Home Bldg. & Loan Ass’n v. Blaisdell

Supreme Court of United States
290 U.S. 398 (1934)

ELI5:

Rule of Law:

A state law that temporarily alters the remedy for enforcing a contract, such as extending the redemption period for a mortgage foreclosure, does not violate the Contract Clause of the U.S. Constitution if it is a reasonable and necessary exercise of the state's police power to address a legitimate public emergency.

Facts:

In 1928, John and Rosella Blaisdell mortgaged their Minneapolis lot to the Home Building & Loan Association.
The mortgage contained a power of sale clause, allowing the Association to foreclose by advertisement if the Blaisdells defaulted.
The Blaisdells defaulted on their mortgage payments.
The Association foreclosed on the property, and on May 2, 1932, purchased it at the foreclosure sale.
Under the existing Minnesota law at the time the mortgage was made, the Blaisdells had a one-year period to redeem the property, which was set to expire on May 2, 1933.
Amid the severe economic crisis of the Great Depression, the Minnesota legislature enacted the Mortgage Moratorium Law on April 18, 1933.
The Blaisdells occupied the property as their homestead and were threatened with the irretrievable loss of their home.

Procedural Posture:

The Blaisdells applied to the District Court of Hennepin County, Minnesota, for an order extending the mortgage redemption period under the Minnesota Mortgage Moratorium Law.
Home Building & Loan Association, the mortgagee, moved to dismiss the petition, arguing the law was unconstitutional.
The district court (trial court) granted the Association's motion and denied a new trial.
On appeal by the Blaisdells, the Supreme Court of Minnesota, as the state's highest court, reversed the district court's decision.
On remand, the district court held a hearing, found facts, and entered a judgment extending the redemption period to May 1, 1935, conditioned on the Blaisdells paying $40 per month to the Association.
The Supreme Court of Minnesota affirmed this judgment.
Home Building & Loan Association, as appellant, appealed the decision of the Supreme Court of Minnesota to the U.S. Supreme Court, with the Blaisdells as appellees.

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does the Minnesota Mortgage Moratorium Law, which authorizes state courts to extend the redemption period for mortgage foreclosures during a declared economic emergency, violate the Contract Clause of the U.S. Constitution?

Opinions:

Majority - Chief Justice Hughes

No, the Minnesota Mortgage Moratorium Law does not violate the Contract Clause. While the Contract Clause prohibits states from impairing the obligation of contracts, this prohibition is not absolute and must be reconciled with the state's essential sovereign power to protect the general welfare of its people. The state retains a 'police power' to safeguard the vital interests of the community, and an economic emergency may furnish the occasion for the exercise of that power. The court's reasoning is that the legislation was a legitimate response to a severe economic emergency, served a public purpose rather than merely benefiting private individuals, and imposed conditions that were reasonable and appropriate to the emergency. Key factors supporting its reasonableness were that the law was temporary, did not impair the integrity of the mortgage debt itself, and required the mortgagor to pay the reasonable rental value of the property to the mortgagee during the extended redemption period, thus compensating the creditor for the delay. The court distinguished this law from earlier debtor-relief statutes that were struck down, like in Bronson v. Kinzie, because this law provided for compensation and was a conditional, temporary measure rather than an outright destruction of the creditor's rights.

Dissenting - Justice Sutherland

Yes, the Minnesota Mortgage Moratorium Law violates the Contract Clause. The Constitution's meaning does not change with time or circumstance, and an emergency cannot justify disregarding its plain language. The historical context of the Contract Clause shows it was specifically designed to prevent the exact type of debtor-relief legislation enacted by Minnesota, which was common and destructive after the Revolutionary War. The law is not a mere modification of a remedy; it is a substantial impairment of the contract's obligation. It destroys the mortgagee's contractual right to ownership and possession for two years, and the payment of rental value is not adequate compensation for the loss of this fundamental right. The Framers intended to foreclose this type of state interference in private contracts, and the court should not create an emergency-based exception that undermines this core constitutional protection.

Analysis:

This decision represents a landmark shift in Contract Clause jurisprudence, moving from a near-absolute prohibition on state interference with contracts to a more flexible balancing approach. The Court effectively read a 'police power exception' into the Contract Clause, allowing states to temporarily impair contracts to combat a severe public emergency, so long as the regulation is reasonable and for a legitimate public purpose. This 'living Constitution' interpretation, which adapts constitutional principles to modern crises, stands in stark contrast to the dissent's originalist view. The case set a precedent for greater state and federal economic regulation and significantly weakened the Contract Clause as a barrier to government intervention in the economy.

Gunnerbot

AI-powered case assistant

Loaded: Home Bldg. & Loan Ass’n v. Blaisdell (1934)

Try: "What was the holding?" or "Explain the dissent"