Home Building & Loan Association v. Blaisdell 290 U.S. 398 (1934)

• Author: Leonard W. Levy
• Pages: 1300-1301

Page 1300

This was the most important CONTRACT CLAUSE case since CHARLES RIVER BRIDGE V. WARREN BRIDGE CO. (1837). The great Depression of the 1930s, by wiping out jobs and savings and savaging the economy, threatened homeowners, farmers, shopkeepers, and others with the loss of their property through foreclosures on mortgages. The states responded by enacting debtors' relief legislation that postponed the obligations of mortgagors to meet payments. Minnesota's statute authorized a state court, on application from a debtor, to exempt property from final foreclosure for no more than two years, during which time the creditor must be paid a reasonable rental value fixed by the court and the debtor might refinance the mortgage. The Supreme Court's precedents seemed to require a decision that the contract clause was violated by the statute, which operated retroactively on mortgages contracted prior to its enactment and delayed enforcement of the mortgagee's contractual rights.

By a 5?4 vote the Court sustained the statute in an opinion by Chief Justice CHARLES EVANS HUGHES. The prohibition of the contract clause, he declared, "is not an absolute one and is not to be read with literal exactness like

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a mathematical formula." In times of acute economic distress the states might employ their RESERVED POLICE POWER, "notwithstanding interference with contract," to prevent immediate enforcement of obligations by a temporary and conditional restraint, in order to safeguard the vital public interest in private ownership. As Justice GEORGE SUTHERLAND, for the dissenters, trenchantly observed, the POLICE POWER, whether reserved or inalienable, had never previously justified impairing the OBLIGATION OF CONTRACT between private parties. Hughes, however, distinguished...