Home Building and Loan Assn. v. Blaisdell

t Hughes1934. Facts. This case involved an emergency modification of debtor’s obligations. A Minnesota statute, enacted at the height of the Depression, postponed mortgage foreclosures and extended periods of redemption. The statute permitted courts to give extensions from mortgage foreclosure sales, if the mortgagor paid “all or a reasonable part” of the property’s fair income or rental value. The measure was intended to apply to mortgages issued prior to the date of the law (e.g. the statute was retroactive).

t Holding. SCt upheld the law; although what Minnesota had done appeared to be a paradigm violation of the Contracts Clause, SCt refused to invalidate the law.

n Right to protect public interest. SCt upheld statute on the theory that the state had at least the right to temporarily delay enforcement of a mortgage’s literal terms, where “vital public interests” would otherwise suffer. In view of the enormous economic emergency which gave rise to the statute, the modification was a limited and reasonable one. SCt stressed that principal remained due, interest continued to run, the right of foreclosure would ultimately be restored, and the statute would (SCt assumed) be rescinded once the economic emergency was over.

n Implied power to modify. In justifying this limited right to modify contracts in order to protect the public interest, the Blaisdell Court noted that “the reservation of essential attributes of sovereign power is read int contracts as a postulate of the legal order.”

t Relevance of New Deal, Cardozo’s unpublished opinion:

n Here, as was the case in Commerce Clausecases, we see the transformative effect of the New Dealon constitutional law. It is hard to imagine this statute being upheld even ten years earlier. The most unprecedented depression that the country faced almost certainly played a large role in the SCt’s decisionmaking.

n This was less clear in the published opinions than in Cardozo’s concurrence, which he ultimately chose not to publish. Cardozo argued that in the 19^th Century Contracts Clausecases, only the rights of individuals seemed to be at stake.

i. In the 19^th century, the rights and interests of the state itself were involved, as it seemed, only indirectly and remotely, if they were thought to be involved at all.

ii. However, in modern times, “the welfare of the social organism in any of its parts is bound up more inseparably than ever with the welfare of the whole.” Laissez-faire theory is inadequate for economic life today.

iii. Statute in question is not designed to further either individual or class interests, but rather the good of the state “by maintaining the economic structure on which the good of all depends.” This attainment of this “august and impersonal” end will not be barred by obstruction of a contract set up along the way.

Date: 2015-01-02; view: 611