This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
A remedy given by the law is no part of the obligation of a contract.1 Neither party has such a vested right therein that the legislature cannot alter it.2 On the other hand, the existence of some sufficient remedy is essential to the obligation of a contract. A change made by a written law, affecting a remedy in existence when the contract right arose which destroys or modifies the remedy, and does not supply an alternative remedy equally adequate and efficacious, or does not leave the remedy thus modified as efficacious as before, is an impairment of the obligation of contracts.3 A change of remedy such " as substantially to impair and lessen the value of the contract" is forbidden by the Constitution of the United States.4 Thus a statute limiting the amount of recovery on a debt secured by mortgage to the proceeds of the mortgaged property is invalid.5 So a statute forbidding sale under an inferior lien where realty has once been sold under a superior lien and the holder of the legal title has the right to redeem in fifteen months impairs the obligation of the contract of a prior lien.6 So a statute which provides that no action can be brought on pre-existing notes unless the plaintiff files an affidavit that he has paid taxes thereon is invalid.7 A statute which modifies a remedy so that the original right is scarcely worth pursuing clearly impairs the obligation of contracts.8 The practical application of these distinctions to different statutes which modify remedies has caused the courts considerable difficulty.
3 Mobile v. Watson, 116 U. S. 289; Broadfoot v. Fayetteville, 124 K. C. 478; 70 Am. St. Rep. 610; 32 S. E. 804.
4 Shapleigh v. San Angelo, 167 U. S. 646.
5 Kansas Town Co. v. McLean, 7 Kan. App. 101; 53 Pae. 76; Metealf v. State, 49 O. S. 586; 31 N. E. 1076. So of a statute changing a school district so as to include some territory without the old district, and excluding some of the territory within the old district, and making the new district liable for the debts oi its predecessor. Attorney General v. Lowrey, 131 Mich. 639; 92 N. W. 289.
6 Meriwether v. Garrett, 102 U. S. 472; Luehrman v. Taxing District, 2 Lea (Tenn.) 425.
1 Brown v. Challis. 23 Colo. 145; 46 Pac. 679; Templeton v. Home, 82 111. 491; Terre Haute, etc., By. v. State, 159 Ind. 438; 65 N. E. 401; Coffin v. Rich, 45 Me. 507; 71 Am. Dec. 559.
2 Baltzer v. North Carolina, 161 U. S. 240; Hill v. Ins. Co., 134 U S. 515; Kerchoff-Cuzner, etc., Co. v. Olmstead, 85 Cal. 80; 24 Pac. 648; Groesbeck v. Barger, 1 Kan. App. 61; 41 Pac. 204; Somerset Ry. Co. v. Pierce, 88 M. 86; 33 Atl. 772; Brown v. Buck, Kalamazoo Circuit Judge, 75 Mich. 274; 13 Am. St. Rep. 438; 5 L. R. A. 226; 42 N. W. 827; Sims v. Steadman, 62 S. C. 300; 40 S. E. 677; Kirkman v. Bird. 22 Utah 100; 83 Am. St. Rep. 774; 58 L. R. A. 669; 61 Pae. 338.
The rule that a change of remedy is not an impairment of the obligation of pre-existing contracts is subject to one qualification. If the parties to a contract have specifically contracted for certain remedies and such contract is legal and valid, a subsequent change of statute cannot take away the right to the remedy thus contracted for.9 Impairment of the obligation of contracts "always happens where the parties make legal remedies a subject of their contract and subsequent legislation conflicts with what they have expressed in their agreement."10 Thus where a trust deed contained a clause providing for a sale in default of the obligation which it secured, a sub-sequent statute which provides for a different notice and requires the sale to be made in the county in which such real estate is situated, cannot restrict such power of sale.11 So if a power of sale is given which does not require a notice, a sub-sequent statute providing for a notice cannot affect such power.12 So if a deed of trust provides for a sale "at any time," a subsequent statute providing that such sales must be made on a certain day of the month is invalid as applying to such prior deeds.13 So a mortgage in which the mortgagor covenants to pay all assessments on all interests in the land mortgaged cannot be affected by a subsequent statute providing for separate taxation of the different interests in mortgaged realty.14 A statute which either lengthens,15 or shortens,10 the time fixed by an insurance policy fur bringing an action on such policy, is invalid. If the so-called prior remedy gives no means of enforcing the contract, abolishing it without any substitute does not impair the obligation of contract. Thus a clause in the Constitution giving the Supreme Court jurisdiction to hear claims against the state and, if it finds in favor of such claim to recommend to the state legislature that it should make an appropriation therefor, does not provide a remedy within the meaning of this rule; and a subsequent constitutional amendment abolishing this procedure and providing that the legislature shall not authorize payment or taxation for the payment of certain claims, including the one in question unless by a previous vote of the people, does not impair the obligation of contracts.17
3 McGahey v. Virginia, 135 U. S. 662; Memphis v. United States, 97 U. S. 293; Lake Erie. etc.. Co. v. Griffin (Ind.), 53 N. E. 1042; Beverly v. Barnitz. 55 Kan. 466; 49 Am. St. Rep. 257; 31 L. R. A. 74; 42 Pac. 725.
4 Edwards v. Kearzey. 96 U. S. 595.
5 Dennis v. Moses. 18 Wash. 537; 40 L. R. A. 302; 52 Pac. 333.
6 Shrigley v. Black, 66 Kan. 213; 71 Pac. 301.
7 Walker v. Whitehead, 16 Wall. (U. S.) 314.
8 Teralta. etc.. Co. v. Shaffer. 116 Cal. 518; 58 Am. St. Rep. 194: 48 Pac. 613.
9 Lake Erie. etc.. Ry. v. Griffin, - Ind. - ; 53 N. E. 1042: Pool v. Young, 7 T. B. Mon. (Ky.) 587; O'Brien v. Krenz. 36 Minn. 136: 30 N. W. 458; Breitenbach v. Bush, 44 Pa. St. 313: 84 Am. Dec. 442; Thompson v. Cobb, 95 Tex. 140; 65 S. W. 1090.
10 Billmeyer v. Evans, 40 Pa. St. 324, 327; quoted in International, etc., Association v. Hardy, 86 Tex. 610; 40 Am. St. Rep. 870; 24 L. R. A. 284; 26 S. W. 497.
11 International, etc., Association v. Hardy. 86 Tex. 610; 40 Am. St. Rep. 870; 24 L. R. A. 284; 26 S. W. 497.
12 Smith v. Green. 41 Fed. 455.
13 Thompson v. Cobb, 95 Tex. 140; 65 S. W. 1090.
1* Detroit Common Council v. Rentz, 91 Mich. 78; 16 L. R. A. 59; 51 N. W. 787.
15 Farmers' Co-operative Creamery Co. v. Ins. Co., 112 la. 608; 84 N. W. 904; Kimball v. Accident Association, 90 Me. 183; 38 Atl. 102.
16 Contra, that shortening the time affects the remedy merely. Jones v. Ins. Co.. 110 la. 75; 46 L. R. A. 860; 81 N. W. 188.
The propositions in this section are true under the constitutional "provision protecting the obligation of contracts. Other constitutional provisions may give different results. Thus under a provision, as in New Jersey, that the legislature shall not pass any law depriving any person of any remedy for enforcing a contract which existed when the contract was made, vested rights in remedies exist.18