;

Robards vy. Brown, 40 Ark. 423 (1883).

The principle stated’ in JIome Building & Loan Assn. V.

Blaisdell, 290 U. 8. 398, has been materially clarified by the

further decisions of the United States Supreme Court in

W. B. Worthen Co. vy. Thomas, 292 U.S. 426;

W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56;

Louisville Bank vy. Radford, 295 U.S. 920.

In the first of. these cases, W. B. Worthen Co. v. Thomas, the

Court, referring to the Blaisdell case, said (pp. 433-434) :

“In Home Bldg. & L. Asso. v. Blaisdell (290 U. 8.

434), we held that ‘the reserved power of the State -

17

must be construed in harmony with the fair intent of

the constitutional limitation’ and that this principle

precluded a construction which would pérmit the State

to adopt as its policy the repudiation of debts.or the

destruction of contracts or the denial of means to en-

force them.” * *.* and ‘when the exercise of the re-

served power of the State, in order to meet public need

because of a pressing public disaster, relates to the

enforcement of existing cont ‘acts, that action must be

limited by reasonable conditions appropriate to the

emergency. Accordingly, in the Blaisdell case wé sus-

tained the Minnesota mortgage moratorium law in the

light of the temporary and conditional relief which

the legislation granted. We found that relief to be

reasonable, from the standpoint of beth mortgagor

and mortgagee, and {o be limited to the erigency to

which the legislation/was addressed.

‘In the instant case, the relief sought to be afforded :

is neither temporary nor conditional. In placing in-

surance moneys beyond the reach of existing creditors,

the Act contains no limitations as to time, amount,

circumstances, or need. We find the legislation as

- here applied, to be a clear violation of the constitu-

tional restriction’ "(Italics ours. )

In W. B. Worthen Co. y. Kavanaugh, the Court (unani--—-~

mously) said:

“Not even. changes of the remedy may he’ pressed

so far as to eut down the security of a mortgage, with-

out moderation.or reason, or in the spirit of oppres-

sion, even when the public welfare ig involved as an

excuse, their bounds must be respected,” bs

and condemned the Arkansas legislative acts as unconstitu-

tional, distinguishing the Blaisdell case.

In Louisville Bank vy. Radjord the Court held certain pro-—

Visions of the F ‘azier-Lemke Act unconstitutional, citing,

applying and distinguishing the principles of the Blaisdell

. Case and the two cases above referred to, _The Court said:

“Under the Act, the purpose of the delay in making ‘

a sale and of the prolonged possession accorded the

mortgagor is to promote his interests at the expense

of the mortgagee. , x

aw

a

Home Bldg. & L. Asso. v. Blaisdell, 290 U. 8. 398,

a >|

78 L. ed. 413, 54S. Ct. 231, 88 A. L. R. 1481, goed

which Radford+ aoe nana no support to his conten-

tion. Theré the statute left the’ period of the exten-

sion of the right of redemption to be determined by:

‘the court w ithin the maximum limit of two vears.

Kven after the period had been decided upon, it could,

as was pointed out, ‘be reduced by order of the court

under the statute, in case of a change in cireun-

stances, *~ * *?’. (p. 447); and at the close of the

period, the mortgagee was free to apply the mortgaged

property to the satisfaction of the mortgage debt (pp.

933-934) * % *."

In the case of Beaver County Building & Loan Assn. Y.

Winowich [No. 158, Oct. 5, 1936, reported only at the time

of this writing in Advance Sheets of Noy. 14th, 187 Atl. (Pa.).

481] there was under consideration. the Pennsylvania Mort-

gage Deficiency Act (1934), and it was held unconstitutional

as to mortgages contracted before its enactment because of

the constitutional provision prohibiting the impairment of

obligations ef contracts. Under the laws of Pennsylvania

in effect at the time of the enactment of the statute, a mort-

gagee was entitled to a deficiency judgment in an amount

equal to the amount of the mortgage debt, interest and costs,

after deducting therefrom the net proceeds of a foreclosure

sale. The Act under consideration provided for a deficiency

judgment in an amount fixed by deducting the fair value of

the property instead of the proceeds of the foreclosure sale.

The Court say: :

“The sale price is no longer conelusive between the

parties as to the credit to be allowed on the debt, and

the amount of the deficiency judgment to which the

mortgage was previously entitled is thus altered to a

substantial and, it may he, drastic degree. * * *

The remedy, or means of enforcing a contract, is a

part of its obligation Which the Constitution protects.

TheLegislature has the power to. formulate, alter and

suspend modes of procedure, even as to preexisting

contracts, provided, that, under the guise of a pro-

‘ cedural statute, it does not deprive a party of any

substantial right under the contract. Breitenbach V.

‘ a ee

—- See eee .

Fhe Reh as echghp splines ttadra Se eke Be eather ea oi aaa .

ar 19

e

Bush, 44 Pa. 313, 318, 320; Penrose y. Erie Canal Co.,

56 Pa. 46,48; West Arch Building & Loan Association

Vv. Vichols, 303 Pa. 434. Any change in procedure

which does not supply an alternative remedy, equally

adequate and efficacious, in place of that which existed

when the contract was made, is violative of the con-

stitutional prohibition. - The ideas of right and remedy

are inseparable. Greene y. Biddle, 8 Wheat. 1, 17:

Walker v. Whitehead, 16 Wall. 314, 317; Edwards y.

Kearzey, 96 U.S. 595, 600; McGahey v. Virginia, 135

U.S. 662, 693; Barnite y. Beverly, 163 U. S. 118, 127:

Oshkosh Waterworks Co. y. Oshkosh, 187 U. 8. 437.

439. *+* * +

The change wrought by the Pennsylvania Mortgage

Deficiency Judgment Act is one not merely of remedy

but of substance. Whereas before its enactment the

mortgagee after a sale on foreclosure had the impor-

tant right to a judgment measured by the difference

between the debt and the net proceeds realized from

the Sale, by the terms of the act this judgment is re-

duced by substituting the ‘fair value’ of the property

for the price obtained at the sale as the amount of

‘the credit to be allowed.”

After citing Home Bldg. & L. Assn. v. Blaisdell and W. B.

Worthen Co. vy. Kavanaugh, and many of the cases herein-

before referred to, the opinion adds:

“While it is true that none of the cases thus sum-

marized is wholly analogous to the present one, they

lead fairly to the conviction that a statute which com-

pels a mortgagee to accept real estate at an appraised

valuation, in place of money, as a part liquidation of

the mortgagor's obligation on the bond, must, as ap-

plied to jweexisting mortgages, be held to be uncon-

stitutionaPif the obvious trend of these decisions in

the Supreme Court ofthe United States is to be fol-

lowed.

This conclusion is strengthened by the almost com-

plete unanimity of state courts in striking down recent

legislation curtailing the rights of mortgagees—some

of it practically identical with the act now under con-

sideration. * * *”

And at page 492:

“It is contended that it is unfair to allow a mort-

gagec, under existing conditions, to bid in the mort-

|

>

E

S~"S aaah -*

BE I LERNER, LBP ete 8

EE

20

gaged property for a nominal sum, thereby enriching

himself by acquiring the security and at the same time

retaining the right to collect what might amount to

almost the entire debt from other property of the

mortgagor.

It may be questioned whether mortgagees in many

cases have been able to realize more from both ac quisi-

tion of the property and collection on the bond than

the amount of the debt, interest and costs. Even 4f,

however, as a bidder at the foreclosure sale, a mort-

gagee obtains the property at a cheap price, he accom-

plishes this, as already stated, in an independent ca-

pacity and not as mortgagee; as a purchaser he ob-

tains the same title as might have been acquired by

any member of the general public in competitive bid-

ding. Moreover, if the system of foreclosure in use

does bring about undesirable results, it may be cor-

rected by the parties’ originally contracting to adopt

the .appraisement method (assuming that an investor

could be induced to loan money on the security of a

mortgage with such a provision), or, as to future

mortgages, by appropriate legislation. But as to exist-

ing mortgages the constitutions of Nation and State

alike prohibit any such impairment of the mortgagee’s

rights.”

In Sayre Vv. Duffy, 13 N. J. Mise. 458, 179 Atl. 459, the

New Jersey statute, Chapter 82 of the Laws of 1933, pro-

viding that the Court should determine the amount of the

deficiency in mortgage foreclosures by deducting from the

amount of the debt the fair market value of the premises,

was held to be unconstitutional, the Court saying:

“The effect is not to delay the remedy but to abro-

gate completely the rights of the mortgagee to a de-

ficiency judgment.”

Vanderbilt v. Brunton Piano Co., 111 N. J. L. 596, 169 Atl.

177, likewise holds the New Jersey statute unconstitutional.

In Beaver County Building & Loan Assn. ¥. Winowich,

supra, the Court say (p. 491) that

“New York is apparently the only state that has sus-

tained the validity of a mortgage deficiency judgment

act similar to the Pennsylvania statute. The act tem-

porarily stayed foreclosures and suits to recover the -

mortgage indebtedness if interest and taxes were paid.

It also provided. for a deficiency judgment to be fixed

at the time of confirmation of the sale, allowing a

credit for the market value of the property as deter-

mined by the court, or the sale price, whichever might

be the higher. In actions to recover the indebtedness

secured by the mortgage, the debtor was to be allowed

‘to set off the ‘fair and reasonable market value’ of the :

property. In a brief opinion on the question of con-

stitutionality, unsupported by any citation of authori-

ties, the court upheld the act. Klinke y. Samuels, 264

N. Y. 144.” : 7

The New York Court of Appeals, however, added: -

“That such legislation, reasonably seeking only

temporary relief, is not unconstitutional, we may

refer to our recent decision in Matter of People (Title

«€ Mortgage Guarantee Co. v. Buffalo) (264 N. Y. 69),

und Home Building & Loan Assn. y. Blaisdell (290 —

U.S. 398)."

In Home Bldg. & Loun Assu. vy. Blaisdell, this Court sus-

tained the constitutionality of the Minnesota Mortgage Mora-

- terium Law, stating:

“We are here concerned with the provisions of Part

One, §4, authorizing the District Court of the County

to extend the period of redemption from foreclosure

sales ‘for such additional time as the court may deem

just and equitable,’ subject to the above described limi- .

tation. The extension is to be made upon application

to the court, on notice, for an order determining the

reasonable value of the income on the property in-.

volved in the sale, or if it has no income, then the rea-

sonable rental value of the property and directing the

mortgagor ‘to pay all or a reasonable part of such in-

come or rental value; in or toward the payment of

taxes, insurance, interest, mortgage * * * indebted-

ness at suchstimes and in such manner’ as shall be de-

termined by the court.”

RE EL Ra PE es Ree

ee eA

Veale. Miaely os

99

The Minnesota statute did not suspend foreclosure or regu-

late deficiency judgments. It extended the period of redemp-

tion after foreclosure for a period not exceeding two years

upon terms and conditions to be fixed by the Court after a

hearing.

We do not herve question Chapter 793 of the Laws of 1935,

which prohibits foreclosure during the emergency period so

lony as interest and taxes are paid and as to which it might

be said that it is “temporary relief.” We are concerned oily

with Chapter 794, which clearly impairs remedies against

mortgagors, guarantors, indemnitors, or persons liable in

any way toa holder of a niortgage; and in the case at bar is

held to be fn actual bar to an action to recover upon a loan

for which there was pledged as security a bond and mortgage,

as we have already pointed out in our Point II]. Under the

Minnesota statute a debtor was required to apply for relief

and show facts to a court of equity to justify a brief extension

for redemption upon terms and conditions. Under the New

York. act a debtor does nothing and no consideration what-

ever is given to the rights of the creditor. The New York act

simply benefits the debtor by releasing him from his ob-

ligation.

No such question as is here presented was passed upon by

this Court in the Blaisdell case.

This Court has consistently held over many years that the

vacation or serious modification of pre-existing law as it

affects an existing contract is repugnant to Nection 10 of

Article 1 of the Constitution.

W. B. Worthen Co. et al. v. Navanaugh, 295 U.S

56, 79 L. Ed. 1298 (1935) ;

W. B. Worthen Co. v. Thomas, 292 U.S. 426, 78 L.

Ed. 1344 (1934) ;

Bradley v. Lightcap, 195 U.S. 1, 49 L. Hd. 65

(1904) ;

Barnitz v. Beverly, 163 U. S. 118, 41 L. Ed.

(1896); _

McGahey v. State of Virginia, 185 U.S. 662, 54 L.

Ed. 304 (1890) ;

23

Edwards vy. Kearzey, 96 U. S. 595, 24 L. Ed. 793

(1878);

Walker v. Whitehead, 16 Wall. 314, 21 L. Ed. 357

(L873) ;

Gunn vy. Barry, 15 Wall. 610, 21 L. Ed. 212 (1873) ;

White y. Hart et a’, 13 Wall. 646, 20 L. Ed. 685

(1872) : |

Von Hoffman v. Quincy, 4 Wall. 535, 18 L. Ed. 403

(1867) ; )

Howard v. Bughee,. 24 How. 461, 16 L. Ed. 753

(1861);

Guntly v. Ewing, 3 How. 707, 11 L. Ed. 794 (1845) :

McCracken vy. Hayward, 2 How. 608, 11 L. Ed. 397

(1844) :

Bronson v. Ninzie, 1 How. 311, 11 L. Ed. 143 (1843).

' Many of the State courts which have had occasion to pass

upon the constitutionality of similar legislation. have simi-

larly decided:

Travelers:Ins. Co. et al. v. Marshall et al., 124 Tex.

45, 76S. W. (2nd) 1007 (1934) ;

Federal Land Bank of Omaha v. Wilmarth et al.,

“18 Towa 339, 252 N. W. 507, 90 A. L. R. 133

(1934) :

Hanauer vy. Republic Bldy. Co., 216 Wis. 43, 225

N. W. 136 (1934);

Langever v. Miller, 124 Tex. 80, 76 8S. W. (2nd)

1025, 96 A. L. R. 836 (1934) ;

State ex rel. Roth v. Waterfield, 167 Okla. 207, 29

P. (2nd) 24 (1933) ; |

State ex rel. Cleveringa v. Klein, 63 N. D. 514, 249

N. W. 118, 86 A. L. R. 1523 (1933) ;-

* Adams et al. v. Spillyards et al., 187 Ark. 641, 61

S. W. (2nd) 686, 86 A. L. Ri 1493 (1933).

Clearly, the New York statute, Chapter 794, Laws of 1933,

must be held violative of appellant’s eontract rights.

24

It is to be noted that the New York act referred to does

not postpone foreclosure where: interest and taxes are nof

paid. It does not prevent or postpone actions on bonds where

interest and taxes are not paid.. It simply provides that

where the mortgagor is in default, the mortgagee will be re-

quired to suffer a loss of his rights, if he pursues any remedy,

and the New York act is held to apply to appellant’s contract.

Such an act violates every principle of equity and cannot

be sustained under Article 1, §10, of the Constitution of the

United States.

Respectfully submitted,

ROBERT B. HONEYMAN,

Of Counsel for the Appellant,

61 Broadway,

New York City, N. Y.

2 “ Panes mh AL me ee eae OP TOL

APPENDIX.

The New York Staiute, C hapter 794 of the Laws of 1933,

reads as follows

“AN AcCr to amend the civil practice act, in relation

to deficiency judgments in actions to foreclose mort-

gages on real property and actions to recover judg-

ments on bonds secured by mortgages on real property.

“Became a law August 28, 1935, with the approval

of the Governor Passed, on Ilessage of necessity, three-

fifths being present.

“The People of the State of New York, represented

in Senate and Assembly, do enact as follows:

“SECTION 1. It is hereby declared that a serious

public e-nergency affecting and threatening the wel-

fare, comfort and safety of the people of-the state and

resulting from the abnormal disruption in economic

and financial processes, the abnormal credit and cur-.

rency situation in the state and nation, and the abnor-

inal deflation of real property values and the curtail-

ment of incomes*by unemploy ment and other adverse

conditions, exists. Therefore, in the public interest,

the necessity for legislative intervention. by the enact-

ment of the provisions hereinafter prescribed, and

their application until July first, nineteen hundred

thirty-four, is hereby dec ‘lared as am: itter of legisla-

tive ‘determination.

“$2. The civil practice act is hereby silaabiod by

inserting therein two new sections, to be sections ten

hundred and eighty- three- “a and ten hundred and

eighty-three-b, as follows:

“1083-a. LIMITATION UPON DEFICIENCY ~UDGMENTS

DvuRING EMeRrcENCY PERIOD.—No judgme..é shall be

granted for any residue of the debt remaining unsat-

isfied as preser ibed by the preceding section where the

mortgaged property shall be sold during the emer- -

gency, except as herein provided. Simultaneously with

the making of a motion for an. pete confirming the

—_ or in any event within ninety days after the ; date

be oi a

26

of the sale, the party to whom such residue shall be

owing may make a motion in the action for leave to

enter a deficiency judgment upon notice to the party

against whom such judgment is sought or the attorney

who shall have appeared for such party in such action.

Such notice shall be served personally or in such other

manner as the court may direet. Upon such motion

the court, whether or not the respondent appears,

shall determine, upon affidavit or otherwise as it shall

direct, the fair and reasonable market. value of the

mortgaged premises as of the date of sale or such

nearest earlier date as there shall have been any mar:

ket value thereof and shall make an order directing

the entry of a deficiency judgment. Such deficiency

judgment shall be for an amount equal to the sum of

the amount owing by the party Hable as determined

by the judgment with interest, plus the amount owing

on all prior liens and encumbrances with interest, plus

cost and disbursements of the action including the

referee's fee and disbursements, less the market value

as determined by the court or the sale price of the

property whichever shall be the higher. If no motion

for a deficiency judgment shall be made as herein pre-

scribed the proceeds of the sale regardless of amount

shall be deemed to be in full satisfaction of the mort-

page debt and no right to recover any deficiency in

any action or proceeding shall exist.

“S$ 1083-b. JUDGMENTS IN ACTIONS ON BONDsS.—In

any action pending at the time this section as hereby

added takes effect, or hereafter commenced during the

emergency, other than an action to foreclosé a mort-

gage, to recover a judgment for any indebtedness se-

cured solely by a mortgage on real property and which

originated simultaneously with such mortgage and

which is secured by such mortgage, against any per:

son or corporation directly or indirectly or contin:

gently liable therefor, any party against whom a

money judgment is demanded, shall be entitled to set

off the fair and reasonable market value of the mort-

gaged property less the amounts owing on prior liens

and’ encumbrances. In any action to foreclose the

mortgage commenced after the emergency as defined:

by the law shall have expired, a deficiency judgment.

may be recovered as though this secttion had not been

e.

enacted but the amount of any money judgment recoy-

ered as. provided in this section shall he deducted in

computing such deficiency judgment.

3. If any section, part or provision of this act

shall be declared unconstitutional or invalid Or in-

effective by any court of competent jurisdiction, such

declaration shall be limited to the section, part or

provision directly involved in the controversy in-which

such declaration was made and shall not affect any

other section, provision or part hereof.

“4. The period of the emergency hereby declared

shall be from the dat this act takes effect until July

first, nineteen hundred thirty-four. This act shall not.

tpply to mortgages dated on or after July first, nine-

teen hundred thirty-two, or to any bond, collateral.

bond, guarantee, or extension agreement or other

agreement or writing concerning or delivered in con-

nection with any indebtedness secured by a mortgage

dated on or after July first, nineteen hundred thirty-

two.

os.

» This act shall take effect immediately.”

By Chapter 277, Laws 1934, the period of emergency was

extended to July 1, 1935; and by Chapter 2, Laws of 1935,

was further extended to July 1, 1936. It has since been.

extended to July 1, 1937. .