Rights Without Remedies: Moratoriums And Real Estate

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If blog postings, law firm memorandums, newspaper articles, televised pundits, and the like were effective medications for COVID-19 infections, this crisis would be over. Without even asking readers, we know that all of you are inundated with reliable [and less than reliable] information and guidance about this virus and how to deal with it. Unfortunately, more and more, it seems like we’re hearing Arthur “Guitar Boogie” Smith and Don Reno performing “Feudin’ Banjos” on their seminal 1955 recording. We don’t play the banjo. Therefore, we won’t be joining the COVID-19 legal advice band today.

 

One thing, however, bothers us more than the many others. We’ve seen a lot of words speculating on what “laws” were needed. Some opinions have been sage. Many have been uninformed. What bothers us is that much of what we are reading ignores or blurs the difference between “rights” and “remedies.” Almost all lawyers know the following; many of our other readers may not. One way to explain what is going on is to use an example that comes right out of our current news. An increasing number of jurisdictions are legislating (or administratively imposing) rent relief for (usually only residential) tenants.

 

We’ve read a lot of suggestions that states should relieve tenants of their rent obligation and borrowers of their loan repayment obligations. Most of those suggestions translate into plans to rewrite leases and loans. But, Article I, Section X, Clause 1 of the United States Constitution reads: No State shall … pass any … Law impairing the Obligation of Contracts….” A lot of Constitutional scholars believe this prevents the passage of legislation that says a tenant doesn’t have to pay agreed-upon rent, essentially depriving a landlord of its “right” to collect the stated rent. [We’re sure there are opposing views, almost certainly from a tiny minority of “authorities.”] If correct, what kind of law would protect delinquent tenants without denying a landlord its right to demand payment of the rent (or a lender to require a loan payment)? Simply speaking, they would be laws that deny a remedy for non-payment. And this isn’t a new approach.

 

[The following is not a typical Ruminations digression. It is central to the first part of today’s blog posting.]

 

Until 1948 (in the United States), it was common for a deed to include a restriction against the property being “occupied by any person not of the Caucasian race.” Such “racially restrictive covenants” remained “legal” in the United States until 52 years ago when the Fair Housing Act (Title VIII of the Civil Rights Act of 1968) was enacted. What was the status of such covenants between 1948 and 1968? That’s where the distinction between “rights” and “remedies” comes into play.

 

In 1945, the Shelleys, an African-American couple, bought a house in St. Louis. Unknown to them at the time of their purchase, their deed, and those for 46 others of the 57 in their neighborhood included this text:

 . . . the said property is hereby restricted to the use and occupancy for the term of Fifty (50) years from this date, so that it shall be a condition all the time and whether recited and referred to as [sic] not in subsequent conveyances and shall attach to the land as a condition precedent to the sale of the same, that hereafter no part of said property or any portion thereof shall be, for said term of Fifty-years, occupied by any person not of the Caucasian race, it being intended hereby to restrict the use of said property for said period of time against the occupancy as owners or tenants of any portion of said property for resident or other purpose by people of the Negro or Mongolian Race.

 [At about the same time, a family in Detroit, the McGhees, purchased a home subject to a similar restrictive covenant. Indeed, this scenario repeated itself in many other places and for many other buyers.]

 

One of Shelley’s neighbors sued to enforce the deed restriction. If successful, the home bought by the Shelley’s would revert to its prior owner (or to whomever the court might choose). We’ll fly over the litigation history to reveal that the Supreme Court of Missouri ruled in favor of the neighbor. It held that the racially restrictive covenant was valid and enforceable. [So did the Supreme Court of Michigan as to the McGhees.]

 

Both cases were appealed to the United States Supreme Court, where the highest court in the country ruled that this and similar racially restrictive covenants were lawful and valid private agreements.

 

BUT, even though the covenants gave a party the right to exclude those not of the Caucasian race, courts (and the law) were not available to enforce them. Yes, those “offended” by a violation of a racially restrictive covenant retained the rights afforded to them by the covenant, but they could not use any governmental power to enforce that right. [Readers can read the “hows” and “whys” of that 72- year old Supreme Court’s decision by clicking: HERE.] Basically, parties remained free to comply with the covenants voluntarily, but could not use the courts or any other governmental resource to coerce compliance.

 

[Here are a few asides. First, if readers are curious as to how typical these restrictive covenants were in 1948, they were. The Supreme Court decision was unanimous, but only six of the nine Justices ruled. The other three recused themselves because their own property deeds included similar racially restrictive covenants. Second, almost all anthropologists agree: there is no such thing as “race.” National Geographic says that more precisely: “There’s No Scientific Basis for Race—It’s a Made-Up Label.” See its 2018 article by clicking: HERE.]

 

So, what is Ruminations saying today? The right of a landlord to collect rent and the right of a lender to collect loan payments may be protected (and sacrosanct), but the government may have the right to deny them a legal remedy. This is a distinction we need to keep in mind when reading about what states and court administrators are doing when offering relief to those who are obligated to pay money to others. In the end, a right without a remedy may not be very valuable.

 

Errata: A good friend, excellent attorney, and (much more importantly) a superb person, mildly chastised us for prematurely retiring someone last week. Erroneously, we described the very much alive Newton Minow as “the late” Newton Minow. At 94 years of age, he remains active, and we wish him good health and long life. The posting has been amended.

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Comments

  1. Steve Anderson says:

    Ira:

    You may consider it beyond the remit of Ruminations to discuss the constitutional principles affecting the powers of the governments of the United States and the various states to deny access to the courts to plaintiffs with certain types of claims (rent, interest, return of principal) but it would doubtless be very interesting and informative.

    Steve Anderson

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