CHAPTER 6.03. Seal Requirements

• Jurisdiction: United States

6.03. Seal Requirements

Two types of mortgages were developed during Anglo-American legal history: legal and equitable. The English law courts had strict, technical rules concerning the form of mortgages. The English Court of Chancery responded by enforcing any conveyance as an equitable mortgage as long as it was the intention of the parties that the conveyance in question provided security for the debt.⁵⁸ As Justice Story wrote, "[t]he particular form or words of the conveyance are unimportant."⁵⁹

The current state of Delaware law has developed to reflect the Anglo-American split between the court of equity and the law court. The Colonial Act of Delaware vested in its own courts of equity jurisdiction "all matters and causes of equity, according to the practice of the High Court of Chancery of Great Britain."⁶⁰ Since then, the current jurisdiction in the Delaware Court of Chancery over the foreclosure of mortgages has persisted without interruption or limitation under the constitutional or statutory laws of the state.⁶¹ In addition, between 1726 and 1736, the Colonial Authority of Delaware enacted a statute providing for a writ of scire facias sur mortgage.⁶² Through the writ of scire facias sur mortgage, Delaware permitted foreclosure not only in equity, filed in the Court of Chancery, but also at law by a scire facias sur mortgage.⁶³ The equitable and legal foreclosure remedies are concurrent, but the mortgagee must choose whether to seek relief at either law or equity, "as the beginning of the latter is constructive abandonment of the former previously begun."⁶⁴

In 1983, the Delaware Supreme Court, in Monroe Park v. Metropolitan Life Ins. Co.,⁶⁵ held that a mortgage that was not made under seal could not be foreclosed by a scire facias sur mortgage proceeding. Under Monroe Park, a mortgage that was not made under seal was technically defective under Delaware's statutory requirements for a form of mortgage and had to be foreclosed through an equitable foreclosure proceeding in the Delaware Court of Chancery. In a fairly technical analysis of the interplay between Section 5061(a) of Title 10 of the Delaware Code and the form requirements for a Delaware mortgage in Section 2101(a) of Title 25, the court stressed that while such a mortgage remained enforceable, only an equity court can provide relief when there are technical defects in the mortgage.

Much of the Monroe Park opinion sets forth the court's effort to maintain the distinction between law and equity. In the court's view, if the distinction between Superior Court and Chancery Court was to mean anything, the distinction between law and equity must be preserved. So, for example, in Monroe Park, the Supreme Court refused to construe statutory language stating that the Superior Court "shall minister justice to all persons, and exercise the jurisdiction and powers granted it, concerning the premises, according to law and equity"⁶⁶ as granting to the Superior Court equitable powers in enforcing the mortgage.⁶⁷ In fact, the Supreme Court implied that granting any such equitable powers to the Superior Court would be unconstitu-tional.⁶⁸ Thus, any effort to give the Superior Court a jurisdictional right to disregard defects in the execution of mortgages or other technical requirements of a mortgage in the statutory form of mortgage would be an unconstitutional grant of equitable powers to the Superior Court. However, this distinction could be overcome for mortgage lenders by eliminating the seal requirement for mortgages, thus removing the absence of a seal from the scope of technical defects that would prevent a foreclosure in Superior Court. Presumably, this was the thinking of the drafters of the legislation in 2016 that eliminated such a seal requirement.⁶⁹

The 2016 legislation on the seal requirement for a mortgage purported to apply to all foreclosure proceedings filed on or after the effective date of the legislation, including foreclosures of mortgages signed before the effective date. However, it is unclear if the legislation can be given retroactive effective. Delaware courts have followed the general principle that statutes will not be retrospectively applied to a cause of action already accrued unless there is a clear legislative intent to do so, since the retrospective application of a statute may operate unfairly against a litigant who justifiably acted in reliance on some provision of the prior law.⁷⁰ In interpreting the legislative intent, the courts have held that "if there is any doubt whether an amendment was intended to operated retrospectively, the doubt must be resolved against such operation."⁷¹ Nevertheless, not all retroactive statutory applications are impermissible; there are narrow exceptions.⁷² A statutory amendment may apply retrospectively when the amendment relates to practice, procedure, or remedies and does not impair or divest substantive or vested rights.⁷³ It also matters whether that application would impair or violate obligations of contract.⁷⁴

In the case of the amendment to the seal requirement, there is indication that the legislature intended to apply the statute retrospectively to mortgages executed before the legislative amendment. Section 2 of the original bill states, "This Act shall be effective upon its enactment into law and shall apply to any foreclosure proceeding filed on or after the effective date regardless of the date on which the mortgage was signed."⁷⁵ A Delaware court could interpret this statement as an intent that the statute is to operate retrospectively, applying the amended statute to all foreclosures filed on or after the new legislation was effective. Furthermore, the retroactive statutory application may be permissible through the exception to the general rule of statutory construction described above. In other words, the 2016 legislative amendment arguably relates to foreclosure practice, procedure, or remedies. And although this legislative amendment may affect the substantive or vested rights of the mortgagee or the mortgagor (the mortgagor may have intentionally executed the mortgage not under seal so that the mortgage could not be foreclosed in Superior Court), the legislation could be read not to impair or divest such rights of the mortgagee, since the amendment is more permissive in nature. Neither does the 2016 amendment affect substantive obligations of contract. For these reasons, a Delaware court might apply the exception or be more lenient in its reading of the statutory safe harbor⁷⁶ for the statute to operate retrospectively.

Finally, the 2016 legislation does not address other sections of the Delaware Code that contain implications for whether a mortgage is under seal. For example, Section...