Opinion
No. 31952.
November 25, 1935.
BANKS AND BANKING.
Under State Moratorium Law which by its terms did not apply to mortgages held by agency of United States, landowners held precluded from enjoining foreclosure of trust deed given to Federal Land Bank covering their lands, since land bank was agent of federal government (Federal Farm Loan Act, sections 6, 26, 12 U.S.C.A., sections 701, 931; Laws 1934, chapter 247, section 14).
APPEAL from the chancery court of Amite county; HON. R.W. CUTRER, Chancellor.
J.M. Thomas, T.H. Hedgepeth and W.L. Pack, Jr., all of New Orleans, La., and J.T. Lowrey, of Gloster, for appellants.
The bill expressly prays for a preliminary injunction "without bond" and the chancellor expressly stipulated in his fiat that no bond should be required. This clearly indicates that the bill was regarded by both the appellees and the chancellor as being based on the Moratorium Law, because a preliminary injunction without bond is unknown to Mississippi jurisprudence, aside from the Moratorium Law.
Griffith's Mississippi Chancery Practice, sec. 448.
If we are correct in our contention that the bank is, as a matter of law, an agency of the United States, the allegation in the bill to the contrary is immaterial, because it is elementary that a demurrer does not admit conclusions of law.
Griffith's Mississippi Chancery Practice, sec. 288.
Federal land banks were appointed financial agents of the government and the mortgages executed to them are expressly declared by the act to be instrumentalities of the government of the United States.
12 U.S.C.A., sec. 651, et seq.; Smith v. Kansas City Title Trust Co., 255 U.S. 180, 65 L.Ed. 577, 41 S.Ct. 243; Federal Land Bank of New Orleans v. Crosland, 261 U.S. 374, 67 L.Ed. 703; Federal Land Bank of Columbia v. Gaines, 290 U.S. 247, 54 S.Ct. 168, 78 L.Ed. 298; Krauthoff v. Kansas City Joint Stock Land Bank, 23 F.2d 71; Smith v. Kansas City Title Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577; Federal Land Bank of Columbia v. State Highway Commission, 172 S.C. 174, 173 S.E. 284; Dallas Joint Stock Land Bank v. Ballard, 74 S.W.2d 297; Travellers' Ins. Co. v. Marshall, 76 S.W.2d 1007, 96 A.L.R. 802; Federal Land Bank of St. Louis v. Priddy, 79 L.Ed. 709.
We desire to call the court's attention to certain legislation enacted by Congress during the past three or four years which shows the great extent to which the federal government has gone in its supervision and control over federal land banks, and how the government is financially interested in the banks.
12 U.S.C.A., 1934 Pocket Part Supplement, secs. 698, 781-tenth, 771-twelfth, 678-680, and pages 124-126; Farm Credit Act of 1935.
The Moratorium Law itself shows that the Legislature had federal land banks in mind in exempting federal agencies.
Sections 3 and 14, chap. 247, Laws of 1934; Millsaps College v. City of Jackson, 136 Miss. 795, 101 So. 574, 275 U.S. 129, 48 S.Ct. 94, 72 L.Ed. 196.
There is still another reason why the statute should be construed so as to exempt mortgages held by federal land banks, and that is that any other construction would render the statute unconstitutional as applied to such mortgages, in that the effect of the statute would be to hamper, impede and interfere with instrumentalities of the federal government.
Staple Cotton Co-op. Association v. Hemphill, 142 Miss. 298, 107 So. 24; Miller v. Sherrard, 157 Miss. 124, 126 So. 903; 12 C.J., page 787, sec. 220.
If the statute does not exempt mortgages held by federal land banks, it is, as applied to such mortgages, in contravention of the Federal Constitution and laws and therefore invalid.
12 U.S.C.A., sec. 931; Federal Land Bank of New Orleans v. Crosland, 261 U.S. 374, 67 L.Ed. 703; McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579; Farmers' Mechanics' Savings Bank v. Minnesota, 232 U.S. 516, 58 L.Ed. 706; Johnson v. Maryland, 254 U.S. 51, 65 L.Ed. 126; Gillespie v. Oklahoma, 257 U.S. 505, 42 S.Ct. 171, 66 L.Ed. 338; Panhandle Oil Co. v. Mississippi, 277 U.S. 218, 48 S.Ct. 451, 72 L.Ed. 857; Dallas Joint Stock Land Bank v. Ballard, 74 S.W.2d 297.
Fred A. Anderson, Jr., of Gloster, for appellees.
The appellees have alleged in their bill of complaint below that the Federal Land Bank of New Orleans was not an agency, bureau, department, board or commission of the United States and by the demurrer of the appellants they have admitted this fact to be true, as every demurrer admits the facts which are alleged in the bill or declaration to be true, and having so admitted this to be true as a matter of law and fact the appellants by this demurrer did bring themselves clearly within the purview and limits of chapter 247 of the Laws of 1934, said chapter of act being commonly known as the Moratorium Law; and are estopped to deny then that they are not an agency, bureau, department, board or commission of the United States.
The Federal Land Bank is not an agency of the federal government or an instrumentality thereof.
Even though these mortgages which are made to the Federal Land Bank might be instrumentalities of the federal government insofar as to be exempt from local taxation does not make them agents, or instrumentalities of the federal government for all purposes or preclude them from reasonable regulations which might be placed thereupon by the sovereign states for the common welfare and good of the people within their state; this act of the Mississippi Legislature does not so impede or interfere with an instrumentality of the federal government.
In the case of Manhattan Bank Trust Co. v. Ellda Corporation et al., 265 N.Y. Supp. 115, an injunction was granted preventing the mortgagee from foreclosing on a mortgage which they had on an apartment hotel, Justice SCHMUCK rendering the opinion which was in part as follows: "In normal times the question proposed would occasion little difficulty and would evoke instant response. But in this hour of grave economic distress a new element obtrudes itself, bringing forth a situation embarrassing, not so much in the legalistic, as from the practical aspects. . . . Regardless of whether the property be rural, urban the courts are seeking to circumscribe the effect of foreclosure. In recognition of the change which has made security insecurity, and prosperity indigence, the result usually following a foreclosure suit is now regarded askance and sought to be avoided."
Suring State Bank v. Giest et al., 246 N.W. 556; Graselli Chemical Co. v. Aetna Explosives Co., 252 Fed. 456.
As to the power of a court of equity in judicial and foreclosure sales the court's attention is called to the case of Northern Pacific Ry. Co. v. Boyd, 228 U.S. 482, 57 L.Ed. 931, 33 S.Ct. 554.
Argued orally by W.L. Pack, Jr., and T.H. Hedgepeth, for appellant.
The appellees were complainants in the court below and filed a bill against the Federal Land Bank of New Orleans and J.T. Lowrey, trustee, seeking to enjoin the sale of lands conveyed to the appellant under a trust deed to secure an indebtedness of one thousand one hundred dollars, given to appellant by B.L. Randall and wife, who afterwards conveyed the land to W.L. Tatum, Mrs. Emma McLain, and Doris McLain. The bill alleged that appellant was undertaking to foreclose said trust deed; that the appellees regularly paid all taxes due on said land except for the year 1934; that they had endeavored to make the payments due the mortgagee on said land, but that due to the low or subnormal prices they received for cotton and other agricultural products, they had been unable to make enough money out of the land to pay the taxes that year, and that due to the limiting of the amount of cotton which could be planted under the restrictions of the department of agriculture, they had been unable to produce sufficient cotton, at the present low price, to pay the indebtedness on said land. They further alleged that they had been unable to refinance this indebtedness with the Federal Land Bank and had endeavored to have them hold up said foreclosure until there was a fair market for real estate, or until agricultural products again reached normal prices, and they would not lose the property for the small sum due; that there are approximately about one hundred fifty acres of land covered by the trust deed which at public sale would probably bring about twenty dollars per acre, a total of three thousand dollars; that they paid two thousand five hundred dollars for said property and have placed valuable improvements thereon; and that if this sale takes place, they will suffer irreparable injury. They further alleged that they have no remedy at law or equity other than by applying to the chancellor for an injunctive writ.
This bill was demurred to by the appellant on the grounds (1) that there was no equity on the face of the bill; (2) that the Federal Land Bank is an agency of the United States and exempt from the Mississippi Moratorium Law, chapter 247, Laws of 1934; (3) that said deed of trust is now held by said bank as security for an indebtedness due by the appellees who are now in default in the payment of said indebtedness; (4) that said deed of trust is an instrumentality of the government, and if chapter 247 of the Laws of 1934 exempts said deeds of trust, it is in contravention of the Constitution and laws of the United States, in that it hampers, impedes, and interferes with an instrumentality of the federal government.
The chancellor overruled this demurrer and granted an appeal to settle the principles of the case.
By chapter 247, Laws of 1934, it was provided that since an emergency existed of an economic nature in the state of Mississippi, it granted a moratorium to stay sales of property. By section 14 of this act it is provided that: "The provisions of this act shall not apply to any mortgage while such mortgage is held by the United States or by any agency, department, bureau, board or commission thereof, as security or pledge of the maker, its successors or assigns, nor shall the provisions of this act apply to any mortgage held as security or pledge to secure payment of a public debt or to secure payment of the deposit of public funds."
While it is alleged in the bill that the Federal Land Bank was not a government agency, we are of the opinion that whether it is an agency or not is determined by a consideration of the law and federal decisions, construing the Federal Farm Loan Act, chapter 245, 39 Stat. 360, 12 U.S.C.A., section 641 et seq.
By section 701, 12 U.S.C.A., it is provided as follows: "All Federal land banks and joint stock land banks organized under this chapter, when designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, except receipts from customs, under such regulations as may be prescribed by said Secretary; and they may also be employed as financial agents of the Government; and they shall perform all such reasonable duties, as depositaries of public money and financial agents of the Government, as may be required of them."
By section 931, 12 U.S.C.A., supra, it is provided that: "First mortgages executed to Federal land banks, or to joint-stock land banks, and farm loan bonds issued under the provisions of this chapter shall be deemed and held to be instrumentalities of the Government of the United States, and as such they and the income derived therefrom shall be exempt from Federal, State, municipal, and local taxation."
We think these decisions of the United States Supreme Court construing the Federal Farm Loan Act, Smith v. Kansas City Title Trust Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577, and Federal Land Bank v. Crosland, 261 U.S. 374, 43 S.Ct. 385, 67 L.Ed. 703, 29 A.L.R. 1, hold that the Federal Land Bank, and its instrumentalities, is an agent of the federal government, and being such, the Mississippi Moratorium Law, chapter 247, Laws of 1934, does not apply under the express provisions of section 14 of said chapter above quoted.
In view of the conclusion we have reached, upon this point, it is unnecessary to discuss the other questions raised, and the judgment of the court below will be reversed, the demurrer sustained, and the bill dismissed.
Reversed and rendered.