Atlantic Oceanic Kampgrounds, Inc. v. Camden National Bank

GLASSMAN, Justice,

with whom ROBERTS, J., joins, concurring.

I cannot join in the analysis the majority employs in holding 14 M.R.S.A. § 6204-A does not oblige a holder of a real estate mortgage to render the surplus from a post-foreclosure sale of the mortgaged property to the mortgagor or his heirs, successors, or assignees. Because, however, application of section 6204-A in the instant case would constitute an unconstitutional impairment of the mortgage contract before us, I concur in the majority’s result.

Repeatedly, this court has unequivocally declared that the plain meaning of a statute as manifested on its face will control its interpretation. See, e.g., Soucy v. Board of Trustees of the Maine State Retirement System, 456 A.2d 1279, 1281 (Me.1983); Opinion of the Justices, 460 A.2d 1341, 1345 (Me.1982); Coffin v. Rich, 45 Me. 507, 511 (1858). This fundamental tenet of statutory construction represents an important constraint on the power of the judiciary. If the courts were to construe statutes in a manner inconsistent with plain meaning, they would in effect act as a law making rather than interpretive body, and therefore, usurp the legislative function.

14 M.R.S.A. § 6204-A, enacted by the Legislature in 1975, provides, in pertinent portion:

The holder of a mortgage of real estate, or his representative, out of the money arising from a completed sale after the period of redemption has expired pursuant to a foreclosure under this sub-chapter, shall be entitled to retain all sums which were secured by the mortgage, whether then or thereafter payable, including all costs, charges or expenses incurred or sustained by him or them by *888reason of any default in the performance or observance of the condition of the mortgage or of any prior or subsequent mortgage, rendering the surplus, if any, to the mortgagor or his heirs, successors or assignes. [sic]

(emphasis added). According the express terms of this statute their plain and common meaning, it is clear the statute is applicable to ail methods of foreclosure under 14 M.R.S.A. chapter 713, subchapter III. Sub-chapter III delineates three methods of foreclosure — foreclosure by possession, 14 M.R.S.A. § 6201, foreclosure without possession, 14 M.R.S.A. § 6203, and foreclosure pursuant to a power of sale of a mortgage given by a corporate mortgagor, 14 M.R. S.A. § 6203-A. Of these three methods, only the latter requires a sale of the mortgaged premises to effectuate a foreclosure. See 14 M.R.S.A. § 6203-A. The other two methods are of the common law “strict” type, wherein if the mortgagor fails to redeem the property within one year1 after default, and the mortgagee has followed certain statutory procedures, the mortgagor’s interest in the property is forever extinguished, and title to the property, both legal and equitable, vests absolutely in the mortgagee. See Warner Brothers Co. v. Freud, 138 Cal. 651, 72 P. 345 (1903); Light-cap v. Bradley, 186 Ill. 510, 58 N.E. 221 (1900). See generally G. Osborne, Handbook on the Law of Mortgages § 10, at 20-21, § 311-13, at 648-56 (2d ed. 1970); Note, Strict Foreclosure: A Neglected Remedy, 25 Va.L.Rev. 947, passim (1939). In a strict foreclosure proceeding, the law does not require the mortgagee, now legal and equitable title holder, to sell the property to effectuate foreclosure. The mortgagee is free to do with the property as he wishes.

When, however, a mortgagee in whom absolute title has vested under the provisions of 14 M.R.S.A. ch. 713, subchapter III elects to sell the mortgaged property, he is not entitled to retain all proceeds from the sale. Rather, pursuant to the clear mandate of 14 M.R.S.A. § 6204-A, he may retain only those sums which were secured by the mortgage, plus all reasonable costs, charges and expenses occasioned by reason of the default in the condition of the mortgage.2

To the extent section 6204-A requires the mortgagee to render the surplus from a sale of property upon which a mortgage has been foreclosed by possession or without possession, see 14 M.R.S.A. §§ 6201, 6203, it represents a significant departure from the common law doctrine of strict foreclosure. The Legislature is not to be lightly presumed to modify or abrogate a longstanding rule of common law. See authorities cited in Palmer v. Inhabitants of Town of Sumner, 133 Me. 337, 340, 177 A. 711, 712-13 (1935). Interpreting a statute as modifying the common law is proper, however, when the language of the statute in question is clear. Id., 177 A. at 712-13. 14 M.R.S.A. § 6204-A falls within this category-

Moreover, it is important to note that construing section 6204-A in a manner consistent with its plain meaning works an equitable result. See New England Tele*889phone and Telegraph Co. v. PUC, 376 A.2d 448, 453 (Me.1977) (strict letter of statute may be disregarded to avoid absurd re-suits); accord Schwanda v. Bonney, 418 A.2d 163 (Me.1980). Although the intent of the Legislature in enacting section 6204-A cannot be discerned from examining the legislative record, it is entirely fair to assume the Legislature regarded strict foreclosure as working an unjust and inequitable result, namely, the forfeiture of the excess of the value of the land over the amount of debt remaining. It is noteworthy that the majority of sister jurisdictions do not recognize strict foreclosure. See Osborne, supra § 312, at 650-51 (strict foreclosure commonly allowed in only three jurisdictions).3

Having determined that section 6204r-A requires a mortgagee to render to the mortgagor the surplus after costs from the post-foreclosure sale of mortgaged property under all methods of foreclosure contained in 14 M.R.S.A. ch. 713, subchapter III,4 it is necessary to consider whether the statute in question is applicable to mortgages executed prior to 1975, the year of the enactment of section 6204-A, and foreclosed subsequent thereto.

Article I, section 11 of the Maine Declaration of Rights, and article 1, section 10 of the United States Constitution are similar in structure and scope. These constitutional provisions, read literally, prohibit state legislatures from enacting any law that impairs the obligation of contract. Traditionally, we have, consistent with United States Supreme Court doctrine, drawn a distinction between statutes which affect contract rights and those which affect remedies. As a general rule, the bar against legislation affecting existing contracts does not apply when the statute affects only the remedy of enforcement involved. See, e.g., Thut v. Grant, 281 A.2d 1, 6 (Me.1971) (quoting Miller v. Fallon, 134 Me. 145, 147, 183 A. 416, 417 (1936)); Oriental Bank v. Freese, 18 Me. 109, 111 (1841); cf. Portland Savings Bank v. Landry, 372 A.2d 573 (Me.1977) (because statute reducing period of redemption for mortgage lessens value of contract to parties, constitutional prohibition against law impairing obligation of contract violated).

Recently, however, the United States Supreme Court enunciated a standard which suggests the traditional rights/remedies distinction is no longer the critical inquiry when determining whether a statute enacted pursuant to the police power unconstitutionally impairs existing contractual obligations. In Energy Reserves Group, Inc. v. Kansas Power & Light Co., - U.S. -, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983), the Supreme Court declared, “Although the language of the Contract Clause is facially absolute, the prohibition must be accommodated to the inherent police power of the State ‘to safeguard the vital interests of its people.’ ”5 Id. at-, 103 S.Ct. at 704, 74 L.Ed.2d at 580 (quoting in part Home Building & Loan Association v. Blaisdell, *890290 U.S. 398, 434, 54 S.Ct. 231, 78 L.Ed. 413 (1934)). The Court then stated:

The threshold inquiry is “whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.” (citations omitted). The severity of the impairment is said to increase the level of scrutiny to which the legislation will be subjected, (citations omitted). Total destruction of contractual expectations is not necessary for a finding of substantial impairment. United States Trust Co. [v. State of New Jersey,] 431 US [1,] at 26-27, 52 L Ed 2d 92, 97 S Ct 1505 [1519-1520.] On the other hand, state regulation that restricts a party to gains it reasonably expected from the contract does not necessarily constitute a substantial impairment. Id., at 31, 52 L Ed 2d 92, 97 S Ct 1505 [at 1522] citing El Paso v. Simmons, 379 US 497, 515, 13 L Ed 2d 446, 85 S Ct 577 (1965). In determining the extent of the impairment, we are to consider whether the industry the complaining party has entered has been regulated in the past, (citations omitted). The Court long ago observed: “One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them.” Hudson Water Co. v. McCarter, 209 US 349, 357, 52 L Ed 828, 28 S Ct 529 [531] (1908).

Id. at-, 103 S.Ct. at 704-05, 74 L.Ed.2d at 580-81. The Court declared that if the state regulation amounts to a substantial impairment, it must have a significant and legitimate public purpose. Id. at-, 103 5.Ct. at 705, 74 L.Ed.2d at 581. The Court noted that the elimination of unforeseen windfall profits is one such legitimate state interest. Id. Finally, the Court stated that “[o]nce a legitimate public purpose has been identified, the next inquiry is whether the adjustment of ‘the rights and responsibilities of [the] contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation’s] adoption.’ ” Id. (quoting in part United States Trust Company of New York v. New Jersey, 431 U.S. 1, 22, 97 S.Ct. 1505, 1518, 52 L.Ed.2d 92 (1977)).

Applying this analysis to the instant case, I would hold 14 M.R.S.A. § 6204-A inapplicable to mortgages executed prior to 1975 and foreclosed thereafter. At least since 1841, strict foreclosure has been part of the law of mortgages in Maine. See R.S. ch. 125, § 3 (1841). Therefore, a mortgagee has long been able to expect rightfully that all proceeds from the sale of property upon which the mortgage has been foreclosed could be retained without an accounting. See Portland Savings Bank v. Landry, 372 A.2d at 575 (law in effect when contract is executed becomes part of that contract); accord Phinney v. Phinney, 81 Me. 450, 460, 17 A. 405, 407 (1889). The right to retain such proceeds must be regarded as an essential incident of the pre-section 6204-A mortgage, which helped make the contract valuable. See Barton v. Conley, 119 Me. 581, 585, 112 A. 670, 672 (1921) (where statute lessens value of contract to party, constitutional prohibition against contract impairment implicated). When in 1975, the Legislature enacted 14 M.R.S.A. § 6204-A, it altered drastically the very nature of strict foreclosure in Maine. To apply this law retroactively would substantially impair those mortgage contracts entered into prior to the effective date of section 6204-A.

Having determined that the degree of contractual impairment is substantial, it is necessary under Energy Reserves to examine the countervailing interest of the public protected by the legislation, and weigh it against the degree of contractual impairment. The Legislature, in enacting section 6204-A, sought to ameliorate the harsh effects on property owners of common law strict foreclosure, and in so doing, served a legitimate and reasonable governmental purpose.6 This purpose, however, is not of sufficient importance to justify impairing *891the mortgage contract in the manner which would result from applying section 6204-A retrospectively. Section 6204-A cannot be said to be inimical to the welfare of the citizens of Maine at large. Rather, this statute was designed to ease the harsh effects of strict foreclosure on a certain body of individuals — property owners who have given a mortgage on their property. The limited remedial breadth of section 6204r-A does not justify the impairment of contract which would ensue from its retrospective application.7

Additionally, I deem significant the Legislature’s failure specifically to provide for retroactive application of section 6204-A. We have long held that absent express command or convincing implication, statutes will be given prospective application only. See Terry v. St. Regis Paper Co., 459 A.2d 1106, 1109 (Me.1983); Miller v. Fallon, 134 Me. 145, 148, 183 A. 416, 417 (1936).

. 14 M.R.S.A. §§ 6202 and 6204 provide the mortgagor one year in which to redeem the mortgaged property after the mortgagor has defaulted and the mortgagee has taken appropriate statutory procedures.

. Section 6204-A is titled, “Disposition of proceeds of foreclosure sale.” It might thus be argued that section 6204-A applies only to proceeds emanating from a sale necessary to effectuate foreclosure, i.e., foreclosure pursuant to a power of sale, 14 M.R.S.A. § 6203-A. The unambiguous language of a statute, however, and not its title, governs its construction. See, e.g., American Sav. & Loan Ass’n v. Enfield, 261 Ark. 796, 551 S.W.2d 552 (1977); State v. Ellenberger, 96 N.M. 287, 629 P.2d 1216 (1981). The body of section 6204-A suggests no such limitation. On the contrary, the statute is clearly applicable to all methods of foreclosure delineated in 14 M.R.S.A. ch. 713, subchapter III. Moreover, 14 M.R.S.A. § 6203-A, foreclosure by power of sale, enacted prior to section 6204-A, already provides for rendering of surplus to the mortgagor. If section 6204-A was intended to apply only to section 6203-A, it would be redundant and unnecessary.

. Illinois has taken an analogous approach to ameliorating the harshness of the strict foreclosure proceeding. Pursuant to Illinois law, in order for strict foreclosure to be employed, the premises must not be worth more than the debt plus interest and costs, the mortgagee must be willing to take the property in full satisfaction of the debt, and the mortgagor must be insolvent. See Rabbit v. First Nat’i Bank of Rock Fails, 237 Ill.App. 289 (1925); Barnes v. Ward, 190 Ill.App. 392 (1914); Griesbaum v. Baum, 18 Ill.App. 614 (1886).

. The majority’s reliance on Pierce v. Northeast Bank of Westbrook, 381 A.2d 667 (Me. 1978), as supportive of its holding, is misplaced. The mortgage in question in Pierce was executed and foreclosed prior to the Legislature’s enactment of 14 M.R.S.A. § 6204-A. Pierce merely restated the common law rule of strict foreclosure, i.e., upon strict foreclosure, title vests absolutely in the mortgagee and the mortgagor’s interest in the property is extinguished. As discussed previously, in enacting section 6204-A, the Legislature modified the common law of strict foreclosure in this very regard.

.We have previously held that the freedom to contract is itself necessarily subject to reasonable police power measures intended to promote the welfare of citizens. National Hearing Aid Centers, Inc. v. Smith, 376 A.2d 456, 461 (Me. 1977).

. The law has long disfavored interpretations which permit a forfeiture. See C Co. v. City of Westbrook, 269 A.2d 307, 309 (Me. 1970).

. The instant case differs significantly from Energy Reserves Group v. Kansas Power and Light Co., - U.S. -, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983), in which the Supreme Court allowed retrospective application of a state statute regulating the price of natural gas. The Energy Reserves Court reasoned that the contract clause was not violated because, among other reasons, the complaining party was operating in a heavily regulated industry in which state authority to regulate gas prices was well established. Id. at -, 103 S.Ct. 706, 74 L.Ed.2d 569 at 582. Therefore, the change in law in Energy Reserves was, or should have been, reasonably anticipated. The opposite is true in the instant case, where the statute involved changed well over 100 years of law. Additionally, we regard the public purpose served by the statute in question in Energy Reserves to be more compelling than that in the instant case.