Opinion
Hearing granted by Supreme Court June 13, 1927.
Appeal from Superior Court, Contra Costa County; A. B. McKenzie, Judge.
Action on street improvement bonds by W. M. Jeffreys against the Point Richmond Canal & Land Company and others. Judgment for plaintiff, and defendant Mintzer Estate Company appeals. Affirmed.
COUNSEL
McCutchen, Olney, Mannon & Greene and John F. Cassell, all of San Francisco, for appellant.
Rufus H. Kimball, of San Francisco, and A. F. Bray, of Martinez, for respondent.
Ernest A. Wilson, of San Mateo, amicus curiæ.
OPINION
NOURSE, J.
Plaintiff sued as the purchaser for value of 250 street bonds issued by the city of Richmond in the year 1917 under the Street Improvement Act of 1911 (Stats. 1911, p. 730). Judgment went for the plaintiff for the amount prayed and also for the foreclosure of separate liens on the lots of land involved. From this judgment the defendant Mintzer Estate Company, which held a mortgage on these lots declared to be subsequent to plaintiff’s liens, has appealed on a bill of exceptions. The other defendants, the city of Richmond, the treasurer of the city, and the owner of the lots involved, have not appealed.
There is really no dispute as to the facts. The appellant was the holder of two promissory notes from the owner of the lots involved, which were secured by a mortgage on the lots and which were taken in the year 1920 subsequent to the issue and delivery of all the bonds and at a time when the owner of the lots was in the hands of a receiver. Both notes were taken by the appellant to secure payment of a past-due indebtedness, and both the notes and the mortgage were taken at a time when the corporation debtor was insolvent. No question is raised on this appeal affecting the validity of the proceedings under the Street Improvement Act by which the bonds were issued, and no suggestion is made that the work, in payment for which the bonds were issued, was not properly done in accordance with the contract.
The primary question involved on this appeal is whether the amendment in 1921 to the Street Improvement Act of 1911 permitting a foreclosure suit of this character is inapplicable to bonds issued prior to the amendment as violative of the constitutional inhibition against the impairment of the obligation of contracts. The basis of the attack is this: The Street Improvement Act, as it read when the bonds were issued, specially provided two distinct remedies against the delinquent property owner-first, a summary sale of the property by the city treasurer on demand of the bondholder, and, second, a foreclosure of the lien of the assessment at the suit of the contractor. In addition to this, section 28 of the act seemed to contemplate some sort of legal action by the bondholder to enforce the lien of the bond which was established by the act as distinguished from the lien of the assessment. By the amendment to section 76 of the act made in 1921 (St. 1921, p. 297, § 10), it was expressly provided that "by way of a separate, distinct and cumulative remedy, the holder of any bond *** may file and maintain a suit to foreclose the lien of the bond in the same manner provided in this act for the foreclosure of the lien of delinquent assessments." The amendment also provided for a simple method of pleading and proof in such cases, for substituted service of process where the lot owner could not be found, for the foreclosure of the lien of the bond, and for attorney’s fees and costs. The right of redemption of the property after sale was preserved "as in other cases."
In considering the question whether the amendment offends the constitutional inhibition against the impairment of the obligation of a contract, it is well to point to the accepted rule that an attack upon a law on this ground is a federal question upon which the rulings of the federal courts are controlling. 12 Cor. Jur. p. 1057. The rule of the federal courts on this subject is correctly stated in 12 Corpus Juris, pp. 1070 and 1072, where it is said:
"A statute may not be declared unconstitutional for giving an additional remedy, or enlarging or making more efficient an existing remedy for the enforcement of a contract. *** A statute providing an additional method of enforcing an existing statutory lien is not unconstitutional as impairing the obligation of any contract of the owner of the property subject to the lien."
See Livingston v. Moore, 7 Pet. (32 U. S.) 469, 551, 8 L.Ed. 751; Gross v. United States Mortgage Co., 108 U.S. 477, 488, 2 S.Ct. 940, 27 L.Ed. 795; People v. Seymour, 16 Cal. 332, 342 (76 Am. Dec. 521), where the court said: "It is nothing to say that the new remedy is more effectual than the old; so is, or ought to be, every new remedy." Kerckhoff-Cuzner Mill & Lumber Co. v. Olmstead, 85 Cal. 80, 85, 24 P. 648; Teralto L. & W. Co. v. Shaffer, 116 Cal. 518, 523, 48 P. 613, 58 Am. St. Rep. 194; Boggs v. Ganeard, 148 Cal. 711, 720, 84 P. 195; Buck v. Canty, 162 Cal. 226, 233, 121 P. 924; Lantz v. Fishburn, 17 Cal.App. 583, 589, 120 P. 1068; Aikins v. Kingsbury, 170 Cal. 674, 679, 151 P. 145, 147, where the court said: "A remedy may be given where none existed before and it follows that a new and more liberal remedy may be substituted for one which was in effect at the time the contract of sale was made." The amendment of 1921 was designed to come within this rule as it was declared to provide merely an additional remedy for the enforcement of an existing obligation.
In support of the appeal the appellant is of course forced to contend that the bond is a contract and that the obligation of that contract has been impaired by the amendment. In support of the argument Chapman v. Jocelyn, 182 Cal. 294, 187 P. 962, and Oakland Street Improvement Bond Co. v. Fitzmaurice, 47 Cal.App. 258, 190 P. 499, are cited. In reply, respondent and amicus curiæ point out that the Chapman Case was an appeal by a property owner from a judgment quieting title based upon a sale of the property by the city treasurer, and that the only issue involved was whether the sale was void because the treasurer incorrectly computed the interest chargeable under the bond, and that the latter case was a suit of the street contractor against the city treasurer to require him to make a sale under the Street Improvement Act without payment by him (the contractor) of the costs for a title search in order to give notice to all lienholders as required by a later amendment. It is argued that the statements in these opinions to the effect that these street bonds, as well as the street assessments, were contracts, should be disapproved as mere dicta and not supported by the authorities. It is not necessary for us to do this in this proceeding. We may assume that these bonds are contracts, but that would not aid the appellant because, if they are contracts, they do not run to a mortgagee of the premises, but are obligations between the contractor and the city.
Appellant insists that because of Chapman v. Jocelyn, supra, we should hold that the bond is a contract to which the lot owner is in some measure a party. Conceding the point, we are unable to see how it may avail appellant in this proceeding. If the lot owner is a party to the contract, his obligation under it is to pay into the city fund sufficient money to meet the principal and interest on the bond and the penalties added in case of forfeiture. The obligation on the part of the city is to turn over these payments to the bondholder when, and only when, they have been paid into the special fund for that purpose. The obligation of the bondholder, if any, is to make proper acknowledgment of these payments and release of the lot owner’s obligation. The obligation of the lot owner to pay is in fact fixed by the assessment proceedings under the statute rather than by the bond. These proceedings being regular (a matter which is conceded on this appeal), that obligation is just as firmly fixed as if it had been covered by a final judgment against the lot owner. By the terms of the act the bond was declared to be a lien upon the property to cover all these costs and penalties. This lien was made enforceable by sale by the city treasurer, but we have been shown no authority holding that no other method could have been employed to enforce the fixed obligation against the lot owner.
The case is similar to those arising under the arbitration statute of the state of New York, which has been held to apply to contracts providing for arbitration executed before the statute was passed. An attack upon the statute was based upon the claim that it impaired the obligation of these contracts, but the courts of the state of New York, as well as the Supreme Court of the United States, have held that the statute merely provides an additional remedy and is therefore not subject to the objection that it violates section 10 of article 1 of the federal Constitution. In the Matter of Berkovitz, 230 N.Y. 261, 272, 130 N.E. 288, 290, Cardozo, J., speaking for the Court of Appeals, said:
"The wrong to be redressed is the rejection of merchandise in violation of a contract. Such a wrong had a remedy for centuries before the statute. All that the statute has done is to make two remedies available when formerly there was one."
See, also, Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 123, 124, 44 S.Ct. 274. 68 L.Ed. 582.
The appellant lays considerable stress upon the rule of cases cited that the laws in force at the time a contract is made enter into its obligation, and it is argued from this that because the lot owner contracted to suffer foreclosure by sale without proceedings in a court of law, the Legislature was powerless to add such a remedy for the breach of his obligation. In Oshkosh Waterworks Co. v. Oshkosh, 187 U.S. 437, 439, 23 S.Ct. 234 (47 L.Ed. 249) Harlan, J., speaking for the court said:
"It is well settled that while, in a general sense, the laws in force at the time a contract is made enter into its obligation, parties have no vested right in the particular remedies or modes of procedure then existing. It is true the Legislature may not withdraw all remedies, and thus, in effect, destroy the contract; nor may it impose such new restrictions or conditions as would materially delay or embarrass the enforcement of rights under the contract according to the usual course of justice as established when the contract was made. Neither could be done without impairing the obligation of the contract. But it is equally well settled that the Legislature may modify or change existing remedies or prescribe new modes of procedure, without impairing the obligation of contracts, provided a substantial or efficacious remedy remains or is given, by means of which a party can enforce his rights under the contract."
To the same effect is National Surety Co. v. Architectural Co., 226 U.S. 276, 285, 33 S.Ct. 17, 57 L.Ed. 221, and Bernheimer v. Converse, 206 U.S. 516, 530, 27 S.Ct. 755, 51 L.Ed. 1163.
Appellant advances the argument that the obligations of the contract are impaired because the period of redemption after sale is altered. In this connection it is pointed out that under a sale by the city treasurer under the original act the property owner was permitted to redeem within 12 months after sale and for a further period if the purchaser neglected to apply for a deed, while, under the amendment, the period of redemption was fixed at 12 months from the date of the foreclosure sale. As we read the statute, the amendment is more favorable to the appellant than to the respondent. Under the original act the purchaser was not required to wait until the expiration of the 12 months’ period to apply for a deed; this application could be made at any time within that period, and, if made in time, the deed would issue immediately upon the expiration of 12 months from the date of the sale. Under the amendment the period of redemption ran from the date of the foreclosure sale after the judgment became final. It is unnecessary to do more than mention the fact that the time required for service of process, the delay in bringing the cause to trial and in executing the judgment, and the time required to give notice of the sale, would extend rather than shorten the rights of the property owner in so far as his right of redemption is concerned.
It is also argued that the amendment impairs some obligation of the contract because it prescribes a special and simple method of pleading the complaint, because it makes the city treasurer’s certificate that the bond has not been paid "prima facie" evidence of that fact, and because it permits the recovery of costs and attorney’s fees. We are not able to follow appellant in its contention that under the original act the bondholder had no legal action to enforce the lien of the bond. If, as appellant argues, the bond is a contract, we are unable to perceive why the bondholder, as one of the contracting parties, could not have his suit to enforce his contract under the ordinary rules of procedure. Certainly the fact that the statute provided a method of summary sale without suit cannot be taken as a denial of the right to pursue the ordinary legal or equitable remedies for the enforcement of the contract, particularly in the absence of some expression of that intention in the statute itself. There may be no controversy on this principle-that there is no vested right in a particular remedy or in a particular form of legal procedure. Black Constitutional Prohibitions, § 192; 12 Cor. Jur. p. 974; Tennessee v. Sneed, 96 U.S. 69, 74, 24 L.Ed. 610; Terry v. Anderson, 95 U.S. 628, 633, 24 L.Ed. 365; Boggs v. Ganeard, 148 Cal. 711, 720, 84 P. 195. Contracts are made in contemplation of the power of the state to amend the remedy or to provide a new one so long as the vested rights and obligations of the parties are not disturbed. Wilson v. Standefer, 184 U.S. 399, 415, 416, 22 S.Ct. 384, 46 L.Ed. 612; Aikens v. Kingsbury, 170 Cal. 674, 679, 151 P. 145. But, in any event, the point is not available to appellant on this appeal. Though a demurrer to the complaint was filed, it appears from the bill of exceptions that at the opening of the trial the respondent offered in evidence without objection the street bonds with the coupons attached thereto and all the proceedings under which the bonds were issued. It also appears from the bill of exceptions that the respondent "also offered proof sufficient *** that the amounts thereof had not been paid, and also proof sufficient to sustain all of the remaining allegations of the plaintiff’s complaint." It also appears that no attorney’s fees were allowed and that the costs awarded were merely the statutory costs of suit allowable in ordinary actions. The appellant has therefore failed to show any prejudicial error in respect to any of these specifications.
The further point is made that the amendment is not applicable to bonds issued prior to its enactment because it does not expressly provide that it shall be retroactive. This question is always one of the intention of the Legislature-to be determined by the context of the act itself when possible and by the history and surrounding circumstances when necessary. Smith v. Mathews, 155 Cal. 752, 761, 103 P. 199, concurring opinion of Shaw, J. Here the amendment authorizes "the holder of any bond upon which any payment *** has not or shall not be made" to maintain a suit to foreclose the lien. It would seem clear that the Legislature intended the amendment to apply to bonds outstanding and unpaid as well as to those issued in the future. Furthermore, the general rule is that statutes which merely affect the remedy or the procedure for the enforcement of existing rights are to be treated as prospective in that they apply to all actions thereafter instituted, but not to actions pending at the time of the enactment. Matter of Berkovitz v. Arbib & Houlberg, 230 N.Y. 261, 130 N.E. 288; Dowell v. Talbot Paving Co., 138 Ind. 675, 38 N.E. 389.
Finally, it is argued that the judgment is faulty in that it includes the amount of taxes assessed against the property involved pending the litigation and paid by the respondent. There is no merit in the point. Section 76 of the Street Improvement Act under which this suit is prosecuted provides that the action to foreclose the lien of the bond shall be governed by the Codes of the state when not in conflict with express provisions of the act. Section 2876 of the Civil Code provides that: "Where the holder of a special lien is compelled to satisfy a prior lien for his own protection, he may enforce payment of the amount so paid by him, as a part of the claim for which his own lien exists." The latter section has been followed in Savings & Loan Soc. v. Burnett, 106 Cal. 514, 39 P. 922; Weinreich v. Hensley, 121 Cal. 647, 54 P. 254; Windt v. Covert, 152 Cal. 350, 93 P. 67; and Morris v. Hartley, 26 Cal.App. 61, 146 P. 73. But appellant argues that all these cases were suits for the foreclosure of a mortgage and that they cannot be controlling here. The Code section refers to "the holder of a special lien"; it is not limited to the holder of a mortgage lien, and we can find no reason or equity in holding that the section does not apply to a street bond lien. In fact, the taxes were paid by the respondent upon the express stipulation and consent of the appellant to save the property from delinquent sales to the state. Under any view of the transaction it was a benefit to the appellant. The costs which would have arisen from the tax sales as well as the penalties which would have been added have all been eliminated by the payment of the taxes by respondent, and if appellant contemplates redeeming the property under the judgment rendered herein its burden is lessened to that extent at least.
Judgment affirmed.
We concur: KOFORD, P. J.; STURTEVANT, J.